Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in Denmark might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labour contracts for employees in Denmark including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In Denmark, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils.
Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into Denmark.
What Employee Benefits are there in Denmark?
Benefits and entitlements for Danish employees are based on a framework of statutes, European Union (EU) directives and collective and trade union agreements. Foreign companies hiring employees in Denmark must operate within this flexible arrangement of legislation that provides safeguards and guarantees 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.
Minimum guaranteed benefits, either from legislation or agreements, include:
- Minimum wages
- Paid vacations
- Working hours
- Termination, notice periods and severance
- Sick leave
- Maternity allowances and benefits
Denmark’s Employment Certificates Act stipulates that all employees receive written confirmation of all entitlements.
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations, however. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship.
What Compensation Laws exist in Denmark?
The employer-employee relationship in Denmark is based on a mix of contractual arrangements, statutes, and case law. Collective and trade union agreements also feature and are drawn up in conjunction with the Danish Employers’ Federation. Some statutes apply to all workers, while others apply only to salaried staff:
- The Holiday Act guarantees a statutory five weeks annual vacation. Entitlement to holiday pay is built up in the year prior to the ‘holiday year.’
- The Employment Rights Act imposes obligations on employers to pay the same to people undertaking the same work.
- The Salaried Employees Act primarily covers business and office positions where employees must work a minimum of eight hours per week to qualify for the Act. Provisions cover such notice periods, dismissals and sickness pay.
The requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures. Statutes apply to such as maternity allowances and benefits, holidays, sick pay, and severance payments. However, those regarding minimum wages and working hours, for example, are governed by collective or trade union agreements and individual contracts between employers and employees. Drawing up contracts is tricky enough, but in Denmark, it is vital for employers to be up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Denmark has a confusingly fluid and flexible employment market. Do not take the risk of paying penalties for ignoring these responsibilities.
Compensation, entitlements, and benefits include:
National Minimum Wage: Minimum wage rates are governed by employer associations, trade unions and Collective Bargaining Agreements (CBAs). The monthly average minimum for 2021 was around DKK 40,600 (€5,456, US$6,350).
Sick Leave: Employment contracts should cover employees’ entitlements when they are ill. If not, the employers typically pay full salary for 30 days from the first day but will require a doctor’s certificate. Subsequently, the benefit is paid by the relevant municipality subject to restrictions. The maximum benefit is DKK 4,460 (€600, US$696) divided by 37 (hours) for a maximum of DKK 120 (€16, US$19) per hour.
Working Hours and Breaks: A typical working week should be 37 hours over five days, which may be specified in collective or contractual agreements and include a daily 30-minute rest period.
The European Union’s Working Time Directive, which is applied in Denmark by the Working Environment Act, decrees that the average working week cannot exceed 48 hours (including overtime) averaged over four weeks.
Maternity Pay is currently set at 90% of the employee’s average earnings for the first six weeks of maternity leave, or £151.97 per week or 90% of the employee’s average weekly earnings for the next 33 weeks.
The Act also stipulates that: A minimum of 11 hours daily rest away from work, with a break for a shift exceeding six hours; no more than six workdays between two days off; night workers must not average more than eight hours each 24-hour period. There are exceptions and some industries may apply different working hours and breaks, for example, agricultural workers and those caring for people, animals, or plants.
Overtime: There is no specific legislation governing extra working hours, outside of the European Union (EU) Working Time Directive that sets an absolute maximum of 48 hours. Employers contractually agreeing to overtime, generally pay 1.5 times the normal hourly rate for the first three hours, then twice the rate for extra hours or working on weekends or public holidays.
Unemployment: Individuals who are looking for work are entitled to a Jobseeker’s Allowance, which is a weekly allowance, with the amount depending on a person’s age.
Paid Vacations: Since September 2020 employees receive 25 working days of paid vacation, although some employers add another five. These extra days can be carried over to the following year or worked for pay in lieu. Vacation days accrued in the qualifying ‘holiday year,’ which runs from September 1 until 31 August, can be taken up to December 31 of the following year. Employees have 2.08 days of paid vacation for each employment month in the holiday year. Non-qualifying workers receive a holiday allowance of 12.5% of their pay.
Maternity Benefit: This is administered by the Public Benefits Administration (Udbetaling Danmark) and is calculated on hourly wage and hours worked over the three months before starting leave. The maximum allowance is DKK 4,460 (€600, US$696) divided by 37 (hours) for a maximum of DKK 120 (€16, US$19) per hour. Those earning less than DKK 120 receive their usual hourly wage. Maternity / Paternity / Parental Leave: This provides for four weeks pre-natal and 14 post-natal for the mother; two weeks “paternity leave” for the father or co-parent immediately following the birth or within the 14 weeks as agreed with the employer; 32 weeks’ parental leave can be shared.
Termination and Severance: There is no statute covering severance pay. Those covered by the Act on Salaried Employees (Funktionærloven) who have been in continuous employment for between 12 to 17 years are entitled to a severance payment of between one to three months’ salary if dismissed by the employer. Some Collective Bargaining Agreements (CBAs) provide for improved terms.
Notice Periods: These apply to both employer and employee as agreed in the contract or collective agreements. The amount of notice is also governed by years of service, from one month in the first year up to six months for over nine years’ service. Individuals not covered by the Salaried Employees Act or a CBA are still entitled to receive a reasonable period of notice, depending on the type of work and their length of service. Employees who resign must give at least one month’s notice.