New collective agreement in metalworking industry

In May 2007, the collective bargaining parties in the metalworking industry in Baden-Württemberg signed a new collective agreement. The settlement, which was subsequently adopted as a ‘pilot agreement’ in the industry’s other bargaining regions, provides for a pay increase of 4.1% with effect from 1 June 2007 and a lump-sum payment of €400. A further wage increase of 1.7% will take effect from 1 June 2008, combined with another lump-sum payment worth 3.69% of the monthly income.

On 7 May 2007, the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) and the employer association for the metal and electrical industry in Baden-Württemberg (Verband der Metall- und Elektro-Industrie Baden-Württemberg, Südwestmetall) reached a new collective agreement covering pay increases for the years 2007–2008.

The agreement followed a series of warning strikes which involved some 470,000 workers in 1,900 establishments across the whole metalworking industry in western Germany. The largest strike activities occurred in North Rhine-Westphalia, where some 100,000 workers from 712 companies took part in the strike action, and in Baden-Württemberg, where almost 160,000 workers from 434 businesses were involved.

The settlement was adopted as a ‘pilot agreement’ and applied in other bargaining regions, with some adjustments.

Pay increases

The new collective agreement on pay has a duration of 19 months, covering the period from 1 April 2007 to 31 October 2008, and provides for:

  • a general pay increase amounting to 4.1% from 1 June 2007; this includes remuneration for apprentices;
  • a lump-sum payment of €400 to compensate for the two so-called ‘zero-months’ with no pay increase from April to May 2007; apprentices will receive a one-off payment of €125;
  • a general pay increase amounting to 1.7% from 1 June 2008;
  • a lump-sum payment worth 3.98% of the monthly income covering the months from June 2008 to October 2008.

Depending on the economic situation of the companies, works councils and employers may agree at company level by way of a voluntary works agreement that the general increase of June 2008 and/or the second lump-sum payment of 2008 may be delayed by up to four months, that is, until 1 October 2008 at the latest. In such an instance, the lump-sum payment will be reduced in proportion to the number of months of delay.

Other issues

In light of the gradual increase in the statutory retirement age from 65 years to 67 years (DE0702019I), the bargaining parties in Baden-Württemberg agreed to mandate their national organisations to develop models which will allow for flexible retirement schemes in the future. Negotiations at national level about collective agreements based on these proposals should start in 2008.

Reactions of the social partners

In a statement to the press (in German), the Chair of IG Metall in Baden-Württemberg, Jörg Hofmann, called the agreement a very good compromise. The union had entered the negotiations seeking a 6.5% pay rise. In particular, IG Metall was opposed to the employer demand of a performance-related flexibilisation of the annual bonus.

On the employer side, the Chair of Südwestmetall, Jan Stefan Roell, defended the agreement in an interview on 10 May 2007 (in German) against criticism from the German Engineering Federation (Verband Deutscher Maschinen- und Anlagenbau, VDMA). Mr Roell argues that given the current good economic situation of the sector, it is clear that companies are able to afford the agreed pay increase. Furthermore, he emphasised that employers would be in a better position to calculate the cost of the pay rise since it had also already been agreed for 2008. Mr Roell sees no indication that the agreement would motivate companies to leave the employer association.

Commentary

The pay increase achieved by IG Metall is the highest for more than a decade in the German metalworking industry. After 19 months, wages will have increased in total by 5.8%. This new agreement exceeds significantly the agreed 3% pay rise in 2006 and thus reflects the improved economic situation of the industry. Just before the bargaining round started, many companies – particularly engineering businesses – had announced an excellent income of orders. Against this background, employers obviously did not want to risk serious industrial action. For employers, it was important that the agreement allows for some deviations at company level depending on the company’s economic situation. The extent to which companies will make use of this provision remains to be seen.

Heiner Dribbusch, Institute of Economic and Social Research (WSI)

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