Hiring your first employee: a complete legal checklist

Hiring your first employee is a milestone, your business is growing beyond yourself. But with the first employee comes a series of legal obligations that many new employers are not aware of. If you are missing just one element, it can lead to fines, disputes or claims from a dissatisfied employee.

This guide takes you through the whole process, from the job posting to the signed contract and the ongoing obligations, step by step.

Before you post the job: registration and preparation

1. Register as an employer in eIndkomst

Before you can pay salary to an employee, your business must be registered as an employer with the Danish Tax Agency via eIndkomst. Registration is done via virk.dk under "Register business" → employer.

As an employer you are obliged to:

• Report salary and A-tax monthly to eIndkomst
• Withhold and settle A-tax (the withholding rate from the employee's tax card)
• Withhold and settle AM-bidrag (8% of the gross salary)

If your business does not have a CVR number yet, the first step is to register your business on virk.dk.

2. Take out occupational injury insurance (mandatory)

Before your employee starts, you must have taken out occupational injury insurance (arbejdsskadeforsikring). It is an absolutely mandatory insurance for all employers in Denmark, even for a single employee.

The insurance covers:

• Accidents that happen at work or during transport to/from work
• Occupational diseases arising as a result of the work

If the insurance is missing, Arbejdsmarkedets Erhvervssikring (AES) can require the premium plus a fine from you. It is not an insurance you can leave to order "soon".

3. Check whether you are covered by a collective agreement

If your business is a member of an employers' association (for example Dansk Erhverv, DI, HORESTA), you can be bound by a collective agreement that sets minimum wages, supplements and working conditions for that industry.

If you are not bound by a collective agreement, the statutory minimum rules apply, but many industry norms are defined by the collective agreements. Check what applies in your industry before you set the wage level.

Job posting and hiring process

4. Write a lawful job posting

The job posting must not, directly or indirectly, discriminate on the basis of:

• Gender, age, ethnicity, religion
• Disability, sexual orientation
• Political or trade union affiliation

Avoid formulations like "young and dynamic team seeks..." or "Danish background an advantage", they conflict with the equal-treatment rules.

5. GDPR in recruitment

When you receive applications, you process personal data. Remember:

• Inform applicants about what you use their data for and how long you keep it (typically 6 months)
• Do not keep rejected applications unnecessarily long without consent
• Use a secure method to receive and store applications (avoid insecure inboxes for sensitive CVs)

The employment contract

6. Issue an employment certificate (7 days / 1 month)

The Act on Employment Certificates and Certain Working Conditions (in force 1 July 2023, the former Employment Certificate Act) requires that all employees with more than 3 hours of weekly working time on average (measured over 4 weeks) receive written information about the terms of employment. The most important information must be given no later than 7 calendar days after the start of employment, and the rest no later than 1 month after. If the employee does not receive the information within the deadline, you can be ordered to pay compensation.

Best practice: give the contract on the first working day, preferably signed before.

7. What your employment contract must contain

A statutory employment contract must contain at least this information:

The parties:

• The employee's name, address and CPR number
• The employer's name, address and CVR number

The employment:

• Start date and any end date (fixed-term employment)
• Place of work (address)
• Job title and an overall description of the job

Salary and working hours:

• The amount of the salary (fixed salary, hourly basis, commission)
• Salary supplements (pension, lunch scheme, free phone, etc.)
• Payment interval (weekly, monthly)
• Normal weekly working hours

Holiday and leave:

• Holiday days and timing (the Holiday Act as a minimum)
• Any extra days off or special holiday

Termination terms:

• Notice periods in the probation period and after
• Any grounds for summary dismissal

Probation period:

• A probation period can be agreed up to 3 months
• During probation the notice periods are shorter (typically 14 days' mutual notice)

Salary, tax and pension

8. Set up payroll

You must report salary to eIndkomst monthly (no later than the 10th of the month for the previous month). The options are:

• Manual reporting via eIndkomst: works for a single employee
• Payroll system: Dinero, e-conomic, Billy or similar, recommended from the first employee
• External bookkeeper: outsourcing of payroll

Make sure to obtain the employee's tax card electronically via eIndkomst before the first salary.

9. Pension, voluntary or collectively agreed

There is no general statutory pension in Denmark (apart from ATP, see below). But:

• Many collective agreements require pension contributions (typically 12-17% of the salary)
• If you do not offer a pension, it can be a competitive disadvantage in recruitment
• If you agree a pension in the employment contract, you are bound by it

The usual arrangement is that the employer pays 2/3 and the employee 1/3 of the pension contribution.

10. ATP, mandatory for all

ATP (Arbejdsmarkedets Tillægspension) is mandatory for all employees with more than 9 hours of weekly working time. The contribution is low (fixed, depending on working hours) and is shared between employer and employee. The ATP contribution is calculated and settled via payroll.

11. Holiday pay and FerieKonto

The employee earns 2.08 holiday days per month (25 days/year) with the right to salary during holiday ("paid holiday") or holiday allowance. The rules depend on whether the employee is monthly-paid:

• Monthly-paid employee: salary during holiday + any holiday supplement (typically 1%)
• Hourly/irregular pay: pay holiday allowance to FerieKonto or pay directly

FerieKonto: If your business is not part of the holiday-card scheme, holiday allowance must be paid to FerieKonto or Feriepengeinfo.

Confidentiality agreement and GDPR for employees

12. Confidentiality clause in the contract or a separate NDA

If your employee handles confidential customer information, trade secrets, pricing strategies or sensitive personal data, you should include a confidentiality clause in the employment contract, or have the employee sign a separate confidentiality agreement.

The clause binds the employee to keep confidential information secret, both during employment and after it ends.

13. GDPR for employee data

You process personal data about your employees, CPR number, salary, health information (sick notes), bank account number. GDPR requires:

• Employees are informed about which data you process and for what purposes (employment, salary, tax, pension)
• Data is not kept longer than necessary
• CPR numbers are processed separately and secured against unauthorised access
• If you use an external payroll service or HR system, a data processing agreement is required

Special rules to know

14. Young people under 18

If you hire young people under 18, special rules apply under the Working Environment Act and the order on young people's work (bekendtgørelse om unges arbejde):

• Under 15: as a rule may not work (except light work for 13-14-year-olds to a limited extent)
• 15-17: limited working hours, a ban on dangerous work, special rules for evening and night work

15. Leave rules for pregnancy and parental leave

As a new employer you should know the basic parental-leave rules:

• The mother has the right to 4 weeks' leave before birth and 14 weeks after
• Both parents have the right to 24 weeks' leave, which can be distributed flexibly
• Employees may be entitled to parental-leave benefit from the municipality, but many collective agreements give the right to full salary during leave from the employer

Parental leave can come as a surprise to new employers, know the rules and plan in good time.

16. Illness and sick pay

In case of illness:

• Employees with more than 8 hours of weekly working time are entitled to sickness benefit from the municipality (after a qualifying period)
• Many collective agreements give the right to full salary during illness from day one, check whether it applies to you
• You can apply for reimbursement of sickness benefit from the municipality

17. Dismissal and procedural rules

If you dismiss an employee:

• During probation: shorter notice (typically 14 days from both sides)
• After probation: notice periods rise with seniority (the Salaried Employees Act for monthly-paid staff)
• Summary dismissal: only for material breach (theft, deliberate damage), and you must act immediately

If you lack the correct notice or grounds, you risk damages or compensation to the employee.

The complete checklist, step by step

Before hiring:

• CVR registration as employer via virk.dk/eIndkomst
• Occupational injury insurance taken out
• Check of collective agreement and industry norms
• Payroll system or bookkeeper identified

Recruitment process:

• Lawful job posting (no discriminatory wording)
• GDPR procedure for applicant data documented

Employment documents:

• Employment contract with all statutory elements
• Signed before/on the first working day
• Any confidentiality clause or NDA
• Tax card obtained via eIndkomst

Salary and pension:

• First payroll planned (reporting by the 10th of the next month)
• Pension scheme established (if agreed or required by collective agreement)
• ATP contribution set up in the payroll system
• Holiday allowance/holiday pay matters clarified

GDPR:

• Employee informed about data processing
• Data processing agreement with the payroll/HR system

Frequently asked questions

When am I obliged to give a contract?

You are obliged to give the most important information no later than 7 calendar days after the start of employment (the rest within 1 month). But always give the contract before the first working day, it is good practice and avoids misunderstandings.

Can I hire on a trial basis without a contract?

No. Even during probation you are obliged to issue an employment certificate. The probation period is only a period with shorter notice, it does not exempt you from the other legal requirements.

What does it cost if I do not comply with the rules?

A missing employment certificate can cost up to 13 weeks' pay in compensation. Missing occupational injury insurance leads to a fine and a back-claim for the insurance premium. GDPR breaches can result in warnings and fines from the Danish Data Protection Agency.

Must all employees have a pension?

There is no general statutory pension, but many collective agreements require pension contributions. ATP is mandatory for all. Check what applies in your industry.

Can I dismiss an employee during probation without grounds?

Yes, during probation dismissal is possible with shorter notice and without a requirement of grounds, but you may not dismiss for discriminatory reasons (pregnancy, illness, trade union activity, etc.). Summary dismissal still requires material breach.

Conclusion

The first employee is a big day, but the legal preparation must be in place before they turn up for the first time. Occupational injury insurance, an employment contract and eIndkomst registration are the three non-negotiable cornerstones. The rest, pension, GDPR, holiday pay matters, you build up over time. Start with the right documents, and you avoid the expensive surprises.

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The content of this article is for guidance only and does not constitute legal advice. Consult a lawyer for advice on your specific situation.