Reform of special pension schemes near completion

Prime Minister François Fillon provoked strong trade union reaction in September 2007 when he declared that the reform of special pension schemes was ready to go ahead. This reform had been part of Sarkozy’s presidential election programme. After several strikes in October and November 2007, particularly in the transport sector, a process of tripartite bargaining was finally set in motion, leading to initial results in the form of decrees and company agreements by the end of the year.

The reform of the special pension schemes (FR0703029I), which was announced by the government on 9 September 2007, concerns the electricity and gas industries – namely the French Electricity Board (Electricité de France, EDF) and the French Gas Board (Gaz de France, GDF) – along with the Paris Public Transit Authority (Régie Autonome des Transports Parisiens, RATP) and the French national railways (Société nationale des chemins de fer français, SNCF).

The trade union confederations, in particular the General Confederation of Labour (Confédération générale du travail, CGT), have a strong presence in these companies. Therefore, imposing such a reform would be bound to lead to industrial conflict, as was the case in 1995 when the then liberal-right wing government first attempted to do so. As the current government had repeatedly insisted on its determination, it seemed difficult to avoid any confrontation in this respect. However, last year’s scenario is somewhat different from previous episodes.

Basic principles of special pension reform

The Minister of Labour, Industrial Relations and Solidarity, Xavier Bertrand, was given responsibility for reforming the special pension schemes available to public sector workers in certain sectors of the economy. During a period of two weeks, he met with trade unions in the sectors and companies concerned, as well as employers and members of parliament.

Two types of special pension schemes were concerned, notably:

• those of employees of public establishments of an industrial and commercial nature managing a public service – such as EDF, GDF, RATP, SNCF, Bank of France (Banque de France), Paris National Opera Company (Opéra national de Paris) and the national theatre (Comédie française). The rules of the pension schemes in these establishments are approved by the state;

• those concerning occupations with a special employment status, regardless of whether the employer is public or private – such as miners, seafarers, solicitors’ clerks, as well as elected members and staff of the French parliament (Assemblée nationale) and Senate (Le Sénat).

On 10 October 2007, Minister Bertrand presented a document to the trade unions outlining, on the one hand, the government’s responsibilities in terms of defining the ‘general principles of harmonisation’ of the special pension schemes with the civil service scheme and, on the other hand, those reform aspects which must be negotiated within the companies concerned. Nonetheless, Minister Bertrand had already highlighted the points that are to be dealt with in the context of the pension reform. These include:

• increasing the number of contribution years to 40, as is the case for the civil service – this is a non-negotiable point of the reform;

• introducing a system of pension ‘penalties’ and ‘bonuses’, depending on whether a worker has contributed for fewer or more than the required number of years;

• revising the regulation of retirement imposed by the employer, which is currently prohibited before the age of 65 years in the private sector, except if a sectoral agreement exists providing for special dispensation (FR0507105F);

• reassessing the minimum number of years required in a job to be entitled to a special pension scheme;

• reviewing the system of credited pension contributions (bonifications) and compensation for arduous work, notably through ‘prevention measures, working conditions, pay, work organisation and management of career paths’;

• indexing pension benefits in line with price inflation;

• taking bonuses into account when calculating pensions;

• making back payments for pension contributions for study years or incomplete contribution years;

• harmonising family advantages with those of the civil service.

A second round of consultations was to be held in October, with the aim of having finalised the pension reform by the end of 2007, before starting the discussions on ‘issues for 2008’.

Reasons for reforming the special pension schemes

Although the special pension schemes are pay-as-you-go schemes, these schemes (Régimes spéciaux de sécurité sociale) are different from the general pension scheme and those aligned with the general one. They combine the basic pension provision with complementary occupational schemes, most of which authorise retirement before reaching the age of 60 years. Pension entitlements are calculated on the basis of wages paid over the last months at work. Finally, a minimum period of 15 years of service in the job – known as ‘de stage’ – is required in order to benefit from a special pension scheme.

Apart from the civil service pension schemes, the relationship between economically active people and pensioners is much less favourable in the special pension schemes than in the general one. This is due to the unfavourable trend in numbers of employees in some of the occupations concerned. The accounts of these pension schemes are therefore balanced out by a system of compensation – either a generalised compensation between all pension schemes and/or an additional compensation between the special pension schemes.

The so-called ‘Balladur’ law which was adopted on 22 July 1993 did not affect any of the special pension schemes. Attempts to reform these special schemes in 1995 led to a major industrial dispute and the resignation of the then prime minister, Alain Juppé. With the exception of the civil servants’ pension schemes, which cover civil servants in central and local government bodies, hospitals, as well as workers employed by the state (ouvriers d’État), the special pension schemes were not affected by the pension reform of 21 August 2003 (FR0306104F).

Nevertheless, over the past decade, changes have been made to the organisation and funding of pensions of several special schemes. Following on from changes in the special pension schemes of the French telecommunications provider, France Télécom, in 1997 – along with the pension schemes of the electricity and gas industries, including EDF and GDF, in 2005 (FR0411102N), and the RATP in 2006 – it is now the turn of the postal services provider, La Poste, to modify its special pension schemes to bring these into line with the provisions of the general pension scheme. It should be noted, however, that the special pension schemes of the aforementioned establishments have been attached to, but not incorporated into the general pension scheme. If they were fully incorporated, the provisions of the special scheme would disappear and the general pension scheme would become the only scheme that deals with the pension entitlements of the insured workers.

In the case of attaching a special pension scheme to the general one, the special scheme continues to exist and deals directly with the insured person. Such an attachment relieves employers of some of their pension commitments, because the general scheme and also the special pension schemes – the Association of Salaried Employees’ Supplementary Pension Schemes (Association des régimes de retraite complémentaire de salariés, ARRCO) and the General Association of Managerial Staff Pension Institutions (Association générale des institutions de retraite des cadres, AGIRC) – take care of basic pension entitlements. In such a case, employee and employer contributions are brought into line with the general scheme and a compensating adjustment is made through the payment of an ‘entrance fee’, in order to make up for the additional costs borne by the Old Age Insurance Fund (Caisse nationale d’assurance vieillesse, CNAV). Employers only have to pay for the specific rights that they provide for their employees. This separation enables public companies to act in conformity with the International Financial Reporting Standard No. 19.

Moreover, in line with an agreement that was signed with six trade unions on 24 November 2006, the provisions of Banque de France’s pension scheme were brought into line with those of the civil service in January 2007, notably regarding the number of contribution years and revaluation of pension entitlements.

Strike action against reforms

The reform of the special pension schemes was high on Nicolas Sarkozy’s presidential election agenda and had already led to negative reactions from the trade unions during the election campaign. After Prime Minister François Fillon’s announcement, criticisms of the absence of prior negotiations with the social partners added fuel to those regarding the fundamental issues related to the reform of pension schemes.

Following the official statements of the sectoral trade unions affiliated to the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO) and the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT) against the reform of the seafarers’ pension scheme, Minister Bertrand finally confirmed that this scheme would remain unchanged. The confederations and other trade unions had often underlined the arduous working conditions of seafarers in both the merchant and fishing fleets.

Regarding the reform of the energy workers’ special pension schemes, the trade unions affiliated to the Independent Union – Solidarity, Unity, Democracy (Union syndicale – Solidaire, Unitaire, Démocratique, SUD), CGT and CGT-FO reacted quickly by calling a strike on 18 October 2007. Following this strike call, independent worker representatives and the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC) at RATP called for a ‘major day of intersectoral action and strikes’ on 18 October. The turnout was massive in the energy sector and the two public transport companies, RATP and SNCF – particularly in the latter, where the participation rate was greater than the highest levels recorded in 1995, with some 73% of workers going on strike.

On 31 October, six of the eight railway trade unions announced another day of strike action for 13 November, which would be renewable on a 24-hour basis, following votes at daily general assemblies of the workers concerned. CFDT joined the strike call a week later, while the Independent Train Drivers’ Union (Fédération générale autonome des agents de conduite, FGAAC) abandoned the movement, after it signed a separate agreement that they had negotiated with management.

On 2 November, a similar call was launched by the trade unions representing workers at EDF and GDF, followed by those at RATP.

Tripartite negotiation on pension reform

CGT is the biggest trade union confederation in the four major companies concerned – EDF, GDF, RATP and SNCF. The confederation’s General Secretary, Bernard Thibault, had announced that CGT refused to negotiate at company level if a common reform framework was not negotiated with the government beforehand.

On 6 November, Minister Bertrand called for negotiations at company level concerning specific arrangements; however, three key principles of the reform were not up for negotiation, notably the:

• increased number of contribution years for entitlement to a full-rate pension;

• introduction of penalties;

• indexation of pension benefits according to price inflation.

In order to unblock the situation, which was dangerous for the trade unions, CGT proposed a compromise on the eve of the first day of strike action: the confederation agreed to negotiate at company level, provided that a government representative was present. The government accepted this proposition the following day, under the precondition that there should at least be a partial return to work.

Widespread strike action continued over nine days in October and November; however, on 14 November, 62% of workers were on strike at SNCF, 44% at RATP and 37% at EDF, which was a lower turnout than on 18 October. On 16 November, a majority of railway worker trade unions demanded a tripartite meeting at national level, in order to define the framework for company-level bargaining. SNCF management presented a document setting out the details of bargaining topics and the timetable – eight round table discussions were planned over the period of one month. The discussions began at SNCF and RATP on 21 November. The majority of trade unions welcomed the beginning of the tripartite discussions, and 42 out of 45 general assemblies at SNCF decided to suspend the strike action. Workers in the other companies also gradually returned to work in the days following the start of the tripartite negotiations.

The bargaining process was planned to last one month, with a view to reaching agreement on a system of compensation that was both acceptable to employees and in line with the principles imposed by the government. Nevertheless, the mobilisation against the reform of the special pension schemes did not come to an end during that time. The trade unions continued to call for sporadic strike actions to influence the bargaining process. Five trade unions at SNCF thus called for a demonstration for 22 January 2008; some RATP, EDF and GDF workers joined the march on the day.

First decrees adopted implementing the reform

Three decrees stipulating the reform of the special pension schemes were published on 15 January 2008 for SNCF and RATP, and on 22 January for the electricity and gas industries. These will come into force on 1 July 2008. The decrees set out the fundamental principles for bringing the special pension schemes of these companies into line with the civil service pension scheme. They also outline the measures that had already been agreed in the course of bargaining at company level, more specifically:

• 41 years of contributions beginning in 2016 to qualify for pension entitlements at a full rate;

• pension benefits calculated on the basis of wages paid over the last six months preceding retirement;

• introducing pension penalties, which means that pension entitlements will be reduced if quarterly contributions are missing;

• indexing pension benefits according to price inflation;

• terminating the right to impose retirement under the age of 60 years;

• maintaining for current staff the supplementary credit of pension contributions for ‘active’ and ‘unhealthy’ service.

To date, bargaining is continuing on the terms and conditions under which arduous work is to be taken into account with respect to pension entitlements – especially regarding future recruits, arrangements for those who are at the end of their career and the introduction of time-saving accounts. On 4 December 2007, the social partners and the government reached a compromise at SNCF regarding pay measures to accompany the pension reform; these measures consisted of reorganising the pay scale and introducing an additional grade for length of service. In the electricity and gas industries, CFE-CGC, CFDT and CFTC signed a sectoral agreement on career paths on 21 February 2008.

Two further decrees reforming the special pension schemes of the Paris National Opera and the national theatre were published on 6 March. At the Paris National Opera, management and the CGT, CFDT, CFTC, CGC and CGT-FO signed an agreement for pursuing negotiations on 11 January. These negotiations concern the improvement of pay scales for workers at the end of their careers, as well as the introduction of an occupational pension scheme and a time-saving account. The aim is to reach agreement by May 2008.

The draft reform of the pension scheme for solicitors’ clerks includes the introduction of 40 years’ contribution for entitlement to a full-rate pension and setting the retirement age at 60 years for all clerks by 2018; women will receive the credit of one year’s contributions per child, instead of the current six months. Although CGT-FO has signed the draft decree, CFDT, CFE-CGC and CGT are objecting to it. Nevertheless, the decree was published on 15 February 2008. Up until now, women could retire at the age of 55 years, provided that they had paid pension contributions for at least 25 years; men are entitled to retire at the age of 60 years if they have accumulated 37.5 years of pension contributions. It should be noted that women’s pay and therefore their pension benefits remain lower than those of their male counterparts. In light of this, CFDT is demanding equal pay for men and women in an occupation with a high proportion of women among the workforce: 80% of the 50,000 staff concerned by the pension reform are women.

Commentary

The question of the retirement age in public companies was part of an overall compromise concerning pension schemes, pay, working conditions and work organisation. Thus, if one element of this compromise is changed, then all of its other elements will also have to be re-examined. These elements could have been negotiated before the issue escalated into an industrial dispute. In fact, the question arises whether the dispute could have been avoided. The government did not take any initiative in this regard. On the contrary, it wanted to show that it could deal with a social conflict and strike action and that it was able to impose a reform which was supported by public opinion. At the same time, the trade unions of the companies concerned could not simply give up on such an important issue. However, the trade union confederations were aware of the trap that they could have fallen into: knowing that the government would not back down on its principles, and as they were keen to save their image among private sector workers, the trade unions sought a compromise solution to the situation. The outcome of this dispute is in some ways a first in industrial relations in these major public companies.

Annie Jolivet and Jean-Marie Pernot, Institute for Economic and Social Research (IRES)