Creeping erosion of branch-level bargaining - a workplace perspective

A study published in early 1998, instigated by the IG Metall metalworkers' trade union, analyses what current developments in German collective bargaining policy mean for works councillors and workplace union representatives. One of the main findings is that metalworking is experiencing a process of a creeping erosion at company level of branch-level collective agreements. An increasing number of works councillors feel that the management has "blackmailed" them into agreeing to social concessions which sometimes breach collective agreements in force. As a consequence, many works councillors are demanding stronger union support to defend collectively agreed standards and norms at company level.

Currently, Germany is experiencing a broad debate on the future of its traditional system of branch-level collective agreements (branchenbezogene Flächentarifverträge). This is particularly the case in metalworking, where both collective bargaining parties - the IG Metall trade union and the Gesamtmetall employers' association - have recently presented new proposals for a modernisation of collective agreements (DE9712240F). The debates among the bargaining parties reflect the fact that in recent years German branch-level agreements have been under increasing pressure from employers demanding more company-specific regulations on employment conditions. The bargaining parties have reacted to these pressures by making agreements more flexible, through a differentiation of collectively agreed norms and standards and a decentralisation of bargaining competence to the company level (DE9709229F).

However, the consequences of a more differentiated and decentralised bargaining system for industrial relations at company level have not been the focus of attention. A recent study, instigated by IG Metall's collective bargaining department, now tries to fill the gap by evaluating the views and opinions of works council lors (Betriebsräte) and workplace trade union representatives (gewerkschaftliche Vertrauensleute) on recent trends in German collective bargaining. The study - "Reform des Flächentarifvertrages? betriebliche Realitäten - Verhandlungsysteme - gewerkschaftliche Politik", Joachim Bergmann/Erwin Bürckmann/Hartmut Dabrowski, Supplement der Zeitschrift Sozialismus 1/98 (1998) - is based on in-depth interviews with 30 works councillors and workplace union representatives from different companies and different subsectors within the metalworking industry, such as the automobile, electronics and machinery-building industries. Since it was one of the study's aims to analyse the relationship between the trade union's central and local bargaining policy, all of those surveyed were active IG Metall members. All in all, the study's findings deal with two main questions:

  1. What are the current trends and experiences in using collective agreements at company level? and
  2. What do works councillors and workplace union representatives think about current trends in German collective bargaining and, in particular, IG Metall's recent bargaining policy?

Using branch-level agreements at company level

As an overall result, the study finds clear signs of, and tendencies towards, a creeping erosion at company level of branch-level collective agreements. Against the background of increasing international competition, many companies have laid down working conditions which often differ from, or even openly breach, the collective agreements in force. Often these differing regulations have been introduced with the joint support of the management and the works council, sometimes even with the consent of the local IG Metall organisation. As a result, collectively agreed norms and standards are steadily going to lose their normative character.

The study has identified at least three different factors which might cause the creeping erosion at company level of branch-level collective agreements:

  1. the deepening employment crisis;
  2. the modernisation and restructuring policy of companies; and
  3. the far-reaching "flexibilisation" of working time.

The meaning of the employment crisis

Since the early 1990s, all German collective bargaining has been overshadowed by the increasing employment crisis. In particular, manufacturing has seen a sharp decline in employment: between 1991 and 1996, the number of employees in the metalworking industry was reduced by 1.5 million to 3.5 million.

According to the study, almost all works councillors and workplace union representatives surveyed have been confronted with a continuing process of employment reduction, and in many companies this has not yet come to an end. Against this background, a majority of works councillors have been ready to accept all kinds of social concessions in order to secure at least the jobs of the core workforce. As a result, many companies have concluded some form of "company pacts" in which the works council agrees to a further reduction of labour costs in exchange for the management's commitment to making no redundancies for economic reasons (betriebsbedingte Kündigungen) over a certain period of time (see, for example, DE9802247F).

The social concessions made by the works councils have included a wide range of cost-cutting measures, such as:

  • a reduction in company "payments above contract wages" (übertarifliche Leistungen) - the additional payments on top of the rates set in the branch-level agreement, which are paid by many companies;
  • a reduction in contractual wages;
  • a working time reduction without wage compensation; or
  • an unpaid working time extension.

In some cases, these company pacts actually undermine valid collective agreements. However, most surveyed works councillors said that they felt "blackmailed" by the management to either agree on social concessions or to accept further redundancies.

The meaning of companies' modernisation and restructuring policy

Since the late 1980s, almost all major companies have been in a continuing process of modernising and restructuring their entire business and work organisation. Following concepts like "lean production" or "business re-engineering", the notion of the firm is changing dramatically with various implications for industrial relations and collective bargaining. Companies' new production concepts contain at least three major aspects:

  1. a concentration on the company's core business, including various "outsourcing" and subcontracting strategies;
  2. a decentralisation of operational competence by splitting the company into relatively independent business units such as cost- or profit-centres; and
  3. the introduction of new forms of work organisation such as group or team working

Given the various outsourcing and subcontracting strategies, the company is increasingly losing its status as a single social unity where all employees are covered by the same collective agreement. Wherever a certain part of a metalworking company's business (for example, the canteen or the security service) is outsourced, that unit also usually quits the metalworking collective bargaining area and either

  • moves into another branch-level bargaining area, probably with rather lower wages and working standards; or
  • concludes a new company agreement; or
  • even has no collective agreement at all.

For example, when in August 1997 Siemens announced the creation of five new service companies out of its former service departments, one of the company's explicit aims was to escape the 35-hour week agreement in metalworking and to extend weekly working time up to 40 hours (DE9709130N). Although the Siemens longer working hours initiative failed on that occasion because of IG Metall's strong resistance, in many cases the union has had no power to avoid a worsening of employment conditions in the outsourced company.

The splitting of companies' organisations into cost- and profit-centres is another element which questions the social unity of the firm. The introduction of market mechanisms for the regulation of the company's internal relations leads to an enormous pressure of competition between the different business units. Many of the surveyed works councillors stated that management had tried to use these pressures to obtain social concessions from their workforce by playing one plant off against another. Whenever a works council at one plant agreed, for example, on a reduction of payments, it seemed to be nearly impossible for the works councils at the other plants to avoid the same reduction. To sum up, the new competition within companies increases the works councils' readiness to accept social concessions and thereby favours the undermining of collective agreements.

Finally, recent restructuring policy in companies also includes a reorganisation of the work process, in particular by the introduction of group or team working. Since the central aim of these new forms of work organisation is to increase productivity, they often lead to an intensification of work performance (Arbeitsleistung). In Germany, the definition, measurement and assessment of employees' work performance is traditionally regulated by framework collective agreements and gives the works council a rather strong position in controlling the use of such agreements at company level. However, these collectively agreed regulations on work performance are less and less compatible with the new forms of work organisation. For examples, collective agreements in metalworking still distinguish between white- and blue-collar workers, which in practice is becoming more and more pointless. As a result, companies have started to develop their own regulations beyond those laid down in the collective agreements in force.

The meaning of flexibilisation of working time

When, in the 1984 collective bargaining round, IG Metall achieved a breakthrough in reducing working hours towards the 35-hour week, this was only possible because the union also agreed on the principle of flexible working time. Since then, various flexible working time arrangements have been introduced, including:

  • the possibility for up to 18% of the workforce to work 40 hours per week;
  • a further working time reduction without wage compensation;
  • the introduction of individual working time accounts, which has the effect of eliminating much overtime working;
  • seasonal work; and
  • making weekend work easier to introduce.

All these flexible working time arrangements correspond with collective agreements in force, or at least with an "extensive interpretation" of them. In addition, many companies have working time arrangements which are not covered by collective agreements, for example the acceptance of longer shifts or overtime above the collectively agreed maximum. In recent years, the most spectacular violation of valid collective agreements has occurred through a couple of company pacts (for example in the battery industry) which have agreed to an unpaid working time extension.

In the meantime, there exists a great variety of working time arrangements in metalworking companies, which has already destabilised a homogeneous working time regime. The number of employees who are actually working 35 hours per week is decreasing, while more and more employees have all kinds of flexible working time arrangements. Hence, the branch-level collective agreement on working time is going to lose its binding character and become more a point of orientation, while actual working time is defined at company level.

Decentralisation of bargaining and its meaning at the workplace

While IG Metall and Gesamtmetall have recently started negotiations on how to reform existing collective agreements, many works councillors and workplace union representatives have a rather sceptical view of those negotiations because they are afraid that, in practice, the notion of "reform" will mean little more than giving new concessions to the employers. Indeed, a majority of the works councillors surveyed strongly criticise any proposals for a further decentralisation of collective agreements. The more that collectively agreed standards at branch level lose their status as strictly binding norms, the weaker will be the works councillors' bargaining position at company level.

Against this background many of the works councillors surveyed expressed criticism of IG Metall's policy and accused the union of offering too little resistance to the creeping erosion at company level of branch-level agreements. Even in cases where, for example, a company pact has openly breached a collective agreement in force, it is claimed that the union has often taken a viewpoint of "passive tolerance" - ie officially neither supported nor objected to the works agreement. As a conclusion, the study points out that the fact that many works councillors feel permanently blackmailed by the management has also to do with a lack of trade union support. It has to be primarily the task of the union to defend the collectively agreed standards and to define the limits of "concession bargaining".


The new study gives a clear view of the problems of recent developments in German collective bargaining from the perspective of works councillors and workplace union representatives. The study has identified clear tendencies towards a creeping company-level erosion of branch-level collective agreements which, according to the works councillors surveyed, cannot be stopped by a further decentralisation of the bargaining system. On the contrary, there is a clear danger of a vicious circle: under pressure from employers, works councillors are ready to accept social concessions which might breach valid collective agreements; as a result, the employers put pressure on the bargaining parties to reform current collective agreements and bring them back in line with the new social reality in companies; the bargaining parties might then react with further decentralisation and differentiation of collective agreements, which will further weaken the bargaining power of the works councillors and might open the door for a new round of social concessions at company level.

To avoid this downward spiral, from a union perspective there seems to be no alternative but to renew the political viability of branch-level collective agreements. Therefore, the union probably needs a twofold strategy: on the one hand it has to work towards a modernisation of the content of collective agreements so that they will fit better into the needs of a modern company organisation; on the other hand, the union needs to use its political power for an even stronger defence of collectively agreed standards against their violation at company level. (Thorsten Schulten, Institute for Economics and Social Science (WSI)).

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