Collective Bargaining

Collective bargaining coverage

One indicator of the importance of collective bargaining is the proportion of employees affected by it – its coverage. Across the EU as a whole, two thirds of employees (66%) are covered by collective bargaining, although there are important variations between countries. It is also striking that some countries have very high levels of collective bargaining coverage – at around 80% or above – which are well above the levels of union density. In most cases this reflects the specific legal framework for collective bargaining in the individual countries.

Overall however, it is important to remember that in many countries, the figures for collective bargaining coverage are uncertain and, in some, the agreements signed do no more that restate existing legal minimum requirements and therefore have little impact on employees’ terms and conditions. The figures should therefore be treated with caution.

There are 10 countries at the top of the table – with collective bargaining coverage of around 80% or more – and they can be divided into two main groups.

There are three countries – Sweden, Finland and Denmark – where high collective bargaining coverage goes alongside very high union density. Unions in effect have the strength to require that their members’ terms and conditions should be negotiated, although in Finland agreements are normally considered binding for all employees in the industry concerned.

In the second group – Austria, Belgium, France, Italy, the Netherlands, Portugal and Slovenia – the high levels of collective bargaining coverage reflect, at least in part, the legal framework in which collective bargaining takes place. In Austria the negotiators on the employers’ side include the chambers of commerce and industry to which all employers must belong, with the result that almost all employees are covered. This was also the situation in Slovenia until recently, and the statistics reflect this arrangement. It is too soon to judge how the new legislation which requires that agreements must be signed with individual employers or voluntary employers’ associations will affect collective bargaining coverage.

In Belgium, coverage is high because agreements signed at industry level automatically extend to all those employed in that industry. In Italy there is no legislation which makes industry level agreements generally binding but courts have normally interpreted them in this way.

In the Netherlands, agreements do not apply to whole industries automatically, but government action in extending collective agreements adds around 15% to bargaining coverage. In France too, the extension of agreements by the government to non-signatory employers, combined with the legal obligation on employers to negotiate annually at company and (in some circumstances) at industry level provide a high level of coverage.

However, the case of France indicates why the figures need to be treated with care. Although collective bargaining coverage is high, a number of the agreements have rates which are below the level of the French national minimum wage and therefore invalid. Individualised pay increases, which are not negotiated, also play an important role in setting the pay of many French workers.

In Portugal, the situation is changing as a result of the financial crisis. In the past, the government frequently extended agreements to employers who were not signatories. However, this has now been halted and the government is planning other changes, which are likely to reduce the proportion of employees covered by collective bargaining.

Further down the table, Germany, Greece, Luxembourg, Norway and Spain all have collective bargaining coverage of between 60% and 75%, and in all cases there is extensive industry bargaining, although in Greece and Spain this may change in the future (see below).

In the countries in the bottom half of table, it is bargaining at company level that almost always predominates. The exceptions are Ireland, where until recently national level bargaining set pay increases for company level bargaining, Cyprus, where there is both industry and company level bargaining and coverage is relatively high, and Slovakia, where industry level bargaining is declining in importance. Almost by definition, company level bargaining depends on union activity at company level and is therefore more closely related to levels of union density.

In Romania, it is currently impossible to estimate collective bargaining coverage, as the system has been fundamentally changed by legislation passed in 2011 and collective bargaining at national level, which previously set minimum pay and conditions for the whole economy, has been abolished. There are also new arrangements for bargaining at industry and company level.

The level of collective bargaining

However, as the example of Romania makes clear, collective bargaining coverage is by no means the whole story. The level at which bargaining takes place and the way different levels interact is also crucial. The details of each country are set out in the individual country sections, but it is worth pointing to some of the variants on offer.

There are some countries where national level agreements set a framework for negotiators at lower levels to follow. This is clearly the case in Belgium, where there are then both industry and company negotiations, and in Norway too there is a clear hierarchy of negotiations, from confederation to individual unions to company level, although the confederations do not always take the lead. However, this pattern seems to be becoming less common. In Ireland the system of national agreements which set pay increases, among other things, for more than 20 years, has effectively broken down under the pressure of the economic crisis. In Finland, on the other hand, the pattern of national agreements making recommendations to lower level negotiators, which had lasted for almost 40 years, appeared to have finally ended in 2007 when the employers refused to negotiate a new national agreement. However, in 2011, in the light of the economic crisis, the employers again agreed to sign a national framework agreement.

In other countries, it is industry level bargaining that provides the framework. In Sweden and Denmark for example, industry level bargaining provides a basis on which bargainers at lower levels can build. And these lower level bargainers have substantial room for manoeuvre. In Denmark, only 17% of all private sector employees have their pay entirely set by the industry level collective agreement, and in Sweden it is only 6%. The position in Italy is in principle similar, with industry level bargaining providing increases which keep place with inflation, while productivity gains are to be compensated for at company level. However, new bargaining arrangements potentially give greater weight to company level bargaining.

There are then some countries where industry and company level bargaining both co-exist and are not directly linked. Cyprus, the Netherlands and Spain are examples, where most employees are covered by industry level bargaining – normally at provincial level in Spain – but some employees, particularly in larger companies, are covered by company level agreements. (As already noted, this may change in Spain, with new legislation giving company agreements precedence over agreements signed at all other levels.) In Luxembourg, company bargaining is key in some sectors, industry bargaining in others.

Finally there are the countries, like the UK and most of the countries of Central and Eastern Europe, where industry bargaining has largely disappeared, at least in the private sector, and it is company level negotiations which predominate.

Collective bargaining arrangements are not static, and the arrival of new EU member states in 2004 and 2007 shifted the numerical balance away from the previously dominant industry level.

Industry level bargaining still remains more widespread in the old EU states but even here, this pattern is under pressure. There are growing moves to decentralise, either with employers moving away from collective bargaining completely, as is the case for some employers in Germany, or, as already noted, with important parts of the pay package being left to negotiations at local level, as in Denmark and Sweden. In addition, the economic crisis is leading to more rapid structural change. In both Greece and in Spain new legislation means that employers can now legally negotiate terms and conditions at company level that are worse than those in higher level agreements, which cover them (national and industry level in Greece, industry level in Spain). This was not the case in the past.

One clear change over a longer timescale is that a national minimum wage has now become more typical, largely because all but one of the new member states, Cyprus, have this form of protection for the lowest paid. The seven member states without a minimum wage are: Austria, Cyprus, Denmark, Finland, Germany, Italy and Sweden. There is also no minimum wage in Norway.