Improvements in partial unemployment allowances

In mid April 2009, during negotiations on unemployment benefit issues, the social partners in France accepted the roll-out of a reduced working hours allowance put forward by the government. The allowance supplements the contractual partial unemployment benefit, which was amended in December 2008, under certain conditions. The agreement received a mixed response from the social partners, with the General Confederation of Labour the only trade union not to sign it.

At an extraordinary meeting on 15 April 2009, the trade union and employer organisations managing the National Union for Employment in Industry and Commerce (Union nationale interprofessionnelle pour l’emploi dans l’industrie et le commerce, Unédic) almost unanimously adopted an agreement with the state to increase partial unemployment allowances to 75% of gross hourly wages. Although UNEDIC merged with the National Employment Agency (Agence nationale pour l’emploi, ANPE) in January 2009 to form Employment Pole (Pôle emploi) (FR0804079I), it continues to operate as an independent agency managed by the social partners.

The ‘long-term reduced working hours’ scheme is the second stage of improvements to partial unemployment measures.

Revision of contractual allowances

Following negotiations at the end of 2008, an agreement was reached on 15 December to revise the partial unemployment contractual allowance – thus, amending the national multi-industry agreement of 21 February 1968, which has already been modified on several occasions. The changes have been ratified by ministerial decree.

The new amendments resulted in the following outcomes from 1 January 2009:

  • an increase in the partial unemployment allowance from 50% to 60%.
  • a rise in the lower limit paid by companies to €6.84 per hour not worked, compared with €4.42 since 1993;
  • an increase in government funding for companies that use partial unemployment – offering a special partial unemployment allowance – amounting to:
    • €3.84 per hour not worked (an increase of €1.40) for companies employing up to 250 staff,
    • €3.33 per hour not worked (an increase of €1.20) for companies employing over 250 staff;
  • a rise in the upper limit of hours covered by the allowance from 600 to 800 hours a year, although the limit was set at 1,000 hours in some sectors of economic activity, such as the automotive and textiles industries in particular.

A joint letter signed by the trade unions and employers also called for the government to change partial unemployment allowance eligibility conditions for part-time workers – for example, employees working fewer than 18 hours a week were not eligible to receive the allowance. However, a decree issued on 30 March 2009 extended the partial unemployment allowance scheme to all employees.

Improvement of allowance for employees

Following several weeks of discussions between the government and Unédic, an agreement was reached on 15 April improving the allowance given to employees as of May 2009. All of the employer and trade union organisations voted in favour of the measure, apart from the French Confederation of Professional and Managerial Staff – General Confederation of Professional and Managerial Staff (Confédération française de l’encadrement – confederation générale des cadres, CFE-CGC), which abstained. The agreement mainly draws on the employment agreement signed on 7 May in the metalworking sector by CFE-CGC, the French Christian Workers’ Confederation (Confédération française des travailleurs chrétiens, CFTC), the French Democratic Confederation of Labour (Confédération française démocratique du travail, CFDT) and the General Confederation of Labour – Force ouvrière (Confédération générale du travail – Force ouvrière, CGT-FO).

Provisions of new agreement

The agreement sets out the following provisions.

  • A partial unemployment agreement for employees who are working fewer than the legal number of hours over a long period should be reached between an industry organisation, a multi-industry organisation or a company and the minister for employment, the prefect (the central government’s département-level representative) or the departmental offices of the Ministry of Labour, Employment and Vocational Training (Direction départementale du travail, de l’emploi et de la formation professionnelle, DDTEFP). The agreement will last for a minimum period of three months and a maximum period of 12 months.
  • As part of the agreement, the employees will receive at least 75% of their gross wages (about 90% of net wages).
  • The company will receive an additional allowance from the state for the first 50 hours (€1.90 an hour) and then from Unédic up to the limit for partial unemployment hours (€3.90). This allowance supplements the special partial unemployment allowance.
  • In return, companies must maintain the posts of the affected employees for twice the length of time mentioned in the partial unemployment agreement and offer the workers an individual meeting to discuss training options or employment reviews during the period of partial unemployment.
  • cannot contribute more than €150 million in 2009 to accommodate these provisions. No partial unemployment agreements can be signed once this amount has been reached. The agreement signatories will meet to discuss a possible extension of the agreement once 70% of the allocated amount has been used.

Reactions to provisions of agreement

The head of the employers’ delegation in the negotiations, Benoît Roger-Vasselin of the Movement of French Enterprises (Mouvement des enterprises de France, MEDEF), stated that with the December agreement ‘companies have made a major effort and taken responsibility’. Despite reticence on the part of employers in the services sector, which has less recourse to partial unemployment than other sectors of the economy, the employer organisations signed the agreement and voted for the state-Unédic agreement.

The trade unions have mainly highlighted the progress made by the December agreement and the state-Unédic agreement.

The National Secretary of CFDT and Vice-President of Unédic, Annie Thomas, was ‘delighted about the increase in purchasing power for the employees affected by the measure’. However, she emphasised her ‘determination to obtain something in return for the funding given to companies’. Ms Thomas highlighted the role of the social partners who are ‘putting forward and implementing socially responsible, targeted and context based initiatives to deal with the [current economic] crisis’.

However, the General Confederation of Labour (Confédération générale du travail, CGT) and CFTC remain more critical of the agreement. They insist that partial unemployment hours should be used for training. CGT, the only trade union not to sign the agreement, believes that the demands made on companies in return for state funding are minimal. The trade union demands that the eligibility conditions for this funding are better defined – for example, the company’s financial position, the level of dividends paid to shareholders over the past three years and whether the company is receiving orders should all be taken into account. CGT’s representative on the Unédic committee, Eric Aubin, believes that ‘the improved allowance will mean that companies turn more readily to partial unemployment’. CFTC, meanwhile, considers the scheme to be unattractive for companies and fears that the improvement will be limited to the media impact of the initial announcement.

The Minister for the Economy, Industry and Employment, Christine Lagarde, and the Secretary of State for Employment, Laurent Wauquiez, were pleased by Unédic’s decision. As the result of a ‘long consultation process’ with the government, ‘the involvement of the unemployment benefit organisation is justified because partial unemployment helps to prevent redundancies’, he commented.

Commentary

Companies themselves decide whether to sign an agreement with the state and pay more than the contractual partial unemployment allowance. Some employees who are working reduced hours may therefore not benefit from the measure. However, some companies – such as the car manufacturers PSA Peugeot Citroën and Renault – have already rolled out 100% wage allowance schemes, funded by a range of sources, including co-funding by management in the case of Renault.

During the last quarter of 2008, close to 146,000 employees were made partially unemployed in France, which was three times more than during the previous quarter. In light of the worsening economic conditions, the DDTEFP is already forecasting a reduction of 80 million working hours and 500,000–600,000 people being partially unemployed in 2009. This could prove to be a significant underestimation. Partial unemployment in industry is increasingly affecting management, although a number of sectoral agreements as a rule exclude partial unemployment for employees paid on the basis of a set number of days worked a year.

Partial unemployment is, however, a temporary measure. Redundancies could be inevitable if the economic crisis continues. A recent study by the Centre for Employment Studies (Centre d’Études de l’Emploi, CEE) concluded that partial unemployment only postpones redundancies.

Annie Jolivet, Institute for economic and social research (IRES)

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