Manifesto calls for companies to pay out unemployment benefits

Companies should be made financially responsible for unemployment benefits, according to a manifesto signed by a coalition of employee and employer representatives. The proposal, initiated by two prominent members of the Dutch Trade Union Federation (FNV), has met with both approval and criticism from the various political parties. Labour experts have also expressed some doubts about the proposal. Nevertheless, all parties agree that through this initiative, FNV has made an attempt to end the deadlock regarding dismissal rules in the Social and Economic Council.

Proposals of manifesto

A coalition of employee and employer representatives has spoken out in favour of the privatisation of unemployment benefits. In their manifesto – which leading players in public administration and, in particular, in the social security administration, have signed – the representatives argue in favour of reducing the government’s role in the social security system. According to the manifesto, centrally formulated rights, which offer everyone the same provisions in varying circumstances, should be replaced by rights which enable individual citizens to remain financially secure. The government’s role should be limited to determining the conditions for benefits and to establishing standards. Implementation of new rules should be passed over to the social partners.

Representatives of the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), Vice-chair Ton Heerts and federation member Henk van der Kolk, who initiated the manifesto, are of the opinion that companies must pay unemployment benefits after dismissing employees. Benefits should be paid not only during the first half year of unemployment, but during the entire period as set out by the Unemployment Insurance Act (Werkloosheidswet, WW). The underlying idea is that, in a situation of having to dismiss employees, companies will invest more in the education and retraining of (former) employees and in intensifying mediation efforts to help them find other work. These investments in preparing former employees for their futures would be cheaper for employers than paying unemployment benefits.

Privatisation of occupational disability benefits

The proposal follows the recent change with regard to the Sickness Benefits Act and long-term occupational disability. Companies have mainly become financially responsible for the payment of such benefits. Following the shift of responsibility, absenteeism rates have fallen significantly. Companies can insure themselves against the costs of occupational disability or they can opt to bear the financial risk themselves. FNV representatives stipulated in their proposal that they would like to see the same financial coverage in relation to unemployment benefits, with responsibility for the payment of unemployment benefits being removed from the public sphere and also privatised.

Political reaction

The political parties gave a mixed response to the FNV proposal in relation to the WW. Two government parties, the Christian Democratic Party (Christen Democratisch Appèl, CDA) and the People’s Party for Freedom and Democracy (Volkspartij voor Vrijheid en Democratie, VVD), along with the largest opposition party, the Labour Party (Partij van de Arbeid, PvdA), indicated that they found the proposal interesting. CDA believes that placing an emphasis on training employees threatened with dismissal is very important for their future chances of employment. As far as financing is concerned, CDA commends the idea of linking the amount of the premium to the number of employees requiring unemployment benefits. A negative point, which VVD highlighted, is the fact that unemployment is directly related to economic cycles. Therefore, it questioned whether employers should be held responsible for having to dismiss employees. Members of PvdA have reservations about shifting the entire responsibility to the social partners. The experience with the occupational disability insurance has not been positive, as there was far too high an influx of recipients.

However, these criticisms do not detract from the fact that various political parties believe the FNV proposal is worth studying. It is hoped that the proposal might be able to form a bridge between the conflicting opinions of the social partners about the dismissal rules (NL0606039I). Representatives of the social partners in the Social and Economic Council (Sociaal-Economische Raad, SER) are on completely opposite sides: trade unions want to maintain the current system, while employers want greater flexibility of the dismissal rules. Such flexibility is not entirely unfeasible, but it will mean that employers will then be expected to take greater responsibility for unemployment benefits, to invest more in the ‘employability’ of employees and to actively assist them in finding other work.

Commentary

In addition to the responses from political parties, labour experts have also commented on the proposal put forward by FNV. A central issue of their criticisms is who should bear the financial responsibility for unemployment benefits. On the one hand, there is the call for more individualisation, i.e. by the employee. Employees should arrange their unemployment benefits themselves, for example in the form of a basic group insurance and with supplementary, individual insurance. At the same time, others believe that the proposal over-emphasises individual responsibility of employers and that they should not be held responsible for the unemployment entitlements of their employees. This is closely related to the influence of economic cycles, over which individual companies have little or no control.

The idea of premium differentiation in relation to the number of employees has, in particular, raised questions. If companies have to dismiss personnel, they will be confronted with this extra financial burden. In addition, it makes a significant difference whether a large or small company is affected. For instance, small companies cannot carry such a burden. If the risk was instead arranged at a group level – for example, by sector or industry – the advantage of the direct pressure is lost.

In general, the proposal has been welcomed, but also sharply criticised. Nevertheless, all parties agree that through this initiative, FNV has made an attempt to end the deadlock regarding dismissal rules in the SER negotiations.

Marianne Grünell, Hugo Sinzheimer Institute (HSI)