The Danish Parliamentary Election – Risks and Opportunities for Businesses

On March 24, 2026, elections were held for the Danish Parliament (Folketinget). The election resulted in a highly unclear parliamentary situation, with no majority for either the right or the left. Twelve parties (plus four parties from Greenland and the Faroe Islands, each with one representative) were elected to Parliament. Never have so many parties been represented in the Folketing.

The election was a defeat for the current government. The Prime Minister Mette Frederiksen’s party, the Social Democrats, became the largest party with just under 22 percent of the vote. This marks their worst election result in more than 100 years. Venstre, a liberal party, which was also part of the previous government, received 10 percent of the vote—its worst result ever, dating back to 1870.

The former Prime Minister and Minister of Foreign Affairs, Lars Løkke Rasmussen, currently holds the decisive mandates, but it is uncertain what the next government will look like, and therefore also uncertain what program the government will pursue. The following provides an overview of the labor‑market‑related proposals that were debated during the election campaign, which may become reality depending on the outcome of the government formation.

Wealth Tax

The Social Democrats have proposed introducing a wealth tax of 0.5 percent on all wealth above DKK 25 million. The value of both real and financial assets would be included in the tax base. However, DKK 10 million per person would be exempt if it relates to the value of a primary residence.

A wealth tax is expected to pull money out of businesses—money that could otherwise be used to grow the companies. This could be a significant obstacle, especially for start‑ups. During the campaign, the Social Democrats attempted to communicate that entrepreneurs would be exempt from the proposal, but as currently formulated, this is not the case.

Several business leaders and company owners have stated that they will leave Denmark if the tax is introduced. Should that happen, the revenue from the tax would be lower than expected.

The chairman of the trade union “Dansk Metal – Danish Metal Workers” has also warned against the tax.

International Employees

The Social Democrats want to make several of the business schemes that allow non‑EU citizens to come to Denmark for work country‑specific. This means that only individuals from selected non‑EU countries would be able to come to Denmark to work. In addition, the party wants to require companies to have a collective agreement to recruit employees from outside the EU.

The Social Democrats also want companies that recruit international employees to take responsibility for ensuring that these employees learn Danish.

A consequence of limiting recruitment to specific countries would likely make it more difficult for employers to find the necessary employees. A new scheme has been politically agreed upon, based on 16 specific countries. These countries, together with the EU, cover more than half of the world’s population and therefore still provide good opportunities for recruiting international employees.

A collective‑agreement requirement would exclude all companies without traditional collective agreements. This would make it impossible for these companies to recruit employees from outside the EU.

The requirement that companies must ensure international employees receive Danish language instruction risks reducing labor supply and increasing costs for businesses.

In contrast to the Social Democrats, the Social Liberal Party (Radikale Venstre) wants to improve opportunities for international recruitment. They propose introducing a scheme similar to the certification scheme agreed by the previous government, but without country restrictions, allowing companies to recruit from all countries if the job is covered by a collective agreement.

The proposal would give companies better opportunities to recruit the employees they need. However, it is unlikely that Radikale Venstre will succeed in pushing the proposal through.

Right to Part‑Time Work

The Social Democrats have proposed that families with children should have the right to reduce their working hours and receive state compensation for the reduced hours.

The proposal leaves many uncertainties. It is unclear how many hours per week an employee could reduce their working time, and how long the scheme could be used. It is also unclear whether the right to a public benefit would also give employees a right vis‑à‑vis the employer to work part‑time and later return to full‑time work.

If extensive rights are granted to employees in relation to employers, implementing the proposal would be a major challenge for businesses. Companies that hire a full‑time employee logically need the employee full‑time. A part‑time employee may struggle to fulfil the specific job requirements, leaving the company with an employee who does not fit into the work schedule. Would the employee in such a situation be protected from dismissal?

If the proposal entails rights affecting companies, it may lead businesses to hesitate in hiring employees who are expected to make use of the right to part‑time work.

Overall, the proposal would reduce labor supply when the state begins paying employees not to work.

Earlier Retirement

Retirement has been widely discussed during the election campaign, and the Social Democrats in particular have emphasized easing retirement conditions.

Currently, the state pension age is linked to life expectancy in Denmark. When the remaining life expectancy for 60‑year‑olds increases by one year, the pension age also increases by one year.

The Social Democrats want to change this link so that from 2045 the pension age increases more slowly. They also want to improve opportunities for early retirement for people who have been in the labor market for many years.

The proposal could reduce labor supply and thereby weaken the foundation for running a business. It would also significantly weaken public finances in the long term and to a lesser extent in the short term.

Venstre has proposed improving opportunities for early retirement for people who can no longer perform their current job. Today, this is possible six years before the state pension age, and the proposal would extend this to nine years before the pension age.

The proposal would pull more work‑capable individuals out of the labor market, thereby weakening the foundation for running a business in a labor market already characterized by labor shortages.

Radikale Venstre has proposed reducing the increase in the state pension age so that from 2045 it increases by only 0.8 years for every one‑year increase in life expectancy. They also want to allow people to receive their state pension three years before the pension age, in exchange for a permanently lower pension.

Additionally, Radikale Venstre wants to abolish the early retirement and early pension schemes.

The proposal would reduce labor supply in some areas but could increase it in others. Overall, the proposal would have a limited effect on the foundation for running a business.

Lower Corporate Tax

Venstre wants to reduce corporate tax from 22 to 20 percent and spend an additional DKK 1 billion on further reducing corporate tax for small and medium‑sized enterprises. The Liberal Alliance wants to reduce corporate tax to 18 percent.

These proposals would improve the conditions for running a business in Denmark, as a larger share of company profits would remain within the business, strengthening the basis for development.

Reducing Administrative Burdens for Businesses

Several parties want to reduce administrative burdens for businesses. A concrete target of a 25 percent reduction by 2030 has been proposed. The proposal parallels the EU Commission’s goal of easing burdens on businesses.

Fewer administrative burdens are equivalent to a tax cut, as companies would need to spend fewer resources on activities that do not create value.

The proposal would also increase the effective labor supply, as more employees would be freed from the public sector and could be recruited by private companies.

Making Investment in Shares More Attractive

Venstre and the Liberal Alliance have proposed reducing the tax on returns from shares to make it more attractive to provide capital to the business sector.

Lower taxation of share returns would increase businesses’ access to risk‑willing capital and therefore be positive for companies.

Conclusion 

The most crucial thing for businesses is not what was discussed during the election campaign, but what concrete plans a future government will have. More than a month has passed since the parliamentary election was held, and it is still unclear how a future government will be formed and thus what specific program it will pursue.

*Erik Simonsen is a Senior Labor Market Advisor with Littler Denmark