‘Generation contract’ to benefit young and older workers

One of the core initiatives aimed at combating high levels of unemployment proposed during this year’s presidential election campaign in France was the creation of a new kind of contract to help the country’s youngest and oldest employees. The goal is to combine job-creation for young people aged between 16 and 25 with a drive to keeper older workers aged 57 and over in active employment. Part of the initiative is a scheme to encourage older workers to help train young entrants to the labour market.

Background

One of the main pledges of the election campaign of French President François Hollande was a promise to tackle the country’s chronic youth unemployment problem. His government, elected in April 2012, put forward proposals for its Generation Contract, one element of which would be intended to encourage companies to hire younger workers.

A policy document (in French, 169Kb PDF) presented on 4 September 2012 to the Council of Ministers suggests that a bill introducing the ‘contrat de génération’ (Generation contract) could be discussed in Parliament in early 2013. However, Minister of Labour Michel Sapin announced that if talks between ministers and the social partners were successful, it could be presented again to the Council on 12 December 2012 with the inclusion of any agreements reached.

Two main objectives will be discussed. The first is to increase the numbers of young workers in companies in order to tackle skill shortages, while increasing the employment rate of older workers. The second objective is the integration of young people into the labour market and stabilising their job status by ensuring they are offered contracts with indefinite terms.

Company size

The success of the Government’s Generation contracts will be based on the active participation of employers, and so the contracts will take into account company size.

In companies with at least 300 employees, a company-level agreement would have to be concluded to set conditions on the employment of young workers and for maintaining the levels of older staff. If no agreement could be reached, the employer would be required to set up an action plan. In smaller organisations, a company agreement may be concluded between the employer, a newly-recruited young person and a senior employee.

One innovative part of the plan would be to allow the young person to work alongside the older employee who would act as a trainer and mentor.

Social partner input encouraged

In July, President Hollande invited social partners at national level to open inter-sectoral negotiations in order to set a framework for this contract. It was hoped that discussions would concentrate on concrete methods of going forward, and lead to some commitments by companies. Agreements could, for instance, set quantitative goals for recruitment, prepare end-of-career paths, set a framework for the transfer of skills, or set specific rules for young disabled workers.

Social partners were also asked to consider tutorship and training policies, as well looking at situations where a company owner was an older worker who may need help with the transfer of the business after retirement.

Financial aid for small companies

Although the Generation contracts are intended to be designed to apply to all types of companies, financial incentives should be particularly attractive to small and medium sized organisations.

The government has said that companies with fewer than 300 employees would be offered a lump-sum grant and, in some cases, it would top-up the social security contribution exemptions already applicable to low wages. It is proposed that financial aid should be given for a three-year period for young people aged 16–25 years hired on indefinite contracts, and for senior employees aged 57 and over who are working until retirement age.

For larger companies, no financial aid is envisaged in the hope that this will prevent a ‘deadweight’ effect. Larger firms may even be subject to financial sanctions – equivalent to 1% of the overall company payroll – if they do not put a Generation contract agreement in place by September 30, 2013.

Social partners’ reactions

Trade unions believe this new contract will have a positive effect. They hope to reach agreement before the deadline set for the end of 2012 by the government. They consider that Generation Contracts are a good addition to existing employment measures offered by the National Employment Agency (Pôle Emploi), particularly because they focus on the transfer of skills between generations. The trade unions also support the principle that policies promoting youth employment should not be based on the withdrawal from the job market of senior workers.

The Movement of French Enterprises (Medef), France’s largest employer federation, is also in favour of the contracts in principle, as long as they also help to simplify mandatory negotiations with trade unions.

It is thought that one of the consequences of Generation Contracts could be the replacement of and/or the incorporation of various agreements such as the Senior Agreement and Forward-looking employment and skills management (GPEC). However, if this happens, it will be necessary to determine how company agreements will be combined with certain elements of sectoral agreements such as training, restructuring or GPEC.

Commentary

At this stage of the process, it is difficult to assess the relevance of the programme. Its substance has not been made clear by the public announcements made. At first glance and on the basis of the information available, its implementation looks likely to be quite complex, but its principles are innovative.

The outcome of the negotiations at inter-sectoral level and then at company level will provide precious information about whether this new programme can be useful or not. If it leads to a simplification of the system of collective bargaining and to a more efficient and coherent ‘age management’ policy, it is likely that the programme will be a success.

The final result may depend largely on the good will of the stakeholders and also on the incentives available to companies against a background of tough economic conditions.

Jean-Philippe Lhernould, Université de Poitiers, IR Share

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