Taxes and payrolls: the labour market in Denmark
Each labour market has some peculiarities. It may be tricky for foreigners to understand fully the payment methods, the taxes and other benefits related. In TalentUp we are starting a series of different blog articles, one for each country. This article analyses the labour market in Denmark.
Even if the national currency is the Danish Krone (DKK), the whole article is in EUR to compare easily across countries and exchange rates.
General data about the Danish labour market
| Minimum wage | Not established |
| Payment basis | Monthly |
| Payment | Must be paid by the end of the month |
| Maximum working hours a week | 37.5h |
| Maximum overtime hours a week | 48h |
| Working hours compensation | Paid at 150 to 200% rate |
Payroll taxes in Denmark
Social security contributions are made by the employer and the employee and are used for funding unemployment, pension, maternity/paternity leave, and sickness or injury.
| Contingencies | Employer | Employee % |
| Mandatory Social Security (ATP) | 304.72€ | 152.4€ |
| Public social security schemes (estimated) | 711.14€ | |
| Industrial injuries insurance (estimated) | 670.89€ | |
| Maternity Leave Fund | 181.14€ | |
| Holiday Bonus (accrued each month & paid out in May). | 1% | |
| National/State Tax | 12.1% (and 15% of part of the top tax base Exceeding 76,333.47€ annualy) | |
| Local tax | 32.97% | |
| Share tax | 27% (42% when above 7,903.40€ monthy) | |
| Church tax | 0,67% | |
| Total | 1599.53€ + 1% | 152.4€ + 72.74% |
Example of net salary in Denmark
As a reference, we use the average salary of a software engineer. In Denmark, on average, software engineers earn annually 67,000€.
| Employer | Employee | |||
| % | € | % | € | |
| Gross salary (annually) | ||||
| Mandatory Social Security (ATP) | 304.72€ | 152.4€ | ||
| Public social security schemes (estimated) | 711.14€ | |||
| Industrial injuries insurance (estimated) | 670.89€ | |||
| Maternity Leave Fund | 181.14€ | |||
| Holiday Bonus (accrued each month & paid out in May). | 1% | 670€ | ||
| National/State Tax | 12.1% | 8107€ | ||
| Local tax | 32.97% | 22,089.9€ | ||
| Share tax | 27% | 18,090€ | ||
| Church tax | 0,67% | 448.9€ | ||
| Total | 2,269.53€ | 48,888.2€ | ||
| Net salary (annually) | 18,111.8€ |
The employer contributes 2,269.53€ to social security and the employee 48,888.2€.
After paying the income tax, the employee has a net salary of 18,111.8€ coming from a gross salary of 67,000€.
Unemployment regulation in Denmark
The Danish Salaried Employees Act specifies the notice of termination that must be given by the employer to terminate the employment.
| Time worked | Notice period |
| Less than 6 months | 1 month |
| From 6 months to 3 years | 3 months |
| From 3 to 6 years | 4 months |
| From 6 to 9 years | 5 months |
| More than 9 years | 6 months |
The employee must give notice of 1 month, regardless of the length of the employment.
In general, probation periods are up to three months. The probationary period for fixed-term contracts cannot be more than one-quarter of their duration.
Different kinds of leaves in Denmark
In Denmark, they have 25 working days of holidays. Holidays are divided into 3 weeks which are called the main holiday, and an additional 2 weeks which are called residual holidays. Workers must use at least 20 days per year, any remaining can be carried over to the following year.
They have 12 days of public holidays.
Salaried employees receive full salary during sick leave:
- First 30 days paid by employer.
- For continuous employment of at least 8 weeks and 74 hours worked.
- After, the municipality covers if conditions met, like 240 hours worked in 6 months, with at least 40 hours in 5 of those months.
Sickness benefit calculated from hourly pay and weekly hours.
In Denmark, individuals aged 18 to 30 can be randomly selected for national military or civil service. Both men and women can volunteer as well. This service typically lasts four months. Employers must provide leave for national service, and employees are safeguarded against dismissal for requesting or taking such leave.
Paid parental leave
Maternity leave lasts 18 weeks total, starting 4 weeks before due date, with 2 weeks mandatory. Employees meeting statutory eligibility get 50% salary from 4 weeks before expected birth until 14 weeks after actual birth.
Fathers can take 2 weeks during the mother’s 14-week maternity leave. Employer payment isn’t legally required but is common under agreements.
After the initial 14 weeks of maternity leave, each parent can take up to 32 weeks, extendable but affecting monthly allowance. One parent can defer 8-13 weeks before the child turns one. Adoptive parents have equal leave rights.
Other common Danish benefits
| Benefit | % of companies with this benefit |
| Diversity | 15.6 |
| Professional Development | 12.8 |
| Cutting Edge Technology | 10.1 |
| Equal Opportunity Employer | 8.3 |
| Company Events | 5.5 |
How to employ a Danish worker
To hire employees in Denmark, you must first obtain legal standing as a business and an employer. This implies you will have to go through a few processes.
You will need the following aspects:
- Organizational structure;
- Registration as a DBA;
- Registration with the IRS;
- Bank account and share capital;
- Documents;
- Space for work;
- Insurance for work-related injuries.
Some platforms (Papaya Global among them) offer the Employer of Record (EoR) service helping companies hire countries where they do not have any office.
Follow TalentUp on LinkedIn and subscribe to our newsletter to get our latest articles!
