Most employers positive about extension of collective agreements

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Research published in December 2003 finds that most Dutch employers favour the extension of sector-wide collective agreements (ie to cover non-signatory employers within the sector). However, a sizeable minority would expect benefits from switching over to company-level collective agreements. Recently, a growing number of employers seem to be seeking actively to escape their obligations arising from extended sectoral collective agreements, by signing separate agreements with non-mainstream trade unions.

Most employees in the Dutch private sector are governed by an extended or 'generally binding' sector-wide collective agreement - ie one that the Minister of Social Affairs and Employment has declared to be binding on the whole sector, including those employers and employees not members of the signatory organisations (NL0211104F). Some 13.7% of employees fall under a company-level collective agreement, 60.3% are directly covered by a sector-wide collective agreement and 8% are covered by a sector-wide collective agreement as a result of extension, while 18% do not fall under the terms of a collective agreement.

This distribution has remained stable for years despite a growth in the number of company-level collective agreements. At the same time, it has increasingly been argued that sector-wide collective agreements - certainly of the extended variety - are outdated because they fail adequately to meet the needs of employers (in particular) and employees for tailored solutions at company level.

Following introduction of the Collective Labour Agreements Act (Wet op de Collectieve Arbeidsovereenkomst, WCAO) in 1927, and especially since the introduction of the Collective Agreements (Declaration of Generally Binding and Non-binding Status) Act (Wet op het algemeen verbindend en onverbindend verklaren van bepalingen van collectieve arbeidsovereenkomsten, WAVV) in 1937, regular discussions have been conducted about the pros and cons of collective bargaining for employers. The most significant arguments for and against appear to be relatively timeless. The greatest advantages given include the promotion of tranquillity in the labour market and the reduction of transaction costs. The greatest disadvantages mentioned are a lack of flexibility, especially for fledgling companies, disruption of market forces and the problems represented by potential wage inflation for disadvantaged groups in the job market.

Research into extension

In 2003, a study was conducted into what employers think about (extended) collective agreements - Ervaringen van werkgevers met de CAO en AVV['Employers’ experiences with the collective agreement and its extension'] MHDAG Heijnen and C van Rij, Regional Plan, Amsterdam, December 2003. The study finds that most employers favour the regulation of employment conditions within their organisations, whether this takes the form of an extended sector-wide collective agreement, a company-level collective agreement or an internal arrangement in the absence of a collective agreement. Below we summarise the most important points to emerge from the study.

The 2003 research included random samples among four groups of employers:

• those bound by a sector-wide collective agreement through membership of an employers’ association;
• those bound by a sector-wide collective agreement as a consequence of the latter's extension ;
• those with their own company-level collective agreement;
• those with no collective agreement.

Respondents were asked for their opinions on their current situation, and for their ideas about probable changes following a switch to another form of collective agreement coverage.

General opinions

Employers bound by a sector-wide collective agreement are largely positive about their situation. On a scale of 1 to 10, they rate the collective agreement situation at 7.0 (those bound by the agreement directly) and 6.8 (those bound through extension). Employers with a company-level collective agreement and employers not governed by a collective agreement are even more positive, rating their situation at 7.4.

According to employers, the greatest advantage of extension is that this makes for clarity and equality. In this context, employers not only point to equality among themselves (concerning recruitment and staff costs), but also to equality among employees.

'Collective goods'

Coverage by a sector-wide collective agreement can make it easier to invest in so-called 'collective goods', such as training and pension schemes. Under sectoral agreements, all the companies concerned must contribute a share of the wage sum to such provision. The survey finds that more than two-thirds of the employers governed by a sector-wide collective agreement believe collective funding to be a good principle. At the same time, there is a large group that disagree. Employers with their own collective agreements and employers not covered by a collective agreement are clearly less enthusiastic about collective funds - see table 1 below

Source: Heijnen and Van Rij, 2003.

Standardisation of terms of employment

Employers are less positive about standardising employment conditions (ie through the provisions of sectoral collective agreements). It is noteworthy that employers bound to sectoral agreements through extension are more enthusiastic than those directly bound by such agreements. A significant minority of employers who fall under a sector-wide collective agreement are opposed to standardisation, as are a majority of employers with their own collective agreement - see table 2 below.

Source: Heijnen and Van Rij, 2003.

Restriction of competition

Employers are clearly positive about the restriction of downward competition among employers (through sectoral agreements). No less than 84% of employers bound directly by sectoral agreements and three-quarters of employers bound by such agreements through extension support the principle. The opinions of employers with their own collective agreement and those not governed by a collective agreement are somewhat more polarised: around one-third against and two-thirds for.

Employers are even more enthusiastic about the fact that extension prevents downwards (wage) competition between employees (around 80% support thus principle), with the exception of employers who do not fall under a collective agreement (just over 60%).

Industrial conflict

Finally, employers governed by a sector-wide collective agreement appear particularly keen on the fact that industrial conflict over employment conditions will thereby be kept beyond the scope of the company itself. Employers with a company-level collective agreement and those not covered by a collective agreement clearly have fewer concerns about industrial conflict within their own company - see table 3 below.

Source: Heijnen and Van Rij, 2003.

Change of regime

The survey also examined the possible consequences of a change in the form of collective agreement coverage, considering the following two options:

• from a sector-wide collective agreement to no collective agreement or a company-level collective agreement;
• from no collective agreement or a company-level collective agreement to a sector-wide collective agreement.

Employers covered by a sector-wide collective agreement expect to benefit more from such a change in form than those without an agreement or with their own company-level collective agreement. Employers bound directly to a sector-wide collective agreement are most articulate about perceived improvements or deteriorations. For example, most such employers expect that a company-level collective agreement would lead to an improvement in: the degree of flexibility in further detailing employment conditions (71%); the effectiveness of the company (55%); and the 'readability' of the collective agreement (54%). However, these employers believe that there would also be disadvantages, especially in terms of: potential conflicts regarding employment conditions (79%); a greater chance of industrial unrest (73%); and increased administrative pressure (44%). A similar picture emerges among employers governed by a sector-wide collective agreement through extension.

Employers with their own collective agreement expect a marked deterioration if they were to come under a sector-wide collective agreement, in terms of: more potential for conflicts (77%); diminished flexibility in further detailing employment conditions (62%); and a greater chance of industrial unrest (56%). Significantly fewer employers cite possible improvements. A similar picture emerges for employers not covered by a collective agreement.

Conflicts over extension of collective agreements

Although a majority of employers support extension in broad terms, various conflicts have arisen recently in this area. Several non-organised employers have increasingly sought to escape the conditions imposed on them through extension by concluding collective agreements of their own (NL0302103F). Because established trade unions (which are involved in the extended collective agreements) withhold their cooperation in this regard, the employers concerned have sought alternative routes. While in some cases they have found relatively small unions that are prepared to sign such a collective agreement, in others staff have been encouraged to form their own trade union. In three sectors, two separate sector-wide collective agreements have been established: the temporary employment agency sector, the hotel, restaurant and catering industry; and the petrol station sector. In the hotel, restaurant and catering industry, the collective agreement signed with the regular trade unions has been extended. The industry's other sector-wide collective agreement (which has been granted exemption from extension) was concluded with Landelijke Belangen Vereniging (LBV), a national independent union representing special interests, which is also party to the smaller petrol station and temporary employment agency collective agreements.

In December 2003, the Minister of Social Affairs and Employment, Aart Jan de Geus, deemed that there was sufficient evidence to suggest that the employees' associations at three temporary work agencies - Van der Noordt, CF&F Payroll Services and ES&T Payroll Services- were not genuinely employees’ associations because they do not operate sufficiently independently of the employer. These companies have thus not been granted exemption from the extended collective agreement for the temporary employment agency sectoral agreement.

In September 2003, a transport company, Postma Internationaal Transport, accepted the sector-wide road transport collective agreement under pressure from the trade unions. Previously, it had signed a collective agreement with LBV. Postma had been one of the first road transport companies (of a total of roughly 25) to enter into its own collective agreement beyond the scope of the sector-wide agreement. In March 2004, 22 road transport firms were granted exemption from the sectoral agreement. LBV conducted the negotiations on behalf of the employees.

Commentary

Most employers appear relatively satisfied about their (largely extended) sector-wide collective agreement. At the same time, a minority are not, and a somewhat larger group would expect more advantages than disadvantages if they shifted towards a company-level collective agreement. The group of employers which are less satisfied with sectoral agreements is large enough to make conflicts concerning extension a rather permanent phenomenon. (Robbert van het Kaar, HSI)