Tripartite 'autumn agreement' covers broad social reform agenda

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The Dutch government and the social partners concluded a new 'social agreement' on 5 November 2004, against a background of wide-scale trade union protests. The 'autumn agreement' contains an almost complete socio-economic agenda for the years ahead, covering topical issues such as early retirement and 'life-span leave' arrangements, occupational disability insurance and unemployment insurance. Controversy surrounding wage moderation has also been clarified by the agreement. Commentators see the agreement as reflecting an explicit choice on the part of the government to cooperate with the social partners, following a year of very cool relations.

Consultations in spring 2004 between the government and the social partners became derailed on 18 May (NL0407101N) on the issue of early retirement and a proposed 'life-span leave' scheme (levensloopregeling) enabling workers greater scope to save and manage periods of time off over their careers (NL0304103F). The government then returned to its plans on this issue despite criticism from the social partners as well as pension funds and the Council of State (Raad van State) (NL0406102F and NL0409105F). In response, the trade union movement stated that it no longer felt bound to the wage freeze included in the autumn 2003 tripartite 'social agreement' (NL0310103F). Furthermore, the unions organised a wave of industrial action in autumn 2004, culminating in a 300,000-strong demonstration on 2 October, which appeared to serve as a turning point (NL0409102N and NL0410101N)

The government resumed negotiations, initially with the trade unions in particular. These focused on a broad agenda, and reforming the Occupational Disability Insurance Act (Wet Arbeidsongeschiktheid, WAO) turned out to be an especially thorny issue. On this topic, the Minister of Social Affairs and Employment, Aart Jan de Geus, had already passed over the social partners before the spring 2004 consultations by setting aside several fundamental recommendations made by the tripartite advisory Social and Economic Council (Sociaal-Economische Raad, SER) in 2002 (NL0204101N and NL0201113F) and 2004 (NL0404101N). After the spring consultations, amendments were also announced to the Unemployment Insurance Act (Werkloosheidswet, WW). The fact that an SER recommendation was not even requested on this topic annoyed the social partners. Finally, the government further inflamed matters by announcing that provisions in collective agreements concerning wage increases would no longer be extended to non-signatories (NL0408104F). However, a tripartite social agreement was reached on 5 November, in which the government made concessions to the social partners, and especially the trade unions, with respect to all these points (NL0411101N).

The 2004 'autumn agreement' was signed by the government and the trade union and employers' organisations represented on the bipartite Labour Foundation (Stichting van de Arbeid, STAR). These include: on the employer side, the Confederation of Netherlands Industries and Employers (Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW), the Dutch Federation of Small and Medium-sized Enterprises (Nederlandse Vereniging van het Midden en Kleinbedrijf, MKB) and the Dutch Confederation of Agriculture and Horticulture (Land- en Tuinbouworganisatie Nederland, LTO Nederland); and on the trade union side, the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), the Christian Trade Union Federation (Christelijke Nationaal Vakverbond, CNV) and the Federation of Managerial and Professional Staff Unions (Vakcentrale voor Middengroepen en Hoger Personeel, MHP).

Early retirement and life-span leave arrangements

Discussions regarding life-span leave arrangements took place mainly within the context of the linked issue of scrapping tax incentives for early retirement. The autumn agreement reflects this. As well as the fact that life-span leave arrangements may be used to finance early retirement, a number of old-age pension arrangements directed specifically at early retirement have been introduced. A number of changes have also been made to the planned life-span leave arrangements in response to criticism made by parties such as the Social and Cultural Planning Board (Sociaal Cultureel Planbureau, SCP, 2004) that the scheme would be especially attractive for people in higher-income brackets, men, older employees and childless couples. The agreement contains the following points with respect to early retirement and life-cycle leave arrangements.

  • The government upholds its decision to scrap tax incentives related to early retirement.
  • The proposed life-span leave arrangement will be broadened and made more attractive. The scheme allows employees to use part of their gross annual wage to fund long-term leave. This money can be used for various purposes, such as care duties, training or retiring earlier. It was previously proposed that a maximum total sum of 150% of the employee's gross annual wage could be saved over their career, but it has now been agreed that employees can accrue 210% of their earnings (the equivalent of three years' leave at 70% of the last-earned salary) for all types of leave, which can also be utilised for early retirement. The maximum annual accrual percentage remains 12% of pay. To make participating in life-span leave arrangements more attractive for lower income earners, the government will be introducing a tax-free bonus of up to EUR 183 a year. Collective agreements may make provisions on the financial contributions of employers towards leave arrangements. While life-span leave arrangements will be individual, as planned, the scheme will be more attractive to participate than under the previous government proposal, because the employer’s contribution will also be tax deductible. Although non-participants in the scheme will also have a right to the agreed employer’s contribution, they will have to pay tax on this amount.
  • Two new tax incentives will be introduced concerning retirement pensions. First, the social partners will be given the option of specifying in occupational pension schemes that employees who have accrued 40 years of contributions in the fund and are aged 63 or above are entitled to a pension of 70% of their last-earned salary, even if actuarial recalculation of the accrued pension would result in a pension level of less than 70%. An arrangement such as this would be eligible for tax support and is especially important for people who start work at a young age, such as construction workers. Additionally, it will be possible to accrue more towards the pension based on tax incentives over a 15-year period, making it possible to reach a pension level of 100% of the last-earned salary, which may then be used to stop work earlier at a lower percentage of the last-earned salary.

Occupational Disability Insurance Act

Earlier objections made by the social partners via the STAR during discussions relating to the government's occupational disability benefit (WAO) plans in spring 2004 (NL0404101N) failed to persuade the latter to alter its plans. However, in the autumn agreement the government has made concessions by almost completely accepting the two most recent recommendations put forward by the SER on the WAO (in 2002 and 2004). The most significant changes to the cabinet’s plans are as follows.

  • Full and partial occupational disability will be governed by two different legal regimes - the Fully Disabled Workers Income Scheme Act (Wet Inkomensvoorziening Volledig Arbeidsongeschikten, IVA) and the Partially Disabled Workers Resumption of Work Act (Wet Werkhervatting Gedeeltelijke Arbeidsgeschikten, WGA). For this reason, the criteria for assessing if a person is fully occupationally disabled play a significant role. Unlike in its earlier plans, the government now understands this definition to include not only those people who stand no chance of recovering in medical terms but those who stand only a marginal chance of recovery. Only if their health actually improves will such people fall within the scope of the regulations governing partial occupational disability.
  • In 2006, benefits for fully occupationally disabled claimants will be increased by 5 percentage points to 75% of the last-earned salary, providing the number of new WAO entrants falls to 25,000 or below.
  • The emphasis in the new WGA is on the resumption of work coupled with supplementing wages. In the original government plans, partially disabled individuals would receive wage supplements only if their remaining earning capacity was being fully utilised. Agreement has now been reached that this will be the case even if only 50% of earning capacity is utilised.
  • In the original government proposals, all occupationally disabled people under the age of 55 were to be re-examined on the basis of strict assessment criteria, potentially leading to the loss of disability benefits for a group of around 110,000 WAO claimants. By lowering the age threshold for re-examination to 50, some 30,000 fewer people will now be affected, according to calculations carried out by FNV. Moreover, under the adjusted plan, people who lose their benefits and cannot find immediate employment will be offered the possibility to undertake a work reintegration scheme.

Unemployment Insurance Act

The government wanted to scrap unemployment benefits for the short-term unemployed and deduct all or part of the compensation awarded to dismissed employees from their subsequent unemployment benefits (NL0410103F). These plans have been postponed. Instead, the SER has been asked to make a recommendations on a 'future-proof' Unemployment Insurance Act (WW) system by 1 April 2005. The government will be receptive to these recommendations if they seek to achieve the same decrease in the number of unemployment benefit claimants as envisaged in its own plans.

Wage trends

Based on an expectation that the social partners will adopt a degree of restraint regarding wage increases, the government is prepared to withdraw its proposal no longer to extend the pay provisions of collective agreements.

Commentary

The tripartite agreement reached in November follows a period of decidedly cool industrial relations. It even appeared to some as if the government was deliberately attempting to marginalise the role of the social partners, especially that of the trade union movement, by flatly refusing to take any of their standpoints into consideration with respect to various issues related to reforming the social security system. The government sought confrontation by explicitly disqualifying the trade union movement as an outdated institution. Employers and some researchers also asserted that, given its choices, particularly on the topic of early retirement, the trade union movement showed itself to be a conservative bulwark that mainly supported the interests of the older, white, male employee (the average union member) and doubts were expressed about its future role. The massive protests launched by the trade unions in autumn 2004, however, certainly put paid to such notions. Especially during the huge demonstration held on 2 October at Museum Square in Amsterdam, it became evident that there was widespread support for protests against the government’s policy. The unions attribute realisation of the autumn agreement to these protest actions and triumphantly refer to the 'Museum Square agreement'. Prime Minister Jan-Peter Balkenende sees the agreement as proof of the rehabilitation of the consensual Dutch 'polder model'. FNV adopts a slightly different angle, arguing that the experience of autumn 2004 show that the polder model deserves reassessment, based on more recourse to industrial action. Either way, in reaching this agreement the government has opted for dialogue with, and therefore support for, the social partners. In achieving this agreement, it is the trade unions in particular that have reasserted their place as fully-fledged negotiating partners. The altered opinions of the government are also reflected in the significant role awarded to the SER by the agreement.

However, these considerations say little about the contents of the agreement and its consequences for the social security system. The government justifiably asserts that its agenda of social reform has remained essentially intact, with a transition from a collective to individual approach and an emphasis on 'activation' instead of benefits being the main points, alongside wage moderation. Nonetheless, the success of trade unions in softening the blow cannot be seen as limited by any means. However, the exact scope cannot yet be established because:

  • several measures need to be agreed at decentralised level - will employers be prepared to contribute towards life-span leave arrangements? Will early retirement provisions be made for employees with 40 years of service?;
  • regarding individual life-span arrangements, it remains to be seen in practice if the preferences of employers will be influenced as a result - ie is the arrangement attractive enough to invite broad-based participation, making it financially viable?; and
  • the success of activation policy for those those outside the labour market (reintegration instead of benefits) is partly determined by the economic situation.

(Marian Schaapman, HSI)

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