EurWORK European Observatory of Working Life

Spain: Talks over salary increase for 2017 collapse

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Since the end of 2016, the main Spanish social partners have been trying to reach agreement about a salary increase for 2017, as part of the Agreement for Employment and Social Dialogue 2015–2017. Despite several attempts, negotiations were finally broken off at the end of July 2017 with no agreement reached.

Background

The Pact on Salaries for 2017 is part of the Agreement for Employment and Social Dialogue 2015–2017 (PDF), signed by the main Spanish trade unions (Trade Union Confederation of Workers’ Commissions (CCOO) and General Workers’ Union (UGT))  and employers (Spanish Confederation of Employer Organisations (CEOE) and Spanish Confederation of Small and Medium Businesses (Cepyme)). In practice, this agreement serves as a general framework for the discussion of collective agreements – for instance, sectoral and company level agreements. Its recommendations must be followed by the trade unions and employer organisations that signed it.

The Agreement for Employment and Social Dialogue 2015–2017 was expected to be approved by the end of 2014, but it was not finally agreed until June 2015. The main reason behind this delay was the difficulty in agreeing salary increases.

The agreement provided for a 1% pay rise in 2015, rising to 1.5% in 2016. The 2017 pay rise was left to be set later, although it was agreed that it should be linked to growth in Spain’s gross domestic product (GDP).

Negotiation process and social partners’ positions

The negotiation of the Pact on Salaries for 2017 began in September 2016. At the beginning of the negotiation process, both parties showed their interest in reaching an agreement before the end of the year. Their initial positions can be summed up as follows.

Employers’ representatives were in favour of salary moderation in order to maintain employment creation levels. To begin with, CEOE proposed salary increases of around 1%, in line with figures registered in collective agreements, which were seen by CEOE as what companies could afford in practice. Signed collective agreements for the year up until 30 June 2016 registered an average salary increase of 1.12%. As the negotiation process advanced, CEOE modified its proposal and accepted a maximum increase of 1.5%, similar to the recommendations agreed between social partners for the year 2016.

From the trade unions’ perspective, the priority was for workers to recover the purchasing power lost during the years of crisis. They wanted the productivity increases and benefits obtained by Spanish companies to be reflected in significant pay rises. At the same time, trade unions wanted to link salary increases to national economic indicators, such as GDP growth or the inflation index. At the beginning of the negotiation process, UGT proposed a 4% salary increase, while CCOO did not give precise figures. In mid-November 2016, both trade unions presented a common proposal, namely, an increase in the range of 1.8% to 3%. They stated that they were open to modifying this proposal on the condition that the employers’ representatives met trade unions’ expectations concerning the minimum salary (which was also due to be fixed before the end of the year).

At the end of 2016, negotiations were at a standstill, and trade unions accused CEOE of obstructing salary negotiations. A new proposal made by CEOE and Cepyme in January 2017 re-opened the negotiation process. This new proposal implied an increase in their offer up to a 2% maximum (1.5% increase and additionally 0.5% depending on company’s productivity and absenteeism rates), with no minimum level of increase. They claimed that salary moderation was one of the factors helping Spanish companies to recover the competitiveness lost during the crisis, and so they thought it was a priority to maintain employment creation levels. Meanwhile, the trade unions drew a red line: they would not accept an agreement which included only a maximum salary increase (that is, a pact where a 0% increase or pay freeze is accepted). Both UGT and CCOO, in view of GDP growth and other macroeconomic indicators such as inflation, kept their recommended salary increase at 3%, with a minimum of 1.8% (under which no collective agreement should be signed), in order to recover lost purchasing power for their members.

By February 2017, negotiations had broken down again and protests grew. Trade unions organised protests  in the main Spanish cities in mid-February. Finally, in March, after two months of standstill, an emergency meeting was convened and the highest representatives of the Spanish social partners met. The negotiation process advanced as follows.

In April 2017, CEOE made a new proposal, which consisted of an increased range of between 1% and 2%, with an additional 0.5% based on companies’ productivity (that is, up to 2.5%). The employer organisations assumed that Spanish companies were in a better economic situation than two years ago, so they accepted slightly higher salary increases and even included a recommended minimum increase of 1%. They remarked that the particular economic circumstances of each company should be borne in mind when negotiating company level collective agreements.

One month later, the agreement was still to be signed, and on 1 May 2017, unions called for demonstrations. Given that the Spanish GDP was expected to grow by around 3% in 2017, they demanded that salary increases should be closer to 3% in order to guarantee a fair recovery from the crisis (although they kept the previously proposed range of 1.8% to 3%). Moreover, the unions made a formal demand to activate a wage guarantee clause to compensate for the 2017 increase in the Consumer Price Index (CPI).

In June, there seemed to be a consensus among trade unions and employer organisations concerning recommended pay rises, with a salary increase ranging from 1.2% to 2.5% (although CCOO preferred the top percentage to be closer to 3% at  2.75%). However, at that moment the key issue in the negotiations was inflation. The trade unions demanded wage guarantee clauses linked to inflation in order to ensure the recovery of workers’ purchasing power. In contrast, the employer organisations were categorically opposed to such wage guarantee clauses, as they wanted salaries to be linked to companies’ productivity and competitiveness.

By July 2017, the social partners had not been able to reach an agreement on salary recommendations for 2017. Having reached this point, and given that more than half of the year was already over, negotiations were finally broken off, with both parties assuming that there would not be any arrangement that could serve as a generic reference for the negotiation of collective agreements.

In September, after the holiday period, social partners resumed their negotiation process, but now looking towards the year 2018.

Commentary

This is only the second time that the negotiation of the salary pact has been brought to an end without agreement since 2001, when this type of pact was introduced. The first time was in 2009, at the beginning of the economic crisis.

Regarding obstacles to the negotiation process in 2017, employer organisations argued that there were important differences between CCOO and UGT, which made it difficult to reach an agreement. Meanwhile, trade unions criticised employers for their ‘lack of interest’ in the process.The main hurdle was the setting of wage guarantee clauses linked to inflation rates. In practical terms, this wage guarantee clause would not have an effect on pay rises in 2017, as CPI was expected to increase by between 1.5% and 1.9%. The real problem for the employer organisations with introducing this wage guarantee clause linked to inflation was the setting of a precedent for future negotiations.

In 2018, social partners will have to negotiate not only on salaries, but also on a new Agreement for Employment and Social Dialogue.

Finally, while social partners were not able to reach a consensus, the signing of collective agreements proceeded as usual, with 77.2% of the agreements, covering 93.3% of employees, signed by June 2017.

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