Bargaining in 1996 - from the Employment Alliance to the sick pay dispute

Collective bargaining in Germany in 1996 was overshadowed by the failure of the tripartite initiative for an "Employment Alliance". Nevertheless, collective agreements provided for relatively moderate pay increases between 1.3% and 2%, and a wide range of measures to secure employment. Following a major political dispute on sick pay, most collective agreements eventually secured sick pay at 100%, in exchange for a reduction in annual bonus payments.

The Institute for Economics and Social Science (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) has recently published its annual examination of the previous collective bargaining round. It paints a rather mixed picture of 1996, a year in which collective bargaining was overshadowed by continuing relatively poor economic performance and a further increase in unemployment. GDP grew by only 1.4% over the year, while at the end of the year more than 4 million people were officially registered as unemployed.

Employment Alliance fails - sick pay dispute breaks out

At the beginning of 1996, representatives of trade unions, employers' associations and the Government came together to discuss a tripartite initiative known as the "Employment Alliance" (Bündnis für Arbeit) with the aim of improving the employment situation. The initiative was based on a proposal made by the president of the IG Metall metalworking union, Klaus Zwickel, who offered moderate wage increases in return for employment maintenance and creation guarantees. In a first joint statement made in January 1996, all parties supported the basic idea of an employment alliance and agreed on the central aim of halving unemployment by 2000. However, the overall initiative failed in March 1996, after the Government announced its "programme for further growth and employment" which contained several cuts in social benefits and a deregulation of dismissals legislation.

Politically, the most controversial point of the government programme was the change in the law on sick pay. This requires employers to pay employees during the first six weeks of sickness at 80% of previous pay, instead of the former 100%. However, the legal situation was left rather unclear, because several collective agreements still provided for 100% sick pay. Referring to the new legislation, in autumn 1996 a majority of employers tried to introduce 80% sick pay, leading to protests by employees, notably in the metalworking industry. In the food industry the sectoral trade union NGG (Gewerkschaft Nahrung Genuss Gaststätten) went on strike in support of 100% sick pay. In the subsequent collective bargaining, employers in nearly all sectors finally agreed to retain 100% sick pay, while in exchange trade unions accepted the exclusion of overtime payments and bonuses from the calculation of sick pay, and made concessions in terms of moderate wage increases and cuts in annual Christmas or holiday bonuses.

Bargaining on pay and working time

In most sectors, collectively agreed pay increases ranged between 1.3% and 2%. However, it should be borne in mind that in some sectors (such as steel and public service) periods of applicability longer than one year have been agreed upon (see table below). In addition to pay increases, the majority of collective agreements provided for working time measures to preserve employment. These included: compensation for overtime working in the form of time off (as in chemicals, steel, metalworking and banking); flexible working time arrangements, such as annualised working hours (as in textiles and clothing); and partial retirement (as in chemicals, rubber and banking). In metalworking, the agreement seeks to secure jobs by allowing companies, in agreement with works councils, to reduce weekly working time to 29 hours for a limited period without pay compensation. The companies concerned must agree not to make any redundancies during the period of the working time reduction. Similar agreements have been signed in paper processing, printing, banking and insurance. In many sectors additional vocational training places have been created and the subsequent engagement of the trainees secured.

In the new federal states the gradual process of pay-level adjustment has continued in a variety of ways, depending on the particular sector. In the majority of the larger bargaining units, the pay level in eastern Germany is between 85% and 95% of the corresponding western basic pay rates. Nevertheless, there is still often an extensive gap in terms of working hours and additional pay-related benefits, such as holiday pay and Christmas bonuses.

The table below sets out the main provisions of a selection of 1996 agreements in western Germany

Date of agreement Collective agreement (region) Main outcomes
27 February Coal mining (Ruhr) Five extra free shifts, wages and salaries unchanged in 1996; in return - ban on dismissals for operational reasons.
18 March Textiles and clothing (west) Pay increase of 1.5% for 12 months from 1 June or 1 May (clothing), which can be suspended for operational reasons for up to one year in return for the commitment to retain employees. Flexible annual working time arrangements; introduction of working time accounts.
29 March Chemicals (Rhineland Palatinate pilot agreement) 2% pay rise from 1 March for 12 months. Employment guarantee: overtime compensated by time off. Federal agreement on part-time work for older workers; 5% more trainee/apprentice jobs in 1996.
10 April Construction 1.85% pay rise from 1 April for 12 months (eastern Germany from 1 September). Introduction of minimum hourly wage of DEM 17 in western Germany and DEM 15.64 in eastern Germany from 1 January 1997 (agreed 23 August).
19 April Printing 1.85% pay rise from 1 April for 12 months. Possibility of works agreements on working time cuts of up to 5 hours, to a 30-hour week, in return for ban on dismissals for operational reasons.
5 June Insurance (west) 1.9% pay rise for 12 months and DEM 10 per month increase in travel assistance. Scheme to secure jobs by restricted working time cuts.
12 June Paper manufacturing (west) After four-month freeze, 1.85% pay rise from June to end March 1997 Possibility of safeguarding jobs by restricted working time cuts of up to six hours to a 30-hour week.
13 June Public service After conciliation, settlement of DEM 300 flat-rate payment for May to December 1996, plus 1.3% increase from January 199 until end 1997. Adjustment in eastern Germany from 54% to 85% of the western pay level from 1 September 1997. No adjustment of trainee pay in return for an additional 1,200 trainee jobs.
19 June Banking (west) Flat-rate payment of DEM 100 for both May and June. 1.9% pay rise from 1 July 1996 for 12 months. 7% more trainee jobs in 1997. Up to eight hours' cuts in weekly hours by voluntary works agreement. Basic compensation of overtime with time off.
19 June Steel ( North Rhine Westfalia, Lower Saxony, Bremen) Flat-rate payment of DEM 100 for each month from June to September. 1.8% pay rise from 1 October until end September 1997.
20 September Retail trade (North Rhine Westfalia- other regions comparable) 1.85% pay rise from 1 April 1996 for 12 months. 20% time bonus for late opening hours; bonus payment increased from 60% to 62.5%. Employer commitment not to terminate full pay benefits during sickness prior to October 1997.
5 December Metalworking (Lower Saxony- other regions comparable) Flat-rate payment of DEM 200 for each month from January to March 1997. 1.5% pay rise from April 1997, 2.5% rise from April 1998. 100% sick pay until the end of 2001. Reductions in the Christmas bonus from 65% to 55% of monthly pay.
18 December Chemical (west) 1.5% pay rise from March 1997 to February 1998. One-off payment of DEM 60. 100% sick pay maintained. Reduction of holiday bonus for the first five days of sickness to a maximum of DEM 350.

Source: WSI Collective Agreements Archive 1996

Sector-specific issues

Payments for longer shop opening hours

After months of dispute and numerous strikes all over the country, the sectoral trade union for the retail trade, HBV (Gewerkschaft Handel, Banken und Versicherungen),succeeded in obtaining collective regulations on the introduction of late working hours in the wake of the new legislation on later shop-opening hours (Ladenschlußgesetz). Under this legislation, since November 1996 shops have been allowed to open until 20.00 from Monday to Friday and 16.00 on Saturday (instead of until 18.30 from Monday to Friday and 14.00 on Saturday, as previously). Basic payment for employees now includes a 20% time bonus for hours worked after 18.30 on weekdays and after 14.00 on Saturdays.

Minimum wage in the construction industry

On 9 February 1996, Parliament adopted the Posted Workers Act, providing that foreign workers in the construction industry should be covered by the same pay rates and employment conditions as German workers. The new law was prompted by the increasing activity in Germany of foreign construction companies (particularly from Portugal and the UK), which recruited workers from outside Germany on the basis of their home-country pay and conditions. Because of the large gap between the wages of German and non-German workers, the companies concerned were widely accused of "social dumping", and of undermining the collective agreement for the German construction industry. The adoption of the Posted Workers Act in itself had no practical effect because Germany had neither a statutory minimum wage nor, at that time, an extended collective wage agreement in the construction industry. In general, collective agreements in Germany cover only those companies which are members of an employers' association which signed the agreement. There is, however, the possibility for the Collective Pay Agreement Committee at the Ministry of Labour to adopt an order imposing the extension (Allgemeinverbindlichkeitserklärung) of the collective agreement. This means that even companies which are not members of a signatory employers' association are covered by the agreement. Following several rounds of difficult and controversial negotiations, on 23 August 1996, construction employers and trade unions agreed to a basic minimum wage of DEM 17 per hour in western Germany and DEM 15.64 per hour in eastern Germany. On 12 November 1996 a majority of the Collective Pay Agreement Committee at the Ministry of Labour unanimously agreed to an extension of the construction industry collective agreement on minimum wages, applying from 1 January to 31 August 1997. With this, the provisions laid down by the Posted Workers Act became effective in practice.

Debate on centralised bargaining

The 1996 collective bargaining round was overshadowed by an intensifying debate on the future of the centralised collective bargaining system (Flächentarifvertrag). In Germany, most collective agreements are signed at sector level, covering all employees in that sector. In the light of the challenges of increasing international competition, a growing number of employers are questioning the system and demanding more "decentralised", company-related collective bargaining. At present, the overwhelming majority of employers and employees are still covered by central collective agreements and wish to continue with this system. However, both employers' associations and trade unions are agreed in principle on modernising the German collective bargaining system by giving more freedom to regulate working conditions at company level. On 5 December 1996, the social partners in the Lower Saxony metalworking industry signed a declaration on centralised collective bargaining, stating that they will continue with this systems in future. However, booth parties agreed to modernise and reform bargaining - for example, in the area of pay structures, they will seek to end the continuing distinctions between blue-collar and white-collar workers. The debate on the reform of the collective bargaining system will probably be one of the most important features in German industrial relations in 1997.


German collective bargaining in 1996 was not conducted under propitious circumstances. The failure of the Employment Alliance early in the year, resulting from government decisions to cut social benefits and deregulate certain laws on employment protection, created a political climate of mistrust and confrontation among the social partners. The dispute on sick pay became very much a symbolic issue for the trade unions, who were keen to prove their capability of defending employees' interests. The fact that most collective agreements eventually provided for 100% sick pay underlines that German unions still had the strength to mobilise social power in support of their principal aims. On the other hand, for the employers' associations the "lost" struggle over sick pay could shift even more individual employers into the camp of those who question the principles of the centralised bargaining system, and are in favour of company-based bargaining. Therefore, the debate on future reforms of the bargaining system will be a crucial issue in 1997. However, the moderate wage increases agreed in 1996, as well as the wide range of measures to secure employment - working time flexibility, improved vocational training and so on - showed that the majority of the German social partners are still willing to continue under the main conditions of the current centralised system. Even though the 1997 collective bargaining round has not yet finished yet, the agreements concluded in the early part of the year again contain very moderate wage increases of about 1.5%, and seem to be following the general pattern of 1996. (Thorsten Schulten, Institute for Economics and Social Science (WSI), Germany)

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