Collective bargaining developments marked by stability

Collective agreements cover around 84% of workers in the Netherlands, and this makes the annual report on collective agreements produced by the Ministry of Social Affairs and Employment at the end of 2013 a significant document. The report looks at the content of these agreements, which is generally very broad, covering issues such as sickness, disability, employability and flexible work. The report contributes significantly to the understanding of Dutch industrial relations.

Background

At the end of 2013, the Ministry of Social Affairs and Employment in the Netherlands (SZW) published its annual report on collective agreements in the country. The report covers developments in collective agreements in the Netherlands in 2012 and, where information is available, in 2013.

The report is based on a sample of 100 collective agreements, including all sectoral agreements. It covers more than 10,000 employees and all company agreements covering more than 3,000 employees.

Major subjects tackled are developments in working time and pay. However, the overview also contains chapters on low paid jobs, employability, sick pay, disability and unemployment, variable pay and fixed-term contracts.

Pay developments

On average, pay increased by 1.6% between 2011 and 2012, a 0.3 percentage point rise.

The report differentiates between agreements made before 1 January 2012, in which the average pay rise was 2%, and agreements reached after that date, in which the average was 1.3%. This analysis reveals a downward trend.

Individual agreements show wide variations from -0.9% to the 5.38% negotiated by taxi drivers.

For 25% of employees, wage rises were less than 1%. Wage increases of between 1% and 2% were given to 33%, and 40% had rises of between 2% and 3%. The increases were relatively high in the construction sector and relatively low in the agriculture and fishery sectors.

In 53 cases, the agreements covered the whole of 2013. The average rise was the same as in 2012 (1.6%) with variations of between -1.6% and 4.98%. Again, the highest rise was negotiated by taxi drivers.

The report shows that between 2003 and 2012, wages set by collective agreements rose by 19.3%, with a yearly average of 1.8%. The highest rise (3.5%) was in 2008, just before the economic crisis. The lowest rises were in 2004 (0.46%) and 2010 (0.79%).

Lowest pay scales

Traditionally, in most agreements the level of the lowest pay scales is somewhat higher than the legal minimum wage. However, this gap has narrowed in the past 15 years, partly through the intervention of the Government of the Netherlands. The government has said it would not extend agreements where the gap was considered too wide. In 2012, the difference stood at 3% on average, varying from almost 0% in industry to 5.9% in transport and communication.

In the Netherlands, the legal minimum wage applies to any employees aged 23 or over. Younger employees are only entitled to a certain percentage of the adult minimum wage, ranging from 30% for a 15-year-old to 85% for those aged 22.

In many agreements, the lowest pay scales for younger employees are significantly higher than the legal minimum for that age. The average lowest pay scale for a 21-year-old is 115.3% of the legal minimum wage for that age, and for someone aged 22 it is 111.5% of the legal minimum wage for that age. For younger employees the average hovers around 120%, with an exception for employees aged 16, where it stands at 112.6%.

Looking at the period 2008–2012, there have been some significant developments in pay arrangements for younger employees. In six agreements the distinction between younger and older employees was abolished. In other agreements, including those for hospitals, some of the age-related scales were abolished. Some agreements also lowered the threshold for the adult minimum wage.

Working time

The average number of hours worked per week was 37.5 hours in 2012 for full-time workers. Taking into account of the number of employees covered by these agreements, in 2012 the average working week negotiated was 37.1 hours.

Variations between sectors are small with the exception of the transport and communication sector, where the average working week was 39.1 hours. Figures show that there have been few changes since 2008, and that there were no changes in 2013.

Sick pay

In the Netherlands, in the first two years of sickness the employer is obliged to continue paying at least 70% of an employee’s wage, and in the first year this must be at least 70% of the legal minimum wage. Compared to other countries, this two year-period is exceptionally long.

In virtually all collective agreements, the employer’s obligation has been enhanced. Usually the agreement contains the obligation to pay 100% in the first year of sickness. This percentage may fall to 70% in the second year, but this is not always the case.

In only two agreements, sick employees were entitled to less than 170% of what they would normally have earned during the first two years of sickness. In 36 cases employers had to pay 170%, and the remaing 62 were obliged to pay more than 170%. How much an employer has to be pay often depends on how successfully an employee is reintegrated into the workplace.

Disability

Two-thirds of the agreements contain clauses about supplements to the disability benefits that start after two years of sickness. The level of the supplements varies between 70% and 100% of the previous salary. The duration of this supplement varies between one and five years.

The report shows that these figures have remained more or less stable since 2006.

Unemployment

Employees made redundant or unemployed through no fault of their own are entitled to unemployment benefit. To qualify, they must have worked at least 26 out of the last 36 weeks preceding unemployment. This benefit lasts between three and 38 months, dependent on employment history. The benefit is 75% of the last earned wage for the first two months of unemployment, dropping to 70% for the remaining period.

The SZW report shows that 41% of collective agreements, covering 52% of employees, contain clauses about a supplement.

In 36% of these agreements, the level of the supplement is fixed to give an income of between 75% and 100% of the previous salary. In 31% of agreements, both the level and the duration are specified. In 18% of agreements, the maximum duration is 38 months – equal to the maximum duration of unemployment benefit. In some agreements, the duration varies depending on the age of the employee.

Variable pay

Just over two thirds of collective agreements, 69%, covering 66% of employees, contain clauses on variable pay. These are often one-off and structural payments, such as a 13th-month bonus or performance-related pay which are dependent on profits, results or individual performance.

Performance-related pay clauses appear in 31% of agreements, and are less common than clauses on structural payments, which feature in 56%. Variable pay is more common in company agreements – appearing in 96% of these deals – than in sectoral agreements (66%). In 2012, clauses on profit-related pay were in 25% of sectoral agreements.

Looking at the period 2008–2012, the incidence of variable pay clauses has, after a peak in 2009 and 2010, slightly decreased. It has gone down from 71% of the collective labour agreements containing such clauses in 2008 to 66% in 2012.

Flexible contracts

The percentage of employees with a flexible contract in the Netherlands is increasing. This category includes temporary agency workers, on-call workers and workers with a fixed term contract. This ‘fixed term contract’ group makes up 10% of the total number of employees in the country.

Since 1998 Dutch legislation has specified that, under certain conditions, fixed-term workers are entitled to a permanent contract, depending on how many fixed-term contracts they have completed and how long they lasted. However, derogation is possible by way of collective agreements.

The report shows that more than half of agreements contain such derogation clauses, concentrated in the agriculture, construction and services sectors.

If successive agreements amount to 36 months of employment without any break longer than three months, the employee is entitled to a permanent contract. In 25 collective agreements, the legal threshold of 36 months has been lowered, usually to 24 months. In 12 agreements the threshold has been raised, to as much as six years in some instances.

Another provision of the legislations is that after three successive contracts of any length without any break of longer than three months, the fourth contract is deemed to be permanent.

One quarter of the collective labour agreements contained derogation clauses on this provision. Eight agreements lowered the threshold to one or two agreements and 17 raised the threshold or removed it altogether.

Commentary

Collective agreements cover around 84% of the Dutch employees, and are the main mechanism for setting working conditions such as wages and working time. The content of these agreements is generally very broad, covering issues such as sickness, disability, employability and flexible work. It means the annual report of the Ministry of Social Affairs and Employment on developments in collective labour agreements contributes significantly to the understanding of Dutch industrial relations.

The 2012–2013 report mainly indicates stability, especially when taking long-term developments into account. Wage rises remain moderate, working time patterns are stable, and the same is generally true for the other issues.

Robbert van het Kaar, AIAS

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