Denmark

While there are generally four ways of employing people across borders, not all are legal or sensible. Here is an overview of each way to employ salaried employees in Denmark, outlining the potential cons.

HQ country employment & payroll

While the person is in Denmark, they are employed and payrolled directly by the company’s HQ entity.
Cons: This may appear attractive, but it generally isn’t legal in the long term. HQ payroll won’t be possible if the person is not a tax resident in the HQ country.

Independent contractor agreements

People are locally registered as sole traders or limited liability company owners in Denmark and invoice for their work. There is no direct employment relationship.
Cons: In Denmark, this is not a compliant or legal way to engage full-time workers who work solely for your company. There will be challenges in attracting and retaining talent.

Direct local employer setup

The company sets up as a fully-compliant local employer. This often involves setting up a local entity and local tax registration.
Cons: Expensive, time-consuming, high-level of complexity. Unknowns around how obligations and costs will evolve over time. There will be a need to stay on top of changes in regulations.

Partnering with an Employer of Record Denmark /full-service Professional Employer Organisation

Employment is handled by a platform that specializes in employing people on behalf of customer companies. The Employer of Record helps to hire and pay employees.
Cons: For some countries, the ongoing costs may be higher than direct employment. Some education is needed to inform employees about how the employment relationship will work.

Setting up a local company in Denmark is relatively straightforward. However, the difficult part comes after the initial setup when the employer needs to run payroll for their Denmark employees every month, file taxes, extend and manage employee benefits, and follow changes in rules and regulations to collective bargaining agreements.

When you hire employees in Denmark, you have certain obligations as an employer. HR compliance is about ensuring your policies and procedures respect all applicable laws, regulations and collective bargaining agreements regarding employment and work practices. Complying with local employment law in Denmark is fundamental for the correct running of your business – not only because these laws are in place to protect employees and guarantee their rights are safeguarded, but to minimise your risk of liabilities as an employer. Being compliant means respecting and following all Danish salaried employees laws, sickness benefits, annual leave, minimum wage, tax credits, working hours regulations, employment contracts, etc.

As with every other country, there are certain costs associated with employing a worker in Denmark that come on top of the gross salary you are offering. A Denmark employer must contribute to social security and occupational injury insurance . To view the exact percentages and amounts given the salary you are planning to offer, you can use our handy calculator tool.

Boundless as the Employer of Record Denmark files all pertinent taxes, and other contributions to the social system for the Denmark employee to be compliant.

We carefully choose employment lawyers or advisories to partner with in each country we operate in, including Denmark. They ensure the Danish employment contracts, and any other relevant documents required for new employees comply with the local jurisdiction. We have thorough discussions on specific norms such as payroll services, social protection, data protection, notice period or work-from-home regulations. Whenever a potentially sensitive issue arises in Denmark, our internal team contacts the relevant firm to ensure all steps are taken to resolve it promptly.

Any new employee that is locally employed through an Employer of Record gets full employment rights and benefits as specified in Danish employment law. They get a locally compliant employment contract, statutory maternity leave, annual leave, illness benefits, any relevant tax credit, and many more.

In Denmark, both employers and employees have to pay taxes. For employers, these include social security contributions and occupational injury insurance. For employees, these are social security contributions that include pension contributions and labour market contributions, as well as and income tax. To get a clear overview of both employee and employer taxes, use our salary breakdown calculator.