Do I Need a Local Entity to Hire in Denmark?

In Denmark, a "local entity" refers to a recognized employing presence that allows you to act as an employer, typically a subsidiary or branch office. This setup is essential for fulfilling local payroll and employment obligations, ensuring compliance with Danish labor laws.

Without establishing a local entity, you can't manage mandatory payroll processes, register as an employer, or issue compliant employment contracts. An Employer of Record (EOR) can serve as a solution, allowing you to hire employees without the complexities of setting up a local entity.

What is Required to Employ Someone in Denmark?

• Local employing entity required to directly employ? Yes (to manage payroll and compliance)
• Payroll registration required? Yes (must register with the Danish Tax Agency)
• Withholding/tax remittance required? Yes (mandatory income tax withholding applies)
• Social contributions required? Yes (employer must contribute to social security)
• Local employment agreement required? Yes (written contracts are mandatory)
• Mandatory benefits to budget? Yes (includes holiday pay and pension contributions)
• Works council/collective agreements considerations? Often (many sectors have collective agreements)

Best Options If You're Hiring in Denmark

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but be cautious about misclassification risks.

While you can hire contractors without establishing a local entity, Denmark's strong labor protections mean you must ensure that the contractor truly operates independently. Misclassification can lead to significant liabilities if the contractor is deemed an employee.

Consider the following factors when hiring contractors:

• Ensure the contractor has multiple clients and is not exclusively working for you.
• Maintain minimal control over how they perform their work.
• Clearly define the project scope and deliverables in the contract.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Denmark, depending on the type of entity and required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated 2,000–5,000 DKK per month ($300–$750)
• Payroll provider: Estimated 1,000–3,000 DKK per employee per month ($150–$450)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated 10,000–30,000 DKK per year ($1,500–$4,500)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 p/month with Playroll)
• Pass-through statutory costs (e.g., employer social contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Denmark

Hiring in Denmark can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Denmark quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.