EMCC European Monitoring Centre on Change

Luxembourg: ERM Comparative Analytical Report on ‘Public policy and support for restructuring in SMEs’

  • Observatory: EMCC
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  • Published on: 13 May 2013



About
Country:
Luxembourg
Author:
Vassil Kirov
Institution:

Disclaimer: This information is made available as a service to the public but has not been edited by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Measures and instruments in order to support restructuring in SMEs are usually developed at national level. The country has a large number of instruments in to order to support these companies or their employees in the case of restructuring.

QUESTIONNAIRE

Part 1: Overall policy context

In order to understand better the situation, it is important to recall that Luxembourg is a relatively small economy with a very strong financial sector (accounting for 101,000 out of 352,000 jobs in total). Only 30 organisations in the country have more than 1,000 employees, according to the ITM 2009 report, and many of these are banks or consultancy companies.

1.1. Has there been public or policy debate on the specific challenges for SMEs and/or their employees in restructuring before the global recession of 2008/09? Please specify, for example:

There was a general debate about competitiveness of the country in recent years, already before the crisis. For example, in 2007, the employers’ organisation UEL has published a paper called ‘The Competitivness of the Luxembourg economy: Analysis and Proposals’ (‘Compétitivité de l’économie luxembourgeoise. Analyse et propositions’). In this paper the organisation claims that despite the good ranking of Luxembourg in several international comparisons (based mainly on the performance of the financial sector) the country is losing competitiveness.

• If so, since when (e.g. up to 3 years before, 3-10 years before, longer), at which level (national, regional, sectoral, all of them) and in which form (‘real’ policy debate mirrored in policy documents or rather public debate mirrored in media, or both)?

The debate started in the years before the crisis (2006 – 2007). Part of it is mirrored in policy documents such as the above-mentioned paper or in the annual reports of UEL. The question of the competitiveness started to be discussed in the Tripartite Committee since 2003.

• Which policy areas (for example, SME policy, entrepreneurship policy, employment policy, social policy, regional policy etc.) were involved? Particularly: Does SME policy specifically deal with restructuring? Does ‘restructuring policy’ specifically deal with SME issues?

The employers’ organisation UEL identified several areas that contribute to the decreasing competitiveness of the Luxembourg economy, among them the automatic indexation of wages to the evolution of prices which causes inflation; the worsening of the business environment, the insufficient performance of the education system, etc. SME policy does not deal with restructuring and the ‘restructuring policy’ does not deal particularly with SMEs issues, however there are some instruments (to be examined further in the text) suitable for SMEs.

• Did the public and policy discussions deal with restructuring as such or were specific types or phases of restructuring covered?

Public and policy discussions focus on the anticipation of change and adaptation of business.

• Which were the issues/contents that have been discussed? Which specific characteristics of SMEs in restructuring were considered in this context? Was the specific case of SMEs as subcontractors a topic for discussions?

Not relevant.

• Did the discussions rather deal with the enterprise perspective or with the employee perspective or both?

The discussions related to SMEs deal rather with the employers’ perspective. However the union have their word in the defence of the interest of employees – for example, through the employment preservation plans, etc. (to be developed further in the text).

1.2. Did the global economic and financial crisis of 2008/09 cause any change in focus of the above (for example, increased/decreased focus on SMEs and their employees in restructuring, change in policy areas or issues covered)?

The financial and economic crisis that started in 2008 has had immediate effects on the Luxembourg economy (see more in Thomas, 2010), both in the financial sector and in the industry. The unemployment of the country has increased significantly – in October 2008 it equalled 4.4%, it was already 5.9% in October 2009 and 6.1% in October 2010, to be on similar levels in the following two years. There were attemps to preserve employment since the start of the crisis but these attempts were of ‘general nature’, not targeting on SMEs.

1.3. Are social partners or employers’ and employees’ organisations involved in public and policy debate on restructuring in SMEs?

Social partners are involved in public and policy debate on restructuring in SMEs but the focus was on the restructuring of large companies.

• If so, which (types of) organisations and at which levels?

The national level organisations (both, employers’ and employees’ organisations) were involved in the debates in different tripartite bodies, such as the Conjuncture committee, a body established in 1975. It has meetings twelve times per year and closely analyses and monitors the labour market and social situation in the Grand Duchy of Luxembourg and to report to the government at least once per month among other activities assigned, including examining the employment preservation plans.

• What are their opinions, perspectives, recommendations?

The social partners – with differing perspectives - took part in the adaptation of the various existing measures for the challenges of the crisis, such as the Partial Unemployment Support Measures, the Redeployment units (see more in the Data Base of Eurofound) but alos the measures for youth unemployment, etc. (LU1101011Q)

• Did they succeed in convincing governments or public authorities at various levels of their viewpoints?

The representatives of the employers and the employees were very active in the context of the crisis, helping the government to elaborate adequate measures to accompany restructuring.

Part 2: Support instruments

The public instruments used to support restructuring in Luxembourg are numerous. They could be divided according to different typologies. However, for the objective of the present text they could be classified as measures to maintain employment, measures to develop skills and measures to support businesses.

The main measure used during the crisis period was the partial unemployment. The access to subsidies for partial unemployment depends on the examination of the demand by the tripartite body, the Conjuncture Committee. The widespread use of part-time working (‘partial unemployment’) as an instrument for smoothing the effects of the crisis however was not accompanied by training of the people concerned in order to increase their employability (that is, in spite of there being an incentive to do training during short time working, it was rarely done in practice). The partial unemployment was specifically adapted in order to better respond to the needs of the enterprises during the crisis. During the last five to six years a lot of new instruments were made available in the country in order to contribute to skills development of employees. Together with the existing subsidies for training in the enterprises some new measures were introduced such as the individual holiday for training or the language leave, allowing employees to learn Luxembourgish. Those measures were very often initiated upon demand of social partners. The anticipation efforts for the future skills needed could be also mentioned here. Finally numerous measures exist to support businesses in the country. Initiatives for support of SMEs, development of clusters, promotion of companies’ abroad, attracting investors, linking investors with companies, doing technological watch are among them. Special focus should be put on the strategies aimed at diversifying Luxembourg’s economy.

There are some measures targeted at self-employed or microenterprises, developed in ’Luxembourg: ERM comparative analytical report on Public support instruments to support self-employment and job creation in one-person and micro enterprises’.

2.1. Please provide an overall assessment about how accessible and suitable public and social partner based restructuring support for companies in general are for SMEs or their employees.• Do SMEs and/or their employees generally have access to the available instruments and are these suitable for their specific needs in restructuring?

SMEs have access to the available instruments. Most of the instruments are suitable for their needs (for example partial unemployment, etc.).

• Are there specific (types of) instruments (for example, targeting specific types or phases of restructuring, offered at specific administrative levels) that are more/less accessible and suitable for SMEs and/or their employees that for larger firms? If so, why?

There are some instruments targeted at SMEs but they concern the investments and not the employees – for example, the support of the investment of SMEs (‘aide à l'investissement pour PME artisanales ou commerciales’).

2.2. Do there exist specific public or social partner based support instruments explicitly targeting at SMEs and/or their employees in restructuring? Please specify, for example:

No, there are not exclusive instruments except those targeted at SMEs but they concern the investments and not the employees – for example, the support of the investment of SMEs (aide à l'investissement pour PME artisanales ou commerciales).

• If so, by whom are they offered (public vs. social partners/employers’/employees’ organisations) and at which administrative levels (national, regional)?

Those instruments are offered by the national administration.

• Are the activities of different support service providers coordinated? If so, how and how well does this work?

There are different support providers and their activity is partly coordinated by the government and through the mechanisms for tripartite cooperation. However there is not always link between the business development support and the support to employees in terms of restructuring.

• Which phases of restructuring do they target?

Anticipation.

• Which types of restructuring do they target?

They target cases of internal restructuring or business expansion.

• Do they target SMEs in general, or specific size classes, sectors, regions, legal forms, roles (for example, as subcontractors) etc.? Do they target employees of SMEs in restructuring?

They target SMEs in general and, the skill development, the employees too.

• What type of support do they provide? What specific challenges for SMEs in restructuring do they address?

The provide support to companies that have difficulties to modernise their equipment, that need guidance and help on economic, legal, fiscal, social and administrative matters.

• Is there some information about how well they are known among SMEs and their advisors and about how they are generally assessed by the SME sector? What are their strengths and weaknesses? Are there recommendations for improvement?

There is no information how well known are these measures among SMEs and their advisor.

Part 3: Good Practice

  • Name of the instrument in national language and English:

Chômage partiel (Temporary Unemployment).

  • Justification for selecting this measure as Good Practice:

The measure is a good practice because it allowed many Luxembourgish enterprises (including many SMEs) to preserve employment.

  • Date of launch of the instrument and end date (if applicable):

mid 1970s

  • Initiator/administrator (organisation):

The State

  • Other involved actors and their roles:

The social partners - employers' or employees' organisations (through their participation in a tripartite body).

Companies have to apply for partial unemployment compensation to the so-called Conjuncture Committee (Comité de Conjuncture), a tripartite body consisting of members representing the government (the Ministry of Economy, the Ministry of Labour and the Ministry of Labour and the Ministry of Finance), representatives of employers’ organisations and trade unions.

  • Source of funding:

National funds and partly funded by the employer.

  • Target group/eligibility/coverage:

Large companies and SMEs; Subsidies may be allocated to employers who, rather than carrying out redundancies, undertake to maintain the employment relationship with their personnel and to pay them compensation for lost salary caused by reduced working hours. The compensation for the non-worked hours amounts to 80% of normal pay. This measure may be used when all other possibilities within the company have been exhausted. These include a reduction in the use of agency-supplied temporary workers, time off in lieu of overtime, use of remaining holiday entitlement, and internal redeployment.

  • Phase of restructuring targeted:

Management

  • Type of restructuring targeted:

Internal restructuring

  • Purpose/content/characteristics/description of services provided:

In Luxembourg there are four types of partial unemployment available as mentioned in the Eurofound Report (Luxembourg: partial unemployment compensation): namely partial unemployment due to economic reasons (chômage partiel de source conjoncturelle), partial unemployment due to economic dependency (chômage partiel pour lien de dependence économique), partial unemployment due to force majeure (chômage partiel – cas de force majeure) and partial unemployment due to structural reasons (chômage partiel de source structurelle) (http://www.cdc.public.lu/instruments/3_differents_regimes/index.html). In the case of the crisis, subsidies may be allocated to employers who, rather than carrying out redundancies, undertake to maintain the employment relationship with their personnel and to pay them compensation for lost salary caused by reduced working hours. The compensation for the non-worked hours amounts to 80% of normal pay. It is provided for all non-worked hours except the first 16 hours per month for full-time workers, or the first eight hours per month for part-time workers; the employer takes responsibility for payment of 80% of normal salary for these hours. There is, however, a ceiling on the public reimbursement, which is set at 250% of the minimum wage. The amount of time off work under short-time working arrangements may not exceed 50% of the normal monthly hours worked.

  • Outcome of the instrument (e.g. number of beneficiaries, effects):

On average, approximately 5,500 people were in partial unemployment each month in 2009. In November 2010, the Conjuncture Committee approved 42 out of 64 demands for partial unemployment. A total of 1,767 employees benefit from the partial unemployment measures, out of 3,765 persons employed by those companies. In 2012, still a number of enterprises demand such a partial unemployment support (see http://www.wort.lu/fr/view/36-entreprises-introduisent-une-demande-d-octroi-de-chomage-partiel-503dd392e4b0f8051008d4e7).

  • Strengths/success factors of the measure:

The strengths of the measure are related with its large scope and use and with the participation of the social partners in the examination and monitoring of its application.

This measure allows companies to retain their skilled and qualified workforce. It leads to consensus and cooperation among the social partners. Extensive monitoring is involved.

  • Weaknesses/bottlenecks of the measure:

There is a limited uptake of training during partial unemployment due to organisational problems. Agency workers and interns (apprentices) can not benefit from this measure.

  • Was the instrument formally monitored/evaluated? If so, please specify (by whom, how, what were the finding and how were the findings used etc.)

The instrument was monitored in the framework of the Conjuncture Committee.

  • Weblink:

http://www.guichet.public.lu/fr/entreprises/entreprise-difficulte/sauvegarde-emploi/chomage-partiel-technique/conjoncturel/index.html

  • Information sources used for filling this section:

http://www.eurofound.europa.eu/publications/htmlfiles/ef10634.htm

Commentary

Luxembourg is a very small country and measures and instruments are usually developed at national level. The country has a large number of instruments in order to support companies or employees in the case of restructuring (for example in the data base on Public instruments to support restructuring in Europe - ERM Report 2011 are identified 18 instruments from 394 for all the EU countries covered).

Vassil Kirov, IR Share

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