” Flexicurity ” and the ”Danish model”

1. ”Flexicurity” and the ”Danish model” AIDP meeting, Bologna 12 May 2014

2. Agenda Bologna 12 May Welcome Flexicurity and the Danish Model Disabled persons Education system Cultural differences Company driven initiatives.

3. My background Bologna 12 May Ulla Plüger Michelsen • HR Manager at GEA Process Engineering A/S, 2012 - present Overall responsibility for HR in a company with 700 people • HR Manager at Grant Thorntonand PwC, 2006-12 • HR Manager at KPMG, 1999 - 2006 • HR Consultant at Ernst & Young, 1998 - 99 • HR Consultant at L.M. Ericsson A/S, 1995 – 98 • Graduated in 1995 as MSc. in Economics and Business Administration

4. Definition of Flexicurity Active labour market policy Security Flexibility Bologna 12 May Flexicurityis a compound of flexibility and security. The Danish model has a third element - active labour market policy - and together these elements comprise the golden triangle of flexicurity. The term was first coined by the social democratic Prime Minister of Denmark Poul Nyrup Rasmussen in the 1990s.

5. The danish model – the golden triangle Bologna 12 May One side of the triangle is flexible rules for hiring and firing, which make it easy for the employers to dismiss employees during downturns and hire new staff when things improve. About 25% of Danish private sector workers change jobs each year. The second side of the triangle is unemployment security in the form of a guarantee for a legally specified unemployment benefit at a relatively high level - up to 90% for the lowest paid workers. The third side of the triangle is the active labour market policy. An effective system is in place to offer guidance, a job or education to all unemployed. Denmark spends approx. 1.5% of its GDP on active labour market policy.

6. Basic characteristics of The Danish Model Bologna 12 May

7. State, Unions and Employersworkactivelytogether • Around 80% of the workforce is member of a trade union • People in public organisations and… • Blue collarworkersare more likelymember of a trade union Bologna 12 May

8. Unemployment rate DK Sweden Denmark 6,7% oct 2013 Norway Bologna 12 May

9. Unemployment rate some EU countries Bologna 12 May

10. Flexible rules for hiring and firing Bologna 12 May Employmentsecurityinstead of Jobsecurity Danish SalariedEmployees Act – lessrestrictiverules of dismissalaccording to OECD report Collectivebargains The model is good at handling temporary business cycleshocks Management has the right to manage – not unions or workcouncils Hearings in case of massdismissal.

11. Dismissal – howare the rules Youneed to have a goodreason for dismissing an employee: • Lack of work • Performancereasons (youneed to makewarningsbefore) • Breach of contract • Otherwise the employee is entitled to severancepay of 1-3 months Bologna 12 May

12. Unemploymentsecurity Bologna 12 May Relativelymoderate admission demands Average cost for unemploymentsecurity: EUR 65 per month Eligibility rules for claiming benefits Long duration (2 yearsnow – was 4 years) Unemployment benefits is a contribution financed supplementary insurance in relation to the social security system The unemploymentbenefits are determined partly by a replacement rate of 90% of the previous salary And partly by an absolute maximum for unemployment benefits currently EUR 2358 per month The average replacement rate is approximately 60%

13. Active Labour Market policies Bologna 12 May • Activation • Education • Subsidized job training • Job search assistance • Right and dutyprinciple – improving chances of employment

14. Activation – between 13 weeks and 9 months Bologna 12 May • The threateffect – thiseffect is substantial This is not necessarilyveryattractive and unemployedpeoplethereforechooses to leaveunemployment • The locking-in effect during participation in a programme the job search intensity may be lowered • The post-programme effect Hopefully, the individual’s employability has been increased

15. Well-developedwelfareschemes Bologna 12 May It is crucial that unemployed persons are brought back into employment and do not end up receiving social benefits A system with a well-developed welfare service and a relatively comprehensive social security system can only be maintained if asufficientlylarge part of the population is in employment Financing is created mainly through taxation of earned income

16. Considerationsbeforecopying Bologna 12 May Complementarity between this labour market model and the welfare policy The model does not function solely by virtue of flexible dismissal rules and a generous unemployment benefit system Incentives to work rather than being unemployedshouldbe present

17. Cross border initiatives in the Nordic countries - 2010 Bologna 12 May The Nordic countriesexperienced a rise in unemploymentespeciallyamongyoungpeople – Initiatives: Creating early educational initiatives Tailoring the educational system individually Conducting efficient follow-ups Acting early and targeted on individual target groups Combining job seeking activities with other activities that motivates youths Establishing more educational opportunities Ensuring cross-sector activities

18. Is the model under pressure? Bologna 12 May Thereshouldbe an incentive to work and not to stay on unemploymentbenefits => therefore the system has been changed Demographicchanges => the elder generations is growing Is the system good for major changes in the economy? Growth in peoplecoming form othercountries EU regulations ”yellow unions” Solution = Active Labour Market Policy (and taxincentives)

19. Help for disabled persons Bologna 12 May Flexjobs Discrimination act fx. Handicaps and age Equaltreatment act fx. Male/female Governmentsubsidized jobs Economicbenefits in case of illness Follow-up on long term illness Social pension (Maternity)

20. The Danish education system Bologna 12 May • Equal and free admission for everyone for the highschools, universities, business schools etc. • 3+5 yearspaidstudy support from the government: EUR 780 per month • High educationlevel 98% are attending further education after finishing primary school 70% are attending highschool 17% are attending universities (bachelor and master) • Plenty of options of freesupplementarytraining

21. The flipside in my opinion Bologna 12 May For companies: The use of internships is oftenlow People takeeducation and training for granted ? ?

22. Cultural differences – doesthis have an impact?-Hofstede Tradition for co-operation Bologna 12 May

23. What is the opinion of the audience Bologna 12 May

24. Company driven initiatives in case of massdismissal Bologna 12 May Making Cv´s available for othercompanies Using the network of the management Help for outplacement Help for upgradingcompetencies/employability Otherpossibilities – counseling fx earlyretirement

25. Question to the audience Bologna 12 May Where do yousee the big difference to the system, you have in Italy?