Wage negotiations provoke conflict as companies return to profit

French workers are facing real cuts in their standard of living as pay increases fail to keep pace with inflation. Workers have, on the whole, refrained from taking action against their employers throughout the worst of the global economic crisis. However, recent union protests and a few local strikes called in response to a series of below-inflation pay increases have demonstrated the impatience of workers, and their apparent willingness to participate in strike action.

The average wage increase in France for the first quarter of 2011 is 2.6% and while this figure is up on the previous year, it is much lower than the average increases seen throughout the last ten years, at 3.3%.

According to HR Consultancy firm Aon Hewitt, ‘total wage increases will be maintained at a low level despite signs of an economic recovery’.

Although the position of trade unions appears weakened by rises in unemployment, a drop in purchasing power combined with higher energy prices has prompted workers to take strike action. This environment, combined with the fact that some of France’s biggest household names in the CAC 40 (France’s stock exchange index) have doubled their profits over the past 12 months, has produced fertile conditions for collective action.

Employees become impatient

According to Les Échos, trade union demands are once again focusing on pay increases as a result of higher fuel prices. Despite concerns about rising unemployment, the impatience of workers is growing, according to Pierre Beretti of the consultancy Altedia. ‘Employees played the game during the crisis, but their impatience [now] shows,’ he said.

All of this has led to industrial action across a number of companies, such as Faurecia, Mondadori and Intermarché and local strikes at Keolis, Valeo, JCDecaux and Fenwick. Less favourable pay offers led to recent strikes at Prisma, where strike action led to an improved offer. Recently, in response to what was perceived as an unfair pay offer of €200, workers of Thales Communications took industrial action across half of the company’s sites.

The latest results from the Agency for Research, Studies and Statistics (DARES) of the Ministry of Work, Employment and Health, suggest that wage increases in basic monthly salaries (excluding extra payments such as premiums and overtime) increased by an average of 1.8% in the past 12 months. DARES notes: ‘With a slower progression in their basic monthly salary, employees will experience a loss of purchasing power of 0.1%’.

Although companies are trying to moderate wage increases, they are trying to retain the best performers by rewarding them with increases in bonuses and other premium extras. According to Ariane de Calbiac, responsible for remuneration policy at Aon Hewitt:

HR directors are confronted with the double challenge of justifying the increase to their employees while having to retain the best performers to prepare for the future.

Some wage increases as high as 4%

However, despite the level of inflation, a number of large companies have made concessions to their workforce. At L’Oréal, for example, the overall increase in salaries for 2011 (including individual increases) will be 4.7%. Employees at EDF will see a rise of almost 4% in their wages, in addition to an increase of 4.4% last year. Some 17,000 workers at Total will receive an average of at least 3.3% and at PSA Peugeot Citroen and Renault workers will receive an increase of 3%.

However, such increases buck the overall trend. De Calbiac suggests that ‘companies have certainly seen signs of recovery but prefer to remain cautious’. According to research conducted by HR firm Mercer France on 66 companies in December, wage increases, including both collective and individual agreements, will stagnate at 2.6%.

Companies need to boost the wages of better performers

Of course, while the action of workers in some companies has improved the initial pay offer, not all worker protests have been successful. At Alcatel-Lucent, despite a return to profitability, workers have seen no pay increase for two years. According to French Democratic Confederation of Labour (CFDT) representative Roland Tutrel, workers want ‘increases in line with the cost of living’. However the company has since made clear that its offer of a wage increase of €50 per month is final.

According to the National Association of Human Resource Directors, companies are seeing an average rise of 3% in their wage bills. However the organisation’s President, Jean-Christophe Sciberras, suggests companies need to boost the wages of better performers. In previous years companies have tended to prefer to reward employees collectively, rather than offer individual increases. But this, according to de Celbiac, ‘does not improve the motivation of the better performers’.

David Tarren, HERA