Hiring in Denmark: A Practical Guide for International Employers

Denmark stands out as a top destination for global talent, offering a robust, innovation-driven economy and a highly skilled workforce. 

The country consistently ranks high for ease of doing business, transparency, and quality of life, making it an attractive hub for international companies seeking to expand their operations. With a reputation for progressive labor laws, efficient infrastructure, and a collaborative business culture, Denmark provides foreign employers with strategic advantages in accessing top-tier talent and establishing a strong European presence.

For foreign companies, hiring in Denmark means tapping into a well-educated talent pool, benefiting from a stable regulatory environment, and leveraging Denmark’s strategic location within the EU. 

The Danish labor market is known for its flexibility, strong employee protections, and emphasis on work-life balance, all of which contribute to high employee satisfaction and retention rates. Whether you’re looking to scale quickly or establish long-term operations, Denmark offers a compelling landscape for international hiring.

How to Hire Employees in Denmark

Assess Your Hiring Needs

Before hiring in Denmark, clarify your business objectives and workforce requirements:

• Full-time vs. project-based support: Decide if you need permanent employees for ongoing roles or contractors for short-term projects. Denmark’s labor laws accommodate both, but compliance obligations differ.
• Local compliance requirements: Understand Danish employment contracts, statutory benefits, and tax obligations. Compliance is essential to avoid legal or financial penalties.
• Onboarding speed vs. long-term control: Consider if you need to hire quickly (using an Employer of Record) or prefer to establish a direct, long-term presence (setting up a legal entity). Each route affects your onboarding timeline and operational flexibility.

Hiring Options in Denmark

You have two primary options for hiring in Denmark:

• Set Up a Legal Entity: Establishing a Danish subsidiary or branch gives you full control over employment relationships. This approach is ideal for companies planning significant, long-term investment in Denmark but requires navigating local registration, tax, and compliance processes.
• Partner with an Employer of Record (EOR): An EOR acts as the legal employer on your behalf, handling payroll, benefits, and compliance. This model allows you to hire quickly without setting up a local entity, making it ideal for testing the market or scaling rapidly.

EOR vs. Setting Up a Legal Entity: Side-by-Side Comparison

Feature	Employer of Record (EOR)	Setting Up a Legal Entity
Setup Speed	Fast (days to weeks)	Slow (weeks to months)
Compliance Responsibility	EOR manages all local compliance	Your company is fully responsible
Cost	Pay per employee / service fee	Higher upfront costs (registration, legal, admin)
Scalability	Easy to scale up/down	Best for stable, long-term teams
Market Entry	Ideal for testing new markets	Suited for long-term, large-scale operations
Direct Control	Limited (EOR is legal employer)	Full control over employment terms
Payroll & Tax Handling	EOR handles all payroll, tax, and benefits	Your company must manage payroll and taxes

For more insights on choosing between EOR and legal entity setup, see our Complete Guide for Global Employers and Top 20 Countries Where You Definitely Need an EOR Service.

Understanding Worker Classification

Employees vs. Contractors in Denmark

Correctly classifying your workers is crucial for compliance in Denmark. Here’s how employees and contractors differ:

Aspect	Employee	Contractor
Legal Status	Hired under an employment contract	Hired under a service or consultancy agreement
Taxation	Employer deducts tax and social contributions	Contractor manages own tax and contributions
Benefits	Entitled to statutory benefits (leave, pension)	Not entitled to employee benefits
Control	Employer directs work, hours, and workplace	Contractor controls how and when work is done
Termination	Protected by notice periods and labor laws	Contract terms govern termination

Legal Implications and Risks of Misclassification

Misclassifying employees as contractors can lead to significant legal and financial risks:

• Penalties and Back Payments: Danish authorities may require back payment of taxes, social security, and benefits if a contractor is found to be a de facto employee.
• Legal Disputes: Workers may claim compensation or statutory rights if misclassified.
• Reputational Damage: Non-compliance can harm your company’s reputation and ability to hire in Denmark.
• Compliance Audits: Danish regulators actively monitor worker classification, especially for foreign employers.

For more on global worker classification, check out Freelancers, Independent Contractors, Consultants: Exploring Opportunities & Challenges.

Hiring Costs and Payroll

Hiring Costs Overview

Hiring in Denmark involves several direct and indirect costs:

• Gross Salary: Competitive salaries are expected, especially for skilled roles.
• Statutory Benefits: Employers must provide benefits such as paid leave, pension contributions, and social security.
• Payroll Administration: Costs may include payroll software, accountant fees, or EOR service charges.
• Onboarding and Training: Budget for integrating new hires and ensuring compliance with Danish processes.

Payroll Setup Steps

Setting up payroll in Denmark requires:

1. Registering as an Employer: Sign up with the Danish authorities via Virk.dk.
2. Obtaining a CVR Number: This is your company’s registration number, required for all tax and employment filings.
3. Reporting to E-income: Use the E-tax system to report salaries, tax deductions, and contributions.
4. Issuing Payslips: Provide detailed monthly payslips to employees, including all deductions and benefits.
5. Deducting A-tax and Labor Market Contributions: Withhold and remit taxes and contributions as required.

For more on payroll setup, see Reporting Pay (E-income).

Income Tax Rates

• A-tax: Employers must deduct A-tax (income tax) from employee salaries at source.
• Labor Market Contributions: Additional contributions are required for Denmark’s labor market fund.
• Tax Cards: Employees provide tax cards indicating applicable withholding rates.

For detailed tax rates and requirements, consult the Danish Tax Agency.

Payment Methods

• Direct Deposit: Most common method, transferring net salary to employee bank accounts.
• Bank Transfers: Used for both employees and contractors.
• EOR Payroll: If using an Employer of Record, all payments and deductions are handled by the EOR, ensuring compliance and timely payments.

Using Global Payroll Services

Global payroll providers or EORs can simplify payroll management:

• Automated Compliance: Ensure all local tax and reporting obligations are met.
• Multi-Currency Support: Handle payments in DKK or other currencies as needed.
• Centralized Reporting: Access consolidated payroll data for all international hires.

Learn more about how EOR services can ease management of payroll and benefits.

How to Properly Hire and Pay Contractors

• Written Agreement: Use a clear service contract outlining deliverables, payment terms, and IP ownership.
• Tax Compliance: Contractors are responsible for their own tax filings, but companies must avoid treating them as employees.
• Payment Methods: Pay via bank transfer or contractor management platforms.
• Avoid Misclassification: Do not set working hours or provide employee-like benefits to contractors.

These are the Best Ways to Pay International Independent Contractors.

Compliance Risks

Incorrect Payroll Contributions

• Risk: Failing to deduct and remit correct taxes and social contributions can lead to fines and back payments.
• Mitigation: Use payroll software, accountants, or EOR services to automate deductions and ensure accuracy.
• Documentation: Maintain records of all payroll transactions for at least five years.

Permanent Establishment Risk

• Risk: Hiring employees directly in Denmark without a legal entity may trigger permanent establishment, subjecting your company to Danish corporate taxes.
• Mitigation: Use an EOR to avoid creating a taxable presence unless you plan a long-term operation.

Explore more on compliance challenges when establishing an entity overseas.

Statutory Benefits

• Mandatory Benefits: Include paid annual leave, sick leave, pension contributions, and parental leave.
• Non-Compliance: Failure to provide statutory benefits can result in legal action and compensation claims.

Misclassification Risks

• Consequences: Misclassifying employees as contractors can lead to back taxes, social security payments, and penalties.
• Prevention: Regularly review worker roles and contracts to ensure proper classification.

Provincial/Regional Law Variances

• Uniformity: Denmark’s employment laws are largely national, with minimal regional variation. However, some collective agreements may introduce sector-specific rules.

Overview of Main Types of Intellectual Property Rights Relevant for Employers

• Copyrights: Protect original works created by employees during their employment.
• Patents: Inventions made by employees may be owned by the employer if stipulated in the contract.
• Trademarks and Trade Secrets: Ensure confidentiality clauses and NDAs are in place to protect proprietary information.

Learn about Managing Intellectual Property (IP) Through EOR: Key Considerations for Businesses.

Onboarding Process

Before Their First Day

• Employment Contract: Issue a compliant contract within seven days of employment starting, detailing all required terms.
• Work Permits: Ensure foreign employees have valid work and residence permits.
• Payroll Registration: Register the employee in the E-income system and obtain necessary tax cards.
• Equipment and Access: Arrange for work tools, IT access, and workspace setup.

On Day 1

• Orientation: Introduce company policies, team members, and workplace safety procedures.
• Compliance Briefing: Review Danish labor laws, workplace rights, and reporting channels.
• Document Collection: Gather necessary identification and tax documents.

During Their First 90 Days

• Probationary Period: Monitor performance if a probationary period is set (max six months).
• Training: Provide job-specific training and support.
• Feedback: Schedule regular check-ins to address questions and ensure smooth integration.

Here are the Top Eight Best Practices for Onboarding International Employees.

Offer Letter Essentials

• Key Details: Include job title, start date, salary, benefits, working hours, notice period, and probation terms.
• Compliance: Ensure all statutory information is present to avoid legal disputes.

NDAs and Confidentiality

• Protect IP: Use NDAs to safeguard trade secrets and confidential business information.
• Employee Obligations: Clearly outline confidentiality expectations in the employment contract.

Running Background Checks

• Permitted Checks: Conduct background checks in compliance with Danish privacy laws and GDPR.
• Consent: Obtain written consent from candidates before performing checks.

Remote Employee Management

Managing remote employees in Denmark requires a strategic approach:

• Computer Access: Provide secure laptops and ensure compliance with company IT policies.
• App Access: Use cloud-based collaboration tools, ensuring data security and GDPR compliance.
• IP Protection: Implement NDAs, confidentiality clauses, and clear IP ownership terms in contracts.
• Types of IP Rights: Address copyrights, patents, and trade secrets in employment agreements.
• Actionable Tips:
  • Regularly update software and security protocols.
  • Restrict access to sensitive data based on role.
  • Train employees on data protection and cyber security.

For more on managing distributed teams, read How to Manage Employees Remotely and Globally and Building Organizational Culture in Remote Teams.

Labor Law Compliance

Key Working Condition Requirements

• Working Hours: Standard workweek is 37 hours; overtime rules apply per contract or collective agreement.
• Rest Periods: Employees must receive a 30-minute break and 11 consecutive hours of daily rest.
• Leave: Employees are entitled to five weeks of paid annual leave, plus sick and parental leave.

Working Conditions by Employment Type

• Permanent Employees: Receive full statutory protections and benefits.
• Part-Time/Fixed-Term: Pro-rated benefits and protections based on hours and contract duration.
• Contractors: Not covered by statutory benefits; governed by contract terms.

No At-Will Employment

• Notice Periods: Danish law requires notice periods for termination; at-will employment is not recognized.
• Protections: Employees are protected against unfair dismissal and entitled to compensation if terminated without cause.

Trade Unions and Collective Bargaining

• Union Membership: Many employees are unionized, and collective agreements may set higher standards than statutory minimums.
• Employer Obligations: Respect collective agreements and consult unions on employment matters where applicable.

Learn about Employment Compliance and Its Importance.

Termination Guidelines

Acceptable Termination Reasons in Denmark

• Valid Grounds: Termination must be based on objective reasons such as redundancy, performance issues, or misconduct.
• Documentation: Employers must document the reasons for termination and follow due process.
• Employee Rights: Employees have the right to contest unfair dismissals and may be entitled to compensation if termination is found unjustified.
• Collective Agreements: Some sectors require additional procedures or consultations with unions before termination.
• Probationary Period: Shorter notice periods may apply during probation, but statutory limits still exist.

Notice Periods and Legal Protections

• Notice Periods: Vary based on length of service and contract terms, but statutory minimums apply.
• Legal Protections: Employees are protected against dismissal on discriminatory grounds (e.g., gender, age, union membership).
• Severance Pay: May be required by law or collective agreement, especially for long-serving employees.
• Appeals: Employees can appeal dismissals to labor courts or mediation boards.
• Documentation: Maintain thorough records of all termination decisions and communications.

Read more:  Severance Regulations Across Countries.

Benefits of Hiring in Denmark

• Highly Skilled Talent Pool: Access to a well-educated, multilingual workforce with strong technical and soft skills.
• Stable Business Environment: Transparent regulations, low corruption, and efficient public services.
• Cost Efficiency: Competitive labor costs relative to Western Europe, especially when leveraging EOR solutions.
• Time Zone Benefits: Central European Time (CET) facilitates collaboration with both European and global teams.
• Modern Infrastructure: Reliable digital and physical infrastructure supports remote and in-office work.
• Pro-Business Policies: Denmark ranks high for ease of doing business and innovation support.
• Work-Life Balance: High employee satisfaction leads to better retention and productivity.

Denmark Hiring, Simplified for Global Companies

Hiring in Denmark offers foreign companies a strategic gateway to the European market, backed by a highly skilled talent pool and a business-friendly environment. 

With clear processes for onboarding, payroll, and compliance, Denmark minimizes operational risks while maximizing access to top talent. Whether you choose to set up a legal entity or partner with an Employer of Record, understanding local laws and best practices ensures a smooth, successful hiring experience. 

By leveraging Denmark’s strengths, your organization can scale efficiently, remain compliant, and build a resilient international team.Ready to expand your team in Denmark? Discover how Tarmack’s global platform can simplify hiring, payroll, and compliance—so you can focus on growth. Learn more about our Employer of Record solutions.