Employment laws in Denmark: How to hire and stay compliant

Denmark is one of Europe’s top destinations for hiring talent. This is hardly a surprise, given that this Scandinavian nation is among the top socially and economically advanced countries in the world.

If you’re looking to hire talent in Denmark, though, you’ll need to have a solid understanding of Danish laws and make sure you comply with labor regulations and tax practices. If you fail to operate in compliance with Danish employment laws, your company can face serious legal and financial risks. 

That said, employing remote employees from Denmark can be easy and efficient with the right partner. A reliable employer of record (EOR) like Remote can help you access the best talent and reap the benefits of international hiring, all while staying compliant with labor laws in Denmark. In this comprehensive guide, learn more about employment laws in Denmark and how to hire and manage remote workers.

Understanding key labor laws in Denmark

Denmark’s labor laws have an emphasis on employee protection and their rights. Therefore, companies need to have a strong understanding of the legislation around the employer-employee relationship.

Do employment laws in Denmark vary by state?

Employment law does not vary according to individual regions in Denmark. However, there can be certain adjustments to employment law in different parts of this country, usually due to trade union interference rather than laws set by the Danish constitution.

If you want to stay on top of these regulations at all times with minimal effort, consider partnering with an employer of record. Remote are experts in employment law can help you hire talent in Denmark without opening a legal entity.

What do you need to know before hiring a Danish employee?

Before you hire remote employees in Denmark, consider all the legal implications, as disregarding local regulations can lead to harsh penalties. First and foremost, an employer cannot hire workers in Denmark without a local entity, which means you must have a registered legal entity in the country.

The alternative to establishing and managing your own legal entity in Denmark is to hire employees via a global employment partner, who already has a local entity in the country. An EOR like Remote allows you to onboard, manage, and pay employees through their own local entity in Denmark. 

They act as the employers on your behalf and handle employee onboarding and management, global payroll, benefits and compensation, and other daunting tasks of international hiring. Remote gives you the ability to expand your team efficiently at affordable rates.

What’s more — Remote’s legal experts can help you comply with state and federal employment laws in Denmark. Alongside reaching and onboarding your employees, we also help you manage them and provide competitive employee benefits to rival the top employers in the country. Remote takes over the responsibility of legal compliance and allows you to focus on what matters most — building your global team and operations. 

Statutory employment rights in Denmark 

Denmark's labor laws cover critical areas such as minimum wage, trade union involvement, and other working conditions. They ensure that employees receive equal and fair compensation for their work under good conditions. Infringement upon these rights may result in severe punishments for employers.

What is the minimum wage in Denmark?

The Danish labor system follows a decentralized model. Critical employment features like salaries and working hours are subject to negotiations, which come from agreements between trade unions and the government or agreements between employers and employees on a smaller scale.

As a result, the law does not provide a standard minimum wage in Denmark at the state or federal levels. Due to the unique labor market model practiced in Denmark, the minimum wage depends on agreements in collective bargaining.

However, if trade unions and employees fail to reach an agreement on wages, the state may intervene.

What are the standard working hours in Denmark?

Like the minimum wage, there are also no standard working hours set in Denmark for employees. However, there is a maximum working hours of 48 hours per week on average.

What is the overtime rate in Denmark?

Like the minimum wage, there are no statutory rates for carrying out duties in overtime. Thus, overtime rates are typically agreed upon between employer and employee before work commences. They become legally binding when included in the employment contract.

How do probation periods work in Denmark?

Probationary periods in Denmark depend on the nature of the employment or category of the employee. For example, they differ for salaried and non-salaried employees.

Salaried employees get up to three months of probation before becoming permanent workers. During this period, either the employee or employer can terminate the employment agreement. They do not need justifiable reasons to end their professional relationship.

Meanwhile, the probationary period for non-salaried employees knows no limits. It is flexible, allowing both parties to decide on a suitable period in the contract agreement.

What discrimination protections does Denmark provide for workers?

Denmark has several laws protecting employees from discrimination or harassment of various kinds. The regulation protects employees from discrimination based on sex, ethnicity, political views, or religious beliefs. 

Other regulations protect employees against sexual harassment, and the Danish criminal code levies hefty fines and imprisonment for violations. 

Can employees in Denmark join unions?

Every worker in Denmark is entitled to become a member of a trade union. Employers must allow their employees to partake in union demonstrations or activities. 

Can companies drug test employees in Denmark?

Running drug tests and other forms of background checks on employees is legal in Denmark. However, employers must seek consent from workers before running these tests. A drug test should only be requested if there is a legitimate reason.

What is the relevant workers' compensation legislation in Denmark?

The Danish government understands that accidents can happen in the workplace. Therefore, the law mandates all employers to provide occupational injury insurance for their workers to ensure the compensation of employees who may suffer accidents or illnesses at the workplace. In Denmark, the Employment Accidents Insurance Act governs this insurance policy.

What are the unique considerations for employers hiring in Denmark?

Although employment in Denmark can be rewarding, it is advisable to consider some crucial factors beforehand, such as work culture, labor law flexibility, and politics. 

If you intend to hire in Denmark, you should also have good knowledge of the Danish language. Official communication, including filing documents, filling out forms, and receiving information, is typically done in Danish. 

As a foreign employer, you will also need your papers certified by an official entity. For instance, your employees must have all their documents transcribed into Danish when sponsoring their migration to Denmark.

If you are not well-versed in the language, consider hiring a translator to avoid mistakes in your business endeavors. 

Calculate employee hiring costs in Denmark with Remote’s Salary Calculator

Hiring employees is a multifaceted process that tends to be capital-intensive, especially in foreign countries. Some expenses may include but are not limited to job advertising, referral bonuses, onboarding, and recruitment assessment. Navigating these costs can be challenging for foreign employers. For this reason, many foreign companies opt to partner with a global hiring service like Remote to simplify and lower the costs of international hiring. 

Remote makes it easy for businesses across industries to employ workers in different countries, including Denmark. We also help you calculate hiring costs upfront, so you can plan your budget on time. 

Remote's Employee Cost Calculator offers you insight into the cost of hiring an employee in Denmark (and other countries) in a few clicks. All you need to do is select the country, the position, and pay, and our calculator will show you the mandated costs per employee. It's as simple as that. 

If you need more clarification or advice on the next steps, you can always contact our experts to help you with quick solutions.

Budget your next hire with our free Cost of Employment Calculator

Use the calculator to find the total cost to hire an employee in a new country including all government mandated contributions.

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Managing employee offboarding in Denmark

Offboarding can be tricky in Denmark. The law penalizes employers who unlawfully terminate employment contracts. To successfully manage an employee’s termination, follow the next sections to learn more about the procedure.

Does at-will employment exist in Denmark?

Denmark does not practice at-will employment. Thus, employers cannot dismiss workers for no good reason. Terminating an employee’s contract without just cause may lead to severe penalties for the employer and their business. 

How do companies terminate employees in Denmark?

Employers can terminate employees by providing a notice. This notice may range from one to six months, depending on how long the employee has served the company. The employer must then compensate the worker in severance if dismissed, subject to any applicable collective bargaining agreement.

Besides severance, the employer must reimburse the employee for spending on official assignments or company resources. They must ensure the employee receives their full salary before completing the legal termination process.

How do you terminate an employee in Denmark?

When terminating an employee’s contract, take the following steps:

• Define the reasons for their termination, if for a just cause

• Give the employee a formal notice when dismissing without cause

• Determine employee severance, if applicable

• Calculate salary, benefits, and holiday entitlements 

Are terminated employees in Denmark entitled to severance pay?

There are no statutory rules on severance payment when an employer dismisses a worker. Like in most cases, any form of severance payment is stipulated in the employment agreement. In addition, collective bargaining agreement endeavors by trade unions can determine the severance pay.

There is no uniform severance pay rate. The Danish Salaried Employees Act mandates employers to pay severance to salaried employees who have spent at least 12 years in the organization. The severance pay in this instance is between one month and three months’ salary.

Employees on old-age pensions do not receive severance pay upon dismissal or retirement. 

Differences between employees and contractors in Denmark

The two main categories of workers who can offer services to a company are employees and contractors. Employers can hire any or both entities to perform specific duties for them. However, while both parties can perform similar tasks, employers must manage them differently. 

According to the labor code of Denmark, an employee and an independent contractor each have different features or functions that determine how they operate in an organization.

What are the relevant rules on contract workers in Denmark?

Denmark's employment law doesn’t protect contractors the same as employees. Before they begin working with the employer, however, contractors must clearly state the terms of the agreement. The law can only protect their rights based on the contract.

Can employers hire employees on fixed-term contracts in Denmark?

Employers have free will to hire remote workers on a temporary or fixed-term basis, depending on the business needs. Such contracts will be valid if both parties agree. 

What are the misclassification laws and penalties in Denmark?

Denmark holds a similar position on misclassification as other European countries. Independent contractors and employees are separate entities with different financial implications for their employers. 

Usually, employers make higher statutory deductions such as taxes and social security on employees. They also offer employees statutory benefits which are not provided to contractors. Thus, misclassifying a contractor as an employee implies defrauding the contractor and the government of their rightful earnings.

Misclassification and other acts of perjury are punishable by law. In most cases, perpetrators get a fine and must reimburse misclassified workers. To avoid misclassification risks, partner with Remote to classify your workers correctly, and stay compliant with labor rules and regulations in Denmark.

Contractor Management —

6 min

The consequences of misclassifying employees as contractors

When you employ international workers, you typically pay your team in one of two ways: as contractors or as full-time employees. Misclassify someone as a contractor who should be an employee, and your company could face stiff fines and penalties.

The fast, simple, compliant way to hire in Denmark

Hiring in Denmark can be a great way to add diversity to your team and expand operations in Europe.

However, Denmark's employment laws can be challenging to navigate and can be an expensive and time-consuming process, especially if you decide to establish a local entity.

The good news is that you can hire local talent quickly and at affordable rates with a global employment partner. Remote takes over the responsibility of managing a local entity and ensuring compliance with employment laws in Denmark, so you can grow your team effortlessly. With in-depth knowledge of local regulations, we can help you to reap the benefits of hiring in Denmark. In addition, Remote gives you a suite of services, including payroll, benefits, tax management, employee onboarding, and offboarding — which makes international hiring a breeze.

Take a look at Remote’s global HR platform to learn more about how we can make it easy and simple to hire in Denmark or anywhere in the world. Or calculate hiring costs in Denmark and beyond using our free Employee Cost Calculator tool.

References:

European Working Time Directive