'New wage' system will be difficult issue in regional/municipal bargaining

In autumn 2004, trade unions and employers in Denmark's regional and municipal authorities sector are preparing to negotiate new collective agreements. A decentralised pay scheme introduced in 1998, known as 'new wage', is likely to be a source of major difficulties in the bargaining. Some major unions are demanding the abolition of the system, while employers want to extend it and earmark a larger part of the overall wage sum for local distribution through the scheme.

Late 2004 and early 2005 will see collective bargaining in the public sector, when the current three-year agreements signed in 2002 for municipal and regional authority workers (DK0205102F) and central government workers (DK0204103F) expire. Bargaining must be completed by 1 April 2005, covering about 650,000 employees in the regional and municipal sectors and about 160,000 employees in the central government sector. The specific demands for the negotiations are due to be exchanged on 5 October 2004. However, the municipal and regional authorities have already indicated that they want the 'new wage' (Ny Løn) system introduced in April 1998 (DK9705110F) to be expanded. They also want the new agreement to run for a period of three years.

Employers want to develop 'new wage' system

At a press conference held on 15 September 2004, the wage and bargaining committee of the Danish Federation of County Councils (Amtsrådsforeningen, ARF) stated that the 'new wage' scheme is here to stay. 'Whether the wage system is given a different name at this moment is not so important, but the principle that parts of the wage are to be negotiated at local level is extremely important', said the chair of the committee, Hans Jørgen Holm. He promised that ARF will in the coming bargaining rounds be prepared to support 'new wage' with additional funds. However, the extent of the additional funds that ARF will contribute for decentralised wage-formation purposes has not yet been decided, according to Mr Holm.

It was also stressed at the press conference that numerous problems that have arisen at workplaces with regard to late payment of wages under the 'new wage' scheme are primarily due to calculation problems and difficulties with the 'regulation scheme' that seeks to ensure is that regional/municipal employees have the same wage development as employees in the private sector. It was thus emphasised by the employers' negotiators that the time has come for an overhaul of 'new wage'. Nevertheless, the employers stressed that 'new wage' ensures a close connection between wage policy and personnel policy, while the individual aspects of the scheme give employers the possibility to recruit and retain qualified employees continuously.

Some trade union opposition

The message from the ARF wage and bargaining committee has little in common with the signals emerging from trade unions representing municipal and regional employees in the run-up to the 2005 bargaining round. A number of unions - notably those representing nurses and teachers, which are major groups within the Confederation of Salaried Employees and Civil Servants Organisations (Funktionærernes og Tjenestemændenes Fællesråd, FTF) - have clearly stated that they support the abolition of the 'new wage' system. The Danish Nurses’ Organisation (Dansk Sygeplejeråd, DSR) and the Danish Teachers’ Union (Danmarks Lærerforening, DLF) have stated that they are ready to take industrial action if the scheme is not abolished. It thus seems that the scene has been set for rather difficult negotiations in late 2004 and early 2005.

Since its introduction in April 1998, the 'new wage' system has been criticised by many employees. The scheme comprises a basic wage with supplements for, for instance, special qualifications and performance, and part of the wage sum is the subject of local negotiations with employers. Employees have, in particular, criticised local and regional employers for being too slow to pay agreed wage increases - or in some cases for having saved the amount meant for local pay bargaining for other purposes. At a time of overstretched municipal and regional budgets, the authorities often feel faced by a choice between wage increases for their employees and cutbacks in social welfare provision. A major problem of 'new wage' is that it has been implemented during a period of difficult finances.

Nurses and teachers want more centralised system

There is a common wish in FTF's municipal section (FTF/Kommunal, FTF-K), led by the DLF school teachers' union and the Federation of Early Childhood Teachers and Youth Educators (Forbundet for Pædagoger og Klubfolk, BUPL), to cancel the current agreement on the 'new wage' system in 2005 (the DSR nurses' union is not a member of FTF-K).

FTF-K consists of 18 organisations that negotiate through the trade union bargaining cartel in the regional/municipal sector, the Association of Local Government Employees’ Organisations (Kommunale Tjenestemænd og Overenskomstansatte, KTO). KTO brings together the demands of FTF-K and the municipal and regional groups in the other main trade union confederations, the Confederation of Danish Trade Unions (Landsorganisationen i Danmark, LO) and the Confederation of Professional Associations in Denmark (Akademikernes Centralorganisation, AC). The individual unions themselves negotiate a number of issues directly, while the KTO bargaining cartel negotiates a number of demands on behalf of all the unions.

In calling for abolition of the 'new wage' system, the FTF-K unions do not want to return to the pre-1998 wage system, but they are in favour of a model in which most of the wage is fixed at the central level. They will emphasise a collective wage model as against the costs of the individualised 'new wage' system.

The president of DLF, Anders Bondo Christensen, thinks that it would be much more flexible to have five or six different municipal wage systems - albeit within a common framework - because some groups are more suited to a system based on individual skills and performance than others. For teachers, Mr Bondo Christensen is convinced that 'new wage' in its current form has proved useless.

In November 2003, the DSR nurses’ union, as part of the Health Cartel (Sundhedskartellet), left the KTO regional/municipal bargaining unit (DK0312101N). The Health Cartel consists of 11 unions in the health sector, chaired by DSR. The idea of the split from KTO (to which 65 unions belonged) was that healthcare workers' unions would be in a stronger position by standing alone and conducting direct negotiations between the Health Cartel and the regional and municipal employers, represented by ARF and the National Association of Local Authorities in Denmark (Kommunernes Landsforening, KL). The president of DSR and of the Health Cartel, Connie Kruckow, stresses that DSR will focus on changing the wage system. 'New wage' has not functioned in the way intended and nurses have not received the expected increase in wages, she argues. Therefore a general wage increase connected with a reformed wage system, including a new wage scale solely for the employees represented by the Health Cartel, is the Cartel's top priority in the forthcoming negotiations.

The demands of the regional/municipal trade unions are, as noted above, in direct opposition to the demands of the employers, which are in favour of maintaining and further developing and decentralising the 'new wage' system. Given the battle-lines being drawn up in autumn 2004, the negotiations might well end up being referred to the Public Conciliation Service (Forligsinstitutionen) as they were in 2002, although for different reasons (DK0203101N and DK0205102F). The bargaining parties are clearly on collision course, but the possibility of finding a compromise over another flexible wage system, rather than 'new wage', and thus avoiding a direct conflict, is not unrealistic. The sticking point will be finding a balance between the central and decentralised elements of a revised wage system.

However, not all unions oppose 'new wage'. Some unions organising workers in the administrative and technical area want to keep a wage system with a strong decentralised element. This applies to a major trade union in the regional/municipal area, the Union of Commercial and Clerical Employees in Denmark/Municipal (Handels- og Kontorfunktionærernes Forbund/Kommunal, HK/Kommunal). This may make make it more difficult to reach a compromise, because of the significant distance between the parties' views. On the other hand, it will increase the possibilities for a compromise if the employers to a higher degree accept differences in wage models between different areas.

The trade unions in the central government sector have not expressed the same degree of dissatisfaction with the 'new wage' system as their counterparts in the regional/municipal sector and, although they want to adjust the system, there are no signs that they want to give it up. A general, visible wage increase tops these unions' demands at present.


It was not only in the DSR nurses' union but more widely within KTO that there was dissatisfaction with the outcome of the 2002 collective bargaining round. The DLF teachers' union, for instance, had to accept a result that its members had voted against, because the negotiations ended up with the Public Conciliation Service, and a combined ballot conducted among all 65 unions thus decided on whether to accept the overall deal.

There was subsequently an agreement among the unions in KTO that a repetition of this course of events was to be avoided, and a new negotiation model, giving individual unions a certain amount of freedom, was discussed. The result was a model that has turned the previous course of negotiations upside down. Instead of beginning with general negotiations involving KTO at the turn of 2004-5, the individual member unions will first negotiate their specific issues with the municipal employers directly in autumn 2004. These negotiations will take place before the general negotiations, ie covering cross-union topics, and there are few limits to what can be negotiated at the individual union level, which means that these negotiations will be much more comprehensive than previously. The individual unions will thus have an opportunity to negotiate a wage model that fits exactly their membership groups. This is especially relevant in connection with 'new wage'.

It is not likely that the employers will accept around 50 different wage models. However, it may be possible to reach a compromise about a smaller number of models, which cover the main sectors in the regional/municipal area - ie healthcare, administration, teaching, care for children, and technical jobs. A problem is that DSR and the Health Cartel will demand their own wage model (ie wage scale definitions) and that the employers will then demand that another main groups in the health sector, health assistants and social workers, will be covered by the system. These groups are organised in the Danish Trade Union of Public Employees (Forbundet af Offentligt Ansatte, FOA) which is the largest union in the regional/municipal area. The president of FOA is also president of the KTO bargaining unit, and therefore the main negotiator on the employees' side.

Even though it might seem to be a difficult task for the employers, the new, more fragmented negotiation system might strengthen their position. Instead of a KTO-controlled process, the new system will transfer control of the process to the employers. For organisations like DSR, joint coordination has had the disadvantage that they have first had to fight with the other unions in KTO before getting to the 'real battle' with the employers. Now they will have an open fight from the beginning. However, since the employers are in position to 'juggle' between the different negotiating tables, they are able in the first round of bargaining to circumvent (or steer between) certain problematic areas and try to conclude agreements with unions that are more likely to compromise. By so doing, in practice it may be possible for the employers to lay down the main principles and guidelines that will determine the nature of the agreement for the rest of the unions and for KTO as a whole. Arguably, the employers have in 2005 a unique opportunity to conduct a 'divide and conquer' strategy and play off one union against another. (Carsten Jørgensen, FAOS)

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