The labour market contribution is a tax, that has to paid on all labour income. This tax covers the state’s expenses in connection with the labour market. These consist of expenses for unemployment benefits, activation, vocational training, leave and more.
What is a paycheck?
A paycheck is a written overview over what you have earned in a given pay period. It is often monthly and issued by your employer. The purpose of a paycheck is to issue a written document that shows, that an employee has completed a certain kind of work and has been compensated according to their employment contract. It also shows, whether your employer has paid your supplementary labour market pension, labour market contribution and payroll tax from your wage.
A paycheck is legally required to be written and legible, but otherwise there are no specific formal prescriptions. This means, that it can be handwritten, digital or automatically issued through a payroll system.
All employees are entitled to receive a paycheck, regardless of the pay period.
What does a payroll contain?
Paychecks have no specific formal rules to follow. Hence, they can vary a lot from one workplace to another. It can be adjusted depending on the industry, but also depends on the employee’s position, seniority, conditions stated in the employee’s employment contract and the employer’s own preferences.
There are requirements regarding the content itself though. A paycheck always has to contain the following:
- Name, address and social security number
- Salary for the period
- The applicable pay period
- Name, address and social security- or VAT-ID number of employer/company
- The payroll tax deducted from the salary
- Labour market contribution
However, a paycheck often contains additional information regarding one’s salary or taxation. This can be the amount paid to the employee, hourly wage, overtime, supplementary labour market pension, deposit to the retirement benefit scheme, deductions, record of leave, tax exemption, earned holidays, various bonuses and other relevant financial aspects.
Where and when do you receive your paycheck?
You receive your paycheck at the end of your pay period. In most employments, this will typically be at the end of the month, often the last day of the month. A paycheck is often received digitally, in your e-box, via e-mail or through the company’s own payroll system. It’s important to be able to document your employment and salary, especially if you have to apply for indemnification with the Wages Guarantee Fund in the event of lost wages due to your employer going bankrupt.
If you have lost or thrown out a paycheck, you can request that your employer hand out your paychecks. They are legally required to store their employees’ payroll information for five years.
What your paycheck means
It is important for an employee to understand their paycheck. This is because there are often mistakes or discrepancies between the employment contract and the paid salary, pension, supplement or leave. Hence, you should also read your paycheck when receiving it.
Certain expressions and terms on a paycheck can be difficult to understand, however. The points of contention are often gross and net salary, labour market contribution, supplementary labour market pension and various bonuses.
Gross and net salary
Gross salary is your salary before subtracting taxes, various contributions and your deductions. It is the amount paid by your employer but not the amount paid to you. Net salary is the amount paid to you. That is to say, after your taxes and various contributions have been paid.
Labour market contribution
The labour market contribution is a tax of 8 % on all earnings.
Supplementary labour market pension
The supplementary labour market pension is an obligatory pension scheme for all wage earners in Denmark. It is a complementary pension on top of your state pension and other pension schemes. When self-employed, it is your decision whether you want to participate in it or not.
In certain companies, institutions and organizations employees have the opportunity to receive bonuses, an additional payment only applicable to you, your department or your position. It can be the result of working there for several years (seniority bonus), negotiating it for yourself (personal bonus), having a specific role in the workplace (position bonus) or having certain skills (qualification bonus) etc.