The Employers' Utopia

Which countries in Europe come closest to the ideal? By Robin E.J Chater, Secretary-General: The Federation of European Employers (FedEE) The typical US or Japanese company thinking about expanding its operations into Europe will have to come to terms with over 50 states or semiautonomous territories, 27 major languages and a confusing mass of tax and labour legislation. At its heart is the European Union (EU) - a seeming United States of Europe - but with far less centralised control than the USA. Whilst the EU has within it Germany, the biggest European national economy but lying outside it is Russia, the biggest physical entity in the region. Where in this complex geographical and cultural landscape should a company lay its corporate head? Within the 27 countries that make up the European Union there appears to be a high degree of harmonisation. They are limits imposed on value added tax and a common framework of labour laws. Yet, big differences remain and in strategically important fields, such as hiring and firing, there are remarkably few limitations placed on member states. In many ways it is easier to say where not to go than to decide on what is particularly attractive for employers. Yet individual countries have, like the curates egg, come up with legislation that is good in parts and if there was an ideal world for companies the following mix of current practice would probably be as good as it could get. What employers want most from a government (apart from being left alone to get on with running their business) is clarity and certainty. From this perspective laws do not have to be particularly employer-friendly as, to a point, even the most obstructive legal framework can be tolerable as long as it is consistently applied. For this reason Norway must be the starting point for our journey. The Norwegian Working Environment Act brings together all the major workplace rights and obligations into one place and is a beautifully drafted document. I would not advocate legislative texts as bedtime reading, but this is the nearest it can get. Whilst in Norway we might also drop by on their mediation laws. Compulsory mediation in labour disputes has long been a concern for Norwegian trade unions, but it work and has helped to keep the peace for many years. If Norway in commended for its well written labour law then its Scandinavian neighbour Denmark must be commended for its absence of formal legislation and reliance on collective agreements to apply minimum standards, especially for blue-collar workers. Employers and trade unions in Denmark enjoy a high level of co-operation and extreme union militancy is thankfully quite rare. The government has cannily devised a social security system that requires contributions to be almost entirely the responsibility of employees. This means that gross salaries are very high by comparison with other European countries - although employers do not have to worry about additional social costs. Moving southwards on our journey into Germany we find two laws that are standouts for employers. Under the German termination law employees only have three weeks to decide whether they wish to take their employer to a labour court for unfair dismissal. Employers can also pay an additional sum on top of dismissal compensation which, if accepted, removes the right to go to court. During the recent recession Germany also operated a layoff law that allowed companies to retain many of their skilled employees when they would otherwise have had to

make them redundant. It was partly due to this provision that Germany was one of the first countries to pull itself out of the recession. Moving east into the Netherlands there is little to commend and much to fear. The Dutch operate one of the most generous statutory sick pay schemes in the world and there is a legal requirement to get official permission from the state or a court before dismissal can take place. Two things in favour of the Dutch system, however, is that it encourages flexibility (mainly through part-time employment) and operates a tax-free savings scheme that gives employees greater economic security and stability. A recent edict allows employees to cash in all their savings tax-free next year - thus providing a helpful boost to the economy. A short sea trip away and we are in the UK. Although in many ways the UK is the most employer- friendly country in Europe it remains a difficult environment for employees because like the USA - Britain is a highly litigious country. It may be easier on paper to dismiss an employee than in most of its continental neighbouring countries, but employers that attempt to do so will often find that they are being accused of unfair dismissal - or increasingly discrimination on gender, race or age grounds. Britains common law system creates a happy hunting ground for ambulance chasing solicitors and it is all too easy for companies to face fabricated cases that it will cost more to contest than to settle out of court. So we move on to France. If Britain seems to most employer-friendly country in Europe - but is not - the same reverse logic applies to France. Here labour laws appear to be most heavily biased in favour of employees and if an employer finds themselves in court then they only have the slenderest chance that they will find the conseil de prud'hommes coming out in their favour. Trade unions in France are also the toughest and most militant in Europe. Cross the CGT union and you are likely to find your factory manager being held hostage in his or her own office for days on end with the police looking on. Yet France does have a number of secret delights for employers. Although international employers are generally exasperated by the statutory 35-hour week its introduction has not resulted in any reduction in overall productivity and the fact that overtime is tax free means that employers have little difficulty in persuading staff to put in extra time. France also has the lowest level of unionisation in Europe and because the government normally legally enforces collective agreements across entire industry sectors employers can operate self-protective labour cartels in circumstances where collusion with competitors over the price of goods would by an antitrust violation. For the last leg of the trip we must take a plane. It is tempting to stop off in Switzerland to admire their relaxed dismissal laws and much of eastern Europe to commend their low statutory minimum pay rates (compared with western Europe) but for innovatory labour laws our final destination must be Greece. The economic woes faced by Greece has encouraged the EU to rethink its whole philosophy about the need for increasingly higher labour standards, especially in the field of social protection. It has finally twigged that without a safety net the trapeze artist will perform at their best. A free market will naturally maximise its potential and if employees are less secure in their jobs, employers will conversely be more secure in generating and filling them. If companies cannot enjoy reasonable common labour rates - as in France - then the next best thing for companies is to be free to set their own wage levels. Under the latest austerity measures companies can effectively decide if they want to enter into a labour cartel or do their own thing.

The new collective bargaining law states that sectoral agreements will no longer be mandatory within their sector unless businesses representatives or owners are themselves members of the labour unions with which the collective agreement is signed. In any case deals will not be able to extend for longer than a year at a time before having to be renegotiated. Companies with ten or more employees will also be able to set up their own union of individuals with whom to negotiate. This tour through Europe from the arctic circle to the balmy Ionian shores has illustrated how widely differing European countries remain. Companies will continue being tempted to set up shop in eastern Europe to save on labour costs, but in 5-10 years the wage differential with the rest of Europe will have come to an end. What will be left is a potpourri of employment laws and labour practices with every country continuing to make its own mistakes and remaining too proud or insular to learn from others. My greatest faith lies in a European country that does not appear on many maps, nor is recognised internationally - but exists nonetheless. Transnistria, a self-governing territory of over 500,000 people is nestled between the poorest country in Europe - Moldova and the second poorest - Ukraine. Yet its very nascent quality could give it a chance to be one of the richest states in Europe. Currently effectively ruled over by a faceless corporation called ironically Sheriff this one horse semi-state could - under a new, more democratic regime - use its independence to open itself up a genuinely free market and cherry pick its labour laws from older nations where the politics of inertia prevents the importation of new ideas. Robin E.J Chater FedEE, London Copyright: FedEE Services Limited 2011.