Dutch deal: golden handshakes capped

Dutch deal: golden handshakes capped

10th September 2008, Comments 0 comments

Dutch deal: golden handshakes capped.

Dutch Social Affairs Minister Piet Hein Donner, employers and trade unions have reached agreement behind the scenes on limiting 'golden handshakes'. In the agreement, people with annual incomes over 75,000 euros will be able receive a maximum severance payment equivalent to one year’s salary. Minister Donner is dropping other plans to relax the rules covering dismissal.
                              Piet Hein Donner - Minister of Social Affairs (ANP photo) 
                 Piet Hein Donner - Minister of Social Affairs (ANP photo) 
In addition to limiting golden handshakes, the parties have agreed that extra money should be set aside for training or re-training employees, and also that employers should make greater efforts to bring more people into employment. 

The agreement, which has been negotiated without much public attention, appears to offer benefits to all sides. Employers will no longer have to pay enormous amounts in compensation to get rid of employees who they have employed for a long time. 

Golden handshakes can amount to as much as three annual salaries for some employees who’ve been with an employer for a long time, and – taken across the board on a national scale – cost business and industry billions. Employers argue that, because of this they are forced to keep people in jobs that they would prefer to let go. 

The agreement means that the social affairs minister can cross at least one difficult issue off his list. His attempt to relax dismissal laws in 2007 ran into resistance from the other two parties in the three-party coalition, Labour and the Christian Union. In fact, the issue almost brought the  government down. Now that severance payments have been limited, the minister can concentrate on increasing employment. There may be severe shortages of personnel on the labour market, yet there are still a great many unemployed people on benefit who are willing and able to work. 

The FNV trade union federation (the smaller Christian-based CNV federation not involved in the negotiations) will also benefit from the outcome of the talks. It will be able to tell its members that the dismissal laws are now not going to be relaxed and that the limits to be placed on golden handshakes will only affect higher income brackets. In addition, Minister Donner is said to have promised not to make more cuts in, for example, unemployment benefit. 

Stemming inflation 
The agreement is the latest in a series of measures aimed at stemming inflation. By scrapping unemployment insurance payments for employees, not increasing VAT (value added tax) from 19 percent to 20 percent – as the government had originally planned -  and agreeing on pay restraint, the government, employers and unions hope to limit inflation and prevent salaries from spiralling out of control. 

The removal of unemployment insurance contributions will mean an additional amount of about 50 euros net per month for people on average salaries. The decision not to increase VAT will stop inflation rising by about  half a percent. 

The objective is to keep the Dutch economy competitive and to soften the blow when the economy slows down, as it is forecast to do in 2009. The details of the agreement and other plans will be discussed at talks to be held this autumn after the government lays out its budgetary and other plans later this month during and after the Queen’s Speech to parliament.

Pay restrictions?
The FNV trade union federation denies that agreements have been made about pay restraint, but it is unlikely that the unions will make big pay demands given the nature of the raft of plans and proposals already agreed or on the table. With the exception of last year, pay demands in recent years have been modest in spite of the favourable economic climate. 

The CNV, the trade union federation which did not participate in the talks with the minister and employers, has criticised the agreement. CNV president René Paas says it does nothing for employees, while a limit has been set on golden handshakes for the high income bracket. In an initial reaction, the main opposition party – the conservative VVD – said that it thinks that the agreement will do too little to relax dismissal laws.
Hans Andringa
10 September 2008
Radio Netherlands 

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