IRENE
Policy Paper
N°14 / 2014
Monitoring Learning and
Innovation in European
Restructuring
Draft synthesis report
Ola Bergström
Professor
Moliere
A project funded by the EU
DG Employment, social affairs and inclusion
www.responsible-restructuring.eu
Table of Content
1. INTRODUCTION ........................................................................................................................................ 4 1.1 Previous studies ............................................................................................................................ 6 1.2 A comparative study ................................................................................................................... 9 1.3 Nature of the evidence ............................................................................................................. 10 1.4 A conceptual framework ......................................................................................................... 12 1.5 The Structure of this report ................................................................................................... 20 2. LEARNING AND INNOVATION IN RESTRUCTURING REGIMES ........................................ 22 2.1 Introduction .................................................................................................................................. 22 2.2 Restructuring regimes before the crisis ........................................................................... 22 2.3 Developments since the financial crisis ........................................................................... 24 2.4 Conclusion ..................................................................................................................................... 47 3. REGULATIONS AND RESTRUCTURING ........................................................................................ 49 3.1 Introduction .................................................................................................................................. 49 3.2 Regulating restructuring ......................................................................................................... 49 3.3 Redundancies and regulation ............................................................................................... 55 3.4 Regulating the conditions for transition .......................................................................... 61 3.5 Discussion: Trends in transition conditions ................................................................... 75 4. CONCLUDING REMARKS .................................................................................................................... 81 4.2 Changing restructuring ............................................................................................................ 82 4.3 What can be done? ..................................................................................................................... 83 4.4 Considerations for policy makers ....................................................................................... 87 5. References ................................................................................................................................................. 90 THE IRENE NETWORK
Born during a seminar held in Dublin in 2003, IRENE (Innovative Restructuring- European Network of Experts) is a network bringing together independent experts – academics, practitioners, managers, social partners, consultants – from various countries (Belgium, Bulgaria, Czech Republic, France, Germany, Italy, Poland, Portugal, Romania, Slovenia, Spain, Sweden, The Netherlands, United Kingdom). It is open to new
partners. Working on social and economic dimensions of restructuring in Europe with a view to promote responsible and therefore innovative practices, the IRENE network has achieved or contributed to a range of
EU projects such as MIRE, AGIRE, HIRES, HIRES PUBLIC, ARENAS etc.) as well as to the Green paper
published by the EU on restructuring (2012) or the report issued on the same topic by the European Parliament (2013). The IRENE network publishes policy papers and other relevant information on restructuring the
website www.responsible-restructuring.eu.
www.responsible-restructuring.eu
contact the IRENE network: [email protected]
MOLIERE SYNTHESIS REPORT
Preface
This report is concerned with the developments in a selection of European Member
States since the economic crisis that started in 2008, in particular as regards how the
practice of restructuring has changed. Restructuring is here used as a unifying concept for all types of changes in work arrangements that, from the point of view of the
individual worker, implies a change in employment status or working conditions. The
aim of this report is to analyse whether and how the practice of restructuring has
changed in a selection of Member States, to assess the impact of the economic crisis
on the national level and to monitor how the practice of restructuring changes in the
longer term. We also wish to provide policy makers on the European, national and
regional level to understand these developments, to assist them in policy formation
and the design of more effective legislation. Furthermore, our aim is to support social
partners, such as trade unions and employers associations, in their policy-making.
The comparative analysis in this volume is based on data collected by an international
group of researchers in a EU-financed project “MOLIERE”1. This report is the first
attempt to draw conclusions from the national reports from this project.
Gothenburg 6th November 2014
Ola Bergström
We gratefully acknowledge the European Commission (DG Employment, Social Affairs and Inclusion) and FORTE for the
financial support that made this project possible.
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1. INTRODUCTION
Europe is going through the worst economic crisis in its modern history. It is now time
to reflect upon the tools available to anticipate and manage restructuring and change
for employers and workers to develop the capacity of European economies and labour
markets to handle such situations in the future.
The European Commission has initiated a range of activities over the past 15 years
with the aim of trying to help organizations and stakeholders to manage restructuring
in ways that have the least possible negative impact on workers, their families and
the surrounding community. There are also a wide range of research activities aiming
at identifying good practices, measures or actions to better anticipate restructuring
and manage change in a responsible way (European Commission, 2012b). While the
results of these activities and research projects show that there is a significant degree
of convergence between these practices, there is still great variation and imbalance
across Member States (ARENAS, 2010; European Commission, 2012a). There are a
wide range of measures, practices and policies, operating on different levels and with
multiple stakeholders. The different national legal frameworks, industrial relations
systems and political priorities implies that the way companies manage restructuring
differs between Member States and, maybe most importantly, the meaning and impact of restructuring differs significantly for those who are affected.
In fact, the experience from the most recent financial crisis suggests that Europe,
in general, has difficulties in accommodating structural change, without significant
increase in unemployment rates. To provide social security in times of crisis was the
initial rationale for the extensive active labour policy that is still a central feature of
the European social model and has always been the common denominator for European policy responses to structural change. While the relevance of the European social
model has been questioned, the recent economic crisis shows that a common European
policy on how to manage structural change is more relevant than ever.
Our previous analysis suggest that there have been improvements in the way restructuring is anticipated and managed since the European Commission started to
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pay attention to these issues, but the distribution and emphasis is uneven among
Member States (ARENAS, 2010). In several Member States, public measures to manage restructuring are non-existent and social dialogue concerning redundancies is less
developed (ARENAS, 2010). Employers, with some exceptions, are less prone to provide dismissed workers with outplacement services to support them in their transfer
to new jobs (Gazier & Bruggeman, 2008; ARENAS, 2010). The adaptation needs of
companies are often solved through offering older employees state funded early retirement programs (European Commission, 2012b) and in several countries measures
to try to avoid or postpone redundancies are implemented (ARENAS, 2010). While the
practice of restructuring in Europe has improved during the last decade the recent
economic downturn challenges the gains made in European model of restructuring.
There is an apparent risk that the lessons learnt during the last ten years are lost and
thrown away as the conditions for restructuring change in the face of the financial
crisis.
Of course, restructuring is not a new phenomenon. But the way in which restructuring is practiced and the magnitude is new. The financial and economic crisis in
2008-2009 implies that the number of workers subject to collective redundancy has
increased considerably and other measures to manage restructuring (such as short
time working schemes) have been adopted in an increasing number of European
Member States. In some countries governments are reforming or radically changing
their legal frameworks in order to respond to this development. At the European level
the interest in restructuring is further intensified by the European Parliament’s proposal for a European directive on Anticipating and Managing restructuring, which
was intended to provide a general framework for how restructuring should be managed within all European Member States. Although the worst part of the economic
crisis is over and that news about mass redundancies and closure of factories no longer appear in the media, restructuring is still going on in several European Member
States and it will be a phenomena that will continue to haunt workers and employers
across Europe. However, because of the short time since the crisis and the different
political interests involved, most discussions about what conclusions to draw from the
economic crisis are, at best, still speculative. Therefore it is not easy to come to any
clear conclusions about how to design a framework for anticipating and managing
restructuring for the future. In our view it is now time to reflect upon the use and impact of the different measures applied to anticipate and manage restructuring to be
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better prepared for future crises and to ensure the sustainable competitiveness of the
European economy without the negative consequences that may follow for workers,
the unemployed, employers and for the European societies in general.
1.1 Previous studies
The financial and economic crisis in 2008-2009 has intensified writing and debate
about restructuring among both academics and practitioners. Most of the discussions,
both in the academic and policy literatures, however, suffer from three main problems
that make it difficult to reach easy conclusions. First, authors refer to similar phenomena with a wide range of terms. For example, terms for restructuring include:
collective redundancies, dismissals, outsourcing, downsizing, short time working, off
shoring, flexible working schemes, wage cuts, mergers and acquisitions, management
buyouts or bankruptcy. There is a lack of conceptual clarity, which makes discussions
on the topic blurred.
The concept restructuring is, as many have noted, problematic, not only because of
the lack of agreement about its definition. It is sometimes used as a euphemism for
other terms with even more problematic connotations, e.g. dismissals, downsizing, lay
offs. It is a concept, which is so vague that it can include almost anything and therefore also nothing. We have chosen to embrace this term, despite the lack of agreement
in the literature, because it gives an opportunity to take a broader perspective of the
phenomenon. Restructuring is here used as a unifying concept for all types of changes
that, from the point of view of the individual worker, implies a change in employment
status or working conditions. This can include dismissals, reduction of wages, reduced
working hours and other forms of changes where the employer changes the working
conditions in an effort to reduce labour costs and or adapt the workforce to avoid redundancies.
Second, as comparative studies have shown, there are considerable differences between Member States in terms of for example the way collective redundancies are
regulated (OECD, 2013). The national differences mean that the results of national
studies are difficult to translate into policy recommendations in other Member States
or to recommendations for how regulations should be harmonised on a European level. What is needed is a conceptual framework from which national and country specific policies and practices are compared. Developing a more general comparative
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framework would give opportunity to compare national differences not favouring one
or the other national policy or approach. In this way, comparative studies offer a valuable opportunity to discover the role played by laws, collective bargaining structures,
and labour market institutions in affecting the way restructuring is managed in each
country. Moreover, comparative studies offer an opportunity to assess the impact and
possibilities of harmonising regulative frameworks on a European level.
Third, the impact of regulation on restructuring is not clear. On the surface there
seems to be a relationship between the strength of employment protection legislation
and the rate of job displacement in a country (OECD, 2013). But the particular dynamics and inter-relationships between different types of regulation are not well
known. For example, what is the impact of employment protection legislation and the
various policy measures deployed to manage restructuring (e.g. short-time working
schemes, early retirement, transition services, wage reduction, etc)? Is there a causal
relationship between legislation and the way restructuring is managed or are there
intermediate factors affecting how labour law is used and interpreted? Furthermore,
the introduction of regulatory reforms may, due to the already existing traditions and
practices to manage restructuring, have effects that run counter to the aim of managing restructuring in a responsible way. What is the impact of the financial crisis on
the way restructuring is managed, and how do measures, policies and regulations
change?
It may be argued that policy makers are mistaken if they assume that an extra
dose of deregulation will automatically translate into an extra dose of flexibility for
employers. On the other hand, further regulation to stifle negative consequences for
some workers may lead to unintended consequences and worse conditions for other
workers. Policy makers are equally mistaken if they assume that a given deregulatory
practice that works in one country can be made to work similarly in another. As
Esping-Andersen (2000) notes, deregulatory policies may, paradoxically, have the
perverse effect of strengthening other rigidities. It is difficult to know with certainty
what needs to be reformed, regulated or deregulated.
In order to answer these questions a comparison of the legal framework for managing restructuring in several countries is needed. The comparison of national legal
frameworks needs to be complemented by qualitative analyses of the regulatory and
policy frameworks of each country. This means to consider other forms of regulatory
institutions affecting the way restructuring is managed, such as codetermination, ac-
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tive labour market policies, and specific measures aiming at facilitating restructuring
(for example working time reduction and early retirement schemes). Moreover, the
way restructuring is implemented on the local level have to be taken into account. The
legal framework and the measures available in a country provide incentives for actors
to resolve their adjustment needs in a particular way. For example if there are extensive state subsidies for early retirement, social partners would tend to resolve their
adjustment needs by letting older workers leave rather than other categories. To the
extent that measures affect the way restructuring is managed, they may also have an
impact on the outcomes of financial crises in the labour market and the economy in
general. Thus, the impact of an economic crisis may be influenced by the different
measures available to facilitate and manage restructuring.
The aim of this report is to assess the impact of the economic crisis in 2008-2009 on
the way restructuring is managed in a selection of European Member States, to analyse whether and how the regulative and policy framework for managing restructuring has changed and to monitor the implications of these changes in the longer term.
In order to address these issues, this report will focus on the following questions:
•
How did the crisis in 2008-2009 affect the way restructuring is managed?
•
What changes are made in the regulatory and policy frameworks?
•
What are the implications of these changes on a European level?
This project thus aims at creating a better understanding of how the practice of restructuring in Europe is being changed by the current financial crisis. More specifically, the project aims at describing how the measures to manage restructuring has
changed, in terms of the new measures implemented and how responsibilities for restructuring are allocated to various actors. Furthermore, the project aims at identifying the long-term effects of these changes for the relationship between employers,
employees, trade unions, regional authorities and member states. Special attention
will be paid to the availability of regulatory frameworks that may facilitate workers
transition to new jobs. Moreover, the analysis of the changing conditions for restructuring will be compared to the developments of policies on the European level. Particular attention will be paid to processes of harmonization, seeking to develop a European framework in order to understand the dynamic relationship between restructuring measures and established labour market institutions in Europe.
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1.2 A comparative study
We have chosen to compare the lessons learned regarding measures to anticipate and
manage change and restructuring since the recent and current economic crisis in
eleven European Union Member States. The selection of countries for investigation is
based on the assumption that there are important differences in traditions, culture,
legislation, industry structure, industrial relations systems, welfare and social security systems and national education and training systems, possibly affecting the kind of
measures implemented in each country. We also wanted to compare developments
and consequences of the economic crisis in the northern European Member States
(Germany, France, the Netherlands, Belgium, Sweden and United Kingdom) to those
in the South (especially Spain and Portugal), where employment conditions have been
more strictly regulated and therefore experience of redundancies are less developed
among social partners generally.
Another important comparative dimension is the older Member States of Western
Europe and the younger Member States in the east (for example Bulgaria, Czech Republic and Slovenia), where conditions for welfare and social security as well as industrial relations systems and social dialogue are very different. Thus, the following
Member States have been selected for investigation: Belgium, Bulgaria, Czech Republic, Germany, France, Portugal, Sweden, Netherlands, Slovenia, Spain and United
Kingdom. The selection of countries represents some of the great variation across Europe. This does not mean, however, that the results may be generalised to other
Member States, rather that the results can illustrate some of the divergence that exist
within the European Union. This study could thus function as a background and inspiration for both broader comparative studies and also more detailed analyses.
This study relies on an interdisciplinary and international group of experts from
the eleven Member States. The experts co-operate in a project (MOLIERE) financed
within the European Commissions call for proposals on Mutual learning in the field of
skills and employment, specifically Sector Skills Councils and Restructuring. Each
participant is expert in their respective fields of study, varying from Sociology, Occupational Health, Labour law, and Economics to Human Resource Management and
Business Administration. Thus, the study is an example of both cross-disciplinary and
cross-country research. The analysis was conducted in transversal workshops where
comparisons of the national data took place.
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1.3 Nature of the evidence
Although it is possible to draw conclusions about the impact of the financial crisis on
the way restructuring is anticipated and managed, it is difficult to interpret the data
with clarity. Several researchers have in recent years collected indications of the
changing nature of restructuring. There are a great number of statistical sources but
their use in providing good estimates for the development of for example collective
redundancies is limited. This is partly due to the difficulty to create satisfactory definitions of restructuring (see e.g. Eurofound, 2006). An additional problem is created in
attempting to draw comparisons between the Member States due to the variation in
labour market policies, terminology and varied regulations that exist. There are many
policy measures that might be considered as related to restructuring and their relative importance can differ across institutional and policy settings. The nature of restructuring and differences related to industrial relations traditions and industry variation may cause difficulties in drawing generalisations across Member States (Bergström, et.al., 2010).
Maybe the most comprehensive studies of restructuring have been conducted by
the European Foundation for the Improvement of Working and Living Conditions and
its specific research centre: European Monitoring Centre on Change (EMCC). Dissatisfaction with the national statistics regarding the announcement of redundancies to
measure how many jobs were lost and gained across European Member States, in particular how many workers were dismissed in collective redundancies, led the EMCC
to set up an instrument, the European Restructuring Monitor, that collects media
reports of major restructuring events in each Member State in 2001. Previously there
were no official body available that could monitor the extent of job loss and redundancies across Europe. However, it is no secret that this database does not reflect the true
number of workers who are loosing their jobs, since it is limited to what is reported in
national media, based on announced redundancies in larger establishments. In order
to be included in the database, an individual case of restructuring must involve the
announced loss or creation of at least 100 jobs, or employment effects affecting at least
10% of a workforce of more than 250 people (Eurofound, 2009; 2013). This means that
not all announcements of redundancies are covered by the database and as a measure
of job loss it tends to overestimate the number of redundancies because normally not
all workers who are notified as redundant as redundant are in fact dismissed. It is
clear that large shares of job losses are not shown in the database. The database does
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therefore not serve as a reliable source of information for deeper investigations of
changes in job loss or job creation. However, since the European Restructuring Monitor was set up already in 2001 and has been following the same procedures over time
it does provide an estimate of the general upward or downward trends in restructuring across Europe and within Member States. These efforts have certainly raised the
awareness of and improved precision in discussions regarding restructuring in the
European context.
The starting point of our study was the national reports on anticipating and managing change produced in the ARENAS project in 2009. We started by investigating
the developments and economic and labour market trends in each country. Data collection was structured according to a common general framework applied in each
country. Comparable data was collected from Eurostat. The goal was to compare developments before and after the financial crisis (2007-2013). Data included general
employment trends, unemployment, GDP, the composition of the labour force by gender, age, education and ethnicity. We also collected data from previous studies investigating collective redundancies in terms of the number of workers dismissed and outcome of employment transition, etc.
Comparing the data, we sorted out the variables that appeared to be relevant to
identify the economic and labour market outcomes of restructuring over the selected
time period. We compared data concerning employment change and GDP change in
the eleven countries between 2007 and 2013. This means that we were able to compare the economic and labour market outcomes and the way restructuring is practiced
in each country and changes in the use of measures and the regulatory frameworks.
This is a difference in relation to other studies in the same field. The most complete
study – ARENAS (2010) – compares 27 European Member States and collected examples of the various measures available in each Member State, but there were no comparative analysis of the measures and the analysis was limited to the existence of the
measures, without assessing the impact of the measures in addressing the problems
of the financial crisis.
Our study continued by identifying, the evolution of the regulatory framework in
each country. The comparison of regulatory frameworks was made on three dimensions: statutory laws regulating the employers’ initiation of restructuring, the working conditions for workers who are notified as redundant and the measures available
to support workers if redundant and measures available to avoid redundancies. It
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should be noted that we did not conduct formal testing of the relationship between the
identified variables. Such an analysis would, given the type of data available in this
context, probably oversimplify the highly complex relationships between regulatory
frameworks and how restructuring is managed. Instead our analysis should be regarded as a tentative first step in developing questions and hypotheses for further
analysis to be conducted at a later stage.
1.4 A conceptual framework
The study is based on a common conceptual framework for identifying and comparing
change in the way restructuring is managed. Given the definition of restructuring
that we apply in this project it is necessary to identify and define the different actors
involved in restructuring.
The individual employee
The employee, that is, the individual who conducts work is the main subject of restructuring. The employee may be directly employed (through an open ended or fixed
term contract) by an employer, which is initiating some form of change, which may
lead to a change in the working conditions or a termination of the employment relationship. To be subject to restructuring is a liminal state, with both objective and subjective dimensions. An employee who is, for example, notified as redundant is the typical case of being subject to restructuring. However, not all workers who regard themselves as subject to restructuring are in fact, in legal terms, subject to for example the
risk of being made redundant or to any other changes or measures implemented in
the workplace. Nevertheless, workers may perceive that their working conditions are
affected, simply because other workers are affected in the same workplace or organization. When dismissals are implemented, the workload of the remaining workers
(the survivors) is often increased (Devine, et.al., 2003). Similarly, not all people who
are subject to restructuring regard themselves as such. In many cases employers and
employees have different expectations and perceptions about the status of the individual and to what extent their working conditions have changed. Thus, to address
the impact of restructuring on the individual level, one needs to consider the individual’s subjective definition of the situation. Furthermore restructuring is not only limited to workers employed permanently. Different forms of contractual relationships
need to be taken into consideration as well. Workers can be employed on an open-
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ended contract. They can also work through a fixed term contract, through a temporary work agency or be employed by a supplier or subcontractor to the company,
which is going through restructuring. The impact of restructuring on the individual
level and the responsibilities assumed by the employer often varies dependent on the
centrality of the employment relationship.
The employer
The employer is the actor who initiates restructuring, i.e. changes that affect the employment status and or working conditions for the individual worker. The employer is
the actor with formal responsibility for the employment relationship, but they are not
always responsible for the decision to initiate restructuring. Decisions can be made by
owners, executive boards, investors or other stakeholders more or less external to the
workplace affected by the decision. In the public sector, for example, political leaders
and governments, initiate decisions to change, but they are not always held accountable for the formal responsibilities in the relationship to the worker affected by the decision (Bergström, et.al., 2013). Similarly, in larger companies, the decision leading to
restructuring can be rather distant from the actual workplace where workers are affected. This distance is a major issue when it comes to anticipating and managing
change and is even more complicated when the initiators (decision makers) are located in one country, like in large multinational companies, and the formal employer
responsibility is located in another. In such organizations, decisions about restructuring are not only distributed through multiple hierarchical levels, it is also interpreted
through multiple institutional, regulative and cultural frameworks. Thus, a distinction has to be made between the employer and the initiator of restructuring. It is important to distinguish between the employer and the interests and responsibilities
connected with this role, and the employer as an actor engaging in restructuring, i.e.
as an actor initiating a restructuring process.
Workers’ representatives and trade unions
Workers’ representatives have an important role to play in restructuring processes in
representing workers’ interests and ensuring that they are treated with dignity and
respect (Moore, Thomson & Luton, 2008). A precondition of this is anticipation, the
early provision of information and transparency, necessary to establishing trust as a
basis for negotiation and consultation (ibid.). The role of trade unions and workers
representatives is more complicated the larger the workplace and the enterprise, as
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mentioned previously, the distance between the initiator, the decision maker, and the
worker who is affected by the decision is greater the larger the company.
The mere existence of trade unions and workers representatives at a work place
implies that employers need to take particular considerations when initiating restructuring. Thus, even when trade unions are passive, they may play a role. Workers’ representatives may also take more active roles in restructuring, for example, by taking
part in negotiations regarding conditions for workers who are made redundant or by
influence the decision about which workers to be selected for redundancy. They may
also take action to resist restructuring by initiating strikes and other forms of conflicts or suggest other alternatives than to make workers redundant.
Trade unions do not only influence and monitor decisions on the local level, they also influence decisions on a more general level, through negotiation of collective
agreements that regulate conditions for restructuring on a more general level for sectors or occupational groups and or by influencing legal and policy frameworks on national and European levels.
The supporting actors
The employers’ responsibility for workers in times of restructuring is often outsourced
to external actors. The most wide spread and common form of supporting actor is the
Public Employment Services (PES). The role of the PES is to provide income support
workers who are subject to restructuring and to reduce unemployment through various forms of active labour market programmes. There are, however, several examples
of cases where employers decide to take on further responsibility for workers, where
they organize some form of in-house transition unit, where workers are supported,
both economically and substantially with the processes of finding new jobs before the
employment contract is terminated (Bergström & Diedrich, 2008b). In other cases,
employers outsource this “function” to private employment agencies or outplacement
firms (Knuth, 2008). In Sweden there are specific job security councils, established
through collective agreements between social partners, which provide transition services to redundant workers covered by the agreement (Bergström & Diedrich, 2008a).
There are also examples of transition agencies, which are funded by both public and
private actors, for example the German Transfer companies. Thus, there is an emerging sector or group of actors, with different forms of funding, which play an important
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role in restructuring. In their role to facilitate transfer of workers to new jobs, they
may help to buffer some of the negative consequences of restructuring.
The state
As identified in the ARENAS project (Bergström, et.al., 2010) the state has two primary roles in relation to managing change and restructuring:
(1) The first role is regulatory, to set the rules governing the actors in restructuring
activities, for example the responsibility of employers to inform and consult with
workers’ representatives, and the requirements and obligations of employers should
they decide to initiate collective redundancies, as well as the resources, rights and
obligations of workers and their representatives in such situations;
(2) The second role is facilitative, to help actors play the roles they have been given in
their respective labour markets and stimulate preferred patterns of behaviour among
employers, workers and workers’ representatives.
In all European Member States, governments play these two roles in one way or another. During economic crises there may be shifts between these roles in terms of emphasis and power. In dramatic economic downturns governments may be pressured to
take on roles they are not ready to play. Governments may also be struggling to find
their role and play it well or. This is primarily the case in the new Member States,
where regulatory frameworks were put into place relatively recently, and the experience of actors in playing their given roles is still developing. Economic crisis may also
imply that there are relatively limited resources available to stimulate preferred behaviour patterns. Governments may also be struggling to move away from the role
they played in the past, held back by traditions from the past. In the face of external
pressures, governments may also struggle to retain the role they have played in the
past. It is important to take this diversity of roles and developments into account
when trying to understand the development of measures for anticipation and management of restructuring in Member States. We will discuss these different roles in
further detail in later sections in this report.
Restructuring regimes and change
The configuration of the relationship between the five main actors may have an important impact on the outcomes of restructuring. When employers initiate changes
that affect the working conditions of workers it has effects on the labour market as
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well as the economy in general. It is therefore important to also consider the impact of
restructuring on a more aggregate level.
Furthermore, when we compare the way restructuring is managed across different
countries we face the problem that there are different conditions for managing change
across Member States, due to differences in legislative frameworks. Moreover, the
measures available to facilitate or mitigate change, the different traditions of industrial relations and the various impact and involvement of social partners and the
state, and the combination of such support structures affect the impact of restructuring in the labour market and the economy in general. It is therefore relevant to distinguish between the changes that take place within a particular national context in
two dimensions. First, changes in terms of economic and labour market developments.
Second, changes in the ‘system’ that facilitates change, the collection of measures,
policies and regulations that exist in a country, what Gazier (2008) calls a restructur-
ing regime, defined as the combination of adjustment mechanisms and measures controlled or adopted by a particular group of actors. It is the second form of changes that
is of most interest in this report.
Figure 1: Restructuring and workforce adjustment regimes
Wage and labour cost adjustment
Market
Quantitative
adjustment
Qualitative
adjustment
Dominant measure
Working time
reduction
Dominant measure: transition to
new job
Market led regimes
Dominant measure: wage cuts
Negotiated
State
Dominant measure: Early retirement
Source: adapted from Gazier (2008)
According to Gazier (2008) three major types of adjustment mechanisms, and their
respective measures, can be identified.
Price adjustment is, according to Gazier (2008), on of the most common forms of adjustment mechanism in any market. In labour markets price adjustment refers to
wages and salaries. When companies face drops in product/service demand they can
adjust by reducing wages or postpone negotiated wage increases and thereby avoid
redundancies. In a similar way, governments may influence employers’ labour costs
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by offering different forms of wage subsidies or reductions of pay roll taxes, to reduce
the impact of economic downturns or stimulate employment. Gazier (2008) also argues that along with the adjustment of wages and salaries, governments may influence employers’ preference for collective redundancies as a way to adjust the labour
force by introducing severance payments. Thus, elaboration of labour costs (either
through wages or through severance payments) is a mechanism highly related to restructuring.
Quantitative adjustment refers to limiting or reducing the supply of labour when
the demand for labour is decreasing or ways of increasing or expanding the supply of
labour when demand is increasing. Reducing the supply of labour can be done in several ways. First, by reducing the number of hours worked. Second, by reducing the
number of workers in the labour force by offering workers early retirement, i.e. taking
older workers away from the labour force. The supply of labour can be increased by
opening up for more immigration, extending the retirement age or by stimulating individuals to supply their labour through tax reductions or reduced social benefits. Investments in training and education can also be seen as a way to increase the supply
of skilled labour.
Qualitative adjustment refers to measures that enhances or maintains the quality
of the workforce or makes sure that labour is used more effectively2. This can be done
in several ways. The most common form of measure is probably training and education, which aims at increasing the productivity of the workforce. Another measure
that could be said to contribute to qualitative adjustment is various forms of transition support, where redundant workers are supported to find new jobs. Thus, qualitative adjustment signifies a mechanism that facilitates a re-allocation of labour (within
or between firms) in a way that maintains or enhances productivity.
The distinction between the different adjustment mechanisms is not always clear
and specific measures can be seen as contributing to several forms of adjustment at
the same time. Nevertheless, this framework can be used to identify the dominant
patterns of how change is managed within a specific context and can be used to ask
questions such as, what is the dominant pattern of adjustment in the particular
Member State? For example, are measures and practices primarily geared towards
It should be noted that we here differ somewhat from Gaziers definition of qualitative adjustment, which merely refers to
the “skills levels of the workers or the skills requisites of jobs”. This perspective is in our view rather limited and only regards
the use of labour in terms of a particular skill level and does not acknowledge the informal capacities that allow workers to
engage in productive labour and how work and labour is organised to be used more effectively. Another difference is that
qualitative adjustment should be seen from the point of view of the labour market in terms of how the restructuring regime
facilitates the re-allocation of labour within the economy, for example through the transition of skilled workers to new jobs.
2
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managing change through the adjustment of the price of labour or are measures applied primarily focused on facilitating quantitative adjustment, by reducing or increasing the supply of labour?
In our previous projects, see for example Gazier, (2008), five Member States (Belgium, Germany, France, Sweden and the UK) were classified according to this
scheme. France was, for example, categorized as a typical example of a country with
high degree of state involvement and where quantitative adjustment is the dominating mechanism.3 In this project we expand the scope of the analysis to also include
Netherlands, Spain, Portugal, Bulgaria, Czech Republic and Slovenia. However, our
focus is not only to classify Member States in relation to the comparative framework,
we are also interested in identifying whether and how the restructuring regime in
Member States have changed as a consequence of the financial crisis. This make the
analysis more complicated. We therefore need a framework, for not only comparing
restructuring regimes, but also to compare how they change.
To develop such a framework we borrow ideas from institutional theory and theories about organizational learning. Restructuring regimes can be seen as products of a
long history of interactions between actors. Like any institution, the particular form
or configuration of adjustment mechanisms is the result of path dependent selfreinforcing processes. Once a particular pattern of interactions has been established
(lock-in) it may be difficult and/or costly to deviate from this trajectory (Gazier, 2008).
It is only under certain circumstances that actors can break out from such a path, but
most often paths are interrupted through external shocks that disturb the interaction
between actors. A financial crisis may for example be an example of such a shock, but
not necessarily.
To analyse how restructuring regimes change, we may differentiate between at
least two different kinds of change in two different dimensions. The first kind of
change refers to changes within the existing regime. On this level, actors are acting
within the existing restructuring regime. The already established measures are
adopted. To the extent that changes are made, they are only modifications or corrections of experienced errors or mismatches of existing measures. Measures are adapted
to operate more efficiently within the existing framework, but the goals of the
measures are neither questioned nor changed. Here there are no radical changes of
3 In the MIRE-project, which was the basis for the categorization of Member States in the Gazier (2008) framework, five
Member States were categorized (Belgium, Germany, France, Sweden and the UK). In this project we extend the analysis to
also include Netherlands, Spain, Portugal, Bulgaria, Czech Republic and Slovenia.
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the regime, rather amendments and corrections. Measures may, for example, be extended to cover additional actors or conditions for applying them may be modified.
This type of change process refers to what Argyris (1990) calls single-loop learning.
The second kind of change refers to movements in the horizontal axis of Gaziers
(2008) model, a learning process that signifies a movement from one adjustment
mechanism to another, and is similar to what Argyris (1990) call double-loop learning.
Actors, through the experience of using the existing measures, which turn out to fail,
reconsider their goals and use other measures. This implies a change that breaks out
of the existing framework, moving towards another way of understanding the problem
and also a different way of solving it, leading to a different pattern of action. Such a
learning process can result in developing completely new measures, following a different logic and with other goals, complementing the existing measures or rejecting the
old. Such changes, if extensive, may radically change the dominating adjustment
mechanism and lead to a change of restructuring regime or at least a movement towards a different regime. When the restructuring regime change the impact of restructuring in the labour market and the economy change. Such processes may be
slow and take place over long period of time. Compared to the first kind of change,
however, this type of change leads to a change in the configuration of actors within
the regime.
The third type of change refers to the vertical axis in the Gazier model, changes in
the way changes of restructuring regimes are made or changes in the power game
between different actors within the restructuring regime. There are several different
ways in which such changes may take place. On the one hand changes may be implemented through the involvement of new types of actors. For example in a country
with very limited involvement of social partners, the involvement of social partners in
decision making about restructuring regimes may be regarded as an example of a
third order change. On the other hand, changes may be implemented in a top down
manner, moving more towards an administrated regime. The way changes are implemented are important because it may affect the efficiency of the restructuring regime.
Without involvement of the actors who are supposed to use the system, the changes
may be superficial, decoupled from day to day operations. It may also affect how the
restructuring regime evolves in the future. Actors tend to repeat the patterns of
change over time. It is important to take notice of the way changes used to be made
within a country, for example, top down, through formal amendments of legislation or
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through the involvement of social partners. An economic crisis may change the way
changes are made, but not necessarily. There may be calls for radical interventions,
when systems are not adapted to the new situation. But changes may also be slow and
emergent, barely noticeable.
We now have a terminology that can be used to identify change in restructuring regimes. If we want to achieve harmonization across Member States we need to
acknowledge not only the starting point. But also the directions in which countries are
moving. Are they moving in the same direction, towards a common restructuring regime? Or is it that there is a third order change? Is there more or less involvement of
social partners?
1.5 The Structure of this report
To create a better understanding of the implications of labour market regulations on
the restructuring, we will analyse and discuss the nature of and the different forms of
regulation that apply to anticipating and managing restructuring. We begin, however,
in chapter 3 to identify the restructuring regimes in the selection of Member States
and identify to what extent and how restructuring regimes are changing and compare
the restructuring frameworks in the eleven European Member States.
Doing so highlights three characteristics of the developments since the financial
crisis in 2008-2009, which are summarised and discussed in chapter 4. First, the extent of restructuring and the measures available to anticipate and manage restructuring varies considerably among the different countries studied. But there are clear
movements among the eleven Member States with an increasing emphasis on
measures to facilitate quantitative and qualitative adjustment and an increasing emphasis on efforts to facilitate social dialogue between social partners. Second, we find
that the statutory regulations of collective redundancies in the selection of European
Member States are rarely designed on the basis of actually being used. They are designed to prevent use or to deter employers from initiating redundancies. As such
they can be seen as a form of institutional blockage, favouring the remaining workers
rather than the interest of those workers who are made redundant or those who do
not hold open-ended contracts. Third, except for the radical changes in Spain and Portugal, regulatory frameworks are only partially reformed. In this instance it is valuable to compare the changes with the European Quality Framework initiated by the
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European Parliament. We find that despite the various efforts to reform or change
restructuring regimes in the countries studied, the problematic features of restructuring still exist, the uneven distribution of measures across Member States and the lack
of attention to the transition of dismissed workers to new jobs.
We argue that measures to support workers’ transition to new jobs limit some of
the problems of restructuring for workers and that such measures serve a particular
function in the labour market that should be facilitated. However, we find that the
efforts to limit and control collective redundancies are contradictory and they are
most often not taking into account the interest of those workers who are in fact dismissed and other marginal groups of workers who are more or less directly affected
when restructuring is initiated. This distinction, we believe, is important in identifying recommendations for future policies trying to limit the negative consequences of
restructuring for workers and to facilitate the ability to change and maintain competitiveness in the European economy. In the last chapter we propose a way of thinking
about how to reform regulation of restructuring so as to attain sustainable competitiveness in the longer term.
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2. LEARNING AND INNOVATION IN RESTRUCTURING REGIMES
2.1 Introduction
In this chapter we compare and analyse the main developments among the eleven
member states in terms of how the measures to manage restructuring has changed
since the financial crisis in 2008-2009, following the adapted Gazier-model described
in the previous chapter. Our analysis of the development since the financial crisis
shows that there are four main movements among the eleven Member states.
•
A temporary intensification of wage and labour cost adjustment.
•
A shift in emphasis concerning quantitative adjustment mechanisms, implying a
decline of state funded early retirement schemes and an expansion and institutionalization of different forms of working time reduction schemes.
•
A withdrawal of state intervention and an attempt to facilitate agreements between social partners.
•
An increasing emphasis on measures to support qualitative adjustment, both in
terms of legal provisions and measures to support transition to new jobs.
In this chapter we will exemplify and analyse these movements in further detail.
However, the fourth trend concerning the increasing emphasis on qualitative adjustment and measures to support transition to new jobs will be discussed in the next
chapter.
2.2 Restructuring regimes before the crisis
It is difficult to categorize Member States according to a common comparative framework without simplifying the enormous complexity and diversity of legal frameworks,
the history of industrial relations and national labour market policies. However, a
general categorization of the main features of adjustment and governance mecha-
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nisms among Member States helps us identify broader trends and developments within and among Member states.
Before the crisis the eleven Member States studied in this project were distributed
in three main clusters. In the first group we find countries where labour markets are
primarily adjusted through modifying the price of labour, through wage reduction and
labour cost subsidies, and with relatively limited state intervention as well as relatively limited power and influence of social partners. The typical example is the United Kingdom, but we also chose to place the relatively new Member States (Bulgaria,
Czech Republic and Slovenia) in this category. In all these four Member States expenditure on labour market policy is relatively limited and there are few examples of
measures to manage restructuring that go beyond the legal requirements.
Figure 2: Restructuring regimes for eleven Member States before the crisis
Wage and labour
cost adjustment
Quantitative
adjustment
Qualitative
adjustment
Market
United Kingdom Czech Republic Bulgaria Slovenia Negotiated
Germany Sweden Netherlands State
France Spain Belgium Portugal Source: Adapted from Gazier (2008)
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In the second group we find Member States with a relatively strong focus on quantitative adjustment and state intervention. In these Member States employment protection legislation is relatively strong and the state plays an important role in providing
measures to facilitate change, primarily through early retirement schemes and
through different schemes to allow employers to reduce working hours. Even if there
is variation among them, we place Belgium, France, Spain and Portugal in this group.
The different Member States have different emphasis and focus, but in. Another
common feature among these Member states is the relatively tight relationship between the state and the social partners.
In the third group we place Member States where the governance of labour markets are characterized by relatively strong and independent negotiations between social partners, typically exemplified by Germany and Sweden. In both these Member
States collective bargaining has a strong role, both in terms of negotiation wages and
different measures to manage restructuring. However, while in Germany adjustment
were typically made through state funded early retirement and working time adjustment schemes, the Swedish “regime” were primarily oriented towards qualitative adjustment, through wide spread measures to support redundant workers’ transition to
new jobs. Thus, even if they have different adjustment mechanisms, they can be seen
as being relatively close to each other through the common emphasis on collective
bargaining and social dialogue.
2.3 Developments since the financial crisis
Comparing the development in the eleven member states since the financial crisis we
can identify a number of changes and developments. In the following sections we analyse developments within and across the dimensions in the comparative model. We
start with developments within wage and price adjustment and continue with quantitative and qualitative adjustment respectively. Finally we analyse movements in the
vertical dimension of the comparative framework.
Wage and labour cost adjustment
First of all there is an intensification of wage and labour cost adjustment. In several
Member states where there is a tradition of managing restructuring through the reduction of wages when there is a reduced demand for products and services, this practice has continued. Typical examples are the United Kingdom, Bulgaria, Portugal and
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Slovenia, were employers re-examined their wage policies, bonus systems and implemented wage freezes in order to preserve jobs. The Slovenian national report, for example, mentions that companies under restructuring usually reduced employment by
terminating, first of all, all posted workers, self-employed, and some previously outsourced activities were again performed by own employees. In other companies, management decided to cut production costs by reducing planned wage increases, cutting
usual employee benefits and awards.
In some Member States this form of adjustment has also been facilitated by the
state through different labour market policies that intervene in the price setting of
labour, for example by reduction of social security obligations or by providing different
forms of wage subsidies to allow employers to retain their workforce in the context of
recession. For example in Portugal wages in the Public sector were frozen and the
payment of supplementary work was reduced in general (Rego, 2014).
Another way for the state to intervene in labour costs is through the reduction of
pay roll tax and or value added tax for the employment of specific groups, for example
younger workers, or to stimulate employment in certain sectors. For example in Sweden, the government implemented a program of reduced pay roll tax for employers
who employ individuals who are between 15 and 25 years old. In Slovenia the state
offered many different types of subsidies to reduce wage and labour costs or taxes intended to increase the employment opportunities of the vulnerable groups and unemployed persons (Urdih Lazar & Dodic Fikfak, 2014).
The advantage of wage reduction as a mechanism to adapt to economic turbulence
is of course that production could be retained and employment opportunities could be
saved. This is particularly relevant in high skilled sectors with temporary reduction of
demand. However, except the obvious negative consequences for workers who receive
lower wages, the problem with these measures are the difficulties in reaching agreements between social partners. As mentioned in the UK and the Swedish national
reports, trade unions were critical to the employers’ proposals to reduce wages. Furthermore, even if wage or labour cost reduction measures promise to prevent redundancies, employers are not able to guarantee that workers will not be dismissed at a
later stage. More importantly, as mentioned in the Swedish national report, if workers and their representatives agree upon wage reduction as a way to avoid redundancies in a crisis situation, there is a risk that future wage bargaining processes will be
affected. Thus, for workers, wage reduction as a way to avoid redundancies may pro-
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duce a vicious circle of lower wages and worse working conditions, if it is not limited
to extreme crisis situations.
Wage subsidies or tax exemptions to stimulate employment do not necessarily have
the same effect, but there may be difficulties to specify to which firms the wage subsidy should be restricted. The main danger is that subsidies are granted to nonproductive firms with little or no prospects for the future. In general, as a measure to
manage restructuring, wage subsidies provide a distorted incentive structure for employers. The ambition to support companies in economic difficulties produces employers who present themselves as being in economic difficulties. The alternative, to stimulate employers to develop strategies and practices that allow them to survive even
under difficult situations, seems to be more sustainable.
Quantitative adjustment
Quantitative adjustment refers to limiting or reducing the supply of labour when the
demand for labour is decreasing or ways of increasing or expanding the supply of labour when demand is increasing. Reducing the supply of labour can be done in several
ways. First, by reducing the number of hours worked. Second, by reducing the number
of workers in the labour force by offering workers early retirement. A clear trend since
the financial crisis in the eleven Member States studied in this project is a shift in
emphasis concerning quantitative adjustment mechanisms, implying a decline of
state funded early retirement schemes and an expansion and institutionalization of
different forms of working time reduction schemes.
Decline of early retirement Our review of the development in the eleven Member States also shows that one of
the most important developments since the economic crisis in 2008-2009 is the decline
of state funded early retirement schemes, both in terms of the amount of public expenditure and the number of beneficiaries. This is however a long term process, which
started already before the crisis. As shown in figure 3 the most important decline in
the number beneficiaries of publicly funded early retirement has taken place in
France, Belgium, Portugal and to a lesser extent in Germany.
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Figure 3: Beneficiaries of publicly funded early retirement, 2001-2012
300000 250000 200000 150000 100000 50000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Belgium Germany France Portugal Source: Eurostat
In four of the eleven Member States studied in this project (France, Netherlands,
Germany and Portugal) early retirement schemes have been withdrawn. In France
the special allowance of the national employment fund (“AS-FNE” in French), a public
subsidy to early retirement was closed in October 2011. This financial support allowed
the payment of a substitute income (only partly replacing the wage received previously by the worker) to a worker of 57 years of age who was unable to benefit from reemployment measures and made redundant on economic grounds, until being entitled
to claim full retirement (Teissier & Triomphe, 2014).
In the Netherlands state funded early retirement used to be an important measure
to manage restructuring, but there has been a consistent policy by the government to
limit this kind of measure. Tax exemptions for early retirement schemes are no longer
available. Sectoral pension funds faced substantial deficits in 2008 as a direct result
of the economic crisis, but recovered in 2009. Most of them were near or over the minimum legal financial obligations at the beginning of 2010. Employees opting for the
early retirement way-out of restructuring could pay a high individual price loosing
benefit rights and facing lower pensions. This implies that the attractiveness for social partners of using such schemes as a tool to manage restructuring have declined.
In 2014 there are practically no early retirement schemes left in social plans
(Sprenger, 2014). Instead the government has focused on policies to keep older workers longer on the labour market. In the Dutch ‘two tier’ pension system (a general
basic benefit and, on top of it, a company/sectorial pension, depending on the number
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of years worked and wages earned) early retirement systems like pre-pension or
bridge pension only survived for some special jobs. The formal pension age for the
general old age benefit (AOW) is 65 plus one month, and will rise further with one
month per year. Individual (part time) pensions can still be taken before 65, but at
high costs for the early retiree.4 Similar developments have taken place in Germany.
Already in 2009 it was stated that early retirement was regarded as a measure of the
past and it has been a policy of the German government to increase employment
among older workers rather than facilitating early retirement. In Portugal the government not only suspended the right to early retirement but also increased the age
to retire from 65 to 66 years old.
The main argument for the withdrawal of state subsidized early retirement programs is that they not only tend to push older workers out of the labour force and
thereby reduce tax income to the state. Maybe most importantly, early retirement is a
very costly restructuring measure and since workers are excluded from the labour
force they do not contribute to the welfare system and the pension system in particular. Thus, the retired individuals make use of pension funds, rather than contribute to
it.
Figure 4: Public expenditure on early retirement in a selection of Member States, Million EURO
3000 2500 Belgium 2000 Germany 1500 Spain 1000 France Portugal 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Eurostat
In two of the eleven countries (Belgium and Spain) the public early retirement
schemes have not been completely withdrawn, but have been reformed in the direction of making it less attractive for both employers and employees to use it, as well as
However, the Dutch Trade union confederation FNV recently pleaded for a temporary and special variant of part time early
retiring. Young unemployed should share one job with an older employee, who then can reduce productive working hours
and use the rest of the working time for sharing knowledge, helping and coaching a youngster who is partly taking over the
job. Employers and the government, however, did not react to this proposal.
4
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including other labour market objectives in the schemes, for example to facilitate the
entry of younger workers in the labour market.
In Belgium the previous general early retirement scheme was accessible to elderly
workers (60 or 58 years old) with a tenure of 25 years if, and only if, they have been
laid off. The employer is obliged to replace the retired worker with an unemployed
worker, but if the company is under restructuring it can under certain conditions receive exemptions from the Minister of Employment (for further details, see Naedenoen, 2014). The retiree is compensated through unemployment benefits with an extra
amount monthly paid by the employer.
The early retirement schemes were, however, questioned by the “solidarity pact between the generations” (Naedenoen, 2009) because it was seen as not creating sustainable conditions for the pension system in the future. As a consequence, measures
were taken to try to discourage the use of early retirement schemes in several steps.
Reforms of Belgian early retirement schemes
In 2010 the costs for the employer was increased. Until that date, the cost for the employer was 50% of the difference between the last salary and the unemployment benefit. Since the unemployment benefit is regularly
growing from year to year, this extra amount was decreasing. Through this new law, the total amount of the
employers’ indemnity is the same over time.
In 2011 a new law was enforced, stipulating that the threshold limits will be progressively increased for the
companies in difficulty. The same evolution is expected for the companies under restructuring but the law
must still be promulgated.
In 2012 a law renamed the device as “Unemployment with company complement” and imposed to the workers
concerned by the device to stay on the job market and to keep looking for a job. (Naedenoen, 2014)
In Spain there were negotiated partial retirement schemes that were applied on condition that another person is employed. As mentioned in the Spanish national report
(2009) workers’ representatives and trade unions usually regarded this measure as
“the lesser of two evils”, since it provided the possibility to maintain the level of employment. The objective was to exchange older workers on permanent contracts with
other cheaper contracts (both in terms wages and labour costs), destined to younger
workers. In Spain there were also, so called, relief contracts, which implies that a person aged 60 will leave the undertaking whilst another person would enter the company for at least a five-year period, the so-called “relief worker”. The duration of the relief contract was amended and now it shall be indefinite or at least until the retiree
worker reaches the date of the legal retirement plus 2 years more (assuming the time
reduction for the retiree worker is 75%). The relief worker shall carry out the same or
similar tasks that the retiree worker.
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These contractual arrangements are still available, but the government has substantially limited the conditions to avoid abuses, for example by increasing the contributions employers have to pay to make use of the scheme and the eligibility criteria
for early retirement (For more details see Rodriguez Contreras, 2014). The new early
retirement rules make a distinction between two different forms of early retirement.
First, early retirement for causes external to the employee, which will apply to employees who are at least four years before their retirement age and who have contributed to the social security system over 33 years and request their early retirement in
case of, among others, restructuring measures at their employer, such as collective or
individual redundancies. Second, early retirement at the employees’ request, which
will apply to employees who are at least two years before their retirement age and
who have contributed to the social security system over 35 years.
Thus, in these two countries the early retirement schemes have been reformed in a
direction of restricting the use for both employers and workers. This general trend of
more restrictive use and withdrawal of state funded early retirement schemes may
have an important impact in the labour market. As shown in figure 5, there is an increasing employment rate among older workers in those Member States where early
retirement schemes have been removed.
The figure also shows that the employment rate for older workers is higher in those
Member states where early retirement schemes are only used to very limited extent,
for example Sweden and the United Kingdom. Of course there may be other explanations to the increasing employment rate for older workers, for example demography,
the official retirement age and other incentives and programs to facilitate active ageing. Nevertheless, removal of early retirement schemes indicates an interest to at
least not counteract active ageing.
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Figure 5: Employment rate for older workers (55-65)
80 Belgium 70 Bulgaria 60 Czech Republic 50 Germany Spain 40 France 30 Netherlands 20 Portugal Slovenia 10 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sweden 0 United Kingdom Source: Eurostat
In sum, based on our analysis of the development after the financial crisis in eleven
Member States state funded early retirement is a declining phenomenon in Europe.
Governments spend less money on early retirement and a decreasing number of
workers leave their jobs before retirement age. Even if it cannot be explained completely by the reduced opportunities for early retirement, one of the possible effects is
an increasing employment rate of older workers. In general it implies a reduced government involvement in social partners decisions on how to manage restructuring.
In some Member States where early retirement schemes have been withdrawn, social partners respond to this development by calling for governments to reinstall the
previous early retirement schemes. This is not surprising since social partners have
clear incentives to retain early retirement, since it provides a relatively simple way of
solving adjustment problems and therefore functions as a way to maintain social
peace in the workplace. It is also seen as legitimate, since it offers compensation to
workers with longer tenure. When state funded retirement schemes are withdrawn it
is easy for social partners to retain the programs by shifting the financial responsibility to the employer. Such reactions make the process of reducing early retirement difficult and slow, unless there are other alternatives available and or discouraging disincentives for those who use it.
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The limited availability of state funded incentives for early retirement, however,
puts pressure on social partners to solve their adjustment needs in other ways. We
can see a movement towards other ways of adapting the workforce, both on a company
and a labour market level in two different directions. On the one hand, an increasing
interest in other ways of adapting the supply of labour. For example an increasing
attention to different working time reduction measures: short time working schemes,
temporary lay offs and partial unemployment. On the other hand, a shift towards establishing measures to support adjustment through transition to new jobs. In for example France and the Netherlands we have seen an increasing focus on the development of measures to manage redundancy processes and to establish measures enabling the transfer of workers to new jobs through different forms of transition services. In the next section we will take a closer look at the increasing interest in working time reduction schemes.
Expansion of working time reduction A third strong trend is the expansion and development of different forms of working
time reduction schemes. One of the most debated and celebrated measures to manage
restructuring during the crisis 2008 and 2009 was the so-called short time working
schemes. Short time working is a general concept for a whole family of different
measures, which all share the general objective to provide an opportunity for employers to reduce labour costs temporarily by reducing working time. The reduction of
working time can be done to different degrees, either completely, for a limited period
of time, or partly. The schemes are called different names dependent on how much
working time is reduced, for example temporary lay-offs, part time unemployment or
short time working. The key feature of these schemes is that workers are not obliged
to work full time and retain their employment contract, but receive a reduced income.
In most, but not all, cases the individual worker is compensated for the reduced income incurred by the reduced working time through subsidies. The subsidies are
granted to employers that cut working hours and the national public employment services or some other body provides payment to the individual or through the employer
for the difference, to ensure that individual income is not reduced. In some schemes
the individual workers are fully compensated for the income loss, but in others the
compensation is reduced. The subsidies may also be offered through reduced social
security contributions.
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By their nature working time reduction schemes are temporary. They are only offered to employers for a limited period of time, when the economic difficulties are assumed to end and demand returns. The intention of working time reduction schemes
is to avoid collective redundancies and in several countries it has been seen as a good
way to save jobs and reduce unemployment. The adoption of working time reduction
schemes often include a requirement that the employer should suffer from a temporary economic difficulty due to reduced demand. In several countries the adoption of
working time reduction schemes required authorization by a governmental authority,
such as the local public employment service. In some countries the adoption requires
a social partner agreement, thus providing an incentive for employers to negotiate
and come to an agreement with workers representatives on the terms and conditions
of applying the working time reduction arrangement.
The most common and well-known form of working time reduction scheme is short
time work. In such schemes employers may reduce a few working hours every week or
for a shorter period of time. Partial unemployment differs in relation to short time
work in that it refers to a more drastic cut in working hours, to the extent that it can
be called part-time. Another difference is that in many cases, employment contracts
are shifted to part-time contracts and part-time workers are registered as part-time
unemployed and are offered unemployment benefits. However, in most cases, the part
time unemployed are granted higher benefits than they would be offered through unemployment benefits. It also has a more symbolic difference in that it is called partial
“unemployment” and not part-time “work”, implying that it is not merely a reduction
in working hours. Thus, compared to short-time work, partial unemployment signals
a more severe situation for the involved actors. A third version is to avoid redundancies through temporal lay-offs. This means that employers are temporarily dismissing
workers, but the contract of employment is retained or the employer promises reemployment after a specified time period. The time periods and conditions differ between countries, but the principle is the same. While the worker is not working he or
she is compensated by the employer and or through public subsidies, primarily unemployment benefits.
Several commentators have explained the successful development of the German
economy and labour market as a result of the use of working time reduction schemes,
where employers were able to avoid redundancies and reduce labour costs by reducing
working time for limited periods, while workers received income from public funds.
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The support of such schemes has, however, not been unreserved. As was found in the
ARENAS synthesis report (Bergström, et.al., 2010) there are arguments both in favour and against the use of working time reductions as a measure to manage restructuring. Compared to other schemes to avoid redundancies working time reduction
schemes were seen as having several advantages. For employers in temporary economic difficulties temporary reduction of working time was seen as a relatively simple
and quick way to reduce labour costs, without much social conflict, but it should only
be used when there is a relatively short-term drop in product or service demand. Another advantage is that the programs can be limited to particular groups of workers,
sectors or companies, but this is also one of its potential weaknesses in terms of securing equal treatment of workers and fair competition between companies.
Another advantage from the employers perspective is that employment contracts
do not have to be terminated and working hours may be returned to normal when the
demand for products and services return. Compared to the alternative – dismissals employers do not need to spend time and money to recruit and train workers when
demand returns. In Germany it was particularly emphasized that this was an important advantage in the skilled segments of the labour market (Knuth, et.al 2009). It
was further argued that temporary laid off workers could easily return to their previous work duties and when combined with training they would be even better prepared
than before. Most importantly, for employers it is seen as beneficial that labour costs
are transferred to the public employment services when the employer has limited capacity to pay wages.
As mentioned in the ARENAS synthesis report there were also criticisms related to
the use of working time reduction schemes in several countries. Voices were raised
regarding the predictability of economic recovery and the risk that employees may be
dismissed anyhow, after the working time reduction period is completed (Bergström,
et.al., 2010). For example in Germany it was argued that short time working allowances used for an extensively long period could lead to a delay of necessary and unavoidable collective redundancies and closure of businesses. In such cases temporary
working time reductions becomes deceiving. Instead of working temporarily with reduced working hours and compensation with the promise of keeping their job, workers
may have been better off being dismissed, unemployed for a period of time and directing their energy towards new career somewhere else. Thus, what appears as a successful measure in the short term may have difficult consequences in the long term.
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Furthermore, if workers are dismissed after a period of temporary reduced working
time, they may suffer from reduced unemployment benefits, because their contribution has been decreased. Similar effects were identified in relation to future retirement compensation. In some cases, workers had been forced to waive holiday entitlements or to switch over to a new severance pay system, potentially entailing significant financial losses in terms of severance pay for employees who had been employed
with a company for many years. Workers’ interest groups were also critical of the suspended workers’ social security costs being shifted to the national public employment
service.
A critique raised was that reduced working time schemes could have direct negative repercussions with respect to employees’ future retirement pensions, as the service period is calculated proportionally with the actual working time of part-time jobs.
There were also concerns regarding the possibility for employers to over-utilize this
measure and the problems to control whether working time is actually reduced. Debates in several Member States also indicated that there had been difficulties associated with combining temporary lay off schemes with training.
Working time reduction after the crisis In some Member States publicly funded working time reduction schemes have a long
history and is seen as an integrated part of labour market policies (for example Belgium, France, Germany, Netherlands, Portugal and Spain) and in several other Member States working time reduction schemes have been spread and adopted in recent
years, for example (Bulgaria, Czech Republic, Slovenia and Sweden). In these countries working time reduction schemes were initiated for the first time during the crisis
as part of an anti-crisis package. The only exceptions to this expansion of working
time reduction schemes are in UK, Sweden and the Netherlands. In the UK, publicly
funded working time reduction schemes have never been an important measure and
this did not change during the financial crisis. In the Netherlands, the existing program for partial unemployment was abolished in 2012 and in Sweden in the absence
of publicly funded short time working schemes, social partners set up a collective
agreement including an employer funded scheme for working time reduction in times
of crises, but this temporary crisis agreement did not continue (see Bergström, 2014).
Reforms of the established In those countries were working time reduction schemes already existed they have
been reformed to be more efficient and extended in time and in terms of coverage to
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MOLIERE SYNTHESIS REPORT
larger groups of workers. In Germany, the well known publicly funded schemes have
primarily stayed the same since the beginning of the crisis. At the peak of the crisis in
2009 the government extended the funding of short time work. The maximum duration of funding was prolonged from 6 to 24 month. In addition the costs for social security contributions were covered by the PES under specific conditions. Until the end
of 2014, the maximum funding of Short Time Work is 12 month. If this exemption will
not be prolonged, from 2015 the normal and previous duration of 6 months maximum
will apply again (Knuth, etal., 2014).
In Spain the schemes for temporary reduction of working time were reformed to
make them more efficient and in Belgium the partial unemployment schemes, previously limited to blue-collar workers, were temporarily extended to cover also whitecollar workers. In 2013 the temporary measures were made permanent. The schemes
were also changed to include more employer-co-financing of individual compensation
(Naedenoen, 2014).
In Portugal various forms of working time reduction schemes were in place already
before the crisis and these were reformed in several steps to make them more efficient
in response to requirements from the Memorandum of Understanding on Specific
Economic Policy Conditionality (MoU) in 2011 (for more information, see Rego, 2014).
Example: Changing working time reduction schemes in Portugal According to the MoU, the Portuguese government had to present draft legislation on the : ‘implementation of
the commitments agreed in the March Tripartite Agreement regarding working time arrangements and shorttime working schemes in cases of industrial crisis, by easing the requirements employers have to fulfill to introduce and renew these measures’ (MoU, 2011: 54). Nevertheless, most measures had already been introduced
with the revision of the Labour Code in 2009. In that year, four main measures were introduced to allow a
more flexible management of the working time according to the company’s needs. These measures are: intermittent work contracts; adaptability regime – collective or individual; time accounts – collective or individual;
time concentration. The youth of these measures together with the lack of data on the collective agreements
content, do not allow us to provide information on their impact.
The partial unemployment subsidy (which has three types: partial unemployment subsidy, partial subsidy for
activity ending, partial subsidy for professional activity ending), created in 2006, allow workers to keep working for a short time, and in certain cases allow independent workers and managers to receive also the unemployment subsidy. Therefore, this mechanism allows workers to keep a connection to the labour market and
companies to reduce labour costs.
The temporary reduction of normal working hours or suspension of employment contracts at the initiative of
companies usually concerned companies in position of recovery, but, since 2012, may also be used by companies in a difficult situation, this meaning companies missing in contributions to social security system and fiscal
authorities. Moreover, since 2012, the period of written notice to workers was reduced from 10 to 5 days, the
temporary layoff does not consider anymore the position of the workers’ representatives (the employer only
has to inform them), and the employer is prevented from terminate the work contract.
Number of workers in layoff per type of situation (2008-2013)
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MOLIERE SYNTHESIS REPORT
2008 2009 2010 2011 working Lme reducLon 2012 2013 temporary suspension Source: Segurança Social, 2014.
Workers have the right to receive from the employer a monthly retributive compensation, paid by the employer (30%) and the Social Security System (70%), equal to two thirds of their gross regular salary, besides other
benefits. They also have the right to have another work. Managers are not covered by the workers’ rights under
the layoff. The reduction of the normal working hours or suspension of employment contracts may begin after
the lapse of five days from the date of written notice to each worker as the employer decided to apply immediately or in situations where there has been agreement with employees or employee representatives. (Source:
Rego, 2014)
In France, the already established working time reduction schemes have been subject
to extensive reforms in a direction to make them more efficient, for example by merging the existing measures - partial activity and partial long-term activity - to a single
measure. The rules for calculating hours to be paid to the employee involved in the
schemes were simplified. Moreover, as in Belgium, the schemes were also changed to
involve the employers to a greater extent and the state can ask employers to make
specific commitments in terms of training and avoiding redundancies. The reformed
schemes also included a differentiated level of compensation, depending on whether
training is implemented or not during the short-time work period (for more information see, Teissier & Triomphe, 2014). The reforms have had a substantial impact
and an increase in the use of the partial unemployment scheme. According to the
French Minister of Labour, during the second semester 2013, 11 300 administrative
authorisations were delivered, representing a 27% increase compared to the previous
year (same period). This covers 53 million hours, which is an overall increase of 75%.
Thus, in contrast to early retirement, the reforms of working time reduction
schemes are made to make them more efficient and useful for employers and workers,
typical for what Argyris (1990) would call single loop learning. Changes are made
within the existing regime. The already established measures are used more extensively. To the extent that changes are made, they are only modifications or corrections
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MOLIERE SYNTHESIS REPORT
of experienced errors or mismatches of existing measures. Measures are adapted to
operate more efficiently within the existing framework, but the goals of the measures
are neither questioned nor changed. Similar developments can be seen in those countries where working time reduction schemes were adopted during the crisis, primarily
the newer Member States.
The new adopters In countries where working time reduction schemes were adopted during the crisis
the schemes have been increasingly popular and there have been amendments to improve their efficiency (Bulgaria, Czech republic and Slovenia).
In Slovenia, for example, the measures were expanded and employers who use the
schemes are now obliged to offer educational and training programmes to workers
included into these schemes.
Example: Working time reduction schemes in Slovenia In the beginning of the economic crisis, the Slovenian government introduced two temporary anti-crisis packages targeting the labour market:
The first package was introduced in January 2009. The package was called “Partially Subsidizing of Full-time
Work Act” and was adopted in order to prevent dismissals or at least to postpone lay-offs of larger number of
employees. In this package companies could receive from 60 to 120 EUR per worker included in the short time
work scheme. In the years 2009 and 2010 more than 900 companies used this possibility for more than 65,000
employees. The scheme was initially seen as successful, but there were concerns that the measure might only
postpone the negative effect of the crisis on employment and as mentioned in the Slovenian NBP (2009), “even
though the temporary lay off scheme is primarily focussed on preserving existing jobs, it should be somewhat
more long-term oriented, encouraging structural shifts towards more technology-intensive industries with
high productivity and returns, which in previous years created jobs and did not reduce the number of employees. In certain sectors, keeping existing jobs may have long-term negative implications for development and
competitiveness.”(Slovenian National report, 2009)
As the crisis continued and companies needed more support, recommendations from social partners led to the
adoption of a second legislative package. In July 2009 the government introduced the Law on partial reimbursement of payment compensation for temporarily laid-off workers. The law stipulates that eligible employers – private employers as well as cooperatives (except in agriculture) – could place up to 50 % of their workers
(including part-time and fixed-term workers (but not temporary agency workers or managers) on a temporary
layoff scheme (Ignjatovič, 2012). The possibility to place workers on temporary layoff scheme with partial reimbursement of payment contribution was also very well accepted by employers. Subsidies were granted to
946 enterprises for more than 25,000 employees. Among the beneficiaries of both crisis packages there were
mostly manufacturing companies (44%), followed by wholesale and retail trade enterprises (18%), companies
performing real estate and rental activities (16%), and construction companies (12%) (Kajzer, 2011).
In order to enhance workers’ employability, the law on temporary layoffs also introduced an obligation to offer
educational and training programmes to workers included into these schemes. According to ESS data, a substantial majority of companies have organized fairly short internal courses led by their own employees and focusing mostly on technical knowledge closely connected with the companies’ main activities. This kind of education and training didn’t contribute much to better employability of workers within the scheme. Better results
could be expected if specialized organizations would be involved in planning and performing these courses (i.
e. ESS or the Slovenian Institute for Adult Education).
The main aim of both of the acts was to preserve as many jobs as possible, but the duration of the introduced
measures were limited due to lack of public funding and growing fiscal problems (Urdih Lazar & Dodic
Fikfak, 2014).
In Bulgaria, since the beginning of the crisis, companies increasingly resorted to
working time arrangements. First, many companies used the measure allowing a
temporary switch to part-time work (for up to three months) along with the possibility
of a public subsidy equal to one-half of the minimum salary per month (120 leva for
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MOLIERE SYNTHESIS REPORT
the respective year). In 2009, the government for the first time allocated funds, and
companies submitted applications to receive this public aid. In March 2009 the Labour offices in Bulgaria started to accept demands for compensation from employees
who started working part-time because of the economic crisis. The government programme envisaged that over three months, 120 leva per person would be paid to
about 19,000 people. The overall budget of the programme was about 6.9 million leva.
The compensation was paid in accordance to a number of criteria. For example, parttime working should be introduced for at least 5% of the personnel because of the
negative impact of the economic crisis on company profits. These demands were to be
discussed by the social partners at local level. The documents were submitted to the
local labour offices but examined and discussed in the Regional councils for tripartite
cooperation. Since 2009 – 2010, the use of reduced working time has decreased but is
still operational (Kirov, 2014).
In the Czech Republic a working time reduction scheme was implemented as a part
of a National Anti-Crisis Plan in 2009. The scheme allows employers, temporarily
facing lower volume of orders due to the economic crisis with a consequent reduction
of production, to lower wages down to 60 % (so called partial unemployment). This
measure was used by 850 employers in 2009 and influenced 37,000 employees consequently. If the trade union regulates the level of compensatory wages and individual
employee must be paid compensatory wage at the minimum level of 60 % of his average earning. There is no compensation to the individual from the Government. The
measure appeared to be attractive for the employers. If there is no collective agreement in the workplace the employer has to ask the Labour Office for approval before
implementing the scheme. In 2012 the scheme was amended. Since January 2012 the
approval of the Labour office may be substituted by company internal regulations.
This means that in the case there is a trade union in the company, the employer
needs to agree with the trade union about the value of the compensation. In the case
there is no trade union the employer decides by about the compensation and has to
announce the decision to the employees (Karasek & Janickova, 2014). The scheme is
still operating, but fewer employers are using it.
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MOLIERE SYNTHESIS REPORT
Qualitative adjustment
Qualitative adjustment refers to measures that enhances or maintains the quality of
the workforce or makes sure that labour is used more effectively. This can be done in
several ways. The most common form of measure is probably training and education,
which aims at increasing the productivity of the workforce. Another measure that
could be said to contribute to qualitative adjustment is various forms of transition
support, where redundant workers are supported to find new jobs. Thus, qualitative
adjustment signifies a mechanism that facilitates a re-allocation of labour (within or
between firms) in a way that maintains or enhances productivity.
An increasing emphasis on measures to support transition The most important trend in terms of qualitative adjustment is the increasing emphasis on measures to support transition to new jobs. In the ARENAS project in 2009
it was emphasized that there were various forms of measures to facilitate the transition of dismissed workers to new jobs in all Member States. The most common form of
transition service is job counselling. The purpose of counselling services is to stimulate, at an early stage in the process of restructuring, individuals who are subject to
dismissals to think through their career options and strengthen their opportunity to
find new employment. Such measures were often provided by the Public employment
services, but it was also noted that the role of the public employment services in cases
of restructuring was sometimes limited. Even if there has been an increasing public
expenditure on labour market policy measures in most of the eleven Member States
studied in this project, there is no indication that the role of the public employment
services has changed in any radical way in terms of providing support to redundant
workers. In contrast, the Public Employment Services are increasingly withdrawn
from restructuring and focuses resources to the long-term unemployed and or to stimulate younger workers to enter the labour force. In the Netherlands, for example, the
PES has gone through a major restructuring itself from 2014, and will further downsize employment until 2018. The number of jobs will go down from 16.600 in 2013 to
14.50 in 2018. Services to unemployed will be automated as much as possible5 and the
number of locations restricted. In particular employees providing placement services
will be redundant at the Dutch PES. From 2011 the Public Employment Services already closed 30 of its 68 locations, which cost 2000 jobs (Sprenger, 2014).
5 As un unemployed to be helped and supported by a UWV employee will become the exception, for those unable to cope
with digital service provision.
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MOLIERE SYNTHESIS REPORT
There is a growing trend towards the establishment of other actors that provide transition services, financed by employers and/or in collaboration with the public employment services. In the ARENAS synthesis report 2010 we identified the emergence of
non-public transition service providers, at the side of or in parallel with the public
employment services. In several Member States there is an emerging outplacement
service industry or private employment agency industry that provides transition services and there is a growing non-profit sector with different forms of mobility or job
centres set up as a consequence of collective agreements between social partners. This
trend has stabilized and has been further institutionalized since then, but there are
also developments indicating a more radical shift in countries where such schemes
were less prominent.
One example was the “March 2009 Pact” in the Netherlands where social partners,
together with the ministry of labour, agreed upon setting up a network of 33 regional
Mobility Centres, with the purpose to guide employees threatened to be dismissed as
quickly as possible to another job. Since then a lot of things have happened.
Example: Changing restructuring in the Netherlands In the Netherlands, several new initiatives have been formulated in the Social Pact 2013 and more in the various two-year sector plans the Pact has stimulated. The many plans were developed by social partners and cofunded by the government. As for spring 2014 (with a series of plans still to be approved) 185,000 employees
will be directly involved with one or more measures. 16 health care plans will be executed at a regional level.
For 2015 a third round will be opened, concentrating on job-t-job and unemployment-to-employment transitions by social partners and their organisations. The New Technology Pact should result in more and better
educated technician for the labour market and technical firms of 2020 and after. The activities of the Platform
Beta-technics (from 2004) have contributed to a rise of MTS graduates, anticipating for the future labour market. TechniekTalent.nu, a collaboration of social partners in 8 technical branches, must attract and keep more
graduates/youngsters within the technical branches. Socials plans are still the main instrument for managing
restructuring. In 2010 1 in 2 social plans followed the then recent ‘reflection principle’. Nearly all plans contained financial regulations and job-to-job incentives. Some general tools (like early retirement) seem to disappear. Short time work (part time unemployment) was temporarily introduced but is no longer available. New
tools evolved, like anti cyclical training (although the successful construction initiative from 2009 has not had
many successors, due to lacking budgets in times of crisis. The government prepares a ‘reversed’ short time
work scheme, Bridge Unemployment, financing working hours for retraining in certain scarce jobs for unemployment or employees threatened with unemployment. Although mobility centres are still concentrated in
large corporations (‘internal centres’) a number of initiatives show mobility can also be facilitated at sectorial
and regional levels (Sprenger, 2014).
Thus, in the Netherlands there is an emerging development of a different approach to
managing restructuring, from measures oriented towards quantitative adjustment to
measures that facilitate more qualitative adjustment.
In Germany, there is a long history of negotiating social compensation plans at
company level between employers and works councils on restructuring, providing a
number of actions to help employees to find alternative employment. It was reported
already in the ARENAS report (2009) that social compensation plans have become
more common and that provisions for re-training and outplacement services have
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MOLIERE SYNTHESIS REPORT
complemented redundancy payments. In particular, so-called ‘job transfer schemes’
(Transfermaßnahmen) have become particularly prominent in recent years.
Example: Job transfer schemes in Germany These schemes were first developed as a way to cope with the restructuring that was taking place following the
unification of eastern and western Germany in the early 1990s. Under these schemes, employers offer workers
the annulment of their existing open-ended contract in exchange for a fixed-term contract with a third party
specifically created for such purposes, a so-called transfer company. In return for giving up legal employment
protection by voluntarily entering into a fixed-term contract, the worker receives a temporal extension of their
employment beyond the notice period, plus outplacement-related services generally delivered by the transfer
company.
From a worker’s perspective, their attractiveness lies in the avoidance or postponement of unemployment plus
the availability of immediate and more effective services than the public employment service would be prepared to deliver. By implementing a job transfer scheme, the employer may circumvent the restrictions of social justification for dismissal and thus avoid the procedural risks inherent in legal actions to be expected from
the side of affected workers. Job transfer schemes may also serve to shorten individual notice periods in order
to speed up restructuring, to report favourable headcounts to international headquarters in order to counteract
pressures for downsizing, or to enhance the attractiveness of a company to potential buyers.
Under a job transfer scheme, the employer will offer the workers the annulment of their existing open-ended
contract in exchange for a fixed-term contract with a third party specifically created for such purposes, a socalled transfer company. In return for giving up legal employment protection by voluntarily entering into a
fixed-term contract, the worker will receive a temporal extension of his or her employment beyond the notice
period, plus outplacement-related services generally delivered by the transfer company. If the worker should
later become unemployed, this will be regarded as the automatic result of the fixed-term contract expiring.
Sanctions against entering unemployment ‘voluntarily’ or ‘prematurely’ (before the end of the notice period)
will not apply – workers may keep whatever they receive in terms of redundancy payments or compensation,
which would not be the case if they would enter unemployment directly and voluntarily.
As a rule, transfer schemes are negotiated by works councils within the framework of social compensation
plans. Traditional redundancy payments will thus be supplemented by outplacement services, and financial
subsidies may work as an incentive for labour market transitions. There may be premiums for opting for the
transfer company instead of awaiting dismissal, for taking part in training and other active measures, and for
taking up a new job as early as possible. Guarantees that workers may return to the transfer company in the
event that a new job does not work out as expected will facilitate transitions, as will subsidies to initially lower
wages in a new job. Occasionally, there may also be provisions for the capitalisation of severance payments
and the possibility of cheap loans for those who want to set up their own business. These examples of ‘propelling’ rules/provision are not the standard practice but only found in advanced transfer schemes. (Source:
Knuth, Mühge & Kirsch, 2014)
In Belgium social partners are also increasingly negotiating measures to support dismissed workers’ transition to new jobs. These measures are specific to certain sectors
or result from the negotiations between the social partners of particular companies.
They do not all share the same objectives. Some, for example, favour the departure of
the workers, whilst others are aimed at retaining them (for more information, see
Naedenonen, 2014). This movement in Belgium is also supported by legal reforms.
Example: Legal reforms supporting transition in Belgium In 2006 a law imposed an obligation for employers to create a transition unit for dismissed workers over 45
years old. However, in 2009, as a reaction to the global financial and economic crisis, a new law was enforced,
requiring business of over 20 workers which announces its intention to carry out a collective layoff to set up a
special transition unit (or to contribute to, under certain conditions, multi-company transition unit) through
which the employer guarantees outplacement services for all its workers affected by the layoff, and not only
those aged over 45. The employer is obliged to pay for a reclassification allowance during 3 months (for workers aged under 45) or during 6 months (over 45) (which replaces the advance notice indemnity and which is the
equivalent of the current salary including the extra-legal advantages, such as lunch tickets, night premium,
etc.) for all the open ended contract workers effected and who have a minimum seniority of one year. These
latter receive a “restructuring card”. The restructuring card for the workers of businesses under bankruptcy is
temporary crisis measures made permanent by a law in 2009 and extended to the workers laid off because of a
closure or liquidation. The restructuring card is a document, which gives the right to reduced social security
contribution, both for the new employer and for the laid-off worker (victim of a collective redundancy). The
6
6
The costs linked to these measures can be partially reimbursed by the public authorities.
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MOLIERE SYNTHESIS REPORT
validity period of this card starts when the collective redundancies are announced and ends 12 months later.
The restructuring card also enables an employer undergoing restructuring to benefit from a repayment of part
of the outplacement costs for a worker it has had to lay off. In the case of companies in bankruptcy, in closing
or in compulsory liquidation, the period of the validity of the card is reduced to 6 months.
Workers on permanent employment contacts are obliged to participate in the special federal transition unit until they find a job or for a minimum period of 3 months (less than 45) or 6 months (over 45). After that period,
the workers who have not found a job join the classical system of unemployment benefits. Workers who refuse
to join the unit are exposed to sanctions (exclusion of allocations). Temporary workers are not obliged to subscribe to the special transition unit but, if they have a minimum seniority of one year in the business, they can
join the unit on a voluntary basis.
The federal transition unit is steered, at the minimum, by the employer, a representative trade union organization, the sectorial training Fund (if existing) and the regional PES (FOREM, Actiris, VDAB). In case of successive restructuring processes, large companies must officially create a specific unit each time, even if, in practice,
the workers are often gathered in the same room and followed by the same counselors. (Source: adapted from:
Naedenonen, 2014).
Thus, in Belgium, legal reforms have supported to establishment of transition units,
where redundant workers are supported to find new jobs. Even if these transitions are
only established for a limited number of employers, it can nevertheless be seen as a
changing approach to managing restructuring in Belgium.
Similar developments have taken place in France, where measures to support
transition have been reformed in several steps, exemplifying how collective learning
can take place over time.
Example: Legal reforms supporting transition in France In firms with less than 1 000 workers, employees were previously entitled to benefit either from a “personalised re-employment agreement (“convention de reclassement personnalisée”) or from a professional transition
contract (“contrat de transition professionnelle”). The purpose of these measures were to offer workers affected
by redundancy in firms with less than 1000 workers, psychological and social support, skills assessment, and
vocational guidance and training to facilitate their transition to new jobs.
A law of 28 July 2011, in force since 1 September 2011, substituted a new measure for the former ones: the
employment security contract (“contrat de sécurisation professionnelle” - CSP). This measure is similar to the
former “professional transition contract”, which was only an experimental measure but appeared to be successful enough to be generalised through a new instrument. Generally speaking, it has to be seen as a result of
a collective learning process. All employees affected by an economic redundancy, whether individual or collective, may benefit from this measure. The aim of the contract, the maximum term of which is 12 months, is to
closely supervise the professional transition process, which may include support measures, training periods
and work periods within firms or public organisations.
th
st
The support is implemented and financed by the Public Employment Service. For the term of this contract and
outside periods in which he/she exercises a paid activity, the holder of the CSP, provided he/she had one
year’s seniority in the company, receives an “employment security allowance” (“allocation de sécurisation professionnelle”) equal to 80 % of the gross average wage received over the 12 months preceding the signature of
the CTP, which corresponds closely to the previous net wage of the worker. The scheme is partly financed by
the employer on one side and by the State and the Unemployment Insurance on the other side.
A first assessment of this measure was provided in 2013. It showed that 79% of the beneficiaries came from
small companies (less than 50 employees). In September 2012, 91.400 people benefited from this measure. The
personal support provided to the worker was considered as being very positive. 40% of the beneficiaries get an
access to training but only 9% can benefit, in order to maintain or increase their employability, from a paid activity, which is a weakness. The average time spent into the scheme is 8 months. 54% of people leaving the
measure get an open ended employment contract, whereas 2% of them remain unemployed at the end of the
contract. (Source: Teissier & Triomphe, 2014)
Thus, in France measures to provide transition support to redundant workers are
stimulated through legal reforms. In Sweden, similar measures have emerged during
a long period of time with very limited intervention from the state and through a slow
process of negotiations between social partners.
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MOLIERE SYNTHESIS REPORT
The emergence of Job Security Councils in Sweden Job Security Councils are based on collective agreements between social partners in a sector or an occupational
field. A Job Security Council is a kind of non-profit foundation, which provides employees who have lost their
job due to collective redundancies support in their efforts to find new employment. Job security councils are
actively involved in the process of restructuring and provide advice and consultation to the employers and
trade unions at an early stage in the process. They also provide transition services and guidance to workers
who are made redundant. These activities are financed through fees from the companies concerned that are
calculated and expressed as a percentage of the sum of salaries and wages (0,3 percent of the labour costs).
The first Job Security Councils were established already in the end of the 1970s. Since then such organizations
have been established in most segments of the labour market. After the establishment of the Job Security Council for municipal and health care sector in January 2012, now covers virtually the entire Swedish labour market.
More than 3.2 million of the 4,6 million workers in the Swedish labour force is now covered by such agreements.
This implies that Job Security Councils take on a different role in relation to the Public Employment services.
Job security agreements cover all types of businesses, large and small. Almost every sector, industry and occupational group in the Swedish economy is covered by transition agreements and have access to Job Security
Councils. They also have national coverage, which means that they can be regarded as a comprehensive system
in parallel with the Government-funded unemployment insurance and job placement services. But while it
may seem like a common system, the Job security councils, with their respective collective bargaining foundations, is not a common system. There is no common control and management.
The system of job security councils has developed progressively by the social partners taking note of the lessons learned from the early Job Security Councils, established in the white-collar segment of the labour force.
The intent has never been to create a unified system. Each individual Job Security Council was developed as a
solution to a problem defined by the social partners, and in particular to support companies and employees
who have a need to adapt their workforce. From this perspective the availability of transition support may
make it possible for social partners to agree upon redundancies, simply because there is an effective support
available. Job Security Councils can also provide social partners with advice on how negotiations on redundancy can be made in a good way, or how to avoid redundancies. In sum, the Job Security Councils have
evolved as a way to create solutions between the social partners and thus contribute by making it possible for
companies to deal with cyclical fluctuations and, at an early stage, face structural changes.
In sum, there is an emerging trend of various measures aiming at facilitating transition of dismissed workers to new jobs, either internally or externally. However, while
this trend is clear in some countries, the coverage is still limited and in most cases
workers on fixed term contracts are not covered by such measures. In addition
measures to support transition are still unknown in some Member States, primarily
those where price and wage adjustment is the main adjustment mechanism.
Withdrawal of the state and facilitating social dialogue
The fourth trend can be seen as an upward movement in the vertical axis in the Gazier (2008) model: withdrawal of state intervention in collective redundancies and an
attempt to facilitate agreements between social partners. This trend is most clearly
exemplified by the recent reforms in France and Spain.
In France the trend towards decreasing intervention by the state in favour of national cross-sectoral collective bargaining is a long-term process that has gained increasing attention in recent years, implying that social partners are increasingly involved in the development of law (for more information see French national report,
2014). The government is obliged to consult with the social partners before proposing
any labour law reform. Such provisions can then lead to the negotiation of a national
cross-sector collective agreement, which in turn can be taken into account in a draft
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MOLIERE SYNTHESIS REPORT
law proposed by the government. This new articulation of the relationship between
law and collective bargaining at national level can be exemplified by the recent reforms in the field of restructuring.
Example: French labour market reform One of the most important reforms results from the law of 14 June 2013. Following a request from the new socialist government, the social partners at national and cross-sectoral level reached a landmark agreement on labour market reform in January
2013. The latter was signed by all employer organisations and by three unions – two unions refused to sign the pact (CGT
and CGT-FO). The agreement was then incorporated into the Labour Code through legislation. Considering restructuring
issues, this reform:
•
Develops human resources planning provisions through different means (voluntary mobility, information and consultation of employee representatives...)
th
•
Intends to ensure a greater involvement of employees in the definition of companies’ strategies, through the introduction of employees’ representatives in boards of directors
•
Sets up new tools to foster vocational training, especially through the establishment of individual training accounts
•
Reforms the partial unemployment regulation to make it more attractive for companies
•
Promotes greater predictability and legal certainty for employers by reforming collective redundancies procedures
In addition, a National cross-sectoral agreement concluded on 14th December 2013 has planned a deep reform of the
vocational training system, partly implementing the law of 14 June 2013. This agreement was recently transposed through a
law of 5 March 2014. The overall objective of the new regulation is to make the French vocational training system more
efficient, by making transitions easier and improving workers’ employability. This reform encompasses a wide range of
topics but two main elements should be pointed out:
th
th
•
The reform sets up a new financing system of vocational training to provide companies with incentives to train their
employees
•
The reform implements the new individual training account planned by law of 14 June 2013.
th
As for the management of restructuring processes and their consequences for workers, two other reforms are worth highlighting:
•
A reform of the unemployment insurance has been decided by social partners at national level. An agreement was
found on 22 March 2014 by unions (but CGT and CFE- CGC) and employers organisations. One of its main provisions
seeks to encourage unemployed people to accept part-time or lesser-paid employment without reducing their right to
unemployment benefits. In other words, the agreement establishes unemployment insurance based on job history.
7
th
•
Following an intense political debate linked to the closure of part of the ARCELORMITTAL unit in the east of France
(Florange), a law of 29 March 2014 plans a new obligation for large companies (1 000 employees or more) in the event
of site closure. Before closing a site, the company will then have to search for a prospective buyer in order to safeguard
jobs. This sensitive measure was directly inspired by the crisis context.
th
Source: Teissier & Triomphe, (2014) French National Report.
As the case illustrates, there is a clear movement in France to facilitate involvement
of social partners in not only the formulation of legal provisions, but also to involve
facilitate social dialogue and collective bargaining in the implementation of specific
restructuring events.
In Spain there have been similar developments, but the reforms are initiated by
the Troika and enforced upon the government and the social partners, which means
that the responses from national stakeholders are rather different.
7
This agreement will not come into force before the government validates it, as it is the rule in this field
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Example: The Spanish reform In 2010, after the failure of repeated rounds of negotiations between the social partners, the socialist government
adopted legislation reforms addressed at improving the functioning of collective bargaining as well as labour market
and employment regulation by reducing severance pay entitlements for employees on permanent contracts and increasing them for those on temporary contracts, while simultaneously introducing a system of individually capitalised
mobility-funds, drawing heavily on the Austrian system.
The second stage started in January 2012, with a conservative government, which, from that time to the present day,
has used its parliamentary absolute majority to pass sets of austerity measures and suggested structural reforms over
a wide range of aspects that affect public life. With respect to the labour market in its relationship with restructuring,
the government’s reform has been far-reaching and had a high impact.
An important change made by this Royal decree is the constraints it imposes on the power of the courts to declare void
the collective redundancy procedure, In simplified terms:
•
It limits the documents that were deemed essential and without which the procedure would be judged null and
void, which is what leads to the declaration of the reinstatement of workers (with pay back) with no possibility for
employers to opt for additional compensation in lieu of reinstatement.
•
It limits the cases where workers can individually challenge collective dismissal agreements.
In short, these legislative changes in collective redundancies legislation make restructuring of the workforce easier
and faster. The State authorization is not requested anymore and its role is reduced to control the suitability of the
formal procedure. The core workers’ rights to information and consultation remain unchanged, although with some
relevant amendments with regard the time span applicable to the proceedings and reinforcing the content and the
quality of the documentation to be provided by the employer. Internal flexibility facilitating the suspension of employment contracts and the temporary reduction in working hours are promoted. Alternative and social measures are
encouraged and even obliged to be agreed and applied between employers and workers’ representatives accompanying
the dismissals, although in practice they are not enforced properly.
In August 2013, further legislative changes were made in order to reduce uncertainty regarding collective redundancy procedures. The Royal
Decree law 11/2013 clarifies in great detail:
•
How the negotiating committee should be established: just one committee composed of a maximum of 13 members (by each side
taking part in the consultation process),
•
Who are the legitimated actors to intervene;
•
The deadline for the naming of its members,
•
The way in which this is communicated,
•
Expressly sets out that the company management, once the deadline has been reached, may announce the initiation of the consultation
period to the workers’ representatives if the deadline for forming the committee has not been met.
•
Also details the information that should be provided, both to the administration and to the workers’ representatives which, in this case,
is less than in the previous regulation, which would support the interpretation that this is a consultation period more on paper than in
practice. (Source: Rodriguez Contreras, 2014)
The similarity with the French example lies in the ambition to modify the relationship between social partners, not only in the field of restructuring, but on collective
bargaining in general.
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2.4 Conclusion
To sum up, our analysis of the developments of measures to manage restructuring
since the financial crisis in 2008-2009 indicates three main movements in our comparative framework.
Figure 6: Restructuring regimes for eleven Member States after the crisis
Wage and labour
cost adjustment
Quantitative adjustment
Qualitative adjustment
Market
United Kingdom Bulgaria Slovenia Czech Republic Negotiated
Sweden Germany France State
Spain Netherlands Belgium Portugal Source: Adapted from Gazier (2008)
First of all, there seems to be a horizontal movement to the right in two steps. Member States primarily dominated by price adjustment are slowly introducing and adopting measures aiming at facilitating quantitative adjustment, primarily through the
use of working time reduction schemes, which enables firms to reduce their labour
costs when demand suddenly decreases. This movement is typical for Slovenia, Bulgaria and the Czech republic. However, these movements are made, with very limited
public intervention and most importantly with very limited investment from the
state. Typically, when wage reduction schemes were reformed in the Czech Republic
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the control function of the Labour authorities was abolished and there were no compensation for the income loss provided by the state.
Furthermore, Member States operating within the framework of a quantitative restructuring regime are also slowly moving right towards an increasing adoption of
measures that support qualitative adjustment, for example transition services. This
movement is clear in France, the Netherlands, and Belgium, but to a limited extent in
Germany.
The third main movement is a vertical upward movement indicating a shift in the
role of the state, with declining use of state funded early retirement scheme and an
increasing involvement of social partners.
Three countries in this comparison are relatively stable the United Kingdom, Germany and Sweden. In these Member States, while there have been relatively intensive changes in the economy and the labour market, there have been relatively few
changes in terms of how restructuring is managed and regulated. The most radical
shifts and movements have taken place in Spain and France where regulative reforms
have drastically changed the way restructuring is managed. These reforms, are however, rather young and it is too early to say whether the suggested movement in the
comparative framework would hold.
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3. REGULATIONS AND RESTRUCTURING
3.1 Introduction
In this chapter focus is placed on the regulation related to restructuring in labour law
in the eleven countries and how they have evolved since the economic crisis in 20082009. We then explore possible links between the restructuring and regulation. We
also relate the growth of collective redundancies and the different measures available
to anticipate and manage restructuring identified in the national reports. In the third
section we compare the regulative framework related to what we here call the transition conditions, those legal provisions that set the working conditions for dismissed
workers during the notification period. This we argue is one of the key elements to
consider when reforming legal frameworks related to restructuring.
3.2 Regulating restructuring
This section provides some of the central features of the regulation of restructuring in
the eleven countries and the changes made since the financial crisis 2008-2009. Emphasis is placed on the regulation of the employers’ initiation of collective redundancies, which is the main form of regulation in most of the eleven countries. Regulations
pertaining to the transition conditions are discussed in later sections.
Thresholds
The countries studied in this project differ appreciably as regards the regulation of
the employers right to initiate restructuring. First of all there is a clear difference in
terms of the applicability of employment protection legislation among the selected
Member States. In most Member States, there are thresholds, pertaining to the size of
the enterprise being restructured or the size of the restructuring event, compared to
the size of the workforce. The most common threshold is that companies must have at
least 20 employees in order to fall within the scope of the national legislation. In Slovenia the threshold is enterprises with 30 employees and in France and Portugal 50
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employees. In Spain the threshold is formulated in a different way. Collective dismissals are defined according to how many workers are affected in relation to the size of
the enterprise, see table 1 below. But the company needs to have a minimum of six
employees if the entire workforce is affected. In Sweden there are no lower numerical
bounds at all, implying that the legal framework is applicable to all enterprises, independent of their size. There are, however, exceptions to be made for smaller enterprises when it comes to the selection of workers for redundancy. Thus, there is great
variation between Member states in terms of the coverage of provisions for collective
redundancy.
Figure 7: Threshold conditions: minimum size of company, number of employees
60 Employees 50 40 30 20 10 0 Source: EMCC legal database
The implication of thresholds is that the initiation of collective redundancies is only
regulated in a small minority of enterprises. Employees in small enterprises, which
constitute about two thirds of the private labour force, are not covered by any form of
employment protection. This exclusion of SMEs and the public sector was also identified as one of the key gaps in the European Commissions’ fitness check of the European directive on information and consultation, including the directive on collective redundancies (Wauters, et.al., 2013; European Commission Staff working document,
2013).
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Table 1: Thresholds for collective redundancies
Countries
Minimum size of company covered
BE
A company must have at least 20 persons employed to fall within the scope of national legislation on collective redundancies.8
BG
A company must have at least 20 persons employed in order to come within the
scope of national legislation on collective redundancies.
CZ
20 employees9
FR
50 Employees
DE
Establishments of more than 20 employees
NL
20 employees
PT
at least 2 dismissals in companies with fewer than 50 employees, or at least 5 dismissals in larger firms
SI
Within the scope of legislation on collective redundancies, if at least 10 employees are
to be made redundant when the employer employs more than 20 and less than 100
people.
ES
SE
To fall within the scope of legislation, employers must plan to dismiss or make redundant between 10 and 30 employees within 90 days due to a negative economic situation or the adoption of technical, organisational and production measures.
The minimum figure varies – 10 if under 100 are employed in the company, 10% if
between 100 and 300 are employed; and 30 if 300 or more than 300 are employed.
The company needs to only have a minimum of more than five employees if the entire workforce is affected.
There are no numerical lower bounds. All enterprises are covered. 10
UK
20 persons must be employed.
Source: EMCC legal database
In several of the eleven Member States, the labour law is only applicable to the private sector, with exceptions for public sector employers. An exception is the Czech
Republic and Sweden, where the employment protection legislation is universal and
covers all employers, both private and public.
Regulating the initiation of collective redundancy
Labour laws also regulate the grounds under which the employer may initiate collective redundancies. In most countries the law stipulates specific grounds for which
termination are prohibited. Terminating an employment contract because of marital
status, whistle blowing, ethnic origin or political opinions are examples of prohibited
grounds specified in several countries. However, member states vary in the specification of prohibited grounds for dismissal. There are also specific categories of workers
Since June 2009, however, companies employing less than 20 workers may also be subject to this legislation, under certain
circumstances.
9 Collective dismissals means the termination of employment relationships by one employer within a period of 30 calendar
days to no less than: (i) ten employees where an employer employs from 20 to 100 employees; (ii) 10 % of employees where
and employer employs from 101 to 300 employees; (iii) 30 employees where an employer employs more than 300 employees.
10 A unique feature of the Swedish employment protection legislation is that, while legislation is universal, the law makes
exceptions for smaller enterprises in cases of collective redundancies, for example to be allowed to make exceptions for key
employees when deciding upon whom to make redundant.
8
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who are protected in cases of collective redundancies, for example workers’ representatives, pregnant women or workers on parental leave.
Table 2: Allowable reasons for collective redundancies
Countries
BE
BG
Allowable reasons defined by law
Partly based on the collective agreement n°24 (1975), the collective dismissal is described as a
redundancy for which the responsibility is non-inherent to workers. This means that dismissals
are related to economic or technical reasons, or reasons linked to production.
Employers can justify redundancies on the grounds of a reduction in business activity or plant
or branch closure.
CZ
A mass layoff is defined as the termination of work contracts by the employer in consequence
of a business shut-down or relocation of the business or redundancy of the worker.
FR
“redundancy implemented by an employer for one or more reasons not related personally to
the worker, resulting in the elimination or transformation of a job or a change, which is refused
by the worker, of an essential element of the employment contract, notably as a result of economic difficulties or technological changes”.
The law (§17 Protection against Dismissal Act) does not specify the allowable reasons, and
operational difficulties are considered to be a sufficient condition to justify collective redundancies, provided the works council is informed and consulted. The works council has to agree on
the social selection of workers to be dismissed. If no agreement has been reached before the
public announcement, the works council may comment on the measures to the labour office.
A redundancy is defined as dismissals due to reorganisation for economic reasons, a merger,
take-over or liquidation.
DE
NL
PT
Legislation outlines a number of reasons for justifying redundancies – market decline, financial
reasons, greater efficiency, technological change, or closure of departments or units.
SI
Economic, organisational, technological, structural or similar reasons.
ES
Redundancies can be implemented for a range of reasons – corporate financial problems, technological change, organisational drivers, or production or market reasons.11
SE
Collective dismissals are all dismissals that are not due to the characteristics or behaviour of
the individual worker, but for business reasons (e.g. shut down or restructuring due to introduction of new technology). The definition of the business reasons are the prerogative of the
employer.
A redundancy is defined as a dismissal for a reason unrelated to the individual employee concerned by the UK regulation governing redundancies. In practice, redundancies often result
from economic difficulties faced by organizations. Other reasons for redundancies can include
the re-organization of work at a workplace.
UK
Source: EMCC legal database
Another form of regulation of the employers’ initiation of redundancies is to define the
conditions and reasons for when redundancies are allowed. There are several different
ways of doing so. In many countries the law stipulates that the employer may only
initiate collective redundancies if there is “just cause” or if it is “socially motivated”.
In some countries (France, Portugal and Spain) employers need to show evidence that
11
In Spain labour law has been going through an extensive reform since 2012. Before the labour reform, the economic
justification has always been controversial between employers and employee representatives. The labour reform tried to
clarify this issue and now it is accepted as an “economic” reason for redundancy purposes that a business has suffered a
reduction in sales for three consecutive quarters compared with the same period in the previous year (for further information,
see Rodriguez Contreras, 2014)
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the economic circumstances are deteriorating. In some countries (for example the
Netherlands and Spain) employers need to ask for permission from a government
agency before collective redundancies can be initiated. Thus, employers are not allowed to initiate workforce reductions unless the business is under economic strain. In
France, there are similar provisions, but it has been amended. The employer needs to
send a notification to the labour market authorities, but if they do not respond within
a particular period of time, it can be assumed that it is accepted (Teissier & Triomphe,
2014). In France employers are also obliged to consider alternatives before starting a
redundancy process. Similar provisions exist in Bulgaria. In Bulgaria, companies envisage redundancies only as last resort and only after having considered all possible
alternative options and/or identifying and implementing supporting measures (e.g.
phasing planned measures over time, extending or reducing working time, seeking
replacement activities). The employer is obliged to consult with trade unions about
the alternatives. The trade unions should submit the statement to the Employment
Agency related to options for future employment of the dismissed employees.
In France social partners have also, since 2008, introduced a new means of terminating employment contracts, termination by mutual agreement (“rupture conven-
tionnelle”), which to some extent provides greater flexibility for employers when terminating contracts. In this new form the employer and the worker reach an agreement on the termination of the employment contract. This agreement has to be approved by the Labour administration. Before 2008 such mutual or voluntary terminations were problematic from the point of view of workers, since they were not eligible
to unemployment benefits if they left their job voluntarily. The advantage of this new
form of termination is that it does not affect entitlement to unemployment benefit,
thus ensuring a more “secure transition between jobs”. From the perspective of employers, the advantage of this measure is a secure mode of termination. In essence,
this new mode of termination constitutes a response to the major uncertainties and
risks related to the old termination procedures that employers are said to face, that is,
the risk of legal proceedings12 if the employment contract is terminated unilaterally.
Since the launch of this measure, termination by mutual agreement has enjoyed considerable popularity and if dismissal figures are now at all time lows, this is, in part,
connected to the introduction of terminations by mutual agreement (for more information, see Teissier & Triomphe, 2014). These procedures are used most frequently
Meaning the time and costs it takes to go through the procedures before the courts and to cope with conflicts with employees and /or unions
12
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by small businesses, allowing them to terminate a worker’s employment contract
without resorting to dismissal. However, in case of such terminations, there is a risk
that what is presented as a voluntary or mutual agreement is not always so mutual or
voluntary, i.e. that the employer informally forces the individual to accept an agreement to leave.
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3.3 Redundancies and regulation
Despite the regulation of the employers right to initiate redundancies, the ERM database shows that one of the main features of the financial economic crisis is the increase in the number of workers who are threatened by redundancy. The peak was in
2009 when more than 400 000 workers were threatened by job loss. However, the data
shows that 2007 was an exceptional year with a very low number of redundancy
threats. The number of workers threatened by job loss in 2005 and 2006 were even
higher than the years after the crisis 2010-2013. Thus, from this perspective the
number of workers threatened by redundancy did not change that much over a longer
time period.
It should be noted, however, that the ERM database systematically under reports
on the number of redundancies, since it only covers the larger redundancies published
in major newspapers. Moreover, the data does not reflect the real number of workers
who were laid off in the respective announcements. Most often the actual redundancies are reduced after negotiations between social partners. Nevertheless, the data
indicates the general trends among the eleven countries.
Figure 8: Workers threatened by job loss in the eleven countries
Workers threatend by job loss 450000 400000 350000 300000 250000 200000 150000 100000 50000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ERM database, Eurofound
As Table 3 shows, more than 2 million workers were threatened by job loss in the
eleven countries during the period 2007 to 2013. If we break down the number of
threats over the eleven countries we can see that the UK, Germany and France had
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the most number of workers threatened by job loss. However, if we divide the sum of
all threats during the period with the number of workers employed in 2007 an interesting pattern emerges. Slovenia had the highest rate of redundancy threats during
the crisis years in relation to their total labour force in 2007, followed by Sweden and
the Czech Republic. According to this data set, more than 4,5 % of those who had a job
in Slovenia in 2007 were threatened by redundancy during the coming years. It
should be noted that, even if the crisis hit Spain and Portugal very hard, the share of
workers who were threatened by redundancy, at least according to the ERM database,
was among the lowest together with Bulgaria and Germany.
Table 3: Workers threatened by job loss in the eleven countries, 2007-2013.
Number of threated by job loss (20072013)
Rate of threatened of employed in 200713
Belgium
73443
1,69%
Bulgaria
14595
0,45%
Czech Republic
123182
2,54%
France
444270
1,75%
Germany
349932
0,94%
Netherlands
165047
1,98%
Portugal
25247
0,52%
Slovenia
43293
4,52%
Spain
122335
0,60%
Sweden
110043
2,47%
UK
563792
1,98%
Total
2035179
1,43%
Source: Eurostat and ERM database on restructuring
This data should, however, be analysed with caution. There is a great risk that the
number of threats for redundancies reported in the EMCC database underestimates
the number of real redundancies in each country. For example, a comparison with the
Swedish redundancy statistics we found that more than 460.000 workers were threat13 This indicator is calculated as the sum of all workers threatened by redundancy between 2007 and 2013, divided by the
number of workers employed in 2007. Thus, the indicator shows how many of those employed in 2007 were threatened to be
redundant during the period 2007-2013.
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ened by redundancies between 2007 and 2013, which is more than four times more
than what is presented in the EMCC database.
In general, it may be argued that the incidence of threats of redundancies in the
countries reflects the strength of employment protection in the country. Countries
with stronger employment protection has less redundancies and in countries with
weaker protection there is a stronger tendency to use collective redundancies as a
measure to adapt to economic turbulence. The exception is Belgium, where employment protection is the strongest among the eleven countries according to the OECD
index, but the threats of redundancies were relatively intensive, at least in 2009.
Thus, in some countries there is a tendency to approach turbulent times with redundancies, rather than using other means of adapting to the crisis. This is of course
dependent on the availability of other measures within the institutional framework.
The potential impact of regulation on the intensity of dismissal is related to the
regulation of the employers right to initiate redundancies. The more restrictions on
employers decision the fewer redundancies. However, there also seems to be an impact of the measures available in the respective country. If there are other alternative
measures available, for example short time working schemes, employers may tend to
use this alternative rather then going through lengthy and complicated dismissal procedures.
As shown in figure 9 to 11, the intensity of redundancy threats varies over time
and here we find three different patterns. On one extreme, we find the three countries
with the most relaxed regulative framework, according to OECD, (UK, Czech Republic
and Sweden). In these Member States the financial crisis was met with a peak in redundancy threats, which returned relatively quickly. While Sweden had its redundancy peak already in 2008, the peak was somewhat later in the United Kingdom and
the Czech Republic. Slovenia is a special case with a dramatic increase in redundancy
threats in 2008 and 2009 with a peak of more than one per cent of the labour force
threatened by redundancy in 2010.
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Figure 9: Redundancy threats as share of labour force 2005-2013 UK, CZ, SI & Sweden
1,2 1 0,8 0,6 0,4 0,2 0 2005 2006 2007 2008 Czech Republic 2009 Slovenia 2010 2011 Sweden 2012 2013 United Kingdom Source: Eurostat and the Eurofound, ERM database on restructuring
On the other extreme, we find that in Bulgaria, Portugal, Spain and Germany, the
redundancy intensity were rather low (less than 0,2 % of the labour force) during the
studied period, indicating that any adaptation to the financial crisis was made in other ways than through collective redundancies. We also note that there is an increasing intensity of redundancy threats in Spain 2012 and 2013, possibly reflecting the
impact of the austerity measures14.
Figure 10: Redundancy threats as share of labour force 2005-2013
1,2 1 0,8 0,6 0,4 0,2 0 2005 2006 2007 Bulgaria 2008 2009 Germany 2010 Portugal 2011 2012 2013 Spain Source: Eurostat and the Eurofound, ERM database on restructuring
14 It should be noted that Germany came from a situation in 2005 and 2006 where the share of redundancies had been relatively high, indicating that the possibility to rationalize production through additional redundancies would be rather limited
This may perhaps explain why short time working schemes were used to such an extent.
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In between the two extremes we find the Netherlands, France and Belgium (see figure
11). In these countries there is a dynamic shift up and down, with increasing intensity
of threats in the Netherlands and a clear peak in France and Belgium, but not as intensive as in the first group.
Figure 11: Redundancy threats as share of labour force 2005-2013
1,2 1 0,8 0,6 0,4 0,2 0 2005 2006 2007 2008 Belgium 2009 France 2010 2011 2012 2013 Netherlands Source: Eurostat and the Eurofound, ERM database on restructuring
The restriction on the employers’ decision seems to have an impact on when the dismissal takes place. In those countries with more extensive restrictions the announcements seem to be come at a later stage, perhaps as a result of the requirement to
specify the economic reasons before dismissals are carried out. However, it is not obvious that there is such a straightforward relationship between the legislative provisions and dismissal outcomes.
In the Swedish national background paper from 2009 (Bergström, 2009) much attention was devoted to the impact of collective redundancies on the increase in collective agreements in the 1990s. The most obvious empirical indication that experiences
of the financial crisis in the 1990s lies behind the growth of dismissals is that the
share of cuts in comparison to closures have increased drastically in the period 1995
to 2005 and that the level has been relatively stable over time. This indicates that,
while the legal framework has been stable, collective agreements makes it easier for
employers to initiate redundancies, since they are able to avoid some of the restrictions in labour law.
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Finally, this report has pointed out the serious empirical limitations of research on
collective redundancies and displaced workers. While being the most comprehensive
data set, the European Restructuring Monitor seriously under-report the number of
dismissed workers. Even if it is legally required to report any announcements of redundancies to the national or local labour authorities in most European Member
States, it has not yet been possible to coordinate a European body that would be able
to collect reliable data on the number of announced and implemented redundancies
across Europe. Such a database would certainly raise the awareness of restructuring
and also provide a better knowledge base as regards the impact of regulative frameworks and the effectiveness of labour market policies in Europe.
Thus despite the great advances in labour statistics in recent decades, it should be
noted that our empirical knowledge of one of the basic elements (it is also the most
regulated and politically sensitive areas) of our labour market, i.e. collective redundancies, is close to zero, at least on a European level. There are examples of Member
States who collect data, but there is no comparative data available. It seems strange
that enormous amounts of money is spent on labour market policies to avoid and
manage the consequences of restructuring, but there is no effort of trying to collect
information about the extent of collective redundancies and the fate of those workers
who are dismissed. On this matter policy makers are fumbling in the dark. It is simply assumed that increasing redundancies are reflected in increasing unemployment,
but as we will see this is far away from the truth.
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3.4 Regulating the conditions for transition
Of the various forms of regulations examined in this project we would argue that the
regulation concerning, what we call the transition conditions15 , i.e. the working conditions for workers who are notified as redundant, is of most interest and worth special
attention in this final chapter. There are several reasons for this. First of all, dismissal is the ultimate outcome of restructuring and also the most politically sensitive
issue. Second, during the financial crisis the number of dismissed workers has increased dramatically. Even if dismissal, in most Member States, is seen as the last
resort and something that should be avoided, dismissals have been executed to an
extent never seen before. Collective redundancies increased dramatically during and
after the financial crisis in 2008-2009, implying that more workers than ever were
experiencing the conditions of transition. As Knuth (2008) expresses it, job loss is not
only about changing jobs, “it touches people’s perception of identity”. It is also the
kind of regulation, with the most importance for the dismissed workers chances to
find new employment. It is therefore relevant to consider the legal regulations providing the basic conditions, though temporary and transitive, that this group of workers
endures. It is a field of regulation not covered by the European Directive of collective
redundancy16. From a policy perspective, it has been the object of much innovation the
last 15 years, both in terms of legal amendments and agreements between social
partners. In this area there are several examples of innovative measures and amendments of labour law provisions that could be generalized across European labour
markets.
Finally, and perhaps of most interest and importance is its potential to contribute
to one of the major issues in the last fifteen years of European debates on restructuring, namely how to anticipate and manage restructuring in a way that mitigates the
negative consequences for workers and facilitates the transfer of dismissed workers to
new jobs. We argue, if appropriately designed, that the regulation of transition condiWe use the term “transition conditions” to point out the specific impact of the regulation of the obligations placed on the
employer when terminating the employment relationship, from the point of view of the worker. Employment protection is
often evaluated either as a cost to bear by the employer or the protection it provides for the employees. However, we believe
this gives a somewhat biased view of how employment protection is seen from the point of view of the worker who is being
notified as redundant. Thus, focusing on the conditions provided to workers to transfer to new employment gives a different
perspective on how to evaluate employment protection in times of restructuring.
16 The only provision in the directive that refers to the conditions for transition is article 4(1) which refers to the time period
between the notification to the public authorities and the actual termination of employment relationships: “Projected collective redundancies notified to the competent public authority shall take effect not earlier than 30 days after the notification
referred to in Article 3(1) without prejudice to any provisions governing individual rights with regard to notice of dismissal.”(Article 4(1)) From the point of view of the individual 30 days gives very little scope for anticipating and preparing for the
coming termination of the employment relationship. 15
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tions for workers in the period after the notification of redundancy until the final termination of the employment contract should be the starting point when considering
harmonization of European labour laws regarding collective redundancies.
Do the dismissed workers find new jobs?
A central question in assessing the impact of transition conditions is to examine to
what extent and how dismissed workers find new jobs. It is difficult to find data on reemployment of dismissed workers and this was not the main objective of this project.
In a recent study by OECD, however, the re-employment rates of dismissed workers
in a number of European Member states were analysed (OECD, 2013). In this study
the re-employment rates, measured as the proportion of dismissed workers who are
employed within one and two years after displacement, i.e. have found new jobs after
their jobs have been terminated, vary considerably across countries.17 For example,
re-employment rates within one year of displacement range from around 30-40% in
France, the UK and Portugal to more than 80% in Sweden. In Germany reemployment rates within one year were around 60%, see figure 12. They also noted
that re-employment rates improved between the first and second year after displacement and that re-employment rates fell markedly across all countries during the recession. The biggest falls in their sample of countries were in Denmark and Portugal,
which both suffered a large increase in unemployment. Of course it is difficult to draw
too strong conclusions from this comparison, due to the weakness of the data. However, we may ask questions about the reasons for the different re-employment rates in
different member states.
17 This implies for example that a worker who is observed in April each year and who is displaced between April 2007 and
April 2008 is said to be re-employed within one year if he/she is employed in April 2008 and to be re-employed within two
years if employed in April 2009 (regardless whether or not he/she was employed in April 2008). It should be noted that this
method of estimating re-employment rates tends to underestimate true re-employment rates because workers may be employed for some of the period following displacement, but not in the month when they are observed again. By contrast it may
overestimate the extent of stable re-employment because workers may be employed in the month when they are observed but
lose their new job quickly afterwards (OECD, 2013).
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Figure 12: Proportion of displaced workers re-employed within one and two years, 2000-08 and 2009-10, averages.
100 90 80 70 Portugal 60 UK 50 40 Germany 30 Sweden 20 France 10 0 Re-­‐employed within one Re-­‐employed within two Re-­‐employed within one year (2000-­‐2008) % years (2000-­‐2008) % year (2009-­‐2010) % Source: Adapted from OECD (2013)
Despite the growth and availability of jobs in the labour market, there are many factors that may explain re-employment rates for dismissed workers. The most obvious
explanatory factor would of course be the availability of jobs, the number of vacancies
and the general growth in the economy. Re-employment may also be dependent on the
different measures available and the support provided to dismissed workers. On the
one hand, re-employment may be higher in countries where there are generous conditions for transition support provided to dismissed workers. It may also be dependent
on how much time dismissed workers have available to devote them selves to jobsearch activities. On the other hand, re-employment rates may be dependent on who
is dismissed, the dismissed workers employability.
There is limited data available on the demographic characteristics of dismissed
workers. The same study (OECD, 2013), found that dismissed workers were concentrated among the young and the oldest in the labour force. Workers aged 20-24 years
faced displacement rates for the period 2000-2008 approximately 20-70% higher than
those for prime-aged workers, with the gap growing during the recession in most of
the countries. According to this study, older workers (aged 55-64 years) also had a
higher incidence of displacement than prime-aged workers in France, Germany and
the United Kingdom, but not in Sweden. The different outcome in Sweden is probably
associated with the additional protection provided to workers with longer seniority
due to selection rules of last in first out principle in the Swedish employment protection legislation.
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The OECD study also showed that displacement rates for men were, on average,
higher than for women in most countries. This may be driven by differences in the
types of jobs that men and women hold, rather than any underlying discrimination
against men when it comes to dismissal. Anecdotal evidence suggests that the gender
distribution of dismissals can largely be explained by the sectors in which the two
sexes work, because this particular crisis primarily hit industrial and manufacturing
sectors in most Member States. Unfortunately, there is no statistics available to enable more specific data on the demographic characteristics of dismissed workers. It is
clear that developing such databases would significantly improve the understanding
of the consequences of restructuring in times of economic crisis.
As our national reports show, the emphasis on measures to support dismissed
workers in their efforts to find new jobs varies considerably across countries. There
are also, as we will se below, considerable differences in the legal provisions defining
the conditions offered to those workers who are made redundant. More efforts should
be made to investigate the impact of both the legal conditions for dismissed workers
and the measures (aimed at supporting dismissed workers transition to new jobs) on
the re-employment rates of dismissed workers. This is probably the most important
issue to consider when identifying issues for future legislative amendments on the
European level as well as the improvement of active labour market policies.
Working conditions for dismissed workers
It is obvious that the increase in dismissals during and after the financial crisis was
an exceptional situation. More workers were announced redundant than ever before
and many of them were in fact dismissed and left to search for a new job. It is therefore relevant to consider the legal provisions available that regulate the conditions for
those workers who are dismissed?
A definition of dismissed worker, though one that does not apply fully to all countries and all situations, is a worker employed on an open-ended contract who has been
notified by the employer that the employment relationship is terminated via a process
of collective redundancy.
Our review of the national reports show that there are at least two means of regulating the transition conditions for dismissed workers, the regulation of the notification period, and the regulation of duties and obligations of both parties (employers
and dismissed workers) during and after the notification period (for example economic
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compensation, severance payments, social plans and employee rights to leave the
workplace to be able to search for jobs before the contract is terminated). In the following sections we will compare these provisions and some of the recent legislative
developments.
Notification periods The notification period is primarily regulated by means of specifying how long before
the actual termination of the contract the individual worker should be notified as redundant. There is great variation among Member States as to the length of the notification period. The maximum legally required length of the notification period varies
between 30 days in Spain and Czech Republic and up to 210 days maximum in Germany.
Figure 12: Min and max days before termination workers should be notified
250 200 150 100 Min 50 Max 0 Source: ERM legal database and national reports
Not all workers, in fact very few, are eligible to the maximum notification period. In
most countries, the notification period varies dependent on the seniority of the worker. More senior workers are eligible to longer notification periods, assuming that notification periods are seen as a compensation for loyalty and service to the employer.
But it can also be seen as a compensation for the assumed difficulty of more senior
workers to re-enter the labour force and to find new employment.
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MOLIERE SYNTHESIS REPORT
Table 4: Legal provisions for notification periods
Countries
BE
BG
CZ
FR
DE
NL
PT
SI
ES
SE
UK
Notification period
The period of advance notice that employers are required to give to employees whom they
decide to make redundant depends on the length of service, and varies significantly between
blue and white collar workers.
Employers must give notice of 30 days for employees with permanent contracts and up to
three months if agreed by both parties (according to length of service).
Legislation requires that employers give prospective redundant employees one month notice.
The length of notice varies according to the employee's seniority in the company. If the length
of service is between six months and two years, the employee is entitled to one month’s notice; if the length of service is longer than two years, the employee is entitled to two months’
notice; if the length of service is less than 6 months, the length of notice is set by collective
agreement or by the company's practices.
Affected employees have to be informed by at least one day after the announcement of collective redundancies to the public authority.
The statutory notice period that needs to be given to the employee is related to the length of
service of the employee. It is one month for less than five years of service, two months for
service between five and 10 years, three months for 10–14 years’ service and four months for
15 or more years of service. Both parties may agree as an exception that the notice period for
the employee is longer than the legal period however, it cannot exceed six months. In this
case, the employer must give a notice period that is double the statutory notice period (independent of years of service).
Employers need to notify those employees who are to be made redundant at least 60 days
beforehand.
Employers are required to notify employees between 30 and 120 days before the termination
of contract (depending on length of service).
Employers must notify employees whom they plan to make redundant 30 days in advance (or
15 days if fewer than 50 people are employed in the company).
The notice period for collective (and other) dismissals is 1 month for all employees with less
than 2 years of service. This is extended to 2 months for those with 2–4 years' service, 3
months for workers with 4–6 years' service, 4 months for those with 6–8 years' service, 5
months for employees with 8–10 years' service and 6 months for those who have worked at
the company for 10 years or more.
The advance notice that employers must give to employees depends on the length of service –
it is one week for each year of service, up to 12 weeks.
Source: ERM legal database and MOLIERE national reports
Severance payments Another form of transition condition is severance payments. Many Member States
stipulate severance payments to be paid to the dismissed worker after the contract is
terminated. This does not exist in all Member States, but is more common in those
countries with relatively short notification periods (see for example UK, France and
Belgium). Severance payments most often vary dependent on seniority, again assuming that severance payment is a compensation for work done and not a compensation
to ensure transition to a new job. In fact, as noted in the ARENAS project, in some
countries where employers are required to offer dismissed workers severance payments, social partners have agreed upon transforming parts of the severance payment
to activating measures to support workers transition to new jobs. In the Netherlands,
for example, severance pay will transfer into an instrument for transition to new jobs.
It may be used before the moment of actual dismissal or after. The employee and/or
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MOLIERE SYNTHESIS REPORT
the employer can use the budget to finance training and mobility programs enabling
the employee to be employed in other jobs or even other industries. From 1 January
2016 this legal transition budget will replace severance pay for most employees.18 The
budget will be maximized at €75,000 or one year income sum. Only the judge will be
entitled to increase or decrease this maximum in individual cases, depending special
circumstances (Sprenger, 2014).
Table 5: Legal provisions for severance payments
Countries
BE
BG
CZ
FR
DE
NL
PT
SI
ES
SE
UK
Severance Payments
The legislation requires employees to be compensated in the event of being made
redundant, subject to certain conditions. For example, certain categories of worker
are excluded, such as those on fixed-term contracts, workers in construction, and
port and ship workers.
Redundancy compensation is paid by the employer for up to one month's wages
(unless higher compensation is agreed between employer and employee) and by the
social funds (for employees with benefits - 4-12 months depending on the length of
service). Unemployment benefits amount to 60% of average earnings over the previous 9 months. Those eligible for old-age pensions are due two month's wages, and
six months' wages where they have worked for 10 years with the same employer.
Employees must be compensated in the event of being made redundant, in the form
of severance pay equal to three months average monthly wage. However, collective
agreement can determine a higher amount.
Anyone who has worked for one year or more for the same employer on an openended contract is entitled to legal severance compensation of a fifth of the monthly
salary per year of service, to which two-fiftheens of the monthly wage is added per
year of service over 10 years. This is applicable for workers made redundant except
for cases of gross misconduct or negligence.
The maximum payment stipulated by law is equal to 12 months’ salary. This is increased to 15 months’ salary for employees aged 50 or older, with at least 15 years
of continuous service, and to 18 months’ salary for employees aged at least 55 and
with at least 20 years of continuous service.
Once a dismissal is permitted, the judge operates with standard compensation
amounts, depending the length of service and other factors
In the event of being made redundant, employees are entitled to compensation
equivalent to one month's salary plus an additional amount for each year of service.
In the event of being made redundant, employees are entitled to a severance payment of between one-fifth and one-third of the average wage of the last three
months, depending on length of service.
In the event of their being made redundant, legislation requires that employees be
paid a minimum of 20 days' pay for each year of service, up to maximum of 12
months' pay.
No severance pay required
The specified compensation for redundancy depends on an employee's age and
length of service – up to 30 weeks' pay (at a maximum of GBP 260 a week) for 20
years' service.
Source: ERM legal database
In several Member States provisions for severance payments have been amended in
the last five years, primarily in a direction of reducing the employers requirements to
pay severance to redundant workers. There is also a movement to also require employers to pay severance to workers on fixed term contracts.
For the first time also the ’flexible peel’ will have formal rights in restructuring processes. Employees with fixed term or
temp contracts of more than 2 years in total will be entitled to get the variation of severance pay, the transition budget.
18
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MOLIERE SYNTHESIS REPORT
In Portugal, for example, a reform of severance payment provisions was made in
2011, where severance payments for new hires were reduced. The new Portuguese
legislation determines a payment of 20 days per year on new hires, which means a
reduction by one third of the amount (with a limit of 20 times the national minimum
wage or 12 monthly salaries). In a second stage, in July 2013, the Parliament approved the reduction of severance payments to 12 days per year of service for all new
open-ended employment contracts. For existing permanent contracts and all fixedterm contracts, severance payments were reduced also to 18 days per year of service
for the first three years of the contract, and to 12 days per year of service for subsequent years. The law became effective on the 1st October 2013. In 2013 the severance
payment of fixed-term contracts was ruled according to the duration of the contract,
reducing the values considered through a very complex scheme. This scheme allows a
differentiated payment according to the different contract extensions, resulting in a
general reduction of costs for the employer when initiating redundancies (Rego, 2014).
In the Czech Republic provisions on severance payments were reduced in a similar
way. Employees were, until 2012, entitled to receive severance payments equal to at
least three times the average monthly wage19. Since 2012 this provision was modified
and stricter conditions were adopted. The main reason for changes was to create more
flexible labour market and higher protection of the employment relationship. The new
provisions imply that the severance payments are differentiated dependent on the
length of service of the employee20, implying that for the employer the costs of making
workers redundant may be reduced (Karasek & Janickova, 2014).
In Slovenia provisions of severance payments were already based on a calculation
of the years of service, but legislative reforms changed the scale. The calculation of
severance payment in Slovenia was based on the average monthly salary of a full-time
worker during the last three months before cancellation and depending on years of
service (wage basis). The new legislation changed the way of calculating the number
of years of service to be eligible for severance payments, implying that fewer workers
19 This is valid if the notice is given by his employer for one of the following reasons: (i) if the employer´s undertaking, or its
part, is closing down; (ii) if the employer´s undertaking, or its part, is relocated; (iii) if the employee becomes redundant because of the decision of the employer.
20 The employee is entitled to receive redundancy payment from the employer at least in the amount equal to (i) once his
average (monthly) earnings where an employment relationship to the employer lasted less than one year; (ii) twice his average
earning where an employment relationship to the employer lasted at least one year and less than two years; (iii) triple his
average earning where an employment relationship to the employer lasted at least two years. If the employee is under the
working hours account20, he will receive sum of triple his average earnings and the amounts laid down in (i) to (iii) where his
employment relationship is terminated in a period when he is subject to a working hours account. If according to a medical
certificate issued by the occupational medical services provider the employee is not allowed to perform his current work due
to an industrial injury, an occupational disease and others, employee is entitled to receive severance pay in the amount of at
least twelve times his average earnings upon termination of the employment relationship.
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would receive the higher amounts. In practice this means that there is a reduction of
severance payments for the employer.
Table 6: Severance payment minimum amounts in Slovenia21
Minimum amount of severance payment for each
year of service
Years of service with the
employer
Years of service with the
employer
Act 2002, 2007
Act 2013
1/5 of the wage basis
1-5 years
1-10 years
1/4 of the wage basis
5-15 years
10-20 years
1/3 of the wage basis
more than 15 years
more than 30 years
Source: Urdih Lazar & Dodic-Fikfak, (2014)
However, the new Slovenian legislation also extended the right to severance pay to
employees with fixed-term contracts in case they are not offered a new employment
contract. With this change the government wanted to increase protection of the fixedterm employees and to bring their rights in case of dismissals closer to the employees
with open-ended contracts since fixed-term employment arrangements were becoming
more and more common (see Urdih Lazar & Dodic-Fikfak, 2014). Thus, the reform
implied both a weakening and strengthening of severance payments.
Time off for job search There is also variation as to the duties of the worker during the period of notice. In
most member states it is assumed that the worker should complete his or her job during the notification period until the last day when the contract is terminated. In several Member States dismissed workers have the right to leave from the workplace to
be able to go to job interviews, apply for jobs or go to training during the notification
period. Such provision indicates that the interest of dismissed workers to reduce the
transition time between the old job and a possible new job is recognized. However, as
can be seen in table 7, the conditions offered vary considerably and in some Member
States such provisions are not available at all.
21
The amounts stated here are the minimum severance payment amounts that the dismissed workers are entitled to. The
employer may always pay higher amounts but they may not exceed tenfold the wage basis, unless otherwise stipulated by a
branch collective agreement. If the collective agreement determines higher amount, the worker has to pay income tax for the
amount that exceeds this limit (tenfold the wage basis).
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MOLIERE SYNTHESIS REPORT
Table 7: Legal provisions for time off for job search
Countries
BE
BG
CZ
FR
DE
NL
PT
Time off for job search
During the notice period, blue-collar workers are allowed to be absent once or twice
a week (with a maximum of the number of hours usually worked in one day). In this
case, the worker keeps its salary for the unworked period. This is the same conditions for white-collar workers who get an annual gross salary of less than €31,467
(as of 2012). For those who get a higher salary, they are allowed to be absent for
half a day per week during the last six months of the notice period.
No provisions for time off for job search exist.
The time off with refund of wages before the termination of employment due to reorganisation is provided to a maximum of one half day per week, during the notice
period of two months. Time off may be consolidated with the consent of the employer.
Dismissed employees are entitled to a reclassification leave (congé de reclassement)
in companies having more than 1,000 employees, in companies belonging to a group
that has its head office in France and has more than 1,000 employees or in companies or groups having at least 1,000 employees in EU member states having signed
the agreement on social policy annexed to the Treaty on the European Union and
that include at least one undertaking having at least 150 employees in at least 2
states. This leave lasts between 4 and 12 months and is taken during the notice
period, for which the employee is exempted. The termination of the employment
contract is postponed until the end of the leave but terminates if the employee finds
a new job. During the leave, the employee continues to receive his usual remuneration and if the period of leave exceeds the notice period, he receives a portion of his
remuneration that cannot be less than 85% of the minimum legal salary.
On request of the employee, the employer has to agree to ‘adequate’ time off to
search for a new employment.
No information available
During the prior notice period following the redundancy decision, the employee is
entitled to a time credit in order to look for a new job (a time credit of two days per
week without reduction of salary until the effective date of the redundancy).These
hours can be used by the worker whenever it is convenient as long as three days'
notice about his or her intention to use this time is given to the employer.
SI
If the employer gives notice of cancellation of the employment contract, the worker
shall be entitled to absence from work during the period of notice to search for new
employment and shall be entitled to wage compensation for a minimum of two hours
per week. In the event of termination of the employment contract for a business
reason, an employer who does not offer the worker the conclusion of a new contract
under modified conditions and inform the Employment Service of the cancellation of
the employment contract, must enable the worker to be absent from work for at
least one day per week to integrate into activities in the labour market in accordance
with labour market regulations. The employer shall be obliged to pay wage compensation for the time of absence from work for job search in the amount of 70% of the
average monthly wage for full-time work during the past three months.
ES
The employee is entitled to paid leave of six hours per week during the notice period
to look for alternative employment when there is an ‘objective’ (justified by external
circumstances) dismissal.
An employee who has received notice of termination is also entitled, during the period of notice, to reasonable leave of absence from the employment with full employment benefits in order to visit an employment agency or otherwise seek work.
An employee with two years’ service who is issued with a notice of redundancy is
entitled to paid time off in their working hours to either look for work or to organise
training. There is no specified duration of the maximum time that an employee can
have off to look for work or access training, only that such time must be 'reasonable'. An employer must pay up to 40% of each weeks pay to allow workers to look
for work and/or training.
SE
UK
Source: EMCC legal database & MOLIERE national reports
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MOLIERE SYNTHESIS REPORT
In several countries notified workers have the right to 1 or 2 days leave per week. In
some countries even less, for example Czech Republic and Spain where time is calculated in hours per week and not days. In Germany, Sweden and the UK the provisions
are more generous. In these countries the legislator does not define a certain number
of days or hours. Instead the rules are formulated in terms of adequate or reasonable
leave. In most countries the dismissed worker is eligible to full pay during this leave,
but in Slovenia and the UK compensation is limited to 70 and 40 per cent of wages. It
should be noted that the total number of days available for dismissed workers for job
search activities is dependent on the length of the notification period. Thus, in those
countries with very short notification periods the total number of days off can be very
limited.
In France there is a provision called reclassification leave (congé de reclassement),
which means that the notified worker has the right for a leave of between 4 to 12
months. During this period the employee continues to receive his/her usual remuneration and if the period of leave exceeds the notice period, s/he receives a portion of
his/her remuneration, no less than 85 % of the minimum legal salary. This special
transition condition is intended to allow notified workers to try out employment
somewhere else, go to training or other forms of activities that would facilitate transition to a new job after the termination of the contract (Teissier & Triomphe, 2014).
Social plans In some countries employers are obliged to present a social plan, i.e. a plan concerning
actions to take to facilitate the workers transition to a new job. In France, for example, if the number of redundancies is 10 or more in a firm of 50 workers or more, the
employer have to set up a social plan, i.e. an “ employment safeguard plan”. The employment safeguard plan can be defined as a tool aimed at “avoiding redundancies or
limiting the number of redundancies and facilitating the redeployment of staff whose
redundancy could not be avoided”. The employer’s obligation to establish an employment safeguard plan has thus a dual dimension. Firstly, it has to plan measures aiming at avoiding redundancies. Second, it has to plan specific measures to ensure the
redeployment, of workers affected by job cuts, either within or outside the company.
The employer finances these measures in most of the cases. The outcomes of these
schemes are, however, limited. According to an evaluation of the redeployment
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measures, only 50% to 60% of people made redundant for economic reasons find a new
job (see Teissier & Triomphe, 2014). These figures raise questions about the efficiency
of measures usually included by companies in the social plans. One of the possible
explanations to the limited results is that some of the support measures (training, job
coaching, etc..) are not always long enough to foster workers' redeployment or, "simply", some of the measures usually planned in such "PSE" are not efficient: for instance
financial supports to geographical mobility and additional redundancy compensations
(Teissier & Triomphe, 2014).
The French requirement to set up a social plan is an exception. In most Member
States there are no such obligations, but social partners often negotiate specific compensation plans in collective agreements. In the UK, for example, employers are not
obliged to set up any social plan, but additional compensations to redundant workers
can be included in collective agreements. In Sweden it is not uncommon that longer
notification periods and are agreed upon in local collective agreements. There are also
general sector or occupational specific agreements, the so called restructuring agreements, that specify the type of transition services dismissed workers are eligible to if
their employer are covered by the agreement. These collective agreements also stipulate the directives for setting up transition agencies that provide transition services to
the dismissed workers and how such services should be financed (see Bergström,
2014). Thus, despite the very limited regulation of the conditions for the dismissed
workers, more extensive conditions could be negotiated in collective agreements.22 The
first Job Security Councils were established already in the early 1970s. Since then
such organizations have been established in most segments of the labour market. After that the establishment of the Job Security Council for the municipal and health
care sector in January 2012, Job Security Councils now covers virtually the entire
Swedish labour market. The measures offered to redundant workers are financed
through fees from the companies concerned that are calculated and expressed as a
percentage of the sum of salaries and wages (0,3 percent of the labour costs).
In some Member States negotiated social plans are co-funded by the public authorities. This is for example the case in Germany and Belgium. In Belgium there is no
legal framework placing any obligation on employers to produce a social plan. Nevertheless, The Federal PES (Public Employment Service) explains on its web site that
22 The leverage for this is the, so-called, semi-disposivity of other provisions in the labour law. More specifically, the workers
representatives, in this case trade unions, have the right to allow the employer to use, for example, other principles for selecting workers or dismissal than stipulated by labour law. In exchange trade unions most often ask for further compensation and
better conditions for those workers who are dismissed.
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social plans are becoming a generalized practice in Belgium and defines them as an
extra legal process ‘characterized by extra-legal measures consented to by the em-
ployer to improve the fate of workers hit by anticipated restructuring.’ Moreover, the
existence of a social plan policy is implied by collective bargaining agreement n°24,
which applies to companies employing 20 or more workers, obliging the employer to
inform the workers about the method of calculation envisaged for every possible extra-legal indemnity. Concerning the content of the social plan, it can be made up of a
number of measures: whilst they previously contained primarily measures such as
early retirement, complementary indemnities for redundancies and the reform of
working hours, social plans contain more and more measures for the “activation” of
the workers, thanks to outplacement program and/or transition units (Naedenoen,
2014).
In Belgium, a new law was enforced already in 2006 requiring firms undergoing restructuring to set up an outplacement program23 to support dismissed workers to find
new jobs. However, employers were only obliged to provide transition services to
workers who were over 45 years old. In 2009, as a reaction to the global financial and
economic crisis, the application of the requirement was expanded. Since then, a business with more than 20 employees24, which announces collective redundancies, has
the obligation to set up a special transition unit through which the employer guarantees transition services to all its workers affected by the layoff. Thus, there is an extension to cover all workers and not only those over 45. The new legislation also
changes the conditions for ensuring the individual’s income during the transition period. The employer is obliged to pay what is called a “reclassification allowance” during a period of 3 months (for workers aged under 45) or during 6 months (over 45) for
all workers employed on an open ended contract, affected and who have a minimum
seniority of one year. The costs of these measures can be partially reimbursed by the
public authorities. The re-classification allowance replaced the previous compensation
that the employer was obliged to pay dismissed workers during the dismissal period
(Naedenoen, 2014).
23
Outplacement is ‘an ensemble of services and guidance provided individually or to groups by a third party, hereafter called
an outplacement office, requested for and paid by an employer in order to enable a worker to find a job with a new employer
as quickly as possible or to develop a professional activity as a self-employed person.’ Extract from Collective Bargaining
Agreement n°51 of 10th February, 1992.
24 If the company has 20 workers at the most, the employer is obliged to create a special transition unit only if it wants to
lower the early retirement age for the workers it is planning to dismiss. In the opposite scenario, the employer is not obliged
to set up such a transition unit, but it must24 then offer outplacement measures to all the workers over 45 who have a minimum seniority of one year.
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MOLIERE SYNTHESIS REPORT
A similar development has taken place in Germany and the Netherlands. According to, Knuth, Mühge & Kirsch, (2014), social compensations plans in Germany have
become increasingly innovative in the way that provisions for re-training and outplacement services have complemented severance payments. Individual voluntary
redundancies (‘buying the worker out of the contract’) have been reframed as collective pathways into new employment, called ‘job transfer schemes’ (Maßnahmen des
Beschäftigtentransfers) in which so-called transfer companies play a crucial role. As a
rule, transfer schemes are negotiated by works councils within the framework of social compensation plans. Traditional redundancy payments will thus be supplemented
by outplacement services, and financial subsidies may work as an incentive for labour
market transitions. There may be premiums for opting for the transfer company instead of awaiting dismissal, for taking part in training and other active measures, and
for taking up a new job as early as possible. Guarantees that workers may return to
the transfer company in the event that a new job does not work out as expected will
facilitate transitions, as will subsidies to initially lower wages in a new job. Occasionally, there may also be provisions for the capitalisation of severance payments and the
possibility of cheap loans for those who want to set up their own business. Unfortunately, these examples of ‘propelling’ rules/provision are not the standard practice but
only found in advanced transfer schemes.
In the Netherlands, social plans are commonly drawn up at company level, to help
alleviate the consequences of restructuring. But the growing number of bankruptcies
has diminished the number and length of social plans, in particular in the SME dominated sectors like construction, hospitality and smaller industrial companies. At the
bigger corporations social plans often include investments in internal mobility centres. These centres deal with training, internal relocation and organizing job-to-job
transitions to the external labour market (Sprenger, 2014).
Thus, in several Member States larger employers often set up transition programs
in cases of mass redundancies, voluntarily or by legal obligations. Smaller companies,
for obvious reasons, do not always have the resources to offer such programs to their
workers. Since collective redundancies often takes place when the company has problems of profitability it means that resources to care for dismissed workers are limited.
A reason for the lack of coverage for SMEs is, as we will come back to later in this report, the thresholds in labour law on collective redundancies, which imply that employers of smaller enterprises have limited incentives to add additional packages to
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support redundant workers. Thus, legal frameworks may have an important impact to
facilitate transition support.
To provide a broader coverage of transition services to include redundant workers
even in smaller establishments the French government has introduced a new innovative scheme. Since 2008 there has been a scheme available where the State may provide financial support to companies facing serious financial difficulties aiming at facilitating the redeployment of workers through different measures, such as support to
set up transition units, to provide training and to support job search activities, i.e. to
facilitate their transition to a new job. In practice, this financial support is mainly
focused on SMEs. However, since 2011, the State also partly finances what is called
the “employment security contract” (contrat de sécurisation professionnelle) (Teisser
& Triomphe, 2014).
3.5 Discussion: Trends in transition conditions
As we can see from this analysis, the legislative provisions for conditions for transition varies across member states. In some member states conditions for transition are
very limited, with short notification periods and low severance payments.
In the ARENAS report it was concluded that the availability of specific measures to
support transition to new jobs among Member States was very uneven. Even if there
are important developments on this point in the last years (for example France), our
review of the national reports, indicates that this imbalance remains.
In most Member states dismissed workers are subject to the policies and practices
of the public employment services. It may be noted, that a potential problem with
such programs is that dismissed workers are then blended with the general activities
of labour market policy, aiming at avoiding unemployment. The problem with this is
that the specific needs and qualities of dismissed workers are not acknowledged. Experience from countries with long experience of designing transition services is that
the chances to find a new job are greater immediately after the event of dismissal,
implying that measures to facilitate transfer to new jobs should be implemented as
soon as possible, even before the employment contract is terminated.
Our comparison of the eleven member states shows, however, two clear trends.
First, there is trend towards increasing movement towards more negotiated
measures. Second, a movement towards measures to support transition.
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Transition conditions and re-employment
The transition conditions for dismissed workers, as outlined above, have obviously
been an important factor behind the possibility to find new employment after termination of the contract. But it is unclear what legal provisions are effective in this respect. It seems, for example, as if the requirement on employers to provide a social
plan (as in France and Belgium) does not necessarily contribute to better reemployment rates. It is rather the length of the notification period that seems to have
an impact on the chances to return to new employment. Moreover, it is also clear that
the position taken by various social partners has impacted on the re-employment
rates of dismissed workers and the contrasting position taken by trade unions in
Germany and Sweden (see the national reports) is a case in point. However, we would
prefer to view the difference in re-employment rates as a reflection of the interest
from social partners to ensure transition for their members and the general availability of such measures as a part of the restructuring framework.
As our review of case studies and the literature show there are a number of reasons
why an employer may invest in transition services, such as to ensure a good reputation in the labour market (in case the employer needs to recruit again in the future),
as a signal to the remaining employees that the employer cares for its workforce
(Knuth, 2008) and also as a responsibility in relation to the dismissed workers to ensure that they are supported in the best possible way in their efforts to find a new job
(Bergström & Diedrich, 2008b). To care for the destiny of dismissed workers may also
have positive effects in the longer term. By reducing the negative consequences of
dismissals, the employer enhances the possibility to implement changes in the future,
because the remaining employees can see that the dismissal does not necessarily lead
to unemployment. Thus, to help dismissed workers find new jobs may have several
advantages for the employer.
It is clear, however, that employers are reluctant to pay severance payments. Severance payments may make frequent termination of open-ended employment contracts unprofitable for the firm. Legally required severance payments in combination
with heavy regulations on the employers freedom to decide upon dismissals (where
employers are only allowed to execute collective redundancies in severe economic situations) may also reduce not only the employers willingness to pay severance, but
also make it difficult for the employer to pay. In such situations, legally required severance payments ask the employer to pay when she/he has the least capacity to pay.
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Thus, while it can appear as beneficial for the worker, severance payments may create additional uncertainty for the dismissed workers.
As this report has demonstrated, it is therefore worrying to see that one of the most
prominent trends among this selection of European Member States has been the
weakening of the transition conditions for dismissed workers (primarily by reduction
of severance payments and shortening of notification periods). There is also a tendency among employers to reduce the investments in transition services, see for example
the Swedish national report. Here we do not address the issue of why employers as a
response to the financial crisis have, to an increasing degree, have reduced their previously generous transition programs (internal labour markets or in house job to job
services), but take it as a stylized fact. However, it is relevant here to demonstrate
that prolonged notification periods may be a more appropriate measure than requiring employers to pay severance payments when terminating employment contracts,
because it serves the interest of both the employer and the dismissed worker.
The distinguishing feature of long notification periods in this context is that the
employers’ responsibility for the transition of workers to new jobs is increased. The
employer needs to anticipate redundancies at an earlier stage and provide time for
workers to prepare for a transition to new jobs. It also means that the employers costs
for initiating redundancies increases. However, the externalization of this responsibility may lead to lower costs through an outsourcing of these functions to external transition service providers than for the employer to perform them in-house (Ohlsson &
Storrie, 2006).
The outsourcing of some functions of the personnel department to external actors is
most obviously apparent when viewing the role of the public employment services and
active labour market policies. This is also the starting point of most analyses of flexicurity (see for example, European Commission, 2007). The model argues that the
successful development in for example Denmark was due to the extensive investments
in ALMP combined with a relatively low level of employment protection (Madsen,
2005). The question is why this may have occurred?
As was mentioned above, one of the key factors for re-employment is almost certainly the length of notification periods, i.e. the time period between the notification of
redundancy to the workers and the actual time when the contract is terminated. The
impact of collective agreements in Sweden, in particular, the relatively long transition
periods negotiated between social partners must be viewed as one of the reasons for
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the high re-employment rates. Notification periods are also extensive in Germany but
these countries are exceptions. As notification periods increases, the opportunity for
dismissed workers to at an early stage start searching for a new job increases. This is
certainly one of the obvious candidates to enable the increase in re-employment rates.
We argue that the characteristic feature of long notification periods is the possibility to start the transition process at an early stage, i.e. a kind of insourcing of the labour adjustment function to the employer, and in particular to start the transition
process before the employment contract is terminated. In this situation investments
in transition services can reduce the adjustment costs facing the firm as the employer
will have the incentive to invest in transition services not only support the worker,
but also to reduce the labour costs if the notification period can be reduced. This can
be done if the employer maintains the responsibility until the dismissed worker has
found new stable employment. In other words, by investing in transition services,
which speeds up the transition process, the employer can reduce the costs of termination. Thus, with increasing notification periods the employer will be more interested
in facilitating transition. Transition to a new job is in both parties interest.
Finally, the comparison with severance payments highlights one of the most important potential advantages of long notification periods and the provision of transition services in that it can increase the chances for re-employment for the dismissed,
while contributing to flexibility for the employer. Any type of dismissal is per definition associated with job insecurity and with negative consequences for the employees.
However, dismissal does not necessarily mean that workers are deemed to long periods of unemployment and the evidence from countries with extensive coverage of
transition services shows that re-employment periods are often less than 8 months
(see Swedish national report). Thus modifying the conditions for transition for the
category of workers who are dismissed worker has the potential to contribute to the
solution one of the major conflicts in European labour markets in recent decades,
namely to reconcile the firm’s preference for flexibility and the worker’s preference for
job security. While of course there are problems specific to longer notification periods,
see below, it does, in principle, provide one means of attaining a positive sum solution
to this basic conflict of interests as well as a possible basis for compromises between
social partners. Indeed it was the exploitation of this opportunity that contributed to
the Swedish Social Partners reaching their collective agreements.
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However, it must be underlined that a major concern about long notification periods is related to the need for substantial reorientation of careers or training for the
redundant workers and the coverage of employment protection legislation for different
groups (e.g. notification periods are typically not offered to employees with limited
duration contracts).
Some problems
As shown in the national reports in this project, we should also acknowledge that
there are a number of other problems related to transition and re-employment. A major problem is the difficulty of finding an appropriate means of financing investment
in training. The skills required for dismissed workers to enter new jobs are obviously
not always firm specific. Firms are most often not be prepared to finance non-firm
specific human capital, as they may not be able to reap the return on their investment, especially when the worker will no longer work for the employer. Moreover, in
some cases the necessary investments in training may be so high that it is not possible for the employer to take on such responsibility. There are few examples of firms
that have invested heavily in training during restructuring. The French new framework for individual skills accounts is an exception, where the government offers individuals training based on the number of years worked (see French national report).
Such schemes, if effective, may provide a solution to the employers’ resistance to invest in non-firm specific training.
There are two additional features specific to dismissed workers that may be expected to lead to reduced re-employment rates. These are 1) working conditions that
reduces the workers employability (both in terms of skills development and health)
and 2) tendency for social partners to care for the remaining workers/members, rather
than those who leave. This means that all matters that require some form of dialogue
between social partners are likely to be difficult to deal with. Indeed, there is evidence
that testify to the problems in creating a responsible social dialogue for dismissed
workers.
Nowhere does the combination of insider-outsider problem and the working conditions that produce reduced employability combine to such potentially problematic effect than in health and safety at the workplace. These matters have been discussed
extensively in the HIRES report and are also mentioned in the Cercas report (but
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withdrawn from the Quality framework). The main thrust of the proposal is to place
primary responsibility with the employer and to require the employer to rehabilitate
the worker to be able to return to their previous job. The Cercas report proposes that
the worker should be given support to deal with health and safety matters but does
not specify who should be responsible for this. It is far from obvious where the responsibility should lie. A similar remark can be made when it comes to the employers’ responsibility for training. If employers should invest in training beyond the scope of
what is required in the workplace is to be effective employers need to know about the
dismissed worker’s interests in future careers, what jobs are available in the labour
market and the particular skills and training requirements of future employers?
When one also considers the very short duration of a notification period, it is far from
obvious how these problems can be solved.
There is much anecdotal evidence of dismissal leading to reduced income or poor
working conditions, but much less hard evidence. Moreover, most research cannot
differentiate between the factors related to the dismissal process per se, i.e. the selection of workers for dismissal and factors related to the job or the worker. However, the
OECD-study “Back-to-work” (OECD, 2013) shows that, in some countries (Germany,
Portugal and the United Kingdom), dismissal is associated with appreciably lower
earnings than in other countries (for example Sweden). Thus, even if the dismissed
worker avoids unemployment and finds a new job, dismissal may imply reduced income and worse working conditions, but this is not always the case.
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4. CONCLUDING REMARKS
The purpose of this report was to contribute to a better understanding of the impact of
the financial crisis in 2008-2009 on the restructuring is managed in a selection of
Member States, to analyse whether and how the regulative and policy framework for
managing restructuring has changed and to monitor the implications of these changes
in the longer term. In chapter one, we defined restructuring as any change to the
structure of an organization that, from the point of view of the individual worker, implies a change in employment status or working conditions. We also developed a comparative framework for identifying the different trajectories of change in the restructuring regimes in European Member States. In the following chapters we analysed
the changes in the legal and policy framework related to restructuring in a selection
of eleven Member States and discussed the relationship between collective redundancies and its regulative framework.
In this chapter we will discuss the main conclusions of this project. First we will
summarize the main findings of the project based on a comparison of the developments in the studied countries. With this as a basis we will then discuss the findings
in relation to more general questions regarding the impact of the financial crisis for
the development of a common legal framework on a European level. Finally, we propose a way of thinking about how to reform regulation of restructuring in Europe so
as to facilitate sustainable competiveness.
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4.2 Changing restructuring
The extent of restructuring and the measures available to manage restructuring varies considerably among the different countries studied. This observation was already
made in the ARENAS project in 2010, but by comparing Member States through the
lens of our comparative framework we can better understand how Member States differ in terms of their regulative and policy framework and their potential impact on
economic and labour market outcomes. Most importantly we find that Member States
differ considerably in terms of the dominating adjustment mechanism and the role of
the state in supporting and facilitating adjustment in labour markets (see chapter 3).
Our analysis of the restructuring regimes in the eleven Member States highlights four
main developments since the financial crisis in 2008-2009.
First, despite the short time period there are considerable changes in the way restructuring is managed and regulated in several Member States. Member States primarily dominated by price adjustment are slowly introducing and adopting measures
aiming at facilitating quantitative adjustment, primarily through the use of working
time reduction schemes, which enables firms to reduce their labour costs when demand suddenly decreases. This movement is typical for Slovenia, Bulgaria and the
Czech republic. However, these movements are made, with very limited public intervention and most importantly with very limited investment from the state. Working
time reduction schemes are now available in a clear majority of the eleven Member
States and there is also a gradual expansion and reform in terms of coverage and efficiency in those Member States where working time reduction schemes were already
available before the crisis.
Second, there is a clear movement towards increasing emphasis on measures to
support transition of workers to new jobs. This movement is clear in France, the
Netherlands, Belgium, and to a limited extent in Germany. Furthermore, in Sweden,
where Job Security Councils that support transition to new jobs for redundant workers were already available, the coverage of transition services has expanded. In several member states there is an emerging network of transition units and mobility centres with different forms of financial solutions, primarily set up as a result of collective agreements, but also with financial support from public authorities. This movement is combined with a decline in the use of early retirement schemes, something
that is now almost completely erased as a measure to manage restructuring in the
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eleven Member States. The decline of early retirement schemes also signifies a withdrawal of the state from the management restructuring.
Fourth, measures to manage restructuring are increasingly organized by and
through collaboration between social partners. On the one hand, the financial crisis
has provided incentives for social dialogue and collaboration. On the other hand, there
is also a shift in the role of the state in relation to social partners, for example in
France and Spain were regulative reforms aim at facilitating social dialogue and including social partners in regulating the conditions in the labour market.
Fifth, the financial crisis also serves as a stress test of the legal framework related
to collective redundancies. While more workers have lost their jobs through collective
redundancies during a short period of time than ever before in European labour market history, it is clear that far from all workers who are affected by restructuring have
access to measures to support their transition to new jobs. Employment protection is
still something for those who already have a relatively secure position in the labour
market. Legal frameworks are primarily designed to prevent collective redundancies
and to deter employers from initiating redundancies. As such they can be seen as a
form of institutional blockage, favouring the remaining workers rather than the interest of those workers who are made redundant or those who do not hold open-ended
contracts.
Thus, despite the various efforts to reform or change restructuring regimes in the
countries studied, the problematic features of restructuring still exist, the uneven distribution of measures across Member States and the lack of attention to the transition
of dismissed workers to new jobs, and it is clear that Europe has difficulties in accommodating structural change without significant effects for workers, labour markets and the competitiveness of our economies. What can be done to develop a framework for restructuring that could support sustainable competitiveness in the longer
term?
4.3 What can be done?
The concern for survival and competitiveness of companies and the concern for employment and income continuity for workers has always been one of the major sources
of conflict between the employers and employees within the European social model.
These two aims appear incompatible and more of one appears to imply less of the other. However, as mentioned above, restructuring can be made in such a way as to pro-
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vide both security and competitiveness, by means of support to those workers who are
made redundant with a view to find a new job. Thus, the final section of this report
explores how, in principle, the regulation of restructuring could develop to obtain this
dual aim.
As shown in chapter 3, we find great variation of regulation of collective redundancies between countries. There are thresholds that limit the application of the regulation. The most common threshold is that employers with less than 20 workers are
exempted from the legislation, or that larger employers who reduce a particular share
of the workforce during a certain time period are exempted. The redundancy must be
of a particular size to offer workers some form of protection. It is unclear what the
purpose of this threshold is? However, the effects of such regulations are rather clear.
It means that larger employers are circumventing the regulation by dismissing smaller groups of workers several times, instead of doing it all at once, or that workers in
the smaller companies are not protected in the same way as employees of the larger
companies. This is paradoxical because SME:s account for more than 99% of European enterprises and about two-thirds of private sector employment. This means that
the legislation, for unclear reasons, discriminates between workers dependent on the
size of their employer. There are therefore good reasons to argue that employers
should be treated equally and that thresholds for application of the law should be
abolished. However, such expansion of the scope of employment protection legislation
would probably initiate extensive dissatisfaction among employers, in particular
SMEs, because such regulations would restrict employers’ freedom to decide upon the
size of its workforce. However, such resistance is based on the assumption that there
would only be an extension of the current legislation.
The restriction of employers’ freedom to decide upon the size of the workforce, including dismissing workers, is the main means of regulating restructuring in labour
law. The idea is that workers are protected from being dismissed by making it difficult and or costly for the employer to take such decisions. However, it is far from obvious that such restrictions of the “freedom to decide upon the size of the workforce” –
always is in the interests of (all workers) those workers who are indeed dismissed. As
regards the continuity of employment, income or the capacity to anticipate future employment termination for the worker, the restrictions on the employers freedom to
dismiss workers per se is not the critical issue, but rather the continuity of the income
level, which, in all European Member States, is secured through some form of unem-
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ployment benefits. The regulation of the employers’ freedom to decide upon the size of
the workforce appears primarily to serve the purpose to ensure that dismissals do not
become widespread and thereby contribute to create insecure working conditions for
workers in general who would continuously be threatened by the risk of being dismissed. It is clear that the cost of dismissal and the procedures are meant to deter
employers from choosing redundancies as the solution to their problems.
When regulation of collective redundancies is extensive, dismissals as a means of
restructuring the workplace is blocked. To “block” the use of collective redundancies
may be regarded as a way to stimulate employers to search for alternative ways of
restructuring the organization25. However, such regulations also deter employers from
developing measures and practices to support workers after dismissals have been executed. This may be devastating in case the preventive and postponing measures are
unsuccessful and redundancies have to be implemented anyway.
The regulation of employers’ freedom to dismiss workers is thus primarily related
to the interests of those workers who remain after dismissals have taken place – the
survivors – and not those workers who are dismissed. This, while perhaps obvious,
should be made explicit. If one is to regulate collective redundancies to the benefit of
the workers who are dismissed, the regulation of the employers’ freedom to decide
upon the size of the workforce is not the relevant issue.26 Instead the focus of regulation should be on the conditions that may have an impact on the dismissed workers’
chances to find a new job – the transition conditions.27
As shown in chapter 3 there are several examples of regulations that serve such
purposes and there are alterations in collective agreements in several countries that
provide inspiration for further development of legislative proposals, for example:
-
Longer notification periods that allow dismissed workers longer time to search
for a new job,
-
Time off for job search
For example to consider other alternative measures to manage the firms’ adaptation needs, such as working time reduction,
etc. In many countries extensive regulation is combined with generous state funded programs to enable employers to use
other alternatives than dismissals, see for example Germany, which offers the possibility for employers to reduce labour costs
through short time working schemes. However, such programs are not always available in countries with a restrictive regulation.
26 The exception is the prohibition of employers to dismiss particular groups of workers, e.g. trade union representatives or
individuals with ill health.
27 For example, the conditions for dismissed workers (after the decision has been made) varies considerably. Dismissal periods. (equally long and defined according to how long time it ”normally” takes to find a new job. (not as a compensation for
good work or seniority, loyalty and commitment).
25
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-
Mechanisms to incentivise or require employers to provide transition services,
such as job search activities for dismissed workers or transition units.
The common denominator of such practices and regulations is that they regulate the
process and conditions for the dismissed workers, something that the remaining
workers and their representatives do not always take into consideration. The interests of the remaining workers at the workplace are of course important, however, it is
also important to take the interest of the dismissed workers into account.
There is clearly a risk that regulations of the transition conditions to ensure better
treatment for the dismissed workers may be seen as costs that could potentially undermine the survival of the company, as the costs of such activities are enforced upon
the employer when the company probably has the least resources available.28 Indeed,
it may be assumed that employers initiate collective redundancies when they are in
economic difficulties and therefore would not have the resources to support workers
who are dismissed to any greater extent. This is also linked to the experiences of several EU projects: the need to disconnect restructuring from economic crises. Collective
redundancies are more difficult to manage when it is regarded as a crisis measure.
There are several examples of anticipated restructuring where collective redundancy
is a response to a long-term adjustment and plan for the future operations of the company. Of course this can not be done in all cases, but in general it may be argued that
is better to allow employers to rationalise the organization little by little, to stay productive and competitive, instead of waiting until the crisis makes it necessary to cut
the workforce. And in such situations, often a major economic crisis, it is probably
more difficult for the displaced workers to find new jobs. Therefore it is better, for the
sake of long term competitiveness, to shift the focus of regulation from blocking collective redundancies to facilitating worker transition to new jobs.
Thus, a reformed legislative framework must include a shift from regulating the
employers’ freedom to initiate redundancies to regulating the conditions that facilitate
the dismissed workers’ transition to new jobs.
28 This explains why Swedish trade unions and employer associations set up job security councils, as they believed that they
could save money in a foundation to be used whenever there are dismissals at stake.
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4.4 Considerations for policy makers
What then should be considered when reforming regulation of restructuring? As noted
above, the regulation of the event of restructuring does not necessarily serve the interests of the dismissed worker. Indeed, limitations on the employer’s decision to dismiss workers in particular, may obviously limit the workers anticipation of coming job
transition needs29. It is the regulation of the conditions of employment after the notification of redundancy, – “the transition conditions” – that should be the focus of attention. As we have seen above, legal frameworks regarding transition conditions
vary across Member States. It is hardly appropriate to recommend specific proposals
for all countries. Nevertheless, it appears reasonable to suggest that workers should
have the same notification periods independent on their seniority, assuming that the
time it takes for individuals to find a new job is similar independent of seniority.
Thus, the assumption should be that the time it takes to transfer to a new employment is similar independent of seniority unless there are objective grounds to assume
otherwise. In some countries social partners have negotiated dismissal periods based
on the assumed time it takes for a worker to find new employment (equal for all) and
if it takes shorter time the individual receives a bonus for speedy transition. This is
the situation in several large companies in Sweden and in France, where social partners have developed a form of transition contract. Longer notification periods may
also serve to award dismissed workers more anticipation and time for transition.
To summarise, when considering reforms of the legal framework on restructuring the
following main principles should be considered:
-
Equal treatment of sectors/industries, measures implemented should be, as far
as possible, industry neutral, private and public sectors should be equally treated.
-
Equal treatment of employers, large and small, and independent of location30.
There is a tendency among employers to be secretive concerning restructuring. When putting restraints on the employers
decision to announce redundancy there is a tendency to postpone, decisions until it is too late. Such information bias may also
be dependent on the distance between the initiator of restructuring and the formally responsible employer. Employers may
keep information about changes for themselves. This does not provide good conditions for workers transition to new jobs in
case they need to go anyway in the end, neither does it provide good conditions for social dialogue and collaboration between
social partners. Experience from case studies show that it is better to receive information at an early stage to be able to prepare for the coming situation.
30 To avoid social dumping it should not be easier or more difficult for employers in one country to dismiss workers than in
another.
29
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Equal treatment of dismissed workers,
-
o
Provide the same transition conditions for all dismissed workers, equally
long notification periods, dismissed workers should have the right to leave
the workplace for job search activities and engage in transition services
during the notification period.
Equal treatment for employees:
-
o
Measures that reduce wages or undermine standards of employment/working conditions should be avoided in times of restructuring.
o
Efforts should be made to explore the possibilities to regulate restructuring that implies externalization of the employers responsibility, i.e. dismissal and transfer to agency work or dismissal and transfer of activities
to external service provider (outsourcing) or transfer of activities to other
location (offshoring).
However, legal reforms are not enough. There is also a need for change among social
partners, as French and Swedish experiences indicate. In both these countries there
appears to have been a growing acceptance of the phenomenon of restructuring and a
willingness to seek measures that are not exclusively focused on the short-term objective to save jobs or to make profit. Similar developments can be observed in other
countries. There is a need for unions to reconsider their policies in relation to redundancies as a means to manage restructuring and to move towards discussing how to
support those workers who are made redundant rather than trying to save jobs at any
costs.
There is also a need for employers to recognize the advantages of investing in transition services for dismissed workers. Most importantly, the examples investigated in
this project shows that adaptation can be achieved without having to reduce the
standards of employment or cutting wages. It is conditioned upon responsible negotiations of working conditions and wages that enable long-term competitiveness in the
economy rather than to use any crisis situation as a way to reduce working conditions
and wages.
Second, measures to support transition to new jobs may promote higher employment rates, especially for older workers, compared to the alternative, for example early retirement, where the older workforce are taken out from the labour force.
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Third, enabling firms to initiate redundancies, but with good conditions for the
dismissed, provides more incentives to retain skilled workers in the labour force than
other measures and there are reasons to believe that firms may be more productive
and thus serve to enhance long term competitiveness. From this perspective there
may be much to gain from shifting the regulation of restructuring along the lines discussed above. The removal of the barriers to initiate redundancies, limitations of criteria for selecting workers for redundancies and above all the removal of limitations of
reasons for initiating redundancies would almost certainly be of benefit to the employers and perhaps the entire economy. On the other hand, regulations should be
more focused on conditions that secure transition of workers into new employment.
Acknowledgements
This report was made possible by the EU project MOLIERE, which is financed by the European Commission. I also gratefully acknowledge
the financial support of the Swedish Council for Work Life and Social Research (FAS) and Vinnova, which has made the production of this
text possible. The report benefitted greatly from the comments from the independent experts of the IRENE network and MOLIERE project
partners: Claude Emmanuel Triomphe, Christophe Tessier, Vassil Kirov, Johannes Kirsch, Gernot Mühge, Matthias Knuth, Ricardo Rodriguez Contreras, Zdenek Karasek, Frederic Naedenoen, Fanny Fox, Metoda Dodik Fikfak, Vedran Omanovic, Lars Walter, Raquel Rego, Wim
Sprenger, Nick Clarke, Sonia McKay and Reinhard Neumann. Thank you all for your advice and insightful comments!
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