Bargaining under the central wage freeze

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A central tripartite agreement signed in the Netherlands in autumn 2003 imposes a pay freeze for 2004. This agreement is casting a shadow over the 2004 collective bargaining round, and trade unions are seeking to test the limits of the wage freeze. This article looks at developments in the bargaining round up to March 2004,

The 2003 'autumn agreement' signed by the government and the social partners provided for a wage freeze in 2004 and 2005 (NL0310103F and NL0311101N). After the agreement was signed in November 2003, the central trade union and employers’ organisations set out their aims for the 2004 collective bargaining round, and a number of collective agreements have since been finalised. Below we provide an outline of the most important developments in the bargaining round up until late March.

Trend in wage increases

According to figures published by the Central Statistical Office (Centraal Bureau voor de Statistiek, CBS). it appears that the average real wage increase in 2003, corrected for inflation, amounted to 0.6%, higher than the annual average of 0.3% calculated for the period since 1990. It is noteworthy that the greatest nominal increase in 2003 was in the public sector (3.2%). The average increase in the private sector was 2.7%. The additional increase for civil servants stems mainly from a 'catch-up' operation underway in relation to 'exceptional' wages. Notwithstanding the provisions of the 2003 autumn agreement, the data indicate that there is unlikely to be a zero increase in 2004, because at least some of the 2003 deals provide for wage rises in 2004.

Aims for the 2004 bargaining round

The trade union movement appears to be very keen to explore the limits of the wage-freeze agreement for 2004. The Dutch Trade Union Federation (Federatie Nederlandse Vakbeweging, FNV) has issued a document setting out its aims for bargaining over employment conditions, which lists the wage freeze as the last point. Preceding this, numerous demands are formulated, including contributions towards rising medical costs and pension premiums, and measures on training, working conditions and combating youth unemployment. FNV is also demanding one-off bonuses linked to company results. In its response, the General Industrial Employers' Association (Algemene Werkgevers Vereniging Nederland, AWVN) - which conducts collective bargaining negotiations for the Confederation of Netherlands Industry and Employers ( Vereniging van Nederlandse Ondernemingen-Nederlands Christelijk Werkgeversverbond, VNO-NCW) - called on the trade union movement not to take too much liberty in interpreting the autumn agreement.

In December 2003, the Dutch Federation of Small and Medium-Sized Businesses (MKB-Nederland) also published its document on bargaining over employment conditions. Amongst other points, MKB proposed reopening earlier collective agreements valid for 2004 and 2005 for adjustment, since they contain provisions that deviate from the autumn agreement. Examples include the collective agreements for the wholesale food trade, construction industry, retail fashion trade, retail electrical trade and the temporary employment sector. MKB also wants to dispense with automatic annual pay increments.

Company-level collective agreements

Major company-level collective agreements concluded so far in 2004 include the following:

  • in December 2003, a collective agreement was concluded at the KPN telecommunications group (19,000 employees) containing a structural (ie consolidated) wage increase of 1%. The central employers’ organisation was prepared to make an exception from the autumn agreement for KPN because wages had already been frozen for two years as a result of major reorganisations within the company;
  • agreement was reached at Shell (petrochemicals) in January 2004. With backdated effect from 1 October 2003, staff were awarded a wage increase of 0.85%, plus a one-off bonus of EUR 200 for 2003. Additionally, the budgets for two bonus arrangements rose by a total of 5.5% to cover payments related to both company and individual performance;
  • in February 2004, a new collective agreement was signed for the 30,000-strong workforce at Philips (electronics). With effect from 1 April 2004, there will be a structural wage increase of 1.25%, but this represents a postponed wage increase for 2003. As compensation for having to wait for this raise, employees will also be awarded a one-off bonus of 1.3% of pay, along with a further 2% in September. For the first time, earlier experiments with performance-based payment have been taken up in the collective agreement, and poorly performing employees will risk not being awarded a pay increase. Around 2% of the workforce may suffer as a result of this new agreement. Furthermore, employees may now work up to four stretches of nine hours at a time if required for business reasons. Moreover, Philips has made concessions in the area of training and, finally, after a 10-month period of negotiation, agreement has been reached on a new company pension scheme; and
  • a new collective agreement valid for a 10-month period was hammered out at Corus (the Dutch/UK steel producer) at the end of February 2004. While the De Unie trade union, openly opposed to the autumn 2003 'social agreement', had hoped to achieve a structural wage increase of 1.5%, it failed. Instead of a consolidated wage increase, employees have been awarded a performance-based bonus of 1.5%. Profit sharing has also been increased and employees have been awarded an amount as compensation for rising medical costs. Additionally, management agreed to extend the company's current 'employment pact' until 1 February 2007. The pact encompasses job guarantees for the company’s staff.

Sectoral collective bargaining

Some new sector-wide agreements have been concluded so far in 2004, but bargaining has run into difficulties in a number of cases :

  • the new collective agreement in the cleaning sector (180,000 employees) provides only for a one-off holiday allowance worth 0.5% of employees' gross annual pay, plus compensation for increased pension costs. After the agreement had been signed, it emerged that executive staff at a number of the larger companies would in fact be receiving more in the way of increases. The trade unions were enraged and are seeking compensation from the companies in question. The employers are attempting to side-step the issue, stating that the employees concerned are not covered by the collective agreement and that the amounts in question are one-off bonuses anyway;
  • a new collective agreement for the nursing and specialised care sector contains a structural wage increase of 1.5%, with retroactive effect from 1 September 2003. Consequently, the increase is considered as falling before the date of commencement of the autumn agreement. Furthermore, employees were awarded a one-off end-of-year bonus of 0.4%;
  • employers in the construction sector made their collective bargaining objectives (affecting 150,000 employees) known in January 2004 . In essence, this involves doing away with the current automatic adjustment of wages in line with inflation. The employers are hoping to reach an agreement with a two-year term which, it is thought, will create enough of a lull in bargaining activity to facilitate the integration of the two existing separate collective agreements for blue-collar and white-collar workers, arriving ultimately at a single sector-wide agreement. However, the initial response of the CNV-affiliated Wood and Construction Union (Bouw- en Houtbond CNV) was far from encouraging. This union hopes to achieve a situation whereby construction workers aged 57 years and above are given the option of working only three days a week. The mileage allowance for employees' travel is also a stumbling block in negotiations;
  • at the beginning of March 2004, negotiations for a new collective agreement in the graphical industry (involving 48,500 employees in graphics and media) broke off abruptly. Employers completely rejected the unions’ demands for a wage increase. Referring to the central agreement, the unions are calling for a performance-based bonus of 1.25%. Employers in this sector fear that in the years ahead, the unions will seek to turn one-off bonuses into structural pay rises. According to the unions, because negotiations have been derailed, employers will now be required to top pay for sick employees up to 100% of full pay during a second year of sickness. Legal changes which came into effect on 1 January 2004 mean that employers are required to continue paying sick employees during a second year of sickness (previously this only applied to the first year). However, the central employer and trade union organisations have agreed that pay in the second year of sickness should not exceed 70% of the last earned wage; and
  • in January 2004, negotiations over a new collective agreement for the retail, fashion and sports trade (100,000 employees) became deadlocked after conflict arose concerning the remuneration of employees who receive more than the amounts laid down in the collective agreement. The unions demand that these wages be kept in line with the increases specified in the wage scales set in the collective agreement. The employers refuse to meet this demand.

Commentary

Against the backdrop of the autumn agreement, it is hardly surprising that wages are a focal point in the current collective bargaining round. The topic is especially charged in view of the following factors:

  • the 'pensions dilemma'. Many pension funds are having to supplement their reserves as a result of disappointing stock market yields (NL0306104F). This has given rise to sharp premium increases;
  • sharply increasing healthcare premiums;
  • the mileage allowance obstacle. As a consequence of tax measures adopted by the government, the tax-free travel allowance has been lowered from EUR 0.28 to EUR 0.18. As compensation, a number of collective agreements include an increase in the allowance - but this is more the exception than the rule.

One-off (non-structural) wage increases are not ruled out by the autumn agreement. The agreement thus appears to have reinforced the trend towards increasing the variable payment component. Employers have for some time been calling for a wage structure that can rise and fall in line with the highs and lows of the economic cycle (NL0203101N and NL0003184F) and they now appear to be having some success in achieving their aim. This applies to both the private and public sectors. However, it remains to be seen if this phenomenon will be limited to pay top-ups, or if - as evidenced by the Philips scenario - downward deviations from fixed wages will also be deemed acceptable by the unions (TN0104201S). (Robbert van het Kaar, HSI)

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