Collective bargaining in Germany

The autonomy of the collective bargaining partners is guaranteed by law. The concluded agreements are binding and must be applied by all members of the employer organisation (unless the organisation offers membership without a binding obligation to apply collective agreements). Collective agreements cover all trade union members in a company; in practice, they are generally applied to all workers of a company.

The dominant feature of collective bargaining in Germany is sectoral collective bargaining, and agreements are typically concluded at regional level. Single-employer agreements are of minor importance and their proportion has only slightly increased in recent years, according to survey data from the IAB.

Collective agreements reached in the metal and electrical sectors serve as guiding examples for many other sectors, but pattern bargaining has been affected by a growing gap between the more stable industrial relations in the export-oriented manufacturing sector and the more difficult and conflicting private service sectors, which depend on private demand.

Collective wage bargaining coverage of employees from different sources

Note: * Percentage of employees working in local units where more than 50% of the employees are covered under a collective pay agreement against the total number of employees who participated in the survey.

Sources: Eurofound, European Company Survey 2013 and 2019 (including private sector companies with establishments of >10 employees (Nomenclature of Economic Activities (NACE) codes B–S), with multiple answers possible; Eurostat [earn_ses10_01], [earn_ses14_01], [earn_ses18_01], Structure of Earnings Survey 2010, 2014 and 2018 (including companies with >10 employees (NACE codes B–S, excluding O), with a single answer for each local unit); IAB Establishment Panel, representative survey of the IAB (2022) (including private sector companies with establishments with more than one worker); see also Destatis (2019a)

Data from the European Company Survey and national sources are not easily comparable, as the European Company Survey provides data at occupational level and national cross-sectoral level, which are not categories that are used in German statistics. National data may be more reliable than data from the European Company Survey, as the IAB survey offers a representative sample and surveys 16,000 establishments. According to the national data, there has been an ongoing decline in both collective bargaining coverage and in works council coverage, although this decline has been less pronounced in recent years.

Levels of collective bargaining, 2022

Articulation

All three levels of vertical articulation exist; the main level is the sectoral level and Germany is a paradigm case for sectoral-level collective bargaining. Due to increased decentralisation, such as the increasing use of opening clauses, company-level collective bargaining is gaining in importance and must be considered as an important level of collective bargaining at present. National-level collective bargaining is comparably rare.

New bargaining rounds can start once a collective agreement has expired. As of 2022, collective agreements remained in place for 24.4 months on average – the longest duration was in the financial services and insurance sector (30.9 months), while the shortest duration was in the food and beverage industry (14.6 months).

Due to Germany’s federal structure and the regionalised structure of trade unions and employer organisations, the main pattern is horizontal coordination within a sector across different regions. Federal states vary significantly in their collective bargaining coverage – between 60% in North Rhine-Westphalia and 40% in Saxony (Lübker and Schulten, 2020). Vertical coordination is rare and is carried out mainly through the dbb, which in some sectors bargains on behalf of small trade union affiliates.

Pattern bargaining under the leadership of the metal and machinery sectors remains a dominant form of coordination in Germany. In the service sectors, public sector bargaining plays an important role, even as regards wage setting under church law. In recent years, pattern bargaining has been losing importance due to a growing divergence in the quality of industrial relations.

Collective agreements can be extended either under the TVG or under ArbEntG. Under the former, the federal and regional labour ministers may extend an agreement if the extension is approved by a bipartite wage committee. Under ArbEntG, the Federal Labour Minister may react to a plea by the collective bargaining partners and extend a sectoral agreement at national level.

From 2000 to 2016, the number of extended agreements decreased from 551 to 444. Excluding agreements that amend existing agreements, the total number of extended agreements is even lower: in 2016, it was 230 (Schulten, 2018). To counteract the trend, the previous government amended both the TVG and ArbEntG to simplify the extension mechanism. Sectoral agreements can now be extended if the extension is ‘in the public interest’; previously, they had to cover at least 50% of the sectoral employees to be eligible for extension. Despite these legislative efforts, the number of new extensions remains both generally low and limited to few sectors. In July 2017, nearly three-quarters (73%) of all of the extended collective agreements in force had been reached in one of the following five sectors: textile and clothing, construction and construction-related trades, hairdressing, security services, and the stone industry and related trades (Schulten, 2018). There are no other voluntary mechanisms of extension/application of the terms of collective agreements.

Many collective agreements contain so-called opening clauses that allow derogation from collective agreements under various circumstances. The exact proportion that contain these clauses is unknown. There is no year in which no such clauses existed.

Under Article 4 of the TVG, collective agreements remain valid until a new collective agreement is concluded (Nachwirkungsfrist). Workers hired after the termination of the collective agreement and before the settling of a new agreement are not covered by the expired agreement.

Collective agreements are by nature meant to ensure industrial peace and contain an obligation to hold the peace during the validity of the agreement. Collective bargaining partners typically conclude a relative obligation, meaning that industrial action can be taken to reach a new agreement. BetrVG contains an absolute peace obligation, meaning that works councils are not allowed to call a strike by themselves and outside collective bargaining.

In recent years, collective agreements have gained importance in settling new working time arrangements or in providing options to do so at establishment level. This trend is due to employers’ call for more flexibility in working time and to trade union demands for more autonomy. Under a collective agreement settled in 2016, workers employed by Deutsche Bahn can choose between a wage increase, a reduction of weekly working hours or an additional six days off. In the chemical and mining sector, the collective agreement of 2017 offers an opening clause to deviate from sectoral weekly working hours at establishment level by providing a choice between 35 and 40 hours to particular units or groups of workers. Very long working hours of up to 12 hours are also allowed. Adjustment time is extended to 36 months (the EU Working Time Directive stipulates four months). The collective agreement settled in the metal and electrical sector in 2018 contained an opening clause giving all workers the choice to either reduce their working time to a minimum of 28 hours for a fixed period and to return to full-time hours afterwards or, on the other hand, increase the proportion of workers working overtime.