In most countries the labour market is regulated by laws stipulated by the government, and disagreements are settled within the legal system. The Danish labour market, however, is unique, since the labour unions and the employer organizations agree on collective agreements without governmental interference.
Because of its uniqueness it is labeled 'the Danish Model'.
Through negotations the employer organisations and trade unions in the Danish labour market have reached a balance between flexibility and security – sometimes called flexicurity. This approach is an advantage for both employers and employees.
It allows companies the flexibility to adjust to the market demands.
It increases the employment security, because companies are not afraid to hire the people they need.
The result is a high mobility on the labour market resulting in approximately 27 pct. of the Danish workforce changing jobs annually.
A key factor for the success of the Danish Model is the trust between the parties on all levels of the labour market.
For this reason the labour unions and employer organizations are able to negotiate and reach agreements without governmental interference. Since the 1950s the private labour market has only experienced five conflicts, which had to be settled by the government.
This mutual agreement between employers and employees results in a stable and conciliatory labour market which rarely experiences serious conflicts.
The unions and organizations agree on collective agreements, which regulate the labour market. Nevertheless, a small number of laws regulate specific areas. Most of these laws originate from EU legislation.
Collective agreements regulate work conditions concerning minimum pay, termination of employment, work hours, time off, pension, vocational training, etc.
Confederation of Danish Industry (DI) is the largest employer organization with approximately 9.000 member companies.
DI has more than 200 collective agreements. The largest of these, ‘The Industrial Agreement’, covers 240.000 employees working in 6.000 companies.
The Danish model was founded more than a century ago.
In the late 19th century, employees and employers started organizing in labour unions and employer organizations. At this point they had yet to start bargaining on how to solve disagreements. The Danish labour market was marked by discords and conflicts.
The two main organizations were the Confederation of Danish Employers (DA) and the organization that corresponds to LO, The Danish Confederation of Trade Unions. In September 1899, after several months of labour conflict, the two parties entered into an agreement that stopped the conflict and laid the foundation of the future rules for employers and employees.
The September settlement acknowledged the employers’ right to direct and distribute the work while the employees were allowed to organize in unions. Furthermore, the parties agreed on a set of rules for entering into and terminating collective agreements, and giving notice of and initiating conflicts.
Today the Danish labour market is known for its collective bargaining system. Within this system and through collective agreements the two parties, the employers and the employees, solve conflicts and agree between themselves on pay and work conditions.
This benefits the competetiveness of Danish companies and their job creation.
You can read more about legislation in Denmark and collective agreements:
FAOS – Employment Relations Research Centre – is a research centre at the Department of Sociology, University of Copenhagen. FAOS focuses on studies of the labour market, industrial relations, and employment relations, applying Danish, Nordic and European perspectives.