Two
assassinations, weekly union marches in Rome and a general strike in April: are
Italians going to accept a modernised labour market? Lucia Graves looks at what
Italy has done to become more flexible and how far it still has to go
When
Italian university professor and economist Marco Biagi was shot dead just
metres from his home in Bologna earlier this year, it sent shockwaves through
Italy and the rest of the world. It was only three years since the terrorist
group Brigate Rosse gunned down an adviser to the previous administration,
Professor Massimo D’Antona.Â
Biagi
was one of a team of researchers behind the White Paper on the job market in
Italy, published in October last year, a paper that proposes far-reaching
changes to employment law. The most unpopular of these changes, which Italy’s
unions have latched upon, is the suggested removal of Article 18, a clause that
makes it virtually impossible for companies to dismiss workers unless they have
committed a capital offence, but that unions say protects the worker against
unjust sackings.Â
Article
18 has mobilised protesters on a scale not seen in Italy for several years
because they feel the change in employment law would put their jobs on the
line. Union-organised demonstrations in Rome have attracted up to a million
people at a time, coming to the capital from as far away as Trieste and Sicily.
While some commentators dismiss this as a cynical union move, jockeying for
newspaper exposure and new members, it is an alarming sign of the times that
there are about 10 professors working on employment law in Italy who have to
live with police protection. Biagi – catastrophically, had part of his
protection removed in cutbacks last year.
Biagi’s
assassination has strengthened the Government’s resolve to press ahead with the
change of law on Article 18, but the power struggle between the Government and
the unions seems likely to continue well into the summer. How far are Italians
going to accept a new modernised labour market?
"Italy
has the lowest general employment rate in Europe, the lowest level of female
employment, the highest level of long-term unemployment, and the most marked
territorial discrepancy," says Biagi’s White Paper on the labour market
(the Italian Government’s manifesto for its reforms).
Italy
has one of the most protected and highly unionised workforces in Europe, and
one of the least mobile. According to the International Monetary Fund, Italy
comes 19th.out of 21 countries ranked by how dynamic they are, It has one of the highest unemployment rates
at 9.5 per cent (2001), of which 8.3 per cent is long term compared to a
European average of 4.9 per cent, and it has one of the lowest official
employment rates, 53.4 per cent (2000). Between 15 and 23 per cent (Istat,
Censis) of the country’s workforce is working illegally, approximately double
that of the average European country.
"One
of the problems facing Italy is a lack of competitiveness. This is based on a
number of issues – one of which is rigidity in labour relations," says
Gualberto Ranieri, vice-president of corporate communications at Fiat. Ranieri
thinks that one of the key reasons for Italy missing out on foreign investment
is this rigidity. While smaller firms have traditionally used illegal forms of flexibility,
multinationals can’t afford to go down that route.
Head
of Manpower in Italy Maura Nobili says: "Companies with fewer than 15
people have used home-grown methods to make themselves flexible but not illegal
by not outgrowing the 15-person threshold. They have often used illegal workers
who therefore have had no legal protection. This has happened because the
system is too rigid."
New
opportunities since the Treu law
The
first sign of change in Italian industrial relations was the introduction of
the Treu law in 1997. This opened up temporary employment – something that had
been banned since 1960.
Colgate-Palmolive
head of HR Roberto Di Bernardini says: "The Legge Treu contributed to
making Italy a little less medieval and backward. Temporary agency contracts
was a big revolution. The chemical industries is a very innovatory, seasonal
and experimental sector, and was one of the first to use these." About 7
per cent of Colgate-Palmolive workers are employed through agencies.
Manpower
and other employment agencies now operate in Italy – even the enormous Fiat
group has set up a temporary employment agency, Work Net, and numbers have shot
up to 9.7 per cent of the Italian workforce in temporary positions, or nearly 2
million working days a month. The advantage of temps to Italian companies are
huge, not just because they need seasonal and short-term contracts, but because
full-time workers are exceptionally difficult and expensive to get rid of. The
percentage of workers that are agency-employed is still very small: it can’t
exceed a percentage that is established by the union treaty, the Contratto
Collettivo Nazionale, and never exceeds the full-time workers. These however,
were changes to the original Treu law, and may be modified in time.Â
Alitalia
uses 50 temps, but there are security and training problems in the specialised
aerospace industry. Giovanni Giacomelli, vice-president of HR for its
engineering and maintenance division, explains: "For the engineering and
maintenance division we need lots of time to train workers, from five to nine
years. Some things in our offices are not aeronautical and we think we could be
less rigid. There are also problems of safety that stop us using temporary
workers."Â
The
company makes use of short-term contracts for call centres and other seasonal
work.
Swiss
Re Italia is also looking for specialists. Its HR head Roberto Savini Zangrandi
says it wants a culture of loyalty. It took on just six temps in the past two
years, out of 300 employees in Italy.Â
"If
you take lots of people on short-term contracts there is an understanding ‘you
don’t want me forever’. Our business is to get them to stay faithful to our
company, so we don’t want that."Â
But
Zangrandi acknowledges that temps have freed-up seasonal work. "It helps
in running short-term contracts, as there was lots of bureaucracy and costs to
take people on short-term contracts. You can now be flexible and legal. Before
the change in law we took people on short-term contracts where possible,
otherwise we use overtime. But overtime is complicated in Italy, limited to
about 90 hours a year per head."Â
Temps
are paid at least the same as the corresponding permanent employees and
contracts can be extended four times, up to a total of 24 months. Employment
companies put 4 per cent of the gross salary into a government-run fund for
training programmes. And they have to deal with all the tiresome bureaucracy
that the firm otherwise has to contend with. Manpower’s revenues rose 35 per cent in 2001 in Italy.
So
government action was needed. It decided to concentrate on small firms as these
form the majority of businesses in Italy. There are 2.9 million firms with
fewer than 15 people, and it is these firms that will often have the unofficial
employees that the state wants to get into the open. But Maura Nobili, head of
Manpower Italy, suggests that the government’s move on Article 18 for small
firms is the start of something bigger: "It is the first step to modifying
it for all firms. It won’t happen
immediately."
Termination
of contract, Article 18 of the Statuto dei lavoratori (1970)
This
is the article that ties firms not to sack individuals without ‘just cause’ and
has been causing union disturbances in Italy. The Government is proposing to
suspend the article for four years for employees whose contracts are moving
from short term to permanent, those who are becoming legitimate employees and
paying taxes and for firms that want to expand beyond 15 employees, the
threshold at which the article kicks in. If you believe Manpower’s Nobili, this
is the start of something bigger: "It is the first step to modifying it
for all firms. Even if it won’t happen immediately."Â
Manpower
says: "Italy has the most complex, restrictive laws allowing for
downsizing." Currently, if you fire without ‘just cause’, you have to
rehire the employee and pay damages. This is well in excess of most other
European countries, and the proposed change in law will affect only small
companies or those with fewer than 15 people. Even then, Nobili says, firms
will be asked to pay a one-off severance fee. "It is going to be difficult
for a small company to pay 18 months salary," he says.
Colgate-Palmolive’s
Di Bernardini says that in 2001 there were less than 2,000 individual
dismissals in Italy. "It is not often used because you have to go to
court, it takes up to four years, and if at the end the judge decides there was
no just cause, the worker gets his job back and you have to pay a back salary
for the whole period."
Nobili
says: "In Italy the work contract is removed from the quality of the work
achieved and insures the worker for life, because in companies with more than
15 workers the contract can only be broken for grave motives – such a theft and
fraud."
Swiss
Re’s Zangrandi says: "The problem is that without Article 18 you can
imagine circumstances in which the right to dismiss could be abused." He
gives a hypothetical example of a garment factory whose floor manager could
make instant dismissals without giving a reason. What if he used the power to
demand sexual favours?
Di
Bernardini agrees that it opens up the possibility of "indiscriminate
dismissal – it is too risky". He thinks Italy is not ready for a change in
law on Article 18, instead, he wants to redefine and expand ‘just cause’. He
says: "Scrapping Article 18 is too extreme, the ambit of just cause needs
modification. It could take in low productivity when people don’t work or are
away from work, for example."
Giacomelli
told globalHR: "If it extended to all companies, it would be useful. If
workers knew they could be sacked no doubt they would work harder."
Collective
redundancy
Italy
has a crisis collective redundancy procedure: the Cassa Integrazione procedure
works when there is a flux in demand and the Government funds workers to stay
off until the crisis passes. But welfare in Italy is almost non-existent for
former employees of small firms, something that the Government is starting to
address only now.
It
looks like the Government has a long way to go to make Italy’s employment
market more flexible in a legal way, running the gauntlet of public opinion. As
well as making it easier for firms to take people on (and dismiss them) it is
going to have to take in urgent welfare reforms – something that is in
progress, and possibly create work arbitration systems. Is it going to be more
tempting for multinationals to set up in Italy in the near future? CISL
spokesman Pierpaolo Baretta says no: "Normally what creates jobs is not a
reduction in working hours, or freedom to sack people: it’s investment."
Italy’s
complex employment laws
Statuto
dei Lavoratori (1970)
Contains
famous Article 18 that said that in companies with more than 15 employees,
workers who are sacked without just cause would be reintegrated into the
company and financially recompensed.
Cassa
Integrazione
If
a company is in crisis the state will pay up to 80 per cent of a worker’s
salary for up to six years while the worker is sent home. There are no controls
on this. Di Bernardini says: "Get rid of it."
White
Paper on the job market in Italy
(Libro Bianco sul mercato del lavoro)
This
does not explicitly mention Article 18, but Marco Biagi told Panorama, an
Italian current affairs magazine, that his objective was to get over Article 18
as it allowed protectionism of those in work, while it gave no help to those
outside the world of work, whether unemployed or young people looking for work.
Biagi’s paper ends hoping for a bigger participation of workers in the life of
the company and for the introduction of referendums for strike action in public
services.
Contratto
Collettivo Nazionale
Every
sector negotiates contracts every two years on working hours, salaries,
percentage of temps allowed and so on, which are across the board. Biagi’s
Libro Bianco suggested some individual contracts, but CISL is against it
because the worker would have less power negotiating directly with the business
than through a union. "I am obliged to do this, if I wanted a meritocratic
system I’d have to take supplementary money and give it just to those who I
thought deserved it," Di Bernardini says. Nobili says the result is
illegal workers: "Companies continue to use forms of ‘grey’
flexibility."Â
Welfare
There
is no minimum wage in Italy and, outside the Cassa Integrazione procedure,
there is a very small unemployment benefit that runs for just six months. Di
Bernardini says: "A welfare reform could make Article 18 more
acceptable."
Unions
Italy
is more than 50 per cent unionised; the main unions have 13 million
members. There is even a union for
company directors. The unions negotiate the Contratto Collettivo Nazionale. The
start of this year saw a huge number of working hours lost to strikes over
Article 18 and other contractual disputes: 3.7 million in January and February
compared to 200,000 for the 2001 period.Â
A CISL spokesman, one of the big four unions, told globalhr: "I
think the battle is bigger than Article 18. We need to find ways to reduce problems,
such as arbitration procedures, that we do not have in Italy. We need to make
judicial processes faster so that things happen within three months."
Further
information
–
Manpower’s A Code of Ethics for Temporary Work from Crora, the centre of
research on business organisation, at Bocconi University. Launched March 2002.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
–
Biagi’s Libro Bianco sul mercato del lavoro in Italia is available at www.minwelfare.it
–
Some useful links in the University of Modena and Reggio Emilia’s website www.economia.unimo.it/Centro_Studi_Intern/Adapt.html
