Home truths

Recently, the economic crisis hit the global economy hard. Within this gloomy context, local human resources (HR) managers of multinational companies have been kindly asked ‘to evaluate possibilities to reduce headcount’.

In a perfect world, a central project team assists local HR in translating strategy, preparing communication and coordinating transnational aspects. In the real world, there’s usually no real central support and local HR has to manage its own local restructuring.

So, what does local HR have to do? After being informed of a group’s plans, it should ask a few important questions: will this project entail a collective dismissal? Who’s aware of this project locally? What’s been done? What’s the project’s timing? After that, it has to thoroughly prepare the announcement for the works council. Finally, it plays a crucial role in the process towards an agreed social plan.

Collective dismissal?

Though it’s based on the same directive, the definition of a collective dismissal is not the same in different EU member states. A project may be a collective dismissal in one EU member state but not in another. Many projects that don’t appear to lead to collective dismissal may in fact warrant one – such as a move, merger, etc.

If the project warrants collective dismissal, employee representatives must be informed first. Local HR will have to establish an insiders’ list, have them sign a confidentiality agreement, and prepare a holding statement. In multinational groups, the risk of leaks is indeed rather high: many projects are simultaneous, so it’s not always clear which projects are still hush-hush.

Timing is all

As long as no decision has been made, the group can’t implement the project. In a small or medium-sized company, this is easy to oversee. In a multinational group, where most functions like IT, finance, legal, and HR are internationally structured, this is more difficult. IT may already be merging platforms before any merger has been announced in the Works Council, so HR should ensure no such measures have been taken before a decision to implement the project has been made.

Finally, local HR must check whether the timing is realistic. Ideally, it gets about one month to prepare the local collective dismissal procedure.

Check and check again

So, how will local HR now prepare the announcement for the works council? Local HR should receive a business plan detailing the impact on personnel, a budget, a communication plan and, possibly, a contingency plan. Then, it must check the information and adapt it locally to feel comfortable with the project. Once the announcement is made, local HR will confront the employees and their representatives to defend the project. If HR doesn’t understand the project or why it is important to the group, it is in for a bumpy ride.

Another important point is that, in the legislation of many EU member states, the interest of the legal entity prevails upon the interest of the group. Local HR – or the local legal function – should check whether the project makes sense for its own legal entity, otherwise its directors may be confronted with claims based on their liability for mismanagement.

Towards an agreed social plan

Once the collective dismissal procedure is in motion, there are again multiple related challenges for the local HR. In most EU member states, the procedure is a two-stage process. The first stage is when the project is discussed, while the second stage is when the social plan is negotiated for those affected by the collective dismissal. At the start of the first stage, the company announces an intention, and makes a decision by the end of that same stage.

The date of announcement may be problematic for instance: it might fall in the middle of a negotiation with local trade unions on a different topic. If the first stage takes longer in its own country than in others, local HR will need to speed it up. Or, it might have to wait for other countries and manage the expectations of its own unions in the meantime.

Information gaps

Uncomfortable situations might arise. Other countries may give more information to their workers or representatives because it’s legally necessary, or because it’s a local tradition. If the representatives communicate, local HR may be confronted with local representatives who know more about the project than they do. This could also happen if the multinational group has a European works council.

Until now, the negotiation of a social plan has been a local issue. Today, trade unions start using social plans negotiated in other EU Member States as precedents to obtain better social plans themselves. Therefore, local HR should be kept informed of what other group companies grant dismissed workers in that same project.

When the affected workers are dismissed at the end of the second stage, the new organisation may not be ready. Local HR will have to stall the negotiations, provide for flexibility on dismissal dates, or re-negotiate exit strategies if the plan has already been signed.

Alexander Vandenbergen is an employment lawyer and managing partner at Lydian in Brussels