How to run payroll in Denmark

Payroll in Denmark runs on a monthly cycle. Payment is usually due by the last working day of each month.

Most Danish employers process payroll monthly, though some companies pay bi-weekly or even weekly for hourly workers. The standard practice is to pay salaries on the last working day of the month, with many companies choosing the 25th-30th as their consistent pay date.

Danish law requires employers to pay wages at least once per month. Late payments can result in interest charges of 2% above the National Bank's lending rate, plus potential penalties from labor authorities.

Payment methods

Bank transfers are the standard payment method in Denmark. Cash payments are heavily restricted and only allowed for amounts under DKK 20,000 annually per employee.

All employees must provide a Danish bank account number (kontonummer) for salary payments. International companies can use SEPA transfers for EU accounts, but Danish banks are preferred to avoid transfer fees and delays.

Holiday pay system

Denmark operates a unique holiday pay system where employees earn 2.08 days of paid vacation per month worked (25 days annually). Holiday pay is calculated as 12.5% of the previous year's gross salary.

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Holiday pay is typically paid out in May each year, though employees can request earlier payment. Unused holiday pay must be paid when employment ends.

Payslip requirements

Danish payslips must include specific information in Danish or English:

• Employee name and CPR number
• Employer name and CVR number
• Pay period and payment date
• Gross salary breakdown
• All deductions (tax, ATP, pension)
• Net pay amount
• Year-to-date totals

Electronic payslips are widely accepted but require written employee consent. Many companies use digital platforms like e-Boks or Zenegy for payslip distribution.

Tax withholding reports in Denmark are due by the 10th of each month following the pay period. Late filing means penalties starting at kr 1,000 for the first offense.

Denmark uses a progressive income tax system with municipal taxes that vary by location. Most employees pay between 36% and 56% total tax, including both state and municipal portions.

Income tax brackets

Denmark combines state income tax with municipal taxes. The 2026 rates include a basic state tax plus municipal taxes that average 24.9% across the country.

*Municipal tax rates range from 22.5% to 27.8% depending on location. Copenhagen is 24.5%.

Additional taxes apply:

• Labor market contribution (AM-bidrag): 8% on all income
• Top bracket tax: Additional 15% on income over kr 588,900 annually

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Withholding requirements

Employers must withhold taxes using the tax card system (skattekort). Each employee receives a tax card showing their withholding rate and any deductions.

You'll calculate withholding monthly and remit by the 10th of the following month. File returns through TastSelv Erhverv, the Danish Tax Agency's business portal.

Monthly obligations:

• Calculate and withhold taxes from gross pay
• Submit withholding report by the 10th
• Pay withheld amounts by the 10th
• Include AM-bidrag (8%) in calculations

Annual reconciliation happens automatically through the tax system. Employees file individual returns by May 1st if needed.

Tax registration

Register for payroll taxes through Virk.dk before your first payroll. You'll need your CVR number (business registration) first.

Required registrations:

• Employer registration with SKAT (tax authority)
• A-tax registration for withholding
• AM-bidrag registration for labor market contributions

Processing takes 3-5 business days. You'll receive access to TastSelv Erhverv for monthly reporting.

Special tax considerations

Non-resident employees pay the same rates but may qualify for researcher tax scheme (27% flat rate) or expatriate tax scheme (32.84% flat rate) if they meet specific criteria.

Denmark has tax treaties with 70+ countries to prevent double taxation. Non-residents typically can't claim personal allowances unless their treaty provides otherwise.

Temporary assignments under 183 days may remain taxable in the home country, depending on the tax treaty terms.

Common tax mistakes

Wrong municipal tax rate - Using Copenhagen's rate for all employees costs you compliance headaches. Each employee's home municipality determines their rate.

Late monthly filings carry kr 1,000 minimum penalties, escalating to kr 5,000 for repeated violations.

Missing AM-bidrag on benefits triggers 20% penalties on the unpaid amount. This 8% contribution applies to most taxable benefits, not just salary.

Incorrect tax card interpretation leads to over or under-withholding. When in doubt, contact SKAT directly rather than guessing the employee's correct rate.

Think your home country has high employer taxes? Denmark's contributions total 30.8% on top of every salary.

Here's what you'll pay for a kr60,000 monthly salary:

Total employer cost breakdown

For that kr60,000 monthly salary, you'll pay:

• Base salary: kr60,000
• Social security (ATP): kr95 monthly
• Pension contribution: kr4,800
• Unemployment insurance: kr1,380
• Work injury insurance: kr300
• Holiday pay fund: kr600
• Total monthly cost: kr67,175
• Annual multiplier: 1.31

The pension contribution hits hardest at 8% of gross salary. There's no cap, so high earners cost proportionally more.

Contribution caps and ceilings

Only ATP (social security) has a fixed annual amount of kr1,135.80 per person in 2026. All other contributions are percentage-based with no caps.

This means a kr100,000 monthly salary costs you kr130,800 total - the multiplier stays consistent regardless of salary level.

Registration requirements

You must register with these agencies before hiring:

• Borger.dk for tax registration (CVR number required)
• ATP for social security within 8 days of first employee
• Work injury insurance provider before work begins
• Unemployment insurance fund (A-kasse) if employee chooses coverage

Payment deadlines

All contributions follow the same schedule:

• Due date: 10th of the following month
• Late penalty: 1.3% monthly interest on outstanding amounts
• Payment method: Electronic transfer through Borger.dk or your payroll system

The Danish Tax Agency (Skattestyrelsen) handles most collections automatically if you're registered for digital reporting.

Sick leave in Denmark is paid at 100% for the first 30 days by the employer. After that, municipalities take over payments, but you'll still handle the administrative side of payroll adjustments.

Annual leave

Danish employees earn 25 vacation days per year (5 weeks). They earn 2.08 days per month worked, so calculate vacation accrual monthly for accurate payroll records.

Vacation pay calculation: Employees earn 12.5% of their annual salary as vacation pay. This gets paid out when they take vacation or at year-end if unused. Set aside this amount monthly to avoid cash flow surprises.

Carryover rules: Employees can carry over up to 5 unused vacation days to the next year, but these expire on September 30th. The remaining days must be paid out at termination.

Termination payouts: You must pay all accrued vacation pay in the final paycheck. Calculate using 12.5% of total earnings during the vacation year.

Sick leave

First 30 days: You pay 100% of salary for sick leave. No waiting period - coverage starts from day one.

After 30 days: The municipality pays sick benefits, but you may need to advance payments and get reimbursed. This creates temporary payroll adjustments you'll need to track.

Medical certificates: Required after 14 consecutive sick days, or immediately if you have reasonable doubt about the illness. Factor certificate costs into your sick leave budget.

Parental leave

Maternity leave: 18 weeks at full pay from the employer. This includes 4 weeks before birth and 14 weeks after. You'll handle the full salary cost during this period.

Paternity leave: 2 weeks at full pay from the employer, typically taken within the first 14 weeks after birth.

Extended parental leave: After employer-paid periods, parents can take additional leave paid by municipalities. You'll stop salary payments but may need to process municipal benefit applications.

Payroll impact: Budget for full salary replacement during employer-paid periods. Unlike some countries, there's no government reimbursement for the initial maternity and paternity periods.

Public holidays 2026

Work performed on public holidays requires double pay (200% of normal rate). This applies even if the holiday falls on a weekend and employees work their regular schedule.

Mandatory benefits affecting payroll

ATP (supplementary pension): Employees contribute DKK 1,135.80 annually, employers contribute DKK 2,271.60. Deduct the employee portion monthly and add your contribution to payroll costs.

Holiday allowance: Set aside 12.5% of gross salary monthly for vacation pay. This isn't optional - it's required by law and must be available when employees take vacation.

Unemployment insurance: Voluntary but common. If employees choose coverage, deduct approximately DKK 500-600 monthly depending on their union.

The key with Danish leave and benefits is the upfront employer costs. Unlike countries with extensive government support, you'll carry the full financial weight of sick leave, maternity leave, and vacation pay. Plan your cash flow accordingly.

Miss the 10th monthly filing deadline in Denmark and penalties start at kr 1,200 per day. The Danish Tax Agency (SKAT) doesn't offer grace periods, and late fees compound quickly.

Here's what you need to stay compliant with Danish payroll requirements in 2026.

Monthly filing requirements

You'll submit A-tax returns (Oplysningssedler) by the 10th of each month for the previous month's payroll. This covers income tax, AM-contribution, and social security withholdings.

File through SKAT's TastSelv Erhverv portal - paper submissions aren't accepted for employers with more than 9 employees. The system requires detailed employee-level data including CPR numbers, gross pay, and all deductions.

Monthly pension contributions to ATP (Arbejdsmarkedets Tillægspension) are due by the same deadline. You'll pay kr 1,135.20 per employee annually, split into monthly installments of kr 94.60.

Annual reporting

Year-end reconciliation is due by January 20, 2027 for the 2026 tax year. This reconciles your monthly filings with actual payments and identifies any discrepancies.

Employees receive their annual tax statements (Årsopgørelse) automatically from SKAT by March 2027. You don't generate these directly, but SKAT pulls data from your monthly filings.

Audit requirements: SKAT audits approximately 12% of employers annually. They focus on payroll tax compliance, proper employee classification, and benefit-in-kind reporting. Keep digital records accessible - auditors expect immediate document production.

Employee documentation

Employment contracts must be in Danish and include specific mandatory clauses: salary details, working hours, vacation entitlement, notice periods, and pension arrangements. Contracts missing these elements are legally invalid and trigger labor authority penalties.

Payslips require 14 mandatory elements including gross salary, tax deductions, pension contributions, vacation pay accrual, and net pay. Issue payslips monthly, even for salaried employees paid less frequently.

Language requirements: All payroll documents must be available in Danish. Foreign employees can request English translations, but Danish versions remain the legal standard.

Penalties and violations

Regulatory bodies

Danish Tax Agency (SKAT) oversees all payroll tax compliance. Contact them at +45 72 22 18 18 or through TastSelv Erhverv portal at www.skat.dk.

Danish Working Environment Authority handles employment law compliance and workplace safety requirements affecting payroll.

ATP (Labor Market Supplementary Pension) manages mandatory pension contributions. Access their employer portal at www.atp.dk for contribution management and reporting.

Effective January 1, 2026, all employers in Denmark must apply the new ATP contribution rates that increased by 0.1% for both employee and employer portions.

Key payroll updates for 2026

ATP contribution increase - Effective January 1, 2026

• Employee contribution: 1.1% (up from 1.0% in 2025)
• Employer contribution: 2.2% (up from 2.1% in 2025)
• Applies to all employees earning above kr 45,000 annually

The change affects monthly payroll calculations immediately. Update your payroll system to reflect the new rates for January 2026 processing.

Tax bracket adjustments - Effective January 1, 2026

• Bottom tax rate remains 12.11%
• Top tax rate threshold increased to kr 568,900 (up from kr 552,500 in 2025)
• Municipal tax average: 24.9% (slight increase from 24.8%)

These adjustments mean employees earning between kr 552,500 and kr 568,900 will see reduced tax withholding in 2026.

Holiday allowance calculation update - Effective September 1, 2026

• New calculation method for part-time employees
• Pro-rata adjustments now calculated monthly instead of annually
• Affects employees working variable hours

Digital reporting requirement - Effective March 1, 2026

• All payroll data must be submitted electronically to SKAT
• Paper submissions no longer accepted
• Monthly deadline remains the 10th of the following month