With a highly skilled workforce that is growing, Denmark has a pool of highly skilled professionals. If your company is considering hiring an independent contractor in Denmark, follow these best practices to keep the process smooth and successful.
Hiring independent contractors in Denmark
Before you start working with an independent contractor in Denmark, you should understand the legal requirements and how to manage this employment relationship.
Independent contractors vs. full-time employees
The distinguishing factor between independent contractors and employees is that contractors are their own business. They provide services and are legally distinct from your company. Since contractors are legally self-employed, you typically do not need to provide benefits or withhold taxes from them.
Penalties for misclassification
Under Danish law, you must correctly classify workers to prevent liability in court. All employees are protected by certain rights to benefits and compensations, so if your company misclassifies an employee as a contractor, you could face a lawsuit, penalties, and fines for back payments covering all the individual’s missed benefits compensation.
How to hire independent contractors in Denmark
The hiring process for independent contractors is different compared to a full-time employee. The contract hiring process should involve three key steps.
1. Carefully conduct interviews
When hiring contractors in Denmark, it’s important to handle the process as a business transaction. During the interview, focus on discussing past client projects, industry certifications, and other key qualifications with candidates. This contrasts with a full-time employee interview where you might focus on questions related to company culture.
Look for a contractor who can best address the specialized type of work they would be completing for your company.
2. Create a service agreement
Following national labor laws is key to facilitating a smooth hiring process. To help establish your legal business relationship, write a formal agreement that both parties sign. Include the following terms in the agreement to set appropriate expectations for the role:
- Pay rates and arrangements
- Services the contractor will provide
- Length of the contract
- Termination conditions
3. Introduce necessities
When a contractor begins working with your company, they may require some introduction to your organization in order to be successful. Consider providing brief training on your company’s different work processes, equipment, and software if applicable.
How to pay independent contractors in Denmark
Contractors are not on your employee payroll, so you must compensate them through a separate system. You may need to use an international money transfer service to pay contractors securely.
While a contractor is usually responsible for paying their own social security taxes and income taxes, you may have some select responsibilities. However, certain qualifying contractors are eligible to receive paid vacation benefits and other provisions. If you’re unsure of your contractor’s status, you should consult national labor laws.
Terminating independent contractors
Contractors’ duration of service is usually straightforward, ending on a set date or running on a project-by-project basis. The relevant legal regulations allow you to set your terms of service and extend them. At the same time, you should detail your termination and extension processes in writing in case you need to end the contract early or extend it. Include these conditions in your initial agreement to ensure you and the independent contractor both concede to them.
Turn to Globalization Partners when hiring independent contractors in Denmark
As an extension of Globalization Partners’ Global Employment Platform™, G-P Contractor allows companies to hire anyone, anywhere, for both short- and long-term projects. Whether you’re hiring employees or contractors, we streamline the process with a single solution for your global workforce. Contact us to learn more.
THIS INFORMATION IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). Globalization Partners does not provide legal or tax advice and the information is not tailored to the specific situations of your company or your workforce. Globalization Partners makes no representations or warranties concerning the accuracy, completeness or timeliness of this information. Globalization Partners shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information.