Social partners agree national pay settlement

Social partners have worked out a tripartite framework for a new centralised national agreement on wages and conditions. The 25-month agreement offers a 4.3% pay increase with a lump sum payment of €150 in January 2012. It also covers issues affecting the quality of working life. The government is supporting the agreement with tax reliefs worth €400 million. The agreement will only take effect if sectoral coverage is 100%, with 25 November the deadline for negotiations.

Background

A tripartite framework for a new centralised national agreement on wages and working conditions working conditions has been worked out between Finland’s social partners. The agreement will be for 25 months, offering a pay increase of 4.3 % by the end of the agreement period, with a first increase of 2.4% covering the first 13 months, and a further 1.9% increase for the remaining 12 months. A lump sum payment of €150 at the beginning of 2012 is also included in the agreement.

It is estimated that this agreement will raise the annual cost burden for employers by 2.05%.

On the employees' side, the boards of the Central Organisation of Finnish Trade Unions (SAK), the Finnish Confederation of Salaried Employees (STTK) and the Confederation of Unions for Professional and Managerial Staff in Finland (AKAVA) have all approved the deal. The employers' representatives at the Confederation of Finnish Industries (EK) have also accepted the agreement.

Complex negotiation process

In late September and early October, the Finnish social partners tried to produce a centralised wide-ranging incomes policy accord, but both SAK and STTK rejected the pay increase offer put forward by EK.

The first deal rejected by SAK and STTK had a similar wage solution to the one eventually accepted, with a 2.4% rise during the first 13 months and then an increase of 1.9% in the remaining 12 months. After its unanimous rejection by the trade union side, the Managing Director of EK, Mikko Pukkinen, said the attempt to reach a centralised national incomes agreement had ended and there would be no return to the tripartite negotiating table.

After the collapse of the first attempt, the Metalworkers' Union (Metalli), the Trade Union Pro (Ammattiliitto Pro) and the Finnish Electrical Workers´ Union (SA) filed a strike warning for 44 companies belonging to the Federation of Finnish Technology Industries (Teknologiateollisuus).

Government intervention

However, the negotiations started again after an intervention from Prime Minister Jyrki Katainen.

Prime Minister Kataineen met the leaders of labour market confederations, and after the meeting said it was good that negotiations were continuing. Due to the intervention of the government and several changes of the agreement in working life regulations, the social partners succeeded in reaching a new national accord within a week. From the basis of the centralised agreement, individual trade unions and member associations of EK will enter into sectoral collective agreements, on 24 November at the latest.

The new Finnish government, formed in May 2011, had indicated from the beginning that it would be willing to consider tax incentives in exchange for a moderate pay agreement, and will almost certainly welcome the prospect of a centralised deal rather than settlements reached between individual unions and employer federations. The government is supporting the centralised accord with €400 million in tax relief.

The final agreement will only take effect if sectoral negotiations result in broad enough coverage. EK has stated that it wants 100% coverage, and if important branches stay out of the agreement, it could jeopardise the realisation of the agreement. These negotiations must conclude by 25 November 2011.

The agreement also includes several substantial quality of working life issues that include:

• the opportunity for employees to participate in paid training of three days per year to increase their expertise;

• a two-week extension of paternity leave which can be used flexibly until a child is two years old;

• the status of fixed-term employees and temporary agency workers is being strengthened. A proposal for legislative changes concerning the grounds of temporary agency work and temporary employment will be submitted accordingly by the end of March 2013;

• an amendment to the act on cooperation within undertakings to include flexible working hours, grounds for temporary employment and enhancement of employee vocational skills in human resources plans. The associated statutory amendment proposals will be submitted no later than the end of November 2012;

• a revision of labour protection legislation to focus special attention on the strain imposed by shift work;

• a study of the use of working time banks, with associated legislative proposals submitted no later than the end of November 2012;

• a study of the effectiveness of pay reviews with a view to promoting equal pay, forming the basis for proposing further measures no later than the end of May 2012;

• planned cuts in Finland’s job alternation scheme will be cancelled.

In addition to the key points of quality of work/life issues, the agreement contains initiatives concerning the harmonisation of work and family life, enhancing trust in the labour market and improving employee security in enterprise downsizing.

Social partners satisfied with agreement

The representatives of social partners are in favour of the accord. EK’s Mikko Pukkinen said it brings stability, which is needed at a time when economic instability is increasing. Mr Pukkinen also suggested that a centralised accord would help prevent an upward spiral of costs and wages. The President of Akava, Sture Fjäder, said he was more than satisfied with the new national centralised accord and added that the pay increase model was similar to the one considered acceptable by Akava.

The President of SAK, Lauri Lyly, said the agreement was good for employees, highlighting the significant investment in quality of working life and workplace development outlined in the accord. Mr Lyly was particularly pleased that employees could improve their vocational skills by participating in the annual three-day training, and those employees over 55 could use these three days to improve their employability.

The President of STTK, Mikko Mäenpää, said the agreement was offering a good pay increase to employees in a challenging economic situation and in the middle of an unclear economic outlook. In STTK’s view, the centralised agreement opens a new route for the development of tripartite cooperation on issues surrounding the quality of working life that had, in its opinion, recently become stalled.

Statements critical of the new centralised agreement have come from the Federation of Finnish Enterprises (Suomen Yrittäjät). According to Suomen Yrittäjät’s Chair, Mikko Simolinna, the agreement does not encourage employment and the pay increase was too high. Suomen Yrittäjät did not take part in the collective bargaining process.

Commentary

After a break of several years, social partners have now re-entered into a centralised settlement. The national centralised incomes policy settlement was last applied in Finland in 2005–2007. In 2008, the Confederation of Finnish Industries (EK) announced that sectoral, company and even individual-level bargaining would be the negotiation models of the future. Trade unions and some key politicians have, however, kept the door open for centralised accords.

With an uncertain economic situation in Europe and throughout the world, wide-ranging wage coordination should benefit both employees and companies by offering stability and predictability. EK has however emphasised that the agreement is a framework agreement within which employer associations and trade unions can reach their own agreements on the size of pay increases.

Pertti Jokivuori, University of Jyväskylä