Are British workers cheaper to sack than others? Yes – but not always, reports Stephen Overell
It is because we are quick, easy and cheap to sack”. So said Tony Woodley, the T&G’s lead negotiator as Ford announced the ending of Fiesta production at Dagenham last week, with the loss of between 1,900 jobs (Ford’s official figure) and 5,000 jobs (the trade union prediction).
The accusation that Britain is the bargain basement of Europe when it comes to employment costs always irks national pride.
But it was clearly not to Ford’s taste, either. The car giant said its voluntary redundancy package was the best ever offered in British manufacturing history, totalling some £8m.
European chairman Nick Scheele argued that cuts programmes in Cologne two years ago and Genk, Belgium, last year, which cost $100,000 (£67,000) per head and $55,000 (£37,000) per head respectively, were snips in comparison to the cost of Dagenham redundancies. “Flexibility is not an issue, here,” he said.
The figures the company issued to highlight the generosity of the package seem to illustrate, in this case at least, it was not skimping.
Employees were likely to get nine months’ basic pay in addition to early retirement from 45 with an unreduced pension from 50. Thus for an hourly paid worker receiving £21,264 taking voluntary redundancy at 41 with 15 years’ service, he would get £30,144. At 55 with 30 years’ service, he would get £37,582 with a £10,350 annual pension.
But yet the substance of the charge – that multinationals are better off making people redundant in Britain as opposed to elsewhere – is one many believe is broadly correct.
In theory, it should not be this way with the Collective Redundancies Directive (1975) laying down pan-European standards. But in practice, it is the methods by which nation states have transposed the directive into national law which have given rise to profound discrepancies.
Incomes Data Services, the T&G’s source for its comments, warns against stark comparisons because practices vary across Europe, and the rest of the world.
In Britain, as in Denmark and Spain, we operate a system of redundancy payments (depending on age, one week’s pay per year of service up to £220 per week with a maximum of 20 years’ service). Germany does not.
And yet, procedures in Germany are more stringent, time-consuming and expensive.
Central to the German system on collective redundancies is the right of a works council to be notified and consulted “in good time and in writing”. The two sides are expected by law to attempt to resolve their differences (no time limit is specified) and if they can’t, conciliation can be called upon.
Employers must notify local labour authorities, which can lengthen the time between notice and start of termination. If employers fail to notify the works council, the redundancies are automatically void.
Bizarrely, selection for redundancy cannot be on the basis of poor performance in Germany. Employers are obliged to keep on people whose position is the most vulnerable – although they can make a case for retaining a balanced age and skills profile.
The works council can object if it feels “social factors” have been ignored or if alternative employment has been overlooked.
If this happens, employers must continue employment until differences have been resolved.
“In Germany, there is a very strong presumption against making people redundant, partly because of the commitment on both sides to a sense of social partnership,” says IDS international editor Pete Burgess.
“Good employers in Britain may well do the same, but there is certainly a perception that we have a more hire and fire mentality here.”
According to data compiled by pay and benefits specialist William M Mercer, significant disparities in redundancy costs can be readily identified. In Spain, the state lays down a complicated series of payments for different types of contract and the nature of dismissal. The very least payable on redundancies for an organisational reason is 20 days’ salary per year of service.
In non-Euro-land Sweden, all dismissals mean employers must pay an indemnity based on a flat-rate fee plus an age-related supplement.
In France, collective agreements dictate the indemnities employers must pay – generally, a fraction of monthly salary. But they must also pay a legal indemnity to employees with over two months’ salary of a 10th of the last monthly salary per year of service (an additional 15th to employees with over 10 years’ service).
In Denmark, the state dictates notice periods ranging from one month to six months, depending on years of service. Most workers are also entitled to a minimum indemnity of one month’s salary, rising to two months after 15 years and three months after 18 years.
But yet, in practical terms, much of this analysis of statutory benefits is of limited relevance. They are legal minima. Employers use benefits as one of the principal tools of retention for staff.
Many, says, Don Cuthbert, head of international employee relations at Towers Perrin, may seek to harmonise terms and conditions across the different countries of operation – meaning a genuine comparison of actual redundancy practice across Europe would require exhaustive company by company research.
Accepting that, Cuthbert thinks the T&G has a point. “Many multinationals would go beyond the statutory minimum as a matter of course, but if you are looking at the statutory position, then the UK is not as generous.”
Robin Chater, director of the Federation of European Employers, agrees – but with a proviso. “If you compare us with somewhere like Spain, then it is cheaper to make people redundant here. But then employers’ organisations in Europe have been trying to get rid of their system for years because of the high social costs.
“In the US, there is no such thing as redundancy at all. If you have not got it written into employment contracts, then there is no statutory fallback. In Britain, like in so many areas, I suppose we are a sort of halfway house.”