Back to BlogUnderstanding flexicurity: Insights from the Danish labour market
The Danish labour market is widely admired thanks to its high level of flexibility, strong social welfare system and active hiring policies. Together, these three elements make up the ‘flexicurity’ model, which successfully combines a traditional market economy with typical Scandinavian welfare protections.
In this article, we’ll discuss the key elements of this unique labour market, including its benefits for both employers and employees. By the end of the post, you’ll understand everything you need to know to begin hiring or searching for a new job in Denmark.
Understanding the flexicurity model
Denmark’s labour market model is admired by countries around the world because it manages to both safeguard employee welfare and protect the needs of employers. The model is made up of three core elements:
- Employers in Denmark can engage and dismiss employees fairly freely, allowing them to meet their business needs. Unlike in other countries, litigation surrounding dismissals is relatively rare (though there is still legislation protecting employees from unfair dismissal).
- Employees who have paid into an unemployment insurance scheme (A-kasse) can access unemployment benefits for up to two years. This is a voluntary system, but paying into such a scheme is common. According to a 2022 article, 2.1 million Danes are A-kasse members.
- The Danish government runs education and training programmes to help out-of-work Danes retrain, gain new skills and ultimately find new employment. The government also provides counselling services to help get people back into work as quickly as possible.
What are the benefits of flexicurity?
Here are some of the benefits of the flexicurity model for both employers and employees:
- Enhances flexibility and adaptability: The relatively relaxed hiring and firing procedures in Denmark make it easy for employers to scale their workforces up and down as needed. This allows Danish businesses to be reactive to changes in the market by taking a flexible approach to labour.
- Provides a safety net for employees: At the same time, employees don’t need to worry too much about losing a job, because they’re protected by both voluntary insurance coverage and the country’s robust social security system.
- Encourages job mobility: The flexicurity model effectively removes the barriers to job mobility that exist in many other countries. Because employees can change jobs without losing access to pensions or earned holiday entitlements, they feel confident moving around to advance their careers.
- Allows calculated risk-taking: The relative ease of hiring and dismissing employees in Denmark means that employers are more likely to take chances on different types of candidates — who may otherwise have been left out of the job market.
What is an example of flexicurity?
To demonstrate what the flexicurity model looks like in practice, let’s imagine an employer that needs to hire a candidate for a particular position. Since they’ve had trouble finding the right people for this role in the past, they decide to opt for a less traditional candidate.
While this person doesn’t have the qualifications that are traditionally associated with the role in question, they show promise in interviews and the hiring manager believes they’ll be able to learn the necessary skills on the job.
Because of the unique situation in Denmark, the employer knows they’ll be able to dismiss the employee without too much difficulty if it doesn’t work out — so they’re comfortable taking a chance. In the end, the risk pays off and the employee turns out to be a great fit for the role. However, if this hadn’t been the case, the employer would have been able to part ways with the employee without an excessive administrative burden or legal risk.
The employee would then have had access to a safety net in the form of unemployment benefits, which they could receive for up to two years. At the same time, they could have taken advantage of the government’s active labour market policies, receiving the training, education and counselling they needed to secure a more suitable role in the future.
The role of trade unions and collective bargaining agreements in shaping the Danish labour market
While the law does set minimum standards in some key areas, the Danish labour market is primarily regulated by collective bargaining between trade unions and employers’ associations. Almost 70% of employees in Denmark are members of trade unions, and 80% are covered by collective bargaining agreements. These are often applicable to an entire sector or industry.
For example, there is no national minimum wage in Denmark. Instead, minimum salaries are set by collective agreement for specific industries or occupations. These wages are relatively high compared to other European countries, with the lowest set at around DKKK 110 (about EUR 15) per hour.
In addition, collective bargaining agreements set minimum standards for things like working hours, pay, and holidays. The government rarely interferes with matters related to working conditions in Denmark.
Employee rights in Denmark
Part of the reason the flexicurity model works so well is that it’s based on a long tradition of dialogue between employers’ associations and trade unions. While each side wants to protect its own interests, there’s also an element of compromise. That means that, while the Danish labour model allows employees to take a flexible approach to talent, it also ensures employees are protected.
For example, here are some of the most important rights that employees have in Denmark:
- Sick pay and paid holidays: Employees in Denmark are entitled to paid sick leave, which is funded by either employers or the social security system, depending on the length of the leave. They also have the right to at least 25 days of annual holiday leave, plus a holiday supplement.
- Maternity, paternity and parental leave: Denmark is known for its generous parental leave policies. In addition to specific leave reserved for each parent, mothers and fathers in Denmark are each entitled to a total of 24 weeks of leave, which can be taken at any time before their child’s ninth birthday. Some of this leave can be transferred to the other parent, giving Danish employees the flexibility to balance their family and career needs in the way that works best for them.
- Limited working hours and overtime pay: Employees in Denmark have the right to a working week that’s no longer than 48 hours on average. Employees are typically paid overtime for any hours over a weekly maximum of 37 hours. Overtime pay varies according to the collective agreement that applies but is typically between 150% and 200% of the employee’s normal hourly wage.
Employers in Denmark must also provide all employees with a written statement of their key terms and conditions of employment. This provides clarity to employees and ensures everyone understands their rights and obligations.
FAQs on working and hiring in Denmark
Still have questions about working or hiring in Denmark? Here are the answers to some common questions.
What is the 11-hour rule in Denmark?
The 11-hour rule is part of Denmark’s Working Environment Act. It guarantees employees the right to at least 11 hours of continuous rest between two working periods. For example, if an employee’s shift ends at 8pm, their next one can’t begin until at least 7am the following day.
What is the new vacation law in Denmark?
Denmark’s new Holiday Act came into effect in September 2020. The most important change it introduced was a switch to concurrent holidays. Prior to the act, employees accrued holiday days during one calendar year, but couldn’t take them until 1 May the following year. Now, employees accrue holiday from 1 September to 31 August each year and can take it during the same period and up to 31 December of that year.
How are wages determined in Denmark?
As we’ve mentioned, there is no national minimum wage in Denmark. Instead, minimum wages for specific industries and professions are set by collective bargaining agreements, which cover around 80% of the Danish labour force.
As long as they pay at least the relevant minimum wage, employers in Denmark are free to negotiate salaries with their employees. In general, salaries are quite high in Denmark, with an average net annual salary of EUR 41,931 as of 2023. The EU average is EUR 28,217.
Navigating the Danish labour market with CXC
The flexicurity model makes Denmark a unique and interesting place to do business — and a popular destination for international expansion. However, hiring employees in Denmark requires an understanding of local labour laws, collective agreements and the cultural norms that shape the way work is viewed.
If you’re thinking about hiring Danish talent to drive your business forward, consider working with an experienced partner, like CXC. We’ve been helping businesses like yours to compliantly engage talent overseas for more than 30 years — and we can even source, manage and pay those workers on your behalf too. Contact our team today to find out how we could support your business.
About CXC
At CXC, we want to help you grow your business with flexible, contingent talent. But we also understand that managing a contingent workforce can be complicated, costly and time-consuming. Through our MSP solution, we can help you to fulfil all of your contingent hiring needs, including temp employees, independent contractors and SOW workers. And if your needs change? No problem. Our flexible solution is designed to scale up and down to match our clients’ requirements.
