Payroll and Benefits Guide Denmark
Last updated: May 03, 2023
Contributions
Employer
Employer Payroll Contributions
|
2,271.00 DKK (annually) for full time employee |
Mandatory Social Security (ATP) |
|
5,300.00 DKK |
Public social security schemes (estimated) |
|
5,000.00 DKK |
Industrial injuries insurance (estimated) |
|
1,350.00 DKK |
Maternity Leave Fund |
|
1% |
Holiday Bonus (accrued each month & paid out in May). |
|
11,921.00 DKK +1% |
Total Employment Cost |
Employee
Employee Payroll Contributions
| 1,135.80 DKK p.a. | Social Security (ATP) |
Employee
Employee Income Tax
National/ State Tax
|
12.10% |
Bottom Tax |
|
15% |
Top Tax (15% of part of the top tax base Exceeding 568,900) |
Local Tax
|
8.00% |
Labor Market Tax |
|
24.971% |
Municipal Tax (average)
|
Share Tax
|
27.00% |
up to 58,900 DKK – (highly paid expat workers might also be eligible for a lower tax rate of 27% for up to 84 months.) |
|
42.00% |
58,900 DKK and above |
Church Tax
| 0.669% |
Church tax average Church tax average, Church tax is imposed by municipalities and is only charged for members of the Danish State Church (Lutheran). When registering in Denmark, all individuals should explicitly state if they should not be comprised. |
Employer taxes
Employee taxes
Minimum Wage
General
The minimum wage is decided through the Collective Bargaining Agreements of each sector.
For foreign nationals working in Denmark, the Government has set a minimum salary under the pay-limit scheme at 465,000 DKK per year (for 2023).
MINIMUM WAGE (PER MONTH)
Payroll
Payroll Cycle
The payroll cycle in Denmark is generally monthly and employers must make payments on the same day of each month before the end of the month.
13th Salary
In Denmark, it is not a legal requirement to pay a 13th-month salary payment, however, employers are known to offer employees bonuses.
Authority Payments
|
Authority Payment |
Paid To |
Due Date |
Method |
|
Payroll tax withholding |
A-Tax |
10/12 of the following month |
Wire |
|
Employer Contribution |
AM bidrag |
10/12 of the following month |
Wire |
Working Hours
General
A general working week for a Danish employee is five days, working on average 37.5 hours per week. According to the Working Time Directive Act, the maximum working time is 48 hours per week, calculated as an average over four months.
Overtime
A maximum of 48 hours can be worked per week including overtime. Overtime hours in excess of 37 hours a week are paid at an overtime compensation rate between 150-200% of the employees’ regular pay rate, depending on the Collective Bargaining Agreement in place. Overtime pay is not mandatory unless stated in a Collective Agreement.
Working Week
Monday-Friday
Leave
Paid Time Off
In Denmark, the standard paid leave entitlement for full-time employees is 25 working days per year, accrued at the rate of 2.08 days of paid leave for each month of service. It is common to give 5 additional days’ leave as an added benefit. Holidays are divided into 3 weeks consisting of the main holiday plus an additional 2 called residual holidays.
The Danish Holiday Act operates with two different systems for pay during holidays. An employee is either entitled to pay during the holiday i.e. payment of the usual salary and a holiday supplement of 1%, or, a holiday allowance consisting of 12.5% of the employee’s salary or wages (for blue-collar workers). The holiday allowance must be deposited with FerieKonto (administrator of the holiday allowance) so that the money is available to be paid out to the employee.
The paid leave entitlement is accumulated from 1 September through to 31 August. However, the period for taking leave is extended by four months giving a use period of 16 months in total e.g. leave earnt between 1 September 2022 to 31 August 2023 may be taken up to and including 31 December 2023, though this is still subject to approval from the employer.
Workers must use at least 20 days leave per year, any remaining days can be carried over into the following year. If special circumstances prevent the employee from taking accrued paid holiday before the holiday period expires then up to four weeks of paid holiday can be transferred to the next holiday period.
Sick Days
The Salaried Employees Act and most Collective Agreements outline that workers are generally entitled to receive their usual remuneration during sickness.
- The first 30 days are paid by the employer. Further leave is paid by the authorities (usually the employer will continue to pay the full compensation and then claim a refund from the authorities for the amount corresponding to the sickness benefit rates from the local municipality).
- As a general rule, employees will receive sickness benefits for a maximum of 22 weeks in a nine-month period.
- To be eligible for sickness benefits, workers must have been employed continuously for the eight weeks prior to sickness absence and during that time worked for a total of at least 74 hours.
- Employers must notify the municipality of their employee’s absence due to illness within the specified time period.
Maternity Leave:
The mother is entitled to 4 weeks’ maternity leave before the expected date of birth – however, the mother is entitled to longer maternity leave if this is stated in their terms of employment.
Following childbirth, mothers are entitled to 24 weeks of leave, which is categorized as follows:
- 2 weeks of parental benefits immediately after childbirth.
- 8 weeks of parental benefits before the child reaches 10 weeks of age.
- 14 weeks of parental benefits to be used before the child turns one year old. (5 weeks of this period can be postponed until the child reaches nine years if specific conditions are met.)
Full-time employees (those working 37 hours a week with a monthly salary exceeding DKK 19,728) will receive the highest unemployment benefit of DKK 4,550 (2023) per week before tax during their leave.
To qualify for maternity leave or parental leave, employees must work a minimum of 40 hours per month for at least three months.
Parental Leave:
Fathers or co-mothers are also entitled to 24 weeks of leave after the child’s birth, consisting of:
- 2 weeks of compulsory leave immediately after the birth.
- 22 weeks of flexible leave, which can be used within the first year after the child’s birth, with exceptions for special circumstances.
- The 9 weeks of leave within the first year cannot be transferred to the other parent and must be taken within one year.
- The remaining 13 weeks can be transferred to the mother and utilized until the child reaches one year of age. This period can be extended or postponed until the child reaches nine years, subject to specific conditions.
These regulations ensure that both parents have the opportunity to take time off to care for their child during the crucial early stages of life.
Other Leave
National Military or Civil Service Leave – In Denmark, employees between 18 and 30 are liable to be called up for the national military or civil service by ballot, while both men and women can volunteer for national service. The normal period of service is four months. Employees must be granted leave by the employer during national service and are protected against dismissal regarding requesting or taking such leave.
Termination
Termination Process
Employers are required to have a valid justification for terminating an employee to prevent potential claims of unfair dismissal. Justifiable reasons encompass factors such as an employee’s unsuitability for their role, issues related to cooperation, or financial and company-related concerns like work shortages, restructuring, or cost-saving measures.
In cases where employees with more than 12 months of service are terminated due to poor performance, it is imperative to ensure that a proper disciplinary procedure has been followed to minimize the risk of an unfair dismissal lawsuit. The pre-dismissal process should entail issuing a warning to the employee and conducting performance reviews, with the objective of establishing a clear and attainable performance improvement plan. This plan should afford the employee a reasonable timeframe within which to enhance their performance. The employee should be provided with a genuine and meaningful opportunity to rectify their performance or behavior.
Furthermore, additional support, such as training, may be offered to provide the employee with ample opportunities to enhance their performance and avoid termination.
Notice Period
The Danish Salaried Employees Act specifies the notice of termination that must be given by the employer as follows:
- During the Probation Period = 14 days notice
- 0 – 6 months service = 1 month notice
- 6 months – 3 years service = 3 months notice
- 3 – 6 years service = 4 months notice
- 6 – 9 years service = 5 months notice
- 9+ years service = 6 months notice
Workers must give 1 month written notice to terminate, regardless of the length of the employment.
Notice of termination will always be applied from the last business day of the month.
Severance Pay
Severance payments equal to 1 month’s pay might apply to workers with at least 12 years of continuous service. Workers with 17 years of continuous service can claim severance pay of 3 months salary.
There is no severance pay rights for workers who have less than 12 years service.
Probation Period
The probationary period in Denmark is dependent on the type of role and is stipulated within the employment agreement. In general, probation periods are up to 3 months.
The probationary period for Fixed Term contracts cannot be more than one-quarter of their duration. It is not allowed to agree on further probationary periods in connection with the extension or renewal of Fixed Term contracts.
Common Benefits
- Private Health Insurance – 1,000 to 2,000 DKK per month
- Pension Scheme – 5 to 10% of base salary
- Commuting Allowance (between home and work) – 500 to 3000 DKK per month
- Mobile Phone Allowance – 150 to 400 DKK per month
- Additional Annual Leave – 5 days
VISA
VISA
Danish law provides many options for employers of foreign nationals.
Denmark is a member of the European Union (EU) and the Schengen Area. Nationals of Finland, Iceland, Norway, and Sweden are free to reside, study and work in Denmark. However, suppose the employee is an EU/EEA or Swiss citizen and intends to live in Denmark for more than three months. In that case, the employee must apply for a registration certificate at the International Citizen Service or the State Administration (in Danish: “Statsforvaltningen”) upon arrival in Denmark.
Employers must meet the new threshold for new work permits under the pay limit scheme. Extensions of existing work permits may continue to use salaries from the initial application.
If the employee is a citizen of a country outside the EU/EEA or Switzerland, the employee must apply for a residence and work permit before entering Denmark. Suppose the employee already resides legally in Denmark. In that case, the employee can submit their application for a residence and work permit at newtodenmark.dk, at a Danish police station, or the Citizen Centre of the Danish Agency for International Recruitment and Integration.
With effect from May 2023, the Schengen Area countries have implemented a new digital system (EES) to track the entry and exit of non-EU citizens at their borders.
VAT
General
The standard rate of VAT in Denmark is 25.00%.
Stay up to date on payroll & employment law changes
Version History
Questions & Answers
See how Papaya can help you automate your global payroll or EoR whilst staying 100% compliant with local labor laws
Payroll and Benefits Guide
in Denmark
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
And more...
Public Holidays Calendar
| Day | Date | Holiday | Notes |
|---|---|---|---|
| Sunday | Jan-1 | New Year’s Day | |
| Thursday | Apr-6 | Maundy Thursday | |
| Friday | Apr-7 | Good Friday | |
| Sunday | Apr-9 | Easter Monday | |
| Friday | May-5 | General Prayer Day | |
| Thursday | May-18 | Ascension Day | |
| Monday | May-29 | Whit-Monday | |
| Monday | Dec-25 | Christmas Day | |
| Tuesday | Dec-26 | St Stephen’s Day |
Is there a maximum length for a fixed-term contract?
There are no limits on the length of a fixed-term contract or the number of times it can be renewed, but the contract has to be tied to an objective criteria like the completion of a particular task or the arrival of a certain event.
How is the industrial injury insurance calculated?
Hi, thank you for your question. To answer, the industrial injury insurance is calculated based on the type of industry, number of employees the employer has, and the insurance company used to facilitate the insurance policy.
How does the optional pay account process work?
Hi, The optional pay account (free choice account) is for employees who have a collective agreement and are covered by the Agreement for Trade, Transport and Service, or the National Agreement for shops. It is an employer contribution of 6% (7% starting March 2022) that the employee uses to save up salary for use on holidays, childcare, sickness, etc., or for extra payment for pension. The employee chooses (depending on the agrrement) each year how many vacation days they want to take during the upcoming vacation period, how the value of the untaken vacation days should be used, and what the current payments to the free choice account are to be used for.
Hi, nice info and page!
As a future employer of temporary seasonal jobs in Copenhagen, will I have to calculate to give any sick leave benefits on short fixed term contracts, or is that 100% optional given that we wont have a collective agreement for this short period? And on contracts of 1-3 months, does paid time off (vacation) come into play?
Hi Johan, being a ‘seasonal worker’ in itself does not mean that time off and sick leave does not have to be given; there are many different employment terms that can impact this so it is important these requirements are always reviewed with the specifics of the company, industry and worker. For sick leave, there could be collective bargaining agreements that could have an impact. Generally white collar would receive full salary during sickness. For Blue collar there tends to be more variation in terms depending on any Union agreement/Employment contract/Staff handbook as well as length of employment. For vacation leave, workers on full-time schedules will earn 2.08 days every month; workers who are paid hourly earn 0.07 days per day.
Thank you for the reply!
Since these are seasonal kiosks open to retail household goods only about 1 month, and not being unionised, could we specify in our employment contracts that no sick leave and/or vacation days are earned?
So how are calculated overtime hours overal. I dont get it. Any hours after 37 should be treated as overtime? I’m in construction. Working 53 hours weekly. In contract not stated any fixed working hours.
Hi Sandor, overtime law in Denmark isn’t strict and overtime pay is not always required, that’s why it’s important for employees to have overtime agreements written within their contracts. There are however limits on working hours and daily rest requirements. An employee should not be working more than 48 hours on average per week measured over a period of four months. I recommend speaking with your HR team to understand your companies specific requirments.
When holiday payment should be payed when you have claimed that? I have waited over one month so far..
And yes i have spoke with employer several times.
Hi Markus, holiday pay is generally paid out on May 1st of each year.
How it goes on that situation when you dont work on that company anymore? I have changed my employer in September.
Hi Markus, how long did you work at your previous company for?
Not long. 4 months. There was so much issues with salaries etc.
Hi Markus, this is not something that we can really advise on. In general, an employee is eligible to get paid holiday pay after completing one month of employment. At the end of your employment, you should receive holiday pay unless it’s already been taken. However, most likely holiday pay will be paid to your account with Feriekonto. I would suggest that you speak with the employer and find out what has been arranged.
What is the maximum working hours per week for a university student from abroad? And the minimum hourly rate?
The maximum number of hours that international students can work per week is 20. The minimum wage isn’t set, but students typically earn between 75 and 90 DKK per hour.