The Flexibility and Security Act, The Netherlands: Executive Summary

Transcription

1 The Flexibility and Security Act, The Netherlands: Executive Summary Introduction The Flexibility and Security Act entered into force on 1 st January It is the result of a long series of efforts to reduce unemployment by introducing more flexibility into Dutch labour law. During the 1980s the Netherlands suffered high unemployment and a stagnation in economic growth. During the 1990s however there was an upswing in the Dutch economy and the unemployment rate sank to a current rate of 3.4%. This change can be attributed to a combination of factors including the reduction of taxes, moderate wage demands, the high number of disability benefits which may mask unemployment and a growing rate of part-time work. It is thought that the Flexibility and Security Act also had a part to play in the positive developments. It is important to note that part-time work is highly accepted in the Netherlands. Most part-time workers have a permanent position. The term of part-time work only refers to the working hours in relation to the standard working hours within the company. 1. Background and policy considerations The Netherlands have a strong tradition of co-operation between the government, employers associations and labour unions dating back to the post-war period of reconstruction. One result of this co-operation was the Foundation of Labour set up by the national employers associations and trade unions to negotiate e.g. wages. Although wage negotiations no longer take place at national level, a form of national consultation, co-ordination and implementation still exists today. To describe this form of co-operation between employers and employees associations, trade unions and the government the term polder model was coined. The idea is to find compromises in the fight against unemployment and in dealing with the new demands resulting from the change in industries in the interest of both the employers and the employees. The term polder comes from the lasting Dutch struggle between water and land. The Netherlands also have a longstanding system of protection against dismissals whereby employers cannot dismiss workers without the previous permission of the Regional Director of the Public Employment Service unless the employment contract is dissolved in court (Article 7:685 Civil Code). The system is supported by the unions and small companies (who see it as a form of protection against being sued by former employees) but criticised by large companies. 1 1

2 In 1982, the leaders of the most important national trade union, FNV, and the most important employers association, VNO, signed the Wassenaar Agreement. The Agreement put an end to the system of automatic compensation for inflation in wages and introduced the flexible reduction of working time as a measure against unemployment. The Wassenaar Agreement has had an impact on the Dutch labour market in three major ways: 1. The reduction of working hours was achieved across the board to a national average of 38 hours per week but in many different forms (e.g. more free days, regular afternoons off etc.); 2. The government started to promote part-time work with particular emphasis on women s employment; 3. Employers began to promote the external flexibility of their workforce through the introduction of more fixed-term contracts and by taking on more temporary workers from temporary work agencies. This move was at first rather unpopular with the trade unions but experience showed that unemployed people often found jobs more easily through the temporary employment agencies than through the public employment service and that temporary workers were often taken on on a permanent basis by the company once their temporary contract had run out. On-call contracts also became more popular. The result of these developments is that in 1998 only 56% of the workforce in the Netherlands had a full-time job, 37% worked part-time (of whom 75% were women), 13% had a fixed-term contract 1. In 1996, the Foundation of Labour produced a report on flexibility and security. The report was a sort of package deal 2 in which both the demands of the unions for the protection of the workers and the demands of the employers for more flexibility were integrated. Legislation concerning dismissals and employment contracts was changed on the basis of the report leading to the introduction of the Flexibility and Security Act on 1 st January In addition to the background of the Act, it is of relevance to mention the general economic situation at the time of the introduction of the new legislation since this has an effect on implementation, acceptance and effects. According to the Ministry of Social Affairs and Employment, three elements illustrate the current situation: positive dynamics, promising prospects while carrying out the policy agenda and also the occurrence of flexibility in different forms. The Dutch labour market has been very buoyant over the last few years with a net employment growth of 3% from 1997 to 1999 and a forecast growth of 2% in 2000 and There are a large number of new vacancies (which often have to be filled by imported labour) and high levels of rotation between jobs. However, despite the positive overall picture, there is also a hard core of unemployment which the policies also try to address with apparent positive results. In conclusion, it can be said that the Dutch labour market benefits from a tradition of co-operation and consensus among the social partners and the government which increases the acceptance of new policies. The current buoyancy of the economy also facilitates the positive integration of the Flexibility and Security Act. 1 Quoted by Gustav J.J. Heerma van Voss, University of Leiden, The Netherlands, from W. van Eeckhoute, Aspekten van Flexibilisering, in: F.J.L. Pennings (red.), Flexibilisering van het sociaal recht in Belgi? en Nederland, Deventer, Kluwer 1998, p. 1-7, 6. 2 Gustav Heerma van Voss, The Flexibility and Security Act, The Netherlands. Presentation and Assessment of the Policy as Basis for Review by Peer Countries. 2 2

3 2. The Dutch Flexibility and Security Act The new labour legislation consists of two statutes: a) The Act on Allocation of Workers by Intermediaries of 1 st July 1998 b) The Act on Flexibility and Security of 1 st January 1999 The first act is an independent statute. The latter is a modification of a series of acts. The most important changes are those to the Civil Code. The Flexibility and Security Act includes such measures as the shortening of periods of notice, easier access to unemployment benefits in the case of dismissal on economic grounds, a procedure of no objection if the employee accepts his or her dismissal and claims unemployment benefit. In the case of the dismissal of sick workers, the ban is lifted if the sickness is declared after the dismissal request was received by the Regional Director of Public Employment Service. 3 With particular reference to flexibility, the Act covers the following measures: 2.1. Part-time workers The Netherlands has a very high rate of part-time workers, most of these are women but an increasing number of men also choose to work part-time. The status of part-time workers overall is the same as that of full-time workers although the highest positions still tend to be full-time posts. In legal terms there is no difference between full and part-time workers and since 1996 the Civil Code prescribes that they be treated equally in relation to the amount of hours worked. In July 2000, the Act on the Adjustment of Working Hours was introduced in the Netherlands. The Act allows the employee to request to work more or less hours. The employer can only refuse on irrefutable business grounds. Although the Act is seen as restrictive by employers, it is a good example of the efforts made in the Netherlands to facilitate the conciliation of work and family life and to regulate part-time work Fixed-term contracts First-time fixed-term contracts have always been unrestricted in the Netherlands but, up until 1999, a second consecutive fixed-term contract could only be terminated with the permission of the Regional Director of the Public Employment Service and with the observance of a period of notice, thus making it no different to a permanent contract. There were two ways in which the employer could avoid these restrictions: a) by observing a 31-day period between fixed-term contracts and b) by making use of the possibility foreseen in the Civil Code to deviate from the regulation on consecutive contracts by collective agreement. 3 E.g. Gustav Heerma van Voss: The Flexibility and Security Act, The Netherlands. Presentation and Assessment of the Policy as Basis for Review by Peer Countries. 3 3

4 The Act on Flexibility and Security introduced a new system of fixed-term contract. It is now possible to issue three consecutive fixed-term contracts as long as they do not exceed a period of three years. If the total employment period exceeds three years then the contract automatically becomes permanent and the worker is protected against dismissal. Other articles to protect the worker are: a) contracts that follow each other within three months are considered consecutive b) the nature of the work is not significant in the case of consecutive fixed-term contracts between the same employer and employee c) fixed-term contracts where the same employee works for two consecutive employers who can be considered consecutive with regard to the work are considered consecutive contracts. The new regulations correspond to the new EC directive on fixed-term contracts On-call contracts On-call contracts where the time and hours of the work are not set in advance are very popular in the Netherlands. The nature of on-call contracts varies greatly regarding hours and job certainty. Two types of on-call contract existed before the introduction of the Flexibility and Security Act: a) The zero hours contract in which labour is not guaranteed but the framework is set for work if available. When work actually materialises, a fixed-term contract is signed. b) The min/max contract in which a minimum number of working hours is agreed. The zero hours contract was often misused by employers in practice. The courts took the position that if an employee had a regular pattern of work, he or she was entitled to the average amount of work that he or she had worked during the preceding period. The Flexibility and Security Act aims to strengthen the position of the on-call workers through two measures: a) when a worker works for the same employer for three consecutive months for no less than 20 hours a month, he or she is presumed to have an employment contract; b) the number of hours covered by the employment contract is determined on the basis of the average number of hours worked a month over the last three months. Another improvement is that employers have to pay at least three hours work for any call if the calls are not regular and amount to less than 15 hours per week. On-call workers and temping workers are now (since the Act on Flexibility and Security) protected by the common labour law in the same way as regular employees working on an employment contract. 4 4

5 2.4. Temporary work agencies Very few restrictions apply to temporary work agencies today. In 1996, the ABU (Organisation of temporary work agencies) reached an agreement with the unions whereby the ABU accepted that the temporary workers were working on the basis of an employment contract and the unions accepted the temporary work agencies as rightful employers. This agreement was formalised in the Civil Code in Temporary work agencies operate like any other company with two prevailing restrictions: temporary workers are not allowed to undermine a strike and parity of wages with permanent employees. The wage issue can be avoided by collective agreement. 3. Evaluation results A first assessment of the practices was carried out at the time when the Flexibility and Security Act came into force in A second assessment was carried out at the beginning of the year The research was limited to measuring the responses of the employees and flexworkers to the new regulations and was carried out by phone among employers and temporary employment agencies and among standby (on-call), fixed-term workers and temps. It is too early to be able to make definitive statements on the effects of the new regulations and the results should be seen as providing an indication of the effects that can be expected in future. The results were presented by the Dutch Ministry of Social Affairs and Employment under the three main types of contract affected by the new regulations: On-call contract The research showed that the new regulations have had the following effects: The employment relationship of standby workers had been terminated; The employment relationship of standby workers had been maintained through a temporary employment agency; The on-call contract of standby workers had been changed to a fixed number of hours per week; The on-call contract of standby workers had been changed into a permanent job. Fixed-term contract The research showed that the new regulations have had the following effects: contracts were terminated contracts were prolonged contracts were changed into permanent jobs Employers now tend to see the new regulations as an incentive to hire personnel on a fixed-term basis. Employees find that their fixed-term contracts are changed less frequently e.g. into a new contract or changed conditions, than before. 5 5

6 Temping contract A temporary employment contract is entered into for a certain period of time agreed between the employer and the employee. The temporary employment contract terminates automatically at the agreed time. The employer does not have to observe a notice period or apply for a redundancy permit from the employment office. In the new collective agreement for temporary workers ( ) the right to training and access to an employment agency has been stipulated by the unions. The collective agreements concerning temps introduced a four-level system of employment. The research showed that the new regulations have had the following effects: 55% of temps were employed at level 1 (26 weeks with intervals of less than 1 year); 25% of temps were employed at level 2 (6 months/training/access to pension scheme); 13% of temps were employed at level 3 (24 months: a number of fixed-term contracts of a 3- month period); 7% of temps were employed at level 4 (permanent job). It was found that in about 2500 cases, the introduction of the level system caused a breach in the temporary employment relationship. 75% of the temporary employment agencies interviewed were worried that the new regulations concerning permanent jobs for the temps would make the agencies less flexible and that it would be difficult to combine a permanent job with the nature of the temping work (e.g. seasonal work). The temps themselves are getting more fixed-term contracts and permanent jobs with their temporary employment agencies although 13% find that the period between two temping jobs lasts over three months meaning that they fall back a level or two. However, overall, the temps tend to feel that they owe the altering of their contracts into fixedterm or permanent contracts to the Flexibility and Security Act. The situation for temps concerning training and pensions has improved with 28% of temps actually being trained and increasing access (78%) to pension schemes. The research indicates that the positive effects of the Flexibility and Security Act outweigh the negative ones and that the reception of the Act is slowly improving. The effects are influenced by and contribute to the positive economic situation. A broader evaluation will be carried out at the end of the year Relevance for the peer countries Finding the balance between flexibility and security on the labour market and between economic growth and social justice is, of course, a central concern of most modern democracies. The interest in the Dutch Flexibility and Security Act is correspondingly great. It was pointed out at the close of the meeting that reproducing the Dutch model one to one in another country is not possible. What may be possible, however, is to transfer some aspects of the experience to other national circumstances. 6 6

7 5. Transferability aspects of the policy to peer countries France is considered to have very strict labour market regulations in comparison to the Netherlands. This is not the whole picture. Recent legislation on working time 4 and collective bargaining at enterprise level has greatly increased flexibility. There is also a marked difference between the laws and their enforcement and in fact, French employees often benefit from less protection than their European counterparts. Indeed, a number of the social protection measures are obsolete and in urgent need of being reviewed or replaced. France has placed more emphasis in recent years on internal rather than external flexibility. Fixedterm contracts are still considered precarious in France and are therefore not being encouraged. A law was passed in January 2000 allowing employees to request a change in working time. Like in the Netherlands, the employer can refuse but must justify his decision. To date, France has no legislation covering on-call employment. On-call contracts could be a way of counteracting moonlighting and therefore of interest for France. Unemployment in Greece is relatively high which is due to several factors, one of which may be the rigidities of the Greek labour market. Low wages and other factors limit part-time work and the largest number of fixed-term employment can be found in the public sector. A new law was passed in 1998 to increase flexibility in working time but with relatively little impact. The government has recently tried to introduce new legislation on dismissals, working time, part-time employment and overtime but the unions and also the employers organisations repeatedly opposed its proposals. A dialogue has, however, recently been started between the social partners on the government proposals which is a positive sign. Given the need for more flexibility in the Greek labour market and the legislative action being planned, the Dutch experience is of great interest for Greece. However, given the significant differences between the two countries, the transferability aspect is difficult. It may be possible to transfer certain parts of the Dutch model, e.g. the Dutch model of industrial relations and co-operation between the social partners, or the Dutch temporary employment agencies. The on-call contracts could be a way of combating illegal employment and a secondary source of income for families. Care would have to be taken that these less secure forms of work do not replace permanent employment contracts. According to the independent expert, the possibility for workers to request changes in their working time could be interesting and may encourage more people to consider part-time work. Italy has a similar situation now to the Netherlands in the past in the sense that flexibility (e.g. for young people and women) is often accompanied by a lack of security especially compared to the relative security of regular workers. The segmentation in the labour market between those with and those without regular contracts is an important issue in the Italian labour market. Further issues relate to social security, pension rights, the use of active labour market policies e.g. training, and representation. The independent expert found the Dutch experience interesting with regard to the role of the trade unions and the balancing of flexibility with security for the workers

8 The employment rate in Portugal is growing, particularly among women, and the unemployment rate is sinking. However, a high percentage of the labour force has low qualifications and productivity rates are also low. As a legacy of the former dictatorship, the government is rather interventionist in labour issues and amongst other things the dismissal restrictions are relatively tight. This leads to employers favouring fixed-term contracts which now make up about 20% of all employment in Portugal. The employees under fixed-term contracts suffer from a lack of investment in their skills, e.g. training, which compounds their precarious situation and the overall low skills level of the workforce. However, the employers have to pay a compensation to the workers at the end of a fixed-term contract, which makes it an expensive form of labour. Despite incentives to companies introduced in the new legislation on part-time workers in 1999, part-time work is not popular in Portugal. This is mainly due to the low wage levels. It is therefore done mainly by students, women, older workers and people with low qualifications. Temporary workers can only be used as a temporary solution in Portugal and on-call contracts are non-existent. Various forms of external flexibility are not used by companies to reduce wage costs but to adapt the labour force to the needs of the companies. Before considering the transfer of the Dutch experience to Portugal, a new form of dialogue between the social partners is necessary. Spain had a high percentage of workers on fixed-term contracts up until 1994 when a new legislation curbing this kind of contract was introduced. Employers responded with demands for more flexibility and dismissal restrictions were eased in the reform in Collective agreements became more important and the role of the unions increased. In 1997, new legislation aiming to enhance the stability of employment whilst providing more flexibility for employers was introduced. In 1998, a new law pertaining to part-time work was introduced. However, due to its unpopularity among employers, it was reviewed in On-call contracts could be interesting in future for the Spanish situation but it is too early at present. Spain could benefit from a balance between security and flexibility such as was the case in the Dutch experience. Conclusions The Dutch Flexibility and Security Act can be seen as a good practice example of legislation catching up with new trends on the labour market and in the economy in general. The Dutch Act responds in a enlightened way to the employers and employees need for greater flexibility without foregoing security. The Act appeared to be of great interest to the peer countries present at the meeting and a number of them found the balanced approach (government and social partners) towards the issue very inspiring. However, most of the delegates admitted that it would take a good deal of preparation to introduce such legislation in their own countries. 8 8