Denmark: The role of governments and social partners in keeping older workers in the labour market

  • Observatory: EurWORK
  • Topic:
  • Social dialogue,
  • Sustainable work,
  • Retirement,
  • Agreements,
  • Published on: 02 June 2013



About
Country:
Denmark
Author:
Carsten Jørgensen
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

The social partners in Denmark in the private sector and in particular in the public sector concluded collective agreements on senior policies already before the crisis. After the crisis, these agreements has been revised or extended. The central point in the agreements is a recommendation to establish senior practices at company or organisational level based on individual ‘development dialogues’ with older workers, i.e. workers from around 55 years of age. The aim is to keep older workers in the labour market and to get common awareness about the benefits of having a senior policy.

Background

The ageing workforce is a demographic process that can cause problems related to the sustainability of the welfare regimes and more specifically to the maintenance of the pension systems. On the labour market side, the aforementioned process can have damaging implications for the reproduction of skills and for the availability of the necessary workforce with different impacts in the various economic activities. Therefore, a shrinking working age population risks acting as a drag on economic growth through labour and skills shortages. Moreover, the projections of the 2012 Ageing report suggests that there will be a considerable increase in employment rates for older persons across the EU-27 during the next half a century.

In this context the EU has recognised the importance of the ageing challenge for many years and has developed policy in several areas. Active ageing features as part of the flagship policy ‘Europe 2020’.

Active ageing recognises that if people are to work for a longer period of time, then they will need to be in good physical and mental health, with access to more flexible working arrangements, healthy workplaces, lifelong learning and retirement schemes. In this regard, the attention might go beyond the older group of workers including middle age workers, for example. In order to address the abovementioned challenges, policy measures at national level are needed to promote working conditions that can help keeping workers in the labour market for longer in their lifetime. The content and aims of these policies may vary from country to country because of the particular situation of the different EU countries as regards life-expectancy, ageing, economic and sectoral structure and budgetary aspects.

The role of social partners is essential in this context, as they are key actors in shaping and improving working conditions in the various sectors. Some sectors are characterised by more strenuous jobs, adding to the challenge of keeping older workers in employment longer. Moreover, it is important to examine if and how recent changes (increasing statutory retirement age, economic crisis, technological change, and sectoral and production changes) have impacted on the nature of the policies for improving the quality of work of older workers.

In this framework, earlier case study research by Eurofound identified examples of companies with practices intended to develop a sustainable workforce through adequate working conditions that facilitate keeping older workers in employment and at the same time making possible the presence of the necessary skills in companies. However, given the recent socioeconomic changes and lack of updated comparative information, further research is needed in order to map strategies and measures at national level, as well as to assess certain initiatives from governments, social partners and social dialogue with the aim to improve quality of work in order to keep longer workers in the labour market.

National active ageing policies

The participation of older workers in the labour market is strongly conditioned by the national policy environment, in particular by the pension system framework, employment legislation, wage policies, occupational and wider health care provisions, active labour market policies as well as the availability of education and training.

In recent years most Member States have put policy emphasis on reforming their pension systems and restricting access to early retirement and other early exit routes, which had become popular during the 1970s and 80s as ways to address youth unemployment and challenges of restructuring. As a result of these reforms, leaving the labour market early has become much more costly for individuals.

In addition, many countries are considering – or have already implemented – an increase in the statutory retirement age, partly to take account of the rise in healthy life expectancy and the changing nature of jobs (less physically demanding), but also – and particularly in the current economic climate – to ensure the long-term viability of their public pension systems in the context of increasing pressure on public budgets.

It is also important to note that pre-retirement pensions, which are contra-intuitive to the above outlined EU policy objectives, are still commonly used in a number of EU countries (including also as a result of the crisis), although they have been rendered significantly less attractive to older workers themselves as well as companies. Similarly, the possibilities of part-time career breaks or partial retirement, intended to stimulate workers’ return to a labour market or their retention on a reduced hours basis have in many countries been used as a first step towards early retirement.

Consequently, while the Member States’ policies emphasis has been on foreclosing avenues towards early retirement and raising of the retirement age, The number of governmental initiatives which have been taken to improve quality of work and to assist older workers in retaining a foothold on the labour market seems to be much smaller. Nevertheless, the measures which have been undertaken include among others:

  • Supporting ongoing skills development and validation of existing competences. These measures spring from the recognition that lifelong learning and ongoing skills development are key to supporting sustainable employability not just for older workers, but for the workforce at large (throughout working lives). To make lifelong learning a reality at this scale the current trends demonstrating an under-representation of lower skilled and older workers in continuous learning need to be overcome. Initiatives in this area have been taken both by social partners and national governments. In France, for example, a cross-sectoral social partner agreement from 2006 (later transferred into law), encourages the development of “second half of career interviews”, skills assessments and a better implementation of the individual right to training for workers over 45, while a law from 2005 obliges all companies with more than 300 employees to agree a three-year anticipatory plan on development of competences.
  • Awareness raising measures. These include, for example, financial support for initiatives aimed at making the business case for active age management and retaining older workers in the workplace. These measures also include fighting stereotypes about older workers’ adaptability and willingness to learn, health issues and the level of absenteeism.
  • Member States can also provide support in the development of age management strategies at organisational level (such measures exist in Germany and the Netherlands, among others).
  • Active labour market policies, including:
  1. Advice, counselling, guidance, job matching and vocational training measures to update existing skills and upskill older workers active in sectors facing declining demand;
  2. Subsidies for employers offering employment opportunities for older workers. Such subsidies are often time limited and can be tied to commitments to offer longer term employment or training.
  • Comprehensive approaches, including measures to support work ability and employability. A number of countries provide financial support for “work ability” measures, which take a holistic approach to ensuring an individual’s employability and work ability throughout working life, incorporating training, occupational health and other measures. The most commonly applied approach is the so called “Work ability index” initially developed in Finland.
  • Work organisation related measures, like removing barriers and promoting flexible working. Flexible working time organisation can benefit older workers. Such policies may include regulation developed to promote among older workers flexible work schedules, part-time working, teleworking and easier transition from old (outdated) positions to new tasks, simultaneously improving the employment protection of workers on atypical employment arrangements.

Social partners and active ageing

In recent years awareness of the importance of active age management policies has increased significantly among employers and trade unions in the EU, although the extent to which this has been actively addressed varies.

Just as different countries and regions, also different industry sectors and employers will face divergent age profiles among their staff and therefore varying pressures to take decisive action, although the overall trend towards a declining and ageing workforce is widely recognised as a challenge.

On the whole, social partners’ practices with regard to active ageing can include a number of key elements:

  • Changing attitudes to older workers within organisations (being age positive);
  • Workforce mapping and workforce planning combined with age positive recruitment;
  • Training, development and promotion policies as well as succession management;
  • Health and safety/ergonomics and job design (the two categories above are sometimes referred to as measures to maintain “work ability”);
  • Flexible working practices (temporal, geographical as well as functional, including workplace and work process redesign and redeployment; and
  • Cross cutting policies including inter-generational learning.

It has to be noted that social partner agreements may cover many of the above areas in a holistic approach to modernise industrial relations. For example some social partners organisations in the Netherlands have recently agreed on a social manifesto aiming to create sustainable employment through focus on developing knowledge, improving working conditions, increasing diversity and availability of individual’s choices for all their represented workers including older employees, youth, various education levels, working time arrangements and types of contracts.

Similarly, the social partners in Spain have recently signed a comprehensive active ageing strategy covering the period 2012-2014, which includes elements such as promotion of healthy and secure working conditions through evaluation of risks for older people and corresponding training and information, enhancing companies’ flexibility with regard to working hours to suit older workers needs, re-adapting PES services in improving employability of older workers, fostering experience transfer and fighting age discrimination.

Objectives of the assignment

The main objective of this questionnaire is to describe the strategies/ policies/measures developed by the national governments, as well as social dialogue agreements or individual initiatives of social partners (on national or industry level only) that contribute to improve the quality of work and employment conditions of older workers and to create the working conditions that promote longer working life, and therefore to keep older workers in the labour market.

1. National background and policy context – the main issues encouraging or preventing the extension of working life in your country

1.1 What are the main barriers in your country for the extension of working life?

  • Pension systems which continue to encourage, or fail to provide appropriate incentives to delay retirement (including the ongoing use of early retirement systems);

The overall employment situation of older workers in Denmark is rather encouraging. For the age group 55-59 years, the employment rate of 75.9 % in 2010 is the second highest in the EU. For the older age groups, however, Denmark is surpassed by a number of Members States as a reflection of the sharp decline seen in the Danish labour force participation of workers aged 60 years and older. This is partly a reflection of the special retirement scheme for older workers (60+), the Voluntary Early Retirement Pay (VERP) scheme, which has been in existence in Denmark since 1979.

On the other hand, since the crisis began in 2008 the share of the 60+ at the labour market has grown from 37% to 44% in 2012 (Eurostat Labour Market Survey), however still under the level of Sweden, Norway, Finland and Germany.

  • Taxation systems which make it difficult to combine the receipt of a wage with that of a (partial) pension;

No

  • Unemployment benefit systems which do not require older workers to be actively seeking work or which restrict their access to active labour market policy measures;

No

  • particularly large sectors (of national importance) that have predominantly outdated skills or predominantly employ older workers who are shortly expected to leave the labour market;

No

  • poor quality of working/employment conditions or prospects of personal development in sectors of national importance that force older workers out of employment (sooner);

It is mostly blue-collar workers that make use of the possibility to retire voluntarily at the age of 60(+). Originally the VERP scheme were targeted people worn out after a long physical working life, i.e. mostly blue-collar workers in the manufacturing industry, construction, as well as home care employees and cleaners, which are also the type of workers that make use of the scheme.

  • any discrimination or stereotypes regarding older workers that hinder their employment or their re-employment;

It is in general understood that there is a hidden discrimination against re-employment of older workers, depending however of the job. A recent analysis made by the economists’ and lawyers union’, DJØF, and the Danish Association of Masters and PhDs, DM, about the redundancies in the state in connection with a cost-cutting requirement programme called ‘Effective administration in the State’ showed that a clear majority of the dismissed were 55+ of age even if the state employer claimed that an age-view on the job cuts were not intended. A couple of cases of discrimination filed by DJØF are pending in the labour court system.

  • provision in employment protection legislation which discourage the recruitment (or retention) of older workers;

No

  • any other contextual factors constituting barriers to longer and better quality working lives.

The willingness to continue on the labour market, seen in the light of VERP, seems to be linearly proportional to job satisfaction and inversely proportional to wage. The lower the income the higher is the willingness to make use of the VERP, which is around 80% of the maximum unemployment benefit, which again is around 70% of the minimal wages according to sector.

1.2 In general, what are the main existing policies and other contextual elements contributing to the extension of working life? a) Working conditions related aspects

A central aspect in the existing policies contributing to the extension of working life is among other things to offer the older worker flexible working conditions that fits their capacity – mental and physical.

b) Social and labour market aspects

  • Flexible pension systems which significantly reward extending working lives;

If an older person eligible for statutory old age pension stays another year or more on the labour market, the pension payment will be higher depending on the number of years the person continued (the increase in the pension is thus calculated on an actuarial basis). The old age pension can be postponed for up to 10 years.

  • Taxation systems which encourage working longer (for example in combination with a partial pension)

If older workers stay on the labour market until they reach the statutory public pension age, and therefore do not receive VERP, they will be rewarded with a tax-free fixed amount of around € 20,000.

  • Well developed care systems (for child or elder care) which limit demand on older workers to take up such roles;
  • The Danish care system is so developed that it should not be necessary for older workers to take up such roles;
  • Active labour market policy measures which effectively encourage the recruitment of older workers (including subsidies).

The special rules for unemployment benefits and fewer obligations for older workers with respect to taking part in ALMP programmes have been cancelled thus removing an incentive for older workers to leave the labour market.

There are also wage-subsidies for firms recruiting older workers, although the wage-subsidy scheme is directed at all unemployed. The individual amount of a wage-subsidy is granted for a limited period and can only be implemented with a job center as responsible.The amount differs according to the collective agreement in play.

According to the ‘Act on senior jobs’ from 2006 unemployed workers of 55+ whose eligibility for an unemployment benefit is terminated have a right to be offered a job in the municipalities.. However, there is no guarantee that the job matches the former occupational or educational level of the applicant. Therefore the measure is only partly a success. The new wave of unemployment among high educated in the state are not inclined to make use of the scheme. Statistical facts concerning the number of persons over 55 years of age who has used this possibility is not known.

  • Any other contextual factors constituting contributing to longer and better quality working lives.

There are special schemes for older workers (from 58(+) or 60 (+)) in all trend-setting agreements in the private as well as the public sector. See more details under 2.6.

The age limit in the law concerning age discrimination was in 2006 increased from 65 to 70 years of age.

2. Policies promoting prolongation of working life through the improvement of quality of work

2.1 Developing skills (Training, lifelong learning)

  • Measures / policies / agreements to improve in-work training provision.
  • Measures / policies / agreements to validate existing competencies and skills.
  • Other relevant measures (i.e. promotion of intergenerational skills exchange)
  • Others related to this area (i.e. a general initiative in this area)

By law, there are no specific training measures or programmes directed only at older workers.

Competence development and further training is usually not perceived as specific instruments in relation to the retention of older employees. Denmark has a rather comprehensive adult and further training system following a life course perspective and encompassing all employees and unemployed of all age groups. The system, containing many programmes, is national and based on legislation although the social partners are deeply involved in implementing adult and further training. The aim of the programme is to secure a high level of education and a high level of job mobility in Denmark..

Although no specific measures exists it is emphasised in the collective agreements, for instance in the public sector, that it is important that older workers take up further training where advisable in relation to keep them on the labour market. To this end it is suggested to make special senior courses about the special possibilities for older workers within the sector (for instance: ‘Vejledning til rammeaftale om seniorpolitik’ i.e. Guidance to the framework agreement on a senior politics between the partners in the local government sector.)

On the other hand, based on the Adult Education Survey of Eurostat, in 2007, only 29 % of older workers had taken part in formal or non-formal education and training during the previous 12 months. For all workers, the share was 45%.

A ‘soft’ assessment of why the older workers do not take up more adult and further training would point at the fact that, in most cases, they do not need extra skills to take care of the job they have and career perspectives have less interest.

2.2 Health and safety and health promotion

  • Measures / policies / agreements to improve health and safety in the workplace (which go beyond basic legislative requirements)
  • Measures / policies / agreements to assist in the adaptation of workplaces for (older) workers with limited physical or psychological work capacity, including rehabilitation after incapacity/sickness and integration in the workplace for older workers.
  • Measures / policies /agreements aimed at overall health promotion in the workplace
  • Other relevant measures (i.e. a general initiative in this area)

Older workers with reduced ability to work but at the same time do not qualify for a disability pension can be offered a ‘flex job’ according to the Act on an active labour market policy – the executive order on flex job. The flex job scheme covers all age groups.

Changes in the older worker’s job function with a view to health and safety and thereby a longer working life for the older worker is an option in connection with the ‘development dialogue for older workers’ at company level as agreed between the social partners in both public and private sector.

2.3 Work organisation related measures: flexible working time, career development and horizontal mobility

  • Measures / policies / agreements to support temporal working time flexibility (flexible work schedules, part-time / reduced hours working in the run up retirement, time banks, etc.).
  • Measures / policies / agreements to support geographical flexibility (home working or teleworking policies).
  • Measures / policies / agreements to support functional flexibility (to achieve greater flexibility in who does what and how – for example to enable workers no longer able to do their former job to adapt to carry out new tasks). This could also mean mobility between companies.
  • Measures / policies / agreements to support career development beyond 50+
  • Other relevant measures related to work organisation (i.e. a general initiative in this area)

Special arrangements regarding the older worker’s job functions, for instance work tasks , flexible hours, reduced working time, change to another job within the company or teleworking can be settled in the ‘development dialogue for older workers’ that is laid down in the collective agreements in force between the social partners in the public as well as the private sector with a specific view to ease the job function for the older worker and thereby keep him or her active at the labour market.

2.4 Initiatives related to socio-cultural change

  • Measures / policies / agreements to change “early exit culture”
  • Measures / policies / agreements to promote the value of older workers in terms of performance, competencies and experience
  • Other policies related to promoting changes of attitudes in the society and or in an specific sec tor about the value of older workers
  • Other (i.e. a general initiative in this area)

The mentioned ’development dialogue for older workes’ and the establishment of a senior practice are good examples on how to arise awareness among older workers as well as their younger colleagues about the value of a senior policy at workplace – and an overall senior policy at national level.

2.5 Returning to work for unemployed older people

  • Policies to improve access to the labour market, especially when 50+ workers are unemployed.
  • Others (i.e. a general initiative in this area)

2.6 Comprehensive programmes

  • Initiatives covering various aspects for the improvement of quality of work in order to contribute to longer working lives.
  • Programmes combining working conditions, labour market and welfare aspects.

Examples:

Labour Market Reforms

The ‘Retirement Reform’ from 2011 amended in 2012 narrows the possibilities for taking up the VERP (voluntary early retirement pay) by gradually raising the age limit from 60 to 62, 63 and finally to 64, and by shortening gradually the period for receiving VERP from five to three years. The reform will be phased in gradually until 2023 . Regarding the public old age pension, the pension age is raised by six months a year from 2019 to 2022, so that the retirement age will be 67 years in 2022. Besides discouraging older workers to take up the VERP scheme, the arrangement is estimated to give the state an extra DKK 10 billion in income. An extension of the eligibility to a disability pension concerning the injured or worn out workers is implemented as to balance the slow abolishment of the VERP.

The early retirement scheme is also flexible. Employees with the right to early retirement may withdraw gradually from employment before retirement age, because it is allowed to work unlimited for reduced early retirement benefit. This means that an employee who has a desire both continue work, but also to have more leisure time, have the ability to finance gradual retirement by going on flexible early retirement. In order to supplement earned income with retirement, working hours is to be reduced by at least 7.4 hours per week for full-time insured.

Collective agreement in the private sector

The following is laid down in the trend-setting collective agreement for the private sector, the Industry Agreement 2012-2014: Based on a local agreement individual agreements on a senior scheme regarding reduced working hours may be concluded at company level. The parties determine the design of the reduced working hours based on the individual's wishes and the company's operational needs. The employee that makes use of the senior scheme may choose to have the current pension payment paid as a supplement to the salary.

Senior days in the local government sector

At the collective bargaining round in 2011, the KL and KTO agreed to continue their Framework Agreement on a Senior Policy with a few changes. Among other things, senior days continued as a permanent arrangement with minor adjustments in relation to the scheme, as it was in the period 2009-2011. The reason for this is, among other things, a common evaluation showed that senior day was welcomed by both managers and employees in municipalities.

Senior days are a number of days that the older worker dependant of age is entitle to take as holidays in accordance with the collective agreement. According to the framework agreement on senior policy a monthly paid employee is entitled to take two holidays extra a year with full pay following the year he or she turns 6o years of age. After 61 years of age the number of senior days increases to three and after 62+ the number of senior days reaches the maximum of four days.

Besides the senior days the framework agreement contains different suggestions of how to keep the older worker at work place by combining senior days with different job functions, competence development, reduced working time, a bonus for staying in the company, etc. The suggestions are collected in three types of arrangements for the older workers:

  • Senior jobs (Seniorstillinger)
  • Generational succession arrangements (Generationsskifteordninger)
  • Retirement benefit plans (Fratrædelsesordninger)

The aim is to give the older workers, in de facto 50+, possibilities to plan how to leave the labour market in time and by offering different arrangement early in the ‘late working life’ to keep them in work in order to mitigate the effects of the demographic change and to the benefit of the companies. Central in the arrangements is the ‘development dialogue’ between the older worker and the manager or daily supervisor.

Senior days cancelled in the state

The senior days concluded in the collective agreement in local government has been criticised for being too expensive for the municipalities in the long run, especially when it is taken into consideration that the public pension age is postponed over the next decade. The arrangement has a time bomb incorporated, the critics say.

Senior days also existed in the state sector, same way as in the local government sector, but the social partners suspended the scheme in the latest bargaining round in the public sector in 2011.Still, the agreed senior practice in the state sector offers a possibility for the employees of 62(+) years of age a day off every month, i.e. 12 days a year still receiving full pay.

Moreover, the senior practice in the state sector is, as in the municipalities and the private sector, a flexible and proactive measure with focus on arising awareness about the usefulness of staying longer at the labour market and to this end offering different solutions that makes it more attractive to stay on the labour market. The measures are many, f as the examples mentioned in this questionnaire illustrate,The pivoting point to establish a senior policy in the departments of the state is based on the ‘development dialogue’ with the older workers – or workers getting older.

3. Views of Social Partners on the role of working conditions for keeping older workers in the labour market

Through collective agreements the Danish social partners in the public as well as in the private sector have taken the responsibility for formulating senior or older workers’ policy in the country. The social partners in the state and the municipalities have published a large number of on-line pamphlets with suggestions and good practices regarding senior policies. The social partners in the private sector have done the same, however, to a less extensive degree. The most relevant aspects for the social partners are to encourage the local parties to formulate a senior policy and a senior practice among themselves with the aim to keep older workers at the labour market as long as it is possible.

A small survey, published 25 September 2012 and made by Momentum (a KL magasin) for the public sector partners, shows that a significant high number of managers and daily leaders in the private and public sector are aware of the need of a practice for older workers at the same time that the VERP scheme is being phased out if they are to be kept as valued employees. However, the outcome of this willingness is still to be seen, as pointed out by the critics among the supporters of a continued VERP on unchanged conditions.

Important links for establishing a senior policy:

4. Commentary

Senior policy in Denmark is mostly a combination of flexible measures agreed by the social partners at sectoral level. Mainly in the public sectors at state and municipal level, but also the private sector has established a senior policy. The agreements tend to suggest rather than command that the involved parties establish a senior policy and give thorough suggestions as to plan a senior policy. Central in the suggestions stand the individual ‘development dialogue’ with the older worker in which the manager/director/daily leader and the older worker try to find an agreeable pattern in the last part of the working life of the employee.

Combined with economic incentives targeted at keeping older workers longer at the labour market parallel with the phasing -out of the VERP, it seems that the next five years will show if the number of older workers has increased relatively or not.

Carsten Jørgensen, FAOS, University of Copenhagen

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