Employment Laws in Denmark: Comprehensive Guide for Employers

Denmark is number one on the World Bank’s ease of doing business index in Europe. The Scandinavian country holds favorable demography and other resources for the growth of cleantech, design & innovation, software development, life sciences, food, and maritime industries.

Global companies and entrepreneurs may hire local talents to get better returns on their investments in Denmark. And in doing so, they must enter into a fair employment relationship in compliance with Danish labor law, following basic labor regulations in Denmark –

• A maximum of 48 hours of weekly work, including overtime

• Five weeks of annual vacation leave

• Ten weeks of maternity leave in Denmark for foreigners and citizens

• Equal treatment and equal pay for all employees, irrespective of gender

• Mandatory tax deductions and social security contributions

The Danish labour market is significantly influenced by collective labour agreements and trade unions, which play a crucial role in establishing wages and employment terms across various sectors.

Continue reading this employment law in Denmark guide on significant provisions, like working hours, leave schemes, payroll taxes, dismissal rules, and data privacy obligations.

Most Danish employment laws apply equally to all salaried residents, irrespective of their nationality. However, Denmark’s employment law provides different levels of protection for contract workers compared to employees. Contractors must outline their terms of agreement, as their rights are primarily determined by their contracts.

Denmark’s employment laws are derived from the legal framework of labor laws and suitably applied to the individual employee-employer relationship.

The labor law in Denmark encompasses employee rights protection, social security benefits, leave entitlements, privacy protection, and greater transparency in salary and bonus payments.

The Danish labor law provisions like working hours and overtime protection, dismissal rules, employee data privacy, etc., are usually not applicable to managing directors and employee shareholders.

Furthermore, the labor law in Denmark also does not apply to independent contractors and self-employed individuals. However, platform workers in Denmark may be classified as employees and come under the protection of Danish employment rules.

The labor law in Denmark allows employers to conclude written or verbal employment contracts with salaried employees or workers, defining employee-employer rights and obligations.

However, Danish employment rules require employers to provide written terms of employment within one month of the commencement of work along with the following details:

• Establish the identity of employer and employee

• Specify the date of beginning the work

• Elaborate on the employee’s job role and place of work

• Mention working hours, holidays, salary, and any allowances (if applicable)

The applicable collective bargaining agreements may oblige employers to additional employment terms and conditions.

Employers may also negotiate a particular contract with chief executive officers (CEOs), employee shareholders, or independent contractors who are usually outside the ambit of Danish labor act rules.

Employer obligations for hiring and managing local talents in Denmark are based on the following:

• National labor rights legislation (for example, The Salaries Act, The Holiday Act, etc.)

• European Union directives on employment

• Case laws decided by Danish labor courts

• Individually negotiated employment contracts

• Collective bargaining agreements

Here are some of its key provisions, including working hours, leave schemes, payroll taxes, reporting obligations, dismissal rules, and data protection.

• Danish working hours law mentions overtime provisions and is measured over a seven-day work week across an average period of four months.

• The average working hours per Danish labor law is 37 hours a week across employment sectors. However, employers may extend the maximum working hours to 48 weekly.

1. Per Danish labor act rules, daily working hours are determined with a mandatory rest period of 11 hours. – The labor regulations in Denmark oblige employers to add mandatory rest breaks for employees working more than six hours a day.

• Employers may accept flexible working hour requests per collective bargaining agreements.

• Additionally, employers have no statutory restrictions to ask employees to work at night, on Sundays or on public holidays.

Overtime and maximum working hours

• The labor regulations in Denmark do not impose statutory obligations on employers to pay employees for overtime work. 

• However, individual employment contracts or collective bargaining agreements may detail rules on overtime pay. 

Statutory minimum wage

Denmark does not prescribe a statutory minimum wage. Instead, the minimum wage in Denmark is determined through collective bargaining agreements between trade unions and employers. Denmark’s employment law, in cognizance with EU directives, expects employers to make fair wage payments and bonuses proportional to the work.

Additionally, the Equal Treatment Act per labor code in Denmark obliges businesses to offer equal treatment and pay to all employees, irrespective of gender.

Public holidays 

• Danish labor law prescribes 11 public holidays per year, including New Year’s Day, Maundy Thursday, Good Friday, Easter, Great Prayer Day, Ascension Day, Pentecost, Whit Monday, and Christmas Day. 

• Employers may oblige to collective bargaining agreements for additional days off (for example, Labour Day on 1 May and/or Constitution Day on 5 June). 

Leave schemes and collective bargaining agreements

Maternity and Paternity leave:

• The recent implementation of the new European Work-Life Balance Directive makes significant changes to shared paternity leave in Denmark. 

• Some crucial provisions for BPL under Danish labor law include: 

Maternity leave

• Denmark’s paid maternity leave period per statutory requirements is ten weeks, usually taken four weeks before birth and two weeks immediately after birth. 

• Employers may extend post-natal leave up to eight weeks. 

• Further, two weeks of paid leave are earmarked for the other parent, and the employer must grant it anytime within ten weeks after childbirth.  

Parental leave

• Employers must ensure both parents take 24 weeks of leave each in connection with pregnancy & parenting. 

• Further, employers may make suitable provisions for 13 weeks of shared paternity leave in Denmark. 

Annual leave:

• Denmark’s labor code, in the Holiday Act, prescribes five weeks or 25 working days of annual paid leave. 

• Further, the labor act rules in Denmark regarding paid annual leaves obliges employers to

1. Allow employees to accrue and take holidays at the same time

   • The accrual period runs from 1 September to 31 August, with 2.08 days paid holiday for each month of employment

   • Extend a holiday supplement of 1% to eligible salaried employees

   • Offer holiday allowance equal to 12.5% of the eligible pay for those not entitled to paid annual holidays, for example, non-salaried employees.

Other leaves 

Denmark’s labor law mandates employers to grant leave during ordinary working hours, without employees having to use their paid vacation for work absence, for the following reasons. 

Furthermore, employers may get the equivalent allowance reimbursed from the government if the salary has already been paid. 

Sickness leaves:

• The labor regulations in Denmark oblige employers to grant sickness benefits for the first 30 days of sick leave. 

• Employees are eligible for sickness benefits only if they have worked for eight weeks and at least 74 hours in that time. 

Carer’s leave:

• Employers may grant paid time off to care for a close relative who is dying, terminally ill, or disabled. 

Payroll taxes & obligations

The financial year in Denmark runs from 1 January to 31 December. Here is a brief account of payroll tax obligations for employers per Denmark’s labor laws –   

• A registered employer in Denmark is required to:

1. Deduct and withhold taxes and social security contributions from the salaried employee

   • Pay social security premiums & file withheld taxes to Danish authorities on the 10th of the following month

• Income taxes deduction

1. Income taxes in Denmark are progressive and grouped under three income slabs: DKK 0 – 46,700, DKK 46,701 – 544,800, and above DKK 544,800. 

   • Visit this page to learn about Denmark’s latest applicable income tax deduction rate. 

• Social security contributions

1. Employers in Denmark must ensure the following contributions towards employee social security benefits.

   1. ATP: mandatory pension contributions 

   2. AM-bidrag: mandatory labor market contributions for unemployment benefits, absence due to sickness, training costs, etc. 

   3. Maternity leave fund: monthly contributions to the maternity fund

   4. AES: employer contributions toward occupational injury and disease 

   • An employer’s annual social security contributions went up to 13,721 DKK per employee in 2022. 

• There are no statutory obligations on employers per Danish employment law to deduct income tax or social security contributions when paying self-employed individuals. 

Payslip

• Denmark employment rules prescribe salary payments to be transferred digitally to Danish bank accounts. 

• While the labor code in Denmark has not mentioned any template for payslips, employers may ensure the following details in the employee payslip:

1. Disclose information about the employer and employee, including name, address and CVR no. (for business), civil registration number of employee, employee code, tax cards (hovedkort, bikort, or frikort), etc. 

   • Recorded working hour

   • Record of employee absence 

   • Gross salary (before deductions) 

   • Tax deducted at the source

   • Employer’s social security contribution

   • Date of salary payment 

   • Total amount paid 

Employee termination

Danish employment law regarding termination allows employers to terminate employment contracts without statutory obligations unless it is a collective redundancy.

Collective redundancy in Denmark means dismissing employees over 30 months in the following circumstances

• Ten or more employees in companies with more than 20 and fewer than 100 employees

• 10% of all the employees in companies with 100 and fewer than 300 employees

• 30 or more employees in companies with at least 300 employees

Notice period:

• Employers may ask employees to serve a notice period before terminating the employment contract. 

• The labor regulations in Denmark mandate employers to offer notice periods of one month to six months to terminate employment, based on seniority level:

1. one month’s notice for the first six months of employment

   • three months of notice for three years of employment

   • four months of notice for six years of employment

   • five months of notice for nine years of employment; and hereafter

   • six months of notice

Severance payment:

• Danish labor law prescribes severance pay of one to three months’ salary upon dismissing an employee who has worked for over 12 or 17 years with the same employer. 

• No other statutory requirements regarding severance pay apply per Danish employment rules.  

Data protection and employee privacy

Employers in Denmark are bound by the European Union’s General Data Protection Regulations (GDPR) to ensure data protection and employee privacy. 

The Danish Data Protection Act supplements GDPR while collecting, storing, and processing employee information and requires prior employee consent for activities like reference checks, workplace supervision, monitoring employee access to company electronic resources, etc. 

Danish employment law on employee privacy mandates employers to disclose stored employee data upon request. 

Employers are charged with fines and/or payment of compensation for not obliging to the following terms under the Danish labor law: 

• Non-compliance with the Act on Collective Redundancies 

• Non-compliance with the Working Environment Act and executive orders and guidelines from the Work Environment Authority

• Failure to consult with employee representatives 

Businesses may hire and manage employees adhering closely to Danish labor law using the following compliance strategies: 

Hire through employment contracts:

The labor act rules in Denmark include guidelines for working conditions and other statutory employee rights.

Employers may negotiate Danish employment rules based on these guidelines and draft employment contracts to frame a legal basis for hiring and managing employees. While there is no statutory requirement for working hours, there is a maximum average of 48 weekly working hours within a four-month period. The typical working time in Denmark is 37 hours per week, with different practices regarding overtime for white-collar and blue-collar employees.

Develop an in-house HR team to manage employees:

• Companies may build an in-house HR team that analyzes Danish labor law to draft job-specific employment contracts, manage payrolls, and compliant hiring. 

• Management usually entrusts HR managers to maintain safe workplace conditions and deal with structural changes, layoffs, employee appraisals, etc.  

Third-party assistance for managing payroll

• Contemporary global businesses are rapidly switching to SaaS-based HR solutions for payroll management, drafting legal documents, and background checks. 

• Such platforms ensure compliant hiring and managing employees globally with minimum effort and maximum benefit. 

Multiplier is a leading PEO/EOR platform that ensures compliance with Danish labor and employment laws for employment-related services like automated employment contracts, tax reporting, social security obligations, and salary payments at the click of a button. 

Further, a well-drafted employment contract in the local language can improve hiring outcomes. You can collaborate with Multiplier to generate employment contracts and related legal documents in Danish, thus simplifying hiring and managing employees in Denmark. 

Hundreds of entrepreneurs and global companies have trusted to fast-track their international expansion in 150+ countries, including Denmark. Now you can too!

Health and Safety at Work

Denmark prioritizes health and safety at work, and employers are responsible for ensuring a safe working environment for their employees. The Danish Working Environment Act (Arbejdsmiljøloven) regulates the working conditions and safety measures that employers must implement to prevent accidents and illnesses at the workplace.

Employers must:

• Conduct regular risk assessments to identify potential hazards and take measures to mitigate them.

• Provide employees with necessary training and equipment to perform their jobs safely.

• Ensure that employees are aware of the safety procedures and protocols in place.

• Provide a safe and healthy working environment, including adequate lighting, ventilation, and sanitation.

• Ensure that employees are not exposed to hazardous substances or materials.

Employees also have a responsibility to contribute to a safe working environment by:

• Following safety procedures and protocols.

• Reporting any hazards or incidents to their employer.

• Participating in safety training and education.

• Using personal protective equipment (PPE) when required.

Employers who fail to comply with the Danish Working Environment Act may face penalties, including fines and imprisonment. Ensuring a safe workplace is not only a legal obligation but also a crucial aspect of maintaining a productive and positive working environment.

Trade Unions and Collective Agreements

Trade unions play a significant role in Denmark’s labor market, and many employees are members of a trade union. Trade unions negotiate collective bargaining agreements (CBAs) with employers, which regulate employment terms and conditions, including wages, working hours, and benefits.

CBAs are legally binding agreements that cover a specific industry or sector, and they can be negotiated at the national, regional, or local level. Employers who are party to a CBA must comply with its terms and conditions, and employees who are covered by a CBA are entitled to the benefits and protections it provides.

Some of the key aspects of CBAs in Denmark include:

• Wages and Salaries: CBAs regulate the minimum wages and salaries for employees in a particular industry or sector.

• Working Hours: CBAs regulate the normal working hours, overtime pay, and rest periods for employees.

• Benefits: CBAs may provide for benefits such as pension schemes, health insurance, and paid leave.

• Dispute Resolution: CBAs often include procedures for resolving disputes between employers and employees.

Employers who are not party to a CBA may still be required to comply with certain employment laws and regulations, such as the Danish Salaried Employees Act (Funktionærloven). Understanding and adhering to the applicable collective bargaining agreement is essential for maintaining compliance and fostering a fair working environment.

Compliance Strategies for Employers

To ensure compliance with Denmark’s employment laws and regulations, employers should:

• Develop a comprehensive employment contract that outlines the terms and conditions of employment, including wages, working hours, and benefits.

• Establish a clear policy on working hours, overtime pay, and rest periods.

• Provide employees with necessary training and equipment to perform their jobs safely.

• Conduct regular risk assessments to identify potential hazards and take measures to mitigate them.

• Ensure that employees are aware of the safety procedures and protocols in place.

• Provide a safe and healthy working environment, including adequate lighting, ventilation, and sanitation.

• Ensure that employees are not exposed to hazardous substances or materials.

• Comply with the terms and conditions of any collective bargaining agreement that applies to their industry or sector.

• Keep accurate records of employee data, including wages, working hours, and benefits.

By following these compliance strategies, employers can minimize the risk of non-compliance and ensure a positive and productive working environment for their employees. Adhering to Denmark’s employment laws not only protects the business from legal repercussions but also promotes a fair and safe workplace.

Penalties for Non-Compliance

Employers who fail to comply with Denmark’s employment laws and regulations may face penalties, including:

• Fines: Employers who fail to comply with employment laws and regulations may be fined by the Danish authorities.

• Imprisonment: In severe cases, employers who fail to comply with employment laws and regulations may be imprisoned.

• Back Pay: Employers who fail to pay employees their rightful wages or benefits may be required to pay back pay.

• Compensation: Employers who fail to provide a safe and healthy working environment may be required to pay compensation to employees who are injured or become ill as a result.

• Loss of Business License: In severe cases, employers who fail to comply with employment laws and regulations may lose their business license.

It is essential for employers to comply with Denmark’s employment laws and regulations to avoid these penalties and ensure a positive and productive working environment for their employees. Compliance not only safeguards the business but also fosters trust and loyalty among employees.