How to establish a business in Denmark: Danish Employment law

Part 2 of 3 in our series, "How to Establish a Business in Denmark."

In Part 1, we looked at how to register a business in Denmark and get your digital setup in place. Once your company is up and running, the next big step is people – hiring, paying and looking after your employees.

This article is the second in our three-part series. It gives you an overview of employment law in Denmark: what it costs to employ someone, the rights and rules that apply, the new EU Pay Transparency Directive, and what your employees need to do when they move to Denmark. Part 3 will round off the series with accounting, tax and ongoing reporting.

Denmark has a reputation as a flexible, employer-friendly place to hire – but there are still important rules to get right from day one.

Wages and social costs

When you employ people in Denmark, you take on a few core responsibilities: paying wages, reporting them correctly to the tax authorities, and contributing to a handful of social security schemes.

The good news? Employer social costs in Denmark are modest by international standards. But the reporting side has its own rhythm – monthly payroll reporting, several employer contributions, and rules around fringe benefits (like a company car or phone) that can carry a tax value. Getting the setup right early saves a lot of headaches later.

Pensions and health insurance are also worth understanding. Occupational pensions are commonly offered as part of the employment contract, while health insurance is usually optional unless a collective agreement makes it mandatory.

How the Danish labour market works

Danish employment law is shaped by two things: legislation and collective agreements negotiated with trade unions. Together, they set the framework for pay, working conditions and how the employer–employee relationship works.

A few things are essential to know as an employer:

• Employment contracts are required, and you must give employees a written statement of their key terms within set deadlines.
• There is no statutory minimum wage in Denmark – pay is set by collective agreements or individual contracts.
• Working time must be registered to ensure rest periods and weekly limits are respected.
• Notice periods and dismissal rules are clearly defined and depend on length of service.

Each of these areas comes with its own details and exceptions, so they reward a closer look before you hire.

Employee rights: holiday, illness and family leave

Danish employees enjoy strong, well-defined rights – and as an employer, these are among the most important areas to understand.

• Holiday: Employees accrue paid holiday each month and are entitled to five weeks per year under the Holiday Act.
• Illness: Salaried employees are generally entitled to their normal pay during sickness, with rules on documentation.
• Familyleave: Parents share a generous leave entitlement, with earmarked weeks for each parent and specific notification rules.
• Non-discrimination: A range of laws protect employees from discrimination and unfair treatment.

The precise entitlements, timelines and calculations matter here – and mistakes can be costly – so this is a section worth reading in full.

The EU Pay Transparency Directive

One of the biggest changes on the horizon is the EU Pay Transparency Directive, which EU countries must implement into national law by 1st January 2027.

Its aim is to reduce the gender pay gap by making pay more transparent. In practice, it means employers will need to:

• Share salary information with employees and job applicants (including a salary range for advertised roles).
• Be able to objectively justify any pay gap above a set threshold using gender-neutral criteria.
• Stop asking candidates about their pay history.

Importantly, this is not a wage-setting law – it doesn't dictate what you pay. But it does mean reviewing how you set, document and communicate pay. Getting ahead of it now is far easier than scrambling later.

Note on timing: Some of the figures and dates in this area are due to change as the directive is implemented. Always confirm the current rules before acting – or ask an adviser.

Moving employees to Denmark

If setting up in Denmark means relocating staff, there are a few practical steps every new arrival needs to handle. Nordic and EU citizens have it easiest; non-EU citizens will need the right residence and work permit scheme.

Once in Denmark, employees typically need to sort out:

• A CPRnumber (civilregistration number) — the key to almost everything.
• A Danish bankaccount and apersonal MitID.
• A health insurance card and, often, housing.
• Personaltax registration , including understanding when full Danish tax liability applies.

There are also special tax schemes for researchers and highly paid employees recruited from abroad. Because the process involves several authorities and plenty of Danish-language paperwork, many companies bring in local support to make relocation smooth.

Key things to remember

• Employer social costs are low in Denmark, but reporting is detailed and ongoing.
• Contracts, working-time registration and notice rules are all legal requirements.
• Employees have strong rights around holiday, illness and family leave.
• The EU Pay Transparency Directive takes effect in 2026 – start preparing now.
• Relocating staff involves CPR numbers, MitID, tax and more – plan it early.

Want the full picture? Download the free whitepaper

This article is just an overview. Our complete whitepaper, "How to Establish a Business in Denmark – Employment Law," goes much deeper – covering wages, fringe benefits and every employer social cost, the full detail of employee rights and leave, the EU Pay Transparency Directive, and a step-by-step guide to moving employees to Denmark.

Download the free whitepaper here

Do you need help?

At Azets we can help you with setting up a business in Denmark – from business registration to outsourcing services and maintaining business critical functions for your company. We also offer advice and consultancy services about all business aspects. Please reach out, if you have any questions.