Thematic feature - collective agreements on changes in work organisation

This article gives a brief overview of collective bargaining on changes in work organisation in Hungary, as of September 2004. It looks at: the extent to which collective agreements introduce changes in work organisation that take into account productivity demands, flexibility and security in an integrated way; the main areas in which changes are being introduced; the overall success or otherwise of bargaining on the topic; and the prospects for the future.

The EU’s European employment strategy was revised in 2003 (EU0308205F), following demands for a more results-oriented strategy contributing successfully to the targets for more and better jobs and an inclusive labour market set at the Lisbon European Council in 2000 (EU0004241F). To support the three objectives of full employment, quality and productivity at work and cohesion and an inclusive labour market, the current employment guidelines identify 10 priorities ('commandments'), including one on 'promoting adaptability of workers and firms to change'. This identifies work organisation (alongside skills, lifelong learning and career development, gender equality, health and safety at work, flexibility and security, inclusion and access to the labour market, work-life balance, social dialogue and worker involvement, diversity and non-discrimination, and overall work performance) as an element in improved quality at work, which should be pursued through a concerted effort between all actors and particularly through social dialogue.

The 2004 Council Recommendation on the implementation of Member States’ employment policies provides for four priorities:

  • increasing adaptability of workers and enterprises;
  • attracting more people to enter and remain on the labour market, making work a real option for all;
  • investing more and more effectively in human capital and lifelong learning; and
  • ensuring effective implementation of reforms through better governance.

The Recommendation refers to promoting flexibility combined with security in the labour market, by modernising and broadening the concept of job security, maximising job creation and raising productivity. As defined in the employment guidelines, 'job security' refers not only to employment protection but also to building people’s ability to remain and progress in work. Changes in work organisation thus appear to be seen as a main vehicle for increasing the adaptability of workers and enterprises. Related to this issue is flexibility and security in the labour market and the relative attractiveness of 'standard' and 'non-standard' employment relationships (with the aim of avoiding a 'two-tier' labour market).

With work organisation playing an increasingly important role in European employment policy, in September 2004 the EIRO national centres were asked, in response to a questionnaire, to give a brief overview of the industrial relations aspects of the topic, looking at: the extent to which collective agreements introduce changes in work organisation that take into account productivity demands and flexibility and security at the workplace in an integrated way; the main areas in which changes are being introduced; the overall success or otherwise of bargaining on the topic; and the prospects for the future. The Hungarian responses are set out below (along with the questions asked).

Recent agreements on changes in work organisation

Please provide information on recent developments (over the last three-five years) in collective agreements on work organisation that introduce changes in flexibility, security and productivity in an integrated way. The kind of issues that such agreements might cover include: introducing autonomous (or semi-autonomous work) teams; reducing the number of hierarchical layers; new forms of employee involvement; reorganising work functions; moving away from product-based structures to business unit; flexible working hours; multiskilling; job rotation; improving training (eg making it more systematic, ensuring wider participation, or changing the focus); new pay systems (eg performance-based pay, profit-sharing, share ownership schemes), and new financial and non-financial performance measures; or new appraisal systems.

The kind of agreements that we are interested in here are those that deal with a number of the issues listed above as an overall 'package'. Please provide any overall information available on this kind of development, if possible, and brief details of three or four agreements (at company and/or sectoral level) that you consider particularly innovative and interesting. Below is an indicative list of the kind of information we are seeking.

  • What are the main aims of bargaining on work organisation - eg increasing productivity? Increasing personnel flexibility? Improving the company’s position in the market? Avoiding redundancies and lay-offs?
  • What is the extent of bargaining on work organisation - how many agreements are there? How many companies/employees are covered?
  • What are the main areas in which changes are being introduced - eg new organisational structures, new more flexible and less hierarchical methods, new corporate cultures, new business practices, more training, new performance measurement techniques, new reward systems?
  • In the context of the introduction of work organisation changes, what kind of contractual and working time arrangements are provided - ie how is the flexibility and security issue being addressed?
  • In the context of work organisation changes introduced with a view to improving productivity, what specific measures have been agreed?
  • What are the motives of the parties in concluding such agreements - please indicate the motives of each side (management and workforce), such as reducing costs, promoting flexibility, securing employment, preventing compulsory redundancy, or improving terms and conditions.

In the course of the post-socialist restructuring of the economy, work organisation also underwent extensive changes in Hungary. The opening up of the economy was accompanied by a quick adoption of modern management techniques and efficient work organisation practices. The 'organisational learning' of management was facilitated by the inflow of strategic foreign investors and the insertion of Hungarian companies into the supplier networks of major multinational companies. Case studies carried out at Hungarian subsidiaries of multinational enterprises found that many companies, as an integrated part of the transfer of their whole production system to Hungary, introduced up-to-the-minute organisational methods (such as 'just-in-time' production, KANBAN, teamwork, job rotation, 'total quality management', flat hierarchies, new pay systems linked to the introduction of appraisal systems, and new forms of employee involvement). These were not only transplanted from parent companies, but in some cases even a more efficient system was established than at existing 'brownfield' plants of the same companies. Local suppliers also had to adopt some of the abovementioned practices to ensure quality and flexibility. Research on the issue also revealed the widespread use of job enhancement and multiskilling.

In assessing the role of collective agreements, it should be noted that the unionisation rate is fairly low at export-oriented manufacturing enterprises in Hungary, where the pressure is most apparent for a highly efficient and flexible work organisation. This is especially true for small and medium-sized enterprises and for 'greenfield' manufacturing plants - although there are notable exceptions. Collective agreements, if they exist at these companies at all, typically do not include stipulations on specific changes in the shopfloor work organisation, or procedures for negotiating over them. Furthermore, a lack of 'job control'-style trade unionism and craft traditions mean that the detailed regulation of job descriptions, wage tariffs and work rules are missing from existing collective agreements. Typically, collective agreements regulate only the guidelines for a wage system - ie whether it is hourly or performance-related system - rather than the specific rules on pay. Consequently, in most cases the introduction of a new work organisation does not require the amendment of the existing collective agreement. Thus, in most cases these changes have been introduced unilaterally by the management. This does not mean that there was no information, or consultation with employee representatives over the changes in work organisation, but these consultations were mostly confined to negotiations over compensation and solving problems related to the changes.

The only significant exception is the issue of introduction of flexible working hours beyond the standards set by the Labour Code. This special feature of Hungarian industrial relations is due to the logic of the Labour Code, which permits flexibilisation beyond the mandatory limits only if these measures are negotiated with trade unions and become part of the collective agreement. The same regulation is applicable for allowing additional flexibilisation in the venue where the actual work is performed.

The 1992 Labour Code established minimum labour standards and allowed the industrial relations parties to set stricter rules (ie stipulations more favourable for the employees) in collective agreements. A 1995 amendment of the Labour Code first allowed that collective agreements in certain areas could establish lower standards than set by the law - for instance, while the Labour Code only allows a maximum of 200 hours overtime for an employee annually, collective agreements may increase the annual limit of compulsory overtime to 300 hours. This type of legislative measures was supposed to create incentives for employers to conclude agreements and offer 'bargaining chips' for unions. A 2001 amendment of the Labour Code pursued the philosophy of the 1995 amendment by allowing more flexibilisation, provided that the issues are negotiated with trade unions. Employers were very responsive to the legislative changes. Large numbers of them grasped the new possibilities and initiated the renegotiation of collective agreements. Frequent features in the renewed collective agreements concluded following the 2001 amendment of the Labour Code. (HU0401103F) include a two- to six-month reference period for calculating working time (working time accounts), annualised working time and cumulated rest periods (ie employees cannot take their rest days as in the traditional working schedule, but the employer provides them with free days during an idle period in the production cycle). Another typical regulation issue in collective agreements is shortening the rest time between daily work shifts from the mandatory 14 hours to eight or 11 hours. Similarly, a relatively large share of the renegotiated agreements dealt with flexibility in job contents and the posting of employees elsewhere in the country. Altogether, 21% of the agreements increased the annual limit for such in-company reallocation of staff, and 12% specified a higher maximum annual period of reallocation, posting and transfer (ie the temporary change/enhancement of job assignments) than the 110 days set by the Labour Code.

The major issue in the course of bargaining was the amount of compensation for the more flexible working time regime. The use of an extended reference period (ie the span of time accounting/banking) was an especially hot issue, as this option would amount to not to having overtime premia and wages for idle hours. Overtime premia represented a particularly important extra income for many workers. It was up to the bargaining strength and abilities of local trade unions whether they could achieve what they regarded as fair compensation for the loss of extra income resulting from overtime. The legal regulation concerned does not specify any wage premium or additional rewards for employees in exchange for greater flexibility. In the decentralised Hungarian collective bargaining system, the outcome of these negotiations is varied. Nonetheless, the assumption of the overwhelming majority of employees and trade unions was that flexibility should be compensated financially. Probably, the best practice is represented by those agreements - which are, though, rather rare - that make employers pay some kind of extra 'flexibility supplement' for employees working in flexible work schedules (typically using a reference period) to compensate them for the extra efforts of adaptation and for the lost overtime bonus.

There are, however, very few known cases when unions successfully bargained for non-pecuniary compensation regarded as fair in return for extended flexibility. In some cases, unions were able to achieve some supplementary paid holiday in exchange for using an extended reference period. In one case, a local union was successful in achieving employment security in exchange for flexibility. This particular deal was struck at a major foreign-owned construction enterprise, which had employed 80% of its 2,500-strong manual workforce on fixed-term contracts, which in practice meant that these employees had no employment in wintertime. Thus, their fixed-term employment contracts expired in December and next March the company rehired the same workers. The new agreement ensured continuous employment for a certain number of employees by introducing annualised working time instead of fixed-term contracts. According to the modification of the collective agreement, overtime hours worked on longer workdays in summertime can be accumulated, and workers can make use them with a 25% bonus in wintertime. In practice 250 hours of overtime plus the annual paid holiday may be enough to bridge the wintertime idle period. With this arrangement, some of the seasonal workers may gain continuous employment due to the annualised time budget.

Further training is a relatively common item of the collective agreements in question, with 47% of them including some stipulations on how the company may support the employees’ education. The vast majority of these agreements, however, do not focus on the overall training policy of the company (ensuring wider participation, a more systematic approach etc) - their stipulations are limited to the general conditions of individual 'study-contracts' between the employer and the employee, and/or the possible time-off for courses supported by the employer.


What have been the results of collective agreements introducing work organisation changes? Drawing on assessments/evaluations made by researchers or the parties to agreements (employers, trade unions, works councils etc) or other sources, please provide information on issues such as the following:

  • whether agreements have been successes or failures, and the reasons why in both cases;
  • the impacts on flexibility and security (eg are there any successful examples of collective agreements addressing this issue as part of work organisation changes?);
  • the impacts on productivity (has productivity been improved as a result of the work organisation changes introduced?); and
  • the impacts on collective bargaining - are such deals broadly considered as concession bargaining, or as 'zero-sum' or 'positive-sum' situations? What are the implications for the structure, process or nature of collective bargaining (eg company versus sectoral? workplace representatives versus trade union? from “distributive” to “integrative” bargaining [with mutual gains for both sides]) and the role of management?

Where significant differences of interpretation exist in assessments on these questions - notably between the social partners - please report on the differing views.

In Hungary, the most important collective bargaining takes place at the company level. Theoretically, decentralised bargaining would be an adequate structure to negotiate company-specific issues such as changes in work organisation. Surprisingly enough, collective agreements almost never address these issues in spite of the rapid and frequent changes. The major reason for this is thought to be the lack of a tradition of 'job-control' unionism. Consequently, even major changes in work organisation would not require the amendment of the relevant collective agreement. Most of the agreements’ content is formulated in a rather schematic way: as a rule, the stipulations are confined to certain procedural rules and to substantive issues that are explicitly specified by the Labour Code as possible fields of deviation from the statutory standards (either to the advantage or to the disadvantage of employees). Established procedural rules sometimes explicitly name certain situations in which negotiation should be assumed between the management and employee representatives. In the light of the experiences of the transition period, this list understandably consists of events having a direct impact on wages and job security, such as privatisation, organisational change (for instance, decentralisation - ie hiving off a former company unit and turning it into an independent business), collective redundancy, and perhaps bankruptcy or insolvency. It is also thought that the narrow focus of collective agreements is partly the consequence of the weak bargaining power of company trade unions. At the same time, bargaining is mainly focused on wages and job security - at all levels of union policy - and less attention is paid to training, job content and work conditions. Of course, in theory the law allows all kinds of deviations in issues that are not regulated by the Labour Code’s compulsory rules, but only few innovative agreements deal with organisational changes.

In the majority of cases, making decisions on changes in work organisation remains a management prerogative, and trade unions are at best informed about them, or these issues are put on the consultative agenda. This approach is underpinned by the Labour Code, which provides an almost identical list of issues subject to information and consultation with both company unions and works councils (HU0401106F). This stipulation explicitly includes 'new methods of organisation of work'. According to various surveys, however, changes in work organisation are rarely a priority on the agenda of works councils. Case studies indicate that, generally, changes in work organisation that have no serious impact on wages and/or job security are mostly negotiated or consulted on at the plant level or at shopfloor level, where the local management is responsible for the implementation of changes, and in the absence of local employee representatives direct communication with employees often plays an important role.

As far as bargaining on the flexible organisation of the working time is concerned, company-level unions’ policy has focused on the pecuniary compensation for the extra burden of adaptation, or at least to mitigate a decrease in earnings, especially for those employees who lose a large number of overtime hours because of the introduction or extension of a reference period. A 'zero-sum game' seems to be a correct characterisation of the objectives, as hardly any non-financial advantages have been negotiated that would make the flexible working schedule over a reference period attractive for employees. Neither the government’s intention in the course of the 2001 legislative period, nor the outcome of the subsequent collective bargaining accommodated the 'flexicurity' approach of the European employment strategy, for instance reconciling work and family life.

Debate and prospects

What impact has the kind of agreement referred to above had in your country, and what impact might such agreements have in future? What is the current debate on the topic? Please provide an assessment of prospects for the future in terms of work organisation bargaining in your country (differentiating by sector, if relevant).

The climax of debates on flexibilisation was in 2001, preceding the major amendment of the Labour Code. Since then both trade unions and employers are entrenched in their positions. Unions are not against flexibility as such, but they require fair compensation and urge the government to strengthen the enforcement of laws protecting employees. Employers' organisations persistently seek more deregulation in the labour market. At the moment, the government does not say much about these issues, and has left it to the employers and unions to bargain at sectoral and company level. At the same time, however, it is known that a comprehensive revision of the Labour Code has been under preparation for long time. As Hungary’s first National Action Plan for employment is to be submitted soon, it can be predicted that the objectives of the European employment strategy will gradually gain greater impact on the domestic debates. Notwithstanding, at present 'flexicurity' still seems to be a brand new approach for many in the country. The first awareness-raising seminar on this topic was held by the International Labour Office (ILO) in Budapest in September 2004. (László Neumann and András Tóth, Institute of Political Science, Hungarian Academy of Sciences)

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