EUROPEAN DOWNTURN: A CHALLENGE YET TO OVERCOME

3 WHAT DOES EUROPE MEAN FOR THE WORLD?

4

5

6 HARMONISED UNEMPLOYMENT RATE WORLDWIDE 2010 Q4

7 HARMONISED UNEMPLOYMENT RATE IN THE “EURO AREAS”

8 EMPLOYMENT GROWTH RATES IN EURO AREA AND EU27

9 HARMONISED UNEMPLOYMENT RATE BY COUNTRY

10 WHERE DO WE CURRENTLY STAND IN THE CRISIS?

11 WHERE DO WE CURRENTLY STAND IN THE CRISIS?

12 “Three areas at the core of efforts that will contribute to shaping the contours of the post-crisis order (…) First, institutions. The second area at the core of our efforts concerns reforms of the financial sector. The third area of work concerns fiscal consolidation”. Jean-Claude Trichet, President of the ECB at the conference “The ECB and Its Watchers” XII Frankfurt am Main, 9 July WHERE DO WE CURRENTLY STAND IN THE CRISIS?

13 WHERE DO WE CURRENTLY STAND IN THE CRISIS? ³“By February 2010 the EU unemployment rate had risen to its highest level in a decade (9.6 %). Within the EU, Member States such as the Baltic States, Ireland, and Spain have undergone wrenching adjustments in their labor markets, in part linked to the collapse of construction booms or property bubbles”. Employment in Europe report (2010). ³“The labor market is in a deplorable state. I must admit that the crisis will not pass unless the unemployment rate decreased significantly”, Dominique Strauss-Kahn (Executive Director of the International Monetary Fund)

14 WHERE DO WE GO NOW? The picture varies across Member States: ³For many it has led to a substantial increase in unemployment, and potentially in long-term unemployment, ³For some others job losses have been rather restrained to date, especially compared to certain of the EU’s global competitors (Japan and United States).

15 WHERE DO WE GO NOW? General recourses battling unemployment during the crisis ³Increase internal flexibility: ³Flexible working time arrangements ³Shorter hours or temporary partial unemployment, ³Temporary closures, ³Nominal wage concessions ³Employment stability in some sectors General absence of new policies to create new job opportunities.

Amsterdam, 24 March 2011 WSG 2011 European Regional Meeting Legislative measures adopted by Italian Government (and not only) to face the crisis Raffaella Betti Berutto

17 “AMMORTIZZATORI SOCIALI” (I.E., SOCIAL SHOCK ABSORBER) The “ammortizzatori sociali” are a Governmental support offered to people who have been suspended or laid off because the employer is in financial crisis

18 THE “SOCIAL” SHOCK ABSORBERS  CIGS  Solidarity Agreement  Mobility Indemnity  Unenployment Indemnity

19 “CASSA INTEGRAZIONE GUADAGNI” Payments to employees may be made under one of two regimes: the so-called ordinary regime (Cassa Integrazione Guadagni Ordinaria - Ordinary Wages Guarantee Fund (CIGO)) which applies where there is a temporary interruption or reduction in work caused by factors such as market trends or flooding; the extraordinary regime (Cassa Integrazione Guadagni Straordinaria - Extraordinary Wages Guarantee Fund (CIGS)) which applies in the event of the employer’s insolvency, restructuring, or reorganisation, cessation. Is a Government redundancy fund (partially funded by employers’ national insurance contributions and by the INPS) ensuring that some form of compensation is paid to those who have been suspended from work or who are working reduced hours.

20 EXTRAORDINARY WAGES GUARANTEE FUND (CIGS) Reasons for intervention: financial crisis Reasons for intervention: financial crisis CIGS for financial crisis is granted if the following conditions are met : (a)negative or backwards trend of the enterprise, shown by the presence of economic-financial indicators referred to the previous two-year period (b)The headcount has not been increased in the previous two-year period (c)existence of a recovery plan setting forth the actions to be taken to overcome the financial crisis (d)submission of an headcount relocation plan if the employer envisages to have redundancies Remarks: Prot. No. 4/ of March 30, 2009 (i)The requirements under (a) and (b) are not required if the crisis has been caused by a “sudden and unexpected” event, to be evidenced, of the enterprise, with regard to its unpredictability, the quickness with which it caused adverse effects and the thorough autonomy from the business management policies. See circular of the Ministry of Labour Prot. No. 4/ of March 30, 2009 about the possibility to ascribe the events originated by the economic crisis of 2009 to the notion of sudden and unexpected event (ii)In addition, until 2001 it is not necessary to submit the recovery plan in presence of a request for CIGS due to the occurrence of a sudden and unexpected event (Ministerial Decree of June 29, 2009). (iii)Lately, CIGS has been admitted in case of business crisis with cessation of the business of the entire enterprise or of one of its sectors, with contextual submission of an headcount relocation aimed at decreasing the recourse to the collective lay-off.

21 EXTRAORDINARY WAGES GUARANTEE FUND(CIGS) Reasons for intervention Restructuring: remarkable changes in the business structures (equipment or premises) with following investments Reconversion: introduction of production of different product fields by changing the production cycles of the existing facilities Reorganization: organisational and management rationalization aimed at facing business inefficiencies Various ministerial decrees lay the basis for the admission of the enterprises to CIGS vis-à-vis the three specific cases at issues indicated above

22 EXTRAORDINARY WAGES GUARANTEE FUND(CIGS) Reasons for intervention: insolvency Reasons for intervention: insolvency procedures (art. 3 of Law no. 223/91) Declaration of bankruptcy Issue of the measure of compulsory winding-up Subjection to receivership Admission to composition with creditors, consisting in the assignment of assets prot. No. 14/4314 of March 17, 2009)Debt restructuring pursuant to art. 182-bis of the Bankruptcy Law (see Note of the Ministry of Labour prot. No. 14/4314 of March 17, 2009)

23 EXTRAORDINARY WAGES GUARANTEE FUND(CIGS) Sectors concerned 15 employees in the last six-month periodEmployers of industrial staffed with more than 15 employees in the last six-month period 200 employeesEmployers of commercial businesses staffed with more than 200 employees (monthly survey) Remarks: (i)Specific sectors are excluded from CIGS such as hotel, and banking industry (ii)Each year, the admission to CIGS is provided for commercial businesses with more than 50 employees, supervisory firms with over 15 employees, travel and tourist agencies with over 50 employees Beneficiary workers Blue collars White collars Quadri having at least a seniority of 90 days at the company Remarks: (i)they may be both open-ended and fixed- term workers, both full-time and part-time (ii)Executives and apprentices are left out (yet, see infra for the “in derogation” shock absorbers for apprentices) (iii)the criteria for the identification of workers to be suspended as well as the modalities for the personnel turnover shall be the subject of a unions consultation (see infra) (iv)Personnel turnover: if the enterprise envisages, for technical-organisational reasons linked to the maintenance of the ordinary efficiency levels, not to adopt any turnover among workers performing the same tasks and working in the production unit concerned by suspension, it shall indicate the reasons for it

24 EXTRAORDINARY WAGES GUARANTEE FUND (CIGS) Duration of the intervention 36 months General rule: for each production unit, the CIGS cannot exceed 36 months in a five-year period (Law no. 223/91). Specific rules linked to the different reasons for intervention: the duration of the programme for business crisis shall not exceed 12 months; an extension for the same reason may be provided for only once 2/3 of the initial term has elapsed or reconversion shall not exceedthe duration of the business restructuring, reorganization or reconversion shall not exceed 2 years, with the possibility of two extensions, each of one not exceeding 12 months, for such programms showing a particular complexity :In case of insolvency proceedings: 12 months with possibility to a six-month extension

25 EXTRAORDINARY WAGES GUARANTEE FUND(CIGS) Procedure for the admission to CIGS Unions consultation  The employers who intend to request the admission to CIGS must promptly informs the Unions  Within 3 days after the above mentioned notice, the employer or the Unions submit to the competent administrative office, the application for joint examination of the business situation  The consultation procedure must be completed within 25 or 10 days (depending upon whether the employer employs over or less 50 employees) Submission of the application to the Ministry  Within 25 days after the end of the pay-period outstanding in the week when the business suspension or reduction began  After completion of the preliminary proceedings, the Ministry issues the measure for the admission to CIGS  In case such admission is refused, it is possible to request a review, without prejudice the possibility to have recourse to the Regional Administrative Court Submission of the request to INPS  Within 25 after the end of the pay-period outstanding as of the date of publication of the decree granting CIGS on the Official Gazette

26 EXTRAORDINARY WAGES GUARANTEE FUND (CIGS) Amount of the CIGS indemnity 80% of the overall pay that the employee would have received for hours not worked, with the following monthly ceilings (2011 ceilings) 80% of the overall pay that the employee would have received for hours not worked, with the following monthly ceilings (2011 ceilings): -€ gross per monthly pay up to € 1, € 1, per monthly pay exceeding € 1, In principle, the CIGS indemnity is paid in advance by the employer and reimbursed to the latter by INPS. Should the enterprise be in an exceptionally critical financial situation, INPS may effect a direct payment (nevertheless, see infra, CIGS in derogation). Contribution for CIGS Current contributionCurrent contribution: 0.90% (of which 0.30% to be borne by workers), to be calculated on the taxable salaries of the employees entitled to CIGS Additional contribution:Additional contribution: 3% (up to 50 employees) and 4.50% (over 50 employees), to be calculated on the amount of the wage integration paid to workers; it shall be doubled starting from the first day of the 25 th month after the beginning of CIGS; no additional contribution shall be due for CIGS in case of insolvency proceedings

27 DEFENSIVE SOLIDARITY AGREEMENTS (CDS) “Contratto di solidarietà” - Special features The solidarity agreement is an agreement between employer and unions concerning the reduction of working hours in order to avoid headcoutn reductions The loss of salaries deriving from the reduced working hours is partially reimbursed by INPS. Term: 12/24 months which may be extended for further 24 months within the maximum limit of 36 months whithin the five years period.

28 DEFENSIVE SOLIDARITY AGREEMENTS (CDS) Sectors concerned The same employeres falling within the scope of CIGS Remarks: The employers admitted to insolvency proceedings are left out Beneficiary workers Blue collars White collars Quadri Remarks: (i)Fixed-term workers are left out (ii)Executives and apprentices are left out

29 DEFENSIVE SOLIDARITY AGREEMENTS (CDS) Wage integration for workers 60%Integration of 60% of the wage lost vis-à-vis the working time reduction The monthly ceiling provided for CIGS is not applicable Benefits for enterprises The additional contribution established in case of CIGS is not provided for for the hours worked equal toSocial security contributions reduction for the hours worked equal to 25% (if such reduction ranges between 20 and 30%) and to 35% (if such reduction exceeds 30%); the reduction is higher in the areas of the South of Italy

30 DEFENSIVE SOLIDARITY AGREEMENTS (CDS) DSA for enterprises subject to CIGS DSA for enterprises not subject to CIGS (2 nd- type solidarity agreements) avoid or reduce the excess personnel during the mobility procedures avoid individual dismissals for objective justified reasonEnterprises which do not fall within the scope of CIGS may enter into solidarity agreements (a) in order to avoid or reduce the excess personnel during the mobility procedures or else (b) in order to avoid individual dismissals for objective justified reason contribution equal to the half of the wage for the total working hours not worked, equally divided between the employer and the workers concerned by the reductionFor the reduction of working hours, a contribution equal to the half of the wage for the total working hours not worked, equally divided between the employer and the workers concerned by the reduction, is paid for a period not exceeding 24 months, that may be extended for maximum further 12 months

31 MOBILITY INDEMNITY Main features The mobility indemnity (i.e., the indemnity paid by INPS to the dismissed employees) applies in the following cases:  An enterprise admitted to CIGS needs to start, during the programme or upon completion of the same, the dismissal of one or more people  An employer employing more than 15 employees intends to perform – after a reduction or change of business or work, or else after cessation of its business – at least 5 dismissals, in a period of 120 days, in each production unit or in more production units within the territory of the same province (collective dismissal procedure) In both cases, the dismissal is subject to the completion of the following process as per Law no. 223/91:  Notice to the trade unions  Unions’ consultation which may take up to 75 days  dismissal Regulatory source: Law no. 223/91

32 MOBILITY INDEMNITY Requirements to benefit from the Mobility Indemnity Workers dismissed and enrolled in the regional unemployment records (so-called mobility lists) who:  have a seniority of 12 months, of which at least 6 worked  submit the relating application enjoy the Mobility Indemnity CIGS The Mobility Indemnity is applicable for personnel of enterprises falling within the scope of CIGS and quadri having an open-ended labour contract The beneficiary workers are blue collars, white collars and quadri having an open-ended labour contract

33 MOBILITY INDEMNITY Duration of the Mobility Indemnity Age of workerEmployment in the North-Centre Employment in the South Until 39 yearsMaximum duration 12 months Maximum duration 24 months From 40 to 49 years Maximum duration 24 months Maximum duration 36 months From 50 yearsMaximum duration 36 months Maximum duration 48 months. INPS Circular no. 95/2008: for the purposes of the acknowledgement of the 12-month increase, reference should be made exclusively to the place where the enterprise permanently organizes the activity of the worker concerned.

34 MOBILITY INDEMNITY Amount of the Mobility Indemnity The Mobility Indemnity is determined – detailed as follows - according to the wage integration that the worker has received (mobility for CIGS) or that he/she would receive (mobility for collective dismissal) in the period immediately preceding the termination of the labour relationship: 100% in the first 12 months 80% from the 13 th month on with the following ceilings (2011 ceilings) € gross, for salaries up to € 1, € 1,098 gross, for salaries exceeding € 1,961.80

35 MOBILITY INDEMNITY Financing of the Mobility Indemnity – Contribution to be borne by employers Financing of the Mobility Indemnity – Contribution to be borne by employers Monthly ordinary contribution (0.30%) borne by the employer during the employment Payment, for each worker to be dismissed, of:  9 times the monthly mobility indemnity, in case of collective dismissal process without an agreement with the unions;  6 times the monthly mobility indemnity, in case of CIGS  3 times, if the monthly mobility indemnity in case of collective dismissal which ends up with an agreement with the Unions Cases of exemption from the above payment:  total exemption in case the insolvency proceedings triggering heacount reductions  the employer who dismiss the worker and offers an open-term job having certain characteristics, benefits from a reduction of the mobility cost

36 THE SO-CALLED “MOBILITY FOR SMALL EMPLOYERS” The workers dismissed for objective justified reason by enterprises employing up to 15 employees, for whom the mobility procedure cannot be started, may, upon request, register in the regional unemployment records (mobility lists). Such registration does not entitle workers to the mobility indemnity. However, employers who hire workers enrolled with enjoy social security benefits.

37 SOCIAL SHOCK ABSORBERS “IN DEROGATION”

38 SOME GENERAL PRINCIPLES art. 7-ter, paragraph 4, of Legislative Decree no. 5/2009,,.In compliance with art. 36, paragraph 2, of Law no. 203/2008 (the Budget Law 2009), as amended by art. 7-ter, paragraph 4, of Legislative Decree no. 5/2009, the CIG, mobility and unemployment indemnity may be granted uninterruptedly, for periods not exceeding 12 months, in derogation of the regulations in force. all kinds of subordinate employment, temporary workers supplied by external employment agenciesThe financial resources allocated for shock absorbers “in derogation” of the regulations in force may be used for all kinds of subordinate employment, including the apprenticeship and temporary workers supplied by external employment agencies (art. 19, paragraph 8, of Legislative Decree no. 185/2008). of the private sector. The shock absorbers “in derogation” therefore potentially guarantee a thorough coverage for all kinds of subordinate workers of the private sector. Agreement for the management of the shock absorbers in derogation in the two-year period On February 12, 2009 the Government, the Regions and the Autonomous Provinces executed an Agreement for the management of the shock absorbers in derogation in the two-year period which has been extended to 2011 and specific agreements have been entered into between the Ministry of Labour and any single Regions. The Regions have a basic role in the complex system of the shock absorbers in derogation. Reference must be made to the specific regional agreements in order to identify the type and regulation of the shock absorbers in derogation to which an enterprise may be entitled.

39 THE MAIN ANTI-CRISIS MEASURES Unemployment indemnity for suspension of work (art. 19, paragraph 1, letters a) and b), of Legislative Decree no. 185/2008) Unemployment indemnity for apprentices suspended or dismissed (art. 19, paragraph 1, letter c), of Legislative Decree no. 185/2008) CIG (ordinary and extraordinary) in derogation Mobility in derogation Una tantum for consultants engaged under a project collaboration agreement (art. 19, paragraph 2, of Legislative Decree no. 185/2008)

40 CIG AND MOBILITY IN DEROGATION on condition that personal requirementsWorkers may benefit from CIG and mobility in derogation on condition that they are provided with the personal requirements usually requested in order to enjoy the CIG indemnity or the mobility indemnity, i.e. respectively (i) 90 working days of length of service as far as CIG is concerned and (ii) 12 months of length of service as far as the mobility indemnity is concerned INPS is authorized to pay in advance CIG and mobility in derogation. Contribution due in case of CIGS in derogation: the employers are not bound to pay any ordinary contribution (0.90% of which 0.30% to be borne by workers) but only the additional contribution (3% or 4.50% depending on whether the employer has up to or more than 50 employees), only for the period in which they benefit from the CIGS in derogation. No additional contribution shall be due if the employer is undergoing an insolvency proceedings. INPS explained that the periods of CIG in derogation do not fall within the calculation of the maximum ceiling of 36 months in a five-year period.

41 UNA TANTUM PAYMENT FOR PROJECT COLLABORATORS (ART. 19, COMMA 2, D.L. 185/2008) Experimental measure effective for 2009 / 2011 periodExperimental measure effective for 2009 / 2011 period Objective requirements:Objective requirements:  Termination of the consultancy agreement Subjective requirementsSubjective requirements  Enrolment with INPS  Working for only one principal  Preceding year: income exceeding € 5,000 (but less than € 14,240) and a social security seniority of at least 3 months  In the relevant year: social security seniority of at least 3 months  Declaration of availability of undergoing a training and professional requalification course Una tantum payment equal to 10% of the income earned in the preceding yearUna tantum payment equal to 10% of the income earned in the preceding year

42 UNEMPLOYMENT, “JOB GAP” AND EMPLOYMENT EXPECTATION Unemployment rate According to Confindustria economists, unemployment in Italy in 2011 will touch its peak and begin to decline until 2012 It is estimated that the unemployment rate will reach 9% in 2011 “Job gap” To return the pre-crisis employment rate, according to Confindustria, should be designated in more than 440,000 employees in 2011 In Europe so far, the "job gap" was filled in Germany due to increased employment in the last three years Employment level rate After a decrease in 2010 (-1.7%, -2.6% in 2009), the employment level rate should remain mainly stable in 2010 (+0.1%) The rise in the employment level rate should occur according to economics forecast in 2012 only (+0.9%)

43 SOCIAL SHOCK ABSORBERS IN DEROGATION Year 2011 In 2011 the recourse to anti-crisis measure is expected to be still very high due to the slow due to the slow economic recovery and the refinancing of social shock absorbers by the Italian Government employees will be involved Year employees are expected to be interested in the use of social shock absorbers in derogation

44 OTHER INSTRUMENTS TO FACE THE CRISIS AT COMPANY LEVEL early retirement flexible working time assignment of workers to different working duties (even lower) “concession barganing” Collective barganing agreement at company level departing from the national collective barganing agreements Derogation in peius: Derogation in peius: are in compliance with Italian law

45 FANCIFUL INSTRUMENT TO FACE THE CRISIS: THE MIRAFIORI PLANT’S AGREEMENT (FIAT CASE) Background In Italy a large number of principal terms and conditions of employment are governed by collective agreements applying to almost every employee. Collective agreements are made between trade unions (organizzazioni sindacali) and employers’ organizations (associazioni di categoria) (usually grouped on an industry-wide basis) generally applicable only if the employee and employer are members of the contracting trade union and employers’ organization Collective agreements are generally applicable only if the employee and employer are members of the contracting trade union and employers’ organization or the parties have otherwise agreed to be bound by its terms.

46 FANCIFUL INSTRUMENT TO FACE THE CRISIS: THE MIRAFIORI PLANT’S AGREEMENT (FIAT CASE) Background FIAT as member of the employers’ organization (associazione di categoria) so-called CONFINDUSTRIA applies the Collective bargaining agreement for employees of metal-mechanic sector (“Metal-mechanic CBA”)

47 FANCIFUL INSTRUMENT TO FACE THE CRISIS: THE MIRAFIORI PLANT’S AGREEMENT (FIAT CASE) FIAT’S WILL Derogation in peius of the Metal-Mechanic CBA with regard to Work shifts Overtime Absences due to sickness Daily breaks

48 THE MIRAFIORI PLANT’S AGREEMENT (FIAT CASE) Background In particular, SICKNESS Under Italian law, during the sickness employees are entitled to retain their jobs for a certain period of time (periodo di comporto) (generally 180 days – 12 months executives pursuant to the national collective bargaining agreements); to receive statutory sick pay (indennità di malattia) which is paid by INPS after 3-day of sickness, INPS pays 50% of the normal salary from 4 th to 20 th day, 66% over 20 th day). Generally, the national collective bargaining agreements provide for that the employer first 3 days of absence pays the statutory sick pay during the first 3 days of absence (100%) (periodo di carenza) contributes up to 100% to the payment of the statutory sick pay made by INPS.

49 THE MIRAFIORI PLANT’S AGREEMENT (FIAT CASE) AVERAGE SICKNESS ABSENCES FIAT: 8% In order to reduce such average FIAT introduced a system whereby, if the average sickness absences does not decrease to a certain treshold, those who have been absent (more than twice within 12 months) for less than 5 days immediately preceding or after holidays, will not be entitled to payment of day first and day second over the 3-day period (so- called periodo di carenza) to be borne by the employer pursuant to the applicable national collective barganing agreement.

50 FANCIFUL INSTRUMENT TO FACE THE CRISIS: THE MIRAFIORI PLANT’S AGREEMENT (FIAT CASE) CGIL – one of the main Trade Unions, together with CISL and UIL – disagreed with FIAT’s proposal to derogate in peius the Metal-Mechanic CBA FIAT: established a NEWCO made a transfer of undertaking from FIAT to NEWCO NEWCO: is not a member of CONFINDUSTRIA therefore the Metal- Mechanic CBA is not applicable entered into with CISL and UIL only a collective bargaining agreement at company’s level replacing the Metal-Mechanic CBA and implementing new rules aimed at granting competitiveness (w entered into with CISL and UIL only a collective bargaining agreement at company’s level replacing the Metal-Mechanic CBA and implementing new rules aimed at granting competitiveness (work shifts, Overtime, absences due to sickness, daily breaks)

51 Collective bargaining agreement at company level of 11 February 2009 WELFARE PROGRAM Luxottica, introducing a best practice, agreed to build up a “WELFARE PROGRAM” at company level for its employees and their families Assumption The national collective barganing agreement is a frame in which the employer can set up a governance closer to the company’s and employees’ needs (including welfare programs) A DIFFERENT WAY TO BATTLE THE CRISIS: WELFARE AT COMPANY LEVEL (LUXOTTICA’S CASE)

52 A DIFFERENT WAY TO BATTLE THE CRISIS: WELFARE AT COMPANY LEVEL (LUXOTTICA’S CASE) GOALS OF LUXOTTICA –recruit and retain talent –motivate workers letting them feel “part of the company” and “be the focus of the company’s policy” –preserve the purchasing power of employees during the crisis not only through fixed and variable salary but relying on innovative and complementary income support which is alternative to more traditional systems of remuneration

53 INTERVENTIONS IN PLACE Provision of non-monetary benefits (having a considerable economic value) to protect employees purchasing power, to face family needs as well as to allow better work-life balance needs (Collective bargaining agreement at company’s level of December 14, 2009 and June 24, 2010) A DIFFERENT WAY TO BATTLE THE CRISIS: WELFARE AT COMPANY LEVEL (LUXOTTICA’S CASE) integrative sanitary assistance to employees’ and their families food expenditure school (textbooks and scholarships to children of employees) careers social care supporting workers with family problems associated with disability, elderly care and drugs addiction loans fitness training courses work-life balance plans (i.e., childcare, laundry, teleworking, etc.)

54 FURTHER ANTI-CRISIS SOLUTIONS provide tax incentives for businesses reduce the mismatch between demand and offer of employment develop the welfare program at company level decrease taxes on productivity bonus reduce the cost of labor increasing the employees’ net salary

55 Raffaella Betti Berutto Raffaella Betti Berutto GIANNI, ORIGONI, GRIPPO & PARTNERS Via delle Quattro Fontane 20, Rome, Italy telephone: fax: mailto: mailto:

Düsseldorf, 30. Oktober 2007 WSG European Regional Meeting Amsterdam, March 24 th 2011 Martin Reufels Battling the crisis Approaches in Germany to prevent mass dismissals

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober  Temporary Reduction of regular weekly Working Hours per company / establishment / organisational entity (agreed by collective bargaining agreement / shop agreement / individual employment contract)  Reduction of Pay  67% of net loss contributed by social security authorities  up to 24 months 2 Concept of “Kurzarbeit“

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober Advantages 1)for Employer: - huge and considerable savings by employer especially in case of „Kurzarbeit 0“. 2)for Employee: - retains job - no considerable loss of pay, especially when add-on contributions are granted by employer (“full pay and no work”) 3)for social security authorities / government: - low percentage of unemployment - low spending on unemployment aid (re-directed into direct support of “Kurzarbeit” employees) 3

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober  Qualification Programs and Vocational Training at “Kurzarbeit 0” or “Health Program”  “Subsidies” for “seminar & conference” industry  Evaluation & Consultation of employees by social security authorities 4 Additional Programs

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober exists since helped to “bridge” excess labour supply through a recession - has been successful in the 1970s /80s, i.e. construction bubble - “solution” to prevent unemployment in aftermath of financial crisis (e.g workers at Volkswagen) - helps only in short-term phenomena - helps to prevent social unrest (employees keep their job) 5 Factual Evaluation

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober in total:  has been successful, thanks to sudden recovery & export boom in Germany.  has prevented mass dismissals and allows companies to immediately “boost up” business in times of recovery. 6 Factual Evaluation

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober Thank you for your attention! 7

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober Berlin Friedrichstraße 149 · D Berlin T +49 (0) · F +49 (0) Brüssel Avenue Louise 140 · B-1050 Brüssel T +32 (0) · F +32 (0) Chemnitz Weststraße 16 · D Chemnitz T +49 (0) · F +49 (0) Düsseldorf Cecilienallee 5 · D Düsseldorf T +49 (0) · F +49 (0) Frankfurt Grüneburgweg 102 · D Frankfurt am Main T +49 (0) · F +49 (0) Hamburg Bleichenbrücke 9 · D Hamburg T +49 (0) · F +49 (0) Köln Magnusstraße 13 · D Köln T +49 (0) · F +49 (0) München Prinzregentenstraße 48 · D München T +49 (0) · F +49 (0)

Battling the Crisis: Legislative Approaches in Russia for Competitiveness and Flexibility in the Labour Market March 24, 2011 Irina Anyukhina, ALRUD Law Firm WSG European Regional Meeting 2011 Amsterdam, Netherlands

Unemployment in Russia 65  Statistical information for the years 2009 and 2010 is calculated in accordance with the methodology of the International Labor Organization.  Statistical information for year 2008 is approximate.

Measures for improvement  Anti-сrisis Government Program –Labour market support –State financing –Support of business  Legislative Changes 66

 Requalification and professional education  Temporary working positions  Relocation of dismissed employees in other regions  Support of small business and self-employment  Monitoring dismissals  Monitoring introductions of reduced working day  Promote information awareness of employees 67 Labour Market Support

 Subventions from the Federal budget to regional budgets  Strategic sector  Domestic manufacturers  Township-forming companies  Small business 68 Financial Support

Legislative Changes 69  Simplification of dismissal procedure for trade union leaders Lower contributions to the State Social Funds  Benefits for IT companies No obligation to obtain the consent of a trade union organization (except for some cases) Important for employer Important for employee  Increase of unemployment compensation Minimum amount increased by 80 %  Increase of minimum wage rate Maximum amount increased by 57 %

Major Projects 70 Winter Olympic Games in Sochi 2014 Establishing of Clusters (Pharmaceutics, tourism, etc) Summit of APEC in 2012 Skolkovo Innovation Center  New working places  Attraction of foreign highly-qualified specialists  Tax and organizational benefits

Migration Policy Restriction of quota for issuance of work permits for foreign nationals:  Year 2010: decreased by approx. 51% vs year 2009  Year 2011: decreased by approx. 10% vs year 2010 Simplification of procedure of engagement of foreign highly-qualified specialists  No special permit for the employer  Quick obtaining of work permit  Simplified procedure of registration on the territory of Russia  Simplified procedure of registration for accompanying family members 71

Hot Topics on the Agenda  Simplification of dismissal procedures  Legalization of free-lance  More grounds for fixed-term labour contract  Work on 1.5 wage rate, 60 hours per week  Outsourcing  Labor or civil contract  Introduction of institutional labour arbitration  Change of procedure of beginning of a strike  Preferential regime for innovative business 72

Thank you for your attention! ALRUD Law Firm Irina Anyukhina, 17 Skakovaya Street, Moscow Russia tel.: , fax.:

15 years of reaching the stars for our clients WSG European Regional Meeting Amsterdam, Netherlands, 24 – 25 March 2011 Ukraine seeks labor reform as part of anti- crisis program Armen Khachaturyan, Senior Partner

75 Proposal of concurrent pension and labor reform (the bill to be reviewed by Parliament in March 2011) ●Legalizing wages and jobs through tightened employers’ liability (41 % of official social taxes on a payroll leads to USD 25 bln of unoffical wages; fines to grow 10 times to USD 1, ,000 for unofficial wages and jobs; tax administration and pension fund are authorized to impose fines; measures to bring almost USD 9 bln to pension fund) ●Introduction of indicative wages subject to social insurance and pension contributions (reference to similar law in Bulgaria, but criticism from experts) ●Restructuring of employer’s and employee’s shares in total social tax on wages/payroll (currently employee pays only 2% of total contribution to pension fund while employee’s share is 10.25% in Austria and 8.205% in Bulgaria)

76 Draft New Labor Code (second reading is pending in Parliament, current Labor Code is effective since 1971) ●Refusal from pro-employee approach ●Certainty in hiring procedure (written form of employment agreement; freedom of contract outside imperative rules of law, administrative order is possible only upon employee’s consent; essential terms include description of position, structural unit, term, compensation, work time and labor protection) ●More grounds for conclusion of term employment agreements (currently only 10% of all employment agreements in Ukraine while majority in western jurisdictions) ●Possibility of agreed unpaid vacation during suspension of works ●Reclassification of contractor’s agreements into employment agreements ●Extension of probation from 3 to 6 months with de minimis severance pay

77 Draft New Labor Code ●Possibility of extension of work time to 12hours per day and 48 hour per week, provided, however, that an average work day/week within a month does not exceed standard 8/40 hours ●Voluntary 6 day work week eliminates two-job arrangements ●Employer’s right to issue regulations (orders, instructions), including for covering legal issues at absence of collective bargaining agreement ●Cancellation of vacation for passing exams in educational institutions ●Limitation of rights of small trade unions in favor of monopoly of federation of trade Unions of Ukraine ●Unilateral change of contract on economic grounds ●Increase of grounds for termination of employment (violation by management of shareholders’ rights, softer definition of redundancy as certain economic, technological, structural or organizational conditions resulting in impossibility or non feasibility of employment, but employer’s successorship is not an employment termination ground)

Thank you for your attention!

Mit Recht erfolgreich – Unternehmensporträt | 30. Oktober 2007