Thematic feature - collective agreements on changes in work organisation

This article gives a brief overview of collective bargaining on changes in work organisation in Germany, as of September 2004. It looks at: the extent to which collective agreements introduce changes in work organisation that take into account productivity demands, flexibility and security in an integrated way; the main areas in which changes are being introduced; the overall success or otherwise of bargaining on the topic; and the prospects for the future.

The EU’s European employment strategy was revised in 2003 (EU0308205F), following demands for a more results-oriented strategy contributing successfully to the targets for more and better jobs and an inclusive labour market set at the Lisbon European Council in 2000 (EU0004241F). To support the three objectives of full employment, quality and productivity at work and cohesion and an inclusive labour market, the current employment guidelines identify 10 priorities ('commandments'), including one on 'promoting adaptability of workers and firms to change'. This identifies work organisation (alongside skills, lifelong learning and career development, gender equality, health and safety at work, flexibility and security, inclusion and access to the labour market, work-life balance, social dialogue and worker involvement, diversity and non-discrimination, and overall work performance) as an element in improved quality at work, which should be pursued through a concerted effort between all actors and particularly through social dialogue.

The 2004 Council Recommendation on the implementation of Member States’ employment policies provides for four priorities:

• increasing adaptability of workers and enterprises;

• attracting more people to enter and remain on the labour market, making work a real option for all;

• investing more and more effectively in human capital and lifelong learning; and

• ensuring effective implementation of reforms through better governance.

The Recommendation refers to promoting flexibility combined with security in the labour market, by modernising and broadening the concept of job security, maximising job creation and raising productivity. As defined in the employment guidelines, 'job security' refers not only to employment protection but also to building people’s ability to remain and progress in work. Changes in work organisation thus appear to be seen as a main vehicle for increasing the adaptability of workers and enterprises. Related to this issue is flexibility and security in the labour market and the relative attractiveness of 'standard' and 'non-standard' employment relationships (with the aim of avoiding a 'two-tier' labour market).

With work organisation playing an increasingly important role in European employment policy, in September 2004 the EIRO national centres were asked, in response to a questionnaire, to give a brief overview of the industrial relations aspects of the topic, looking at: the extent to which collective agreements introduce changes in work organisation that take into account productivity demands and flexibility and security at the workplace in an integrated way; the main areas in which changes are being introduced; the overall success or otherwise of bargaining on the topic; and the prospects for the future. The German responses are set out below (along with the questions asked).

Recent agreements on changes in work organisation

Please provide information on recent developments (over the last three-five years) in collective agreements on work organisation that introduce changes in flexibility, security and productivity in an integrated way. The kind of issues that such agreements might cover include: introducing autonomous (or semi-autonomous work) teams; reducing the number of hierarchical layers; new forms of employee involvement; reorganising work functions; moving away from product-based structures to business unit; flexible working hours; multiskilling; job rotation; improving training (eg making it more systematic, ensuring wider participation, or changing the focus); new pay systems (eg performance-based pay, profit-sharing, share ownership schemes), and new financial and non-financial performance measures; or new appraisal systems.

The kind of agreements that we are interested in here are those that deal with a number of the issues listed above as an overall 'package'. Please provide any overall information available on this kind of development, if possible, and brief details of three or four agreements (at company and/or sectoral level) that you consider particularly innovative and interesting. Below is an indicative list of the kind of information we are seeking.

• What are the main aims of bargaining on work organisation - eg increasing productivity? Increasing personnel flexibility? Improving the company’s position in the market? Avoiding redundancies and lay-offs?

• What is the extent of bargaining on work organisation - how many agreements are there? How many companies/employees are covered?

• What are the main areas in which changes are being introduced - eg new organisational structures, new more flexible and less hierarchical methods, new corporate cultures, new business practices, more training, new performance measurement techniques, new reward systems?

• In the context of the introduction of work organisation changes, what kind of contractual and working time arrangements are provided - ie how is the flexibility and security issue being addressed?

• In the context of work organisation changes introduced with a view to improving productivity, what specific measures have been agreed?

• What are the motives of the parties in concluding such agreements - please indicate the motives of each side (management and workforce), such as reducing costs, promoting flexibility, securing employment, preventing compulsory redundancy, or improving terms and conditions.

According to a recent article on 'flexicurity' (a concept that is intended to resolve the apparent irreconcilability of flexibility and social security) in Germany: 'by international comparison, internal flexibility has been highly valued in Germany. Especially since the 1990s, actors at the sectoral as well as the enterprise level have expanded the scope of internal flexibility and have introduced new instruments of adjustment (for example, enterprise alliances for jobs, opening clauses in collective agreements). The new possibilities can partly substitute external flexibility and so provide employees with a higher degree of employment security' ('Flexicurity - the German trajectory', Berndt Keller and Hartmut Seifert, in Transfer 2/2004). In particular, the parties to collective bargaining have gradually expanded the scope for variable forms of working time since the mid-1980s. Thus, today German firms enjoy considerable room for manoeuvre in the allocation and differentiation of working time. Nonetheless, many companies are now pushing to extend this room for manoeuvre still further in order to stay competitive. Furthermore, the extension of the scope of collective bargaining to encompass such issues as further training and retirement provisions is also important.

Some recent examples of collective agreements on work organisation that introduce changes in an integrated way include a limited number of collective agreements at sectoral and firm level. Furthermore, a substantial number of works agreements at firm and establishment level (that is agreements concluded with the works council) exist which, amongst other measure, lay down an individual right to training leave and require skill formation in response to technical/organisational change or as a means of preventing redundancy. In particular, following the lead of the Mining, Chemicals and Energy Industrial Union, IG Bergbau, Chemie, Energie, IG BCE) (DE0307205F), in 2001 the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) reached a landmark agreement (DE0107233N and DE0104218F) that foresees contractual entitlements to further job training. Training measures can focus on maintaining skills, adapting workers’ qualifications to new occupational demands or providing skill upgrading that enables workers to achieve a more demanding position within the company. Further, an 'agency for the improvement of continuing training' jointly managed by the metalworking social partners has been established and provided with far reaching competencies to develop new curricula and training courses (DE0201272F).

A far-reaching agreement on further training was also concluded at the new Volkswagen subsidiary Auto 5000 GmbH (DE0109201F). In 2001, after lengthy and controversial negotiations, Auto 5000 GmbH, a wholly-owned subsidiary of Volkswagen AG established for this very purpose, and IG Metall signed a landmark agreement on what is known as the '5000x5000 Project'. Only unemployed people are considered for recruitment to the new manufacturing jobs created. The project attempts to take a new approach to pay and conditions. It cut labour costs, although within the constraints of the relevant sectoral collective agreement and the minimum standards they contain. 'In terms of content, Auto 5000 also has a number of unusual features, such as the way it deals with work organisation and training. On self-regulating work teams it goes further than any of VW’s previous teamwork projects. The intention is only to have four levels of management, as opposed to the six or seven levels usually found in car plants. There is also a separate agreement on qualifications and an agreement on co-determination which provides the works councils with additional rights. It now has the right jointly to decide on performance and staff evaluation,' according to the sociologist Matthias Helmer. In other words, the intention of the project is to tap into the potential for greater productivity, flexibility and quality by using integrated business processes and by implementing improvements in work and business organisation, including flat hierarchies, teamwork and pay based on agreed targets. The basic gross monthly pay at Auto 5000 is about EUR 2,300, while assembly line workers at VW earn at least EUR 300 more. Pay depends on meeting productivity targets, with earnings linked to previously agreed output and quality levels. Moreover, 'rectification' work is paid only if the worker was not responsible for the problem in the first place. Another important element of the project is the collective agreement on training. Additional to their initial training, employees must spend three hours a week on further training, although they are paid for only half of this. The training takes the form of either on-site, on-the-job-training in 'learning factories' that run alongside the production line, or external training. Further, there are personal development feedback sessions.

In the 2002 collective bargaining round, the issue of performance-related pay became increasingly important. Germany’s first major sectoral 'agreement on performance-related pay' was signed in banking, according to which companies can use up to 4% of collectively agreed annual basic pay for distribution as variable pay related to individual and/or company performance (DE0301202N). The introduction of such performance-related variable pay must be regulated at establishment level on the basis of a works agreement concluded by management and works council. In addition, some sectoral agreements, for example in chemicals and banking, introduced a new performance-related pay component in collectively agreed annual bonus schemes.

Assessment

What have been the results of collective agreements introducing work organisation changes? Drawing on assessments/evaluations made by researchers or the parties to agreements (employers, trade unions, works councils etc) or other sources, please provide information on issues such as the following:

• whether agreements have been successes or failures, and the reasons why in both cases;

• the impacts on flexibility and security (eg are there any successful examples of collective agreements addressing this issue as part of work organisation changes?);

• the impacts on productivity (has productivity been improved as a result of the work organisation changes introduced?); and

• the impacts on collective bargaining - are such deals broadly considered as concession bargaining, or as 'zero-sum' or 'positive-sum' situations? What are the implications for the structure, process or nature of collective bargaining (eg company versus sectoral? workplace representatives versus trade union? from “distributive” to “integrative” bargaining [with mutual gains for both sides]) and the role of management?

Where significant differences of interpretation exist in assessments on these questions - notably between the social partners - please report on the differing views.

Although the interest in new forms of work organisation has been steadily increasing in recent years, empirical knowledge as to their use, their effects and their economic consequences remains rather limited.

Evaluating the abovementioned examples of recent collective agreements in this area, it can be said that, the collective agreement on training concluded in the Baden-Württemberg metalworking industry in 2001 is one of several that includes significant innovative provisions. Employees have a right to meet at least once a year with their superior in order jointly to identify training needs and agree the necessary training measures on that basis. Individual needs have thus been given priority over standardisation of annual training time. In the event that the company and the employee are unable to reach agreement on training, the joint agency established by the sectoral social partners (see above) resolves the matter. Overall, these procedures are supported by the IG Metall trade union and the regional employers. According to an assessment by researchers, 'the awareness for further training has improved and the planning of further training - as well as determining the skills needed - has become common practice in the companies. On the whole the personnel managers display more acceptance towards the collective agreement but only a minority expect an improvement in further training. The works councils, however, expect more positive effects from the collective agreement. The collective agreement has created more awareness and support for iniatives which mostly come from the works councils. In some cases the agreement has effected a starting point for new initiatives in further training, or led to an optimisation of existing instruments and procedures. However, in the majority of enterprises the agreement has not had a lasting effect on further training measures' ('Der Qualifizierungstarifvertrag für die Metall- und Elektroindustrie in Baden-Württemberg', Reinhard Bahnmüller and Stefanie Fischbach, WSI-Mitteilungen 4/2004).

Auto 5000 is regarded as a bold experiment, and researchers who have been monitoring the project have recently given their impressions in a new publication. They report that about 3,800 workers, including many older people, have so far been taken off the unemployment register to manufacture the VW Touran. The initial results indicate that, in particular, the labour market policy goal of the project appears to have been achieved. However, not everything is perfect, according to the researchers, and there are several unresolved issues. They report that the project’s supposedly 'holistic' approach appears to be contradicted by the fact that so far the reality of production workers’ jobs has been dominated by various traditional tasks and they seem to be involved in planning only to a limited extent. Moreover, the workers’ ability to manage their own working time within the three-shift system is also limited. Hartmut Meine, head of the Hanover district of IG Metall, states that although the arrangements fall short of VW’s company-level agreement, it was still possible to reach a compromise offering terms comparable to those in IG Metall’s industry-level agreement for metalworking. He adds that there were overtime problems, especially during the start-up phase.

According to a recent study, compensation practices that link workers’ pay more closely to individual and company performance have spread rapidly among large German firms since the mid-1990s. A survey of the 100 largest German firms found that 70% had schemes with wage components based on individual performance evaluations or goal-setting targets, in order to enhance employee motivation and commitment in several ways. Moreover, more than half of all works councils report that performance-related pay components are are in place for the employees in their companies ('Decentralisation of German collective bargaining?' Reinhard Bispinck and Thorsten Schulten, in WSI Mitteilungen Special Issue 2003). However, according to representative data from the IAB Establishment Panel, in 2001 only 8.7% of all establishments used profit-related pay and even fewer used capital-related pay (2.4%). ('Mitarbeiterbeteiligung - ein guter Weg zu höherer Produktivität und Flexibilität', Claus Schnabel, in Sozialer Fortschritt 53 (2004) 4). As performance-based pay has been found to be associated with superior economic performance in empirical studies, scope for more such agreements that are potentially mutually beneficial seems to exist in Germany, according to some observers.

A number of recent studies highlight current tendencies in work organisation in Germany, notably:

• analysis of a longitudinal data set (1991-8) from the metalworking industry demonstrates the economic relevance of innovative work organisation. 'The empirical analysis reveals that the organisation of work has changed considerably during the period under consideration. Moreover, it appears that not only the number of HPWP [high-performance work practices] but also their specific combination have - other things equal - an economically relevant and statistically significant and positive influence on firm performance while at the same time their impact on labour demand is significant and negative. The latter finding is likely to explain the scepticism of many works councils towards these HPWP,' ('High performance work practices und betriebliche Mitbestimmung: Komplementär oder substitutiv? Empirische Befunde für den deutschen Maschinenbau', Bernd Frick, in Industrielle Beziehungen, 9, 2002); and

• using individual data from the European Survey on Working Conditions covering the 'old' EU 15 Member States in 2000, an August 2004 study finds that 'workers from Germany show a relatively low involvement in flexible work system'. More generally, the results suggest that innovative workplace organisations appear to be more common in the Scandinavian countries, the UK, Ireland, the Netherlands, Austria, and Luxembourg, when compared with the Southern European countries, Belgium, France and Germany. This is said to be problematic for Germany since the study also finds that a higher involvement of workers in 'high-performance workplace' organisations appears to be associated with higher job satisfaction.

Debate and prospects

What impact has the kind of agreement referred to above had in your country, and what impact might such agreements have in future? What is the current debate on the topic? Please provide an assessment of prospects for the future in terms of work organisation bargaining in your country (differentiating by sector, if relevant).

Social partner representatives have made several statements. with regard to changes in 'qualitative' collective bargaining that addresses changes in work organisation. For example, in 2003. Robert Reichling, the head of the wage and collective bargaining section at the Confederation of German Employers’ Federations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) stated: 'In addition to wage rates and working times, qualitative aspects of collective bargaining have, in the last few years, also become the focus of attention in these collective agreements. The qualitative aspects of collective agreements can, in the future, fulfil genuine service functions for firms. It should, of course, be noted that these qualitative elements should not be allowed to become obligatory quantitative cost burdens. Collective agreements should, in terms of their qualitative aspects, only set out broad guidelines. It should then be up to companies to provide the actual policies that will be implemented. For example, qualifications are only meaningful where further training measures are not only necessary, but also geared towards covering the qualification needs of the firm. The actual extent and content of vocational further training must, therefore, remain the prerogative of companies. The needs of firms cannot be determined well enough either by policy makers or by the collective-agreement partners (unions and employers’ associations).'

Mr Reichling added that also in the areas of pension provision, equal opportunities for men and women, and working time flexibility via either long-term or life-long working-time accounts, the primary concern of collective agreements and laws should be only the provision of either options for firms to take up or general guidelines that allow for variations between firms. Compulsory regulations that must be adhered to are often counterproductive, he argued.

According to Wolfgang Schroeder, a senior representative of IG Metall, 'over the last few years, many new subjects have become included within the areas discussed as parts of qualitative collective agreements. For instance, employment guarantees and questions related to qualifications and pensions have been discussed as parts of collective agreements.' In Mr. Schroeder’s view, this is a consequence of the reduced provisions of the welfare state as well as the transformation of company structures. These recently discussed areas have also served to make 'work-life' coordination problems easier to solve. Furthermore, he pointed out: 'From the perspective of German trade unions, it is a matter, on the whole, of providing regulations that are legally binding, so that, amongst other things, individual workers can be protected against the arbitrary behaviour of employers.'

Against a background of globalisation, which results in increased competition, restructuring of companies, new technologies and changes in work organisation and high levels of unemployment, new forms of collective agreements are emerging. For example, the Auto 5000 project (see above) shows that, despite some initial problems cost reductions can be achieved through innovative organisational changes. Similar arguments apply to many other 'pacts for employment and competitiveness' at the firm level in Germany. A major characteristic of such agreements in Germany is an attempt to negotiate mutually acceptable solutions and to reconcile the concerns of workers for their jobs with the maintenance or improvement of business competitiveness. Differences exist, however, between employers' associations and trade unions with regard to the question of the scale of concessions needed from either side in order to solve the problem of low growth and high unemployment in Germany (DE0408204F). (Lothar Funk, Cologne Institute for Business Research, IW)