Denmark

Denmark PEO & Employer of Record

WeHG provides an International PEO and global Employer of Record service in Denmark to companies willing to enter the Danish market or hire local/expat employees in this country.

Traditional approach requires establishing a subsidiary in Denmark.  However our solution allows you to start the operations in Denmark within days hence save time and money.  WeHG would hire candidates on your behalf while you maintain full operational control of their work. So legally they would be our employees, on our local payroll, 100% compliant but will work on your behalf. 

Denmark fast facts

Population, million: 5.8
Land area: 42,933 km²
Capital: Copenhagen
Local currency: Danish krone (DKK)

In general, the statutes regulating employment relationships apply to all persons working in Denmark, regardless of both:

  • Their nationality and country of residence.
  • Any choice of law in the employment contract.

Therefore, they also apply to foreign nationals working in Denmark. They include statutes on:

  • Employment contracts 
  • Working hours 
  • Holiday entitlement 
  • Leave Temporary workers 
  • Non-discrimination 
  • Information and consultation 
  • Transfers of undertakings 
  • Employers’ use of non-solicitation and no-hire restrictions

Hiring, Negotiating and Doing Business in Denmark

Necessity of written employment contract

A written employment contract is recommended but not required. However, employees working at least eight hours a week on average, and whose periods of employment are intended to last at least one month, must be notified in writing of all material employment terms (Employment Contracts Act (Consolidated Act No. 240 of 17 March 2010)). This notification must be given to them within one month after the date on which their employment begins. At a minimum, the notification must include details regarding:

  • The names and addresses of the employer and the employee.
  • The place of work.
  • The job title or position, or a description of work duties.
  • The date of commencement of employment.
  • In the case of temporary employment, the expected length of employment.
  • Entitlement to paid holiday.
  • Notice periods.
  • Remuneration, including benefits-in-kind and pension contributions, and the intervals at which remuneration is paid.
  • The standard daily or weekly hours of work.
  • CBAs governing the employment.

The Employment Contracts Act contains additional minimum requirements for employees posted from Denmark to work in another jurisdiction. These employees must receive the notification before they are sent abroad and no later than one month after the date on which the employment begins.

Different forms of engagement: employment, contracting, work with private entrepreneur

Temporary workers

Temporary workers are entitled to the same statutory rights and benefits as permanent employees. With regard to non-statutory rights and benefits, they are generally entitled to the same rights and benefits as those that apply to a “comparable permanent employee” (Act on Temporary Employment (Act No. 907 of 11 September 2008)). A comparable permanent employee is defined as an employee in the same establishment:

  • With an employment contract or relationship of indefinite duration.
  • Engaged in the same or similar work or occupation, with due regard being given to qualifications and skills.

No qualifying period applies.

Agency workers

Agency workers are entitled to the same statutory rights and benefits as permanent employees. No qualifying period applies.

In relation to non-statutory rights and benefits, agency workers’ rights generally depend on the terms and conditions that, based on their individual employment contracts and/or a CBA, apply to their employment relationship with the agency in which they are employed. However, if a CBA applies at the company to which the agency workers provide their services, the company may have to ensure that, at a minimum, the agency workers have the same rights and benefits as the company’s employees.

Denmark Employment Contract

Types of employment agreements

While a written employment contract is not required, best practice is to put a strong employment contract in place in Danish which spells out the terms of the employee’s compensation, benefits, and termination requirements. It is mandated by law that employees are entitled to a written contract after the commencement of their employment.

Denmark working hours

Unless otherwise agreed in a CBA, the average working hours during a seven-day period must not exceed 48 hours, including overtime, over a period of four months. In addition, average nightly working hours must not exceed eight hours for each 24-hour period (Working Time Act (Consolidated Act No. 896 of 24 August 2004)).

Overtime pay is governed by the CBA.

Rest breaks

Employees are entitled to a:

  • Daily rest period of 11 consecutive hours for every 24-hour period.
  • Weekly rest period of 24 consecutive hours for every seven days, which must immediately follow a daily rest period. The weekly rest period should generally fall on Sundays and be at the same time for all employees working in the company.

There are exceptions to both the daily and the weekly rest period.

Vacation leave in Denmark

Employees are entitled to a minimum of 25 days’ holiday in each holiday year (1 May to 30 April) (Holiday Act (Consolidated Act No. 762 of 27 June 2011)). Employees earn the right to 2.08 days’ paid holiday for each month of employment in the calendar year preceding the calendar year in which the respective holiday year begins.

Employees whose notice period is one month or more, and who are entitled to be paid on public holidays and during sick leave for example, salaried employees receive their full salary during paid holidays and a holiday allowance amounting to 1% of their salary in the previous calendar year.

All other employees who are entitled to paid holiday receive holiday pay equivalent to 12.5% of their income in the previous calendar year.

Payment in lieu of holiday can only be made in respect of the last five days’ holiday. CBAs and individual agreements often provide employees with more favourable holiday entitlements.

Denmark Maternity Leave

The Act on the Entitlement to Leave and Benefits in the Event of Childbirth, Consolidated Act No. 67 of 25 January 2019, regulates the right to leave and the right to receive child benefit from the municipality during leave related to childbirth. There is no general statutory entitlement for employees to receive salary during leave related to childbirth, but female salaried employees are entitled to receive 50% of their salary during pregnancy and maternity leave in accordance with the Salaried Employees Act. Further, a right to salary may follow from the individual employment agreement or from any applicable CBA.

The mother is entitled to the following leave:

  • Four weeks’ leave prior the expected date of birth.
  • 14 weeks’ leave after the birth (the first two weeks after the birth are mandatory).

Danish Severance Laws

Termination of employment

Many people working in Denmark are employed under a legislation called the “funktionærloven”. If you are employed under a contract following this act, they also have clear rules of notice and termination that they must comply with:

  • Employed for up to six months – one month notice period
  • From six months to three years – three-month notice period
  • From three years to six years – four-month notice period
  • From six years to nine years – five-month notice period
  • Over nine years – six-month notice period

Employees are also entitled to the following severance pay per the Salaried Employees Act:

  • One month’s salary if the employee has been continuously employed with the same employer for at least 12 years, but less than 15 years.
  • Two months’ salary if the employee has been continuously employed with the same employer for at least 15 years, but less than 18 years.
  • Three months’ salary if they have been continuously employed with the same employer for at least 18 years.

Employees can challenge a termination in court if they deem it unfair.

Denmark Tax

Income tax. To calculate tax on employment income in a tax year (calendar year), it is necessary to distinguish between labour market income, personal income, capital income and taxable income:

  • Labour market income is calculated as taxable employment income less:
    • any employee pension contributions to a tax approved pension scheme 
    • any employee social security contributions 
  • market tax.
  • Capital income is generally calculated as the difference between interest earned and interest paid by the employee.
  • Taxable income is calculated as personal income less any negative capital income and various deductions, including a personal allowance of DKK46,500 (in 2020).

Income tax rates are progressive. In 2020, the rates are:

  • Labour market income: labour market tax of 8%.

Social security contributions

Employees are only liable to make minor Labour Market Supplementary Pension contributions (LMSP contributions) The amount of LMSP contributions payable by the employee depends on the employee’s number of working hours. For a full-time employee, the monthly contributions payable are about DKK90.

Employers are liable to make various minor social security contributions, including the employer’s part of LMSP contributions In general, for a full-time employee, these various contributions total about DKK10,000 per year.

Health Insurance Benefits in Denmark

Entitlement to time off

Employees can lawfully be absent from work in the case of illness or injury if their illness or injury renders them unable to perform their work.

Entitlement to paid time off

During absence, the following are entitled to receive full salary from their employer without any time limit:

  • Salaried employees (Salaried Employees Act).
  • Employees covered by certain CBAs.

Other employees are entitled to statutory sickness benefits from (Sickness Benefits Act (Consolidated Act No. 653 of 26 June 2012)):

  • The employer for the first three weeks if they have worked with the employer for a period of eight weeks or more before the sick leave, and worked at least 74 hours during this period. It is generally not possible for the employer to recover these payments from the state or the local authority.

The local authority for the remaining period if one of various occupational conditions is met (for example, that they have been employed with one or more employers for a continuous period of at least 13 weeks before the sick leave, and worked at least 120 hours in total during the past 13 weeks). This also applies to the first three weeks of sickness if employees do not fulfil the conditions entitling them to statutory sickness benefits from their employer during this period (see above).

Additional Benefits in Denmark

Flexible work hours are common in Denmark. As stated earlier, employees who commute from home are entitled to a statutory allowance for the expense.

Denmark Holidays

In addition to the minimum holiday entitlement, there are 10 public holidays, some of which fall or can fall in some years on a Saturday or a Sunday. Furthermore, many employees are either under a collective agreement or their individual employment agreement entitled to one to three additional semi-public holidays.

  • New Year’s Day
  • Maundy Thursday
  • Good Friday
  • Easter Monday
  • General Prayer Day
  • Ascension Day
  • Whit Monday
  • Constitution Day
  • Christmas Day
  • Second Day of Christmas

Why Choose WeHireGlobally

WeHG takes care of all the onboarding hurdles, payroll, compensation and benefits, tax filing, and termination of employment. Our Employer of Record solution allows you to manage your overseas teams efficiently while minimizing cost and risk.

 

FAQ Denmark

  • Denmark working hours

    The average working hours during a seven-day period must not exceed 48 hours, including overtime, over a period of four months

  • Denmark Holidays

    • New Year’s Day
    • Maundy Thursday
    • Good Friday
    • Easter Monday
    • General Prayer Day
    • Ascension Day
    • Whit Monday
    • Constitution Day
    • Christmas Day
    • Second Day of Christmas
  • Denmark Tax

    • Labour market income is calculated as taxable employment income less:
      • any employee pension contributions to a tax approved pension scheme 
      • any employee social security contributions 
    • market tax.
    • Capital income is generally calculated as the difference between interest earned and interest paid by the employee.
    • Taxable income is calculated as personal income less any negative capital income and various deductions, including a personal allowance of DKK46,500 (in 2020).

    Income tax rates are progressive. In 2020, the rates are:

    • Labour market income: labour market tax of 8%.
  • Hannah Kohl
    Author:
    Hannah Kohl. Head of Customer Success. Has extensive experience in the HR and IT industries. Helped 100+ international clients to achieve their global goals.

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