22 July 2024
In this article, we provide some practical tips for the Works Council to have control over the complex pension dossier for the company and employees.
In the Netherlands, there are tens of thousands of pension schemes managed by insurers. These must be amended due to the Future of Pensions Act (Wet toekomst pensioenen, Wtp). The Works Council has a statutory right to consent in this regard. Moreover, the Works Council of a company voluntarily participating in a mandatory industry pension fund also has the right to consent. The right to consent also applies to the necessary amendments to the implementation agreement under the Wtp, insofar as they relate to the employment condition of pensions, such as determining premiums and indexation. In our practice, we see that Works Councils are already dealing with these issues and have therefore gained a lot of expertise in pension amendment processes.
Our advice is to map out the pension schemes within the company before a consent request is made by the employer. Based on the Works Councils’ own initiative proposals under the Works Councils Act, they can submit proposals and request information from the employer about the pension schemes. This way, the Works Council is better prepared to assess a request to agree to a new pension scheme. The Works Council should also be alert to the steps taken by the employer, such as preparing a transition plan towards a specific new pension contract. This prevents the Works Council from being faced with a fait accompli when choosing a new scheme.
Pension is a complex financial product. Many Works Council members and their constituents will recognize the complexity of pensions. Deciding whether or not to agree to a pension amendment has far-reaching financial implications, both for the employer and the participants. Consider premium costs, compensation costs resulting from Wtp-related changes, and the implications for pension benefits associated with certain choices for a new pension scheme. Participants who suffer from a reduced pension accrual due to the transition to the new pension system can be compensated for this disadvantage, as stated by the Wtp. This compensation can take place in the pension sphere or in the wage sphere. Choices where the Works Council plays an important legal role.
It is advisable for the Works Council to engage expert advisors now to be well-prepared for decision-making on the new pension scheme, especially pension law attorneys. The costs are borne by the company in accordance with the Works Councils Act. Since it is likely that the Works Council will be dealing with pension matters in 2024 and 2025, it is also wise to spend the legally available training budget on pension knowledge. The Works Council should also consider discussing with the employer about providing more (working) time to properly assess a consent request. Ultimately, it is also in the employer’s interest for a new pension scheme to be timely agreed upon through good consultation with the Works Council.
Due to various financial implications for groups of employees in the organization, different interests may come into play within the constituency, despite compensation measures in the context of the transition. Which age groups will receive which compensation? Or will compensation for the effects of implementing the Wtp apply from a certain date of employment? How should the Works Council handle this, given also the obligation under Works Councils Act to promote equal treatment in the company? Questions that should be considered within the Works Council and with employees now; especially at the moment when the Works Council has received a consent request.
Moreover, the Works Council can attach conditions to its consent. There are examples in case law where the WC indicated its agreement, on condition that all employees were financially compensated. It is important for the WC to specify which measures for compensating for the decline due to pension changes (for certain groups) are acceptable. Especially compensation for any decline and the distribution of compensation among different categories of participants can become a contentious issue.
The key message for the Works Council is to start working on the pension dossier now, together with experts such as a pension law attorney, and to develop a future vision for pensions for the company and employees.
Do you have questions about the Wtp or would you like expert advice to be well-prepared for decision-making on the new pension scheme? Please don’t hesitate to contact us.
