- Social Dialogue
- Wage flexibility
- Working time flexibility
Betriebliche Bündnisse für Arbeit
Company employment pacts
Measure can be used by all companies that have a works council.
These agreements, or pacts, are made between the company's management and its works council, and are usually backed by the trade union. The aim of the agreement is to maintain the number of jobs in the company, as well as to foster competitiveness. The employer generally commits to an employment guarantee; employees will not be dismissed for reasons related to business conditions. In exchange, workers accept pay scales that are below the collectively agreed sectoral levels or pay cuts in the form of reduced or lost bonuses (such as Christmas or holiday bonuses or pay for overtime) or accept changes to collectively agreed working time.
Public employment services
Not involved as partners of the pact, but play a role if staff are dismissed.
Employer or employee organisations
Based on an agreement between management, the works council and the trade union.
Funded by employees, through their acceptance of a pay cut or changes in working time.
Debates regarding the effectiveness of this measure are ongoing. Survey findings, based on IAB Establishment panel data (Bellmann, 2008) do not show a significant and positive association between company-level agreements and employment stability. Employment pacts offer little scope for prompting positive employment changes. At the same time, pacts have been shown to foster usage of working time accounts, short-time working and training provision. Agreed measures are implemented in most cases.
In 2010, nearly 24% of all firms with an employment pact did not implement all agreed measures (Bogedan et al, 2011; WSI works council survey).
However, other studies show that employers are able to reach their objectives through these pacts. One survey of employment pact companies in the machine and plant engineering industry found that:
- 62% were enabled to improve their productivity;
- 47% could deal more quickly and flexibly with the wishes of their clients and improve their ability of delivery;
- 34.9% could preserve endangered jobs and sites (Berthold et al, 2003).
A survey amongst 1,285 companies in the metal and electrical industry in 2007 shows that one third of companies bound by a collective agreement had negotiated an employment pact. This held only true for 6.5% of those companies neither bound by nor oriented towards a collective agreement. Average running time of employment pacts was 30.3 months. When asked for their motives:
- 67% of the companies indicated securing the site,
- 42% were facing economic difficulties, and;
- 27% needed additional investment at the site.
When pay cuts were negotiated, around half of the companies (50.6%) introduced pay cuts for overtime, postponement, reduction or cuts in collectively agreed annual bonuses (42.7%) or holiday bonuses (33.3%). A reduction of monthly pay was only noted by 16.1% of the surveyed companies. With regard to changes in working time: longer working hours with no increase in pay were introduced by 42.7% or with increase in pay by 38.5%. In more than 90% of the cases, intended company goals were fully or partially reached (Lesch, 2008).
Employment pacts facilitate the control of labour costs by enabling a variety of working time regimes, a differentiation of working conditions and an implementation of pay cuts. They enable the protection of employment and sites.
Concessions made by the workforce such as agreeing to pay cuts and working time changes may not improve employment stability. Co-management practice may delegitimise works councils. There is a risk that some commitments may not be implemented. It remains unclear whether an employment pact improves the employment situation of workers.