Employment contracts for the self-employed

When the freelancer becomes an employer

There is a turning point in the life of every self-employed business: the day you hire your first employee. Suddenly you are no longer just a sole trader, you are an employer with the legal obligations that entails.

It is a step most self-employed people underestimate. You focus on whether the person can do the work, whether the chemistry is good, and whether you can afford the salary. What you often forget: a valid employment contract is mandatory, and it must be handed over within fixed deadlines.

This guide gives you the full overview: what an employment contract for a self-employed business must contain, which mistakes to avoid, and what it costs not to do it right.

The employment-certificate law applies to all employers

Whether you are a large company, a sole proprietorship or an ApS with one owner, the employment-certificate law applies. The law requires that employees receive written information about the essential terms of the employment relationship.

The rules were markedly tightened with the EU directive that came into force in Denmark in 2023. The requirements now:

• Within 7 calendar days of the first working day: core terms such as salary, workplace, working hours and start date
• Within 1 month of the first working day: the full employment contract with all mandatory information

If the deadlines are not met, you as an employer risk having to pay compensation to the employee of up to 13 weeks' pay. That is money few self-employed people can afford to give up.

What must an employment contract contain?

A valid employment contract must as a minimum contain these elements:

1. The parties

The employer's full name and address (including CVR number), the employee's full name and address plus CPR number for tax reporting.

If you are a sole proprietorship, it is your personal name and CVR number that are entered as the employer.

2. Workplace

Where will the employee work? State the primary work address. If the employee works partly from home, this should appear.

3. Job title and job description

A clear description of the position and the primary tasks. It need not be a detailed job description, but the employee must know what the job broadly involves.

4. Start date

The day the employment officially begins, typically the first working day.

5. Salary and payment

• Basic salary (monthly or hourly)
• Salary period and payment date
• Any supplements: holiday pay, pension, allowances, mileage
• Any form of supplement beyond the basic salary

Remember: as a self-employed employer you are obliged to report and withhold A-tax and AM-bidrag on behalf of the employee. This is done via the Tax Agency's business portal.

6. Working hours

• Weekly working hours (for example 37 hours)
• Any flexitime or variable working hours
• Is the work arranged as part-time?

7. Notice period

The notice period depends on the length of employment and is governed by the Salaried Employees Act (for salaried employees) and collective agreements. For non-salaried employees the notice is agreed, but the law's minimum requirements apply.

For salaried employees the employer's notice rises with seniority:

• 0-6 months: 1 month's notice
• 6 months to 3 years: 3 months
• 3-6 years: 4 months
• 6-9 years: 5 months
• Over 9 years: 6 months

The employee's own notice is as a rule 1 month.

8. Holiday

The Holiday Act gives the right to 25 days of paid holiday a year. State how holiday is accrued and taken in the business.

9. Training and skills development

Since the 2023 law, the employment contract is required to state the employee's right to training paid by the employer, or explicitly state that there is no such right.

10. Collective agreement

Is the business covered by a collective agreement? Then it must appear. If not, this is stated.

11. Probation period (optional)

A probation period of typically 3 months (salaried employees) can be agreed. During probation the notice period is shorter. The probation period must be stated explicitly in the contract to have effect.

Self-employed as an employer: special considerations

Tax and payroll administration

As a self-employed employer you must register as an employer with the Tax Agency and the Business Authority. This involves:

• Registration for withholding A-tax and AM-bidrag
• Monthly reporting and payment to the Tax Agency
• Any contributions to Arbejdsmarkedets Erhvervssikring (AES) and the Employees' Guarantee Fund (LG)

It is a good idea to use a payroll system from the start, many accounting programs include this.

Pension

Self-employed businesses are not automatically obliged to contribute to pension, unless it is agreed in the employment contract or a collective agreement applies. But it is recommended to include a pension scheme as part of the package, it strengthens your ability to attract good employees.

Sick leave

Employees can be entitled to sickness benefit if the employment requirement is met (from the employer: employed in the last 8 weeks and at least 74 hours of work). Salaried employees are entitled to full salary during illness; other employees receive sickness benefit from the employer in the employer period (the first 30 calendar days), after which the municipality takes over and the employer can seek reimbursement. Be aware of the rules, because as a small self-employed business a long-term sick employee can be hard on liquidity.

Non-compete clauses

If you want to protect your business against an employee taking customers or knowledge to a competitor, you can insert a non-compete clause. But be aware: non-compete clauses are governed by the Employment Clauses Act. They require compensation (at least 40-60% of the salary) and can only be imposed on an employee in a specially trusted position who has been employed for at least 6 months.

See our guide to non-compete clauses in employment for details.

The 5 most expensive mistakes self-employed employers make

Mistake 1: No contract or contract handed over too late It is by far the most common mistake. And it costs: compensation of up to 13 weeks' pay.

Mistake 2: Using an old template from 2020 or earlier The 2023 legal change added several mandatory elements. If you use an old template, you risk missing these, and still owing compensation.

Mistake 3: No clear job description Unclear expectations create conflicts. A good employment contract describes what the job involves, it saves discussions and potential disputes.

Mistake 4: Incorrect classification: employee vs. consultant If the person is really an employee but is treated as a consultant (without an employment contract), you risk a claim for back-payment of employer contributions, holiday pay and compensation. If in doubt, choose the employee relationship and hire properly.

Mistake 5: Missing information on pension and training Since the 2023 law it is mandatory to disclose these. Do not forget it.

Salaried employee vs. hourly-paid: what is the difference?

Many self-employed people are unsure whether they are hiring a "salaried employee" (funktionær) or not. The answer determines which legal rules apply.

Salaried employees are typically staff in commercial and office businesses who primarily work with sales, administration or similar, and work more than 8 hours a week. The Salaried Employees Act gives them extra rights:

• Longer notice period (see above)
• The right to full salary during illness for the first 30 days
• Protection against unfair dismissal

Hourly-paid employees (non-salaried), for example tradespeople, cleaning staff, shop assistants, are as a rule covered by collective agreements in their industry.

If in doubt, ask an accountant or check on Borger.dk.

Dismissal: what you need to know before you hire

Self-employed people are often nervous about hiring, because they fear it is hard to dismiss again. It is a real concern, but the rules are not insurmountable:

• During probation (typically 3 months) both parties can terminate with 14 days' notice, no grounds required
• After probation the statutory notice periods apply
• Dismissal without fair grounds can lead to compensation, but the claim typically only arises after 1 year of employment (the "protected" employment relationship)

A clear contract with a well-described probation period gives you the necessary room to manoeuvre at the start.

Create your employment contract on LegalDock

With LegalDock you create a legally correct employment contract in under 15 minutes. Our template is updated with the 2023 legal requirements and guides you through all mandatory points, from start date and salary to training, pension and notice period.

You download a PDF that both parties sign, either digitally or on paper. No lawyer's fees, no complicated systems.

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Ready to hire your first employee? See the employment contract template, legally up to date, ready in 15 minutes.