Thematic feature - redundancies and redundancy costs

This article examines the procedures and costs involved in collective redundancies in Norway, 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 Norwegian 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).

Norwegian employees are protected against unfair dismissals under theAct relating to Worker Protection and Working Environment (Arbeidsmiljøloven, AML). Dismissals have to be'objectively justified on the basis of matters connected to the establishment, the employer or the employee'. Normally, the need to cut the workforce for economic reasons or the need to reorganise are considered as objectively justified reasons. However, a precondition is that the employer does not have other suitable work to offer the employee. The legislation distinguishes between collective dismissals and dismissals involving individuals, and establishes specific procedures regarding collective redundancies.

The present regulations regarding collective redundancy procedures is a result of revisions of the AML in the early 1990s in connection with the implementation of the EU Directives on collective redundancies. The AML's regulations regarding collective redundancies apply if dismissals affect'at least 10 employees within a period of 30 days without being warranted by reasons related to the individual employees' (AML Section 56A).

According to the regulations, an employer contemplating collective redundancies shall'at the earliest opportunity enter into consultations with the employees' elected representatives with a view to reaching an agreement to avoid collective redundancies or to reduce the number of persons made redundant'. This will normally mean trade union representatives (NO0309102T).

The AML further states that if redundancies cannot be avoided, efforts shall be made to remedy their unwarranted effects. Social welfare measures aimed at providing support for redeploying or retraining workers made redundant are mentioned as possible measures to this end. In a situation where collective redundancies are considered, the employer is obliged to give the elected employee representatives all relevant information. Such information should include (among other issues) written notification of the grounds for the redundancies, the number of employees who may be made redundant and the period during which such redundancies may be effected. In addition, the AML stipulates that the notification should include criteria for the selection of employees who are to be made redundant and - if relevant - the criteria for calculation of'extraordinary' severance pay (see below). Such notifications must be given at the earliest opportunity, and at the latest at the same time as the employer calls a consultation meeting. In situations where collective redundancies are planned, the employees’ representatives have the right to receive expert assistance.

A copy of the notification mentioned above must be sent to the public employment service. The employees’ elected representatives may give any comments they may have regarding the notification directly to the public employment service. Projected collective redundancies shall not come into effect earlier than 30 days after the public employment service has been notified. The reason for this is to allow the employment service time to prepare efforts to find alternative employment for the workers made redundant.

Temporary lay-offs

Companies in situations where production has to be stopped or cut temporarily may choose temporary lay-offs as an alternative to redundancies. Situations where temporary lay-offs are an alternative may be temporary shortages of work, or where work has to be stopped due to weather, temporary shortage of raw materials or other unforeseen events. Under the temporary lay-off scheme, the employees are for a certain period not obliged to work for their employer and for most of this period are compensated by the national insurance scheme. The level of compensation is the same as if the employee were unemployed. The employer has to compensate the employees for the first three days. When production resumes, the employees return to work. If the employer eventually decides to dismiss the employees, it has to follow the ordinary procedures as described above and observer the normal notice periods (see below).

The use of temporary lay-offs by employers is not regulated by legislation, but is an option in many private sector collective agreements, and the courts have accepted it as a general rule. Procedures regarding information, notice periods etc are also regulated through agreements. However, the state's duty to compensate temporarily laid-off employees is regulated through legislation, as is the period during which compensation is given. This means that changes to these regulations will have a bearing on if and when lay-offs can be used.

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.

The minimum notice period for termination of an employment contract is one month (for both parties). For dismissals, the notice period is the same regardless of whether the dismissal is a collective redundancy or an individual dismissal. In practice this means that such dismissals at earliest come into effect two months after the first notification. For employees with more than five years' service, the minimum notice period is at least two months (this also applies to resignation). For employees aged over 50 years and with more than 10 years' service, the minimum notice period is up to five months.

The one-month minimum notice period can be departed from by means of written agreement or a collective agreement. However, only the parties in companies with collective agreements can agree a notice period shorter than one month. Collective agreements do to a certain degree add to these provisions, for instance by establishing a notice period for both parties of three months for workers employed on open-ended contracts. This mainly applies to agreements in the municipal sector and in the semi-public sector or agreements otherwise linked to the public sector. Some agreements also move the point where a two-month notice period applies from five years' service (as laid down in the AML) to three years's service.

There are no legal provisions regarding severance pay/redundancy pay in connection with collective redundancies. Employees who are made be redundant will be eligible to unemployment benefits (with the exception of the first five days), and such benefits are paid from the social insurance scheme. However, most collective agreements in the private sector include a scheme (introduced in 1966) regarding severance pay for employees aged over 50 years with more than 10 years' service who are dismissed/made redundant without this being linked to reasons related to the individual employee. The scheme also covers employees who are forced to retire due to disability/chronic disease. This kind of severance pay is drawn from a fund jointly financed by employers and employees. It takes the form of a lump sum, and varies between NOK 18,000 (for those aged 50) and NOK 57,000 (for those aged 62). The amount is reduced for employees in 62-67 age group. There are no similar arrangements in public sector collective agreements.

It is not unusual for companies resorting to redundancies among their employees to use severance pay packages. Such arrangements are normally conditional upon the employee resigning voluntarily. This also means that the employers' responsibility is nullified. Such redundancy packages may be the result of negotiations with the trade unions (at company level) or may be a unilateral offer from the employer in order to make the redundancy process go more smoothly. Such schemes may involve several months' extra pay, economic support during further education/retraining, or special measures allowing older employees to take early retirement. In addition, companies may offer assistance in seeking new employment, such as counselling. There is no information on how common such measures are in connection with redundancies.

Such measures have also been widely used in situations where public (mainly state) enterprises have gone through major workforce-reduction processes or restructuring. Examples are the workforce-reduction processes in larger state enterprises such as the defence forces, Norway Post (NO9712139F) and the Norwegian Railways. A framework agreement defines the measures that can be used if state sector enterprises have to reduce their workforces.

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.

There are no statistics available on the number of collective redundancies taking place in Norway, neither are there any statistics for the number of people who are dismissed for any reason.

The number of unemployed people has increased by more than 30,000 over the last two years, and is expected to increase further in 2004. It is safe to assume that the number of employees dismissed due to collective redundancies has increased over this period. Sectors witnessing problems include the information and communications technology industry and parts of the manufacturing sector (eg shipbuilding).

As mentioned above, temporary lay-offs may in many situations be considered as an alternative to dismissals, and the number of people involved has increased over the last year.

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).

There has not been any recent debate in Norway on the AML regulations regarding collective redundancies. A public committee will shortly present a proposal for revisions of the AML (NO0210103F), and at present it is not known whether any changes to this section will be recommended. However, the general assumption is that the Norwegian regulations are not very strict when it comes to collective redundancies - ie that the Norwegian system is relatively deregulated in this area.

There has lately been considerable more debate regarding the way temporary lay-offs are carried out - ie where companies can reduce their workforces for a certain period and where the employees are compensated through the national insurance scheme. Temporary lay-offs are often seen as an alternative to dismissals. In 2002, the number of weeks during which an employee may be laid off was reduced from 52 to 26 weeks. However, for certain sectors this period was again increased in July 2003. In the 2004 state budget proposal, the government proposed a significant tightening of this scheme (NO0310103F). Among other matters, it was proposed to increase the period during which the employer has to pay the laid off employees from three days to 30, and to discontinue the temporary arrangement whereby some sectors may take advantage of the scheme beyond 26 weeks. This proposal was strongly criticised both by the employers' organisations and the trade unions. The opposing arguments included that it would lead to more dismissals and make it more difficult for companies to go back to normal production when times change for the better. The employers' organisations also argued that the proposed change would increase the companies' personnel costs at a time where a major part of the manufacturing sector is experiencing major problems. The proposal was withdrawn in November 2003 as part of a budget agreement between the centre-right government and the Norwegian Labour Party (Det norske Arbeiderparti) (NO0312101N). (Kristine Nergaard, FAFO Institute for Applied Social Science)