Denmark has one of the strongest market economies in Europe which is open to trading with foreign companies. In fact, the Danish economy relies heavily on foreign trade and the country boasts some world-leading advanced industries with a major focus on maritime shipping, pharmaceuticals, and renewable energy. Denmark ranks 3rd in World Bank’s Ease of Doing Business 2018 rankings and 6th in the Forbes List of Best Countries for Business. Based on GDP, it is the 39th largest economy in the world.
Currency: Danish Krone
Principal language: Danish
Government: Parliamentary Representative Democracy and Constitutional Monarchy
Capital City: Copenhagen
Major Cities: Aarhus, Odense, Aalborg
A written employment contract is mandatory under the Danish law, which needs to be finalized 1 month before the employment commencement date. The Act addressing the Employer's Obligation to Inform Workers about Their Employment Conditions mandates that employers draft employment certificates containing crucial employment terms, with the following details:
- The name and address of the employer and the employee
- The address of the workplace or details of the central place of work
- Description of the work or indication of the rank, title, job profile or position
- The employment commencement date
- The period of employment if it is a fixed-term employment
- The rights of employees regarding paid vacation
- Required notice and other regulations of termination for both employer and employee
- The salary and any supplements and benefits not included in the salary, such as pension contributions
- The time of salary payment
- The daily or weekly working hours
- Any collective bargaining or other agreements that regulate the employment, and
- Information regarding any other material terms of employment, such as bonuses, overtime, time off in place of payment for overtime and salary payable in lieu of maternity or paternity leave.
Based on recent case law, an employer's noncompliance with the act may result in paying compensation to an employee up to 10,000 krone. The Danish Salaried Employees Act regulates the employment of salaried employees.
The Danish Act on Working Hours stipulates that average working hours during a week and in a period of 4 months, cannot be more than 48 including overtime. The Danish Act on Working Environment specifies that employees are entitled to a weekly day off, which if possible should be Sunday.
Also, working hours need to be organized in a way that employees get a period of at least 11 hours of consecutive rest within every 24 hours-period. Special rules apply to night shifts and work that employees under the age of 18 perform.
Denmark observes the following public holidays:
- January 1: New Year's Day
- Maundy Thursday: Thursday before Easter; date varies
- Good Friday: Friday before Easter; date varies
- Easter: Date varies
- Easter Monday: Monday after Easter; date varies
- Common Prayer Day: The fourth Friday after Easter; date varies
- Ascension: Date varies
- Pentecost: Date varies
- Whit Monday: Day after Pentecost, seventh Monday after Easter; date varies
- Dec. 25 - Christmas Day
- Dec. 26 - Boxing Day
Salaried employees get full pay on holidays. Collective agreements may specify additional holidays and the terms of payment in lieu of holidays for non-salaried employees.
According to the Danish Act on Maternity Leave and Allowance, a female employee is entitled to leave due to pregnancy and childbirth from 4 weeks before expected childbirth, maternity leave for 14 weeks after childbirth, and 32 weeks of additional parental leave subsequent to the 14th week of childbirth. It is mandatory for all private sector Danish employers to make contributions to the maternity pay equalization scheme. The annual contribution per full-time employee amounts to 750 krone currently. In return for contributing to the scheme, employers receive reimbursement for employees whose salary they need to pay on account of maternity, paternity and parental leave.
Female salaried employees are entitled to 50% of their salary during pregnancy and maternity. However, based on individual employment agreements or collective bargaining agreements, employees may receive full salary during some of their maternity leave.
An employer that pays salary on account of maternity leave may get its reimbursement from the public authority Udbetaling Danmark. Employees who do not get any payment from their employers may receive it from in the form of maternity/paternity pay from Udbetaling Danmark.
Men receive paid leave of 5 days for the birth or adoption of a child. In case the mother dies during childbirth, or during her maternity leave, the father is entitled to her unused leave. The same leave policies apply to adoptive parents. A worker may get up to 12 weeks' leave if he is the guardian or custodian of a baby younger than 6 months. The 12-week leave period can increase up to 18 weeks with a part-time work agreement.
Adoptive parents can take paid leave for 14 weeks post-adoption. The adoptive parents can share the leave of 14 weeks between them, but they are allowed to take leave one at a time compulsorily. Additionally, one of the adoptive parents is entitled to paid leave of 2 consecutive weeks within the first 14 weeks after adoption of the child, allowing the adoptive parents to be on leave together during this period.
According to the Salaried Employees Act, the salaried employees receive full salary, including bonuses, during sick leave. An employer pays salary during the first 30 days of sick leave, after which the municipality reimburses the employer. As a general rule, the employer's right to reimbursement does not impact the employee's right to complete pay during sick leave.
The amount an employee gets depends on the employee's hourly pay and weekly working hours. An employee not covered by the Salaried Employees Act may be entitled to payment during sick leave according to the relevant collective bargaining agreement or under the individual employment agreement. If the employee is not entitled to pay during sick leave, the employee may receive sickness according to the relevant Danish Act.
Danish citizens who can submit proof of having a permanent residence in Denmark get old age pensions payable by the state according to the provisions of the Danish Act on Social Pensions. Currently, the old-age pension is payable from the age of 65-67, varying based on the date of birth.
While it is not mandatory by the law for employers to provide pension schemes for their employees, many collective bargaining agreements include pensions covering blue-collar and white-collar employees. Mostly, these pensions accumulate through defined contribution plans.
In case there is no collective bargaining agreement, a private pension scheme, financed by contributions made by the employer and the employee, need to be established. Under this requirement, called Arbejdsmarkedets Tillaegspension (ATP), the employer makes two-thirds of the contribution, and the employee makes balance one-third. Usually, the employer’s contribution is 8%, and correspondingly, the same of employee’s is 4%.
The Danish Act on Labor Market Supplementary Pensions mandates that all employers and employees need to contribute to a supplementary pension, which is in addition to the old age pension. Monthly employer and employee contributions depend on hours worked per month and whether the employee receives payment on an hourly, weekly or monthly basis.
Under Danish the law, employers are under an obligation to contribute a fixed amount per year per employee to the Labor Market Industrial Disease Insurance plan. The amount changes according to the number of industrial diseases in the relevant line of business. Employers are not under any obligation to provide health insurance to employees, although many companies offer this benefit.
How GPS can Help
With our Global PEO/Employer of Record services, companies can expand into Denmark and hire their employees without having to establish a branch office or subsidiary in Denmark.
- Your candidate is hired via our Denmark PEO. If needed, we can also help you find the right talent in any country with our comprehensive global staffing services.
- Your new employee begins work quickly as we take care of employment contracts, statutory and non-statutory benefits, and running their payroll - all in full compliance with Denmark laws.
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- With no contractor risks, pass on the compliance burden to Global PEO Services.
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