Hiring in Denmark: A Guide for International Employers

Udgivet 10. april 2026 af Jakub Slusarek

Hiring your first employee in a new country can feel complicated. Denmark has a reputation for being heavily regulated, but the system is quite straightforward once you understand the basic principles. It is a system built on collective agreements, digital reporting, and clear distinctions between different types of work. This guide explains the essential things you need to know before you hire someone in Denmark.

The Core Obligations: A-skat, AM-bidrag, and eIndkomst

When you employ someone in Denmark, you are responsible for withholding and paying their income tax and labour market contributions. This is managed through the state's digital systems.

A-skat (A-tax) is the preliminary income tax paid by the employee. As an employer, you must deduct this from your employee's salary before you pay them. The specific percentage is determined by their personal tax card (skattekort), which you retrieve digitally from the Danish Tax Agency (SKAT).

AM-bidrag (Labour Market Contribution) is a flat 8% tax that all employees pay. This also needs to be withheld from the gross salary. It contributes to state expenses for unemployment benefits, training, and leave schemes.

Your primary responsibility is to report and pay these amounts correctly. This is all done through one central platform: eIndkomst. Before you can pay your first salary, your company must be registered as an employer with the Danish Business Authority (Erhvervsstyrelsen). Once registered, you get access to eIndkomst. For every salary payment, you report the employee's gross pay, A-skat, AM-bidrag, and other details. The system then tells you the total amount to transfer to SKAT.

Holiday Pay: The Feriepenge System

In Denmark, employees have a right to 5 weeks of paid holiday per year. The system for managing this is called feriepenge, or holiday pay. As an employer, you contribute 12.5% of an employee's qualifying salary into a holiday fund.

For most salaried employees (funktionærer), you can choose to manage this obligation yourself and pay them their normal salary during their holiday. However, for hourly workers, you must pay the 12.5% into the state-managed fund, FerieKonto. The employee then claims their holiday pay directly from FerieKonto when they take time off.

It is a legal requirement. You cannot pay it out as a lump sum or ignore it. The purpose is to ensure that everyone gets their paid time off, even if they change jobs during the year. When an employee leaves your company, you must settle their accrued holiday pay with FerieKonto.

Pension Contributions

Pension is a significant part of compensation in Denmark, but the rules are not universal. Whether you are required to contribute to a pension scheme depends on the industry and any applicable collective agreement (overenskomst).

Many sectors have collective agreements that mandate pension contributions. Typically, the employer pays two-thirds (e.g., 8% or 10%) and the employee pays one-third (e.g., 4% or 5%) of the salary into a pension fund. If your business is not covered by a collective agreement, you are not legally required to offer a pension. However, it is a very common benefit and a key factor in attracting and retaining staff. Many companies choose to establish their own pension schemes as part of their standard employment package.

Employment Contracts: Getting it in Writing

While oral agreements are technically binding, Danish law requires employers to provide a written employment contract (or a letter of employment) no later than one month after the employment starts. The contract must outline all material terms of the employment.

Key details to include are:

For salaried employees, a probation period (prøvetid) of up to three months is common. During this time, the notice period for termination is much shorter, often just 14 days from the employer's side and one day from the employee's. This must be explicitly stated in the contract.

Employee vs. Freelancer: A Crucial Distinction

It might seem easier to hire a freelancer or independent contractor instead of an employee. You avoid the obligations of withholding tax, paying holiday money, and dealing with pensions. However, the distinction is strictly defined by the authorities.

A person is generally considered an employee if:

In contrast, a freelancer:

Misclassifying an employee as a freelancer can lead to significant financial penalties. If SKAT determines that the relationship was, in fact, one of employment, you could be held liable for back-taxes, holiday pay, and any social contributions you should have paid. It is always better to be certain about the classification from the beginning.