New pension scheme? How to involve the Works Council

7 April 2022


Is your organisation looking at a new pension scheme? Then as an HR professional, you also have to sit down with the Works Council. And that is good news, because an engaged Works Council helps with the introduction of the new scheme. Seven tips for involving the Works Council in the new pension scheme.

1. Involve your Works Council in the new pension scheme
When there are changes within your organisation, you cannot and do not want to ignore the Works Council. The Works Council also plays an important role when there are changes to the pension scheme. Over the coming years, the Pension Agreement will lead to many changes in terms of pensions. A new system is better suited to the way the labour market works. Will your company be introducing a new pension scheme in due course? Or are you making interim adjustments to the existing scheme? Then the Works Council has a say. The choice of pension administrator? Allocation of the contributions? The Works Council has the right to participate in decisions on all these issues and more. The Works Council can even block changes with a veto. The Works Council’s contribution is valuable: the Works Council can provide the managing director and HR with information and signals from within the organisation. In practice this has been shown to make the introduction and acceptance of a new scheme easier. That’s no surprise, since as an employee representative body the Works Council knows better than anyone what is important to the people in your organisation.

2. Get the Works Council involved early
Inform the Works Council in good time about the plans for a different scheme. At least one year before its proposed introduction. That allows sufficient scope for consultation and for exploring and working out the various scenarios. Make agreements about the communication at the same time. For example, agree on how often the Works Council will receive a formal report on the status of the new pension scheme. And when the managing director will share information in the interim. Allow reasonable deadlines for informing the Works Council; avoid taking the Works Council by surprise, such as by not presenting them with a proposed decision until late in the process. Contrary to what is sometimes thought, this does not save time. Quite the opposite: it slows down the process. The Works Council will still want to examine the various options in order to reach a sound decision.

3. Invest in advice
Pensions are one of the most expensive and complex terms of employment. There are many rules, exceptions and options. Fortunately, all the parties can seek assistance from one or more advisors, including the Works Council. That right to advice is enshrined in the Wet op de ondernemingsraden (WOR, or Works Council Act). The company pays the advisor’s fees, but the Works Council must indicate what the proposed advice fees are.

It might appear that this advice results in more disagreement. Yet it is generally money well spent. As a rule, having a well-informed Works Council at the table makes consultation on a new scheme run more smoothly. For example, an independent advisor can help the Works Council by mapping out the financial impact of the proposed changes on employees. If the parties cannot reach agreement, that is precisely when an advisor can prove their worth. If there are conflicting interests, the advisors of the managing director and the Works Council can point out possibilities to them and thus bring them closer together.

What advice?
You can help the Works Council in choosing the right advisor. For example by providing a shortlist of expert advisors. Before approaching an advisor, the Works Council must decide what advice is required. Will the advisor only be looking at the big picture? Or should they provide a detailed report on the pension proposals? Does your Works Council already have a lot of knowledge about pensions, but little experience of negotiation processes? Then an expert advisor can help them in this area.

4. Share the pension ambitions with the Works Council
The company always has one or more aims with the new pension scheme. Is there a need for greater cost control? The best scheme for employees within the available budget? Or a stripped-down pension scheme that provides ample room for salary increases within the salary scope. Whatever the pension ambition, discuss it with the Works Council in good time. Or even better, decide on the aims in consultation with the Works Council. This prevents the Works Council from spending a lot of time investigating alternatives that are not in line with the pension ambition and will therefore quickly be off the table.

5. A good pension is a shared interest
A good pension scheme balances the interests of the employees and the organisation. So pay attention to this when you modify the scheme. Share plenty of information about the pension ambitions; this results in insight and mutual understanding. Often the participants in the pension scheme – including the Works Council members – have no idea of how much the company contributes to the pension scheme, for example. Is your Works Council aware of the Right to Information? The Works Council can ask the company for information about all relevant aspects of the business. There is a job for HR here: by properly informing employees and the Works Council, you can avoid misunderstandings.

After all, a change of pension scheme does not necessarily mean a more austere approach. A change can also be an improvement. For example, the employer might take on a larger share of the contributions. A change is often also an improvement if, due to acquisitions in the past, the company has a collection of different pension schemes. Bundling in a single scheme may then be an attractive option for both employer and employees. Do not forget to involve the pension administrator in this as well. They can provide the Works Council with the correct information about the proposed new scheme.

6. Present together with the Works Council
Pensions only become meaningful for employees when they know what is (and what is not) provided. The Works Council can make an important contribution in this regard through their communication about the scheme. Employees can then make informed decisions, for example to cover financial risks they are unwilling or unable to bear themselves. Or by contributing more for their future income. If you want employees to feel even more engaged with their retirement, organise a presentation about the new scheme, for example together with directors, the pension administrator, the advisor and the Works Council. With plenty of opportunity for questions. This increases pension awareness, and that in turn encourages employees to take control of their own pensions. An additional advantage is that employees gain better insight into the value of their pension, which is a valuable employment benefit.

7. Seize the moment
Arranging a new pension scheme is an intensive process. HR, directors and the Works Council work closely together over a short period of time, and mutual understanding often develops. Make use of that momentum. This is the perfect time to look at whether other terms of employment could also be better aligned with employees’ wishes. Use the Works Council’s insights to scrutinise HR policy. Perhaps you could invest more in employees’ sustainable employability, for example. To keep employees fit and engaged, so that they can reach retirement enjoyably at your organisation.

This article appeared on on 5 April.