Italy: New collective bargaining agreement marks a turning point for industrial relations in the metalworking sector

On 25 November 2016, in the wake of a long-standing dispute, the social partners in the metalworking sector signed a new national collective bargaining agreement. It features new provisions on wage-setting mechanisms and private welfare and union rights, which could influence collective bargaining in other sectors.

Introduction

On 25 November 2016, after a year of negotiations, the social partners in the metalworking industry agreed to renew their national collective bargaining agreement (NCBA) until 2019. The agreement comes after a seven-year dispute, during which NCBAs had been signed without the consent of the union with the largest number of members in the sector, the Federation of White and Blue-Collar Metalworkers (FIOM).

The rift was not only between FIOM and the sector’s main employer organisations – the Association of the Italian Metalworking Industry (Federmeccanica) and the National Association of Plant Manufacturers, Energy Service Companies and Facility Management (ASSISTAL), but also between it and the other most representative sectoral unions – the Italian Federation of Metalworkers (FIM) and the Italian Union of Metalworkers (UILM). This rift stemmed mainly from disagreements about:

  • wage increases;
  • the possibility for company-level collective agreements to derogate from NCBAs;
  • rules on conflict and industrial action.

The new NCBA smoothed out some of these issues by introducing several experimental provisions on wage-setting mechanisms, including welfare benefits. It also prepared the ground for further negotiations on collective bargaining rules.

New rules on wage increases

The most controversial issue has always been the way wage increases are worked out. Under the rules agreed in 2009 and 2012, all employees were entitled to wage increases in line with the trend of the expected Harmonised Index of Consumer Prices (HICP), excluding the effect of imported energy products. Instead, Federmeccanica and ASSISTAL proposed aligning wage increases with the value of the actual HICP, excluding the effect of imported energy products. These organisations, moreover, suggested applying them only to workers not covered by additional pay schemes (such as bonuses and performance-related pay) agreed at company or individual level.

Under the new rule, the unions accepted the replacement of the expected inflation rate with the actual one. This should help to overcome misalignments between wage and inflation due to differences between the expected and the actual HICP value.

As to the restricted coverage of wage increases, unions claimed the proposed change could make the national bargaining level irrelevant, as barely 5% of employees receive the minimum wage set by the NCBA. A compromise was reached by agreeing that wage increases set by NCBAs will remain on top of the pay agreed at company and individual level before 2017, but they will absorb any increases from 2017, unless specified differently.

The effect of the new provisions will therefore depend on the bargaining power of the parties at company level. The new rules might trigger the conclusion of new agreements within undertakings that so far have been covered only by the NCBA, although they might temper wage trends in companies where collective bargaining is already in place.

Shift to tax-exempt private welfare benefits

Although the average expected wage increase resulting from the new rules should equal €51 per month by 2019 (far below the increases recently agreed in other sectors), this sum will be supplemented with an additional €40 in the form of private welfare benefits. This amount is divided between:

  • training-related funding;
  • increased employers’ contributions to paritarian health and pension funds;
  • flexible benefits.

The NCBA introduced an individual right for permanent employees to vocational training for a total of 24 hours (of which 16 hours are  paid by the employer) over a three-year period. Employees can ask to take part in training organised by their company, by the sectoral vocational training fund or by other authorised providers. This adds up to the already existing 150-hour paid leave granted to employees for them to attend formal educational courses.

Employers’ contributions to paritarian funds have been roughly doubled. And, although enrolment in a pension fund is still voluntary, the health fund coverage has been extended to all employees. Dependent family members can be included too, provided the employees concerned pay contributions for them.

Companies are now also obliged to guarantee that each employee enjoys a range of flexible benefits worth up to €200 per year in 2019. This is something completely new for the Italian industrial relations system as so far these sorts of benefits, such as vouchers for meals or educational and care services, have been set unilaterally by employers or through company-level agreements.

The welfare provisions allow for  an overall net wage increase slightly above that agreed in other sectors to be reached, while reducing the tax wedge on wages. Under the rules introduced by the 2016 Budget Law and the 2017 Budget Law, these benefits are completely exempt from income tax and are complemented by reliefs from social security contributions and corporate taxation. However, they are not taken into account in the calculation of the severance pay or of future pension payments.

Although the new provisions ensure a more equal distribution of private welfare schemes, this comes at the expense of public finances, which are earmarking increasing resources for private welfare at a time when universal services are in a critical situation.

New rules on collective bargaining

The agreement also introduced new provisions on collective bargaining, laying the basis for further negotiation rounds on the issue.

On the issue of health and safety at work, the parties strengthened training, as well as the right for workers’ representatives to access relevant documents. The parties also committed themselves to establishing a national paritarian committee to promote guidelines and training, as well as to monitor accidents in the sector. Furthermore, the NCBA strengthened the consultation rights of workers’ representatives in large companies on decisions that affect work organisation and employment. It also introduced a specific consultation phase in the event of a change of contractor in public works.

Over the next few months, the parties will define the aspects that the Industrial Relations System Agreement signed on 10 January 2014 (Testo Unico sulla Rappresentanza) shifted from the cross-sectoral level to NCBAs. This should bring together different views about the relationships between the national and the company-level agreements, including the possibility for company-level agreements to derogate from NCBAs, as well as from the clauses governing conflict and enforcement of collective bargaining agreements.

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