It’s not often that one finds union representatives trying to shield well-paid bankers, but that’s what’s happening in Germany in a bizarre dispute triggered by the UK’s departure from the European Union.
The government, keen to help Frankfurt attract banks that are fleeing London, hopes to soften Germany’s strict notice rules because it’s worried that such red tape could deter banks and make them choose other financial centers in the EU.
The lower house of parliament, the Bundestag, is debating the change, which would apply only to the banking industry Wednesday. The government said it will affect up to 5,000 bankers with an annual income of more than €220,000 ($251,000), contrasted with the national average for full-time employment of €45,000 in 2017.
In effect, Germany is ready to accommodate the Anglo-Saxon hire-and-fire mentality in the banking sector where bosses can eliminate highly paid underperformers or restructure as quickly as possible.
While their fate is unlikely to cause union bosses sleepless nights, there is concern that the exemption being granted to banks could be the thin end of the wedge. Trade unionists and lawyers are warning that it could trigger the erosion of a rule that provides greater job security for workers in Germany by making it difficult for employers to dismiss them without good reason.
As a result, a relatively minor change intended to seize on the once-in-a-life time opportunity created by Brexit is fast mutating into a fundamental debate over worker rights.
Thomas Schäfer, the finance minister of the central state of Hesse, home to Frankfurt, said he was confident the Bundestag will pass the exemption. “It’s necessary to strengthen Germany’s location in the European competition for banks that must leave London after Brexit,” he told Handelsblatt. Schäfer, a member of Chancellor Angela Merkel’s conservatives, was instrumental in getting the provision included in the coalition deal with the center-left Social Democrats reached a year ago.
Germany is playing catch-up here with France, which in 2017 introduced a reform that caps payouts for unfair dismissals and provides greater freedom to hire and fire. Paris is vying with Frankfurt to attract finance jobs from London.
Stefan Winter, the head of the Association of Foreign Banks in Germany and a member of the UBS management board, said the new rule “will be seen internationally as an important signal that Germany wants to make its financial center more attractive again.”
“In many discussions over relocation in the course of Brexit, Germany’s governing dismissal and payouts for highly-paid bank employees are regarded as too inflexible and time-consuming,” he added.
A risk to workers’ rights
Some critics said the change could be unconstitutional because it would mean the law will end up treating some employees — rich bankers — differently from less well-paid ones, not to mention from workers in all other industries.
Others see it as a risk to workers’ rights in general. “Competition among companies in Europe must not be waged through deteriorating labor conditions,” said Roland Leroux, the president of the United Leaders Association, an organization representing 60,000 managers across Germany. “Recipients of high incomes are also dependent on their employers. We cannot allow dismissal protection to become a political plaything.”
The DGB German Trade Union Confederation agrees. “After the Brexit vote most banks opted for Germany even without a deregulation of dismissal protection,” said Nadine Absenger, head of DGB’s legal department.
“There’s a danger that in future the ruling could be applied to other professions and income groups, for example during an economic recession. The erosion of dismissal protection in the financial sector can then serve as a blueprint.”
Berlin: “La, la, la, not listening”
That kind of criticism has been falling on deaf ears in Berlin. The finance ministry, headed by Social Democrat Olaf Scholz, said the exemption was warranted because the people involved could pose “particular risks for the affected banks and thereby for the entire financial system.”
It remains to be seen if the dismissal rules will eventually be loosened in other industries. “Of course one thinks of many industries while brainstorming,” admitted Schäfer, Hesse’s finance minister.