Portugal: Decline in collective bargaining reaches critical point

Since 2008 there has been a steady decline in the number of collective agreements concluded in Portugal. Reasons for the decline include stalling of negotiations, the economic crisis, new Labour Code rules and mandatory wage freezes.

Although the sectoral level has been the main level of collective wage bargaining in Portugal, since 2008 there has been an overall decline in the number of sectoral and multi-employer agreements concluded. In 2012, there was a dramatic fall in the number of multi-employer agreements and workers covered. The number of company agreements declined as well, although at a slower pace.

In 2013, Portugal experienced a second year of collective bargaining crisis. Only 46 sectoral and multi-employer agreements were concluded, covering only 242,239 workers. Not only a result of the economic crisis, this critical situation is also caused by political measures on the extension of collective agreements issued in 2012. These measures introduced stricter criteria that undermine the coverage of workers and also employers' interest in concluding agreements, as they know in advance that they will have limited impact and result in unfair competition. Employer and trade union confederations have voiced concerns and demand a revision of these measures.

Economic and political challenges

The decline in multi-employer agreements can be attributed to: a halt in negotiations, where employer associations were reluctant to make agreements; the economic crisis; provisions of the new Labour Code introduced during 2012 (PT1205019I); and mandatory minimum wage freezes.

However, the decline in workers' coverage resulted from the revision of the procedures on the extension of collective agreements set by Portugal’s Council of Ministers in Resolution No. 90/2012 (in Portuguese, 200 KB PDF), published in October 2012, in line with the Memorandum of Understanding requirements. The resolution defined stricter criteria for extending collective agreements to non-unionised workers and to companies not affiliated to employer associations. These included rules on the level of representativeness of the employer association signing the agreement. Only collective agreements signed by an association representing 50% or more of the employees in the respective branch could be extended.

Earlier, during 2011 and 2012, the government had made a commitment to the Troika (IMF/EC/ECB) not to allow the extension of any collective agreements until the criteria had been redefined. This had a major impact on collective bargaining in 2012, even before the resolution restricting the extension of collective agreements was drawn up.

Change in coverage

The recent report by the General Workers’ Union (UGT) on developments in collective bargaining in 2013 (in Portuguese, 597 KB PDF) shows that the situation remains highly critical. In 2012 and 2013, the number of sectoral and multi-employer agreements was only about a quarter of the number of agreements concluded in 2008. In 2012, the number of workers covered was almost one-sixth of those covered in 2008, which means around 1.5 million workers were left without collective agreement coverage. In 2013, the number of workers covered was almost one-eighth of those covered in 2008, which is around 1.6 million workers without collective agreement coverage (see table). 

  2008 2009 2010 2011 2012 2013
Collective agreement coverage, 2008–2013
Sectoral and multi-employer agreements 200 164 166 115 46 46
Company agreements 95 87 64 55 39 48
Total agreements 295 251 230 170 85 94
extension ordinances 137 102 116 17 12 9
workers covered 1,894,788 1,397,225 1,407,066 1,236,919 327,662

242,239

Furthermore, in relation to the limited number of collective agreements negotiated, in 2013 the revised pay scales had not been updated for 30.7 months. This is the highest period in recent years (16.6 months in 2007, 18.7 in 2008, 13.7 in 2009, 15.9 in 2010 and 2011, 19.9 in 2012), to the obvious detriment of the workers concerned.

Reasons for the decline

The impact of Resolution No. 90/2012 in the current bargaining crisis relates to a number of issues:

  • most employer associations have no way of getting an accurate assessment of their representativeness (due to lack of updated official statistics on the number of workers in companies in the sector/domain they represent) to comply with the requirements of the resolution;
  • this prevents the possibility of extension ordinances and consequently reduces dramatically the number of workers covered by collective agreements;
  • it also hinders the possibility of concluding sectoral agreements because employers fear unfair competition as they know that many companies will disaffiliate themselves from associations if extension ordinances are not concluded.

Therefore, the suspension of extension ordinances has resulted in the non-conclusion of sectoral agreements because employers are reluctant to conclude agreements they know in advance will have limited scope. This might also be combined, in certain cases, with the pressure to force the invalidity of existing agreements.

Both social partners are critical

The debate on these issues generated mixed reactions, but neither the employer confederations nor the trade union confederations agree with government policy in this respect and they criticised the resolution (PT1302029I). Vieira Lopes, President of the Portuguese Trade and Services Confederation (CCP) points to the problem of unfair competition and erosion of associations. At first, the conditions negotiated in collective bargaining apply only to companies and workers affiliated to the associations that negotiate. Only after this, these conditions are extended to the sector, through extension ordinances. Thus, according to Mr Lopes, 'there are companies that may exit from the associations to practice wages and other conditions below those defined by collective bargaining, which can create unfair competition.'

Gregório Rocha Novo, Deputy Director-General of the Confederation of Portuguese Industry (CIP), highlights the same problems, saying that companies that abandon their associations are 'more likely to enter into informal activity'. Moreover, the absence of extension ordinances undermines collective bargaining because the associations are not willing to negotiate, so as not to lose their members (Diário Económico, 6 March 2013).

The General Confederation of Portuguese Workers (CGTP) and the UGT also protested at government policy on extension procedures. On 2 February 2013, the CGTP announced it would formally protest against the violation of the right to collective bargaining at the national level to Portugal’s Ombudsman and, at international level, to the International Labour Organization (ILO).

Commentary

The present situation, where around 1.6 million workers have been excluded from collective agreements, has certainly a heavy impact on their employment conditions, in particular in relation to wage decline, contributing to the decline in internal demand and inequality. It represents a major rupture of the industrial relations system in Portugal, where low trade union density has been compensated for by the extension of collective agreements, thus preventing the segmentation of the labour market and social dumping. The role of sectoral and multi-employer agreements is crucial, taking into account the predominance of micro and small companies.

The International Labour Organization (ILO) has expressed concern about this critical situation in its report Tackling the jobs crisis in Portugal (1.9 MB PDF), published in November 2013. It highlights that 'the reform has resulted in an overall reduction in the coverage of collective agreements, thus increasing the pressure to reduce wages and contracting domestic demand even more.'

 
 

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