Collective Bargaining

Collective bargaining is still primarily conducted at industry level between individual trade unions and employers' organisations. However, the system is under pressure as employers leave or never join employers' organisations, and the agreements themselves provide for greater flexibility at company level.

The framework

Collective bargaining at industry level between individual trade unions and employers' organisations is still the central arena for setting pay and conditions in Germany. Separate agreements between trade unions and specific companies are less common, although there are some exceptions (such as the agreement covering the motor company Volkswagen), and they are generally found more frequently in the former East Germany (see below).

Bargaining at national level between the DGB and the employers does not normally take place, although in 2003 the DGB negotiated an agreement on agency staff on behalf of the individual unions, which has since been renewed on a number of occasions, and which has been supplemented by separate industry-level agreements signed by the individual unions.

This system, with collective bargaining primarily taking place at industry level rather than at the workplace, has traditionally been seen as one of the strengths of the German system. It has the potential to keep conflicts on pay and conditions at industry level, between the unions and the employers’ associations, while at workplace level, individual employers and workplace employee representatives – the works councils (see section on workplace representation) – can develop more cooperative relations.

 

 

Figures from the government-backed research body the IAB for 2013 show that 60% of employees in the former West Germany are covered by collective agreements – 52% signed at industry level and 8% at company level. In the former East Germany the overall figure is lower – 47% covered by any agreement – with only 35% covered by industry agreements, compared to 12% by agreements signed at company level.1 This is not the full extent of the influence of collective agreements, however, as half of the employees not directly covered by them work in companies which say that they take account of the agreements in setting terms and conditions for their staff (53% in former West and 48% in former East Germany). With 28.7 million employed in the former West Germany, excluding Berlin, and 6.8 million in the former East Germany, including Berlin,2 this indicates that 57% of all German employees are directly covered by collective agreements.

 

The IAB figures also provide details on the proportion of workplaces, as well as the proportion of employees, covered by collective agreements. The overall percentages for workplaces are 32% in former West and 20% in former East Germany. These are lower than the figures for employees, because larger workplaces are more likely to be covered by collective bargaining than smaller ones. Only 26% of workplaces with up to nine employees in West Germany are covered by a collective agreement (15% in East Germany). In contrast, 88% of workplaces with 500 or more employees in West Germany are covered by a collective agreement (82% in East Germany).

 

 

A separate study by the official statistics office (Statistisches Bundesamt) used the results of the 2010 structure of earnings survey to calculate the degree to which workplaces and employees are bound by collective agreements. It produced findings which were very close to the IAB figures. It found that, in 2010, 50% of employees and 25% of workplaces were bound by collective agreements signed at industry level, with a further 5% of employees and 3% of workplaces bound by a company-level agreement with a union. As in the IAB figures, industry level collective agreements are more important in the former West than in the former East, although, in the figures from the official statistics office, this difference is not so marked – 51% of employees and 27% of workplaces in the West, compared with 41% of employees and 19% of workplaces in the East. The greater significance of company level agreements in the East is also found in these figures – 5% of employees and 3% of workplaces in the West, and 6% of employees and 4% of workplaces in the East.3

Industry agreements are normally negotiated at regional rather than national level. As a result there are slight variations between regions. However, the main elements of the agreements, in particular the size of the pay increase, will normally be the same across all regions. The main exception is the former East Germany where pay and/or conditions are often still inferior to those in the former West Germany, although the gap is closing very slowly, and will close further with the introduction of a national minimum wage for the whole of Germany (see below). A comparison of basic pay in 50 important bargaining groups in 2013 found that the average level of collectively agreed pay in the East was 97.0% of that in the West.4

 

 

Works councils are not legally able to negotiate collective agreements. They can, however, reach agreements with individual employers on issues not covered by collective agreements, and there are a whole range of issues such as employment security, the organisation of working time, rules on internet use or working from home, where works councils have reached agreements with local employers (see section on workplace representation).

Works councils are also able to negotiate over areas covered by collective agreements in two specific circumstances. These are where they negotiate improvements – better pay, longer holidays and so on – under the so-called “favourability principle”, and where the collective agreement itself contains a so-called “opening clause”, which allows the works council to negotiate on the issue.

Opening clauses that allow the works council to negotiate arrangements which are less favourable than those set out in the industry-level agreement, to take account of the particular circumstances of their employer, are seen as important way of providing flexibility to the system. One well known example is the Pforzheimer accord signed by IG Metall in 2004, which has subsequently been integrated into a more general collective agreement on job security. This permits the works council to agree reductions in hours and pay on a temporary basis in order to avoid redundancies.

 

 

Pay agreements also sometimes include opening clauses to allow works councils to take account of the particular circumstances of their company. The 2010 metal industry settlement, for example, allowed the 2011 pay increase to be either brought forward or postponed by two months, depending on the financial position of the individual employer. And in 2015 the settlement for the chemical industry also allowed companies facing severe economic difficulties (which had to be demonstrated to the union) to delay the pay increase for up to two months

 

 

Figures from the IAB show that in 2011 23% of workplaces covered by collective agreements said that there were opening clauses in the agreements that applied to them. They were most common in manufacturing industry, where 35% of workplaces reported that their agreements included them. Where they were present, they were often used. Overall, 59% of workplaces whose agreements included opening clauses on pay, said that they had used them, and 73% of workplaces with opening clauses on working time said that they had used the flexibility they provided.5

 

 

There are legal mechanisms for extending the results of collective agreements beyond the parties to all employers in an industry, although the rules for doing this have changed significantly in recent years. For more than 60 years it has been possible to make agreements generally binding. This is subject to a number of conditions, including that the agreement to be extended should cover at least 50% of employees in the industry and that both employers and the union should call for the agreement to be extended beyond those directly covered. With levels of coverage dropping (see below), this mechanism has become less widely used. As at July 2014 only 501 (0.7%) of the approximately 70,000 registered collective agreements, which cover a wide range of issues other than pay, had been declared generally binding in this way.

 

 

However, since the late 1990s legislation has been introduced which provides a different route to setting generally binding minimum rates for specific industries. One reason for this was to deal with the low wages often paid by non-German firms employing their own nationals in Germany. The legislation gives the labour minister the power to extend collective agreements which do not cover 50% of an industry’s workforce, and to set minimum rates in industries where there are no collective agreements if a specially appointed commission decides this is appropriate. The German labour ministry reported in February 2014 that minimum rates had been set in this way for nine industries, including construction, postal deliveries, cleaning, refuse collection, social care and meat processing.6 The government also sets minimum rates for agency workers using other legislation. (This is in addition to the new national minimum wage, which has been introduced from January 2015 – see below.)

 

 

The German collective bargaining system has come under pressure as the coverage of industry-level agreements has fallen. The IAB figures show that the proportion of all employees in West Germany covered by industry-level agreements fell from 70% in 1996 to 52% in 2013. Looking at just the private sector, the percentage fell from two-thirds (66%) to under a half (47%). In East Germany over the same period, the situation is considerably worse, down from 56% to 35% for all employees, and from 48% to 28% for those in the private sector.7

 

 

This downward trend is in part a result of employers leaving employers’ federations, or alternatively staying in them without being bound by the agreements they sign (so-called OT membership), as well as by the fact that new companies emerge and existing ones disappear. (New companies are less likely to be bound by industry-level agreements than existing ones.) However, although many employers argue that being outside industry-level agreements gives them greater flexibility, the IAB research does not give a clear indication of the precise factors involved.8

 

Who negotiates and when?

Negotiations normally take place between the unions and the employers' federations. The agreements are legally binding in respect of trade union members (in practice normally for all employees) and the members of the employers' organisations who sign them.

 

There are no specific rules on union representativeness in Germany, unlike other countries, but in order to be a party to an agreement the union must have the capacity to negotiate (be “tariffähig”). As well as meeting more formal conditions such as having a constitution which allows them to negotiate, unions must also show that they can be effective and put the other side under pressure, as indicated by membership and organisational strength. In the past the courts have found that some of the unions in the Christian CGB do not have this capacity and that agreements they have signed were invalid. The best known example of this was the Christian union for agency workers, CGZP, which was found not to have the capacity to negotiate in December 2010.

 

Until recently one of the basic principles of bargaining was that an employer could only be covered by one agreement. Only in a few exceptional cases, were specific occupational groups, such as doctors, pilots or locomotive drivers, with substantial bargaining power, able to negotiate separate agreements just for them. However, in a judgment in June 2010 the labour court ruled that while an individual could only be covered by one agreement, several agreements could coexist within the same company. Potentially this could lead to a greater fragmentation of bargaining. The coalition government formed in 2013 has indicated that it is considering legislation which will re-establish the position of allowing only a single agreement to cover a single employer. This had been broadly supported by the DGB, and the main employers’ association the BDA, which together argued that where there were several agreements, the one signed by the union with the largest number of members should be applied. However, the plan has been opposed by unions representing particular occupational groups such as the Marburger Bund (hospital doctors) or Cockpit (pilots). At its congress in May 2014, the DGB modified its position, stating that any changes should not limit existing rights to strike or to bargain.

 

Agreements are signed throughout the year and those covering pay normally last for around one or sometimes two years or more. Agreements covering other issues have a longer life – perhaps five years or longer, while some go on until one side wishes to change them and gives the required period of notice.

The subject of the negotiations

German collective agreements regulate a wide range of issues. Apart from pay, agreements also deal with issues such as shiftwork payments or pay structures, working time, the treatment of part-timers and training.

 

Typically in any industry there will be an agreement dealing with pay and a framework agreement which deals with issues such as working time, appointment and dismissal, premium payments for night and shift work, holidays and sick pay. There may also be separate agreements on topics such as the treatment of older workers. All of these are likely to be present in several regional variants, although, as already stated, other than between East and West, the differences between them are likely to be small.

 

Following sustained pressure from the unions, the coalition government formed in 2013 passed legislation introducing a new minimum wage starting on 1 January 2015. Industry-level collective agreements paying less than the minimum wage continue to be valid until 1 January 2017, at which point the minimum wage, or a higher rate agreed by the parties, will apply.

 

A minimum wage commission, made up of representatives of the unions and employers, with external experts in an advisory capacity, will decide on future increases in the rate.

L. Fulton (2015) Worker representation in Europe. Labour Research Department and ETUI. Produced with the assistance of the SEEurope Network, online publication available at http://www.worker-participation.eu/National-Industrial-Relations.

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