The inception of the Danish model has its humble beginnings over two centuries ago. To understand how and why The Danish Model works the way it does, we must first delve into the history of the Danish labour market. On a late summer day, the 5th of September 1899, the shoulders on which the Danish labour market stands today, were created. During a major labour dispute, which had started months before, in May, a decisive compromise was reached between the employees and the employers of Denmark.

The September Compromise meant that the Danish Employers' Association and the trade unions, representing the employees, mutually recognized each other as organized parties. Since its inception, this first compromise has been the basis of negotiations between the parties. The new agreements have come to be named "hovedaftaler", meaning main agreements. Although the collective agreements have evolved and adapted to the world they work in, they still work within the "law" of the original compromise. This is also why the September Compromise is often called the constitution of the Danish labour market.

The results of the compromise were manyfold, but the most important and decisive parts of it were as follows. The compromise recognized the employers' right to direct and divide the work. It also recognized the right to organize and unionize for the employees, and the right for the employees to take collective action, when dissatisfied. In essence, the September Compromise led to a common understanding of the ground rules in the Danish labour market, and thus effectively ended a tumultuous period with frequent labour disputes.

The Danish model is unique because the terms and conditions applicable to the employees have been negotiated by the labour market parties, i.e., the trade unions on the one hand and the employers' associations on the other. The parties negotiate collective agreements, which can determine e.g., minimum wages for particular areas and pension contributions payable to employees. Most employees in Denmark work under the rules of these collective agreements. This is not the case in most other countries, where rules on e.g., working hours, overtime work, notices of termination and wages are determined by politicians and put into statutory form through legislation covering all or parts of the labour market. The unique collective agreements in Denmark, thus give an opportunity for both employers and employees to work together to create the best possible working conditions in specific parts of the labour market.

In Denmark, it is voluntary and common to be a member of a trade union or professional organization. In fact, 70% of Danish employees are members of a trade union or organization representing their specific professional interests. This means that Denmark has one of the highest unionization rates in the world.

Companies can become part of employers' associations and employees can become part of trade unions, that both represent the respective parties and negotiate on their behalf. In most other countries, collective agreements are not nearly as common as they are in Denmark. And the rate of industrial conflict incidents in Denmark is among the lowest in the EU.

Flexicurity is a portmanteau of "flexibility" and "security". The term is not particularly old, as it was coined by then prime minister of Denmark, Poul Nyrup Rasmussen, in the 1990's. It is however a useful way to describe how The Danish Model works in practice.

It means that employers can easily hire and terminate employment to adjust to the needs of the marketplace. However, it also entails that employees have a secure safety net in-between jobs. This creates a unique system which can accommodate the ever-changing needs of the employers while, at the same time, safeguarding the welfare of the employees.

As mentioned earlier, The Danish Model implies that the Danish Parliament does not interfere with the determination of terms and conditions applicable on the labour market (if the labour market parties are able to reach an agreement).

This is also the case in the individual workplace, as management and employees may agree on the rules that best match their specific relationship and conditions. For example, highly seasonal businesses (e.g., ice-cream shops) may agree on varying working hours to allow for peak season and off-season periods. Moreover, collective agreements vary from industry to industry, ensuring that the rules are adapted specifically to the different wants and needs of the market.

The Danish labour market legislation is structured to accommodate the flexible rules of the collective bargaining system and ensure that people who become unemployed are entitled to benefits and employment services and in many cases unemployment benefits through unemployment insurance funds, where employees can get up to two years of unemployment benefits.

Furthermore, the Danish government runs education and retraining programs and provides counselling services to get unemployed people back to work as quickly as possible.

The Danish labour market is a testament to the idea that a balance between labour market flexibility and job security can be achieved. The system is of course not without flaws, and it continues to evolve. There are however several benefits apart from the beforementioned to The Danish Model:

The Danish tax-system can be a bit of a challenge, that is for Danes and internationals alike. It is a complicated system, and you might find it hard to know where to even start. That is why we, at Expat in Denmark have teamed up with the Danish Tax Agency to bring you webinars where we will be available to help you out and answer questions you may have about taxes specifically or generally.

The webinars will be held in the form of a Q&A and there will be a mandatory video for you to watch before attending the webinars. Both webinars will be held with the upcoming preliminary tax assessment in mind.

The Danish Tax System Online Q&A will be held live on November 21 and December 6 from 17:00 to 18:30.

Watching the video before attending the live Q&A is a requirement to avoid repetitive questions so we can ensure the best possible event. Watch the video already by clicking here.

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