How Europe Learnt to Handle Collective Redundancies
- Axel Menzel
- Jan 16
- 9 min read
Updated: Jan 25
The History of an Instrument that Supports People Through Uncertain Times
Structural changes are among the great constants of European economic history. Yet, whilst other regions of the world treat restructuring primarily as a unilateral business measure, Europe has chosen a distinct path:
Economic change must be shaped through social responsibility.
The mandatory dialogue is the most visible symbol of this attitude. Rather than prescribing a specific financial outcome, European regulations mandate a strict process: notification, consultation and the search for alternatives before any irreversible decisions are executed. It forces organisations to pause and engage, ensuring that transformation is not just imposed from above, but negotiated.
This European commitment to procedural responsibility is finding renewed purpose.
We are currently witnessing a disruptive megatrend that is already fundamentally reshaping the world of work: Artificial Intelligence.
Unlike the external shocks of the past, this transformation is driven by technological advancement, yet its impact is no less profound. As AI and automation alter business models and industry structures, we face a wave of extensive restructuring in the short to medium term.
This shift forces us to revisit the social answers of the past to manage the uncertainty of the future. This article examines the history of the social plan and demonstrates why this established instrument is essential for managing responsible restructuring.
What you will read in this article:
#1 The Historical Context
The 1970s: When Europe Realised Change Needs Rules
Before the turning point of the 1970s, mass redundancies in most of Europe were largely dictated by entrepreneurial freedom. With the exception of Germany, which acted as a pioneer with early protective laws, most nations treated collective dismissals merely as a sum of individual firings.
The early 1970s initially seemed like the continuation of a success story. The economic miracle appeared unshakable. Until 1973, when the first oil crisis hit – and Europe realised how fragile prosperity could be. Within a few months, consumer prices rose, production costs exploded and companies began to reduce capacities. In sectors such as steel, mining, or textiles, the workforce consisted of generations of families – and suddenly factories stood still. Unemployment rose, protests increased and governments sought answers.
It was a moment that changed Europe. Not only because a significant volume of people lost their jobs, but because it became visible: when companies dismiss hundreds or even thousands of employees, it affects not just a particular business – it affects entire regions, societies and economies. Yet, it took a single, spectacular case to make it clear that Europe needed more than national solutions.
The Akzo Case: A Spark that Ignited a European Debate
In 1973, the Dutch chemical fibre group Akzo (via its subsidiary Enka-Glanzstoff) announced plans to close several plants in different countries. Around 6,000 people were to lose their jobs – in Germany, Belgium and the Netherlands. The decision was made at group headquarters.
However, the impact hit workers in three nations, whose fate was sealed literally overnight. Works councils could do nothing – their jurisdiction ended at national borders, whilst the problem had long since become global. Protests, occupations, and expressions of international solidarity ensued.
For the first time, it became visible: multinational corporations decide globally – but workers' rights are organised locally. The European Community reacted: it began to consider how companies could be obliged not to leave people and states defenceless. It was the birth of the idea of a European framework for collective redundancies.
#2 The Legal Evolution
The European response came in stages ...
1975: The First Collective Redundancies Directive
For the first time, Europe prescribed:
Companies must inform. Companies must consult. Companies must involve authorities.
A dismissal was not banned – but it could no longer be prepared in secret. The aim was not just social protection, but also the prevention of competitive distortions caused by differing national protection levels.
1992: The Crucial Tightening
Practice immediately showed where the loopholes lay. Many companies claimed that "the decision was made by the group" and they themselves knew nothing – a popular defensive argument. Europe responded with a clear message: The obligation to consult applies always – regardless of where in the group the decision is made. The directive was specifically sharpened against corporate structures that bypassed transparency and participation.
1998: The Modern, Consolidated Version (98/59/EC)
This version remains valid today. It created a clear, Europe-wide minimum standard – and made it clear: structural policy is always social policy.
The directive changed the handling of collective redundancies culturally:
It made collective redundancies dialogue-oriented. Companies had to examine alternatives. Authorities were involved. Workers' representatives were given a real role.
It prevented "social dumping". A single market only works if companies do not close down where redundancies are cheapest.
It created a "level playing field".
It shaped the case law of the ECJ. For example, the European definition of "establishment" is much broader than the German one in some contexts, meaning protection applies in far more situations.
It created an awareness that restructuring is not purely an economic process. It is a societal process.
#3 The Reality of Social Plans
What European Social Plans Have in Common – and Where Europe Deliberately Allows Differences
Anyone looking closely at social plans in Europe quickly recognises an apparent paradox: whether in Spain, Germany, Austria, or the Nordic countries – the process seems familiar, almost identical. Yet the results differ considerably.
The reason lies in a deliberate European decision:
The EU harmonises the process – not the outcome.
Furthermore, the legal instrument itself varies: whilst the "Social Plan" is standard in the DACH region, other countries, such as Italy, do not have a formal "social plan" in their law, but rather operate through trade union agreements regarding selection criteria and redundancy numbers.
A Common Rhythm: The Obligation to Engage
Regardless of the country, every collective redundancy in Europe follows the same basic pattern. The employer must not create a fait accompli before engaging with employee representatives.
This does not mean that a signed social plan must already exist before redundancies can be announced. However, it does mean that a serious attempt to reach an agreement must be made and statutory consultation periods must be observed. In practice, this often means: whilst arguments over severance payments or additional benefits are still ongoing, administrative blocking periods are already expiring. Redundancies can be pronounced – the subsequently agreed social plan then applies retroactively. The crucial point is not the result, but the mandatory dialogue before the act.
Transparency as a Prerequisite for Negotiation
To ensure this dialogue is more than a formality, European law obliges companies to provide comprehensive information.
Everywhere in the EU, the same core questions must be answered: Why is the reduction happening? Who is affected? In what timeframe? What criteria are used for selection?
Without this information, no valid consultation process is possible. It forms the basis for everything that follows – legally and humanely. A professional social plan or agreement typically clarifies matters on two levels: it summarises existing rights (declaratory part) and creates new, concrete claims such as severance payments or hardship funds (constitutive part).
The Role of Authorities: Brake or Mediator?
Almost everywhere in Europe, the process is linked to notification of the authorities. This triggers a blocking period – often 30 days – during which redundancies are legally ineffective. The legislator conceived this phase as a "cooling-off period": time to examine alternatives, calm emotions and seek solutions.
However, the role of the state varies significantly across Europe. Whilst in Germany the Federal Employment Agency often acts as a financier of transfer measures (transfer short-time work allowance) , authorities in Southern Europe, such as Italy, often act as active mediators to help parties reach an agreement when negotiations stall.
A Common Core of Content: Avoidance, Enablement, Fairness
Even though the EU does not prescribe severance levels, it gives a clear direction regarding content. Article 2 of the Directive specifies measures that must be the object of negotiations.
Almost everywhere, a social plan begins with the attempt to avoid or at least reduce redundancies: hiring freezes, reducing overtime, internal transfers, or the expiration of fixed-term contracts are the first step. The actual core lies in social accompanying measures. Unlike in purely Anglo-American models, the focus is not on "pay and go", but on the question: How does someone remain employable?
Outplacement, qualification, retraining, or transfer solutions are therefore not an "add-on", but an expression of a European understanding of responsibility. Another common denominator is the establishment of transparent selection criteria. Discrimination is forbidden Europe-wide; social criteria such as age, maintenance obligations, or length of service almost always play a role – even if their weighting varies nationally.
Where Europe Deliberately Allows Differences
Despite all commonalities, harmonisation ends at two decisive points: money and enforceability. The EU makes no stipulations on the amount of severance pay. Whilst complex severance formulas are often negotiated in Germany or Austria, other countries are guided more strongly by statutory minimum standards.
Differences become even clearer regarding the compulsion to agree. In countries like Germany or Austria, a social plan can essentially be forced through a conciliation board if necessary. In the end, there is almost always a result – even against the will of one party. In many other European countries, however, there is "only" an obligation to negotiate. If negotiations are conducted seriously, the employer can proceed with redundancies after the deadlines have expired, even without an agreement. Europe has deliberately decided against uniformity here – in favour of national labour cultural flexibility.
Precisely this mix of European structure and national distinctiveness shows why models are needed that provide orientation – beyond paragraphs. This is where the Social Plan Pyramid comes in: It translates European minimum logic into a manageable leadership and design model – independent of the country, yet compatible with every system.
#4 The Social Shield Pyramid
From Paying Off to Guiding: The Social Evolution of Social Plans
Whilst large severance sums were often the focus in the 1970s, a central thought changed in the 1990s and 2000s: It is not money that decides the future – but perspective.
Europe began to concentrate more strongly on activation: Outplacement, further training, re-skilling, coaching, mobility programmes, and psychosocial support. The OECD was a key driver of this change. Organisations realised: those who guide people instead of just "paying them off" retain trust – even during change.
A prime example of this evolution is the "Transfergesellschaft" (transfer company) model, particularly prominent in Germany. Here, employees are not made unemployed but transfer into a new transitional employment relationship to be qualified and placed in new jobs – a specific Central European instrument that goes beyond the EU standard. This development later flowed into models like the Social Shield Pyramid.
Modern social plans today follow a principle that runs like a golden thread through European restructuring practice.
Level 1: Avoidance
The first impulse is always: Can redundancies be reduced or prevented? In many restructurings, it is decided here how seriously companies take their responsibility.
Level 2: Reintegration
This is the heart of European social plans: enabling people to arrive again – professionally and personally. Coaching, outplacement, qualification and human support are central. As highlighted in your transition whitepapers: Structure creates stability – but guidance creates trust.
Level 3: Financial Cushioning or: the Capital Shield
Severance payments, hardship funds, pension models – they are important, but they are never the beginning. They are the final chord of a process that began much more humanely beforehand.
#5 The Road Ahead: Why Transformation Needs a Safety Net
Europe is once again facing profound upheavals: Digitalisation, AI, geopolitical tensions, energy issues, skills shortages, and new business models. Never before have organisations had to shape so much and cushion so much simultaneously.
Modern social plans are today:
Leadership instruments, not just legal instruments.
Cultural markers, not just procedures.
Stabilisers, not just cost centres.
An employer once said in a restructuring project: "People don't just leave their jobs – they leave a piece of their identity. Our task is to give them the feeling that the path continues." Exactly that is what modern social plans do.
A European Promise – and a Mandate for Leadership
When one looks at the development of social plans, a red thread emerges: Europe has learnt that economic progress is not sustainable without social responsibility. And that transformation only succeeds if people do not go under in the process.
The social plan is therefore not just an instrument. It is a promise:
Change must be shaped – not suffered.
For executives, this means: How you design a restructuring says more about an organisation than any mission statement slide. Handling uncertainty is the moment when culture becomes visible. And perhaps that is the most important realisation of this European path:
You can lose people without losing humanity.
#6 Further Reading & Sources
Directive 98/59/EC (Collective Redundancies Directive): The central European legal basis. It regulates consultation duties and the framework for negotiations.
Giudici, Camilla (2019): Der Sozialplan in einer vergleichenden europäischen Perspektive. Provides an in-depth comparison, highlighting that whilst the process is harmonised, the instruments (e.g., social plans vs. agreements) and enforceability vary by nation.
Eurofound – European Restructuring Monitor (ERM): For data on restructuring instruments across the EU.
The "Akzo / Enka Glanzstoff" Case (1973): The key historical event that triggered the debate on cross-border redundancy protection.
