Tuesday, July 8, 2008

The Dutch Social Plan process

imageOur Dutch workforce voted in favor of the Social Plan proposal at our company last week, officially kicking off the transfer of the business back to our headquarters in the US. Events will move quickly now, and the entire process should be complete within a few months.

For me, it has been an education. I don't think that our US folks really understood the process when we began, highlighting the importance of taking time to learn the cross-cultural differences early in the planning process.

So, for context, here's my personal perspectives on the Dutch Social Plan process (a good overview is also given at EIRO).

The Dutch Works Councils Act mandates that any business with over 50 people will establish a Works Council "in order to ensure the proper consultation and representation of the persons working in the enterprise".

I think that this is a good thing. In my observation, it promotes dialog and the free flow of authoritative information between management and the workers, aligns and involves everyone in the operation of the business, and assures that issues and opportunities get discussion and agreement. Excesses by both management and the unions in the US might be prevented if both were forced to be more open and consultative about their actions. The current alternative, demonization and marginalization of unions rationalized by "trickle-down" and globalization promoters, is, in fact, the greatest threat facing the US worker today.

When Dutch management wants to make a major change in the way that the business is being run, it needs to solicit the advice of the Works Council. During that consultation, the workers need to be supplied with "a summary of the grounds for the decision, its expected consequences for persons working in the enterprise, and the measures proposed for dealing with such consequences." A major action like a shutdown triggers two responsibilities for the Council: to approve the advice (or to reject it with appeal to a court), and to negotiate the severance terms (the Social Plan) on behalf of the workforce.

Severance agreements are much more generous in the Netherlands than in the US: a month of salary per year of service vs. a week for each year in the US. The Social Plan also includes provisions for outplacement and education assistance, continuation of health and pension benefits, work-to-work assistance, and perhaps hardship bonuses. The goal is to provide a consistent and fair treatment of all people affected.

Our Works Council, although new to the process, acted well in their role on behalf of the workforce, and seemed trusted in return. They gathered appropriate advisors, organized subgroups to make recommendations on specific issues, and held regular meetings to communicate progress and to take suggestions form the team. There was disagreement and doubts. But the representatives were able to keep the discussions constructive and effective without getting loudly adversarial with either side throughout the negotiations.

The biggest factor in the negotiations is the structure of the Cantonal Formula, which governs the magnitude of the severance payouts. The formula multiplies corrected years of service (older workers get a multiplier for their years beyond age 40) times gross monthly salary times a correction factor. The correction factor, usually between 0.25 and 2.0, varies depending on the state of the business and tradeoffs with other parts of the Plan. It is closely watched and diligently negotiated by both sides, and is the main indicator of the quality of any settlement proposal.

Once a proposal is finalized, it is presented to the workers and put to a vote after a week's consideration and discussion: 50% + 1 is required for approval. Once passed, the terms of the settlement are distributed to each worker, the agreement is individually signed, and the terms take effect over a subsequent three month period.

The system seemed to work well, allowing for discussion of the event and securing a fair settlement which gives each employee a boost towards continuing their life after the company is gone. There is still emotion about leaving and dispersing, uncertainty about what the next job will be. But people are starting to talk about how they can use their settlement to start businesses, provide for retirement, or relocate to find new work. A substantial number are taking this chance to start over in a new field; many are finding jobs at equivalent or greater salary in the tight Dutch labor market.

There doesn't seem to be the bitterness and individual divisiveness that seems to characterize labor / management negotiations in the US. I like to think that this is a result of a balanced allocation of power and a structure of mutual consultation.

Giving labor a voice doesn't have to be 'bad for business'.

Disclaimer: I am sharing my own observations, which may be incorrect or incomplete in some particulars. As a US employee working under an expatriate agreement, I do not have any stake in the process or the Plan. This essay does not contain any proprietary details of our Social Plan Agreement.

Photo credit European Commission

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