UK: Multinational companies and collective bargaining’

  • Observatory: EurWORK
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  • Published on: 01 July 2009



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United Kingdom
Author:
Paul Marginson
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Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.

Multinational companies (MNCs) account for a significant proportion of private sector employment, and collective bargaining coverage is above the private sector average. Under the UK’s single-employer bargaining arrangements, MNCs act as pace-setters in negotiations on wages and conditions. Comparisons of cost and performance are widely used by management in local negotiations. Union responses to this internationalisation of the bargaining context are limited and uneven.

1. MNCs and collective bargaining: basic data

1) MNCs account for a significant proportion of private sector employment in many European countries. Please provide the following information according to availability:

a) proportion of private sector employment accounted for by MNCs, and recent change (e.g. since 2000)

c) proportion of service sector employment accounted for by MNCs, and recent change (e.g. since 2000)

14.6% of private sector employment was accounted for by overseas-owned MNCs in 2004. No trend data is available, although this figure has probably been rising.

The % of manufacturing employment accounted for by overseas-owned MNCs in 2004 was 26.6%, up from 19.6% in 2000.

Data are not available for private services as a whole. 13.1% of employment in commerce, hotels and restaurants and 15.4% of employment in finance were accounted for by overseas-owned MNCs in 2004.

Source: OECD

2) Please provide any available information on the breakdown of employment in multinationals between foreign-owned MNCs and home-based MNCs

In the mid-1990s, UK-based MNCs accounted for 45% of manufacturing employment whilst overseas-owned MNCs accounted for 16%. No recent figures are available for UK-based MNCs.

3) What is the level of collective bargaining coverage amongst MNCs, and how does this compare with levels of collective bargaining coverage within the private sector? In the absence of precise figures, please provide an estimate of whether it is higher or lower than the average in:

i) the private sector overall

ii) manufacturing

iii) private services

Collective bargaining coverage in the private sector is higher in foreign-owned MNCs than UK-owned organisations. According to WERS 2004, 32% of employees (in workplaces employing 10 ) in foreign-owned companies are covered by collective bargaining, compared to 23% in UK-owned companies.

A 2006 survey of the UK operations of 302 MNCs (employing 500 worldwide and at least 100 in the UK) estimated collective bargaining coverage at 29% (43% in manufacturing and 16% in services). There was no difference between UK- and overseas-owned MNCs.

4) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, are MNCs covered by sector agreements? What is the nature of the relationship between MNCs and sector agreements?

Owing to the general absence of arrangements for multi-employer bargaining in the UK, this question is not applicable.

a) If Yes, do they mainly conform with the provisions specified in these agreements?

b) If No, do MNCs conclude their own company agreements? If so, what if any relationship do these company agreements have with the sector agreement?

5) In countries characterised by single-employer bargaining arrangements for the manufacturing and/or private service sectors, to what extent are MNCs regarded by other employers as pattern setters for wage negotiations?

In manufacturing, wage settlements in large UK- and overseas-owned MNCs are widely regarded as setting the benchmark for company wage negotiations. In the engineering sector, settlements at the major automotive companies such as Jaguar-Land Rover and Vauxhall and other leading companies such as Rolls-Royce are widely reported in the specialist publications which provide information on settlements trends across this and other sectors.

In services, settlements by key UK-based organisations (which are themselves multinationals) in sectors such as banking and retailing are influential in establishing patterns within their respective sectors.

2. MNCs and change in national systems of collective bargaining

1) To what extent have MNCs been a source of recent change in the agenda and outcomes of collective bargaining in respect of any of the following issues. Please distinguish between manufacturing and private services:

a) payments systems? If so, please elaborate and give examples.

Analysis of the 2004 UK Workplace Employment Relations Survey (WERS) finds that workplaces belonging to overseas-owned MNCs are no more likely to use performance-related pay than those which are UK-owned. However, the incidence of both profit-related pay and share-ownership schemes is higher amongst overseas-owned than UK-owned workplaces. WERS 2004 does not, however, contain information of whether such schemes are negotiated. Other findings, from an UK Economic and Social Research Council (ESRC) funded study involving case studies in unionized companies in two sectors – engineering and banking – indicates, however, that profit-related payments and share ownership schemes are rarely the subject of negotiation, being usually introduced unilaterally by management.

b) working time arrangements? If so, please elaborate and give examples.

In a national context where overtime working remains an entrenched practice, prominent MNCs in engineering have negotiated the introduction of working time ‘corridors’ with arrangements for banking hours which can be built up and draw down over an annual or multi-annual period according to fluctuations in demand. The major automotive and aerospace manufactures have nearly all concluded agreements introducing such arrangements. The spread of annualized hours arrangements has been limited in incidence, and these are largely found amongst MNCs in process industries such as chemicals and the utilities.

c) flexibility arrangements (other than working time)? If so, please elaborate and give examples.

Analysis of WERS 2004 finds that workplaces belonging to overseas-owned MNCs are more likely to utilize agency workers than UK-owned ones. WERS 2004 does not, however, contain information on whether their use is negotiated. Evidence from manufacturing indicates that in the local operations of larger MNCs, the extent to which agency workers are used and the wages and conditions on which they are employed are often the subject of local understandings, if not agreements. The potential advantages to MNCs of the limited restrictions on the use of agency labour in the UK were highlighted by the February 2009 decision of BMW to lay-off 850 agency workers, recruited to the weekend shifts at its plant in Oxford, at very short notice (UK0811039i)

d) handling restructuring? If so, please elaborate and give examples.

The severe economic downturn in manufacturing has prompted negotiations over short-time working arrangements, aimed at preserving jobs and involving loss of earnings, at some leading MNCs in engineering in particular. Such agreements are unusual in the UK. These include construction equipment manufacturer JCB (UK0811039i), car manufacturers such as Jaguar Land Rover and Nissan, and the steel manufacturer Corus.

In the late 1990s / early 2000s, several leading MNCs in engineering were also prominent in the negotiation of ‘package’ deals involving trade-offs of enhanced flexibility and cost-saving measures for employment security.

In services, UK-based MNCs in banking (e.g. Barclays, HSBC) and telecommunications (e.g. BT) have negotiated innovative agreements addressing the effects of the offshoring of activities such as customer service centres and data processing on the UK workforce (UK0405103F).

2) Are any of these changes associated with MNCs headquartered in particular countries? If yes, which countries?

No particular patterns according to MNC country-of-origin are evident.

3) Are MNCs introducing new issues onto the bargaining agenda? If so, what are these new issues? (Examples might include equality and diversity practices; environmental issues; new employee participation practices; teleworking.)

There is little available information on innovations in the bargaining agenda amongst MNCs as a distinct group of employers. Equality and diversity practices are increasingly likely to feature on the bargaining agenda across the private sector. At the same time, a growing number of larger organizations – including MNCs – have adopted initiatives aimed at improving their equality and diversity practice. However, their introduction is not necessarily negotiated. Where unions are recognized, evidence suggests that they are more likely to be consulted or involved in the implementation process.

There are relatively few agreements covering teleworking in the UK (UK0711039i), and MNCs appear no more likely to have concluded agreements than companies which are regional or national in the scope of their operations.

4) Are any of these new issues associated with MNCs headquartered in particular countries? If yes, which countries?

No particular patterns according to MNC country-of-origin are evident.

5) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, what has been the role of MNCs in opening up greater scope for company negotiations? Please distinguish between developments in manufacturing and private services.

N/A

a) are company negotiations mainly confined to issues on which sector agreements

i) provide openings and/or a framework?

ii) establish minimum standards or conditions?

b) are there company negotiations on issues which are not addressed by sector agreements? If yes, please give examples.

c) are there any instances of company negotiations resulting in breaches of provisions in sector agreements? If yes, please give examples.

6) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, are there any recent examples of MNCs:

N/A

i) leaving a sector agreement? If yes, please give details.

ii) placing new operations or sites outside of the coverage of the sector agreement(s) which apply at existing sites? If yes, please give examples.

7) In countries characterised by single-employer bargaining arrangements for the manufacturing and/or private service sectors, is there any evidence of the practice of ‘double-breasting’ by MNCs? (Double-breasting is when companies recognise trade unions for collective bargaining purposes at longer established sites, but not at more recently opened ones.) If yes, please indicate the extent of the practice and provide examples.

A 2006 survey of the UK operations of 302 MNCs found that one-half of the 142 multinationals which recognized trade unions did so at only some of their sites, suggesting that the practice of ‘double-breasting’ is reasonably widespread. The incidence was higher amongst UK- than overseas-based MNCs, reflecting the higher incidence of non-unionism amongst US-based companies in particular. The establishment of new sites, rather than acquisition, seems to be the critical event which prompts MNCs which recognize unions at established sites to introduce non-union arrangements. Broad comparison with a similar survey undertaken in 1992 suggests that the incidence of double-breasting has increased.

3. MNCs and the cross-border dimension to collective bargaining

1) Is there evidence of MNCs using comparisons of labour costs, flexibility and performance drawn from company operations in other countries in the course of local company negotiations? If yes, please give examples when answering the following:

i) in which sectors does this typically occur?

ii) what is the geographical focus of the comparisons (e.g. western Europe, eastern Europe, Asia, worldwide)?

iii) what is the impact of these comparisons on the outcome of local negotiations?

A 2006 survey of the UK operations of 302 MNCs found that the systematic monitoring of labour costs, headcount and aspects of labour performance was widespread (over 80% of companies) and extensive (covering a range of metrics), and most so in manufacturing as compared to services. The outcome of these comparisons is deployed by international management to place pressure on local management to improve site performance, and to implement working and employment practices which have been deemed ‘best’ within the MNC.

An ESRC-funded comparative study of MNCs in the automotive/aerospace and banking sectors found that the monitoring of such cost and performance data on an international basis was routine in the former, but less widespread in the latter. Amongst the automotive/aerospace MNCs the outcomes of these cross-border comparisons were also routinely deployed by management to set the context for local negotiations, resulting in the negotiated introduction of cost-saving and flexibility-enhancing measures. Other studies have identified similar outcomes in MNCs in the pharmaceutical and food manufacturing sectors. The absence of such activity in banking is attributable to the continuing ‘domestic’ character of the major retail operations of multinational banks, and the resulting lower level of international integration.

2) Is there any evidence of threats to relocate operations influencing the agenda and outcomes of local company negotiations? If yes, please give examples when answering the following:

i) in which sectors has this occurred?

ii) what are the destination countries / regions of the global economy for any threatened relocations?

iii) what has been the impact on the outcome of local negotiations?

There is little available information on the incidence and consequences for local negotiations of threats to relocate. Threats would seem more common in manufacturing sectors with internationally integrated production operations, such as automotive and aerospace. The impact of the EU’s eastern enlargement, and the existence of potential production sites in central European new member states which are extremely competitive in terms of unit labour costs, is highlighted by two examples. Peugeot-Citroen’s UK manufacturing plant, which was unable to secure a mandate to produce new models, despite rapid improvements in costs and flexibility during the 1990s and early 2000s, and was closed in 2007. An important factor in the decision was the UK plant’s inability to match the lower costs which investment in a new facility in Slovakia promised (UK0605029i). At Rolls-Royce’s major manufacturing plant near Glasgow in Scotland, radical changes to work organization and working practices were negotiated by the trade union in 2003 as the company decided between investing in a new site nearby or relocating to a new location in the Czech Republic. The outcome was that production remained in the UK.

In the service sectors, growth in the offshoring of customer service and data processing activities has prompted negotiations aimed at securing the future employment of the UK workforce (see 2.1 above).

3) Is there evidence of MNCs seeking to introduce so-called ‘best’ practices and/or corporate policies from their operations in other countries in the course of local company negotiations? (This may arise through the use of benchmarking.) If yes, please give examples when answering the following:

i) in which sectors does this typically occur?

ii) is the process linked to the use of comparisons of labour costs, flexibility and performance or other Human Resouces policies (if so, please specify)?

See 3.1 above. The results of various studies suggest that the identification and diffusion of ‘best’ working and employment practices is more widespread amongst MNCs in manufacturing than services.

4) Do MNCs employ significant numbers of posted workers (e.g. amounting to more than 5% of the workforce)? If yes,

i) in which sectors does this typically occur?

ii) are these posted workers covered by local sector and/or company agreements?

Employment of posted workers is a feature of the construction and engineering construction sectors. MNC contractors are prominent in large civil engineering projects in the former, as well as in engineering construction. Both sectors have industry-wide agreements, and in engineering construction in particular the agreement is largely comprehensive in its coverage of employers in the sector. A high profile dispute in January 2009 over the employment of foreign, posted, workers by an Italian-owned sub-contractor on work at the Lindsey oil refinery, owned by Total, sparked widespread unofficial action at sites across the industry drew attention to the application of the sector’s agreement to posted workers (UK0902019I). A report by the UK Advisory, Conciliation and Arbitration Service ( Acas) into the dispute makes clear that under the UK’s posted workers legislation, the wages and conditions specified in the agreement do not represent an enforceable minimum standard. The same would apply to the construction sector agreement.

5) Are there any instances where MNCs headquartered in your country have engaged in transnational negotiations at either European or global levels? If yes, please provide details of the MNC(s) concerned and the issues addressed.

There are not reports of framework agreements or other joint texts being negotiated at European Works Councils (EWCs) in UK-owned MNCs. The UK operations come under the scope of agreements / joint texts negotiated at the EWCs of a number of the 50 or so overseas-owned MNCs estimated to have concluded such texts.

No UK-owned MNC is listed by the ILO’s International Institute of Labour Studies (IILS) amongst the 60 multinational companies which had concluded International Framework Agreements (IFAs) with international trade union organizations (as of December 2007). The UK operations of MNCs based in other EU countries which have concluded IFAs, come with the scope of these – as indicated by the 20% of respondents in a 2006 survey of the UK operations of MNCs which indicated that an international code of conduct on CSR within the multinational have been negotiated with either an international trade union organization or EWC.

4. MNCs and the social partners

4a. Employers

1) Are MNCs affiliated to the main employers’ organizations at cross-sector and sector levels?

Many MNCs, both UK- and overseas-owned, are individual affiliates of the Confederation of British Industry (CBI), as well as belonging to sector employer federations where such exist. Historically, some major overseas-owned manufacturing MNCs did not join the relevant employers’ association and therefore did not participate in sector-level collective bargaining, preferring instead to conclude their own agreements with trade unions. For example, neither Ford nor General Motors are or were members of the Engineering Employers’ Federation (EEF).

2) To what extent are MNCs regarded as key players within the main employers’ organizations at cross-sector and sector levels?

MNCs, both UK- and overseas-owned, are prominent in the leading bodies of the major sectoral employers associations such as the Engineering Employers’ Federation and the Chemical Industries Association (CIA).

3) Are MNCs also organized in country-of-origin specific assocations (e.g. American or German Chambers of Commerce). If yes:

Do these associations intervene on industrial relations issues? If yes, please provide details.

Country-specific chambers of commerce have a presence and are active in the UK, but do not intervene on industrial relations issues.

4) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, what influence do MNCs exercise over sector negotiations? For example, how far are MNC personnel involved as lead negotiators for employers’ organizations?

N/A

5) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, what, if any, kind of reforms to sector agreements are MNCs proposing? For example, are they pressing for:

N/A

i) limited reform, with modest extension of scope for company bargaining within sector agreements? If yes, please give examples.

ii) extensive reform, under which sector agreements are confined to establishing either minimum standards or a basic framework governing a few key issues? If yes, please give examples.

6) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, is there any indication of the advantages or disadvantages that MNCs perceive in continuing to be party to sector agreements?

N/A

4b. Trade unions

1) How have trade unions responded to the impact of MNCs on the agenda and outcomes of collective bargaining? Please give examples.

Trade unions have been generally been prepared to negotiate over innovations to employment and working practices with overseas-owned MNCs in order to attract new investments, and therefore employment, or to secure the continued viability of existing sites and therefore jobs. Periodically this has generated controversies both within ad amongst trade unions and more widely, as with the trend twenty years ago to negotiate single-union, no strike deals with incoming inwards manufacturing investors, notably Japanese-owned MNCs.

British trade unions have, however, been less prone to initiating, or participating, in cross-border mobilizations within particular MNCs – in the face of European-scale restructuring – than their counterparts in western continental Europe. For example, the British unions did not participate in the key European demonstration or protest strike over the merger and restructuring of ABB-Alstom Power. Conversely, British unions have participated in several European-wide protest actions at General Motors Europe.

The reasons for this uneven picture are various. Until implementation of the EU’s information and consultation of employees directive in 2005, the UK had no statutory rights to employee information and consultation. Unions therefore tend to lack the advanced information necessary to frame strategic actions in response to MNC international restructurings. Restrictions on strike action also place obstacles in the way of participating in international actions. At company level, British unions also lack the resources and access to expertise available to their counterparts elsewhere in Western Europe. This reflects the weakness of union organization across sites in many MNCs, as distinct from the traditional strength of site-level organization. Exceptions where robust cross-site union organization exists include MNCs in the automotive and aerospace sectors, where such structures have provided a platform for British unions to participate in European-wide actions (General Motors and Airbus are examples).

2) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, how have trade unions responded to attempts by MNCs to broaden the scope of company negotiations? Please give examples.

3) In countries characterised by multi-employer bargaining arrangements for the manufacturing and/or private service sectors, how have trade unions responded to any attempts by MNCs to:

N/A

i) leave sector agreements? Please give examples.

ii) place new operations or sites outside of the coverage of the sector agreement which applies to existing operations? Please give examples.

4) In what ways have trade unions responded to the use by MNCs in local, company negotiations of:

i) comparisons of labour costs, flexibility and performance?

ii) threats to relocate? Please give examples.

See 4b.1 above. Unions have tended to engage with the implications of management’s comparisons of costs, flexibility and performance at site level. The absence of effective cross-site union structures within the UK in many MNCs has limited the capacity of unions to respond to these. Integrated MNCs in the automotive and aerospace sectors are an exception.

MNC decisions in recent years to close or scale-down UK manufacturing operations under international restructuring initiatives has prompted growing union concern that UK employment laws make the conditions and costs of exit relatively low, as compared with other countries. For example, the UK trade union Unite the Union (Unite) has forcefully expressed this concern and called for laws which give British workforces equivalent protections to those found in much of continental western Europe, over recent closures, actual or threatened) at Peugeot-Citroen, Vauxhall (General Motors Europe) and Corus.

5) Are there instances where trade unions have targeted specific MNCs because of public, media or political interest in their practices? If yes,

i) have they involved political exchange, involving mobilization of popular sentiment against foreign companies as political leverage to gain concessions from government (e.g. the cases of Alstom in France and Alitalia in Italy)? Please provide examples.

ii) have new industrial relations actors, such as NGOs, been involved in such campaigns? Please give examples.

The UK has experienced large flows or inward investment by overseas-owned MNCs for over 20 years, on a greater scale than those into the other major European economies. Public policy has encouraged this. In this context, union concerns at the potential consequences of overseas acquisitions have focused on employment prospects for the local workforce. Accordingly, they have intervened to obtain assurances on future production and employment. Recent examples include the acquisition of steel-producer Corus by Indian-owned Tatra and the divestment of Jaguar-Land Rover by Ford, ultimately also to Tatra.

New industrial relations actors have not been prominent in such interventions.

6) Are trade unions in MNCs engaged in compiling their own cross-border comparisons of working conditions etc. at sites in different countries? If yes, please give examples.

Such activity is being engaged in by union representatives in a number of EWCs in internationally integrated, manufacturing MNCs. Union representatives from Britain are, however, rarely central to the coordination of such initiatives, reflecting the structural limitations noted at 4b.1 above.

7) Are national and local trade unions involved in European-level negotiations with MNCs on any issues? If yes, please give details.

See 3.5 above. Unions representatives from Britain have been involved in the negotiation of framework agreements and other joint texts in some EWCs, including Ford Europe and General Motors Europe.

8) More generally, do trade unions have policies aimed at developing the cross-border and European-level dimensions to collective bargaining in MNCs?

Trade unions in Britain have not been prominent in initiatives towards European-level negotiations within MNCs, nor in those promoting cross-border coordination of local negotiations within multinationals.

5. Commentary by the NC

Each NC is asked to comment on the issues covered by this study, paying particular attention to the implications of MNCs for recent, and likely further, developments in collective bargaining. References to relevant research evidence and publications on this issue should be included.

There is extensive research evidence on developments in industrial relations and collective bargaining in MNCs. Major recent studies include: P Almond and A Ferner (2006) ‘American Multinationals in Europe’, Oxford University Press; H-Tueselmann et al (2008) ‘Employee Relations in Foreign-owned subsidiaries: German MNCs in the UK’, Palgrave Macmillan; and P Marginson and K Sisson (2004/06) ‘European Integration and Industrial Relations’ Palgrave Macmillan (Chs 7 and 8). The first two studies underline the influence of ‘country-of-origin models in shaping the existence and extent of collective bargaining in the UK’s single-employer system. Almond and Ferner underline the continuing preference of US-owned MNCs for non-unionism, but also that some American companies in Britain’s manufacturing sector have developed constructive relations with trade unions through collective bargaining. Tueselmann et al find that German-owned MNCs are significantly more likely to recognize trade unions and therefore engage in collective bargaining than their American counterparts. Marginson and Sisson demonstrate the extent to which considerations of employment and competitiveness have underpinned the shifting bargaining agenda in MNCs operating in Britain, and also three other European countries, and that this is a prominent feature in a major service sector, banking, as well as the automotive and aerospace sectors within manufacturing. Cross-border ‘coercive comparisons’ of labour costs and performance are, however, limited in use and extent in banking, but widespread in automotive and aerospace. Reflecting this contrast, coordinated union responses within MNCs aimed at counteracting management’s coercive comparisons are found only in the latter.

Bibliography

  • Almond, P., and Ferner, A. 2006: ‘American Multinationals in Europe’, Oxford University Press
  • Marginson, P., and Sisson, K. 2004: ‘European Integration and Industrial Relations’, Palgrave Macmillan.
  • Tueselmann, H., et al 2008: ‘Employee Relations in Foreign-owned subsidiaries: German MNCs in the UK’, Palgrave Macmillan

Paul Marginson, IRRU, University of Warwick

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