Regulation and flexibility

Contrary to most other European countries, the Danish labour market is regulated by collective agreements covering nearly 80 per cent of all employees. Law regulation is almost non-existent in Denmark.

The collective bargaining system implies that employers and employees must reach mutually binding agreements on labour issues satisfactory to both parties. In most cases working conditions are negotiated at company level in accordance with each company and sectors’ specific needs. The co-operative nature of industrial relations combined with a well functioning social security system translates into flexible hiring and firing practices and co-operative labour, as shown in the table below.

Source: World Economic Forum, Global Competitiveness Report, 2004-2005

* Scale runs from 1-7. The higher number, the greater flexibility.

** Scale runs from 1-7. The higher number, the more is the labour-employer relation characterised by cooperation instead of confrontation.

The relatively high degree of flexibility is possible because most persons are insured against unemployment and guaranteed a high level of social security when unemployed. This condition is the main point of the Danish Flexicurity model, which has been an inspiration to a number of European countries as a solution to their problems with unemployment. The concept of flexicurity will be described below.

In practice the flexibility implies that it is easier to dismiss workers in Denmark than in most other countries. The period of notice required varies according to the number of years of employment. Provided that the legal and agreed notices are observed there are no costs for the employer in relation to layoffs of skilled and unskilled workers.

The flexicurity concept

In recent years, the concept of flexicurity has been introduced in order to describe the particular Danish mix of flexibility and social security (Bredgaard, Larsen & Madsen, (2005): The flexible Danish labour market – a review”, CARMA Research papers). The concept is a hybrid between a liberal approach to low employment protection and the comprehensive social security systems that characterizes the Scandinavian welfare states. The Danish model is a result of a long historical development and though the term “flexicurity” is new it is describing some deep-rooted characteristics of the Danish labour market.
The Flexicurity model contains three elements in combination and interaction. 1) A flexible labour market characterized by easy hiring and firing practices, 2) a generous welfare scheme with high benefits for the unemployed, and 3) a pro-active labour market policy referring to an obligation of and a right to training for the employed.

The consequence of the interaction between the three elements of the model is that the Danish labour market is characterized by a high level of employment security as opposed to the high level of job security that characterizes the other Scandinavian countries. A high level of employment security provides security for a job but not necessarily for a particular job for a longer period of time. This offers a basis for a high level of labour force mobility, which makes it easier for the employer to get qualified labour while also making it easier to lay off redundant labour. Flexible hiring and firing practices involve more willingness to hiring labour.

Labour force mobility

The mix of high degrees of flexibility and security on the labour market results in a high degree of mobility in the labour force compared to for example both Sweden and Finland, as shown in figure 8 below. According to the Economic Council of the Labour Movement (Arbejderbevægelsens Erhvervsråd), on average, between 25 per cent and 35 per cent of the Danish workforce change employers each year.

Figure: Average tenure with the same employer in years (2002)

Source: Auer, Peter: “Protected mobility for employment and decent work: Labour market security in a globalised world”, ILO 2005

Working hours

In Denmark, the normal working week consists of 37 hours spread out on a five-day week. Due to the collective bargaining system there is no upper limit to working hours in Danish legislation. However, EU legislation imposes a ceiling on working time of a weekly average of 48 hours. Though EU legislation imposes a ceiling on working time the Danish system is very flexible when it comes to changes in working hours and it is thereby easy to adjust labour to meet unexpected changes in demand.

Regarding holidays, 10 paid public holidays are observed. In addition all employees have the right to 25 days of vacation every year. Whether this is paid vacation depends on the duration of the employment - for every month of employment the employee earns 2.08 days of paid vacation. It is worth noticing that the above-mentioned requirements are the law-regulated.. Additional days of vacation may exist in some industries depending on collective agreements between employers and employees. For many groups additional 5 days are common.

For more information, download the factsheet "Labour Market

Last updated on: 08-06-2006	<< Back   Top