Pay Attention Episode 13: Is Denmark Already Løn-done on Pay Transparency?

With gender pay gap reporting already in place for over a decade, Denmark might seem ahead of the curve on pay transparency. But how much still needs to change under the new EU Directive? In this episode, we are joined by Yvonne Fredericksen of Norrbom Vinding to explore the Danish model, its flexicurity foundations, and whether employers are truly “løn-done” with pay transparency—or just getting started.

Transcript

The Agenda podcast by Lewis Silkin: Pay Attention

Pay Attention Episode 13: Is Denmark Already Løn-done on Pay Transparency?

Tom Heys: Hello and welcome to Pay Attention, a regular podcast coming to you from the Lewis Silkin offices in London. I'm Tom Heys 

David Lorimer: And I'm David Lorimer. 

Tom Heys: And once again, we have gathered around the table to talk about the Pay Transparency Directive. Now, when you think of Denmark, you might picture the political drama of Borgen, the effortless elegance of Danish furniture, or the quiet comfort of hygge. But beneath the minimalist design lies a finely tuned system, one that applies not just to chairs, but to the workplace too. 

Denmark is known for its flexicurity model, combining a flexible labour market with strong worker protections. It's also been ahead of the curve on pay transparency with gender pay gap reporting laws in place for years. But does that mean the job is done? Or is there still a gap between policy and progress? With the EU's PTD bringing new requirements, will Denmark adapt seamlessly, or will even the most balanced system need a few adjustments? 

As the Danes say, Nøden lærer naken kvinne å spinne, necessity teaches the naked woman to spin. So when it comes to pay transparency, is it necessity or choice driving the change? Now with that, I'd like to bring into the pay transparency conversation, Yvonne Frederiksen.

Yvonne Frederiksen: Thank you so much for this great introduction. 

David Lorimer: How bad was the pronunciation on a scale of 1 to 10, Yvonne?                                                                                                                                           

Yvonne Frederiksen: Oh I’ll give it a seven. 

Tom Heys: Oh pretty bad! 

Yvonne Frederiksen: That’s quite good!  

David Lorimer: Well done Tom! 

Well we're delighted to have you Yvonne and thank you for taking time out to join us. Of course, as avid listeners will know we like to talk to local subject matter experts about quite how much of a change the PTD will make in their territory and how clients can best prepare. So let's get stuck right in Yvonne.

I suppose the first and obvious question is, do you have any insight into when we might expect to see implementing legislation in Denmark and what it might look like? 

Yvonne Frederiksen: Thank you so much for inviting me. We do not have any official information about when we’re going to expect the draft proposal for the amendment of Danish law, but we do know that the implementation of the Directive is at the moment being discussed in the Danish government implementation committee. This committee consists of the representatives from the ministry of labour and employment and the social partners, and the social partners is the employers’ organisations and the employee organisations in Denmark. 

It seems that the discussions in this committee are being delayed and according to the latest report – which is in fact more correctly rumours, as there is no official news yet from the ministry – we should not expect to see a proposal for a new or amended law until early 2026. So unfortunately, quite late, taking into consideration that the deadline for the implementation of the Directive is early June 2026. It will be interesting to see the proposal for the new law from the Danish government as we will then know how the Danish government will approach the implementation. But unfortunately, the expected timeline for the implementation will most probably not leave Danish employers with much time to adjust their approach based on the proposal for the new law. This is also why we strongly recommend that Danish employers initiate their preparation, their strategy in regards to the implementation as soon as possible, so they are prepared in the best possible way when the proposal of the new law is being presented by the government.

David Lorimer: That’s great news. So we can obviously learn a little bit from what's already in place. So what's the set up like in Denmark? What kind of pay reporting or pay equality obligations exist at the moment, Yvonne? 

Yvonne Frederiksen: Yeah, we were actually one of the first countries in EU to implement or establish a gender pay gap reporting obligations. However, it's not something that has got a lot of attention in Denmark. I would put it this way, it lives a quiet life. Actually a bit surprisingly because when it was implemented, I think almost 15 years ago now, we did expect a lot more attention on this. I think one of the reasons is that what was decided when it was established, this obligation, was to base… it's really a gender pay statistics that the employers are under an obligation to prepare. And it is based on the salary reporting that all employers must do to Denmark's statistics or Danish statistics. So it's automatically generated based on the reporting of salary to the Danish statistics. And this means that it's based on what we call disco codes, which is when you report the salary to the Denmark statistic, you need to base it on a specific disco code system, which is based on different job categories. And the problem is that this disco code system is quite outdated. It's not been updated for many, many years. So the value of this pay statistics that you get automatically from Danish statistics every year is not very good. 

David Lorimer: Interesting. Disco codes does sound like it's from the Saturday Night Fever era, so it's no surprise that it's a bit outdated.

Yvonne Frederiksen: Exactly yeah. 

Tom Heys: So it sounds like in Denmark, quite a lot might change then as a result of the pay transparency. It's not a case that the job's been done and you just need to tinker with it. It sounds a bit like you're going to have to start all over again, or is that too big a statement to make? 

Yvonne Frederiksen: I think it's too big a statement to start with because what we do expect is that the social partners will try to limit the number of changes. But when it comes to gender pay gap reporting, there certainly has to be some changes because in the directive, we have the requirements when it comes to pay structures, and that part is something new that is actually requiring the employers to make sure that they have pay structures that they can explain. And that is the difference so in that sense, we are going to see some changes, definitely.

Tom Heys: So we're talking categorization here. And is it right that there's not currently of categorization approach in Denmark? This is going to be something that's new? 

Yvonne Frederiksen: It is because the only categorization requirement that you have, that is really the disco code system that is part of the Danish statistics reporting obligation. And as this has not been updated for many, years, yeah, that is going to be changed, definitely. 

David Lorimer: So the big question is, will the disco codes be staying alive!  

Yvonne Frederiksen: Hahaha. That was fun. 

David Lorimer: Sorry! So I mean, we're seeing a lot of questions about this. And obviously, there are other countries like Italy that have existing federally mandated systems of categorization that we don't think are going to come up to the mark for PTD purposes. So I suppose the big challenge for employers, including in Denmark, is to come up with something that's going to work once the Directive is implemented in the meantime.

So it's not uncommon to have this question about whether or not the existing legal regime says enough about categorization and what changes we might see, and we know many clients are moving ahead and trying to adopt broadly Europe-wide systems of levelling and categorization. Is that something that you are seeing in Denmark or that you think might have to change once we see the implementing legislation, Yvonne? 

Yvonne Frederiksen: So the difference that is definitely going to be is the fact that we are going to have to implement Article 4 of the Directive on the pay structures. And as I see that is going to mean a huge difference because we do already have the principles that are in the existing directive at the moment saying that you need to ensure equal pay for equal work or work of equal value. So we do already have case law on that. It's not significant, at least not recently. 

We did have some case law back in the 90s when we implemented the principle of equal pay. We have also seen a couple of one Supreme Court case in 2009. We did also have a huge arbitration case in 2024 that was also in the media and it concerned a lot of employees in both groups of employees that compared to each other whether work for lab technicians were of equal value to technicians, operators in the production side. So we do have case law on that as well

But as I see it, the significant difference will be that now we are going to have obligations for employers to ensure pay structures that allows the employees to ask for information about the different pay levels and how, or the reason why the employer has decided to arrange the pay structures as they are, and also making it possible for the employees to request the employer to inform them about other employees performing work of the same value. So it's not just the same work, it's also being able to ask information about other groups of employees performing work of equal value.

And that is going to be a difference that you can ask that information upfront. You do not need to raise a claim for equal pay and then ask for that information as part of the trial. You can actually with the law in your hand, go to the employer and ask for this information upfront. And this is going to be a difference as I see it. 

Tom Heys: Do you think that employees in Denmark will be making use of this new right? Do you think employers will be hit with a lot of requests for information about pay? 

Yvonne Frederiksen: That is of course going to be interesting to see, but we do have quite strong unions in Denmark. Historically, they have also in recent times had periods where they have been talking a lot about equal pay, because the fact is that we do not have equal pay yet in Denmark. But they have not succeeded in winning a lot of cases on this. So I think that we should expect as employers that unions will focus on this in the future now with this new amended legislation that we're going to have.

David Lorimer: Absolutely, and that segues nicely onto the questions we have around collective representation. That's clearly something that the directive has in mind. Employee reps are going to be empowered to query the methodologies used by employers for reporting, to discuss the systems of categorization, to make requests, as you've already mentioned, Yvonne. So lots of powers, and then significant powers on joint pay assessments. 

What's the context for that in Denmark? You mentioned unions being popular there. Do most bigger employers have a recognised union on site that they bargain with? 

Yvonne Frederiksen: It varies a lot based on the industry. So there are certain industries where the unions have representatives and a strong representation, there are collective agreements. And then there are other industries where there's less union representation because there are no or almost no collective agreements in place. So it varies a lot.

But in most companies, there's a requirement to have, or a de facto decision to have, a works council. So even though you do not have a strong union representation, there is a works council where you discuss things that goes on in the workplace.

And I do expect that this will have in the works council much more attention in the future and definitely in the industries where you have strong unions, you should expect that this will be an issue that will be addressed by the unions, the union representatives, during the work council meetings regularly.

Yes, so in certain industries, more focus than perhaps in other industries. 

Tom Heys: So the Works Council, you think, will be taking on the worker representative role for the PTD.  

Yvonne Frederiksen: I’m just guessing, but I think that that may be the case, yes. 

Tom Heys: That then leads on to our next question, which is there's a lot of maths required for PTD. And we've seen in the UK with gender pay gap reporting, initially there was a lot of individual struggles with some of the basics, mean and median and all of this stuff, and the pay transparency directive requires a lot more complicated stuff than that. So I think my question is, will employers give training to works council representatives to try and have more sensible conversations with them? Is that something that's done at the minute routinely? 

Yvonne Frederiksen: No, it's not. And I think that as it is now, my guess is that employers would be reluctant to do that. That it would be something that would…of course, the employers have an obligation to ensure that this is done right. And then it would be for the unions to challenge the way of doing it. That would be the common way of doing it when it comes to discussions in the workplace between the employer and the union representatives and the work councils. But who knows, things can change in the future. 

There's another thing that is a huge factor here also is that there's an interest for many organizations to actually be able to show that they are in compliance with this obligation. So of course, this could be a motivating factor to actually empower the works council representatives to get a better insight in the math, how are we actually doing this? So I'm not saying that this is not something that we could end up seeing in the future, but it is an unusual approach in Denmark in this area. 

David Lorimer: Yeah, it'll be interesting to see because I suppose there's only one thing that's worse than challenge by employee reps and it's challenge based on misconceptions. So, let's see if the training comes into play there. We've talked briefly about the right to request one's pay and average male and female pay. That's part of a kind of package of what we're describing as kind of individual transparency rights and that includes things like the right for applicants to have their pay range in advance, the ban on asking about pay history and the ban on pay secrecy clauses. Those requirements seem to us to be more squarely aimed at changing the culture in workplaces so that conversations about pay are less taboo and negotiations can happen more transparently. Is that going to shift the dial in Denmark do you think Yvonne or are these things already done in practice there?

Yvonne Frederiksen: We do already have a ban on using contractual terms on restricting employees from disclosing information about their pay. So that is already in place and has been for many years now. 

But we do not have a ban on asking job applicants about their pay history. So that is something that is going to change, definitely. And I know already now that even though we have not implemented the directive, this is something that is being implemented, has been implemented in many organizations, because already now there's a focus on trying to be compliant before the directive is implemented. So there has been a change there already, so I do not expect the implementation to actually mean a huge change in that area. 

But what is going to change definitely is the fact that you will, as an employer, be on an obligation to inform the employees, the applicants about the initial pay level or pay range prior to job interviews. So, because that is not common today. And this is something that is actually concerning many employers because when should they do it? Are they going to do it in the job ad or could they wait till they call the applicants for the job interview? And at least as we read the directive, they could wait. They will not have to do it in the job ad. They could wait till they decided who they're going to call for the job interview and then send the information before the job interview. So, this has already now attracted some attention in many organizations. So that is going to change. 

Tom Heys: Do you think that might lead to some difficult conversations for employers who are assessing a range from, I don't know, 50 to 70,000 and then making their offer to the successful candidate? And if that offer is at the bottom end of the range, might the candidate, you know, start debating with them about what place in the range they should be on? 

Yvonne Frederiksen: That may very well be, because you're right, if you disclose a pay range, that is obviously also something that you need to be prepared for being challenged in the negotiation. 

Tom Heys: I think employers will need to have, if not a process, some sort of clear structure for where you put people on a range. So, someone at the bottom of the range might look like X. Someone at the top of the range might look like Y. So that then there is something you can point to for when you make your decision as to where someone should be. And it gives that bit extra transparency. 

David Lorimer: I think that probably goes to the kind of, having the idea of having pay progression and pay setting criteria, but I suppose the difficult thing is always, there's going to be attention with hiring managers who want to get people in quickly and keep them happy and the institutional rewards teams who will want to have, who sensibly will want to have, some level of discipline around all of this. So interesting to keep an eye on. 

Speaking of discipline, one of the big questions that's coming up is around enforcement of the pay transparency directive. So what type of enforcement are we likely to see in Denmark? We know what the types of powers are. Do we think that local labour inspectors will be given lots of fining powers, for example, Yvonne? 

Yvonne Frederiksen: Yeah, that is actually something that is going to be very interesting to see how the enforcement mechanism is going to be. Because right now, we do not have anyone officially keeping an eye on this. This is really up for each individual employee or the unions to challenge whether there's pay equity in the workplace.

And we are course guessing a bit on who is going to be authorized to do this inspection. And I've heard different guesses, but I will not guess on that. But for sure, this is something that is going to change in Denmark because as it is now, we do not have any official authority keeping an eye on the obligations in the Equal Pay Act, and that is obviously a requirement under the directive. It might be the working environment authority. It might be some other institution, but we're not sure about that. I haven’t heard any rumours either on that, so that is going to be very interesting to see. 

Tom Heys: What about the threat or the risk of equal pay claims being brought? Might that be a bigger motivator for employers to try and get things right? How far back can people claim for equal pay in Denmark? 

Yvonne Frederiksen: Generally, there’s considered to be a five-year possibility of going back and ask for back pay five years back. So that is the common approach in equal pay cases.

Tom Heys: And do you think there will be more as a result of the pay transparency directive? 

Yvonne Frederiksen: That's a very interesting question.

I do expect that there's going to be a lot of focus on this. I expect that a lot of big organizations will be very, very keen on being compliant when the directive comes into effect. So, and in my opinion, being compliant will mean reducing the risk of equal pay claims because you will actually be able to explain how your pay structures are and explain to each employee why is your pay as it is.

But there's also a risk here that we will see mid-size organizations, small organizations for whom it will take longer to be compliant, to become compliant, and I expect that the risk of pay claims will be a lot higher for those organizations that will struggle more to get to a point where they are compliant. 

So the answer is yes, I do expect that we will see more equal pay claims because I think that some organizations will struggle to become compliant because it's a complex legal system that we are implementing. But again, it is going to be interesting to see how much change the legislature, the parliament is going to implement here.

It is a minimum directive. We have a tendency here in Denmark to really do the minimum implementation and then wait and see whether the European Court of Justice or the Commission will end up deciding the specific direction of the directive. So, it might also be that the requirements are actually going to be less than we expect when we look at each article in the directive. And actually that is what we are expecting too, that they will be really reluctant to do a lot of change here. And I have to say that when I look at the directive, I would expect there to be much more amendments, much more change that I'm actually expecting there to be. 

So that's why right now we are kind of in a limbo, because we are trying to explain everything to the employers to make sure that they start already now, to make sure that they are not running behind. But at the same time, also trying not to create any drama that when we get the draft proposal for the law, employers will look at it and say, well, what was all the fuss about? Because this is not a big deal. So it is a difficult situation. That's why I'm struggling a little bit when you ask about, you know, the prediction, because it is really, really difficult to predict exactly what level the parliament will, or the legislator will place themselves in. 

David Lorimer: Great, some really useful insights Yvonne. Thank you so much. 

I think you're absolutely right. This is quite a big lift for small and medium-sized employers who might not have the resources to fix the problems that the PTD presents. So, a really great insight and some really helpful insights on the journey that the Danish employers are going to go through too. 

So, thank you so much for joining us and thank you for your contributions. That brings us to an end of this episode of Pay Attention. We'll be in your news feeds and hopefully in your ears again soon with more on the Pay Transparency Directive and we look forward to you joining us for that.