Letting someone go is never straightforward, and in Denmark the rules are detailed enough that getting it wrong can be costly. Whether you’re ending a contract due to redundancy, performance, or restructuring, you’ll need to follow a specific legal process tied to the employee’s length of service, employment type, and contract terms. This guide covers everything foreign employers need to know about terminating employment in Denmark compliantly.
The legal framework for termination in denmark
Denmark’s termination rules depend heavily on the type of employee you’re dealing with. White-collar (salaried) employees are primarily governed by the Salaried Employees Act, known in Danish as Funktionærloven. This law sets out statutory notice periods, severance entitlements, and unfair dismissal protections for funktionær employees.
Blue-collar workers, on the other hand, are mainly covered by collective bargaining agreements rather than Funktionærloven. If you’re hiring workers in a unionised sector, the applicable collective agreement will dictate the termination rules you need to follow.
Regardless of employment type, any termination must be objectively justified. Acceptable grounds include genuine operational needs (such as a restructuring or role elimination) and issues with the employee’s conduct or performance. Dismissals based on discriminatory reasons are unlawful under Danish law.
Probation periods
Denmark allows a maximum probation period of 3 months. During this window, you have more flexibility: you can terminate with as little as 14 days’ notice. This is significantly shorter than the notice periods that apply once the probation period ends, so if a new hire isn’t working out, acting before the 3-month mark gives you more room to move quickly.
Notice periods
Once an employee moves past probation, the notice periods under Funktionærloven scale with length of service. All notice periods run to the end of the calendar month, so you can’t simply give notice mid-month and have it expire two weeks later.
The statutory minimums for employer-initiated termination are:
- Less than 6 months’ service: 1 month’s notice
- 6 months to 3 years: 3 months’ notice
- 3 to 6 years: 4 months’ notice
- 6 to 9 years: 5 months’ notice
- 9 or more years: 6 months’ notice
These periods can’t be shortened by the employment contract. You can agree to longer notice periods contractually, but you can’t go below the statutory minimums for salaried employees.
Severance pay
Severance pay under Funktionærloven isn’t triggered by all terminations. It only applies when the employer initiates the termination, and it doesn’t apply if the employee is eligible for an old-age pension at the time of dismissal. It also doesn’t apply in cases of misconduct.
For eligible employees, the entitlements are:
- 12 to 17 years of service: 1 month’s additional salary
- 17 to 18 years: 2 months’ additional salary
- 18 or more years: 3 months’ additional salary
This is paid on top of any notice period salary owed. It’s worth checking an employee’s start date carefully before initiating a termination, particularly for long-tenured staff.
Unfair dismissal
Employees who’ve been with you for more than 1 year have the right to claim compensation if they believe their dismissal was unfair. The maximum compensation for an unfair dismissal claim is 6 months’ salary.
This means you’ll want a clear, documented basis for any termination. Keeping records of performance conversations, warnings, and the business rationale for a redundancy will put you in a much stronger position if a claim is made. Verbal explanations aren’t enough if the matter goes to a tribunal.
The 120-day rule
Denmark has a specific provision that can be useful for employers dealing with long-term sick leave. If the 120-day rule is written into the employment contract, you can terminate a sick employee with just 1 month’s notice once they’ve been absent due to illness for 120 days within any 12-month period.
There’s one important condition: the notice must be given while the employee is still on sick leave. If the employee returns to work before you issue notice, the rule no longer applies for that period of illness.
This clause isn’t automatic. It has to be explicitly included in the contract, so it’s worth building it in from the start if you want this option available later.
Collective redundancies
If you’re making 10 or more employees redundant within a 30-day period, Denmark’s collective redundancy rules come into play. You’re required to notify the Danish Agency for Labour Market and Recruitment, known as STAR, before the redundancies take effect.
There are also consultation obligations with employee representatives in these situations. Failing to follow the collective redundancy process can expose you to additional liability, so don’t treat it as a formality.
Final pay and offboarding
When an employment relationship ends, you need to settle all outstanding amounts promptly. This includes:
- Any salary owed through the end of the notice period
- Accrued holiday pay (Feriepenge), which is calculated at 12.5% of gross earnings
- Any applicable severance payment under Funktionærloven
Denmark’s holiday pay system means accrued but untaken leave has a cash value that must be paid out on termination. Make sure your payroll records are accurate so you can calculate this correctly.
You’re also required to give the employee written notice of the termination and inform them of their right to challenge the dismissal. Getting the paperwork right from the start avoids disputes further down the line.
Managing terminations in denmark through an EOR
If you don’t have a legal entity in Denmark, you can’t employ workers there directly. That’s where an Employer of Record (EOR) comes in. An EOR employs workers on your behalf, handling the local employment contracts, payroll, and statutory obligations, including terminations.
When it comes to ending an employment relationship, an EOR manages the notice calculations, severance entitlements, final pay settlements, and required documentation. This keeps you compliant with Funktionærloven without needing in-house Danish employment law expertise. If you’re evaluating providers, look at EOR services that have strong local knowledge and a clear process for handling terminations across different employee types.
Book a demo to see how RemotePass handles compliant terminations in Denmark.
Frequently asked questions
What’s the minimum notice period for terminating an employee in denmark?
During probation (up to 3 months), you can terminate with as little as 14 days’ notice. After probation, the minimum under Funktionærloven is 1 month for employees with less than 6 months’ service, rising to 6 months for those with 9 or more years. All notice periods run to the end of the calendar month.
Is severance pay mandatory in denmark?
Severance pay under Funktionærloven is only required when the employer initiates the termination and the employee has at least 12 years of service. It doesn’t apply in cases of gross misconduct or if the employee qualifies for an old-age pension. The amount ranges from 1 to 3 months’ salary depending on length of service.
Can you terminate an employee in denmark who’s on sick leave?
Yes, but only under specific conditions. If the 120-day rule is written into the employment contract, you can give 1 month’s notice after the employee has been on sick leave for 120 days within a 12-month period. The notice must be issued while the employee is still sick. Without this clause in the contract, you can’t rely on this provision.
What counts as unfair dismissal in denmark?
A dismissal is considered unfair if it isn’t objectively justified by the employee’s conduct, performance, or genuine operational needs. Employees with more than 1 year of service can bring an unfair dismissal claim, with compensation capped at 6 months’ salary. Dismissals based on discriminatory grounds are unlawful regardless of tenure.
