Read news from:
Austria
SHARE
COPY LINK
For members

JOBS

EXPLAINED: How to understand your Danish payslip

Danish payslips can have a lot of terms that are difficult to understand, technically as well as linguistically.

Published: 24 January 2020 15:37 CET
EXPLAINED: How to understand your Danish payslip
Photo: Bax Lindhardt/SP/Ritzau Scanpix

Our guide helps you to understand your payslip and the terminology used for salary paperwork.

Generally (but not always), if you are an employee at a Danish company, you will receive your wages once a month, usually on the last or first working day. You should also get a wage slip or payslip: lønseddel in Danish. The payslip can be considered a receipt showing how much you have been paid and what you receive net taxes.

Your name, address and personal registration or CPR number along with the period covered by the payslip should all be included on the paperwork. Your employer’s name, address company registration (CVR) number and the day’s date should also be stated.

You will see the following terms accompanied by a corresponding amount:

AM-bidrag

AM-bidrag or arbejdsmarkedsbidrag, literally ‘labour market contribution’ is a taxation amounting to 8 percent of your wages. It is paid directly to the Danish Tax Agency (SKAT) by your employer (for those who are not self-employed or freelance).

Your wage slip will tell you the amount to which this 8 percent taxation is applied: some parts of your gross income are not applicable to the AM-bidrag. More information on this below.


A detail from a Danish payslip.

A-skat

This is the primary form of income tax, paid directly to SKAT by your employer on your behalf.

Your payslip will also tell you how much of your income A-skat is applied to after supplements and deductions are applied to your gross wage. The amount you have already paid as AM-bidrag is deducted, for example as are pension contributions and other deductions to which you may be entitled.

ATP-bidrag

ATP stands for Arbejdsmarkedets Tillægspension, which translates to ’labour market pension contribution’. This is a pension into which you are legally obliged to pay and which supplements the state pension (folkepension).

Your employer pays two-thirds of the ATP contribution, you one third comes from your wage. This is the amount you will see on your payslip.

How much you actually pay depends on how you receive your wages, but if you are paid monthly it will be 94.65 kroner (for 2019). Your employer contributes 189.35 kroner, adding up to 284 kroner per month.

AM-Pension

Arbejdsmarkedspension and other pension contributions will be recorded on your payslip. You may see the terms AM-pension firma or AM-pension egen, depending on the type of pension you may pay into.

Read more about how pensions work in Denmark here.

Feriepenge

Feriepenge or ‘holiday money’ is a monthly contribution paid into a special fund, depending on how much you earn.

You can claim back the money once per year, provided you actually take holiday from work. You will be notified when the money can be paid out around May, and directed to the borger.dk website, from where you claim it back from national administrator Udbetaling Danmark.

There are two sub-types of feriepenge. These are ferie med løn, whereby you are paid while on holiday – in this case you are entitled to a supplement of about 1 percent to your wages. If you are not paid while on holiday, you will receive feriegodtgørelse as part of your wages and will see this on your payslip. This means that your employer is obliged by law to pay 12.5 percent of your wages in holiday money into the national pool for you to claim back each year, equivalent to five weeks’ holiday.

READ ALSO: What you need to know about vacation in Denmark – and how the rules are changing


A detail from a Danish payslip.

Whether or not you are entitled to paid holiday or the feriegodtgørelse wage supplement will likely depend on the contract or collective bargaining agreement you have, either as an individual or a member of a trade union.

READ ALSO: EXPLAINED: Should I sign up with a Danish union and get unemployment insurance?

Fradrag

Literally ‘(tax) deduction’, fradrag is the part of your income which can be exempted from taxation. It is calculated by SKAT based on information the tax agency has about you and on information provided by you to your employer. Your employer will be informed how much of your wage is encompassed by fradrag. Your net earnings will therefore reflect that you have paid A-skat on the part of your wage to which tax exemption or fradrag does not apply.

Fradrag can be given for a range of things, including membership fees for unemployment insurance (A-kasse) and trade unions and other expenses. You can check what your are entitled to here (in Danish).

READ ALSO: What Denmark's new budget proposal means for foreign residents

Two other important terms come into play here for people who have more than one employer: hovedkort (primary tax card) and bikort (secondary tax card). Your fradrag can only be applied to one employer at a time, so you should always ask your main employer to use your hovedkort for tax payments, and other employers to use the bikort. The bikort shows only your tax percentage and not the fradrag reductions to your tax payment.

Going further, because monthly wages tax returned via the bikort do not use fradrag, that does not mean you don’t get the tax deductions. These are calculated by SKAT after the event and you will be informed of them via two statements known as forskudsopgørelse and årsopgørelse.

These are both forms of yearly tax accounts. The forskudsopgørelse is issued in November and shows your expected income and tax for the coming year, and you can make changes to it to change how much tax you are paying if the information doesn’t match up with your actual earnings.

The årsopgørelse is an annual statement, released in March, and tells you your income for the past year and what you paid in tax.

If you have paid too much or too little in tax in relation to your earnings, this final statement will inform you of this and any subsequent tax rebates you may be due (you may also owe tax). The money is paid out or collected automatically.

Månedslønnet

If you are paid monthly, this word, which means ‘paid monthly’, is relevant and also means that your grundløn or basic wage will be marked on your payslip. This is the basic wage before any supplements are added and before tax and other payments are taken from your earnings. You will also see timetal or the number of hours you have worked – typically 160.33 hours for someone in full-time work, but dependent on your contract and other factors such as whether you work nights.

Further to this, normtid is your regular or expected working hours, and overtid denotes overtime.

Other terms:

Brutto: The Danish word for ‘gross’, i.e. the amount prior to calculation and deduction of tax.

Netto: Not a supermarket in this context, but the amount of wages you receive after tax.

Disponibel dato or disp. dato: This is the date your wages will be paid out into your bank account.

Enheder: Units, i.e. a month, an hour, a krone and so on.

Sats: the rate, for example an hourly wage or the percentage of wage you pay into a pension scheme.

Timeløn: your hourly pay rate. If applicable, you will see this together with the number of hours (enheder) you actually worked and the monthly pay it has resulted in.

Tillæg: Additions or supplements to your basic wage, such as through overtime, bonuses or seniority perks.

Sources: borger.dk (1), borger.dk (2), Serviceforbundet, SKAT (1), SKAT (2),

Are there any general or specific topics related to working, living, studying or anything else in Denmark that you'd like us to write about in detail? Let us know — we'd like to hear your suggestions.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

TAXES

Does Denmark really have the highest tax in the world?

Denmark is known for having having high income tax but is it really the highest tax in the world?

Published: 23 February 2023 13:39 CET
Updated: 25 February 2023 09:27 CET
Does Denmark really have the highest tax in the world?

It is well known that Denmark is a country of high taxes but during the election last year, several politicians complained that Denmark’s tax was the highest in the world.

“We are the world’s most heavily taxed country”, said Liberal’s (Venstre) party leader, Jakob Ellemann-Jensen, during a debate between prime ministerial candidates on DR in October 2022.

Then-leader of the Nye Borgerlige party leader, Pernille Vermund, made a similar point on Twitter, writing “we live in a country with the world’s highest tax burden”, in a post about failures in nursing homes.

More recently, the libertarian opposition party Liberal Alliance has also pushed the line that taxpayers are subject to a higher rate in Denmark than in any other country.

Politicians and parties making this assertion typically refer to the fact that the OECD (Organisation for Economic Co-operation and Development) has listed Denmark as the highest tax country for several years.

The most recent OECD report listed Denmark as top, followed by France, Belgium, Italy and Sweden.

But some economists disagree with the way tax is assessed in these world rankings, which makes Denmark’s tax system appear more extreme than it is.

How much do people in Denmark pay in tax?

A salary in Denmark will include the following deductions: Labour market tax (AM-bidrag 8%), State tax (bundskat 12%), Municipality tax (kommuneskat 25%), State pension contribution (ATP-bidrag 94.65 kroner).

If you have an income of 45,500 kroner per month (which is the average salary in Denmark, according to Statistics Denmark), that means around 45.1 percent will be taxed, and 94.65 will go towards the state pension, giving you a total of 24,884.85 kroner per month (3,340 euros per month) after deductions. 

Various tax deductions can result in this amount being reduced.

READ MORE: What salary can you expect to earn in Denmark?

Why is Denmark so high in the world rankings?

Analysis from Denmark’s economic-political thinktank Economic Council of the Labour Movement (Arbejderbevægelsens Erhvervsråd, AE) shows that some key factors are missing in the OECD calculations of countries’ tax burdens.

“The tax burden is the amount of personal income a typical person is meant to hand over to a government and the total income in society administered by the government,” AE’s chief analyst Jon Nielsen told The Local.

“The OECD calculates the tax-to-GDP ratio but that is not a good reflection of the tax burden for two main reasons.

“Firstly, the calculations include taxes on social benefits. Tax collected on social benefits is not income that shifts from the hands of citizens to government, it is income shifted from one area of government to another.

“In 1994, public pensions became taxed, so the tax-to-GDP ratio rose without the government getting higher revenue, or citizens getting lower disposable income, because benefits were set up to compensate people. So if you compare countries where social benefits are fully or partly taxed, we need a correction to make the comparison accurate,” Nielsen said.

This situation was noted by Statistics Denmark in its report ‘Taxes and Charges’ 2022.

“The second correction needed is that we should be using gross domestic income (GDI) to compare countries and not gross domestic product (GDP). GDP measures how much value is created within Denmark’s borders but a lot of Danish income now comes from abroad,” Nielsen told The Local.

“During the last thirty years, globalisation has set in and more income has come from assets abroad, for example through pension funds. If you include that income, the Danish tax burden is reduced,” Nielsen said.

If you take those factors into account, Denmark drops to fifth place among the OECD countries, an AE analysis concluded.

“The myth that we the have the highest taxes in the world makes people think of Denmark as somewhere exclusively highly taxed and an international exception, but we are not. We are in the higher ranks of course but there is nothing special about Denmark and high taxes,” Nielsen told The Local.

Is Denmark’s tax too high?

Politicians who favour lower taxes in Denmark might argue that the analysis by AE doesn’t change anything. 

“I have no doubt that there is more than one way to calculate the tax burden. But even if you use AE’s figures, it does not change the fact that the tax burden is very high in Denmark. Fifth place is also high,” the Conservative mayor of Lyngby-Taarbæk municipality, Sofia Osmani, told newspaper Politiken in October 2022.

AE’s chief analyst Nielsen argued that Denmark’s tax system is what provides an equal society.

“You can’t say that countries with high taxes are more expensive to live in. The fact that healthcare, childcare and education are financed by the tax system, means that the personal amount you have to spend on those items is less than in other countries,” Nielsen said to The Local.

“Denmark’s taxes are one of the reasons we have such an equal and highly productive society, where the general education level is high, the infrastructure works well and spending on research and development is high. The fact that we have high taxes is a key reason why our welfare system produces these equal and fair opportunities for all,” Nielsen said.

READ ALSO: How will new Danish government change income tax?

SHOW COMMENTS