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Deloitte Legal Perspectives

A comparative look at

dismissal costs and issues across Europe 2012

This is a study conducted by Deloitte in June 2012 and, consequently, reflects the legislation of the

different countries at that particular time. The values used in the cost projection date of December

2011, therefore, do not take into account any changes in legislation of a later date.

Although this study

has been performed with the greatest care, the material in this guide is only for information purposes

on general practices. This publication contains general information only, and none of Deloitte Touche

Tohmatsu Limited, its member firms, or their related entities (collectively, the "Deloitte Network") is, by

means of this publication, rendering professional advice or services. Before making any decision or taking

any action that may affect your finances or your business, you should consult a qualified professional. Challenging times: Dismissal regulations across Europe

Contents

1

Introduction

3 Cost projection - comparison of the dismissal cost in Europe 4

Results of the comparison of dismissal cost

6

Main conclusions

8

Summary of country reports

27

Country reports

27

Austria

30

Azerbaijan

32

Belgium

37

Bulgaria

39

Croatia

42

Czech Republic

45

Denmark

48

Finland

51

France

54

Germany

57

Hungary

60
Italy 64

Latvia

66

Lithuania

71

Norway

73

Poland

76

Romania

79

Russia

82

Slovakia

86

Slovenia

88
Spain 91

Sweden

94

Switzerland

96

The Netherlands

99

United Kingdom

102

Contacts

For more information, please contact:

Renaat Van den Eeckhaut

Partner, Laga

Tel. + 32 2 800 70 52

Email: rvandeneeckhaut@deloitte.com

Nicolaas Vermandel

Partner, Laga

Tel. + 32 2 800 70 77

Email: nvermandel@laga.be

Karin Rasschaert

Partner, Laga

Tel. + 32 2 800 70 19

Email: krasschaert@laga.be

Véronique Child

Deloitte Legal Service Line Leader

Employment and Pension Solutions

Tel: + 33 1 55 61 66

Mobile: + 33 6 85 57 42 64

Email: vchild@taj.frUnum nos

Deloitte is proud to present the second edition of its European dismissal survey. This survey is a collaboration of the European practices of Deloitte Legal with specialists from Deloitte Tax practices from Europe.

The study was led by a team from Laga, Deloitte

Legal"s practice in Belgium. The survey covers dismissal legislation in 25 countries: Austria, Azerbaijan, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, Latvia, Lithuania, Norway, Poland, Romania, Russia, Slovakia, Slovenia, Spain, Sweden, Switzerland, the Netherlands, and the

United Kingdom.

The second Deloitte Legal European dismissal survey is more than a refresh of the rst edition of 2009. In 2012 the number of participating countries has increased to 25 (the rst edition was limited to 18 countries). In addition the survey provides a cost of dissmissal comparison for 22 of the 25 participating countries based on four different scenarios, which are explained in detail on page 3 in this document. The costs of dismissal in Azerbaijan, Finland, and Russia were not included in this study since the information available for these jurisdictions did not allow a consistent comparison with the other participating jurisdictions (additional information on these three jurisdictions can be made available upon request). The survey is focused on three main areas: i) statistical analysis of the dismissal cost; ii) summary of all country regulations; and iii) detailed reports on country regulations by country. It is compiled from an employer"s perspective and only covers dismissals initiated by the employer and not by the employee. The study takes into account the average cost which an employer will incur in a particular country to dismiss an employee and reach a nal settlement agreement without court interference.

Observations

The survey reveals that although all countries concerned have rules in place to protect employees from unfair and unjustied dismissal, there are a number of differences in their employment protection legislation. It also reveals that most of the European legislators generally take the view that dismissing employees should not be made easy, that existing jobs need to be protected to a certain extent, and job security should be maintained. A predominant technique of the employment protection legislation in most countries is that dismissals need to be justied. The reason for dismissal must be stated in the actual notice or the employer has to submit the reason upon the employee"s request. The reasons should be fair and objective. In some countries, the legislation limits the reasons which an employer may use to justify a dismissal. If the employer cannot provide a valid reason for dismissal, then severance pay or another form of compensation, in some countries even reinstatement,can be ordered by the courts. Nearly all countries provide for two kinds of dismissal. An ordinary dismissal, whereby a notice period is to be observed and an extraordinary or summary dismissal, which does not require a notice period. A common feature in the rules within the surveyed countries regarding extraordinary dismissal is that it is reserved for cases involving breach of trust or condence, which makes even a temporary continuation of the employment contract impossible. The 2012 study also reveals that some countries have made substantial changes to their dismissal legislation (e.g., Italy and Spain), either due to the current economic climate or other external factors. Such changes are mostly aimed at creating more exibility in the labor market and have an impact on the actual dismissal cost and/or dismissal procedure. Challenging times: Dismissal regulations across Europe 1

Introduction

2

West-European

countries face a substantially higher dismissal cost compared to

Central-European

countries. Challenging times: Dismissal regulations across Europe 3 In order to compare the employer"s dismissal cost in the various countries, Deloitte Legal used two practical examples which were approached by all participating countries, taking into account the respective local dismissal regulations.

The examples were compiled in a way to provide

relevant information on the differences in the regulations in the participating countries. Amongst others, we aimed to determine the impact of the following elements on the dismissal cost: contracts of indenite term, age (younger vs. older employee), level of salary (lower vs. higher salary), composition of the salary (which elements are taken into account?) and tenure with the company (short vs long). We excluded employees with lower salaries and/or lower seniority for a number of reasons, (i) in a number of countries such individuals are typically not employed through a contract of indenite duration (i.e., short term contracts) and (ii) the underlying drivers, such as age, seniority and salary, which may substantially impact the gures, would to a much lesser extent be revealed when comparing the different jurisdictions.

The following sets of parameters have been used:

Case 1:

age 35

Case 2:

age 49 In both practical examples, the participating countries were requested to provide the dismissal cost, always considered from an employer"s perspective, in view of both a dismissal due to individual reasons (e.g., the employee"s behavior or ability) as well as a dismissal for economic reasons (e.g., shortage of work). Following this approach, the survey includes a comparison across four different scenarios mentioned below: Scenario 1.1: Dismissal for individual reason in case 1quotesdbs_dbs14.pdfusesText_20

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