Collective agreement reached in public sector after tough negotiations

In the early months of 2008, new collective agreements were signed by the social partners in the public sector at state, municipal and regional level. The renewal of the agreements took place amid unprecedented turbulence, and three of the largest trade unions gave notice of possible industrial action. The trade unions had highlighted that pay levels in the public sector lagged behind the private sector and they demanded extra increases to compensate for the deficit.

Background

Collective bargaining in the public sector in Denmark usually takes place in an atmosphere of consensus rather than conflict. The public sector is second in the collective bargaining hierarchy after the export-oriented economic activities of the private sector, which set the norms for wage development (DK0803029I). Furthermore, the traditions that have formed the Danish model of labour market regulation prescribe that collective bargaining on pay and working conditions is an issue for the social partners alone; legislation in this field is limited and the political system does not interfere in the negotiations – unless the social partners in the end fail to reach an agreement (DK0605049I). protracted

During the most recent bargaining round, things began to go wrong even before negotiations started. Nurses, persons who care for elderly individuals, and child and youth educators announced early on that they lagged behind significantly in terms of pay increases compared with the private sector, and that they therefore expected a substantial pay rise that might even exceed the average increase in the private sector. Unexpected intervention from the political parties in favour of special treatment of these groups added to the tension and turned the collective bargaining round into a collision course (DK0709029I).

Expectation of extra funds available

The situation in the run-up to the start of negotiations for the 2008 public sector collective bargaining round can be summarised as follows.

The supporting party of the government, the Danish People’s Party (Dansk Folkeparti, DF), proposed in the summer of 2007 to give the employees in the health and social work sector – that is, members of the public sector union Trade and Labour (Fag og Arbejde, FOA) – an extra earmarked pool of DKK 5 billion (€670 million as at 30 May 2008). This sum would be independent of the forthcoming collective bargaining round, and was proposed by DF because the sector is characterised by low wages. FOA, for its part, had already issued a media statement demanding an extraordinary pay increase, claiming that its workers lag far behind in average pay developments compared with the private sector. The proposal was backed by the opposition parties – the Social Democrats (Socialdemokraterne) and the Socialist People’s Party (Socialistisk Folkeparti, SF).

Other trade unions within the Association of Local Government Employees’ Organisations (Kommunale Tjenestemænd og Overenskomstansatte, KTO) supported the idea of an extra pool of money, but declared that the sum should be divided equally among the unions, according to negotiation practice. The President of FOA and KTO, Dennis Kristensen, had to resign his post in KTO due to the perceived favouring of his trade union.

FOA, the Danish Nurses’ Organisation (Dansk Sygeplejeråd, DSR) and the Danish Federation of Early Childhood Teachers and Youth Educators (Forbundet for pædagoger og klubfolk, BUPL) all demanded an extra pay rise and made clear that they would take industrial action if their claims for significant wage increases were not met.

Negotiation participants

The main actors taking part in the 2008 public sector collective bargaining round were, on the employers’ side: the state, represented by the Ministry of Finance (Finansministeriet, FM); the municipalities, represented by Local Government Denmark (Kommunernes Landsforening, KL); and the regions, represented by Danish Regions (Danske Regioner). Meanwhile, the trade unions taking part in the negotiations were gathered in three joint bargaining cartels:

  • KTO, consisting of 48 trade unions and representing 532,000 employees in the municipalities and regions;
  • the Central Federation of State Employees’ Organisations (Centralorganisationernes Fællesudvalg, CFU), which consists of representatives from three state-level organisations comprising 59 trade unions covering 176,000 employees;
  • the Healthcare Cartel (Sundhedskartellet), consisting of 11 trade unions connected to regional hospitals and the health sector at municipal level. In this grouping, DSR is the dominant trade union; it covers about 60,000 active members of the 90,000 members in the whole cartel.

Minister of finance proposes solution

On 18 December 2007, the Minister of Finance, Lars Løkke Rasmussen, responded to the political pressure about the extra DKK 5 billion (€670 million) to be included in the collective bargaining round for 2008. Minister Løkke Rasmussen advised that, for 2008, 2009 and 2010, the public sector social partners at state, municipal and regional level could increase wages by 4% instead of the 3.2% that was set aside in the economic budgets for the municipalities and regions. Thus, the government increased the block grant by DKK 900 million (€120 million) for the municipalities, DKK 300 million (€40 million) for the regions and DKK 500 million (€67 million) for the state. This gives a total sum of DKK 1.7 billion (€227 million) in 2008 and in the following two years of the agreement period, which altogether adds up to a further DKK 5.1 billion (€683 million) to be spent on pay increases for employees in the public sector.

However, this increment of up to 4% would have taken place anyway; the question was soon raised as to how much ‘extra’ the minister’s solution would leave in the end. As it stands, a special adjustment scheme (reguleringsordningen) in the public sector ensures that the yearly development of pay in that sector follows the actual development in the private sector. For instance, if the increase in the public sector – combining general wages, pension, extra days off, payment during sickness and maternity leave, excluding holiday pay – adds up to a total increase of 3% in a particular year and this percentage is 4% in the private sector, the adjustment scheme will ensure that 80% of the difference will be released the following year in the public sector.

In other words, even if the government had not increased the economic scope, the adjustment scheme would have given the public sector employees almost the same pay increase as in the private sector. Only the timing of the releases would be delayed, as the minister’s proposal instead releases a larger sum in the first year. Thus, it is difficult to argue that the DKK 5 billion conjured by the minister is ‘extra’ at all. Mr Kristensen of FOA remarked that it was like ‘feeding the dog with its own tail’.

Negotiations at local and regional level

During January 2008, KTO concluded partial agreements with KL and Danish Regions. The main results were the introduction of ‘senior days’, more paternity and maternity leave, better working conditions, including a small fee for employee representatives, and extra means set aside for competence development. Most remarkable is the six weeks of paternity leave, that is, earmarked for the father. The existing 12 weeks of paid leave after the birth of a child is changed to three periods of six weeks, where the mother and father are reserved six weeks each and the remaining six weeks can be planned as wanted. If the father does not wish to use this opportunity, his six weeks of leave will be annulled.

Regarding the rights of senior workers, it was agreed to introduce special ‘senior days’. Employees in the public sector will now have two extra days off a year at full pay at the age of 60 years, three days at 61 years and a maximum of four days at 62 years.

Settlement at state level

On 18 February 2008, the social partners at state level – CFU and the Ministry of Finance – concluded the first sectoral agreement in the public sector for 2008. The tradition that the state signs first was thus followed.

The agreed economic framework – that is, the maximum increase including all pay provisions, pension contributions, family leave, extra care days and other benefits – was 12.8% divided over the three-year agreement period. The settlement included the ‘soft chapters’ from the KTO partial agreements, combined with another day off with pay in connection with a child’s second day of illness. As a new feature, 0.2% was set aside as compensation for the lack of ‘fringe benefits’ in the public sector; such perks are widespread in the private sector, for example a free home computer or free transport. This extra compensation is kept outside the regulation scheme.

The major part of the economic framework, 8.17%, was set aside for general pay increases and 1.5% for local pay rises. Thus, the total represents a 9.67% wage increase over the three-year period. A further 2.2% was earmarked for the trade unions’ own negotiations with the state. Of the total framework, 5.8% is provided in the first year.

Second attempts at local and regional level

The day after, KTO and KL tried to reach a settlement at local level, using the state agreement as a guideline. KTO demanded an increase of the economic framework to 13.1% because the municipalities lagged behind in pay development compared with the state level. However, Minister Løkke Rasmussen had underlined that the framework of 12.8% in no circumstances could be exceeded, and the minister has to approve an agreement before it is signed. The employers in KL had no choice but to reject the 13.1% claim. FOA then left the joint negotiations with KTO in order to continue discussions alone.

A week later, the Healthcare Cartel delivered the first notice of industrial conflict after reaching a stalemate in the negotiations with Danish Regions. The nurses were standing firm on an economic framework of 15%, which was promptly turned down. KTO and KL met on 28 February but had to abandon talks without coming to an agreement.

Third time lucky

On 29 February 2008, the negotiators in KTO and KL met for the third time in order to find another acceptable and innovative solution, and they succeeded in doing so by the end of the day. This was the last chance to conclude an agreement before the negotiations had to be transferred to the Public Conciliator. Failure of the negotiations would have been seen as humiliating for the social partners, in not being able to find a solution themselves and being forced to rely on an external mediator.

The final settlement was kept within the economic framework of 12.8%; nevertheless, the municipal employees managed to obtain slightly more than they would have got in the first negotiation attempt. The first demand of 13.1% was a ‘flexible translation’ of the settlement at state level into the municipal level. As noted, the municipalities lag a little further behind pay developments in the private sector than is the case at state level. The small difference up to 13.1% would compensate for this deficit but, since this was unacceptable for the Ministry of Finance, another solution to counterweigh this difference had to be found.

The final agreement gave 7.53% in general wage increases over the three-year period, which in itself is estimated to secure a positive development in actual pay. Furthermore, 4.5% was allocated for the organisations to negotiate individually with KL. In addition, the settlement provided for compensation of 0.2% for the lack of fringe benefits and 0.4% was added to the special holiday allowance. The latter was also kept outside the regulation scheme and this factor was decisive for KTO. This benefit constitutes the difference compared with the settlement in the state sector, where only the 0.2% is kept outside the regulation scheme.

Commentary

Although KTO in the end agreed to a limit of 12.8%, the actual result was slightly better because of the extra 0.4% which was gained at local level. Both sides could therefore claim that their negotiations were successful. The employers managed to keep the economic framework within 12.8%, while the employees managed to obtain a little extra by increasing the special holiday allowance that was not included in the framework.

Carsten Jørgensen, FAOS

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