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During 2005, collective agreements for one million government employees are being negotiated under pressure for better performance at a lower cost. The biggest cutbacks relate to staff costs: many civil servants leave on the basis of early retirement schemes. Early retirement schemes are likewise under scrutiny in collective bargaining in this sector of the economy. The police force and city cleaning services came out on strike largely because of this. In its role as an employer, the government finds itself facing an ageing workforce. Expectations are that the younger staff members needed will either not be there in the future or will not choose to work for government. Under heavy pressure, a collective agreement emerged for government employees, in which transition measures have been put in place concerning (early) retirement. Younger staff members can build up new rights in the form of life-course leave arrangements, and older employees can forfeit early retirement rights.
The collective agreements for 2005 and 2006 governing one million employees working for the national authorities and in education are being negotiated under pressure that government must perform better at a lower cost. In 2005, it appears that three-quarters of these cutbacks will be achieved on the basis of staff reductions. The cutback targets set in the 2002 coalition agreement were largely achieved on the basis of staff cuts in 2003 and 2004. As well as the agreed level of 1,975 full-time jobs, a further 2,540 full-time positions were also scrapped in order to reach the cutback targets. The VVD parliamentary group in the Lower House has asked cabinet if government intends to continue cutting back in this manner and, if so, what consequences this will have on government service levels. In his response, Minister of Finance Gerrit Zalm calculated that, if the current pace of cutbacks is maintained, there would be 19,149 fewer civil servants by 2007 (of which 10,000 at national government). This would generate cutbacks totalling more than EUR 1 billion. However, this is an unlikely scenario because there is a limit to the number of jobs the ministries can realistically scrap without compromising their work, according to government. The Christian Democratic Appeal (Christen Democratisch Appèl, CDA) and the liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) coalition parties, nonetheless, agree that fewer regulations - good for the business sector - require fewer civil servants.
Early retirement schemes
At the end of 2004, studies showed that many redundant civil servants left the payroll on the basis of early retirement schemes in place at the time. In 2003, some 15,000 civil servants and teachers retired early. This figure had risen to 20,000 by the end of September 2004. According to the Foundation for Economic Research (Stichting voor Economisch Onderzoek, SEO), this number mainly related to government officials. Through the reorganisation (cutbacks), older civil servants (in the defence forces, for example) received an additional benefit over and above their pension scheme, making retiring earlier more enticing. The survey shows that, if working longer is not rewarded, employees tend to stop earlier. Uncertainties relating to the future form of early retirement schemes are also driving employees to play it safe and take advantage of existing schemes when they can. This is exactly the reverse of what cabinet hopes to achieve in general, but does have the effect of self-imposed cutbacks.
On the basis of a European comparison, the SEO concludes that, in countries where employees set aside a fixed share of their earnings to pay for their pensions at a later date, people continue working for longer than employees in countries where pension incomes are set in advance. The SEO recommends giving financial incentives: employees who continue working for longer should receive a higher pension than their colleagues who stop earlier.
By June 2005, a collective agreement had not yet been completed for the police force. Large protest demonstrations launched by police officers made it clear that they would not accept a further postponement of the collective bargaining rounds until the autumn. In addition to early retirement, the discussions included medical expense arrangements and risk arrangements. Before resuming negotiations, the Minister of Internal Affairs first wanted to calculate how much financial leeway there is for early retirement schemes in the ABP pension fund. However, the police forfeited a salary increase in 2004 and were expecting the same to happen in 2005. The minister asserts that everyone must continue working for longer, and the police force is no exception. The city cleaning services in the capital came out on strike for a week in August 2005 in order to force the Association of Dutch Municipalities (Vereniging van Nederlandse Gemeenten) to resume collective bargaining following postponement. At the beginning of September, negotiations were reopened.
The central collective agreement for civil servants was concluded at the end of August 2005. This relates to the terms and conditions of employment governing around one million employees working for the state and in the education sector. A number of significant agreements have been reached concerning early retirement. Early retirement for civil servants has now been pushed back to a slightly later point - on reaching the age of 62 years and three months. If they continue working after the age of 65, they receive a higher pension. In 2005, civil servants contributed 7.8% of their earnings towards the early retirement scheme. Under the terms of the new agreement, this premium will drop to 6.5% in 2006. This will create a 1.3% salary leeway; 0.8% will go towards life-course leave arrangements and 0.5% will go towards a salary increase. The agreement also establishes that future pension capital will be covered: employees themselves will be saving for their pension. The current apportionment system means that, based on their premiums, the employees of today pay for the pensions of the current (early) retirement candidates. Based on this division, the discussion about the interests of older employees versus those of younger employees could be brought into better balance, the premiums for early retirement could be lowered, and a premium for life-course leave arrangements, from which the younger employees in particular stand to benefit, could be introduced. While the agreement has yet to be put before the membership base for approval, it will certainly serve as an example for sub-sectors in the other service sectors.
Commentary
For the government as an employer, this agreement is interesting in a number of respects. First, premiums will go down, thus creating more leeway for the primary condition of employment, the salary. It is also significant that the agreement effectively creates two bridges: from group early retirement schemes to individual arrangements based on choice, such as the life-course leave arrangement. At the same time, this bridges the gap to the younger generations, who could make use of this in the future. Older employees have not been able to save enough to take a substantial leave period or enter early retirement. More attractive employment conditions for the younger generations are very important for government. The currently ageing ranks of the civil service are forcing government to address the issue of (recruiting) future staff. Some 25% of the less well-educated population and close to 45% of the well-educated population find employment within government. According to the SEO, government could derive a degree of security from the fact that the survey showed that at least one third of the current workforce would be prepared to work longer weekly hours (for the same hourly rate). However, the pressing question of whether government will be able to compete with the private sector in the mid to long-term still remains, with the government awaiting answers through various studies it has commissioned (NL0104129F; NL0309103F). (Marianne Grünell, HIS)