New agreements introduce 'individual options' for employees

Early 2003 saw the negotiation of new collective agreements in the Danish finance and slaughterhouses/meat processing sectors. In both cases, the new agreements have introduced an innovative system of 'individual options', whereby employees can decide on the use of a certain amount of the overall wage sum - eg choosing between higher pay and more time off - within the collective framework of the agreements. Commentators have raised the question of whether the new agreements are a sign of radical changes in the collective bargaining system in the direction of a higher degree of individualisation, and thus in the longer term an indication of the demise of the trade union movement and the collective bargaining model.

Negotiations during the first months of 2003 about the renewal of the collective agreements in the slaughterhouses and meat processing sector (DK0301105F) and the finance sector have led to a breakthrough in the introduction of greater 'individual options' within the collective framework of the agreements. With minor differences in the formulations, workers in Danish slaughterhouses and the meat processing industry, as well as those in insurance companies, banks, mortgage credit institutions etc, will now have an 'à la carte' model in their collective agreements, whereby individual employees are free to choose what a part of the agreed wage sum is to be used for - more holidays or pay increases, for instance.

The question asked by commentators is whether these new arrangements imply radical change in the collective bargaining system. Will they be the first steps in the direction of an individualisation of the regulation of pay and working conditions - and thus, in the longer perspective, a farewell to the trade union movement and the collective bargaining model? Or are they to be seen simply as an adjustment of the balance between the collective and the individual within the framework of a continued system of collective regulation?

Finance sector - free choice except for pension contributions

The introduction of individual options was a priority demand in 2003 from the employee side in both the meat/slaughterhouse and finance sectors, and it turned out to be a demand which the employers were interested in meeting as the negotiations were concluded without any major problems, resulting in compromises which introduced such free options in the form of an à la carte model.

On 4 February, a two-year agreement was concluded between the National Insurance Workers’ Association (Danske Forsikringsfunktionærers Landsforening, DFL) and the Danish Employers’ Association for the Financial Sector (Finanssektorens Arbejdsgiverforening, FA), which covers about 10,000 employees in insurance companies. It was followed on 8 February by a similar two-year agreement between the Association of Employees in the Finance Sector (Finansforbundet, FF) and FA for the 50,000 or so employees in banks, financial institutions and mortgage credit institutions etc.

Both agreements include a so-called 'wage package' which gives the employees the possibility of deciding on the make-up of their own pay package, including a choice between using part of the wage sum for more time off or higher pay, on the basis of 'catalogues' which will drawn up in cooperation between the companies and employee representatives. There is a wide scope for the elements that can be included in these catalogues but, importantly, occupational ('labour market') pension contributions cannot be included. Although the deal in the banking sector includes an increase in the occupational pension contribution to 15% of pay - of which at least 10 percentage points is to be paid by the employer - the two sides could not reach an agreement to include the contributions as an option in the new à la carte model. The position of the FF union seems to be that the full 15% is needed to ensure an acceptable income on retirement, and that there is no room here for a free choice.

Slaughterhouses - free choice, including pension contributions

The agricultural group of Danish Food and Allied Workers’ Union (Nærings- og Nydelsesmiddelarbejder Forbundet, NNF) made the à la carte model a major demand prior to the start of the negotiations in slaughterhouses and meat processing. As the Association of Employers in the Slaughterhouse Sector (Slagteriernes Arbejdsgiverforening, SA) resigned in 2002 from the Danish Confederation of Employers’ Associations in Agriculture (Sammanslutningen af Landbrugets Arbejdsgiverorganisationer, SALA) and joined the Confederation of Danish Industries (Dansk Industri, DI) (DK0208102F), bargaining took place, for the first time, between NNF and DI

The new bargaining parties conducted lengthy negotiations - in the last round, they lasted for 30 hours - but, bearing in mind the tradition of breakdowns in negotiations and complications in this sector (DK0104117F), it provided relatively easy to reach a one-year deal on 9 February 2003. A contributory factor in reaching agreement on a 'free choice' model was that the employees also obtained the possibility of including their occupational pension contributions in their option scheme - unlike the employees in the finance sector. They thus have a choice between higher wages, more leisure time or higher pension contribution, within a framework corresponding to 2.7% of the agreed wage sum. This is initially a pilot scheme which will expire at the end of 2004.

The new agreement increases occupational pension contributions to 9% of pay, which will now be the minimum contribution. However, during the period of the agreement, this pension contribution may be increased through individual choice. This makes it possible for workers who wish to use the entire framework for individual options for pension purposes to increase their pension contribution to a maximum of 11.7%. However, they can also choose to have only the minimum 9% contribution and instead use the extra money for more holidays or higher wages. The 9% contribution will thus be the minimum level and the collective basis. It can be questioned how high this basis is, if one looks at comparable groups in the public sector which passed the 12% contribution level as early in 1997 (DK9702103N). Otherwise, the essence of the new free choice models as they have been designed so far is they offer an individual option on the basis of a high general level of provision.

Will the new free choice models set precedents?

Will the new free choice models agreed in slaughterhouses/meat processing and finance spread to other sectors, so that à la carte agreements will become the norm? The answer to this question appears to be: no, not necessarily or exactly. It would be in sharp conflict with the idea of having a wider range of options and increased flexibility in agreements if the rules were to be completely uniform in all sectors - also as regards the question of individual options. There are different traditions and different possibilities in the existing sets of rules from one sector to another and it is thus not a given that the models agreed in the finance and slaughterhouses/meat processing sectors will spread to all other sectors - although in many sectors they may probably serve as a source of inspiration and thus be introduced in adapted versions.

However, in the industrial sector it is less likely that that free options agreement for the slaughterhouses/meat processing sector between DI and NNF will be copied in the major agreement for industry between DI and the Central Organisation of Industrial Employees in Denmark (CO-industri) bargaining cartel. CO-industri, with the Union of Metal Workers in Denmark (Dansk Metal) in the forefront, has already indicated that it is opposed to a similar model in the industry agreement. With its 'minimum wage' system (whereby the sectoral agreements set only minima, built on by subsequent local bargaining), this sector has a long tradition of negotiations at company level over wages and - in line with the decentralisation of other matters in the national agreement - also over working time and pensions matters. By way of example, a number of company agreements have been concluded whereby the local parties have agreed on a higher occupational pension contribution than that fixed in the central industry agreement. The argument is thus that sectors with a tradition of local bargaining and thus flexible solutions adapted to individual enterprises already have adequate flexibility, so that there is no need for free choice models which are more suitable in sectors with a 'normal wage' system (whereby the sectoral agreement sets actual pay rates, with little local bargaining), such as the slaughterhouses/meat processing and finance sectors, where most matters have so far been determined at the central level.

Other points of the agreements

The new agreements in finance and slaughterhouses/meat processing include a much wider range of issues than pay and employment conditions in a narrow sense. This reflects a general broadening of the bargaining agenda to cover a number of issues of a more 'social' nature.

Finance sector

The new collective agreements in both insurance and banking have a total framework of a 6.2% increase in costs, most of which has been earmarked for wage increases - 5.9% in the insurance agreement between DFL and FA and 5.7% in the banking agreement between FF and FA. In both cases, the majority of the latter sum will be used for general wage increases - 4.0% and 4.2% respectively. In insurance, 1.9% has been reserved for local wage negotiations and in banking 1.5%. This strengthening of local-level bargaining was introduced in the previous bargaining round (DK0103116F) and has thus been continued. Local wage bargaining requires agreement between the two sides and, if no such agreement can be reached, a special clause will become effective, providing that this part of the overall framework too will be used for general wage increases.

Although wages weigh most heavily in terms of costs, it is, however, the other elements of the finance agreements which have more long-term perspectives. The most important element is probably the agreements' partnership provision on training and competence development which is based on the parties' joint view of the importance of strengthening the competences of employees. Another important element in both agreements is a provision on policy for older workers, with a new right for employees aged 58 or older to cut their hours to 80% of the full working time while retaining a full pension contribution. The rules on maternity leave have become more flexible so that new parents can take leave with full pay. It is also noteworthy that the banking agreement introduces health insurance schemes which give members the possibility of treatment in a private hospital or aftercare services if they become sick or injured. There may be far-reaching welfare policy consequences if such insurance become common in the collective bargaining system.

Finally, both agreements in the finance sector contain provisions on the integration of immigrants, stipulating that such employees may be offered jobs on special terms (DK0206104F) and that foreign qualifications are to assessed more quickly.

Slaughterhouses/meat processing

The total framework for cost increases in the slaughterhouses/meat processing agreement is between 4.5% and 5%, depending upon whether it the employer side or the union side that evaluates the result. In either case, this seems to be at a level which is perhaps on the high side of what is acceptable for employers, but it seems that this was the price to pay if DI were to persuade NNF to conclude an agreement with a duration of only one year - which was the most important objective for the employers in the negotiations. This brings this new DI bargaining unit into step with the other agreements in the industrial sector and, more generally, with the fields covered by the Confederation of Danish Trade Unions (Landsorganisationen i Danmark, LO) and the Danish Employers’ Confederation (Dansk Arbejdsgiverforening, DA). These sectors concluded four-year agreements in 2000 (DK0002167F), which will expire in 2004 .

In addition to the regulation of wage rates, the slaughterhouses/meat processing agreement also contains a number of further provisions. As regards training, the agreement contains a declaration of intent which states that the parties will work to ensure that employees in the individual enterprises are offered the necessary continued and further training. It is seen as important to develop employees’ vocational and personal qualifications and the signatories therefore recommend that systematic planning of training initiatives is introduced in the individual enterprises.

NNF attaches special importance to a concrete improvement which ensures that employees who are injured as a result of industrial accidents will in future be entitled to full pay from the first day of absence, and also to improved conditions in connection with the introduction of new technology. The parties have agreed that new technology and automation are prerequisites for ensuring the competitiveness of enterprises, but that such measures should be introduced in a climate where the enterprises give a high priority to staff development and retention. In order to compensate for possible earnings reductions in connection with the introduction of new technology, the parties have agreed a so-called 'technology allowance' and guidelines for the procedures for handling the introduction of new technology. Finally, the parties will seek to strengthen cooperation in order to eliminate the causes of the many local disputes which are more frequent in meat processing and slaughterhouses than in other sectors.

Ballots

In mid-February 2003, the parties in both finance and slaughterhouses/meat processing were awaiting the results of ballots among their members before the agreements are finalised. On the basis of previous experience, it is expected that that the two agreements in the finance sector will be adopted by a clear majority. On the other hand, there is more uncertainty as to the result of the ballot of union members in the slaughterhouses/meat processing sector, in the light of the turbulent course of previous ballots (DK0104117F). It is, however, expected that the deal will be adopted. The result was unanimously supported by the executive committee of the agricultural group in NNF and, at a meeting of employee representatives, 153 voted in favour of the bargaining result and only one against it.

Commentary

The agreements concluded in early 2003 have introduced individual options for employees within a collective framework. These options build on a solid general foundation. It is thus not a question of a revolution in the collective bargaining system, but rather an adaptation to modern working life which is characterised by individual employees’ wishes for a higher degree of individual influence and freedom of action. In this way, there is a logical connection between the conclusion of new agreements providing free choice models and the adoption at an extraordinary LO congress in February 2003 of a set of 'new values' which is to prepare LO for conditions in the 21st century through a new balance between individual and collective rights (DK0302103F).

Free choice models may contribute to improving the trade unions’ chances of survival in a more individualistic age where individuals' obvious wish for self-determination can interact with the equally obvious interest in ensuring a collective basis for their working and living conditions. It cannot be said with certainty whether the LO trade union movement, which dates back more than a century, and the collective bargaining model can survive for another century. In this matter, free choice models play only a minor role. The decisive factor in this connection will be how the trade unions act and react in relation to other and more radical changes which they will be facing.

The preparations for 2004's major collective bargaining round are in the initial phase. One of the issues which will be discussed is what the key issues should be in the new agreements. As can be seen from the agreements concluded in 2003, the issue of training is an important element, but the question is whether the subject of an increase in occupational pension contributions will be brought up again, in spite of the fact that the four-year agreements concluded in 2000 ensure that the unions' original target of a contribution of 9% of pay will be reached during this period.

Increased pension contributions seem to be one of major demands for Dansk Metal, as the union's leaders presented such a proposal to 1,000 employee representatives who participated in a recent series of regional meetings. The metalworkers’ union argues that the public sector has gone much further and that occupational pensions will undoubtedly become an important part of the total pension in the future. It will therefore be necessary to seek to replicate NNF's new agreement with DI which exceeds 9% in terms of collective pension contributions, while other part of the agriculture-related 'green sector' represented by the SALA employers' organisation already took the lead in 2001 (DK0101112F) by increasing the contribution to 9.9% over the four years to 2005. (Jørgen Steen Madsen, FAOS)