Denmark payroll and benefits guide
What global companies need to know about payroll in Denmark
Did you know that Denmark’s average full-time salary is between €60,000 and €70,000 a year, higher than every other EU country except Luxembourg? Denmark is a prosperous country that values its work-life balance — but with those high earnings, come high tax rates.
Denmark has long been a progressive society, with relatively high taxes by European standards funding good-quality public services and support. Its tax laws were adjusted at the start of 2026, meaning that taxes have been reduced for some middle earners, but increased substantially for the highest earners, some of whom may now be required to pay as much as 60% of their earnings to the state.
The trade-off for that is good quality of life, a highly skilled workforce (90% of whom speak English), a country that has excellent trade and political links with the rest of Europe, even if it has retained its own currency rather than adopting the Euro.
This guide covers all the key complexities around payroll and employment law in Denmark, including the facts and figures on the new tax rates.
Getting Started
Starting a business in Denmark is relatively straightforward and speedy, and is now largely an online process, meaning much of the admin can be conducted remotely. However, all companies from outside the EU, Scandinavia or EEA (European Economic Area) need to register online with the Danish Commerce and Companies Agency (DCCA) at least eight days before commencing trading, and will also need a work permit. The Business in Denmark website is your ideal starting point in the registration process.
The most popular choices for new businesses are private (ApS) and public (A/S) limited companies. The minimum share capital requirement for a private company was halved at the start of 2025, and is now only 20,000 Danish krone (DKK) (approximately £2,300; $3,100; €2,700); for a public company, the minimum is 400,000 DKK (approx. £46,500; $62,000; €53,500). For either of these companies, it is advisable to work with a lawyer in Denmark to draft and confirm the shareholders’ agreement, and your articles of association.
One important difference with the private limited company is that business owners may still be considered personally liable for any bank loan debts. This can be negotiated with lending banks on a case-by-case basis, and is an important area to watch out for when applying for loans and credit.
All businesses should register for a Central Business Registration Number (CVR). Completing this process automatically registers a business with the relevant tax authorities, and also gives the business access to a digital mailbox, to which official public notices and messages are sent.
A bank account in Denmark is not required to start a business but it is highly recommended. Corporate bank accounts are fairly fast and easy to open, and can be done at any major Danish bank.
Employment Considerations
Written contracts are mandatory in Denmark. The influence of collective bargaining is strong, and many agreements regarding pay, hours and working conditions are determined by mutual agreement. The official working week in Denmark is 37 hours, spread across Monday to Friday, and regularly working late hours is uncommon as Danes generally value family time and work-life balance.
The maximum working time is 48 hours per week (as a rolling average over four months), in line with the requirements of the EU Working Time Directive. As of July 2024, employers are now legally required to measure and record the working hours of all their employees to ensure these rules are being adhered to.
A common overtime pay structure used in many CBAs is to pay 150% of normal rate initially, rising to 200% as more overtime is worked, or for work at weekends and on public holidays.
Probation periods are variable, depending on the employment agreement, and in some cases collective bargaining. Generally speaking, they run for a maximum of three months. For fixed-term contracts, there is a hard limit of 25% of the total length of the contract.
Compensation and Severance
There is no statutory national minimum wage in Denmark, but collective bargaining sets requirements for different types of workers based on both skill and experience. Wage growth is normally determined by employee and employer negotiation, or potentially through collective bargaining. Typically, there is little friction in this area as employers are expected to increase salaries every year, commensurate with the employee’s experience.
As of 2026, the average minimum wage rate agreed through collective bargaining is around 22,600 DKK per month (approx. £2,620; $3,500; €3,000). However, these rates can be much higher in some specialist industries. The payment of discretionary bonuses is common in Denmark, although there is no requirement to pay a 13th-month bonus.
There are no all-encompassing legal requirements around severance pay, although these entitlements are often agreed through collective bargaining. However, there are certain severance entitlements for most long-serving employees, at one month’s pay for those with 12 years’ service, and three months’ pay for those with at least 17 years’ service.
Notice periods in Denmark are relatively long. They start at two weeks for employees serving their probation, and one month for those with less than six months of service, rising to three months thereafter. Progressively longer periods then kick in: four months after three years, five months after six years and six months after nine years.
Tax and Social Security in Denmark
All employees who work in Denmark must have a tax card, and general taxes are automatically withheld from employees. However, Danish tax rules are complex, can be difficult for incoming businesses to get to grips with, and were subject to significant reforms that took effect at the start of 2026.
Firstly, the national ‘bottom tax’ is applied at 12.01%, on all earnings above the personal allowance of 54,100 DKK per year (approx. £6,250; $8,350; €7,250). On top of that, further tax is applied on higher earnings:
- Middle tax: 7.5% on annual earnings above 696,956 DKK (approx. £80,800; $108,000; €93,300)
- Top tax: 15% on annual earnings above 845,543 DKK (approx. £98,000; $131,000; €113,000)
- Top-top tax: 20% on annual earnings above 2,818,152 DKK (approx. £327,000; $436,000; €377,000)
Additionally, there is local labor market tax at 8%, a municipal tax of around 25% (although this is only applied to ‘taxable income’), and a church tax of around 0.64% for members of the Danish state church. All this means that some higher earners in Denmark now face a total marginal tax rate of as much as 60%. Corporate tax runs at 22% and VAT at 25%.
With tax rates so high, the need for additional social security contributions is lessened, which means that these annual contributions are relatively low:
- Social security: 2,376 DKK employer; 1,188 DKK employee
- Public social schemes: 5,300 DKK employer
- Industrial injuries fund: 5,000 DKK employer
- Maternity leave fund: 1,500 DKK employer
This means the total that has to be paid out by employers each year is 14,176 DKK (approx. £1,650; $2,200; €1,900) per employee.
Holidays and Leave Considerations
The standard paid leave entitlement in Denmark is 25 days, although many employers offer 30 as an employee benefit. Three weeks of leave is normally taken as one block in the summer. The paid leave year runs from September to August, and any unused leave can be carried over for a further four months until the end of that calendar year.
Holiday pay for white-collar workers is normally usual salary plus 1%, while blue-collar workers (mainly those who work on an hourly rate) tend to get a ‘holiday allowance’, at 12.5% of their earnings over 12 months.
Denmark has ten days of national holidays each year: New Year’s Day, four over the Easter weekend, Ascension Day, two around Whit Sunday, and two at Christmas. Employees are entitled to time off, but only when they fall on a weekday.
Maternity leave entitlement is four weeks before the due date, ten weeks after the birth, and a further 14 weeks to be used any time before the child’s first birthday. Further parental leave (which includes fathers) runs to two compulsory weeks immediately after the birth, and another 22 flexible weeks that can be used within the first year after the child’s birth. Of those 22 flexible weeks, 13 of them can be transferred to the mother and can even be used up until the child turns nine. Full-time employees can receive benefits from social security at normal salary for all of this leave, up to a maximum of 4,865 DKK a week (approx. £565; $750; €650) during these periods.
Sick pay is covered by the employer for the first 30 days, after which employers can claim any further sick pay back from local authorities. Sick pay is capped at the same level as maternity and parental leave pay: 4865 DKK per week. Maximum sickness benefit entitlement is 22 weeks over any nine-month period. However, Denmark does have a rule that an employee who is off sick, and has already been off sick for 120 days within the previous 12 months, can be dismissed with one month’s notice.
Denmark Payroll: A Summary
Denmark is a high-wage, high-tax society that places a strong focus on fairness for all. The new tax system implemented at the start of 2026 has added further complexity from a payroll perspective, on top of the influence of collective bargaining, so there is plenty of work to do to establish a smooth Danish payroll operation. This is where the expertise and support of a global payroll provider can be invaluable.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.