Salaried Employees Act: rights and dismissal

Millions of Danes are salaried employees (funktionærer), but most do not know exactly what rights they have under the law. The Salaried Employees Act (funktionærloven) is one of Denmark's most important employment-law statutes, and it affects everything from your notice period to your pay when you are ill.

This guide reviews the most important rules of the Act, so that, whether you are an employee or an employer, you understand what the law requires and what you can expect.

1. What is the Salaried Employees Act?

The Salaried Employees Act (officially the Act on the legal relationship between employers and salaried employees) was passed in 1938 and has since been the basis for the employment relationship of millions of Danish employees.

The purpose of the Act is to create a minimum level of protection for salaried employees. It sets minimum rules for:

• Notice periods and procedures
• Pay during illness
• Severance pay for long service
• Compensation for unfair dismissal

The Act is a minimum law: collective agreements and individual contracts can always give the employee better terms, but not worse.

The Act applies to a broad range of private employment relationships, while public employees are governed by other legal bases.

2. Who is a salaried employee? Definition and requirements

Not all employees are salaried employees in the sense of the Act. To be covered, three conditions must be met:

Type of work

The Act applies to employees who mainly perform:

• Commercial or office work, for example sales, customer service, bookkeeping, administration and HR
• Technical or clinical assistance of a defined character
• Work management or supervision on the employer's behalf

Unskilled workers who exclusively perform manual work (for example production or cleaning work) are typically not salaried employees.

Working time

The employee must work more than 8 hours a week on average for the employer in question. Part-time employees can therefore be salaried employees when the limit is met.

The employment relationship

There must be a genuine employment relationship. Freelancers, the self-employed and consultants who work for their own CVR number are not covered.

Practical example: a salesperson who works 20 hours a week in an office is a salaried employee. A graphic designer who invoices through their own company is not.

3. Notice periods under the Act (section 2)

One of the most important elements of the Act is the notice period, that is, the period between notice and leaving.

The employer's notice period

The periods increase with the employee's length of service:

Length of service	Notice from the employer
0 to 6 months	1 month
6 months to 3 years	3 months
3 to 6 years	4 months
6 to 9 years	5 months
9 years or more	6 months

Notice runs to the end of a month. (The precise service thresholds are 2 years and 9 months, 5 years and 8 months, and 8 years and 7 months, because notice must be given so that the departure falls after 3, 6 and 9 years of service respectively.)

The employee's own notice period

Regardless of length of service, a salaried employee's own notice period is as a rule 1 month to the end of a month, unless otherwise agreed to the employee's advantage.

Summary dismissal

In the case of gross breach (for example theft, fraud or serious disloyalty) the employer can dismiss the employee with immediate effect and without notice. Summary dismissal is an extraordinary measure, and the threshold is high.

4. Pay during illness (section 5) and the 120-day rule

The right to pay from day one

A salaried employee is entitled to full pay during illness from the first day of illness and for the whole period of illness, regardless of length of service. The employer can subsequently claim sickness-benefit reimbursement from the municipality.

The 120-day rule

The Act contains a special provision that allows the employer to give shortened notice in the case of long-term illness:

• If the employee has received pay during illness for more than 120 days within the last 12 months, the employer can give 1 month's notice
• The days need not be consecutive
• The notice must be given in immediate connection with the 120 days of illness and while the employee is still ill

Important: the 120-day rule does not apply automatically. It must be agreed in writing in the employment contract to be used.

5. Severance pay (section 2 a)

The Act secures employees with long service a severance payment when they are dismissed by the employer.

The current rates

After the amendment with effect from 1 February 2015, the rates are:

Length of service	Severance pay
At least 12 years	1 month's salary
At least 17 years	3 months' salary

There is therefore no longer a step of 2 months' salary at 15 years, and the threshold for 3 months' salary is 17 years (not 18).

Important conditions

• The payment is only made when the employer dismisses the employee (or on unjustified summary dismissal). If the employee resigns, there is no payment.
• It is the length of service at the time of leaving that counts, so the notice period is included.
• After the 2015 amendment it no longer matters for the right whether the employee goes on to a pension (including the state pension or an employer-paid pension). The former pension exception has been abolished.

Severance pay is taxed under the special rules in section 7 U of the Tax Assessment Act.

6. Non-compete and customer clauses

For employment clauses entered into from 1 January 2016, the Employment Clauses Act (ansættelsesklausulloven) applies. Older clauses may still be covered by the earlier rules in sections 18 and 18 a of the Salaried Employees Act.

Non-compete clause

A non-compete clause prohibits the employee from taking employment with a competitor or starting a competing business for a period after leaving. The conditions include:

• The clause must be agreed in writing
• The employee must have held a specially trusted position
• The clause can bind for at most 12 months from leaving
• The employer must pay compensation: at least 40% of pay per month if the clause is maintained for up to 6 months, and at least 60% if maintained for up to 12 months (the rates are lower if the employee finds other suitable work)

Customer clause

A customer clause limits the employee from contacting or serving the employer's customers. It can apply for at most 12 months, requires a written agreement and compensation, and can only cover customers the employee has had a business connection with within the last 12 months before the dismissal.

Combined clause

If a non-compete and a customer clause are combined, the combined clause can be maintained for at most 6 months from leaving, and the compensation is at least 60% of pay per month.

7. Holiday and holiday pay for salaried employees

Salaried employees are fully covered by the Holiday Act and accrue 2.08 holiday days per month, corresponding to 25 days of paid holiday a year (5 weeks).

An advantage for salaried employees is that they as a rule get pay during holiday from the first day of employment, because the salary is paid on an ongoing basis.

Concurrent holiday

Under the 2020 Holiday Act, holiday is accrued and taken more or less at the same time. Holiday is accrued in the holiday year from 1 September to 31 August and can be taken from 1 September to 31 December the following year (a 16-month period for taking it). The employee as a rule has the right to take continuous main holiday in the summer period (1 May to 30 September).

Holiday on dismissal

On dismissal, holiday not taken must either be taken during the notice period or paid out on leaving. Special rules apply if the employee is on garden leave.

8. Unfair dismissal and compensation (section 2 b)

Although employers in Denmark can dismiss employees, the Act sets limits on dismissals that are unfair.

What is an unfair dismissal?

A dismissal is unfair under section 2 b if it is not reasonably justified in the employee's circumstances (for example cooperation problems or breach) or in the company's circumstances (for example savings or restructuring). The employee must have at least 1 year's service to invoke section 2 b.

The size of the compensation

The compensation is set specifically on the basis of length of service and circumstances, but the law sets caps:

• As a rule at most pay for a period equal to half the notice period
• If the employee has turned 30, up to 3 months' salary
• After at least 10 years' service, up to 4 months' salary
• After at least 15 years' service, up to 6 months' salary

There is therefore no cap of 52 weeks' (one year's) salary under section 2 b. The compensation is not the same as pay during the notice period, and the two can be added together.

If you are in doubt about whether a dismissal is fair, you should seek advice from your trade union or a lawyer.

9. The Act vs. a collective agreement

The Salaried Employees Act is a minimum law. Collective agreements can always improve the terms, but not reduce them below the law's minimum.

Many collective agreements give salaried employees, for example, a shorter own notice period, higher severance pay or extra days off. In those cases the better terms of the agreement apply. Many salaried employees in the private sector are not, however, covered by a collective agreement, and here the Act is the primary legal basis. Your employment contract must as a minimum meet the requirements of the Act and can only give you better or neutral terms, never worse.

Frequently asked questions about the Salaried Employees Act

What is the Salaried Employees Act?

The Salaried Employees Act (the Act on the legal relationship between employers and salaried employees) is a Danish law from 1938 that protects employees who perform commercial, office, technical or supervisory work. The Act sets minimum rights for, among other things, notice periods, pay during illness and severance pay.

Who is a salaried employee under the law?

A salaried employee is an employee who mainly performs commercial or office work, technical or clinical assistance, or work management, and who works more than 8 hours a week for the employer.

What is the notice period for a salaried employee?

The employer's notice depends on length of service: 1 month at 0 to 6 months, 3 months at 6 months to 3 years, 4 months at 3 to 6 years, 5 months at 6 to 9 years and 6 months at 9 years or more. The employee's own notice is as a rule 1 month.

Is a salaried employee entitled to pay during illness?

Yes. A salaried employee is entitled to full pay during illness from the first day of illness, regardless of length of service, under section 5 of the Act.

What is the 120-day rule?

The rule allows the employer to dismiss a salaried employee with 1 month's notice if the employee has received pay during illness for more than 120 days within the last 12 months. The rule must be agreed in writing in the contract to apply.

When is there a right to severance pay?

Under section 2 a of the Act, a salaried employee is entitled to 1 month's salary at at least 12 years' service and 3 months' salary at at least 17 years' service, when the employer dismisses. The payment lapses if the employee resigns.

Can a salaried employee have a non-compete clause?

Yes, but under strict requirements in the Employment Clauses Act: a written agreement, a specially trusted position, compensation (at least 40% for up to 6 months and at least 60% for up to 12 months) and a maximum duration of 12 months. A combined non-compete and customer clause can apply for at most 6 months.

What is compensation for unfair dismissal?

For an unfair dismissal under section 2 b, the employee may be entitled to compensation, which under the law can be at most 3, 4 or 6 months' salary depending on age and length of service. The employee must have at least 1 year's service.

Does the Act also apply to directors?

It depends on the nature of the position. A registered director is typically not covered by the Act, while a manager employed on ordinary employee terms can be. It is assessed specifically.

---

The content of this page is for guidance only and does not constitute legal advice. The rules can change, and the specific assessment always depends on the individual circumstances. Contact a lawyer or your trade union if you need specific legal advice.