Agreement on temporary layoffs reached in manufacturing

Due to the current economic crisis and situation in the labour market, a general agreement on temporary layoffs and training has been reached between the central social partners in Sweden’s manufacturing industry. Temporary layoffs are normally prohibited in Sweden and the settlement has caused disagreements among trade unions. While the Union of Metalworkers has welcomed the agreement, Unionen considers it a short-sighted solution.

The financial crisis and weakening demand has affected Sweden’s manufacturing industry in particular and necessitated action by the social partners. The Union of Metalworkers (IF Metall) states that 25% of their members risk unemployment if action is not taken. As a result, a general agreement on temporary layoffs and training was reached on 2 March 2009 between the social partners, in an attempt to rescue the jobs of many employees within the manufacturing industry. The rules of the general agreement must, however, be applied through a local agreement. Although temporary layoffs are normally prohibited in Sweden, this agreement gives employers an opportunity already obtained by many of their counterparts in Europe.

Details of agreement

The new general agreement on temporary layoffs and training was reached between IF Metall and the following employer organisations: the Association of Swedish Engineering Industries (Teknikföretagen), the Swedish Industrial and Chemical Employers’ Association (Industri- och Kemigruppen) and the Metal Group (Metallgruppen). The agreement is valid until 31 March 2010.

An agreement was also reached on 10 March 2009 between IF Metall and the Association of Motor Industry Employers (Motorbranschens Arbetsgivareförbund, MAF).

The general agreement allows for shorter working hours, even though layoffs are normally not permitted in Sweden. According to the general agreement, employees can be temporarily laid off from work while keeping their job. During this time, the employee will receive a payment of at least 80% of their normal salary. The salary will be paid according to the time actually worked.

The agreement also contains the following provisions:

  • if an employee is free one working day a week, their total salary will be reduced by a maximum of 20% – in other words, the free day will remain unpaid;
  • employees who work two days a week and are free three days a week during ordinary working hours will have their total salary reduced by a maximum of 20%;
  • employees with free time for four hours a week will face a maximum reduction of 10% of their salary;
  • local parties can agree on training provisions for the workers instead of free time.

Local agreement at Volvo

Two weeks after the general agreement was signed, the first local agreement was reached at Volvo. According to a spokesperson of Volvo Verkstadsklubb, Mikael Sällström, the agreement provides an alternative to dismissal s and has made it possible for Volvo to keep 1,000 employees, who would otherwise have lost their jobs (see Dagens Arbete (DA) article (in Swedish), 13 March 2009).

Reaction of social partners to agreement

According to IF Metall’s Collective Bargaining Chief, Veli-Pekka Säikkälä, Volvo represents a good example of how to avoid dismissals in companies facing declining sales volumes (see DA news article (in Swedish), 13 March 2009). The severe crisis in the economy has necessitated these agreements, insists IF Metall. The general agreement is a tool that can be used over a shorter period of time as an alternative to further dismissals. At local level, it offers the possibility to reduce working hours, avoid more dismissals and maintain the competitiveness of Swedish industry, so that when the economy improves, people can quickly return to their jobs. The agreement should also be seen as a way to save strong companies from bankruptcy. IF Metall considers that all employees in the manufacturing industry must take responsibility and help to ease the effects of the current economic crisis. The trade union also highlights that the agreement involves a reduction in working hours and not a pay cut.

In contrast, Unionen, the trade union for professionals in the private sector, is critical of the agreement and considers it as a way of reducing wages. Unionen argues that the economy is suffering from a demand crisis and therefore that a wage decrease would only make the situation worse. If one company undertakes a wage reduction, more firms will be forced to do so in order to remain competitive. Unionen contends that this will not eliminate the risks of dismissals and bankruptcy. Moreover, there is a danger that the reduction in working hours will not be temporary, but will become a more permanent arrangement. The union believes that the main problem that needs to be addressed is, in fact, the shortage of demand. It argues that temporary layoffs are a short-sighted solution that will not improve the situation in the long term.

Karolin Lovén, Oxford Research

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