Social fund and extension of jobs pact agreed at Deutsche Bahn

In June 2000, the German rail workers' trade union TRANSNET and the board of Deutsche Bahn AG agreed to an extension of the company's "pact for jobs" until the end of 2004 and to a new social fund to finance extra payments for staff, linked to the railway company's privatisation and reorganisation.

On 7 June 2000, the rail workers' union TRANSNET (formerly GdED- DE0006263N) and the board of Deutsche Bahn AG (DB AG) agreed to an "alliance to safeguard the future" (Bündnis für Zukunftssicherung). This consists of an extension of the existing "pact for jobs" (Beschäftigungspakt) (DE9810277N) until the end of 2004 and the creation of a "social fund" (Sozialfonds) of an estimated DEM 6 billion, an idea mooted by TRANSNET.

Social fund

The social fund is to finance extra individual payments and benefits which are in excess of the collectively agreed rates. About 100,000 employees were assured that they would continue to receive these payments and benefits when the state-owned railways were transformed into a joint-stock company and the employees transferred their rights - such as pensions and long-service bonuses - to the new employer. Furthermore, the fund is to compensate for financial disadvantages incurred by the staff affected by reorganisation, and to provide a new professional orientation, plus extra income, for some groups of employees. The fund is seen as providing the best solution to the problems caused by the change in the company's status. Staff do not have to give up their rights, but their extra payments will not be charged to the budget of DB AG, which thereby hopes to become more competitive. The social partners expect that the new fund will be a means of lowering personnel costs.

It has not yet been decided how the fund is to be financed, and the parties hope to have negotiated its concrete design and application by August or September 2000. Basically, it is planned that DB AG will pay a large amount of money from reserves for redundancy schemes and early retirement into the fund, but is not quite clear yet how much money this will be. While TRANSNET mentioned a sum of DEM 4 billion - from funds set aside for restructuring the railways - the chair of the DB AG board, Hartmut Mehdorn, mentioned a single-figure (billion) sum. The question of whether the federal state, which still owns parts of DB AG, will also be asked to contribute some financial resources, remains uncertain. While Mr Mehdorn expects the federal state to subsidise DB AG only if the company itself is performing well, the president of TRANSNET, Norbert Hansen, proposed that the state should be obliged to pay money into the fund. In the run-up to the negotiations, Mr Hansen mentioned the possibility of also using financial means received by the company from the Federal Labour Office for retraining and further training. TRANSNET and the two other unions representing DB AG employees - the engine drivers' union (Gewerkschaft Deutscher Lokführer, GDL) and the union representing railway career public servants (Gewerkschaft deutscher Bundesbahnbeamter und –anwärter, GDBA) - succeeded in obtaining an agreement to prevent dismissals until 2004 and thereby extend the company's pact for jobs, which was to expire at the end of 2000. The social partners consider that this creates a basis for trust. Subsequently, the unions withdrew a strike threat (see below).

Background

In mid-January 2000. Mr Mehdorn announced his plans for restructuring DB AG (DE0001234F). The core of his plan was to cut costs by DEM 8.6 billion by 2004. Among the measures envisaged to achieve this goal was the loss of about 70,000 jobs, with a saving in personnel costs of DEM 3.6 billion. The unions reacted to this announcement with the threat of calling a strike, which would have affected the EXPO world exhibition in Hannover.

In the run-up to the negotiations in June 2000 it became clear that the key problem was the extra payments and benefits for employees, which cost the company DEM 700 million each year. Management argued that this amount is too high and that it causes the company higher personnel costs than its competitors. To guarantee that employees will continue to receive these extra payments and benefits, and to find a solution to the conflict, TRANSNET proposed the social fund which the management has now agreed to.

After the agreement, both the DB AG board and the unions stated that they wanted to get the company into shape to face increased competition without social conflicts. In concrete terms, unions will accept a workforce reduction of 35,000 employees by 2004. Management has given assurances that it will handle the retrenchment in a socially acceptable way, meaning that it will be achieved without compulsory redundances but through "natural wastage" and a reduction in the number of new employees. Concerning the forthcoming collective bargaining round, the unions have already signalled that they will accept moderate wage agreements. Management has stated clearly that the success of the new alliance is dependent on such a moderate wage settlement. Horst Föhr, the DB AG personnel manager, has proposed an agreement providing for a wage freeze, offset by a one-hour weekly reduction of working time without loss of pay. Although a reduction of working time might be possible in some areas in order to save employment, a working time cut with reductions in pay will no longer be discussed. According to management, the new agreement has the advantage that the company will be able to act in the market economy from 2001 without the annual financial burden of DEM 700 million arising from the extra payments and benefits. In combination with other measures, like an improvement of technical processes or a reduction in the number of lines, this could lead to savings which would prepare DB AG for market flotation by 2001.

Commentary

As DB AG is under great financial pressure, the new agreement can be seen as a progressive step towards retaining the company's pact for jobs and preventing redundancies. At the same time (and as long as it is not clear where the money for the fund is coming from), the deal seems arguably to be a superficial attempt to calm the conflict regarding personnel policy at DB AG and to avert industrial action by the unions. The fact that TRANSNET and the two smaller unions are following a strategy which is based more on cooperation can be seen as a result of the low standing of DB AG in the eyes of the public. It may be that the fear that a strike would not receive any public support is too great. Nevertheless, it has to be questioned if the unions should support the company's whole strategy, which includes a reduction of services through a reduction in staff, the closure of lines, an increase in fares and other problematic measures. Without financial support from the government, it will be difficult for DB AG to solve its financial problems. This support need not necessarily take the form of a direct subsidy but could also be indirect, through relieving the company of the costs for the total maintenance of the railway system and through lower taxes. (Alexandra Scheele, Institute for Economic and Social Research, WSI)

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