New general framework agreement signed in public services

In February 2005, the United Services Union (ver.di) signed a new general framework collective agreement for the public services with representatives of the German government and municipal employers. The deal includes a new uniform pay framework for both blue- and white collar employees in the public service at federal and municipal level. The 2.1 million public sector workers covered by the deal will receive one-off payments of EUR 300 in each of the next three years, but the agreement does not contain an increase in basic pay rates. The weekly standard working time will be 39 hours for all federal employees - meaning an extension of 30 minutes in western Germany and a reduction of an hour in eastern Germany. Working time for municipal employees remains unchanged, but an opening clause allows an extension of up to 40 hours a week if the bargaining parties agree. Public employers at federal state (Länder) level had left the negotiations at an early stage, so 900,000 public employees at this level are not covered by the new framework.

On 9 February 2005, the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di) agreed with representatives of the federal government and the Municipal Employers’ Association (Vereinigung kommunaler Arbeitgeberverbände, VKA) on a new general framework collective agreement (Tarifvertrag öffentlicher Dienst, TVöD) for about 2.1 million employees in the federal and municipal public sector. Concluded following two years of negotiations, the TVöD replaces the separate collective agreement frameworks for blue-collar and white-collar employees in the public sector (the BAT and MTArb respectively) that had existed for 45 years. The TVöD will come into force on 1 October 2005. The new collective agreement will run until 31 December 2007. The new pay agreement came into effect on 1 January 2005. The ver.di federal bargaining commission for the public sector, which is composed of lay officials of the trade union, accepted the outcome by 80 'yes' votes to 32 'no' votes and five abstentions.

The new collective agreement does not apply to about 900,000 public employees employed by the federal states/regions (Länder) because the Employers' Association of German Länder (Tarifgemeinschaft deutscher Länder, TdL) had left the negotiations at an early stage (DE0306202N) and is opposed to the compromise now reached.

Career civil servants (Beamte) are legally not covered by any collective agreements as their pay and conditions are unilaterally set by federal or regional governments (DE9707123F).

New uniform grading system

The TVöD introduces a new uniform grading system that applies to both blue- and white-collar workers. It comprises 15 scales, ranging from simple repetitive work that does not require much training (scale 1) to work requiring a university degree, several years of work experience and a supervisory position (scale 15). All pay rates are set on a monthly basis. Currently there are two different rates in each scale, applying to western and eastern German employees, as the process of harmonising pay rates is still underway (see below for details).

The basic monthly pay rate at the bottom of scale 1 will be EUR 1,286 in western Germany and EUR 1,209 in eastern Germany. This rate is well below the lowest rates in the old collective agreements - the bargaining parties have thus deliberately introduced a new lower pay level. This rate is oriented towards comparably low levels of pay agreed in other collective agreements, for example the agreement signed by the Trade Union for Building, Forestry, Agriculture and the Environment (Industriegewerkschaft Bauen-Agar-Umwelt, IG BAU) for cleaners. In agreeing the new low rate, the aim of ver.di is to stop the process of outsourcing of certain service jobs in the public sector, for example in canteens and cleaning, and even to bring certain jobs back under the umbrella of the TVöD. The new scale 1 will apply only to new recruits and the bargaining parties still have to agree on the precise definition of the range of occupations falling under this new pay category.

In the future it will be possible for employees to move to a higher scale only if the nature of their work has changed, whereas in the old system it was also possible to move up the scales after a certain number of years of employment.

All current employees in the federal and municipal public sector will be grouped in one of the 15 scales, with the current effective pay levels of each employee safeguarded in principle. There are a number of detailed provisions that regulate the transition from the old to the new pay framework.

Within each scale there are up to six pay grades related to the employee's length of service - see table below.

New public sector grading system - timing of employees' entry to pay grades
Scales Pay grade 1 Pay grade 2 Pay grade 3 Pay grade 4 Pay grade 5 Pay grade 6
2-15 start of employment after 1 year after 3 years after 6 years after 10 years after 15 years
1 - start of employment after 4 years after 8 years after 12 years after 16 years

Note: employees in scale 1 will start in grade 2.

As the bargaining parties have agreed that young employees should be better paid in the future, movement through the pay grades is particularly strong in the first years of employment and the progression of pay slows down in later years. This was not the case under the previous grading system, which also included a link between age and wage.

The difference compared with the current grading system is particularly marked for white-collar employees. Some employees in this group would have received higher salaries over the coming years under the old collective agreement than they will be entitled to under the new system. To compensate for this, they will receive an additional payment (Strukturausgleich).

In the future, there will no longer be special allowances for married employees and those with children. All employees who have children before 31 December 2005 will, however, keep their allowances. These allowances are now partly integrated into the pay scales, with the effect that in future unmarried employees will be better off under the new system.

Performance-related pay

The bargaining parties have agreed in principle to the introduction of a performance-related additional payment. This can amount to 8% of the salary of the employee concerned and will be introduced in 2007. The detailed criteria for entitlement to this payment still have to be agreed.

In cases where the individual performance of the employee is considered to be considerably above average, it is possible to move up the pay grades more quickly. Conversely, should performance be assessed as considerably below average, progression through the pay grades can be slowed down. However, a move to a higher scale is only possible when the employee's occupation or function changes and is not related to performance.

Pay increases

There will be no increase in basic pay scales within the next three years. All public employees at federal level will receive lump-sum payments of EUR 300 per year in 2005, 2006 and 2007. The same applies to the municipal employees in western Germany. Apprentices and student nurses in western Germany will receive a lump-sum payment of EUR 100 per year.

The wages of municipal employees in eastern Germany will be adjusted to the western German pay levels by 1.5% per year in 2005, 2006 and 2007 instead of a lump-sum payment. The same applies to eastern German municipal apprentices.

Holiday and Christmas bonus

In 2005 and 2006 the holiday bonus of EUR 332.24 (western Germany) and EUR 255.65 (eastern Germany) remain unchanged, as does the so-called Christmas bonus, equivalent to 82.14% of a month's pay in western Germany and 61.61% in eastern Germany. From 2007 onwards however, there will be only one uniform annual bonus. This will be set at 90% of a month's pay for employees in scales 1-8, 80% of monthly pay for scales 9-12 and 60% for scales 13-15. The annual bonus for eastern German employees will generally be set at 75% of the western German level.

Sickness benefit allowance

During the first six weeks of sickness, employees receive their normal wage from the employer. After that time, members of a statutory health insurance fund receive a sickness benefit (Krankengeld) which is set at 80% of monthly pay. The new collective agreement provides that all public employees will be entitled to an allowance covering the difference up to the normal monthly income up to the 39th week of sickness (currently eastern German employees receive this allowance only up to the 26th week).

Working time

The standard weekly working time for public employees at federal level will be 39 hours a week. Currently the standard working week is set at 38.5 hours in western Germany and 40 hours in eastern Germany.

For municipal employees, thus current standard weekly working time will remain unchanged in principle. However, the bargaining parties agreed to a so-called opening clause that allows bargaining parties for the municipal sector in each of the German federal states to negotiate new working time arrangements which may allow working time of up to 40 hours. Ver.di, however, has announced that it remains opposed to any general extension of working-time.

Protection against dismissal

Public employees in western Germany cannot be dismissed after 15 years of continuous employment, except in cases of gross misconduct. This provision, which had been disputed by public employers, is continued in the new collective agreement but was not extended to eastern Germany.

'Most beneficial' clause

The bargaining parties also agreed to a so-called 'most beneficial' clause (Meistbegünstigungsklausel), whereby if public employers at federal or local level regard the provisions on annual bonuses, pay or weekly working time in any future collective agreement concluded with one of the affiliates of the Employers' Association of German Länder (TdL) to be more beneficial than that of the TVöD, they may insert these more beneficial (for the employers) provisions into the TVöD without any further negotiations. In other words, if ver.di agrees with one of the affiliates of TDL on a general 40- or 42-hour week or on lower bonus payments, it would be entirely at the discretion of public employers at federal or local level to introduce these provisions. If ver.di therefore wants to maintain the compromise now reached, it must not agree to any new collective agreement that undercuts the core standards of the TVöD.

Reactions of bargaining parties

The chief negotiator for the public employers, the minister of the interior, Otto Schily, welcomed the agreement as a major reform of the collective agreement framework in the public sector. He pointed in particular to the fact that the new system will be more transparent and that, instead of age, marital status and the number of children, pay will now be linked to individual performance.

The negotiator for VKA, Thomas Böhle, was content that public employers had achieved elements of performance-related pay and the introduction of a new wage scale for repetitive and simple work. He particularly welcomed the possibility to negotiate longer working time up to a 40-hour week and said that the new collective agreement would help to make the public administration more efficient and municipal companies more competitive.

Ver.di welcomed the new deal as a transparent and uniform framework collective agreement. Its chief negotiator for the public sector, Kurt Martin, said that on the whole trade unions had achieved a lot. Although the extension of working time for federal employees in western Germany 'watered down' the agreement, he welcomed the reduction of working time for federal employees in the east. He said that he was still against any extension of working time but that this had been the price that had to be paid for the compromise.

Eva-Maria Stange, the chair of the German Union of Education (Gewerkschaft Erziehung und Wissenschaft, GEW) which also represents employees in the public service, also welcomed the new collective agreement as the positive outcome of a necessary modernisation process. Against the background of more than 5 million unemployed people, however, any extension of working time was 'socio-political nonsense'.

Kerstin Phillipp, the federal chair responsible for collective bargaining at the German Police Union (Gewerkschaft der Polizei, GdP), also deplored the extension of working time but said that the introduction of elements of performance-related pay and the new grading system would help to make the public service attractive for young people.

Negotiations for other public employees

The bargaining round for public employees at regional (Länder) level between ver.di and TdL is still pending. TdL has stated that the agreement for the federal and municipal sectors was not acceptable for public employers at Land level . The key issue in bargaining at Land level is working hours - state governments insist on extending the standard weekly working time.

Collectively agreed provisions retain their validity even when the collective agreement expires, as long as no new agreement is signed (a principle known as Nachwirkung, or 'after-effect') (DE9905200F). Therefore, for all employees covered by the old public sector collective agreement, the rules on working time and other matters remain unchanged unless replaced by a new agreement. However, regional public employers can, and have, unilaterally introduced a 42-hour week for all newly recruited employees. Ver.di has called for warning strikes in order to put pressure on the employers to accept the federal and municipal compromise. The trade union must not make any concessions in bargaining with the Länder if it does not want to risk the compromises found with the federal and municipal employers.

Public employees in the utilities and local transport sectors are partly covered by separate collective agreements for utilities (known as TV-V) and local transport (TV-N). These collective agreements were negotiated in order to cover both public and private companies in sectors where both forms of ownership exist. As part of the compromise between ver.di and the public employers at federal and municipal level, it was agreed that all companies in these sectors will be given the option to join either the TV-V or TV-N or remain under the provisions of the old general public sector agreement, which will remain frozen. They cannot, however, choose to enter the new TvöD.


The negotiations and the outcome of the collective bargaining round in the public sector must be seen against the background of a continuous erosion of the old general framework collective agreement (BAT) in the course of liberalisation and privatisation in the public service. More and more employees dropped out of coverage by the old framework. The defection of TdL and the unilateral extension of working time introduced by several federal states for their career civil servants and for new recruits in the public service added to the problem, with the effect that the old framework became increasingly hollow. The ver.di leadership feared that collective bargaining in the public sector could completely collapse, leading to a fragmented and unmanageable bargaining landscape. By paying a considerable price, the trade union finally preferred to safeguard a general framework agreement for the public sector. The extension of working time is the most contested aspect of the new agreement amongst some trade union activists.

For public employers, the new pay system will eventually reduce the wage bill. Seen from the other side, this indicates that in the long run public employees in total will be paid less compared with today. Many details of the new agreement, however, are still to be fixed and it remains to be seen how the agreement is perceived by public employees and whether it will help ver.di to maintain or even improve its position in the public sector. (Heiner Dribbusch, Institute for Economic and Social Research, WSI)

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