2002 Annual Review for the Netherlands

This record reviews 2002's main developments in industrial relations in the Netherlands.

Political developments

In the May 2002 general elections, the governing'purple coalition' of the social democratic Labour Party (Partij van de Arbeid, PvdA), the liberal Party for Freedom and Democracy (Vereniging voor Vrijheid en Democratie, VVD) and the social liberalDemocraten 66 (D66) lost power (NL0206103N). The largest coalition parties, PvdA and VVD, both lost seats. A new populist party,List Pim Fortuyn (LPF) gained 26 seats in parliament (out of 150), while the opposition Christian Democratic Appeal (Christen Democratisch Appel, CDA) increased its number of seats from 29 to 43. The LPF and CDA, together with the VVD, formed a new coalition government. The government’s relationship with the social partners soon became tense: the social partners did not agree with government proposals to amend the Occupational Disability Insurance Act (Wet op de Arbeidsongeschiktheid, WAO), abolish subsidised employment schemes, make cutbacks in the civil service, and reform severance pay, savings and pension schemes (NL0207103F).

The new government collapsed in October 2002 (NL0211101N) following conflict within the LPF. The electorate thus returned to the polls for the second time within a year on 22 January 2003 to vote for a new parliament. The CDA received the most votes, gaining 44 seats, followed closely by the PvdA (42 seats). The LPF, which had been plagued by internal conflict during its term of office, lost significant ground and managed to hang on to only eight of its 25 seats. The traditional political parties thus succeeded in winning back most of the Dutch electorate. New coalition talks began.

Collective bargaining

In comparison with 2001, no significant changes took place during 2002 with respect to the number of collective agreements or the level at which they were negotiated.

Pay

In line with the government's policy, pay moderation was once again a key issue for employers in 2002, a factor which made negotiations with trade unions difficult throughout the year (NL0204103F). Collective agreements concluded in 2002 provided for an average 3.8% wage increase, compared with 4.4% in 2001, which suggests a degree of moderation. The lowest increases in 2002 were 2.9% in industry and transport, and the highest in agriculture, at 4.5% (according to data from the Labour Inspectorate,Arbeidsinspectie). The average wage increase in the care sector was 1.1 percentage points higher than in the commercial sector and 0.3 percentage points higher than the average increase for civil servants.

Given the changed, more difficult, economic conditions, the government urged renewed wage moderation as the year progressed. In response, the unions stated that they were not prepared to moderate their wage demands as long the government kept to its proposals to abolish subsidised employment schemes and amend the WAO occupational disability legislation (NL0207103F). However, in their annual autumn consultations in November 2002, the government and the social partners concluded a'social agreement' for 2003. The two largest trade union confederations, the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) and the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV), agreed to accept a wage increase of 2.5% for all employees in 2003, despite their earlier demands for 3.5% based on inflation and rising pension contributions (NL0212101N). This was the first time in 10 years that such a centrally agreed wage ceiling had been decided. For its part, the government released EUR 1 billion to meet the demands of the social partners in areas such as reducing social security contributions. Compromises were reached on government plans to amend subsidised employment schemes (NL0206104F) and the tax-exempt employee savings scheme (spaarloon), and it was agreed that the WAO legislation would remain unchanged.

Collective agreements increasingly contain provisions on flexible and performance-related pay. In February 2002,KPMG Consulting published the findings of research into variable pay in the Netherlands (NL0203101N). The study found that, since 1997, the number of collective agreements providing for variable pay has increased fourfold; 30% of agreements concluded in 2000 include provisions on the topic. Individual performance-related payment methods are the most common form of variable pay, followed by payments linked to team performance. According to a Labour Inspectorate survey of 125 collective agreements concluded in 2001, flexible pay provisions, mainly in the form of an end-of-year bonus, were found in 78, while more than half of the agreements (65) included a'motivating' pay policy. The social partners disagree on the effects of performance-related pay, with employers generally more positive than unions.

Working time

The 36-hour working week remained the norm set in collective agreements in 2002, while average collectively agreed normal weekly hours stood at 37 hours.

Job security

Job security was not a particularly prominent issue over the year. Although the economic situation is difficult and uncertain, attention has focused on skills shortages and labour market bottlenecks. Employers link job security to the issue of employability and pay by performance (see above).

Equal opportunities and diversity issues

2002 saw no significant new bargaining developments in the area of equal opportunities and diversity. On the specific issue of equal pay for women and men, the social partners and government agree that pay inequalities should be abolished. In 2000, within the bipartite consultative Labour Foundation (Stichting van de Arbeid, STAR), employers and unions agreed an opinion on a government plan for achieving equal pay. The partners stated that they would cooperate in planned government campaigns, ensuring that the information reaches the relevant groups and institutions. In 2001, the STAR developed a checklist on equal pay - to be used by negotiators at branch and company level, individual employers, human resource managers and members of works councils - serving as the social partners' own instrument for use when implementing, applying or evaluating pay systems. However, despite these efforts, research published in autumn 2002 (NL0211103F) indicated that, although there had been some narrowing of the gender pay gap between 1998 and 2000, it still stood at 15% on average (down from 18% in 1998). Around a third of the gender wage gap remains after factors such as education and experience have been discounted, and researchers highlight labour market segregation into'male' and'female' sectors. The same research found that the wages of foreign nationals from outside western Europe in the Netherlands lag behind those of Dutch nationals.

Legislative developments

Due to the fall of two governments (see above under'Political developments'), there were few legislative developments in the field of industrial relations in 2002. However, in November, the EU fixed-term contracts Directive(1999/70/EC) was transposed into Dutch law. In July, the revisedEU Directive (98/50/EC) on the transfer of undertakings was transposed, with the major change being that in future pension schemes will also be transferred to the acquiring employer (NL0301106F). The effect will be that the number employees not covered by supplementary pension arrangements (NL0106135F) will further decrease. Legislation giving employees the right to refuse to work on Sundays was passed in both the upper and lower chambers of parliament and will come into effect in 2003 (NL0301101N). However, the Confederation of Netherlands Industry and Employers (Vereniging Nederlandse Ondernemers-Nederlands Christelijk Werkgeversverbond, VNO-NCW) has advised its members to seek provisions in collective agreements which could prohibit employees from refusing Sunday working. Trade unions have attacked VNO-NCW for what they view as an attempt to circumvent the law through collective agreements.

Otherwise, many legislative proposals related to employment (NL0202108F) were still pending at the end of the year. The same can be said for proposals in the field of company law that will have effects on the position of works councils (NL0204102F).

The organisation and role of the social partners

There were no major changes to the organisation and structure of social partner organisations in 2002. Serious financial problems afflictedFNV Bondgenoten, the largest trade union affiliated to the FNV federation. FNV Bondgenoten, which organises workers in industry and commercial services, was created by a merger of four unions in 1998, one of whose aims was decreasing costs - however, this has not happened. From the start, FNV Bondgenoten faced financial problems resulting from the combination of decreasing membership, excessive personnel costs, shrinking capital due to stock market falls and the need to eat into this capital to cover losses. Various reorganisation measures, which included reducing the union's workforce from 840 to 674 over two years, seem to have had little effect, and financial targets have not been met. The FNV Bondgenoten board submitted its resignation in spring 2002, stating that it could no longer competently guide the reorganisation process or meet financial and savings targets. The anticipated financial shortfall of EUR 4.5 million in 2002 was already exceeded in the first quarter of the year. Staff pensions and member service are at stake, along with another 40 to 50 jobs. At the end of 2002, a crisis management team led by the chair of FNV took control FNV Bondgenoten.

According to figures published in 2002, trade union membership in the Netherlands fell by 0.4% in 2001, while the labour force grew by 1.4%, thus slightly reducing the overall union density. Unions have launched a number of strategies aimed at attracting new members - for example FNV is offering new services and developing new activities for new groups of employees (such as migrants and employees in the information and communications technology sector).

In 2002, the Netherlands' basic legislative framework for collective bargaining was 75 years' old, and the relevant laws have changed little over this period and are still not fundamentally questioned. However, certain provisions of the legislation - notably on extending collective agreements to non-signatory employers and on applying agreements to non-union employees - were increasingly under debate in 2002 (NL0211104F). For example, extension procedures have been questioned in the light of the declining representativeness of unions - 25% of employees are union members, while 78% of employees are covered by a collective agreement.

Industrial action

The general level of strikes was, as usual, low when compared with the European average, while the level of court cases related to industrial action remained high. In August 2002, theCouncil of Europe criticised the high level of court intervention in strikes in the Netherlands (NL0209103F). The context is that the right to strike is not regulated in Dutch law.

In general, there was probably less industrial action during 2002 than in 2001. At the beginning of the year, a series of one-day strikes took place in the childcare sector, mainly over pay issues. In December 2001, the childcare employers, represented by the Social Employers' Group (Maatschappelijk Ondernemers Groep, MOG), reached agreement with a small union,De Unie, which accepted a 5.5% pay increase over two years. This was not accepted by the two largest unions organising the bulk of employees-AbvaKabo, the public sector union affiliated to FNV, andCFO, the public sector union affiliated to CNV - and organised strikes. Mediation took place in January 2002 and a more favourable compromise agreement was achieved (NL0201177N).

Another notable strike occurred in July at theKLM airline, when'wildcat' action by ground engineers resulted in many flights being delayed or cancelled. The strike, which cost the company EUR 9 million, was aimed at forcing KLM to pay salaries comparable to those of the ground engineers' US counterparts. It led to the company taking court action to recover these losses from the individual strikers (NL0210101N).

June 2002 saw the first strike to be held in the Dutch information and communications technology (ICT) sector, when employees atGetronics held a one-day strike over a pay dispute. Despite the low level of unionisation in this sector, the strike was recognised and supported by FNV Bondgenoten,CNV Dienstenbond and De Unie (NL0207102N). The current wave of restructuring and redundancies in the sector also prompted unrest among employees in other ICT companies

Employee participation

The implementation in 2002 of the revised EU Directive (98/50/EC) on the transfer of undertakings (see above under'Legislative developments') introduced an obligation on employers to inform and consult employees over transfers, in the absence of a works council or other form of staff representationNL0301106F).

With regard to the implementation of the EU Directive(2001/86/EC) on employee involvement linked to the European Company Statute (ECS) (EU0206202F), in 2002 the government asked the advisory Social and Economic Council (Sociaal Economische Raad, SER) for advice on several points. There were no initiatives on the transposition of 2002 EU Directive (2002/14/EC) on national rules for informing and consulting employees (EU0204207F) This Directive is unlikely to have major consequences for the Netherlands because this area is already thought to be adequately regulated by works councils legislation.

During the course of 2002, there were two significant court rulings on works councils. First, the Supreme Court (Hoge Raad) further narrowed the scope of influence for works councils in the government sector (NL0004189F). Second, the s-Hertogenbosch court ruled that works councils have a'right of consent' concerning the introduction of share-option schemes for employees.

Recent research indicates that, in general, works councils are well accepted in the Netherlands (NL0203102F). At the same time, however, mounting problems have arisen, relating to issues such as a lack of interest in works councils among employees and the ability of individual works council members to perform their duties, which affects the performance of the works council as a whole. The legislation governing works councils is due to be evaluated in the near future.

Telework

2002 saw no specific response in the Netherlands to theagreement on telework signed in July 2002 by the EU-level central social partners (EU0207204F), which is to be implemented by the national social partners in the Member States (by July 2005). There were also no other new developments concerning telework during the course of the year. It is generally estimated that teleworkers account for between 1.5% and 7% of the working population in the Netherlands.

Vocational training

Vocational training is a topic that has been high on the agenda of the social partners since 2000, when they agreed that employers will invest more in employee training in return for unions moderating wage demands (NL0107137F). The government supported this agreement by facilitating the training investment of employers through tax measures.

In October 2002, the bipartite Labour Foundation published a report on training efforts (NL0212103F), in which it explicitly refers to the'joint framework of actions for the lifelong development of competencies and qualifications ' agreed by the EU-level social partners in March 2002 (EU0204210F) . The report states that almost all collective agreements include arrangements on training - eg training provisions were included in 121 of 125 agreements surveyed by the Labour Inspectorate in 2001. Training provision has become wider, aimed at general employability rather than strict vocational training. The arrangements are at present integrated into a broader personnel policy (including'qualitative' employability and'age-conscious' policies). In addition, new policy instruments such as personal training plans and personal training budgets have been developed. Around 90% of companies have implemented training; among small companies, this figure rose from 53% in 1993 to 85% in 1999. In 2001, around 5% of labour costs was spent on training..

Labour Inspectorate referred to by the Labour Foundation shows that half of all collective agreements include arrangements on the training of young employees by combining work with training. Further, more than half of collective agreements include arrangements for individual development plans, employability and the stimulation of career progress.

New forms of work

The number of employees with a full-time or part-time open-ended contract has remained relatively stable over the last 30 years, standing at 80% in 1970 and 77% in 1998. In 1999, the Flexibility and Security Act came into force, increasing employment security for'flexible' employees, including temporary agency workers (NL9901117F andNL9906146N).

2002 saw considerable debate on theEuropean Commission’sdraft Directive on temporary agency work (EU0204205F). In September 2002, the (then) government announced that it supported the Commission's proposal. The General Association of Temporary Work Agencies (Algemene Bond Uitzendondernemingen, ABU) criticised the proposal, fearing a loss of flexibility in the labour market. The FNV union confederation, on the other hand, expressed strong support for the draft Directive.

During the year, there was a call by the FNV for a reintroduction of permits for temporary work agencies, which abolished in 1999 (NL9706116F). A new collective agreement was also signed for the temporary agency work sector. The agreement is valid for nine months from September 2002 and includes a pay rise of 2.75%. Finally, during 2002 there were repeated calls by temporary agencies’ organisations to cut sickness benefits for temporary agency workers. ABU has proposed paying the collectively-agreed extra 20% of normal pay on top of the legal minimum sick pay of 70% only after a worker has been employed by the agency for a certain minimum period of time. The Dutch Association of Temporary Work Agencies (Nederlandse Bond van Bemiddeling en Uitzendondernemingen, NBBU) concluded an agreement on this subject with a small union organisation in August 2002.

In November 2002, the EU Directive on fixed-term work was implemented into Dutch law (see above under'Legislative developments'). No major modifications of existing legislation were necessary.

Other relevant developments

2002 saw a change in industrial relations in the Netherlands. With the collapse after eight years of the'purple' coalition of PvdA, VVD and D66, the new CDA/LPF/VVD government sounded a new note. The proposed policies of the new government - such as reform of WAO disability benefits and private pensions, abolition of subsidised employment schemes, and cutbacks in public employment and severance pay - attracted sharp criticism from the social partners (see above under'Political developments'). After modification of the proposals in autumn 2002, the social partners and the Minister of Social Affairs reached a'social agreement' for 2003 (see above under'Collective bargaining'). Nevertheless, the social climate has changed and altered the relationship and cooperation between the social partners. After the fall of the government within three months, the further developments of industrial relations will depend upon the new government to be formed following the election in January 2003.

Because their standpoints were so far apart, the government and the social partners agreed in their autumn 2002 consultations that the perennially controversial WAO occupational disability insurance legislation should remain unchanged. In March 2002, the SER, on which the social partners are represented, had reached an agreement on reform of the WAO. The underlying reasoning behind the SER proposals was that investing in prevention and assisting disabled employees back into the workplace should be a more attractive and easier option for employees and employers alike. To this end, the period of sickness absence preceding WAO eligibility should be extended to two years. A distinction was also drawn between fully disabled individuals, who should retain the right to claim full disability benefit, and partially disabled individuals (NL0201113F). However, the government then issued proposals which ignored the SER's advice, eliciting angry reactions from both unions and employers (NL0207103F). It now remains to be seen what the new coalition government will do with the SER's recommendations. Meanwhile, the WAO's problems remain unchanged.

Outlook

After several years of prosperity, the success of the Dutch economy would appear to have come to an end. Unemployment is rising fast and economic and productivity growth are hovering around zero. The Netherlands has also dropped from eighth to the 15th position in the latest list of the most competitive countries drawn up by theWorld Economic Forum. Within Europe, the Netherlands has often been cited as an example of good practice over the years, in areas such as wage moderation, vastly reduced unemployment, increasing labour participation especially amongst women and a relatively flexible labour market. In the meantime, however, the economic performance of the Netherlands appears to have fallen far below the EU average.(NL0212103F).

Although the January 2003 elections resulted in a victory for the'traditional' parties, the new coalition government - whatever its composition - will face difficult times. The problems mentioned above have been exacerbated by lower government income through taxes. Severe budget cuts have been announced, which in sectors such as education will almost certainly fuel industrial conflict. The restructuring of the WAO disability benefit system will be high on the agenda, both in parliament and among the social partners. Further, a proposed reform of the healthcare system may be an important new issue in the years to come.

In terms of bargaining, although the unions federations are prepared to agree to moderate wage rises in 2003 (NL0212101N), they will not accept the zero increases some employers are seeking. The rising costs of pensions and healthcare will be another issue in the 2003 collective bargaining round. According to a traditional proverb, the Chinese wish their enemies'interesting times': 2003 will be interesting, for both employers and unions. (Marianne Grünell and Robbert van het Kaar, HSI)