In many countries, a social plan is a proven instrument for personnel restructuring. A social plan is intended to protect employees whose jobs are to be eliminated in connection with a change in operations. In the social plan, which is legally regarded as a works agreement, compensation claims for these employees are agreed between the company management and the works council.
They have various options for implementing this compensation, for example by increasing unemployment benefits, through severance payments, through time off during the notice period or through additional hardship compensation. If early retirement arrangements have not already been exhausted in advance, there are also options here.
Try to reach an agreement on a social plan together with the works council; otherwise, a conciliation board would make the decision, over which neither management nor the works council has any influence.
Unlike a reconciliation of interests, a social plan is mandatory in order to be able to reduce personnel as a result of a change in operations. An agreed social plan is binding. Note that companies must adhere to all terminations issued and to all termination agreements with severance offers bindingly in accordance with the conditions agreed in the social plan – but only if employees accept the severance offers. The financing of the social plan is usually an issue. All creditors and the majority of the stakeholders has to be convinced that the restructuring by means of a social plan will succeed.