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Minimum wage in Denmark
Payroll in Denmark
Statutory benefits in Denmark
Other employee benefits in Denmark
Compliant, seamless payroll and benefits in Denmark and beyond
Payroll and benefits in Denmark
Each country has its own rules, regulations, norms, and customs when it comes to payroll and benefits. And it’s crucial to understand these before hiring talent. For example, in Denmark, payroll is usually conducted on a monthly basis. Employers have to withhold certain taxes and charges from their employees’ salaries and pay employer contributions too.
Basics of payroll in Denmark
Before hiring employees, employers should have a thorough understanding of payroll in Denmark. This allows them to ensure their operations are both compliant with the law and in line with local employee expectations. In this section, we’ll cover various particularities of payroll in Denmark, including:
- How minimum wages are defined
- The standard payroll frequency and process
- Statutory and additional benefits
- Social security benefits
Payroll outsourcing in Denmark
Many employers choose to simplify their administration by outsourcing HR tasks like payroll. Foreign employers that want to hire Danish talent can go a step further and engage workers through an employer of record (EoR). As well as becoming the legal employer for the workers in question, EoR providers offer HR services including payroll and benefits administration.
Minimum wage in Denmark
Denmark is one of only five countries in the EU that doesn’t have a national minimum wage. However, collective bargaining agreements, which cover most employees in the country, usually stipulate a minimum wage for employees in the relevant industry or occupation. The lowest minimum wages as defined by CBAs are around DKK 110 (about EUR 15) per hour.
Average wage in Denmark
According to Statistics Denmark, the average Danish employee earns DKK 46,972 (around EUR 6,200) per month before taxes. This is the equivalent of:
- DKK 293 per hour
- DKK 10,839 per week
- DKK 563,664 per year
Taxes in Denmark
Taxes are extremely high in Denmark compared to most other countries in Europe, with employees typically paying around 30–40% of their salary to the government. As an employer hiring in Denmark, you should take this into account when determining the right salaries to offer.
Payroll in Denmark
As in all countries, there are specific rules and regulations that apply to payroll in Denmark. First, employers must withhold certain taxes and charges from their employees’ salaries each month and remit them to the proper authorities. Employers also have to provide their employees with a payslip each month, which details all of the deductions they have made.
Denmark payroll frequency
There is no statutory regulation on payroll frequency in Denmark. However, standard practice is to run payroll once a month. Employees are typically paid on the same day each month.
Other requirements for running payroll in Denmark
Employers in Denmark must pay their employees in the local currency, which is the Danish Krone (DKK). It’s illegal to pay an employee into a foreign bank account. Employers also have to provide a payslip after each payroll run, which must contain:
- The name, address, and tax number of the employee and the employer
- The dates the pay period covers
- The hours the employee worked
- The employee’s gross and net pay
- The A-tax and market contributions deducted
- The employee’s total pension contributions
- Withholding rates and other relevant information
- Details on employee benefits such as holiday pay
Employers running payroll in Denmark can choose to provide payslips in either digital or paper format. Employers also need to keep payroll records for at least five years.
Payroll taxes in Denmark
Withholding and paying taxes and social security contributions is an important part of running payroll in Denmark. Employers have to pay both employer and employee contributions to the tax authorities each month.
Employer contributions include:
- ATP: Pension contributions
- AUB: Contributions to fund apprenticeships and vocational training
- AES: Contributions towards occupational injury and disease
- FIB: Contributions towards unemployment, sickness, and maternity benefits
Employers must also collect contributions from their employees in Denmark, which include:
- Pension contributions: Both employees and employers in Denmark pay pension contributions, which give employees access to the state pension when they retire.
- Labour market contributions: This covers employees in the case of unemployment or sickness and pays for training expenses. It’s paid at a rate of 8% of the employee’s gross salary.
- Income tax: The income tax rate is progressive, which means that higher earners pay more tax. Income tax in Denmark includes municipal, state, and church taxes.
13th salary in Denmark
Unlike in some other countries in Europe, there is no legal obligation in Denmark to provide employees with a 13th salary payment. However, some employers do choose to pay their employees an annual bonus in recognition of their work.
Statutory benefits in Denmark
Statutory benefits are benefits that employers are legally obliged to provide for their employees. These are different in every country. In Denmark, employee benefits may be set out in various labour laws or in collective bargaining agreements.
Social security benefits
Many employee benefits in Denmark are not provided by the employer directly but by the country’s robust social security system. This is paid for by contributions from both employers and employees. Social security benefits in Denmark include:
- State health insurance: Healthcare in Denmark is free and universal, and funded through the tax system. The quality of care in Denmark is generally agreed to be very high. However, the public system doesn’t include all medications or types of care.
- Unemployment insurance: People in Denmark can access unemployment benefits while they are out of work. This is funded through the social security system.
- Child allowance: The child allowance is one of the many benefits in Denmark provided by the social security system. It’s a quarterly payment that parents can claim to help them with the cost of caring for a child. The amount parents receive depends on their situation.
- Parental benefits: Parents in Denmark are entitled to paid time off when they or their partner gives birth. This is paid for through the social security system. Some collective bargaining agreements state that employers have to pay their employees’ salary during part of the leave.
- State pension: Danish employees are entitled to a state pension once they reach the state retirement age. How much they receive depends on various factors including their age, marital status, and work history.
Mandated employee benefits in Denmark
Employers in Denmark are required to provide certain statutory benefits to their employees by law. These include:
- Paid holiday: Employees in Denmark are entitled to five working weeks (25 days) of paid holiday per year. This is accrued at the rate of 2.08 days per month of work, and employees can use their leave as soon as they have accrued it. Independent contractors are typically not entitled to paid holiday, but employers must pay them an additional 12.5% of their annual pay in lieu of leave.
- Overtime: Overtime is mandated by collective bargaining agreements. Generally, employers are required to pay overtime at a rate of between 150–200% of the employee’s normal rate of pay for any hours they work above the weekly maximum of 37 hours.
- Maternity and paternity leave: Parents in Denmark are entitled to 24 weeks of paid leave when they or their partner has a baby. Birth mothers also get an additional four weeks of leave before the birth of their child. Parents can choose to transfer some of their parental leave to their partner.
- Minimum wage: There is no national minimum wage in Denmark. However, various collective bargaining agreements mandate a certain minimum wage. Employers in Denmark should be sure to check the CBA that applies to them, so they know what to pay their employees.
Other employee benefits in Denmark
Employers in Denmark can choose to offer additional employee benefits, even when these are not required by law or according to the terms of the relevant collective bargaining agreement. While this represents an expense to the employer, it can be worth it if it makes it easier to attract and retain top talent.
Employers who are thinking about hiring employees in Denmark should conduct research to find out which benefits would be particularly valuable to Danish talent. Read on for a few common benefits offered by employers in Denmark.
Private health insurance
Because Denmark has a robust and accessible public healthcare system, private health insurance is not as common an employee benefit as it is in some other countries. However, some employers choose to provide it to give their employees greater coverage and more options for care.
Competitive compensation
Salaries in Denmark are some of the highest in the world. That means that paying a competitive salary and other forms of compensation is crucial if you want to attract Danish talent. It’s a good idea to conduct research into the standard pay rates in your industry before hiring in Denmark.
Additional time off
Many employers choose to offer their employees time off in addition to their statutory entitlement. This can be a valuable employee benefit in Denmark, where many employees are interested in improving their work-life balance.
Flexible working hours
Employers in Denmark have an international reputation for promoting the well-being of their employees. As part of this, allowing employees to work flexible or reduced hours is becoming a common employee benefit in Denmark.
Taxes on employee benefits in Denmark
Some employee benefits in Denmark are taxable, while others are tax-exempt. In general, employees don’t have to pay taxes on benefits that are directly related to their work, up to a total value of DKK 7,000 (around EUR 938). This includes things like training and education, parking spaces, transport passes, or free food and drinks for working overtime.
However, employees are taxed on these benefits if their total value exceeds DKK 7,000. When employee benefits are not linked directly to the employee’s work, they are taxed if their total value exceeds DKK 1,300 (around EUR 174).
Compliant, seamless payroll and benefits in Denmark and beyond
Getting payroll and benefits right is not just a legal issue.
Every country also has its own customs, norms, and expectations about employee compensation. And if your operations aren’t in line with your workers’ expectations, they may not stick around for long.
Thankfully, we know what we’re doing. When you work with CXC to engage workers in Denmark, we’ll handle everything from tax withholding to employee bonuses on your behalf.
Want to find out more?
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