Banking sector bargaining system examined

By comparison with other sectors in Austria, collective agreements in banking cover a relatively broad range of issues and provide for pay and conditions which are comparatively favourable to the employees. This feature examines the distinctive institutions and actors of bargaining in the sector and the issues and problems that the bargaining system currently faces. In 2001, the banking social partners are reviewing the largely seniority-based payment system.

Collective bargaining in Austria's banking sector has a number of distinctive features. In the wake of the conclusion of a new industry-wide collective agreement for the sector in January 2001 (AT0103210N), we take this opportunity to look at the system of collective bargaining and the challenges it is currently facing.

Economic context

Unlike the situation in some other Organisation for Economic Cooperation and Development (OECD) countries, pay and conditions in the Austrian banking sector are above the national average This is most evident with regard to earnings: in 1999, a banking employee's average gross annual income stood at ATS 532,469 (EUR 38,697), which was 167% of the average for the whole economy. These favourable employment terms originate in the fact that the sector was for many years dominated by public ownership and also protected from international competition. Since the 1990s, this has changed in the wake of privatisation and Austria's accession to the European Union, which unleashed major restructuring, including mergers and takeovers. However, recent employment growth and high profitability suggest that the sector has successfully adjusted itself to the new circumstances. In 1999, the banking sector had 79,134 employees (2.8% of all Austrian employment).

Institutions and actors

Again in contrast to some other OECD countries, collective bargaining Austrian banking relies exclusively on multi-employer settlements. This is due to Austria's labour law, which privileges multi-employer bargaining in that it attributes the right to bargain to individual firms in only a few exceptional cases. The structure of the bargaining system echoes the sector's differentiation by type of bank and ownership. Distinct collective agreements exist for the commercial banks, the savings banks, the mortgage banks owned by the federal states (Länder), cooperative banks of the "Raiffeisen" type and cooperative banks of the "Schulze-Delitzsch" type (in Austria and Germany, cooperatives are run on these two different sets of principles). Special employers' associations represent each of these five employer groups in collective bargaining. However, they have only one trade union counterpart, the Union of Salaried Employees (Gewerkschaft der Privatangestellten, GPA).

In terms of the actors involved, the bargaining system in banking differs from the standard pattern in Austria in that the five employer groups are represented by voluntary employers' associations. In almost all other sectors, collective bargaining on behalf of the employers is exclusively conducted by the corresponding sectoral subunit of the Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ), of which membership is obligatory (AT0009230F). All five employer groups also have their own special subunits within WKÖ, so that - from a formal point of view - there is a dual system of employer representation. In practice, the offices of the relevant WKÖ subunits are run by the corresponding voluntary employers' association. The fact that the same representatives occupy leading positions in each of the WKÖ subunits and corresponding voluntary associations also ensures close ties between these two types of employers' organisations.

This unique arrangement dates back to a 1947 agreement between WKÖ and the banking sector's voluntary employers' associations. From WKÖ's perspective, the system is attractive because it saves resources. For their part, the voluntary employers' associations can benefit indirectly from WKÖ's privileged position in concertation and consultation. In terms of collective bargaining, this arrangement means that agreements are signed formally by the voluntary associations, except in the case of commercial banks where both the voluntary and obligatory association act as signatory parties. The aim of this latter arrangement is to extend the agreement's coverage to commercial banking employers which are not affiliated to the voluntary association. For the other four voluntary associations, this is no problem because membership of the associations is 100% among employers. Union density in the sector is about 43%. Collective bargaining coverage in banking is 100%, reflecting the level of employer density.

While distinct collective agreements are formally concluded for each of the five employer groups, there is a practice of conducting joint negotiations. As a consequence, the agreements share the same main elements.

The banking sector's collective agreements are complemented by works agreements (Betriebsvereinbarungen) between management and the works council in individual companies which provide for employment terms that are more favourable to the employees, compared with the sectoral collective agreement. According to labour law, however, works agreements are not authorised to fix wage increases.

Issues and problems

In Austrian terms, the banking sector's collective agreements are extraordinarily rich in terms of the issues covered. This includes provisions for occupational pension schemes, something which is rare in Austria. The collective agreement for the savings banks also contains clauses on tenure of employment. These clauses refer to employees who have worked 10 years or more in the same enterprise. According to the collective agreement, an enterprise is obliged to give tenure at least 70% of its employees recording such a length of service. The occupational pension scheme established by the collective agreement for commercial banks also, de facto, provides for tenure. This is because the scheme implies that the enterprise would be obliged to pay older employees their pension benefits in the event of dismissal, even though the employee had not not reached the statutory retirement age.

Length of service is also an important component of the payment system established by the banking collective agreements. The payment system is based on pay grades (demarcated in terms of skills requirements and job demands) which in turn are subdivided into pay bands referring to the employees' length of service with the employer concerned. The pay bands endorse the seniority principle in the payment system, in that the employees move to higher pay bands as their length of service increases, with a regular and automatic increment.

This payment system has increasingly met with criticism from the employers, which argue for a weakening of the seniority principle by reducing the 30 existing pay bands to five or six. This position reflects a general employers' interest in more flexible and performance-related pay. In accordance with this wish, the 2001 collective bargaining round saw the employers seeking to have part of the pay increases paid in the form of a one-off, non-recurring bonus (AT0103210N).

This criticism of the payment system by the employers coincides with GPA's growing concern about the declining ability of the system actually to govern pay conditions in practice. This decline is mainly manifested in the fact that "overpayment" above the collective agreed rates runs at about 30% in the sector. One reason for this is that actual job profiles have moved away from what is traditionally defined in the pay grades. In the course of the 2001 bargaining round, the two sides of industry thus agreed to enter negotiations over a reform of the payment system.

Another feature of the sector is the remarkable difference in pay between the sexes. On average, female employees earn only 55% of the income of their male counterparts in banking - for the whole economy the corresponding figure is 60% (AT0103209F). Together with insurance, the banking sector records the highest gender-related pay differentials in Austria. These differentials can mainly be traced to the fact that part-time work is widespread among female employees in banking. It is important to note that the negative impact of part-time work on income extends beyond the lower number of hours worked, compared with full-time jobs. This is due to reduced opportunities for advancement. This is especially relevant in banking as a result of its elaborate internal labour market. As a rule, part-time employees have no opportunity either to participate in their enterprise's qualification and training programmes, or to achieve leading positions. A shift from full-time work to part-time work may also cause a loss of income when this affects the job profile so significantly that the employee moves back to a lower pay grade. For all these reasons, female employees are strongly under-represented in the banking sector's leading positions, which in turn translates into lower overall pay levels.

Commentary

The process of economic restructuring which banking has undergone since the mid-1990s has not challenged the institutions of the bargaining system. However, a need for adjustment has emerged, as far as the content of the sector's collective agreements is concerned. In line with Austria's principles of social partnership, the bargaining parties are likely to reach a consensus on the reform of the payment system in banking, all the more since GPA successfully negotiated a similar reform package for the manufacturing sector in 1997. (Franz Traxler, University of Vienna)