Differences between sectors in collectively agreed Christmas bonuses

According to an overview published in October 2006 by the Institute of Economic and Social Research of the Hans Böckler Foundation, the collectively agreed Christmas bonus paid to employees towards the end of the year varies considerably between sectors. In a number of sectors, the bonus amount is related to the performance of the individual company. However, many collective agreements may also contain so-called ‘hardship clauses’, which allow Christmas bonuses to be cut. Employees in eastern Germany still receive lower Christmas bonuses than their colleagues in western Germany in a number of sectors; some employees, such as those working in the construction industry, do not receive any bonus at all.

On 30 October 2006, an overview of collective agreements in 23 sectors was published by the Collective Agreement Archive (Tarifarchiv) of the Institute of Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) within the Hans Böckler Foundation (Hans-Böckler-Stiftung, HBS). Among its findings, the overview reveals that the so-called ‘Christmas bonus’ – an annual bonus paid to employees towards the end of the year – varies widely between sectors (see Table).

Key findings

Most industries have a collectively agreed Christmas bonus, which is generally fixed as a percentage of the individual monthly gross wage. A comparably high Christmas bonus of between 95% and 100% of the monthly gross wage is paid in the banking, chemicals, printing, and sweets and confectionery sectors. Lower bonuses are provided in the public sector in western German municipalities (82% of monthly gross wage), in the insurance sector (80%), in the western German retail sector (62.5%) and in the metalworking sector (55%). The latter industry, however, provides relatively high collectively agreed holiday bonus payments. There are still differences in bonus payments between sectors in eastern and western Germany.

Collectively agreed annual Christmas bonuses as % of one month’s pay, by sector
This table shows the collectively agreed annual Christmas bonus of a number of sectors as a % of one month’s pay
Industry Western Germany % Eastern Germany %
Banking 100 100
Sweets and confectionery 100 100
Printing 95 95
Chemicals 95 65
Public sector (municipalities) 82.14 61.6
Insurance 80 80
Retail* 62.5 50
Wood and plastic processing** 57.5 60
Metalworking*** 55 50
Construction**** 55 0
Hotels and restaurants 50 €499*****

Notes:*In most bargaining areas; **Includes bargaining regions in both eastern and western Germany; ***In most bargaining areas following three years of employment; ****White-collar employees/blue-collar workers in western Germany who receive 93% of the gross hourly wage; *****Fixed sum noted rather than percentage.

Source: WSI-Tarifarchiv, October 2006

In the agricultural sector in eastern Germany, employees receive a Christmas bonus of €256, in addition to €7.70 per year of employment; this is the case, for example, in the eastern German region of Mecklenburg-Pomerania. Conversely, a flat rate of €205 is given in the western German region of Bavaria. In the industrial cleaning sector, no annual bonus is awarded to employees.

Performance-related bonuses

An increasing number of sectoral collective agreements now fix the Christmas bonus on a variable basis, according to the performance of a particular company. In the chemicals sector, for example, the collectively agreed Christmas bonus of 95% of the monthly gross wage in western Germany can fluctuate from between 80% and 125%, depending on the company’s performance. At the same time, the average bonus of 65% of the monthly gross wage in eastern Germany may vary from 50% to 95%.

In the banking sector, bonuses may range – according to the company-level collective agreement – from between 90% and 120% of the monthly gross wage; otherwise, the bonuses remain fixed at 100%. The same situation applies in the sweets and confectionery industry.

Hardship clauses

In many industries, so-called collectively agreed ‘hardship clauses’ also exist; these allow companies to negotiate a reduction in, or even to suspend, the annual bonus payment, if they claim to be experiencing economic difficulties. In many cases, agreements between works councils and management require the final consent of the sectoral bargaining parties, in other words the employer organisation and the trade union concerned. Moreover, cuts in annual bonuses are often bound to guarantees by management to abstain from forced redundancies for a certain period.

The collectively agreed Christmas bonuses are minimum bonuses and a number of companies may still grant voluntary additional bonus payments. These voluntary payments are much less protected against cuts or complete cancellation than those which are collectively agreed. According to the WSI’s fourth works and staff council survey (DE0510202F) – carried out between January and March 2005, and covering a representative sample of enterprises with 20 or more employees and a works council – opening clauses that allow the payment of the annual bonus to be either cut or suspended were in place in 17% of establishments.

Civil servants

In July 2006, ‘career civil servants’ (Beamte), who are exempt from collective bargaining and whose remunerations are fixed by law, had their Christmas bonuses cut by about 50%. The approximately 300,000 federal public servants are now entitled to a Christmas bonus equivalent to 2.5% of their annual remuneration. Meanwhile, those in the lower pay grades have had their bonus topped up by €125.

Heiner Dribbusch, Institute of Economic and Social Research, WSI

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