Denmark: Collective bargaining in private sector gives way to some optimism

For the first time since the crisis began in 2008, the renewal of collective agreements in the private sector gives grounds for optimism. Not only do the new agreements cover three years, union members also voted to accept the proposed settlement with the biggest 'yes' vote since the turn of the millennium. 

Introduction

New three-year collective agreements in the private sector were concluded without major problems in early spring 2014 in all the large sectors covered by the Danish Confederation of Trade Unions (LO) and the Confederation of Danish Employers (DA). These agreements affected around 550,000 employees. Wage increases, though small, were agreed for the first time since the beginning of the economic and financial crisis in August 2008. In a ballot, members accepted the proposed final settlement with the largest ‘yes’ vote since 2000.  In the whole LO area, 37.7% voted compared with less than 30% in 2012 and 73% (the highest since 2000) were in favour. However, disagreements about initiatives against social dumping in the construction sector increased.

The majority (85%) of the Danish labour market is covered by the so-called ‘minimum wage system’. Under this system, minimum hourly wage increases are agreed at central sector level while actual wages are negotiated every year at company level. This gives more flexibility the longer the agreement period is.

Industry agreement in the manufacturing sector

As usual, the pace-setting industry agreement in the manufacturing sector was concluded first. This sets the standard and an economic framework for all the other collective bargaining agreements in Denmark.

The social partners in the manufacturing industry, the Central Organisation of Industrial Employees (CO-industri) and the Confederation of Danish Industry (DI), agreed an increase in the minimum pay rate. This was DKK 108.70 (€14.60) per hour before the renewal of the collective agreement which raised by DKK 1.50 (€0.20) on 1 March 2014 (1.4% increase),  by DKK 1.65 (€0.22) on 1 March 2015 (1.5% increase) and by DKK 1.80 (€0.24) on 1 March 2016 (1.6% increase). These increases are slightly higher than the agreed rate increase in the 2012 agreement of DKK 1.35 (€0.18) for both 2012 and 2013. What the actual wages received by workers are will not be known until the end of the period when the results of the wage bargaining at company level are published. However, a favourable prognosis about low inflation gives grounds for optimism.

The mobile Danish labour market, with many job changes during a working life, requires constant upgrading of skills. The trade unions try to make upgrading a collective action, rather than an individual one, through skills development funds and many public further training services. The new President of CO-industri, Claus Jensen, takes a keen interest in this issue. Therefore, it was unlikely that CO-industri would reach an agreement without any new education initiatives and it was not in the interests of DI to oppose them as long as they would not be too expensive to implement. The final compromise contained a few innovative features in relation to the notice period in case of redundancy. A dismissed employee with minimum six months of seniority now has the option to receive further training for a minimum of a week during their notice period. This training is paid for by the employer-funded Competence Development Fund in Industry.

'Free choice' accounts

During the collective bargaining round in 2007, it was agreed to open ‘free choice' accounts for employees. These accounts include contributions from employers on the basis of holiday qualifying pay and employees can use the amount as pay, to take paid leave, make an extra pension payment or to participate in a 'senior scheme' aimed at keeping older workers in the labour market. Each employee has their own account and can decide what to do with the money in it. During the 2014 bargaining round it was agreed to increase the employers' payment by 2% from 1 March 2016.

Provision regarding temporary agency workers

Before negotiations on the renewal of the collective agreements began in 2014, it became obvious that trade union shop stewards wanted to discuss the provisions about temporary agency workers (TAW) because they were worried about their increasing use by companies. At first sight, the possibility of solving this problem through agreements seemed unlikely since the overarching industry agreement already contains a protocol on TAWs, which is quite far-reaching. The result was a procedural improvement to ensure that TAWs are not abused at the expense of full-time jobs. During the negotiations, it was agreed that shop stewards can ask to be informed by the company about the expected use of TAWs.

Transport sector

The main agreement in transport is negotiated between the transport department of the United Federation of Danish Workers  (3F Transport) and the transport department of DI (DI Transport).

The transport sector differs from other sectors in Denmark in that is covered by the so-called ‘normal' wage system. The main characteristic of this system is that all important wage increases are negotiated and concluded at central level. This makes it difficult to foresee developments in the labour market over a three-year period. However, the negotiators found a solution that anticipates some increases at company level in the flexible wage system (the minimum wage system) during the three-year period. Thus the 2014 collective agreement provides for increases in the normal wage of DKK 2.10 (€0.28) an hour in the first year, DKK 2.25 (€0.30) in the second year and DKK 2.40 (€0.32) in the third year.

However, the 2014 collective bargaining round did not solve the most pressing problems for 3F Transport: the increasing number of foreign low-wage drivers. The union succeeded only in having a rule that copies the ‘TAW settlement’ in the manufacturing sector, that is, the user company must inform the union about agreements with temporary work agencies.

Construction sector

The collective agreement in the construction sector is negotiated between 3F Construction and Danish Construction Association (Dansk Byggeri). As in the transport sector, the union's main challenge is the use of low-paid Eastern European workers. During the 2014 negotiations, 3F Construction had demanded on protection against social dumping through:

  • introducing a third-party liability in contracts;
  • not paying foreign workers the sectoral minimum wage but giving them a special bonus as a compensation for not working on a piecework contract.

These issues had also been on the table in 2012 and the employers flatly rejected them again in 2014.  Instead, agreement was reached on some very technical settlements about ‘disproportion in wage setting’ and ‘evasion of the collective agreement’ by large companies.

The difficulties in finding a solution about social dumping came to the fore in the collective bargaining between the Federation of Master Painters and the Painters’ Union. They agreed that a subcontractor was obliged to pay the collectively agreed wage, thus introducing a form of chain responsibility. However, according to DA's rules, all agreements made by the member employer organisations must be approved by DA and this agreement was not approved. The Federation of Master Painters regretted this decision by DA, but pointed out that ‘these were the conditions that they were subject to as part of a larger community’. 

This course of events can be seen as evidence that many small and medium-sized enterprises (SMEs) – as in the painting business – experience unfair competition from larger companies operating as subcontractors. To a certain degree, SMEs have a shared community of interest with the trade unions which are under pressure from the same companies due to their use of low-paid foreign workers.

Conclusion

Thus, the outcomes of collective bargaining in 2014 in the transport sector, and in particular in the construction sector, again underline the division between the social partners in Denmark over that initiatives that seek to mitigate against social dumping.

Source documents: 
PDF icon vejen_ud_af_krisen.pdf
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