Controversy over increased use of employment suspension arrangements

Trade unions have criticised employers’ increased use of so-called ‘suspension’ arrangements since the start of the current economic downturn. They argue that employers may be pressurising employees to accept such arrangements, which are potentially detrimental to the employees’ income and social security. Employers claim that the temporary suspension of employment is often the only means of reducing costs without laying off staff permanently.

Trade unions in Austria have issued claims that, since the beginning of the current global economic downturn, companies have increasingly made use of so-called suspension arrangements (Aussetzverträge). Such arrangements provide for the temporary suspension of employment of individual employees – in such cases, the employer and the employee agree to terminate the employment relationship and to re-establish it after a certain period of time. In formal terms, these arrangements can only be concluded on a voluntary basis. However, according to the Union of Salaried Employees, Graphical Workers and Journalists (Gewerkschaft der Privatangestellten – Druck, Journalismus, Papier, GPA-DJP), employers regularly put pressure on employees to agree to contracts temporarily suspending employment. It is argued that companies may prefer suspension arrangements over other instruments for coping with the consequences of the economic crisis, such as short-time working arrangements. Temporary suspension arrangements tend to be more favourable for the companies both legally and in terms of costs.

Two types of suspension arrangements

In Austria, two types of suspension arrangements currently exist. The first type is the re-employment commitment (Wiedereinstellungszusage), which unilaterally obliges the employer to restore the employment relationship after a certain period of suspension. The second type is the re-employment agreement (Wiedereinstellungsvereinbarung), which is binding for both parties. In the latter case, employees risk losing all claims in relation to the termination of employment – such as severance or holiday pay – if they refuse to resume work, unless they have taken another job. Negligence of information regarding the non-resumption of work by the employee may result in indemnification claims for the employer.

Advantages for employers

For employers, suspension arrangements are cheaper compared with other measures, such as the unilateral termination of employment or short-time working settlements. In using suspension arrangements, employers do not need to enter into negotiations with the works council over short-time working arrangements or a social plan. Moreover, they are not bound to any redundancy notification procedure in relation to the Labour Market Service (Arbeitsmarktservice, AMS).

In addition, the employer is not obliged to observe any formal periods of notice and therefore saves on pay for the period until the termination date, as well as saving on costs such as proportionate bonuses. Furthermore, the company in question does not have to provide any evidence of alleged economic difficulties when offering its employees such temporary suspension contracts. During the period of suspension, all social insurance contributions payable by the employer are also suspended, since the employee is registered with the AMS as being unemployed and is thus eligible to receive unemployment benefit. For their part, the employees affected have to face substantial losses in terms of income and social security, since in addition to regular pay they also lose contributions for retirement pensions and severance pay.

Social partner views

Against the background of the increased use of such suspension arrangements during 2009, the trade unions and the Chamber of Labour (Arbeiterkammer, AK) have warned their members about accepting such ‘offers’ made by employers. The trade unions have reported of numerous cases, particularly in economically underdeveloped regions, where employers have pressurised their workforce to sign these suspension contracts. According to GPA-DJP, the employers would frequently threaten to close down the plant affected if the employees refused to accept such temporary suspension arrangements. The trade union argues that the employers want to unilaterally offload the consequences of the current economic crisis onto the workforce and the AMS, by transferring the social security costs of the staff affected by suspension arrangements to the country’s public employment service. At the same time, GPA-DJP claims that many of the employers using such schemes have continued to distribute dividends and yields to their shareholders – a fact which would indicate that the economic downturn is being used as an excuse to reduce wages. As a consequence, the trade unions demand that the use of suspension arrangements should be legally restricted to cases of actual seasonal fluctuations in the orders of certain companies.

However, the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKÖ) firmly refuses to accept the claim of widespread abuse of suspension practices committed by Austrian employers. Instead, it highlights the importance of this instrument as the fairest means for coping in a flexible manner with the current crisis, thus allegedly preventing many companies from having to resort to business closures and collective dismissals.

Georg Adam, Department of Industrial Sociology, University of Vienna

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