Thematic feature - redundancies and redundancy costs

This article examines the procedures and costs involved in collective redundancies in Denmark, 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 Danish 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).

Statutory procedures

The EU Directives oncollective redundancies (now consolidated in Directive98/59/EC) were implemented by the Act on notice etc in connection with collective redundancies (Act no. 414, June 1994) - sometimes called the Collective Dismissals Act (Lov om Kollektive Afskedigelser). The provisions of the law apply when:

  • companies employing 20-100 workers plan to make at least 10 employees redundant within 30 days;
  • companies employing 100-300 workers plan to make at least 10% of employees redundant within 30 days; or
  • companies employing over 300 workers plan to make at least 30 employees redundant within 30 days.

Dismissals due to the employee fall outside the scope of the law, though in collective redundancies individual employees cannot be blamed for the redundancy.

Where collective redundancies are announced, negotiations between the company and the employees or their representatives (DK0309102T) must take place as early as possible with a view to either totally avoiding redundancies or limiting them as much as possible. The company must give written notification to the employees or their representatives, setting out:

  • the reason for the redundancies;
  • the number of employees affected;
  • the type of employees affected; and
  • the time period during which the redundancies are foreseen to take place

A copy of the notification must be sent to the Regional Labour Market Council (Regionale Arbejdsmarkedsråd, RAR).

If the company, after negotiations with the employees or their representatives, chooses to carry out collective redundancies as defined in the Act, it must inform the RAR, which may take measures to assist the workers concerned. Thereafter, 30 days must elapse before the redundancies can come into force, or eight weeks in cases where 50% of the employees in a company with more than 100 employees are affected, unless otherwise agreed in a collective agreement. Ten days at the latest after this information has been sent to the RAR, the latter must receive a letter setting out the names of the affected employees, who are informed at the same time.

When the RAR receives the first notification of the employer's intentions, the Public Employment Service (Arbejdsformidlingen, AF) is involved. The AF contacts the company in order to evaluate the possibilities for reducing the problems arising in connection with the announced redundancies. It can set up special retraining schemes, and the regional AF in question is also involved in finding new jobs in the area for the redundant workers

Collective agreements

The text of the Collective Dismissals Act is incorporated into a protocol to the collective agreement in industry/manufacturing, which is the dominant sectoral agreement in the Danish private sector. Most collective agreements include an obligation to involve the local trade union in the preliminary negotiations about collective redundancies. Furthermore, in the event of closure of an establishment, employers are obliged to draw up social plans regarding the training and/or redeployment of the redundant employees. Central cooperation agreements between the social partners provide for the establishment of cooperation committees in companies (DK0309102T) . The cooperation agreement between the Danish Employers’ Confederation (Dansk Arbejdsgiverforening, DA) and the Danish Confederation of Trade Unions (Landsorganisationen i Danmark, LO) provides for such committees in companies with more than 35 employees, and their rights include information over major changes and any proposed restructuring.

§8 of the basic agreement between LO and DA gives workplace trade union representatives (shop stewards) special dismissal protection. Their employment relationship cannot be terminated during the notice period, and in collective redundancies due to closure, the shop steward must be present at the workplace until the last day of operation.

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.

No special compensation in the form of additional redundancy pay is provided for in the Collective Dismissals Act. However, employees receive full pay for the duration of their notice period. For white-collar workers, there are statutory minimum notice periods, which vary with the length to service as follows

  • one month's notice for those with under six months' service;
  • three months' notice for those with service of between six months and two years, nine months;
  • four months' notice for those with service of between two years, nine months and five years, eight months;
  • five months' notice for those with service of between five years, eight months and eight years, seven months; and
  • six months' notice for those with service of over eight years, seven months.

For blue-collar workers, collective agreements set notice periods, which in most cases are similar to the statutory periods for white-collar workers.

If a dismissed employee faces unemployment, the employer must pay an amount equivalent to their unemployment benefit for the first and second day of unemployment (under the terms of the Act on unemployment insurance)

In cases where the employer fail to give notification of planned redundancies according to the Collective Dismissals Act or the provisions of collective agreements (see above), it is obliged to pay compensation to the employees (of 30 days' pay or eight weeks' pay where 50% of the employees are made redundant in a company with more than 100 employees)

Employment protection agreements

Some collective agreements, especially at local level, contain special rules on employment protection in the event of company closures or collective redundancies. Employment protection agreements (tryghedsaftaler) are especially present in sectors characterised by structural industrial change, such as the food industry. For example, the current agreement in the slaughterhouses sector (DK0302102F) between the Danish Food and Allied Workers’ Union (Nærings- og Nydelsesmiddelarbejder Forbundet, NNF) and the Confederation of Danish Industries (Dansk Industri, DI) contains employment protection provisions. In the event of company closure or collective redundancies, workers with more than four years' service receive redundancy/severance pay of DKK 17,500 (EUR 2,300), with a further DKK 1,500 (EUR 200) for every additional year of service.

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.

The Danish labour market authorities provide data on the number of notifications received of collective redundancies in line with the Collective Dismissals Act. Table 1 below sets out the figures for redundancies involving under 50% of the workforce and table 2 the figures for those involving over 50% of the workforce. The former type of notification is more common than the latter. There was a rise in both types over 2001 and 2002, which dropped off to some extent in 2003.

Table 1. Notification of collective redundancies involving under 50% of the workforce, 1996-2003
. 1996 1997 1998 1999 2000 2001 2002 2003
Total number of notices 166 111 135 196 162 246 248 198
- due to closure 15 4 9 5 9 12 4 12
- due to restructuring 151 107 126 191 153 234 244 186
Number of employees involved 6,872 4,825 7,337 9,819 7,035 11,028 11,014 8,945
- due to closure 922 193 588 793 288 672 55 283
- due to restructuring 5,950 4,632 6,749 9,026 6,747 10,356 10,959 8,662

Source: Danish labour market authorities.

Table 2. Notification of collective redundancies involving over 50% of the workforce, 1996-2003
. 1996 1997 1998 1999 2000 2001 2002 2003
Total number of notices 49 48 73 68 56 71 92 74
- due to closure 31 35 44 57 41 47 67 42
- due to restructuring 18 13 29 11 15 24 25 32
Number of employees involved 3,202 3,451 4,354 4,088 3,646 3,853 5,009 3,799
- due to closure 2,156 2,667 2,737 3,440 2,578 2,965 3,854 2,228
- due to restructuring 1,046 750 1,617 648 1,068 888 1,155 1,571

Source: Danish labour market authorities.

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).

There is no current, specific debate on collective redundancies in Denmark, though the topic is brought up during collective bargaining in the form of employment protection agreements. However, the many company restructurings and closures over the past two years - in sectors such as mobile telecommunications, the food industry, the windmill industry, shipyards and electronics - have received media attention, especially when the number of redundancies has been particularly high, or the focus has been on the struggle for market share in businesses such as telecommunications.

Directive 2002/14EC is not currently a topic for public debate. Its implementation is still subject to consultation among the social partners and the ministries involved. Transposition is not expected to be problematic with regard to information and consultation requirements over restructuring and its employment consequences.

With regard to the costs associated with unemployment benefits following collective redundancies, there has been a general discussion in parliament as well among the social partners over whether funds should be set aside for special training schemes, and how large such funds should be. There has also been some debate on whether more attention could be focused on preventing of larger-scale redundancies. Debate over'good corporate governance' has also touched on this subject. Some critics have stated that globalisation is often used as an automatic excuse for company relocations to lower labour-cost countries or major restructuring. (Carsten Jørgensen, FAOS)

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