Public sector pay and collective bargaining: Pay restoration or new perspectives?

This article presents some of the key developments and research findings on aspects of public sector pay and collective bargaining in the EU during the third quarter of 2015. Its main focus is a growing trend of restored pay levels in public sector agreements. It also deals with the broadening scope of such agreements and discusses evidence that some governments want to introduce more flexibility in pay-setting.

Major public sector agreements concluded in the first half of 2015 point to an increasing willingness to restore pay, after the cuts imposed following the economic crisis.

A number of recent Eurofound reports deal with this pay trend:

• Developments in collectively agreed pay 2013;  
• Pay in Europe in the 21^st century;
• Developments in collectively agreed pay 2014.

All point out that the public sector has been the most affected by pay cuts. Although collective bargaining has often been maintained in the public sector (in contrast to the private sector), with wages being set by law following consultations with trade unions, there have been several cases since 2009 of governments unilaterally imposing change, as outlined in the Eurofound report Industrial relations in central public administration: Recent trends and features.

Nevertheless, research shows that across Europe, wage increases were back on the agenda in 2014 in at least half of the Member States. This EurWORK topical update summarises developments regarding the most recent major agreements in the first half of 2015.

Denmark: Major public sector agreement – new perspectives?

A major public sector agreement in Denmark covering 850,000 workers was renewed in the first quarter of 2015. The agreement will be valid for three years, a sign that the social partners expect positive economic development. An important change is the adjustment of the ‘regulation mechanism’ on pace-setting agreements: this means that when public-sector wage rises exceed those in the private sector, there will immediately be a downwards adjustments to match the public rise to the private one.

The change was suggested by the Ministry of Finance, and accepted by employees as a way to keep the regulation mechanism in force. It could be questioned whether the agreement was merely a renewal of existing agreements, or one offering ‘new perspectives’. It has led to a noticeable increase in real wages, in contrast to the two former bargaining rounds (underlining how deep the pay freeze was). It also includes significant change in the adjustment mechanism.

Finally, and most importantly, teachers have reached a kind of truce after long and tough negotiations over their working time. In April 2015, members of unions in the education sector voted to accept a deal covering the state, municipalities and regions.

Netherlands: Breakthrough after four years of negotiations

After a period of rather difficult bargaining, there has been a breakthrough in several important bargaining rounds, such as the one for the construction sector. Nevertheless, negotiations involving 600,000 public sector employees still remain tense. An umbrella agreement was signed between three unions and the employer representatives in May 2015 after four years of deadlock. Wages will now increase by 5.05% and all civil servants will receive a lump sum of €500. However, FNV, the largest union involved, has refused to sign the agreement, saying that the agreed increases have been financed by cuts in pensions. FNV challenged the agreement (and the drop in pensions) in court, but lost the first summary proceedings case on 1 October 2015.

Ireland: First increases agreed after seven years

After a seven-year pay freeze for public servants and, indeed, cuts in nominal wages, in early 2015, the Irish government and public-sector unions started negotiations on pay restoration. The ‘Haddington Road agreement’, covering pay and working conditions for public sector workers was, at that point, about to expire. The final draft of the new 'Lansdowne Road Agreement covers 290,000 public sector workers (draft of 29 May). It sets pay rises for the next three years, with lower increases for those in higher pay grades. Unions have also secured protection for workers against outsourcing. The agreement gives the government the option of considering ‘an alternative pay determination structure', likely to be strongly influenced by the fiscal situation. Local, so-called ‘side deals’ (for instance on working time flexibility) are generally welcomed by trade unions.

Slovenia: Introducing performance pay?

On June 23, the Slovenian government started wage negotiations with public-sector trade unions. Talks covered the elimination of anomalies, the wage policy for 2016–2020 and measures for funding salaries and other labour costs in 2016. This followed proposed changes inthe Public Administration Development Strategy for 2015–2020, the announcement of the National Reform Programme 2015–2016, and some recommendations from the OECD.

Although the government wants to leave the basic structure of the salary system unchanged, it is proposing measures that will achieve the following:

• contribute to the deregulation of the system;
• prevent automatic increases (which take no account of whether the state can afford them);
• allow greater flexibility in setting wages based on performance.

Trade unions oppose this, with the president of the Confederation of Public Sector Trade Unions (KSJS) pointing out that government analysis is not transparent and that the government’s proposals could lead to wage inequalities. KSJS expects public sector wages to start rising again in 2016, as agreed with the government, and rejects more wage cuts and other austerity measures. The government, however, has stressed the importance of financial motivation for public sector employees. The new Slovenian Social Agreement 2015–2016 envisages introducing motivation mechanisms in the public sector.

Croatia: Restoring bonuses, in line with collective agreements

In 2013 the Government overrode collective agreements to cut the basic bonus from HRK 1,800 (€236 as at 9 October 2015) to HRK 500 (€65). However, when workers entitled to annual bonuses began to sue the government, a law (OG 65/15) was passed on 11 June 2015 to allow payment for 2014 and 2015, because the government felt it would probably lose more costly court procedures. A similar court ruling in Slovenia in 2014 was made in favour of the workers and restored public sector pay rises agreed before the financial crisis.

Unions applied to the Constitutional Court when an act (OG 36/15) was introduced to impose a pay freeze on 180,000 public sector workers, even though salary increases based on seniority had been guaranteed in collective agreements. However, the Court ruled in favour of the government and the act has been extended until the end of 2015.

Greece: Attempts to restore public-sector collective bargaining

There is a growing move in Greece to restore collective bargaining across the board. A draft law was sent for public consultation at the beginning of the year, outlining a return to collective employment agreements for public servants. It covers court and government officials, public entities and local authorities such as municipalities and prefectures. The draft bill proposed that employment contracts should be negotiated by trade unions and the government (represented by both the Minister of Interior and Administrative Reconstruction and the Minister of Finance); contracts would cover pay (general contracts) but also employment (special contracts). However, on 24 April, following objections by the Greek civil servants' union ADEDY, the Ministry of Administrative Reform withdrew the proposals to convert 40,000 indefinite contracts to permanent ones. Although the union supported the conversion in general terms, they wanted it to be optional. For some employees, the change would have given them worse employment conditions. Some other clauses on restoring collective bargaining in the public sector were also withdrawn. The Ministry committed itself to restoring both provisions in another bill, after some alterations.

Lithuania: New stage in public sector social dialogue

The beginning of 2015 marked a new stage in Lithuanian social dialogue. Lengthy negotiations between educational trade unions and the Ministry of Education and Science have given rise to proposals for improving working conditions in the education sector. A sectoral agreement drawn up by a working group created by the Prime Minister is expected to be signed soon in the (public) education sector. Until now, most agreements between the Ministry and trade unions have been rather fragmented, focusing on one particular issue; there were no real sectoral collective agreement signed in the education sector.

Similarly, the Ministry of Social Security and Labour has been authorised to conduct negotiations with trade unions’ on preparing a sectoral collective agreement in the Lithuanian social services sector. The Lithuanian government has agreed to pay rises for social workers and other social services workers from 2016. The government has also supported proposals to increase the lowest salaries by an average of 5% from 1 March 2016.

Commentary

It needs to be stressed that not all Member States have yet restored public sector pay levels (Italy and Hungary, for example).

While every agreement has to be seen in light of its national economic and financial context, as well as its industrial relations tradition, the examples here have at least three points in common with trends that have been recorded elsewhere:

• pay is being restored or increased;
• governments are seeking more flexibility in wage-setting to better respond to changes in the economic situation;
• the scope of agreements is broadening to include other aspects of working conditions, such as pension entitlements, working time and performance-related pay.

Following years of austerity and public-sector pay squeezes, and the consequent impact on industrial relations, it has yet to be seen what new issues – beside the restoration of pay – arise from social dialogue and collective bargaining for public-sector workers.

About this article

This article is based mainly on contributions from Eurofound’s network of European correspondents relating to the first quarter of 2015. Further resources on public sector can be obtained from Eurofound’s 2014 report, Industrial relations in central public administration: Recent trends and features and from EurWORK's collective wage bargaining portal.

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