An Employer of Record (EOR) in Denmark is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer.
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Denmark to help you with your global staffing needs.
EOR Denmark - Scope of Services
An employer of record in Denmark assist you with the following
- Draft local employment contracts
- Register employees with the social security agencies
- Withholding taxes
- Provide Benefits
- Comply with the local labor laws in Denmark
- End to End Payroll
- Work Permit
- Hiring and Payments
Employment Contracts in Denmark
As per the new employment laws in Denmark (ACT no. 501 of 16/05/2023), the following laws apply to the employees with joining date after July 1st 2023.
- It is mandatory for employers to provide employment contracts if the contract duration is over 1 month and average working hours per week is over 3.
- Probation period cannot exceed 3 months for a white-collar worker.
- The new law on “work on the side” makes it easier for employees to engage in a side job alongside the primary job. Employers can prevent an employee from taking up a second job only if there are valid reasons that justify the side job will impact the current job.
- The new minimum requirements of working conditions ensure that the employees are not required to work beyond specific set hours and days. Furthermore, if an employer cancels a work assignment before a previously agreed-upon period, employees are entitled to receive compensation. This is beneficial for employees with unpredictable work schedules as it provides protection and compensation in case of sudden work assignment cancellations.
- Employees are entitled to receive the employment contract before 7 calendar days of the joining date.
What should be included in Denmark employment contracts?
Employment contracts in Denmark must include the following information:
- Employer and employee details: Names and addresses.
- Location of work: Address or information about working in different places.
- Description of work: Job title or description.
- Start time of employment: Commencement date.
- Expected duration: When it's not an indefinite employment.
- Temporary employees: Identity of user companies (when known).
- Probationary period: Duration and conditions.
- Absence with pay: Duration.
- Termination notices: Employee and employer notice periods.
- Salary details: Base salary, allowances, and payment dates.
- Working hours: Normal hours, overtime, and shift details.
- Unpredictable work pattern: Variable schedules, guaranteed hours, reference hours, notice periods.
- Right to education: Offered by the employer.
- Collective agreements: Indication of which agreements apply.
- Social security: Identification of social security institutions for contributions.
Types of Employment in Denmark
| Type of Employment | Description |
|---|---|
| Full-Time Employee | The most common form, typically involving a 37-hour workweek and 5 weeks of annual leave. |
| Part-Time Employee | Involves fewer weekly working hours than full-time positions. |
| Temporary Employment | Includes temporary work and project work where employment is for a specified period mentioned in the contract. |
| Freelance/Consultant | Self-employed individuals who provide services on a task-to-task basis. Employers do not provide benefits like leave or sick days. Freelancers are responsible for their work equipment and offices. |
| Student Positions | Many students work alongside their studies, and some have student or intern positions with companies as part of their education. |
| Posted Workers | Workers posted to Denmark by foreign companies have rights and obligations regulated by Danish law. |
| Salaried Employees | Covered by the Act on Salaried Employees, typically working more than eight hours per week, in roles such as shop assistants, engineers, nurses, and doctors. They have specific rights under the law. |
| Young Workers | Regulations apply based on age, with legal employment contracts starting at 18 years. Special rules and considerations are in place for individuals between 13 and 15 and those under compulsory education. Parents or guardians must be notified of the employment, working hours, and potential risks. |
Minimum Wages in Denmark
There is no statutory minimum wage in Denmark. Average minimum wage is DKK 110 per hour, which is equivalent to 15.6 USD as per the USD to DKK conversion rate in October 2023.
Payroll Cycle
In Denmark, payroll is typically processed monthly and salary is paid on the last day of the month. There is no statutory payroll cycle in Denmark.
Probation Period and Notice Period
As per ILO, the probationary period in Denmark is 3 months. During probation, both the employer and employee can terminate the contract with a notice of 14 days.
As per the Act on Salaried Employees (funktionærloven), notice period after probation for the employer varies based on the employment duration.
| Duration of Employment | Notice Periods |
|---|---|
| 0–6 months | 1 month |
| 6 months – 3 years | 3 months |
| 3–6 years | 4 months |
| 6–9 years | 5 months |
| 9+ years | 6 months |
| Agreed probationary period of max. 3 months | 14 days |
| Agreed temporary assignment of max. 1 month | No notice |
Working Hours
The standard working hours in Denmark is 37 per week. Working hours cannot exceed 48 hours in 4 months. Employees are entitled to take at least 11 hours of rest per day and 24 hours rest per week.
Overtime
Employees are entitled to receive an overtime pay of 150% to 200% in Denmark. 50% of the standard pay is paid for the first 3 hours and 100% for the following hours.
13th Month Salary
It is mandatory to pay a 13th month salary as per the Danish labor laws. It is common for employers to pay a bonus as agreed in the employment contract.
Social Security in Denmark
Employee Payroll Contributions in Denmark
| Employers | DKK per month |
|---|---|
| Mandatory Pension Scheme (ATP) / Labor Market Supplementary Pension | 189.35 |
| Educational Scheme (AUB) | 233.58 |
| Occupational Injury (AES) / Labor Market Insurance | 33 |
| Danish Labour Market Fund (AFU) | 0.58 |
| Pension Finance Scheme (FIB) | 47.58 |
| Maternity Leave Fund | 102.08 |
| Industrial Injury Insurance | 273.6 |
| Administration of Holiday Fund | 10.2 |
| Administration of Frozen Holiday Pay | 2 |
| Ferietillæg (1% holiday appendix) | 1 |
| Total Employment Cost | 930.00 to 1388.00 DKK per month |
Employee Payroll Contributions in Denmark
| Employees | DKK per month |
| Social Security | 1135.80 DKK |
| Total Employee Cost | 1135.80 DKK |
Overview of Denmark Social Security Contributions
Labour Market Supplementary Pension aka ATP (Arbejdsmarkedets Tillægspension) Livslang
ATP Livslang is a Danish pension fund. Employers pay two-third of the contributions and employees pay one-third of the contributions. Contribution rates are decided based on the category of workers and the working hours. Categories include payroll frequency of monthly, bi-weekly, weekly and casual workers.
The below contributions apply to all employees that work in Denmark or sent by a Danish employee to a foreign country and if the minimum working hours are 9 per week, 18 per 2 weeks and 39 per month.
For a regular employee with a standard working hours of 116 per month, the ATP contributions are 189.35 DKK per month.
Contributions rates for the employees paid on a monthly basis
| A-rate | Employee share | Employer share | Total per month |
|---|---|---|---|
| Min. 117 hours/month | 94.65 DKK | 189.35 DKK | 284.00 DKK |
| 78 - 116 hours/month | 63.10 DKK | 126.25 DKK | 189.35 DKK |
| 39 - 77 hours/month | 31.55 DKK | 63.10 DKK | 94.65 DKK |
| Under 39 hours/month | 0.00 DKK | 0.00 DKK | 0.00 DKK |
Contributions rates for the employees paid for every 14 days
| A-rate | Employee share | Employer share | Total per 14 days |
|---|---|---|---|
| Min. 54 hours/14 days | 49.80 DKK | 99.60 DKK | 149.40 DKK |
| 36 - 53 hours/14 days | 33.20 DKK | 66.40 DKK | 99.60 DKK |
| 18 - 35 hours/14 days | 16.60 DKK | 33.20 DKK | 49.80 DKK |
| Under 18 hours/14 days | 0.00 DKK | 0.00 DKK | 0.00 DKK |
Contributions rates for the employees paid weekly
| A-rate | Employee share | Employer share | Total per week |
|---|---|---|---|
| Min. 27 hours/week | 24.90 DKK | 49.80 DKK | 71.10 DKK |
| 18 - 27 hours/week | 16.60 DKK | 33.20 DKK | 47.40 DKK |
| 9 - 18 hours/week | 8.30 DKK | 16.60 DKK | 23.70 DKK |
| Under 9 hours/week | 0.00 DKK | 0.00 DKK | 0.00 DKK |
Casual Workers
| Casual laborers | Employee share | Employer share | Total per hour |
|---|---|---|---|
| Per hour | 0.67 DKK | 1.34 DKK | 2.01 DKK |
Employers are liable to report and pay the contributions on a quarterly basis as below
| Quarter | Reporting date | Due date | Final date of payment |
|---|---|---|---|
| Q1 | 10 April | 1 May | 7 May |
| Q2 | 10 July | 1 August | 7 August |
| Q3 | 10 October | 1 November | 7 November |
| Q4 | 10 January | 1 February | 7 February |
ATP Contributions will be revised in January 2024.
Employers' Education Contribution aka Arbejdsgivernes Uddannelsesbidrag (AUB)
The aim of AUB (Arbejdsgivernes Uddannelsesbidrag) is to facilitate work placements for students pursuing vocational education.
Quarterly contributions are 803.25 DKK and monthly contributions are 267.75 DKK.
Employers are required to contribute 803.25 DKK for every quarterly contribution of 852 DKK to ATP Livslang pension.
Occupational Insurance aka Arbejdsmarkedets Erhvervssikring (AES)
AES is a workplace injury scheme and it is to ensure the employees are covered under workplace injury. AES is public insurance and it covers personal and material damage that occurs at work.
Employers are required to contribute an AES rate and an industry injury fee. The fee is determined by taking into account two factors: 17 percent of the total AES contributions and 12 percent of the expenses linked to compensating workplace accident-related costs. On top of this, each company must also pay a standard fee of DKK 2 per full-time employee to manage administrative expenses related to this fee.
| Time | Paying-in slip sent | Charge due for payment | Payment date |
|---|---|---|---|
| 1st quarter 1 Jan - 31 March | Mid June | 1 July | 14 July |
| 2nd quarter 1 Apr - 30 June | Mid Sep | 1 Oct | 14 Oct |
| 3rd quarter 1 July - 30 Sep | Mid Dec | 1 Jan | 20 Jan |
| 4th quarter 1 Oct - 31 Dec | Mid March | 1 Apr | 14 Apr |
Danish Labour Market Fund aka Arbejdsmarkedets Fond for Udstationerede (AFU)
In Denmark, posted workers refers to the foreign workers residing in Denmark for temporary employment. AFU is to safeguard the wages of posted workers in Denmark. AFU covers the employee salary in case the foreign employer fails to pay the wage. Subsequently, the foreign employer is listed as one who has failed to pay wages to their employee working abroad.
It is required to contribute to AFU alongside ATP and these payments are collected through Samlet Betaling. There is no contribution for AFU in 2023. AFU is subject to annual adjustments.
Samlet Betaling
Samlet Betaling functions as a central collection entity. In Denmark, employers have an obligation to make ongoing contributions to various mandatory programs designed to bolster the Danish labor market and enhance the welfare of their workforce. These contributions are systematically gathered by a unified collection agency known as Samlet Betaling.
Pension Finance Scheme aka Finansieringsbidrag (FIB)
FIB is a financial obligation to cover a portion of state’s expenses related to ATP contributions to groups including Individuals receiving unemployment benefits, sick pay, maternity/paternity benefits, and resource course grants. Wage earners who are enrolled in VEU (Voksen- og Efteruddannelse) programs for occupation-oriented adult and continuing education.
A portion of the Finansieringsbidrag also contributes to Lønmodtagernes Garantifond (LG), which serves the purpose of ensuring that employees can receive their owed wages, pensions, and holiday allowances even if their employer goes bankrupt.
Employers are required to contribute 123.25 DKK to FIB for every quarterly contribution of 852 DKK to ATP.
Maternity Leave Fund aka Barselsfonden
Barsel.dk provides financial support for maternity leave. It's in addition to Udbetaling Danmark's benefits. This applies to both employers and self-employed individuals. There's a quarterly contribution. To qualify:
- Keep paying employees on maternity leave.
- Be eligible for Udbetaling Danmark's Benefits.
- Ensure the employee's hourly wage is above DKK 122.97 (including holiday pay).
Barsel.dk refunds up to 37 hours per week, even for employees at multiple workplaces.
Employers are required to contribute quarterly 0.85% of the total payroll.
The following are eligible to receive a refund from the Barselsfonden:
- Employers who have paid wages to an employee who is on maternity leave.
- Self-employed women who are on maternity leave.
Industrial Injury Insurance aka erhvervsskadeforsikring
Erhvervs Skadeforsikring is Private insurance and it covers damage to the company's property, damage to other companies or individuals, and damage to the company's employees. It is funded by employers and the government. Employers contribute 80% and the balance is 20% through government subsidy. Employers' premium is decided based on the size, industry and the coverage selected by the employer.
Administration of Holiday Fund aka Administrering af feriefond kontingent.
Arbejdsmarkedets Feriefond (AF) is the Danish Labour Market Holiday Fund. It is a public body that uses its funds to pay for holidays for disadvantaged families and children. The fund is funded by contributions from employees and employers, as well as a government subsidy.
The contribution rates for AF are as follows:
- Employers: 0.29% of total payroll
- Employees: 0.12% of gross salary
The government subsidy for AF is equal to 20% of the total contributions from employers and employees.
Administration of Frozen Holiday Pay aka Lønmodtagernes Feriemidler
Lønmodtagernes Feriemidler is an important part of the Danish vacation system. The fund helps wage earners save up for vacation and ensures that they have access to their vacation funds when they need them.
All salaried employees are entitled to 25 vacation days per year. These vacation days can be availed or paid out as vacation pay. Employees can also get paid vacation pay incase of unemployment.
Employers will receive a letter from LF if the frozen holiday money is due for payment by July. Some scenarios include employees reaching national pension age or left the labor market or passed away. Employers are required to pay the due by September 1st.
Holiday Bonus aka Ferietillæg
Ferietillæg means holiday allowance refers to the additional payment made to employees in Denmark for their annual vacation period. This payment is 1% of the employee's salary and is intended to cover their expenses during their vacation.
Denmark Overview
| Overview | |
| Continent | Europe |
| Country | Denmark |
| Capital | Copenhagen |
| Time zone | UTC−04:00 — Thule Air Base in Greenland |
| Total Time zones | 5 |
| Working hours per week | 37 |
| Working week | Monday–Friday |
| Typical hours worked | 7.4 |
| The personal Tax filing deadline | The tax return must be filed by 1 May or no later than 1 July in the year following the relevant income year. |
| Financial Year | 1st January to 31st December |
| Date format | dd/mm/yyyy |
| Currency | Danish Krone (DKK) |
| VAT | the standard rate is 25% |
Personal Income Tax Rates in Denmark
Denmark has a progressive personal income tax system, meaning that the higher your income, the higher proportion of your income you will pay in tax. The state income tax rate in Denmark ranges from 0% to 52.1%, with the top rate applying to incomes over DKK 552,500 (in 2023).
| Income Tax | Marginal tax including labor market tax |
| DKK 0 - 46,700 | 8% |
| DKK 46,701 - 544,800 | 42.83% |
| Over DKK 544,800 | 56.5% |
| Taxes (2022) | Income basis | Tax rate (%) |
| State taxes: | ||
| Bottom tax | Personal income | 12.1% |
| Top tax | Personal income | 15% |
| Local taxes: | ||
| Municipal tax (average) | Taxable income | 24.982% |
| Labour market tax | Personal income | 8% |
| Share tax: | ||
| DKK 0 to 57,200 | Share Income | 27% |
| More than DKK 57,200 | Share Income | 42% |
Severance Pay
Severance pay in Denmark is not mandatory as per the Danish labor laws. However it is common to pay severance pay to the senior employees. Severance pay for employees with length of employment over 12 years is equal to one month’s salary. Severance pay for employees with length of employment over 17 years is equal to three month’s salary.
Leave Policy in Denmark
| Leave Type | Details |
|---|---|
| Holidays |
|
| Paid Time Off (PTO) |
Vacation/Annual Paid Leave: Up to 10 weeks in the transition year, with limits.
Use-it-or-lose-it policy: Unused holiday days can be carried over or agreed upon differently. PTO payout at termination: Accrued holiday pay is provided when the employment ends. |
| Maternity, Paternity, and Adoption Leave |
Maternity Leave: Expecting mothers get various periods of paid leave, with a maximum of 46 weeks.
Paternity Leave: Fathers have paternity leave and parental leave with extensions. Adoption Leave: Adoptive parents have leave based on the type of adoption. |
| Sick Leave | Employers pay for the first 30 days of sick leave, followed by social benefits for up to 22 weeks, subject to specific requirements. |
| Dependent Care Leave | Employees can get paid leave for specific situations, like hospitalization of their children under 14 years. |
| Jury Duty and Voting Leave | Not specified by law. |
| Bereavement Leave | Employees who lose a child before age 18 are entitled to 26 weeks of unpaid leave, including co-mothers, adoptive parents, and future adoptive parents. |
| Military Leave | Employees between 18 and 30 are liable for national military or civil service, with protections. |
In Denmark, Employer of Record (EOR) services simplify global workforce expansion by handling local employment regulations. This allows businesses to concentrate on their core operations while ensuring legal compliance and efficient payroll management. Denmark's strong economy makes it an appealing destination for international companies, and EOR services enable them to navigate the local labor market smoothly, saving time and resources.
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