New pay settlements take decentralised approach

Flexibility was the key word in the collective pay agreements concluded between January and March 1999 in Denmark's public sector, finance sector and independent baking sector. Agreements were reached for around 1 million workers, the main results being extra holidays, more flexible working hours and continued rises in real earnings. One important aspect is a tendency towards decentralisation, with decisions on pay, working hours and arrangements for the additional holidays being deferred to local negotiations and decisions, within the central frameworks set out in the national agreements. The final fate of the settlements will be decided in membership ballots due to be concluded during April.

The period from January to March 1999 saw new collective agreements in a number of sectors which were not covered by 1998's main private sector bargaining round for the area covered by the Danish Federation of Trade Unions (Landsorganisationen i Danmark, LO) and the Danish Employers' Confederation (Dansk Arbejdsgiverforening, DA), including the public sector and the financial sector. The year's bargaining is thus almost complete, though it is still uncertain whether the 1999 pay round can, unlike the previous year's, be resolved without resort to strikes. The new settlements have been put to the signatory organisations' members for approval, with the final results due to come in around 20 April.

One key outcome of the 1999 agreements is an increased tendency towards a more flexible treatment of working time, without a rise in total working hours. The fixed working week of 37 hours will thus soon no longer be the norm for many Danish employees, with working hours in most sectors to be calculated over a longer time horizon in future - allowing the possibility, for example, of employees working 30 hours one week and 42 hours the next. In all probability, typical variations will be smaller, but the capability exists to lengthen and shorten working hours according to the needs of employees and managers, while maintaining an average over a reference period.

This tendency has been making headway for some time, for example within the all-important industrial sector, where the 1998 collective agreement allowed normal weekly working hours to be varied, as long as an average of 37 hours is maintained over the year (DK9803158F). In the public sector agreements reached in February 1999 (see below), flexibility has been increased by allowing local variations from the centrally set rules. The essential condition is that employees are willing to accept such variations: employers cannot impose new working hours on employees unless they agree. This means that a right to local agreements has been linked to the potential for greater flexibility in working hours, and the same is also the case in the industrial sector. The decentralisation process - or rather "centralised decentralisation", whereby decisions on pay and working hours are shifted to the local level within a framework which continues to be set at the centre - will thus not entail a general weakening of the Danish bargaining model, but only a relocation of negotiations and negotiating skills.

The new agreement for the financial sector also includes greater flexibility. Here, the normal 37 hours per week can be dispensed with and working hours varied between 31 and 41 hours. However, over a four-week reference period the average weekly working time must still be 37 hours.

From a zero-sum to a plus-sum game

One problem for negotiations in the public sector was that Minister of Finance,Mogens Lykketoft, in his role of chief negotiator, had in the autumn of 1998 (DK9811194N) rejected the trade unions' demands for extra holidays - which would have marked a significant step in the direction of a sixth week of holidays (five weeks are guaranteed by law) - together with pay rises equivalent to private sector trends (DK9812198F). The demands of the public employees' organisations were a bid to achieve the same advances as laid down in as the settlement imposed by the government itself to end the 1998 bargaining round in the DA/LO are, following a major industrial dispute (DK9805168F). This settlement granted at least two extra days of annual holiday, as well as two "care days" for workers with families, rising to three days.

In spring 1998, the government was arguably willing to grant extra holidays because it wished to create a conducive atmosphere ahead of the referendum on the Amsterdam EU Treaty at the end of May, but even then it was clear that extra holiday and a tendency to higher pay rises were in conflict with the government's overall economic policies. Over the year, the problem became sharper because of the socio-economic problems emerging in the wake of the Asian financial crisis, and because analyses were making it increasingly clear that there was a danger of labour shortages in the coming decade - not least in the major public sector welfare services areas (DK9901102F).

Hence the government - despite its intervention in 1998 - was against extra holidays for public employees, while the employees would not accept a worse result than that achieved by the private sector employees covered by the 1998 DA/LO settlement. This stalemate was broken in the negotiations held in January and February 1999 by making flexibility the key word. By providing for the possibility of local agreements on more flexible working hours, allowing the extra holiday to be paid as wages and extending the duration of the agreements to three years instead of the normal two, sufficient elbow-room was created to permit the compromise of introducing three extra days off a year over the period of the agreements.

An apparently stalled negotiating situation with all the hallmarks of a "zero-sum" game was transformed into a "plus-sum" game, in which both parties stood to gain. Thus it was that on 25 and 26 February, general settlements were agreed first for the 640,000 local authority employees and then for the 200,000 state sector employees.

Public sector settlements

The main points which characterised both the local authority and the state sector settlements were the following:

  • three extra days off annually, to be introduced at the rate of one per year up to 1 April 2001;
  • three-year agreements with total pay rises of 7.55%, plus an adjustment scheme guaranteeing public employees 80% of the pay rises in the private sector;
  • two weeks' parental leave on full pay;
  • an easing of waiting period rules in order to give more people the right to a pension, in particular by implementing an earlier start to making pension contributions. The starting age limit is to be reduced from 25 to 21 years in the local authority sector and to 20 years in the state sector, and pension contributions will begin for this new age group;
  • flexible working time, allowing locally agreed variations from the centrally decided rules. An existing provision relating to the avoidance of overtime will also be abolished, while in future it will normally be possible for overtime to be recompensed with pay rather than with days of in lieu; and
  • abolition of the "120-day rule", under which dismissal was almost automatic for employees with more than 120 days off sick in one year.

In addition, the new pay models introduced in the 1997 bargaining round (DK9705110F) will be continued and extended in both the state and the local authority sectors. Bringing school teachers, pre-school workers and a number of unskilled groups over to "new pay" means that practically the whole of the local authority sector will have changed to the new system, in which functions and skills, which are substantially negotiated locally, play the main role in determining pay levels, instead of the previous system which was largely based on length of service.

In the local authority sector, it was agreed to change the system granting 10 childcare days in total to one allowing two childcare days per year per child up to the age of five. From 1 April 2001, the scheme will be extended to cover children up to the age of eight.

Problem of teachers' working time

One problem which threatened to lead to public sector strikes was the issue of the teachers' working time rules. The local authority employers made it an unconditional demand that the rules be changed to allow more flexible locally determined working hours. One important aim of the employers was to change the general rule that one teaching hour automatically generates one preparation hour, modified by the fact that breaks etc are included in the preparation time. Such a change was essential in order to create extra teaching hours. The rising numbers of pupils in coming years will overload local authority budgets, already very tight, unless a modicum of freedom for teachers to teach more can be created.

The teachers, organised in the Danish Union of Teachers (Danmarks Lærerforening, DLF), were unwilling to be forced into longer hours, or at least not without extra pay. By the autumn of 1998 it was hard to see how there could be any settlement between local authority employers and teachers. However, at the end of the year the signals became more conciliatory (DK9812198F), and the parties were after all able, as an extension of the general settlement, to reach agreement on new working time rules. This agreement takes account of the fact that nowadays teachers very often work in teams rather than alone. So, as well as personal preparation time, time is also to be allowed for development and teamwork.

The agreement has met with scepticism from many DLF members, because they believe that the greater local freedom provided for in the agreement contains the in-built risk of a higher number of teaching hours. Even though the increase in hours is likely to be only marginal, and even though a pay bonus will be forthcoming, it is far from certain that teachers will agree to the settlement in the ballot. The possibility of a conflict in the schools sector is still very real. Up until now, teachers have been against the new, more locally-based public sector pay system, but it looks as if this point will now be accepted by most of them: partly because they have seen that other groups which went over to the new system in 1997 have achieved higher pay rises; and partly because the development of a new pay model for teachers has side-stepped payment by results, something to which the teachers were particularly opposed, and has also secured generous pay increases, particularly for young teachers.

Political pressure

A particular problem in the negotiations over teachers' working time has been the very obvious political pressure. This started with the 1999 Budget settlement (DK9812197F), concluded in November 1998, in which all the participating political parties, from the Liberal Party (Venstre) and the Conservatives (Konservative) to the Social Democrats (Social Demokratiet), agreed that one important goal of the 1999 collective agreements should be to ensure a change in teachers' working time. The teachers and their union felt this to be inappropriate political pressure, signalling that the politicians would legislate for new working time rules unless the teachers themselves agreed to a change in the course of the negotiations (DK9812198F).

Once the public sector settlement was agreed on 1 March 1999, political pressure resumed when it appeared that there was a certain degree of resistance to the new working time provisions among teachers. This led Members of Parliament from the Liberal and Conservative parties to declare themselves agreeable to a political intervention to force teachers to accept the new rules if they rejected them in the ballot. Such interference is rarely seen in Denmark, where the autonomy of the bargaining system is generally honoured. It created a common external enemy for DLF's negotiators and members, together with a certain nervousness that this move might encourage those planning to vote "no", because they could now oppose the settlement without any consequences. The result would not be a conflict but an intervention and thus teachers could easily absolve themselves of responsibility for the new rules.

Settlements in the financial sector

In the financial sector, two settlements were reached by the Employers' Association for the Financial Sector (Finanssektorens Arbejdsgivere, FA): with the National Insurance Workers Association (Danske Forsikringsfunktionærers Landsforening) on 2 March; and with the Financial Services' Union (Finansforbundet) on 11 March. The latter settlement is the sector's largest, covering some 45,000 employees in banks and mortgage institutions.

In the financial sector, extra free time was not an issue, as conditions here are already better than in the other sectors. Instead, the questions of general pay rises and flexible working hours were to the fore. It was assumed that the negotiations would be relatively smooth and such proved to be the case. That is not to say that the contents of the two-year settlement are without nuances. As mentioned above, greater flexibility in working hours was introduced, with the capability of varying the standard 37-hour week, and also of working weekly hours over four days a week instead of five.

Other elements in the settlement are:

  • a total framework of a 6.5% increase in pay costs, of which most goes to pay rises of 2.9% from 1 July 1999 and a further 1.7% from 1 July 2000. In addition, 1% has been reserved for new individual forms of pay, and it has already been agreed to set aside a further 1% for the same purpose in the next bargaining round;
  • a reduction to three months of the waiting time for inclusion in the sector's occupational pension scheme, and an increase in the minimum contribution to 8.5% of pay;
  • the introduction of an insurance scheme to cover death and critical illness, funded by employers; and
  • the creation of wider frameworks for local agreements on flexible working hours, including the possibility of a four-day week.

Average pay in the financial sector is now around DKK 300,000 per year. Some employees already have six or seven weeks holiday, while all employees have five care days a year.

Bakers' strike averted

The only bargaining area which looked like ending in a strike was the independent bakery sector, in which a strike warning was issued for Sunday 14 March. Baking employers and bakers' assistants could not agree on the number of Sundays off, with the assistants seeking a guaranteed day off every second Sunday. Employers could not accept this, as this is the day on which they have the most customers and highest earnings. The compromise, achieved at the last moment, was that assistants should have at least six Sundays off over a period of 13 weeks. At the same time, more flexible working time arrangements were agreed and this gave an acceptable result for employers.

Bakery workers are also to receive four extra free days, two ordinary free days plus Whit Monday and Ascension Day. This last will, however, first become effective from 1 March 2000. A settlement with similar content was also agreed in the independent patissiers sector.


A particularly difficult bargaining round was thus resolved surprisingly peacefully. The main problem of the Finance Minister's refusal to grant the same improvements which the government had granted private sector employees in the DA/LO area in 1998, was removed, as employees were able to offer both greater flexibility over working hours and a three-year settlement period. An extra prize was that it will in future be possible for the two dominant bargaining areas - the 850,000-strong public sector and the DA/LO private sector area - once again to renew their agreements simultaneously.

This renewed synchronisation means that the risk of "leverage effects", which make settlements dearer than they would otherwise be, can be reduced. This is certainly in the interests of employers, as the problem of holidays hanging over from the 1998 bargaining round to the 1999 round clearly showed. However, it may also be an advantage for trade unions, as negotiators can avoid the situation of members' expectations being raised so high that they are unable to reach the longer-term agreements which could secure Danish competitiveness.

The tempo of bargaining which applied up to 1995 (DK9705110F) will be re-established if in 2000 the LO/DA private sector area opts either for an ordinary two-year deal or perhaps for a four-year settlement period, if a longer period is felt necessary. Thus there will be room for improvements, for example in holidays and pensions, which will again make the settlements acceptable to members.

The two-year settlements in the agriculture and forestry area (DK9902110F) and in the financial sector mean that these areas are still out of step with the LO/DA area, but this must be reckoned of lesser importance in comparison with the public sector. The collective agreement negotiations of 1999 may prove to be an important step in solving one of the most serious problems of the collective bargaining system in the 1990s. (Jørgen Steen Madsen, FAOS)

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