The Danish Labour Market Model
The Danish Model is a designation used to describe the unique way in which the Danish labour market is structured. Understand the structure of the Danish labour market and why DI plays a central role.
Why is the model unique?
The model is unique because the terms and conditions applicable to employees have been negotiated by the labour market parties, i.e. trade unions on the one hand and employers’ associations on the other. The parties negotiate collective agreements, which determine e.g. minimum wages for particular areas and pension contributions payable to employees. Most employees in Denmark are comprised by a collective agreement.
This is not the case in most other countries, where rules on e.g. working hours, overtime work, notices of termination and wages are determined by politicians and put into statutory form through legislation covering all or parts of the labour market. In most other countries, collective agreements are not nearly as common as they are in Denmark.
Flexibility for businesses and security for employees
The Danish model implies that the Danish Parliament does not interfere with the determination of terms and conditions applicable on the labour market if the labour market parties are able to reach an agreement. This gives employers and employees considerable influence on the prevailing rules.
This is also the case at the individual workplace, as management and employees may agree on the rules that best match their specific relationship and conditions. For example, highly seasonal businesses may agree on varying working hours to allow for peak season and off-season periods. Moreover, collective agreements vary from industry to industry, ensuring that the rules are adapted specifically to e.g. transport, manufacturing or service businesses.
Danish labour market legislation is structured to accommodate the flexible rules of the collective bargaining system and ensure that people who become unemployed are entitled to benefits and employment services.
The combination of collective bargaining and legislation ensures a unique balance in the Danish labour market between flexibility for businesses and security for employees. As a result, it is easy for Danish businesses to hire new employees – and to let them go again if company order books run out. In return, employees are safeguarded financially if they are made redundant and must find a new job.
This balance between flexibility and security is often referred to as flexicurity, and this is what has given Denmark one of the most well-functioning and admired labour markets in the world.
DI is Denmark’s largest business organisation and therefore plays a central role in the collective bargaining process in the private-sector labour market.
DI negotiates about 200 collective agreements, The Industrial Agreement (Industriens Overenskomst) comprising most employees.
Did you know?
- That the Industrial Agreement is the largest collective agreement and therefore breaks the ground for the rest of the private-sector labour market bargaining. Therefore the Industrial Agreement is called the “ground-breaking collective agreement”.
- That the Danish labour market model was established as far back as in 1899 with the so-called September Compromise (Septemberforliget).
- That the September Compromise, often said to be the constitution of the labour market, was the first collective agreement to govern the relationship between employers and employees.
- That Denmark has one of the highest unionisation rates in the world.
- That many rules in collective agreements may be derogated from by agreement between the management and employees of a business.
- That the rate of industrial conflict incidences in Denmark is among the lowest in the EU.