Committee recommends 'adjustment agreements' for entire labour market

White-collar workers in the Swedish private sector and central government sector are covered by collective 'adjustment agreements', providing them with support and benefits in the event of redundancy. In July 2002, a government-appointed committee presented a report on adjustment agreements, recommending that similar accords should be established across the whole labour market, as they bring advantages for all parties.

For nearly 30 years, a large part of the Swedish labour market has been covered by so-called 'adjustment agreements' (omställningsavtal). These are collective agreements providing a form of insurance seeking to facilitate the adjustment process for employees who have been given notice of redundancy, helping them to find new jobs and giving them support and benefits in the time 'between jobs'. About 1 million white-collar employees in the private sector (SE9712158N) and the central government sector are entitled to this kind of support when their employers have given them notice of redundancy. However, there are no such collective agreements for blue-collar workers in the private sector, or the great majority of employees of municipalities and city councils.

In August 2000, the Minister for Industry, Employment and Communications, Björn Rosengren, commissioned a committee to conduct a survey analysing the existing adjustment agreements and job security agreements (see below) and the effects they have had for individual workers and certain employee groups, and from a socio-economic perspective. The aim of the committee was to consider if it would be possible for the whole labour market to be covered by similar collective agreements and, in close cooperation with the social partners, to find new forms that such agreements could take. According to the terms of reference for the survey, a crucial starting point for the committee's work was that employers should take responsibility for the 'adjustment' of employees in the event of restructuring of companies' activities, and should have sufficient resources to do so. The social partners should meet both the responsibilities and the costs of adjustment agreements.

Adjustment and job security agreements

Adjustment agreements - including both job security agreements (trygghetsavtal) and adjustment agreements proper (the two are similar) - currently cover white-collar workers in the private sector and in the central governmental sector.

Private sector agreement

The employees covered by the private sector adjustment agreement are members of trade unions affiliated to the Swedish Confederation of Salaried Employees in Industry and Services (Tjänstemännens Centralorganisation, TCO) and the Swedish Confederation of Professional Associations (Svenska Akademikers Centralorganisation, SACO), represented in bargaining by the cartel, the Federation of Salaried Employees in Industry and Services (Privattjänstemannakartellen, PTK). The employer party to the agreement is the Confederation of Swedish Enterprise (Svenskt Näringsliv).

An 'agreement on transition' (Omställningsavtalet) originally signed in 1974 by PTK and the Confederation of Swedish Enterprise's predecessor, the Swedish Employers' Confederation (Svenska Arbetsgivareföreningen, SAF), established the Council for Redundancy Support and Advice (TRR Trygghetsrådet) (SE9709137F). Some 32,000 companies with 650,000 employees are now covered by this agreement, about 60% of all white-collar workers. In the event of workforce reductions and restructuring, the employees affected are guaranteed support including a personal advisor, tailored training, financial support for skill-development programmes, and additional income support for older redundant employees, if they face a period of unemployment. This redundancy pay (avgångsersättning, AGE) is payable if the person concerned is at least 40 years old and has been continuously employed for five years by the same employer. The TRR recruitment service helps employees to find suitable job vacancies. The measures based on the agreement are financed by employers through a contribution currently set at 0.3% of paybill.

Central government sector

A Job Security Foundation (Trygghetsstiftelsen) and Job Security System for Governmental Employees was established in 1990 in order to help the rising number of redundant employees in the central government sector to find a new job. The 'job security agreement for government employees' (Trygghetsavtalet), concluded by the social partners in the state sector, entered into force at the same time. Employers' contributions finance the agreement. As in the private sector, the Foundation provides various forms of support (training for new tasks etc) at both company level and individual level. The individual rights under the agreement include:

• an extended period of notice of redundancy, with the period of notice fixed by law or collective agreement doubled. This aims to give workers affected a better chance to find a new job;

• paid leave for those who are taking part in activities organised by the Foundation;

• income supplements for workers who find a new job with a lower salary. This supplement provides full compensation for two years and 50% compensation for the following two years;

• supplementary unemployment benefit for unemployed workers whose general unemployment benefit does not amount to 80% of their previous pay; and

• early retirement and pensions for workers who have reached the age of 60 on termination of their employment, if they do not wish to seek a new job

Other agreements

Alongside the abovementioned adjustment agreements, there is a handful of rather similar collective agreements for white-collar workers regulating adjustment conditions in specific sectors, such as buildings maintenance, social insurance offices and the finance sector. Furthermore, enterprises owned by municipalities and unions representing both white- and blue-collar workers concluded an adjustment agreement (KFS trygghetsavtal) in 1994. This agreement prioritises support for older workers.

Committee report

On 3 July 2002, the government-appointed committee presented its report on adjustment agreements ('Omställningsavtal - ett aktivare stöd till uppsagda', SOU 2002:59). The committee's analysis found that adjustment agreements generally have positive effects on individual workers. Those who are given notice of redundancy rapidly receive individual support from the Job Security Foundation or TRR, or the smaller similar bodies in specific sectors, and largely succeed in finding employment or starting their own business. A relatively large proportion of workers proceed to further education. Most of the former employees receive the same or higher pay in their new jobs. The risk of unemployment is reduced, as is the duration of unemployment, when this occurs.

The Swedish Agency for Public Management (Statskontoret) conducted a socio-economic analysis for the committee that indicates that adjustment agreements have a positive effect for society, especially by helping the labour market to transform. Furthermore, the financial effects for the state are positive, in particular because the costs of unemployment insurance and labour market measures decrease where adjustment agreements are used.

According to the committee, in redundancy situations, for companies and public authorities the issues relating to the order of priority to be observed in redundancies (turordningsfrågor) are important - ie which workers are to be given notice and which are not, and the order of issuing the notices - and employers are also concerned that the procedure should be fast. The committee finds that the current 'last in, first out' rules on order of priority in the Act on Employment Protection (Anställningsskyddslagen) create an appropriate balance of power between the parties (SE0011165N).

The committee also found that adjustment agreements are very positive for small companies, as the agreements give them access to resources and skills.

Municipalities and city councils currently have no adjustment agreements. The committee presents an outline of a special model for this sector, whereby for example a traditional adjustment agreement on 'transition' out of an organisation could be combined with incentives for internal redeployment within a municipality or city council.

The adjustment agreements should be seen as complementing and assisting governmental labour market policy and its measures, the committee concludes. Therefore, a well functioning cooperation between the job security organisations based on the agreements and public job centres should be established. Overall, the committee recommends that similar adjustment agreements should be established across the entire labour market, as they bring advantages for all parties.

Commentary

About 1 million white-collar employees in the private sector and the central government sector are currently covered by adjustment agreements, while private sector blue-collar workers and almost all employees in the municipal and city council sector have no such agreements.

At the beginning of 2002, the Confederation of Swedish Enterprise and the blue-collar Swedish Trade Union Confederation (Landsorganisationen, LO) started negotiations over an adjustment agreement. The parties had not previously done so because LO argued that ordinary labour market measures and legislation were sufficient for blue-collar workers. However, LO has now changed its mind. In the talks, the Confederation of Swedish Enterprise is seeking to to establish the idea of establishing an 'inclusion' insurance (inslussningsförsäkring) scheme, combined with individual 'adjustment accounts' for workers. The main objective of the insurance scheme would be to help workers with special difficulties in finding a new job, such as those over 55 years of age. The negotiations are currently paused but will restart in September 2002.

The Confederation of Swedish Enterprise wishes to focus a new adjustment agreement on individuals' possibilities of finding a new job, and to prevent redundant blue-collar workers retiring early, remaining on sick leave or entering 'hidden' unemployment in various labour market schemes. The employers' organisation believes that there is too much risk that adjustment agreements may clash with or duplicate labour market policies - a risk that the committee downplays, stating that adjustment agreements should only be complementary to other measures. However, a major advantage in the use of adjustment agreements is that assistance for redundant workers can be delivered rapidly.

The employers in the municipalities and city councils have hitherto shown little interest in concluding adjustment agreements. The main reason is that these employers continually need to recruit more staff and have difficulties in retaining workers until they retire. The employers, especially the Swedish Association of Local Authorities (Kommunförbundet), also fear future labour shortages combined with rising demand for services in the healthcare sector and in the schools. Local public employers would rather retain workers as long as possible than make them redundant. However, the model for this sector outlined by the committee may provide an alternative way of reaching an adjustment agreement. (Annika Berg, Arbetslivsinstitutet)