Employment Contracts

Contracts

A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries by creating compliant and balanced labour contracts. Our team keeps track of the Danish laws and regulations on a daily basis to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labour contracts for employees in Denmark, including local benefits.

To support your plans, we made this guide including the basics of employment contracts in Denmark. After reading this guide you will know everything about social security, notice periods, and the average working hours.

How Do You Hire Denmark Employees?

Foreign companies hiring employees in Denmark must operate within a flexible framework of legislation that relies on both collective agreements as well as case and European Union (EU) directives to provide safeguards and entitlements for the workforce. These include the Holiday Act 2020, the Salaried Employees Act (Funktionærloven), and rules governing employee contracts alongside statutes prohibiting discrimination and ensuring equal pay for men and women. However, unlike many European nations, Denmark’s flexible employment market does not have a comprehensive labour code.

These considerations come into play during the first stages of hiring and onboarding – drawing up a contract with your new employee. Once Bradford Jacobs’ Professional Employer Organization (PEO) recruitment networks have located the best talent for your company, we step in to advise on this crucial element of recruitment.

General requirements apply to all contracts. These include:

• Employers provide a written contract within a month if the employee works for more than a month and at least eight hours a day. The contract covers specific conditions of employment. Oral contracts are considered equally legally binding.
• There is no legal requirement to provide the contract in a particular language. Foreign employees should ask for a translation if they have insufficient Danish to understand the contract terms.
• Contracts should include full details of employer and employee, job type and location, vacations and other benefits, type of contract (permanent or fixed term), notice and termination details, and any relevant trade union, or collective agreements.
• Employees contracted under the Salaried Employees Act (Funktionærloven) will be covered by laws concerning maternity and parental leave, sickness, termination, severance, and vacations.
• Other issues must be dealt with before companies move into the ‘contract phase.’ These involve:
• Obtaining a Central Business Registration (CVR) number from the Danish Business Authority (DBA) for dealing with the authorities
• Registering with the Danish Customs and Tax Administration (SKAT) for withholding tax from employees’ salaries and remitting to the authorities
• All employers must take out mandatory industrial insurance, along with making contributions to the Danish Labor Market Supplementary Fund (ATP)
• Outsourcing the recruitment and hiring process through Bradford Jacobs’ Professional Employer Organization (PEO) network will give you the security that our in-depth knowledge can deal with all these potential problems.

Guarantee a trouble-free move into your new territory by trusting our Employer of Record (EOR) services to handle every aspect of payroll compliance.

Types of Employment Contracts in Denmark

Employees working more than eight hours each week and having been employed for more than one month are entitled to receive a written employment contract, containing all essential elements and conditions of the role. This must be issued within one month of the date of work starting. In addition, most businesses provide an employee manual, or display documents in the workplace detailing internal guidelines and rules on health, safety, and other areas. These are not usually mandatory; however, it is mandatory to have a non-smoking policy and a policy on e-cigarettes.

The main contract types in Denmark consist of:

• Indefinite, Open-ended Employment Contracts: The most common type of contract. If no other arrangement has been agreed upon, the contract is deemed to be indefinite. Either party can terminate the contract but must abide by contracted terms of notice, severance agreements if applicable and any collective agreements.
• Fixed-term Employment Contracts: These can be for a specific period, generally without a limit, or project, but can only be renewed more than once for a justified reason. These could include the absence of another employee due to illness, pregnancy etc.

The Danish Employment Contract Act applies mandatory requirements to a contract. These include:

• Full details of names and addresses of employer and employee; workplace location or primary location if more than one operating base
• Job description, including employee’s title
• Employment start date and duration, if not an open-ended contract, and terms of the notice
• Salary, payment schedule, any allowances or pension contributions
• Working hours each week and any paid vacation entitlements
• Identifying any collective agreements which affect the employment terms

Any proposed substantial changes to the contract must be provided to the employee on a timescale equal to their notice period, giving them the opportunity to agree to or terminate the agreement.

Collective Bargaining Agreements:

There is a tradition of collective and trade union agreements in the Danish employment market, although there is no legal requirement for Danish or foreign companies to enter into them. However, close to 80% of the private sector is subject to them, while collective and trade union agreements cover most of the public sector. Agreements cover the rights and obligations of workers and employers, for example dealing with working hours, pay and overtime, the working environment and resolving disputes. They are largely governed by guidelines developed between the Danish Employers Confederation and the Danish Federation of Trade Unions.

What Employment Laws exist in Denmark?

Denmark has a flexible employment market in terms of hiring and firing, but the social insurance unemployment fund brings a safety net in a system known as ‘flexicurity.’ The employer-employee relationship is typically covered by contracts, trade unions and collective agreements, although salaried staff also come under the Salaried Employees Act (Funktionærloven). The employment market has had to come into line with various European Union directives with legislation now applying to them such as working hours, paid vacations, “maternity leave” benefits and parental rights. However, these only come into force when workers are not covered by collective or trade union agreements that at least come up to statutory levels.

The framework protecting mainly blue-collar workers in the private sector is based on agreements between the Danish Employers’ Confederation, the Danish Trade Union Confederation, and the Confederation of Danish Industry.

The most common employment laws include:

Working Hours & Overtime: There is no legal provision on working hours, but they are determined through the relevant collective agreements. In normal cases, working hours are fixed at 37 a week, and cannot exceed 48 hours (including overtime).

Overtime is also governed by collective agreements and is usually fixed at 150-200% of the employee’s normal pay. There are, however, some collective agreements that may allow employees to choose between receiving payment or allocated time off for overtime hours worked.

Rest Days & Breaks: Employees in Denmark are entitled to an unpaid break during any working day that is longer than 6 hours. This break is normally determined by the employment agreement, but it normally lasts about 30 minutes. For daily resting periods, normal working hours should be organized to ensure that employees receive at least 11 consecutive hours between every 24-hour period. Weekly resting periods should be at least 24 hours, usually falling on a Sunday.

Health and Safety: In Denmark, health and safety is ensured through a joint employer/employee body. The size of the company affects the structure – small companies are one tier, whilst larger companies are two-tier. The employer is ultimately responsible for the health and safety of the workplace, but communication is dealt with between employer and employee representatives.

Annual Leave: Employees are entitled to 5 weeks or 25 working days of paid annual leave per year. Public holidays are not included in leave entitlement. An employee can accrue and take leave during the same period. Holiday leave is earned from Sep. 1st to Aug 31st and can be used during the qualifying year and the following 4-month period.

Sick Leave: Employees are entitled to a full salary and bonus during sick leave, which consists of 30 days. Employees who are not covered by the Salaried Employees Act, may be entitled to pay during sick leave as written under an individual employment agreement or collective agreement.

Maternity Leave: Pregnant employees are entitled to approx. 18 weeks of maternity leave, which can be split up as four weeks before childbirth and 14 weeks after childbirth. Based on the individual employment agreement or relevant collective bargaining agreement, employees may be entitled to full salary during some of their maternity leave. Employers that pay employees’ salaries during maternity are eligible for reimbursement by the social security authorities. Employees are also entitled to return to their previous job after maternity leave or will be given an equivalent one.

Paternity Leave: Employees are entitled to two consecutive weeks of paid paternity leave, which is to be taken within 14 weeks after childbirth. The leave may also be taken non-consecutively, as long as it is taken within the first 14 weeks of childbirth.

Parental Leave: There is no law for paternity leave in the Czech Republic, but fathers are entitled to parental leave, along with the mother, until the child reaches the age of three. Parental Leave can begin from the end of maternity leave for the mother and the date of birth for the father. This can be granted to employees on request.

Probationary Period: There is no statutory probationary period in Denmark, but a period of up to three months can be agreed to and cannot be extended. During this period, both the employer and employer are entitled to contract termination by giving 14 days’ notice.

Termination and Notice: The notice period for employment termination in Denmark depends on the employee’s length of service:

• up to 6 months: 1 month
• 6 months – 3 years: 3 months
• 3 – 6 years: 4 months
• 6 – 9 years: 5 months
• 9+ years: 6 months

In cases of termination, a notice is not required in cases of gross misconduct.

Severance Pay: There is no general legislation for severance pay, but it is only granted in cases of redundancy and has been continuously employed with the same employer for at least 12 years. In this case, it amounts to one month’s pay or three months’ pay for over 17 years of service.

Companies extending their operations into Denmark need a total understanding of employment and contract laws. Bring Bradford Jacobs’ expertise into the equation with our comprehensive understanding of Danish laws and regulations. The global reach of our Professional Employer Organization (PEO) specialists is matched by in-country Employer of Record (EOR) platforms that ensure a smooth entry into the Danish economy.