By Globalization PartnersJanuary 2021
Reading Time: 8 minutes
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Like its Scandinavian cousins, Denmark is known as one of the happiest countries in the world. It’s also an excellent place to do business for international companies looking to expand, ranking fourth in the world on the ease of doing business scale — that’s higher than any other European country and the United States.
If you’re considering taking on a new Danish team of employees, read through our guide to hiring employees in Denmark. We’ll cover some key points of information you need to know and some tips for hiring in Denmark so you can be prepared before you start the process.
What to Know Before Hiring in Denmark
Before you begin hiring new employees in Denmark, you should understand some important facts about the culture, labor market, and legal parameters in the country. Overall, Denmark is open to international companies that want to invest there, and its employment laws are fairly relaxed. However, you also have to abide by union and employer agreements that apply to your industry.
1. Openness to Job Changing
Employers looking to hire in Denmark should note that many Danish employees stay on the lookout for new job opportunities. Every year, about a quarter of the Danes who work in private industry change jobs. This is good news for companies recruiting in the country for the first time since it makes it easier to attract top talent.
To stay competitive, you must offer compensation and benefits packages and a company culture that will encourage professionals to choose your company over others that may also be trying to recruit them. Of course, Danes’ openness to changing jobs also means you should make a concerted effort to retain talented employees once they join your team.
2. Collective Bargaining Agreements
Most of Denmark’s labor laws are not established by the government, but by collective bargaining agreements (CBAs). Most CBAs are the result of negotiations between employer associations and labor unions. Nearly 70 percent of Danish workers belong to trade unions. While unions do negotiate on behalf of workers for high pay rates and other benefits, strikes are uncommon in the country. Generally, parties work together to come up with CBAs that are fair and beneficial for all involved.
Collective bargaining agreements differ from industry to industry and determine employment regulations related to factors like minimum wage and working conditions. Therefore, rather than researching Danish laws for the standards you must follow as an employer, you’ll need to look to the applicable CBA.
3. The Workweek and Days Off
One of the few things Danish law dictates for all employees is working hours and time off. Legally, Danes cannot work more than 48 hours per week on average, including overtime. This average is calculated over a four-month period. Most Danes don’t come close to this cap since the standard workweek in the country is 37 hours. Employees tend to work Monday through Friday and leave work around 4 p.m. most days. Employees are also entitled to daily breaks.
The law also stipulates that Danish employees get five weeks of paid annual leave. A recent update to the Holiday Act now allows employees to earn their leave and use it incrementally during the year rather than waiting to get all their leave at once for the calendar year. Danes also enjoy 11 public holidays each year. Some CBAs may also specify that employees receive additional days off, such as Labor Day.
4. Taxes and Social Security
Danes pay exceptionally high rates of taxes. The income tax rate is progressive, so employees who earn more contribute higher percentages. For the average Danish citizen, almost half their salary goes to taxes.
Danes also pay 8 percent of their salaries directly to social security. Employers must also make contributions to social security, which can be as much as 8,000 Danish krone (DKK) per year. In Denmark, social security funds go to health insurance, sickness benefits, maternity benefits, disability benefits, child allowance, and holiday pay.
5. Employment Contracts
Written employment contracts are legally required in Denmark. Keep in mind that you cannot violate laws or collective bargaining agreements in your contract, but the contract can add more specific information. The employment contract must cover the following points of information:
- Name and address for both employer and employee
- Workplace location
- Job title or description
- Start date
- Expected duration for nonpermanent positions
- Policies regarding holidays and holiday pay
- Terms of notice for employee and employer
- Salary, any other wages, and frequency of paychecks
- Typical working hours
- Information on any collective agreements that apply
Cost of Hiring in Denmark
International hiring can require higher costs than hiring locally. You should budget for:
- Research: You’ll need to invest some time and funds into conducting research to identify any laws or CBAs that apply to your company. You may even want to hire an expert from the country to help.
- Business establishment: There are costs involved in establishing a subsidiary in Denmark, which is required before you can legally employ people in the country. Fortunately, these registration fees are more of a one-time investment you won’t have to repeat when you hire additional employees in the future.
- Hiring agency or committee: You may want to partner with a hiring or headhunter agency in Denmark to help you find qualified job seekers to work for your company. This partnership will come at a cost, however. The alternative is to handle the whole process in-house, but this also includes expenses since you’ll be paying your employees working on your hiring committee.
- Software: You can also use software to help you organize and sort through job applications. These programs are a financial investment you should consider if you don’t already have software in place.
- Job advertisements: Posting your job ads online on Danish job portals can also add to your hiring costs. You may be able to post some ads for free.
- Legal checks: Screening checks include steps like verifying applicants’ information on their resumes, checking visas, and ordering background checks.
- Training: When you take on new hires, you should also budget for training costs. You want your new employees to understand your company and have the tools they need to succeed in their new positions.
Keep in mind that the high turnover rate in Denmark means you may need to repeat the hiring process more frequently than you’re used to in your home country. This emphasizes the importance of establishing an affordable hiring process and implementing effective employee retention strategies.
What Does a Company Need to Hire Employees in Denmark?
To hire employees in Denmark, you need to have legal status as a company and an employer there. This means you need to work through some necessary steps. You will need:
- Business structure: You’ll have to decide which business structure makes sense for your expansion. This could be a branch, which will essentially be an outpost of your company, or if you want a structure that functions more independently, you can choose to set up one of two types of subsidiaries: an Aktieselskab (A/S) or a Anpartsselskab (ApS). An ApS, which is essentially a private limited liability company, is the most fitting choice for most international businesses.
- DBA registration: You must register with the Danish Business Authority (DBA) online to get your Central Company Register (CVR) number. To do so, you’ll need a NemID, a type of digital signature. If you do not have a work permit or aren’t a resident in Denmark, you’ll need to work with a lawyer.
- Tax registration: You must register with the Danish Tax Authorities. This can involve separate registrations for various types of taxes depending on your company’s operations.
- Share capital and bank account: You need a Danish bank account and a minimum amount of share capital, the amount of which differs depending on the business structure you choose.
- Documents: You’ll have to prepare some documents, such as your Memorandum and Articles of Association. To form a branch, you’ll need an incorporation resolution.
- Office space: A physical address in Denmark is required for your company if you’re establishing a subsidiary. This is a legal necessity, and you’ll also want a place to conduct your interviews before you begin the hiring process.
- Industrial injuries insurance: Companies in Denmark must take out an industrial injuries insurance policy with an insurance company in the country. In some rare instances, you may be able to get this policy through an insurance company in your home country.
You can avoid all of these requirements by choosing to partner with a professional employment organization (PEO), also known as an Employer of Record (EOR), rather than establishing yourself as the employer. This is an effective and completely legal workaround for companies that want to expand quickly and avoid the complexities and costs associated with setting up a subsidiary.
Steps to Hiring in Denmark
Once you’ve established your company in Denmark, you’re ready to begin the hiring process. Hiring practices in Denmark will likely look quite similar to the practices you’re already used to in your home country but include some country-specific details that are essential to know. Let’s look at the steps for how to hire in Denmark.
1. Advertise Your Job Openings
Start by creating job ads that share information about your company and the duties and requirements that apply to each job position. You should post these ads on online job boards where Danish job seekers are likely to see them. Some of the most popular job boards in Denmark are Jobnet, Jobindex.dk, Ofir, Jobzonen, and Stepstone. You may also want to seek out job boards that are specific to your industry. Don’t forget to specify in the ad if you want applicants to submit their materials in English.
2. Read Applications
If you don’t have time to read applications manually, you may want to use software or a hiring agency to help sort through them. American and Canadian companies should keep in mind that Danish CVs will look similar to other European CVs, which tend to be longer than the succinct resumes you find in North America. Look for applicants who meet or exceed your expectations and create a shortlist of top candidates.
3. Conduct Interviews
If you are establishing a subsidiary in the country, you can host these interviews in your new office. If you’re hiring remote employees in Denmark, you can either travel to the country to conduct interviews in-person or schedule a phone call or virtual video interview. When scheduling virtual interviews, keep in mind the time difference between your home and Central European Time.
4. Submit Offers and Contracts
Once you’ve identified the best candidates, reach out to formally offer them the job. You should also take this time to create a written contract your new hire can look over and agree to in order to fully understand the job and the terms of employment. As discussed earlier, there is a list of topics you must cover in this contract, and the contract should align with or exceed requirements set out by law or the relevant CBA.
5. Onboard New Employees
Now you can work through the onboarding process with your new employees. Make sure they fill out any necessary paperwork. Answer any questions they have after reading over their contracts. You can also provide training where it’s needed to help them get started in their new roles.
Globalization Partners Can Serve as Your Global PEO in Denmark
Despite how business-friendly Denmark is, setting up your company there and navigating the relevant laws and standards can be costly and time-consuming. If you want to start employing skilled workers in Denmark right away, then you should consider working with Globalization Partners. We have an established presence in Denmark and many other countries across the globe, so we can help your company expand quickly and easily.
For more information on hiring international employees in Denmark and across the globe, check out our Global Hiring Handbook, available for free download.