The aim of what the EU has termed flexicurity is to achieve a balance in employment strategies between the security to which all employees are entitled, alongside the growing desire and need for workplace flexibility that both enterprises and workers increasingly demand, particularly considering the rapid growth in remote working.
In order to achieve this goal, the EU and national governments have been working together (along with academics and other stakeholders) to set out some common principles as to how flexicurity policies can be implemented.
There are four main pillars underpinning flexicurity:
- Contracts that offer both flexibility and security
- Opportunities for lifelong learning
- Interventionist labour market policies
- Social security systems that reflect modern working practices
The EU incorporates these flexicurity principles into its European Employment Strategy, and they also underlie the employment targets set out in Europe 2020 Strategy (focused on the achievement of smart, sustainable, and inclusive growth). The flexicurity approach also informs the advice that is given by the EU to member countries as part of the European Semester.
How the flexicurity model has been implemented in Denmark
In terms of how the principles of flexicurity are best implemented, Denmark’s approach to employment policies offers an effective example.
Broadly speaking, Danish labour laws offer an environment in which the needs of both employers and employees are considered and accounted for.
There are no policies that dictate a minimum wage, appropriate social security benefits are in place for workers who lose their jobs, and there are government-sponsored education programs that enable people who are out of work to receive effective training that enables them to re-enter the labour market.
Flexicurity gives employers greater flexibility
One of the key outcomes of the Danish flexicurity model is a more flexible labour market.
For instance, Denmark’s Employment Protection Legislation (EPL) enables employers to reconfigure how their workforce is constituted quickly and easily, so that as an organisation it can better respond to changes in the market and demand.
In addition, pay and working conditions in Denmark are not established and set by legislators, but rather through individual contracts, or via agreements negotiated on behalf of a particular workforce by a trade union.
Furthermore, an agreement between the Danish Employers’ Confederation and the Danish Trade Union Confederation (known as the DA-LO main agreement), covers the employment terms of many of the country’s blue-collar workers.
In summary, Denmark offers employers significant flexibility in the hiring, paying and termination of workers, making it a place where employers have greater freedoms than in many other jurisdictions, a net benefit of which is that it helps to minimize termination costs.
Greater security for employees
Another reason that employers are able to have greater flexibility with hiring and termination is Denmark’s approach to employees’ benefits, most notably with regard to income security and unemployment insurance funds.
Employees in Denmark who are members of an unemployment insurance fund have access to unemployment benefits for two years, and the compensation rate provided is relatively high (it can be as much as 90% for lower paid workers). This is a voluntary scheme, and the funds are managed by providers rather than the state.
Workers who become unemployed but are not part of an unemployment insurance fund are nevertheless entitled to a cash unemployment benefit (which is means tested), albeit at a lower rate than those received by members of an unemployment fund.
Education and training to help people back into the job market
A further plank in Denmark’s flexicurity policy is its emphasis on the importance of vocational training, and the education initiatives it has put in place over several years.
Any low-skilled and skilled workers who lose their jobs but are members of an unemployment insurance fund are entitled, from the first day of their unemployment, to six weeks’ vocational training as a means of supporting their getting back into the job market.
The focus of these training programs is dictated by the needs of the labour market and looks to train and put people into those sectors or industries where there are shortages of workers. This combination of state interventionism and flexibility means that employers benefit through having a greater pool of trained and skilled employees from which to recruit a workforce, particularly at times of labour shortages.
No set minimum wage benefits both employers and employees in Denmark
For employers in Denmark, a significant advantage of a flexicurity employment policy is that there is no statutory minimum wage — instead, enterprises can negotiate individual contracts with employees, or alternatively negotiate collective agreements with trade unions in particular sectors and industries.
This provides a competitive advantage for many employers, as it means that wage levels better reflect labour demands, overheads and prices in a particular industry (rather than a one-size-fits-all approach), and enables Danish companies to compete on the international stage, increasingly important in these days of greater worker mobility and remote working.
Likewise, having no set minimum wage also works in favor of employees, as unions are better placed to be able to negotiate wages that reflect a workforce’s specific skills, demand for its services, and the competitiveness of a particular sector in global terms.
However, there is a minimum salary set by the government for foreign nationals working in Denmark, under what is known as the Pay Limit Scheme. This is currently set at 448,000 DKK per year (37,334 DKK per month).
Under this scheme, foreign nationals working in Denmark are not entitled to benefits under the terms of the Active Social Policy Act but, provided you have a residence permit, you are entitled to free Danish lessons through your municipality.
Other employee benefits in Denmark
At the same time, while the government does not legislate a minimum wage, there are a range of other laws and regulations in place that detail workers’ rights and responsibilities.
For instance, there is a maximum average working hours directive (48 hours per week), as well as guidelines regarding paid time off (25 days per year). There are also statutory rules in place regarding sick leave, paternity leave, paternal leave, and national service leave.