monitoring learning and innovation in european...

www.responsible-restructuring.eu

Monitoring Learning and Innovation in European

Restructuring Synthesis report

Ola Bergström Professor

Moliere A project funded by the EU DG Employment, social af-

fairs and inclusion

IRENE Policy Paper N°14 / 2014

Table of Content

1. INTRODUCTION ........................................................................................................................................ 5

1.1 Previous studies ............................................................................................................................ 7

1.2 A comparative study ................................................................................................................. 10

1.3 Nature of the evidence ............................................................................................................. 11

1.4 A conceptual framework ......................................................................................................... 13

1.5 The Structure of this report ................................................................................................... 21

2. LEARNING AND INNOVATION IN RESTRUCTURING REGIMES ........................................ 23

2.1 Introduction .................................................................................................................................. 23

2.2 Restructuring regimes before the crisis ........................................................................... 23

2.3 Developments since the financial crisis ........................................................................... 25

2.4 Conclusion ..................................................................................................................................... 48

3. REGULATIONS AND RESTRUCTURING ........................................................................................ 50

3.1 Introduction .................................................................................................................................. 50

3.2 Regulating restructuring ......................................................................................................... 50

3.3 Redundancies and regulation ............................................................................................... 56

3.4 Regulating the conditions for transition .......................................................................... 62

3.5 Discussion: Trends in transition conditions ................................................................... 76

4. CONCLUDING REMARKS .................................................................................................................... 82

4.2 Changing restructuring ............................................................................................................ 83

4.3 What can be done? ..................................................................................................................... 84

4.4 Considerations for policy makers ....................................................................................... 88

5. References ................................................................................................................................................. 91

THE IRENE NETWORK

Born during a seminar held in Dublin in 2003, IRENE (Innovative Restructuring- European Network of Ex-perts) is a network bringing together independent experts – academics, practitioners, managers, social part-ners, consultants – from various countries (Belgium, Bulgaria, Czech Republic, France, Germany, Italy, Po-land, 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 re-sponsible 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 Parlia-ment (2013). The IRENE network publishes policy papers and other relevant information on restructuring the website www.responsible-restructuring.eu.

MOLIERE SYNTHESIS REPORT

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This publication is supported by the European Union Programme for Employment and Social Solidarity - PROGRESS (2007-2013). This programme is implemented by the European Commission. It was established to financially support the implementa-tion of the objectives of the European Union in the employment, social affairs and equal opportunities area, and thereby contribute to the achievement of the Europe 2020 Strategy goals in these fields. The seven-year Programme targets all stakehold-ers who can help shape the development of appropriate and effective employment and social legislation and policies, across the EU-27, EFTA-EEA and EU candidate and pre-candidate countries. For more information see: http://ec.europa.eu/progress The information contained in this publication does not necessarily reflect the position or opinion of the European Commission.


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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 con-cept 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 20th February 2015

Ola Bergström

1 We gratefully acknowledge the European Commission the European Union Programme for Employment and Social Soli-darity - PROGRESS (2007-2013) and FORTE for the financial support that made this publication 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 im-pact 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 Europe-an 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 re-structuring 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 man-age restructuring are non-existent and social dialogue concerning redundancies is less developed (ARENAS, 2010). Employers, with some exceptions, are less prone to pro-vide 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 re-tirement 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 restruc-turing 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 pro-posal for a European directive on Anticipating and Managing restructuring, which was intended to provide a general framework for how restructuring should be man-aged 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 long-er 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 im-pact 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 phe-nomena 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 there-fore 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 re-dundancies.

Second, as comparative studies have shown, there are considerable differences be-tween 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 lev-el. What is needed is a conceptual framework from which national and country specif-ic 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 val-uable 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 dy-namics 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 manag-ing 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 manag-ing 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 exten-sive 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 ana-lyse whether and how the regulative and policy framework for managing restructur-ing 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 re-structuring in Europe is being changed by the current financial crisis. More specifical-ly, the project aims at describing how the measures to manage restructuring has changed, in terms of the new measures implemented and how responsibilities for re-structuring are allocated to various actors. Furthermore, the project aims at identify-ing 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 restruc-turing will be compared to the developments of policies on the European level. Partic-ular attention will be paid to processes of harmonization, seeking to develop a Euro-pean framework in order to understand the dynamic relationship between restructur-ing 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 securi-ty 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 Re-public and Slovenia), where conditions for welfare and social security as well as in-dustrial relations systems and social dialogue are very different. Thus, the following Member States have been selected for investigation: Belgium, Bulgaria, Czech Repub-lic, Germany, France, Portugal, Sweden, Netherlands, Slovenia, Spain and United Kingdom. The selection of countries represents some of the great variation across Eu-rope. 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 in-spiration 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, Occu-pational 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 defi-nitions 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 rela-tive importance can differ across institutional and policy settings. The nature of re-structuring and differences related to industrial relations traditions and industry var-iation may cause difficulties in drawing generalisations across Member States (Berg-ström, 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). Dissat-isfaction with the national statistics regarding the announcement of redundancies to measure how many jobs were lost and gained across European Member States, in par-ticular 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 redundan-cies 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 Moni-tor 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 restructur-ing 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 man-aging change produced in the ARENAS project in 2009. We started by investigating the developments and economic and labour market trends in each country. Data col-lection was structured according to a common general framework applied in each country. Comparable data was collected from Eurostat. The goal was to compare de-velopments before and after the financial crisis (2007-2013). Data included general employment trends, unemployment, GDP, the composition of the labour force by gen-der, age, education and ethnicity. We also collected data from previous studies inves-tigating collective redundancies in terms of the number of workers dismissed and out-come 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 com-pare 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 exam-ples of the various measures available in each Member State, but there were no com-parative 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 dimen-sions: statutory laws regulating the employers’ initiation of restructuring, the work-ing 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 re-garded 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 re-structuring. 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 rela-tionship. To be subject to restructuring is a liminal state, with both objective and sub-jective dimensions. An employee who is, for example, notified as redundant is the typ-ical case of being subject to restructuring. However, not all workers who regard them-selves 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 organi-zation. 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 indi-vidual 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 individ-ual’s subjective definition of the situation. Furthermore restructuring is not only lim-ited 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 tempo-rary 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 em-ployment 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 accounta-ble for the formal responsibilities in the relationship to the worker affected by the de-cision (Bergström, et.al., 2013). Similarly, in larger companies, the decision leading to restructuring can be rather distant from the actual workplace where workers are af-fected. 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 locat-ed in one country, like in large multinational companies, and the formal employer responsibility is located in another. In such organizations, decisions about restructur-ing are not only distributed through multiple hierarchical levels, it is also interpreted through multiple institutional, regulative and cultural frameworks. Thus, a distinc-tion has to be made between the employer and the initiator of restructuring. It is im-portant 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 restruc-turing. Thus, even when trade unions are passive, they may play a role. Workers’ rep-resentatives 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 con-flicts or suggest other alternatives than to make workers redundant.

Trade unions do not only influence and monitor decisions on the local level, they al-so influence decisions on a more general level, through negotiation of collective agreements that regulate conditions for restructuring on a more general level for sec-tors or occupational groups and or by influencing legal and policy frameworks on na-tional 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 vari-ous 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 ser-vices 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 emerg-ing 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 pri-mary 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 an-other. During economic crises there may be shifts between these roles in terms of em-phasis 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 experi-ence 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 be-haviour 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 man-agement 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 im-portant 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 indus-trial relations and the various impact and involvement of social partners and the state, and the combination of such support structures affect the impact of restructur-ing in the labour market and the economy in general. It is therefore relevant to dis-tinguish 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 con-trolled 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 la-bour cost ad-

justment

Quantitative adjustment

Qualitative adjustment

Market Dominant

measure: wage cuts

Negotiated Dominant measure

Working time reduction

Dominant measure:

transition to new job

State Dominant meas-ure: Early retire-

ment

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 ad-justment 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 ar-gues that along with the adjustment of wages and salaries, governments may influ-ence 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 re-structuring.

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 sev-eral 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 in-dividuals to supply their labour through tax reductions or reduced social benefits. In-vestments 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 educa-tion, which aims at increasing the productivity of the workforce. Another measure that could be said to contribute to qualitative adjustment is various forms of transi-tion support, where redundant workers are supported to find new jobs. Thus, qualita-tive 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 2 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. We have also added a layer of negotiations between social partners as an important way to organize adjustment. In the origi-nal model Gazier only made a distinction between more or less influence of labour market policies. In our view this distinc-tion is too limited to provide a distinctive understanding of the different mechanisms through which adjustment is made. Introducing a distinction between three different ways in which adjustment may be organized, the role of social partners to negotiate, organize and finance specific measures to manage restructuring is more clearly outlined. Thus, a distinction should be made between state funded, social partner organized measures and mechanisms that rely heavily on market mechanisms.


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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 managing change through the adjustment of the price of labour or are measures ap-plied primarily focused on facilitating quantitative adjustment, by reducing or in-creasing the supply of labour?

In our previous projects, see for example Gazier, (2008), five Member States (Bel-gium, 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 dominat-ing 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 theo-ries 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 self-reinforcing 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 correc-

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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tions 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 the regime, rather amendments and corrections. Measures may, for example, be ex-tended 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 differ-ent 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 to-wards a different regime. When the restructuring regime change the impact of re-structuring 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 imple-mented 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 imple-mented 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


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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 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 re-gimes. 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 re-gime? 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 ex-tent of restructuring and the measures available to anticipate and manage restructur-ing 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 em-phasis 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 de-signed 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


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not hold open-ended contracts. Third, except for the radical changes in Spain and Por-tugal, regulatory frameworks are only partially reformed. In this instance it is valua-ble to compare the changes with the European Quality Framework initiated by the European Parliament. We find that despite the various efforts to reform or change restructuring regimes in the countries studied, the problematic features of restructur-ing 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 dis-missed and other marginal groups of workers who are more or less directly affected when restructuring is initiated. This distinction, we believe, is important in identify-ing recommendations for future policies trying to limit the negative consequences of restructuring for workers and to facilitate the ability to change and maintain competi-tiveness 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 competi-tiveness 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 institu-tionalization of different forms of working time reduction schemes.

• A withdrawal of state intervention and an attempt to facilitate agreements be-tween 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 adjust-ment 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 frame-work without simplifying the enormous complexity and diversity of legal frameworks,


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the history of industrial relations and national labour market policies. However, a general categorization of the main features of adjustment and governance mecha-nisms among Member States helps us identify broader trends and developments with-in 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 rela-tively limited power and influence of social partners. The typical example is the Unit-ed 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 ex-penditure 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



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Source: Adapted from Gazier (2008)

In the second group we find Member States with a relatively strong focus on quantita-tive adjustment and state intervention. In these Member States employment protec-tion 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 be-tween the state and the social partners.

In the third group we place Member States where the governance of labour mar-kets are characterized by relatively strong and independent negotiations between so-cial 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 adjust-ment schemes, the Swedish “regime” were primarily oriented towards qualitative ad-justment, 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 ana-lyse developments within and across the dimensions in the comparative model. We start with developments within wage and price adjustment and continue with quanti-tative 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 re-


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duction of wages when there is a reduced demand for products and services, this prac-tice has continued. Typical examples are the United Kingdom, Bulgaria, Portugal and Slovenia, were employers re-examined their wage policies, bonus systems and imple-mented wage freezes in order to preserve jobs. The Slovenian national report, for ex-ample, mentions that companies under restructuring usually reduced employment by terminating, first of all, all posted workers, self-employed, and some previously out-sourced activities were again performed by own employees. In other companies, man-agement decided to cut production costs by reducing planned wage increases, cutting usual employee benefits and awards.4

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 Swe-den, 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 in-tended to increase the employment opportunities of the vulnerable groups and unem-ployed 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 agree-ments between social partners. As mentioned in the UK and the Swedish national reports, trade unions were critical to the employers’ proposals to reduce wages. Fur-thermore, even if wage or labour cost reduction measures promise to prevent redun-

4 It should be noted that the use of wage adjustment does not exclude other forms of adjustment. However, the important point is that these countries rely to a large extent on the lightly regulated functioning of markets to organize restructuring. This may also imply that employers to a large extent dismiss workers, but with limited measures to support workers to find new jobs.


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dancies, 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 work-ers and their representatives agree upon wage reduction as a way to avoid redundan-cies 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-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 subsi-dy should be restricted. The main danger is that subsidies are granted to non-productive 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 em-ployers. The ambition to support companies in economic difficulties produces employ-ers who present themselves as being in economic difficulties. The alternative, to stim-ulate 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 la-bour 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 ex-penditure and the number of beneficiaries. This is however a long term process, which


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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.

Figure 3: Beneficiaries of publicly funded early retirement, 2001-2012

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 previous-ly by the worker) to a worker of 57 years of age who was unable to benefit from re-employment 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 min-imum 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

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benefit rights and facing lower pensions. This implies that the attractiveness for so-cial 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 work-ers 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 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.5 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 gov-ernment 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 pro-grams 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 particu-lar. 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

5 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.


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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 direc-tion of making it less attractive for both employers and employees to use it, as well as 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 re-ceive exemptions from the Minister of Employment (for further details, see Naedeno-en & Fox, 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 be-tween the generations” (Naedenoen & Fox, 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 sev-eral 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 dif-ference 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 & Fox, 2014)

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In Spain there were negotiated partial retirement schemes that were applied on con-dition 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 em-ployment. 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 per-son aged 60 will leave the undertaking whilst another person would enter the compa-ny for at least a five-year period, the so-called “relief worker”. The duration of the re-lief 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.

These contractual arrangements are still available, but the government has sub-stantially limited the conditions to avoid abuses, for example by increasing the contri-butions 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 em-ployees who are at least four years before their retirement age and who have contrib-uted 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 in-creasing 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,


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for example Sweden and the United Kingdom. Of course there may be other explana-tions to the increasing employment rate for older workers, for example demography, the official retirement age and other incentives and programs to facilitate active age-ing. Nevertheless, removal of early retirement schemes indicates an interest to at least not counteract active ageing.

Figure 5: Employment rate for older workers (55-65)

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 com-

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pletely 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 gov-ernment involvement in social partners decisions on how to manage restructuring.

In some Member States where early retirement schemes have been withdrawn, so-cial 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 responsibil-ity to the employer. Such reactions make the process of reducing early retirement dif-ficult and slow, unless there are other alternatives available and or discouraging dis-incentives for those who use it.

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 es-tablishing measures to support adjustment through transition to new jobs. In for ex-ample France and the Netherlands we have seen an increasing focus on the develop-ment of measures to manage redundancy processes and to establish measures ena-bling the transfer of workers to new jobs through different forms of transition ser-vices. In the next section we will take a closer look at the increasing interest in work-ing 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 employ-


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ers 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 in-come incurred by the reduced working time through subsidies. The subsidies are granted to employers that cut working hours and the national public employment ser-vices 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.

By their nature working time reduction schemes are temporary. They are only of-fered to employers for a limited period of time, when the economic difficulties are as-sumed 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 tempo-rary 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 un-


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employment 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 redundan-cies through temporal lay-offs. This means that employers are temporarily dismissing workers, but the contract of employment is retained or the employer promises re-employment after a specified time period. The time periods and conditions differ be-tween 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 unem-ployment 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. 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 fa-vour and against the use of working time reductions as a measure to manage restruc-turing. Compared to other schemes to avoid redundancies working time reduction schemes were seen as having several advantages. For employers in temporary eco-nomic 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. An-other 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 secur-ing 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 im-portant 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 previ-ous 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


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are transferred to the public employment services when the employer has limited ca-pacity 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 allow-ances used for an extensively long period could lead to a delay of necessary and una-voidable collective redundancies and closure of businesses. In such cases temporary working time reductions becomes deceiving. Instead of working temporarily with re-duced 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 direct-ing their energy towards new career somewhere else. Thus, what appears as a suc-cessful measure in the short term may have difficult consequences in the long term.

Furthermore, if workers are dismissed after a period of temporary reduced working time, they may suffer from reduced unemployment benefits, because their contribu-tion has been decreased. Similar effects were identified in relation to future retire-ment compensation. In some cases, workers had been forced to waive holiday entitle-ments or to switch over to a new severance pay system, potentially entailing signifi-cant 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 sus-pended workers’ social security costs being shifted to the national public employment service.

A critique raised was that reduced working time schemes could have direct nega-tive repercussions with respect to employees’ future retirement pensions, as the ser-vice 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. De-bates in several Member States also indicated that there had been difficulties associ-ated 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 Bel-gium, France, Germany, Netherlands, Portugal and Spain) and in several other Mem-


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ber States working time reduction schemes have been spread and adopted in recent years, for example (Bulgaria, Czech Republic, Slovenia and Sweden). In these coun-tries 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 pro-gram 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 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 dura-tion of funding was prolonged from 6 to 24 month. In addition the costs for social se-curity 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, previ-ously limited to blue-collar workers, were temporarily extended to cover also white-collar workers. In 2013 the temporary measures were made permanent. The schemes were also changed to include more employer-co-financing of individual compensation (Naedenoen & Fox, 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).


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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 short-time working schemes in cases of industrial crisis, by easing the requirements employers have to fulfill to in-troduce 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: inter-mittent 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 work-ing for a short time, and in certain cases allow independent workers and managers to receive also the unem-ployment 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 compa-nies 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)

Source: Segurança Social, 2014.

Workers have the right to receive from the employer a monthly retributive compensation, paid by the employ-er (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 immedi-ately 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 merg-ing 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

2008 2009 2010 2011 2012 2013

working Lme reducLon temporary suspension


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training is implemented or not during the short-time work period (for more infor-mation 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 exten-sively. 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. Similar developments can be seen in those coun-tries 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 im-prove 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 pack-ages 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 employ-ees. 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 reim-bursement of payment compensation for temporarily laid-off workers. The law stipulates that eligible employ-ers – 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 re-


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imbursement 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 sub-stantial majority of companies have organized fairly short internal courses led by their own employees and fo-cusing mostly on technical knowledge closely connected with the companies’ main activities. This kind of edu-cation 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 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 La-bour offices in Bulgaria started to accept demands for compensation from employees who started working part-time because of the economic crisis. The government pro-gramme 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, part-time 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 conse-quently. 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 aver-age 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 agree-


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ment 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.

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 em-phasis 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 transi-tion 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 stimu-late, 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


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from restructuring and focuses resources to the long-term unemployed and or to stim-ulate 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 down-size 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 possible6 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 al-ready closed 30 of its 68 locations, which cost 2000 jobs (Sprenger, 2014). There is a growing trend towards the establishment of other actors that provide tran-sition services, financed by employers and/or in collaboration with the public employ-ment 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 ser-vices 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 vari-ous two-year sector plans the Pact has stimulated. The many plans were developed by social partners and co-funded 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 transi-tions 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 mar-ket. 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 con-tained financial regulations and job-to-job incentives. Some general tools (like early retirement) seem to disap-pear. 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 unem-ployment 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).

6 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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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 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 pre-pared to deliver. By implementing a job transfer scheme, the employer may circumvent the restrictions of so-cial 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 so-called 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 ‘propel-ling’ 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 dis-missed 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 Naedenoen, 2014). This movement in Belgium is also supported by legal reforms.


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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 work-ers 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.7 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 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 un-til 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 sub-scribe 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 organiza-tion, the sectorial training Fund (if existing) and the regional PES (FOREM, Actiris, VDAB). In case of succes-sive 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: Naedenoen, 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 “personal-ised 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 28th July 2011, in force since 1st 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 suc-cessful 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 collec-tive, 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.

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 pro-fessionnelle”) 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.

7 The costs linked to these measures can be partially reimbursed by the public authorities.


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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 ac-tivity, 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.

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 Coun-cil 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 agree-ments.

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 occu-pational 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 founda-tions, 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 les-sons 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 redun-dancy 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 transi-tion 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 Ga-zier (2008) model: withdrawal of state intervention in collective redundancies and an


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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 na-tional cross-sectoral collective bargaining is a long-term process that has gained in-creasing attention in recent years, implying that social partners are increasingly in-volved 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 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 re-forms in the field of restructuring.

Example: French labour market reform One of the most important reforms results from the law of 14th June 2013. Following a request from the new socialist gov-ernment, 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 consul-

tation of employee representatives...)

• Intends to ensure a greater involvement of employees in the definition of companies’ strategies, through the introduc-tion 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 14th June 2013. This agreement was recently transposed through a law of 5th 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:

• 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 14th June 2013.

As for the management of restructuring processes and their consequences for workers, two other reforms are worth high-lighting:

• A reform of the unemployment insurance has been decided by social partners at national level. An agreement8 was found on 22th 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.

• Following an intense political debate linked to the closure of part of the ARCELORMITTAL unit in the east of France (Florange), a law of 29th 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.

Source: Teissier & Triomphe, (2014) French National Report.

8 This agreement will not come into force before the government validates it, as it is the rule in this field


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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.

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 in-creasing 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 em-ployment 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 relation-ship 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 com-parative framework.

Figure 6: Restructuring regimes for eleven Member States after the crisis

Wage and labour cost adjustment



Market

Negotiated

State

Source: Adapted from Gazier (2008)

Belgium

Bulgaria Czech

Republic

France

Germany

Netherlands

Portugal

Slovenia

Spain

Sweden

United Kingdom


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First of all, there seems to be a horizontal movement to the right in two steps. Mem-ber States primarily dominated by price adjustment are slowly introducing and adopt-ing 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, Bul-garia 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 the control function of the Labour authorities was abolished and there were no com-pensation for the income loss provided by the state.

Furthermore, Member States operating within the framework of a quantitative re-structuring 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, Ger-many and Sweden. In these Member States, while there have been relatively inten-sive 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, but in different direc-tions. 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 2008-2009. 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 transi-tion 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. Em-phasis is placed on the regulation of the employers’ initiation of collective redundan-cies, 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 Slo-venia 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 dismis-sals 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, inde-pendent of their size. There are, however, exceptions to be made for smaller enter-prises 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

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 identi-fied as one of the key gaps in the European Commissions’ fitness check of the Europe-an directive on information and consultation, including the directive on collective re-dundancies (Wauters, et.al., 2013; European Commission Staff working document, 2013).

0

10

20

30

40

50

60

Employees


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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 nation-al legislation on collective redundancies.9

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 employees10

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 dismis-sals 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 To fall within the scope of legislation, employers must plan to dismiss or make redun-dant between 10 and 30 employees within 90 days due to a negative economic situa-tion 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 en-tire workforce is affected.

SE There are no numerical lower bounds. All enterprises are covered. 11

UK 20 persons must be employed.


In several of the eleven Member States, the labour law is only applicable to the pri-vate 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 collec-tive 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 specifica-tion of prohibited grounds for dismissal. There are also specific categories of workers

9 Since June 2009, however, companies employing less than 20 workers may also be subject to this legislation, under certain circumstances. 10 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. 11 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.


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who are protected in cases of collective redundancies, for example workers’ represent-atives, pregnant women or workers on parental leave.

Table 2: Allowable reasons for collective redundancies

Countries Allowable reasons defined by law

BE 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.

BG 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 eco-nomic difficulties or technological changes”.

DE 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 redundan-cies, 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.

NL A redundancy is defined as dismissals due to reorganisation for economic reasons, a merger, take-over or liquidation.

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, tech-nological change, organisational drivers, or production or market reasons.12

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 intro-duction of new technology). The definition of the business reasons are the prerogative of the employer.

UK A redundancy is defined as a dismissal for a reason unrelated to the individual employee con-cerned 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.


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

12 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 previously also 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 employ-er needs to send a notification to the labour market authorities, but if they do not re-spond 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 alterna-tives 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 sup-porting 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 termi-nating employment contracts, termination by mutual agreement (“rupture conven-tionnelle”), which to some extent provides greater flexibility for employers when ter-minating contracts. In this new form the employer and the worker reach an agree-ment on the termination of the employment contract. This agreement has to be ap-proved by the Labour administration. Before 2008 such mutual or voluntary termina-tions 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 em-ployers, 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 proceedings13 if the employment contract is terminated unilaterally. Since the launch of this measure, termination by mutual agreement has enjoyed con-siderable 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 infor- 13 Meaning the time and costs it takes to go through the procedures before the courts and to cope with conflicts with employ-ees and /or unions


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mation, see Teissier & Triomphe, 2014). These procedures are used most frequently 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 agree-ment to leave.


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3.3 Redundancies and regulation Despite the regulation of the employers right to initiate redundancies, the ERM data-base shows that one of the main features of the financial economic crisis is the in-crease 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 redundan-cies 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

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

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

2005 2006 2007 2008 2009 2010 2011 2012 2013

Workers th

reaten

d by jo

b loss


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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 inter-esting 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 (2007-2013)

Rate of threatened of employed in 200714

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 threat-

14 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 employ-ment 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 re-dundancies, 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 im-pact 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 pro-cedures.

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 re-dundancy threats, which returned relatively quickly. While Sweden had its redun-dancy 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

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 oth-er ways than through collective redundancies. We also note that there is an increas-ing intensity of redundancy threats in Spain 2012 and 2013, possibly reflecting the impact of the austerity measures15.

Figure 10: Redundancy threats as share of labour force 2005-2013


15 It should be noted that Germany came from a situation in 2005 and 2006 where the share of redundancies had been rela-tively 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.

0

0,2

0,4

0,6

0,8

1

1,2

2005 2006 2007 2008 2009 2010 2011 2012 2013

Czech Republic Slovenia Sweden United Kingdom

0

0,2

0,4

0,6

0,8

1

1,2

2005 2006 2007 2008 2009 2010 2011 2012 2013

Bulgaria Germany Portugal Spain


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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 in-tensive as in the first group.

Figure 11: Redundancy threats as share of labour force 2005-2013


The restriction on the employers’ decision seems to have an impact on when the dis-missal takes place. In those countries with more extensive restrictions the announce-ments 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 ob-vious that there is such a straightforward relationship between the legislative provi-sions and dismissal outcomes.

In the Swedish national background paper from 2009 (Bergström, 2009) much at-tention was devoted to the impact of collective redundancies on the increase in collec-tive 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 re-strictions in labour law.

0

0,2

0,4

0,6

0,8

1

1,2

2005 2006 2007 2008 2009 2010 2011 2012 2013

Belgium France Netherlands


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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 re-dundancies 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 frame-works 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 redun-dancies, 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 simp-ly 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 conditions16, i.e. the working condi-tions 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, dismis-sal is the ultimate outcome of restructuring and also the most politically sensitive issue. Second, during the financial crisis the number of dismissed workers has in-creased 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 provid-ing 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 redundancy17. 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 amend-ments 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 restructur-ing, 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 condi- 16 We 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. 17 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 collec-tive 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 dismis-sal.”(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.


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tions for workers in the period after the notification of redundancy until the final ter-mination 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 re-employment 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.18 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 re-employment 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 displace-ment and that re-employment rates fell markedly across all countries during the re-cession. 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. Howev-er, we may ask questions about the reasons for the different re-employment rates in different member states.

18 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 em-ployed 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.

Source: Adapted from OECD (2013)

Despite the growth and availability of jobs in the labour market, there are many fac-tors 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 condi-tions 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 job-search 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 concen-trated 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 protec-tion legislation.

0

10

20

30

40

50

60

70

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Re-‐employed within one year (2000-‐2008) %

Re-‐employed within two years (2000-‐2008) %

Re-‐employed within one year (2009-‐2010) %

Portugal

UK

Germany

Sweden

France


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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 ena-ble 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 there-fore 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 coun-tries 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 regu-lating the transition conditions for dismissed workers, the regulation of the notifica-tion period, and the regulation of duties and obligations of both parties (employers and dismissed workers) during and after the notification period (for example economic


66

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 fol-lowing 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 re-dundant. There is great variation among Member States as to the length of the notifi-cation 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 Ger-many.

Figure 13: Min and max days before termination workers should be notified

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 work-er. More senior workers are eligible to longer notification periods, assuming that noti-fication 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.

0

50

100

150

200

250

Min

Max


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Table 4: Legal provisions for notification periods

Countries Notification period BE 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.

BG 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).

CZ Legislation requires that employers give prospective redundant employees one month notice. FR 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 no-tice; 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.

DE Affected employees have to be informed by at least one day after the announcement of collec-tive redundancies to the public authority.

NL 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 (inde-pendent of years of service).

PT Employers need to notify those employees who are to be made redundant at least 60 days beforehand.

SI Employers are required to notify employees between 30 and 120 days before the termination of contract (depending on length of service).

ES 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).

SE 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.

UK 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 assum-ing 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 pay-ments, 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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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.19 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 Severance Payments BE 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.

BG 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 previ-ous 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.

CZ 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.

FR Anyone who has worked for one year or more for the same employer on an open-ended 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.

DE The maximum payment stipulated by law is equal to 12 months’ salary. This is in-creased 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.

NL Once a dismissal is permitted, the judge operates with standard compensation amounts, depending the length of service and other factors

PT 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.

SI In the event of being made redundant, employees are entitled to a severance pay-ment of between one-fifth and one-third of the average wage of the last three months, depending on length of service.

ES 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.

SE No severance pay required UK 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 em-ployers to pay severance to workers on fixed term contracts.

19 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.


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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 ap-proved 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 fixed-term 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 subse-quent 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 wage20. 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 employee21, 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 20 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 be-cause of the decision of the employer. 21 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 account21, 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 Slovenia22

Minimum amount of sev-erance payment for each year of service

Years of service with the employer

Act 2002, 2007

Years of service with the employer

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 fixed-term 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 dur-ing the notification period until the last day when the contract is terminated. In sev-eral 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.

22 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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Table 7: Legal provisions for time off for job search

Countries Time off for job search BE 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 condi-tions 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.

BG No provisions for time off for job search exist. CZ The time off with refund of wages before the termination of employment due to reor-

ganisation 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 employ-er.

FR 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 compa-nies 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 remunera-tion 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.

DE On request of the employee, the employer has to agree to ‘adequate’ time off to search for a new employment.

NL No information available PT 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 compen-sation 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.

SE An employee who has received notice of termination is also entitled, during the peri-od of notice, to reasonable leave of absence from the employment with full employ-ment benefits in order to visit an employment agency or otherwise seek work.

UK 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 'reasona-ble'. An employer must pay up to 40% of each weeks pay to allow workers to look for work and/or training.

Source: EMCC legal database & MOLIERE national reports


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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 calcu-lated 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 remunera-tion 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 transi-tion 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 exam-ple, 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 em-ployment 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 employ-ment safeguard plan has thus a dual dimension. Firstly, it has to plan measures aim-ing 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, "simp-ly", 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 com-pensation 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 agree-ments, that specify the type of transition services dismissed workers are eligible to if their employer are covered by the agreement. These collective agreements also stipu-late 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.23 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. Af-ter 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 author-ities. 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. Never-theless, The Federal PES (Public Employment Service) explains on its web site that 23 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 select-ing 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 ex-tra-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 & Fox, 2014).

In Belgium, a new law was enforced already in 2006 requiring firms undergoing re-structuring to set up an outplacement program24 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 busi-ness with more than 20 employees25, which announces collective redundancies, has the obligation to set up a special transition unit through which the employer guaran-tees transition services to all its workers affected by the layoff. Thus, there is an ex-tension 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 pe-riod. The employer is obliged to pay what is called a “reclassification allowance” dur-ing 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 & Fox, 2014).

24 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. 25 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 must25 then offer outplacement measures to all the workers over 45 who have a mini-mum seniority of one year.


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A similar development has taken place in Germany and the Netherlands. Accord-ing to, Knuth, Mühge & Kirsch, (2014), social compensations plans in Germany have become increasingly innovative in the way that provisions for re-training and out-placement services have complemented severance payments. Individual voluntary redundancies (‘buying the worker out of the contract’) have been reframed as collec-tive 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 so-cial 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 in-stead 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. Occasion-ally, 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. Unfortu-nately, 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 domi-nated sectors like construction, hospitality and smaller industrial companies. At the bigger corporations social plans often include investments in internal mobility cen-tres. 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 prob-lems 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 re-port, the thresholds in labour law on collective redundancies, which imply that em-ployers 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 innova-tive scheme. Since 2008 there has been a scheme available where the State may pro-vide financial support to companies facing serious financial difficulties aiming at facil-itating 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 transi-tion 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. Ex-perience 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 termi-nation of the contract. But it is unclear what legal provisions are effective in this re-spect. 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 re-employment 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 availabil-ity 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 reputa-tion 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 en-sure 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. Sev-erance payments may make frequent termination of open-ended employment con-tracts 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 sit-uations) 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 sev-erance 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 cre-ate 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 tenden-cy 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 pre-viously 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 requir-ing 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 responsibil-ity may lead to lower costs through an outsourcing of these functions to external tran-sition 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 flex-icurity (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 cer-tainly 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 possibil-ity to start the transition process at an early stage, i.e. a kind of insourcing of the la-bour 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 termina-tion. 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 im-portant potential advantages of long notification periods and the provision of transi-tion 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 defini-tion associated with job insecurity and with negative consequences for the employees. However, dismissal does not necessarily mean that workers are deemed to long peri-ods 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 peri-ods 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 ma-jor 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 invest-ment, 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 possi-ble 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 frame-work for individual skills accounts is an exception, where the government offers indi-viduals 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 in-vest in non-firm specific training.

There are two additional features specific to dismissed workers that may be ex-pected 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 condi-tions that produce reduced employability combine to such potentially problematic ef-fect 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 respon-sibility should lie. A similar remark can be made when it comes to the employers’ re-sponsibility 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 selec-tion 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 in-come 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, im-plies a change in employment status or working conditions. We also developed a com-parative framework for identifying the different trajectories of change in the restruc-turing 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 redundan-cies 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 develop-ments 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 pro-pose 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 var-ies 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 dif-fer 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 re-structuring is managed and regulated in several Member States. Member States pri-marily 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 de-mand suddenly decreases. This movement is typical for Slovenia, Bulgaria and the Czech republic. However, these movements are made, with very limited public inter-vention 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 effi-ciency 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 work-ers were already available, the coverage of transition services has expanded. In sever-al member states there is an emerging network of transition units and mobility cen-tres with different forms of financial solutions, primarily set up as a result of collec-tive agreements, but also with financial support from public authorities. This move-ment 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 with-drawal of the state from the management of 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 in-cluding 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 mar-ket 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 inter-est 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 dis-tribution 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 ac-commodating structural change without significant effects for workers, labour mar-kets and the competitiveness of our economies. What can be done to develop a frame-work 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 em-ployment 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 oth-er. 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 redundan-cies between countries. There are thresholds that limit the application of the regula-tion. 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 small-er 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 Europe-an 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, in-cluding 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 diffi-cult and or costly for the employer to take such decisions. However, it is far from obvi-ous 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 em-ployment 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 dis-missed. 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 organization26. Blocking collective redundancies also incentivizes employers to employ more workers on fixed term contracts, which means workers less protection and support. Furthermore, such regulations deter employers from develop-ing measures and practices to support workers after dismissals have been executed. This may be devastating in case the preventive and postponing measures are unsuc-cessful 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.27 Instead the focus of regula-tion should be on the conditions that may have an impact on the dismissed workers’ chances to find a new job – the transition conditions.28

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,

26 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 regula-tion. 27 The exception is the prohibition of employers to dismiss particular groups of workers, e.g. trade union representatives or individuals with ill health. 28 For example, the conditions for dismissed workers (after the decision has been made) varies considerably. Dismissal peri-ods. (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).


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- Time off for job search

- 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 inter-ests 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 un-dermine 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.29 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 sev-eral 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 com-pany. 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 pro-ductive 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 collec-tive 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.

29 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 in-terests of the dismissed worker. Indeed, limitations on the employer’s decision to dis-miss workers in particular, may obviously limit the workers anticipation of coming job

transition needs30. It is the regulation of the conditions of employment after the noti-

fication of redundancy, – “the transition conditions” – that should be the focus of at-tention. 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 employ-ment 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 part-ners 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 treat-ed.

- Equal treatment of employers, large and small, and independent of location31.

30 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 pre-pare for the coming situation. 31 To avoid social dumping it should not be easier or more difficult for employers in one country to dismiss workers than in another.


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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 employ-ment/working conditions should be avoided in times of restructuring.

o Efforts should be made to explore the possibilities to regulate restructur-ing that implies externalization of the employers responsibility, i.e. dis-missal 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 objec-tive 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 redun-dancies 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 tran-sition 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 negotia-tions 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 employ-ment rates, especially for older workers, compared to the alternative, for example ear-ly 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 dis-cussed above. The removal of the barriers to initiate redundancies, limitations of cri-teria 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 em-ployers 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 publication is supported by the European Union Programme for Employment and Social Solidarity - PROGRESS (2007-2013). This programme is implemented by the European Commission. It was established to financially support the implementation of the objectives of the European Union in the employment, social affairs and equal opportunities area, and thereby contribute to the achievement of the Europe 2020 Strategy goals in these fields. The seven-year Programme targets all stakeholders who can help shape the development of appropriate and effective employment and social legislation and policies, across the EU-27, EFTA-EEA and EU candidate and pre-candidate countries. For more information see: http://ec.europa.eu/progress

The information contained in this publication does not necessarily reflect the position or opinion of 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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