Employer of Record Denmark
Infotree Global Solutions help companies to achieve potential growth globally by providing global payroll and Employer of record services in the country where it wants to expand. Setting up a business in a foreign country like Denmark can be challenging but with Infotree global you don’t have to worry about a thing. As your Denmark Employer of record, we take responsibility for all formal employment duties so that you can focus on your business development without being concerned about the legal hassles.
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Hiring in Denmark
Denmark is a Nordic European country. With a population of 5.7 million, it is one of the countries to have the lowest income inequality rating and the country to have the highest social mobility in the world. The process of expanding business on the Danish land is comparatively easier if compared to other parts of Europe. The Danish business market focuses more on simplifying the employment process for employers rather than imposing an innumerable number of restrictions made by the government. This simplicity in the hiring process attracts a huge number of companies to establish their franchise there, and as a result, the Danish employees are never running out of amazing job options.
Even though the hiring protocols are pretty simple in Denmark, dealing with the Danish management structures and labor laws can be daunting for any company. As your employer of record Denmark and PEO, we ensure all contracts are according to local laws and meet all compliance requirements.
Employment Compliance in Denmark
For smooth functioning of business and companies in Denmark. The Danish employment laws have a certain level of protection for employees including The Salaried Employees’ Act, The Holiday Act, The Act on Restrictive Covenants, and The Discrimination Act. These are comparably uncomplicated and flexible. Employees are classified into three groups- executive officers, salaried workers, and salaried employees. The legislation is applied based on the group they belong to. The Danish Salaried Employees Act pertains to only the salaried employees. The compliance obligations are much lower if one compares them to other European countries.
While drafting a contract, all the essential information involved with the hiring process must be known by the Employer. Here are a few of the aspects that companies should know before initiating the contract drafting.
Working hours – The average working hours allocated for employees is 48 hours including overtime, and this period should be distributed throughout one week. Sundays are supposed to remain off every week.
While planning for a proper salary for your employees, here is some of the information you need to know.
- In Denmark, there is no minimum wage demarcation.
- There are no rules associated with overtime pay.
- The minimum wage in Denmark is around 110 DKK per hour.
Being your employer of record in Denmark we can help you draft legally compliant employment offers by providing detailed compensation insights.
Bonus – There are no rules and regulations involved with the bonus payment. But, incentive bonuses are becoming common in Denmark, even in public sectors.
Probationary period – There are no laws regarding the probation period in Denmark. However, a probationary period of up to three months may be agreed upon and the period cannot be extended. During this period an employer can terminate an employee by giving two weeks’ notice with immediate effect.
Termination and severance – Under the Salaried Employees’ Act (funktionærloven), an employer can dismiss an employee from duty by giving notice of termination with justification. Notice of termination varies from one to six months depending upon employment duration. An employee can terminate the contract by giving one month’s notice irrespective of the duration of employment. The termination procedures and rules are not as complicated as it is in the other countries of Europe. As per rules imposed by the CBA, the employees will follow the following:
- Worked for 2 years and 9 months – 3 months of the notice period.
- Worked for 5 years and 8 months – 4 months of the notice period.
- Worked for 8 years and 7 months – 5 months of the notice period.
- More than that- 6 months of the notice period.
Employees who have been terminated for a cause are entitled to the following severance pay as per the Salaried Employees Act:
- One month’s full salary if the employee was working in the company for at least 12 years but less than 15 years.
- Two months’ salary if the employee was working in the company for at least 15 years but less than 18 years.
- Three months’ salary if the employee was working in the company for at least18 years.
Employee Entitlements in Denmark
An employment contract is created in the Danish language that specifies the employee’s precondition of compensation, benefits, and termination. The compensation amounts are in the Danish Krone currency. Each employee is lawfully entitled to a written contract after the beginning of their employment and should be notified about the duration of their work hours and the period it will last for. Infotree Global comes with an employment contract guide just for times like this.
An employer must keep in mind the statutory benefits and leaves they are required to provide to their employees while hiring them. These leaves and benefits must be mentioned in the contract as well. We as your Employer of record Denmark make sure these are well incorporated while drafting the contract.
Maternity leaves – Both parents in Denmark are entitled to leave for childbirth or adoption, leaves can also be split among them as per their requirements. A pregnant employee is entitled to four weeks’ leave before childbirth and fourteen weeks after delivery. After fourteen weeks employee is entitled to extend leaves for up to 46 weeks. Female employees are entitled to 50% pay for 18 weeks. Male employees are entitled to two weeks’ leaves in the first 14 weeks after delivery with a 50% payout of their salary.
Sick leave – The policy of paid sick leave entirely depends on the contract provided by the company; if a person is eligible to get the paid leave, he or she will. For employees who are not eligible for the company’s paid sick leave, there is an opportunity from the Danish Act of Sickness Benefits where employees can get sickness benefits for the first 30 days only.
The employers are entitled to provide sickness benefits for up to 14 days but after the 14th day, the local authority will have to take the responsibility of providing the sickness benefit at a rate of 90% of the person’s salary or DKK 3016 for every week.
Vacation – Employees will be getting two days of paid leave per month of the holiday year between 1st September and 31st August. Employees can also take 25 days of vacation every year, but this can be either a paid or an unpaid leave. They can also take three consecutive weeks off during the holiday year.
Employees receive an amount that is equal to 1% of their gross earnings in May as their holiday allowance. Employees are in general elections to take up to 25 days of paid leave for holidays. The carry-over period might be there and here five days can be carried over and must be utilized around the end of December. The unused holidays which are not more than 20 days of the holiday will be paid in the holiday fund.
Pension – The pension policy made by the Danish government is for every permanent resident of Denmark who is of the age of 65 or above. Employers are legally required to provide pension benefits to their employees; however, many companies focus on providing them just to stay competitive and attract better candidates into their workforce.
Payroll in Denmark
Denmark has been ranked 4 on the World Bank’s Ease of Doing Business Survey, therefore, Denmark offers a favorable business opportunity. The Danish currency is the Danish Krone (DKK). The salary and compensation in the employment contract have to be mentioned in local currency only. The employees will be asked for personal information for the payroll processes. This information will include the full name, address, personal tax number, phone number, pension details, and bank details. The employment contract specifies the employees about the job and the duties they need to perform.
Payroll in Denmark runs on a monthly basis. It’s required by an employer to obtain recent tax information from employees every month. A tax card is a digital document that contains deductions and the updated tax rate of an employee. It’s required by employers to update monthly payroll information to the Danish tax authorities site to report the current month’s details and to pay withheld taxes. Employees should be provided with payslips each month mentioning payout details. It’s a mandate to keep payroll reports for up to five years.
Payroll Tax in Denmark
In Denmark, the Danish tax authority is called SKAT (Skatteforvaltningen) and all the systems available are in Danish only. In Denmark, the corporate tax rate is 22%, VAT is 25%, the sales tax rate is 25%, and withholding taxes are in the range of 22-27%. The employees are required to pay national, health, and state tax (total 51.95% approx.), municipal tax (28% as of 2015), and social security tax (8%) on an annual basis. Social security is financed by taxes and social security contributions, where the contributions can be up to 8,000 DKK yearly. There is no payroll tax to be paid besides the companies conducting VAT-excused activities. There are also allowances like personal allowances, transport allowances, and employment concerning allowances that help take some weight off the taxpayer’s shoulders.
Denmark tax rate chart (as of 2021):
|Grossed income (in DKK)||Tax Rate|
|0 – 50,761||8%|
|50,762 – 544,800||42.83%|
Denmark is very strict with its tax payments. A professional company like the Denmark employer of record is familiar with the law and will make sure all these are paid in full and on time. They will also handle all the employment and payroll tasks of the companies. And be of great help in tax needs.
Challenges When Expanding into Denmark
To set up a company in Denmark one needs to take into consideration the cultural, political, business, geographical, and regulatory aspects. Denmark does not ask for any special requirements in setting up the business but one still needs to consider the industry type, nationality of individuals, and the existence of trade agreements. Location wise one needs to be aware of the costs, availability, and rules of that place. While setting up, there are three courses of action to lead from- corporation (Aktieselskab – A/S or Anpartsselskab – ApS), representative office, branch office, and some miscellaneous entities.
Any Non-EU company needs to register itself at least eight days before opening a business with the Danish Commerce and Companies Agency (DCCA). Once registered, you will be allotted a Central Business Registration Number (CVR), an identification number used to correspond with private entities or public authorities. Businesses do not require to register with Denmark tax authorities (SKAT) as company information is automatically transferred to them once registered with DCCA. The company can apply for a corporate bank account with any major Danish bank. The account opening process is fairly fast and easy if proper documents are provided like recommendations from a major bank in the home country, an article of association, and a list of authorized people conducting business.
Benefits of Denmark Employer of Record
To simplify your expansion process let Infotree Global assist you to deal with all the complexities. Be it hiring employees or distributing payroll or taking care of expenses, we are there to assist you at every step. Partner with us and start your global business without worries.
Market Access – Relying on the professional expertise of an employer of record is the best way to enter an unknown market quickly. By using EOR services, an international organization can avail the expertise of a Denmark employee to work for its company. Besides quick access to the Denmark market, the employer of record also enables the client to ease off worries related to payroll and HR.
In Country Laws – It is hard to ignore the importance of regulations and compliance in a foreign country. If you are operating a business in Denmark, you need to be well aware of the payroll and taxation rules. With Denmark’s employer of record services, a company can hire a foreign individual or local employees and deal with the complexities of the country’s rules. Be it income tax, social security contribution, expanse management, withholding charges, or business tax, an EOR/PEO takes care of it all with total compliance.
Diverse Solutions – No matter whether you already have a company in an international location or you are going to establish the one, an employer of record can help you significantly. The EOR Company can hire staff on your behalf without having the need of setting up a subsidiary in Denmark. If your firm is already operating, using EOR for managing payroll tasks can be a great idea as they can present an effective solution to tax and accounting responsibilities in the country.
Why Infotree Global Solutions?
Infotree Global saves you the effort to set up a local division in Denmark. We align our in-country team of experts to conduct all the formal employment tasks for you abiding by country laws. We hire the best and most effective staff for the company and manage their payroll processing. Thus, we save your time by taking care of all the legal formalities so that you can focus on global expansion only. Our Global payroll and Employer of record services will make the process of expanding businesses simpler and smoother. Take the advantage of the finest talents provided by us from all over the world and let us assist you in innumerable employment challenges.
If you are looking for global expansion and local setup in foreign nations, contact us today.