New collective agreement for Siemens AG outsourced companies

In April 1998, Siemens AG and the IG Metall trade union agreed on the conclusion of a new "supplementary" collective agreement for some "outsourced" Siemens companies in industry-related services in Germany.

The companies which form part of Germany's largest electrical engineering and electronic company, Siemens AG, are usually covered by the metalworking branch-level collective agreements. In recent times, however, Siemens management has developed - in particular for its service activities - various "outsourcing" strategies which at the same time allow the affected business units to depart from the legal framework of the branch-level collective agreement. In 1997, Siemens realised that within its information technology subsidiary, Siemens Nixdorf, an intended "flight" from the existing collective agreement would create considerable conflict with the metalworkers' trade union, IG Metall (DE9709130N). Therefore, once Siemens had announced further outsourcing plans at the beginning of 1998, it immediately started negotiations with the union.

Originally Siemens planned to outsource more than 20,000 employees (including main parts of the technical service divisions). Since one of the central aims of outsourcing strategies is to reduce labour costs, Siemens management proposed leaving the scope of the branch-level collective agreement for the metalworking industry and applying instead the agreement for the metalworking trade. IG Metall, however, sharply rejected this proposal as unacceptable, stating that the switch would mean an average 25% decrease in payments and a two-hour extension of weekly working time for every employee. The unions also rejected the outsourcing of the technical services divisions, which are seen as part of Siemens core business.

After various protest actions and warning strikes by employees, on 6 April 1998 the board of Siemens and the IG Metall finally reached a first compromise for some 6,000 employees who work in the service divisions of three Siemens business segments - "building systems" (Gebäudetechnik), "building management" (Gebäudemanagement) and "private communication systems" (privateKommunikationssysteme). For the outsourced Siemens companies, the bargaining parties agreed on the conclusion of a new "supplementary collective agreement" (Ergänzungstarifvertrag) which is still linked to the metalworking industry collective agreement. The most important provisions of the new agreement are as follows:

  • the level of basic wages and salaries will continue to follow the metalworking industry agreement, but further wage increases will become effective six months later than their introduction in the metalworking industry;
  • from 1 October 1998, the holiday bonus and a part of the Christmas bonus will be cancelled step-by-step over two years;
  • the already agreed 2.5% wage increase in metalworking from 1 April 1998 will not become effective in the outsourced companies;
  • from 1999, there will be an additional wage component in the outsourced companies, related to individual and company performance. Every employee will receive a yearly bonus of at least DEM 600 plus a guaranteed profit-share of DEM 300. Performance-related pay may be increased to up to 5% of basic monthly wages and salaries;
  • there will be no more set weekly working time. Instead the agreement determines an annual working time of 1,575 hours in west Germany (equivalent to an average 35.8-hour week) and of 1,672 hours in east Germany (equivalent to an average 38-hour week). In addition, every employee will have to set aside a fixed amount of 50 hours per year from his or her working time account for training measures;
  • the outsourced employees will keep most of the Siemens company-related social benefits, such as occupational pension and employee shares; and
  • other provisions of the metalworking agreements - for example, on partial retirement, capital-formation payments or safeguarding jobs - will continue to be valid for the outsourced Siemens companies.

IG Metall sees it as a success that, in comparison with Siemens' original outsourcing plans, the union was able to limit these activities to certain business units. However, Siemens management has declared that it sees a strong need for further restructuring of the company.

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