Collective bargaining in Denmark

In Denmark, all important issues relating to the employment relationship, such as wages, working conditions, training and pensions, are regulated by the social partners through recurring collective bargaining. The most important levels are the sectoral and company levels, which interact in a form of coordination referred to as ‘centralised decentralisation’. Collective agreements are binding.

Collective wage bargaining coverage of employees, all levels

Notes: ECS, private sector companies with establishments > 10 employees (NACE B–S) – multiple answers possible. SES, companies > 10 employees (NACE B–SxO) – single answer for each local unit: more than 50% of employees covered by such an agreement [earn_ses10_01], [earn_ses14_01], [earn_ses18_01]; percentage calculated by dividing the number of employees working in local units where more than 50% of the employees are covered by a collective pay agreement by the total number of employees in the scope of the survey. * National data: the figure includes coverage in the private and public sectors – 74% and 100%, respectively; The labour market report cited is based on data from Statistics Denmark, Eurostat, various state agencies and DA’s own member associations. The collective bargaining coverage rate is also based on data from the only other private sector employer confederation in Denmark, FA. SES, Structure of Earnings Survey.

The only important levels for collective bargaining regarding wages and working time are the sectoral and company levels, which are linked through centralised decentralisation.

Levels of collective bargaining, 2022

Articulation

The interlinkage between the central (i.e. sectoral) level and local/company level is determined by the wage system in the sector. In the minimum wage system (which covers 80% of the private sector), only minimum wage increases are settled at central level, while actual wage increases are negotiated at company level. Thus, the minimum wage specified in sectoral agreements hardly ever reflects the real wage level in companies. Wages, however, can also change depending on the sector or the market situation of the company. The remaining 20% of the private sector is covered by the normal wage system, in which all important issues such as wages are settled at central level. The normal wage system is strongly associated with the transport sector. In the public sector, bargaining mostly takes place at central level between the public authorities and large bargaining coalitions of the public sector unions, and only a small number of agreements are left to be settled at organisational level between the authorities and the unions. Thus, wage negotiations in the public sector are closer to the normal wage system than the minimum wage system.

Collective bargaining in the private and public sectors takes place in the first quarter, beginning in January. Following the conclusion of an agreement in the private sector, negotiations begin in companies. The validity of a collective agreement has always been between two and four years, depending on the economic outlook. The more uncertain the outlook, the shorter the period of validity. Over the past two decades, three-year agreements have been the norm. The private and public sector conduct bargaining rounds at staggered intervals, so that their negotiations do not take place in the same year.

The main mechanism is vertical coordination, referred to in Denmark as centralised decentralisation, with the sectoral level as the central point. The Industrial Agreement (Industriens Overenskomst) in manufacturing is pace-setting regarding the expected level of wage increases (if any) and the rest of the labour market follows the concluded agreement on this issue. Furthermore, there is a certain degree of coordination between the higher-level trade unions/employer organisations and the lower-level ones about what are realistic wage expectations to present during bargaining.

There are no extension mechanisms in Denmark regarding collective agreements.

In the pace-setting sectoral collective agreement in Denmark, the Industrial Agreement covering the manufacturing industry, there is a provision on deviation from the sectoral agreement regarding working time and further training at company level. Deviation requires the agreement of both parties. The option to agree locally on working time is widely used. Otherwise, there are no derogation mechanisms in Danish collective agreements.

In Denmark, the main purpose of terminating an expiring agreement is to negotiate a new one. In practice, it is necessary to terminate an agreement in accordance with provisions in the Basic Agreement between the social partners, even if the purpose is to renegotiate the former agreement. Otherwise, the parties would not be released from the peace obligation under the former agreement, and would not be able to support new demands for change with threats of industrial action.

By concluding a collective agreement, the social partners also agree to a peace clause that exists during the agreed time of validity of the agreement. Employees are bound by a peace obligation and are not allowed to take strike action for the duration of the collective agreement. If industrial action is nevertheless initiated and a case comes before the Labour Court owing to a breach of the collective agreement in force, they will be liable to pay fines.

In Denmark, all aspects of working life are subject to collective bargaining. Besides wages and working time, training, lifelong learning, further training, paternity leave, education leave, break periods, sickness leave, a child’s first sick day, senior days (days off for older members of staff), stress and harassment are on the bargaining agenda. In the past two decades, subjects that used to be regulated by legislation – such as leave, stress and harassment – have also been addressed by provisions in collective agreements.