Have you ever moved to a new country for work, received your first payslip and realized that you do not understand what half of it means?

Perhaps the amount transferred to your bank account was lower than expected. You may also have noticed unfamiliar terms, deductions or a tax percentage that looks very different from what you were used to in your home country.

You are not the only one.

Working in a new country also means becoming familiar with a new salary and taxation system. Unfortunately, your Danish payslip does not usually arrive with a guide explaining every calculation.

This article introduces some of the most common terms you may see on a Danish payslip.

Payslips may look different

The layout and terminology used on Danish payslips may vary depending on the employer, payroll system and type of employment.

However, most payslips include some or all of the following:

• Gross salary
• Working hours and hourly rate, where applicable
• Pension contributions
• ATP contributions
• Labour market contribution
• Tax allowance and withholding rate
• A-tax
• Holiday allowance or holiday balance
• The final amount transferred to your bank account

You may also see accumulated figures showing how much salary, tax, pension and holiday allowance have been registered during the year.

Gross salary – bruttoløn

Your gross salary is your salary before tax, pension and other deductions.

For salaried employees, this is normally the monthly salary stated in the employment contract. For hourly paid employees, the payslip may show the number of hours worked and the applicable hourly rate.

The gross amount may also include overtime, bonuses, commission or other allowances.

Pension contributions – pensionsbidrag

If your employment includes an occupational pension, your payslip will normally show the employee and employer contributions.

Your own contribution is deducted from your salary, while the employer contribution is transferred directly to your pension scheme.

The employer contribution is part of your overall compensation package, but it is not transferred to your bank account as part of your net salary.

ATP

ATP is the Danish Labour Market Supplementary Pension.

Many employees working in Denmark are covered by ATP. The employee’s share is deducted from the salary, while the employer pays the remaining share.

The contribution may depend on factors such as your working hours and employment conditions.

Labour market contribution – AM-bidrag

The labour market contribution, normally written as AM-bidrag, is an 8% contribution deducted from salary income.

It is calculated before ordinary income tax. This means your full gross salary is not simply multiplied by your tax percentage.

Pension and ATP contributions may first be deducted, followed by AM-bidrag. A-tax is then calculated based on the remaining taxable income and your tax allowance.

Tax allowance – fradrag

Your tax allowance is the amount deducted from your taxable income before A-tax is calculated.

The allowance is based on the information registered in your preliminary income assessment, known as your forskudsopgørelse.

It may be affected by factors such as:

• Your expected annual income
• Your personal allowance
• Transport deductions
• Interest expenses
• Pension contributions

This is why two employees earning the same gross salary may receive different net salaries.

Withholding rate – trækprocent

The withholding rate is the percentage used to calculate your A-tax.

It is not applied directly to your full gross salary. Pension contributions, ATP, AM-bidrag and your tax allowance may all affect the amount on which A-tax is calculated.

A-tax – A-skat

A-tax is the income tax your employer withholds and pays to the Danish Tax Agency on your behalf.

The amount is calculated based on your income, tax allowance, withholding rate and tax card.

Primary and secondary tax cards

Denmark uses digital tax cards.

Your primary tax card, called hovedkort, includes both your withholding rate and tax allowance. It should normally be used by the employer or provider from whom you receive your main income.

The secondary tax card, called bikort, normally only includes the withholding rate and is used for additional jobs or sources of income.

Only one employer or provider should use your primary tax card. Otherwise, your tax allowance may be used more than once, and you may pay too little tax during the year.

What happens if you do not have a tax card?

International employees need a Danish tax number and a digital tax card.

If your employer cannot access a valid tax card, a high default tax rate will be used. The employer may be required to withhold 8% AM-bidrag and 55% A-tax.

This can make your first salary significantly lower than expected.

Once your tax card has been created, your employer can normally retrieve it electronically.

Holiday allowance – feriepenge

Your payslip may show holiday allowance, salary during holiday or an accumulated holiday balance.

Employees who do not receive their usual salary while taking holiday generally accrue holiday allowance corresponding to 12.5% of their holiday-entitled salary.

Employees who are entitled to paid holiday normally receive their usual salary while taking holiday, together with a holiday supplement of at least 1%.

You may also see:

• Accrued holiday days
• Used holiday days
• Remaining holiday balance
• Holiday supplements
• Salary deductions related to unpaid holiday

If you take holiday without having accrued enough paid holiday, you may see a salary deduction. In some cases, you and your employer may agree that you can take paid holiday in advance.

Taxable employee benefits

Some employer-provided benefits may be taxable, such as a company car or a telephone available for private use.

A taxable benefit may increase the amount on which your tax is calculated, even though you do not receive the value of the benefit as cash in your bank account.

This is one reason why the taxable salary shown on your payslip may be higher than the amount you expected.

Net salary – nettoløn or til udbetaling

Your net salary is the final amount transferred to your bank account.

A simplified calculation may look like this:

Gross salary
– Employee pension contribution
– ATP
– Labour market contribution
– A-tax
– Other deductions

• Reimbursements
  = Amount paid to your bank account

The calculation may be more complicated if your payslip includes bonuses, taxable benefits, holiday deductions, expenses or corrections from a previous salary period.

Why is my salary different this month?

Your net salary may change because of:

• Overtime, bonuses or variable working hours
• Holiday or unpaid leave
• Changes to your pension or tax card
• Taxable employee benefits
• Expense reimbursements
• Corrections from a previous payroll period

A change does not necessarily mean that an error has been made, but it is always worth checking.

What should you check?

When you receive your payslip, check that:

• Your salary and working hours match your contract
• Overtime and allowances are included
• The correct tax card has been used
• Pension contributions are correct
• Holiday days or holiday allowance are registered correctly
• Expense reimbursements are included
• The amount matches the payment received in your bank account

If something looks incorrect, contact your employer or payroll department and ask how the amount was calculated.

For questions about your tax card, deductions or withholding rate, you may need to contact the Danish Tax Agency.

Understanding your payslip gets easier

Your first Danish payslip may look complicated, but once you recognize the main terms, it becomes much easier to understand how your salary has been calculated.

It also helps you identify missing payments, incorrect deductions or changes to your tax information.

At Worksphere, we support international employees and companies with employment, payroll and mobility matters in Denmark.

This article provides general information and should not be considered individual tax or legal advice.