Classic compromise agreement in public sector

The outcome of the 2011 collective bargaining round in the public sector in Denmark was a classic compromise settlement, where both parties could claim they got the best deal possible in the context of the economic crisis. The new ‘minimum agreement’ maintains the status quo, with nothing much new. The agreed pay rises will probably not be enough to secure a real wage increase, because of an adjustment scheme regulating the balance between public and private sector wages.

Background

There was some speculation whether the collective negotiations in the public sector in Denmark would produce a ‘minimum agreement’, where very little is changed, or a ‘welfare agreement’, which introduces new issues, as happened during the 2010 negotiations with the introduction of severance pay in the private sector (DK1101029I).

Most experts had correctly predicted a minimum agreement. The negotiating parties, still feeling the repercussions of the economic crisis, both made concessions regarding otherwise high profile issues (DK1101029I). In return for a low wage increase of 3.15% over two years, state employees obtained significant concessions in flexible working time and the individualisation of local wage settlements without, as is currently the case, prior agreement between the local parties. However, as a result of the so-called ‘adjustment scheme’ in the public sector, the real wage increases were reduced to 0.0% for the first year and 1.7% in the second year (see Table 1). The adjustment scheme ensures public sector wages track private sector wage fluctuations. This is now taking effect because of the generous wages increases secured by the trade unions in early spring, 2008, six months before the economic crisis hit Denmark, when expectations about the economy were positive. By the time the private sector renewed its collective agreement in 2010, the crisis meant workers here had no wage increases at all.

The employees’ organisations and their chief negotiators in the Danish Central Federation of State Employees’ Organisations (CFU) went to great lengths to explain that this time it would be difficult to maintain real wage increases because of the crisis and the adjustment scheme. This meant the State Employer's Authority (Personalestyrelsen) – an agency within the Ministry of Finance – had a small advantage at the start of the bargaining round. However, 2011 is general election year in Denmark, and the Minister of Finance, Claus Hjort Frederiksen, who takes part in the negotiations, could not risk pressing public sector employees to the point of provoking people who are also voters.

Table 1. General wage increases in the state sector as a result of collective bargaining 2011
  Adjustment scheme Agreed wage increase Actual wage increase
1 April 2011 -1.48% 1.48% 0.00%
1 April 2012 0.03% 1.67% 1.70%
Agreed total framework   3.15%  

Source: Personalestyrelsen and CFU

Employers’ demands

More flexible working time

Collective bargaining in the public sector in 2008 paved the way for more flexible working time in the form of a ‘plus time’ scheme, which would allow an individual employee to work more than the agreed 37 hours at national level. However, this concession has not been used widely, and currently requires local agreement between shop stewards and the management. In the 2011 bargaining round, employers demanded that the ‘plus time’ scheme was enlarged so that an individual could work up to 48 hours a week without prior local agreement between shop steward and management. Most unions saw this as an ideological attack on their right to negotiate according to labour law and was therefore inadmissible. The Minister of Finance chose to stay neutral on this controversial issue.

More individualised wage formation at local level

The second significant demand of the employers was more room for individuals to negotiate their own wages with management. Employers also wanted to increase the share of individual wages earmarked for distribution at local level and wanted local wage increases to be negotiated only between an individual employee and management. This demand was rejected by the unions.

Although the demands for flexible working time and individual wage bargaining were dropped, these issues have not gone away. Both are to be dealt with by a committee during the agreement period as part of a ‘service check’ of the entire agreement system implemented by the social partners.

Increased pension age and working time for special groups

Both sides agreed they had to deal with two issues left unresolved since the 2008 collective agreement. These issues were upper secondary school teachers' working time and the retirement ages for police, prison guards and the armed forces.. The compulsory pension age of 63 years for police officers and prison guards will be abolished, in 2011 for the police, and 2019 for the guards. However, both groups can still choose to retire at 63 years of age with a small reduction in the pension they receive. Compulsory pension age is to be increased in the armed forces from 60 to 62 years of age, starting gradually from 2019.

The agreement also concluded that upper secondary school teachers should do all lesson preparation at their schools, although the amount of time spent teaching was not changed, which was the chief aim of the employers. The teachers readily accepted the agreement.

Employees’ demands

Job security and training prioritised

It was generally accepted that there could be only low wage increases, so the unions prioritised job security. However, the final agreement does not offer as much security as they would like. Their chief aim, to have more cash earmarked for training, was only partially met, with public sector employees even having to give up the seniority bonus that they achieved in the 2008 bargaining round. The scrapping of this bonus seems a strange demand from the employers, since there is a need to find ways to keep experienced workers. The employees also had to drop a claim for improved pay conditions, especially for fathers, during parental leave.

The municipalities and regions follow

The first collective agreement to be signed in the public sector is traditionally the settlement between CFU and the Ministry of Finance. This is followed by the agreements in the municipal and regional sectors which, by and large, mirror the national agreement.

There were a few differences. There will be no pay increases in 2011, in exchange for general increases of 2.65% in spring 2012 in the municipalities and regions. Furthermore, negotiations between employers in Local Government Denmark (KL) and the Local Government Employees' Organisations (KTO) led to a stabilisation of the ‘senior days’ agreed in 2008, which were abolished for state employees.

KL succeeded in getting more issues settled at local level. The requested paternity leave for fathers was prevented, as were extensive job security proposals and, as in the state agreement, it was agreed initiatives should be looked at more closely during a ‘service check’ of the collective bargaining system.

KTO secured a moderate fund for training. Shop stewards are to be given longer notice periods for redundancies and teachers got a small, symbolic, wage increase. Unions in the local government sector also succeeded in preventing more local agreements over working time and pay, and in blocking a change in the right to negotiate at a local level which would have reduced the role of the shop steward.

Commentary

More was prevented than added in these agreements. The ballots, in general, showed large ‘yes’ majorities for the compromise settlements – even if the number of union members voting was lower than normal. The employees’ negotiators had been very careful to point out beforehand that it would be very difficult to maintain real wage increases this year, because of having to repay the previously higher wage increases, to maintain the balance between public and private sectors.

In 2013 the conditions will most likely be back to normal and there will be fewer concessions from both sides, but the question remains whether the initiated collective agreement ‘service checks’ will be used as a pretext for inaction or if they will lead to changes in the bargaining system.

Carsten Jørgensen, FAOS, University of Copenhagen

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