Construction compromises safeguard minimum wages and Christmas bonus

Source: own composition.

If the collective agreement is extended to the whole industry it will again apply to all workers, including workers posted from other countries. As far as the different rates of the minimum wage are concerned, it should be noted that around 80% of workers in the industry are regarded as skilled workers. For companies in western Germany which abide by the collectively agreed rates of pay the new'minimum wage 2' has hardly any consequence as the actual agreed rates of pay are well above the minimum rates. In eastern Germany, however, where due to lower overall bargaining coverage the minimum wage is far more important, many companies will now have to adjust their wage rates. It should be noted that if an eastern German employee works on a building site in western Germany the higher western rates apply. On the other hand, if a western German employee works in eastern Germany, the home location of the employing company is decisive - ie the principle is established that an employee sent from eastern to western Germany or vice versa must be paid at the most favourable rate.

In reality, however, both employers' associations and the trade union complain that there are not enough official controls and the enforcement of the minimum wage is inadequate. IG BAU is aware of many cases where eastern German companies do not pay their employees the western German rates when working in western Germany and it must be expected that not all workers now entitled to'minimum wage 2' will receive it. Fear of unemployment means that some workers accept not being paid the proper rates and do not report such breaches of the collective agreement.

New provisions on Christmas bonus

On 16 October 2003, as a result of ajoint-dispute resolution procedure, the bargaining parties - IG BAU, HDB and ZDB - agreed new provisions in the framework collective agreement for the western German construction industry concerning the annual bonus payment, the so-called Christmas bonus. This bonus, which is paid only in western Germany (including Berlin), will remain unchanged at an amount equivalent to 93 times the hourly wage for blue-collar workers and 55% of the monthly salary of white-collar workers. For skilled workers, the bonus amounts effectively to EUR 1,375. However, a new'opening clause' has been agreed which allows a deviation from this bonus by way of either a voluntary works agreement between the employer and the works council or, in cases where no works council exists, by way of individual agreement between employer and employee. There is, however, a lower limit to such deviations. A bonus of at least EUR 780 must be guaranteed. Such deviations from the collective agreement are not bound to any specific condition, such as the economic situation of the company concerned, and deviations are not subject to final approval by the sectoral bargaining parties.

This outcome marked the end of a long dispute between the bargaining parties over the annual bonus payment. Again it was employers belonging to ZDB that were no longer prepared to accept this payment, which unlike the minimum wage is not extended to the whole industry. Four regional employers' associations affiliated to ZDB and representing the bargaining areas of Bremen, Hesse, Lower Saxony and Schleswig Holstein withdrew their mandates for the central association to bargain on their behalf. Therefore, as these associations do not accept the new accord on the Christmas bonus, the collectively agreed provisions on the issue will apply only to those employees in western Germany working in companies which are affiliated to one of the employers' associations which have signed the new agreement.

IG BAU had been prepared to make major concessions concerning the Christmas bonus under the condition that the defecting employers' associations would be prepared to return to the joint collective agreement. In August 2003, it seemed that such a compromise would be possible, but this finally failed as the four employers' associations concerned refused to return to the umbrella of the nationwide collective agreement.

As the Christmas bonus applies only to western Germany and then only to companies bound by a collective agreement, the defection of four regional employers' associations will further erode this payment. Even before this development, IG BAU was aware of several cases where employers did not pay the Christmas bonus despite being obliged to do so. The problem is similar to that related to the enforcement of the minimum wage. Out of fear of losing their jobs, even organised workers who can count on the legal help of their union are reluctant to make legal claims to force their employers to pay the bonus.

Reactions

For IG BAU, it is most important that the new collective agreement safeguards minimum wages in construction in the forthcoming years and that BMWA was prepared to extend the new agreement to the whole industry. To achieve this, the union considered the concession of temporarily reducing the previously agreed minimum wage rates for eastern Germany acceptable. A similar argument has been put forward concerning the Christmas bonus.

In astatement, ZDB welcomed the fact that both the collective agreement on minimum wages and the accord on the Christmas bonus had been finally accepted within its ranks. In particular the opening clause concerning the Christmas bonus is seen by ZDB as breaking new ground in bargaining in the industry and it hopes that employers will make extensive use of it. ZDB was also satisfied that the new collective agreement on minimum wages had finally been accepted amongst its eastern German affiliates which had complained about the 2002 collective agreement.

In a statement to the press, HDB declared that the collective agreement on minimum wages is a good compromise. The employers' association is content that it had achieved its goal of safeguarding minimum wages in construction. HDB regards the minimum wage as an important element in its struggle for fair competition in the building industry. Through the minimum wage, it believes, German building companies are better able to prepare for the increased competitive pressure resulting from EU enlargement. HDB stated that is particularly happy that it has managed to achieve the'unconditional' opening clause over the Christmas bonus. This is seen as an important step towards more flexibility in the industry. HDB appealed to all those companies which are disappointed that a straightforward cut in the Christmas bonus has not been achieved, to take advantage of the opportunity provided by the opening clause.

Commentary

The outcome of the recent collective bargaining must be seen against the background of increasing unrest amongst employers in the construction industry. The large building companies have a vested interest in overall binding collective agreement, and are keen advocates of the minimum wage because they hope that this will help to fight unfair competition. The situation looks different in the building trades, which include thousands of very small enterprises. The intense disputes within the camp of the employers and in particular the erosion of ZDB threatens to undermine the legal extension of the sectoral collective agreements on pay. The fact that the BMWA showed that it was responsive to economic concerns raised by some eastern German employers, and signalled that it might refrain from extending further collective agreements in construction, was finally decisive in the surprising outcome whereby a collective agreement was renegotiated at the same time that new pay rates on which the bargaining partners had agreed only a year previously came into effect. The final willingness of IG BAU to make major concessions must be seen in the light of this development and the fear of complete erosion of the present collective agreements. (Heiner Dribbusch, Institute for Economic and Social Research, WSI)