Increase in share of locally bargained pay rises

Finland’s pay increase structure has traditionally been dominated by general pay increases, while the proportion of locally bargained pay rises has been quite insignificant. However, in 2008 and 2009, this proportion could cover a quarter of workers in the private sector, providing for almost half of the overall pay increase agreed. Forerunners of locally bargained wages have included the financial services sector and technology industry.

Background

In the past, Finland’s national incomes policy agreements have offered relatively small latitude for the pay increase structure, with the great majority of pay increases being general pay rises.

One of the most important objectives of the Confederation of Finnish Industries (Elinkeinoelämän keskusliitto, EK) has been to increase the proportion of locally bargained pay rises. Employers want the locally bargained pay share to constitute about half of the total pay rise.

According to EK’s Director of Labour Market Relations, Seppo Riski, there has been a significant shift towards company-level settlements and reform of pay systems in the 2007 bargaining round, in the context of Finland’s long history of collective agreements. Mr Riski believes that the most significant changes include greater enterprise or workplace-specific determination in forthcoming pay increases, reform of payroll systems and an emphasis on percentage-based wage increases.

Changing pay increase structure

EK’s Senior Advisor, Seppo Saukkonen, considers the change in the pay increase structure as a remarkable development. According to Mr Saukkonen, the proportion of locally bargained increments has normally been between 4% and 7% of the overall pay increase; however, in 2008, it is set to cover a quarter of workers in the private sector.

However, Mr Saukkonen emphasises that Finland is still far behind the other Nordic countries in terms of local pay bargaining, pointing to the lack of a tradition of locally negotiated pay increases in the country. Instead, the negotiation of company-level agreements on working hours is more advanced. For instance, the use of working time banks has increased notably in recent years.

In 2009, the locally negotiated pay increase pool will be increased more substantially in the different sectors. In the financial services sector and technology industry, the company-specific pay increase could even amount to half of the total pay rise. In the collective agreements negotiated by the Finnish Metalworkers’ Union (Metallityöväenliitto), the company-specific proportion reached 23% in the autumn of 2007 and is set to reach 39% in 2008 and approximately 40% in 2009. Among employees belonging to trade unions affiliated to the Confederation of Unions for Academic Professionals (Akateemisten Toimihenkilöiden Keskusjärjestö, AKAVA) in the metalworking sector, the share of company-specific pay increases could be half of the overall increase in both 2008 and 2009.

Trade unions more cautious

However, the Director of the bargaining section of the Central Organisation of Finnish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), Lauri Lyly, states that he does not envisage a clear change of focus regarding the pay increase structure. Mr Lyly insists that such a change relates mainly to the technology industry, highlighting that the proportion of locally bargained pay increases has in fact fallen in the municipal sector.

Mr Lyly adds that analysis of the different pay increase patterns is still at the test stage, and that any conclusions made should be based on actual results.

According to the Managing Director of the Confederation of Salaried Employees (Toimihenkilökeskusjärjestö, STTK), Markku Salomaa, the current situation regarding the pay increase structure sets to act as a kind of showcase for employers. Successful solutions will increase trust in the locally bargained pay share; however, the dictates of employers could rapidly overturn the system of local pay bargaining. Mr Salomaa contends that many STTK-affiliated trade unions have already expressed their satisfaction with the locally bargained pay share.

Pertti Jokivuori, Statistics Finland