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The collective wage bargaining system
The collective wage bargaining system
The principle
Wages and general working conditions are set by agreement, not by the federal government. While direct agreements between employees and employer are possible, most work contracts are subject to collective wage bargaining agreements. Those agreements are normally concluded on a regional basis. For example, the regional association of North Rhine-Westphalia, METALL NRW, negotiates a contract with the local branch of the trade union for the metal industry, IG Metall. This contracts covers a wide area of subjects, from wage increase to wage structure, bonuses, etc.
This contract is valid for all companies in the region who are members of the employers' association and for all employees who are members of the union. However, most member companies extend the contact to all their employees, even to non-union members. Since there are 16 regions, 16 different contracts have to be negotiated; and they do differ, although some parts of the contract may be negotiated for all of Germany – either by declaring one region as a "pilot region" or by negotiations between the head office of the union and GESAMTMETALL.
This system has substantial advantages, one of the most important being the obligation to refrain from industrial action over regional agreements. In other words, strikes are illegal as long as the contracts are still valid. Only after they have expired and after the negotiations have failed may strikes be carried out. This system contributes to the maintenance of industrial peace at the workplace level, creates a secure foundation for relationships with suppliers, provides a reliable basis for planning, and ensures that individual plants are not exposed to the possibility of trade union pressure.
Types and contents of collective agreements
Unlike the systems in many other countries, these contracts are not covered by one single global collective agreement, but by a number of different agreements:
However, the agreements are not necessarily divided into those three parts. In some regions the framework agreement contains provisions which are included in the wage structure agreement in other regions. Whereas the conventional period of validity of the wage agreement is 12 months, the term of the other agreements is much longer. The prohibition of strikes during the period of a current agreement applies separately to each of these agreements, depending on the issue of the negotiations.
The principle
Wages and general working conditions are set by agreement, not by the federal government. While direct agreements between employees and employer are possible, most work contracts are subject to collective wage bargaining agreements. Those agreements are normally concluded on a regional basis. For example, the regional association of North Rhine-Westphalia, METALL NRW, negotiates a contract with the local branch of the trade union for the metal industry, IG Metall. This contracts covers a wide area of subjects, from wage increase to wage structure, bonuses, etc.
This contract is valid for all companies in the region who are members of the employers' association and for all employees who are members of the union. However, most member companies extend the contact to all their employees, even to non-union members. Since there are 16 regions, 16 different contracts have to be negotiated; and they do differ, although some parts of the contract may be negotiated for all of Germany – either by declaring one region as a "pilot region" or by negotiations between the head office of the union and GESAMTMETALL.
This system has substantial advantages, one of the most important being the obligation to refrain from industrial action over regional agreements. In other words, strikes are illegal as long as the contracts are still valid. Only after they have expired and after the negotiations have failed may strikes be carried out. This system contributes to the maintenance of industrial peace at the workplace level, creates a secure foundation for relationships with suppliers, provides a reliable basis for planning, and ensures that individual plants are not exposed to the possibility of trade union pressure.
Types and contents of collective agreements
Unlike the systems in many other countries, these contracts are not covered by one single global collective agreement, but by a number of different agreements:
a. | The agreement on wage or salary rates (Lohnabkommen) specifies the wage (or salary) for different pay groups, for piece work, bonus work, or temporary work. It includes a reference wage and the relation of the different wage brackets. |
b. | The agreement on wage structure (Lohnrahmenabkommen) regulates the wage or salary structure by defining brackets, differentials, general remuneration principles, terms of piece, temporary, and bonus work, and by defining the procedure for the determination of time data and other details. |
c. | The framework agreement on general working and employment conditions (Manteltarifvertrag) sets limits such as the duration of the working week and the distribution of the weekly hours over the individual working days; definition of and the supplemental pay for overtime and for working at night, on Sundays and on public holidays; duration of and the payment during annual leave; periods of notice, etc. |
However, the agreements are not necessarily divided into those three parts. In some regions the framework agreement contains provisions which are included in the wage structure agreement in other regions. Whereas the conventional period of validity of the wage agreement is 12 months, the term of the other agreements is much longer. The prohibition of strikes during the period of a current agreement applies separately to each of these agreements, depending on the issue of the negotiations.
