Pay developments: Pay - Q1 2014 (EurWORK topical update)

Snapshot of pay developments

At EU level, the level of wages was an issue of concern among European trade unions ahead of the Tripartite Social Summit in March 2014. The ETUC and a range of sectoral trade unions, such as IndustriALL, noted that real wages have fallen in the majority of EU Member States since 2009, and called on the EU to choose an economic path that leaves austerity behind.

Continuing trend of wage moderation

Some Member States reported a continuing trend of wage moderation: Slovenia, Hungary, Germany, France and the Netherlands. In Luxembourg, the government explicitly asked the social partners to reach a pay agreement before the summer, advising that only moderate increases be introduced. In the United Kingdom, moderate pay rises for over a million public sector workers have been agreed.

Positive developments in some countries

In other Member States, notably those that have been hit hardest by the crisis, reports suggest that there are positive signs at least in some parts of the economy.

In Estonia, wage growth picked up in the last quarter of 2013 (+7.6% compared with the previous year). In Greece, for the first time in the last four years, an agreement has been reached on pay increases: the sectoral collective agreement in the tourism sector covers about 130,000 workers, provides a pay freeze for 2014 and an increase of 1% in 2015. Also in Greece, the Supreme Court ruled as unconstitutional the law under which salary cuts were imposed since 2012 for military, police and coastguard personnel. In Hungary, a number of collective agreements in public companies have been concluded, foreseeing a moderate pay increase, which is higher among low-paid workers.

In Ireland, a survey among 600 companies found that a third of them expected to increase basic pay in 2014. Higher wage rises were predicted for non-unionised firms. In January, an important step was taken to re-establish sectoral minimum wages for certain low-paid sectors with the signing of establishment orders for new Joint Labour Committees.

In Lithuania, salaries in the public sector were restored or increased after the end of the crisis. In Slovakia, two multi-employer collective agreements came into effect in the public sector, marking the first agreed salary increase in the public sector since 2011. Similarly, wage increases were agreed in collective agreements in the private sector.

Higher wage increases uncommon

Only a small number of countries reported higher wage increases, such as Norway, where agreements made in the trend-setting industries imply a wage growth of 3.3% in 2014. Also in Austria, agreed pay increases in some major sectoral agreements were higher. And in Germany, pay increases fixed in collective agreements amounted to 3% in 2013.

Dissatisfaction with pay

A notable turnaround in the discussions regarding the level of wages is that in a number of Member States dissatisfaction with wages has started to concern employers.

In Belgium, for instance, the government is putting a halt to pay increases above the automatic indexation level, which hampers sectoral collective bargaining. In economically strong and well-paying sectors, such as the chemical or metal industries, however, it has been reported that companies are confronted with dissatisfied employees – for instance, as shown by strike actions at AgfaGevaert, Lanxess or ArcelorMittal (in Dutch).

In Croatia, a study on pay addresses the ‘wanderlust’ of Croatian doctors and other highly educated professionals, who are responding to wage differentials abroad. In Lithuania, a study on bookkeepers, presented to the Lithuanian Confederation of Industrialists, found that they are dissatisfied with their wages vis-à-vis their workloads and necessary qualifications for the job.

In Spain, the Confederation of Business Associations (CEOE) stated that it was not interested in reducing salaries further, despite it being a recommendation to Spain to gain competitiveness. It signed an agreement with Spanish trade unions for 2012–2014, and decided to increase salaries by market niche, according to the competitiveness and productivity of each company.

In the United Kingdom, a report by the Chartered Institute for Personnel and Development (CIPD) asks whether there has been an 'end of the pay rise'. It says employee satisfaction with pay has held up remarkably well, but this may change with stronger economic growth. Employers may need to adapt engagement and motivation strategies if they cannot deliver assumptions of steady increases in real pay.

Issues around collective wage bargaining

In some countries, which have or had a tradition of national cross-sectoral agreements, the return to this type of agreement has become an issue.

Return to centralised bargaining?

In Belgium for the period 2013–2014, the centralised collective bargaining between employer organisations and trade unions on an interprofessional agreement (IPA) failed. The government decided not to allow extra wage increases above the automatic wage indexation level and is effectively refusing to recognise all collective agreements where wage increases above this level are negotiated. This is hampering sectoral negotiations.

In Ireland, where national wage bargaining was abolished during the crisis, debates on returning to it have started, but such a move has been ruled out by the social partners for the time being.

In Spain, Prime Minister Mariano Rajoy encouraged social partners to sign a new ‘salary pact’ for the next three years (2015–2017).

Indexation mechanisms here to stay?

Although they have come under criticism at EU level within the country-specific recommendations (see report Pay in Europe in the 21st century for an overview), automatic indexation mechanisms have not been revised (further) in the relevant countries.

• In Belgium, the government does not allow extra wage increases above the automatic indexation.
• In Luxembourg, the new government is backing the automatic indexation mechanism.
• In Malta, an increase in the cost of living allowance (COLA) has been agreed, although employers would have liked to include productivity developments alongside the rate of inflation in the indexation formula.
• In Cyprus, no changes to the COLA were reported.

Wage-setting mechanisms

Performance pay and productivity

At EU level, on 4 March the European Commission adopted a Regulation on the regulatory technical standards defining the criteria to identify categories of staff whose professional activities have a material impact on an institution’s risk profile (the ‘risk-takers’). The variable component must not exceed 100% of the fixed component of the total remuneration for risk-takers.

The Italian government is granting tax relief to companies that have signed decentralised second-level contracts during 2013. In order to qualify for the tax rebate, the second-level agreements have to include financial rewards for employees, subject to increases in productivity, quality, innovation and organisational efficiency, and must be related to improvements in the company’s competitiveness. The de-taxation of productivity bonuses and public sector wage freezes were strengthened with Law 228/2012, which extended the de-taxation of productivity bonuses to 2013 and 2014 and also the contract freeze on public sector wages.

In the Netherlands, in January 2014 new legislation entered into force that allows companies to claw back excessive bonuses from top management. The cabinet announced it will give works councils a bigger say in the remuneration of top management.

Statutory minimum wages

Introduction of new statutory minimum wages

The most important development regarding minimum wages took place in Germany. On 2 April, the parliament endorsed draft legislation by the Labour Minister, which foresees a statutory minimum wage of €8.50 an hour across industries and all German regions from 1 January 2015. The law excludes certain group of workers, such as posted workers until 2017 and young unskilled workers. A vast body of research, assessing its impact, accompanied this change.

Also in Italy, the new government announced that a draft law launched on 12 March by the Council of Ministers (still to be approved by parliament) will include the introduction of a national minimum wage.

Some discussion took place regarding the possible introduction of a statutory minimum wage in Austria and Finland, but there is general consensus to keep the status quo.

Changes to existing statutory minimum wages

In other Member States, there was debate on issues around existing statutory minimum wages.

In Croatia, social partners are discussing the method applied in determining changes in the national minimum wage. In Spain, trade unions rejected the employers’ proposal of a sub-minimum wage for young workers. In the Netherlands, a bill to extend the scope of the statutory minimum wage to specific categories of self-employed is still pending.  In Poland, the scale of the increase was (again) decided unilaterally by government, as the Tripartite Commission was unable to reach a consensus over the issue and in the United Kingdom, government applies a tougher ‘naming and shaming’ scheme of companies that do not comply with the national minimum wage.

Equal pay

On 7 March 2014, the European Commission adopted a Recommendation on strengthening the principle of equal pay between men and women through transparency (C(2014) 1405 final). The Recommendation suggests four measures to enhance transparency, which includes conducting pay audits in companies with more than 250 employees, the result of which ‘should be made available to workers’ representatives and social partners’.

A number of Member States have already introduced pay audits (see report Addressing the gender pay gap). Others are trying to make the schemes more inclusive: for example, recently in Denmark the Minister of Employment proposed that the minimum number of employees to deliver gender-based wage statistics would be lowered from 35 to 10 employees, providing that there is a minimum of three employees of each gender at the workplace.

About this article

This update is based mainly on contributions from Eurofound’s network of national correspondents. For further contextual information, visit Eurofound’s portal of collective wage bargaining. Comparable data for collectively agreed pay are summarised in Eurofound’s report on Developments in collectively agreed pay 2013.

For further information, contact Christine Aumayr-Pintar: cau@eurofound.europa.eu