Table of contents
Establishing a company in Denmark
Employment of employees in Denmark
Employer of Record in Denmark
What is the difference between an EOR and a PEO?
Summary of available options for hiring employees in Denmark
What to look for when choosing an EOR?
Radner - EOR services in Denmark
Denmark is considered one of the most developed countries in the world economically and socially. It is a country with a high level of income equality, one of the highest per capita incomes in the world, and low corruption. It ranks high in terms of social mobility.
It is a country at the forefront of innovation and sustainable development. For many companies looking for a new market, it is an attractive destination. The small economy and liberal trade policy contribute to this.
Denmark's education system is one of the highest rated in the world, so you can find highly skilled workers there.
General information about Denmark
The vibrant capital city of Denmark is Copenhagen, and the native language is Danish. The currency used in Denmark is the Danish Krone (DKK). The tax year in Denmark runs from the 1st of January to the 31st of December, with the date format following the DD/MM/YYYY pattern. Denmark has a significant number of remote workers, estimated to be around 1.1 million. The estimated population of Denmark is 58.1 million, and the Gross Domestic Product (GDP) amounts to USD 350.1 billion.
In the event of misclassification, Denmark imposes penalties ranging from DKK 10,000 to 20 weeks' salary for employees. On a more positive note, it's worth noting that Denmark consistently ranks in the top 3 of the UN's World Happiness Report.
Establishing a company in Denmark
According to EU regulations, any citizen of any EU member state can set up a company in Denmark. However, this is a resource-intensive venture, as the start-up capital required in the country is quite high. Fees for consultancy firms, certified translators, notaries and lawyers must also be taken into account.
To set up a company in Denmark, follow these steps:
You should also remember to open a bank account. In order to do so, it is necessary to have a CPR number and to provide a set of necessary documents for opening a bank account.
Due to the fact that Denmark receives a very large number of labour migrants, some restrictive steps have been taken in the process of opening bank accounts for foreigners. The number of documents required to open an account is very high. It is advisable to contact the bank of your choice before taking any steps to do so.
Establishing a local company in Denmark is generally a manageable process. However, the complexity arises post-setup, as the employer must handle monthly payroll for their Danish employees, manage tax filings, administer employee benefits, and stay abreast of changes in regulations and collective bargaining agreements.
Employment of employees in Denmark
The employer is responsible for all legal aspects that relate to the employment of employees. Expanding into Denmark, therefore, requires familiarisation with the laws applicable there. Danish labour requirements are usually considered less complex than those in neighbouring countries. Nevertheless, there is a risk of laws and regulations being misinterpreted.
Employment in Denmark is based on the European concept of flexicurity, meaning flexibility with security. Similar to other European economies, the employment system in Denmark is highly flexible. All members of the working population have access to employment. Denmark’s labor force comprises nearly 50% of the Danish population (a higher percentage than most other countries. Danish employees are free to participate in welfare programs and are given benefits in case of unemployment.
All workers employed in Denmark come under the jurisdiction of Danish employment and labor laws. Rae and labor unions are also active and prominent in Denmark. If you are looking to hire in bulk, you might need to engage with these unions.
HR compliance
When you employ individuals in Denmark, you undertake specific responsibilities as an employer. HR compliance involves ensuring that your company's policies and procedures adhere to all relevant laws, regulations, and collective bargaining agreements concerning employment and work practices. Adhering to local employment laws in Denmark is crucial for the smooth operation of your business. Not only are these laws in place to protect employees and safeguard their rights, but they also help minimize your potential liabilities as an employer.
Ensuring compliance entails adhering to all Danish laws related to salaried employees, sickness benefits, annual leave, minimum wage requirements, tax credits, regulations on working hours, employment contracts, and more.
Recruitment
In Denmark, the recruitment process for new applicants has been streamlined, akin to other countries, owing to the widespread use of the internet and online employment. Numerous job portals and social media platforms aid businesses in locating potential candidates, allowing global HR teams to peruse candidate databases to identify the most suitable matches. Once the job description is finalized, it is published on the company's career page, job boards, and professional networking platforms like LinkedIn.
Probation
In Denmark, there is no statutory probation period outlined in the employment regulations. However, it is common for employers to implement a three-month probationary period with a 14-day notice period.
Minimum wage in Denmark
Denmark does not have a statutory minimum wage. Minimum wages are set by collective agreements. Across all sectors, the average hourly minimum wage is approximately DKK 110 per hour.
Employers in Denmark are not obliged to pay a 13-month salary, but most offer annual bonuses to employees. In Denmark, salaries are typically paid on a monthly basis.
Similarly to other countries, employing a worker in Denmark incurs additional costs beyond the gross salary offered. Employers in Denmark are required to contribute to social security and occupational injury insurance.
Weekly working hours in Denmark
The weekly working time in Denmark is 48 hours. The standard working hours typically span from Monday to Friday, falling within the timeframe of 6:00 am to 6:00 pm. Employees usually enjoy a 30-minute lunch break as part of their daily schedule. It is mandatory for a break to be provided if a continuous shift extends beyond 6 hours. The duration of the break depends on its purpose, such as whether it is designated for a meal. Employers may not require employees to work overtime for any payment unless they have the employee's individual or collective consent through a trade union.
Holidays in Denmark
Full-time employees in Denmark are entitled to 25 days of paid holiday per year. Monthly accrued leave is 2.08 days per month, which totals to five weeks of paid vacation annually. Employees accrue these holidays over 12 months, and they then have 16 months to utilize at least 4 weeks of this accrued leave. Employees may also apply for the right to parental, guardianship, adoption or bereavement leave.
In Denmark, there are several national holidays that are mandatory leave for employees. These holidays include:
As a result of collective bargaining in an industry, maternity and paternity leave benefits may increase. This means that some employees may be entitled to one year's leave.
Sick pay
Regardless of length of service and duration of illness, the employee retains the right to full pay. If the sickness lasts for more than 30 days, a request for sick pay must be submitted by the employer within 5 weeks after the first day of sickness.
Termination of employment in Denmark
Denmark is known for its relatively straightforward employee termination process, particularly when compared to other European Union countries. Unless employees are protected by a fair dismissal clause in their contract or a provision of the Salaried Employees Act, there is no safeguard against dismissal. Employers are not required to notify a trade union or employment agency in the event of employee termination.
In Denmark, termination procedures are generally straightforward, although there are several statutory rules that apply to salaried employees, many of which are determined by the Salaried Employees Act.
Termination of an employment contract in Denmark must be in writing. Proof of its receipt is also required. Employees who have been employed for at least one year are protected against termination without cause. This protection also extends to termination due to:
Upon the termination of employment, the employer is obligated to compensate any remaining accrued holiday leave by paying it into the employee's holiday fund.
There are also no statutory provisions for severance pay in Denmark, but employees who have worked continuously for 12 years or more are entitled to severance pay of 1 month's salary. Employees who have worked 17 years or more are entitled to a severance payment of 3 months' salary.
Employee benefits in Denmark
The employment of employees in Denmark is associated with a number of legal obligations. Statutory benefits must also be provided to employees. In order to attract the most talented employees, the employer must develop a legally compliant yet competitive benefits and remuneration package. The list of statutory benefits to be provided under Danish law is extensive.
In addition to the standard benefits, some companies in Denmark provide:
Apart from social security contributions, most of the contributions set by the Danish Labour Code only apply to full-time employees.
Most statutory entitlements and benefits apply to salaried and industrial employees. Independent contractors are only entitled to the payments that result from the contract with the client. An employer who employs Danish full-time employees is legally obliged to provide them with benefits. However, this obligation does not apply to independent contractors, as it is not permitted in Denmark for contractors to work exclusively for one company on a full-time basis.
Regardless of whether a person is perceived by a business as an employee or a contractor, the judgement of the legislator matters. If an employee is employed and the employer does not provide statutory benefits, the company faces serious misclassification risks and consequences in the form of fines or penalties.
Employers are required to make pension contributions to their employees at a rate of 16% of their salary. Employees, on the other hand, pay 8% payroll tax.
Taxes
In Denmark, the taxation system encompasses various aspects for both employers and employees. Employers are subject to an employer tax ranging from DKK 1076.2 to DKK 4764.2. Additionally, the social security contribution falls within the range of DKK 8,000 to DKK 10,000, while the occupational injury insurance typically ranges from DKK 1,176 to DKK 24,441.
For employees, the tax structure involves a progressive scale. The employee tax ranges from 16% to 52.07%, with an additional fixed amount of DKK 1,135. Contributions to the pension scheme (ATP) amount to DKK 1,135, and there's a labor market contribution (AM-bidrag) at 1.46%.
Work permits and visas
Non-EU citizens, particularly those not from Nordic countries, are required to obtain a separate work permit to work in Denmark. This permit is typically sought after securing a job offer. For permanent employment, the work permit can be granted for a maximum of four years and is renewable. However, for other employment types, the work permit is granted for three months at a time.
Types of visas in Denmark include:
Per the regulations outlined in the Danish Working Environmental Act, it is the responsibility of the employer to guarantee the provision of a secure and proper work environment for employees.
Independent contractors
In Denmark, the workforce comprises a substantial percentage of the population due to the accessibility of free education up to the university level for citizens. The country has been embracing remote work long before its recent global surge. Denmark boasts comprehensive internet and telecommunication coverage, facilitating the seamless establishment of remote work infrastructure. Consequently, when remote work became a widespread practice in 2020, Denmark was well-prepared, leveraging its robust infrastructure and foresight.
While it's common for employers to engage remote workers as independent contractors, this practice is often ill-advised. If an individual is dedicating their full attention to your company in Denmark, treating them as an independent contractor could potentially violate Danish employment laws and those in your own country.
In such cases, your company might become liable for fines related to owed holiday pay, sick pay, social welfare contributions, paternity and maternity benefits, and other legal obligations. Not providing these benefits could leave the individuals without the protections typically granted to full-time employees under local employment laws.
Most important provisions of Employment Laws in Denmark
What is an Employer of Record?
Employer of Record (EOR) is a service dedicated to entrepreneurs who want to broaden the horizon of their company's activities to other countries. This involves placing in the hands of an external entity all issues concerning the employment of an employee in another country. Business owners value this option for its minimised risk, time saving and cost reduction, which is undoubtedly linked to the desire to broaden the area of operations of the company in question.
By using Employer of Record, Danish employees can be hired in a short period of time in accordance with local law. With this solution, cooperation with legal advisors, HR specialists and local payroll providers will not be necessary.
Employer of Record can be a solution tailored to the client company's plans and needs. By working with local experts, EOR can provide all information about the Danish market and offer employees a compliant employment contract.
Employer of Record allows companies to easily expand into foreign markets without having to set up a separate business entity in another country, and without violating any legal restrictions. Such a solution entails saving time and money in dealing with all the paperwork, finding a new location that may not be profitable, as well as less risk.
The regulations for hiring employees in another country are often quite complex, which is why companies are increasingly opting to use the service of an EOR that has experience in this area. Employer of Record helps companies to gain access to foreign markets and employees.
Employer of Record is a good solution for companies that want to engage people from abroad for work. The Covid-19 pandemic has contributed to employers and employees looking for new ways of working. They have also started to consider different locations. Thanks to cutting-edge technology, companies are able to expand internationally, as well as access new customer bases and employees.
What does the Employer of Record do?
For large corporations, it may be more advantageous to register a local branch in Denmark. For smaller companies, such a solution is very costly and risky, so they are more likely to choose to work with an EOR that acts as a legal entity in another country and performs all tasks related to the employment of employees in accordance with the applicable law.
Benefits of using Employer of Record:
Using the EOR service can protect the client company from operating in contravention of local regulations.
By working with an EOR, the client company can pay employees in accordance with regulations without having a local legal entity.
The biggest advantage of EOR is that you can quickly set up operations in another country. This is particularly useful for smaller companies that do not have sufficient infrastructure to manage local employee requirements.
The statutory system in Denmark, which stems from the Danish Temporary Workers Ordinance, obliges the end-user to provide the person with access to employee facilities (e.g. a staff room), as well as to provide them with information about vacancies in the company. From the person's first day of work, the Employer of Record must provide the same salary and benefits as the end user's employees.
In Denmark, there is no limitation on how long the end-user company can use the EOR. Therefore, it is possible to use the service both short-term and indefinitely - depending on the needs of the company. Employer of Record does not need a licence to supply employees to the client company and provides it with a flexible staffing solution.
What is the difference between an EOR and a PEO?
Because EORs and PEOs perform similar tasks, the two services are often confused with each other. PEOs are co-employment agreements. A PEO (Professional Employer Organisation) handles the company's human resources and payroll administration. This allows the company to focus on managing employees without having to deal with administrative tasks such as payroll.
Summary of available options for hiring employees in Denmark
While employing people across borders, there are generally four methods; however, not all are legal or practical. Here's an overview of each method for employing salaried employees in Denmark, along with their potential drawbacks.
Partnering with an Employer of Record Denmark / full-service Professional Employer Organisation
This approach involves employing a specialized platform that manages employment on behalf of client companies. The Employer of Record assists in hiring and paying employees.
Cons: For some countries, ongoing costs may be higher compared to direct employment. Employees may need some education to understand the dynamics of the employment relationship.
HQ country employment & payroll
Employees are directly employed and paid by the company's headquarters entity while working in Denmark.
Cons: While this approach might seem appealing, it is typically not a viable long-term solution. HQ payroll is usually not permissible if the employee is not a tax resident in the HQ country.
Independent contractor agreements
Individuals register locally as sole traders or limited liability company owners and invoice for their services. There is no direct employer-employee relationship.
Cons: In Denmark, this method is not compliant or legal for engaging full-time workers dedicated solely to your company. It could pose challenges in attracting and retaining talent.
Direct local employer setup
This involves establishing a fully compliant local employer, which often requires setting up a local entity and local tax registration.
Cons: The process is expensive, time-consuming, and complex, with uncertainties about how obligations and costs may evolve over time. Keeping track of regulatory changes is necessary.
What to look for when choosing an EOR?
Although Employer of Record providers present a similar service offering, they have different levels of expertise and ways of working. They also differ in terms of price. Before choosing an EOR provider, it is worth asking yourself a few questions:
Radner - EOR services in Denmark
By paying a monthly subscription, you receive a guarantee of legal, i.e. compliant with local law, work of the person you send. Radner services also include handling the formalities related to benefits, insurance, payroll, tax settlement or payment of wages, and above all, taking care of the safety of the foreign employee in Denmark.
Choose to work with us and we guarantee that we will not take away your competence to manage the work of delegated people and to watch over the development of your company on the foreign market.
Cooperation with us is a guarantee of:
- saving you time and money,
- minimisation of business risks,
- reliable care for employees working under the EOR model,
- responsibility for legal employment according to Danish law,
- trust - we treat all clients individually and with due diligence,
- knowledge and experience, as we have been operating in the market for more than two decades,
- transparency - there are no unexpected extra costs with us,
- competence - our employees are thoroughly familiar with Danish law and the Danish market.
Radner can become your business companion to help your company spread its wings on the foreign market. Working with us offers numerous operational and financial advantages.
The scheme for establishing a partnership and providing EOR services is child's play. The first step is to contact us and express your desire to establish a partnership. You can do this by completing the form a few lines below. The next steps are interviews to obtain detailed information about the posted persons, their remuneration for the work, the period of work in Denmark or the rules of employment. This is basically what the cooperation procedure is limited to. We take all the necessary formalities into our own hands.
The first step to establishing cooperation with Radner:
Order the service
What does the payment of an employee's salary look like under the EOR model?
We make sure that our clients save not only time but also money. Therefore, during our cooperation, we act as an intermediary in the payment of remuneration for work. In other words, you, as an entrepreneur, transfer the amount to us in Polish zloty, and it is up to us to convert it and pay it out in the relevant currency (in Denmark it is Danish kroner). Such an operation has two important benefits - simplifying the formalities and saving money by minimising the cost of international transfers or currency exchange.
They cooperate with us:
Do you want to hire an employee in Denmark but do not want to set up a company in Denmark? Choose Radner and Employer of Record services.
If you have any doubts about employment under the EOR model, fill in the fields below and benefit from a free meeting (via Zoom) with a Radner expert!
Establishing a company in Denmark
Employment of employees in Denmark
Employer of Record in Denmark
What is the difference between an EOR and a PEO?
Summary of available options for hiring employees in Denmark
What to look for when choosing an EOR?
Radner - EOR services in Denmark
Denmark is considered one of the most developed countries in the world economically and socially. It is a country with a high level of income equality, one of the highest per capita incomes in the world, and low corruption. It ranks high in terms of social mobility.
It is a country at the forefront of innovation and sustainable development. For many companies looking for a new market, it is an attractive destination. The small economy and liberal trade policy contribute to this.
Denmark's education system is one of the highest rated in the world, so you can find highly skilled workers there.
General information about Denmark
The vibrant capital city of Denmark is Copenhagen, and the native language is Danish. The currency used in Denmark is the Danish Krone (DKK). The tax year in Denmark runs from the 1st of January to the 31st of December, with the date format following the DD/MM/YYYY pattern. Denmark has a significant number of remote workers, estimated to be around 1.1 million. The estimated population of Denmark is 58.1 million, and the Gross Domestic Product (GDP) amounts to USD 350.1 billion.
In the event of misclassification, Denmark imposes penalties ranging from DKK 10,000 to 20 weeks' salary for employees. On a more positive note, it's worth noting that Denmark consistently ranks in the top 3 of the UN's World Happiness Report.
Establishing a company in Denmark
According to EU regulations, any citizen of any EU member state can set up a company in Denmark. However, this is a resource-intensive venture, as the start-up capital required in the country is quite high. Fees for consultancy firms, certified translators, notaries and lawyers must also be taken into account.
To set up a company in Denmark, follow these steps:
- Determine the business type, such as a partnership, private entity, or public company.
- Select an exclusive name for the company.
- Register the company with the Danish Business Authority to obtain your CVR number.
- If your sales of goods or services exceed a specific revenue threshold, register for VAT.
- Commence the process of hiring employees in Denmark.
You should also remember to open a bank account. In order to do so, it is necessary to have a CPR number and to provide a set of necessary documents for opening a bank account.Due to the fact that Denmark receives a very large number of labour migrants, some restrictive steps have been taken in the process of opening bank accounts for foreigners. The number of documents required to open an account is very high. It is advisable to contact the bank of your choice before taking any steps to do so.
Establishing a local company in Denmark is generally a manageable process. However, the complexity arises post-setup, as the employer must handle monthly payroll for their Danish employees, manage tax filings, administer employee benefits, and stay abreast of changes in regulations and collective bargaining agreements.
Employment of employees in Denmark
The employer is responsible for all legal aspects that relate to the employment of employees. Expanding into Denmark, therefore, requires familiarisation with the laws applicable there. Danish labour requirements are usually considered less complex than those in neighbouring countries. Nevertheless, there is a risk of laws and regulations being misinterpreted.
Employment in Denmark is based on the European concept of flexicurity, meaning flexibility with security. Similar to other European economies, the employment system in Denmark is highly flexible. All members of the working population have access to employment. Denmark’s labor force comprises nearly 50% of the Danish population (a higher percentage than most other countries. Danish employees are free to participate in welfare programs and are given benefits in case of unemployment.
All workers employed in Denmark come under the jurisdiction of Danish employment and labor laws. Rae and labor unions are also active and prominent in Denmark. If you are looking to hire in bulk, you might need to engage with these unions.
HR compliance
When you employ individuals in Denmark, you undertake specific responsibilities as an employer. HR compliance involves ensuring that your company's policies and procedures adhere to all relevant laws, regulations, and collective bargaining agreements concerning employment and work practices. Adhering to local employment laws in Denmark is crucial for the smooth operation of your business. Not only are these laws in place to protect employees and safeguard their rights, but they also help minimize your potential liabilities as an employer.
Ensuring compliance entails adhering to all Danish laws related to salaried employees, sickness benefits, annual leave, minimum wage requirements, tax credits, regulations on working hours, employment contracts, and more.
Recruitment
In Denmark, the recruitment process for new applicants has been streamlined, akin to other countries, owing to the widespread use of the internet and online employment. Numerous job portals and social media platforms aid businesses in locating potential candidates, allowing global HR teams to peruse candidate databases to identify the most suitable matches. Once the job description is finalized, it is published on the company's career page, job boards, and professional networking platforms like LinkedIn.
Probation
In Denmark, there is no statutory probation period outlined in the employment regulations. However, it is common for employers to implement a three-month probationary period with a 14-day notice period.
Minimum wage in Denmark
Denmark does not have a statutory minimum wage. Minimum wages are set by collective agreements. Across all sectors, the average hourly minimum wage is approximately DKK 110 per hour.
Employers in Denmark are not obliged to pay a 13-month salary, but most offer annual bonuses to employees. In Denmark, salaries are typically paid on a monthly basis.
Similarly to other countries, employing a worker in Denmark incurs additional costs beyond the gross salary offered. Employers in Denmark are required to contribute to social security and occupational injury insurance.
Weekly working hours in Denmark
The weekly working time in Denmark is 48 hours. The standard working hours typically span from Monday to Friday, falling within the timeframe of 6:00 am to 6:00 pm. Employees usually enjoy a 30-minute lunch break as part of their daily schedule. It is mandatory for a break to be provided if a continuous shift extends beyond 6 hours. The duration of the break depends on its purpose, such as whether it is designated for a meal. Employers may not require employees to work overtime for any payment unless they have the employee's individual or collective consent through a trade union.
Holidays in Denmark
Full-time employees in Denmark are entitled to 25 days of paid holiday per year. Monthly accrued leave is 2.08 days per month, which totals to five weeks of paid vacation annually. Employees accrue these holidays over 12 months, and they then have 16 months to utilize at least 4 weeks of this accrued leave. Employees may also apply for the right to parental, guardianship, adoption or bereavement leave.
In Denmark, there are several national holidays that are mandatory leave for employees. These holidays include:
- New Year's Day
- Maundy Thursday
- Good Friday
- Easter Sunday
- Easter Monday
- Great Prayer Day
- Ascension Day
- Whit Sunday
- Whit Monday
- Constitution Day
- Christmas Day
- Second Christmas Day
As a result of collective bargaining in an industry, maternity and paternity leave benefits may increase. This means that some employees may be entitled to one year's leave.
Sick pay
Regardless of length of service and duration of illness, the employee retains the right to full pay. If the sickness lasts for more than 30 days, a request for sick pay must be submitted by the employer within 5 weeks after the first day of sickness.
Termination of employment in Denmark
Denmark is known for its relatively straightforward employee termination process, particularly when compared to other European Union countries. Unless employees are protected by a fair dismissal clause in their contract or a provision of the Salaried Employees Act, there is no safeguard against dismissal. Employers are not required to notify a trade union or employment agency in the event of employee termination.
In Denmark, termination procedures are generally straightforward, although there are several statutory rules that apply to salaried employees, many of which are determined by the Salaried Employees Act.
Termination of an employment contract in Denmark must be in writing. Proof of its receipt is also required. Employees who have been employed for at least one year are protected against termination without cause. This protection also extends to termination due to:
- redundancy,
- misconduct,
- incapacity to work,
- breach of contract.
Upon the termination of employment, the employer is obligated to compensate any remaining accrued holiday leave by paying it into the employee's holiday fund.
There are also no statutory provisions for severance pay in Denmark, but employees who have worked continuously for 12 years or more are entitled to severance pay of 1 month's salary. Employees who have worked 17 years or more are entitled to a severance payment of 3 months' salary.
Employee benefits in Denmark
The employment of employees in Denmark is associated with a number of legal obligations. Statutory benefits must also be provided to employees. In order to attract the most talented employees, the employer must develop a legally compliant yet competitive benefits and remuneration package. The list of statutory benefits to be provided under Danish law is extensive.
In addition to the standard benefits, some companies in Denmark provide:
- Additional annual leave
- Private pension fund contributions
- Career development allowance
- Flexible working hours
- Provision of hardware and phone
- On-site massage services
- Performance-based bonuses
- Medical insurance coverage.
Apart from social security contributions, most of the contributions set by the Danish Labour Code only apply to full-time employees.
Most statutory entitlements and benefits apply to salaried and industrial employees. Independent contractors are only entitled to the payments that result from the contract with the client. An employer who employs Danish full-time employees is legally obliged to provide them with benefits. However, this obligation does not apply to independent contractors, as it is not permitted in Denmark for contractors to work exclusively for one company on a full-time basis.
Regardless of whether a person is perceived by a business as an employee or a contractor, the judgement of the legislator matters. If an employee is employed and the employer does not provide statutory benefits, the company faces serious misclassification risks and consequences in the form of fines or penalties.
Employers are required to make pension contributions to their employees at a rate of 16% of their salary. Employees, on the other hand, pay 8% payroll tax.
Taxes
In Denmark, the taxation system encompasses various aspects for both employers and employees. Employers are subject to an employer tax ranging from DKK 1076.2 to DKK 4764.2. Additionally, the social security contribution falls within the range of DKK 8,000 to DKK 10,000, while the occupational injury insurance typically ranges from DKK 1,176 to DKK 24,441.
For employees, the tax structure involves a progressive scale. The employee tax ranges from 16% to 52.07%, with an additional fixed amount of DKK 1,135. Contributions to the pension scheme (ATP) amount to DKK 1,135, and there's a labor market contribution (AM-bidrag) at 1.46%.
Work permits and visasNon-EU citizens, particularly those not from Nordic countries, are required to obtain a separate work permit to work in Denmark. This permit is typically sought after securing a job offer. For permanent employment, the work permit can be granted for a maximum of four years and is renewable. However, for other employment types, the work permit is granted for three months at a time.
Types of visas in Denmark include:
- Short-Stay Visa: Granted for various purposes such as tourism and visiting relatives in Denmark, allowing a stay of up to 90 days.
- Business Visa: Typically issued for short-term business-related activities, requiring documentation like invitation letters to support the purpose of the visit, also allowing a stay of up to 90 days.
- Long-Stay Visa: Generally approved on a case-by-case basis, primarily for individuals needing to make multiple short-term visits to Denmark. This visa is relatively more accessible for EU citizens and allows a stay of up to 5 years, with a maximum of 90 days within every 180-day period.
- Work Visa: Necessary for non-EU citizens intending to work in Denmark. Usually, the employer initiates the application process on behalf of the employee or sponsors the application. The work visa is valid for up to 4 years.
Per the regulations outlined in the Danish Working Environmental Act, it is the responsibility of the employer to guarantee the provision of a secure and proper work environment for employees.
Independent contractorsIn Denmark, the workforce comprises a substantial percentage of the population due to the accessibility of free education up to the university level for citizens. The country has been embracing remote work long before its recent global surge. Denmark boasts comprehensive internet and telecommunication coverage, facilitating the seamless establishment of remote work infrastructure. Consequently, when remote work became a widespread practice in 2020, Denmark was well-prepared, leveraging its robust infrastructure and foresight.
While it's common for employers to engage remote workers as independent contractors, this practice is often ill-advised. If an individual is dedicating their full attention to your company in Denmark, treating them as an independent contractor could potentially violate Danish employment laws and those in your own country.
In such cases, your company might become liable for fines related to owed holiday pay, sick pay, social welfare contributions, paternity and maternity benefits, and other legal obligations. Not providing these benefits could leave the individuals without the protections typically granted to full-time employees under local employment laws.
Most important provisions of Employment Laws in Denmark
- Danish Salaried Employees Act: This comprehensive law encompasses all aspects of employment for white-collar employees in Denmark. It outlines the intricacies of the hiring process, contractual obligations for both employers and employees, regulations regarding termination and probation, employee benefits, and other essential aspects of employment.
- Danish Act on Restrictive Covenants: Introducing the concept of restrictive covenants within employment contracts, this act delineates the terms and conditions under which one party is restricted or prohibited from taking specific actions against another.
- Danish Holiday Act: This legislation, passed by the Danish Parliament, delineates the entitlements of different categories of employees concerning holidays. It stipulates the mandatory holiday period for employees, the monthly holiday entitlements, and the accrual of holiday time.
- Differential Treatment Act: Reflecting its title, the Differential Treatment Act ensures that employees and job applicants are not subject to differential treatment or discrimination based on factors such as age, skin color, disability, political affiliations, religious beliefs, ethnic origins, or nationality.
- Taxation ID: The unique identifier for tax purposes is the SE Number, which must be provided when paying taxes. This number is issued by the SKAT (Danish Customs and Tax Administration).
- Choosing a payroll system: Selecting a payroll system depends on various factors, including the requirement to comply with local laws governing employee benefits and provisions. Additionally, consider the mix of contractual or agency employees and full-time employees in your company when making this decision.
- Acquisition of employee information: Maintaining comprehensive employee records is essential for taxation and internal operational efficiency. Implement modern and secure IT systems to facilitate the storage and retrieval of employee data seamlessly.
Employer of Record in Denmark
It is not financially, administratively and logistically possible for all companies to set up a business entity by a foreign company in Denmark and hire employees. Only large, global companies can afford to take this step. Thanks to the EOR, international expansion and the process of hiring employees for companies can be made much easier.What is an Employer of Record?
Employer of Record (EOR) is a service dedicated to entrepreneurs who want to broaden the horizon of their company's activities to other countries. This involves placing in the hands of an external entity all issues concerning the employment of an employee in another country. Business owners value this option for its minimised risk, time saving and cost reduction, which is undoubtedly linked to the desire to broaden the area of operations of the company in question.
By using Employer of Record, Danish employees can be hired in a short period of time in accordance with local law. With this solution, cooperation with legal advisors, HR specialists and local payroll providers will not be necessary.Employer of Record can be a solution tailored to the client company's plans and needs. By working with local experts, EOR can provide all information about the Danish market and offer employees a compliant employment contract.
Employer of Record allows companies to easily expand into foreign markets without having to set up a separate business entity in another country, and without violating any legal restrictions. Such a solution entails saving time and money in dealing with all the paperwork, finding a new location that may not be profitable, as well as less risk.The regulations for hiring employees in another country are often quite complex, which is why companies are increasingly opting to use the service of an EOR that has experience in this area. Employer of Record helps companies to gain access to foreign markets and employees.
Employer of Record is a good solution for companies that want to engage people from abroad for work. The Covid-19 pandemic has contributed to employers and employees looking for new ways of working. They have also started to consider different locations. Thanks to cutting-edge technology, companies are able to expand internationally, as well as access new customer bases and employees.
What does the Employer of Record do?
- The EOR is registered with the tax authorities and performs all related tasks.
- It acts as an intermediary between the client company and the employees and between the client company and the local authorities.
- Employs employees in accordance with Danish law and applicable regulations.
- Is responsible for employment contracts, payroll, HR (human resources) and taxes.
- Organises and delivers required visas or work permits.
- Manages benefits such as employee health insurance and pension fund contributions.
- Advises the client company on local employment restrictions, such as notice periods.
- Provides the employee with information on leave entitlements, employee benefits and changes in employment law.
- Informs the client company of changes in local law and adapts to them.
- Sends out employee declarations every month, issues invoices, and when payments are received, deducts taxes and contributions and pays the employee.
- It allows the client company to maintain control of the employee's daily duties.
- Some Employer of Record entities also handle the recruitment of employees, which helps the client company save time. Doing the recruitment process yourself can be time-consuming and difficult, especially if the company does not have enough staff in the HR team.
- Keeps up to date with changes in local regulations and complies with them.
- Ensures that the client company operates in compliance with all laws, regulations and restrictions.
For large corporations, it may be more advantageous to register a local branch in Denmark. For smaller companies, such a solution is very costly and risky, so they are more likely to choose to work with an EOR that acts as a legal entity in another country and performs all tasks related to the employment of employees in accordance with the applicable law.
Benefits of using Employer of Record:
- Easy and quick expansion to Denmark.
- No need to set up a branch in Denmark.
- Saves time and money.
- The EOR takes care of the legal compliance aspects, including wage, tax, health insurance, immigration, visa or work permit issues.
- Onboarding, i.e. familiarising the employee with the company, its culture and the duties they will have to perform.
- Ensuring legal employer liability for employees in Denmark.
- Competitive benefits and insurance packages for employees.
- Having a talented international workforce.
- Reducing risk, making expansion into the Danish market simpler.
- Having local knowledge available through EOR.
- The EOR allows the client company to focus on its growth.
- Assistance with labour law and local regulations.
- Transfer of control over payroll.
- Less control and influence in terms of administration.
- External impact on the client company.
- Potential for changes and modifications to company standards.
Using the EOR service can protect the client company from operating in contravention of local regulations.
By working with an EOR, the client company can pay employees in accordance with regulations without having a local legal entity.
The biggest advantage of EOR is that you can quickly set up operations in another country. This is particularly useful for smaller companies that do not have sufficient infrastructure to manage local employee requirements.
The statutory system in Denmark, which stems from the Danish Temporary Workers Ordinance, obliges the end-user to provide the person with access to employee facilities (e.g. a staff room), as well as to provide them with information about vacancies in the company. From the person's first day of work, the Employer of Record must provide the same salary and benefits as the end user's employees.
In Denmark, there is no limitation on how long the end-user company can use the EOR. Therefore, it is possible to use the service both short-term and indefinitely - depending on the needs of the company. Employer of Record does not need a licence to supply employees to the client company and provides it with a flexible staffing solution.
What is the difference between an EOR and a PEO?
Because EORs and PEOs perform similar tasks, the two services are often confused with each other. PEOs are co-employment agreements. A PEO (Professional Employer Organisation) handles the company's human resources and payroll administration. This allows the company to focus on managing employees without having to deal with administrative tasks such as payroll.
Summary of available options for hiring employees in DenmarkWhile employing people across borders, there are generally four methods; however, not all are legal or practical. Here's an overview of each method for employing salaried employees in Denmark, along with their potential drawbacks.
Partnering with an Employer of Record Denmark / full-service Professional Employer Organisation
This approach involves employing a specialized platform that manages employment on behalf of client companies. The Employer of Record assists in hiring and paying employees.
Cons: For some countries, ongoing costs may be higher compared to direct employment. Employees may need some education to understand the dynamics of the employment relationship.
HQ country employment & payroll
Employees are directly employed and paid by the company's headquarters entity while working in Denmark.
Cons: While this approach might seem appealing, it is typically not a viable long-term solution. HQ payroll is usually not permissible if the employee is not a tax resident in the HQ country.
Independent contractor agreements
Individuals register locally as sole traders or limited liability company owners and invoice for their services. There is no direct employer-employee relationship.
Cons: In Denmark, this method is not compliant or legal for engaging full-time workers dedicated solely to your company. It could pose challenges in attracting and retaining talent.
Direct local employer setup
This involves establishing a fully compliant local employer, which often requires setting up a local entity and local tax registration.
Cons: The process is expensive, time-consuming, and complex, with uncertainties about how obligations and costs may evolve over time. Keeping track of regulatory changes is necessary.
What to look for when choosing an EOR?
Although Employer of Record providers present a similar service offering, they have different levels of expertise and ways of working. They also differ in terms of price. Before choosing an EOR provider, it is worth asking yourself a few questions:
- Does the EOR provider in question provide this service in Denmark?
- Does it offer the full range of Employer of Record? Is this its core service or an add-on practice? A provider whose core service is EOR will be a better choice.
- How does the Employer of Record deliver its services? Will the way they are delivered be convenient from a business practice perspective?
- Does the service provider operate in accordance with local law?
- How long has the Employer of Record in question been providing its services in Denmark? Does it have many years of experience? Knowledge of Danish legislation is very important in terms of hiring employees for a client company.
- Does EOR serve the industry we are interested in? Are there similar companies among his clients? Does he/she know the specifics of the industry in which our company operates?
- How does the service provider charge? Does he charge a percentage for a particular employee or a predetermined amount?
- What is the duration of the contract? What are the conditions for its termination?
- Does it offer data protection and commercial interests? This issue must be clearly stated in the contract, as the service provider will have access to sensitive data.
Radner - EOR services in Denmark
By paying a monthly subscription, you receive a guarantee of legal, i.e. compliant with local law, work of the person you send. Radner services also include handling the formalities related to benefits, insurance, payroll, tax settlement or payment of wages, and above all, taking care of the safety of the foreign employee in Denmark.
Choose to work with us and we guarantee that we will not take away your competence to manage the work of delegated people and to watch over the development of your company on the foreign market.
Cooperation with us is a guarantee of:
- saving you time and money,
- minimisation of business risks,
- reliable care for employees working under the EOR model,
- responsibility for legal employment according to Danish law,
- trust - we treat all clients individually and with due diligence,
- knowledge and experience, as we have been operating in the market for more than two decades,
- transparency - there are no unexpected extra costs with us,
- competence - our employees are thoroughly familiar with Danish law and the Danish market.
Radner can become your business companion to help your company spread its wings on the foreign market. Working with us offers numerous operational and financial advantages.
The scheme for establishing a partnership and providing EOR services is child's play. The first step is to contact us and express your desire to establish a partnership. You can do this by completing the form a few lines below. The next steps are interviews to obtain detailed information about the posted persons, their remuneration for the work, the period of work in Denmark or the rules of employment. This is basically what the cooperation procedure is limited to. We take all the necessary formalities into our own hands.
The first step to establishing cooperation with Radner:
Order the service
What does the payment of an employee's salary look like under the EOR model?
We make sure that our clients save not only time but also money. Therefore, during our cooperation, we act as an intermediary in the payment of remuneration for work. In other words, you, as an entrepreneur, transfer the amount to us in Polish zloty, and it is up to us to convert it and pay it out in the relevant currency (in Denmark it is Danish kroner). Such an operation has two important benefits - simplifying the formalities and saving money by minimising the cost of international transfers or currency exchange.
They cooperate with us:
vinylee.com
holisticset.com
eternoom.com
caremedis.com
fakturasolid.no
polishamericanartsociety.com
bagrupp.com
Do you want to hire an employee in Denmark but do not want to set up a company in Denmark? Choose Radner and Employer of Record services.
If you have any doubts about employment under the EOR model, fill in the fields below and benefit from a free meeting (via Zoom) with a Radner expert!