Understanding Works Councils and how to integrate them into the decision-making process is vital to the success of multinational firms with employees in Europe.
For international firms, especially those with a presence in Europe, Works Councils play an important role in ensuring employees have a voice in the corporate decision-making process.
Born out of unions, the Works Council represents employees' needs, including economic, health and organizational affairs. They also have a say in employee hiring, firing and transfers, as reported by Reuters. And their influence extends to significant initiatives, such as major capital investments. Before a company can adopt a new human capital management (HCM) solution, or upgrade an existing platform, for example, it must secure support from the Works Councils.
So how did Works Councils come into existence, and what happens if you proceed with a decision to adopt an HCM integration tool without their buy-in?
Understanding the Role of European Works Councils
While a Works Council is an alien concept for many U.S. executives, the European Parliament backed the idea with a 1994 directive, which it revised in 2009. At its core, a Works Council embodies a simple concept: employees need a say in how executives run the business. For multinationals who operate in more than two countries in the European Economic Area and employ at least 1,000 employees, with at least 150 in two member states, the employer or employees may form a Works Council.
Typically, employees elected by their peers serve on the council for a four-year period, and more than one council may exist within each country where the company does business. Once formed, the council's primary goal involves the facilitation of open communication between employee representatives and the firm's leadership.
Similar to other EU Directives, member nations retain the right to apply the Directive in a manner consistent with their laws and regulations. As a result, while Works Councils adhere to common principles, how they function varies by country.
Not surprisingly, given the variations in each member state's laws, coupled with cultural norms and expectations in each country, the meeting schedule and the matters they address varies by council. Most councils, however, meet on at least a monthly basis.
The Importance of Communication
With Works Councils weighing in on myriad issues, frequent, detailed, timely communication sets the stage for a productive partnership between employees and management — especially when it comes to the adoption of employee-facing technology, such as HCM software.
Because the adoption of such HCM technology invariably changes the processes associated with the collection and storing of employee-related data, executives must demonstrate how the technology will comply with data privacy and processing laws across the enterprise during integration, as well as detail the impact on the employees tasked with using the software, among other areas of concern.
"In Germany, the introduction of new IT tools is de facto a decision that requires co-determination (the right of employees to participate in the management of the companies that employ them)," says Sarah Samson, Human Resources Director for ADP in Germany. "If we talk about 'Works Council,' this can mean councils on site level and a joint council. There also exists an independent body from the Works Council, which is called the economic board or economic community, which has the right to consult the management of the company in economical matters."
To that end, the Works Council must receive a detailed description of the any new software's features and functions, and the mechanisms embedded within the solution to ensure compliance with company policies and procedures, and relevant laws and regulations. Executives should also explain how they intend to provide access to the HCM solution for members of the Works Council to discuss and review changes that fall under their purview, such as the review and approval of changes to employee compensation, or promotions and transfers.
In the spirit of cooperation and open dialogue, prior to adoption, some firms require the HCM provider to deliver a demonstration of the software to the Works Council. This session allows the members of the Works Council — as well as the company's Data Protection Officers (DPO) — to ask general questions, such as:
- How does the organization plan to deploy the platform?
- What types of data will it capture and store?
- What measures are in place to ensure employee data privacy and protection?
- How do executives plan to use the data and analysis to manage the business?
"At the very beginning of the project, start thinking about the questions the Works Council might have regarding the project," says Dieter Schmidt, DPO with ADP Germany. "In the manner of a Data Privacy Impact Assessment, we developed a template which captures all necessary information to allow the Works Council to understand the entire project. This helps with the negotiation process as well."
The Legal Power of Works Councils
Organizations may be tempted to try to avoid engaging with the Works Council. In those cases, not only do these organizations run the risk of sparking a labor dispute — and the loss of employee productivity that results — the council may choose to pursue legal options for the failure to comply with applicable laws. As an example, the General Data Protection Regulation (GDPR) is an EU regulation, which is directly applicable in any member state — as opposed to an EU Directive, which has to be transformed into national law to become applicable.
"You need the agreement of the Works Council to proceed with many corporate initiatives," notes Samson. "If you do so without it, you are at risk that the council may go to the court and return with an official mandate which states that you are not allowed to use that new tool without the agreement of the Works Councils."
As firms look to expand to overseas markets, success in Europe hinges, in part, on the executive team's ability to grasp how Works Councils function and when to engage them. And while partnering with employees in management decisions is uncharted territory for some executives, aligning management and employees' interest often results in greater productivity and an increase in employee loyalty, which is good for the organization and everyone involved.
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