Employer of Record (EOR) in Denmark

G-P’s employer of record (EOR) model allows your company to start hiring talent in minutes via our global entity infrastructure. Unlike a Professional Employer Organization (PEO), G-P allows your company to expand your global footprint without the hassle of entity setup and management.

Our global employment products, including G-P Meridian Prime™ and G-P Meridian Core™, are backed by the largest team of HR and legal experts in the industry. We handle the growing complexities of compliant global expansion — so you can focus on opportunities ahead.

As a global EOR expert, we manage payroll, employment contract best practices, statutory and market norm benefits, employee expenses, as well as severance and termination. You’ll have peace of mind knowing you have a team of dedicated employment experts assisting with every hire. G-P allows you to harness the talent of the brightest people in 180+ countries around the world, quickly and easily.

Hiring in Denmark

In Denmark, the majority of employment terms and working conditions are determined by agreements between the labor market parties as opposed to statutory regulations. There are very few statutory labor and employment rules in Denmark, and those that do exist are often the result of EU legislation. Approximately 70% of the entire workforce in Denmark are members of a trade union.

Collective bargaining agreements (CBA) are a major factor in Denmark’s employment law due to the important role of the labor markets. CBAs with trade unions and employee representatives are very common in many industries and the majority of the workforce in Denmark is covered by a CBA. Therefore, employment conditions are widely regulated by CBAs, for example, hours of work, minimum pay, notice period, etc.

Employment contracts in Denmark

While a written employment contract is not required, best practice is to put a strong employment contract in place which spells out the terms of the employee’s compensation, benefits, termination requirements, and other terms and conditions of employment. Employees are legally entitled to receive, in writing, certain terms and conditions of the employment no later than 1 month after the employment begins. An offer letter and employment contract in Denmark should always state the salary and any compensation amounts in Danish krone rather than another currency.

Working hours in Denmark

The average work week in Denmark should not exceed 48 hours, including overtime. However most collective bargaining agreements contain rules on standard work weeks and the typical number of working hours is 37-37.5 per week, Monday through Friday. Employees are required to be given at least 1 full day off throughout the week; this day is typically Sunday.

Overtime pay is generally governed by the CBA, there are no statutory requirements regarding compensation for overtime work. Some CBAs allow employees to choose between receiving payment and time off in lieu of payment.

Holidays in Denmark

Denmark celebrates 11 public holidays, including:

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

It should be noted that there is no legislation on public holidays in Denmark. Collective bargaining agreements or individual employment agreements govern whether an employee is expected to work on such days. If an employee is entitled to the day off but is required to work, they should receive a bonus of 100% of their salary.

Vacation days in Denmark

All employees in Denmark are entitled to 25 working days of annual leave. Employees who receive salary during their holiday are also entitled to a holiday supplement amounting to 1% of their salary. The holiday supplement must be paid in 2 fixed instalments in May and August, or it can be paid at the same time as the holiday is taken.

If the employee has been employed for a short period, 2.08 days of vacation per month of employment will be granted. The employee is still entitled to take up to 5 weeks of annual leave, but this will be unpaid.

As of September 1, 2020, the holiday year is from September 1 until August 31 with a subsequent holiday period extending  until December 31 of the same year. The accrual and deductible period will be concurrent. In other words, employees will accrue leave in the same year in which they can take it, and they may take paid holiday leave before it is accrued. Employees must take a minimum of 20 days holiday per year in accordance with working time regulations (unless there is a justifiable reason why they can’t take the leave).

Unused holidays, up to a maximum of 20 days, will be compensated through payment to the Holiday Fund, unless the employment contract states differently.

Denmark sick leave

It is common practice to specify in the employment contract how long an employee will receive sickness payment from their employer. An employee is entitled to an amount equivalent to at least 30 days’ sickness benefit from the employer. This will apply provided an employee has worked at least 74 hours during the 8 weeks preceding the sickness absence.

After the first 30 days of absence, the employee is entitled to sickness benefits from the local authority for a period of up to 22 weeks of absence, or for salaried employees, the employer can request reimbursement from the local authorities. This period may be extended in specific circumstances.

There is a maximum cap on sick pay available from the municipality which is updated annually.

It is not a legal requirement to pay employees full pay during sickness absence. However, collective agreements and/or individual employment contracts often entitle the employee to full salary during all or part of the sickness absence.

Maternity/parental leave in Denmark

Families where the parents live together when the child is born are each generally entitled to 24 weeks of leave with maternity/parental benefits after birth.

Maternity leave can be taken as follows:

Number of weeks	Rules for the leave
4 weeks of pregnancy leave	The mother can receive maternity benefits during pregnancy leave that can be taken 4 weeks before the due date.
2 weeks of leave after birth	Maternity leave must be taken after the birth of the child and cannot be transferred.
8 weeks at birth*	When the initial 2 weeks of leave end after the birth, mothers have 8 more weeks of maternity leave. The leave must be taken within the first 10 weeks of the child being born. The mother can extend the leave if they resume working part-time as per an agreement with their employer.
9 weeks of leave	The 9 weeks of maternity leave cannot be transferred to the other parent. The leave must be taken within 1 year of the child’s birth unless the mother, due to special circumstances, is prevented from taking the leave.
5 weeks of leave	The 5 weeks of maternity leave with must be taken within 1 year of the child being born. However, the mother can extend or postpone the weeks up until the child reaches the age of 9 if they fulfill the conditions for this.

Parental leave:

Denmark supplementary benefits

It is best practice to budget 20% for benefits costs on top of the gross salary to allocate the total employer’s cost.

Bonuses

Incentive bonuses are becoming increasingly common in Denmark, even in the public sector. These additional expenses and bonuses are negotiated in the employment contract.

Termination/severance in Denmark

Termination of employment in Denmark is relatively uncomplicated compared to other countries in the EU. Salaried employees who have been employed by the same employer for 12 months are protected against unfair dismissal. CBAs often contain similar provisions.

There is no general legislation regarding probationary periods in Denmark, however, for salaried employees a probationary period of up to 3 months can be agreed upon. For salaried employees, employment may be terminated by providing at least 2 weeks’ notice.

The notice period is typically determined by the Salaried Employees Act, an applicable Collective Bargaining Agreement, or the employment contract. For employees covered by a CBA, the notice period varies by industry and applicable CBA. Salaried employees are entitled to the following notice period in case of dismissal:

• 1 month’s notice during the first 6 months of employment
• 3 months’ notice after 6 months of employment, increasing by 1 month for every 3 years of service with the employer, up to a maximum of 6 months’ notice.

Salaried employees who have been continuously employed with the same employer for 12 or 17 years are also entitled to a severance payment of 1 or 3 months’ salary respectively per the Salaried Employees Act.

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

Paying taxes in Denmark

Income tax rates are progressive in Denmark and the income tax payable is calculated on an annual basis.

Income tax in Denmark consists of labor market tax, municipal tax, healthcare, and state tax. Additionally, there is a flat fee social security. Church tax is an obligation only if the employee is a member of the Danish Lutheran church. Labor market tax is on gross income, but other income tax is calculated after allowable deductions are considered for allowances. Altogether, the marginal tax rate does not exceed 52.07% (2023).

• Labor market tax is 8% of gross income.
• Municipal tax is calculated on taxable income at a flat rate and is dependent on the municipality. Rates are between 22.5% and 27.8%
• State tax is based on cumulative income and rates are between 12.09% and 15%
• Social security for employee portion is DKK 1135.80 per year. Employer portion is between DKK 8,000-10,000 per year.

There are a number of allowances in Denmark that offset against a taxpayer’s income, reducing their overall tax burden. The most common allowances are:

• Personal allowance for 2023 is DKK 48,000.
• Employment related allowances including trade union and unemployment fund fees, child maintenance, and private pension contributions can total DKK 8,000 per year.
• Transport allowance for taxpayers who travel a long distance each day to their place of work is calculated based on the number of days worked and the distance traveled. There is no deduction for the first 24 km traveled each day and it does not matter what form of transportation is used. It is the taxpayer’s responsibility to calculate this and include it in their personal income tax return.

Social security in Denmark is funded by employee and employer contributions. It funds the following country programs with an employee annual contribution of DKK 1135.80 and an employer contribution flat fee which can vary by occupation.

Registration at the Civil Registration Office, where a CPR number is issued, is a legal requirement for all residents in Denmark. The CPR number allows residents to be able to benefit from healthcare and social security benefits in Denmark.

Why G-P?

At G-P, we help companies unlock the power of the everywhere workforce through our industry-leading Global Growth Platform™. Let us handle the complex and costly tasks involved in finding, hiring, onboarding, and paying your team members, anywhere in the world, with the speed and guaranteed global compliance your business needs.

Contact us today to learn more.