Changes to wage-setting mechanisms in the context of the crisis and the EU’s new economic governance regime

  • National Contribution:

  • Observatory: EurWORK
  • Topic:
  • Plaća i dohodak,
  • Working conditions,
  • Date of Publication: 17 lipnja 2014



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This report explores the impact of the crisis on wage-setting mechanisms in the 28 EU Member States plus Norway. It also examines the impact of the EU’s new economic governance regime – specifically the requirements of the country-specific recommendations and Memoranda of Understanding – on wage-setting mechanisms. It looks at changes in wage bargaining levels, the extent of horizontal coordination across bargaining units, links between the different levels involved in wage setting, minimum wage-setting and indexation mechanisms, and the volume and duration of collective wage agreements. The report examines the factors influencing changes, chiefly economic and political ones, and addresses the role of different institutional actors in initiating and implementing changes, including the social partners, national governments and the European and international institutions. Overall, the extent and consequences of change in wage setting has been greatest among the countries receiving financial assistance packages from the troika of European and international institutions.

The study was compiled on the basis of individual national reports submitted by the EIRO correspondents. The text of each of these national reports is available below. The reports have not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The national reports were drawn up in response to a questionnaire and should be read in conjunction with it.

Download the report (pdf, 288kb)

See also the executive summary

National contributions may be available


Introduction

Since the onset of the crisis in 2008, wage-setting regimes in parts of Europe have undergone profound change. This comes after a lengthy period marked by an overall trend towards decentralisation, but otherwise relative stability in wage-setting mechanisms across Europe. There are multiple dimensions to the regimes through which wages are set, and countries differ considerably in the nature of the mechanisms they use. Collective wage bargaining between employers and trade unions can be on a multi-employer basis, establishing wage standards which are sector-wide, even cross-sector, in the scope of their application. Alternatively, collective wage bargaining arrangements can be on a single-employer basis, at either company or establishment level. In general, the coverage of collective wage-setting arrangements established by multi-employer bargaining tends to exceed that established by single-employer bargaining. Further, under multi-employer wage bargaining, ongoing pressures for decentralisation in wage setting has been reflected in the growing possibilities for further negotiation over wages at company level, or for differential application of sector and cross-sector agreements. Collective wage bargaining arrangements can also be the focus of supportive state policies, including extension procedures and the favourability principle, under which the standards specified in agreements at lower levels must generally improve on those contained in higher level agreements. The state can also play an important role in wage setting through statutory minimum wage arrangements and wage indexation mechanisms. Alternatively, minimum wages may be negotiated between employers and trade unions at sector or cross-sector level.

The crisis has triggered substantial changes in wage bargaining regimes in a number of countries and further extended the existing trajectory towards decentralisation in others. Also, several countries have seen few or no changes in wage-setting mechanisms. Where changes have occurred, in some Member States they have come as an internal response to changing conditions, while in others they have been triggered by European-level policies (such as annual country-specific recommendations under the EU’s new economic governance regime) or as part of the reform programmes required by the troika of European and international institutions – the European Commission, European Central Bank (ECB) and International Monetary Fund (IMF) – as a condition of financial assistance packages provided to some countries. It is among this last group of countries, which includes Cyprus, Greece, Ireland, Portugal, Romania and Spain, that wage-setting regimes have undergone the most extensive changes.

This comparative report is a follow-up to a wider Eurofound project on the impacts of the crisis on industrial relations and working conditions, comprising an overview report, a previous European Industrial Relations Observatory (EIRO) comparative report on The impact of the crisis on industrial relations, a report from the European Working Conditions Observatory (EWCO) on The impact of the crisis on working conditions in Europe and two literature reviews. In particular, the earlier EIRO comparative report drew attention to the impact that the crisis was having on wage-setting mechanisms in the private sector in several EU Member States. The more important impacts which it identified included changes in levels of bargaining; the spread of opt-out clauses in sector agreements, enabling companies to derogate from wage standards under specific circumstances; inversion of the favourability principle to allow company-level agreements to take precedence over sector ones, even if the wage standards specified were inferior; and changes restricting the use of extension mechanisms.

This report charts and analyses the main changes that have taken place in wage-setting mechanisms in the 28 EU Member States (EU28) plus Norway since the onset of the crisis in 2008. It examines the factors influencing changes, distinguishing between economic and political ones. It addresses the role of different institutional actors in initiating and implementing changes, including the social partners, national governments and the European and international institutions. In respect of the last, attention is paid to the impact of the EU’s new economic governance regime and, in the case of countries receiving financial assistance packages, of the requirements contained in the Memoranda of Understanding with the troika.

The first section of this report charts changes in six main dimensions of wage-setting mechanisms since 2008: main levels of bargaining; horizontal coordination across bargaining units; linkages between levels under multi-tier bargaining, including opening and opt-out clauses; reach and continuity of collective bargaining, including extension mechanisms; minimum wage setting and wage indexation; and parametric outcomes, including the number of agreements and their duration.

The second section explores whether changes have been principally influenced by economic or political factors and, in terms of economic factors, differentiates between macro- and micro-economic influences. The third section investigates the relative weight of the main institutional actors in bringing about the different changes, including employers’ organisations and trade unions, national governments and European and international institutions (the European Commission, European Central Bank and the IMF). Finding that the European and international institutions have exercised considerable influence over changes in a number of countries, the fourth section considers in more detail the impact of the EU’s new regime of economic governance as well as the Memoranda of Understanding between the troika and the respective national governments which govern the financial assistance packages in several countries. The fifth section presents the perspectives of employers and trade unions on the changes which have taken place, and identifies areas of common ground as well as some noticeable differences. The sixth section offers a commentary on the nature and wider implications of the changes which have occurred in wage-bargaining regimes.


Main changes in wage-setting mechanisms since 2008

Mechanisms for collective wage setting are multi-dimensional and vary considerably across the EU Member States. A key distinction is between multi- and single-employer wage-setting regimes (see Table 1). Under the former, negotiations between employers’ organisations and trade unions lead to agreements at sector, inter-sector and territorial levels. Under the latter, agreements are at the level of the company or the establishment. The levels at which wages are negotiated do not, however, straightforwardly correspond to whether wage-setting arrangements are multi- or single-employer in nature. Under multi-employer arrangements, bargaining over wages can occur at more than one level, involving multi-tier arrangements, for example the sector and the company and/or the inter-sector and sector levels.

In turn, a further feature of multi-employer bargaining is the extent to which bargaining across different levels is linked or ‘articulated’. In many Member States, the relationship between levels has been underpinned by the ‘favourability’ principle, under which agreements at lower levels can only improve on the standards established by higher-level agreements and, where applicable, the labour code. Increasingly, however, sector and/or inter-sector agreements have incorporated derogation clauses which allow companies to opt out of the standards specified, including on wages, under specific circumstances such as economic difficulties. A second form of linkage is (horizontal) coordination across bargaining units, such as the different sectors or – under single-employer bargaining – across companies.

The state may also provide supports for multi-employer collective bargaining, including legal underpinning for the favourability principle and legal provisions for the extension of agreements to cover firms (and their workforces) which are not members of the employers’ organisation concluding the agreement concerned. In some countries, continuity of coverage is ensured by legal provisions which prolong the life of agreements beyond their expiry date, until a new agreement is concluded.

Two types of collective wage-setting mechanism have more generalised effects: arrangements for setting minimum wage standards; and indexation mechanisms which automatically link wages to a measure of inflation. Minimum wage standards can be set statutorily, with or without formal consultation with the social partners, or be negotiated between employers and trade unions. Indexation mechanisms tend to be statutorily regulated, with or without social partner involvement.

In what follows, changes to wage-setting mechanisms are clustered into six main types:

  • main levels of bargaining;
  • horizontal coordination across bargaining units;
  • linkages between levels under multi-tier bargaining, including ordering between levels, opening and opt-out clauses, and extending bargaining competence to non-trade union based representatives;
  • reach and continuity of collective bargaining, including extension mechanisms and continuation of agreements following expiry;
  • minimum wage setting and indexation;
  • parametric outcomes, including the number of agreements and their duration.

Of these six main types of change, four are applicable to wage setting under both multi- and single-employer bargaining regimes: bargaining level; horizontal coordination across bargaining units; minimum wage setting and indexation; and parametric outcomes. Two mainly concern multi-employer regimes and are, for the most part, not applicable among single-employer ones: linkages between levels; and reach and continuity. It is therefore useful to identify whether countries are primarily characterised by multi- or single-employer bargaining. Table 1 indicates the prevalent bargaining regime in each of the Member States for 2008 and 2011. Four countries, Bulgaria, Cyprus, Luxembourg and Slovakia, are coded as having mixed regimes with multi-employer bargaining covering some parts of the private sector and single-employer bargaining other parts. The prevalent regime shifted from multi- to single-employer bargaining in two countries: Ireland and Romania (shown in bold). In both countries, this resulted from the demise of inter-sector agreements and a shift to primarily company-level bargaining.

Table 1: Prevalent bargaining regime
 

Multi-employer (MEB) or Single-employer (SEB) bargaining prevalent

  2008 2011
AT

MEB

MEB

BE

MEB

MEB

BG

Mixed

Mixed

CY

Mixed

Mixed

CZ

SEB

SEB

DE

MEB

MEB

DK

MEB

MEB

EE

SEB

SEB

EL

MEB

MEB

ES

MEB

MEB

FI

MEB

MEB

FR

MEB

MEB

HR*

MEB

MEB

HU

SEB

SEB

IE

MEB

SEB

IT

MEB

MEB

LT

SEB

SEB

LU

Mixed

Mixed

LV

SEB

SEB

MT

SEB

SEB

NL

MEB

MEB

NO

MEB

MEB

PL

SEB

SEB

PT

MEB

MEB

RO

MEB

SEB

SE

MEB

MEB

SI

MEB

MEB

SK

Mixed

Mixed

UK

SEB

SEB

Notes: The coding as MEB or SEB is derived from the ICTWSS Database measure of ‘Level’, the predominant level(s) at which wage bargaining takes place. Values of 3, 4 and 5 indicate that the sector and/or the cross-sector level is predominant: these correspond to multi-employer bargaining (MEB). A value of 1 indicates that the establishment or company level is predominant: this corresponds to single-employer bargaining (SEB). A value of 2 indicates an intermediate situation where sector and company negotiations each, respectively, account for at least one-third of those covered by collective wage-setting arrangements. ICTWSS codes five countries as 2: BG, CY, FR, LU and SK. Of these five countries, four are classified as ‘mixed’ in the table: BG, CY, LU, SK. FR is classified as MEB: the wage provisions of sector agreements are almost universally subject to legal extension.

See annex for list of country codes.

*Croatia is not included in the ICTWSS, and for 2011 has been coded on the basis of the EIRO country profile.

Change in bargaining regime shown is in bold (IE and RO).

Source: J. Visser, Database on Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts (ICTWSS), database, version 4, 2013.

Main levels of bargaining

Since 2008, 12 countries have reported some change in the main bargaining levels at which wages are determined, including several where the change involved has been considerable. The other 17 countries reported no changes in level. Of the 12 countries concerned, the dominant tendency was decentralisation, from the cross-sector towards the sector or company levels, and/or from the sector towards the company level. This accounted for changes in 10 countries: Austria, Bulgaria, Cyprus, France, Greece, Ireland, Italy, Romania, Slovenia, and Spain. In two countries, Belgium and Finland, changes were in the opposite direction and involved centralisation. The prevalence of decentralisation since the onset of the crisis continues, and has accelerated; it is the predominant tendency in the evolution of wage setting mechanisms observed since the late 1980s.

Concerning decentralisation, cross-sector agreements were terminated in Ireland and Romania. In Ireland, over 20 years of wage setting through cross-sector wage agreements came to an end in 2009 when the employers’ confederation, Ibec, formally withdrew from the national agreement. This followed the failure of talks, initiated in the light of the crisis, over the implementation of the 21-month wage agreement concluded in 2008. The collapse of the national agreement led to wage negotiations moving to company level. The trade union confederation, the Irish Congress of Trade Unions (ICTU), and Ibec concluded protocols providing guidance to company-level negotiators in 2010, and again in 2012. Furthermore, the sector-level wage-setting mechanisms which feature in a few sectors, and which have binding force, have been suspended indefinitely following a judicial ruling in 2013 (see below). In Romania, the 2011 Social Dialogue Act, enacted by the government without consulting the social partners, abolished the national cross-sector agreement which had hitherto provided the point of reference for wage negotiations at lower levels. It also replaced ‘branch’ agreements, with newly-defined and more disaggregated ‘sector’ agreements. By mid-2013, however, virtually no sector agreements had been concluded and in practice, to the extent that wages continue to be set through collective bargaining, negotiations are at company level. In Slovenia, up until 2009, there was a ‘fall-back’ cross-sector wage agreement which applied to those sectors which were not covered by a sector agreement. Trade unions and employers were not, however, able to agree on a renewal of the agreement when the previous one expired in 2009; in the sectors concerned, wage setting since then has been at company level. Employers are reported to be pressing for sector agreements to open up further scope for company negotiation. In two sectors, chemicals and construction, employers have unilaterally cancelled current agreements in 2013 to try to force through changes along these lines.

In Greece and in Spain, major changes in the principles and mechanisms linking bargaining at different levels (outlined below) have resulted in rapid decentralisation of wage bargaining towards company level. Government measures giving precedence to the outcome of company negotiations over the provisions specified in sector, or territorial, agreements have had the effect of sharply increasing the weight of company-level negotiations in the two countries’ multi-tier bargaining arrangements. In addition, in Spain, a 2012 cross-sector agreement between the social partners encouraged the development of wage bargaining at company level. In France, legislation adopted in 2008 requires companies with trade union representation to engage in annual negotiations on pay, thereby strengthening the role of company-level bargaining in wage setting.

In Bulgaria, the previous trend for sector agreements in parts of manufacturing to be replaced by company agreements is reported to have accelerated since 2008, with chemicals, electrical equipment manufacture and food processing being amongst the sectors where employers stopped negotiating at the sector level. Insofar as wages are governed by collective bargaining, this is now through company agreements. In Cyprus, the previous trend towards company agreements becoming more important for wage setting than sector agreements has accelerated since 2008.

In Italy, a 2011 cross-sector agreement concluded between Confindustria, the main organisation representing manufacturing and services companies, and the three main union confederations reformed the two-tier bargaining system, involving some weakening of the mandate of the sector level in wage setting, in favour of the company level, and introduced the possibility of derogation from the provisions of sector agreements for companies in economic difficulty. The shift in the relative weight of the sector and company levels in wage setting confirmed provisions in an earlier, 2009 cross-sector agreement which had not been signed by the largest union confederation, CGIL. A subsequent, 2012 cross-sector agreement, again not signed by CGIL, opened up scope for a further shift in the balance between the two levels over wage negotiation in favour of the company level. In addition, the withdrawal of Italy’s largest industrial employer, Fiat, from Confindustria towards the end of 2011, and therefore from multi-employer bargaining, in favour of its own single-employer bargaining arrangements, constitutes a significant further development. A shift of a different nature occurred in Austria’s metalworking sector, where the employers successfully pressed for the replacement of the single, sector-wide agreement with a set of agreements covering each of the six sub-sectors in 2012 (renewed in 2013), on the grounds that economic circumstances were increasingly different in the various sub-sectors.

Finland is one of two countries which have seen movement in the opposite, centralising, direction. In 2011, after an absence of four years, a two-year cross-sector wage agreement was concluded which provided a framework for subsequent sector and company negotiations. When the previous cross-sector agreement expired in 2007, reflecting pressure for employers for more decentralised wage setting (FI0806029I), it was replaced by sector-level agreements on wages in the 2008, 2009 and 2010 bargaining rounds. In 2011, the employers’ confederation EK indicated that they would be willing to conclude a national agreement in the light of the deepening economic crisis. Following difficult negotiations, which at one stage broke down, a further two-year cross-sector wage agreement was concluded in 2013. In Belgium, centralisation has taken the form of government imposition of the outcomes to the two most recent wage bargaining rounds, covering 2011–2012 and 2013–2014. In 2011, government intervention followed the failure of two of the three union confederations to agree the draft agreement. In 2013 the government ruled that no increase in wages was permissible beyond that generated by automatic indexation. Already, bargaining rounds since 2008 had seen a decline in the margin left available by the cross-sector agreement for wage negotiations at sector level.

Changes since 2008 in the main levels of wage setting are summarised in Table 2, distinguishing between whether the direction of change was towards centralisation or decentralisation.

Table 2: Changes in main levels of bargaining since 2008

Increased centralisation

Increased decentralisation

BE: government-imposed outcomes to 2011 and 2013 cross-sector wage bargaining rounds, with no wage margin for further negotiation at sector level.

AT: single metalworking agreement replaced by agreements covering each of six sub-sectors (2012).

FI: cross-sector wage agreements abandoned in 2007, but returned to in 2011 and 2013.

BG: acceleration of trend for sector agreements to be replaced by company ones.

 

CY: acceleration of trend for sector agreements to be replaced by company ones.

 

EL: legislative changes prioritising the company level and permitting negotiations with unspecified employee representatives in smaller companies prompted an upsurge in company agreements at the expense of sector ones.

 

ES: legislative change prioritising the company level, together with social partner encouragement, increased the weight of the company level in wage setting.

 

FR: 2000 legislation requires companies with trade union representation to engage in annual pay negotiations.

 

IE: breakdown of national wage agreement following employer and government withdrawal (2009).

 

IT: 2011 cross-sector agreement weakened sector-level mandate over wage negotiations in favour of the company level.

 

RO: cross-sector agreement abolished under 2011 legislation, which also had the effect of paralysing negotiating activity in newly defined sectors. Wage negotiations now mainly at company level.

 

SI: social partners failed to agree on a renewal of the ‘fall back’ cross-sector agreement, which applied in the absence of a sector one (2009).

Source: EIRO 2014

Horizontal coordination across bargaining units

Centralised wage bargaining arrangements at cross-sector level ensure coordination of wage setting across different sectors. In the absence of such, which is the case in most of the countries, various mechanisms can be utilised to effect horizontal coordination across different bargaining units. These include the different sectors but also, under single-employer bargaining, prominent companies. Changes in horizontal coordination were reported to have occurred in seven countries: Austria, Hungary, Ireland, Romania, Slovakia, Spain and Sweden.

In Ireland and Romania, the termination of national, cross-sector agreements has weakened coordination across sectors, particularly given that wage bargaining has largely moved to the company rather than to the sector level. In Ireland, the protocols agreed between Ibec and ICTU in 2010 and 2012 establish ground rules intended to orientate company-level negotiations, and thereby give some coherence to the new, decentralised bargaining regime. The protocols stress the need for negotiations to take account of companies’ business circumstances. No such development is evident in Romania. In Hungary, until 2011, employers and trade unions agreed a joint recommendation for wage increases as a guide for local negotiators, within the framework of the former tripartite body OÉT. With the abolition of OÉT, consultations on guideline wage increases now take place within the government’s consultative forum (VKF) after which the government issues its own recommendation.

In Spain, there was a break in 2009 in the cross-sector agreements which, since 2002, had established pay guidelines for sector and company negotiators, and therefore a degree of coordination. The employer and trade union confederations failed to agree on new guidelines in 2009, but were successful in doing so in 2010 and 2012. Slovakia has seen a strengthening of horizontal coordination, with the previous informal coordination across sectors being augmented by the establishment of a formal bi-partite social dialogue arrangement for industry in 2013.

Under the sector-based bargaining regimes in Austria and Sweden, which rely on pattern-setting to realise coordination, there have been changes in the nature of the pattern-setter. In Austria, the pattern-setting metalworking agreement has been separated into a set of agreements covering each of six sub-sectors from 2012. To date, wage outcomes in the six agreements have been practically identical. Even so, the implications for the previous pattern-setting role of the metalworking sector remain unclear. In Sweden, the pattern-setting role changed in 2010. Since the early 1990s, it had been the prerogative of blue-collar unions in the industry sector (following the move from central bargaining to sector-level bargaining). However, it was the white-collar unions in the sector which concluded the first agreement and thereby established the pattern.

Linkages between levels under multi-tier bargaining

Where more than one bargaining level is involved in wage setting, there are two main types of procedural mechanism which are utilised to link or articulate the levels concerned. The first are mechanisms governing the vertical ordering between levels, including the cross-sector (where applicable), sector and company levels. The second are opening and opt-out clauses in sector (or cross-sector) agreements, which specify circumstances under which further negotiation or derogation from the higher agreement can occur. In addition to these two, a third feature is also addressed below: extending competence to bargain over wages beyond trade unions to other types of employee representative. The rationale for including this last is that articulation between the sector level (where trade unions are the bargaining agent) and the company level is likely to be disrupted where bargaining competence is accorded to other types of employee representative within companies with which the union does not have a direct relationship. The issue of linkages largely concerns the 21 countries where there are multi-employer bargaining arrangements (coded as either MEB or Mixed in Table 1). Since 2008, changes in one or more of these three dimensions have occurred in 16 countries.

Ordering between levels

Labour law, in continental western and central eastern Europe, and basic agreements, in the Nordic countries, have applied the ‘favourability’ principle to govern the relationship between different levels of bargaining over wages and conditions. This holds that agreements concluded at lower levels can only improve on the standards established by higher level agreements. The exceptions to this general picture have been Ireland and the UK, reflecting their different legal tradition based on voluntarism. In the years preceding the crisis, France was the only country to make changes to the operation of the favourability principle. The 2004 Fillon law (FR0404105F) inverted the principle, giving precedence to agreements concluded at company level, over the provisions specified in higher level agreements, with the important exceptions of minimum wages and job classifications.

Since 2008, the operation of the favourability principle has been inverted or temporarily suspended in three countries: Greece, Portugal and Spain. In Spain, changes have been imposed by the previous and current governments in laws enacted in 2011 and 2012, respectively. In between, the social partners called in their 2012 cross-sector agreement for lower level agreements to specify the ways in which sectoral and provincial agreements were to be articulated with those concluded at company level. The 2011 law inverted the favourability principle as between sector or provincial agreements and company agreements, according priority to the latter for negotiations on basic wages and wage supplements. However, employers and trade unions had the option to re-establish the favourability principle under the relevant sector or provincial agreement, if they so wished. This possibility was removed by the subsequent 2012 law introduced by the incoming government, thereby also invalidating the intention of the 2012 cross-sector agreement. Nonetheless, employers and trade unions in some sectors, including chemicals, cork, construction and wood products, have subsequently concluded agreements reverting to the favourability principle.

In Greece, a 2011 law inverts the favourability principle as between the sector and company levels for the duration of the financial assistance measures provided by the troika of international institutions until at least 2015. The 2011 law also specifies that the standards specified in company agreements cannot be set below those of the general, cross-sector agreement. The latter, however, has had its competence to negotiate and set minimum wages removed (outlined below). In Portugal, the 2012 Labour Code (505Kb PDF) inverts the favourability principle, specifying that the provisions of agreements concluded at company level take priority over those contained in sector and cross-sector agreements, but allows employers and trade unions to negotiate a clause in higher-level agreements reverting to the favourability principle.

Opening and opt-out clauses

Opening clauses in sector and/or cross-sector agreements provide scope for further negotiation on aspects of wages at company level, such as variation in the timing and/or phasing of a wage award or in the implementation of a variable (productivity-related) element to wages. Opt-out clauses permit derogation under certain conditions from the wage standards specified in the sector and/or cross-sector agreement. In practice, the distinction is not always clear-cut, as in the inclusion of once-off opening clauses allowing variation in the implementation of wage awards in a few countries in 2009 and 2010. Changes in, or the introduction of, opening clauses relating to wages were reported in seven countries: Austria, Finland, Germany, Italy, Norway, Portugal and Sweden. The introduction of provisions for derogation at company level from standards specified in sector or cross-sector agreements featured in eight countries: Bulgaria, Cyprus, France, Greece, Ireland, Italy, Slovenia and Spain. The use of derogation is mainly limited to companies which are in economic difficulty, although how tightly this is defined varies.

Concerning opening clauses, Portugal’s 2012 Labour Code enables sector agreements to delegate the regulation of some issues, including wages, to other bargaining levels including company level. Italy’s 2012 cross-sector agreement promotes ‘devolution’ clauses in sector agreements intended to prompt bargaining on productivity-enhancing measures at company level. One-off, crisis-response clauses were a feature in Austria, Finland, Germany and Norway. In response to the sharp downturn in industrial output which marked the initial phase of the crisis, one-off opening clauses in Germany’s chemicals and metalworking sector agreements in 2009 and 2010 provided scope to vary the implementation of elements of the wage settlement. In Austria’s electronics sector, a one-off opening clause provided scope for companies undergoing a sharp decline in business activity to not implement the wage award in full. In Finland, several sector agreements in 2010 included a similar clause allowing individual companies to adjust the agreed wage increase to reflect their own financial circumstances. In Norway, a one-off opening clause in most private sector agreements provided local negotiators with the option not to implement the sector increase agreed for 2009. In Sweden, several plant-level agreements de facto varying the main sector agreement in manufacturing paved the way for the conclusion of a time-limited, sector-wide short-time working agreement in 2010 which facilitated local negotiations to maintain employment.

On opt-out clauses, introduction of the possibility of derogation primarily reflects legislative changes in Greece, Spain and – affecting certain sectors only – Ireland. In Bulgaria, Cyprus, France, Italy and Slovenia increased possibilities for derogation have resulted from negotiations at either the cross-sector or sector level. In Greece, a 2010 law introduced scope for company agreements to derogate from the wage and working time provisions of sector agreements in cases of economic hardship. The law was subsequently replaced by the 2011 law which gives precedence to the company over the sector level in establishing wage standards (see above). In Spain, the possibility was first introduced in a 2010 law which enabled the wage provisions of sector or provincial agreements to be modified by company agreements on grounds of economic difficulties. The 2012 cross-sector agreement subsequently encouraged the inclusion of opt-out clauses, on similar economic grounds, in sector and provincial agreements. However, this was overtaken by legislation enacted by the incoming government, which broadened the economic grounds and introduced further criteria such as technical and organisational change, under which company derogations could be invoked. In Ireland, 2011 legislation concerning those relatively few sectors where wage setting is legally governed through Registered Employment Agreements (sector agreements, such as construction and electrical contracting, which are accorded binding force under sector-specific extension) or Employment Regulation Orders (ratifying the recommendations of Joint Labour Committees in low-paid sectors such as hotels, catering, retail and cleaning where union density is low) introduced the possibility of derogation on grounds of economic difficulty (see under Extension mechanisms below for recent legal decisions suspending these two mechanisms).

In France, a 2013 cross-sector agreement, subsequently enacted as law, introduces the possibility of derogation for companies in economic difficulty subject to commitments to refrain from implementing redundancies. The 2011 cross-sector agreement in Italy introduced the possibility of derogation from the wage standards specified in sector agreements on the grounds of economic hardship. Subsequently, the government unilaterally imposed a legislative measure which broadened the circumstances where, and issues on which, derogation could be invoked. The measure was opposed by both the employers’ and trade union confederations. In Bulgaria, Cyprus and Slovenia, the inclusion of derogation clauses which can be invoked by companies in economic difficulty has been a feature of agreements concluded in several sectors from 2009 onwards.

Extending bargaining competence to non-trade union representatives

Articulation between levels is potentially disrupted where employee representatives other than trade unions, which always negotiate sector and cross-sector agreements, are accorded competence to conclude agreements at company level. An important difference is whether or not any such development involves trade union consent. Changes have occurred since 2008 in France, Greece, Portugal and Romania.

In France, a 2008 law implementing a cross-sector agreement aimed at promoting collective bargaining in smaller companies permits management to negotiate with the works committee, or formally elected and recognised personnel delegates, where there is no trade union presence. In Portugal, the conferring of bargaining competence on other employee representatives also involves trade union consent. Legislation in 2009 provided trade unions with scope to delegate negotiating responsibility to company-level employee representation structures in larger companies, employing 500 people or more. This threshold was lowered to 150 or more employees under the 2012 Labour Code, which retained the principle of delegation. Under the Memorandum of Understanding governing the financial assistance package provided to Portugal, the troika included a further change which would remove the condition for delegation to require trade union consent. To date, this has not featured in the government’s legislative proposals.

In Greece, under 2011 legislation, collective agreements can now be concluded in companies with fewer than 50 employees with unspecified ‘associations of persons’ which must represent at least 60% of the employees concerned. In practice, this establishes an alternative beyond trade union influence to the previous situation where such companies were generally covered by the provisions of sector agreements through the application of extension procedures. In Romania, legislation enacted in 2011 introduces tougher criteria for trade unions to secure representativeness status, which is a pre-condition for unions to undertake the negotiation of legally valid agreements at sector and company levels. Where unions do not meet the new criteria at company level, employers can now negotiate agreements with unspecified elected employee representatives.

A different development has featured in Hungary, where bargaining is single-employer based. Where trade unions are not present in a company, 2012 legislation extended negotiating competence to works councils.

Changes since 2008 in linkages between the different levels involved in collective wage bargaining are summarised in Table 3.

Table 3: Changes in linkages between levels since 2008

Ordering between levels

Opening and opt-out clauses

Extending bargaining competence to non-union representatives

  Opening clauses  

EL: 2011 legislation specifying that company agreements have priority over sector ones, although not over the cross-sector agreement, and can entail lower standards.

AT: one-off opening clause in electronics providing the option not to implement the sector wage award in full (2009).

EL: 2011 legislation allowing negotiations with unspecified employee representatives in smaller companies (<50 employees).

ES: 2011 legislation specifying that company agreements have priority over sector and provincial ones, and can entail lower standards.

DE: one-off opening clauses allowing variation in implementation of wage increases in chemicals and metalworking (2009, 2010).

FR: 2008 law allowing negotiations with works committees in smaller companies (<200 employees) with no union presence.

PT: 2012 Labour Code specifies that company agreements have priority over sector and provincial ones, and can entail lower standards.

FI: one-off opening clauses allowing variation in implementation of wage increases in several sectors (2010).

HU: 2012 legislation permitting negotiation with works council where no trade union is present.

 

IT: 2012 cross-sector agreement promoting devolution clauses in sector agreements, aimed at widening the company-level agenda.

PT: 2009 legislation conferring bargaining competence on works councils in larger companies (500+ employees) with trade union consent.

 

NO: one-off opening clause in most private sector agreements providing the option not to implement the sector wage increase (2009).

RO: 2011 legislation permitting negotiation with unspecified employee representatives where no ‘representative’ trade union is present.

 

PT: 2012 Labour Code enables elements of the sector bargaining agenda to be delegated to company level.

 
 

SE: 2010 short-time working agreement in manufacturing, facilitating local negotiation over shortened working time to maintain employment.

 
  Opt-out clauses  
 

BG: increase in the number of sector agreements with opt-out clauses.

 
 

CY: increase in the number of sector agreements with opt-out clauses.

 
 

EL: 2010 legislation introduced possibility for companies in economic hardship to opt out of sector agreements.

 
 

ES: 2010 legislation introduced possibility for companies in economic hardship to opt out of sector or provincial agreements. 2012 cross-sector agreement encouraged inclusion of opt-out clauses in sector and provincial agreements.

 
 

FR: 2013 cross-sector agreement, translated into law, introduces opt-out clause for companies in economic hardship conditional on ‘no redundancies’ commitment.

 
 

IE: opt-out clauses on grounds of economic hardship introduced in sectors governed by binding wage-setting mechanisms (REAs, EROs).

 
 

IT: 2011 cross-sector agreement introduced opt-out clause from sector wage standards on grounds of economic hardship.

 
 

SI: increase in the number of sector agreements with opt-out clauses.

 

Source: EIRO 2014

Reach and continuity of collective bargaining

Changes affecting the reach and continuity of collective wage bargaining arrangements have implications for the coverage of multi-employer agreements and concern two features. The first is mechanisms for the legal extension of the provisions of sector, or cross-sector, agreements to all employers and workers within the relevant domain. The second is clauses which provide for agreements to continue to have effect following their expiry, until a further agreement is concluded. As with the previous section, the issue largely concerns the 21 countries where there are multi-employer bargaining arrangements (coded as either MEB or Mixed in Table 1).

Extension mechanisms

Of the 21 countries concerned, 17 have extension mechanisms or a functional equivalent. Among the eight countries where single-employer bargaining arrangements predominate, there are procedures for legal extension of the few sector agreements that exist in the Baltic countries, the Czech Republic, Hungary and Poland. There is no legal procedure for extending collective agreements in Cyprus, Denmark, Italy and Sweden, Malta and the UK. In Italy, however, judicial decisions have long underpinned de facto extension of the wage provisions of sector agreements.

There have been changes to either extension procedures or in their use in eight countries: Greece, Ireland, Portugal, Romania, Slovakia, Bulgaria, Germany and Italy (concerning de facto practice). In Greece, a 2011 law, in effect, suspends extension procedures for the duration of the financial assistance measures provided by the troika, that is at least until 2015. The law exempted companies which are not members of employers’ organisations from any obligation to implement sector agreements. In practice, this has had a widespread impact among small companies, which have rapidly taken up the opportunity to negotiate company agreements with unspecified ‘associations of persons’, with less favourable provisions than those of the relevant sector agreement (see above). Portugal’s 2012 Labour Code specifies stricter criteria for the application of extension procedures, limiting this to sectors where the employers’ organisation’s member companies account for more than 50% of the workforce. Romania’s extension provisions were curtailed by the 2011 Social Dialogue Act, which stipulates that the newly-defined sector agreements (see above) are applicable only to the members of the employers’ organisation concluding them. In Ireland, decisions by the High Court (2011) and the Supreme Court (2013) found that Employment Regulation Orders and Registered Employment Agreements (REAs), which give binding effect to wage-setting mechanisms in some sectors (see above), were unconstitutional because the 1946 Industrial Relations Act did not provide ‘principles and policies’ to guide the Labour Court and Joint Labour Committees on how to exercise their power. Since 9 May, 2013 REAs, which cover sectors such as construction and electrical contracting, have ceased to have statutory effect in Ireland. The government has reaffirmed its commitment to introduce a new legal framework to replace REAs as soon as possible.

The procedure for triggering extension in Slovakia has been a source of controversy, and there have been several recent changes, with contrasting effect, in the legislation governing extension. A 2007 law had removed the requirement for the individual employer concerned to give consent to implementing extension, and provided for extension requests to be reviewed by a tripartite group. Following subsequent changes of government, this was first reversed at the end of 2010, and then reinstated with effect from the start of 2014. In Cyprus, which has not had extension provisions, an initiative was brought forward by the government in 2012 to introduce such provisions, but subsequently dropped following a change in government.

In Bulgaria and Germany, use of existing extension procedures has increased. Bulgaria has seen the activation of hitherto unused extension procedures, established in 2001, in some sectors from 2010 onwards. The number of sectors in Germany in which minimum wages have been declared legally binding, under legislation on posted workers, has increased. This reflects a growing problem of low pay in parts of the private sector. In late 2013, the new coalition government’s commitments included a measure intended to facilitate the uptake of extension procedures.

In Italy, the long-established practice, based on earlier judicial decisions, of the de facto, ‘quasi-legal’ extension of the wage and working time provisions of sector agreements has been called into question by recent court rulings which confirmed the validity of the new plant-level agreements unilaterally imposed by Fiat during 2011. These agreements include provisions on working time which go beneath the standards specified in the metalworking sector agreement. They were imposed prior to the company’s decision at the end of 2011 to terminate its membership of Confindustria and withdraw all its plants from the metalworking agreement.

Continuation beyond expiry

Clauses providing for agreements to continue to have effect beyond the date of expiry until a new agreement is concluded are intended to protect workers should employers refuse to negotiate a renewal. They are found in a number of countries, for example: Austria, Croatia, Denmark, Estonia, Greece, Portugal, Slovakia, Spain and Sweden.

Changes have been made to such provisions in five countries: Greece, Portugal, Spain, Croatia and Estonia. In Greece, a 2012 law introduced a three-month limit for the period beyond expiry, during which agreements can remain in force. After this period, only the basic wage specified in the agreement is payable (and no supplementary payments or other allowances). A 2012 law in Spain imposes a 12-month time limit, beyond which agreements will no longer have binding effect. As a consequence, considerable numbers of workers could lose the protection entailed by being covered by a collective agreement. Responding to this concern, the social partners adopted an agreement in May 2013 encouraging their affiliates to renew collective agreements. Portugal introduced legislation in 2009 which limited the continuation of agreements beyond expiry to 18 months, should renewal negotiations fail. Where the parties agree to the inclusion of a clause on the issue, the maximum duration permitted is five years. In Croatia, a 2010 proposal to limit the continuation of agreements beyond expiry was withdrawn following sustained trade union opposition. It was reintroduced in 2012 under a law which limits the procedure to three months. A 2012 law in Estonia replaces automatic continuation of agreements beyond expiry with the requirement that this should be agreed between the parties.

Changes since 2008 in the reach and continuity of collective wage bargaining are summarised in Table 4. For extension mechanisms, changes in use are differentiated from changes in the procedures themselves.

Table 4: Changes in the reach and continuity of collective agreements since 2008

Extension mechanism changed

Use of existing extension mechanisms changed

Continuation of agreements beyond expiry

EL: 2011 law in effect suspends extension by restricting its application to employers’ association member companies.

BG: activation of hitherto unused extension procedures in some sectors.

EE: a 2012 legislative change requires the parties to agree continuation of agreements in place of them being automatic.

IE: extension via Registered Employment Agreements (concluded in some sectors) suspended following 2013 Supreme Court ruling.

DE: increase in the number of sectors where minimum wages declared legally binding, under posted workers legislation.

EL: 2012 law introduced a three-month limit on continuation of agreements.

PT: 2012 Labour Code restricts extension procedures to sectors where employers’ organisation member companies employ >50% of the workforce.

IT: court rulings confirming the legal validity of Fiat’s new single-employer agreements call into question widespread practice of de facto extension of wage (and working time) clauses of sector agreements.

ES: 2012 law introduced a 12-month limit on continuation of agreements.

RO: 2011 Social Dialogue Act curtails extension by restricting its application to employers’ association member companies.

 

HR: 2012 law introduced a three-month limit on continuation of agreements.

SK: controversy over whether the consent of individual employers was required before applying extension procedure, resulting in three changes in legislation (2007, 2010, 2014).

 

PT: 2009 law introduced an 18-month limit on continuation of agreements, extendable to five years by agreement between the parties.

Source: EIRO 2014

Minimum wage setting and indexation

Collective wage-setting mechanism establishing minimum wages and providing for automatic adjustments to wages against an index measure of the cost of living have generalised effects on wage standards.

Minimum wage setting

Twenty-one of the EU28 plus Norway have statutory, universal minimum wages, while in Cyprus minimum wages are set for nine different occupations. There is no statutory minimum wage in Austria, Denmark, Finland, Germany, Italy, Norway or Sweden, where minimum wage rates are generally set by sector collective agreements. The incoming government in Germany is committed to introducing a statutory minimum wage within the next four years. Among the countries with statutory minimum wages a variety of mechanisms are involved including cross-sector agreements, as in Belgium or until recently Greece; tripartite bodies, as in Poland, the Baltic States and, until recently, Hungary; independent bodies which consult the social partners or to which the social partners can make representations, as in the UK; or government decision, with or without consulting the social partners, as in France and Slovenia (with consultation) or Spain (since 2011 without consultation).

Among the countries with statutory minimum wages, there were changes in 10: Croatia, Cyprus, Greece, Hungary, Ireland, Poland, Portugal, Spain, Slovakia and Slovenia. Germany, in addition, was the only country with sector-specific minimum wages where there was change. A 2012 law in Greece introduced change to minimum wage setting, as well as cutting minimum wages by more than 20% and freezing them until 2016. Previously, the minimum wage was determined by the cross-sector national agreement. From 2016 it will be set by the government, with the social partners having a consultative role only. In Ireland, the 2010 Memorandum of Understanding between the troika and the government imposed a cut in the minimum wage, subsequently restored in 2012 (by agreement with the troika). In addition, a 2012 law specifies that Joint Labour Committees, which set minimum pay rates in low-paid sectors where collective bargaining coverage is low, must now take account of competitiveness and labour market criteria in determining appropriate rates. In Cyprus and Portugal, the respective Memoranda of Understanding between the troika and the government impose restrictions on the criteria for increases in the statutory minimum wage and require any increase to be agreed with the troika.

In Hungary, the tripartite OÉT, until its abolition in 2011, had determined minimum wages. It was replaced by a new tripartite body, NGTT, with a consultative role only: government now determines minimum wages. Changes in three other central eastern European countries were aimed at strengthening the protection provided by the statutory minimum wage. Croatia introduced a statutory minimum wage in 2008, to be determined by the government according to a formula. Its introduction has affected the minimum wage levels specified in collective agreements. The formula was revised in 2013 by legislation which also provided for annual uprating. In Slovenia, 2010 legislation amended the previous, 2006, minimum wage law, introducing indexation on an annual basis against a measure of the cost of living. A government proposal to reverse this in 2013 was withdrawn following widespread trade union opposition. A 2008 amendment to Slovakia’s minimum wage legislation allows the government to increase the wage above the level indicated by the prescribed formula for uprating.

De facto changes in minimum wage setting featured in two other countries. In Poland, the government has unilaterally set the minimum wage from 2010 onwards, given the failure to agree on this by the Tripartite Commission. While this is envisaged under the procedures for setting the minimum wage, it does represent a change in practice. In Spain, since 2011, the government has discontinued the practice of consulting with the social partners before taking decisions on the level of the minimum wage.

Of the countries where minimum wages are sector-specific, Germany has seen an increase since 2008 in the number of sectors in which the minimum wages specified in the sector agreement have been declared legally binding.

Indexation

Indexation mechanisms, which trigger automatic increases in wages against some measure of the cost of living, are found in five countries: Belgium, Cyprus, Luxembourg, Malta and Spain. In addition, the price index utilised as a reference for cost-of-living wage settlements negotiated at sector level in Italy can be regarded as a proxy mechanism.

There have been changes, or pressure for change, in all six countries. Elsewhere, indexation was adopted in 2010 for the minimum wage only in Slovenia (see above). In the face of a country-specific recommendation under the EU’s new economic governance to reform its system of wage indexation, the Belgian government decided, in 2012, to retain the automatic wage indexation mechanism. It did, however, change the composition of the basket of goods and services used to calculate changes in the cost of living, so as to temper the effect of changes on the wage index. Luxembourg has also received country-specific recommendations from the EU to reform its wage indexation system. Negotiations on a reform in the Tripartite Coordination Committee failed in 2010, with unions opposing proposals tabled by the government and supported by employers. Subsequently, the government suspended the operation of the indexation mechanism for three years, from 2012 to 2014 inclusive, imposing fixed increases in wages instead.

In Cyprus, there has also been substantial debate on reform of the indexation mechanism which was also the subject of a country-specific recommendation from the EU. In 2012, a tripartite agreement provided for the continuation of indexation, but introduced temporary exemption for companies facing economic hardship. This was, however, overtaken by the Memorandum of Understanding governing the financial rescue package made available by the troika in 2013, which requires reform of the system. Government proposals include reduction in the frequency of adjustments, introducing the possibility to suspend automatic uprating under unfavourable economic circumstances, and moving from full to partial (50%) indexation. Implementation is awaiting tripartite agreement. Initially, the troika had sought the abolition of indexation. Malta also received a country-specific recommendation from the EU to reform its wage indexation system. The government has, however, contested the need for change (which was supported by employers and opposed by trade unions) on the grounds that the indexation mechanism ensures that cost-of-living related wage increases are received by many employees not covered by the decentralised, company-level bargaining arrangements which prevail. It took the decision in 2012 to maintain the current mechanism.

In Italy, the 2009 cross-sector agreement, not signed by the CGIL union confederation, introduced a new indicator of expected inflation as the reference point for sector negotiations, which conclude cost-of-living related wage adjustments. In Spain, wage revision clauses in collective agreements have acted as a functional equivalent to indexation. There has been a sharp decline in their use since 2008. Up until 2009, pay guidelines agreed by the social partners in periodic cross-sector agreements were based on officially projected inflation. Wage revision clauses subsequently adjust wages for any deviation between actual and projected inflation. The pay guidelines in the cross-sector agreements concluded in 2010 and 2012 no longer incorporated official inflation forecasts. Probably reflecting this, the proportion of the workforce covered by collective bargaining that was protected by wage revision clauses fell from two thirds in 2007, prior to the onset of the crisis, to an estimated one third in 2012.

Changes since 2008 in minimum wage setting and indexation mechanisms are summarised in Table 5.

Table 5: Changes to minimum wage setting and indexation mechanisms since 2008

Minimum wage setting

Indexation mechanisms

CY: Memorandum of Understanding governing financial assistance package imposes restrictions on criteria for any increase in the minimum wage, and requires international approval.

BE: 2012 change in the method of calculation to temper effect of price increases on wage indexation.

DE: increase in the number of sectors with minimum wages declared legally binding.

CY: 2012 tripartite agreement introduced temporary exemption for companies facing economic hardship. Further changes proposed by government, under the 2013 MoU, include reduced frequency of adjustments, possibility of suspension under unfavourable macro-economic circumstances, replacing full with partial (50%) indexation.

EL: 2012 law changed minimum wage setting, and froze the minimum wage until 2016. Minimum wage no longer determined by the social partners through cross-sector negotiations, but by government following consultation with the social partners.

ES: wage guidelines agreed between the social partners no longer incorporate official inflation forecasts (since 2009). Sharp reduction in number of agreements including wage revision clauses, which adjust for deviation between anticipated and actual inflation.

ES: de facto change. Since 2011, government has discontinued previous practice of consulting the social partners before determining the minimum wage.

IT: 2009 cross-sector agreement introduced a new indicator of expected inflation as the reference point for sector wage negotiations.

HR: statutory minimum wage introduced in 2008, determined by government according to a formula. Annual uprating introduced in 2013.

LU: following the failure of tripartite negotiations over reforming indexation, government suspended operation of indexation mechanism until 2014, imposing a fixed-rate increase for 2012–2014.

HU: abolition, in 2011, of the tripartite body which had determined the minimum wage. The new tripartite body has consultative status only, with government now deciding.

MT: no change, although CSR recommending this. Government decision to retain current mechanism in 2012, supported by social partners.

IE: 2010 cut in the minimum wage under the Memorandum of Understanding governing its financial assistance package. Restored in 2012, but required international approval.

 

PL: de facto change. Failure to agree on minimum wage level in Tripartite Commission, with result that government has unilaterally decided.

 

PT: Memorandum of Understanding governing financial assistance package imposes restrictions on criteria for any increase in the minimum wage, and requires international approval.

 

SI: 2010 legislation introducing indexation for the minimum wage.

 

SK: 2008 legislative change enabling government to increase the minimum wage above the level indicated by cost-of-living formula.

 

Note: CSR = country-specific recommendation

Source: EIRO 2014

Parametric outcomes

Both changed economic conditions and the changes to wage-setting mechanisms outlined in the previous five sections potentially affect the extent of collective wage bargaining activity. Data on collective bargaining coverage, that is the proportion of the workforce covered by collective bargaining, tend to become available only with some lag. The most recent figures in the database on Institutional Characteristics of Trade Unions, Wage-setting, State Intervention and Social Pacts ICTWSS are for 2010 and 2011, but these are available only for some of the countries covered in this report. The most recent year for which there is a complete set of figures for the EU28 (except Croatia) plus Norway is 2008. As an indicator of bargaining activity, EIRO respondents were asked to report on any change in the number of agreements being concluded since the onset of the crisis in 2008. They were also asked to report on any changes in the duration of collective wage agreements since 2008. Findings on both these parametric outcomes are summarised in Table 6.

Table 6: Changes in the number and duration of collective wage agreements since 2008

Country

Number of agreements

Duration of agreements

AT

No change

No change

BE

Small decline

No change

BG

Small decline

No change

CY

Decline

No change

CZ

Increase

No change

DE

Small decline

Increase then reduction

DK

No change

Reduction

EE

Decline

Reduction

EL

Steep decline (sector)

Increase (company)

Reduction

ES

Steep decline

Reduction

FI

n.d.

No change

FR

Increase

n.d.

HR

No change

No change

HU

n.d.

No change

IE

n.d.

n.d.

IT

No change

Reduction

LT

Decline

Reduction

LU

No change

n.d.

LV

Decline

No change

MT

Increase

n.d.

NL

No change

No change

NO

No change

No change

PL

Decline

No change

PT

Steep decline

No change

RO

Decline

Reduction

SE

No change

Reduction

SI

No change

No change

SK

Decline

No change

UK

No change

Reduction

n.d. = no data available

Source: EIRO 2014

Number of agreements

Estimates of the trend in the number of agreements are available for 26 of the 29 countries. The majority reported either a decline in the number of agreements (13 countries, including Greece) or no change (10 countries). Four countries reported an increase, including Greece, where numbers of company agreements increased while those of sector agreements declined.

In Greece, the number of company agreements increased sharply, rising from 238 in 2010 to 976 in 2012, reflecting the new possibilities to conclude agreements with associations of employees which do not have to conform with sector wage standards. The other three countries reporting increased numbers of agreements also did so in respect of company agreements. For France, the number of sector agreements remained unchanged. The increase reflects the effect of the 2008 law introducing an obligation for companies where there are union sections to negotiate annually over pay. In the Czech Republic and Malta, the company is the main level of bargaining. The Czech Republic experienced a step change in the number of company agreements between 2009 and 2010, possibly stimulated by the introduction of a short-time working scheme, which has subsequently been sustained. Malta saw a marked decline in the number of agreements concluded in 2009, 2010 and in 2011 compared with 2008, and then a sharp increase in numbers in 2012 to above 2008 levels. This might prove to be a ‘rebound’ effect.

Eight of the countries reporting a decline in the number of agreements are ones where multi-employer bargaining is prevalent, or there is a mixed pattern, and sector agreements feature prominently: Belgium, Bulgaria, Cyprus, Germany, Greece (sector agreements), Portugal, Slovakia, and Spain. In a ninth country, Romania, multi-employer bargaining was prevalent until the crisis. In the other four, single-employer bargaining, based on company-level agreements, prevails: Estonia, Latvia, Lithuania, Poland. Among the first group, the steepest declines are in Greece, Portugal and Spain. In Greece, as compared with the 70 sector agreements and 67 occupational multi-employer agreements concluded in 2010, only 10 and 2, respectively, were concluded in 2012. In Spain, the number of agreements in force (at sector, provincial and company levels) fell from almost 6,000 in 2008 to just over 3,500 in 2012. In Portugal, the numbers of sector and other multi-employer agreements concluded fell from 200 in 2008 to 115 in 2011 and 46 in 2012, while the number of company agreements declined from 95 to 55 and 39 over the same period. As a consequence, the number of workers covered has fallen dramatically from almost 1.9 million in 2008 to almost 1.25 million in 2011 and just 330,000 in 2012. In contrast, the declines reported in Belgium and Germany were modest or potentially time limited. In Belgium, the decline in the number of sector wage agreements concluded in 2013 compared with previous bargaining rounds in 2011 and 2009 is probably due to the removal of any wage margin for sectoral negotiation as a result of the government’s unilateral decision to limit wage increases in 2013 and 2014 to those arising from indexation. In Germany, fewer wage agreements were reported in 2011 and 2012 than in previous years for reasons which are unclear. The decline in the number of sector agreements in Bulgaria, Cyprus and Slovakia was modest in comparison with the sharp changes in Greece, Spain and Portugal.

In Estonia, Latvia, Lithuania and Poland, the number of company agreements has declined since 2008. In Estonia the number of agreements concluded fell from 88 in 2007 to 50 in 2012. Poland experienced a decline from 154 agreements concluded in 2008 to 92 in 2012.

Duration of agreements

Of the 25 countries for which data are available, a majority – 15 countries – reported no change in the normal duration of agreements. Ten countries reported some change: Denmark, Estonia, Germany, Greece, Italy, Lithuania, Romania, Spain, Sweden and the UK. All, with the partial exception of Germany, indicated a tendency for agreements to be of shorter duration than was the case prior to 2008. In Germany, agreement duration initially increased, in order to provide stability during the sharp downturn in economic activity, and then shortened, in the light of uncertain economic prospects. In the other countries concerned, the main reason for reducing the length of agreements was uncertainty over economic developments.

In Denmark, there was a general reduction in the duration of sector agreements from three years to two years from 2010 (when most previous agreements expired) onwards. Similarly, in Sweden, three-year sector agreements were replaced by ones lasting 18 to 24 months from 2010. Several agreements concluded in 2013 are again for three years, in the light of economic recovery. In Italy, the normal duration of sector agreements was reduced from four to three years under the 2009 cross-sector agreement. Spain experienced a decrease after 2008 in the proportion of sector agreements whose duration is for two or more years... The same applied to the proportion of company agreements which are multi-annual in Estonia, Lithuania and the UK. Reduction in the duration of agreements in Greece and Romania was the result of legislative intervention, which imposed three- and two-year limits, respectively, in place of open-ended duration.

Other indicators

In both the Netherlands and Cyprus, delays in the renewal of agreements were reported, with an increase in the number of agreements in force beyond their expiry. This reflected more protracted bargaining rounds.

The use of extension provisions has fallen markedly in Portugal, in part reflecting new restrictions on their use. The number of extension ordinances fell from 137 in 2008 and 116 in 2010, to 17 and 12 in 2011 and 2012 respectively.

Summary

Table 7 provides an overview of the countries involved in the different main types of change to collective wage-setting mechanisms, setting aside parametric outcomes.

Table 7: Main types of change in wage-setting mechanisms

Type of change

Countries

Main levels of bargaining  
Decentralisation

AT BG CY EL ES FR IE IT RO SI

Recentralisation

BE FI

Horizontal coordination across bargaining units

AT ES HU IE RO SE SK

Linkages between levels of bargaining  
Ordering between levels

EL ES PT

Opening and opt-out clauses

AT BG CY DE EL ES FI FR IE IT NO PT SE SI

Extending bargaining competence

EL FR HU PT RO

Reach and continuity of bargaining  
Extension procedures

EL IE PT RO SK

Increased / changed use of existing procedures

BG DE IT

Continuation beyond expiry

EE EL ES HR PT

Minimum wage-setting and indexation mechanisms  
Minimum wage-setting

CY DE EL ES HR HU IE PL PT SI SK

Indexation

BE CY ES IT LU [MT]*

Note: *Debate in Malta following an EU recommendation, but no change.

Source: EIRO 2014

Reviewing the cross-country pattern across the main types of change to collective wage-setting mechanisms (Table 7) reveals three clusters of country according to the number of changes which have occurred. Table 8 shows that there have been multiple changes in six countries: Cyprus, Greece, Ireland, Portugal, Romania and Spain, while there have been some changes in four countries: Croatia, Hungary, Italy and Slovenia. In the remaining 19 countries there have been fewer or no changes.

The six countries featuring multiple changes have all received financial rescue packages from one or more of the troika of international institutions, comprising the ECB, the European Commission and the IMF. The link between these rescue packages and the changes which have occurred in collective wage-setting mechanisms is explored in subsequent sections. In 2008, prior to the onset of the crisis, multi-employer bargaining constituted the prevalent bargaining regime in five of the six countries, while Cyprus was characterised as ‘mixed’ with both multi- and single-employer bargaining present. By 2012, multi-employer bargaining arrangements had been replaced by single-employer ones in Ireland and Romania. Among the other four countries, a distinctive characteristic of their multi-employer bargaining regimes, up until 2008, was the weakness or absence of procedural provisions articulating bargaining across the different levels. The changes imposed by governments in these countries, under external requirements, have, with the partial exception of Portugal, addressed the issue of articulation by weakening the role of higher level (variously cross-sector, sector or provincial) agreements and according priority to those concluded at company level.

Among the four countries featuring some changes – Croatia, Hungary, Italy and Slovenia – these have been primarily driven by domestic institutional actors, such as governments and/or employers and trade unions. Complying with the EU’s social acquis prior to accession has also been a factor in Croatia.

Table 8: Volume of changes to collective wage-setting mechanisms

Multiple or several changes

CY EL ES IE PT RO

Some changes

HR HU IT SI

Few or no changes

AT BE BG CZ DE DK EE FI FR LT LU LV MT NL NO PL SE SK UK

Source: EIRO 2014

Correspondents in the countries reporting few changes were asked to indicate possible reasons for the relative stability in collective wage-setting mechanisms. Responses were provided for 13 of the 19 countries concerned. Four different types of reason were identified, with some countries referring to more than one. First, the absence of a major impact on economic activity under the crisis, and hence pressure on wage-setting mechanisms, was mentioned in respect of four countries (AT, CZ, NL (until recently), NO). Second, the capacity of existing wage-setting mechanisms to adjust to the changed economic conditions was indicated for several countries with multi-employer bargaining arrangements (DE, DK, NL, SE, NO), Slovakia with mixed arrangements, and for the Czech Republic and UK, with single-employer arrangements. Among the first group, two-tier bargaining arrangements in the Nordic countries (with the exception of Finland) enabled local (company) settlements to rapidly adapt to the need to contain costs (as in the UK) while, in Germany and the Netherlands, hardship clauses in sector agreements offered the necessary scope for adaptation. Third, three countries indicated that collective bargaining plays a marginal role in wage setting (LT, LV, PL). In the two Baltic States, concern focused on reducing wage costs, and securing internal devaluation, which was not seen to entail changes to wage-setting mechanisms. Fourth, governments and social partners can resist (international) pressures for change, as in the case of Malta’s indexation system.


Economic and political factors

Changes in wage-setting mechanisms respond to both economic and political pressures. Correspondents were asked about the influence of three main factors or rationales on changes in the different aspects of wage-setting mechanisms detailed in the previous section. The three main factors were:

  • macro-economic, for example securing wage moderation or augmenting demand in the economy;
  • micro-economic, for example accommodating increased variability in the competitive circumstances of companies or responding to the situation of companies in economic difficulties or undergoing business restructuring;
  • state policies and/or recommendations or requirements from the European Commission and/or the ECB and/or the IMF aimed at weakening or strengthening state supports for collective bargaining.

For each of the six main types of change in wage-setting mechanisms, correspondents were asked to indicate whether one or more of these three main factors had been influential.

Main levels of bargaining

Of the 12 countries reporting changes in the main levels) of bargaining, the factors influencing change were identified for10, as shown in Table 9. Economic and political factors are both influential, with economic factors being cited for more countries than political ones. As between macro- and micro-economic factors, macro-economic factors were reported to be influential in the two countries – Belgium and Finland – which have experienced centralisation in wage-setting arrangements. In addition, for Ireland, the break-up of national bargaining was reported to have been motivated in part by macro-economic reasons such as securing wage moderation. In contrast, micro-economic factors are prevalent among the larger group of countries which have experienced decentralisation in the main levels of bargaining.

The main source of political influence was the European and international institutions, including recommendations under the EU’s economic semester system in Belgium and Spain and the terms of Memoranda of Understanding governing financial rescue packages in Greece and Romania.

Table 9: Economic and political factors influencing change in main levels of bargaining

Factors influencing change in:

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Main levels) of bargaining

BE FI IE

AT CY EL ES FR IE IT RO

BE EL ES RO

Source: EIRO 2014

Horizontal coordination across bargaining units

Changes in horizontal coordination across bargaining units were reported to have occurred in seven countries. The factors influencing these changes were indicated for five of these. In one, Sweden, the switch in pattern-setting in manufacturing from the blue-collar to the white-collar agreement reflects the influence of a further factor, namely industrial change. Findings for the other four countries are given in Table 10. This shows that macro-economic factors are influential in three countries where the nature of cross-sector coordination has changed: Hungary, Slovakia and Spain. Micro-economic factors in Austria relate to metalworking, and the different business conditions prevailing in the six sub-sectors. Government policy has been an additional influence in Hungary.

Table 10: Economic and political factors influencing change in horizontal coordination

Factors influencing change in:

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Horizontal coordination

ES HU SK

AT

HU

Source: EIRO 2014

Linkages between levels under multi-tier bargaining

Of the 21 countries with multi-employer, or mixed, bargaining arrangements, changes in one or more of the three dimensions to linkages between levels were reported in 16. Of these, the factors influencing change were indicated for 11 countries and are shown in Table 11. Of the two kinds of economic factor, it is micro-economic considerations that are the relevant ones. This reflects pressures to make wage-setting mechanisms more responsive to companies’ business circumstances. Micro-economic factors are cited as influencing changes in ordering between levels and in opening and opt-out clauses, where they are the most prevalent influencing factor, but not in the extension of bargaining competence to non-union representatives. In contrast, macro-economic factors are not judged to have been influential in changes to any of the three dimensions.

Political factors are reported to have exercised influence on changes in at least some of the countries concerned on all three dimensions. On extending bargaining competence to non-union representatives, political factors are cited as having been influential in three of the four countries concerned. Both national government and, in the cases of Greece, Romania, Spain and Portugal, the European and international institutions have been sources of political influence on the changes involved.

Table 11: Economic and political factors influencing change in linkages between bargaining levels

Factors influencing change in:

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Ordering between levels  

EL ES IT

EL ES PT

Opening and opt-out clauses  

BG CY ES IE IT NO PT SI

ES IE IT PT

Extending bargaining competence to non-union representatives  

FR

EL PT RO

Source: EIRO 2014

Reach and continuity of collective bargaining

Changes to extension mechanisms and/or to provisions governing the continuation of agreements following expiry were reported in 10 countries. Of these, the factors influencing changes were indicated for nine, as shown in Table 12.

On extension, macro-economic factors were reported to have been influential where augmentation or activation of extension mechanisms has occurred, on the grounds that this prevented undercutting of collectively agreed wages. In contrast, micro-economic influences were cited where extension mechanisms have been curtailed, better enabling wages to be set according to companies’ business conditions. But it is political influence that is more prevalent where extension arrangements have been curtailed. Such influence came from the European and international institutions in four of the five countries concerned, in the form of recommendations or requirements under the terms of Memoranda of Understanding governing financial rescue packages in Greece, Ireland, Portugal and Romania. In Slovakia, changes in government have brought repeated switches in policy on extension mechanisms.

On continuation of agreements beyond expiry, macro-economic factors, relating to capacity for adjustment to changed economic conditions, were cited as being an influence in three of the countries. The influence of political factors was, however, more prevalent, stemming from both national governments (Croatia, Estonia, Spain) and the European and international institutions (Greece and Portugal).

Table 12: Economic and political factors influencing change in the reach and continuity of bargaining

Factors influencing change in:

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Extension mechanisms

BG SK

EL IE

EL IE PT RO SK

Continuation of agreements beyond expiry

EL ES HR

 

EE EL ES HR PT

Source: EIRO 2014

Minimum wage setting and indexation mechanisms

Of the 14 countries reporting changes to either minimum wage-setting or indexation mechanisms, or to both, the factors influencing changes were indicated for 13, as shown in Table 13. Both macro-economic and political factors are influential in almost all of the countries concerned. Micro-economic factors feature for Germany only, where minimum wages are sector-specific and their implementation affects the conditions of competition within a sector.

On minimum wage setting, the influence of macro-economic factors includes both countries where minimum wage protection has been strengthened (Croatia, Slovenia and Slovakia) and those where it has been weakened (Cyprus, Greece, Ireland, Portugal). Different macro-economic considerations are likely to feature among the two groups, relating to sustaining or stimulating demand in the first, and constraining growth in wage costs in the second. Political factors are also influential in all these countries, and additionally in Hungary. Political influence has primarily been exercised by national governments in Croatia, Slovenia, Slovakia and also Hungary. In Cyprus, Greece, Ireland and Portugal the European and international institutions have exercised influence through recommendations or requirements under the respective Memoranda of Understanding.

On indexation, the primary macro-economic consideration is constraining growth in wage costs. In three of the five countries concerned, political factors have also exercised influence, with the European institutions prominent. Country-specific recommendations (CSRs) under the EU’s economic system have featured in each case, as has the 2013 Memorandum of Understanding in the case of Cyprus.

Table 13: Economic and political factors influencing changes in minimum wage-setting and indexation mechanisms

Factors influencing change in:

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Minimum wage-setting mechanisms

CY EL HR IE PT SI SK

DE

CY EL HR HU IE PT SI SK

Indexation mechanisms

BE CY ES IT LU

 

BE CY LU

Source: EIRO 2014

Parametric outcomes

Information on the factors influencing the parametric outcomes is only available for the duration of agreements: correspondents were not asked about the number of agreements. Ten countries reported changes in duration, and the factors influencing change were indicated for nine of these, as shown in Table 14. Economic influences are prevalent, both macro- and micro-economic. Greece and Romania are the exceptions, where a legislative change as part of the reforms required under the Memorandum of Understanding with the European and international institutions has curtailed the duration of agreements in both.

Macro-economic considerations relating to uncertainty over economic prospects were cited in relation to all but one of the countries concerned. Micro-economic influences, relating to uncertainty over business prospects at company level, were cited also for the three countries with single-employer bargaining arrangements (Estonia, Lithuania, and UK) and for Sweden, where the scope for company-based wage negotiation under its multi-employer bargaining arrangements is extensive.

Table 14: Economic and political factors influencing changes in the duration of agreements

Factors influencing change in:

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Duration of agreements

DE DK EE IT LT SE UK

EE LT SE UK

EL RO

Source: EIRO 2014

Summary

The main factors influencing changes in the different aspects of wage-setting mechanisms are summarised in Table 15. This shows that, for some aspects, economic factors – either macro or micro – have been the prevalent influence on change. For other aspects, political factors have been prevalent, and for yet others economic and political factors are approximately equally prevalent.

Table 15: Main influences on changes in different aspects of wage-setting mechanisms
 

Macro-economic

Micro-economic

State policies/ recommendations and requirements from the EC/ECB/IMF

Main bargaining levels

X

XX

X

Ordering between levels  

X

X

Opening and opt-out clauses  

XX

X

Extending bargaining competence    

XX

Horizontal coordination

XX

   
Extension mechanisms

X

X

XX

Continuation beyond expiry

X

 

XX

Minimum wage setting

.

X

 

X

Indexation mechanisms

X

 

X

Duration of agreements

XX

X

 

Note: X = influence indicated for at least two countries; XX = prevalent influence

Source: EIRO 2014

Economic factors are the prevalent influence over changes in main bargaining levels, with the dominant decentralising direction of change reflected in the influence of micro-economic factors being cited for more countries than macro-economic ones. Micro-economic factors are the prevalent ones in the case of changes to opening and opt-out clauses, also reflecting their decentralising character. In contrast, macro-economic considerations are prevalent in changes in horizontal coordination, which relates to centralisation. Economic factors are also a prevalent influence on changes in the duration of agreements, with macro-economic considerations being more to the fore than micro-economic ones.

Economic and political factors emerge as equally prevalent influences over changes in ordering between levels, minimum wage-setting mechanisms and indexation mechanisms. As between macro- and micro-economic factors, the latter is the most influential in changes in ordering between levels. In contrast, macro-economic considerations are the greatest influence on changes to minimum wage setting and indexation.

Political factors have the greatest influence over changes involving the extension of bargaining competence to non-union representatives, to extension mechanisms and to the continuation of agreements beyond expiry. On all three aspects, influence stems variously from national governments and from the European and international institutions.


Institutional sources of change

Different institutional actors can be involved in shaping the changes in wage-setting mechanisms reviewed in the first main section. These include the social partners at the cross-sector, sector and company levels; national governments; and European and international institutions, including the ECB, European Commission and IMF. This section establishes the relative influence of these institutional actors over the different types of change which have taken place in wage-setting mechanisms. The next section looks in more depth at the influence of the EU’s new economic governance regime.

For five of the six main types of change in wage-setting mechanisms (horizontal coordination across bargaining units was the exception), correspondents were asked to identify the main sources of change, in terms of the institutional actors involved, from among the following possibilities:

  • negotiated between social partners at sector level;
  • negotiated or concerted between the cross-sector social partners;
  • imposed by national government;
  • externally influenced, for example via country-specific recommendations (CSRs) under the EU’s economic semester system under its new economic governance regime;
  • externally required or imposed, for example by the European Commission and/or the ECB and/or the IMF as part of the conditions of a financial rescue package.

Correspondents were also asked to indicate any other sources of change, and these largely related to those negotiated between employers and trade unions at company level. Responses were checked and modified for cross-country consistency. This mainly concerned the countries receiving financial rescue packages. Measures covered by the respective Memoranda of Understanding were consistently identified as externally required and imposed by national government.

Main levels of bargaining

Twelve countries reported changes in the main level of bargaining. The main institutional source of change in each of these countries is shown in Table 16. There is no predominant source of change, with negotiated change at different levels and government imposition each featuring in at least five countries. External influence or requirement featured in four countries. Decentralisation of bargaining towards the company level was reported to be influenced by CSRs in Cyprus, Romania and Spain, while in Greece this was regarded as having been required under the terms of the Memorandum of Understanding governing the financial rescue package.

Table 16: Sources of changes in main levels of bargaining

Source of change in:

Negotiated by sector (or company) social partners

Negotiated or concerted by the cross-sector social partners

Imposed by national government

Externally influenced

Externally required

Main bargaining levels

AT [BG] [CY]

FI IE* IT SI

BE EL ES FR RO

CY ES RO

EL

Notes: square brackets [ ] indicates negotiated at company level; *the employers’ confederation, Ibec, and the Government withdrew from the national agreement

Source: EIRO 2014

Linkages between levels under multi-tier bargaining

Changes in one or more of three dimensions to the linkages between levels under multi-employer b

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