One of the most ground-breaking legislative reforms on the horizon is in Ireland, where a new bill proposes to penalise employers with criminal sanctions for failure to comply with employment legislation. Under the new Sarkozy regime, France is trying to balance retaining its 35-hour working week, with the awareness that to do so could stifle competitiveness. Its proposed reforms involve rewarding workers for overtime hours, while retaining the standard 35-hour working week.
Other countries, such as Spain, Germany and Portugal, are considering ways of promoting equality between working men and women. This takes the form of a new equality bill in Spain, while changes to the parental leave provisions in Portugal are being mooted and changes to parental leave and flexible working patterns in Germany are soon to be introduced. We detail these, along with a summary of other changes afoot in Europe, below.
Ireland – comply or face criminal sanctions
One of the most radical areas of reform being considered in Europe at present is in Ireland, with the Employment Law Compliance Bill 2008. This aims to reshape the traditional model of employment law compliance in Ireland. Under the proposed bill, the under-funded and relatively powerless Labour Inspectorate will be replaced by the National Employment Rights Authority (NERA). NERA is a body dedicated to employment rights compliance, with enhanced rights of inspection and enforcement.
Not only will NERA have an increased body of inspectors to investigate breaches of the law, it will be backed up with 23 new criminal offences for breaches of employment legislation, including fines of up to 250,000 euros and/or imprisonment for up to three years.
An array of powers will be given to NERA under its inspection and enforcement powers, including the ability to make dawn raids on employers and to conduct investigations alongside tax inspectors, social welfare inspectors and the police. To add insult to injury, the liability for the cost of a NERA investigation and prosecutions could fall on the employer (where it is found to have committed an offence).
Currently the bill has received mixed reviews. As yet, there is no indication as to when it might be implemented.
France – the delicate balancing act
Sarkozy was elected to the French presidency in May 2007 on the back of a campaign which included the slogan, "work more to earn more". While not daring to return to a longer work week, the French Government, in accordance with this campaign theme, instituted a favourable social security and tax treatment of overtime payments. This predominantly benefits employees, by allowing them to earn higher net wages should they be requested to work longer hours.
A law in August 2007 was aimed at promoting work, jobs and purchasing power (TEPA), which also increased premium rates in small companies.
The law on purchasing power dated February 8, 2008 is also aimed at allowing employees to receive higher net wages. For instance, this second law allows employees to request a commutation into cash of their right to additional rest days (RTT days) accrued since January 1 2008. If the employer accepts the employee's request, the pay received by the employee in connection with RTT days is increased by at least 10 per cent and is subject to favourable social security and tax treatment.
The second major change in France is the recent introduction of the French version of 'flexicurity', the pan-European strategy of securing employees' job security while increasing labour flexibility in the sometimes restrictive French labour market. This is partly achieved by the law on the modernization of the labour market (introduced in June 2008). This law, among other things, aims at making the termination of employment contracts by mutual consent more attractive for both employers and employees, provides for a new type of fixed-term employment contract, and sets out new rules relating to employees' probationary periods.
Italy – challenging informal employment practices
Italy has spent the last few months in a state of some turmoil in legal employment law terms. In March 2008, Italy introduced legislation which sought to counteract the practice of certain employers requiring new employees to sign an undated resignation letter upon their arrival at an employer, in order that, at a later date, the employer may rely on this letter as "proof" that the employee resigned (rather than was unilaterally dismissed). However, this has since been repealed by the new government, which came into power on 8 May 2008.
Instead, Berlusconi's regime anticipates many reforms of the labour market. Some changes have already been introduced; others will follow in due course. The overall thrust of the proposals is to restore competitiveness to the Italian labour market by encouraging more flexible working patterns, especially in temporary labour contracts.
For example, there has been an extension of the circumstances in which fixed-term contracts may be entered into. In addition, the restrictions on working from home (which would previously impact upon Italian employees' pension rights) have also been softened.
Like France, Italy is also focusing upon the tax treatment of overtime hours as a way of raising productivity. An initial phase of implementation, lasting until December 2008, will focus on the private sector and will allow preferential tax treatment of employees earning a gross income of less than EUR 3,000 (who will be taxed at 10 per cent rather than the usual progressive rate income tax of up to 43 per cent). This is expected to expand to the public sector at a later date. There are also expected to be tax breaks on productivity bonuses.
Other moves for change – reform of flexible working and parental leave
Elsewhere, countries are focusing on implementing the equality agenda.
Germany has recently introduced measures in relation to compassionate leave and parental leave. Since the beginning of July 2008, employees have been able to claim emergency leave of up to ten days in order to look after a relative in need of care. Where companies have more than 15 employees, employees are also entitled to claim an "extraordinary release" of up to six months to care for a relative. Education benefits were increased from 2007; the result has been that employees are more likely to take at least one year off work. This can place employers in a difficult situation as many have found it hard to substitute a skilled employee for 12 months or longer.
Germany has also legislated to prevent flexible working patterns being left entirely to the whim of the employer. The Federal Labour Court has determined that flexible working time should be limited to protect the employee against income loss. In any flexible working contract an employer must specify a minimum working time in the contract, with the employer and employee reaching agreement on an additional extra working pattern of not more than 25 per cent of the fixed weekly working time.
Spain has introduced a new law to address gender and equality issues. This came into force in March 2007 and is designed to safeguard the principle of equal opportunity within the labour market. It is not only preventative; it also compels employers to take a proactive approach to preventing harassment and promoting gender equality.
One aspect of this is the requirement on all employers with over 250 employees to introduce "gender equality plans". Failure to introduce such a plan, including all the required purposes and criteria as set out in the legislation can lead to employers being hit with a financial sanction of between 6,251 and 187,515 euros.
Whether this aspect of the law will be successful is hard to know. The law only provides general guidelines and employers in Spain are not, as yet, experienced in implementing such plans or detecting gender discrimination in the workplace.
The law also introduces new rights related to working time and new social security benefits (e.g. paternity leave). This is just another step towards a very family-friendly working environment in Spain; 67,000 men took paternity leave during the first quarter of 2008.
Elsewhere in the European Union…
Portugal is currently embroiled in debate as to how the proposed reform to the country's Labour Code (the "Code") will occur. If agreed, the anticipated revised Code would change a range of current employment practices in Portugal.
The main areas for reform are to promote labour adaptability; reform collective bargaining (one of the more contentious areas); improve the effectiveness of labour laws in general, and specifically in dismissal situations; promote employment in Portugal and challenge the instability of some forms of employment.
From the aim of promoting labour adaptability comes the proposed replacement of current maternal, paternal and adoption leave provision. This includes a suggested increase from five to ten working days paternal leave at birth, plus an optional extra ten paid days off and new parental leave which can be shared between the parents on the birth of a child.
At present, some of the most contentious areas revolve around the future role of trade unions in the country. Collective agreements are widespread in Portugal, but one of the mooted changes would be to allow works councils to enter into collective agreements with an employer, rather than just trade unions.
In addition, the proposed changes would attempt to streamline the country's process of dispute resolution – employment law cases can take years (and sometimes almost a decade) to pass through the courts. Proposals under consideration involve moving to a more Spanish model, which would shift the responsibility to pay interim salaries from the employer to the state when a dismissal is voided.
The Code is being widely debated at present. The outcome of negotiations is not expected until 2009, with particular challenge coming from trade unions.
Belgium has implemented a new collective bonus system, which promises cost advantages (by way of social security and tax advantages) to companies if its employee bonus schemes comply with certain conditions.
Not only would the new bonus system be transparent, the costs savings to employers would be significant. For example, to give an employee a bonus of 500 euros net would cost an employer 665 euros under this system (as against a cost of 1,529 euros if that same bonus were paid by the employer as an individual bonus).
In the Netherlands, the level of severance pay is a hot topic of discussion. Currently, the level of severance pay is generally calculated according to the so-called "sub-district court formula". This court formula takes into account the employee's age, years of service, monthly salary, bonuses (even if they are substantial) and who is at fault (as to the termination of employment). Taking all these elements into account, employers can be forced to pay a comparatively high severance pay to the employee.
In 2007, the Dutch Government submitted a legislative proposal to maximize the level of severance pay. However, this proposal was rejected due to substantial disagreement within the coalition government about various proposed changes to the law on termination of employment, including this proposed level of severance pay.
The Labour Force Participation Committee (which was set up by the Minister of Social Affairs and Employment as a result of the disagreement, presented a report to the Dutch Government in June 2008, part of which covers the level of severance pay. The Committee advised the Dutch Government to "trade in" the employer's obligation to pay severance pay for an obligation to save money during the employment.
The employer can draw on its savings to pay for the employee's extra training, enabling the employee to change jobs more easily in the event of the employment being terminated. In addition, the savings would be used to bridge the employee's income gap when they are in between two jobs. The Committee also recommended the government to oblige employers to continue salary payments for up to six months after the termination of employment. Together with the savings for extra training, the Committee believed that this obligation would result in less unemployment, since the employer would have an incentive to help the employee to get a new job both during employment and once it is over. The Dutch Government will deliberate on the Committee's report and decide whether the existing legislation should be amended.
The level of severance pay is indeed proving to be a very hot topic in the Netherlands. However, until any of the detail of the proposed changes is known in legislative terms, severance pay in the Netherlands remains to be calculated according to the sub district court formula. Watch this space!