Collective agreements concluded in the metal industry

In May 2012, social partners in Germany’s metal and electrical industry signed a new collective agreement in Baden-Württemberg. Employees in the industry will receive pay rises and the agreement also includes new regulations for temporary agency workers and apprentices in metalworking firms. It runs for 13 months and serves as a pilot agreement for other regions. A separate agreement covering temporary agency workers in the industry was also concluded at the end of the same month.

Background

During the recent collective bargaining round in Germany’s metal and electrical sector, four topics dominated the social partners’ agenda; wages, temporary agency work, apprentices and demographic change.

On 19 May 2012, the employer association for the metal and electrical industry in Baden-Wurttemberg, Südwestmetall, and the German Metalworkers’ Union (IG Metall) reached a compromise in their latest negotiations. The agreement reached also serves as a pilot for other areas of the country, with Bavaria, North Rhine-Westphalia and other regions adopting its terms. During the five bargaining rounds, IG Metall organised warning strikes involving around 800,000 workers. In total, the new agreements affect around 3.3 million employees in the industry.

Only a few days later, another collective agreement, this time for temporary agency workers in the industry, was also signed.

Pilot agreement in the metal industry

In the pilot agreement concluded in the metal and electrical industry in Baden-Württemberg, agreement was reached in four main areas.

Pay

The social partners agreed to a wage increase of 4.3%. Employees will receive the pay rises from 1 May 2012 onwards, following a ‘zero-month’ in April 2012.

Apprentices

After their training courses, apprentices are to receive an offer of employment by their companies. Employers are given two options for dealing with the rule.

  • Employers analyse the demand for permanent workers. Not later than six months before vocational training is completed, the management stipulates how many newly qualified permanent staff are required, offers this number of apprentices a permanent position after the successful completion of their training, and informs the works council accordingly. Those apprentices surplus to the stipulated demand are also offered an employment contract after their training period. However, theirs is a fixed-term contract for only another 12 months.
  • Employers and the works councils stipulate in a works agreement how many apprentices are to be offered a permanent position after the successful completion of their training. The company and the works council will analyse the demand for workers before a new training year begins. In this case, the number of positions laid down in the works agreement is binding on the establishment. Those young people who are trained beyond the demand for permanent staff do not have a right to be taken on as permanent or fixed-term staff.

The collective agreement makes provision for companies who are forced to deviate from these options. If a business is in serious economic trouble to the extent that its employment levels are affected, it is not obliged to adhere to these clauses on apprentices. The same holds true if personal reasons warrant further employment of an apprentice. In the first case, the works’ council has to approve of the delay, in the second, it only needs to be agreed by the management.

The new rules apply for apprentices who will finish their training after 31 December 2012. The agreement on apprentices runs from 1 June 2012 to 31 December 2014.

Demographic change

Problems have been caused by demographic changes that have created an ageing population in which older workers cannot easily be replaced by young people. The social partners are negotiating on issues including the provision of low-skilled and skilled jobs, as well as flexible working time models that take age structure and demographic change into account.

Temporary agency work

The recently concluded agreement allows for unrestricted deployment of temporary agency workers in any business for 18 months. After this period, the company must check whether the temporary agency worker in question can be awarded a direct permanent employment contract.

If no objective reasons justify continuation of the temporary contract, a permanent contract must be offered to the worker after 24 months at the latest. Reasons for the continuation of a temporary contract might include employment in project work or the temporary agency worker filling in for permanent staff on temporary leave.

It is significant that the works councils received greater co-determination rights and can call for negotiations to regulate the use of temporary agency workers by a works agreement. Topics for such an agreement can range from the purpose and area of deployment, volume of temporary agency work, to the permanent employment of such workers.

While the use of temporary agency workers can, for example, be limited by a works agreement, other flexibilisation measures can be introduced in compensation, such as the prolongation of weekly working hours to 40 hours for a limited higher share of employees. Finally, if temporary agency workers do not enjoy the same wages and working conditions as permanent workers, the works council can object to them being used in the future.

New agreement for temporary agency workers in metalworking

In addition to the pilot agreement for the metal and electrical industry in southwest Germany, employers and IG Metall also negotiated a sectoral collective agreement covering temporary agency workers throughout the German electrical and metal industry.

In February 2012, temporary agency work employers united to form the Collective Bargaining Association for Temporary Agency Work Employers (VGZ). VGZ is made up of the Federal Employer Association for Personnel Service Companies and Private Employment Agencies (BAP) and the Association of German Temporary Employment Agencies (iGZ).

IG Metall’s and VGZ’s latest agreement led to a wage adjustment of temporary agency workers in the metal industry. To minimise the wage differences between permanent staff and temporary agency workers, supplements will be paid to temporary agency workers. These supplements rise with the duration of the workers’ stay at the companies.

Adjustment periods for wages of temporary agency workers
  Time worked for the user company Supplement payment in the metal industry (%)

Period 1

Six weeks

15

Period 2

Three months

20

Period 3

Five months

30

Period 4

Seven months

45

Period 5

Nine months

50

The new agreement will take effect on 1 November 2012 and will run until 2017. It is also intended to serve as a pilot agreement for other sectors. For example, VGZ and the Mining, Chemicals and Energy Industrial Union (IG BCE) concluded a similar agreement for temporary agency workers in chemical companies (in German) in June 2012. The chemical agreement has the same running time as the one in the metal industry and supplements will also be paid in five steps. However, the scale ranges from 15% to 50% for pay grades 1 and 2 and from 10% to 35% for pay grades 3 to 5.

Reaction of social partners

On 19 May 2012, the Chair of Südwestmetall, Rainer Dulger, welcomed the latest compromise in the metal industry (see press release (in German)). In his view, the new agreement left room for companies to deal in a flexible manner with the regulations on retaining newly-qualified apprentices and employing temporary agency workers. Südwestmetall’s chair also stressed that the wage rise of 4.3% reflected the positive economic development in the sector, from which employees profited.

In a press statement (in German), Martin Kannegiesser, Chair of the Employers’ Associations for the Metal and Electrical Industry (Gesamtmetall) recommended other collective bargaining regions adopt the provisions of the pilot agreement in Baden-Württemberg. He also called for an end to the political debate on the introduction of a national minimum wage for temporary agency work, given that two new agreements guaranteed temporary agency workers better pay and the prospect of being taken on as permanent staff.

On 22 May 2012, VGZ Chief Negotiator Thomas Bäumer commented in press article (in German) on the agreed supplement payments for temporary agency staff in metalworking. Mr Bäumer stressed that the additional costs incurred by the latest compromise would have to be borne by user companies. He also highlighted that this would have a negative effect on the labour market, especially with regard to the employment prospects of low-qualified workers.

After the new collective agreement was concluded in Baden-Württemberg, in a statement to the press on 19 May (in German) IG Metall Chair Berthold Huber thanked all the employees who had participated in nationwide warning strikes. He stressed that their commitment had contributed to the compromise.

Concerning the terms of the agreement, Mr Huber highlighted the new conditions for temporary agency workers in metalworking companies saying that the compromise countered the divisions in the workforce in establishments while, at the same time, IG Metall’s collective agreements provided flexible solutions for a ‘volatile economy’.

Finally, Helga Schwitzer, a member of the IG Metall executive committee, pointed to the important role of the social partners at the establishment level. She highlighted that it was their responsibility to implement the single points of the pilot agreement from Baden-Württemberg. On 22 May 2012, Ms Schwitzer also welcomed in a press release (in German) the compromise reached with VGZ to improve conditions for temporary agency workers in the metal and electrical industry.

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

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