Press information: Flexicurity - Flexibility through Security

Flexicurity and the European social model

Globalisation, accelerated technological progress and the demographic change are exposing European economies to major challenges. These new realities are also producing changes in employment relations. Companies are under continuous pressure to open up new markets. The requirements for adjusting production technologies and forms of organisation are increasing. This also means higher demands on employees as regards their readiness and capacity for change. Increasingly, lifelong learning and mobility are becoming fundamental conditions for success in the workplace. At the same time, there is evidence of increasing pressure on salaries and the employment of low-skilled workers in the context of continuous specialisation processes.

In parallel to these developments, awareness of a shared “European social model” has become established in Europe. Its fundamental characteristics are:

• A basic commitment to social cohesion and solidarity and combating social deprivation and discrimination;
• Securing general access to healthcare and education systems;
• Guaranteeing a broad social security network;
• A significant role for the public sector in the provision of the necessary infrastructure.
• The need for social security has deep roots in Europe and is therefore one of the constants in the development of reform initiatives.

The thinking behind “Flexicurity - Flexibility through Security” addresses the question of how maintaining European competitiveness can be squared with securing the European social model. These two requirements are interdependent. The elements of the social model are a critical productive factor for maintaining competitiveness. Social security in Europe can and must be regarded as a major location advantage as against the USA and Asia.

Concept of Flexicurity - Flexibility through Security

• Flexicurity should in essence be regarded as a combination of flexible labour markets and a high level of social security.
• These two elements, flexibility and social security, need to be brought into a balanced relationship.
• Because you cannot demand world-class flexibility unless you provide employees with world-class social security.

This deliberately broad definition covers action in a number of areas which must be regarded as fundamentally interdependent and brought together under the key concept of “Flexicurity”:

• Employment contract parameters
• Security of finding a job in the event of job loss and/or return to work
• Income replacement payments during unemployment
• Insurance in the event of illness, accident in the workplace, age, etc.
• Measures for active employment market policy, education and training
• Salary negotiation systems

Flexicurity as part of the Lisbon Strategy

Flexicurity corresponds to central elements of the Lisbon Strategy:

• One approach of the Lisbon Strategy consists of an active response to the challenge of globalisation, avoiding measures intended simply to preserve existing structures or measures which exclude international competition. With the Flexicurity model, accelerated structural change is regarded as a fundamental fact, for which adequate solutions must be found in the labour market.
• A basic precondition for the success of the Flexicurity approach is a high level of training of the workforce. Only on this basis can the flexibility of the workforce be secured in respect of various employment profiles in a knowledge-based society.
• Flexicurity is also a major factor in managing the demographic change. A system which provides safety nets but at the same time generates continuous stimuli to employment appears to be of crucial importance with regard to the desired increase in the percentage of older employees in particular.
• Last but not least, a Flexicurity-based system can also make a major contribution to promoting independence and entrepreneurship.

Examples of practical Flexicurity measures in Austrian employment law

The company employee provision scheme, which has been in force since 1 July 2002, increases employee mobility and also enables each employee to save for an additional pension. Under the old system of severance payments, rights were often lost on losing or changing jobs. Fewer than 20% of all employees have ever received a severance payment. The new company provision scheme enables  every employee to take his or her personal “pension rucksack” from one employer to the next - that is flexibility through security!

In order to undergo flexible and individual further training, each employee can agree training leave of at least three months up to one year with his employer. A precondition is that the employment relationship has already lasted for at least three years. During the training leave, the salary will no longer be paid, but financial support will be provided from the unemployment insurance fund at the level of child benefit payments.

So-called sabbaticals, without financial support, can also be taken. The collective agreement may allow the normal working hours to be spread over several years, if time off is taken in connected periods of several weeks. Accordingly, the following model would be possible: 2.5 years with 48 normal working hours per week, then 6 months off.

Flexibility in conjunction with security for the employee is also promoted in Austria through company pensions.

In the event of a change of job, for example, claims to company pensions are transferred to the new employer’s pension fund at the request of the employee, irrespective of whether it is inside or outside the country.

New provisions on (parental) part-time employment are also intended to help employees achieve greater flexibility in balancing their professional and family lives.

For example, in companies that employ over 20 staff, employees are entitled to work part-time up to the child’s seventh birthday or up to school age if later, if the employment relationship has lasted for at least three years without interruption when part-time employment begins.

Special protection against dismissal and redundancy is provided up until four weeks after the child’s fourth birthday. Thereafter, protection against dismissal without grounds is provided until four weeks after the end of the parental part-time period.

Since 1 July 2002, employees have been able to take family care leave to enable them to look after dying family members and children who are seriously ill, without fear of losing their job. They may reduce their working hours or take full-time leave. During this period, the employee is covered by illness and pension insurance and enjoys full protection against dismissal.

Many legislative proposals adopted in the last few years at European level implement the basic concept of flexicurity, in particular those based on initiatives of the social partners, e.g. directives on part-time work and temporary work contracts. These directives give employees working in these new types of employment relationships the same legal protection as employees in permanent full-time employment. The same applies to the directive on parental leave, which contributes to the social objective of making work more compatible with family life.