Disproportionate number of older employees made redundant by Dutch companies

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Although the Dutch Government and the social partners are keen to promote the participation of older employees on the labour market, it is reported that companies currently make disproportionately more older employees redundant. Following the Government's withdrawal of its "Directive concerning Older Employees" in 1994, businesses are not allowed to dismiss disproportionately more older workers on economic grounds. However, the social partners were never in favour of the withdrawal of this Directive. Employers still argue that they require a high-quality workforce which is able to cope with new developments. In the view of individual employees and their representatives, dismissal of older workers, which results in an unemployment benefit and (very often) a redundancy payment, represents an accepted and well deserved form of early retirement.

The high performance of the Dutch economy is widely acknowledged. However, both labour participation rates and job security for older employees are still relatively poor. The Dutch Government and the social partners at central level - represented on the Labour Foundation (Stichting van de Arbeid) - have recently agreed on new legislation and policies to promote further the participation of older employees on the labour market. (NL9708125F) In 1994, the so-called "Directive concerning older employees" was withdrawn by the Ministry of Social Affairs and Employment. This Directive allowed companies exemption from the principles of "first in, first out" (anciënniteit) in redundancies and proportionality (afspiegeling) in cases concerning workers aged 57.5 and above (or 55 and above in cases concerning collective redundancy).

The framework for dismissing older workers

In the Netherlands, there is a so-called preventative system of protection against dismissal, that is, employers have to apply for - and obtain - a permit from the Director of the Regional Public Employment Service (Regionaal Directeur voor de Arbeidsvoorziening, RDA) before notice to terminate the employment contract can be given. The application should indicate the grounds for dismissal and the employee may submit an appeal. The Director will grant a permit only if the proposed termination is deemed "reasonable". This requirement is based on Article 6 of the 1945 Decree on Labour Relations. In the past, the Ministry of Social Affairs and Employment issued several directives which the regional directors were supposed to take into account in dismissal cases. A number of these directives were introduced to endorse the Government's labour market policies. As from 1993, all (former) directives and other standards and procedural requirements have been included in the Delegation Decree, which delegates the Ministry's authority to grant dismissal permits to the Directors of the Regional Offices.

The Directive concerning older employees (Richtlijn oudere werknemers) was issued in January 1982, at a time when a large number of employees were made redundant. Because workforces were growing older and the prospects of finding a new job from a position of redundancy were equally dim for young and older workers, the Ministry changed its policy. This Directive provided the Director of the Regional Public Employment Service with the option to grant a permit in cases in which a disproportionately high number of older workers were made redundant, or when the company was facing an inevitable process of de-staffing (not merely replacing older workers with young workers) and the workers involved did not object to the dismissal or objected to it only nominally to protect their entitlements to unemployment benefit. In 1983, two additional conditions were added: the workers involved cannot fall back on an official early retirement scheme and no collective agreement applies which grants the workers additional benefits to the employment benefit.

In the spring of 1991, the Government, reacting to a study by the Scientific Council for Government Policy (Wetenschappelijke Raad voor het Regeringsbeleid, WRR) entitled A working perspective, announced its intention to withdraw the Directive in view of the improved situation in the labour market and its endeavour to enhance the labour participation of older workers. Besides, the Directive was considered potentially discriminatory. Moreover, withdrawal of the Directive was thought to reduce collective expenditure, as older workers, once redundant, are likely to fall back on social security for a relatively long time.

In 1992 and 1993, the social partners on the Labour Foundation repeatedly asked to postpone the moment of withdrawal, preferring to await changes in companies' personnel policies and a swing in the unfavourable economic tide. Notwithstanding these requests, the Directive was withdrawn on 1 January 1994. All applications for dismissal permits that had been filed before this date were to be dealt with by the Regional Directors in compliance with the Directive. As from 1 January 1994, (old) age no longer represented a (possible) legitimate exception to the principles of "first in, first out" and proportionality in dismissal procedures.

Discrepancy between law and practice

However, statistics concerning the handling of dismissal cases by the Regional Directors of the Public Employment Service clearly reveal a discrepancy between law and practice to date. In 1996, employers applied relatively more frequently for dismissal permits for employees aged 55 and above than for younger employees. This may well relate to the introduction of a new law in August 1996, which requires a more rigorous check on the "involuntariness" of the unemployment of a worker who applies for unemployment benefit (the Law on Fines and Sanctions in Social Security, Wet boeten en maatregelen in de sociale zekerheid).

The most recent figures, concerning the second quarter of 1997, also show that employers apply significantly more frequently for a permit for older workers than for young workers and, furthermore, more frequently for female than for male workers (in both a relative sense and in absolute terms). Tables 1 (male workers) and 2 (female workers) below give figures for the number of applications made for dismissal permits, broken down by the grounds for the proposed dismissal and by the age of the workers concerned.

Source: Ministry of Social Affairs, Department of Analysis and Research, Assessment and Analysis, The Hague.

The Akzo Nobel case

Recently, the Akzo Nobel chemicals company in Hengelo confirmed to the press (de Volkskrant, 30 August 1997) that the company does not fully comply with the dismissal regulations regarding age. It is argued that the company requires a high-quality workforce which is able to cope with new developments. The jobs of older workers tend to disappear and the workers concerned are not adequately equipped to find new jobs. According to the company, only in the long run may it be feasible to keep older workers in the company by means of vocational training. Besides, the company contends that, in practice, the dismissal of older workers is not perceived and experienced as "compulsory". In the view of individual employees and their representatives, dismissal when older, which results in unemployment benefit and (very often) a redundancy payment, represents an accepted and well deserved form of early retirement.

Questions have been posed in the Dutch Lower House (by the PvdA, or Labour Party) about the dismissal policy at Akzo Nobel and elsewhere. Studies by the Supervisory Board for Social Insurance (College van toezicht sociale verzekeringen, Ctsv) in 1995 revealed similar policies at Shell and Digital. The Ports Industrial Insurance Board (Habivi), that decides on unemployment benefits for dock workers, withdrew its objection to the ban on dismissal of older workers only in March 1997.

Commentary

Ongoing discussions about the dismissal of older workers bear directly on the high profile issue of labour market participation. On the one hand, a relatively low participation rate for older people is regarded as undesirable, both from a social point of view - the dangers of social exclusion and age discrimination - and from a (macro)economic point of view - the aspects of collective expenditures and a potential labour shortage in the future. On the other hand, however, in practice, that is, at an individual (company) level, a different rationale exists. Both companies and older workers have "good reason" to fall back on unemployment benefits, be it to "upgrade" the workforce with a minimum amount of effort, or to obtain a form of (often strongly desired) early retirement. It is suggested that only a well-considered human resource management policy which emphasises vocational training and appropriate, "tailor-made" working conditions for older workers may be successful in turning the tide. (Ton Wilthagen, HSI)