Thematic feature - redundancies and redundancy costs

This article examines the procedures and costs involved in collective redundancies in the Netherlands, as well as current trends and debate in this area, as at November 2003.

In November 2003, the EIRO national centres in each EU Member State (plus Norway), were asked, in response to a questionnaire, to give a brief overview of: the procedures and costs involved in collective redundancies - ie the dismissal of a number of employees for economic/organisational reasons (rather than reasons related to the individuals concerned); the levels of, and reasons for, redundancies over recent years; and current debate on the issue. The Dutch responses are set out below (along with the questions asked).

Redundancy procedures

Please outline briefly the statutory procedures involved in making 'collective redundancies' (please indicate how these are defined) in your country, in terms of: information and consultation of employee representatives/trade unions; notification of (or obtaining permission from) public authorities; notice periods to be given to the redundant employees; rules on the order of priority for redundancy or giving special protection to particular groups of employees; and obligations to mitigate the planned redundancies or provide assistance in the form of redeployment, training, outplacement etc (including provisions on 'social plans'). Where collective agreements add to or improve on these statutory provisions, please provide a brief overview of such additional procedures (with examples).

In the Netherlands a proposal to dismiss employees is considered a collective redundancy if an employer, usually as a consequence of cutbacks or reorganisation, intends to dismiss at least 20 employees working within one of the country's six regions within a period of three months. According to the Notification of Redundancy Act 1976, implementing the EU Directive on collective redundancies, the employer is required to send notification of its intention to the regional Centre for Work and Income (Centrum voor Werk en Inkomen) - a public administrative body - as well as to the relevant trade unions. The notification should contain the reasons for the redundancies, the number of employees involved and the criteria for their selection as well as the way of calculation of redundancy payments. According to the Works Councils Act, the employer is also required to consult the works council (NL0309102T).

Before processing the employer’s applications for permission to terminate employment, required by the Extraordinary Decree on Labour Relations of 1945 (Buitengewoon Besluit Arbeidsverhoudingen), the Centre for Work and Income then allows one month to elapse, unless relevant trade unions declare that they have already been consulted. During this month, the possibilities of reducing the imminent job losses by labour market policy measures may be explored. Besides notification, the employer is also required to consult with relevant trade unions on a possible reduction of the number of redundancies and on the consequences for individual employees, including measures directed at reintegration, outplacement or retraining.

The order of priority for redundancy is, within each category of 'interchangeable functions', basically determined by the seniority rule ('last in, first out'). At the request of an employer wishing to preserve a balanced age structure, however, priority may be determined within each of five age categories (the principle of 'mirroring' the age structure). The particular expertise or capacities of an employee can be argued by the employer as a reason to make an exception to the regular order. On the other hand, the Centre for Work and Income may refuse permission to terminate employment of an employee whose chances on the labour market are poor if those of the next one in line for redundancy are far better.

It should be noted that, besides the 'permission' procedure, employers may use a second way of terminating employment (NL0012116F), use of which generally almost equals that of the permission procedure: they may request the district court judge to dissolve the employment contract. Due to the level of compensation attached to dissolution of the contract, for the employer this is usually a safe but more expensive way of termination.

Notice periods and protection against dismissal in special cases (during incapacity, pregnancy and maternity, and on grounds of works council or union membership etc) are not different from the ordinary law on termination of employment.

Collective agreements do add to some extent to the statutory provisions. Some of them do so procedurally, obliging employers to consult with the unions on a 'social plan'; others do so substantially, laying down employers’ duties to provide for outplacement or retraining facilities.

Redundancy payments

Please outline the statutory rules on compensation for employees affected by collective redundancies, in the form of minimum notice periods, redundancy pay, severance pay etc - ie what is the level of payment, how does it vary with age, service etc. Where collective agreements add to or improve on these statutory provisions, please provide a brief overview of such additional payments (with examples). Overall, please provide any figures or estimates which may be available on the 'average' or 'typical' level of redundancy pay per employee. Where company practice and/or collective agreements provide for accompanying measures (ie set up an recruitment agency, retraining schemes with employer’s contribution, etc) please give an overview of such schemes.

In unilateral termination of the contract of employment (including in cases of collective redundancy) the employer has to observe a term of notice which depends upon the duration of the employment relationship. The statutory rule is that: if the employment has lasted less than five years, the notice period is one month; for employment of five to 10 years, the notice is two months; for employment of 10 to 15 years, the notice is three months; and for employment of 15 years and more, the notice is four months. These terms may be extended by collective agreement..

Apart from the Unemployment Benefits Act (Werkloosheidswet) regulating benefits for the general case of involuntary loss of a job, there are no statutory rules in the Netherlands on redundancy payments. In the 1960s, a practice of ad hoc social plans and increasingly also of collective agreements on this issue developed without any government interference except for the procedural rules mentioned above. By the end of the 1960s, redundancy payments had already become customary (agreed in 80% of redundancies involving at least 100 workers). Collective agreements tended to contain only procedural provisions in this area; in the 1980s, only one out of five industry-level agreements regulated directly the payment of supplementary benefits in the event of redundancy. Since the start of the 1990s, 'generic' social plans, sometimes but not necessarily as part of a collective agreement, have regulated the consequences of redundancy in large companies and in some branches of industry. These plans' rules provide for redeployment, for protracted granting of benefits on top of unemployment benefits or of lower wages earned in a new job, and for one-off allowances for those who are prepared to leave their job voluntarily. In 1999, one out of 10 collective agreements contained provisions on the use of posting of workers or 'labour pools' in the event of redundancy.

Indirectly, however, regulations on 'apparently unreasonable dismissal' (kennelijk onredelijk ontslag) in the Civil Code (Burgerlijk Wetboek) provides a significant check on these social plans. In the framework of cases based on these regulations, district court judges have to decide whether the financial compensation offered by the plans is adequate in relation to the relevant circumstances of the dismissal. The same applies when these judges agree to requests to dissolve the employment contract (on the basis of Article 7:681 Civil Code - see above) and have to fix a level of compensation payments. Both practices have repercussions for the content of social plans.

Although in the Netherlands the number of redundancies during recent years has not been very high (see next section), there is some data on the level of payments. In a sample of 14 redundancy cases in 1997 and 1998, supplementary benefits were provided for in seven cases and one-off allowances in five cases. The direct cumulative costs of supplementary benefits for employers lay between three and five months' pay, while the costs of one-off allowances ranged between two and 27 months' pay. The compensation awarded by district court judges agreeing to dissolution requests can be considerably higher and may be as high as 51 months' pay. This is due to a 'weighted' consideration of the effect of the duration of the employment relationship, laid down in a recommendation drawn up by district court judges among themselves: compensation should consist of one month's pay for every year of service preceding an employee’s 40th birthday, one and a half months' pay for every year between the 40th and 50th birthday, and two months' pay for every year after the 50th birthday.

Redundancy levels

Where this is possible, please give statistics on the number of collective redundancies effected in your country each year from 1990 to 2003 (or the latest year for which data are available). If available, please break down by sector, and the jobs, age and gender of the workers affected. Also, please provide any information on the grounds for collective redundancies - eg company restructuring, closure or transfer/relocation. In response to this question, please give an assessment of trends and developments, even where full statistical information is not available.

Generally, the number of redundancies in the Netherlands declined during the 1990s until 1998 and has been rising since. The number of notifications of redundancies rose from about 120 in 2001 to 225 in 2002. Table 1 below summarises the numbers of employees involved in collective redundancies. It should be noted that redundancies may also involve (but usually only in about 5% of cases) requests for dissolution to the district court judge (see above).

Source: Ministerie van Sociale Zaken en Werkgelegenheid, Dir Ramingen & Analyse.

* The numbers of requests do not exactly match the actual number of employees involved, but do so sufficiently (as requests related to more than one person are rare).

Table 2 contains a breakdown of the number of employees for whom requests for permission to terminate employment on grounds of redundancy have been filed, by age group and gender:

Source: Ministerie van Sociale Zaken en Werkgelegenheid, Dir Ramingen & Analyse.

Finally, table 3 below summarises the distribution of the employees for whom requests for permission to terminate employment on grounds of redundancy has been granted, by branch of economic activity.

Source: Ministerie van Sociale Zaken en Werkgelegenheid, Dir Ramingen & Analyse.

Debate

Please summarise any current debate on the issue of collective redundancies in your country. For example, is this an important topic for trade unions and employers’ organisations and in collective bargaining? Has there been any recent new legislation or proposed legislation on the subject, or the prospect of new legislation - eg to implement EU legislation such as Directive 2002/14/EC on national information and consultation rules (EU0204207F), which requires 'information and consultation on the situation, structure and probable development of employment within the undertaking or establishment and on any anticipatory measures envisaged, in particular where there is a threat to employment'? Has there been any debate on the cost met by the government as a consequence of collective redundancies (ie what is the cost associated with unemployment benefits, training schemes funded by the government etc).

Although the number of collective redundancies has been rising during the last four years, there is no current debate on them. There is, however, still a debate on the Dutch law on termination of employment in general, in which the administrative permission procedure is still under fire (NL0308104F). Another point of debate is the level of compensation for termination fixed by the district court judges’ recommendations, which is considered in some quarters to be too high, in particular in times of a relatively tight labour market. (Robert Knegt, HSI)