New collective agreement in metalworking sector

In April 2009, the social partners in the metal and electrical industry signed a new collective agreement on short-time work, training and employment protection for Baden-Württemberg. The social partners have extended the new rules on short-time work introduced by the federal government by establishing two new models to compensate workers on short-time work for lost wages. In addition, rules on the renewal of fixed-term contracts have been relaxed due to the economic crisis.

On 15 April 2009, the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) and the Baden-Württemberg Employer Association for the Metal and Electrical Industry (Verband der Metall- und Elektorindustrie Baden-Württemberg, Südwestmetall) concluded a new collective agreement (in German) on short-time work in the bargaining region of Baden-Württemberg. The new agreement aims to deal with the effects of the deteriorating economic situation on companies with low order books. It will automatically expire on 31 December 2010.

Content of new agreement

Extension of fixed-term contracts

The social partners decided that fixed-term employment contracts due to expire in 2009 or 2010 can be renewed for another 24 months. However, the maximum period of such contracts must still not exceed 48 months. Furthermore, such contracts may only be renewed a total of six times.

Short-time work in companies

Further regulations mainly deal with short-time work in companies. Works councils have been granted the right to initiate or prolong short-time work. The period of notice for short-time work can be lowered from three weeks to a minimum of one day provided the approval of the social partners at the establishment level is obtained.

Allowances for workers

As laid down in national legislation, affected workers receive short-time working allowances to the value of 60% (67% for employees with children) of the wage cut – that is, net of taxes for which employers are reimbursed by the Federal Employment Agency (Bundesagentur für Arbeit, BA) (DE0904039I).

Additional allowances are granted to short-time workers in the metalworking industry through the framework agreement on pay structure. In addition to existing provisions on the level of these allowances, the new agreement introduces the following two new options.

  • The level of additional allowances equals the difference between the actual net wage while on short-time work plus the short-time working allowances granted by BA and 93% of the workers’ regular net wages. The allowance level is independent of the amount of short-time work carried out. In return, other gratifications, such as Christmas and holiday bonuses, are to be reduced. Instead of paying lower bonuses to workers, managements and works councils can also decide to delay bonus payments to the end of 2011 or to debit the staff’s working time accounts.
  • The increase in payments to short-time workers is related to the amount of short-time work carried out. The level of additional allowances equals the difference between the actual net wage while on short-time work plus the short-time working allowances paid by BA and 97% (or 95%, 93%, 91%, 88%, 85%, 82%) of the regular net wage given a wage loss of up to 10% (or 20%, 30%, 40%, 60%, 80%, over 80% respectively) as a result of short-time work. At the same time, employees’ entitlements to bonus payments are reduced proportionally to the decrease in working hours during short-time work. Instead of a reduction in bonuses, additional allowances indicated above can also be lowered by 1.5 percentage points.

Whichever new options are chosen, they must all be introduced by a formal company agreement. Moreover, employers are committed to protecting the jobs of affected workers for the period of short-time work.

Training

The introduction of an opening clause allows for training measures during short-time work. The training time for short-time workers is not counted as working time and is therefore not remunerated by the employer. Disputes between the social partners on the introduction of short-time work and its implementation will be dealt with by an arbitration board.

Daimler implements new regulations

According to a press release by the international automobile group Daimler, the company took advantage of the new regulations (DE0905039I) shortly after the introduction of the new agreement.

Position of social partners

On 15 April 2009, the Chair of IG Metall in Baden-Württemberg, Jörg Hofmann, insisted in a press statement (in German) that the current year was not to become a year of dismissals despite the increasingly difficult situation in the sector. He claims that the two compensation models introduced by the new agreement provide incentives for companies to use short-time work for a longer period instead of laying off staff. Additional allowances guarantee a high net wage to affected workers who need security concerning their monthly remuneration.

On the same day, the Chair of Südwestmetall, Jan Stefan Roell, highlighted in a statement to the press (in German) the fact that the new regulations on additional allowances would provide considerable relief to companies and establishments as a result, for example, of the reduced Christmas and holiday bonuses, while employees would still be protected by a high net wage. Mr Roell considers the new agreement a ‘fair compromise’. He argues that it would not only encourage a longer implementation of short-time work but would also provide a wider range of options to companies and establishments fighting the economic crisis.

Sandra Vogel, Cologne Institute for Economic Research (IW Köln)

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