Use of opening clauses in collective agreements

* 30 June 2005

Source: IAB Establishment Panel, 2005

The findings indicate that large establishments are still predominately covered by branch-level collective agreements. Moreover, small establishments that are not covered by collective agreements also make use of branch-level collective standards as a guideline to negotiate wages. Therefore, collective bargaining remains the most significant system of wage determination. However, the IAB data also confirm a declining coverage of collective agreements since the early 1990s. Furthermore, the data indicate that establishments increasingly prefer a system of wage determination that allows for higher adjustment flexibility.

Role of opening clauses

In order to prevent companies from completely avoiding collective agreements, the social partners have been discussing ways to make collective agreements more flexible. According to the German Works Constitution Act (Betriebsverfassungsgesetz), the management and the works council are not allowed to conclude a works agreement that deals with collective bargaining issues. However, if an opening clause exists in a collective agreement and if certain preconditions hold, companies may deviate from the collective standards. The premises, scope, content and formal specifications of the deviating agreement at the company level are frequently stipulated by both the union and the employer organisation. Different forms of opening clauses are prevalent in Germany:

1. Opening clauses for working time adjustments mostly delegate the allocation of working hours and the handling of overtime to the actors at company level. In this respect, a ‘working-time corridor’ (Arbeitszeitkorridor) allows the company to reduce or extend working times within certain limits.

2. If an establishment suffers serious economic problems, a specific opening clause (Härtefallklausel) enables the company to pay its employees wages below the collective standards. However, this holds true only for a limited period of time. If employees are to be paid below the collectively agreed rates, either the works council or the management has to apply for an exemption from the collective agreement. Social partners then decide whether or not an exemption is appropriate, given the economic situation of the establishment.

3. Opening clauses that also require the approval of the social partners (Öffnungsklauseln mit Zustimmungsvorbehalt). While the works council and management can negotiate a works agreement that deviates from the collective agreement, the validity of any such works agreement requires the consent of both the union and the employer organisation.

4. Opening clauses that do not require the approval of the social partners (Öffnungsklauseln ohne Zustimmungsvorbehalt) – certain issues that are stipulated in the industry-wide collective agreement are left open to self-governed negotiations between the works council and the company management. The resulting works agreement is valid without the prior consent of the social partners.

5. Opening clauses for small-sized companies (Kleinbetriebsklauseln) – small companies can devise singular agreements allowing for lower wages. For example, eastern German retail establishments with up to 25 employees are allowed to pay lower wages; the wages fall short of the collectively agreed standards by 4%.

Distribution of opening clauses

According to the study, 13% of the companies surveyed in both eastern and western Germany that are covered by collective bargaining confirmed that opening clauses exist in their collective agreements (Table 2). Of these establishments, 52% made use of opening clauses in 2005. These clauses were most frequently used in the transport and communications sector in both western (74%) and eastern Germany (88%). Establishments in the construction sector in eastern Germany (89%), as well as those in the consumer goods sector in western Germany (73%), also applied opening clauses frequently.