Introducing New Public Management in Pay Determination

Dorthe Pedersen
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Dorthe Pedersen: Department of Management, Politics and Philosophy, Copenhagen Business School, Postal: Department of Management, Politics and Philosophy, Copenhagen Business School, Blaagaardsgade 23 B, DK-2200 Copenhagen N, Denmark

No 6/2000, Working Papers from Copenhagen Business School, Department of Management, Politics & Philosophy

Abstract: Since 1997 pay determination in the public sector in Denmark has entered a new

and decisive phase. After 10 years of experiments with centrally fixed wage pools for

decentralised renegotiations, 1997 saw a breakthrough in terms of a pay reform,

which creates a serious possibility for using performance-related pay in the public

sector. The centrally controlled local pay has, in two bargaining rounds, been

abolished in favour of a completely new pay system, comprising a basic salary

combined with locally fixed pay additions related to job functions, qualifications and

performances. According to the strategy of the public employers the new types of

pay will function as an incentive system for streamlining, managerial efficiency and

flexibility in public agencies and service institutions. In this sense the new types of

pay are seen as the starting point of a so-called “company-based” and locally fixed

pay determination as an alternative to centrally fixed pay. It is the counties and

municipalities who are leading the way, while the central state administration has

mainly agreed limited trial schemes for about 10 % of the employees. In 1997 the

central parties to the agreement in the municipal sector agreed a permanent

transition to a new pay system for approx. 56% of the 640,000 employed in counties

and municipalities. And at the central agreements in 1999 practically all the

remaining employees joined up. The individual trade unions have entered into

separate agreements along similar lines on a reconstituted system for basic pay

scales for particular professions or occupational groups supplemented by a new

local pay.

Keywords: New Public Management; Pay determination; Pay scales; Performance-related pay; Denmark (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-cdm, nep-lab and nep-ltv
Date: 2000-06-01

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