New collective agreements signed in metalworking

In February 2004, the collective bargaining parties in the metalworking industry in the German region of Baden-Württemberg signed new collective agreements. The settlement, which was subsequently adopted as a 'pilot agreement' in the industry's other bargaining regions, provides for a pay increase of 2.2% in 2004 and a further increase of 2.7% in 2005. As part of the compromise, it was agreed that under certain conditions up to 50% of employees in a firm could work up to 40 hours a week - a deviation from the standard 35-hour week.

On 12 February 2004, the German Metalworkers' Union (Industriegewerkschaft Metall, IG Metall) and the employers' association for the metal and electrical industry in Baden-Württemberg (Verband der Metall- und Elektorindustrie Baden-Württemberg, Südwestmetall) reached new collective agreements covering pay and working time provisions.

Whereas IG Metall had originally demanded a 4% rise in pay, employers had declared that they would settle on pay only if the union agreed to wide-ranging 'opening clauses' (which allow companies to diverge from collectively agreed standards under certain conditions) concerning working time arrangements. One particular demand made by the employers was that the parties at company level (ie the works council and employer) should be given the authority to deviate from the agreed standard working time and to increase weekly working hours, even without wage compensation. In addition, it should not be necessary to acquire the final consent of the trade union in order to allow such deviations. The employers' demands triggered a number of warning strikes involving some 500,000 employees across the metalworking industry, but the dispute was finally settled. The Baden-Württemberg settlement was adopted as a 'pilot agreement' and applied in in other bargaining regions, with some adjustments in cases such as the eastern German metalworking industry.

The agreements in detail

The pilot settlement in Baden-Württemberg consists of a pay agreement and provisions to amend the working time provisions of the general framework collective agreement.

Pay increases

The new collective agreement on pay has a duration of 26 months from 1 January 2004 to 28 February 2006. It provides for:

  • two so-called 'zero-months' with no pay increase in January and February 2004;
  • a pay increase amounting to 2.2% from March 2004; and
  • a pay increase amounting to 2.7% from March 2005

Of each annual pay increase, 0.7 percentage points will serve to allow for a 'cost-neutral' adjustment to the introduction of the new pay framework agreement (Entgeltrahmentarifvertrag, ERA) which the bargaining parties had concluded in 2002 (DE0205206F). The new pay framework agreement merges blue- and white-collar job categories into a single grading system. In 2002, IG Metall and Südwestmetall had agreed that companies should not incur additional costs because of the introduction of the new pay framework. The total adjustment costs for the introduction of the ERA, which might result from the upgrading of certain groups of employees, had been calculated to be equivalent to an extra 2.79% pay increase. Together with non-consolidated parts of the pay increases awarded in 2002 and 2003, amounting to 1.4%, the unconsolidated amounts of 0.7% now awarded in 2004 and 2005 will compensate for the ERA costs of 2.79%. Until the new pay framework is implemented, these 0.7-point components of the annual pay increase will be awarded as flat-rate payments.

Remuneration for trainees will be increased in accordance with the general increase in pay levels.

The bargaining parties agreed to carry out an ongoing evaluation of the economic situation until January 2005 order to be able to agree jointly on whether the pay increase fixed for 2005 is in need for modification.

Agreements on working time

The bargaining parties have committed themselves to the safeguarding and extension of employment and to the improvement of competitiveness, innovation and terms of investment. They have also agreed in principle to allow deviations from sectorally agreed provisions (including the reduction and extension of working time, with and without wage compensation) in certain cases if this proves necessary to achieve sustainable development of employment. Beyond this joint declaration, the bargaining parties agreed on a number of specific provisions, as follows.

The general framework collective agreement for the metalworking industry in Baden-Württemberg already fixed not only a standard weekly working time of 35 hours, but contains a provision to allow up to 18% of employees in a company to work between 35 and 40 hours a week. Under the new agreement, this so-called '18% quota', which exists in other bargaining regions as well (albeit modified in eastern Germany where there is only a standard 38-hour week), can now be extended under certain conditions:

  • in establishments with more than 50% of employees in the upper scales of the grading system (ie employees doing highly skilled jobs) the parties at company level can agree to a quota of 50% of employees with standard working time of up to 40 hours a week. Hours worked above the standard 35-hour week will be paid, but without any entitlement to an overtime bonus;
  • in all other companies the sectoral bargaining parties can also increase the quota beyond 18% if this enables the promotion of innovation or compensates for a lack of skilled workers;
  • jobs may not be cut as a consequence of the increasing the quota;
  • in order to guarantee compliance with the agreed quota, works councils have the right to refuse any further individual extension of working time if the quota has already been fulfilled; and
  • further provisions deal with cases where a company has agreed to recruit additional staff but a temporary extension of weekly working time is required to bridge staff shortages until the recruitment can take place.

Special provisions in eastern Germany

After much resistance, especially from the metalworking employers' association in Saxony, the main provisions of the Baden-Württemberg compromise were finally transferred to all bargaining regions in eastern Germany.

In the eastern German bargaining regions, it was agreed that companies may only cut or cancel the 0.7% ERA-component with the consent of the bargaining parties. As far as the working time arrangements are concerned, the provisions on the quota were adjusted against the background of the standard 38-hour week in eastern German metalworking .

Reactions to new agreements

In a statement to the press, the chief negotiator for IG Metall in Baden-Württemberg, Jörg Hofmann, called the new agreements a reasonable compromise which will safeguard real wages and help employees to participate in productivity growth. IG Metall stressed that there will be no unpaid extension of working time and that the 35-hour week will remain the point of reference at workplace level. The deal will define a new balance between the sectoral collective agreement and the company level, without the sectoral bargaining parties giving ground. The compromise is seen as proof that the bargaining parties are flexible enough to adjust collective agreements to new challenges and situations. In the view of IG Metall, these results were achieved only due to the pressure imposed by the massive wave of warning strikes all over Germany.

The reactions to the agreement on the employers' side were mixed. In a press statement, the chair of Südwestmetall and chief negotiator on the employers' side, Otmar Zwiebelhofer, called the pay agreement 'a certain burden'. He stressed, however, that employers will now have more possibilities to extend weekly working time without having to pay overtime bonuses. He conceded that there will be no deviations from collectively agreed standards without the final consent of the bargaining parties, but added: 'IG Metall stays in the boat but has committed itself to rowing with us in the same direction.'

However, in the Frankfurter Allgemeine Zeitung newspaper, the president of the Confederation of German Employers' Associations (Bundesvereinigung der deutschen Arbeitgeberverbaende, BDA), Dieter Hundt, complained that IG Metall had blocked further decentralisation of collective bargaining. He therefore called for new legislation (DE0312202F).

The president of the federal employers' association for the German metalworking and electrical industry, Gesamtmetall, Martin Kannegiesser, defended the new agreements and argued that even if future legislation introduced compulsory opening clauses in collective agreements, as demanded by some employers (DE0403104F), it would remain necessary to find a compromise with the trade union or at workplace level with the works council. He called on employers to make effective use of the possibilities for more working time flexibility offered by the settlement.

Commentary

Against the background of its defeat on the 35-hour week issue in eastern Germany in 2003 (DE0307204F), IG Metall regards the outcome of the 2004 bargaining round as a success. The demand of employers to extend working time without wage compensation helped the union to mobilise employees.

The result must also be seen against the background of a 2002 study by IG Metall which revealed that in a number of companies, the current 18% quota of employees working 35-40 hours a week had already been considerably exceeded (DE0211204F). The bargaining outcome reflects the fact that within the employers' associations those who consider it more effective to seek further flexibility in pay and conditions in cooperation with rather than in confrontation with the trade unions, have prevailed - at least for the time being.

A number of large companies have already announced their intention to implement the new provisions in order to extend working time and it remains to be seen how this will extend the average working time in the metalworking industry in practice. (Heiner Dribbusch, Institute for Economic and Social Research, WSI)

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