Social security cover when working in Denmark
Denmark has a very extensive social security system, and the purpose of this article is to briefly describe the social security cover for non-Danish citizens when working in Denmark.
The Danish Social Security System is extensive and consists of services and benefits that provide economic security such as health insurance, unemployment benefits, unemployment benefits by sickness, maternity and adoption, national pension, early retirement, and holiday allowance.
For a non-Danish citizen, being affiliated with the Danish Social Security System means a non-Danish citizen is entitled to the same social benefits as Danish citizens. However, before it is decided whether a non-Danish person is entitled to these social benefits, it is relevant to distinguish two groups of individuals:
- Nationals of non-EU countries
- Nationals of another EU/EEA country or Switzerland
Nationals of non-EU countries
The EU has with legislation (EU Regulation No 1231/2010) extended the social security cover in the EU to nationals of non-EU countries legally residing in the EU and in a cross-border situation. However, this does not apply to Denmark. Therefore, a national of a non-EU country will not be covered by the Danish Social Security System according to EU-rules.
Instead, a non-EU national in Denmark must (according to Danish rules) be self-sufficient during his or her stay in Denmark. A non-EU national is therefore not allowed to receive benefits under the terms of the Danish Active Social Policy Act.
Nationals of another EU/EEA country or Switzerland
An employee from another EU/EEA country working in Denmark is entitled to the same social benefits as Danish citizens. This however requires that the employee is registered as a tax resident in Denmark. Furthermore, if the employee is planning to stay in Denmark for more than three months, the employee must apply for a CPR Number from the Civil Registration Office to receive social benefits and to use the Danish healthcare system.
However, the employee will not be covered by the Danish Social Security System, if the employee receives confirmation from the employee’s home country – usually with the issuing of an A1 coverage – that the employee remains in this healthcare system under a treaty made between the employee’s home country and Denmark.
If the employee is not covered by the Danish Social Security System, or the employee have an A1, the employee and the employer must pay social security contributions to the country, where the employee is covered.
Social security contributions
If the employee’s home country does not grant security coverage under a treaty, then the employee and the employer – being Danish or non-Danish – will have obligations regarding payment of social security contributions to the Danish Social Security System in accordance with Danish rules.
In Denmark, the social security system is financed primarily through ordinary tax revenue and social security contributions from the employee and employer.
An employee’s main social security contribution will therefore be to pay tax, with the tax rate being variable and depending on income. Furthermore, the employee must pay labor market supplementary pension (ATP).
The following is not an exhaustive run-through of the employer’s obligations, but the employer is obligated by legislation to take out a work insurance for the employees that covers accidents and short-time damaging exposure, while also paying supplementary labor market pension (ATP). Paying supplementary labor market pension (ATP) is shared between the employer and the employee, with the employer paying 2/3 of the contribution, while the employee pays the remaining 1/3 of the contribution through the salary. Furthermore, the employer must pay 12,5 % of the employee’s salary in holiday allowance. In addition, the employer must also pay contributions to education, maternity, and sickness benefits.
The social contributions paid by the employer is approximately 2-3 % of the employee’s salary excluding holiday allowance, and approximately 14-15 % including holiday allowance.
Independent business owners who do not have social security coverage under a treaty, will also need to pay social contributions to the Danish Social Security System. The size of the contributions amounts to around 2-3 % of the salary.
DAHL Law Firm has extensive experience regarding social security for non-Danish citizens when working in Denmark. For further information please contact our experts.