Jesper specialises in corporate litigation and governance
jesper.nooij@russell.nl +31 20 301 55 55Many companies do not have a works council, even though they should. When is it mandatory to establish one? What are the advantages of a works council? What are the consequences if your company does not have a works council?
An article recently published by the NRC newspaper revealed that 30% of companies that are required to set up a works council do not have one. Often, they do not want to set up a works council at all. Why is that? Setting up a works council can have many positive consequences for companies. In this blog, we discuss the establishment of a works council, the advantages of a works council, and the consequences if the entrepreneur refuses to establish a works council.
A company must establish a works council if it employs more than 50 people. The legislator makes a distinction between employees and hired employees, for example from a temporary employment agency. Employees hired from a temporary employment agency only count if they have been working for the company for at least 15 months. It is therefore quite possible that more than 50 employees work in a company, but that no works council needs to be established.
Once the minimum number of 50 employees has been reached, the employer (often the board/management) is obliged to establish a works council. The first step in this process is to inform the staff, as they must be given the opportunity to stand for election to the works council. Elections must then be held and works council members can be elected. Once the results are known, the works council can be definitively established. The elected persons then form the works council. This new works council will then have to draw up its own rules and regulations and acquire knowledge of employee participation rights. If this is not done, they will not be able to exercise their rights effectively.
Entrepreneurs often wrongly attach a negative stigma to works councils. They often complain that works councils thwart the management and are a club of employees who try to obstruct the management. However, the opposite is true: works councils often bring many advantages to the company. These advantages include improved and more efficient decision-making, greater involvement, and fewer conflicts.
The works council brings the most benefit through improved and more efficient decision-making. Based on the Works Councils Act (WOR), works councils have the right to be consulted and the right of consent. These rights are used during the decision-making process. When exercising its right to be consulted, the works council can express the views of the staff on the proposed decisions. It can also pass on signals to the employer at an early stage. This allows the employer to be better prepared for potential problems and to be more aware of what is going on in the workplace. In addition, if the works council believes that a difficult decision is fair, this increases support for the decision.
Furthermore, the works council ensures that policy for employees is established more efficiently, especially if consent is required. An example of this is the work-from-home policy. Without a works council, an entrepreneur would have to make separate agreements with each employee about working from home. If a works council has been established, agreements can be made that apply to all employees. This saves time and ensures that a uniform policy applies to all employees.
If a collective dismissal of employees falls under the Collective Redundancy Notification Act, an employer must notify the UWV whether a works council has been established and, if so, when it has been or will be consulted. Subsequently, when requesting permission for dismissal, the employer must add a statement that the works council has been consulted. Without this statement, the UWV will not process the application. If the company does not have a works council, the employer must submit a statement that the staff has been consulted in another manner. In addition, the employer can negotiate a social plan with the works council, so that he does not have to make individual agreements with each employee.
In addition, experience shows us that employee engagement increases with the presence of a works council. A works council sends the message that the employer takes its employees seriously. It also demonstrates that the organization is transparent and values employee participation. Consultation reduces the number of top-down decisions. All of this leads to greater trust and engagement among employees.
In this way, the establishment of a works council can lead to a reduction in conflicts. Employees can report problems to the works council, giving them an official, constructive channel for expressing their concerns. This means that problems can be resolved at an early stage and prevented from escalating into conflicts. This reduces the risk of risks and unrest in the workplace, which can only benefit the continuity of the company.
Failure to establish a works council when legally required to do so does not currently have any consequences for the entrepreneur. The percentage of companies that do not have a works council when they are required to do so has therefore remained more or less constant for years, at around 30%. The legislator is therefore in the process of developing rules to improve compliance, but these are not expected in the short term.
There may be consequences if employees wish to establish a works council and the employer refuses, even though the required 50 employees work in the company. In that case, the employees can go to the subdistrict court with a request to oblige the employer to establish a works council. The subdistrict court can even impose a penalty for non-compliance with this obligation. However, most employers do not let it get that far and recognize the above-mentioned advantages of the works council.
Are you unsure about setting up a works council, or have you just been elected to a new works council? We can help you draw up regulations, guide you through consultation and approval processes, and brush up on your employee participation rights. Feel free to contact us:
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