Economic crisis leads to extensive use of work-sharing
In Denmark, the practice of work-sharing is growing extensively, to help mitigate the significant increase in redundancies during 2009 arising from the economic recession. The social partners and companies have called for more flexible rules concerning work-sharing; however, the government has been reluctant to introduce them. In March 2009, the government issued ‘Four initiatives to support employees threatened by unemployment’, which generated considerable scepticism.
Higher incidence of work-sharing
The use of work-sharing has increased significantly during 2009 in Denmark, as a means of avoiding redundancies arising due to the economic recession. In February 2009, the Danish multinational light engineering company Danfoss announced that 416 employees would take part in a work-sharing initiative. In March, another large multinational company, Grundfos, announced that 1,080 employees would begin sharing jobs. Danfoss, which at the end of the 1990s had concluded four agreements to enhance its competitiveness while maintaining employment, urged the Minister of Employment to introduce more flexible legislation concerning work-sharing, in light of the serious employment effects of the economic recession. Danfoss had already dismissed 350 employees in October 2008 and a further 200 employees in February 2009. The company argued that a longer period of lower production through work-sharing could help the company to survive the recession.
In early 2009, the employment situation in the Danish labour market worsened and, in January, the number of redundancy notices peaked. According to the National Labour Market Authority (Arbejdsmarkedsstyrelsen), 107 companies had issued redundancy notices concerning 5,741 employees during this month; this compares with 21 notices encompassing 1,417 employees a year before. At the same time, many companies have started resorting to the use of work-sharing, hoping that the market situation will eventually turn around. During the first two months of 2009, more than 500 cases of work-sharing involving over 12,000 employees had been reported to local job centres, compared with only 27 such cases in 2007 (Table 1).
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Rules of work-sharing
The provision for work-sharing is laid down in Danish collective agreements – for example, in the trendsetting Industry Agreement (DK0703029I) – as an option for difficult economic times. However, the rules concerning the payment of periods without work falls under the law on supplementary unemployment benefit; such benefits are financed by the state. According to the collective agreements, work-sharing can take place for a maximum of 13 weeks, and can be arranged as either one week at work and one week on unemployment benefit, or a minimum of two days a week on benefits. For instance, the employee could work for six weeks and receive benefits for the remaining seven weeks, or visa versa. During the days or weeks of unemployment, those who are ‘periodically unemployed’ are subject to the provisions of the law on supplementary unemployment benefit: in other words, they must be active jobseekers, put together a curriculum vitae, send applications, take part in unemployment meetings, and they cannot refuse offers for another job.
This means that the period agreed concerning work-sharing falls under the competencies of the parties to the collective agreement, while the payment of the weeks without work is the responsibility of the Minister of Employment. A paragraph in the sectoral agreement (Paragraph 8, section 7) allows the parties at company level the possibility to prolong the work-sharing period to 26 weeks. If agreed, the company has to apply to the Regional Employment Council (Regionale Arbejdsmarkedsråd, RAR) to finance the extended period.
Need for greater flexibility in work-sharing
The fast-developing recession has brought work-sharing into focus as an alternative to mass redundancies. As a result of this focus, the work-sharing model has been criticised from different angles for being rigid and insufficient in the current situation.
Large companies such as Danfoss have recommended extending the period of work-sharing from 13 weeks to 18 months, similar to the situation in Germany. As the Chief Executive Officer (CEO) of Danfoss, Niels Bjørn Christiansen, outlined:
We are sure that one and a half years of work-sharing would carry us through the crisis and let us come out in a strengthened position when conditions are better.
The joint shop steward at Danfoss added:
There is no shred of work in this region, especially after the firings at Danfoss and Sauer Danfoss. People will move from the region – 18 months of work-sharing would keep them here.
Most of the trade unions share his view, however only on condition that the periods in between working do not count as supplementary unemployment benefit. The maximum period for receipt of supplementary unemployment benefit is 30 weeks, while the maximum period for work-sharing is 26 weeks; this would only leave four weeks for a later period of, for instance, part-time work that could be complemented by supplementary unemployment benefits. This will pose a problem if the social partners agree to an extended work-sharing model. The President of the Industry Group of 3F, Børge Frederiksen, highlighted:
As long as the minister will not change the unemployment benefit rules, it does not make sense to prolong the period. Furthermore, it would be a demand from our side that work-sharing is combined with measures to upgrade qualifications.
Mr Frederiksen suggests that instead of adopting a ‘work-unemployed-work’ model, a ‘work-education-work’ model would be far more worthwhile. In particular, it would enable companies to retain and qualify their core workers in periods of economic downturn. However, under such a proposal, work-sharing should not count as supplementary unemployment benefit; instead, the employee on work-sharing should be entitled to receive social security while undergoing training.
Government issues four initiatives
The Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) and the Confederation of Danish Employers (Dansk Arbejdsgiverforening, DA) have recommended that the government take the initiative to strengthen the dynamic of the labour market. In particular, they have underlined the need to increase the flexibility of the rules on work-sharing and to adapt them in light of the current difficulties facing companies and the employees who are in danger of losing their job.
On 19 March, the government responded by issuing ‘Four initiatives to support employees threatened by unemployment’ (Fire initiativer til hjælp for ledighedstruede). The four initiatives focus on the following areas:
- and enabling faster access to further training by increasing the funds available;
- establishing a national alert system seeking to offer support as early as possible;
- increasing the monitoring of the labour market’s development;
- introducing more flexible rules regarding work-sharing arrangements.
Henceforth, work-sharing can also be arranged on the basis of two weeks of work followed by one or two weeks of unemployment. Companies working a three-shift pattern can now cancel the nightshift. The three shifts will then replace each other, whereby the employee will be unemployed every three weeks. However, the periods of unemployment will be dealt with as usual. In other words, the periods of unemployment – up to a maximum of 26 weeks depending on whether or not a company agreement is in place – will count as supplementary unemployment benefit.
Response to government initiatives
Three of four government initiatives were in general welcomed by the companies and the social partners. However, the expectations with regard to new rules concerning work-sharing were not met, thus generating strong criticism. The management of Danfoss argued that the package of measures was useless without changing the work-sharing model significantly. As the Human Resources Manager of Danfoss, Peter Norman, outlined:
We have reached a point where it is almost impossible to fire without hurting the company deeply. Only core competences are left and if they are lost it will be very difficult to recover when the recession turns and the capacity of the industry will be needed again.
The trade unions were also dissatisfied with the provisions. 3F was particularly vociferous, expressing its dissatisfaction in the press. The federation’s suggestion of replacing ‘home periods’ with training was not even mentioned by the government. Mr Frederiksen of 3F underlined the federation’s disappointment over the government’s reluctance to amend the work-sharing regulations:
We do not mind prolonging the period of work-sharing in the collective agreement, provided that the minister will pay social security in the periods not at work. And he will not.
Carsten Jørgensen, FAOS