Employers promote flexible 'buffet' wage system

In July 2002, the Danish Commerce and Service (DHS) employers’ organisation launched a document promoting a flexible 'buffet' system, whereby employees could construct their own package of pay and benefits. An example of this approach is the Oracle software company, where employees can now choose how their package of wages, benefits, holidays and pension contributions should be distributed, trading off some elements for others. Trade unions are sceptical, but believe that in the near future collective agreements will become more and more individualised.

In October 2001, the Danish subsidiary of the US-based software company Oracle introduced a new flexible pay system that gives employees freedom of choice - as long as the relevant legislation is complied with - with regard to the distribution of their package of wages, benefits, holidays and pension contributions. Instead of receiving a fixed amount of pay, benefits, pension contribution and holiday entitlement, employees can now mix these elements according to their personal wishes, as long as the total sum does not exceed the maximum wage to which they are entitled. An employee at Oracle can, for example, choose to have an occupational pension contribution of 5% of pay rather then the normal 8%, and receive the difference as a monthly pay increase. They may also choose to have larger contributions to private health insurance, or increase their annual leave above the legally defined five weeks. If an employee is entitled to a company car and decides to have a small car rather than a larger one, the difference in the normal monthly costs is paid out as a supplement to the monthly salary. Oracle is not a member of an employers’ organisation and its 350 employees are not covered by a collective agreement.

The Oracle case is cited in a document containing recommendations on 'do-it-yourself' pay systems sent in July 2002 to its 25,000 member companies and other interested parties by the Danish Commerce and Service (Dansk Handel & Service, DHS) employers’ organisation. DHS promotes a flexible pay system under the title 'pay buffet'. The idea is that the distribution of 'wages'- a concept covering everything from pay to childcare, laundry at the workplace, a home computer or aerobics and massage at the workplace - should in future be agreed individually at the company level. There should be a mixture of core pay and benefits laid down in the collective agreement and personal 'fringe benefits'.

The trade unions are sceptical, but also interested. They believe, supported by labour market researchers, that in the near future the individualisation of the traditional collective agreement is inevitable. However, they want to keep a clear demarcation between collective agreements and fringe benefits. In principle, there is a strong difference in having fringe benefits as a possibility or as a right laid down by a collective agreement. By nature, fringe benefits differ from wage and traditional employment conditions, and it is therefore important for the unions to establish whether fringe benefits could become an integral part of the demands that are negotiated in collective bargaining. In other words, it is necessary to establish whether traditional fringe benefits can be accepted as part of the wage or if they should remain in addition to the wage.

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