Flexicurity enables employers to hire and fire employees in response to changing market conditions while providing security to workers in between roles.
Flexicurity is a welfare model that provides both flexibility and security in the labour market. Flexicurity gives employers the freedom to hire and fire staff to adapt to changing market conditions and stay competitive in the market. This occurs in an environment of relatively low employment protection legislation (EPL), which cuts the costs of making these moves. This model results in a high level of job mobility as flexible contracts allow people to move in and out of employment.
At the same time, the flexicurity model looks after dismissed workers in between roles via elevated unemployment benefit payments and opportunities for further education or retraining. The idea is that these workers will upskill, remain motivated and, as a result, find a new role relatively quickly.
History of flexicurity
Flexicurity was first coined in 1995 by Dutch sociologist Hans Adriaansens, who called for a political reform process to increase security for those participating in flexible employment. While initially focused on contract workers and temporary agency workers, the concept of flexicurity soon evolved to apply to a wider category of employees.
Denmark is widely seen as the ‘model country’ when it comes to flexicurity, as it adopted the model in the mid-1990s. Dutch flexicurity, often referred to as the Golden Triangle System, combines high employment mobility with extensive unemployment benefits providing income security to the unemployed and active labour market policies aimed at skill upgrading and activation of the unemployed. In 2007, the European Union (EU) officially included flexicurity within its European Employment Strategy.
Recent trends in flexicurity
In 2007, the EU worked with national governments and social partners to identify a common set of flexicurity principles. These principles established that flexicurity must be adaptable to the different circumstances in each member state, help reintroduce inactive employees back into employment, and facilitate a smooth transition between jobs through education, retraining and ‘providing the necessary social protection’ for employees. Apart from Denmark, other countries, such as Ireland, have adopted flexicurity models.
The global pandemic and financial crisis, and the recent economic turmoil resulting from the invasion of Ukraine, have challenged the flexicurity model within many nations. This is because many governments are looking to save money to reduce public debt – which often results in social benefits ending up on the chopping block.
The pandemic has also led to an increase in so-called ‘fire and rehire’ practices, where companies fire employees to then reappoint them on less favourable terms. In the UK, public outrage has led to the development of a new code of practice that makes it harder for employers to take part in ‘fire and rehire’ practices.
According to Hilary Ingram of Lancaster University, there is a silver lining – as the EU’s Recovery and Resilience Plan carries strong elements of both security and flexibility. She explains, “More than one-third of the proposals involve labour market activation focusing mainly on the low skilled, the young and the long-term unemployed. There is also an emphasis on the necessity for adequate social assistance. Furthermore, the ECB recommends boosting human capital through on-the-job training and active labour market policies, both of which are components of flexicurity.”
Advantages of flexicurity
- Flexicurity leads to more efficient use of labour as firms are given the freedom to ‘slim down’ or ‘bulk up’ in response to changing market conditions, resulting in increased productivity and performance.
- Employees are protected during periods of unemployment.
- Employees are offered education and upskilling opportunities during unemployment, which can lead to new roles or careers.
- In theory, flexicurity should enable employees to be rehired relatively quickly.
Disadvantages of flexicurity
- Trade unions worry that flexicurity will weaken hard-fought employee rights and protection.
- Flexicurity relies heavily on political and cultural support. As many European countries have well-established welfare and benefits systems due to higher taxation, flexicurity is often well received. However, this may not be the case in traditionally low-tax nations such as the United States.
- While flexicurity has employees’ best interests at heart, unemployment and regular dismissals can still cause mental stress and anxiety.
- Flexible contracts and high labour turnover rates could impact company loyalty and hinder innovation.
One leading Danish company advocating for the flexicurity model is the THORNICO Group, which operates as a holding company. Through its subsidiaries, the company conducts business in a variety of sectors, including technology, packaging, shipping, investment and more. Owner Christian Stadil has described flexicurity as one of the ‘radical’ differences in doing business in Denmark rather than abroad. He explains, “We are fast moving and agile. In Denmark we have the flexicurity model. It means that it is very easy to hire and fire. The flexibility and agility of being able to do this is a huge competitive advantage when doing business in Denmark.” It’s important to note, however, that this is not at the expense of employee engagement or satisfaction. Through its ‘Company Karma’ philosophy, THORNICO ensures that it is doing good while doing business. This is reflected in the company’s commitments to its employees, the environment and within its overall corporate culture.