Germany: Flexicurity and industrial relations

  • Observatory: EurWORK
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  • Published on: 14 September 2009

Birgit Kraemer

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Views of the collective bargaining partners differ widely on what can be termed a flexicurity approach. Both parties criticise public policy measures at place which increasingly have been shaped by the influence of the employer organisations. Collective bargaining has resulted in various flexicurity provisions. However, results are hard to achieve as security is low on the agenda of most employer organisations. Social problems accumulate in private service sectors, where collective bargaining is at its weakest. Trade unions thus voice demand for more regulation, which is rejected by the employer side.

1. Flexicurity policies: main national measures

1.1 Please briefly outline the main nation-wide public policies (even if administered by local authorities), which are usually considered part of the ‘flexicurity’ approach in your country, distinguishing between the four basic components of flexicurity:

In Germany, the term ‘flexicurity’ is rarely applied to public policy approaches. Views of the collective bargaining parties differ on what can be termed a flexicurity approach but both are substantially involved in its implementation (via works councils and companies, collective bargaining, representation in bodies of the dual vocational training and of unemployment, pension and health care insurance systems).

a) contractual arrangements;

Workplace guarantees in case of parental leave were set up. The Law on part-time and fixed term work (Teilzeit- und Befristungsgesetz, (DE0011293F) normalised these contract forms.

Restrictions on the duration of temporary agency work (DE0610049I) and of fixed term work (DE0512104F) were lowered; standards in dismissals protection in SMEs were diminished (Measures which employer associations considered to have a flexicurity approach).

By ministerial directive, several collective agreements on minimum wages were extended as generally binding to the sector via the Posted Workers Act (DE0306207T; DE0609049I, DE0710019I) (measures which trade unions considered to have a flexicurity approach).

b) lifelong learning;

The so-called ‘Job Aqtiv Law’ (Job Aqtiv Gesetz, DE00111203F) installed new measures to support training of young unemployed and of persons at risk to loose their jobs. SMEs giving training to elderly workers are eligible for financial supplements. In accordance with the Fourth law on modern services in the labour market (commonly known as HARTZ IV, DE0311101N) public expenses on training the unemployed were decreased; the Federal Employment Agency introduced selection criteria on training allowances to improve efficiency of training and job-placement activities.

c) active labour market policies;

Aiming to increase the number of ‘minor’ and low-wage jobs, the law on modern services in the labour market raised threshold above which employees must pay social security contribution to 400 euro (mini jobs, DE0302105F). The so-called ‘mini-jobs’ were included in the pension and health care insurance, which contributions are paid by the employers (currently 15% of the pay rate).

Employment-creation measures by the Federal Employment Agency were reduced, whereas pay subsidisation to establishments providing for a job to an unemployed person (50% of wage for one year) was increased. Unemployed workers (50 years plus) accepting a job providing for a lower wage than the preceding one, are entitled to financial support from the Federal Employment Agency (see Entgeltsicherung für ältere Arbeitnehmer, in German).

d) social security.

To lower the number of long-time unemployed persons and to lower tax expenses the HARTZ IV merged unemployment assistance by the Federal Employment Agency and the Social Welfare System (DE0409204N). Doing so, it substantially reduced the benefits of long-term unemployed.

The 1999 Pension Reform Act (Rentenreformgesetz) made legal provision for employees to have contributions deducted from their gross pay and paid into a pension scheme to building up a company pension entitlement. A pension scheme (so-called Riester-Rente, DE010204F) was set up encouraging individuals to participate in privately funded pension schemes.

For each policy, you should specify whether the involvement of trade unions and employer associations in the implementation is: i) substantial; ii) marginal; or iii) none and, if relevant, briefly illustrate their role.

1.2 Please briefly present the main national labour market trends since 1990: labour market participation and employment, unemployment and long-term unemployment.

According to the Federal Statistical Office (Statistisches Bundesamt) employment rates increased from 50.8% to 51.5% (between 1991 and 2006), whereas participation declined from 69.3% to 68.9%. Between 1991 and 2004, the participation rate of women rose by 2.2% (only in West Germany) (62.2%), while male participation declined by 4.1%. Almost half of the employed women work part-time (46%). In the period between 1995 and 2006, the share of employees liable to social security contributions dropped from 75% to 67.5% (see Arbeitsmarkt) while, between 1990 and 2004 full-time jobs declined by 19%. According to Federal Employment Agency (Bundesagentur für Arbeit) statistics, about 6.5 million people were employed as contingent workers (including persons holding other job contracts) in 2007. Unemployment increased from 4.9% (in 1991) to 9% (in 2007).

2. Flexicurity policies: the role and positions of the social partners

2.1 Please, illustrate briefly the role of the social partners and social dialogue – at all levels – in the policymaking process which led to the introduction of any of the policies mentioned under point 1.1 and linked to the efforts to combine flexibility on the labour market and security.

Both parties are consulted on policy matters at the national level and at the level of the Federal States: Both exert substantial influence due to the autonomy of collective bargaining and due to their representation in the bodies of the social insurance systems and of the dual vocational training scheme. Trade unions have been putting an emphasis on internal flexibility, on security issues (at workplace and at societal level) and on defining concepts of flexicurity, whereas employers associations promote internal and external flexibility and individual responsibility. Trade union influence on all four dimensions has been decreasing as public policies have aimed for more flexibility and for cost-saving reforms of the social security system.

2.2 Please outline briefly the main positions of the social partners on flexicurity, with reference to its four basic components (contracts, lifelong learning, active labour market policies, social security):

a) Do employer association and trade union especially stress some dimensions?

The views of employer associations on particular aspects of public policies can differ. For example, the Confederation of German Employers Association (Bunderverband deutscher Arbeitergeberverbände, BDA), considers that flexicurity is best assured by not adhering to old forms of job protection (contractual arrangements) but by improving the chances of individuals to find a new job quickly. Flexibility of companies as well as mobility and flexibility of workers is to be increased. BDA is in line with policies abolishing restrictions on the employment of temporary agency and fixed-term workers, with labour market policies providing for an increase of atypical jobs and with public measures subsidising the pays of newly employed job-seekers. Education and continuous vocational training is to be improved by close cooperation with employers. Further reforms are needed which imply that individuals will have to take more responsibility in job seeking, in training and in contributing to insurance schemes. BDA stresses contractual arrangements, lifelong learning and labour market policies as some of the main issues.

The views of the trade unions differ in some details. We refer to the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB), according to which combining flexibility and security implies that new concepts of regulation are to be developed by public authorities and collective bargaining parties. In what concerns standard employment, jobs of good quality and internal job stability are to be taken as the guideline and new measures are needed to support atypical workers, such as: regulation for the right of permanent work after a certain number of fixed term contracts; a statutory minimum wage and extension of the Posted Workers Act to the temporary agency sector. Labour market policies increasing temporary agency work, ‘mini-jobs’ and other forms of precarious employment should stop, in order to prevent a further substitution of permanent jobs and further growth of the low-wage sector. High quality of education and of the dual vocational training system, continuous training and adult education is needed to support the individual in coping with economic and societal changes. Unemployment Benefit II (Arbeitslosengeld II) should be increased, pension schemes based on the contributions of employees and employers are to be reformed to include all people in employment and to provide special support for those in need.

b) In their opinion, do the policies mentioned under point 1.1 effectively implement flexicurity (i.e. they balance/combine flexibility and security)?

Both parties criticise public policy approaches.

c) According to the social partners, which are the main shortcomings of the policies undertaken so far? What should be needed to progress towards a full-fledged flexicurity approach?

Please note that positions of trade unions or employer associations may vary and may differ from DGB or BDA. For practical reasons, we restrict the answer to the national federations.

Employer associations reject current standards of contractual arrangements as, for example, the standard of dismissals protection, the right to part-time work, restrictions on the employment of fixed-term workers and temporary agency workers and the extension of collective agreements on minimum wages. BDA calls for reforms of labour market policies (HARTZ IV, DE0608049I) at tax-based unemployment benefits and employment schemes are to be reduced if they keep job-seekers from taking up any job. BDA rejects the fact that the employers’ contributions for contingent workers (for pension and heath care system) were increased. Public policies are to provide for better education and for a close cooperation between educational institutions and companies to improve qualification and employability. Non-wage labour costs due to social security contributions are to be abolished. A tax-based retirement pension scheme, private and company-based retirement pension schemes and a tax-based health insurance system are to be set up.

According to DGB, current government shows lack of interest in conceptualising and in implementing flexicurity measures. The trade unions criticise that working time was flexibilised but that legislation does not provide for sufficient security for working time accounts; they oppose any initiatives diminishing standards of dismissals protection and to increase the duration of temporary agency work. They voice harsh criticism that labour market policies have intended to increase the number of precarious ‘mini-jobs’ and of temporary agency jobs, but have shown not to support workers in finding jobs of good quality. HARTZ IV has increased the poverty level. Unemplyoment Benefit II has to be raised. HARTZ IV provisions have decreased the chances for unemployed people to acquire training allowances; lifelong learning has not sufficiently been supported, as public expenses on further training and on adult education were cut. As companies are reluctant to provide for more training, further approaches are needed to mobilise them to do so. Reforms of the retirement pension schemes are insufficient as so far they do not address the security problems of discontinuous work biographies, of low-wage earners, of part-time workers and the self-employed. New schemes including all employees (Erwerbstätigenversicherung) have to be set up.

2.3. How are trade unions and employer associations in your country contributing, either independently or jointly, to implement a flexicurity approach by their own initiative?

Both parties put a strong emphasis on campaigning. However, as these activities are not asked for they will not be considered here.

Referring to the trade unions we choose three fields of activities: guidance/counselling/organising, education/training and social insurances.

Trade unions put a new emphasis on counselling atypical workers on job related matters as well as on insurance issues. United Services Union (Vereinte Dienstleistungsgewerkschaft, Ver.di), provides online-guidance to unemployed persons. The trade union has also set up a company providing services such as counselling to self-employed persons (including non-members); other counselling projects target atypical workers in the professional and adult education sector, the call centre industry, the retail and the media sector. Moreover, the trade union trains volunteers to be contacted locally for guidance on social insurance matters. The ver.di website (http:\\ gives practical information on social security and labour market issues. Trade Union for Building, Forestry, Agriculture and the Environment (Industriegewerkschaft Bauen-Agrar-Umwelt, IG BAU) founded the European Migrant Workers Union. IG Metall local staff offer special guidance services to temporary agency workers and its website also lists information on the subject (

Numerous activities address education (school level) and continuing vocational training. For example, the educational institution of DGB, DGB Bildungswerk (an EU funded project) cooperates with the Federation of West German Crafts Chambers (Westdeutscher Handwerkskammertag) in counselling manufacturing companies and the public sector on providing jobs and vocational training to migrants (see project website).

Trade union membership fees typically include legal protection and privileged provisions in some insurance schemes including the so-called Riester pension (private pension contributions eligible for government subsidies).

A joint undertaking of IG Metall and Gesamtmetall, the employers’ association of the electrical and metalworking industries, is the Metallrente: In 2001, IG Metall and Gesamtmetall established a retirement pension scheme (‘Metallrente’), which is supervised by an advisory board consisting of the collective bargaining partners and external financial experts. Employees are free to contribute up to 4% of their annual gross pay (to a maximum of 2,400 euro) and can choose between three types of pension insurance systems. Since 2007, Metallrente is open to companies which are not members of Gesamtmetall. Companies of the textile and garment industry, the steel industry and the wood carving industry have joint Metallrente, after IG Metall concluded collective agreements with the respective employer associations.

Initiatives on the part of employers’ associations typically relate to the field of professional training but more recently the issue of demographic change and the employment of elderly workers have been taken up.

Employer associations and trade unions have to be consulted if a new profession is defined and if a new training scheme is integrated into the dual vocational training system. Mostly recently, a range of new professions have been created to improve employability of persons in low skilled jobs. For example, the employers association of the hotel and restaurant sector (Deutscher Hotel- und Gaststättenverband, DEHOGA) was involved in creating the profession of Fachmann/frau in der Systemgastronomie (skilled specialist in the fast food service industry). As the fast food service industry (McDonalds, Burger King, etc.) provides for many low skilled and atypical jobs in the restaurant sector, the new profession is meant to improve the career chances of employees.

The Federation of Employers Association North Rhine Westfalia (Landesvereinigung der Arbeitgeberverbände NRW), the Ministry of Labour NRW and the Confederation of German Trade Unions North Rhine Westfalia (Deutsche Gewerkschaftsbund NRW, DGB NRW), signed a joint declaration on improving the chances of elderly workers. On demand of the federation an educational institution provides training seminars to managers on the issue.

3. Collective bargaining and flexicurity

3.1 How is decentralised collective bargaining in your country, either at workplace level or territorial level, contributing to implement a flexicurity approach?

Decentralised multi-employer and single-employer collective agreements define innovative measures which set frameworks for actors at establishment-level (works agreements concluded by works councils and employers have to take collective agreements into account). Chances to settle collective agreements on security enhancing measures vary considerably depending on the industrial relations in a given sector. Typically, chances are significantly lower in the service sector than in manufacturing or extractive industries. Respective agreements are difficult to reach and often are reached after industrial action was taken. Below we give some examples of job security measures in the event of internal restructuring and on continuous vocational training.

In 2007, Ver.di concluded the first Collective Social Plan Agreement (Tarifsozialplan) in the service sector. In the event of announced job cuts, the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) provides for the setting-up of a social plan (Sozialplan, DE0311102T) by management and the works council or by an arbitration board (Einigungsstelle). Social plans typically regulate compensation payments and, more rarely, the transfer of affected workers to a job placement and training agency. The Collective Social Plan Agreement was concluded by the trade union and the employer, the IT-service provider Sparkassen Informatik (SI). SI had planned to close four out of nine local branches and to cut 1,400 jobs. After 18 weeks of strike action, a compromise was reached which did not prevent the closures but significantly lowered the number of job cuts and prevented forced relocations of employees. The bargaining result comprised a set of mixed arrangements – such as extensive use of telework (permanent and fixed term), of working time reduction (80% of agreed weekly working time paid 90% of the full-time wage) and of flexibilised working time and working time accounts (part-time jobs (50% of agreed weekly working time) with flexible working hours and working time accounts).

As internal restructuring may affect specific groups of employees, a collective agreement on elderly workers is of interest. In 2006, IG Metall North Rhine Westphalia (IG Metall NRW) and the employers association for the German steel industry (Arbeitgeberverband Stahl) agreed on a collective agreement on ‘demographic change’, covering some 85,000 employees in the steel industry of North Rhine-Westphalia, Lower Saxony and Bremen. The agreement stated that after consultation with the works council, each employer must carry out a review at company level of the age profile of its workforce in connection with an assessment of qualification levels, the need for further training, and working conditions. Based on the results, the employer and the works council consult about possible measures. These can include lowering the average age of the workforce by increasing the number of apprentices employed, but can also imply provisions such as improving occupational health and safety; adapting working conditions, offering further training; reducing peak workloads or adjusting working time schedules or using long-term working time accounts for earlier retirement. Works councils and employers can also agree to create a company fund to which the employer and employees can contribute (to be used as a company pension fund, for long-term working time accounts, for additional initiatives for early retirement, or for other similar measures).

Collective agreements on continuous vocational training are highly controversial. According to BDA, they are inefficient; according to the trade unions there is a particular need for collective bargaining arrangements as companies do not sufficiently provide for training. However, regional employers associations of the metal and electrical industries and IG Metall settled various collective agreements on the issue. According to the 2006 agreement by the employers’ association of North Rhine Westphalia (Arbeitgeberverband NRW) and IG Metall NRW, companies should set their level of requirement for further training at least annually and conduct individual talks with employees on a yearly basis. If the training of the employee is required by the company or is necessary due to changes in the work organisation, it will be fully paid by the employer. In cases where the continuous training is not immediately required but is aimed at qualifying the employee to take up a better paid position in the organisation (Entwicklungsqualifizierung), 50% of the required training time is covered by the employer.

The effects of a collective agreement on continuous vocational training concluded in 2001 by IG Metall and the employers’ association of the metal and electrical industries Baden Wuerttemberg (Arbeitgeberverband der Metall- und Elektroindustrie Baden Württemberg) were surveyed by Research Institute of Work, Technology and Culture (Forschungsinstitut Arbeit, Technik und Kultur, FATK). Only about a quarter of the managers and half of all works council members said that the collective agreement improved the implementation of training measures. However, 95% of all managers claimed to have conducted talks with employees on an annual basis and 99% said that participation in training was testified (as asked for by the collective agreement). Half of the managers and two thirds of all works council members voiced the opinion that training issues had gained in importance at the establishment level. Involvement of works council members in training planning and the number of works agreements on vocational training increased due to the collective agreement.

3.2 Are there any sectors where the issue of flexicurity is particularly relevant? Please present shortly the basic economic and labour market features of these sectors and their specificities with respect to the implementation of flexicurity, with special reference to collective bargaining.

Please indicate whether, according to existing analysis, the contribution of collective bargaining to flexicurity is: i) substantial; ii) marginal; or iii) none.

In the private service sector, even bargaining a ‘normal’ wage agreement excluding any other provision is highly controversial. It often fails in those domestic market oriented sectors (and often female dominated), which show a massive increase of contingent workers, part-time, fixed-term and posted workers (hotel and restaurant, retail, health sector, company- and person-related services, education and training, building). As collective bargaining has not led to decent wages in certain sectors, service sector trade unions and DGB consider a national minimum wage one of most important issues of the flexicurity approach.

4. Commentary

4.1 Please provide your own comments on the issue of flexicurity and industrial relations in your own country.

As flexicurity is promoted by the EU Commission, there is a risk that in Germany the term will be applied to measures which actually do not provide for security. Though there has been an ongoing debate on the normative concept of flexicurity and on measures of implementation at company level and at societal level – particularly on part of research and of the trade unions –, chances for implementation have been in decline.

Public policy measures on flexicurity, such as the normalisation of part-time and fixed-term work, were more pronounced in the 1990s and at the beginning of the decade, whereas increasing flexibility has been high on the political agenda for the last years. Collective bargaining is often said to play a substantial role in providing for flexicurity measures at company level and well known examples are cited for proof, such as job placement provisions or working time accounts. However, to achieve these bargaining results substantial efforts including industrial action were needed, they are rare in the private service sector and implementation in SMEs is often poor. The number of employers’ associations willing to deal with flexicurity issues is rather limited. Additionally, the number of workers covered by collective agreements is decreasing as companies quit their membership.

There is a strong gender dimension to the problem as labour market policies have increased the employment rate by promoting part-time work and mini-jobs for women and as collective bargaining is at its weakest in female dominated service sectors. Today, 46% of employed women work part-time while female total working hours have stayed the same as in 1990. Considering wage rates in female professions, even standard part-time work does not pay to make a living nor does it provide for sufficient unemployment allowances and retirement pensions. Policies considering rapid job-switches a flexicurity approach, blind out the effects on the individual and on society.

Birgit Kraemer, Institute of Economic and Social Research, WSI

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