How to Hire employees in Denmark

Denmark offers foreign companies a compelling entry point into the Nordic region. Highly educated workforce, world-class digital infrastructure, innovation-driven economy, and strategic access to European markets.

Just because a country is efficient doesn’t mean the rules are easy.

Denmark enforces comprehensive employment regulations with strict compliance expectations across collective bargaining agreements, pension contributions, and industry-specific requirements. Early missteps in contract structure, collective agreement compliance, or employee classification trigger costly disputes, regulatory penalties, and expansion delays that compound with every hire.

Hiring employees in Denmark requires:

• Clarity on hiring models (entity vs. Employer of Record vs. contractor)
• Mandatory employer obligations under the Danish Employment Act
• Payroll tax structures and pension contributions
• Termination protections and notice requirements
• Legal distinctions separating compliant employment from misclassification risk

This guide walks you through each step: choosing the right hiring model, onboarding your first employee, managing payroll, navigating termination rules, and avoiding compliance traps that catch unprepared employers off guard.

Core truth: Hiring employees in Denmark requires the right hiring model and strict adherence to local labor laws. One hire done wrong costs more than doing ten right.

What Are Your Employment Options When Hiring in Denmark?

Before posting a job or signing an offer letter, decide how you'll employ talent. Foreign companies typically choose between three models: establishing a local entity, partnering with an Employer of Record (EOR), or engaging contractors. Each has distinct implications for compliance risk, cost structure, and operational control.

Entity setup → means full legal presence. Register a Danish company (ApS or A/S), handle all employer obligations directly, and bear complete liability.

EOR hiring → outsources employment compliance to a third-party legal employer while you retain operational control.

Contractor engagement → treats individuals as independent service providers, not employees. But only when the relationship genuinely reflects independence.

The stakes are higher than they appear. Misclassifying an employee as a contractor triggers back taxes, pension penalties, and reclassification claims. Setting up a local entity in Denmark for hiring costs minimum DKK 40,000 total, including registration fees, legal services, accounting setup, and Danish Business Authority filings.

Choosing the wrong model doesn't just slow hiring. It creates legal exposure that compounds with every additional hire.

1. Hiring Through a Local Entity

Establishing a Danish entity gives you direct control over employment, payroll, and benefits administration. You become the legal employer. Full responsibility for Danish Employment Act compliance, tax withholding, pension contributions, and statutory filings.

This model makes sense when:

• You're committing to long-term operations in Denmark
• Hiring at scale (typically 10+ employees)
• You need to own intellectual property and operational infrastructure locally

The trade-off: entity formation takes 2-4 months, requires ongoing legal and accounting support, and locks you into administrative obligations even if hiring slows.

2. Hiring Through an Employer of Record (EOR)

An EOR becomes the legal employer in Denmark while you direct the employee's day-to-day work. The EOR handles employment contracts, payroll processing, tax compliance, pension administration, and statutory filings.

You maintain operational control. They absorb legal liability.

EOR hiring suits:

• Companies testing the Danish market
• Scaling quickly (hires live in days, not months)
• Expanding into multiple countries without establishing entities everywhere

It's not a workaround. It's a legitimate employment model under Danish law, ideal when speed, compliance assurance, and low upfront cost matter more than direct entity ownership.

3. Hiring Independent Contractors

Contractors are appropriate for project-based work, specialized services, or genuinely independent engagements. Danish law distinguishes employees from contractors based on control, integration, economic dependence, and the reality of the working relationship. Not what the contract says.

Misclassification happens when companies treat contractors like employees:

• Setting their hours and work schedules
• Providing equipment and workspace
• Directing how work is done
• Maintaining exclusive relationships

Local Entity Vs EOR Vs Independent Contractor: Side-by-Side Comparison

What Are The Legal Requirements for Hiring in Denmark?

Danish employment law operates primarily through collective bargaining agreements rather than comprehensive statutory legislation. The Danish Employment Act covers salaried employees, while collective agreements set industry-specific terms for many sectors. Denmark's labor framework emphasizes negotiation between employer associations and trade unions.

Key employer obligations:

• Provide written employment contracts or employment terms within one month of hire
• Register employees with the Danish Tax Agency (SKAT) for tax withholding
• Enroll employees in the mandatory ATP (Labor Market Supplementary Pension) pension scheme
• Make contributions to applicable occupational pension schemes (typically 10-17% employer share)
• Withhold income tax and AM-bidrag (labor market contribution)
• Comply with applicable collective bargaining agreements where relevant
• Maintain accurate payroll records
• Provide mandatory holiday entitlements (minimum 5 weeks annually)

Employment relationships are presumed permanent unless a fixed-term contract meets specific criteria. Probationary periods cannot exceed three months and must be explicitly stated in writing.

Denmark's enforcement environment is not theoretical. The Danish Working Environment Authority conducts inspections. Employees can file claims through the Labor Courts or civil courts. Non-compliance with collective agreements or contract standards results in financial penalties and reputational damage.

The presumption favors employee protection, not employer flexibility.

What Are the Employment Contract Rules in Denmark?

Written, locally compliant employment contracts are not optional. They're legally required.

While oral agreements are technically valid, written documentation is mandatory within one month of employment start. The contract must specify essential terms and comply with the Danish Employment Act and any applicable collective agreement.

Types of Employment Contracts

• Permanent contracts are the default and most common form. They continue until lawfully terminated by either party with proper notice and include full entitlements under Danish law and collective agreements.
• Fixed-term contracts are permitted for specific circumstances such as temporary project work, seasonal demand, replacement for absent employees, or trainee positions. Danish law allows fixed-term contracts but prohibits abuse through excessive renewals. Multiple consecutive fixed-term contracts without objective justification convert to permanent status.
• Part-time contracts specify regular working hours less than the standard full-time schedule (typically 37 hours per week) with pro-rata entitlements to benefits and holiday.

Full-time employment typically follows a 37-hour workweek as established by most collective agreements, though statutory law does not mandate specific hours.

Probationary periods allow employers to assess new hires during the first three months, with reduced notice periods (typically 14 days) during this window.

What to Include in an Offer Letter?

Employment offers must specify the job title, duties, reporting structure, and work location.

Essential contract elements:

• Job title and primary responsibilities
• Start date and contract type (permanent or fixed-term)
• Work location and any travel requirements
• Gross monthly or annual salary
• Working hours and overtime policies
• Holiday entitlement (minimum 25 days annually)
• Notice period requirements
• Applicable collective agreement (if any)
• Pension scheme details
• Probation period (if applicable, maximum 3 months)

Clarity matters. Ambiguous job descriptions or vague compensation terms create disputes during performance reviews or terminations. Danish courts and arbitration bodies interpret contract ambiguities in favor of employees.

NDAs and Confidentiality Agreements

Confidentiality clauses are enforceable under Danish law, particularly when protecting trade secrets, client information, or proprietary processes. Intellectual property (IP) created during employment typically belongs to the employer for work-related inventions unless otherwise specified.

Post-employment non-compete clauses are valid but must meet strict requirements: reasonable duration (typically 6-12 months), limited geographic scope, compensation during the restriction period (typically 50-100% of prior salary), and apply only to employees with access to significant confidential information or client relationships. Non-competes require individual negotiation and employee consent.

Overly broad non-competes risk being struck down as unenforceable.

How Payroll Costs and Taxes Work in Denmark?

Denmark's labor costs are among Europe's highest. But only if you understand the full employer burden.

As of December 2024, Denmark's average monthly wage is approximately DKK 50,652, with 2026 adjustments via sector collective agreements typically adding 3-4% annually. Typical total employer costs for mid-level hires range from DKK 30,000 to DKK 70,000 per month, including gross salary and mandatory contributions.

1. Payroll and Salary Structure in Denmark

Salaries are quoted and paid in Danish kroner (DKK). Compensation typically includes base salary, pension contributions, and potential bonuses or allowances.

Denmark has no statutory minimum wage. Wages are set through collective bargaining agreements, which typically establish industry-specific minimums ranging from DKK 120-150 per hour for unskilled work to significantly higher rates for professional roles.

2. Employer Payroll Obligations

Denmark has no employer-paid social security contributions in the traditional sense (0% state pension levy). 

However, employers face substantial mandatory contributions:

• ATP (Labor Market Supplementary Pension): Mandatory supplementary pension, approximately DKK 3,300 annually per full-time employee (employer pays two-thirds, employee one-third)
• Occupational pension schemes: 10-17% of gross salary (employer portion typically 2/3 of total contribution)
• Workers' Compensation Insurance: Approximately 0.5-1% of payroll depending on industry risk
• Holiday pay accrual: 12.5% of gross salary for accrued holiday entitlements
• Maternity/Paternity fund: Small contributions for certain collective agreements

Total employer burden typically ranges 10-15% above gross salary for pension and insurance obligations, plus holiday pay accrual.

These contributions sit on top of the employee's gross salary. Not embedded within it.

3. Employee Tax Contributions

Employees face significant tax obligations withheld at source:

• AM-bidrag (Labor market contribution): 8% of gross income
• Municipal tax: Approximately 24-26%, depending on municipality
• State tax: Progressive rates on income above thresholds
• Church tax: Optional 0.4-1.5% if member of the Danish National Church
• Occupational pension contributions: Employee portion typically 1/3 of total (approximately 5-8% of salary)

Effective income tax rates (including AM-bidrag) typically range from 36-52% depending on income level and municipality.

Total employee deductions hover around 40-55% of gross salary.

4. Social Security Contributions

Denmark's social security system is primarily tax-funded rather than contribution-based. The AM-bidrag is the main labor market contribution at 8% of gross income, funding unemployment benefits and labor market programs.

Pension contributions are separate from social security and are managed through occupational pension schemes rather than state systems.

5. Minimum Wage and Statutory Pay Requirements

No statutory minimum wage exists in Denmark. Instead, collective agreements set sector-specific minimums that typically exceed DKK 120-150 per hour for entry-level positions.

Employers must also pay:

• Overtime premiums as specified in collective agreements (typically 50-100% above base rate)
• Holiday allowance (12.5% of gross salary accrued during employment)
• Seniority supplements as per collective agreements
• Pension contributions as required by agreements

In practical terms, employers should budget 15-20% above gross salary for statutory obligations. For professional roles, this puts the true monthly cost of hiring in Denmark between DKK 50,000 and DKK 80,000, depending on seniority, role, and applicable collective agreement.

How Employers Pay Employees in Denmark?

1. Payment Methods

Salaries are paid via bank transfer to the employee's Danish bank account or international account with proper documentation.

Cash payments are uncommon and create compliance risks.

Payslips must contain:

• Gross salary
• All deductions (taxes, AM-bidrag, pension contributions)
• Employer pension contributions
• Holiday pay accrual
• Net pay
• Pay period dates
• Tax card information status

Payslips must be provided monthly, typically electronically.

2. Salary Payment Frequency

Payroll runs monthly, with salaries typically paid at the end of the month or beginning of the following month for work performed.

Payment delays beyond the agreed date breach employment law and give employees grounds for lodging complaints or terminating with full notice entitlements.

How To Onboard Employees in Denmark?

1. New Hire Onboarding Checklist

Register the employee with SKAT (Danish Tax Agency) for tax withholding before their first pay period. Provide signed employment contracts, company policies, role-specific training materials, and access to payroll/benefits systems.

Onboarding essentials:

• Obtain the employee's CPR number (Civil Registration Number)
• Register for tax withholding with SKAT and obtain a tax card
• Enroll in the ATP pension scheme
• Set up occupational pension scheme enrollment
• Sign and provide an employment contract
• Provide the company handbook and policies
• Set up payroll system access
• Assign a direct manager and clarify expectations
• Complete workplace safety orientation if required
• Register with NemKonto for salary payments

Schedule orientation sessions covering workplace health and safety (if applicable under industry requirements), data privacy policies under GDPR, and reporting structures. Ensure the employee understands holiday policies, overtime rules, and performance review timelines.

2. Required Employee Documentation

Danish employment and tax regulations require employers to collect specific employee documents at the time of onboarding. These records support payroll processing, tax registration, and statutory compliance.

Documents you need from new hires:

• CPR number (Civil Registration Number) for Danish residents
• Passport and work permit (for non-EU/EEA nationals)
• Tax card from SKAT showing tax percentage
• Bank account details for payroll (NemKonto registration)
• Educational certificates relevant to the role
• Previous employment documentation (if claiming prior service for seniority)
• Proof of address
• Health insurance information (if not covered by Danish national health)

Maintain signed copies of the employment contract, confidentiality agreements, and acknowledgment of company policies in the employee's personnel file. These documents become critical during audits or disputes.

What Are The Best Practices Of Interviewing and Hiring in Denmark?

Danish employment law prohibits discrimination based on gender, race, color, religion, political opinion, sexual orientation, age, disability, or national, social, or ethnic origin. Interview questions must focus on job-related qualifications and competencies.

• Avoid questions about family planning, marital status, religious beliefs, or health conditions unless directly relevant to the role's requirements and legally justified.
• Data privacy matters. Under GDPR (enforced in Denmark with additional national provisions), candidate information must be collected with consent, stored securely, and used only for recruitment purposes. Candidates have rights to access, correct, and request deletion of their information.
• Document retention and processing justifications carefully.
• Danish candidates value work-life balance, flat organizational structures, and transparent communication.
• Communicate hiring timelines, provide prompt feedback, and set realistic expectations about compensation and role responsibilities.

A sluggish or opaque hiring process signals organizational dysfunction.

Work Permits and Right to Work in Denmark

1. Danish, EU/EEA, and Swiss nationals have unrestricted work rights in Denmark and require no permits.

2. Nordic citizens (Sweden, Norway, Finland, Iceland) enjoy automatic work rights through Nordic agreements.

3. Non-EU/EEA nationals require valid work permits issued by the Danish Immigration Service before starting employment. Common work authorization schemes include:

• Pay Limit Scheme: For positions with an annual salary above DKK 480,000 (2026 threshold)
• Positive List Scheme: For occupations experiencing labor shortages
• Fast-track Scheme: For companies certified by the Danish authorities
• Researcher Scheme: For researchers with employment contracts
• Points-based system (currently suspended, check current status)

Key considerations for non-EU/EEA hires:

• Processing times: expect 1 to 4 months, depending on the scheme and completeness of the application
• Employers may need certification under the Fast-track scheme for expedited processing
• Work permits are typically tied to specific employers
• The Pay Limit scheme requires minimum salary thresholds adjusted annually
• Permits are typically granted for up to 4 years with renewal options

Hiring non-EU/EEA nationals without valid work authorization exposes employers to fines and potential criminal liability.

How Does Employment Termination Work in Denmark?

1. Lawful Grounds for Termination

• Employers can terminate for cause (gross misconduct, serious breaches, repeated violations after warnings) or without cause (business reasons, performance issues, redundancy).
• Termination requires objective justification, though Danish law does not mandate "just cause" for all terminations. Employers must follow proper procedures including warnings for performance-related issues.
• Employees enjoy strong protections against unfair dismissal. Long-tenured employees (typically 12+ years service and age 50+) receive special protection requiring particularly strong justification for termination.

2. Notice Periods

Notice periods depend on employment duration and are specified in the Danish Employment Act or collective agreements:

Employer-initiated notice periods:

• First 6 months: 1 month notice
• 6 months to 3 years: 3 months notice
• 3-6 years: 4 months notice
• 6-9 years: 5 months notice
• 9+ years: 6 months notice

Employee-initiated notice periods:

• Typically 1 month regardless of tenure (unless collective agreement specifies otherwise)

During probation (first 3 months), notice is typically 14 days from either party.Collective agreements may specify longer notice periods. Both parties must provide written notice.

3. Severance Requirements

Danish law does not mandate general severance payments for ordinary terminations with proper notice. However, specific circumstances trigger severance obligations:

• Special protection rules: Employees with 12-17 years of service who are terminated when aged 50+ receive 1-3 months additional notice compensation
• Collective agreements: Many agreements include severance provisions based on tenure
• Age discrimination: Terminations appearing to target older workers may trigger compensation claims

Most severance payments arise from collective agreements rather than statutory requirements. Typical collective agreement provisions range from 1-6 months' salary based on tenure.

Terminations during probation or for gross misconduct typically require no severance beyond accrued holiday pay and wages.

Employee vs Contractor Classification in Denmark

Danish authorities assess classification based on control, integration into business, economic dependence, provision of equipment, and the totality of the relationship. The Danish Tax Agency and courts presume employment relationships when work is performed with subordination characteristics. Contracts labeled "independent contractor" mean nothing if the working relationship resembles employment.

Misclassification consequences include:

• Retroactive tax withholding obligations and penalties
• Back payment of ATP and pension contributions
• Holiday pay and other employment benefits from day one
• Notice period obligations and potential wrongful termination claims
• Employer social contribution adjustments
• Fines from SKAT for payroll violations

The "one contractor won't attract attention" myth dies fast when tax audits begin. Danish authorities increasingly scrutinize contractor relationships in professional services sectors.

What Compliance Risks Should Employers Know When Hiring in Denmark?

• Payroll non-compliance (incorrect tax withholding, missed ATP or pension payments, failure to register employees properly with SKAT) results in financial penalties, back-payments with interest, and potential criminal liability for serious violations. SKAT conducts regular audits with particular scrutiny of foreign employers.
• Contract violations (missing written contracts, failure to comply with collective agreement terms, unclear employment conditions, or incomplete documentation) create unenforceable terms and favor employees in disputes. Courts and arbitration bodies presume terms favorable to employees when documentation is deficient.
• Termination disputes arise when employers bypass proper procedures, fail to provide adequate notice, miscalculate notice periods based on tenure, or terminate protected employee categories without strong justification. Danish courts tilt toward employee protection. Weak documentation guarantees costly settlements.

With net unemployment at 2.6% and projected to rise slightly to 2.9% in 2026, Denmark features one of Europe's tightest labor markets. Approximately 50,000 job vacancies persist, concentrated in shortage occupations like ICT and healthcare. Employment rate for ages 15-74 at 73.0% (2026 forecast) reflects exceptionally strong participation.

Compliance failures don't just cost money. They damage the employer brand in a market where talent competition is intense, and employer reputation matters significantly to candidates.

How an Employer of Record (EOR) Helps You Hire in Denmark?

An EOR eliminates entity formation delays, absorbs compliance risk, and handles payroll, tax, pension, and benefits administration.

What you gain with an EOR:

• Speed: Hires go live in days instead of months
• Certainty: Danish Employment Act adherence, collective agreement compliance, accurate tax and pension remittance
• Control: Employee reports to you, performs work under your direction
• Risk mitigation: EOR handles complex collective agreement navigation, ATP enrollment, and changing regulations

EORs don't replace strategic workforce planning. They enable it.

• Testing the Danish market without committing to entity setup costs? An Employer of Record (EOR) model makes sense.
• Scaling from 2 to 20 employees within six months? An EOR enables rapid, compliant growth.
• Hiring across multiple Nordic or European countries without setting up local subsidiaries? An EOR keeps expansion flexible and manageable.

The model works because it's legally recognized: the EOR is the statutory employer, you're the operational employer, and the employee receives full Danish Employment Act protections and collective agreement benefits where applicable.

How Gloroots Simplifies Hiring in Denmark?

When hiring in Denmark through Gloroots, the entire process is managed for you end-to-end. You do not need to coordinate vendors, navigate local regulations, or manage administrative steps.

Gloroots runs the complete hiring workflow:

• Candidate sourcing, shortlisting, and background verification
• Initial screening to assess skills, experience, and role fit
• Interview coordination for final selection
• Offer issuance and compliant employment setup
• Statutory registrations (SKAT, ATP, pension schemes), payroll setup, and benefits administration
• Employee onboarding aligned with Danish labor regulations

This model removes operational overhead entirely, allowing you to focus on building and managing your team while Gloroots handles hiring execution, compliance, and onboarding from start to finish.

Gloroots provides end-to-end EOR services in Denmark, handling employment contracts, payroll processing, tax compliance, pension administration, ATP enrollment, and statutory filings. Local compliance expertise ensures your hiring aligns with Danish Employment Act requirements and applicable collective agreements, from contract drafting to termination procedures.

The platform combines self-service functionality (contract management, onboarding workflows, payroll visibility) with dedicated customer success support.

With Gloroots, you get:

• Audit-ready reporting
• Transparent cost breakdowns
• Finance-team-friendly invoicing with country-level detail
• GL mapping

Gloroots scales with you: whether hiring your first Danish employee or expanding a distributed team across 140+ countries, the infrastructure supports growth without the complexity of multi-entity management.

It's not a vendor relationship. It's workforce infrastructure that adapts to your expansion strategy.

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FAQs 

1. Can a foreign company hire employees in Denmark without setting up a local entity?

Yes. Foreign companies can hire through an Employer of Record (EOR) without establishing a Danish entity. The EOR becomes the legal employer, handling compliance, payroll, tax, and pension obligations while you direct the employee's work.

2. What are the legal requirements for hiring employees in Denmark?

Employers must provide written contracts within one month of hire, register with SKAT for tax withholding, enroll employees in ATP and occupational pension schemes, withhold income tax and AM-bidrag, comply with applicable collective agreements, and maintain payroll records according to Danish Employment Act provisions.

3. What taxes and social security contributions do employers pay in Denmark?

Denmark has no employer social security contributions (0% state levy). Employers contribute approximately DKK 3,300 annually to ATP, 10-17% toward occupational pensions, and 0.5-1% for workers' compensation insurance. Employees pay 8% AM-bidrag plus 36-52% effective income tax. Total employer cost for mid-level roles ranges from DKK 50,000 to DKK 80,000 monthly.

4. How long does it take to hire and onboard an employee in Denmark?

Through an EOR, hiring and onboarding can occur within 5 to 10 business days. Establishing a local entity first adds 2 to 4 months for registration and regulatory approvals.

5. What is the easiest way to hire employees in Denmark compliantly?

Partnering with an EOR is the fastest, lowest-risk path. The EOR handles contracts, payroll, tax, ATP, pension compliance, and benefits while you maintain operational control, eliminating entity formation costs and enabling hiring within days.

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