Employee Relations in Germany and France - Assignment Example

Employee Relations in Germany and France Compare and contrast the role of the state in any two countries, and account for the differences and similarities identified. A significant issue regarding the employee relations in Germany is the distinction ‘between works councils in establishments where managers have a positive or negative view toward employee involvement in decision making’ (Jirjahn et al., 2006, 650). In order to examine the above issue Jirjahn et al. (2006) focused on the examination of the ‘potential role of works councils and participation in motivating employees’ using data from ‘German manufacturing establishment’ and came to the conclusion that ‘the structure of the workforce, principal-agent problems between owners and managers, collective bargaining, direct employee involvement, human resource management practices, and market strategy and innovativeness all play important roles’. The differences in industrial relations across the countries of the European Union have been studied by Sims (2002, 370) who found that ‘industrial relations, and specifically the relationship between the worker, the union, and the employer, vary dramatically from country to country; in Germany codetermination is the rule; here, employees have the legal right to a voice in setting company policies; in this country workers elect their own representatives to the supervisory board of the employer, and there is also a vice president for labour at the top-management level’. Towards the above direction, Muller (1999, 31) made a research ‘based on 16 case studies of banks and chemical firms operating in Germany, that comply with the requirements of the German labour market institutions of collective bargaining, co-determination and initial vocational training, and hence operate under strong institutional constraints’ and came to the conclusion that ‘institutional features of the German system encourage the implementation of some ingredients of the HRM 'recipe' and inhibit others; constraining influences notwithstanding, a pluralist version of HRM appears to be quite compatible with the highly regulated German context’. Generally, both France and Germany are characterized by the provision of increased support to the employees following the standards of the EU as well as their cultural and industrial traditions. One of the most important requirements for the development of human resources management at a national level is the provision of effective and appropriate protection to employees regarding their rights. In this context, the role of unions can be significant. More specifically, the study of Sims (2002, 383) proved that ‘unions affect wage levels, which in turn affect competitiveness in both labour and product markets; unions and labour laws may limit employment-level flexibility through security clauses that tightly control layoffs and terminations (or redundancies); this is especially true in such countries as England, Germany, France, Japan, and Australia where various laws place severe restrictions on employers’. In accordance with the above findings, Germany and France share a common characteristic: the provision to the unions (by the state) of significant power in order to ensure the protection of employees’ rights. The above two countries although having many cultural differences they are ‘bonded’ regarding the employment policies followed by the state and the power provided to the unions in order to support the rights of employees. Towards the above direction, it has been stated by Burke et al. (2004, 173) that ‘labour laws in countries such as Italy, France, Germany, and Spain make it difficult and expensive to dismiss workers; in Germany, for example, all “redundancies” must by law be negotiated in detail by a workers' council, which is a compulsory part of any big German company and often has a say in which workers can be fired; moreover, setting the terms of severance is tricky, because the law is vague and German courts often award compensation if workers claim they received inadequate settlements; in France, layoffs are rare’. In accordance with the above study the protection offered to the employees in both countries, Germany and France, is significant. More specifically, the state in these two countries not only has offered to the unions an increased power of intervention in the disputes arisen in the employment sector, but also it has created a legal framework which provides several measures to employees in order to ‘secure’ the recognition of their rights by the employers. On the other hand, the role of the state in the relations between employers and unions, in case specifically of Germany could be characterized as limited. More specifically, the study of Sims (2002, 37) showed that ‘In Germany the various laws on codetermination, including the Works Constitution Act (1972), largely determine the nature of HRM policies in many German firms’. However, the study of Ochel (2005, 91) showed that ‘in recent years there has been a tendency towards the decentralization of collective bargaining; individual wage agreements have led to more moderate wage developments, whilst collective agreements with individual firms, and agreements at the production unit level, have not had this moderating effect; on the other hand, collective bargaining has become more flexible, leading to greater pay differentiation’. In this way, both for France and Germany the benefits of employees from the intervention of unions are gradually limited under the pressure of global human resources trends that impose a ‘liberal’ form of employment status which will ensure the protection of employers’ interests. Another issue that needs to be reviewed is the training offered to the employees. Specifically for Germany Burke et al. (2004, 220) supported that ‘when it comes to training, it is hard to deny that investments in employee training are likely to be perceived as “high performance” practices across cultural contexts, although compared to many other countries such as Japan and Germany, American companies offer considerably less formal training to their employees’. In other words, the provision of extensive training in employees is a significant characteristic of the human resources policy applied in Germany. The country recognizes the value of employer – as it has been proved above through the presentation of the measures and the legal rules that have been introduced towards the employees’ protection in this country – as a necessary element of the development of the industrial sector. More specifically, when the value of the employee is increased, then the following increase of the firms’ value (and the country’s industry value) should be expected. As for the selection procedure followed in Germany and France, a basic differentiation between the two countries seems to exist. In this context, it has been found by Burke et al. (2004, 220) that ‘selection procedures used in universalistic cultures such as Australia, Portugal, Canada, and the Netherlands are more likely to report the use of structured interviews than in particularistic cultures such as Belgium, France, Greece, and Italy; in a particularistic society, the interview is seen as a personal conversation rather than a test and practitioners are less likely to be receptive to attempts to structure the process’. In accordance with the above views, the selection procedure in France is based on the country’s ‘particularistic culture’ which supports the discussion with the candidates. On the other hand, Germany although not mentioned in the above study it can be considered as belonging in the same category with Canada and the Netherlands which use structured interviews in the selection procedure. In fact, the specific issue, i.e. the selection procedure, can be characterized perhaps as the most important differentiation in HR policies followed by Germany and France. The human resources policy followed by Germany has not been stable. In fact, the country is facing a period of transition from its traditional forms of employment policies to modern ones as they have been developed in several countries around the world. In this context, it has been noticed by Newland (1999, 638) that ‘the Federal Republic of Germany is a useful first example in that it illustrates both modest changes away from a traditionally hierarchical, rank-ordered system of four career groups in its core civil service and embraces privatization and the growing use of contract employees to facilitate flexibilities that are frustrated by the career system that continues from earlier eras; only about 60 percent of the 600,000 employees at the federal level are now ‘real civil servants’; others are salaried and wage workers who are employed under private-law contracts (work at will)’. However, it should be noticed that Germany has been a country that has just recently (a few years before) obtained a complete and autonomous political system. In this case, any potential development to which the country may proceed, it has to be considered as valuable. On the other hand, with France the conditions were not the same. The country after restructuring its economy which had suffered the consequences of the two World Wars, managed to develop a proactive employment framework which ensures the protection of employees in all industrial sectors. Another characteristic of Germany is that the country promotes the SMEs business scheme instead of the multinational activation. This issue has been examined by Dicht et al. (1990, 25) who found that ‘while emphasis in Anglo-American countries is still placed on multinational enterprises in German-Speaking countries the traditionally high interest in small- and medium-sized businesses led researchers to examine these firms' export problems’. France should be considered as belonging in the same category. The country favours the entrepreneurial activities of SMEs instead of those of large corporations following Germany’s example. The development of economy in France has been gradual but continuous. In accordance with official statistics published in the ‘Invest in France Agency’ (2006) ‘33% of companies listed on the LSE are foreign-owned; however foreign ownership of Paris Stock Exchange Index, the CAC40, accounts for 42.7%.; also, in France, the average size of a company is 5 employees; for subsidiaries of foreign groups, it is 105 employees’. In fact the promotion of the small and medium enterprises is a strategy that characterizes the countries belonging to the European Union area. There are still cases of large multinationals based in the above two countries, however generally the EU market is characterized by the superiority of SMEs against MNEs. An issue that needs to be investigated regarding the employment policies followed by Germany is the internationalization of successful corporations, an initiative which has caused severe damages to the national economy. In this context, IKB Deutsche Industriebank AG CEO Stefan Ortseifen noticed that: ‘the foreign operations of German companies create unjustified discomfort among the German public; furthermore, Germany itself lives from the international division of labour and in this way the planned relocation of activities to other countries is mostly seen as a strategy of success’ (German News Digest, 2005). For France, there is not such an issue. More specifically, the country’s corporations tend to remain within the national borders and avoid relocation apart from the schemes of branding which can offer almost equal advantages. Generally, the comparison of the employment relations in Germany and France has led to the assumption that both these countries participate in similar industrial and financial ‘schemes’. This assumption is also supported by the fact that both the above countries are extremely valuable members of the EU area. At a next level, it has to be noticed that there are certain differences in the employment policies of these countries, but these differences are limited and involve mainly in the private sector. In fact just the method applied in training has been proved to be different among the two countries. The facts stated in the appendix regarding these two countries prove that both Germany and France provide to the employees a high level of protection regarding their rights from employment. However, it has been proved throughout the current paper that the international development of employment relations may affect the current employment policies in Germany and France taking into account the fact that the participation of these countries of EU ensure the stabilization of employment status at a stable level – at least for now. References Briscoe, D., Schuler, R. (2004). International Human Resource Management: Policies & Practices for the Global Enterprise. New York: Routledge Burke, R., Cooper, C. (2004). Reinventing Human Resources Management: Challenges and New Directions. New York: Routledge Dichtl, E., Koeglmayr, H.G., Mueller, S. (1990). International Orientation as a Precondition for Export Success. Journal of International Business Studies, 21(1), 23-31 German News Digest. One Fourth of German Medium-sized Companies to Relocate Activities Abroad, 13 June 2005 Invest in France Agency (2006) France’s official statistics show the number of employees working for foreign companies has doubled in ten years, available at http://www.investinfrance.org/UK/Newsroom/News/news_2006-03-24_en.pdf Jirjahn, U., Smith, S. (2006). What Factors Lead Management to Support or Oppose Employee Participation—With and Without Works Councils? Hypotheses and Evidence from Germany. Industrial Relations 45 (4), 650–680 Muller, M. (1999) Human Resource Management under Institutional Constraints: The Case of Germany. British Journal of Management 10 (s1), 31–44 Newland, C. (1999). The Facilitative State and Human Resources Management. Public Personnel Management, 28(4): 637-642 Ochel, W. (2005) Decentralizing Wage Bargaining in Germany — A Way to Increase Employment? Labour 19 (1), 91–121 Sims, R. (2002). Organizational Success through Effective Human Resources Management. Westport: Quorum Books Appendix Country Legal requirements Severance payment formula Argentina Fifteen days to two months' notice, depending on length of service One-twelfth of highest monthly salary for each month of service longer than ten days Australia One to three weeks' notice, depending on service Up to eight weeks' pay, depending on length of service Belgium Large-scale dismissals must involve the Labor Office and works councils Payment varies by age, salary, position, length of service; minimum payment three months' salary Brazil At least one month's notice Accumulated contributions to special unemployment fund plus 40% Canada Varies by province Payment varies by age, length of service, position, and location; minimum payment of one month's salary for each year of service Finland One to three months' notice Minimum one month's salary for low-level employee to ten months' minimum for executives France Labor inspector must approve layoffs involving more than ten employees Payments to executives usually exceed minimum required three months' salary Germany Dismissals must be discussed with executive board and union Three to six months' salary Hong Kong Payment required for employees with at least two years of service Two-thirds of one month's salary for each year of service; maximum payment of HK$270,000 per employee Japan One month's notice Payment varies by financial condition of firm Korea All dismissed employees are legally entitled to severance pay Payment varies by salary and length of service Mexico No notice required Twenty days' salary for each year of service, plus seniority premium and accrued benefits; minimum three months' salary Netherlands Companies must present valid reasons in court of law Payment varies by age and length of a service; minimum one month's salary for each year of service Table 1 – Global Termination practices (Source: Briscoe et al., 2004, 151) Read More