Looking for an Employer of Record in Denmark? Here’s what you need to know

Knowing how best to hire and pay employees in Denmark can be complicated. Many international companies typically use an Employer of Record (EOR) to hire local talent, but this may not be applicable in Denmark. 

However, companies can use a workforce management platform, like Payoneer Workforce Management, to help simplify the process. 

Find out more about Payoneer Workforce Management or, keep reading to discover how to manage your Denmark payroll, onboarding and more.

How to hire employees in Denmark

Companies looking to hire and pay employees in Denmark have three key options:

1. Set up a local entity: Companies can register a local subsidiary to employ Danish workers, but this requires considerable time and effort.

2. Hire independent contractors: This is a good choice for short-term or project-based work. It offers flexibility and minimizes compliance obligations. However, the role shouldn’t resemble an employee-employer relationship, or you risk misclassification and penalties.

3. Hire employees through a workforce management platform: As an alternative to using an Employer of Record in Denmark, companies can hire through a workforce management platform, which offers assistance with onboarding, management, and compliance tasks.

Payoneer Workforce Management is a great workforce management solution. We assist you in setting up localized benefits as per local laws and requirements while mitigating risks related to contractor misclassification.

How to onboard employees in Denmark

Onboarding is a vital part of the process when you make a new hire. It’s your chance to set the new employee up for the greatest success, as well as fulfill your legal and regulatory obligations.

Here are some things to consider when onboard talent in Denmark.  

• Payroll and benefits processing: Ensure that local employees are properly set up in payroll systems and enrolled in all required benefits in line with local employment regulations.
• Equipment allocation and setup: Confirm that the new local hire receives all necessary devices and that their equipment is configured and ready for use.
• Onboarding orientation: Organize an introductory session during the first week to guide the new employee through company protocols, onboarding steps, and the responsibilities of their role.
• Team introduction and networking: Set aside time for the local hire to meet their team members and connect with colleagues across the broader organization.

Payoneer Workforce Management enables companies to compliantly onboard and engage talent across borders through its technology platform.

Pay employees in Denmark

The payout currency in Denmark is the Danish Krone (DKK), and salaries must be paid on the last day of the month. Denmark does not have a statutory national minimum wage, and there is no compulsory annual bonus.

Taxes and contributions

When it comes to taxes and contributions, here’s what you need to know:

• Income tax: Individual income tax ranges from 8% and 30%, but this may vary. The expat tax rate ranges from 8% to 38%. 
• Public health insurance: Public health insurance is mandatory and automatically covers all residents. 
• Social security: The employer should cover ⅔ of the ATP (lifelong pension) while the employee covers ⅓. In total, social security costs DKK 300 per month for a full-time employee. 
• Industrial injuries insurance: Industrial injuries insurance (Arbejdsskadeforsikring) is mandatory and designed to cover employees in case of work-related accidents or occupational diseases.

With Payoneer Workforce Management, our unified, all-in-one platform gives you a single dashboard to manage your entire global workforce and enables you to pay contractors in just a few clicks.

Employment laws in Denmark

Any company employing workers in Denmark must abide by all local laws and regulations. Here are some of the pertinent Danish employment laws.

• Working hours: Standard working hours are 160.33 hours per month and 37 hours per week. Some employees also work for 7.5 hours per day, 37.5 per week, or 162.5 per month. 
• Overtime hours: There are no standard regulations around overtime hours. These are defined in collective bargaining agreements with the relevant union.  
• Probation period: Probation can last up to 3 months. 

Global businesses can get support to stay compliant with local labor laws using Payoneer Workforce Management’s infrastructure.

Minimum wage in Denmark

Denmark does not have a statutory national minimum wage. Instead, minimum wages are set in collective agreements. 

These are typically updated every few years, so it’s a good idea to check regularly to make sure you stay compliant.

Employment contracts in Denmark

Employers must legally provide employees with an employment contract if their employment lasts for at least 1 month and the average weekly working time is more than 8 hours. 

Contracts should reference the terms of employment, as regulated by a collective agreement. They also typically include:

• Name and address of employer and employee
• The primary location of the workplace
• Job description or employee’s job title, rank, or job category
• Employment commencement date
• Expected duration of employment if not permanent employment
• Employee’s rights regarding vacation and vacation pay
• Terms of notice
• Salary and frequency of payment, including other forms of remuneration such as pension contributions, lodging, and meals
• Standard daily or weekly working hours
• Information on which collective agreements or other agreements regulate the employment conditions

Payoneer Workforce Management allows you to onboard talent quickly and securely with localized contracts and payroll.

Leave policy in Denmark

Denmark sets a minimum leave that employers must provide for their employees, including vacation time, public holidays, sick leave, and parental leave.

Vacation leave and public holidays

Employees receive at least 25 vacation days per year, to be used from September to August.

As long as the employee has been with the company for at least 6 months, they can carry forward up to 5 days to the following year (to be used by the end of December), while the remaining balance must be paid out.

There are also 12 public holidays in Denmark.

Parental leave

Denmark also offers flexible childcare leave, with a total of 52 weeks available, split between parents. Within this, there are specific periods for maternity and paternity leave, as well as 32 weeks of shared parental leave, where individual entitlements can be split between parents. 

	Mother	Father / Co-mother
Total leave	28 weeks	24 weeks
Leave before birth	4 weeks (non-transferable)	Not applicable
Leave immediately after birth	2 weeks (non-transferable)	2 weeks (non-transferable)
Leave after the initial 2 weeks	3 weeks (transferable to the other parent), then 9 weeks (non-transferable)	13 weeks (transferable to the other parent), then 9 weeks (non-transferable)

Employers can claim a social security refund for up to 32 weeks. Maternity leave beyond this period is unpaid by the employer. 

Other leave

In Denmark, sick leave is unlimited. Wedding and compassionate leave are both based on company policy.

Work permit in Denmark

The rules for residence and work permits in Denmark differ based on the employee’s country of origin and the type of job, so always check the government website for details.

Background check in Denmark

It’s possible to carry out a background check before hiring an employee in Denmark. These typically include things like:

• Criminal check
• Employment history
• Education history
• Social media usage

You may need consent from the employee and will have to disclose what you are checking.

Employment termination in Denmark

Termination is a complicated process and needs to be handled delicately. Terminations are possible in the following scenarios:

• Disciplinary dismissal (misconduct/poor performance)
• Dismissal due to objective reasons (redundancy/restructuring/financial grounds)
• Expiry of a fixed-term employment contract (EC)
• Termination during probation
• Employee’s resignation
• Mutually agreed termination

Unless the termination is based on discriminatory or other protective reasons, it’s possible to terminate an employment contract without cause within the first 12 months of employment without having to pay compensation for unfair termination. After this period, it’s not possible to terminate an employment contract without cause. 

Termination notice

The following notice periods apply before termination:

Length of service	Notice period
Probation	2 weeks
0 to 5 months	1 month
5 months to 2 years and 9 months	3 months
2 years and 9 months to 5 years and 8 months	4 months
5 years and 8 months to 8 years and 7 months	5 months
More than 8 years and 7 months	6 months

The employee’s notice period is 1 month (regardless of seniority) in case of resignation. It may be agreed in writing that a longer period of notice must apply, provided the period of notice given by the employer is extended accordingly.

Severance pay

Upon termination, employees are not entitled to severance pay unless they have been continuously employed for 12 to 17 years. In such cases, the employee is entitled to severance pay equivalent to 1 to 3 months’ salary.

Severance pay for unfair dismissal

Additionally, a salaried employee who is unfairly dismissed and has been employed for at least 1 year at the time of dismissal is entitled to severance pay, as per the following rules:

• The maximum amount payable is 50% of the salary in the statutory notice period.
• If the employee is over 30, the potential severance pay is increased to an amount equal to 3 months’ salary.
• If the employee has been employed for at least 10 years, the severance pay may be increased to a maximum of 4 months’ salary.
• The amount payable is further increased to 6 months’ salary if the employee has at least 15 years’ service.

Company registration in Denmark

Companies looking to hire and pay employees in Denmark can choose to register their company in the country. To do this, you need to understand the business structures available to you and the associated legal obligations. Details on how to register a company can be found on the government website. 

However, using a workforce management platform to hire local talent is generally a streamlined option. Payoneer Workforce Management enables compliant onboarding of talent in 160+ countries without having to set up a legal entity.

PEO in Denmark

A PEO is designed to help you with HR and admin tasks for employees you already employ through your local entity.

While some countries allow the use of EORs, in Denmark, companies should use compliant workforce management solutions. These platforms help manage HR and compliance processes for companies without a local entity. This is invaluable for international companies seeking global talent.

Payoneer Workforce Management services in Denmark

Working with a partner like Payoneer Workforce Management helps support global operations and access local talent. 

Our unified platform offers assistance with employment contracts, benefits administration, taxes, payroll, timesheets and more.

Book a demo to find out more.

FAQs

1) Are EORs legal in Denmark?

Using EORs in Denmark may not be an applicable model, but companies can onboard employees through a workforce management platform. For instance, Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

2) How much does it cost to hire talent in Denmark?

The employer cost varies depending on the employee’s salary and other local factors. Please use our cost calculator tool for an employment cost estimation.

3) Why hire Danish talent through a workforce management platform?

Payoneer Workforce Management allows you to onboard and pay employees across the globe in 70+ currencies without setting up a local entity. Get in touch for more details.