Redundancy agreement signed at Italian State Railways

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In December 1997, the Italian State Railways signed an agreement with transport workers' trade unions on the management of redundancies. The agreement provides for the creation of a fund to deal with redundant staff by means of "mobility" procedures, the Wages Guarantee Fund, job-security agreements and early retirement. An important aspect of the agreement was the mediation by the Government.

Background

For years, The Italian State Railways (Ferrovie dello Stato Italiano, FS) have been in a state of crisis. Under a general transport policy which since the 1960s has prioritised road rather than railway transport, the FS crisis has been most evident since the mid-1980s owing to a set of factors such as high costs (in particular of labour), limited innovation and poor management. At the beginning of the 1990s, following the conversion of the FS into a joint stock company, several restructuring plans were drawn up which aimed at improving the efficiency and the quality of the service. They failed to achieve their aims as a result of political problems and management shortcomings.

In September 1997, the managing director of FS, Giancarlo Cimoli, presented the Government with a railway restructuring plan to cover the period 1997-2000. The main points of this plan were:

  • reducing the deficit by cutting costs, increasing fares and improving productivity;
  • undertaking investment in order to modernise the railway network and enhance the quality of the service; and
  • overhauling the organisation by creating four divisions responsible for the management of infrastructures and services (passengers, freight and local transport).

Cutting labour costs and the new agreement

One of the principal areas in which management wishes to reduce the costs of FS is personnel: indeed, FS has labour costs that are considerably higher than those of the railway companies in other European countries. Although there were 63,000 early retirements in FS between 1990 and 1996, staffing cuts are still one of the principal ways to reduce labour costs. This, however, is a sensitive area in view of the lack of "social shock-absorbers" (ammortizzatori sociali) - ie means of mitigating and accompanying job losses - in the transport sector.

In May 1997, the management of the FS and five trade unions - the confederal unions Cgil-Filt, Fit-Cils and Uiltrasporti, and two "autonomous" unions, Fisafs-Cisal and Sma-Confsal- signed a preliminary agreement on the renewal of the FS national collective contract which, besides the restructuring plan, also concerned pay increases (IT9705305F).

At the beginning of December 1997, an agreement was signed by FS and all the unions in the sector (the five which signed the May agreement, plus Comu, the autonomous union for engine-drivers) on the management of redundant staff, mainly through early retirement. Mediation by the Government was crucial in reaching understanding in the negotiations: in fact, the Government has undertaken to present an amendment to the 1998 Financial Law which will enable FS employees to qualify for seniority pensions under the rules introduced by the 1995 "Dini" reform, and not under the more restrictive rules defined by the agreement on reform of the welfare state signed by the Government and union confederations in November 1997 (IT9711315F). This latter agreement introduced equal pension eligibility conditions for public and private sector employees, ending the formers' more generous treatment. At least some of the costs of these early retirements should be borne by a fund financed by FS and its employees. However, the agreement signed by the FS and the unions contains only generic provisions on this point.

The number of early retirements has not been quantified, owing to the resistance of the unions - Cgil especially - to signing an agreement which stated the numbers of redundant staff. However, according to estimates made by FS management, the redundancies should amount to around 15,000 workers.

Responses and change of approach

The agreement has provoked differing reactions among the unions. Some criticism has been voiced by Cgil which, although it signed the agreement, would have preferred the use of measures other than early retirements to tackle the problem of redundant personnel. Cgil believes that, at a time when reform of the pensions system restricting the eligibility criteria for pensions is underway, instead of introducing exemptions for FS employees, other measures would have been preferable - a "mobility" procedure for example. Cisl and Uil, on the other hand, argue that FS employees are on a par with industrial workers receiving benefit from the Wages Guarantee Fund (which makes payments to laid-off workers) or workers on "mobility" benefits, who are exempted from the reform of pension entitlements recently approved by the Government.

Other criticisms of the agreement have been brought by the opposition, by the Ministry of the Treasury, and within the parliamentary majority, by leading members of the Left Democratic Party (Partito Democratico della Sinistra, PDS), the Communist Reconstruction Party (Partito di Rifondazione Comunista, PRC) and the Green Party. Also contested (by PRC) are the number of redundancies and the fact that the "cushioned management" of redundancies will be financed out of the state budget.

On account of these various criticisms, the amendment to the Financial Law of 1998, finally presented by the Government on the basis of an understanding reached by the Treasury Minister, the Labour Minister and the Transport Minister, provides that the FS redundancies will be managed mainly by "social shock-absorbers" like "mobility" procedures, the Wages Guarantee Fund and job-security agreement s, and only to a lesser extent by early retirement. In contrast to the general pension eligibility conditions introduced by the new pensions reform (54 years of age and 35 years of contributions), between 1998 and 2001, redundant FS employees will be able to retire at 53 years of age and with 24 years of contributions, or with 30 years of contributions regardless of age. Moreover, in order to manage the FS redundancies, a special fund will be created by the company and its employees by March 1998.

Commentary

In Italy, the use of "social shock-absorbers" - such as the Wages Guarantee Fund - to tackle occupational crises is available only in industrial firms. Moreover, employees in the Italian public sector services have traditionally enjoyed strong job protection. However, at a time when services are also restructuring, it is important to devise instruments with which to manage redundant personnel in this sector. Thus, current developments in banking (IT9706115N) and in FS, which have especially high levels of redundant staff, are highly significant.

In a company like FS, characterised by a high rate of unionisation, by the marked fragmentation of representation between confederal and "autonomous" unions, and by a high level of conflict with negative effects on the service (and attenuated only to a minor extent by the law regulating strikes in the public sector enacted in 1991 - IT9707209F), it is important to obtain the unions' assent to restructuring plans. For this reason, the agreement on redundancies is of outstanding importance.

The unions' varying reactions to the agreement highlight how difficult it is for the unions to mediate between protecting all workers (as in the case of the current welfare reform) and specific categories (in this case, the FS employees). (Marco Trentini, Ires Lombardia)

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