Thematic feature - redundancies and redundancy costs

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This article examines the procedures and costs involved in collective redundancies in Italy, 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 Italian 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).

Generally, labour surpluses that give rise to workforce reduction procedures are managed by employers through two statutory instruments, depending on whether the reduction is temporary or permanent. In the case of temporary suspension of the employment relationship, the enterprise may use the Wages Guarantee Fund (Cassa integrazione guadagni, Cig), while in the case of definitive termination of the employment relationship, the enterprise may make collective redundancies. The two instruments are not alternatives to each other, but can be adopted in two successive stages if an enterprise which has placed workers on the 'extraordinary' Cig (see below) is unable to re-employ all the workers suspended once the period of suspension has concluded.

Wages Guarantee Fund

The main instrument for the management of temporary structural (or otherwise) labour surpluses is the Wages Guarantee Fund. This divides between the 'ordinary' Cig and the 'extraordinary' Cig. In both cases, when the period of suspension of work has finished, the employment relationship resumes on a regular basis.

Intervention by the ordinary Cig can be requested only by industrial enterprises (for blue-collar and white-collar workers and middle management) and for agricultural and building workers. The Fund intervenes in the event of a downturn or suspension of production due to temporary difficulties affecting an enterprise because of 'transitory events' or 'temporary market situations' to be followed by the 'resumption of normal production activity'. Payment of an allowance to the workers concerned (the income supplement, see below) is conditional on completion of a procedure whereby the employer must apply for intervention by the Fund to the provincial branch of National Institute of Social Security (Istituto Nazionale della Previdenza Sociale, Inps - see below) following prior consultation with trade unions. Prior consultation with the unions is not necessary in the case of objectively unavoidable events which make the reduction or suspension of production inevitable.

The extraordinary Wages Guarantee Fund (Cigs) is reserved for the employees of industrial enterprises with more than 15 employees. Also eligible to apply for intervention by the Cigs are: commercial enterprises with more than 200 employees; publishing companies with any number of employees, and service enterprises, artisanal enterprises and cooperatives (all with more than 15 employees) connected to industrial enterprises with workers placed on the Fund. Unlike the ordinary Cig, the Cigs is intended to handle 'severe situations of labour surplus' and it intervenes in cases of:

  • restructuring (technological change), reorganisation (change of corporate organisation), conversion (change of activity) or a company’s economic difficulties of particular social importance as regards employment; or
  • the initiation of particular procedures by the company, such as bankruptcy, liquidation, or going into 'extraordinary' administration.

The necessary condition for intervention by the Cigs is that the enterprise must draw up a plan for the resumption of its activity and to protect jobs, even to a partial extent. Moreover, the workers to be laid off must be selected according to specific criteria (in compliance with the principle of direct and indirect non-discrimination) and it is obligatory to rotate suspensions, except for technical/organisational reasons, which the competent authority may reject. The procedure for activation of the Cigs involves a phase of trade union consultation and an administration phase. With regard to the former, an employer intending to place workers on the Cigs holds talks with the company-level unions (or in their absence, those most representative locally) for joint examination of the company’s situation. The focus of these talks is: the plan which the enterprise intends to implement in order to resume production; the number of workers to be laid off; the duration of their suspension; the criteria for identifying the workers to be suspended; and the plan for rotating workers still employed among the production units affected by lay-offs. As regards the administration phase, the application for intervention by the Cigs (to be sent to the provincial Labour Offices and to the Ministry of Labour) must be accompanied by the company’s recovery plan, which cannot be of more than two years’ duration (although it may be extended in exceptional cases). This plan is examined and approved by the Ministry of Labour.

Collective redundancies

When the staff cuts are permanent due to production downsizing or the transformation or discontinuation of the business, the employer may apply the regulations on collective redundancies, providing that the following conditions are met:

  • the enterprise has 15 or more employees;
  • the enterprise intends to make redundant at least five employees within a period of 120 days; and
  • the redundancies are to be made at the 'same production unit' or at 'several production units in the same province'.

Enterprises with fewer than 16 employees (which are not covered by these regulations) may make 'multiple dismissals for justified objective reasons'- ie individual dismissals of several workers.

An employer intending to begin the collective redundancy procedure must first communicate this intention to the company trade union representatives or to the most representative national sectoral unions. Following this communication, the unions may ask for a meeting with the employer in order to explore alternatives to dismissals, such as 'job-security agreements' (contratti di solidarietà, see below), the flexible management of working time, or the possibility of transferring the workers concerned to other jobs (even if of a lower grade). If it is not possible to prevent the staff reduction, besides indicating the number and the job profiles of the redundant staff, the employer must also comply with a set of criteria when selecting the workers to be dismissed. These criteria are established by collective agreements on the basis of principles such as non-discrimination. If collective agreements do not specify these criteria for selection, the following statutory ones apply:

  • family responsibilities;
  • seniority; and
  • technical-productive and organisational exigencies.

Once the workers to be made redundant have been selected, the competent public authorities are informed - the Regional Labour Office (Direzione regionale del lavoro) and the Regional Employment Commission (Commissione regionale per l’impiego).

Both workers made redundant to reduce labour surpluses through collective and individual dismissals (the latter for 'just cause' also in enterprises with fewer than 16 employees), and workers not re-employed by the enterprise once they have completed a period on the extraordinary Cig, are enrolled on availability list s (liste di mobilità). Enrolment on the lists takes place following notification to the Regional Labour Office by the enterprise. The availability lists are intended to facilitate the worker’s re-entry to employment also by means of special vocational retraining programmes such as those organised by local employment agencies. Besides the economic benefits for workers of the availability lists (see below), employers that take on available workers from the lists are eligible for financial incentives, while the workers have the option of requesting their entire 'availability allowance' in a lump sum (the intention being to encourage self-employment or cooperative arrangements).

In order to prevent a decrease in employment levels due to collective dismissals, company-level collective bargaining may stipulate job-security agreements. These allow working hours (daily, weekly or monthly) to be reduced according to production requirements, and they may also be used simultaneously with the extraordinary Cig (although they must apply to workers other than those laid off). Job-security agreements expire after 24 months, and during this period the state pays, via the Inps, an allowance amounting to 60% of the pay lost by the worker as a result of the reduction in their working time. Job-security agreements may be utilised for blue-collar workers, white-collar workers, middle managers and cooperative members hired on any type of contract (except for training/work contracts). The advantages for the employer consists of a series of reductions in social security contributions according to the contracts stipulated.

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.

Workers on the Wages Guarantee Fund (Cig) and the availability lists gain entitlement to an allowance.

In the case of the ordinary Cig, the allowance (known as income support, or integrazione salariale) is equal to 80% of the worker’s last pay and may be received for a maximum of one year. It is paid by the state (via the Inps), but financed out of contributions by employers. In the case of the extraordinary Cig, the income support again amounts to 80% of the last pay packet and the duration varies from 24 months to a maximum of 36 months over five years (which may be extended to 48 months for complex programmes). The intervention is paid by the state (via the Inps) and it is financed out of contributions by both employers and workers.

As regards collective redundancies and the enrolment of the dismissed workers on the availability lists, the workers involved are eligible for 'relative' income support or 'availability allowance'. Exceptions are the former employees of enterprises with fewer than 16 workers, who although they are enrolled on the lists, are not paid any sort of allowance: the benefits granted to them concern only tax relief designed to facilitate finding a new job. The availability allowance amounts to 100% of the payment made by extraordinary Cig (see above) for the first 12 months, and to 80% thereafter. The duration of the allowance varies according to the worker’s age and the enterprise’s geographical location. It is paid for a period of 12 months, rising to 24 months for workers aged between 40 and 50, and to 36 months for workers aged over 50. The allowance is financed by the state (through the Inps).

In the southern regions of the country with high unemployment rates, and in other geographical areas designated by the competent authorities, workers may continue to receive the availability allowance until they have fulfilled the contribution requirements for entitlement to a pension (so-called 'long-term availability').

As regards vocational retraining schemes for workers on the availability lists, the law allows the regional public authorities to conclude agreements with temporary labour agencies for the organisation of training courses designed to facilitate work re-entry (on temporary contracts) by redundant workers.

Industry-wide collective agreements may introduce improvements with respect to the provisions of the law on the Cig. These improvements usually concern wage supplements paid by the employer to top up income to 100% of the redundant worker’s last pay.

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.

Figures on the hours covered by the Cig are supplied by the Inps - see the table below. The statistics refer to the number of hours of wage supplements authorised by Inps to be paid by the Cig. In contrast to the previous five years, 2001 saw an increase in the number of hours covered by the Cig (a trend which continued in 2002 and 2003, although official Inps data are not yet available). The total number of hours covered (for both blue-collar and white-collar workers) amounted to 152.5 million in 2001, compared with 147.1 million in 2000, a rise of 3.5%. This was the aggregate result of a considerable decrease among white-collar workers (-20.1%) and a sizeable increase among blue-collar workers ( 7.9%). The hours covered for blue-collar workers are always much greater than those for white-collar workers: in 2001 they amounted to 173.4 million, which was 87.2% of the total.

In sectoral terns, the hours covered by the Cig increased in almost all branches in 2001. There was a substantial increase in mechanical engineering and vehicles production, in which large numbers of hours are traditionally covered: the percentage change on 2000 was 28.5%, with the sector's share of the total hours covered amounting to 30.1%. The other sector with an exceptionally large number of hours was building (construction and plant installation), where 43.9 million hours (32.8% of the total) were covered in 2001.

Hours covered by the Wages Guarantee Fund and % changes on the previous year for industrial blue-collar and white-collar workers, by category and economic activity, 1997-2001 (absolute values in 000s)
Category and sector 1997 1998 1999 2000 2001
Absolute values
Blue-collar workers 178,699 145,403 149,106 123,943 133,701
White-collar workers 33,843 27,011 18,028 23,232 18,552
Total 212,542 172,414 167,134 147,175 152,253
Blue-collar workers
Mining, electricity and gas 1,105 889 1,046 1,003 992
Chemicals 11,207 7,280 8,130 6,665 7,146
Non-metallic mineral products 7,955 5,447 5,903 4,125 2,917
Metal products 6,308 3,620 4,514 4,143 4,354
Mechanical engineering and vehicles production 57,967 45,205 42,995 31,341 40,266
Food 5,120 3,479 2,507 2,593 2,719
Textiles 10,579 10,261 15,884 7,167 7,887
Leather goods 6,465 6,216 9,628 6,064 6,262
Garments and furnishings 11,047 8,671 10,949 10,615 7,444
Wood and furniture 2,698 1,715 2,531 1,354 1,469
Paper and printing 2,410 2,402 1,784 1,175 2,590
Other 8,792 5,967 1,239 5,397 3,339
Construction and plant installation 45,825 41,761 40,905 40,826 43,864
Total for industry 177,478 142,913 148,016 122,469 131,248
Other activities 1,221 2,490 1,092 1,474 2,452
Total 178,699 145,403 149,108 123,943 133,701
% variations on previous year
Mining, electricity and gas -72.2 -19.5 17.7 -4.2 -1.1
Chemicals 0.8 -35 11.7 -18 7.2
Non-metallic mineral products -18.9 -31.5 8.4 -30.5 -29.3
Metal products -52.7 -42.6 24.7 -8.2 5.1
Mechanical engineering and vehicles production -13.4 -22 -4.9 -27.1 28.5
Food -5.4 -32.1 -27.9 3.5 4.9
Textiles -26.9 -3 54.8 -54.9 10
Leather goods 9.2 -3.9 54.9 -37 3.3
Garments and furnishings -19.6 -21.5 26.3 -3.1 -29.9
Wood and furniture -16.9 -36.4 47.6 -46.5 8.5
Paper and printing -54.1 -0.3 -25.7 -34.1 120.4
Other 62 -32.1 -79.2 335.5 -38.1
Construction and plant installation -9.5 -8.9 -2 -0.2 7.4
Total for industry -15.2 -19.5 3.6 -17.3 7.2
Other* -24.9 103.9 -56.1 37.3 66.4
Total -15.3 -18.6 2.5 -16.9 7.9

* Agriculture, tobacco growing, transport and communications.

Source: Hours authorised by Inps for wage supplements paid by the Wages Guarantee Fund.

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 reform of employment incentives and of the 'social shock absorbers' which cushion the effects of restructuring and redundancies (IT9802319F), foreseen by Law 144/99 and still not implemented, is widely endorsed by both the employers’ associations and the trade unions (IT0304307F). It is generally believed that the reform should centre on two objectives. The first is that of extending the range of application of the social shock absorbers to small and very small enterprises operating in non-industrial sectors and whose workers are still not comprehensively protected against the risk of unemployment. In fact, protection and forms of support grow increasingly weaker the further one moves away from the sphere of medium and medium-large industrial undertakings, or from geographical areas with chronic unemployment (like the southern regions of the country). The second aim of the reform is to gear interventions to a logic which is less 'welfarist' and more oriented towards to active employment policies for vocational training and work re-entry (switching from enterprises in crisis to new employment opportunities). There is no doubt that in the past Italian legislators have often sought to deal with employment crises by offering income supplements (mainly through the extraordinary Cig) as an alternative to collective redundancies and in order to cushion their social impact, even when it is unlikely that the company in question will return to normal production.

Finally, reform of the social shock absorbers should also take account of the degree of female 'occupational disadvantage' in the various areas of the country, in an attempt to close the employment gap between men and women. (Livio Muratore, Ires Lombardia)

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