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Denmark 11 min

Employee Benefits in Denmark: All You Need to Know

Written by

Bruce Gilbert

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Hiring employees across borders brings with it a multitude of new and unique legal obligations. Leaving the local authorities aside, there’s one aspect of employment law your employees care most about and that’s statutory benefits. 

If you’re considering hiring Danish nationals, you’ll need to develop a compliant and competitive benefits and compensation package to give your company the best chance of attracting top talent. 

There’s a significant list of statutory benefits you must provide under Danish employment law, and a collection of additional perks that potential hires will be expecting from your business in Denmark.

In this guide to managing benefits and compensation for Danish employees, we’ll explain:

  • How to classify workers and determine whether they’re entitled to benefits
  • The statutory benefits you’re obligated to provide by law
  • Additional benefits that’ll help you attract the best talent
  • How to calculate competitive compensation offers in a global context
  • Why and when you need to start using an employer of record, and finally
  • How to set up and manage your benefits administration

Who is entitled to benefits in Denmark?

Danish law classifies workers into five main brackets, depending on their level of autonomy on the job. These include:

  1. Salaried employees
  2. Industrial workers
  3. Chief executive officers
  4. Employee shareholders, and
  5. Independent contractors

Salaried employees and industrial workers are entitled to most statutory benefits and entitlements, while independent contractors are only entitled to whatever payment they’ve agreed to as per their contract with a client.

Note the importance of managing classification correctly. If you consider a worker to be in a contractor relationship, Danish regulators may develop a different opinion. In this instance, misclassification in the eyes of the law can lead to serious penalties and financial consequences.

It’s important to understand this delineation. With the exception of social security contributions, the majority of benefits stated in the Danish Labor Code only apply to full-time employees.

Regardless of whether you view a worker as an employee or a contractor, legislators will make the only determination that matters. If you’re found to have an employee relationship and you’ve neglected to provide statutory benefits, you’ll open your company up to the serious risks of misclassification and subsequent fines or penalties.

For more detailed information about understanding this concept, be sure to read our dedicated guide to misclassification.

Statutory and common employee benefits

From the breakdown we have provided above, you are only legally required to provide benefits if you’re looking to hire full-time Danish employees (not for independent contractors). 

There are a small number of exceptions, like minimum leave provisions for contractors that are detailed further down this guide.

But, this classification nuance shouldn’t prevent you from offering a consistent benefits package to Danish contractors. By providing fair and consistent benefits to contractors, you can prove your care, build strong trust, and establish a stronger connection with your business, especially in a remote context (more on this in our guide to offering benefits to international contractors).

Leave entitlements in Denmark

According to the Danish Holiday Act of 2020, employees are entitled to five working weeks (25 days) of paid vacation per year, accrued at a rate of 2.08 days for every month worked.

The Act states that employees can exercise their vacation entitlement as they earn it and can accumulate paid leave for 16 months, or until the following year’s end.

Independent contractors and employees who are not eligible for paid vacation are entitled to 12.5% of their normal annual pay in lieu of leave.

Danish maternity and paternity leave

In total, parents in Denmark are entitled to 52 weeks of paid parental leave split between both partners.

Expectant mothers are entitled to four weeks of maternity leave before delivery and 14 weeks off post-delivery. Fathers, on the other hand, are entitled to two weeks of paternity leave following their partners’ delivery.

14 weeks after their child’s delivery both partners receive 32 weeks of paid parental leave that can be shared and either used concurrently or one after another.

Maternity and paternity leave benefits can be increased by collective bargaining within an industry and as such, certain employees may automatically be entitled to longer terms of annual leave.

Note the instance of collective bargaining agreements in Denmark is relatively common. Local HR and employment law experts will be valuable in advising your company on the most effective way to manage these discussions and agreements.

Pension plans & retirement contributions

The Labour Market Supplementary Fund (Danish: Arbejdmarkedets TillaegsPension) is Denmark’s mandatory pension fund for employees across the nation. Employers are obligated to pay 16% of their employees’ wages as pension contributions while employees pay an 8% payroll tax.

Minimum wage

For a nation with extensive labor protections, Denmark has not had a minimum wage for over 100 years. Instead, wages are determined by collective bargaining on an industry-to-industry basis. Danish employees are protected by these arrangements and compensation levels are comparatively high, even in relation to other progressive European labor markets.

Danish employees earn an average of €43.50 (£37) per hour — a good benchmark to work from if you’re expanding into the Danish labor market.

Overtime

In Denmark, working hours are limited to 48 hours per week, including overtime and there’s no obligation to pay overtime unless it’s agreed upon via individual or collective bargaining.

In essence, employers cannot require workers to exceed normal working hours for any kind of payment or compensatory time off — except with the workers’ explicit consent, either individually or collectively, via a union.

Insurances

Denmark offers free universal healthcare to citizens, funded by tax revenue and regulated by the government. The system is known to be of high quality and very efficient. However, the public system does not include all medications, dental care, and some other forms of care. Private insurance is often used to supplement what the public system does not offer. Denmark has a universal healthcare system covering its entire population and as such, health insurance is not an expected benefit in the eyes of Danish employees. However, premium coverage is still highly valued.

This is an important consideration for global companies looking to hire in Denmark. 

Although there is a universal public healthcare system for residents in Denmark, it’s still common for many employers to offer secondary health insurance to their employees to give them greater coverage and more options for care and help them access more specialized care or reduced wait times.

Additional benefits to consider for Danish employees

Although Danish employees enjoy solid government-mandated entitlements, you will still find a significant advantage by providing certain additional perks and benefits to incentivize top talent.

We’ve collated a shortlist of the most relevant benefits you should consider specifically when hiring in Denmark.

Competitive salaries and compensation

Danish salaries are the second-highest in the world on average, according to data released by Swiss banking conglomerate UBS. 

Add to that one of the highest employment rates in the world, generous social welfare that guarantees a safety net, and sky-high work-life balance and you’ll realize why employees in Denmark have high standards of their compensation packages.

Danes are also open to travel and relocation. The proximity of the country to the UK, the rest of Scandinavia, and other European hubs, means that nationals are prepared to consider international offers if the salary package is compelling.

Remember that no matter how many additional perks you offer, you’ll struggle to attract top-quality Danish talent if your offer doesn’t include an internationally competitive salary.

The takeaway is clear:

Develop a salary that competes with the global industry average wherever you’re hiring. 

This is especially relevant when hiring in Denmark.

Remote’s guide to calculating global compensation details a number of mechanisms you could consider to create competitive offers without impacting equity for your employees based in other countries.

There are a few specifics tactic that might help you get a critical hire across the line in Denmark: 

  • A sign-on bonus could be the difference that separates you from a competitor
  • Co-working spaces are well-established in Denmark so you may consider adding an allowance for one or more days a week
  • If you’re offering a Danish candidate a fully-remote role, an equipment or home-office setup allocation could be an inexpensive but highly valued addition

Additional paid time off

Denmark consistently ranks high on ratings of work-life balance. Analysis of mandatory and expected benefits makes this easy to understand. Generous maternity, paternity, parental, and annual leave entitlements have created a culture where employees expect to be able to spend quality time away from work.

Smart employers will tap into this Danish cultural element by offering employees additional paid time off. 

This benefit will open access to a wider pool of skilled professionals in Denmark who are exclusively looking for businesses that genuinely care about affording a strong work-life balance.

Our soft benefits guide outlines a number of relatively inexpensive but highly valued perks you can consider including:

  • gym of health club memberships 
  • personal learning and development budget
  • therapy or coaching allowance 
  • mentorship programs
  • volunteering days
  • flexible working hours

Offering these benefits demonstrates your commitment to care, and gives you an edge in a global labor market where you’re not just competing with Danish, Swedish, and Finnish employers – you’re competing with employers from all corners of the globe.

Our small business benefits guide will help with suggestions about cost-effective benefits that your remote employees are going to love — without eating into your bottom line.

In a global labor market, doing the bare minimum for your employees just won’t cut it any longer. Remote can help you get proactive with perks and benefits for your global team so you can hire and retain the best brains from across the globe.

You need to develop a strategy that’ll help you offer competitive international benefits to attract top talent.

How to set up and manage benefits for international employees

The complexity of hiring, onboarding, and managing payroll for a globally distributed team is immense. Building your own legal entity in each new country you hire is logistically, administratively, and financially prohibitive for all but the biggest global enterprises.

An employer of record (EOR) can help you automate all the time-consuming manual work involved with international hiring. Rather than partnering with multiple local payroll providers, legal advisors, and HR specialists, an EOR provides a fast, simple, and scalable alternative. 

By partnering with Remote as your global EOR, you can focus on growing your business without worrying about any of the challenges of global HR compliance. 

Our team of HR specialists are on the ground in every continent. We become your local experts, building culturally aware employment packages that will separate you from your competitors in each new country of operation. We enable you to find, attract, and retain the best global talent and we help you build trust with your global team.

When should you use an employer of record?

Another big question that comes up while building a global team is exactly when you need to switch and start using an employer of record?

The answer is relatively simple:

An EOR will provide vital expertise whenever you are considering a cross-border hire.

As we explain in our guide to when should you use an employer of record, an employer of record is particularly important in a number of specific situations:

  • Creating compliant employment contracts for international candidates
  • Offering benefits packages designed to stay compliant with local regulations
  • Onboarding new cross-border hires
  • Setting up payroll for international employees and contractors
  • Terminating an employee in compliance with local regulations, and
  • Managing the nuances of IP & patents produced by your remote employees

An employer of record like Remote helps you organize all the tiny details of managing a distributed team.

How to set up and manage benefits for international employees

No matter where you hire, you need a competitive and compliant compensation package to help you attract and retain the best talent. 

Whether you’re hiring a software engineer from Denmark, a technical writer in Peru, or a finance executive from Israel, you need to understand how compensation and benefits work together in each local context. 

And that’s why we built Remote. 

  • Our people are on the ground in every continent, building culturally aware employment packages that help you build trust with your global team
  • We have in-house legal and HR experts in every region to proactively protect you against ever-changing regulations
  • The expertise we provide gives you and your team the opportunity to truly belong in the global market and build strong and meaningful connections across borders

An employer of record like Remote manages the tricky elements of global hiring so you don’t have to. Keeping you compliant with local labor legislation in Denmark is just the start of the world of opportunities we can help you explore. 

You can learn more about how Remote simplifies hiring in Denmark and beyond, and we can help you build a more connected, motivated, and powerful global team.