Pilot agreement on partial retirement in south-west German metalworking

On 28 September 1997, the social partners in the Nordwürttemberg-Nordbaden metalworking industry reached an agreement on the contentious topic of partial retirement. This agreement is expected to become the pilot agreement for the whole of German metalworking and for other industries.

The 1996 Partial Retirement Law

In order to reduce unemployment and create jobs for younger job-seekers, several legal regulations have been introduced in Germany to enable employees to take retirement early, and to promote the gradual transition of older employees to retirement. In 1996, the Federal Government introduced a new Partial Retirement Law (Altersteilzeitgesetz) which came to effect on 1 August of that year. Under this legislation, the Federal Employment Service financially supports the gradual transition of employees aged 55 and over to retirement, if:

  • the employee voluntarily reduces his or her working time to 50% of normal hours; and
  • the resulting vacancy is filled by the recruitment of an unemployed person or a trainee.

The distribution of working time over the years until retirement is up to the parties to the employment contract. If the employer increases the remuneration of employees in the scheme to 70% of former full-time remuneration and pays contributions to the pension schemes on the basis of 90% of former full-time remuneration, the additional expenses are borne by the Federal Employment Service. According to §3 I of the Partial Retirement Law, the implementation of the new provisions require either a collective agreement, a works agreement or an individual contract between employer and employee (DE9708224F).

The negotiations

As a consequence of the requirements of the new law, the metalworkers' union, IG Metall, and the metalworking sector employers' association, Gesamtmetall, started negotiations on a collective agreement on partial retirement in October 1996. IG Metall demanded a single sectoral binding agreement which would include provisions guaranteeing workers aged 55 years and older the right to switch to part-time work without major reductions in pay or pension contributions. Remuneration of employees in the scheme should attain 85% of former full-time remuneration, and pensions calculated on the basis of 100% of former full-time remuneration should be ensured. Expenses exceeding the legal provisions should be borne by the employers. The union's demands were rejected by Gesamtmetall. Instead, the employers demanded a provision that would give companies the option to introduce partial retirement schemes on their own terms voluntarily, depending on their financial situation. Furthermore, Gesamtmetall demanded "opening clauses" allowing for company-level deviations from the industry-level agreement.

In April 1997, talks between IG Metall and Gesamtmetall failed. Subsequent regional negotiations in the bargaining district of Nordwürttemberg-Nordbaden between the regional section of IG Metall and the regional metalworking employers' association Verband der Metallindustrie Baden-Württemberg (VMI) failed in July. In August, IG Metall declared its determination to push through the introduction of partial retirement schemes in western Germany and threatened to mobilise its rank and file and to call a strike ballot. The talks between IG Metall and the employers ended on 12 September with the latter insisting they could agree to a partial retirement agreement only if the terms were not imposed on employers.

On 15 September, IG Metall Baden-Württemberg announced to its wage commission that negotiations in Nordwürttemberg-Nordbaden with the employers had failed, and broke off talks. However, it did not call for a strike ballot immediately, but threatened to do so if the employers would not move from their position. In the week following 16 September, several thousand workers went on strike and joined demonstrations. The joint dispute resolution process for Nordwürttemberg-Nordbaden started on 25 September, with the former state economics minister, Dieter Spöri (of the Social Democrats), acting as impartial chair of the joint dispute resolution board. During the whole bargaining and resolution procedure, VMI closely coordinated its actions with Gesamtmetall.

The agreement

On 28 September 1997, the joint dispute resolution board arrived at a compromise proposal:

  • introduction of partial retirement by voluntary works agreement. All employees in the scheme will receive 82% of previous net full-time wages until the age of 65. Pension contributions will be paid at a rate of 95% of previous gross full-time wages. Annual pay bonuses will be reduced to 50% in the period when the employee is working and to zero in the retirement period;
  • voluntary "opening clauses" may be concluded if the introduction of the scheme would cause job losses, or if the resulting alternative regulation of partial retirement includes equivalent material provisions; and
  • in the event that management and works council cannot conclude a works agreement, employees aged 61 and older have an automatic right to switch to part-time work. An employee choosing this option has to sacrifice 2.5 gross full-time monthly salary payments. Otherwise he or she is eligible for legal entitlements only.

The deal will be integrated into the industry's framework agreement on employment conditions and take effect from 1 November 1997. The planned agreement affects 550,000 workers but is expected to serve as pilot agreement for the other metalworking regions as well as other German sectors. Unions and employers also agreed on starting talks on collective bargaining reform this year, as well as on extending the current framework agreement on employment conditions which also includes provisions on the 35-hour working week until the end of 2000.

Walter Riester, IG Metall deputy chair, said that by this deal the union had done more to support job creation than the Government over its entire period of office. Werner Stumpfe, president of Gesamtmetall, recommended that other bargaining districts should adopt the agreement. The agreement was also welcomed by the central employers' association, BDA, and the DGB trade union confederation. The Federal Minister of Labour, Norbert Blüm (of the Christian Democrats), welcomed the agreement as showing that the bargaining partners were "still able to resolve even very contentious questions with good judgment".

One week after the compromise was struck, Südwestmetall, the regional metalworking employers' association for the two south-west German bargaining districts of Südwürttemberg/Hohenzollern and Südbaden, which employ 250,000 workers, announced that it would take on the deal. On 7 October 1997, the social partners in the Northrhine-Westphalia bargaining district followed suit. On 8 October 1997, a company works agreement on partial retirement was signed at Siemens AG, largely following the provisions of the compromise proposal.

Commentary

The proposal from the joint resolution committee represents a compromise between the original positions adopted by the bargaining parties. It ended nearly one year of sluggish and tough negotiations and avoided the catastrophe of strikes which, on the union side, would have been rather difficult to organise since only a minority of metalworking employees are affected and, on the employers' side, could have driven small and medium-sized companies (Mittelstand) to quit the employers' association.

However, the impact of the agreement exceeds sectoral boundaries. It addresses the important question on who decides on the conditions of employment in German industrial relations. By this agreement, the sectoral organisations transfer further regulatory power to the company level, where management and works councils decide on the terms and conditions of the employment relationship. Thus the agreement represents a further step in the decentralisation of German collective bargaining. (Stefan Zagelmeyer, IW)

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