Freelancer vs. employee: the legal differences

Calling yourself a "freelancer" is not enough to be legally self-employed. The line between a freelancer and an employee in Denmark is not determined by what you call yourself. It is decided by a concrete overall assessment of how the work is actually carried out.

That distinction has major consequences: for tax, insurance, holiday rights, sickness benefit and contracts. And the consequences hit both parties: the hiring party can end up with a retrospective A-tax claim, and the freelancer can lose rights they believe they have.

This guide reviews the legal criteria that distinguish freelancers from employees in Denmark, and what it means for the contracts you enter into.

The basic distinction: what does the law say?

There is no single law that defines a "freelancer." Instead the term self-employed business is used in contrast to employee, and the line is drawn through an overall assessment.

Circular no. 129 of 4 July 1994 to the Personal Tax Act contains the classic list of criteria that the tax authorities and the courts use for the demarcation.

Criteria for employee status

The following factors point towards a person being an employee, even if a "freelance contract" has been signed:

1. The hiring party organises the work and supervises it
2. A fixed workplace at the hiring party's premises
3. Fixed working hours: set times and presence requirements
4. A ban on working for others (an exclusivity clause)
5. Fixed pay regardless of results, for example an hourly or weekly wage
6. The hiring party provides equipment, premises and resources
7. No independent business risk for the freelancer
8. Only one source of income within a period

The more of these factors that are present, the more the relationship resembles employment.

Criteria for self-employed status

Conversely, these factors point towards being a self-employed business:

1. CVR registration: you run an independent business
2. VAT registration: where VAT-liable turnover exceeds DKK 50,000 within 12 months
3. Several clients: you are not dependent on one single source of income
4. Own equipment and premises: the operating costs are borne by the freelancer
5. Independent decisions about how the work is organised: when and how
6. Invoicing: you send invoices, not payslips
7. A real business risk: you can lose money on the project
8. Marketing of your own enterprise: website, CVR, business profile

What decides the outcome?

The overall assessment is decisive. No single criterion is decisive on its own. It is the sum of all the factors. A freelancer can well work in time coordination with a client without losing self-employed status, if the other factors are clear.

The courts look in particular at:

• The real subordination (is there a power of instruction?)
• Who bears the risk?
• Is there real business independence?

Consequences of incorrect classification

For the hiring party (the client)

If a "freelancer" is reclassified as an employee, the client can:

• Be ordered to pay A-tax and labour-market contribution retrospectively
• Be liable for the failure to withhold
• Be faced with claims for holiday pay, seniority-based notice and other employment-law rights

For the freelancer

Reclassification can mean:

• A requirement to correct incorrectly settled VAT
• An altered tax assessment as a result of the difference between self-employed and employee
• Loss of access to the business tax scheme (VSO)

Contract type: freelancer contract vs. employment contract

It is not the heading of the contract that determines whether you are a freelancer or an employee. It is the content and the actual performance. A "consultancy agreement" can easily conceal an employment relationship, and vice versa.

What distinguishes the two contract types?

Element	Freelancer contract	Employment contract
Settlement	Invoice + VAT	Payslip + A-tax
Termination	Contract terms	E.g. the Salaried Employees Act's notice
Holiday	Agreed in the contract	The Holiday Act applies
Sickness	Own risk/insurance	Pay or sickness benefit via employer
Copyright	Agreed in the contract	Unwritten main rule + s. 59 for computer programs
Employer liability	None	Full employer liability
Insolvency/wage guarantee	No protection	The Employees' Guarantee Fund

On copyright in employment: There is no general statutory rule that an employee's copyright automatically passes to the employer. The starting point is that the copyright belongs to the author, but under an unwritten main rule the rights that are necessary for the employer's ordinary activity pass to the employer. The most important statutory exception is section 59 of the Copyright Act, under which the copyright in a computer program created by an employee as part of their work passes fully to the employer. For freelancers neither applies automatically: here the rights are decided solely by the contract.

Freelancer contract: key elements

A freelancer contract must clearly reflect an independent business relationship:

• The parties' CVR numbers (both parties are businesses)
• Project-based payment: per assignment, per hour or a fixed price
• Invoicing terms with VAT
• Independent freedom of method: the supplier decides how the assignment is solved
• No exclusivity
• A termination provision: termination on the contract's terms, not the Salaried Employees Act's

Employment contract: key elements

An employment contract governs a hierarchical relationship of dependence:

• Salary and possibly pension contributions
• Holiday rights under the Holiday Act
• Notice period under the Salaried Employees Act (or an applicable collective agreement)
• A probationary period (if agreed)
• A job description and power of instruction
• Any clauses (non-compete clause, customer clause, confidentiality clause)

Grey zones: hybrid relationships and the platform economy

The platform economy has created a new category: platform workers. The EU Platform Work Directive (Directive (EU) 2024/2831) introduces a presumption: when certain signs of direction and control are present, the person is presumed to be an employee, unless the platform can rebut it. The directive is to be implemented into Danish law within the set deadline, and the detailed Danish rules will be laid down on implementation.

For classic freelancers (consultants, graphic designers, IT people) the traditional overall assessment still applies.

What should your contract contain to support freelancer status?

The following elements in the freelancer contract strengthen the argument for self-employment:

1. "The supplier is a self-employed business": an explicit wording
2. CVR and VAT number for both parties
3. A project description rather than a job description: task-based, not a position description
4. Freedom to delegate: the supplier can use subcontractors
5. No fixed attendance obligation: participation as needed, not a requirement
6. The supplier bears the risk: defective delivery is the supplier's responsibility
7. No exclusivity clause
8. A termination provision on the contract's terms

Practical advice for businesses

Many businesses use freelancers to avoid the administrative and payroll obligations of employment. That is legitimate, but it requires the relationship to be genuinely independent.

Risk assessment: consider whether your "freelancer" really has the characteristics of an employee. Does the person work full time for you, on your premises, with your equipment, under your instruction? Then it is probably employment.

Documentation: keep contracts, invoices and correspondence. Any tax-authority audit looks at the pattern over time, not just at the contract.

Update the contracts on an ongoing basis: each new project should have an updated contract that reflects the current business relationship.

FAQ: freelancer vs. employee

Can you be "semi-employed", partly a freelancer and partly an employee?

In principle yes: you can have a part-time employment relationship with one party and freelance for others. But you cannot have the same working relationship classified as both.

Is a CVR number enough to prove self-employed status?

No. The CVR number is one element in the overall assessment, but not sufficient on its own. Taken together, the criteria must point towards self-employed status.

What is the tax authorities' response if they reclassify?

The tax authorities send a proposal to change the tax assessment to the client regarding the duty to withhold A-tax. The client can appeal, but the burden of proof is heavy. It is far better to get it right from the start.

As a freelancer, can I have one fixed long-term client relationship?

It is possible but risky. The longer and more exclusive the relationship is, the more it resembles employment. Make sure the other criteria (own equipment, freedom of method, no power of instruction) are clear.

Who can help me assess whether I am a freelancer or an employee?

You can ask the tax authorities for a binding answer (under the Tax Administration Act), which binds the authority in the specific situation. An accountant or a tax lawyer can also assess your concrete business relationship.

Get off to a good start with the right contract

Whether you are a freelancer or an employer, the right contract is crucial to avoid tax surprises and legal disputes.

A contract drawn up correctly from the start documents the real relationship: a freelancer contract reflects an independent business relationship with invoicing, freedom of method and own risk, while an employment contract governs salary, holiday and termination under the employment-law rules. If you are in doubt about the classification, have it assessed before the collaboration begins.