Thematic feature - redundancies and redundancy costs

This article examines the procedures and costs involved in collective redundancies in Austria, as well as current trends and debate in this area, as at November 2003.

In November 2003, the EIRO national centres in each EU Member State (plus Norway), were asked, in response to a questionnaire, to give a brief overview of: the procedures and costs involved in collective redundancies - ie the dismissal of a number of employees for economic/organisational reasons (rather than reasons related to the individuals concerned); the levels of, and reasons for, redundancies over recent years; and current debate on the issue. The Austrian responses are set out below (along with the questions asked).

Redundancy procedures

Please outline briefly the statutory procedures involved in making 'collective redundancies' (please indicate how these are defined) in your country, in terms of: information and consultation of employee representatives/trade unions; notification of (or obtaining permission from) public authorities; notice periods to be given to the redundant employees; rules on the order of priority for redundancy or giving special protection to particular groups of employees; and obligations to mitigate the planned redundancies or provide assistance in the form of redeployment, training, outplacement etc (including provisions on 'social plans'). Where collective agreements add to or improve on these statutory provisions, please provide a brief overview of such additional procedures (with examples).

According to §45a of the Labour Market Promotion Act (Arbeitsmarktförderungsgesetz, AMFG), a collective redundancy occurs if the employer plans to reduce the workforce of its establishment by a certain number of employees within a 30-day period. The number of employees depends on the workforce’s size - the planned reduction must affect: at least five employees in establishments regularly employing 21 to 99 employees; at least 5% of the workforce in establishments with 100 to 600 employees; at least 30 employees in establishments with more than 600 employees; or, irrespective of the size of the establishment’s workforce, at least five employees aged over 50. The threshold of dismissals to be qualified as collective redundancies according to Austrian law is thus - with respect to small and medium-sized enterprises - significantly lower than that laid down in the relevant EU Directive (98/59/EC). Any employer planning such workforce reductions must send written notification of the fact to the relevant local office of the Labour Market Service (Arbeitsmarktservice, AMS) at least 30 days prior to the planned first dismissals. A copy of the notification must be forwarded to the works council (if present), which must be consulted on the matter.

If the employer fails to send this notification to the AMS or proceeds with redundancies before a period of 30 days has elapsed from the date of notification, the dismissals concerned are null and void. This is to give all parties involved (ie the employer, the works council and the AMS) time to explore all possibilities for avoiding the planned dismissals or mitigating the effects of those eventually carried out.

The provisions on collective dismissals in §45a of the AMFG cover all kinds of terminations of employment relationships which result from the employer’s initiative (including summary dismissals, cancellation by mutual agreement and even resignation of employees if the employer has put pressure on them). However, the grounds for the termination of the employment relationships are not taken into account by the AMFG. Thus, the only relevant criterion for identifying collective redundancies is the time period in which the accumulated dismissals (as defined above) are carried out.

Even before the employer has notified the planned collective dismissals to the AMS, it has to inform the works council about its intention in advance (AT0309203T). This is because, according to the Labour Constitution Act (Arbeitsverfassungsgesetz, ArbVG), collective dismissals are qualified as a 'major change to the establishment' (Betriebsänderung) entailing serious disadvantages for the entire workforce or a significant proportion of employees. Therefore the employer is obliged to supply the works council with relevant information in particular about all social matters concerned. According to its consultation and co-determination rights, the works council is entitled to call in an expert and to present proposals to the employer in order to prevent, eliminate or mitigate unfavourable consequences for the employees. If the planned workforce reduction affects a significant proportion of the employees, the works council can demand the conclusion of a 'social plan' in the form of an 'enforceable' works agreement. Such social plans - in general - mainly cover financial arrangements for attending or organising retraining schemes and special severance payments for employees to be dismissed.

The employer’s written notification of the planned collective dismissals to the relevant AMS office must contain the following points: the grounds for and the prospective time period of the planned dismissals; the number and job of all regularly employed employees; the number, job, duration of employment, skills, age and sex of the employees planned to be dismissed; criteria for selection of the employees to be dismissed; and planned accompanying social measures to eliminate or mitigate any hardship effects. Moreover, the employer has to prove that it has already consulted the works council in this matter.

The purpose of this obligatory notification to the AMS is that the latter can immediately initiate consultation talks with all parties concerned in order to prevent cases of hardship (in particular for older employees) and to apply appropriate labour market instruments. If the employer and the works council have concluded a social plan, the AMS can agree to reduce the 30-day period (from the date of notification) the employer must observe before proceeding with dismissals. However, this period may also be longer under the provisions laid down in some collective agreements.

Redundancy payments

Please outline the statutory rules on compensation for employees affected by collective redundancies, in the form of minimum notice periods, redundancy pay, severance pay etc - ie what is the level of payment, how does it vary with age, service etc. Where collective agreements add to or improve on these statutory provisions, please provide a brief overview of such additional payments (with examples). Overall, please provide any figures or estimates which may be available on the 'average' or 'typical' level of redundancy pay per employee. Where company practice and/or collective agreements provide for accompanying measures (ie set up an recruitment agency, retraining schemes with employer’s contribution, etc) please give an overview of such schemes.

The general provisions for severance pay also apply to employees who have been dismissed in the course of a collective redundancy programme. The severance pay scheme (which was recently reformed - AT0211203F) obliges employers to contribute 1.5377% of monthly pay for all employees to a separate fund for this purpose from the beginning of the employment relationship until the end. On termination of the employment relationship, employees - if they have at least three years' service - have the option either to take the severance payment at once or to save the entitlement towards a future pension.

Moreover, if a dismissal is made without a substantial reason attributable to his or her culpable conduct, the employee who has been dismissed is entitled to compensation which includes pay in lieu of notice (Kündigungsentschädigung). This is the pay that would have been due up to the end of the relationship under a fixed-term employment contract, or due in the event of dismissal with the required period of notice under an employment contract of unspecified duration. However, if the period of notice pay exceeds three months, the pay may be reduced after this period subject to the dismissed employee’s possible income from other sources.

Many social plans concluded between managements and works councils contain special severance pay regulations providing for extra payments, in particular for vulnerable employee groups such as older and disabled people, who have been included in a collective redundancy.

Redundancy levels

Where this is possible, please give statistics on the number of collective redundancies effected in your country each year from 1990 to 2003 (or the latest year for which data are available). If available, please break down by sector, and the jobs, age and gender of the workers affected. Also, please provide any information on the grounds for collective redundancies - eg company restructuring, closure or transfer/relocation. In response to this question, please give an assessment of trends and developments, even where full statistical information is not available.

Although the AMS has been notified of each collective redundancy by employers at least since 1993 (when the AMFG was introduced), it does not provide any figures on the number of collective redundancies or on the employees concerned for past years. However, it does provide figures for 2003, set out in the table below.

Notifications of collective dismissals to the AMS, January-October 2003
Notifications per month Number of companies concerned Total number of employees concerned Number of female employees concerned Number of male employees concerned
January 131 4,645 716 3,929
February 77 2,580 348 2,232
March 52 1,571 326 1,245
April 152 5,043 1,386 3,657
May 54 2,352 916 1,436
June 50 2,013 460 1,553
July 55 1,898 482 1,416
August 63 2,141 754 1,387
September 147 6,054 616 5,438
October 421 23,282 775 22,507
Provisional total for 2003 1,202 51,579 6,779 44,800

Source: AMS

A quick look at newspaper archives indicates that the main ground for collective redundancies over the recent years has been company restructuring. Closures and relocations of (entire) company sites have been quite spectacular - eg the 2002 closure of the Semperit tyre plant (AT0201209N) - but have not happened very frequently. Although business interest organisations have repeatedly warned that Austria’s unfavourable record of competitiveness (in terms of corporate taxes and non-wage labour costs) in relation to neighbouring countries in central and eastern Europe would result in large-scale business transfers to these countries (AT0310202F), company restructuring has continued to be the most decisive factor for redundancy programmes rather than relocations.

Debate

Please summarise any current debate on the issue of collective redundancies in your country. For example, is this an important topic for trade unions and employers’ organisations and in collective bargaining? Has there been any recent new legislation or proposed legislation on the subject, or the prospect of new legislation - eg to implement EU legislation such as Directive 2002/14/EC on national information and consultation rules (EU0204207F), which requires 'information and consultation on the situation, structure and probable development of employment within the undertaking or establishment and on any anticipatory measures envisaged, in particular where there is a threat to employment'? Has there been any debate on the cost met by the government as a consequence of collective redundancies (ie what is the cost associated with unemployment benefits, training schemes funded by the government etc).

The overriding characteristic of the Austrian economy is the predominance of small firms. In contrast to other small countries such as Switzerland, Finland and Sweden there are virtually no large multinationals with their headquarters domiciled in Austria, and there are also relatively few medium-sized companies. As a result, collective redundancies - even if they affect a high proportion of employees within a company - in general do not affect the hundreds or thousands of employees reported from other countries. However, corresponding to the growing unemployment rates over the last two decades, the number of collective dismissals ( as defined in Austria) has increased.

This development has given rise to debates on the reasons for higher (structural) unemployment. The Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ) emphasises the competitive disadvantages for Austria’s companies due to a higher burden in terms of labour costs and taxes which are forcing them to implement restructuring measures. Trade unions and other labour organisations blame the government’s restrictive budget and economic policy for causing unemployment. They argue that recent austerity programmes have reduced demand as well as the national economy’s production capacities. Moreover, they claim that necessary investments in public infrastructure have been neglected by the government, which has also slowed down economic growth. However, all parties agree that growing unemployment rates resulting from collective dismissals are economically disastrous. The opposition Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ) has computed that one unemployed person costs about EUR 20,000 per year, calculated from accumulated costs of unemployment benefits, the loss of social insurance contributions, and the labour market measures taken by the AMS.

EU Directive 2002/14/EC has had no major influence on the public debate in Austria, since its provisions on information and consultation rules had already been implemented in Austrian legislation. (Georg Adam, University of Vienna)

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