Career & Legal Advice

Are you a fee-based employee?

You’ve started your own business, and you’re therefore not an employee at an other business. What do you do? And should you send fee calculations to your customers or should you send invoices? This can often be hard to navigate.

When are you a fee-based employee?

You are considered a fee-based employee when you do work in your own time for which you are compensated with fees or one-time payments.

A fee-based employee

In general, you are only a fee-based employee if you haven’t got a central business registration number (CVR no.) yet and you’re not running what is called a commercial business.

Therefore, if you submit a fee calculation, it will usually be for work that you do in your spare time, or work you do as a freelancer next to your employee job.

As soon as you get a central business registration number (CVR no.) and you’re running a commercial business with profits or the prospect of profits, you are no longer a fee-based employee.

Classification at SKAT

The Danish Tax Authority, SKAT will consider you as a fee-based employee if you do work in your spare time for which you are paid a fee or one-off-consideration, even though you are an employee or you are self-employed as your main occupation.

As a general rule, you don’t have to register for VAT as a fee-based employee. However, if your turnover exceeds DKK 50,000 before VAT, you should contact SKAT.

Fee-based employees who are self-employed

However, there are some groups who receive remuneration, often also called fees, and who are considered self-employed businesses anyway. For example, consulting engineers.

You run your own business as a self-employed person

If you are not a fee-based employee and instead you run a commercial business, you will send invoices to your customers instead. You need a central business registration number (CVR no.) to send invoices. SKAT considers a business to be commercial when it is operated at its own account and risk in order to earn a profit.

This does not mean that your business will only be regarded as commercial if you have a profit, but it should be organised and run in such a way that it is expected to be profitable.

Contact SKAT (the Danish tax authorities) if you have any queries regarding tax. 

Set the price of your fees

As a self-employed person or freelancer, you set the price for your own work, and you therefore decide how much you should be paid. Read along here and learn more about what you have to take per hour and how much you can pay out of salary to yourself.

There is no fixed hourly rate or fee for independent consultants. It is a matter of negotiation between you and the customer.An indicative starting point for your fee can, however, be 2.5 times the average hourly wage, which the privately employed engineer, cand.scient. or the like within the same cohort and field of study would be able to earn.If you are VAT-registered and self-employed, you must remember that VAT must be added, and this must be mentioned in the contract.

Explain your hourly rate

When you tell non-self-employed people what you charge per hour as a self-employed person, you may have experienced that they roll their eyes. But they probably don't know that as a self-employed person you yourself pay for everything that an employee takes for granted, and which you must therefore include in your calculation of your fee:

  • Holidays and Days off
  • Illness
  • Continuing education
  • Pension
  • Insurances
  • Office maintenance, cleaning and rent etc

In addition, you must take into account expenses for travel activities and the time associated with this, either in your fee or in your consulting agreement with the client.

Pay yourself a salary as a self-employed person

When you are an employee, it is your employer who pays you a salary, and that salary is paid as A income. This means that the employer has already deducted various taxes. You can therefore use your paid salary as you wish.

As a self-employed person, however, you are your own employer, and therefore you are also responsible for paying the tax. If you have a sole proprietorship, it is typically the profit in the business that is your 'salary'.

You typically receive fees and payments from your customers as B income, and you must therefore ensure that you pay tax and VAT on the amount yourself. When everything in your business is paid for, you can pay out 'salary' or the profit to yourself.

Contact SKAT if you have questions regarding tax - go to skat.dk.

Savings in the company

It is very different how you, as a self-employed person in a sole proprietorship, pay yourself a salary.

Some choose to pay out all profits every month, so the income fluctuates, and others pay out a fixed salary - that is, a fixed amount - every month. The amount is typically an average of what you earn throughout the year.

Online banking insurance can be a good idea

If you choose to save in your business and only pay out a bit of the profit to yourself, be aware that the money in your business account is not covered by your private insurance.

It may therefore be an idea to consider taking out online banking insurance .

Legal counselling at IDA

IDA provides legal advice for the self-employed and freelancers, and for those who are employees and self-employed at the same time. Get legal counselling.