Controversy over financial participation schemes

The Austrian Federal Economic Chamber, in line with the conservative People’s Party, wants to introduce financial participation schemes at company level aimed at partially replacing collectively agreed pay increases. However, the trade unions are strongly opposed to this initiative; therefore, this year’s collective bargaining round is not expected to result in large-scale wage flexibility schemes.

Plans to double financial participation levels

In the run-up to this year’s autumn collective bargaining round, a controversy arose over the possible re-design of Austria’s traditional wage bargaining formula in the future. The debate was further fuelled in August 2007 when the Federal Minister for Financial Affairs and Vice-Chancellor, Wilhelm Molterer of the conservative Austrian People’s Party (Österreichische Volkspartei, ÖVP), suggested doubling the current number of employees covered by any form of financial participation by 2010. At present, around 6% of Austria’s employees hold some kind of shares in their employer company, and 5% receive productivity-based bonuses or profit-related pay. According to the ÖVP’s expectations, the proportion of employees covered by financial participation schemes should be raised to 20% by the end of the current legislative period in 2010.

Therefore, Mr Molterer has called on the social partners to agree, within six months, on innovative wage flexibility schemes which are devised to partially replace productivity as a key pay-setting criterion. The aim is to render Austria’s system of wage setting more flexible by encouraging individual companies to offer attractive participation schemes to their employees. Flexible wage components, however, tend to undermine the Austrian tradition of sectoral wage setting, according to which wages are generally calculated on the basis of the national inflation rate and productivity (AT0606019I).

Employers in favour of ÖVP proposal

The ÖVP initiative largely meets the interests of the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKÖ). For some years, this employer organisation has sought to make an increasing part of employees’ pay contingent on profitability at individual company level. The President of WKÖ, Christoph Leitl, proposed leaving it up to the parties to the works agreement at company level to decide which kind of financial participation should be introduced. Mr Leitl suggests concluding framework collective agreements providing for only basic pay increases, such as compensating for the rate of inflation. These agreements should also contain provisions defining terms and conditions of financial participation of employees at company level.

Trade unions prefer traditional wage bargaining

In contrast, the trade unions’ response to the ÖVP initiative was negative. Although the unions appreciate performance-related bonuses paid by individual companies in addition to collectively agreed pay increases, they strongly disapprove of any substantial amendment of Austria’s traditional wage bargaining formula. The trade unions argue that financial participation schemes are by no means an appropriate substitute for collectively agreed wage increases, since the latter have a lasting effect for future pay, while the former involve a single one-off bonus without any impact on subsequent bargaining rounds.

Moreover, such schemes can be risky for the employees concerned, as their effectiveness is contingent on the showing of profits. Since many employers tend to veil or underestimate their profits, financial participation schemes – in particular profit-related pay – would cover only a minority of Austria’s employees. Furthermore, the public sector and non-profit organisations, which do not yield profits at all, are excluded from the purview of these schemes as a whole. The Chamber of Labour (Arbeiterkammer, AK) claims that the extension of financial participation schemes at individual company level is likely to undermine Austria’s system of coordinated wage policy and thus lead to wider intrasectoral pay differences.

Current bargaining round

At the end of September 2007, the metalworking sector, which traditionally sets the pace for other bargaining units (AT0210202F), opened this year’s autumn bargaining round. In contrast to the official rhetoric of the employer organisations, most experts do not expect the bargaining process to result in individual companies being permitted to introduce financial participation arrangements which fully or even partially replace collectively agreed pay increases.

Georg Adam, Department of Industrial Sociology, University of Vienna

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