Germany: negotiated restructuring

Negotiation at company level is at the heart of the German way of dealing with restructuring. In corporations with more than 500 employees (which together employ less than one quarter of the German workforce), there will be employee representatives on the supervisory board where the decision is taken, formally at least.
Where a works council exists (which applies to 40% of the workforce in the private sector), it has extensive legal rights to negotiate a social compensation plan designed to mitigate any negative consequences restructuring might have on the workforce.
Traditionally, compensation consists of redundancy payments. It depends on the partners of the negotiations whether additional services (job search counselling and coaching, training, outplacement/replacement) will be offered to workers concerned as part of the social compensation plan. Where this is the case, financial subsidies for two legally defined measures are available from the Public Employment Service. One of these instruments serves as the financial base for so-called ‘transfer companies’ which offer subsidised fixed-term employment during jobsearch, re-orientation and re-training.
Works councils may be trained and counselled by the union that organises in the respective sector and whose members have the majority on the works council. Such trade union support is crucial when it comes to negotiating restructuring, especially with regard to solutions beyond purely financial compensation.
A slight majority of German employees, mostly in small enterprises of the private sector, is not represented by a works council. Here any systematic approach to deal with restructuring can hardly be expected. In cases of insolvency, sometimes the insolvency manager proposes outplacement/replacement approaches.

Leaflet Germany