Salary and pension
Here you can read about salary and pension.
- What is ATP?
- What is AM contribution?
- What is pension?
- What is a payslip?
- What is transfer service?
- What is eIncome?
- What is a board member's fee?
- What is transportation allowance?
- What is SH payment?
- What is “Samlet Betaling”?
- What is the Store Bededag salary supplement?
1. What is ATP?
ATP (Arbejdsmarkedets Tillægspension) is a supplementary labour market pension in Denmark, which was implemented in 1964 as a supplement to the basic state pension. When an employee in a Danish company reaches retirement age, they will automatically receive a monthly amount from their ATP savings on their NemKonto. The employee will receive the benefit for the rest of their lives.
ATP is a mandatory payment solution, and it is the employer’s responsibility to make the payment on behalf of their employees. However, there are specific requirements before the employee qualifies for the supplementary pension. The employee must either:
- Work at least 39 hours per month (for monthly paid employees)
- Work at least 18 hours per 14 days (for employees paid every 14 days)
- Work at least 9 hours per week (for weekly paid employees)
- Be an occasional worker (regardless of the number of hours worked)
Payment
The payment rate varies based on upon employment categories. You can find all rates and read more about ATP on their website. The employer is obligated to pay 2/3rd whereas the employee pays the rest 1/3rd of the contribution.
On the employee’s payslip, the contribution from both the employer and employee should be listed. Typically, the payslip will also show the ATP contribution for the current pay period and the total contribution amount year-to-date.
Deadlines for ATP payments
- ATP for the first quarter is due on May 1st
- ATP for the second quarter is due on August 1st
- ATP for the third quarter is due on November 1st
- ATP for the fourth quarter is due on February 1st
If you are self-employed, you do not need to contribute to ATP since you are not considered an employee by the Danish law.
2. What is AM contribution?
Arbejdsmarkedsbidrag (AM contribution or labour market contribution) is a payroll tax of 8%, which is deducted after ATP and any other voluntary pension contributions. The tax contribution is calculated from the employee’s entire gross salary, including any employee benefits such as the value of a company car or a company phone. All employees and self-employed individuals are required to pay, and it is the employer’s responsibility to withhold and pay the AM contribution on behalf of the employee, each month.
The tax is paid to the state and is used to cover benefits for employees on the labour market including sick leave and maternity leave.
AM contribution should be listed on the payslip.
3. What is pension?
There are two different types of pensions in Denmark:
- Workplace pension
- Individual pension
Workplace pensions are established in connection with an employment relationship. The pension can either be agreed upon through a collective agreement or be a company pension plan agreed between the employer and a pension company.
The rates for the workplace pension each month can differ from company to company, it is possible for each company and their employees can negotiate at time of employment. The typical agreement is that the employer pays 8-10% of the employee's basic salary to a workplace pension, while the employee pays 4-5% of their salary to the pension. The pension rates are typically stated in the employee handbook.
Individual pensions are schemes that the employee creates himself or herself through a pension company or financial institution.
4. What is a payslip?
A payslip is an employee's receipt that the employer has paid their salary. It is also proof that taxes and social security contributions, such as A-tax, ATP, and AM contributions, have been deducted correctly from the salary.
All employees are entitled to receive a payslip from their employer, when their salary is paid out.
The payslip must be delivered no later than the day the employee receives their salary. Many employees receive their payslip a few days before they are paid. A payslip must be in writing, but does not need to be digital.
The payslip must provide information on:
- The employee's salary for the given period
- The period that the payslip covers
- The amount deducted for A-tax and AM contributions
- The employee's name, address, and social security number
- The employer's name, address, and CVR number.
In addition, these details are typically also included on the payslip:
- Taxable benefits
- Gross income
- ATP
- Company pension
- Deductions
- Holiday accounts
- Holiday and time off savings plan
- Reimbursement of expenses
- AM taxable income
- A-taxable income/A-tax basis
- Tax-free amounts
- Deductions from net salary
- Salary paid to the employee
The employer is required to keep an employee's salary information for five years, and ensure that no one else has access to it.
5. What is transfer service?
Transfer service carries out electronic payments, such as salary and pension transfers, to accounts in Danish financial institutions.
Agreement with your financial institution
As a payment sender, you must enter into an agreement to use Transfer Service. Both the payment sender (the authorized signatory of the company) and your financial institution must sign this agreement.
To sign up for a transfer service, you need NemID / MitID. Azets can assist you in your application process for this.
6. What is eIncome?
eIncome is a register with SKAT where all income information is reported. It is the employer's duty to report employees' wages to eIncome. If the employer uses a payroll service bureau such as Azets for reporting, the reporting is done automatically.
Read more about wage reporting here
7. What is a board member's fee?
Members of a board are paid a monetary amount for their work related to the company, they are affiliated with. The board member's fee is paid to each individual board member and should be treated as regular pay.
8. What is transportation allowance?
Transportation allowance is an economic compensation that an employer may choose to pay to an employee who uses their own car for work-related purposes, such as visiting a customer.
The transportation allowance must be visible on the employee's payslip, and the amount should appear after taxes, as no AM contribution or A-tax is required. The employer has an obligation to register the travel for which transportation allowance is paid, for example using driving logs or a mileage books, or register it through a payroll system.
The employer has control obligations regarding the bookkeeping, and if the travel is not registered or reported correctly, the tax authorities may treat the amount as regular pay subject to taxation.
If the employer uses Zenegy, there is an app for employees where work-related travel in their own car can be reported.
Rates for transportation allowance changes regularly and can be found on SKAT.dk
9. What is SH payment?
SH payment (holiday allowance payment) is an extra payment to hourly paid employees. SH payment is a compensation when public holidays fall on weekdays. The hourly paid employee receives their SH payment as public holidays occur. The employer should withhold and settle tax on the SH payment.
It is possible to create a SH code and specify specific SH percentages in a payroll system such as Zenegy, so the SH savings will be automatically calculated. It is however important for the employer to remember this in the payroll submission, when the SH payment is due.
10. What is “Samlet Betaling”?
As an employer in Denmark, you must pay fixed contributions to a number of mandatory schemes that help support the Danish labour market and ensure better conditions for employees.
The joint collection unit Samlet Betaling collects the contributions.
Samlet Betaling is responsible for collecting employer contributions, such as:
- Employers' Training Levy (AUB)
- The Workers' Compensation (AES)
- The Labour Market Fund for Posted Workers (AFU) - a fund
- Barsel.dk
- Holiday Account (administration fee)
- Financing Contribution (FIB)
- The Employees' Holiday Fund (administration fee)
- Apprenticeship-AUB
The company's contribution to Samlet Betaling is automatically calculated based on the ATP contributions paid for the employees. The ATP contribution is converted into the number of full-time employees and the employer will receive an invoice from Samlet Betaling every quarter.
See more about contributions, rates and payment deadlines for Samlet Betaling
11. What is the Store Bededag salary supplement?
Starting from 2024, the public holiday known as Store Bededag will no longer be considered an offial day off. This change was enacted through legislation in 2023. Consequently, it was decided that employees receiving "fixed monthly salary or fixed salary for another period" would receive financial compensation in the form of a salary supplement. This decision was made to ensure that these employees would not be working an extra day without a corresponding increase in their pay from 2024 onwards. The Store Bededag salary supplement applies to salaried and other fixed-pay employees but does not extend to hourly wage workers.
Hourly employees will naturally work an additional day but will be remunerated for this day at their regular hourly rate, making the special salary supplement irrelevant to this group.
Practical application of the Store Bededag salary supplement:
Compensation in the form of an annual Store Bededag supplement equivalent to 0.45% of their annual salary, equivalent to one day's work.
Options for both accumulation and payout exist, with considerations based on company agreements or local arrangements in the case of existing contracts.
Regarding the accumulation:
• When does it apply?
The supplement accrues from January 1, 2024.
• How is it accumulated?
The supplement accumulates monthly based on the employee's current salary.
• What is included in the salary when accruing the supplement?
Predictable" salary components, such as shi3 allowances, availability bonuses, company pension contributions, and other fixed allowances, are considered in the accrual.
Regarding the payout:
• When is the supplement paid out?
The company has the option to disburse the salary supplement:
• Twice annually with the May and August paychecks.
• On a monthly basis.
What happens in case of termination?
• The supplement is paid out proportionally, essentially "emptying the employee's account."
What should you, as a customer, do?
The default setup at Azets is configured for the supplement to accumulate regularly and be paid out with the May and August paychecks. If you prefer the supplement to be disbursed monthly, please contact Azets.