Since the spring of 2006, employers are obliged to use the ‘proportion’ or age balance principle when making employees redundant as a result of restructuring. It now appears that this principle affects older employees more than other age groups. The Social and Economic Council’s advice concerning new legislation for dismissals has been postponed until the autumn, as the social partners cannot reach agreement on the revised legislation. Employers are in favour of more flexible legislation, while the majority of employee representatives prefer the current regulations.
Since 1 April 2006, the ‘last in, first out’ principle has been abandoned. As a result, in a restructuring situation, the last employee hired is no longer necessarily the first one to be dismissed. Instead, employers now have to apply the ‘proportion’ or age balance principle when making employees redundant during a phase of restructuring. Redundancies have to be proportionally distributed over five defined age categories. Within the age groups, however, the ‘last in, first out’ principle still applies (NL0604029I, NL0406101N).
Effect on older workers
It was predicted that the proportion principle would lead to more redundancies among older employees, compared with the previous system, which mainly targeted younger workers who were in the company for a shorter period. To date, this has proved to be the case. However, the older age group – according to government policy – is supposed to work longer than previously. Moreover, transitional measures to cover the period until their pensionable retirement age at 65 years have been abolished. Early retirement and pre-pension measures have been made financially unattractive to older employees and the supplementary unemployment benefit has also been scrapped. It is expected that, by 1 October 2006, the duration of unemployment benefit will be further cut back to three years; previously, it extended for up to five years. This measure has adverse consequences for unemployed people who have a long employment history, specifically older employees.
Need for transitional measures before retirement
Labour market legal experts now state that employers still need transitional measures with respect to older employees. These experts emphasise that employers are already anticipating the imminent curtailment of unemployment benefits, and are seeking to organise a strategy before the new measures take effect. The General Industrial Employers’ Association (Algemene Werkgevers Vereniging Nederland, AWVN) acknowledges that, at present, the organisation receives many questions from member employers on the forthcoming measures concerning unemployment benefits and on the more rigorous state monitoring of extra bonuses to employees.
The Allied Industry, Food, Services and Transport Union (FNV Bondgenoten) affiliated to the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) declares that the union will not cooperate in the stepping up of transition procedures. On the other hand, Chair of the General Independent Union (De Unie), Jacques Teuwen, surmises that employers do not want to be burdened with the extra costs of supplementing unemployment benefits. He calls for a more creative approach to dismissal measures and procedures. Mr Teuwen is also in favour of additional options for redundant employees within social plans, a so-called ‘à la carte social plan’, and does not believe that it is feasible to cling to existing arrangements.
Mixed opinions delay new agreement
Against this background of successive rapid changes, it is apparent that the social partners in the Social and Economic Council (Sociaal Economische Raad, SER) have not reached agreement on new dismissal legislation. The council’s advice to the government, which should have been delivered in the spring of 2006, has been postponed to the autumn.
The employer organisations the Confederation of Netherlands Industry and Employers (Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW) and MKB-Nederland are in favour of a more flexible and cheaper dismissal system. They believe that employers are reluctant to take on new staff, due to the current dismissal protection legislation.
However, the unions consider that the legislation on flexibility and security offers employers sufficient opportunities to hire employees on fixed-term contracts. The unions are of the opinion that the current dismissal protection system should not be interfered with.
Thus, SER’s advice has been delayed because a divided message would give politicians the freedom to interpret it in their own way. Employer organisations and union federations now hope that their concerns will feature in the political parties’ election programmes. In addition, it is anticipated that more scope for initiatives will be created by new calculations from the Central Planning Office (Centraal Planbureau, CPB). These calculations form the financial basis of the plans to be presented in SER’s recommendations to government. Lastly, if the economy further improves, this may help to close the gap between the social partners.
Marianne Grünell, Hugo Sinzheimer Institute (HSI)