The sovereign debt crisis has triggered labour market reforms across Europe. In most cases, these reforms are intended to simplify hiring and firing and to stimulate employment. Changes in countries such as Spain and Italy are significant and will potentially influence how employers approach these markets. Similarly, pension reform is high on the agenda throughout Europe, with many member states looking at extending careers and postponing the legal retirement age. This winter 2014 edition of our Labour market reforms tracker reports on planned and voted reforms in Belgium, France, Greece, Ireland, Italy, the Netherlands, Portugal, Spain and the UK. If you are familiar with the tracker and only look for updates, important changes and additions have been marked as ‘update’ or ‘new’. Thank you to Kyriakides Georgopoulos Law Firm, to Arthur Cox and to FCB&A, who contributed the Greek, Irish and Portuguese chapters. Belgium Update Major changes in termination law – new notice periods for blue- and white-collar workers In 2011 the Constitutional Court found that certain laws discriminated between blue-collar and white-collar workers. But the court decided to wait until 8 July 2013 to allow the Belgian legislator enough time to reconcile the differences on two counts (and two counts only): the notice period in case of termination and the lack of guaranteed salary for a blue-collar worker’s first day of sick leave. Other differences remain in place and one cannot speak of a full harmonisation between the two status, which continue to exist. Employer and trade union representatives negotiated a solution in July, which the government then transformed in a draft law. The law was voted in late 2013 by the parliament and promulgated on 26 December. It came into force on 1 January 2014. It provides a new way of calculating the notice period for all workers. As expected, blue-collar workers will see their notice period (or the indemnity paid in lieu of notice) increase, and white-collar workers will see theirs decrease. This is the second significant change in Belgian dismissal law after the law of April 2011 that came into force in 2012, affecting employment contracts starting from 1 January 2012. The new notice period From 1 January 2014, a single regime is replacing all the previous ones. There will no longer be any difference between blue-collar and white-collar workers’ notice periods. The length of the new notice periods will depend solely on seniority. This means salary and position will no longer influence the termination package – high earners will be treated the same way as other employees. There will be three phases Up to five years’ seniority: • two weeks’ notice for each quarter started during the first two years; then a total of 12 weeks during year three, 13 during year four and 15 during year five (so a bit more than three months from year five). From five years’ seniority: • 15 weeks, plus three weeks for each additional year started. From 20 years’ seniority: • notice period will continue to increase, but slowly. Employees will get another two weeks for the twentieth year of seniority, then one week for each additional year from the twenty-first year of seniority. So an employee with 25 years’ seniority will be entitled to a 67-week notice period or indemnity in lieu of notice. This is roughly 16 months’ salary, compared with four months’ for blue-collar workers and 25 months’ for white-collar workers under the 2012 regime. The new regime will only apply to seniority accrued from January 2014. For seniority accrued before 2014, old rules as in place on 31 December will apply. There is one important exception for white collar workers, which will make the calculation easier: employees earning more than €32,254 (annual gross) will get one month per year of seniority accrued before 2014, with a minimum of three months. A white-collar worker who started in 2000, earns more than €32,254 gross a year and whose contract is terminated on 1 January 2015 will be entitled to 13 months’ notice for the period between 2000 and December 2013, plus three weeks for 2014. Blue-collar workers are treated differently. A system is being put in place for them to convert their pre-2014 years into white-collar years, in effect accelerating the transition. Other changes Another important change is that all notice periods are now producing effect the Monday following the week of the notification. It used to be the first day of the following months. The provisions on trial period have been removed (it indeed did not make sense to keep these as their purpose was to allow for shorter notice periods during the first few months of the employment relationship. As notice periods are now expressed in weeks and not months, these are not needed anymore). But existing trial period (included in contract signed before 2014) will stay in place and produce effect until the agreed term. Blue-collar workers will get the guaranteed salary from the first day of sick leave. The July agreement contains a general motivation obligation of all dismissals, which is new for Belgium. This new obligation will only come into force when a national collective bargaining agreement is signed, dealing with the details of it. At that time, the provision on unfair dismissal for blue collar workers will cease to exist. Salary increases capped for 2013 and 2014 In application of the law of 26 July 1996, which aims to safeguard the competitiveness of the country’s companies vis-à-vis the neighbouring countries, the social partners are supposed to agree every two years on the maximal cap for salary increases. Failing an agreement between the social partners, the government has enacted a binding cap for the 2013–14. The cap does not constitute an absolute prohibition to increase the salaries. It does not prevent the employers applying the statutory indexations and the salary increases based on sector-level or company-level scales or on promotions. Also, several benefits are not considered a salary increase in this legislation. Retirement age The minimum age for early retirement will be gradually increased from 60 to 62 between 2012 and 2016. Normal retirement age remains 65. Career length requirements will also increase from 35 to 40 years. Exceptions have been foreseen to avoid exorbitant consequences on agreements that were already entered into with employees with a view to allowing them to retire. In calculating the career lengths for both early and normal retirement, several periods of inactivity were assimilated to normal worked time. For retirements that started on 1 January 2013, some inactivity periods will now weigh less in working out the career requirement; ie defined periods of unemployment, career breaks and bridging pensions. To incentivise employees to postpone their retirement, the Council of Ministers has approved a modification of the pension bonus system to make working longer more attractive. The law has yet to be enacted. Bridging pensions A bridging pension (BP) eases the career end of older employees and has been popular in Belgium over the past few decades. Dismissed employees who meet certain age and career length requirements may be entitled to unemployment allowances. And employers may have to pay an indemnity on top, which is subject to specific tax and social security contributions. This system, now called ‘unemployment with indemnity of the employer’, is being changed to reduce the number of people benefiting from BP and to encourage longer active careers. Also, the years of BP will now weigh less in calculating the career length requirement to be entitled to retire. The total cost of the BP regime for the employer has increased. Classic BP at 60 The career length requirement will increase from 35 to 40 years. However, a transitional period is provided for BPs based on collective bargaining agreements (CBAs) entered into before 1 January 2012. For men, the entitlement age remains 35 and becomes 40 from 2015; for women, it remains 28 and becomes 31 from 2015. It will then increase year on year to reach 40 years in 2024. Early BP at 58 This remains in place until December 2014, subject to an existing CBA within the sector or company. But the career length requirements increased on 1 January 2012. From 2015, the minimum age requirement will increase to 60, and BP at 58 will only remain in the event of a serious illness. Early BP at 56 The reform does not materially affect this system. However, this system only covers employees who have worked for 20 years in a regime that includes night shifts and employees from the construction sector who can no longer carry out their duties. Part-time BP This system has stopped. BP in companies in difficult economic situations or restructuring Originally, entitlement to BP in companies in difficult economic situations or restructuring could be lowered to ages 50, 52 or 55. For companies in difficult situations, the age requirement will now increase year on year to reach 55 in 2018. In companies undergoing a restructuring, the minimum age has been 55 since 1 January 2013. On 28 March, a new national CBA, No. 107, was entered into to complement the reforms of the regime. This CBA formalises the entitlement to the additional company allowance for employees who choose to crystalise their future entitlement to the regime based on the current conditions, although they do continue to work. The employer’s social security contributions that must be paid on the additional indemnity have been increased. Depending on the date and on the age of the employee when the system has been implemented, the social security contributions might amount to up to 100 per cent of the additional indemnity. The government’s aim is clearly to discourage the use of this system, except for specific categories of employees. Career breaks for older employees Employees who meet certain criteria may be entitled to a career break and to a small state allowance during that break. Before the reform, conditions for access to the career break system with the benefit of the state allowance were eased for employees over 50 years old, to help reduce working time as a transition to career end. As of 1 September 2012, the conditions to access the system and to benefit from the state allowance have been clarified in the new national collective bargaining agreement, CBA No. 103, and the amended version of the Royal Decree of 12 December 2001. Age pyramid in case of collective dismissal Until now, an employer carrying out a collective dismissal was free to decide which employees to dismiss, as long as it complied with anti-discrimination laws and involved the works council. The limiting factors were the negotiations with the works council and the general anti-discrimination principles, but a new law dated 29 March 2012 now aims to force the employer to distribute the layoffs equally between age groups within the company Under the new regime, the age, career and working time conditions for access to the system remain unchanged, but the conditions to benefit from the state allowance have been strengthened to encourage workers to remain active longer. It means an employee may still enter the career break system from the age of 50 but will only benefit from the state allowance from 55, which makes the system less attractive before that age. In its current form, the law provides that an employer carrying out a collective dismissal must distribute the layoffs equally across the company’s age groups. This obligation is, however, not applicable when the collective dismissal is carried out in the context of a bankruptcy, a judicial liquidation or a complete plant closure that concerns all the company’s employees. The dismissals must be proportionally distributed among the following age groups: less than 30 years, between 30 years and less than 50 years, and 50 years or more. The age groups are identified at the level of the company or at the level of the division concerned by the collective dismissal. The law foresees several adjustments: • up to 10 per cent deviation from the proportional distribution is accepted; • employees under contract for defined duration/ tasks are not taken into account, unless their contract is terminated before the end of the defined duration/task as a result of the collective dismissal; and • ‘key employees’ are not taken into account. The concept of ‘key employee’ is, however, not (yet) defined. Any employer that does not comply with the age pyramid will have to reimburse the reductions on social security contributions that it has gained over the past eight quarters in relation to the employees who have been dismissed in the framework of the collective dismissal and who were 50 years old or more at the time that the collective dismissal was announced. The entry into force of this law will be determined by royal decree. It is anticipated that the rules outlined above will be further amended before entering into force. Plan for the employment of aged workers — new national CBA No. 104 As of 1 January 2013, companies that employ more than 20 employees have to have a yearly action plan to maintain or increase the employment of workers aged 45 and over. The action plan must include measures that are adapted to the company’s size and activity, to the extent it aims to maintain or increase the employment of aged workers. These measures must spread over several years. Existing measures within the company may be included in the action plan. CBA No. 104 includes a sample list of measures, such as: • the selection and hiring of new employees; • training and career path; and • working time adaptations. Employees (and/or their representatives) must be informed and consulted before the action plan is implemented and may express an opinion on the proposed plan. At the end of the annual action plan, the employer has to inform the employees (or representatives) on the outcome of the measures provided for in the plan. The plan must be kept available for consultation by the relevant authority. A draft action plan is attached as an annex to CBA No. 104. Service agreements (eg outsourcing) more easily considered as prohibited posting of workers Under Belgian law, posting workers to companies outside the legal framework of interim employment and leading to the company exercising all or part of the employer’s authority on the posted workers is prohibited. Under a law enacted on 27 December 2012, service agreements whereby the service provider’s workers receive guidelines and/or instructions from the company will more easily be considered as a prohibited posting of workers. Indeed, the amount of instructions that the company may give to the service provider’s workers without these instructions being considered as the exercise of (part of) the employer’s authority, has been significantly restrained. It is now limited to: • instructions that relate to health and safety; and • instructions that are necessary for the proper performance of the service agreement entered between the service provider and the company. In this respect, the service agreement must accurately set forth which instructions will be given by the company, provided that those instructions may not impair the employer’s authority of the service provider and that the service must be actually performed in compliance with the content of the agreement. Instructions or guidelines that would be given by the company to the service provider’s workers and that are not listed in the contract will be considered as the exercise of a part of the employer’s authority and, therefore, as prohibited. Furthermore, a company that enters into such agreement must inform its works council. At the works council’s request, the company must also hand over a copy of the clause in which the allowed instructions have been listed, failing which the contract is considered as non-existent for the application of the law – ie that all instructions given by the company will be considered as the exercise of the employer’s authority and, therefore, prohibited. France Update Acceleration of the pension reform The government submitted draft legislation to the Council of Ministers on 18 September 2013 and to the National Assembly for examination on 7 October 2013. The senate rejected the legislation on 5 November 2013, and the draft law came back before the National Assembly for a second examination in mid-November 2013. The draft legislation the National Assembly adopted extends contributions from 41.5 years to 43 years by 2035. It also increases social contributions. And it introduces special accounts for ‘hardship conditions’ at work. The age threshold is unchanged: the minimum pension age will be 62 by 2017, and the age to benefit from a full-rate pension will be set at 67 from 2020. As an exception, disabled workers may draw an unreduced pension at 62. The conditions for the number of quarters (ie three-month contribution periods) to be validated for pension entitlements are also being tightened, depending on the nature of the activity. Besides, special accounts for employees subject to hardship conditions at work, taking into account difficult working conditions (such as exposure to carcinogens, heavy weights, night work), will be introduced from 1 January 2015. Hardship criteria, such as exposure to carcinogens, heavy weights, or night work, are converted into points. Accrued points will allow employees to manage the ends of their professional careers in three ways: learning new skills, working part-time and/or retiring earlier than the legal retirement age. These special accounts for hardship conditions will be financed by employers: all employers will have to pay a contribution to be determined in a future decree (capped at 0.2 per cent of the total pay of employees eligible for a special hardship account). In addition, employers who exposed employees to hardship conditions will have to pay a supplementary contribution of 0.3–0.8 per cent of pay paid to employees exposed to hardship conditions. Improvement in partial unemployment schemes Since the 2008 crisis, several partial unemployment schemes have been used to avoid collective redundancies in France. These measures allow companies experiencing difficulties (such as economic downturn, difficulties in raw material or energy supply, exceptional events involving damages or loss, restructuring or modernisation of the business, or any other exceptional circumstances) to reduce working hours temporarily or close the business for a limited time and to rely on state contributions to help pay employees’ wages. The Job Security Bill dated 14 June 2013 has unified the existing partial unemployment schemes, which are now replaced by a so-called partial activity scheme. Contrary to the former unemployment schemes, partial activity should be authorised for up to six months, which is renewable once. In return, companies using partial activity will have to offer training programmes to the employees placed under this scheme. The companies’ commitments must be discussed with the Labour Authority. Climb in tax against fall in growth The Amending Finance Act for 2012 dated 17 August 2012 significantly increased the tax burden on stock options, free shares, severance indemnities and ‘top hat’ pension schemes. As of 11 July 2012, companies’ social security contributions on stock options and free shares increased from 14 per cent to 30 per cent. Employees’ social security contributions also increased by two points from 8 per cent to 10 per cent. Severance payments more than 10 times the social security threshold – ie more than €375,480 in 2014 (instead of 30 times this threshold – ie €1,110,960) are fully subject to social contributions from the first euro. As of 1 January 2013, employers’ social contributions owed on ‘top hat’ pension schemes (ie defined benefit pension schemes governed by article 39 of the French Tax Code) will be doubled (from 16 per cent to 32 per cent). Mutual termination agreement As of 1 January 2013, severance payments under a mutual termination agreement (Rupture conventionnelle homologuee) are subject to a specific tax (forfait social) of 20 per cent. This applies to the portion that is exempt from social security contributions. The exemption is capped at twice the social security threshold – ie at €75,096 in 2014 (Decree dated 7 November 2013). Creation of a ‘generation contract’ Following a bill dated 1 March 2013, companies employing at least 300 employees must conclude a so-called inter-generational collective agreement or implement an action plan providing for measures in favour of employment of young and older employees and the transmission of skills within the company. Such collective agreements or action plans will replace those implemented for older employees, which had been mandatory in companies with at least 50 employees since 1 January 2010. Companies, which are invited to analyse the employment of young and older employees before implementing such an agreement and/or action plan, must define targets regarding the recruitment of young employees under indefinite term contracts, the hiring of older employees and/or any measures aiming at keeping older employees at work. Failure to comply with these provisions before 30 September 2013 for companies employing at least 300 employees triggers a penalty corresponding to the higher amount between 10 per cent of the amount of their ‘Fillon reductions’ (these reductions are a discount on employer social security contributions on low salaries), or, if higher, 1 per cent of their total wage bill. Companies employing fewer than 300 employees, which are not obliged to enter into such agreements or action plans, are eligible for annual subsidies if they voluntarily take commitments in favour of employing younger and older employees. Job security to boost French competitiveness Based on an agreement the social partners concluded on 11 January 2013, the job security bill dated 14 June aims to improve labour market flexibility and job security. The bill changes labour code rules. It improves, for instance, supplementary health coverage and implements new rules on unemployment benefits, training rights (creating a training account), internal staff mobility, procedures of information, consultation of employee representatives, and so on. The new bill changes the procedure for collective redundancies, in particular where companies with more than 50 employees plan to dismiss more than 10 employees within 30 days, triggering a job protection plan. Companies (or groups of companies) that are obliged to implement a job protection plan now have to define the dismissal procedure – that is, works council information and consultation procedure, selection criteria for order of dismissals, timing of dismissals, number of job cuts and professional categories concerned, redeployment measures. They have to either sign an agreement with the trade unions or implement a so-called unilateral document established by the employer. This agreement or unilateral document, as the case may be, then has to be submitted to the Labour Authority. The consultation of the works council is now subject to a fixed deadline. At the end, the works council will be deemed to have been consulted, even if it refuses to give an opinion. These new rules apply to any dismissal procedure started after 1 July 2013. The bill changes employment litigation rules: • reducing the statute of limitations from five to two years for claims relating to the performance or termination of the employment contract (three years for salary-related claims instead of five years); and • introducing minimum, lump-sum compensation for employees willing to settle at the conciliation hearing before the labour court in dismissal cases. Finally, a significant part of the redundancy procedure litigation will shift to the administrative courts (except for claims disputing the absence of economic grounds). The bill was enacted on 14 June 2013. The main provisions (‘job security agreement’, ‘internal staff mobility’ agreement, reduced statute of limitations, and so on) came into force in July 2013. Implementing decrees were published in the second half of 2013. New Time limit within which to consult the works council on economic matters On 27 December 2013, the government issued an implementing decree pursuant to the law on job security, dated 14 June 2013, stating the time limits for consultations on economic matters. If an employer consults the works council on economic matters, the consultation is limited to a time frame agreed between employer and the works council. If no agreement is reached, the consultation is limited to one month from the date the employer makes available the information required by law for the consultation. The time limit is two months if an expert is appointed by the works council. Three months if one or more health and safety committees is/are informed and consulted. And four months if a co-ordination body for health and safety committees is set up. As drafted, these time limits are unlikely to be effective. The starting point of the applicable period (1–4 months) will be debatable, since the works council can argue that it has not been given the necessary information. New Social and economic database for the works council and staff delegates Under the job security law of 14 June 2013, the works council (or staff delegates), central works council, health and safety committees and trade union representatives must have access to a social and economic database. The database should hold information on investments, equity capital and indebtedness, components of compensation schemes for key executives and employees, social and cultural activities, financial flows for the company, notably public aids and tax credits, subcontracting, and commercial and financial transfers between companies. It should cover the two last years, the current year and the outlook for the next three years. Under the draft decree the government proposed on 11 October 2013, the content of the database will vary depending on whether the company employs at least 300 employees. The database may be in electronic format or hard copy. Before it is consulted, the works council must have access to the database. The works council must be consulted on the strategic policy of the company, defined by the board of directors or the supervisory board, and its consequences on the activity, employment, evolution of skills, labour organisation, use of subcontractors, temporary employment and internships. The works council’s opinion will then be submitted to the board of directors or the supervisory board, which has to reply. Greece Increase of retirement requirements and reductions of pension amounts As of 1 January 2013, all age retirement requirements are increased by two years. Therefore, according to the new provisions, from 1 January 2013, employees will be able to receive full pension after the completion of the 67th year of age and minimum 15 years of service or after the completion of the 62nd year of age and 40 years of service (general requirements). Specific categories are exempted from these thresholds (eg parents of fully incapable children, employees who are on a labour reserve status, etc). And as of 1 January 2013, the monthly pension amount paid by any social security fund is reduced as follows: a) 5 per cent for pensions totalling €1,000.01–1,500; b) 10 per cent for pensions totalling €1,500.01–2,000; c) 15 per cent for pensions totalling €2,000.01–3,000; and d) 20 per cent for pensions totalling more than €3,000. Statutory minimum salary The statutory minimum salary for employees of the private sector shall be determined by a ministerial cabinet act, which will be effective as of 1 April 2013. The national general collective labour agreements (CLAs) may only determine non-salary-related employment terms and conditions. The statutory minimum salary is determined as follows: For white-collar employees over 25 years old €586.08 (monthly salary) For blue-collar employees over 25 years old €26.18 (daily wage) For white-collar employees under 25 years old €510.95 (monthly salary) For blue-collar employees under 25 years old €22.83 (daily wage) Suspension of salary increases As of 14 February 2012, and until the unemployment rate falls below 10 per cent, the validity of law provisions, regulatory acts, CLAs or arbitration decisions that provide for increases in salaries or daily wages is suspended. Notice periods and severance amounts incase of termination As of 12 November 2012, the statutory notice periods as well as the legal severance amounts in case of termination of an indefinite-term employment agreement are reduced as follows: Completed years of service until 12 November 2012 Statutory notice period (months) Severance amount in case the statutory notice period is granted (monthly salaries) Severance amount in case no notice period is granted (monthly salaries) 1–2 1 1 2 2–4 2 1 2 4–5 2 1.5 3 5–6 3 1.5 3 6–8 3 2 4 8–10 3 2.5 5 10 4 3 6 11 4 3.5 7 12 4 4 8 13 4 4.5 9 14 4 5 10 15 4 5.5 11 16 4 6 12 17 4 6 + 0.5 12 + 1 18 4 6 + 1 12 + 2 Freshfields Bruckhaus Deringer llp Labour market reforms tracker Winter 2014 17 Summary Belgium France G r e e c e Ireland Italy Netherlands Portugal Spain UK Contacts GreeceCompleted years of service until 12 November 2012 Statutory notice period (months) Severance amount in case the statutory notice period is granted (monthly salaries) Severance amount in case no notice period is granted (monthly salaries) 19 4 6 + 1.5 12 + 3 20 4 6 + 2 12 + 4 21 4 6 + 2.5 12 + 5 22 4 6 + 3 12 + 6 23 4 6 + 3.5 12 + 7 24 4 6 + 4 12 + 8 25 4 6 + 4.5 12 + 9 26 4 6 + 5 12 + 10 27 4 6 + 5.5 12 + 11 28 and above 4 6 + 6 12 + 12 The new law has also amended the legislative provisions regulating severance for employees who have completed on the date of issue of the law (12 November 2012) more than 17 years of service in the same company, providing one additional monthly salary per year on top of the 12 monthly salaries and subject to a cap of €2,000 a month. Working hours The new law also provides for a minimum daily rest period of 11 hours between two working shifts. Signing of the new National General Collective Bargaining Agreement The new National General Collective Bargaining Agreement (NGCBA) was signed on 14 May 2013, having 1 January 2013 as a retroactive date of entry into force. Its most important provision is maintaining in force the marriage allowance regardless of gender. However, most private sector employees will not be bound by this, since the Greek Federation of Enterprises has not been a social partner in the negotiations leading to its signature. Anticipated developments on the employees’ severance taxation According to strong press speculation, a tax draft bill of law is under way. Despite the ministry’s denial, it appears to contain a provision that abolishes the exhausted taxation of the severance in case of termination, as currently in force. In particular, until today, the severance is taxed on the basis of the following table: Severance amount (€) Tax rate 0–60,000 0 per cent 60,000–100,000 10 per cent 100,001–150,000 20 per cent 150,000 (and above) 30 per cent In case the new provision is enacted, the amount of the severance of the redundant employees will be added to the rest of their total income and will be taxed at the current scale of the income taxation, which provides: Income bracket (€) Tax rate Bracket tax (€) Total income (€) Total tax (€) 25,000 22 per cent 5,500 25,000 5,500 17,000 32 per cent 5,440 42,000 10,940 Excess amount 42 per cent Taking under consideration that by a recent law the amount of the severance due in case of termination was significantly reduced and in case the severance is eventually fully taxable, these two measures shall essentially contribute to the mobility of the Greek labour market. The reason being that these amendments are institutional ones, established in the period of crisis, to put in place a new framework that, once the labour market recovers, will provide solutions to the labour mobility, since the termination will be easier for the employer, while the amount of the severance will no longer be considered by the employee as an incentive for remaining many years in the same company. Anticipated legislative regulation on whistleblowing The ministries of justice, economy and administrative reform are jointly preparing a legislative act on implementing a legal framework for whistleblowing. The US pattern will be used as a role model. According to a draft of the law – not yet submitted to parliament – the leading part will be borne by an independent authority, the Supervision/Control of Public Administration Authority. Protection as well as incentives (salary increases, promotion, and so on) will be granted to the employees – whistleblowers (also addressed as ‘public interest witnesses’) in the private and public sector, who will disclose any kind of illegal activity in their workplace. In the current economic context where transparency is crucial, such initiative is considered absolutely necessary to protect the public interest and promote accountability. New Collective dismissals: Troika calls for immediate amendment of the current legislative framework In current legislation (law 1387/1983 as amended and in force), the collective dismissals procedure is triggered when – for reasons unrelated to the employees being dismissed – companies that employ more than 20 people exceed the following thresholds within a calendar month: • for companies with 20 to 150 employees, six dismissals in a calendar month; and • for companies with more than 150 employees, 5 per cent of the workforce and not more than 30 employees in a calendar month. If the company employs fewer than 20 employees, the thresholds do not apply. So the company may dismiss all employees. The procedure is strict and bureaucratic. There are two stages: information and consultation with the employees’ representatives and intervention of the public authorities. The obligation to inform and consult with the representatives includes the obligation to discuss the crucial issues related to the collective dismissals and both parties’ obligation to present solutions to avoid or cut the number of the dismissals or at least to ease their negative consequences. Copies of all documents must be submitted to the prefecture or the minister of labour as the case may be. The minimum duration of consultations between employees and employer is 20 days. This starts on the day after the employer’s invitation to the representatives. The period can be extended if both parties agree. The result of the negotiations is drafted in minutes, signed by both parties and submitted to the prefecture/ministry of labour in line with law 1387/1983. If an agreement is reached, its terms and the measures to be taken must be set out in these minutes. If no agreement is reached, the reasons must be stated. If there is no agreement between the parties, the public authorities decide within 10 days of the final consultation minutes being submitted and can choose either to extend the period or to reject the dismissals in part or in whole. If again a decision is not issued, then the employer may proceed with collective dismissals either within the framework of the agreement between the employer and employees’ representatives or, without such agreement, within the employer’s initial plan. The company can carry out the collective dismissals to the extent defined by the decision of the public authorities referred to above. If the company does not comply with the these legal provisions, then the redundancies carried out without following the correct procedure are invalid. The inconvenience of the collective dismissals procedure is that it can only work if the employer agrees with the employees’ legal representatives on the conditions of the termination, their time, the order of the redundancies and so on. In practice, if agreement is not reached, the prefecture/ministry of labour never authorises the employer to proceed to collective dismissals. The Troika has asked the government to amend the law so that no ministerial decision is needed to proceed to collective dismissals and to abolish the 5 per cent threshold, above which the collective dismissal procedure would be triggered. In this context, the International Labour Organisation’s (ILO) opinion has been sought. The minister of labour had confirmed that until the end of 2013, a new institutional framework would be implemented on collective dismissals. As of January 21, no new law has been published. Ireland Workplace Relations (Law Reform) Bill The Irish government has taken steps to set up new institutional employment rights and industrial relations structures. It intends to establish a Workplace Relations Commission to streamline the various employment rights bodies and for a structure made up of one body dealing with matters of the first instance and another body dealing with appeals. The government’s overall objective is to encourage early resolution of disputes, vindication of employees’ rights and minimisation of the costs involved for all parties, including the government. In April 2012, the Minister for Jobs, Enterprise and Innovation published Blueprint to Deliver a World-Class Workplace Relations Service, which set out in detail how it is proposed to reform the workplace relations structures and processes. It is intended that the new legislation will establish a two-tier workplace relations legal system so that two statutorily independent bodies will replace the current five. The Workplace Relations Bill has been under consideration for over a year. The bill is due to be published soon. Social Welfare Act, 2012 This act, among other matters, removes the entitlement of an employer to claim a redundancy rebate for any statutory redundancy payments made after 1 January 2013. The rebate had been reduced from 60 per cent to 15 per cent in the Social Welfare Act 2011, but now has been entirely removed. Employers should bear this in mind when costing redundancy programmes. Employment Permits Bill The Employment Permits Bill will consolidate existing legislation and to take account of evolving jurisprudence. The bill will also cater for future accession to the EU. This bill is due to be published soon. New Protected Disclosures Bill 2013 The purpose of the bill is to make provision for and in connection with the protection of persons from the taking of action against them in respect of making certain disclosures in the public interest and connected purposes. The bill may be passed into law before the end of 2013; however, the timeline is unknown. New Social Welfare and Pensions Act 2011 This act was signed into law on 29 June 2011. It changes the Pensions Act 1990, as amended, and it includes changes to state pension. There will be a standard state pension age of 66 years for everyone from 1 January 2014. The Social Welfare and Pensions Act 2011 also increases the age for qualification for the state pension from 66 years to 67 years from 2021, and a further increase to 68 years from 2028. Italy Remedies for unfair dismissal Under the previous regime, in any case of unfair dismissal, an employer with over 15 employees had to reinstate the employee or pay an indemnity in lieu of reinstatement, if the employee chose this as an alternative. The same rule applied for a collective dismissal implemented in breach of the relevant formal and procedural requirements. The employer also had to pay uncapped damages equal to the employee’s monthly salary for the period ranging from the dismissal up to the employee’s reinstatement. This regime was seen as a major hurdle by employers and caused them to think twice before recruiting. The new regulation disapplies the reinstatement obligation in some cases of unfair dismissal. In particular, when an employee challenges a dismissal, the court can order the employer: • to reinstate the employee in cases of discriminatory dismissal. In such cases, the employee could opt for an indemnity in lieu of reinstatement equal to 15 months’ salary; • to either reinstate the employee or pay an indemnity varying between 12 and 24 months’ salary, in cases of disciplinary dismissal. When a court orders reinstatement, it will also order the employer to pay damages with a cap of 12 months’ salary; • to pay an indemnity of between 12 and 24 months’ salary or reinstate the employee and pay damages with a cap of 12 months’ salary if the reason for the dismissal is deemed non-existent; and • to pay an indemnity of between six and 12 months’ salary if the dismissal, although grounded, is not compliant with formal requirements. The practical impact of the changes to dismissal law can be seen in out-of-court settlements. The limitation of reinstatement has caused – in general – a decrease of the amounts to be paid for a settlement concerning the dismissal. Fixed-term employment – temporary agency contract To enter into a fixed-term employment or temporary agency work contract, it is normally necessary to specify why this contract is better than an open-ended one (the organisational, productive and technical reasons or replacement needs). This is no longer needed for the first fixed-term or temporary agency agreement, for a maximum of 12 months, unless the collective bargaining agreements that apply demand this. The ban on extending this first fixed-term contract, in cases where the relevant duration was less than 12 months, has also been repealed in 2013. When rehiring an employee on a fixed-term contract, a minimum period must pass between the previous contract ending and a new one starting. Under the previous regime, this was 10 or 20 days, subject to the length of the contract. This term was extended under the 2012 legislation: from 10 to 60 days and from 20 to 90 days. These have now been brought back to 10 and 20 days respectively. The terms do not apply to seasonal contracts or to any other case indicated by collective bargaining agreements. Autonomous workers To combat bogus self-employment, the relevant regulation has been made stricter. The main amendments concern autonomous workers with VAT numbers and project workers. As a general remark, when project workers carry on the same working activities as employees within the company, they will be deemed to be employees of the company under a rebuttable presumption. Project workers When such workers enter into a valid agreement, it is now necessary to indicate the specific project that will be carried out, together with the indication of the final results to be achieved. Additional criteria to determine whether a worker on-project could be re-characterised as an employee have been established. Thus, if the description of the project is not provided, the individual will be deemed to be an employee of the company. This presumption is irrebuttable. An exception to these rules applies for people who work in call centres offering customers or potential customers goods or services to buy. In 2013, the statutory procedure for resignation and mutual termination of employees has been extended to project workers. Autonomous workers with VAT numbers The same rules on project worker agreements are applied to autonomous workers with VAT numbers, including the irrebuttable presumption described above, if two of the following conditions are met. The activity exceeds eight months a year for two consecutive years, the income from such activity is equal to the 80 per cent of the overall revenues earned by the autonomous worker during the past two years or the autonomous worker has a workstation at the principal’s premises. Social security contributions have been made slightly higher for work-on-project employment contracts. More specifically, they will gradually increase starting from 2014 to 2018, when they will reach the maximum rate of 33 per cent. Apprenticeship Apprenticeship is the main way for young people (15- to 29-year-olds) to enter the labour market. A minimum duration of six months for an apprenticeship has been established, and the number of apprentices to be employed is subject to certain dimensional parameters of the employer’s workforce. In addition, in certain cases, the employer will be able to enter into a new apprenticeship contract, subject to hiring as permanent employees a minimum quota (at least 50 per cent) of the apprentices used in the previous 36 months. Netherlands The majority of the proposals for reform of the Dutch labour market included in the social agreement (Sociaal Akkoord) are included in the legislative proposal Work and Security Act (Wetsvoorstel Werk en Zekerheid) which has been sent to the Dutch parliament on 29 November 2013. The proposals include amendments in relation to the Dutch dismissal system, unemployment benefits and flexible labour relations. The most important provisions of the legislative proposal Work and Security Act are set out below. Update Dismissal law The dual Dutch dismissal system, where employers can either ask a court to terminate an employee’s employment agreement or seek permission from the Dutch Labour Authorities (UWV) to serve notice of termination, will with effect from 1 July 2015 be replaced by a one-route system, whereby the route to be followed will depend on the dismissal grounds. In short, the most important new rules are: Procedural rules • In case of a dismissal for business economic reasons or on account of long-term disability, the employer should obtain the advice from the UWV before serving notice of termination. In case of a dismissal for (other) reasons related to the employee and in case of a severely impaired employment relationship, an employer will need to ask the court to rescind the employment agreement. • In case of negative advice from the UWV, the employer may ask the court to rescind the agreement. In case of a dismissal following positive advice from the UWV, the employee can challenge the termination in court and ask for reinstatement. • A consensual termination is still possible upon written agreement by the employee. The employee can withdraw his written consent within two weeks. • It will under certain conditions be allowed to deviate from the reflection principle (afspiegelingsbeginsel), which is to be applied when selecting employees for dismissal, for at maximum 10 per cent of the employees who should be made redundant on the basis of that principle. Transition payment • In case one or more consecutive employment contracts have been in place for two years or more (both temporary and permanent contracts), an employer will in case of a premature termination or a non extension in case of a temporary contract be required to pay a transition payment of at maximum €75,000 gross or, if higher, one year’s salary. The transition payment is calculated as follows: one-third gross monthly salary per year of service for the first 10 years of service and half gross monthly salary for every year of service thereafter. For employees aged (over) 50 and employed for at least 10 years, a more favourable transitional arrangement (ie one gross monthly salary per year of service as per the age of 50) will apply until 1 January 2020. • Cost for redeployment arrangements, training and education, etc paid by the employer in the context of the dismissal may be deducted from the transition payment. • No transition payment is due in case the employee is seriously culpable for the dismissal. If the employer is seriously culpable for the dismissal, the court may, in addition to the transition payment, order the employer to pay an additional compensation. Notice period • In case the UWV route applies, the notice period to be observed may be diminished with the period required to complete the UWV procedure (as a starting point four weeks), with a minimum notice period of one month remaining. A court will rescind the employment agreement taking into account the applicable notice period, decreased with the processing time of the request for termination with a minimum notice period of one month remaining. Unemployment benefits The period during which an employee is entitled to receive unemployment benefits will, in the period from 1 July 2016 until 1 July 2019, be reduced from the current 38 months to a maximum 24 months, but social partners may in collective labour agreements agree on an extension of 14 months. During the first 10 years’ service, employees will accrue one month of unemployment benefits per year of service and thereafter half a month for each year of service. Update Flexible labour As of 1 July 2014, measures will be introduced to prevent erosion of employment protection in flexible labour relations. Examples of such measures are that temporary contracts of six months or fewer may not provide for a trial period, temporary contracts may as a starting point not contain a non-compete clause, and that in case of consecutive definite term contracts entered into with intervals of fewer than six (currently three) months, the fourth contract or the contract entered into after two (currently three) years, will automatically convert into an indefinite term contract. In addition, social partners have agreed to further review how to counter misuse of triangular relationships (eg payrolling, contracting, temporary employment agencies) and other sham arrangements. Pensions On the basis of the pension agreement (pensioenakkoord) reached by social partners on 18 December 2013, among others the maximum pension accrual percentage will for defined benefit schemes based on average pay (middelloon) as per January 2014 be decreased from 2.25 per cent to 2.15 per cent and per 2015 presumably to 1.875 per cent. In respect of defined benefit schemes based on final pay (eindloon), the maximum pension accrual will as per January 2014 be decreased from 2 to 1.9 per cent and per 2015 presumably to 1.55 per cent. Furthermore, several criteria will be introduced to safeguard the decrease of premiums as a result of the reform of the pension accrual system, the opportunity for independent workers (zzp’ers) to accrue pension will be further improved and tax beneficial saving of supplemental pensions will as per January 2015 no longer be possible on salaries that exceed €100,000. A legislative proposal including the above proposals will be sent to the Dutch parliament at the beginning of 2014, which might lead to changes to the proposals that are envisaged to come into force as per 2015. Lastly, it is proposed to increase the retirement age for state pension benefits (AOW) to 66 in 2018 and 67 in 2021. New Bonuses in the financial sector On the basis of the legislative proposal Remuneration Policy Financial Enterprises (Wetsvoorstel beloningsbeleid financiële ondernemingen), amongst others the bonus amount for employees working in the financial sector is intended to be statutorily maximised at 20 per cent of their fixed remuneration as per 1 January 2015. New Excessive remuneration The act adopted last year by Dutch parliament under which employers were required to pay a one-off tax of 16 per cent over salaries exceeding €150,000 gross in 2012 will be extended for another year for the salaries in 2013 exceeding €150,000 gross. The tax payment is payable by the employer in March 2014 and cannot be recovered from the employee. Portugal The Portuguese government has been proposing several measures to try to make employment conditions in Portugal less onerous for employers and more competitive. Some of these measures were set out in the Memorandum of Understanding with the EU Commission, IMF and ECB ‘Troika’ and others are purely voluntary. The Portuguese employment ‘reform’ is far from over and more measures – in fact, those expected to have the most effect – entered into force on 1 August 2012. Notwithstanding this, unlike some changes introduced in other jurisdictions to face the changing economic conditions, the Portuguese measures can hardly be described as a reform of the employment laws. Additionally, the Portuguese Constitutional Court has recently declared some of the measures introduced in 2012 unconstitutional. And after one year on the statute book, they have had to be deleted. The government’s proposed measures that remain effective to date are set out below. New Compensation for termination of employment For (non-fixed-term) employment contracts entered into before 1 November 2011, compensation shall be calculated as follows: • one month’s salary per year of service for services until 31 October 2012; • 20 days’ salary per year of service for services between 1 November 2012 and 30 September 2013; • 18 days’ salary per year of service for services between 1 October 2013 and 30 September 2016, if the employee had less than three years’ service on 1 October 2013; — if on 1 October 2013, an employee’s service was more than three years, compensation for work after 1 October 2013 shall be 12 days’ salary per year of service for services after 1 October 2013; and • 12 days’ salary per year of service for service rendered after 30 September 2016. The compensation calculated as described above for (non-fixed-term) employment contracts entered into before 1 November 2011 is subject to a minimum amount of 3 x reference base salary (RBS). For (non-fixed-term) employment contracts entered into after 1 November 2011, compensation shall be calculated as follows: • 20 days’ salary per year of service for services until 30 September 2013; • 18 days’ of salary per year of service for services between 1 October 2013 and 30 September 2016, if the employee had less than three years’ service on 1 October 2013; — if on 1 October 2013 an employee’s service was more than three years, compensation for work after 1 October 2013 shall be 12 days’ salary per year of service for services after 1 October 2013; and • 12 days’ salary per year of service for service after 30 September 2016. For (non-fixed-term) employment contracts entered into after 1 October 2013, compensation will be calculated on the basis of 12 days’ salary per year of service. The maximum amount of the reference base salary (RBS) for calculation of compensation cannot exceed 20 x guaranteed minimum remuneration (GMR) – currently set at €485/month. The maximum global amount of compensation cannot exceed 12 x RBS or 240 x GMR. If compensation calculated until 31 October 2012 is equal to or more than 12 x RBS or 240 x GMR, the employee will be entitled to the full amount (including excess). But no additional compensation will be accrued for service after 31 October 2012. If compensation calculated for employment up to 31 October 2012 is less than 12 x RBS or 240 x GMR, the compensation will be capped at these amounts. For fixed-term employment contracts entered into before 1 November 2011, for services until 31 October 2012, compensation for expiry shall be two- or three-days’ salary per month of service, depending on whether the services lasted more or less than six months. For services after 31 October 2012, compensation shall be calculated on the same terms as for (non-fixed-term) employment contracts. For fixed-term employment contracts entered into after 1 November 2011, compensation shall be calculated on the same terms as for (non-fixed-term) employment contracts. New Employer fund As expected, effective from 1 October 2013, the Portuguese government created a new employer fund aimed at subsidising half the amount of the employee’s final compensation. Employers must now start contributing to two different funds with a total amount of 1 per cent of the employee’s salary. This is not to be discounted from the employee’s monthly salary as it has to be paid by the employer. Other less relevant changes to employment laws Elimination of four public holidays Corpus Christi, Assumption of Our Lady, Republic day, Independence day. Elimination of accrual of additional holiday Employees entitled to an accrual of three additional days of holiday (on top of 22 mandatory days) as a result of no absences from work in previous year, lose the accrual right. However, if any collective bargaining agreement (CBA) foresees an accrual of additional days of holiday, employers must continue to follow the CBA and the elimination shall not apply. Change to holiday planning Saturdays and Sundays will be replaced as days of holiday when the employee has rest days in the working week. Update Changes to flexitime working hours bank The employer and employee will be allowed to agree on a working hours bank, by means of which the employee’s weekly working timetable could be increased to an average 50 hours a week. Changes to rest periods within working day Whenever the employee has a 10-hour daily working period, he may be required to render continuous work for a period not exceeding six hours instead of the previous five hours. Overtime (I) Reduction to payment: on working days, first hour get 25 per cent extra and subsequent hours 37.5 per cent (instead of previous 50 per cent and 75 per cent). On rest days, 50 per cent extra instead of 100 per cent. Any measures contained in CBAs or individual employment contracts in excess of this are suspended for two years. After 1 August 2014, any measures contained in CBAs in excess of this will become effective again. Update Overtime (II) Elimination of compensatory rest period, which created a ‘double’ compensation of employee for overtime provided except for work rendered on mandatory rest days. However, if any CBA that applies to employees foresees a compensatory rest, employers must apply the CBA. Unjustified absences Employees who were unjustifiably absent from work for one or half a day of work, which are immediately before or after a full or half day of rest or public holiday, will not be paid for the entire periods of absence as well as for all previous/subsequent full or half days of rest. Layoff Simplification of procedural rules to make it easier for employers to make layoffs. Holiday and Christmas allowance payment Since 1 January and during the current year, employers must pay their employees holiday and Christmas allowances in the following terms: 50 per cent of both allowances in 12 monthly installments and the outstanding 50 per cent should be paid immediately before the employee enjoys their holiday period (holiday allowance) and until 15 December, as for the Christmas allowance. Youth employment Since 1 September 2012 and with the fourth alteration to the Employment Code, minors under 16 years old are only allowed to do paid work, involving any autonomy, if they have either completed their compulsory schooling period or are attending secondary school. Such work must also be considered as light work, and they should be deemed fit to do this activity first. Stimulus measures – ‘Estímulo 2013’ Since 1 January 2013, some measures have been introduced to support employers that provide employment to unemployed people and provided certain requirements foreseen by law are meet (eg, no debts to Social Security), employers may benefit from a subsidy equivalent to up to 50 per cent or 60 per cent of the employee’s monthly salary. Services providers’ fraud To combat fraud and abuse on the use of services providers as employees, the Portuguese Working Conditions Authority was given the power to notify an employer to correct such situation within 10 days. It also has the power at the end of it, if nothing has changed, to notify the Public Prosecution to bring proceedings against the employer within 20 days. The proceedings will aim to recognise the services provider as an employee. Fixed-term employment agreements extraordinary renewal For fixed-term employment agreements that reach their maximum duration/renewals by 7 November 2015, a new and extraordinary renewal has been allowed. This renewal may itself be renewed once, if it does not exceed 12 months. Update Entry into force The special regime foreseen of compensation for termination of employment and Employers’ Fund entered into force on 1 October 2013. The reduction in the number of public holidays was effective from 1 January 2013. The rules on combat to fraud on use of services providers entered into force on 1 September 2013. The extraordinary renewal of fixed term employment agreements entered into force on 8 November 2013. All remaining changes entered into force on 1 August 2012. New Final note Some changes the government introduced in 2012 have recently been considered unconstitutional by the Portuguese Constitutional Court. In particular, the changes to individual redundancy and dismissal for inadaptation that we reported in earlier trackers. Changes to the Employment Code involving the reduction or elimination of rights foreseen in CBAs (eg holidays accrual, overtime payment and compensatory rest) were also deemed unconstitutional, and the rules contained in the CBAs continue to be effective. Spain The new labour market law reforms have shifted the balance of power between employers and the unions and increased the flexibility of the labour market. Law 3/2012, of 6 July, on urgent measures to reform the labour market, along with Royal Decree Law 4/2013 Royal Decree Law 5/2013 and Royal Decree Law 11/2013 are the reference texts. The main changes are set out below. Measures to improve internal flexibility Changes to terms and conditions of employment The employer may implement more easily both substantial modifications of employment conditions and geographical mobility since the necessary justifying economical, technical, organisational or production reasons (ETO reasons) for those modifications are now easier to satisfy. In addition, the law has made it possible to reduce salaries by changing employment conditions. The royal decree also defines ‘substantial changes’ as being collective or non-collective, which now depends on the number of employees affected by the measure. Temporary suspension or working time reduction Pre-administrative approval has been removed for the suspension of employment agreements and/or working time reduction due to ETO reasons (regardless of the number of employees affected), although the consultation period with employees’ representatives remains in force. Some social security benefits have also been introduced. If after 15 days from the last meeting of the consultation period the employer has not communicated its decision on temporary suspension of employment agreements and/or working time reduction, the procedure will be considered expired. Measures to improve the labour market flexibility Combining retirement pension and employment: on a general basis, the retirement pension shall be compatible with self-employment or paid-employment under the following terms and conditions: • The retiree shall have the legal retirement age (ie not applicable for early retirements). • The compatibility between retirement pension and employment triggers a reduction of 50 per cent of the pension. The work to be carried out shall be full-time or part-time work. • The social security contributions to be paid by the employer (or the retiree in case of self-employment) shall be reduced to the amount corresponding to professional contingencies. New early retirement rules: there are two alternatives for early retirement: • Early retirement for causes external to the employee’s will apply to employees who are at least four years before their retirement age and who have contributed to the social security system over 33 years and request their early retirement in case of, among others, restructuring measures at their employer, such as collective or individual redundancies for ETO reasons. • Early retirement at the employee’s will apply to employees who are at least two years before their retirement age and who have contributed to the social security system over 35 years. Amendment of the partial retirement rules: it establishes a new schedule of application of the partial retirement rules according to the age of the employee and his or her years of contribution to the Social Security system, along with the reductions that shall apply to the retirement pension in case of partial retirement. Collective negotiation Although the general rule remains that all employers and employees party to a CBA are bound by its terms, whenever there are ETO reasons, it will be possible, provided that before consultation with the employees’ representatives is carried out, to avoid applying the terms and conditions set out in the relevant sector or company CBA on various issues, including working time and salaries. As opposed to previous regulation on the matter, the content of company CBAs will have priority in their application over the relevant national or regional sector CBAs in various matters as well. The new legislation limits the application of an expired CBA to one year from the date the parties gave notice of expiry, so that if no agreement was reached or no arbitration resolution was passed, then, unless agreed otherwise, the previous CBA will lose its effect and, either the relevant superior national or regional CBA or the Workers’ Statute will apply. Termination of employment relationships Among other things, the new legislation clarifies the grounds for a termination based on ETO grounds. There will be economic grounds when an analysis of the results of the company shows a negative economic situation (ie, where there are current or forecasted losses or a persisting decrease of the income or sales volume). A persisting decrease takes place when this takes place for three consecutive quarters by comparison with the same quarters of the previous year. The statutory severance compensation to be paid in case the end of the employment relationship is declared unfair is limited to 33 days of salary a year of service up to 24 months’ salary, with a transitional scheme for existing relationships. The employment authorities’ approval for collective redundancies is no longer needed. The rest of the procedure is similar to the existing one. Additional regulation on collective redundancies Further to the recent changes on collective redundancies, the government has finally enacted a regulation specifying certain issues about the procedure. The developing regulation, which implements Law 3/2012, includes certain rules on the development of the procedure, including: • information to be provided in case of collective redundancies based on economic grounds: — a memorandum explaining the negative economic situation; — annual accounts of the past two full years, and provisional accounts as of the date of the start of the procedure, duly signed by the governing body; — in case of forecasted losses, information on the criteria used to estimate those losses, as well as a technical report on the volume of losses, and whether they are transitory or permanent; — in case of decrease of income or sales, tax or accounts showing the decrease, and showing the ordinary level of income or sales; and — if the relevant entity belongs to a group of companies, with the obligation to formulate consolidated accounts and provided that the parent/holding company has its corporate domicile in Spain, the audited accounts and management report consolidated of the holding company, of the past two full years, and provisional accounts as of the start date of the procedure, duly signed by the governing body, provided there are loans or credits with the relevant entity. If there is no obligation to consolidate accounts, accounts of other group companies in Spain that belong to the same sector of activity and have credits or loans with the relevant entity should also be provided; • only one negotiation committee with a maximum of 13 individuals representing each party (if the procedure only affects one work centre with no employees’ representatives – ad-hoc committee with maximum three members). Such committee should be incorporated before consultation process; • the minimum number of meetings, which depends on the size of the entity, and minimum and maximum periods between meetings; and • measures to be included in the social plan with the aim of avoiding or reducing the redundancies, or mitigating their consequences, and with specific reference to the outplacement. If the collective redundancy is declared null and void, such decision will be enforceable without need to go to individual claims, as opposed to what had to be the case before. Case law is quite tough when assessing whether the procedure has been duly followed, and sufficient information has been provided to the employees, otherwise declaring the redundancy null and void. Accordingly, the preparing and implementing the consultation stage will be key for a successful procedure. Additional costs arising in case of collective redundancy – payment to the Treasury Background Historically, it has been usual for some big companies and financial institutions in Spain to carry out downsizings by means of pre-retirement schemes. This means that, to calculate the severance, rather than looking at the years of service of the employee, one looks at the years pending until the individual would be entitled to retire and obtain a pension from the state, and the severance is calculated to finance this period up to a certain percentage of the final salary, taking into account that, during the two first years, less money is needed as the employee would receive unemployment benefits. For example, the company agrees to pay the employee an amount such that, from the date of termination until the date of retirement, he would have monthly earnings of 85 per cent of his final after-tax salary. During the first two years, the company would pay only the amount needed to complement unemployment benefits up to the 85 per cent, rather than having to pay the full 85 per cent. Given that the social security system is in need of money, and to correct this practice, the government has legislated with the aim that companies with benefits finance all this severance on their own. The new rule Royal Decree law 5/2013 amends existing legislation and states that companies carrying out a collective redundancy that includes employees of 50 or more years, shall contribute to the Public Treasury, provided these circumstances are met: • that they are carried out by companies with over 100 employees, or by companies belonging to groups of companies that employ that number of employees; that the percentage of employees affected by the redundancy over the age of 50 or more is higher than the percentage of employees over 50 or more in the company’s total staff; and • that, even if there are ETO grounds for the redundancy, the company (or its group) made profits in the two exercises before the one during which the employer starts the collective redundancy procedure; or that they made profits in at least two consecutive years from the year before starting the collective redundancy to four years later. The relevant amount is assessed yearly by applying a specific rate to the amounts paid by the Spanish Public Employment Service to the relevant employees as: • unemployment benefits for the former employees over the age of 50; • contributions to the social security system for the former employees; and • a fixed fee in case any of the former employees over the age of 50 runs out of unemployment benefits and is entitled to an additional subsidy. The applicable rate runs from 60 to 100 per cent of the payments made by the Spanish Public Employment Service, depending on the percentage of profits on revenue, the percentage of employees over the age of 50 affected over the total amount of employees affected by the collected dismissal, and the total number of employees in the company. New measures for ‘entrepreneurs’ and in favour of youth employment A new type of employment agreement is set out to support entrepreneurs – ie, entities with fewer than 50 employees. The agreement will be indefinite, for full-time employees, and it will be possible to provide for a trial period of up to one year. Reduced social security contributions are set out to be applied to self-employed workers under 30 years old, or under 35 years old in the case of women, if they meet certain requirements – eg, if they register themselves for social security for the first time. It will be possible to combine the perception of unemployment benefits with self-employment activity when established so by employment promotion programmes for groups with the greatest difficulties to enter into the labour market; and a self-employment is initiated by people under 30 years old. The possibility to apply for the capitalisation of unemployment benefits is extended to beneficiaries of unemployment benefits under 30 years old. Companies entering into part-time employment agreements with training purposes with unemployed young people under 30 years old shall be entitled, for a maximum of 12 months, to a 100 per cent reduction in the employer’s contribution to Social Security for each employee, in companies with fewer than 250 employees; or 75 per cent in companies with 250 or more employees; provided that employees meet certain conditions – eg, not having previous work experience. Companies entering into permanent employment agreements, whether full- or part-time, with unemployed young people under 30 years old shall be entitled to a 100 per cent reduction in the employer’s contribution to Social Security for each employee during the first year of the agreement and under certain conditions – eg, not having more than nine employees working for the company. UK Update Implementation of the Enterprise and Regulatory Reform Act 2013 The UK has begun to implement the operative provisions of the Enterprise and Regulatory Reform Act 2013 since its enactment on 25 April 2013. This wide-ranging legislation contains measures intended to improve growth and business practices, including, from an employment perspective, changes to simplify employment proceedings and to improve the chances of early resolution. The changes include: • making pre-termination negotiations (such as settlement offers) inadmissible in unfair dismissal claims (except under certain circumstances, such as when it is alleged that the dismissal was automatically unfair or the tribunal considers the employer’s behaviour to have been ‘improper’). This came into force on 29 July 2013. It is felt, however, that there are limitations to such pre-termination negotiations and that they should be carried out with caution by employers; • new powers for the business secretary to vary the statutory cap on the compensatory award for ordinary unfair dismissal claims. The limit on the compensatory element of awards can now be changed to a specified amount from one to three times median annual earnings; or a specified number, not less than 52, multiplied by a week’s pay of the individual, or the lower of the two. With effect from 29 July 2013, the UK government confirmed that the maximum compensatory award for unfair dismissal would be the lower of £74,200 or 52 weeks’ pay; and • changes to the rules that apply to employment tribunals – these cover matters such as a requirement for claimants to try alternative dispute resolution before issuing a claim (which will apply from 6 April 2014), giving powers to persons appointed as legal officers in Employment Tribunals, a provision that Employment Appeal Tribunal proceedings will be heard by a judge acting alone (without lay members unless the judge directs otherwise) and changes to the regime relating to deposit orders and costs (which came into force in July 2013). New Fees in UK Employment Tribunal The UK government introduced a new system of fees into the Employment Tribunal and Employment Appeal Tribunal. Claimants must now pay a fee to issue a claim, followed by a further hearing fee in advance of the final hearing. The fee will depend on the type of claim. Other fees will apply for certain applications, such as applying for a final judgment to be reconsidered or to issue a counterclaim. This became effective on 29 July 2013. Update UK government makes changes in relation to TUPE Following its consultation on proposed changes to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), the UK government decided not to pursue several potentially significant changes, including the proposed repeal of the regulations relating to service provision changes. The UK government has, however, published draft legislation that would make less significant changes to TUPE. These amendments include: • a clarification that, for there to be a service provision change, the activities carried on after the change in service provision must be fundamentally the same as those carried on before it; • allowing changes in the location of the workforce following a transfer to amount to an economic, technical or organisational reason entailing changes in the workforce; • limiting employees’ protection against post-transfer changes to terms and conditions, and dismissals, to where the reason is the transfer itself (rather than where the reason is connected with the transfer); • clarifying that transferees will only be bound by collective agreements agreed at the date of the transfer, and not by subsequent variations or new collective agreements where the transferee is a party neither to the new agreement nor to the bargaining process; and • extending the period in which transferors must provide transferees with specific information relating to the individuals transferring from 14 to 28 days. Amendments to the Trade Union and Labour Relations (Consolidation) Act 1992 mean that pre-transfer redundancy consultation can count for the purposes of complying with the collective redundancy rules, provided the transferor and the transferee agree and the transferee has carried out meaningful consultation. Update ‘Employee shareholders’ status becomes effective The UK government has implemented new legislation – the Growth and Infrastructure Act 2013 – which introduces the new voluntary status of an ‘employee shareholder’ into UK law. This came into effect on 1 September 2013. Companies and individuals may agree that the individual will become an employee shareholder and, in so doing, the individual will be given shares in his employing company in return for foregoing certain employment rights. Employee shareholders will have the same rights as employees, except that they will forego: • the right to request time off for study or training; • the right to make a flexible working request (except to a limited extent following a return from parental leave); • the right not to be unfairly dismissed (except in health and safety cases, automatically unfair cases, or cases where the dismissal is discriminatory); and • the right to a statutory redundancy payment. Employee shareholders must also give 16 weeks’ notice if they want to return early from statutory maternity, adoption or additional paternity leave. In return for giving up these rights, the employee shareholder will be issued or allotted a minimum of £2,000 worth of shares in their employing company or its parent company. There will usually be a capital gains tax exemption on the gains derived from the first £50,000 worth of shares awarded, and there will usually be no income tax payable on receipt of the first £2,000 worth of shares.