Collective bargaining in the information technology sector
Published: 27 May 1999
The development of new economic branches such as information technology (IT) and "industry-related services" has created new areas which are often not covered by collective agreements. Newly founded firms and spin-offs of traditional industrial companies usually avoid being bound by collective agreements. Some companies are even said to outsource service activities in order to avoid existing agreements which were designed for production activities and which are perceived to be incompatible with the demands of a service company. As yet, there are no sector-specific collective agreements for the IT industry.
Industrial relations and collective bargaining vary considerably within the German information technology sector, as research published in early 1999 confirms. A number of prominent companies are not bound by collective agreements with trade unions. Pay and working time regulations differ considerably between companies bound by traditional sectoral agreements and by those with firm-specific or individual agreements.
The development of new economic branches such as information technology (IT) and "industry-related services" has created new areas which are often not covered by collective agreements. Newly founded firms and spin-offs of traditional industrial companies usually avoid being bound by collective agreements. Some companies are even said to outsource service activities in order to avoid existing agreements which were designed for production activities and which are perceived to be incompatible with the demands of a service company. As yet, there are no sector-specific collective agreements for the IT industry.
Many companies in the IT sector, which comprises hardware and software production and services, started as outsourced computer centres or spin-offs of well-known firms from the metalworking industry. Prominent examples are Daimler-Benz InterService AG (Debis) and Gedas, a 100%-owned subsidiary of Volkswagen. While their parent companies are usually bound by collective agreements, this is not always the case for such service companies.
Collective bargaining coverage in IT firms
Industrial relations and collective bargaining in the IT sector are quite heterogeneous. While unions have managed to conclude collective agreements with some of the bigger firms, others are still not bound by collective agreements. This is confirmed by a recently published study by two staff members of the Industriegewerkschaft Metall (IG Metall) metalworkers' union ("Auf dem Weg zur Tarifbindung im Informations- und Kommunikationssektor", H Wagner and A Schild, in WSI Mitteilungen 52 (1999)).
The table below gives an overview of the way in which pay and working conditions are regulated in prominent IT companies. Four main categories can be distinguished:
sectoral agreements. Many companies still rely on metalworking industry sectoral collective agreements which, among other provisions, restrict working time to 35 hours per week. The service company Debis, however, concluded a firm-specific supplementary agreement with IG Metall in 1998 which modifies the sectoral agreement, for instance by allowing longer working hours (DE9803257F);
company agreements. Some companies have concluded company agreements with either IG Metall or with the salaried employees' union (Deutsche Angestellten-Gewerkschaft, DAG). A special case is IBM Deutschland GmbH which consists of several divisions - while the computer-producing IBM Speichersysteme GmbH is still bound by the metalworking sectoral agreement with IG Metall and thus by the 35-hour working week, the more software-oriented IBM Informationssysteme GmbH concluded a company agreement allowing longer working hours with DAG in December 1998 (DE9901194N), which was extended to cover more employees in April 1999;
works agreements. Some companies try to regulate working conditions by means of works agreement s with their works councils. This is criticised by the trade unions, which point out that the Works Constitution Act (Betriebsverfassungsgesetz) gives priority to agreements with unions; and
no collective agreements. Instead of using collective agreements, some companies negotiate and lay down pay and working conditions in individual employment contracts. Prominent examples are SAP and Hewlett-Packard, neither of which come from traditional metalworking backgrounds.
| Company | Collective agreements with unions | Kind of agreement regulating pay and conditions | Standard weekly hours |
|---|---|---|---|
| Bull | Yes | Sectoral agreement (metalworking) | 35 |
| Debis | Yes (for about two-thirds of employees) | Supplementary agreement to sectoral agreement (metalworking) | 35-40 (depending on age and workload) |
| Digital/Compaq | Yes | Sectoral agreement (metalworking) | 35 |
| DITEC | Yes | Sectoral agreement (metalworking) | 35 |
| EDS | No | Concern-level works agreement | 40 |
| Hewlett-Packard | No | Individual contracts | 38 ( 2 on long-term hours account) |
| IBM Informationssysteme | Yes | Company agreement (with DAG) | 38 ( 3 according to individual contracts) |
| IBM Speichersysteme | Yes | Sectoral agreement (metalworking) | 35 |
| Microsoft | No | Works agreement | 40 |
| SAP | No | Individual contracts | 40 |
| Software AG | No | Works agreement | 40 |
| UNISYS | Yes | Company agreement (with IG Metall) | 37 |
| VW Gedas | No | Works agreement | 37 |
Source: Wagner and Schild (1999), based on information from IG Metall.
Pay and working hours arrangements
Depending on the sort of agreement which applies, standard working hours differ considerably between IT companies. While firms bound by the sectoral agreement for the metalworking industry are restricted to 35 hours per week, standard hours in firms with company agreements or other forms of regulation can be as high as 41. It should be noted, however, that actual working hours in IT are often higher than standard hours. In this sector, computer programmers, software engineers and many other employees do not work by the clock but by targets, making extensive use of long-term flexitime.
Concerning wages and salaries, IT companies tend to make more use of performance-related bonus payments than other firms. In contrast with the sectoral agreement for the metalworking industry, where performance-related payments do not play an important role for salaried employees, IT companies negotiating on their own usually make a substantial part of annual remuneration dependent on individual and company performance. This is also the case with the supplementary agreement at Debis, where bonus payments depend half on individual performance and half on company performance.
Commentary
The growing importance of the information and communication technology industry and of "industry-related services" pose new challenges for German trade unions. Due to structural change, the sectoral demarcations of traditional collective bargaining units often no longer correspond with current economic structures. While traditionally there exist clear demarcation lines between German unions' fields of activity, some unions have started to compete with each other in organising employees and concluding collective agreements in the expanding IT sector and also in the telecommunications industry.
This sort of competition may help to generate collective agreements providing the more flexible working conditions needed in these sectors, where the organisation of work and the qualification of employees often differ considerably from that in traditional manufacturing. While many prominent IT companies rely on some sort of firm-specific or individual agreements, the Debis agreement of 1998 shows that even the traditional sectoral agreement for the metalworking industry can be supplemented and modified in order to meet the requirements of IT companies. Only if trade unions are prepared to make such flexible deals can they expect to increase their bargaining coverage in this sector. (Claus Schnabel, IW Köln)
Eurofound recommends citing this publication in the following way.
Eurofound (1999), Collective bargaining in the information technology sector, article.
