Report on the new pay systems


Report no. 13/2004

The new pay systems are one of the Danish Ministry of Finance’s major reforms and have been in use for up to seven years. Pay expenses constitute a substantial share of total government operating expenditure. At end-2004, the new pay systems encompassed well over half of all government employees with a total payroll cost of some DKK 31 billion.

Generally, there are a number of differences between the old and the new pay systems. The new pay systems are more decentralised and seniority-based pay increases have been reduced considerably. Decentralisation increases the degree of freedom but also responsibility at the local level, because the new pay systems place a larger part of the pay for negotiation and disposal at the local level.

The NAOD performed a separate examination of the new pay systems, primarily in relation to the handling of tasks by the State Employer’s Authority. The NAOD examined whether the Authority’s advisory function is satisfactory, and whether the Authority’s conclusion of agreements is documented and occurs without unnecessary delay. Furthermore, the NAOD has examined whether the Authority has adequate procedures for pay supervision.

In addition to this, the NAOD examined the status of implementing new pay systems in 21 selected institutions. As such, the NAOD examined whether the new pay systems have been satisfactorily implemented locally in the institutions concerned in the form of a pay policy that promotes the objectives of the institutions and efficient pay control focused on results.