Finding New Ways To Say 'You're Fired'


By Sarah Spikes From The Wall Street Journal Online

European companies are getting better at wielding the ax.

This week, United Kingdom insurer Standard Life said it would shed 1,000 jobs, and music company EMI Group PLC announced it would cut 20% of its work force.

More mergers and acquisitions, along with a growing appetite to export jobs to lower-wage countries such as India and China, mean that more companies will try to trim employee ranks.

And while it is much more difficult to lay off people in Europe than in the U.S., lawyers and restructuring experts working for multinational corporations in Europe have amassed an arsenal of weapons to keep lawsuits at bay, preserve company reputations and minimize the consumption of management's time.

"Job cuts are made in Europe with great difficulty," said Stephen Taylor, partner at PricewaterhouseCoopers in the European business-recovery unit. "Quite a bit more restructuring lies ahead in Europe, particularly in technology, and companies will struggle to do this quickly and efficiently."

Here are some of the methods that lawyers and other experts say are widely employed:

The Payoff: A favorite of U.K. banks. They can pay workers a sum so large it isn't worthwhile for them to file a lawsuit. And by the time the severance payments run out, workers will likely have new jobs. In this case, the notification laws aren't applicable, and potential for staff sabotage during the final weeks of employment can be reduced.

The Location Swap: More common in France than other countries, though the loopholes may gradually be closing.

For example, a company tells workers the business unit is moving, hoping to get some to quit. Depending on the country, if the new location is within a certain distance of the original site, this doesn't constitute dismissal.

Some restructuring experts say there is something about commuting and French culture that means a significant number will leave the company rather than work at a new place.

The You're Not Worthy: Common throughout Western Europe. A company identifies the poorest-performing workers at the annual performance review. It might lower pay [often legal], change working hours or even say that those nonperformers are expected to find another job elsewhere.

If the reviewer's tone is harsh enough, some workers will leave if the company agrees to write a positive letter of recommendation.

By The Book: This is the expensive backup, fraught with legal costs, that companies may use it only when none of the other techniques will work.

The process is similar in Germany and France. It requires employers to notify employees of layoff plans anywhere from two weeks to seven months in advance.

It can be an onerous process, because there is at least one union, a workers' council and senior management involved, and government bureaucrats must oversee the whole process. In some cases in France, the government must approve the layoffs and the negotiations, and at least two negotiation meetings must take place with all participants.

The councils are committees that represent workers to negotiate the terms of severance. If more than 20 people are being let go, the company and council must negotiate a social plan to help the workers find new jobs.

Lawyers say these costly social plans can take months to draft and run hundreds of pages but are often good for morale, productivity and the retention of remaining workers. When German electronics group Siemens AG decided to cut 35,000 staff, some of the layoffs came from U.K. factories even though they were more profitable than plants in Germany. The closures proved easier and cheaper to execute in the U.K., said one expert who declined to be named.

In the U.K. and Ireland, which have no workers' councils, employers must notify workers in advance of layoffs, though required notice periods are often shorter than in France and Germany. Employers must alert the Department of Trade and Industry as soon as management has decided to cut staff. The DTI didn't return calls or e-mails asking for information about the layoff process.

According to U.K. law, if more than 20 jobs are at stake, there must be a 30-day "collective consultation" with union representatives. If more than 100 jobs are at stake, the consultation period is extended to 90 days.

The U.K. is still seen as more flexible than other European countries when it comes to layoffs.

"The flexibility of the U.K. labor laws is a double-edged sword," said Richard Greenwood, an economist with the London's Center for Economics and Business Research.

"Because it's much simpler to cut jobs in the U.K., sometimes companies will choose to close factories here over elsewhere in Europe," he said.

"But, ultimately, the greater flexibility means a more efficient distribution of labor, and this is borne out by the fact that the U.K. traditionally has, and continues to have, a lower rate of unemployment and a stronger economy than other large European countries," he added.

An economy with low unemployment does seem to be the best antidote to the hassle of shedding workers.

Switzerland is one of the easiest places to cut jobs. Employers there often need only give two weeks' notice before pay ceases, and with unemployment low, 2.5% in 2002, according to Swiss Secretariat for Economic Affairs, workers are quickly re-employed.

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