Appendices

Appendix 8 - Unions' recommendation on the prediction of changes and change security


1. The intention of the recommendation

At enterprises and in workplaces, the Co-operation Act is often considered a set of norms and standards full of formal requirements related only to situations involving dismissals for financial or production-related reasons. However, the actual purpose of the Co-operation Act is to promote genuine co-operation between an enterprise and its employees. Even though some necessary formal requirements are in place, many of them can be agreed upon differently.

The Federation of Finnish Technology Industries and the Federation of Special Service and Clerical Employees ERTO issue this joint recommendation in order to form a genuine basis for co-operation. This is not a set of new regulations but a new recommendation that concerns the prediction of needs for change in an organisation’s labour as early as possible. At the same time, the intention is to generate best practices in undertaking the appropriate co-operation negotiations related to the reduction in personnel.

Successful co-operation between the employer and employees leads to an end result that benefits both parties. Co-operation helps employees better understand the pressures for change related to the company and their own work, and the employer, in turn, receives information on the employees’ attitudes towards pressures for change. It is not unusual for different kinds of co-operation situations to emerge quickly and without warning, in business life. However, the element of surprise should not lead to poorly managed processes. Poorly executed co-operation will, at worst, lead to a feeling of insecurity and, through it, weaker performance at work and decreasing productivity.

2. Predicting impacts on personnel

The parties to this collective agreement have made a recommendation on predicting impacts on personnel, which is an appendix to the collective agreement for the IT service sector. It is recommended that the employer’s representative and the shop steward or other employees’ representative meet regularly to consider how the business is progressing and what impacts possible personnel changes may entail.

Early co-operation between the employees and the enterprise is sensible because the employees may have constructive ideas for developing the company’s business activities. It is reasonable to listen to and acknowledge such ideas in the evaluation of the impacts of situations of change on personnel.

This recommendation is intended to ensure that changes are negotiated openly, but with full confidentiality. Ideally, a common view can be attained on where the changes in business activities would potentially lead the company. If the discussions produce a clear trend for change that may necessitate quantitative or qualitative pressures for change with regard to personnel, open and timely negotiations will give staff the time and opportunity to prepare themselves for the forthcoming changes. Employees will find it easier to understand the reasons for change and its consequences when they are given the related news in an open and honest fashion. This also diminishes any later conflicts resulting from the situation.

3. Confidentiality of information and trade secrets

Company secrets, both trade and professional, that emerge during even the most casual of predictions constitute confidential information. In addition to any secrecy clauses of the employment contract, confidentiality is based on the secrecy norms of the shop steward agreement. If the prediction is performed according to the procedure as laid down in the Act on Co-operation, the employees’ representatives are bound by the confidentiality clause in Section 57 of the Act on Co-operation. If the company considers any information to be confidential, it is worth pointing this out in good time. Special rules apply to listed companies as regards the confidentiality of data and the obligation to publish information that may affect the company’s share prices in a substantial way. In certain circumstances, rules concerning insiders may also be applied to the representatives of employees in listed companies.

4. Co-operation negotiations on possible impacts on personnel

The Act on Co-operation proceeds from the fact that all significant changes affecting personnel must be dealt with through a procedure that complies with the law. The act specifies that an effort must be made to identify whether a measure under consideration will have substantial impacts on personnel, at present or in future.

Not all measures planned by the employer that affect the personnel will result in the need to implement staff cuts. In such cases, it is enough to discuss the matter prior to any decisions, in accordance with Chapter 6 of the Act on Co-operation – i.e., without adhering to a minimum period of negotiation. Hence one round of negotiations may suffice. However, the grounds, impacts, alternatives, and schedule of personnel impacts of a measure planned by the employer must always be reviewed.

In terms of time, by law, negotiations must be initiated whenever the company is considering a business solution that involves or may involve impacts on personnel as referred to in the Act on Co-operation. The matter must be negotiated on prior to making of any decision.

Example: The company is considering a change in its service provision, which, within a couple of years, will in all likelihood lead the company to transfer its X business to another location in order to centralise its services, and partially end its Y business in the former location. The Act on Co-operation stipulates that a company must start negotiating when it first considers undertaking the above‑mentioned measures (before making any decision), although possible impacts on personnel will only be confirmed and emerge later.

As concerns schedule, the Act on Co-operation requires that companies begin negotiating before production-related decisions are made. As regards the Act on Co‑operation, it is safest for enterprises to initiate and conduct appropriate co‑operation negotiations when the case is in the preparatory stages. This reduces the risk of the legality of the co-operation negotiations being disputed afterwards.

5. Conducting appropriate co-operation negotiations over impacts on personnel

The grounds for the planned measures and the available options are discussed in co‑operation negotiations. In planning of dismissals or layoffs, the grounds for a dismissal or layoff must be examined as referred to in the Employment Contracts Act and alternatives sought for the planned measures.

In planning of staff reductions, the co-operation negotiations begin by dealing with the grounds for dismissal – i.e., the reduction in work or deterioration of the economic situation. The negotiations will consider the reduction in work, establish its reasons, and estimate the reduction in quantitative terms. No real picture of the reduction in work can be established unless information is available, for instance, on the number of employees recruited, the number of temporary employees, and the duration of each period of employment in various positions, as well as on the sub-contracting of work in terms of the reduced work or the use of other types of outside labour.

If the dismissal is to be carried out for economic reasons, the co-operation negotiations should begin by examining the reasons for the deterioration in the economic situation. In practice, changes in the economic situation can be proved, for instance, with the aid of an up-to-date financial report, or with actual sales and cost figures and forecasts of future performance.

When the negotiations have dealt with production-related and economic reasons for the measures planned, the negotiations must assess how many employees will be affected by the decreasing work load or worsening economic situation. At this stage, it is usually relatively clear who among the employees will be the target of the planned measures. Before any dismissals, the possibilities for reassignment and retraining opportunities for each employee must be assessed. This will be almost impossible unless it is known who will be affected by the planned measures.

Examining the reassignment opportunities of any persons facing dismissal or layoff is a prerequisite for there to be grounds of dismissal; i.e., it constitutes the reason for negotiations under the Act on Co-operation. Offering the person facing dismissal or layoff employment in a vacancy within the company or one of its subsidiaries is a key issue to be dealt with after the grounds for the dismissal have been established. Employees facing unemployment must be offered work if vacancies exist within the company that match the employees’ particular professional skills.

If a person cannot be reassigned to other duties, the possibility of training each employee facing dismissal for tasks that the company can offer is considered, provided that this can be done appropriately and reasonably. In order to have legal grounds for dismissing an employee, the employer must investigate the possibility of retraining.

Retraining of employees facing dismissal for other types of work involves a wider social angle, and it is therefore useful to invite the local Centre for Economic Development, Transport and the Environment and the Labour Administration to participate in planning of training. In several example cases, the training has been funded in part with the help of these authorities, which benefits the companies organising the training. The labour administration also organises corresponding training in situations where no dismissals are being planned.

When the grounds for the planned measures have been established and the possibility of re-employing and training the affected employees has been examined, the co-operation negotiations should consider each party’s thoughts on how the desired end result could be achieved by alternative methods. In the information technology sector, there are example cases in which, where economic grounds for redundancy have existed, alternative ways of saving have been suggested by the employer or the employees’ representatives. Being viable, these suggestions have at best led to a smaller number of dismissals at the end of the negotiations.

During negotiations, it is also useful to pay attention to how staff are notified of any planned measures. If the employer’s and employees’ representatives so agree, a good way of notifying staff of the measures is to issue a joint staff notice, prepared by the employer and the shop steward or other employees’ representative.

6. Other obligations under the Act on Co-operation with regard to negotiations on personnel or training issues

The Act on Co-operation requires companies within its scope to prepare an annual personnel and training plan. The act requires that any such plans be confirmed through the co-operation procedure before the start of a new financial year. If the company has a co-operation council comprising representatives of the employer and the employees, it can negotiate on these issues.

Once a year, the personnel plan should record issues that have an apparent impact on the structure, quantity, or quality of the company’s personnel. A good personnel plan is a document that results from open discussions between the company and its employees, updated whenever necessary. The staff must be notified of the content of the plan and any changes thereto. A useful way of informing staff of personnel and training plans is for the employer and employees’ representative to issue a joint notice.

The training plan, like the personnel plan, must be discussed through the co-operation procedure at least once a year, before the end of the financial year. The training plan must include the general training needs of the staff created by the personnel plan, and the plan for implementing training. The training plan is a useful tool in making predictions, as training can often influence, in advance, any need for reductions in personnel, and, on the other hand, to meet the employer’s staffing needs.

The Act on Co-operation requires the employer to give the employees’ representatives details of the company’s financial position immediately upon the approval of the financial statements. Furthermore, the employer must inform employees’ representatives at least twice a year of the development prospects of the company’s production, employment situation, profitability, and cost structure. The obligations under the act apply to the content of communications and their frequency, but the methods of communication are fairly free and up to choice.

7. Informing employees of staff cuts

Sometimes, at the beginning of the negotiations or during them, the employees’ representatives suggest to the employer that, in their opinion, the latter has not given them sufficient information for dealing with the issue under discussion. There is no comprehensive list or a list of minimum requirements applicable, as each situation is unique. However, the following is a list of the most common questions that emerge. With respect to this issue, the main requirement is for the employer to supply any information that will be used as grounds for staff reductions.

  • Which work will be reduced and why
  • By how much the work is estimated to be reduced
  • The time scale that the reduction will take place on
  • Any fixed-term employment contracts
  • Whether employees have recently been recruited for the positions now facing reduction, either just before the negotiations or during them
  • Any other information connected with changes to production or the associated reduction in personnel
  • Grounds for reorganisation of work, if this is cited as the basis for terminations
  • Grounds for cost savings, if they are cited as the basis for dismissals
  • The financial report for the last full financial year
  • Changes in the economic situation between the last full financial year and the start of the negotiations
  • Information on how it is planned that the work and its redistribution will take place if dismissals and layoffs become necessary
  • Other essential information related to the economic situation

8. Best practices for implementing co-operation in situations requiring reductions of personnel

8.1. Training of supervisors

Co-operation between supervisors and other staff is a prerequisite for successful co‑operation within the company. For this reason, the skills and capabilities of supervisors must be maintained and developed even in these respects. Supervisors’ capability to cope with situations of change is greatly enhanced by giving them training, guidance, information, and other types of support.

These capabilities can be increased, for instance, by:

  • Training supervisors to cope with change (the psychological impacts of change, management of dismissal situations)
  • Increasing their basic knowledge of the relevant legislation (e.g., the Act on Co-operation)

The supervisors whose unit/team is directly influenced by the changes must be kept up-to-date throughout the entire process. The supervisors must be highly familiar with the operating models created by their companies and the available support (such as training, HR options, and occupational health care support).

8.2. Description of the process

The co-operation process may be described as follows:

Preparation/prediction > Negotiations > Measures

As part of the overall management and development of the co-operation process, an evaluation can be included concerning the implementation of each stage. The end result of the process can also be reported, as far as possible (for instance, noting whether alternatives were found for the dismissals).

8.3. Supporting the employees

The employees are best supported by being given timely and sufficient information at all stages of the process. Training for change may be necessary, for instance, in situations where the threat of forthcoming dismissal negotiations emerges but has not yet been realised.

The employer’s concern for the company’s key personnel / critical resources is also of utmost importance. An undefined threat or an unnecessarily prolonged process may lead to key personnel seeking employment elsewhere.

During the process, support can be provided by traditional occupational health services, as well as external and internal job-seeking training and special information aimed at particular target groups.

Support given by supervisors, personal communications, and discussions are all important.

Shop stewards and other employees’ representatives may have a key role in supporting and guiding employees facing dismissal. As concerns reassignment and training opportunities, it is recommended that the responsibilities, roles, and tasks of each person within the company have been agreed, defined, and properly instructed in (for the member of staff facing reassignment, the current supervisor, the recruiting supervisor, and the HR administration). Clear rules must be in place to govern how the former unit can support the new recruiting unit in order to ensure the smooth reassignment of employees.

8.4. Participation of management in co-operation negotiations

Experience shows that the active participation of management is important in ensuring the success of the process. Personnel find this positive, and it helps in making of difficult decisions.

8.5. Closing negotiations

The schedule and progress of the negotiation process can be agreed upon between the company and its employees. There are situations in which a schedule shorter than that specified by law may be sufficient. At other times, however, more time may be needed. Careful preparation helps the process to be undertaken in the shortest time, but expeditiously. An extended negotiation process is not good for the company’s working atmosphere and employees’ morale.

An ideal situation would be to reach an understanding on the grounds for the staff reductions and the available alternatives as early in the negotiations as possible. This is not always possible; sometimes the parties disagree throughout the negotiations. This is not in itself a sign of a failure in negotiations. The important thing is to ensure that the parties consider the issues to have been dealt with as comprehensively as possible.

                                                                                                          CO-OPERATION PROCEDURE

Preparation
         <-
 14 days / 6 weeks
->
       Measures
    Negotiation period
   


    
Communications   Circulation of tasks
Studies  | 

Reassignment/training opportunities

  |  Transfers of business
Process planning
  |
Possible transfer of
business negotiations
  |  Lay-offs
Negotiation proposal
5 days in advance
  |
Training of supervisors
  |  Terminations
Information events  |
Personal/group discussions,
cooperation negotiations,
 |  Other measures
   |
Other matters
  |