$Unique_ID{COW01107} $Pretitle{411} $Title{Denmark Selected Information on Doing Business in Denmark} $Subtitle{} $Author{Embassy of Denmark, Washington DC} $Affiliation{Embassy of Denmark, Washington DC} $Subject{labor employees denmark dkk percent work workers collar employer year} $Date{1990} $Log{Table 1.*0110701.tab Table 2.*0110702.tab Table 3.*0110703.tab Table 4.*0110704.tab Table 5.*0110705.tab Table 6.*0110706.tab Table 7.*0110707.tab } Country: Denmark Book: Selected Information on Doing Business in Denmark Author: Embassy of Denmark, Washington DC Affiliation: Embassy of Denmark, Washington DC Date: 1990 Selected Information on Doing Business in Denmark THE LABOR MARKET IN DENMARK A. Labor Force Denmark has a total labor force of about 2.8 million people of which 1.5 million or 54 percent are males and 1.3 million or 46 percent females. The composition of the labor force by age for 1986 and projected 1995 is shown in Table 1. Due to the declining birth rates in recent decades, the number of young people entering the labor market will continue to decrease for a number of years. The number of workers in the age bracket of the labor force below 25 years is expected to decrease by 1995. The number in the age bracket between 25 and 44 will remain largely constant; whereas, an increase is expected in the number of workers in the age segment from 45 to 59. The number of workers 60 years or older is also expected to increase. Most of the labor force is employed in the service sector, manufacturing accounts for less than one-fifth of employment; trade for about one-seventh. Less than 8 percent of the labor force are employed in agriculture and in construction. Table 2 shows the distribution of employment by industry. Denmark had full employment in the 1960s and 1970s. Unemployment began to rise in the 1970s following the first oil crisis and the rate peaked at 10.5 percent in 1983. During the 1980s the unemployment rate has ranged from 7 to 9 percent. The total number of jobs has been increasing steadily but not sufficiently to absorb the increasing working population, in particular women entering the labor force. Currently (early 1990) some 300,000 people, or approximately 10 percent of the total labor force, are out of work. B. Labor Costs 1. Wages and Salaries There are no minimum wage provisions in the Danish legislation. The wages are fixed through individual negotiations or collective bargaining. The basic principle governing the wage fixation mechanisms of labor contracts is that wage increases should be firmly based on corresponding improvements in productivity. a. Blue Collar Workers (wage earners) The hourly wages vary from industry to industry and there are also regional differences. The basic wage levels (excluding premiums, bonuses, and holiday allowances) ranged from an average of DKK 71.47 (about $10) for unskilled female workers in Western Jutland to DKK 107.37 (about $15) for skilled workers in the Copenhagen area in the 1st quarter of 1989. b. White Collar Workers (salaried employees) White collar employees are usually paid a monthly salary which includes an allowance for vacations and public holidays. There are differences in salary levels between males and females and between the Copenhagen area and the provinces. For example,the monthly median salary for Danish white collar employees ranged from a low of DKK 11,873 (about $1,695) for women in the island of Bornholm to DKK 20,676 (about $2,950) for male employees in Copenhagen, in September 1988. The locational difference is generally less than 10 percent for most occupations, with the exception of computer programmers where the difference is 20 percent. The average monthly salary paid to male employees in Copenhagen for selected occupations in September 1988 was as follows: [See Table 1.: Average Monthly Salaries for Selected Occupations] 2. Fringe Benefits Voluntary benefits include supplementary pension schemes, subsidized canteens, free transportation, company cars, free uniforms, payments in kind and group life insurance coverage. The granting of fringe benefits is the prerogative of the employer. Standards in this field vary considerably from company to company, but generally the fringe benefit costs are modest. 3. Profit-sharing There are no mandatory profit sharing obligations in Denmark, but a number of companies do offer their employees profit sharing schemes on a voluntary basis. Companies may give their employees company shares up to an annual amount of DKK 6,000 (about $860) per employee. Companies may also offer their employees stock options for company shares at below-market value. Such benefits are tax-free for the employees provided the tax authorities approve of the scheme, and that the shares are not sold or disposed of within seven years in the former case, and five years in the latter. 4. Overtime and Bonuses Overtime premiums are not fixed by law and they vary considerably from company to company. A 50 percent premium is not unusual for blue collar workers. Annual bonuses are not common. 5. Holidays and Vacation There are ten public holidays each year. In addition to these, all employees have a statutory right to paid vacations of not less than five weeks. Entitlement to paid vacation accrues during each calendar year and must be taken in the year following the year of accrual. The vacation year runs from May 2 in one calendar year to May 1 in the following calendar year. A full year's works, whether or not with the same employer, gives the employee full entitlement to vacation in the following year. The employer's obligation to make payments for vacation is calculated pro rata to the length of the employee's service with the employer in the year of accrual. White collar employees receive their normal salary during the vacation period plus a 1.2 percent vacation allowance. Blue collar workers receive a vacation allowance of 12.5 percent of the annual wages (excluding vacation time) in the year of accrual. 6. Indirect Costs Indirect costs consist primarily of employer contributions to the Supplementary Labor Market Pension (ATP), and premiums for accident insurance. However, these are offset by certain allowances. There are also some minor costs attributable to required health service and training costs. Indirect labor costs are very low in Denmark, about 1.5 percent of the basic wages and salaries, but amounting to practically not due to the offsetting allowances. Tables 3 and 4 present the components of labor costs for typical wage earners and salaried employees. The total amount of labor cost for an "average" blue collar worker is estimated at DKK 184,000 (about $26,300) and amounts to 1.24 times the direct basic wages of such a worker. The total labor cost for a white collar worker is estimated at DKK 210,542 (about 30,100) and amounts to 1.17 times the direct salary of such a worker. C. Regulations Concerning Working Conditions 1. Working Hours Maximum working hours are not fixed by law but through agreement between employers and trade unions. In accordance with a 1987 collective agreement, working hours for 1990 are 37.0 hours per week. A five-day week is the normal standard for most workers. The rules and practices pertaining to working hours, shift work, and overtime are very flexible. Working hours are fixed in accordance with the needs of the company. 2. Discrimination at the Work Place Legislation enacted in 1978 provides for equal treatment of men and women in employment, transfer, or promotion. Equal treatment also applies to working conditions, dismissals, and training. Statements in advertisements that persons of a particular sex would be preferred for employment, or training, are not permitted. An employer cannot dismiss an employee on the grounds that the latter is a member of a trade union. 3. Health and Safety Regulations Health and safety at work is governed primarily by the Working Environment Act which covers both trade and industry. It is the purpose of this Act to ensure that a safe and healthy working environment is created at the working place and that questions relating to health and safety are solved by the companies themselves under the guidance of the employers' and workers' organizations and the guidance and supervision of the Labor Inspection Service. The Act app lies to all persons at work--public servants as well as private sector employees. Employers are obliged to ensure their employees against diseases and accidents resulting from work. The insurance premium varies widely, depending on the risks involved, but for most blue collar workers it amounts to approximately DKK 1,500 (about $215) per full-time employee per annum. The state refunds the employer's insurance premiums at a standard premium paid. 4. Termination of Employment Employers are entitled to dismiss their employees according to their own judgement provided that legal or agreed upon notices are observed. This rule also applies in the case of layoffs. Summary dismissals are allowed in appropriate circumstances. a. Blue Collar Workers Neither the time of notice which workers must give their employers nor the time of notice which employers must give their workers are stipulated by law, but provisions to this effect are usually incorporated in the collective labor agreements. Notice periods vary widely from no notice to 120 days' notice. The general rule is that dismissals must not be based on "unreasonable grounds." b. White Collar Workers Provisions regarding termination of employment of white collar employees are stipulated in the Salaried Employees Act. Employees are obliged to notify their employer at least one month in advance of their intention to terminate employment. Employers are obliged to provide notice of intention to terminate an employee's employment in accordance with the employee's seniority, as follows: [See Table 2.: Notification of Termination Periods] Employees who have served with the same employer for more than 12, 15 or 18 years are entitled to an additional allowance of 1, 2 and 3 months' salary, respectively. Salaries may be paid in lieu of notice. D. Labor Force Performance 1. Labor Turnover In a recent survey carried out by the World Economic Forum for the "World Competitiveness Report 1989," Denmark was ranked as the 6th best among the OECD countries after Japan, Austria, Ireland, the Netherlands and Belgium/Luxembourg on the criterion "employee fluctuation," i.e., extent to which work-force turnover adversely affects enterprises. 2. Absenteeism Absence due to illness, maternity leave or accidents amounted to 5.6 and 2.1 percent of the total annual working time in the 1st quarter of 1989 for male blue collar workers and white collar employees, respectively. Detailed statistics for the most recent years are shown in Table 5. In a recent survey carried out by the World Economic Forum for the "World Competitiveness Report 1989", Denmark was ranked as the fourth best among the OECD countries on the criterion "labor absenteeism," with the best score after Japan, Switzerland and Turkey. [See Table 3.: Composition of Labor Force by Age (in millions and percent)] [See Table 4.: Employment by Industry (1985) (in thousands and percent)] [See Table 5.: Typical Labor Costs for Blue Collar Workers (Based on average wages in 2nd quarter of 1988, 1702 work hours per year)] [See Table 6.: Typical Labor Costs for White Collar Workers (Based on median salary in 1st quarter of 1988)] [See Table 7.: Self Absenteeism Percentage of the Total Annual Working Time] WORKING IN DENMARK WORK AND RESIDENCE PERMITS, AND REAL ESTATE ACQUISITIONS All foreign nationals (except citizens of Scandinavian countries) who intend to work in Denmark must obtain work and/or residence permits. Real estate for business purposes can be owned by foreigners. A. Work and Residence Permits European Community (EC) nationals do not require a work permit but must apply for a residence permit within three months after their arrival in Denmark. Applications are filed with the chief of police in the district of intended residence and permits are readily granted on production of proof of employment and identification. Nationals of Nordic Countries (Sweden, Norway, Finland, Iceland) do not require a work or residence permit. Citizens of other countries must apply for a residence and work permit at a Danish Embassy or Consulate at the place of origin prior to taking up employment and residence in Denmark. Work and residence permits are usually granted to management staff of subsidiaries or branches of foreign companies in Denmark and their spouses and children. Permits are also granted to applicants in possession of special skills, expertise, or capabilities which are either lacking or in short supply in the Danish labor market. Such permits may be limited to the period of time needed to transfer the skills in question to the local labor force. For other applicants permit applications are examined case by case on the basis of their individual merits. In these situations work and residence permits may be granted in cases offering substantial benefits for Denmark in terms of employment or economic activity. In a recent survey carried out by the World Economic Forum for the "World Competitiveness Report 1989" Denmark was ranked 2nd among all OECD countries on the criterion "temporary expatriate work permits", i.e. extent to which government is amenable to issuing such permits. B. Real Estate Acquisition by Foreigners A permit from the Danish Ministry of Justice is required to acquire real property in Denmark if the buyer is not permanent resident of Denmark. Foreign companies and individuals of non-EC nationality who wish to acquire real estate in Denmark for business purposes (e.g. manufacturing plants, distribution centers, sales offices) will usually be granted a permit to do so provided the property is intended for the pursuit of active business purposes. Permission is not usually granted for the acquisition of real estate as a passive property investment. Permission allowing foreigners in possession of valid residence permits to acquire real estate for dwelling purposes is granted as a matter of routine. Equally, foreign-owned companies in Denmark are routinely granted permission to acquire real estate for their expatriate staff in Denmark to reside in. Applications regarding acquisition of real estate should be addressed to the Ministry of Justice (2nd Department). EC nationals who are working in Denmark and EC companies operating in Denmark are permitted to acquire real estate for business or residential purposes without prior permission from the Ministry of Justice, provided the purchase and sales contract contains a statement issued by the buyer stating that he/she belongs to one of the exempted categories, that the property is intended for business or residential purposes, and that it is not a week-end cottage or intended to be used for recreational purposes. EMPLOYMENT COSTS IN DENMARK SOCIAL BENEFITS AND EMPLOYEE/EMPLOYER CONTRIBUTIONS Denmark has a comprehensive social benefits system, which includes unemployment and disability benefits, sickness and maternity allowances, and retirement pensions. A. Benefits 1. Holiday Pay All employees have a statutory right to paid vacation and paid public holidays. There are ten public holidays each year, which must be paid. In addition to these, a legal minimum of five week's annual paid vacation must be granted. Salaried employees receive their normal salary during the vacation period. Wage earners are entitled to a vacation pay of 12.5 percent of their regular wages for the preceeding year. 2. Unemployment Insurance Members of state approved Unemployment Funds are entitled to state paid unemployment benefits of 90 percent of their most recent wages and salaries up to maximum of DKK 2,397 (about $340) per week, provided they have been members for an uninterrupted period of one year and that they have been in employment for at least 26 weeks during the last three years. The maximum duration of unemployment benefit is 2.5 years. All wage and salary employees are normally members of Unemployment Funds. Individuals who are not members of an Unemployment Fund and who have no income are granted a subsistence allowance by the municipality in which they reside. 3. Industrial Accident Insurance All employees are entitled to a compensation in case of work related injury leading to loss of ability to work or permanent injury. The compensation for the loss of ability to work is an annual pension of 80 percent of the last annual earned income up to DKK 198,400 (about $28,340). The compensation for permanent injury is an annual pension of up to DKK 30,000 (about $4,280). In the case of on the job accidental death, the compensation is a one-time payment of DKK 78,000 (about $11,140) to the surviving spouse and children, and an annual pension of up to DKK 123,800 (about $17,680). 4. Sickness Allowances Wage earners are entitled to receive daily allowances from their employer in case of sickness or accident for the first week of absence. The allowance amounts to 90 percent of wages up to maximum of DKK 2,339 (about $335) per week. After the first week, the daily allowances are borne by the state. Salaried employees are entitled to their normal salary for a period of absence due to sickness or accident of up to 120 days a year. The employer's expenses (up to a maximum of DKK 2,339 or about $335 per week for periods exceeding one week are reimbursed by the state. 5. Maternity Allowances Women are entitled to paid maternity leave for 4 weeks before and 14 weeks after delivery. Fathers are entitled to paternal leave for 2 weeks after delivery. Upon expiry of the 14 weeks maternity leave, the parents are entitled to share a supplementary leave of 10 weeks. It is up to the parents themselves to decide how - if at all - this supplementary leave is divided, but the parents are not allowed to take leave simultaneously. During maternity or parental leave periods the parents are entitled to daily allowances of 90 percent of their most recent wages or salaries up to a maximum of DKK 2,397 (about $340) per week. A woman has a legal right to return to her job. An employer may not dismiss a woman on the grounds of maternity. In case of contravention, the employer is liable to payment of up to 26 weeks' earnings to the dismissed female employee. 6. Pensions In addition to the old-age pension granted by the state (generally from age 67 for men and 62 for single women), all salaried employees and wage earners are entitled to a Labor Market Supplementary Pension (ATP). The basic annual pension paid to a single person is DKK 51,336 (about $7,350). In addition, an income adjusted supplement may be paid. The annual supplementary pension for an individual with maximum pension contribution seniority is DKK 5,886 (about $840). Early retirement pensions may be applied for by members of state approved Unemployment Funds as of the age of 60. Many salaried employees are covered by voluntary pension schemes partly financed by their employers. There are no legal requirements concerning coverage and benefits for voluntary retirement plans. B. Funding 1. Holiday Pay Holiday pay is funded by the employer. 2. Unemployment Insurance Unemployment insurance is funded by membership contributions to an Unemployment Fund. Contributions are by employees at a rate of approximately DKK 354 (about $50) per week. 3. Industrial Accident Insurance Employers are required to carry industrial accident insurance with an authorized insurance company. Premiums vary. However, the state refunds the employer by a standard amount of DKK 1,800 (about $260) per employee, regardless of the actual cost to the employer. 4. Sickness Allowances The employer funds the allowances for up to one week absences per year. The rest of the allowances are funded by the municipality where the employee resides. 5. Maternity Allowances Allowances are funded by the municipality where the employee resides. 6. Pensions The annual contribution to the ATP is DKK 1,749.60 (about $250) per full-time employee. Of this amount two thirds are contributed by the employer and one third by the employee. The employer is entitled to set off the amount of this contribution against their labor market contribution. However, the cost to the employer is effectively not since the whole amounts of these contributions are refunded by the state. As of January 1, 1988, an employers' tax (arbejdsmarkedsbidrag, AMBI) has been introduced. This tax is charged at 2.5 percent on the value added by the enterprise. The basis to apply the Labor Market Contribution is arrived at by deducting total purchases subject to value added tax (VAT) but excluding the VAT content of these purchases from total sales subject to value added tax also excluding the VAT content of those sales. As exports are exempt from VAT, effectively, imports, payroll costs and some other expenses form the basis for Labor Market Contribution.