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Yorkshire manufacturers call for German-style part-time work law to reduce number of redundancies

15 April 2011

Manufacturers attending a Nabarro-hosted event on trading in Germany have called for the Government to follow the German example and introduce a new employment law that enables employers to reduce staff working hours and wages to 80% during an economic downturn. They say this will mean fewer workers would have to be laid off and the cost of redundancies and re-hiring would be saved.

The call came at Nabarro’s event to help Yorkshire-based companies trade in Germany, at which speakers included Malcolm Scott, British Consul General to Dusseldorf and Director General of UK Trade & Investment in Germany; Mark Berrisford-Smith, senior economist at HSBC; and Colin Russell, UKTI’s regional international trade adviser for Yorkshire & The Humber. Dr Ralf Rechnagel and Dr Karl Von Hase, from Nabarro’s German affiliate firm GSK Stockmann & Kollegen, spoke about the formation of different types of trading bodies in Germany.

As well as receiving tips on how to trade in Germany, the audience heard how the German government, trade unions and employer organisations worked together to keep unemployment in check during the recession. Many of the audience backed a call for this to happen in the UK.

This would be modeled on the German ‘Kurzarbeit’ law that sees the Government part-fund workers’ reduced wages and enables them to work more flexible hours to meet demand.

Martin McKervey, partner at Nabarro, says: “The audience represented companies working in Germany and those eager to enter that market. It heard that during the recession the German unemployment rate fell to 7 percent, a seventeen-year low, partly due to the short-time working programme known as Kurzarbeit, where workers received 80 percent of their wages and work reduced hours but retain their jobs.

“Without doubt the German economy has recovered far better and faster than ours and this is, in part, due to companies not having to make major redundancy payments and having a skilled workforce ready to step back up to full-time work to capitalise on the upturn when it came, thanks to Kurzarbeit. Many of our manufacturing clients are eager to see a law introduced in the UK that enables employers to reduce workers’ time and pay to 80% to avoid laying people off during a downturn.”

Kevin Parkin, former managing director of DavyMarkham and now chairman of Parkin Limited, says: “In Germany, when workers’ hours were reduced, they were encouraged to spend the extra 20% of their time in training and refresher courses. Other European countries have a ‘continuous trading’ mentality that we don’t find here – for example the French have a training plan agreed with each employee at the start of each year.

“Such an approach would be of great help to the UK’s manufacturing sector and I fully support the call for the introduction of a new law that enabled us to emulate the German approach.”

Chris Hudson, Team Principal at leading cutlery and promotional goods manufacturer Chimo Holdings, adds: “The German view is that economic upturns and downturns are cyclical and to prepare for the bad times. This law helped companies save massively on redundancy costs – in the UK we spent (or wasted) around £14 billion making people redundant whereas in Germany this was only £5.8 billion. What a huge waste of money and resources which equates, roughly, to what the Chancellor is currently trying to save in the next two years with his deep cuts programme.

“Imagine the benefit such a law could deliver to this region’s and the UK’s economy!”

Roger Pearson, managing director at pellet press manufacturer Sizer, added: “At Sizer and at Newburgh Engineering we already have a ‘short working’ clause in our terms and conditions for such down turns and find it highly beneficial, but for it to become mandatory across the board would benefit companies, the region, the Government, individuals and families to survive a recession with fewer job losses.”

Nabarro’s Martin McKervey says: “There is a growing head of steam, spearheaded by Yorkshire’s manufacturers, calling on the Government to investigate fully this German law to keep unemployment in check during a recession and to help manufacturers and other companies be better-placed to succeed when the upturn comes.”

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