German Firms Follow Daimler To Cut Sick Pay

Companies from chemical group BASF to bank Bayerische Vereinsbank and engineering group Mannesmann said they would implement the law beginning on October 1 that cuts sick pay to 80 per cent of normal wages.

Under the old law, sick pay was paid out at 100 per cent of normal salary, totalling some DM60 billion ($40 million) in 1995.

German corporate leaders have said the policy was abused on top of liberal holiday allowances.

Daimler on Tuesday stepped to the forefront in implementing the controversial legislation, linking the cutbacks to its ability to remain competitive in global markets and saying it would negotiate with unions to reduce sick pay.

 

But Daimler's works council and unions reacted on Wednesday with outrage at the new policy. Officials said Daimler's 220,000-member workforce in Germany would refuse to work overtime and weekend shifts.

Daimler works council chairman Karl Feuerstein said talks with Daimler on trimming one billion marks a year in operating costs at Mercedes commercial vehicle production plants in Germany had been broken off.

A once noble German company is at the vanguard of breaking contracts, said Gerhard Zambelli, the leader of the powerful IG Metall union in the state of Baden-Wuerttemberg which is headquarters to Daimler.

But Daimler found support from BASF AG, which said on Wednesday it would also change its sick pay rules effective October 1 for its 44,000 workers in Germany.

Mannesmann AG also said on Wednesday it was recommending to its subsidiaries to cut sick pay. Others who said they would follow the new policy include tyre maker Continental, pharmaceuticals group Schering and Bayerische Hypo-Bank.

Unions and some top politicians said German companies had no right to make the sick pay cutback soquickly, arguing that the bill passed by Bonn earlier this month was not meant to apply to existing contracts but only future ones.

But Daimler and other industrial leaders have taken a sharply different view and intend to use the legislation as a way to force more flexibile working conditions into Germany.

The new policy, which was part of Chancellor Helmut Kohl's austerity plan to boost weak employment and whip Germany's finances in shape for European currency union, will likely lead to more labour unrest during the fall, union leaders said.

IG Metall said it was planning protests against the new law, including a nationwide metal workers union protest day on October 10.