TNT Post to cut up to 7,000 jobs

In April 2007, TNT Post announced a new reorganisation of the company, which will lead to the shedding of some 7,000 jobs by 2010. The need for restructuring has been fuelled by dwindling post volumes as well as liberalisation of the postal services market, bringing increased pressure on terms and conditions of employment. The trade unions and government are concerned at the scale of the job losses.

Restructuring announcement

At the start of April 2007, TNT Post announced a new internal reorganisation. Within the next two and a half years, the largest private employer in the Netherlands – with an overall workforce of more than 50,000 employees – intends to cut between 6,500 and 7,000 jobs. The initiative aims at saving a total of €300 million over and above the previously announced cutbacks, which amounted to €370 million.

Moreover, according to the company’s board, if the trade unions and employees do not agree to a significant rationalisation of the applicable employment conditions, 11,000 jobs hang in the balance. At the very least, TNT Post hopes to maintain wages at the same level or, where necessary, reduce them for the remaining employees over the coming two-and-a-half-year period. The company would also like to introduce more flexible working hours. Collective forced redundancies will be inevitable in a worst-case scenario.

Reasons for restructuring

While liberalisation of the postal services market is behind the company reorganisation, it is also fuelled by declining postal traffic following the substantial growth in email. The number of postal deliveries is falling; expectations are that volumes will have decreased by a quarter by 2012. Meanwhile, competition arising through liberalisation of the postal market has had a significant impact, creating an opportunity for competing companies that can operate for less.

The former state-owned company continues to pay its postal delivery staff wages in line with the collective agreement. However, its competitors, Sandd and Selekt Mail, do not pay their delivery staff by the hour but on an assignment basis. These companies assert that they are in no position to operate in terms of collective agreements or employment contracts.

Thus, TNT Post argues that its latest reorganisation aims at bringing the employment conditions enjoyed by its postal delivery staff more in line with the postal market. According to the board, wages are currently around 20% to 25% higher than those of its competitors. Furthermore, the company has lost 12% to 13% of its market share to competing companies in recent years. Expectations are that the company will lose a further 30% in the years ahead once the postal market opens completely. In 2006, TNT Post generated a reduced operating profit of €671 million on an overall turnover of more than €4 billion; the profit margin has dipped in recent years from more than 20% to 17% last year.

Trade union reaction to announcement

The trade unions are shocked by the scale of the reorganisation. Because the need for restructuring had been announced in advance, it came as no surprise to the public sector union CNV Publieke Zaak, affiliated to the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV), which still represents workers at TNT Post. However, the pace and gravity of the measures are a cause for concern. CNV Publieke Zaak feels that the trade unions are being put in an awkward position. The company is still generating a significant profit so, if employees have to leave, this will have to be achieved on the basis of a favourable severance package. It is uncertain whether the average employee of TNT Post – around 46 years old and with very specific work experience – will find work elsewhere.

The civil servant’s union Abvakabo FNV, affiliated to the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), considers that the employees have a knife to their throats. They may choose between worse employment conditions or more colleagues becoming unemployed. In effect, TNT Post is passing on the consequences of the price war in the postal market to its employees. According to Abvakabo FNV, which opposes such steps, the proposal involves employees paying their own pension premiums and relinquishing other employment conditions. The union will consult its membership base in the months ahead; TNT Post has to close a new collective labour agreement before September 2007.

Plan to amend Postal Act

The government has also responded with alarm to the proposed restructuring measures. The State Secretary of Economic Affairs, Frank Heemskerk, has reassured postal delivery staff at TNT Post who are facing dismissal that they can count on the government’s support in finding alternative employment. Mr Heemskerk appeared confident that the present strong economic cycle would offer postal delivery staff a good chance of finding another job. Potential employers include the police force, as well as security and bus companies.

The Dutch House of Representatives discussed liberalisation of the postal services market in April 2007, a week after TNT Post had announced its reorganisation. The House of Representatives intends to amend the Postal Act in a number of respects. The majority of the house supports the final step in the liberalisation of the postal services market with effect from 1 January 2008. However, it wishes to increase the level of supervision. This applies to new entrants as well as TNT Post, which seems to be making the most of the final aspects of its monopoly with high rates. In the last phase of liberalisation, TNT Post will lose the exclusive delivery of postal items weighing less than 50 grammes. The proposal tabled by TNT Post to reduce the six-day postal delivery cycle to five days has also been rejected.

Moreover, the House of Representatives would like to better regulate employment conditions at new postal service providers, ensuring standard employment contracts and decent pay arrangements. It feels that there is currently insufficient supervision in the market. In fact, although a majority of the house favours complete liberalisation, the government remains cautious in this regard, and is linking the timeframe with similar plans in Germany and the United Kingdom. If these countries fail to open their postal services markets completely, neither will the Netherlands, as this would have a negative impact on TNT Post.

Views of political parties on liberalisation

However, the House of Representatives does not wish the decision on opening the market completely to be dependent on policy in Germany and the UK alone. In the last phase of the debate in the House of Representatives, the left-wing parties including the ruling Labour Party (Partij van de Arbeid, PvdA) proposed that an emergency brake mechanism should be built into the postal services market. In the final round of debate set to take place after the summer, the parties aim to reach a decision on the matter.

The Socialist Party (Socialistische Partij, SP) goes a step further in its demands regarding employment conditions, which the party wishes to include in the debate on the liberalisation of the postal services market. In its view, competition may not lead to poorer employment conditions; SP seeks to establish that all postal companies work on the basis of employment contracts.

PvdA is less dogmatic on this issue, and is confident that the social partners can reach agreement. Nevertheless, the party believes that new postal companies must comply with standard employment conditions although its coalition partner, the Christian Democrat Alliance (Christen Democratisch Appèl, CDA), disagrees.

Tighter supervision of monopolistic behaviour

Other points to be protected in the Postal Act relate to the manner in which TNT Post operates as a company and serves its customers. For example, a majority in the House of Representatives want the post to continue to be delivered six days a week. The ruling CDA and PvdA parties also want TNT Post to be subject to more stringent scrutiny by the Opta supervisory body. Such supervision is mainly intended to increase transparency, thereby exposing whether excessive profits are made on the obligation to provide widespread postal services and on the sale of stamps.

It is not yet clear whether TNT Post is capitalising unduly on its monopolistic position. The company is entitled to make a 9% yield, but research shows that this could be as high as 70%. TNT Post could obscure its yield figures henceforth. A majority in the House of Representatives also want TNT Post to make its infrastructure available to other companies, including its delivery points, letterboxes and sorting machines. Opta must be given more authority to monitor the company’s price structure.

Commentary

The disagreement between the CDA and PvdA coalition about the requirements in employment conditions resulted in the postponement of voting on the Postal Act for several weeks. PvdA would like to set a minimum hourly wage for postal delivery staff but CDA remains opposed to stipulating employment conditions in the Postal Act.

Marianne Grünell, Hugo Sinzheimer Institute (HSI)