Flexible pay disputes and decentralisation are key trends in bargaining

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In the Netherlands' 2000 collective bargaining round, larger employers are seeking more flexible pay systems, while trade unions resolutely oppose virtually all such arrangements. Meanwhile, the tendency towards decentralisation in the setting of terms and conditions of employment seems to be continuing, as evinced by the collapse of the sectoral agreement for banking and the growing role of works councils.

Collective bargaining in early 2000 has been marked by two main trends - efforts by employers to secure flexible pay arrangements, and a tendency towards decentralisation.

Employers seek pay flexibility

During early negotiations in the 2000 bargaining round, groups such as Philips and Akzo have made the introduction of "flexible pay" into their collective agreements a top priority. The larger companies' proposals on this point result partly from guidelines laid down by the main Dutch employers' organisation, VNO-NCW.

The Federation of Small and Medium-Sized Businesses (Midden en Klein Bedrijf, MKB) rejects the concept of performance-related pay, citing the inherent overload of paperwork and arbitrariness associated with individualised payment, but endorses flexible pay. Recent data indicate that employees in sectors marked by personnel shortages already routinely earn more than the amount agreed in the relevant collective agreement. MKB wishes to incorporate this distinction into collective agreements. It also accuses the trade unions of failing to support employees at the lower end of the labour market in setting their wage demands for the 2000 bargaining round at 4%.

Although the trade unions reject performance-related pay as such, their stance on individualised payment seems to show signs of a shift. In early March 2000, the civil servants' union CFO, which has 86,000 members and is affiliated to the Christian Trade Union Federation (Christelijk Nationaal Vakverbond, CNV), announced that an annual pay increase need not necessarily be automatic if an employee's performance is deemed inadequate. However, CFO rejects any comparison of this approach with performance-related pay.

Performance-related pay in action

The new collective agreement for the computer company Origin, which has 6,250 employees in the Netherlands, provides for a performance-related pay scheme (a form of which had been included in the previous agreement). Employees considered to have performed well will have the general pay rise of 2% increased to at least 3%. In response to this agreement, Henk Van der Kolk, the bargaining coordinator for the largest trade union confederation, the Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV), clearly indicated that FNV would no longer summarily reject performance-related pay. He said that this type of pay is acceptable under the conditions that employees are in favour of it, that employees may enter an appeal against decisions related to pay increases, and that the performance-related award is on top of an overall pay increase. FNV also believes that the performance-related increases should be incorporated into pensionable earnings to the highest degree possible and that the goals set for employees should be reasonable.

Performance-related pay continues to be a bone of contention in larger multinationals such as Akzo and Philips. Although in the 2000 bargaining round the trade unions rejected Akzo's proposals to permit pay to be to adjusted downwards, a joint task force has been established to study "modern forms of payment (NL0003183N)".

Philips, with 44,000 employees covered by bargaining, has also proposed replacing its uniform pay increase system with a more flexible arrangement. Allied Unions (FNV Bondgenoten), the largest union at Philips, has rejected the proposals. Although not entirely unwilling to consider flexible pay in certain forms, such as group pay or additional bonuses, FNV Bondgenoten rejects outright adapting the various pay scales instead of implementing a collective pay increase. The union is seeking a 4% pay increase over one year and the consolidation of an annual bonus of 3% of pay. A further union demand is increased certainty for flexible contract employees (of whom there are approximately 4,000 at Philips), who, it is claimed, should be paid according to the Philips collective agreement and offered permanent employment after the second flexible contract.

Decentralising the bargaining structure

Having been under pressure for some time (NL9905139F), the banking sector collective agreement finally collapsed at the end of 1999, with a number of banks deciding to conclude their own company-level agreements. Of the three largest banks - ING, ABN AMRO and Rabo- ING had made the most progress in crafting its own agreement by March 2000. Other banks which have opted for company-level bargaining are Achmea and SNS Reaal.

The move towards decentralisation is apparent both at a sector level and among larger groups of companies. For example, the KBB department store group wishes to set the terms and conditions of employment for personnel in its different operating companies in separate collective agreements. To a certain degree, the trade unions accept decentralisation, but wish to continue regulating factors such as pay and working hours at central level.

Elsewhere, employers' associations continue to push for simplification of current collective agreements, which they believe are far too bulky and detailed, and see the regulation of different issues at different levels as a solution. Again, the trade unions are not opposed to this in principle; in fact, the largest trade union in the energy and utilities sector, the FNV-affiliated AbvaKabo, has proposed the creation of a three-tier structure. At present, there is a single collective agreement for energy and utilities companies, and separate sector-wide agreements for telecommunications activities and refuse-processing companies and environmental consultancies. Water works also have a separate agreement. The proposed three-tier structure is comprised of: a framework agreement for the entire group of sectors; agreements for the individual sectors; and company provisions at the level of separate businesses. The framework agreement would mainly deal with social security (including supplementary arrangements related to sickness, disability, unemployment and early retirement). The sectoral agreements would deal with pay, working hours, job evaluation and other elements of remuneration (overtime, shiftwork, etc). Finally, specific provisions for individual businesses would be regulated further in consultation with works councils. Employers in the construction sector had previously proposed a similar structure to replace this industry's current highly detailed agreement.

Decentralising responsibility to works councils

Although the powers of works councils are predominantly determined by the Works Councils Act (Wet op de Ondernemingsraad, WOR), they can be expanded through provisions in a collective agreement. Collective agreements can also assign works councils a role or responsibility in filling in the details of a specific arrangement provided for in that agreement.

The evidence is that works councils are increasingly being awarded more responsibilities and powers, especially in terms of being required to flesh out the details in sectoral collective agreements at the individual company level. Recent studies (see "De volwassen OR" [The mature works council], RH van het Kaar and JC Looise, Alphen aan den Rijn, Samsom (1999) and "Medezeggenschap: een hele onderneming" [Co-determination: a major undertaking], Y van Brummelen and JP van den Toren, Utrecht, CNV Onderzoek en Ontwikkeling (1998)) show that such a role is granted in some form or other to nearly one-third of works councils. While the powers of the works council vary under each collective agreement, a right of approval is given to the council in about 60% of all cases where a role has been granted. Sectoral agreements mainly grant works councils responsibilities and powers in the area of working schedules, including working hours, shiftwork, days off, etc.

Commentary

During the mid-1990s, employers mainly focused on the subject of working time and, as a result, flexibility increased noticeably. Flexibility of payment is currently at the top of their agenda, but up until now, employers have failed to achieve any significant progress in this area, particularly in the more traditional and established businesses and sectors (NL9712149F).

Concerning the level at which terms and conditions of employment are set, the prevailing trend towards decentralisation appears to be persisting. Sector-wide collective agreement are either disintegrating or taking on a new, stratified structure, and numerous group-wide agreements are under pressure, while at the same time the role of works councils continues to grow.

Despite such developments, the collective agreement itself as a tool has few critics. Employers acknowledge the importance of maintaining a greater or lesser degree of order regarding terms and conditions of employment, as illustrated by comments made recently by the employment conditions coordinator of the General Industrial Employers' Association (Algemene Werkgevers-Vereniging, AWVN). The fact that collective agreement are coming into existence in sectors where they were previously unknown, such as the arts and information technology, confirms this. Decentralisation continues, but seems headed towards a sort of natural "floor". (Robbert van het Kaar, HSI)