EurWORK European Observatory of Working Life

Pacts for employment and competitiveness

Pacts for employment and competitiveness (PECs) are collective agreements at organisational or local level that simultaneously deal with employment and competitiveness issues. Normally found in large companies and especially those undergoing restructuring, they emphasise a ‘partnership’ approach in collective bargaining and may cover a wide range of topics to do with work organisation, working time, productivity, flexibility, and types and levels of employment. PECs are of interest at European policy level since they arguably offer mechanisms to deal with unemployment and competitiveness through collective bargaining, so fit with concerns about adaptability and flexicurity.

Pay bargaining in the 1990s in the majority of the EU Member States was strongly influenced by two mutually conflicting and yet closely related constraints: how to reconcile ever higher levels of unemployment with the need for national governments to respect the economic and financial convergence criteria defined in the Maastricht Treaty. In many Member States, social pacts were concluded during this period. These were tripartite agreements providing for wage restraint in exchange for employment policy measures. Wage restraint was usually implemented via central principles governing decentralised wage determination. Unlike these comprehensive social pacts, PECs are bipartite agreements usually in large companies. The government’s role is restricted to providing support and encouragement. PECs are prevalent in sectors such as manufacturing, banking and privatised public corporations, where there is pressure to engage in restructuring.

PECs seek to support the competitiveness of firms by acting on the cost of labour, on working hours and their flexibility, on internal flexibility and on work organisation, as well as on external work flexibility in, for instance, the case of outsourcing. The main objective is to legitimate change while also encouraging workforce cooperation and reducing costs. As regards employment, PECs typically provide for the safeguarding of present employment levels or for the creation of new jobs. In some cases, they also contain more general and indirect provisions concerning corporate strategies, such as pledges to undertake a certain amount of investment or to keep certain production in certain sites. There are also pacts which seek to promote the ‘employability’ of workers by introducing training and retraining schemes. The majority of pacts are of a ‘defensive’ type, in that they are intended to protect employment rather than create it. Moreover, provisions concerning working hours are more frequent than those concerning pay.

PECs also encourage a change in emphasis from ‘distributive bargaining’ to ‘integrative bargaining’, including not only trade-offs but also on-going joint monitoring and assessment. Many PECs take the form of framework agreements , leaving detailed implementation to individual business units within the enterprise or the group of enterprises. Although in most cases such agreements are signed within the national context, there are already some cases in which European Works Councils have signed framework agreements concerning restructuring issues.

The negotiation of PECs is bringing about considerable changes in the structure, process and agenda of collective bargaining, with significant effects for sector-level agreements. They contribute to an increasing pressure to change existing labour regulation in order to give more regulatory competence to the company level. Most of the EU Member States have experienced a process of organised decentralisation, whereby many provisions of existing labour law or collective agreements have been given a more flexible implementation at company level. In some EU Member States, the introduction of opening clauses allows for the deviation from norms laid down in collective agreements. This development has favoured the emergence of a new type of agreement that is characterised by the lack of clear trade-offs. In these agreements, concessions with regard to wage levels and working time are laid down without giving in return any guarantees concerning employment levels.

If in the 1990s PECs were essentially concerned with the survival of the business or the adaptation to changing market conditions, after 2000 an increasing number of PECs were signed in highly competitive enterprises. That means that PECs are no longer only an instrument for overcoming situations of company crisis, but are increasingly often turning into a strategic instrument in the hands of the management, oriented to improving profitability through the increase in flexibility and the reduction in labour costs.

The increased competitiveness of markets and market ‘turbulence’ are affecting long-term competitiveness and this requires a capacity to adapt and innovate. Collective bargaining may be an important means of obtaining work flexibility in exchange for employment protection and workforce involvement. These requirements favour a ‘proactive’ approach and ‘partnership’ agreements, seen by some commentators as ‘one of the most important ways to achieve social change in an increasingly turbulent world,’ and indeed as ‘the only alternative to change through the market’.

PECs seem, however, to be less acceptable in recent years than they were in the 1990s.

See also: employee representation.


Please note: the European industrial relations dictionary is updated annually. If errors are brought to our attention, we will try to correct them.
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