Announcing your restructuring plan – now or in the autumn?

During the last four weeks, the economy has partially picked up again. However, the number of employees benefiting from part-time temporary unemployment measures has remained extremely high.

At Essensys, we are convinced that the second half of 2020 will be a period of continuous restructuring announcements in Belgium.

Companies confronted with structurally decimated revenues have announced potential collective dismissal plans. Compass, the catering operator, has lost more than 25% of its revenues due to COVID-19 and has announced its intention to shed up to 550 jobs.

Many others have done their homework, drafting an initial restructuring plan which must then be provided to the works council, and securing the financial budget for severance payments from headquarters or shareholders. However, once these are in place it is still difficult to determine the best timing for the announcement.

Should you announce your plan as soon as possible, wait until September when the temporary employment measures end, or even postpone your announcement until after the social elections in November?

No decision to proceed with a collective dismissal may be taken before the works council has been duly informed and consulted. Such a procedure, from intention until the first termination, takes on average four to six months. The exact timing will depend on how quickly agreement can be reached about a social plan and whether negotiations on this point have already begun during the initial information and consultation procedure.

If your financial (or even strategic) time line forces you to take the dismissal decision before the 31st of December, even if implementation will be spread over the first month and into the next accounting year, you will need to begin the process immediately.

The majority of your employees have a good understanding of the economic effects of COVID-19 on the financial health of your company. Moving swiftly will therefore improve trust in the management. Starting now also eliminates the risk of leaks, but above all allows you to propose favourable termination conditions (unemployment with company pension scheme for those aged 59 and above) if the agreement is filed before 31 December.

You should also remember that from a practical perspective it might be difficult to organise meetings with the works council during the summer holidays. And the corresponding delay in negotiations may lead to yet more uncertainty for a high number of employees. Finally, in the period before and during social elections, union representatives tend to be more nervous and very visible within the company. This tenser atmosphere generates a higher risk of strikes.

Is the month of September, when the present temporary unemployment relief measures come to an end, a better alternative?

The government of Prime Minister Wilmès is procrastinating. It has extended the flexible relief measures a number of times because it feels uncomfortable deciding on a substantial economic recovery programme. It is therefore not impossible that the relief measures will be extended again. But if this isn’t the case, you will feel the pain in your profit and loss account from 1 September, unless you apply for the stricter economic unemployment programme.

If you are considering making an announcement in September, it’s a good idea to check the list of candidates for the social elections. It might well be that, in line with many other Belgian companies, the candidates for the works council and the prevention committee at your company are the same individuals. From mid-August until mid-November, employees can still be put on the list for the social elections. Indeed, employee-candidates for both the works council and the prevention committee can withdraw their candidacy for one of those bodies and be replaced by alternative candidates. If this is the case, you might end up with more protected representatives than you had expected.

The next question is then clearly: “Should we wait to announce our restructuring plan until after the social elections?”

There are strong arguments for this, provided you can afford to do so financially and if you make absolutely sure that there will be no leaks. And if you trust that the (new) Belgian government won’t postpone the current dates for the social elections until 2021.

By waiting for the beginning of December you will probably be able to launch your announcement in the midst of a huge wave of similar actions by your competitors, which may mean you receive less negative press coverage. However, you may also pay the price through a levelling-up effect, in which union representatives compare the benefits offered in other social plans.

But above all, as a CEO you should come up with a strong and credible explanation for when you’re confronted about your lack of transparency. “You knew six months ago that you were going to announce this”. Your answer may have a significant impact on the future of your company.

Michel Van Hemele
Managing Partner Essensys