What affects salary determination?

Salary are many things - get an overview of what affects your salary and what counts in this perspective.

The normal market mechanisms naturally also apply to salary determination. These include conditions regarding areas of business, geography and the specific candidate’s options for alternative employment.

Experience and customs

The statistics show a clear connection between salary and seniority. The salary level rises in roughly the first 10 years. This means that younger engineers rise more in salary than their older colleagues. Earlier the seniority salary rise was about 15 years, but it has now shrunk to 10 years. This is probably because of rapid technological development, which means that specific work experience is not valued as highly as in the past. This idea is supported by fact that e.g. the IT business has virtually no course of seniority salary rise.

Additionally, it is interesting to view your salary over the course of your entire life. As mentioned before, the tendency is for the salary curve to flatten earlier than in the past. The interesting part here is how this affects the salary of an engineer during a whole life. After all, it is not a given that you start out with a low salary, rise for several years, and then end up with the same salary for the rest of your working life.

Professional strength

For people who are paid by the hour, e.g. blacksmiths and bricklayers, there has been a 100 year old tradition of struggles about payment. This kind of struggle has not been prevalent among engineers. In the 80s there were a few struggles putting the engineers under so much pressure that a strike was the only solution. However, generally the salary development for engineers is achieved at the negotiation table – collectively or individually – without a fight.

In some of the larger companies the engineers have formed groups to better represent themselves in negotiations with company management. These are here called a Local Society of Engineers (LSE), and they collectively represent the engineers. In doing this the LSEs enhance the perception of many companies today that engineers are a united group of employees seeking additional influence in matters of payment and recruiting.

Career and competency development

Naturally the career development of the engineer influences the salary level, e.g. whether the job functions are managerial, project management, generalist or specialist. Aside from this the specific engineer’s additional training and competency development play an important role. This applies to the whole group of engineers as well as to the specific engineer.

Fringe benefits

Fringe benefits are a common supplement to the salary. In part because of the level of the Danish income tax, creativity is high when it comes to benefits which are tax exempt or taxed lower than if the employee were to pay for it themselves.

The value of a fringe benefit depends on the individual’s interest it. If, e.g. a car is considered only a means of transport an expensive car would not be a benefit valued higher than an inexpensive car. And if you do not read the paper a paid subscription to one would not be worth much.
It is very important to know the taxation rules for the specific fringe benefits. Information about tax is available at SKAT.

Additional terms of employment – alternatives to money

Salary is the employer’s compensation for your labour – and without doubt the most important term of an employment contract. But salary cannot stand alone. Whether a salary is good or bad must be viewed in relation with the other terms of the contract – and how much these terms are valued by the employee.

The salary should among other things be viewed in the context of working time – how much work should the salary cover? What is the agreed working time? Is overtime compensated – either in the form of time off in lieu (TOIL) or overtime payment? Is it a fixed salary, which means that the salary is payment for the completion of a certain job and not how many hours spent on it? In other words: Is the salary compensation for 37h per week or 50h per week?For more information we refer to the proposal for negotiation about working time from the LSE.

Apart from the working time other benefits are important in the valuation of the salary size. How much vacation and how many extra vacation days do you have? Do you only have the minimum 5 weeks and no more? Or do you have 6 weeks of vacation including a number of extra days, e.g. Constitution Day and the Friday after Ascension Day? For more information we refer to the proposal for negotiation about the 6. vacation week from the LSE.

In a time when many work on projects with tight time constraints it is important to have time for personal responsibilities, such as doctor’s appointments, seeing a dentist, tending to sick children or even the opportunity to take a personal day off to avoid stress. To what extend do you have these options? How flexible are the conditions in your work place?

Additionally, a number of other terms are significant in estimating the size of a salary: How are the options for paid maternity leave, to what extend can you organise your own work, how is the working environment, and are you bound by a competition clause and so on? These are issues to be considered when you evaluate the size of your salary.

The economic situation of the company – the counterpart’s options

The economic situation of the company is first and foremost the responsibility of the management. The LSE must of course assess the circumstances – you can’t get more if there is nothing to get – and to a degree adjust your salary demands to the estimated economic situation.

It is important to know that a company’s long-term economic situation will not improve just by paying low salaries and being insincerely economically vigilant. The company’s competitiveness depends to a large extend on maintaining and recruiting capable employees – and this is rarely possible with a low and decreasing salary level. 

Salaries in the public sector in Denmark

As an employee in the public sector, the framework for your salary is set out in collective agreements.

Read about salary, pensions and salary negotiations as a public sector employee