Termination of Employment and Severance Agreements in Denmark

Termination of Employment and Severance Agreements in Denmark

A termination marks the end of an employment relationship between an employer and an employee. Denmark does not operate on an "at-will" basis: for a dismissal to be valid, employers must follow a specific set of rules, and there must be a fair, objective reason behind it. Get it wrong, and an unjustified termination can be costly, entitling the employee to compensation.

Employers operating in Denmark will, at some point, find it necessary to end an employment relationship. The reasons vary widely, and in some cases a termination can arise more indirectly — for example, when significant changes to an employee's terms of employment are, in practice, equivalent to a dismissal combined with an offer of a new position. Beyond that, a termination is generally rooted in circumstances relating either to the company or to the employee.

What counts as a termination in Denmark?

A termination marks the end of an employment relationship between an employer and an employee. To be valid under Danish law, it must be based on fair, objective grounds.

Valid grounds for termination

Having a fair and objective reason is essential. As a general rule, any employee can be dismissed, provided the justification is objective and well-documented.

Illness as grounds for termination

When considering a termination due to illness, employers should weigh up all relevant factors before making a decision. This checklist is a useful starting point:

• Duration of the illness: How long has the employee been ill so far?
• Cause of the illness: Be aware that you are not permitted to ask about the cause unless it is already known to you.
• Prospects of returning to work: Assess whether — and when — the employee is likely to return to normal duties. A "mulighedserklæring" (a Danish medical statement on the employee's capacity for work) can be used to help clarify this.
• Pattern of absence: Consider whether the illness is recurring or intermittent.
• Impact on operations: Does the employee's absence have a significant effect on operations and on colleagues' workload?
• Nature of the role: Would it be possible to arrange temporary cover?
• Work-related illness: Consider whether the illness could be work-related.
• Length of service: As a rule of thumb, greater caution should be exercised when dismissing employees with long service and older employees.

Severance agreements

An alternative to dismissal is a severance agreement, under which the employer and employee mutually agree to end their working relationship. It's important to note that employees cannot be forced into a severance agreement, and there is often an expectation of some form of compensation — for example, additional months' salary. To avoid the agreement being deemed invalid, it must be drafted precisely and thoroughly.

Advice on Danish employment and labour law

Facing a termination or another legal HR challenge in Denmark? Our HR legal specialists help international employers navigate Danish employment law with confidence, so you stay compliant while managing difficult situations the right way.