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Posting of foreign workers to Denmark

In an era of globalization and intensifying international cooperation, companies are increasingly looking to expand their operations into foreign markets. Denmark, with its stable economy and well-developed labor market, is an attractive destination for many foreign companies for projects and services. More and more international entrepreneurs are choosing to delegate employees to Denmark, which is becoming a common practice.

Posting employees abroad involves a number of formalities and obligations that both employers and employees must fulfill. Employers must remember that in addition to domestic labor, social security and tax laws, they may also be required to comply with the laws of the country to which the employee will be posted. It is also necessary to take into account international regulations relating to the posting of workers and the coordination of social security.

The posting employer and the posted employee - rules and obligations

It is possible that your employer will temporarily send you to work in another EU country. During this period, you will have the status of a “posted worker,” which means that you are entitled to the same basic labor rights and working conditions as employees in the host country.

Who is a worker is determined by the laws of the country to which the posting takes place. A posted person is an employee who performs his or her daily duties in another country, and who has been sent to Denmark for a specific period of time by his or her employer in order to perform the services he or she provides.

Temporarily employed persons may be entitled to better terms and conditions of employment than those commonly applied. The more favorable conditions may be determined on the basis of:

Regardless of the situation, the user employer must inform the temporary employment agency of the employment conditions applicable to its company before the posting process begins.

A contract of assignment in EU, EEA or Swiss countries is considered to be semi-subordinate work and co-organized by the posting company. In fact, a posted worker can also be a person employed under a contract of assignment in another European country.

A foreign national who is a citizen of a third country may be considered a posted worker if he or she is employed by a company that has its headquarters or permanent place of business in another European Union country, as long as he or she legally resides and works there. The employer has the option of posting such a person to another EU, EEA or Swiss country under the same rules. However, it is necessary to check that the host country will not require an appropriate residence title, such as a proper visa, for this employee to perform work.

When a posted employee performs white-collar work, the employer is obligated to cover all expenses related to travel and stay in Denmark. This rule applies when an employee is posted from a permanent place of work in Denmark to work temporarily elsewhere. White-collar work includes typical tasks in the areas of trade, sales and office activities.

The rules on the posting of drivers apply to employees working for companies based in another EU country. A driver will be considered to be posted to work in Denmark if he or she performs freight or passenger transport on Danish territory, the road portion of combined transport, or performs international transport that is not bilateral.

When a posted worker performs agricultural tasks or domestic work, and accommodation is included in his salary, the employer is obliged to provide modern and comfortable housing. In addition, he should provide clean bedding and towels.

A company that sends employees to Denmark to provide services is required to register in the RUT system (www.virk.dk/rut), administered by Erhvervsstyrelsen. Registration must be done no later than the day the work begins. For each new assignment, the company must re-register and provide information on the employees performing the assignment and the location of the service provision.

Employees of a foreign company may be posted to Denmark under the following circumstances:

  1. When a company sends an employee to Denmark to work for another company that belongs to the same corporate group or is otherwise related to the posting company.
  2. When an employee is sent to Denmark to provide services to a recipient, such as a company or an individual.
  3. If the company has a temporary employment agency or other arrangements that allow it to hire its employee to work in Denmark for the user company.

Entrepreneurs with a head office or permanent place of business in an EU member state who employ workers may temporarily send them to work in another European Union (EU) country, the European Economic Area (EEA) or Switzerland as part of the provision of their company's services abroad.

The ability to post employees in the provision of services can be used in the following situations:

Legal regulations on posting employees abroad

The Law on Posting of Workers Abroad implements an EU directive relating to this issue. According to it, workers posted to an EU or EEA member state are guaranteed certain working conditions that apply in the host country. The purpose of the directive is to guarantee fair competition and respect for workers' rights when workers are posted to another member state.

The Danish Posting of Workers Act of March 25, 2011, which is based on Directive 96/71, does not set minimum wage rates that foreign service companies are required to pay their employees posted to Denmark. The law also does not require companies from other EU member states to enter into collective bargaining agreements with Danish trade unions.

The introduction of the EU Enforcement Directive is reflected in the Posting of Workers Abroad Law. It aims to ensure more effective enforcement of the rights contained in the Posting of Workers Law and to prevent abuse and circumvention.

Guidelines for the posting of employees

Being posted to work in Denmark by a foreign temporary service company means that you are subject to the Foreign Posting of Workers Act. In order for the provisions of this law to apply, there must be an employment relationship between the employee and the company that is posting or providing the workers. Another condition is that the company posting the workers must have an actual establishment in the home country, which means conducting significant business there.

Posted employees are entitled to a safe and healthy working environment under the same rules as Danish employees. They are generally subject to the regulations of their home country in terms of their vacation rights, but are guaranteed the minimum standards set by the Danish Holiday Act. In addition, they are bound by Danish laws on equal treatment, pay, non-discrimination and certain working time regulations.

Finding yourself working abroad or running a service company in Denmark involves knowing and complying with the relevant laws.

The posting of an employee for a short period may be extended by the employer up to a maximum of 18 months, provided that a reasonable notice of extension is given. If a reasonable notice is given, the posting employer is obligated to provide the working conditions specified for the short-term posting for the entire duration of the posting, up to the end of the 18-month period.

The employer's information obligation to extend the posting is treated as a formality and not as a request, making it impossible for the host country to deny the extension. The notice of extension must be submitted before the expiration of the 12-month posting period. While the posting employer is usually required to provide reasons for the extension, the host state does not have the right to question them.


Short-term and long-term posting of employees

Temporary posting of workers means that it is scheduled for a specific period of time and cannot be a permanent condition.

In Denmark, there are two main periods of posting of workers:

The type of posting, whether short-term or long-term, affects the working conditions that should be provided to the posted employee.

When posting an employee for a period of up to 12 months (or up to 18 months after providing the appropriate notification in the country to which the employee is posted), you are required to ensure that the employee's terms and conditions of employment are in accordance with the applicable law or generally applicable collective bargaining agreements in the country. These requirements include:

If an employee is posted for more than 12 months (or 18 months if a reasoned notification is given in the host country), it is necessary to ensure that the employee is provided with all the terms and conditions of employment stipulated by law or generally applicable collective agreements in the country. It is worth remembering, however, that this does not apply to:

In a situation where the terms and conditions of employment in the employee's home country are more favorable than those in the host country, foreign labor rules should be maintained during the assignment.

Social insurance and the posting of employees

When delegating an employee to another EU, EEA or Swiss country to provide services, you may encounter questions about which country social security and health insurance contributions should be made.

Delegated employees have the right to receive medical services in the host country for the entire period of the delegation. These services are provided on a country-specific basis and at facilities that have a contract with the local health insurance fund, which is the equivalent of the National Health Service. To access the services, one must have a European Health Insurance Card (EHIC). A posted employee or his/her authorized employer may apply for a European Health Insurance Card (EHIC). It is required that the application be submitted to the appropriate branch of the National Health Insurance Fund that serves the employee's place of residence.

An employee is usually subject to the legislation of only one country. This generally means that he or she should be insured in the country where he or she performs work, which in the case of a posting means insurance in the host country. The regulations allow social and health insurance contributions to be made in the country from which the employee is sent on assignment.

If you do not meet all the requirements for insuring a posted employee in force in his or her country of origin, it is necessary to report him for social and health insurance in the country where he performs work during the posting.

System of remuneration for employees on secondment

There is no statutory minimum wage in Denmark. Wage rates are set by collective bargaining agreements, which are negotiated by trade unions together with employers' organizations.

In the case of posted workers, wages should include all the necessary elements that are set by national laws or recognized collective agreements that apply to all local workers in a particular sector or region. This means that a posted worker should be provided with the full components of pay and allowances that a local worker doing the same work in the same industry and location would be entitled to.

It should be borne in mind that amounts paid to cover actual expenses related to the posting, such as travel expenses to and from the place of posting and expenses for food and lodging, cannot be included in the salary of the posted employee.

These expenses are paid or reimbursed to the posted worker regardless of his or her salary and cannot be taken into account when comparing the actual salary amounts with those due according to the regulations in force in the country where the worker is posted.

The salary of a posted employee will not be identical to that of a local employee, but the rules of calculation and the components of remuneration must be comparable. Note, however, that this rule does not apply to temporary employees, who should receive remuneration equal to that of employees of the user employer in the host country. Regardless of whether an employee's posting is short-term or long-term, remuneration for posted employees must be determined and paid according to the same rules from the first day of their posting.

Taxes when posting employees to Denmark

The term “actual employer” refers to the entrepreneur who actually uses the employee's labor and bears the responsibility and risk of the employee's performance, as opposed to the formal employer with whom the employee has a contract.

We are talking about the so-called “international hiring of labor” when an employee, employed by one entrepreneur (the formal employer), performs his duties for another entrepreneur abroad (the actual employer).

By working as a posted employee from a foreign company in Denmark, you can hope to be exempt from paying Danish tax for the first six months. However, if SKAT finds that you have been employed by a Danish company, you may be required to pay tax from the first day of your stay. In that case, the following rules apply:

​Determination of tax residency is based on two criteria, one of which only needs to be met. The employee may have the center of his personal or business interests (center of vital interests) in the territory of his home country. In addition, if he or she is tax resident in his or her home country, he or she is subject to unlimited tax liability, which means that he or she must account for all income (including labor compensation) regardless of where it is earned.

Law L921, which regulates tax on the hiring of foreign workers, became effective in Denmark on September 19, 2012. The Danish entrepreneur for whom the work is performed can be considered a so-called “de facto employer” by the local tax authorities on the basis of the double taxation treaty and the L921 Act.

Introduced by Law L921, the special form of taxation on the wages of foreign workers is 35.6%. It consists of two components:

  1. Labor Market Tax, which is 8% on gross income.
  2. The Labor Market Tax, set at 30% after deducting the Labor Market Tax.

Responsibility for collecting this tax rests with the Danish businessman who uses foreign workers. He is obliged to withhold the tax at the time he pays the invoice for the services rendered to the foreign contractor. This obligation applies both when a Danish company employs foreign workers under a contract with a foreign employer and when the employment and payment of wages are made by another employer or a temporary work agency. The gross salary of the foreign employee, provided by the foreign company, is the basis for calculating this tax.

The Danish businessman who withholds tax on the hiring of employees prepares a monthly statement of the employees who performed work for him, as well as the amount of tax withheld (wages and tax are presented in Danish krone at the exchange rate in effect on the date of withholding). By the 10th day of the month following the one in which the deduction was made and the invoice paid, the Danish entrepreneur is required to remit the tax withheld. Large companies in Denmark that apply the advance taxation rules must pay the tax no later than the last day of the accounting month.

A guide published by the Danish Tax Authorities (SKAT) explains the rules regarding the new tax on the hiring of foreign workers. The document defines the term “international hiring of labor” as a situation in which employees hired by foreign entrepreneurs are sent to work for Danish companies, performing tasks that are an essential part of the Danish entrepreneurs' business.

In the context of international labor hiring, three parties are distinguished:

  1. The formal employer, i.e., an employer from another country who posts workers to Denmark.
  2. The employee, who is tax resident in a country other than Denmark.
  3. The Danish entrepreneur for whom the foreign employee provides services, acting as the de facto employer.

The rules for calculating posting periods are not clearly defined in the regulations. Before sending an employee, it is worth checking whether there are specific regulations on this issue in the destination country. Keep in mind that the countries of the European Union, the European Economic Area and Switzerland may make exceptions to the general rules set by the European Commission.

The official position of the European Commission indicates that posting periods should be counted separately for each service provided. When successive employees are sent by the same employer to perform the same task at the same location, their posting periods add up. The identity of the service, the nature of the work performed and the addresses where the work is performed should be taken into account when determining whether a task is performed in the same place.

Tasks that are a key aspect of the Danish entrepreneur's operation range from the company's core business to regular services that support that business, such as cleaning or accounting services.

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