Payroll & Employment Guide: Denmark

Hiring in Denmark

When hiring in Denmark, employers must align contracts and pay with the relevant collective bargaining agreements and ensure correct registrations with authorities such as SKAT and ATP. Denmark’s flexicurity model combines flexible hiring and firing rules with strong social protections.

Key hiring steps include:

• Identifying the applicable sectoral collective agreement (CBA) for the role.
• Registering as an employer with SKAT and setting up payroll reporting.
• Registering employees with ATP and relevant pension schemes.
• Ensuring correct treatment for EU/EEA and non-EU hires, including work and residence permits where required.

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Employee Benefits

Employees in Denmark benefit from strong statutory protections and extensive benefits shaped by collective agreements. Employers must comply with these minimums and often offer additional perks to remain competitive.

Mandatory Benefits:

• Annual leave: 25 working days statutory leave under the Danish holiday system (accrual-based).
• Sick pay: Employers often pay sick pay for the initial period (e.g., first 30 days), with municipal or state schemes covering longer-term sickness.
• Parental leave, maternity and paternity benefits: generous frameworks with social security benefits, supplemented by employer top-ups depending on CBA and company policy.
• Pension & ATP: Employer contributions to occupational pensions and ATP (state labour market pension) are standard.

Common Employer-Provided Benefits:

• Supplementary health insurance and wellness benefits.
• Meal allowances or canteen subsidies.
• Travel subsidies and commuting support.
• Performance-related bonuses and flexible working arrangements.

Aligning benefits with local CBAs and expectations is key to attracting and retaining talent in Denmark’s competitive labour market.

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Taxes in Denmark

Denmark has a progressive income-tax system combining national and municipal taxes. Tax levels are relatively high compared to many countries, funding comprehensive welfare and social-security benefits.

Income Tax & Withholding:

• Employers withhold income tax at source based on employee tax cards and SKAT rules.
• Employees are subject to national, municipal, and other levies (e.g., labour-market contributions), with overall effective rates depending on income and municipality.

Employer Contributions:

• Employer contributions to occupational pension schemes.
• ATP contributions and other statutory levies.
• Contributions to holiday pay funds and sickness/parental schemes where applicable.

Employer social and pension charges typically add around 12–20% or more on top of gross salary, depending on sector, CBA, and benefit design.

Payroll in Denmark

Payroll in Denmark must be processed in DKK, with tax and contributions withheld and reported in accordance with Danish rules. Collective agreements often influence pay levels, overtime, and allowances.

Payroll Currency: DKK.

Payroll Cycle:
Monthly payroll is standard. Contracts should clearly state the payment frequency and pay date.

Payslips & Deductions:
Payslips typically show:

• Gross salary and any allowances or overtime.
• Income tax withheld under SKAT rules.
• Employee pension contributions.
• ATP and other statutory contributions.
• Net pay and pay period.

Payroll Reporting:
Employers report payroll data to SKAT and other authorities on a monthly basis, ensuring that all taxes and social contributions are declared and paid on time.

Looking for help with Danish payroll, including tax, pension, and holiday-pay calculations?

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Legal Regulations

Denmark’s labour model is governed by both statutory law and extensive collective bargaining. Much of the detail around wages, working hours, and conditions is defined in CBAs rather than only in legislation.

Key Compliance Responsibilities:

• Respect applicable CBA terms (wages, overtime, working time, allowances).
• Register with SKAT, ATP, and relevant pension schemes as an employer.
• Maintain accurate employment records, including timekeeping and holiday accrual.
• Comply with rules on non-discrimination, health and safety, and termination.

Total Employment Cost:
Employer pension, ATP, holiday, and statutory contributions usually add around 12–20%+ on top of gross pay, but this can vary significantly by sector and CBA.

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Work Permits & Visas for Denmark

Work-permit requirements in Denmark depend on nationality. EEA and Swiss nationals enjoy free movement, while non-EEA nationals generally need employer-sponsored permits.

EEA/Swiss Nationals:
Individuals from EEA countries and Switzerland can work in Denmark without a traditional work permit, but they may need to register their residence and employment.

Non-EEA Nationals:
Employers may need to sponsor work and residence permits under schemes such as:

• Pay Limit Scheme
• Fast Track Scheme
• Positive List for in-demand professions

Permit eligibility depends on the role, salary level, and qualifications. Employers are responsible for supporting compliance throughout the permit lifecycle.

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EOR & PEO Services in Denmark

Using Employer of Record (EOR) and Professional Employer Organisation (PEO) services in Denmark allows you to hire quickly under local rules without setting up your own entity or building full HR operations.

Employer of Record (EOR) in Denmark:

An EOR can:

• Draft employment contracts aligned with Danish law and CBAs.
• Run payroll and remit income tax, pension, ATP, and other statutory contributions.
• Administer statutory holiday and sick-pay obligations.
• Support or coordinate work-permit sponsorship for non-EEA employees.

PEO Services in Denmark:

For companies that already have a Danish entity, PEO services can help with:

• Payroll administration and tax filing support.
• Pension and ATP administration.
• Local HR advisory and compliance with CBAs and labour-law updates.
• Drafting and maintaining compliant HR documentation.

These solutions reduce administrative burden and ensure you remain fully compliant with Danish employment and payroll rules.

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Payroll Calculator

Estimate gross-to-net pay, employer pension and ATP liabilities, and total employment cost in Denmark using Dhi ADT’s payroll calculator. Model different salary levels, benefit structures, and CBA assumptions.

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