Collective Bargaining System: Denmark And Australia

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Denmark and Australia are characterised as belonging to different varieties of capitalism as defined by the Varieties of Capitalism (VOC) approach (Hall & Soskice, 2001). The framework is able to make this distinction based on the problem solving behaviours of the countries in the 5 spheres of the VOC framework. For the purposes of this essay, the industrial relations sphere will be used solely to compare the structures and processes of the employment relations in each country to show the usefulness of the VOC approach in identifying countries as belonging to different types of capitalism. It is useful in highlighting the cooperation focus of Denmark and legislative focus of Australia in the industrial relations context which are characterised as a coordinated market economy (CME) and liberal market economy (LME) respectively.


Government regulation in the different countries are contrasting due to the differing regulation structures. Australia’s employment relations have been strongly rooted in a legalistic approach (Andersen et al., 2017). This dates back to the establishment of the federal Conciliation and Arbitration Act 1904 to settle industrial disputes and regulate wages and employment conditions of workers (Bamber et al., 2016). Until recently, the federal government was limited to only making laws in relation to industrial relations to do with conciliation and arbitration. However, in 2009, the majority of the states with the exception of Western Australia handed over their industrial relations powers to the commonwealth government after changes to the constitution were made (Fair Work Ombudsman, 2019). With the implementation of the Fair Work Act (FWA), the Fair Work commission was established which has become the strong regulating government body for employment relations today (Fair Work Ombudsman, 2019). The fair work commission sets out National Employment Standards (NES) and awards for individual employment conditions that are strongly enforced and controlled in the employment system.

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Contrastingly, the Danish model includes a traditional voluntaristic approach whereby the parties in the labour market, unions and employer associations seek to retain their independence from government interference (Andersen et al., 2017). The established collective bargaining system involves extensive self-regulation and coordination between the parties in the various bargaining areas. The collective agreements allow for the relevant contracting parties to establish a set of rules that is tailored to the particular industry or company (Bamber et al., 2016). They are essentially a legally binding contract obtained by negotiation between an employee organisation and an employer organisation or an individual employer, that lays down the conditions applying to the individual employment. Conditions such as pay, working hours, notice periods and other employment conditions are dealt with in this process and as such little government regulation is needed nor welcomed. It is important to note that there has been increased interference in the Danish collective bargaining system due to European regulation. The establishment of the Single European market in 1993 has placed pressure on the existing Danish labour market regulation however efforts have made sure that the outsider regulation does not impact their strategic cooperation mechanisms. (Bamber et al., 2016).


The role of the state in Denmark is also very limited when compared to Australia due to unwanted interference. With the extensive self-regulation by parties in the labour market as part of the Danish model, the state has a limited role in their employment relations system. The most significant role it has is concentrated on growing and stabilising the public sector (Bamber et al., 2016). In Australia, the state is very much involved in the employment relations and has three main roles (Office Of The Commissioner For Public Employment (OCPE), 2012). Firstly, it has the role of a legislator that introduces laws to establish the system such as anti-discrimination legislation, workers compensation, FWA and health and safety legislations. Secondly, it regulates the industrial relations system through tribunals, courts and inspectorates such as the Fair Work Ombudsman. And thirdly it is a major employer (OCPE, 2012). The contrasting roles of the state again highlights the limited use of market-structures in Denmark’s employment relations compared to Australia.

Unions and Employer Associations:

The importance of unions and employer associations are comparatively high in Denmark and declining in Australia. Denmark’s employment relations are characterised by a voluntarist approach to collective bargaining whereby employers and unions cooperate to limit any government interference (Andersen et al., 2017). The two main coordinating bodies in the collective bargaining system is the Danish Confederation of Trade Unions (LO) and the Danish Employer’s Confederation (DA) (Bamber, Lansbury, Wailes, & Wright, 2016). Both LO and DA are the largest confederations of unions and employer associations in Denmark. LO’s power structure has been determined by the desire of major member unions to retain their right to independently negotiate agreements and so it functions as a coordinator for the major unions as opposed to an independent power (Bamber et al., 2016). Similarly DA plays a coordinating role between the larger organisations and acts as a mediator for conflicting interests (Madsen et al. 2016). The confederations act at the highest level of the collective bargaining system where there are framework agreements in place between the two which set the rules for issues which in Australia are regulated by the law (Madsen et al. 2016). The collective agreements allow for the relevant contracting parties to establish a set of rules that is tailored to the particular industry or company. Trade union and employer association membership in Denmark is therefore quite high (Bamber et al., 2016).

Comparatively in Australia, trade union density and employer association membership is declining due to structural changes (Gilfillan & McGann, 2018). The establishment of the conciliation and arbitration system in 1904 encouraged the rapid growth of unions and employer associations (Gilfillan & McGann, 2018). However, union density is declining in Australia due to structural changes that have affected employment in various industries, the increased use of more flexible work arrangements and the collapse of compulsory unionism under the federal Workplace Relations Act 1996 (Bamber et al., 2016). Today the Australian Council of Trade Unions (ACTU) is the main confederation for manual and non-manual unions. The high level of coverage is the result of historical mergers with other peak union bodies and in recent years the ACTU has focussed on strategies to reverse union decline including the ‘your rights at work’ campaign.

Employer associations have also declined in importance and lacked unity for many years due to the decline in the centralised bargaining system and the need for advocacy on behalf of employers before industrial tribunals…. Their role today has therefore become increasingly about lobbying governments and advocating for the interests of employers….

Determination of pay:

The determination of pay in Australia includes multiple legislative standards and processes, compared to the self-regulating collective agreements of Denmark. Australia’s pay system has become more and more decentralised after the move away from the centralised wage setting award system under the Conciliation and Arbitration act to the FWA (Oliver, 2016) (Bamber et al., 2016). Today it involves a combination of a legislated minimum wage, awards, collective bargaining at the enterprise level and individual arrangements (Bray et al., 2013). Awards are set by the industrial tribunal that set the wages and employment conditions for workers in a particular industry or occupation (Bray, 2011). Collective agreements have displaced awards as the main mechanism for setting employee’s wages and conditions (Bray, 2011). However, awards are the base standard for all collective agreements which are predominantly determined at the enterprise level and sometimes involve trade unions as bargaining representatives (Oliver, 2016). The remainder of employees are covered by formal or informal individual arrangements and the (NES) apply to these workers. Under the FWA, a national minimum wage is set by the Fair Work Commission and is reviewed every year to be set based on market factors (Oliver, 2016).

In Denmark wages are set by collective agreements between parties in the various bargaining areas (Andersen et al., 2017). The legally binding contract is negotiated between an employee organisation and an employer organisation or an individual employer, which sets out the pay as well as other employment conditions applying to the individual contract (Bamber et al., 2016). Over the last few years Denmark has been experiencing some changes to their collective bargaining system around the determination of pay known as ‘centralised decentralisation’ (Anderson, 2008). This has seen a shift away from standardised pay agreements where wages are centrally determined at the negotiating table to more flexible pay systems where wages are negotiated at the enterprise level (Anderson, 2008).

Industrial disputes:

Denmark has a very pluralist perspective when it comes to industrial disputes which differs to that of Australia. Denmark views conflict as ok and something that can be managed locally without government intervention. The process of initiating conflict is reserved for ‘conflicts of interest’ when renewing existing collective agreements or when entering into collective bargaining in new areas (Madsen et al. 2016). The parties can use the weapon of conflict when dealing with conflicting interests to force the other side to compromise. A state conciliation board exists that is used as a mediator when parties need further help negotiating a compromise. When parties are unable to reach an agreement despite the aforementioned efforts, then conflict is used… The rules permit the notice of strikes and lockouts in connection with conflicts of interest however unofficial strikes do occur. …. Most conflicts are solved solely with the advice from the participating parties to the collective agreement and rarely progress beyond this level. If an agreement cannot be achieved, the disputes on the interpretation of the collective agreements are handled by industrial arbitration and any breaches of the collective agreement are handled by the labour court.

In Australia, the FWA, modern awards and enterprise agreements are the market structures that set out the mechanisms for settling industrial disputes (Fair Work Ombudsman, 2019b). The FWA requires modern awards to include a clause that sets out procedures for resolving disputes between employers and employees about matters arising under the modern award and the NES set by FWC (Fair Work Ombudsman, 2019b). Likewise the FWA requires enterprise agreements to include procedures to resolve disputes arising under the agreement of relating to the NES. Both clauses contain a procedure whereby if the dispute remains unresolved, the matter can be referred to the FWC (Fair Work Ombudsman, 2019b). The FWC can only deal with disputes if an application has been made by a party to the dispute and they may settle the dispute via mediation, conciliation, arbitration or by making a recommendation (Fair Work Ombudsman, 2019b).

Usefulness of VOC:

In conclusion, the VOC framework is useful in explaining the differences between Denmark and Australia by classifying their behaviour in the industrial relations sphere as typical of a CME and LME respectively. The Danish ‘negotiated economy’ model emphasises coordination between employers and unions to achieve a collective bargaining system with limited industrial relations legislation (Madsen et al. 2016). By contrast, the approach to industrial relations in Australia has been based on a legal system that structures the relationships and interactions between parties according to well-defined legislative boundaries (Andersen, Kaine & Lansbury, 2017). Understanding the focus of these different types of capitalism is useful in understanding the broader employment relations in each country.  


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