the foundation and dynamics of the danish labour market

The foundation and dynamics of the Danish labour market

• There is a long-held tradition for or-ganising employees and employers in trade unions and employers’ associa-tions.

• There are no extension mechanisms linked to collective agreements on the Danish labour market. Instead there is a strong sense of ownership and joint responsibility based on mutual recognition.

• There is no statutory definition of min-imum wage in Denmark, since wages and working conditions primarily are defined by collective agreements concluded between the social part-ners at branch or company level.

• Legislation covers specific topics such as health and safety, holiday entitlements, sickness benefits, equal treatment, equal pay or maternity/ paternity leave.

• The Salaried Employees Act defines issues like probation and notice peri-od for termination.

• The flexible agreements conclud-ed between the social partners are supported by a welfare system, which is financed by taxation and ensures a universal social coverage. For ex-ample, a well-functioning guarantee for child care or active labour market policies support a high level of em-ployment.

Figure 1

T H E D Y N A M I C S

O F T H E D A N I S H

L A B O U R M A R K E T

T R A D E U N I O N S E M P L O Y E R S ’ A S S O C I AT I O N S

T H E D A N I S H G O V E R N M E N T

KEY FACTS

The Danish labour market is unique in the way it is regulated, since there is no compre-hensive governmental interference or legislation regarding wages and working conditions. There is a clear division of responsibility between the government and the social partners in relation to labour market policies.

Legislative acts on labour issues primarily apply to employees not covered by collective agreements. The same principle applies to EU directives. If the collective agreement en-sures the employee the rights of an EU directive, the employee will not be covered by the Danish act that implements the directive.

The regulation of working conditions is primarily in the hands of the social partners, contributing to the creation of a dynamic labour market and at the same time strengthening the influence and relevance of the social partners. This also entails that the social partners can conclude bipartite and tripartite agreements in order to adjust to new developments in the labour market.

SECURITY STAB IL ITY TRUST EFF IC IENCY FLEX IB IL ITY

Figure 2

L E V E L O F W O R K E R S

A N D E M P L O Y E E S B E I N G

O R G A N I S E D I N T R A D E

U N I O N S

REMARKS Level of being organised in trade unions is in some countries calculated by the annual average from 2000-2015.

SOURCE: Benchmarking Working Europe 2017, ETUI.

Pct.

100

90

80

70

60

50

40

30

20

10

0 Estonia

France

Lithuania

Hungary

Latvia

Poland

Slovakia

Czech R

epup

lic

Bulgaria

Sp

ain

Germ

any

Netherland

es

Portugal

Greece

Slovenia

United

Kingd

om

Austria

Rum

ania

Croatia

Ireland

Luxemb

ourg

Italy

Cyp

rus

Belgium

Malta

Denm

ark

Sw

eden

Finland

The fundamental dynamics of the Danish labour market model are based on:

2

On 5 September 1899

the so-called September

Settlement ended a long

period of strikes and

lock-outs. The September

Settlement is regarded

as the constitution of the

Danish labour market. In

the settlement the two

sides recognize the right

to take industrial action

and the employers’ right

to manage the work force.

The high level of organisation and unionisation has created a strong sense of ownership and the social partners play a central role in society. The system is based on a voluntary approach.

The process of collective bargaining in the private sector is conducted autonomously according to the terms set by the two sides of industry in The General Agreement. It lays the framework for collective agreements. It was concluded between the two main sides of industry:

• The Danish Confederation of Trade Unions (LO) • The Confederation of Danish Employers (DA)• Similar systems exist in the public sector

The Cooperation Agreement between DA and LO lays down the conditions for discus-sions on all relevant issues between the management and employees at the workplace. It reflects the general respect and trust between the two sides of industry. It also reflects the high degree of responsibility placed on the social partners to try to find constructive solu-tions to problems which might otherwise turn into labour disputes.

The General Agreement does not cover professional and managerial staff graduated from universities.

3

There is a strong tradition for being organised in employers’ associations and trade

unions and industrial relations are regulated mostly by the autonomy of the social

partners. The level in Denmark is approximately 70 pct., which is one of the highest

rankings in Europe, cf. figure 2.

The organisation rate varies according to sector and profession.

Figure 3

T H E D A N I S H L A B O U R

M A R K E T M O D E L

T R A D E

U N I O N S

E M P L O Y E E S

E M P L O Y E R S ’

A S S O C I AT I O N S

T H E G E N E R A L

A G R E E M E N T

ORGANISAT IONAL

LEVEL

C O L L E C T I V E

A G R E E M E N T S

BRANCH LEVEL

L O C A L

A G R E E M E N T S

COMPANY

LEVEL

C O M PA N I E S

A characteristic of the Danish system is the general peace obligation. This means that during the periods between the renewal of the collective agreements, it is in effect, illegal for the social partners to take industrial action. However, they retain the right to take indus-trial action if they cannot agree on renewing the collective agreements.

C O L L E C T I V E A G R E E M E N T S

The relationships between employers and employees are regulated primarily through

the collective agreements. Examples of issues defined in the collective agreements are:

• Wages, wage-setting and processes

• Pay during maternity/paternity and parental leave

• Occupational pension

• Working hours and flexible workdays

• Access to lifelong learning and ongoing skills development

• Various pay arrangements for employees during periods of illness and paid holiday

• The central agreements for the private and public sector set the framework

for negotiations and local agreements in a specific sector or company.

• During the past 20 years, the social partners in the private sector have decen-

tralised bargaining competences with the aim to increase flexibility – espe-

cially with regard to wage-setting and working hours at company level. Many

agreements are now negotiated and adapted by the parties at company level.

• Almost eight out of ten employees in the Danish labour market are covered by

a collective agreement.

• Employees in a company will often be covered by one or more collective

agreements, based on their occupation and line of work, and often the

non-organised co-workers will also be covered by the agreement.

• EU legislation such as directives, and agreements concluded by the social

partners, will be discussed in a tripartite committee called the Implementation

Council. Subsequently, the implementation of an EU directive can either be

by way of a collective agreement, by way of national legislation or by way of

dual implementation, which combine the collective agreement with national

legislation, thereby also ensuring coverage for those employees, who work in

areas and companies not covered by the collective agreement.

4

T H E D A N I S H M O D E L O F C O L L E C T I V E B A R G A I N I N G

Tripartite negotiations and agreements can function as a political tool to handle issues that have an influence on the Danish labour market and society in general.

The Danish government will intervene as little as possible in labour market issues. When it comes to dealing with concrete challenges on the labour market, which can have an impact on society as such, the Danish government will invite the social partners to tripartite discus-sions.

The discussions of how to handle a societal issue will most often lead to tripartite negoti-ations followed by an agreement concluded between the social partners and the Danish government.

Two different examples show how social partners are instrumental in providing solutions for the Danish society:

• In December 1987, the social partners and the government concluded a joint state-ment aiming at strengthening competiveness, moderating pay increases and creating more jobs. The joint statement laid the foundation of mandatory occupational pension schemes as part of the collective agreements.

• In March 2016, the social partners and the government concluded a tripartite agree-ment on the integration of refugees on the labour market. The agreement aims to prepare refugees to enter the labour market to a much higher extent than previously and much faster. A key part of the agreement is a new scheme, called IGU (IGU is the integrative training program), which offers refugees a two-year job including 20 weeks of education and training at apprentice salary levels.

5

The General Agreement is negotiated by and covers the members of LO and DA.

DA The Confederation of Danish Employers is the main umbrella organisation for

private employers’ associations in Denmark. Their companies employ 30 pct.

of the total workforce (and 50 pct. of the private sector employees).

In Denmark, employees organise according to educational background.

LO The Danish Confederation of Trade Unions is the largest Danish confeder-

ation representing both blue-collar workers and salaried employees and

covering 44 pct. of all organised employees.

FTF The Confederation of Professionals in Denmark is the second largest con-

federation representing white collar employees mainly from the public sector,

and covering 19 pct. of all organised employees.

AC The Confederation of Professional Associations in Denmark is the third

largest confederation - representing professionals and employees with a

university degree and covering 12 pct. of all organised employees.

This information paper is

accompanied by fact sheets,

which supply elaborative

information on the fundamental

features of the Danish labour

market.

Vester Voldgade 113

DK-1790 Copenhagen V

E:mail: [email protected]

www.da.dk

Islands Brygge 32D

DK-2300 Copenhagen S


www.lo.dk

Nørre Voldgade 29

DK-1358 Copenhagen K


www.ac.dk

Niels Hemmingsensgade 12

DK-1153 Copenhagen K


www.ftf.dk

Figure 1

F L E X I C U R I T Y

I N D E N M A R K

1st element: Flexible labour market regulation characterised by the absence of restrictive regulation when hiring and firing employees enabling a high level of job openings and job mobility.

2nd element: Income support during unemployment.

3rd element: An active labour market policy focused on job mobility, training, re-skilling and security in employment, supporting individuals in finding a new job.

Flexicurity in Denmark

T H E F O U N D A T I O N A N D D Y N A M I C S O F T H E D A N I S H L A B O U R M A R K E T

• Danish labour market regulation is characterised by the exclusive role of the social partners with a strong built-in sense of ownership and joint responsibility based on mutual recog-nition.

• Wages and working conditions are primarily regulated through collective

agreements concluded by the social partners at branch or company level.

• Legislation covers specific topics such as health and safety, holiday entitlements, sickness benefits, equal treatment, equal pay or maternity/pa-ternity leave.

The Danish labour market is a hybrid of different elements combining on the one hand a well-developed social protection system and an active labour-market policy with flexible regulation based on agreements between the social partners, cf. figure 1.

The social partners aim for a flexible labour market, where the individual is secured through employment.

KEY FACTS


F L E X I B L E L A B O U R

M A R K E T

I N C O M E S U P P O RT

D U R I N G U N E M P L O Y M E N TA C T I V E L A B O U R

M A R K E T P O L I C Y

The Danish labour market is defined by five dynamics:

The Danish labour market is in general open and inclusive. This is due to active labour market policies and a focus on employment security rather than a narrow focus on job security. This makes companies less hesitant to recruit new employees and allow them to adjust to changes in demand, as it is relatively easy to dismiss employees due to e.g. flexible procedures regarding notification among other things. At the same time, it makes workers more open to mobility and jobchanges.

Among the effects of the flexible labour market regulation are a high job mobility and a high number of newly employed, cf. figure 2.

A high level of flexibility is good for the economy and creates more job-openings. The high job turnover yields many job-openings, making it easier for new entrants to the labour mar-ket, unemployed or those already in work to find a new job.

Denmark has almost 800,000 job-openings annually. Results from the first quarter of 2017, show that 7,3 pct. of the Danish population, aged 15-64, are newly employed. This is more than twice the European average.

2

Figure 2

S H A R E O F N E W LY

E M P L O Y E D , A G E D

1 5 - 6 4 , T H AT H A S G O T

A N E W J O B W I T H I N T H E

PA S T T H R E E M O N T H S

REMARKS: First quarter 2017 results. Newly appointed are defined by persons who have been in their current job for less than three months. The newly appointed come from another job, from unemployment or from being outside of the labour market on other terms.

SOURCE: Eurostats Labour Force Survey and further calculations by DA

–– EU28

Pct.

8

7

6

5

4

3

2

1

0 Rom

ania

Greece

Bulgaria

Chech R

epub

lic

Poland

Ireland

Hungary

Italy

Belgium

Malta

Germ

any

United

Kingd

om

Luxemb

ourg

Latvia

Croatia

Slovakia

France

Austria

Slovenia

Netherland

s

Lithuania

Cyp

rus

Portugal

Estonia

Sp

ain

Finland

Sw

eden

Denm

ark

Another effect of the flexible and open labour market regulation is the low level of long-term unemployment in Denmark, cf. figure 3. Denmark has one of the lowest shares of long-term unemployed in the EU. This indicates that high mobility lead to shorter spells of unemployment.

A focus on lifelong learning and training for employed persons and strong effort to pro-vide employment security characterises the Danish labour market as open, mobile and dynamic. A system of adult education and continuing training funded by the public and businesses is in place for unskilled workers, employees and unemployed persons with a vocational training background.

3

Figure 3

S H A R E O F L O N G -

T E R M U N E M P L O Y M E N T

I N E U R O P E

REMARKS: Annual average results 2016 from total population. Newly appointed are defined by persons who have been in their current job for less than three months. The newly appointed come from another job, from unemployment or from being outside of the labour market on other terms.

SOURCE: Eurostats Labour Force Survey and further calculations by DA

Pct.

20

18

16

14

12

10

8

6

4

2

0 Greece

Sp

ain

Italy

Croatia

Portugal

Slovakia

Cyp

rus

Bulgaria

Slovenia

Ireland

Latvia

Belgium

EU

28

Rom

ania

Lithania

Netherland

s

Hungary

Finland

Poland

Luxemb

ourg

Estonia

Austria

Malta

Germ

any

Czech R

epub

lic

Denm

ark

United

Kingd

om

Sw

eden

The Danish flexicurity model is supported by a national focus on and

efforts to ensure:

• Development of employees’ qualifications and competences

• Further training and education of employees

• Active labour market policies which assure that the workforce

maintains a high level of qualifications and is attractive to hire.

T H E D A N I S H F L E X I C U R I T Y M O D E L

Flexicurity as a way to meet future changes and challenges

The increasingly decentralised collective bargaining process aiming at increasing flexibility combined with a high degree of employment security has so far contributed to the devel-opment of an efficient and sustainable labour market model capable of adapting to e.g. technological developments and globalisation, cf. figure 4.

Figure 4

T E C H N O L O G I C A L

C H A N G E S A N D

D E V E L O P M E N T S

C R E AT E N E W D E M A N D S

F O R T H E L A B O U R

M A R K E T S

N E W Q U A L I F I C AT I O N S

A N D D E V E L O P M E N T

O F C O M P E T E N C E S

F O C U S O N

E M P L O Y M E N T A N D

A N O P E N L A B O U R M A R K E T

W I T H J O B M O B I L I T Y

F R A M E W O R K T O

E S TA B L I S H F L E X I B L E


R E G U L AT I O N

A labour market able to adapt to changes, seize possibilities and handle new forms of

work and platforms.

www.da.dk | www.lo.dk | www.ac.dk | www.ftf.dk

Conflict resolution in Denmark


• Danish labour market regulation is characterised by the exclusive role of the social partners and with a strong built-in sense of ownership and joint responsibility based on mutual recog-nition.




The system of conflict resolution is an established procedure of handling any labour market conflict in close cooperation with the involved parties and often at company level.

A special characteristic of the Danish system is the general peace obligation. This means that, in the periods between the renewal of the collective agreement, it is in effect, illegal for the social partners to take industrial action, although they retain the right to take industrial action if they cannot agree on renewing the collective agreements.

Through the procedures of conflict resolution, the social partners handle conflicts by negotiation and mediation, cf. figure 1.

KEY FACTS



During collective bargaining, the social partners meet in a joint consensus of being respon-sible for ensuring a secure and well-functioning labour market.

2

Figure 1

T H E S Y S T E M O F

C O N F L I C T R E S O L U T I O N

Step 1: A disagreement between employers

and employees is handled at company level,

where a settlement is sought through manda-

tory negotiations at company level.

Step 2: If the disagreement is not settled at

company level, the social partners will contin-

ue to negotiate at organisational level.

Step 3: If the social partners are not able to

settle the dispute, the case will be handled by

either industrial arbitration or by the Danish

Labour Court.

Step 3A: A disagreement on the interpretation

of a collective agreement will be settled by

Industrial Arbitration.

Step 3B: A disagreement regarding an

alledged breach of a collective agreement will

be settled by the Labour Court.

D I S A G R E E M E N T

S E T T L E M E N T

STEP 3

Handled by either industrial arbitration or by the Danish Labour Court

STEP 2

Handled at organisational level

STEP 1

Handled at company level

Joint meeting between the social partners

STEP 3A

Industrial Arbitration

Settlement on interpretation of a collective agreement

Court ruling on breach of a collective agreement

STEP 3B

The Labour Court

Conflict resolution is structured to settle a disagreement or a dispute as quickly as possible. A great number of labour market disputes are settled at company or local level at step 1 or 2. In most instances, the procedure of steps, as illustrated, is obligatory when handling a disagreement in order to make the system more efficient. As a result, the processing time is often shortened.

The industrial conflict resolution system in Denmark is managed autonomously with no interference from the Danish legislative assemblies. The specialised Danish Labour Court possesses specific competences, as the labour law define its jurisdictions.

The President and the 5 Vice Presidents of the Danish Labour Court are judges from the Danish Supreme Court, whereas members of the court are chairmen from trade unions, employers’ organizations or heads of larger companies. Based on recommendations from a number of trade unions and employers’ organizations, the Danish Minister of Employment appoints the members to the court for a period of 5 years.

The Labour Court holds the exclusive competence of ruling on an alleged breach of a collective agreement. Rulings by the Labour Court will set precedents for future ruling in similar cases. The Labour Court’s rulings cannot be appealed.

If a settlement on a disagreement cannot be reached in the previous steps of conflict res-olution, the presiding judge may pronounce a conclusion based on precedents in order to handle the case quickly – if both parties agree on such a procedure.

3

Cases filed with the Danish Labour Court has decreased during the past 10 years

E F F I C I E N T H A N D L I N G

O F D I S A G R E E M E N T S

H I G H L E V E L O F E F F I C I E N C Y

F R O M T H E D A N I S H

L A B O U R C O U RT

H I G H I N V O LV E M E N T

O F A L L A F F E C T E D

PA RT I E S

F E W L O S S E S F O R

E M P L O Y E E S

L O W C O S T S

F O R E M P L O Y E R S

A S TA B I L E

A N D S E C U R E


Figure 3

R E S U LT S O F C O N F L I C T

R E S O L U T I O N

C O N F L I C T R E S O L U T I O N


Collective bargaining in Denmark


• Danish labour market regulation is characterised by the exclusive role of the social partners and with a strong, built-in sense of ownership and joint responsibility based on mutual recog-nition.




In Denmark, labour market regulation is mainly defined by the sectoral collective agree-ments negotiated between the social partners. Local agreements at company level are negotiated between employers and employees, cf. figure 1.

KEY FACTS



Figure 1

T H E D A N I S H L A B O U R

M A R K E T M O D E L

T R A D E

U N I O N S

E M P L O Y E E S

E M P L O Y E R S ’

A S S O C I AT I O N S

T H E G E N E R A L

A G R E E M E N T

ORGANISAT IONAL

LEVEL

C O L L E C T I V E

A G R E E M E N T S

BRANCH LEVEL

L O C A L

A G R E E M E N T S

COMPANY

LEVEL

C O M PA N I E S

Collective agreements ensure a flexible framework for companies and employees in terms of working time, pay and other core working conditions. The company and the shop stew-ard can enter local agreements that supplement or deviate from the framework conditions stipulated in the collective agreement.

All employees in the public sector are covered by collective agreements, whereas 74 pct. of employed persons in the private sector are covered. For members of the Confederation of Danish Employers, DA, 87 pct. of the employees are covered. Foreign workers employed in Denmark are more or less covered by collective agreements to the same extent as Danish workers, cf. table 1.

However, there are differences in the extent of coverage by collective agreements between the different employee organisations in the private sector. For example only approximately 10 pct. of the AC-members in the private sector are covered by a collective agreement. The majority is covered by individual agreements.

There is no legal requirement for Danish or foreign companies to sign a collective agree-ment. Like Danish companies, foreign companies have a right to join a Danish employers’ association and through their membership obtain a collective agreement. Once an employ-er has signed a collective agreement or joined an employers’ association, the employer is obliged to follow and respect the collective agreement.

The collective agreements define labour market regulation regarding working conditions and wage-setting on the Danish labour market.

2

Table 1

P E R C E N TA G E S O F

E M P L O Y E D P E R S O N S

C O V E R E D B Y C O L L E C T I V E

A G R E E M E N T S O N T H E

D A N I S H L A B O U R M A R K E T

NOTE: The definition of foreign workers is excluding workers notified in the Register for Foreign Service Providers (RUT).

SOURCE: Confederation of Danish Employers, Statistics Denmark and Danish Agency for Labour Market and Recruitment 2016.

Persons covered by collective agreement 2015, measured in pct.

All employed persons

Foreign workers

Private sector 74 67

Members of the Danish Employers Confederation 87 85

Public sector 100 100

Labour market total 83 74

Collective agreements in the private sector are renewed sector by sector. It is the social partners in the key bargaining export sector who sets the pace and the framework for increases in wages and costs by concluding the first agreement. By the end of negotiations all agreements are linked and put to the vote in one single ballot by the two sides of indus-try. This ensures that all agreements are either adopted or rejected at the same time. The duration of a collective agreement is decided in each agreement. The current duration of a collective agreement is three years.

The high organisation rate sets the frame for a strong sense of ownership. If the members of trade unions reject the agreements, industrial action will follow. This rarely happens; the last time the collective agreements were rejected in the private sector was in 1998.

3

Wages are defined exclusively in the collective agreements. Wage-setting

and the development of salaries are negotiated at company or sector level.

The system of wage-setting is dynamic, as it is determined by market

demands and changeable elements. This ensures a flexibility at company

level as wage costs are determined by the economic forecasts and market

situation for the individual company.

The system of wage-setting is supported by employers and employees, as

the generel framework is negotiated and agreed between the social partners

within the collective agreements. Even though, there is no defined minimum

wage, the wage level is high in Denmark, cf. figure 2.

The collective agreements define the regulatory framework for working conditions including:

• Pay during maternity/paternity and parental leave

• Pay during sickness and child’s sickness

• Occupational pension• Working hours and flexible workdays• Access to lifelong learning and ongo-

ing development of competences• Additional benefits such as bonus

schemes, paid holiday or forms of compensation

The collective agreement can include a minimum wage, but it is not a standard claim

The frameworks for negotiations on wage-setting and wage in-creases are set in the collective agreements at sector level

Futher wages negotiations takes place at company level

N O S TAT U T O RY M I N I M U M WA G E

W O R K I N G C O N D I T I O N S WA G E - S E T T I N G

The Danish agreement-based system is described as a voluntary system, as it is not ob-ligatory for employees to be organised in trade unions and as companies are not required to be assigned to collective agreeements.

Managers, executives and university graduates are among the few groups who are not covered by collective agreements in the private sector. They negotiate their employment conditions individually.

Foreign employees posted to Denmark by foreign companies are covered by the Danish Act on the posting of workers. According to the Act on posting of workers’ the “hard core” working conditions set out in the Posting of Workers Directive apply, apart from the provision on minimum rates of pay. The posting of workers Act allows trade unions to use industrial action to demand that specific articles on minimum pay in collective agreements also apply to posted foreign workers.

In order to secure the working conditions for the employees on the Danish labour market, trade unions have an option to resort to industrial action and protest against companies that are not assigned to a collective agreement. Industrial action typically takes the form of a strike or so-called sympathy actions by which other companies are prevented from coop-erating with the company in question. Protests in the form of a physical blockade are illegal.

The sympathy actions function as effective tools in order to incite more companies to sign a collective agreement and to secure the rights of employees through the Danish agree-ment-based system without governmental interference.

Figure 2

W A G E L E V E L S

I N E U R O P E

REMARKS: Earnings from all employees in 2014, compared with national purchasing power standard (PPS).

SOURCE: Eurostat, 2017

€

30

25

20

15

10

5

0 Bulgaria

Rom

ania

Lithuania

Latvia

Hungary

Poland

Slovakia

Czech R

epub

lic

Croatia

Estonia

Portugal

Slovenia

Greece

Cyp

rus

Malta

Sp

ain

Italy

EU

28

Austria

United

Kingd

om

Frence

Germ

any

Netherland

s

Finland

Belgium

Luxemb

ourg

Sw

eden

Ireland

Denm

ark

■ 2014

■ PPS


the foundation and dynamics of the danish labour market

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