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 11 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, Romania 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 Romania too, agreements signed at national level legally cover all employees, although here changes are being proposed. In Italy there is no legislation which makes industry level agreements generally binding but courts have normally interpreted them in this way.

In Portugal, coverage is not automatic, but the government frequently extends agreements to employers who were not signatories. (Earlier fears that coverage could fall as agreements would be allowed to lapse, leaving employees outside collective agreements, now seem less justified as the original plans have been revised.) The situation is similar in the Netherlands, where 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.

Further down the table, Cyprus, 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.

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, 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.

The level of collective bargaining

However, 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 Finland, the pattern of national agreements making recommendations to lower level negotiators, which had lasted for almost 40 years, ended in 2007 when the employers refused to negotiate a new national agreement. Similarly in Ireland the system of national agreements which have set pay increases, among other things, for more than 20 years, has effectively broken down under the pressure of the economic crisis.

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, which have not been agreed by the largest Italian confederation CGIL, 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. 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 is more widespread in the old EU states. However, 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 in Greece has produced a new variant with employers now legally able to negotiate terms and conditions at company level that are worse than those in national and industry-level agreements. This was not the case in the past.

One clear change in recent years 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.