Working together: building relationships with European employee groups takes time, money and effort—but can pay off in trust and improved operations

HR Magazine, June, 2005 by Susan Ladika

Rabobank, one of the Netherlands' largest financial institutions, faced an unpleasant task: In changing its pension plan, the bank decided that employees--who had never before been asked to make pension contributions--now needed to cover one-third of the cost.

Seeking employees' understanding and support, management sat down with members of the bank's local works councils to outline financial issues that Rabobank faced.

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"Although it cost the employees money, they saw it was the way we had to go," recalls Jan de Wit, head of Rabobank's industrial relations department. The works councils and management agreed to the change. With that support in hand, management won quick approval of its proposal from the union as well.

Rabobank's experience shows how good relationships with works councils can help smooth out potentially rocky situations for employers operating in Europe. While U.S. corporations may balk when they hear that they may be required to deal with works councils, de Wit thinks works councils "are very effective for having good relations with our employees."

Martin Hopkins, a partner in the Birmingham, U.K., office of the law firm Eversheds LLP, deals with many U.S. firms preparing to set up offices in Europe. He's found that works councils are "an area where there's generally a lot of angst and concern among American businesses looking to do business in Europe. They assume [works councils] must be indistinguishable in function from trade unions."

But that is not the case. Labor unions focus on collective bargaining issues. Works councils, on the other hand, serve as a forum for information-sharing and consultation on a wide variety of issues. And even though certain corporations are legally required to set up the councils, "it falls a long way short of an obligation to agree with works councils," Hopkins says.

In fact, some companies take a positive view of works councils, which come in two varieties--local councils, which focus on local business issues, and European works councils (EWCs), which tackle transnational issues. Both types of councils "often have a perspective that's quite valuable for managers," says Tricia Tarrant, who has worked with works councils in her role as global employee relations manager for Shell International Ltd., based in London. (For more information on the different forms of councils, see "EWCs vs. Local Works Councils," left.)

Experts acknowledge that managing local and European works councils can require an investment of both time and money, but believe that the councils ultimately can help speed decision-making, open lines of communication and help companies refine business strategies.

Local Councils: Viva la Difference

Works council legislation varies greatly from country to country. In Germany, for example, local works councils have been in existence since after World War I and wield a great deal of power. In other countries, their presence is more recent and impact less noticeable. The United Kingdom and Ireland, for instance, only recently passed local works councils legislation, to meet the March 2005 deadline imposed by the European Union (EU) on all member states. The U.K. and Ireland measures meet the minimum requirements of the legislation. Other nations, however, have passed legislation that grants the councils greater rights and places greater demands on employers.

"It's really important to know--and that's typical for Europe--that everything is different" in different countries, says Helmut Hoitz, Unisys Corp.'s HR director for Europe, the Middle East and Africa.

For example, Hoitz, who is based in Frankfurt, says local German works councils have broader rights to be involved in issues ranging from recruitment to termination.

In German firms with local councils, a contested firing can't occur until the works council has reviewed the case. Council members may not agree with the decision, but they aren't able to block it; however, a judge may take the council's opinion into account if the person fired decides to head to court. And if 10 percent of the workforce is being terminated at once, the works council may negotiate an agreement with the company to provide compensation and retraining for those who are losing their jobs, Hoitz says. Doing so will help the company stave off employment lawsuits, he adds.

Rabobank's de Wit, who has headed the industrial relations department for five years, says that local works councils in the Netherlands have never tried to block any bank decisions and that discussions with the works councils sometimes lead to better decisions. But he adds that to work together effectively with works councils, managers "must be open about the policy and path for the coming years."

De Wit's experience with local councils is significant: Rabobank is owned by more than 300 local banks, each of which has its own works council. There also is an umbrella works council that represents employees of the 300 local banks collectively. And Rabobank's headquarters has its own local works council, de Wit says. The local works councils meet eight times a year.