Employer of Record Denmark

Employer of Record (EOR) is a service that allows companies to hire employees in Denmark without the need to establish a local entity.
The EOR acts as the official employer for hired individuals, handling HR administration, compliance with local labor laws, and tax obligations.
This enables businesses to focus on expanding in the Danish market without managing complex HR and legal processes.

Why do companies choose EOR instead of establishing a local entity?

• ✅ Faster market entry – Hiring through an EOR is much simpler than registering and operating a local company.
• ✅ Lower costs and reduced risks – Avoiding the need to register a legal entity eliminates administrative costs and the risk of non-compliance with local regulations.
• ✅ Full compliance – EOR ensures adherence to all legal and tax requirements, avoiding potential issues with Danish authorities.
• ✅ Administrative support – Payroll, social security contributions, and benefits are managed by the EOR provider.

Key challenges of hiring in Denmark:

• 🚀 High labor costs – Denmark has some of the highest salaries in Europe, along with significant social security contributions.
• 🚀 Complex labor laws – Danish labor law is well-regulated and protects employees, requiring strict adherence to rules regarding employment contracts, terminations, and benefits.
• 🚀 Tax and social security contributions – Employers must contribute to healthcare, pensions, and other social benefits, which requires understanding Denmark’s tax regulations.
• 🚀 Visa restrictions for non-EU employees – Hiring workers from outside the European Union requires obtaining work permits and meeting specific criteria.

Using Employer of Record (EOR) in Denmark offers numerous benefits for companies, simplifying market entry and reducing administrative burdens related to hiring employees.
Below are the key advantages of this service:

No need to establish a local entity

One of the biggest advantages of using EOR is the ability to hire employees in Denmark without registering a local company.
Setting up an entity involves costs, a lengthy registration process, and multiple legal requirements.
With EOR, companies can focus on expansion without facing bureaucratic hurdles.

Compliance with local labor laws

Danish labor laws are well-regulated and require employers to adhere to various rules concerning contracts, wages, taxes, and social benefits.
EOR ensures full compliance with these regulations, minimizing the risk of legal violations and potential financial consequences.

Faster hiring and easy market entry

By working with an EOR provider, companies can immediately hire employees in Denmark without going through complex registration processes.
This is especially beneficial for businesses testing a new market or executing short-term projects that require quick workforce deployment.

Administrative support (payroll, taxes, benefits)

Employer of Record takes over all administrative responsibilities, including:

• ✅ Calculating and processing salaries in compliance with Danish labor laws.
• ✅ Handling tax payments and social security contributions.
• ✅ Managing benefits such as health insurance, pension plans, and paid leave.
• ✅ Overseeing HR documentation, including employment contracts, amendments, and termination procedures.

Danish labor law is relatively flexible but also strongly protects workers’ rights.
Employers must comply with regulations regarding contract types, wages, working hours, leave, and dismissals.
Using Employer of Record (EOR) in Denmark helps companies meet all local legal requirements and avoid potential consequences of non-compliance.

Types of employment contracts

Denmark offers different forms of employment contracts, and the choice depends on the company’s and employee’s needs.
The most common contract types include:

• ✅ Permanent contract – the standard form of employment, providing workers with full rights and stability.
• ✅ Fixed-term contract – used for specific projects or temporary workforce needs, but cannot be misused to avoid permanent employment.
• ✅ Freelancer and contractor agreements – B2B contractors are not covered by all labor law regulations, so EOR helps ensure compliance.

Probation periods

In Denmark, the probation period can last up to 3 months, but in some cases (e.g., for management positions), it can be extended to 6 months.
During this time, shorter notice periods apply, making it easier for both employers and employees to decide on continued employment.

Minimum wage in Denmark

Denmark does not have a statutory minimum wage, but salaries are regulated by collective agreements in various industries.
In practice, the lowest wages

Denmark is known for its high taxation levels, but it also offers one of the world’s most developed social welfare systems.
Companies employing workers in Denmark must comply with regulations regarding income tax, social security contributions, and the total cost of employment.

Personal Income Tax (PIT)

The Danish tax system is progressive, meaning the higher the salary, the higher the tax rate.
Income tax consists of several levels:

• ✅ Municipal tax – approximately 24-27%, depending on the municipality.
• ✅ State tax:
  • • 12.10% for income above 46,600 DKK per year.
  • • 15% for income above 568,900 DKK per year.
• ✅ Labour Market Contribution (AM-bidrag) – fixed 8% rate deducted from all income.

In practice, the total tax burden for employees can reach up to 55% of their gross salary.
However, the Danish tax system offers numerous tax deductions and reliefs that can reduce effective taxation.

Social Security Contributions

Unlike many other European countries, social security contributions in Denmark are relatively low.
Most of the welfare system is funded through income taxes rather than direct employer and employee contributions.

• ✅ Labour Market Contribution (AM-bidrag) – 8% (paid by the employee, deducted by the employer).
• ✅ Mandatory employee insurance (ATP) – employee: ~94 DKK/month, employer: ~188 DKK/month.
• ✅ Holiday Fund (FerieKonto) – 12.5% of salary (employer deposits funds for employee leave).
• ✅ Work injury insurance – covered by the employer, depending on the sector.

Total Cost of Employment

Despite high income taxes, the cost of employment in Denmark is relatively low for employers because social security contributions are not as high as in other European countries.

• ✅ Gross salary: 50,000 DKK/month (~6,700 EUR).
• ✅ Employer’s contributions: ~3-5% additional costs.
• ✅ Total employment cost: ~51,500 – 52,500 DKK per month.

In comparison, in countries like Germany or France, the total employer cost can be 30-40% higher than the gross salary.

Tax Optimization Options

Denmark offers various ways to reduce tax burdens for both employees and employers. The most common include:

• ✅ Special Tax Scheme for Expats – allows expatriates to pay 27% tax + 8% AM contribution for up to 7

Recruitment and onboarding processes in Denmark are well-structured and based on transparent principles.
Companies looking to hire in Denmark should be familiar with the most commonly used recruitment channels,
the duration of the hiring process, and the required formalities.
Employer of Record (EOR) helps simplify the entire process, ensuring compliance with local regulations
and minimizing administrative burdens.

Common Recruitment Channels

The Danish job market is highly developed and open to international specialists, but competition for talent is strong.
The most popular recruitment channels include:

• ✅ LinkedIn – the primary tool for recruiting specialists and managers.
• ✅ Job portals – such as Jobindex, WorkinDenmark, and StepStone.
• ✅ Recruitment agencies – frequently used for hiring highly skilled workers and executives.
• ✅ Student and graduate portals – such as Graduateland and TargetJobs, used for recruiting young talent.
• ✅ Referrals and networking – many Danish companies rely on employee recommendations.

Average Recruitment Duration

The recruitment process in Denmark typically takes 4-8 weeks, but this varies by industry and job level.

• ✅ Entry-level positions – approximately 4 weeks.
• ✅ Specialist roles – around 6 weeks.
• ✅ Executive and C-level roles – the process can take up to 2-3 months.

The extended recruitment period is often due to multiple selection stages, including technical interviews,
competency assessments, and reference checks.

Required Documents for Employment

The employer (or Employer of Record) must ensure that newly hired employees have the necessary documentation.
In Denmark, the following documents are required:

• ✅ Employment contract – detailing employment conditions, salary, working hours, and benefits.
• ✅ CPR number (Central Person Register) – a mandatory identification number for all employees.
• ✅ Tax card (skattekort) – required for correct tax calculation.
• ✅ Bank account number – for salary payments.
• ✅ Work permit (for non-EU/EEA citizens) – required if the employee is from outside the European Union.

Onboarding Process in Compliance with Local Law

Onboarding in Denmark plays a crucial role in integrating new employees.
Under Danish labor law, the employer must provide:

• ✅ Introduction to the organization – familiarizing employees with company culture and values.
• ✅ Job training – particularly important in technical and medical industries.
• ✅ Work regulations overview – including working hours, leave policies, and benefits.
• ✅ Administrative support – assistance with obtaining a CPR number, tax card, and social security registration.

Denmark is an attractive job market for specialists from outside the European Union,
but visa procedures and work permits can pose challenges for foreign employers.
Employer of Record (EOR) helps companies efficiently hire international talent,
ensuring compliance with immigration regulations and simplifying the entire process.

What Types of Work Visas and Permits Are Available?

Foreigners from outside the EU/EEA and Switzerland must obtain a work permit in Denmark.
The most commonly used schemes include:

• ✅ Fast-Track Scheme – an accelerated process for companies approved by Danish authorities, allowing for quick hiring of highly skilled professionals.
• ✅ Pay Limit Scheme – for employees earning more than 375,000 DKK per year (approximately 50,000 EUR).
• ✅ Positive List Scheme – for specialists in high-demand sectors such as IT, engineering, and healthcare.
• ✅ Trainee Scheme – for interns looking to gain professional experience in Danish companies.

EU/EEA citizens can work in Denmark without a permit but must obtain a residence registration
(EU residence certificate) if they plan to work for more than three months.

How Long Does It Take to Obtain a Work Permit?

The processing time for a work permit depends on the chosen scheme:

• ✅ Fast-Track Scheme – approximately 1 month.
• ✅ Pay Limit Scheme and Positive List Scheme – approximately 2 months.
• ✅ Trainee Scheme – approximately 3 months.

It is important to note that non-EU applicants must also apply for a Schengen visa
if they plan to travel to Denmark before completing the immigration process.

How Can Employer of Record (EOR) Help Hire Foreign Employees?

Hiring employees from outside the EU can be complex, but EOR simplifies the entire process
by handling work permit formalities. The benefits of using EOR for visas and permits include:

• ✅ Accelerated hiring process – EOR manages visa and work permit procedures, minimizing delays.
• ✅ Full compliance with immigration regulations – eliminates the risk of formal errors and financial penalties.
• ✅ Administrative support – preparation of documentation, coordination with Danish authorities, and management of employees’ immigration status.

Hiring an employee in Denmark comes with relatively high costs, mainly due to high salaries and tax burdens.
However, compared to other Scandinavian countries, Denmark has relatively low social security contributions,
which can be beneficial for employers.
Employer of Record (EOR) helps companies optimize employment costs,
eliminating the need to establish a local entity and bear additional administrative expenses.

Estimated Employment Costs in Denmark at Different Salary Levels

The total cost of employment in Denmark includes gross salary, taxes, social contributions, and additional benefits.

📌 Important: In Denmark, employer costs primarily increase due to high salaries rather than social contributions,
which remain relatively low compared to countries like Germany or France.

Companies planning to expand into the Danish market can choose from several employment methods.
Employer of Record (EOR) is one of the most convenient solutions,
but in some cases, alternative options such as company incorporation, payroll outsourcing, or body leasing may be considered.

Setting Up a Company in Denmark – Pros and Cons

Registering a company in Denmark provides full control over employee management,
but it comes with high costs and time-consuming administration.

✅ Pros:

• ✔ Full control over HR and payroll processes.
• ✔ Ability to build a strong presence in the Danish market.
• ✔ Improved reputation among local clients and business partners.

❌ Cons:

• ⛔ Time-consuming registration process (3-6 months).
• ⛔ High administrative and accounting costs.
• ⛔ Requires expertise in local labor laws and tax regulations.

📌 Conclusion: Incorporating a company in Denmark is a viable option for companies planning a long-term presence in the market,
but for a faster market entry, EOR is the better solution.

Some companies choose payroll outsourcing, which covers only payroll processing and taxes,
but does not solve the legal employment status of workers.

✅ Advantages:

• ✔ Lower administrative burden.
• ✔ Lower costs than maintaining an in-house accounting team.

❌ Disadvantages:

• ⛔ The company must still be registered in Denmark.
• ⛔ The company must comply with local employment regulations.
• ⛔ No full HR and legal employment support as with EOR.

📌 Conclusion: Payroll outsourcing works well for companies that already operate in Denmark,
while EOR is a better solution for companies without a local entity.

Body Leasing – When to Use It?

Body leasing involves hiring employees from external firms.
It is popular in the IT and engineering industries but has its limitations.

✅ Advantages:

• ✔ Quick access to specialists for fixed-term projects.
• ✔ No long-term employment obligations.

❌ Disadvantages:

• ⛔ Higher costs than direct employment.
• ⛔ Limited control over employees.
• ⛔ May not always comply with legal requirements in long-term projects.

📌 Conclusion: Body leasing is useful for short-term projects,
but for companies planning permanent employment in Denmark,
EOR is the better choice.