What Severance Pay Rules Must Employers Follow in Denmark?

Which Employees Qualify for Severance Pay?

• Salaried employees (funktionærer) with at least 12, 15, or 18 years of continuous service with your company, as defined in the Danish Salaried Employees Act.
• Employees whose individual employment contracts or company policies expressly grant severance on termination without serious misconduct.
• Workers covered by collective bargaining agreements that include severance or special termination benefits, such as industrial or sectoral CBAs.
• Employees dismissed by your company (not those who resign voluntarily) where the reason is not gross misconduct that would justify summary dismissal.
• Employees whose roles are made redundant or whose employment ends due to restructuring, closure, or similar business-related reasons, if a CBA or contract grants severance.
• Non-salaried employees only where a collective agreement or written contract explicitly provides for severance or redundancy pay.

What Are the Legal Timelines for Paying Severance?

In Denmark, severance is typically due at the same time as the employee’s final salary and other end-of-employment payments. In practice, you should pay severance no later than the normal payroll date covering the last working day or notice period. Where a collective agreement applies, follow any stricter payment deadlines or procedures it sets. If there is a dispute about entitlement or amount, you should still pay any undisputed minimum and document how you calculated it. Late or missing payment can trigger claims for interest, compensation, and legal costs, so align internal payroll cutoffs with termination dates.

What Penalties Apply if Severance Is Not Paid Correctly?

If your company fails to pay severance correctly in Denmark, you risk financial, contractual, and reputational consequences. Employees and unions can challenge underpayment through the ordinary courts, labour courts, or industrial arbitration, depending on whether a collective agreement applies. Authorities and tribunals can award the unpaid severance, interest, and in some cases additional compensation for unfair dismissal or breach of contract. Disputes can also expose your internal processes and make future negotiations with unions more difficult.

• Employees can claim unpaid severance plus statutory interest from the due date.
• Courts or arbitration bodies may award additional compensation for unjustified or defective termination.
• Breach of collective agreements can lead to contractual penalties and union-backed claims.
• Persistent non-compliance can damage your company’s reputation with employees, unions, and regulators.
• Legal and advisory costs can increase significantly if disputes escalate or involve group redundancies.

Does Outsourcing Employment via an EOR Change Severance Liability?

Using an Employer of Record (https://www.playroll.com/employer-of-record) in Denmark does not remove the need to follow Danish severance rules, but it can shift day-to-day compliance work to the EOR provider. In a typical EOR setup, the EOR is the legal employer responsible for issuing contracts, administering notice, and calculating and paying any severance due. Your company, however, still drives business decisions such as performance management, restructuring, and terminations. If you instruct terminations that breach Danish law or a collective agreement, you can still face commercial, contractual, or co-employment exposure. Clear allocation of responsibilities in the EOR contract and early consultation before terminations are essential.

Be 100 Percent Compliant in Offering Severance with Playroll

Denmark’s mix of statutory rules, collective agreements, and contract-based severance can be tricky to navigate, especially if your HR team is not familiar with the Danish Salaried Employees Act and local bargaining structures. Playroll helps your company map which employees are covered as salaried employees, which are under CBAs, and where additional contractual severance applies. Your team gets clear guidance on notice, severance triggers, and how to document decisions so they stand up in a dispute.

With Playroll, you can also centralise global severance practices while staying aligned with Danish law and market norms. Our platform and local experts support you in planning restructurings, timing payments with payroll cycles, and coordinating with an EOR where relevant. That means fewer surprises, smoother exits for employees, and a much lower risk of costly claims or union conflicts.