ERM case studies: Good practice in company restructuring
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Introduction
This report aims to provide concrete examples of good practice and effective action in relation to restructuring. More specifically, it highlights cases where large enterprises have made significant efforts to minimise the effects of job losses on their workforce, as well as on the local economy. The study also looks at the actions taken by trade unions and public authorities in this regard.
Company case studies typically cover the sequence of events involved when the company restructures its operations, from the initial decision to restructure to the outcome for the workers and local areas affected, with a view to extracting examples of good practice at various stages in this process by the different parties concerned.
For almost all EU Member States, at least one case is presented in which the company, worker representatives and public authorities have, separately or together, sought to assist and support workers and the local area at different phases of a company restructuring process. In each case, the actions taken are compared with what typically happens in such cases in the country concerned.
Such assistance might, for example, involve advising workers well in advance of the possibility of restructuring, and consulting with them closely about how best to achieve their aims or, alternatively or additionally, it might involve helping them to retrain or find new jobs. The cases relate to various forms of restructuring whether they involved, for example, job losses, an internal reorganisation, a plant closure, or a relocation from one site to another.
Most of the cases covered are recorded in the European Restructuring Monitor (ERM), maintained by the European Foundation for the Improvement of Living and Working Conditions (Eurofound), although the details contained in the ERM have been supplemented by information from a range of other sources, including the companies themselves and trade unions.
The cases cover the different phases of the restructuring process, including:
- the advance warning given to workers and to the various public authorities, and how this relates to the legislation or regulations in place and to any collective agreement in force;
- help and support given to workers who were about to lose their jobs, including options for redeployment and retraining;
- financial compensation paid to workers made redundant and how it relates to the amounts they were legally entitled to receive;
- financial support provided to companies to assist them in reducing the scale or minimise the effects of restructuring on workers and the local community;
- action taken by public authorities at local, regional and national level to create new jobs by attracting companies to the area or implementing a regional or local development strategy;
- outcomes – for the company, workers and local economy – of the actions taken.
Most restructuring cases involve businesses – public and private – changing their organisational arrangements and operational procedures in order to improve or maintain their financial viability usually at times of financial or market difficulty or when there is a change of ownership or a merger.
In cases where companies are in financial difficulty and little or no support is available from government, there are clearly limits to the possibilities for them to minimise the effects of job losses on their workforce as well as on the local economy. However, this does not mean that companies do not in many cases make significant efforts to do so.
In the initial phase of the restructuring process, as soon as a reorganisation potentially involving job losses is contemplated, the most important factor seems to be the degree of cooperation and transparency in the relations between the company management, employee representatives, trade unions and public authorities. Advanced warning and provision of information is important for seeking alternative measures and planning for redundancies, but consultation is the key to facilitating the provision of efforts to minimise the effects of job losses on the workforce and the local economy. In the best case examples, cooperative consultation is built into the company’s operating procedures and occurs on an ongoing basis even when restructuring is not an issue.
The amount of support provided to workers varies from case to case. In the best cases, a wide range of measures ensure internal and external redeployment of the workers affected through retraining and relocation, where necessary, and where comprehensive support is combined with high levels of cooperation and transfer of information between the company, employee representatives and public authorities.
For a company to be able to pay workers an amount of compensation above that legally required, it obviously needs to be in a suitable financial position to be able to do so. The company cases presented in this study include a range of different forms of compensation for workers affected by restructuring, the most effective seemingly being those that encourage voluntary redundancy.
Other less common practices include compensation for workers taking up less well-paid jobs, the provision of social funds to provide support for workers who become unemployed and payment of loyalty bonuses.
State-owned companies have tended to receive specific financial support, although generally of a temporary nature pending restructuring. Financial support for private sector companies, although less frequent, has however helped to finance retraining and even, in some cases, assisted them to fund severance payments to prevent bankruptcy. This form of support is particularly relevant in the present downturn, and in recent months a number of crisis packages have been put together for companies affected by the global economic crisis.
Two case studies include job creation measures, introduced in response to specific instances of restructuring. These are equally relevant in present economic circumstances. One of the two cases has already produced favourable results, while the other has not as yet had sufficient time to see any specific outcomes. In a number of other cases, however, there has been extensive cooperation with public authorities responsible for local, regional and national development strategy.
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