A new report from the European Commission examines the incidence of short-time working across the European Union and in particular the use of this mechanism during the economic crisis as a means of avoiding job losses. The report focuses on state-sponsored schemes, but also shows where the social partners have played a role in determining schemes. It found significant variations in the operation of short-time working schemes between Member States.
Study findings
In June 2010, the European Commission (Directorate-General for Economic and Financial Affairs and Directorate-General for Employment, Social Affairs and Equal Opportunities) issued a report, in the form of an occasional paper (742Kb PDF), on short-time working arrangements as a response to cyclical fluctuations, focusing on developments during the recent economic crisis.
High use of short-time working schemes
It finds that publicly sponsored short-time working schemes have been ‘intensively used’ during the recent crisis, ‘to prevent otherwise profitable enterprises from going bankrupt, and to avoid unnecessary labour shedding’.
However, the report also states that the extended use of short-time work can support declining sectors, thus delaying their restructuring. Short-time working schemes should therefore be ‘associated [with] an efficient unemployment benefits system that promotes labour reallocation’.
Variation in schemes across countries
The report finds that there is significant variation in the operation of short-time working schemes throughout the EU. These differences relate to the coverage of the schemes, the level of wage compensation and contributions paid by the state. It classifies the schemes as follows.
- In nine Member States (Bulgaria, the Czech Republic, Hungary, Latvia, Lithuania, the Netherlands, Poland, Slovakia and Slovenia) where there was no scheme before the crisis, publicly supported short-time working has been introduced on a temporary basis to stabilise employment. Compared with countries that have long-standing programmes, those introduced in these countries are typically less generous in terms of duration and benefits, and impose stricter conditions of eligibility. However, their coverage is wider in general.
- In almost all countries with well-established short-time working schemes, which usually give workers on open-ended contracts access to short-time working, the coverage of schemes has been extended to atypical workers (in Austria, Belgium, France, Germany and Luxembourg). In Italy, coverage was temporarily extended to employees in companies previously excluded from short-time working.
- The maximum duration of short-time working compensation was temporarily raised in this same group of countries, in some cases quite significantly (for example, from three to 24 months in Austria and from six to 18 months in Germany), with the exception of Italy and Portugal, where compensation for a reduction in working hours during periods of slack demand can in any case be paid for a relatively long period.
- Conditions for the use of short-time working schemes were eased in Austria, Germany and Luxembourg. In Denmark and Germany, employers were also given more flexibility in the management of schemes.
- Compensation for income lost due to reduced working hours was increased in France and Finland, where the schemes were previously less generous than the unemployment benefits, but also in Belgium, where the two types of benefits were broadly similar. To increase employer incentives to take up short-time working schemes, cuts in employer social security contributions or higher subsidies to employers were also applied in Austria, Belgium, Germany, Luxembourg and Spain.
- Incentives for training were included in almost all new short-time work measures, both in countries where short-time working schemes already existed and in those where new schemes were established on a temporary basis. However, participation in training was compulsory for workers on short-time work in only four of the countries where the scheme was newly introduced (the Czech Republic, Hungary, the Netherlands and Slovenia). Incentives for training were the main element of the new measures adopted in Ireland, Latvia, Poland and Portugal.
Role of social partners
The report focuses on state-sponsored short-time working schemes, but also mentions where social partners have played a role in shaping schemes. For example, in Belgium, additional funds managed by the social partners at sector level, to which employers and employees contribute, help to finance short-time working schemes. Sectoral funds managed by the social partners and designed to help small and craft companies also exist in Italy.
In some countries, such as Austria, a social partner agreement must be concluded before short-time working can be introduced in a company (irrespective of whether or not there is a works council in the company). The agreement should set out the coverage, time limit, extent of hours not worked, employment guarantee and retention period, level of short-time work benefits, training measures and qualification benefits (if relevant).
Commentary
The report highlights the diverse approaches to sponsored short-time working in EU Member States during the recent severe economic crisis. It shows that Member States have either increased their offer of short-time working or introduced new schemes where none previously existed.
Although there are clear benefits associated with short-time working, in terms of allowing viable companies to bridge a temporary downturn without having to resort to redundancies, the report highlights the fact that short-time working arrangements are intended as a temporary measure only and should not therefore be used for a sustained period. This may result in delaying necessary restructuring and supporting industries that are not viable in the longer term.
Andrea Broughton, Institute for Employment Studies (IES)