Dell to transfer 1,900 jobs to Poland

The transfer of 1,900 manufacturing jobs from the Dell computer plant in the midwestern city of Limerick in Ireland, to an alternative manufacturing site in Poland, came as a shock to an Irish economy already suffering its third quarter of recession. At least another 1,500 jobs are likely to be lost in suppliers to Dell and in local services. The European Commission has contacted the Irish government about applying to the European Globalisation Adjustment Fund.

A statement was issued by the computer giant Dell in January 2009, explaining that the ‘migration’ of production from the midwestern city of Limerick in Ireland to Łódź in central Poland was part of a US$3 billion (€2.33 billion as at 16 February 2009) cost-reduction initiative already announced in 2008. The transfer of 1,900 manufacturing jobs to the alternative site in Poland forms part of a series of steps being taken by the company to ‘simplify operations, improve productivity, reduce costs and deliver even higher levels of customer satisfaction’ (see also the European Restructuring Monitor ([ERM](/search/node/emcc OR erm OR ?oldIndex)) [fact sheet](/search/node/emcc OR erm OR ?oldIndexstatic/factsheet_12388.htm) on the announcement).

The remaining Dell employees in Limerick – who number over 1,000 workers – are to continue coordinating manufacturing, logistics and supply chain activities across a range of functions, including product development, engineering, procurement and logistics. The existing sales, marketing and support base in the south suburb of Cherrywood in the capital city of Dublin is also unaffected by this announcement. Dell is a non-union company.

Major regional impact

Several major companies in the Limerick area are engaged in a substantial amount of contract work for Dell and these are likely to be adversely affected, unless they can source significant alternative work from elsewhere. In all, another 1,500 workers may lose their jobs as a direct result of the Dell transfer. This is before any other job losses in local services, arising from reduced consumer spending in the area.

Limerick city has a population of some 52,000 people, although many Dell workers came from throughout the midwest region. It is estimated that as many as 500 of the redundant workers come from Poland, and some of these may be interested in returning to their native country to work in the new manufacturing operation there.

Workers are to be let go on a phased basis over the next 12 months, with the first significant numbers to leave in April 2009. Those workers who choose to leave before their scheduled departure time may not qualify for the redundancy payments.

Terms of redundancy

The redundancy terms for the Dell workers are based on a calculation of six weeks of pay per year of service, inclusive of the state’s statutory redundancy payment, with a maximum payment of 52 weeks. The package does not include shift allowances or overtime. A 7% payment of a twice-yearly incentive cash plan will also be paid. Furthermore, health and life assurance are to be paid for a period of six months. In addition, the company will provide career outplacement services.

Dell states that the terms are in line with severance packages offered in its other recent redundancy programmes. The company let go 60 white-collar staff in 2005 and 100 administrative staff in 2007 on the same terms ([ERM fact sheet](/search/node/emcc OR erm OR ?oldIndexstatic/factsheet_9610.htm)).

EU globalisation fund

The scale of the job losses may bring it within the scope of the European Globalisation Adjustment Fund (EGF), which has operated since the start of 2007 and makes up to €500 million available each year for situations where globalisation results in significant job losses (EU0708039I). It has helped about 15,000 workers over the past two years and the rules were recently changed to make it easier to qualify (EU0901019I).

The Dell closure is well above the threshold required, which has recently been reduced from 1,000 to 500 workers and allows job losses in suppliers to be included. The overall situation of the labour market has also clearly worsened, which would help the case for an application. So far, the Irish economy has reported its third successive quarter of recession.

Thus, the European Commission has been in contact with the Irish Department of Enterprise, Trade and Employment (An Roinn Fiontar, Trádála agus Fostaíochta) to assist it in putting together a proposal which could yield up to €35 million in funds. Such funds would require co-financing from the Irish government and would go towards job-search and career assistance, training and promoting entrepreneurship. Under the original fund, the contribution required from the national government would have been 50%, but this proportion has been lowered to 25% in the recent changes.

Transfer of jobs within Europe may not be eligible

One of the main issues with an application to the EGF would be to show that the job losses are linked to changes in global trade patterns. While Dell is moving jobs to a lower-cost country, the dilemma for the European Commission is that, in this case, the low-cost country in question – Poland – is another EU Member State. The EGF was intended to assist EU Member States that lose jobs to the wider world, whereas funding a ‘jobs migration’ to another Member State may be a more delicate matter, as it could set a precedent for use of the funds.

Nevertheless, as part of the recent changes, the European Commission has stated that, for a temporary period, it is willing to financially support employees made unemployed as a result of the current economic crisis, rather than restricting the eligibility of the EGF to workers made redundant through the negative consequences of global trade developments. It is hoped that the present situation may meet the terms of the fund.

Brian Sheehan, IRN Publishing