Working time accounts and short-time work used to maintain employment

According to a survey by the Institute of Economic and Social Research, 51% of all companies with 20 and more employees and a works council are affected by the economic crisis. However, only a minority of companies have massively laid off workers. The survey revealed that the two most widespread methods used to cut costs while maintaining employment levels have been working time accounts and short-time work. Nonetheless, cuts in employment have also occurred in various ways.

In November 2009, the Institute of Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) within the Hans Böckler Foundation (Hans Böckler Stiftung, HBS) published new findings (in German) from a special WSI Works Council Survey on the effects of the economic crisis. The survey involved 2,324 works councils and was conducted between July and September 2009. Its results are representative for companies with 20 or more employees and a works council. The survey asked works councils whether the company was affected by the crisis and which measures had been taken to maintain employment and avoid forced dismissals.

Survey findings

Sectors most affected by economic crisis

The survey revealed that 51% of all establishments with a works council are affected by the crisis. The crisis affects in particular sectors like raw materials and investment goods. It is also in those areas of activity where, under the label of safeguarding employment (Beschäftigungssicherung), measures to cut labour costs while avoiding job cuts are most widespread. Whereas 78% of establishments in the raw materials and capital goods sector and 75% of those in the investment goods and durables sector took measures under the label of safeguarding employment, this was the case in only 18% of establishments in the financial services sector.

Cost-cutting measures used

Companies have used a wide variety of measures aiming to tackle the crisis by cutting labour costs while avoiding dismissals. The most widespread measure is the use of working time accounts to reduce effective working time. In total, 30% of companies made use of working time accounts either in the form of a reduction of hours saved in individual accounts or in the form of working time credits which will have to be worked in the future when business recovers. The second most widespread measure is the introduction of short-time work. Other measures include the internal posting of employees and adjusted schemes for paid leave, but also cuts in pay and benefits (Table 1).

Table 1: Usage of various cost-cutting measures short of forced redundancies (% of all establishments)
Measure % of establishments introducing cost-cutting measures
Reduction or expansion of working time accounts 30
Introduction of short-time work 20
Internal posting 14
New schemes for paid leave 13
Cuts in pay 11
Other changes in working time 8
Cuts in benefits 5

Note: Survey covered establishments with 20 and more employees and a works council; multiple answers were possible.

Source: WSI, 2009

Job losses inevitable

Although the number of redundancies was much lower than expected by some observers, there have been job cuts (Table 2).

Table 2: Usage of cost-cutting measures involving job cuts (% of all establishments)
Measure % of establishments introducing cost-cutting measures
A reduction of the core workforce 28
Reduction of temporary agency work 24
Non-renewal of fixed-term contracts 13
Paying compensation for voluntary redundancies 7
Establishment of a so-called transfer agency (Transfergesellschaft) 1

Note: Survey covered establishments with 20 and more employees and a works council; multiple answers were possible.

Source: WSI, 2009

In particular, temporary agency workers were among the first to lose their jobs, but works councils also reported that in 28% of establishments job cuts affected the core workforce. In 14% of establishments, there were forced redundancies.

As far as works councils are informed, in the forthcoming months only a moderate decrease in employment is expected but no massive job cuts. This is in line with expectations of managers surveyed by the Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB) in the second quarter of 2009 (DE0910039I).

Heiner Dribbusch, Institute of Economic and Social Research (WSI)

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