Denmark has a reputation for high taxes, but that reputation applies mostly to employees. For employers, the picture is quite different. Unlike most countries, Denmark doesn’t run a broad social insurance contribution system where employers fund healthcare, pensions, and unemployment through large payroll levies. Instead, your obligations as an employer are relatively narrow and predictable. If you’re setting up payroll in Denmark for the first time, here’s what you’re on the hook for.
Atp: the core employer contribution
ATP (Arbejdsmarkedets Tillægspension) is Denmark’s statutory supplementary pension scheme and it’s the main employer contribution you’ll deal with. Both you and your employees pay into it, with you covering two-thirds of the total.
How atp is calculated
ATP contributions are based on hours worked per month, not salary. The 2026 rates are:
- 117 or more hours/month (full-time): Total DKK 297 (employer: DKK 198, employee: DKK 99)
- 78–116.99 hours/month: Total DKK 198 (employer: DKK 132, employee: DKK 66)
- 39–77.99 hours/month: Total DKK 99 (employer: DKK 66, employee: DKK 33)
- Under 39 hours/month: No contribution required
ATP is reported monthly but is typically paid quarterly. The flat-rate structure means it’s simple to budget for regardless of salary level.
Fib and other smaller levies
Beyond ATP, there are several smaller employer-only contributions that add up to a modest annual cost per employee:
- FIB (Finansieringsbidrag): DKK 82 per quarter per full-time employee, a financing contribution that funds certain labour market benefits
- Maternity/Paternity Leave Fund: Approximately DKK 1,350 per year
- AUB (Apprenticeship Scheme contribution): Approximately DKK 2,791 per year
- AFU (Foreign Workers Guarantee Fund): Approximately DKK 48 per year
These are all employer-side costs. None of them are deducted from the employee’s pay.
Occupational injury insurance
You’re required to take out private occupational injury insurance for every employee in Denmark. This isn’t a government levy; it’s a mandatory insurance policy you purchase from a private insurer. The annual premium runs from DKK 215 to DKK 5,157 per employee depending on the risk category of the role. Office-based work sits at the lower end of that range; roles involving physical labour or hazardous environments will cost considerably more.
You can’t legally employ someone in Denmark without this cover in place.
Tax withholding: the a-tax system
As an employer in Denmark, you’re responsible for withholding income tax from employee salaries each month and remitting it to SKAT, the Danish Tax Agency. This system is called A-skat (or A-tax). To do this correctly, you’ll need to register with SKAT and retrieve each employee’s tax card (skattekort), which tells you exactly how much to withhold.
Am-bidrag
Before income tax is calculated, you deduct AM-bidrag (the labour market contribution) at a flat rate of 8% of gross salary. This comes off first, and income tax is then calculated on the remaining amount. AM-bidrag is an employee cost, but you’re responsible for calculating and remitting it.
Income tax and the skattekort
After AM-bidrag, income tax is applied in layers. The base rate (bundskat) is 12.01% on income above the personal allowance, which sits at approximately DKK 54,100. On top of that, employees pay municipal tax averaging around 25.07%, though the exact rate depends on where the employee lives. Higher earners face additional brackets, and the maximum marginal tax rate reaches approximately 55.9% when AM-bidrag is included.
All of this is calculated automatically using the employee’s skattekort. The tax card specifies the employee’s personal deductions and rate codes, so you don’t need to calculate their individual liability from scratch. You withhold the right amount, remit it monthly, and SKAT handles the reconciliation.
Wages and collective agreements
Denmark has no statutory national minimum wage. Pay floors are set through collective agreements (overenskomster) negotiated between trade unions and employer organisations. If your employees are covered by one of these agreements, the minimums within it are legally binding for you.
For roles covered by collective agreements, minimum hourly rates typically fall in the range of DKK 110–130. Not all roles are covered, but a significant portion of the Danish workforce is, so you’ll need to check whether an agreement applies to the sector you’re hiring in.
The standard working week in Denmark is 37 hours. Payroll runs monthly, with salaries typically paid on the last working day of the month.
Taken together, employer on-costs in Denmark sit at roughly 10–12% of gross salary. That’s a low burden by international standards, but compliance still requires getting the details right on ATP, insurance, tax withholding, and any applicable collective agreement.
Hiring in denmark through an Employer of Record
If you’re a foreign company hiring in Denmark without a local entity, you’ll need a way to employ people compliantly without setting up a Danish subsidiary. That’s where an Employer of Record (EOR) comes in.
An EOR becomes the legal employer of your Danish staff, handling payroll, ATP contributions, tax withholding, occupational injury insurance, and all the other employer obligations on your behalf. You keep full day-to-day management of the employee; the EOR manages the compliance layer.
Understanding what is an Employer of Record (EOR) and how the model works will help you evaluate whether it’s the right fit for your hiring plans in Denmark.
When comparing providers, it’s worth reviewing the landscape of EOR services to understand what features and pricing structures to look for.
Book a demo to see how RemotePass handles Danish payroll and compliance end to end.
Frequently asked questions
What are the main employer tax obligations in denmark?
The main obligations are ATP pension contributions (split two-thirds employer, one-third employee), FIB and a few smaller annual levies, mandatory occupational injury insurance, and monthly A-tax withholding remitted to SKAT. There’s no broad social insurance system, so the total employer on-cost is typically around 10–12% of gross salary.
How does atp work for part-time employees?
ATP is calculated based on hours worked per month rather than salary. Employees working 39–77.99 hours/month fall into the lowest contribution tier; those working 78–116.99 hours/month sit in the middle tier; and employees working 117 or more hours/month are treated as full-time. No contributions are required for employees working under 39 hours per month.
Do I need to take out insurance for my danish employees?
Yes. Occupational injury insurance is mandatory for all employees in Denmark. It’s a private insurance policy rather than a government levy, and the annual cost per employee ranges from DKK 215 to DKK 5,157 depending on the nature of the work. You can’t legally employ anyone in Denmark without this cover.
Can a foreign company hire in denmark without a local entity?
Yes, through an Employer of Record. An EOR is a local entity that employs your Danish staff on your behalf, handling all employer compliance obligations while you retain control of day-to-day work. It’s the most common route for foreign companies testing the Danish market or hiring a small number of employees before committing to a full subsidiary setup.
