Why are wages so high in Denmark?
Wage and non-wage costs - Denmark
General information on the labor market
The Kingdom of Denmark is considered a prime example of a country with an effective employment policy among the countries of the European Union (EU). The recipe for success known under the term flexicurity - a combination of high flexibility for the employment and dismissal of employees and economic security for the employees - is based on loose dismissal protection, short notice periods, flexible wages, little bureaucracy, an extensive safety net and an active labor market policy the principle of "support and challenge", special support for young people and a decentralization of competencies for labor market policy measures.
The Danish labor market is characterized by a high participation rate, dynamism and mobility. The seasonally adjusted unemployment rate fell from October 2016 (6.4 percent national average) to March 2018 to 4.8 percent. According to the Employment Outlook 2018 report by the Organization for Economic Co-operation and Development (OECD), only Germany, Estonia, Iceland, the Netherlands, Sweden, Switzerland and the United Kingdom achieved an even higher or in about the same high employment rate.
General data on the Danish labor market (2017)
|Population (in millions) 1)||5,78|
|Labor force (population older than 15 and younger than 65 years, in millions) 1)||3,70|
|Employees (in millions)||2,74|
|Unemployment rate (in%, according to ILO definition)||5,9|
|Illiteracy rate (in%)||very low|
|Medium-length, long further education (in%) 2)||28,9|
1) As of December 31, 2017; 2) Proportion of people with at least three years of university / technical college education (including Bachelor) in the 20 to 69 year old population
Source: based on data from Danmarks Statistics
The trade unions, which are usually organized according to the professional principle, the professional associations with trade union functions as well as union-like organizations are well above the European average in the Danish workforce. In contrast to Germany, the centrally coordinated tariff systems have a very high obligation. In many cases, the collective bargaining provisions virtually replace statutory regulations. However, there is no general binding effect on collective agreements as in Germany.
Some employers' associations also include foreign companies, for example the Dansk Byggeri building association. Membership offers the advantage that companies can receive legal support from the associations in the event of labor law disputes and compensation for the costs incurred in connection with such disputes. If a company is not a member of an employers' association, the union can also reach an individual agreement with that company. With such an accession agreement, the company undertakes to apply the collective bargaining provisions applicable to the industry in full or in a modified form.
Since the trade unions can also demand recognition of the sectoral collective agreements from foreign companies in order to prevent wage dumping (at least the provisions of the Employee Posting Act - Lov om udstationering - must be met), companies often conclude such membership agreements or individual company collective agreements with the regionally responsible trade union department. The German-Danish Chamber of Commerce in Copenhagen has many years of experience in brokering such collective agreements that take into account both the requirements of the trade unions and the wishes of German companies operating in Denmark. By concluding such contracts, it is possible to find compromises in the setting of wages, the organization of working hours and overtime regulations for German employees in Denmark.
Service providers not established in Denmark who only perform services in Denmark on a temporary basis must register in the Register for Foreign Service Providers (Registret for Udenlandske Tjenesteydere; abbreviated: RUT).
In addition to the one-time company registration, every service to be provided in Denmark must be reported. The registration requirement applies regardless of whether or not sales tax is payable in Denmark. An exception applies to the assembly of technical systems or equipment. However, it must not last longer than eight days and must be carried out by posted workers or self-employed who are specialized in or qualified to assemble, install, inspect, repair or provide information about technical systems.
The Danish labor inspectorate Arbejdstilsynet checks the existence of a valid RUT registration for the entire contract period. If the report is missing or incorrect, a fine of 10,000 Danish kroner (DKK) or, in the case of repeated cases, a fine of 20,000 DKK can be issued. From July 1, 2018, the trade office can also impose fines for each day of missing registration.
Striking employees are not entitled to wages during the work stoppage. During this time, union members receive compensation from the union's strike fund.
The main medium for searching for personnel are online portals. Another important recruiting tool are industry-specific portals, some of which are operated by the unions. Companies also publish job vacancies on their websites as well as in newspapers (e.g. Jyllands-Posten, Berlingske Tidende) and specialist magazines.
Wages and salaries
Danish employees are among the top earners in Europe. In the years 2011 to 2013, wage growth in the private sector was below the inflation rate. Since then, however, real wages have risen slightly again.
Development of the average gross monthly wages 1)
|nominal (in dkr)||38.525,37||38.957,98||39.574,89||40.101,77|
|nominal (in euros)||5.165,98||5.225,89||5.305,87||5.386,26|
|real change (in%) 2)||0,5||0,5||1,1||1,0|
1) No information available for 2017 by the editorial deadline; 2) compared to the previous year
Annual average exchange rate: 2013: 1 euro = 7.4579 dkr; 2014: 1 euro = 7.4548 dkr; 2015 = 7.4587 dkr; 2016: 1 euro = 7.4452 dkr
Source: based on data from Danmarks Statistics
The collective agreement concluded between the largest employers' association Dansk Industri (Industry and Services) and the trade union for the period from March 1, 2017 to February 29, 2020 provides for wage increases that are rather small, but nevertheless stronger than the previous agreement, given the current labor market situation. Since March 1, 2018, the minimum wage according to the industrial collective agreement for one hour of work has been dkr 117.65.
When assessing the level of wages, the high taxes and charges typical of the Scandinavian countries and the cost of living must be taken into account.
Gross wages in Denmark are around 30 percent above the corresponding wage level in Germany, but ancillary costs only make up two thirds of the German level.
Due to high minimum and starting wages and comparatively low wages for skilled workers, the wage gap between unskilled and well-trained workers in Denmark is the smallest of all European countries (besides Sweden). In 2016, a site manager only earned around 50 to 60 percent more than a plumber or machine mechanic. The regional wage differentials in Denmark are also small compared to other European countries.
Average gross monthly wages by region (in euros) 1)
|Total employees 2)||Leading forces||Other employees|
1) Annual average exchange rate: 2015: 1 euro = 7.4587 dkr; 2016: 1 euro = 7.4452 dkr; 2) excluding trainees and employees under 18 years of age
Source: based on data from Danmarks Statistics
Service providers from the construction and other craft sectors should bear in mind that they cannot simply calculate German wages for personnel brought along in the context of Denmark-related projects. According to the European Posting of Workers Directive and the Danish Posting Act, posting employers are obliged to pay their posted staff at least the wage that a comparable Danish employee receives. When determining the wages of a comparable Danish employee, it is necessary to take into account the collective agreements that have been concluded by the most representative organizations of the collective bargaining parties and that apply throughout the national territory. In practice, in most cases these are the collective agreements concluded by the employers' associations Dansk Industri and Dansk Byggeri.
However, it is not the Danish authorities that check compliance with the minimum wages, but the Danish trade unions, for example 3F and Dansk Metall. According to the Danish Posting Act, the trade unions are empowered to initiate industrial action to enforce Danish collective agreements.
Average gross monthly wages by sector
|Branch||2016 (in dkr)||Change 2016/2015 (in%) 1)||2016 (in euros) 2)|
|Wage earners without managerial responsibility||38.148||1,3||5.124|
|.Raw material extraction||46.441||2,8||6.238|
|.Water supply / water management||36.546||1,5||4.909|
|.Information and communication||26.868||0,4||3.609|
|.Hotel and catering||47.632||-0,4||6.398|
|.Finance and insurance industry||51.455||1,4||6.911|
|Real estate / rental||36.560||1,1||4.911|
|Managers and executives, overall||64.020||2,2||8.599|
|.Raw material extraction||82.974||13,0||11.145|
|.Water supply / water management||61.990||0,4||8.326|
|.Information and communication||43.983||1,8||5.908|
|.Hotel and catering||75.450||2,5||10.134|
|.Finance and insurance industry||88.586||0,0||11.898|
|Real estate / rental||66.512||2,9||8.934|
1) nominal on dkr basis; 2) Annual average exchange rate: 2015: 1 euro = 7.4587 dkr; 2016: 1 euro = 7.4452 dkr
Source: based on data from Danmarks Statistics
Average gross monthly wages according to selected items
|Position / area of activity 1)||2016 (in dkr)||Change 2016/2015 (in%) 2)||2016 (in euros) 3)|
|Managing director and director with more than nine employees||100.898||-0,4||13.552|
|Head of Sales and Marketing||70.789||2,8||9.508|
|Scientist and engineer||54.427||1,4||7.310|
|Material and engineering specialists||43.603||3,1||5.857|
|General office clerks||34.946||1,1||4.694|
|Office workers in accounting and bookkeeping||36.379||1,4||4.886|
|Machine mechanic and fitter||34.466||1,8||4.629|
1) For better readability, the respective terminology is used in this table for the job titles for both the male and the female form; 2) nominal, based on the information in dkr; 3) Annual average exchange rate: 2015: 1 euro = 7.4587 dkr; 2016: 1 euro = 7.4452 dkr
Source: Danmarks Statistics
Other wage components
To a lesser extent, assuming the costs of private health insurance (around 1 million recipients), co-financing a home PC, providing free Internet access at home, private use of a company telephone and company car, and free allocation of company shares are widespread the assumption of the cost of monthly tickets for local public transport, the provision of press subscriptions, an increase in vacation pay and pension contributions, the payment of physiotherapy measures and massages, preventive examinations and medical advice services, the provision of breakfast as well as discounted offers for private trips (use of Company discounts). For sales employees, commissions, a company car and the payment of a private pension plan of 8 to 15 percent are common. Most of those employed in the private sector drink coffee at work at the employer's expense.
It is not common to pay a 13th month's salary. The payment of a Christmas bonus is hardly widespread.
Social security contributions
In Denmark, a large part of the social benefits financed through non-wage labor costs in Germany are financed through tax revenue and state subsidies (namely the national pension and health insurance, but also part of the expenditure on unemployment insurance). There are no individual social security contributions linked to the salary as in Germany. Membership of employees in one of the state-recognized unemployment funds is voluntary and not a cost factor for employers.
In contrast to the ancillary costs in Germany, most of the costs are not attributable to the statutory contributions for social security, but to collectively agreed, contractual and voluntary payments, in particular for collectively agreed, company or private pension schemes, which are often 10 to 15 percent of the Salary is. The statutory non-wage costs essentially include the low volume payments into the system of the labor market supplementary pension, the so-called financial contribution, the expenses for an occupational accident and disability insurance, costs for a temporary continued payment of wages in the event of illness, costs for continued payment of wages in the event of pregnancy / maternity leave Employees, the assumption of the daily allowance for the first three days of unemployment (for members of the unemployment insurance funds) and, since 2016, the contribution to the AFU fund for posted workers.
Social contributions 2018 (private companies)
|Overall (estimated, including collective preferential conditions often granted), including||Around 7 to 12% of wages 1)||Around 7% of wages|
|. Pension insurance|
|.. Labor market pension / company pension according to collective agreement (frequently applicable rates)||8% of wages||4% of wages|
|..compulsory labor market supplementary pension ATP (rates per full-time employee)||189.35 dkr / month||94.65 dkr / month|
|Costs for sick pay (sick pay or full salary)||30 days 2)||-|
|Wage compensation for leave on the first day of a child's illness 3)||Usually normal wages||-|
|Continued payment of wages during pregnancy and maternity leave||4)||-|
|Unemployment benefit for the first two days of unemployment||Maximum 849 dkr / day||-|
|Industrial accident insurance and disability insurance / AES (industry-specific policies)||From around DKK 1,200 / year 5)||-|
1) without vacation allowance; 2) the 30-day period usually applies to each period of illness; Smaller companies can insure themselves for the costs arising from the 2nd to the 30th day of sickness; the municipality then takes over the wage adjustment; the continued payment of wages in the event of illness after the first 30 days of sick leave is regulated differently in the collective agreements; Employees to whom the Salaried Employees Act applies are entitled to a full salary for the entire duration of their sick leave, but employers can have their salary costs reimbursed by the municipality in the amount of the daily sickness allowance rate; 3) according to the collective agreement, sometimes for several days / with admission to a hospital; 4) In the companies of the DI / Dansk Industri collective bargaining association, paid parental leave of 13 weeks after maternity leave has been in effect since March 1, 2017 (each parent can take five weeks off), but other collective agreements and the Salaried Employees Act provide for different regulations; Employers can receive part of the wage costs from the pregnancy fund of the employer organizations or from the pregnancy compensation fund barsel.dk; 5) the contribution rates per employee vary greatly between the sectors depending on the risk of accident / occupational disability (occupational accident insurance: between the equivalent of 200 euros / year for sales employees up to 160 and 1,400 euros / year for employees from the construction industry; occupational health insurance AES: from around 50 euros / Year for employees in trade up to 250 euros / year for employees in civil engineering, see also http://www.atp.dk)
Sources: Ministry of Employment, professional associations, insurance providers
In addition, the employer accounts for contributions to the central DA / LO development fund, the competence development fund (AUB) as well as contributions to a health system and the co-financing of government expenditure, for example for the unemployed and the sick.
Legal regulations at a glance
|compensation||Free agreement (usually based on collective agreements)|
|minimum wage||No statutory minimum wage 1)|
|Weekly working hours||37 hours 2)|
|Legal holidays||Eight days|
|Vacation entitlement (right to freedom from work)||25 days (five working days per week; according to most collective agreements six weeks or 30 days, managers often more than six weeks) 4)|
|Vacation entitlement (remuneration)||The Danish holiday system applies, according to which entitlement to paid leave must first be acquired. If this has not yet been acquired, 4.8% will be deducted from the salary per day of vacation; According to the Salaried Employees Act, employees are entitled to a holiday allowance of 1% of the previous year's salary, some employers also pay a higher holiday allowance|
|Continued payment of wages in the event of illness||At least 30 calendar days, payment of the usual wage or sick pay, for some occupational diseases up to four months 5)|
|Industry / services: eight or nine weeks (DI tariffs), construction sector: four weeks and eight weeks in the event of illness as a result of the work carried out 6)|
|Salaried employees: full wage compensation (according to the Salaried Employees Act) with the possibility of reimbursement in the amount of the state daily allowance by the municipality and, if necessary, special right of termination by the employer in the event of long illness|
|Probationary period||Six months (workers), three months (employees)|
1) the determination of minimum wages / hourly rates is based on the collective agreements concluded between the employers' associations and the trade unions / professional associations; The general minimum wage in companies that belong to the Central Association of DI, for example, is 117.65 dkr (since March 1, 2018; slightly higher minimum wages apply to certain sectors); 2) there is no statutory provision for working hours; Most collective and employment agreements stipulate a normal effective working time of 37 hours per week (spread over five days) with a maximum daily working time of ten hours; 3) most collective agreements stipulate that employees have a duty to work overtime to a certain extent; These are often remunerated with a surcharge of 50 percent to the basic wage (first three hours after normal working hours or up to one hour before starting work) or 100 percent (further hours); 4) Vacation pay (at least 12.5 percent of the annual salary) is paid by the employer to a vacation account; The entitlement to vacation must be "accumulated" in one calendar year (January 1st to December 31st) and taken in the following year from May 1st to April 30th of the following year (vacation year) (depending on the number of months worked in the calendar year) 2.08 paid vacation days per month); the Holiday Act regulates further provisions; 5) Wages are only paid if the employee has worked at least 74 hours in the eight weeks prior to the illness; The social welfare authorities reimburse the company for the salary from the 31st day of illness up to a maximum amount set annually (daily sickness allowance is paid out for 22 weeks; an extension is only possible if certain circumstances exist, otherwise transition to a so-called job information process); 6) the industrial collective agreement provides for a right to wage compensation for at least five weeks
Danish labor law is enshrined in a number of laws as well as in the collective agreements of the trade unions (professions). Above all, the agreements between the Danish Employers' Association (Dansk Arbejdsgiverforening / DA) and the trade union umbrella organization (Landseinrichtungen / LO) play a major role in the labor law regulations in the private sector and the modalities of the employment relationship, such as the setting of minimum wages, weekly working hours and other possible Overtime or with regard to notice periods, vacation and paid leave. Behind the association DA are mainly the large employer organizations DI (industry, certain sectors also trade, services and transport), Dansk Erhverv (trade / services) and Dansk Byggeri (construction).
A peculiarity in Danish labor law is the distinction between two groups of workers, between workers who carry out manufacturing (industrial) or craft activities, and white-collar workers, the so-called functionaries (holders of various "functions"). This includes employees from the areas of office / administration, technology / engineering, trade / sales, health care / clinic operations as well as management or supervisory functions. For this group, a large part of the labor law provisions are anchored in the Salaried Employees Act (functionaries). Employment contracts with employees must at least meet the requirements and provisions of this Act. There is no such set of rules for workers. Their working and wage conditions are much more determined by collective agreements and individual employment contracts.
There are a number of labor related laws that apply to all workers. The most important laws are: the Employment Proof of Employment Act (Ansaettelsesbevisloven), the Holiday Act (Ferieloven), the Act on Working Conditions and Safety (Arbejdsmiljoloven), the Act on the Legal Status of Salaried Employees in the Event of a Business Transfer (Virksomhedsoverdragelsesloven), the Parental Leave Act (Barslsloven), the Job Clause (Jobklausulloven) and the posting law (Udstationeringsloven).
Conclusion of contract
According to the law on proof of employment, the employer is obliged to inform the employee about all essential conditions of the employment relationship no later than one month after the start of the employment relationship. It is customary to conclude an informal employment contract, the content of which is often based on the corresponding stipulations of collective agreements.
Rights and obligations of the contracting parties
A large part of the rights and obligations of the contracting parties result from the collective agreements, insofar as these are relevant.
The most important regulations for salaried employees result from the salaried employees act. A few important legal aspects should be pointed out at this point:
Basically, an employee (according to the Employees Act) has the duty to carry out the agreed work to an average good standard and to serve his employer faithfully and obediently. He has the right to a salary and reimbursement of travel expenses incurred by the company, to absence in the event of illness, maternity and military service. He is obliged to notify the employer immediately of any sick leave and to adhere to the deadlines for notification of an upcoming maternity leave.
The employer must notify the employee in writing of any changes to an employment relationship (change in one or more of the essential working conditions anchored in the employment contract) no later than one month after the change comes into effect. This obligation does not apply to changes in laws and collective agreements.
Since January 1, 2016, there have been stricter rules in Denmark with regard to employment clauses, i.e. competition, customer and so-called job clauses. These clauses are only permitted under restricted conditions in order to achieve greater employee mobility and knowledge sharing.
Employees who receive ordinary dismissal from their employer after 12 or 17 years of employment are entitled to a severance payment in the amount of one month's salary or three months' salary. An employee is entitled to pursue a secondary job without the approval of the employee if no negative effects on the employer's company are to be expected.
All employees who are subject to the Salaried Employees Act, regardless of the length of their employment with the employer, can give notice of one month (to the end of the month) or, if desired, with longer notice without giving reasons. Immediate termination is possible if you are employed for up to one month. The termination of an employee by the employer must be justified in the behavior of the employee or in an operational matter and, according to the employment contract or the collective agreement, usually in writing. Compared to German law, the requirements for the reason for termination are less strict. There are no dismissal protection laws and dismissal protection lawsuits in Denmark. In the event of gross breach of duty by the employee, termination without notice is possible.
According to the Salaried Employees Act, the following periods of notice apply to the employer: one month for employment periods of up to five months, three months for employment periods of up to two years and nine months, four months for employment periods of up to five years and eight months, five months for employment periods of up to eight years and seven months, six months if you have been working for an even longer period of time.
The employment period always applies from the first day of the month in which the employment relationship began. An agreement of longer notice periods between the contracting parties is possible. It is only legally effective in written form.
The shortened notice period of one month expressly listed in the law in the case of longer illness (at least 120 days within twelve consecutive months) must in any case be agreed in writing between the employer and the employee (expediently in the employment contract). In such cases, termination must be carried out immediately after the 120 days of sick leave (including weekends and public holidays), otherwise it is ineffective and the 120-day rule applies again. By giving notice a few days after the 120-day period has expired, the employer has forfeited his right to a shortened notice period.
The notice periods agreed in the collective agreements for workers and craftsmen are shorter than the corresponding provisions for white-collar workers. For the majority of employees in the construction industry with changing jobs (employees without special responsibility / qualifications), the following deadlines apply:
Notice periods for typical construction and craft occupations in civil engineering (in weeks)
|Employment time||employer||Employee *)|
|0 to 1 year||0||0|
|after a year||3||1|
|after three years||5||2|
|after five years||7||2|
*) Shorter periods after one year of employment are possible if the employee can prove that he can take up another position immediately
Source: Dansk Byggeri
The agreed notice periods for employees to whom neither the Salaried Employees Act nor collective bargaining agreements apply are often identical to the periods specified in the collective bargaining agreements for the respective industry. They are to be anchored in the proof of employment.
|Federal Office of Administration, Federal Office for Emigrants and Foreign Workers||Contact person: Axel Minrath; Internet: http://www.auswandern.bund.de||Practical information for expatriates, such as information on educational institutions, medical care and cost of living, can be obtained from the Federal Administration Office|
|German-Danish Chamber of Commerce (AHK Denmark)||Legal & Tax Department: Jana Behlendorf (Head), E-Mail: [email protected], Internet: http://www.handelskammer.dk||Legal and tax advice, fiscal representation, drafting of employment contracts according to Danish law|
|LEAD Rödl & Partner||Contact person: Alexandra Huber, email: [email protected], Internet: http://lead-roedl.dk/de||Danish law firm|
|Beskaeftigelsesministeriet - BM||Email: [email protected], Internet: http://www.bm.dk||Ministry of Labor|
|Job index||http://www.jobindex.dk||Job portal|
|Adecco||http://www.adecco.dk||Temporary work / recruitment|
|Manpower||http://www.manpower.dk||Temporary work / recruitment|
|Talentor||http://www.talentor.com||Temporary work / recruitment|
|Career information||http://www.karrieredagene.dk||University job fair (Aalborg, Aarhus, Odense, Copenhagen)|
|Job fair Fyn||http://jobmessefyn.dk||Job fair in Odense|
|Career fair Esbjerg||http://www.karrieremesseesbjerg.dk||Career fair in Esbjerg|
|Aalborg Universitet AAU career||http://www.karriere.aau.dk||Career fair / career center Aalborg University|
More information about Denmark can be found at http://www.gtai.de/daenemark.
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