Inside the Danish Labour Market: Does Denmark Have a Minimum Wage?
You’re about to enter the Danish labour market, and you need some background information that’ll enable you to successfully negotiate a fair salary. So, you ask, “What is the minimum wage in Denmark?” Or, better yet, you pop the root question: “Does Denmark have a minimum wage?” The summary of the answer is that no, Denmark does not have a minimum wage.
This doesn’t imply that workers in various sectors of the economy are just thrown into the wild and forced to accept whatever little payments their employers mercifully give them. Neither does it mean that the average salary of an employee in Denmark can be huge enough to sponsor a trip to the moon and back. In this article, we’ll break down the intricacies of Denmark’s wage system.
Instead of a Statutory Minimum Wage, Denmark’s Flexicurity Is Based on Collective Agreements
Up until now, you probably thought it strange for wages in a country to not only be determined by the forces of demand and supply, but also to also be regulated by collective agreements. That’s the case in Denmark. In 2018, the Confederation of Danish Employers did a survey to estimate how many workers in Denmark were benefiting from collective agreements. The survey revealed that collective agreements covered all workers in the public sector and 73% of those in the private sector.
How Collective Agreements Work
Here’s a simplified explanation of how these agreements work:
The Organizations Representing Employees and Employers Bargain
The first scenario is one where the Central Organisation of Industrial Employees in Denmark (representing employees) and the Danish Industry (representing employers) meet to bargain on what the minimum payment should be. Employees may not actually receive the amount these groups agree on during their negotiation. The amount is just a wage floor. Real pay is typically determined individually. In other words, the worker and their employer decide what the former will be paid, but as a general rule, the amount paid must not fall below the minimum payment agreed above.
In another scenario, the Danish Industry and the United Federation of Danish Workers set up a Transport and Logistics Agreement. This agreement covers posted drivers or foreign drivers whose companies send them to Denmark to facilitate the company’s operations there. Under this Agreement, the parties don’t negotiate a minimum payment but a standard payment, which is a minimum hourly wage. Usually, the workers actually receive the standard payment.
A third scenario is one where the trade unions or other organizations representing the employees don’t negotiate a minimum payment or a standard payment but simply draw up a collective agreement that stipulates the factors that must be considered when the employers are fixing wages. Such factors usually include the age and experience of the employee, their performance, etc. The agreement breaks down the components of the employee’s salary into parts like the base salary, bonuses for good performance, allowances, etc.
The Employer Adheres to the Collective Agreement
Whether the employee is in the private or public sector, the employer must ensure that they don’t deviate from the collective agreement. After two or three years, the agreement will be revised to ensure that the negotiated amount is adjusted for inflation and other prevailing economic factors.
If the Employer Refuses to Comply with the Agreement, the Organizations Representing Employees Take Action
Different actions may be taken when an employer decides not to honor the collective agreement. The affected trade union has the authority to instruct its members in the defaulting employer’s company to refrain from working for a specified period. It may also order all its members to go on strike or file an action against the employer at the Labor Court.
The Flexicurity Model
Flexicurity is a merger of two words: flexibility and security. Here’s how it works: There’s a flexible labor market, where wages are determined by collective agreements that give employees the opportunity to negotiate favorable hourly rates. Employment and dismissal are similarly easy. Employees can easily transition from one job to another due to the nature of the labor market, while employers can dismiss workers with ease, provided they provide sufficient notice and provide valid reasons for the dismissal.
Another reason why the labor market in Denmark is so flexible is that the government rarely interferes in the wage determination process. Workers also have the option to join an unemployment insurance fund, or an a-kasse. When a member of the labor force joins such a fund, they must make periodic contributions to it. If they lose their job, they will get unemployment benefits from the fund until they secure another job, for a period of up to 2 work years within three calendar years.
Simply put, they will be paid what they would have earned had they worked for 37 hours per week for up to two years in a three-year period. Recent graduates will be entitled to pay for a work year within two calendar years. This means that the total length of time for which they’ll be paid won’t exceed (37 hours × 52 weeks) or 1924 hours within a two-year period.
Working Hours in Denmark
Standard working hours are influenced by collective agreements or individual negotiations. If no collective agreement covers the company or business in question, then the number of work hours is typically stipulated in the employment contract.
As a general rule, the average work week is 37 hours long, with a rest period of at least 11 hours before each workday. Workers may work overtime, but the number of hours that they spend on their jobs must not exceed 48 hours per week.
Does Denmark Have a Minimum Wage? Final Thoughts
Denmark does not have a legally mandated minimum wage, which may surprise those unfamiliar with how pay rates and working conditions are structured in the country. Instead, salary conditions are typically defined by collective agreements entered between trade unions and employers, a system that reflects the needs of both businesses and employees. These agreements, common in certain sectors like manufacturing and sales, often stipulate binding general provisions regarding pay, working hours, and night work, ensuring that workers in Denmark operate under fair and stable conditions.
This means Danes benefit from a framework where workers must receive equal treatment, including equal pay and benefits comparable to a permanent position, unless otherwise agreed. The EU endorses these practices through regulations like the working time directive, which entitles employees to fair rest periods, holiday pay, and maximum working hours. For businesses in Denmark, this century of co-operation between unions and employers is seen as a key to success.
Social welfare schemes, such as dagpenge (unemployment benefits), act as a safety net, offering subsistence payments to those facing hardship, such as losing their jobs, divorce, or unemployment. This means that even without formal minimum wage legislation, a worker must be paid wages negotiated collectively, with some agreements retrospectively updated to account for inflation and other economic factors.
Ultimately, working in Denmark means you’ll experience a balance of rights and responsibilities. Businesses are supported by flexible agreements, while workers are protected through regulation and supplementary social supports. In this way, Denmark has achieved a resilient economy where, if one job disappears, people don’t fall into poverty but are supported to transition into new opportunities. This is something the EU and global experts continue to praise.
