The Danish Labour Market

• The Labour Market


• Flexibility is the order of the day

The high level of skill and standard of education in Denmark contribute much to the strong productivity performance of Danish industry. Moreover, a flexible and consensus based labour market plays a major role in the performance and cost of labour.

The Danish labour market is based on consensus

The Danish labour market is set by tripartite co-operation which involves labour unions, employers' federations and the government. However, the government plays only a minor role as most rules are based on agreements settled by collective bargaining among unions and employers' federations. This means that rules rather than laws make up the principle framework. This adds to the flexibility of the system.

The system ensures that industrial relations are highly organized and orderly resulting in few lost working days.

The flexibility of the Danish labour market can also be attributed to the fact that the system allows for negotiations at multiple levels. Whereas the all industry level establishes the principle guidelines for the labour market, the industry level allows for regulation in respect to industry characteristics. In addition to this, negotiations at company level give ample room for creating a work environment which meets the needs of the individual company.

In summary, the advantages of the Danish labour market model are:

• Flexible agreements: It is possible to take into account specific circumstances within individual industrial sectors or trade groups. Furthermore, the collective agreement system is becoming more and more decentralized, allowing individual agreements with regard to specific company conditions.

• Strong commitment: Collective agreements ensure a complete agreement between both labour market parties, thus ensuring a high degree of consensus on the labour market.

Flexible working hours, notice periods and hire/fire rules

Unlike many other European countries there are no restrictions regarding night and weekend work, i.e., companies are allowed to operate 24 hours a day, 365 days a year.

The collective agreements stipulate a full working week of 37 hours. However, it is common to set up more flexible arrangements in order to optimize the work force to the actual work flow.

In general, the rules for working hours in Denmark are amongst the most flexible in Europe.

1In Denmark and the UK there are no general regulations on working hours; ²Pay premium calculated for a hypothetical two hours' overtime as a percentage of pay for a normal hour of work.

The rules for termination of employment are very liberal, as employers are entitled to terminate employment of skilled and unskilled workers at any time provided that the legal and agreed notices are respected. The period of notice required varies according to the number of years of employment.

Provided that legal and agreed notices are observed, there are no costs for the employer in relation to lay-offs of skilled and unskilled workers except for costs related to the 1st and 2nd day of unemployment.

Table x.: Hiring and firing practices, world ranking.
Denmark	1
United Kingdom	8
Ireland	27
Netherlands	36
Belgium	39
Sweden	39
France	51
Germany	52
World Economic Forum, 1997.

Generally, it is quite easy to terminate employment in Denmark compared with many other European countries.

Sources: IMD "World Competitiveness Yearbook", 1998. Ernst & Young/Corporate Location, 1995. World Economic Forum, 1997.

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