Autumn 2010 collective bargaining round

New collective agreements for about 300,000 employees have been made so far this autumn in Finland. In line with the Confederation of Finnish Industries’ guidelines, the average general wage increase has been 1% and the average validity of the agreements is one year and three months. All include a company-specific increment that can be used to reward earnings performance, competence or work performance, as well as to adjust wage structures within enterprises.

So far, new collective agreements for approximately 300,000 employees have been made this autumn in Finland. The autumn 2010 bargaining round has been taking place in the context of a severe economic crisis which has weakened the competitiveness of many Finnish companies. At the same time, the overall economy and exports have started to grow again. In 2009, average employee earnings increased by 3.9%, although Finland experienced a sharp drop in gross domestic product (GDP) of about 8%.

EK sets policy guidelines for employers’ negotiators

In August, the Board of the Confederation of Finnish Industries (EK) urged its affiliated federations of employers to:

  • expand opportunities for local- or company-level wage formation;
  • ensure that wage settlements would boost cost competitiveness, economic growth and employment.

The EK Board stressed that, in certain industries and in many companies, there is simply no scope at all for pay increases owing either to the economic situation or impaired cost-competitiveness. EK warned that it is vital to ensure that no general pay increase exceeding 1% is agreed in any industry. According to EK, individual enterprises must be given the opportunity to decide on the content of wage settlements.

The Board also announced that it will continue to coordinate collective bargaining of EK-affiliated employer federations in order to ensure wage moderation. In practice, this means that the general wage increase should not exceed 1%.

Opinion of trade unions

At the beginning of September, the leaders of six industrial trade unions in Finland announced their determination to cooperate with each other during the ongoing round of collective bargaining. Close cooperation will primarily mean exchange of information and common analyses of inflation and other economic factors. More concrete forms of collective support could also be considered, if necessary, but the option was left open for the time being.

The unions that agreed the plan of close cooperation represent close to 200,000 employees. They are:

TEAM, which was created recently through a merger of two federations (FI1001019I), organises workers in the chemical, oil, graphic, textile, rubber, glass and pharmaceutical industries. TU is a member of the Finnish Confederation of Professionals (STTK).

For this round of collective bargaining, which focuses mostly on pay negotiations, the six unions have agreed on several common starting points. They argue that the purchasing power of employees in all industries has to be secured by pay rises, and that since the predicted inflation for 2011 is more than 2%, the 1% upper limit for wage increases set by EK is too low.

However, the union leaders refrained from putting a concrete number on their own wage demands, except for the STTK-affiliated TU which said it was looking for a pay increase of close to 3% in the wood mechanical industry and threatened strike action if its demands were not met.

Currently negotiated wage and salary increases are only valid for the next two years (2011 and 2012), as most collective agreements are set to expire in early 2013. But if the union and employer representatives fail to agree on pay decisions, the agreements may be cancelled before their expiry date.

The need for the closer coordination and cooperation between the unions is understandable and can be seen as a response to the EK’s policy coordination. During a joint press conference, union leaders criticised EK which, according to them, concentrates all the power of industrial relations. According to union leaders, EK is offering more power of decision to different industries and companies, and simultaneously setting its own general condition for negotiations.

In their joint statement, the six unions say: ‘Bargaining has to take place between the representative negotiators of the relevant industries, without intervention by third parties.’ In other words, the trade unions are demanding that EK stops intervening in industry-specific negotiations.

New agreements follow the general line

The Finnish Metalworkers’ Union (Metalliliitto) and the Federation of Finnish Technology Industries ( Teknologiateollisuus) reached an agreement on a new pay settlement in August. The agreement provides for a 1% overall pay increase for all employees and the possibility for personal rises of up to 0.5%. The contract also allows for local contracts under different terms. The agreement covers almost 200,000 employees and is valid until the end of 2012, with annual talks on any pay rises after this autumn.

The Executive Board of the Federation of Professional and Managerial Staff (YTN), which is affiliated to the Confederation of Unions for Academic Professionals (AKAVA), has also approved a pay settlement for senior salaried employees in the technology industries in line with the recommendation of an industry background group. The pay settlement will increase the payroll for senior salaried employees in the sector by 1.5% in October 2010, of which 1% will be paid as a general salary increase and the remaining 0.5% will take the form of a local element payable in accordance with guidelines formulated by the negotiating federations. Larger salary increases may occur where so agreed through local bargaining, depending on the financial position of individual enterprises.

According to these two agreements, the appropriate pay rise will be negotiated locally at the workplace level. If no local agreement is reached, salaries will be raised by 1.5%, effective 1 October 2010, of which 1% will be distributed as a general pay rise and 0.5% in the form of discretionary pay rises.

New collective agreements have also been reached for another 40,000 employees, including salaried employees within the mechanical forestry, carpentry and information and communication technologies (ICT) industries, and for senior salaried employees within the planning and design field.

So far, new collective wage agreements covering about 300,000 employees have been concluded between trade unions and employer organisations that are EK members. The latest wage settlements have been agreed in the technology industry, information technology (IT) service sector and insurance sector. The average general wage increase through these agreements is 1%, and their average validity is one year and three months. All the wage settlements include allowances for company-specific increases that can be used to reward earnings performance, competence or work performance, as well as to adjust wage structures within enterprises.

Negotiations to continue into next year

Wage negotiations will continue within several industries, affecting around 60,000 employees. These industries include information and logistics, communications and logistics, chemical, and branches represented by the Employers’ Association for Transport and Special Services (LTY). The current collective agreements for these industries may be terminated by the end of 2010 or in early 2011 if a wage settlement is not reached.

New collective agreements will also be negotiated by the end of 2010 for about 55,000 employees working in flight services, the financial sector and the pharmacy industry.

In the private sector, wage and collective agreement negotiations will continue over the winter and next spring. These wage negotiations will affect about 380,000 employees.

In the public sector, wage adjustments in local (municipal) and central government (state) will also be negotiated in January 2011. The current agreements may be terminated at the end of February 2011 if a wage settlement is not reached.

Commentary

In its August statement, the EK Board stressed that there is no scope for wage increases owing to either the economic situation or impaired cost-competitiveness. In addition, the Board considered it vital that enterprises be given the opportunity to decide on the content of wage settlements, and that in order to curb rising labour costs, the general increase should not exceed 1%.

The initially angry reaction of the trade unions to EK’s pay increase coordination and policy guidelines seems to have evaporated. So far, EK’s guidelines on wage increases have been observed in all new wage settlements which have continued to include special allowances for local pay agreements.

The structure of wage bargaining has been changing in recent years with a significant shift towards company-level settlements. Since 2007, about half of all employees in the private sector have been covered by company-specific pay increases which have usually been a part of the wage settlement. Since 2009, the share of local pay rises has been a third of total pay rises on average, which is in line with the objectives of EK and its member associations (FI0803019I).

Pertti Jokivuori, University of Jyväskylä

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