1. MAKE A DIFFERENCE Performance-Related Pay of Government Employees in Denmark OECD Expert Meeting Paris, October 7, 2003

2. MAKE A DIFFERENCE Background Design of the new pay system Implementation Difficulties Agenda

3. MAKE A DIFFERENCE 1.Background - the Danish State The Counties (14)130.000 The Municipalities (254)385.000 The State (1)160.000 Typical functions:Central administration Defence Police Universities Typical functions:Hospitals High schools Typical functions:Primary schools. Care of children, elderly and disabled persons

4. MAKE A DIFFERENCE 1.Background - milestones 199720022005 Collective Agreement ’97 Collective Agreement ’02 Collective Agreement ’05 New permanent pay system Academic employed Experiments with the new pay system Office workers IT-workers Etc. Academic employed Office workers Agricultural workers State tradesman Etc.

5. MAKE A DIFFERENCE 1.Background - result contract for managers Ministry of Taxation Director Contract Contract between The department of the Ministry of Taxation and The Central Customs and Tax Administration 1’st of January - 31’st of December 2000 Ministry of Taxation Result contract Focus on: The objectives for the institution in the period Concrete goals for the institution e.g.. number of controls, quality, HRM-activities, etc. Director contract 1. The result of the institution (min. 50%) 2. Strategy and development (min. 10%) 3. Internal management and HRM (min. 10%)

6. MAKE A DIFFERENCE 1.Background - the objectives recruitment and retention strengthen link –pay setting and objectives and strategies –pay and personnel policy reflect responsibility and authority, qualification and performance reasonable and fair

7. MAKE A DIFFERENCE 2.Design of the new pay system - Differences between the systems The old pay system Centralised Based on objective elements Long payruns Few possibilities for allowance The new pay system Decentralised Mainly based on subjective elements Short payruns (In principle) no limits for allowance

8. MAKE A DIFFERENCE 2.Design of the new pay system - delegation The Ministry of Finance Danish State Employer's Authority The departement e.g. Ministry of Culture The State Institution The different management levels - direct leader of the employees

9. MAKE A DIFFERENCE 2.Design of the new pay system - change in pay runs New payrun Old payrun Salary Years Saving Cost

10. MAKE A DIFFERENCE 2.Design of the new pay system - The old pay system Pay level II Pay level VI Clark – 174.199 DKK Clark – 185.769 DKK

11. MAKE A DIFFERENCE 2.Design of the new pay system - The old pay system Wage bracketSteps 123456 1123456 267891011 3789101112 48910111213 591011121314 61112131415 712131415 813141516 914151617...... 31404244 324345 3346 3447 3548 3649....... 4255 Location (geographically) StepIIIIIIVVVI 17199.592203.859206.812211.078214.030 Annual pay

12. MAKE A DIFFERENCE 2.Design of the new pay system - the elements Basic pay - basic pay system - interval pay system - minimum basic pay system Superstructure centrally/decentrally/locally agreed allowance Performance- related pay 80% 20%

13. MAKE A DIFFERENCE 2.Design of the new pay system - linking institutional policies and salary Annual Performance Interview Goals for the institution Personnel Policy Salary Policy Goals and assignments for the employee Competence- development Salary The institution The employee

14. MAKE A DIFFERENCE 3.Implementation - communication Dynamic guide Folders Education of personnel from HR-units Conferences Special information to the top managers Information on the internet Courses for managers Courses on development a local salary policy General information to the press Local meetings/workshop etc. Vej

15. MAKE A DIFFERENCE 3.Implementation - assessment Number of employees on the new pay system Numbers of new agreement based on the new pay system Different surveys

16. MAKE A DIFFERENCE 3.Implementation - Motivation survey Salary has an effect on motivation and effort. The most motivating salary elements: Pay in connection with education and development of qualifications Transparent criteria for pay 54% of the employees find that individual salary based on qualification and work effort has a positive influence on motivation

17. MAKE A DIFFERENCE 3.Implementation - Survey – Negative effects

18. MAKE A DIFFERENCE 3.Implementation - Survey – Positive effects

19. MAKE A DIFFERENCE 4.Difficulties - seen from the central level Lack of delegation Lack of knowledge with the line manager Not enough courage to make discrimination

20. MAKE A DIFFERENCE 4.Difficulties - the institutional level Unclear salary policy No clear link between goals, personnel policy and salary policy not enough information

21. MAKE A DIFFERENCE 4.Difficulties - seen from union representatives’ side Not enough money in the new pay system Resistance against the new pay system among some members Maybe to much focus on pay

22. MAKE A DIFFERENCE 4.Difficulties - prospects From a traditional pay system to a total reward system based on individual needs ”The new salary systems are a good tool in this context, but recognition and rewards should be interpreted and should be adapted to individual needs.” The Danish State’s personnel and management policy, June 2003