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Can collective bargaining create a fairer economy?

Published December 2015 · Updated May 2016

Can collective bargaining create a fairer economy?

Collective bargaining allows employers, employers’ organizations and trade unions to address work-related issues together and negotiate a collective agreement. A collective agreement typically covers issues such as wages, working time and other working conditions, and outlines the rights and responsibilities of the workers and employers involved.

Explore this InfoStory to discover the impact of collective bargaining on the economy, businesses and working lives.

Workers around the world are finding it hard to make their voices heard

The global economy is growing but prosperity isn't shared

Inequality is growing too, with a big gap between the top and bottom earners

Collective bargaining gives workers a right to be heard and a chance to restore the balance

Bargaining can cover many issues that benefit both businesses and workers

Choose a country to learn about successful case studies

Australia: Addressing violence at work

In Australia, it is estimated that some 350,000 women experience domestic violence annually, two-thirds of whom are in the labour force. The impact of domestic violence on workers is significant, with one national survey showing that 25% of employees experienced domestic violence at some point in their lives.

Domestic violence can impact on a survivor’s ability to get to work, and to perform their job effectively once at work. Stalking and violence can also extend to the workplace itself, and workers in abusive relationships may have trouble holding down a job, exacerbating their isolation and vulnerability. Employment and a supportive work environment are seen as key factors contributing to a survivor’s economic independence, and ultimately their ability to leave an abusive relationship.

In 2010, the first clause addressing domestic violence appeared in a registered enterprise agreement. It included paid leave and related entitlements to survivors of domestic violence. Since that time, similar clauses have been incorporated into over 100 agreements or awards, covering 1.6 million employees across all sectors.

The clauses provide for up to 20 days per year (and in some cases unlimited) paid leave for family violence-related absences. Some allow for flexible work arrangements and personal / carers leave to be used in cases of domestic violence. Workers may use this time to, for example, seek medical help, make safe housing arrangements, attend court or other legal appointments, or support family members facing domestic violence.

Germany: Navigating the recession

As the world’s second largest HGV producer, Daimler AG is a huge player in the motor vehicle industry. The company employs approximately 275,000 people worldwide, with over half based in Germany. In 2004, Daimler AG and the works council negotiated an agreement which included a critical “no redundancy” clause effective until the end of 2011. Against a backdrop of falling sales, Daimler AG managed workforce reduction through voluntary retirement and the expiry of fixed-term contracts.

The downturn in the global economy exacerbated falling demand and made it necessary to identify additional cost savings. In 2009, management at Daimler AG announced that additional reductions in labour costs were needed. In a series of extraordinary meetings at 9 of the 15 production locations, the company began to prepare the workforce for potential redundancies. Those hired before the conclusion of the 2004 agreement were protected, but 16,000 workers were at risk of redundancy.

Through a process of negotiation, management and the works council agreed to a range of cost-cutting measures in exchange for, among other elements, the extension of the “no redundancy” clause to workers hired after 2004. In return, workers agreed to measures such as reductions in working hours and short-time work provisions, as well as the postponement of pay increases and bonuses. Management also agreed to forgo a portion of monthly salary and to no salary increase in 2009.

Ultimately, the 2009 agreement saved Daimler AG €2 billion in labour costs. It also saved a substantial number of jobs. Thanks to strong relations with the works council, the company managed to stay afloat through particularly difficult economic circumstances.

India: Informal workers stick together

In India, around 90 per cent of the workforce is part of the informal economy. This includes incense stick rollers, the vast majority of whom do not have a formal employer, but instead buy raw materials from a wholesaler who then buys back the finished product. In addition to earning income well below the minimum wage, incense stick rollers often conduct their work in dark cramped conditions in the home with long working hours. However, Self Employed Women's Association (SEWA) of India has shown that perseverance makes anything possible. Founded in 1972, but not recognized as a national trade union until 2009, SEWA has become a force to be reckoned with in the informal sector.

When SEWA entered into negotiations with the Employers Association of The Incense Stick Trade, their core goal was to fix a minimum rate of pay for incense stick rollers. This proposal initially met with strong resistance from employers, who insisted that they would be forced to raise their selling prices. However, SEWA demonstrated that without a minimum wage, workers could not afford nutritious food, housing and other basic living needs. A fixed rate based on output was successfully negotiated, with provisions for review and further increase every two years.

Over the course of ten years, wages for incense stick rollers increased dramatically and standards of living improved in line with this. Most notably, workers in this sector are now more likely to keep their children in education and put income aside for the future. In addition, SEWA successfully negotiated for medical benefits, as well as toolkits and training which will allow workers to improve their skills and productivity. Informal workers have gained the voice and visibility they need to continue improving their working conditions. The President of the Employers Association of the Incense Stick Trade described the agreement as a win-win situation and expressed confidence that all future disputes can be solved satisfactorily now that mutual trust has been established.

Jordan: Productivity and equality

Jordan’s apparel industry accounts for over 17 per cent of total exports and employs nearly 60,000 workers. Two-thirds of textile workers are female and over 70 per cent are migrants, who are vulnerable to unacceptable practices such as paying fees to gain access to employment. These practices – along with poor working conditions and low wages – had resulted in industrial action, with long drawn-out strikes impacting negatively on productivity.

In May 2013, a collective agreement was signed for the apparel industry in Jordan. The agreement covered all workers in the sector, regulating working hours and wages as well as improving occupational safety. The agreement eliminated distinctions between migrants and Jordanians, and between male and female workers.

Additionally, the parties would work to ensure that no worker be charged fees for their employment. No worker could be made redundant for having used a labour supplier and all subcontractors automatically became parties to the agreement.

Further progress was made in 2015, with the parties agreeing to a unified employment contract for migrant workers that provided for common terms and conditions of employment. The Government has now made the provision of work permits subject to the use of the unified contract.

Thanks to the agreement, the number of industrial disputes has been reduced, bringing greater stability to the sector. Better working conditions have resulted in a reduction in staff turnover, which has in turn generated increases in productivity and allowed Jordan’s garment sector to grow rapidly.

The parties signed a new agreement in 2015, introducing new elements related to seniority bonuses, payslips, health care, nurseries, and training. The Agreement also commits the parties to support the establishment of workers’ centres in industrial zones.

South Africa: Regularizing casual workers

Transnet SOC Limited is a freight and transport handling company in South Africa. It has five divisions, including Transnet Port Terminals (TPT) and Transnet Freight Rail, the largest division. TPT includes both the Durban Container Terminal and the Port of Richards Bay’s mineral bulk operations (imports and exports) which operate 24 hours a day, 7 days a week. They are subject to considerable fluctuations in shipping volumes entering and leaving port, and subsequently in the demand for labour.

For years, the Terminals were staffed by a combination of full-time employees on indefinite contracts, and casual employees engaged through labour brokers. Despite performing identical work, casual workers earned less, had fewer benefits, and no job security as compared to permanent staff. The Transnet Bargaining Council reached a collective agreement on fixed-term workers, committing to regularize into indefinite contracts 300 employees in TPT, and 1,472 in Transnet Freight Rail by end March 2016. The agreement provides that Transnet directly employ fixed-term workers on terms and conditions (including remuneration, bonuses, leave and a variety of other allowances and benefits) set out in the collective agreement. As a result, these workers will no longer be employed through labour brokers. Through social dialogue, parties were able to address the issue of the use of labour brokers.

The industrial relations climate has shifted from one characterized by mistrust and confrontation toward more positive relations. The number of days lost due to industrial action in TPT fell from an average of 13.5 days (2010-2011) at the Durban Container Terminal and Port of Richards Bay to 0.5 days and 0.35 days (August 2014), respectively.

Uganda: Constructive dialogue

The Bujagali Hydropower Project on the Victoria Nile in Uganda was financed by the International Finance Corporation with performance requirements that emphasized respect for freedom of association and collective bargaining rights.

The Uganda Building Workers Union (UBWU) with assistance from the Building and Woodworkers International Union (BWI) was able to use these performance requirements as a lever to win recognition from the principal contractor. Three collective bargaining agreements were negotiated over the course of the construction project. The UBWU bargained for wages higher than the local construction industry average, helped to ensure that the recruitment of workers was fair and based on skills rather than connections, and guaranteed that workers had access to an on-site medical clinic. Health and Safety provisions were also comprehensive, with no fatalities occurring due to construction work.

Throughout the course of the project, disputes were solved through dialogue and not by unilateral management action. As a result, there were no wildcat strikes or sabotage, which often lead to cost and time overruns. Many development projects also suffer from cross-cultural communication problems, frequently caused by managers who are unaware of cultural sensitivities. The existence of the collective agreement and the commitment to dialogue significantly reduced such problems.

United States: Facilitating positive change

Alt Tag

Kaiser Permanente is one of the largest US private healthcare providers, employing over 180,000 people. In 1997, the company and the Coalition of Kaiser Permanente Unions (CKPU) agreed on a national Labour-Management Partnership (LMP). This agreement would guide negotiations aimed at improving working conditions and employee participation, as well as improving efficiency and quality of services. The agreement has since transformed labour relations within Kaiser Permanente.

In 2012, with a solid agreement in place, Kaiser Permanente and the CKPU successfully negotiated the largest private sector collective agreement in the USA, covering workers in 28 unions at hundreds of health care facilities in nine states. The agreement reinforces the commitment to partnership, increases wages, protects and improves benefits and provides measures to control costs. One key pillar of the collective agreement is joint workforce development, which includes training. The agreement aims to benefit all stakeholders by improving conditions for workers while simultaneously improving performance.

The core of the agreement is the development of unit-based work teams, who ensure that sound and productive labour relations are not confined to bargaining rounds but maintained throughout Kaiser Permanente workplaces. These teams have the ability to create real change by bringing their expertise to bear on work processes. In 2014, the Couriers team in Colorado examined outsourcing practices, resulting in the decision to hire an additional employee and improve routes, thus reducing the use of outside contractors. The team also improved their workflow with new technology and processes. These measures resulted in considerable cost savings that would not have been possible without direct input from workers.

Uruguay: Domestic trail blazing

In April 2012, Uruguay became the first country to ratify ILO Convention No. 189 on domestic work. Domestic workers are one of the most disenfranchised groups in the world of work. Wages are low, job security and health insurance are rare and tales of abuse and illegal practice have dogged the profession in developed and developing countries alike. Domestic workers tend to be overwhelmingly female (99 per cent in Uruguay) and come from the poorest and most vulnerable sections of society. However, in Uruguay, in the year preceding the ratification of Convention No. 189, domestic workers were already taking major steps to make their voices heard and achieve wage parity with earners in the formal sector.

Between 2005 and 2009, the Uruguayan Congress passed a series of legislation dealing with gendered issues such as sexual harassment and equal opportunities. The most important of these was Bill 18.065, which extended social protection to domestic workers, regulated their working hours and ensured unemployment benefits and compensation for dismissal. Crucially, this bill gave domestic workers access to Uruguay’s tripartite Wage Council, the national bargaining forum for sectoral wages.

In 2008, domestic workers representing the Sindicato Único de Trabajadoras Domésticas (SUTD) and employers represented by the Liga De Amas de Casa (Housewives’ League - LAC) began their first round of negotiations on the issue of salaries. Since both parties had no bargaining experience, the process was initially slow, but the success of these early negotiations is already apparent.

As of 2013, not only have average monthly salaries increased significantly, but social security coverage for domestic workers has doubled since 2005 and stands at 73 per cent. Less quantifiable but no less important is the fact that union members have the gained skills and momentum necessary to continue organizing and advocating for their rights. Backed by a nationwide government campaign for greater regulation of their sector, domestic workers in Uruguay are no longer an invisible workforce.

South Africa: Regularizing casual workers

Transnet SOC Limited is a freight and transport handling company in South Africa. It has five divisions, including Transnet Port Terminals (TPT) and Transnet Freight Rail, the largest division. TPT includes both the Durban Container Terminal and the Port of Richards Bay’s mineral bulk operations (imports and exports) which operate 24 hours a day, 7 days a week. They are subject to considerable fluctuations in shipping volumes entering and leaving port, and subsequently in the demand for labour.

For years, the Terminals were staffed by a combination of full-time employees on indefinite contracts, and casual employees engaged through labour brokers. Despite performing identical work, casual workers earned less, had fewer benefits, and no job security as compared to permanent staff. The Transnet Bargaining Council reached a collective agreement on fixed-term workers, committing to regularize into indefinite contracts 300 employees in TPT, and 1,472 in Transnet Freight Rail by end March 2016. The agreement provides that Transnet directly employ fixed-term workers on terms and conditions (including remuneration, bonuses, leave and a variety of other allowances and benefits) set out in the collective agreement. As a result, these workers will no longer be employed through labour brokers. Through social dialogue, parties were able to address the issue of the use of labour brokers.

The industrial relations climate has shifted from one characterized by mistrust and confrontation toward more positive relations. The number of days lost due to industrial action in TPT fell from an average of 13.5 days (2010-2011) at the Durban Container Terminal and Port of Richards Bay to 0.5 days and 0.35 days (August 2014), respectively.

Uganda: Constructive dialogue

The Bujagali Hydropower Project on the Victoria Nile in Uganda was financed by the International Finance Corporation with performance requirements that emphasized respect for freedom of association and collective bargaining rights.

The Uganda Building Workers Union (UBWU) with assistance from the Building and Woodworkers International Union (BWI) was able to use these performance requirements as a lever to win recognition from the principal contractor. Three collective bargaining agreements were negotiated over the course of the construction project. The UBWU bargained for wages higher than the local construction industry average, helped to ensure that the recruitment of workers was fair and based on skills rather than connections, and guaranteed that workers had access to an on-site medical clinic. Health and Safety provisions were also comprehensive, with no fatalities occurring due to construction work.

Throughout the course of the project, disputes were solved through dialogue and not by unilateral management action. As a result, there were no wildcat strikes or sabotage, which often lead to cost and time overruns. Many development projects also suffer from cross-cultural communication problems, frequently caused by managers who are unaware of cultural sensitivities. The existence of the collective agreement and the commitment to dialogue significantly reduced such problems.

United States: Facilitating positive change

Alt Tag

Kaiser Permanente is one of the largest US private healthcare providers, employing over 180,000 people. In 1997, the company and the Coalition of Kaiser Permanente Unions (CKPU) agreed on a national Labour-Management Partnership (LMP). This agreement would guide negotiations aimed at improving working conditions and employee participation, as well as improving efficiency and quality of services. The agreement has since transformed labour relations within Kaiser Permanente.

In 2012, with a solid agreement in place, Kaiser Permanente and the CKPU successfully negotiated the largest private sector collective agreement in the USA, covering workers in 28 unions at hundreds of health care facilities in nine states. The agreement reinforces the commitment to partnership, increases wages, protects and improves benefits and provides measures to control costs. One key pillar of the collective agreement is joint workforce development, which includes training. The agreement aims to benefit all stakeholders by improving conditions for workers while simultaneously improving performance.

The core of the agreement is the development of unit-based work teams, who ensure that sound and productive labour relations are not confined to bargaining rounds but maintained throughout Kaiser Permanente workplaces. These teams have the ability to create real change by bringing their expertise to bear on work processes. In 2014, the Couriers team in Colorado examined outsourcing practices, resulting in the decision to hire an additional employee and improve routes, thus reducing the use of outside contractors. The team also improved their workflow with new technology and processes. These measures resulted in considerable cost savings that would not have been possible without direct input from workers.

Uruguay: Domestic trail blazing

In April 2012, Uruguay became the first country to ratify ILO Convention No. 189 on domestic work. Domestic workers are one of the most disenfranchised groups in the world of work. Wages are low, job security and health insurance are rare and tales of abuse and illegal practice have dogged the profession in developed and developing countries alike. Domestic workers tend to be overwhelmingly female (99 per cent in Uruguay) and come from the poorest and most vulnerable sections of society. However, in Uruguay, in the year preceding the ratification of Convention No. 189, domestic workers were already taking major steps to make their voices heard and achieve wage parity with earners in the formal sector.

Between 2005 and 2009, the Uruguayan Congress passed a series of legislation dealing with gendered issues such as sexual harassment and equal opportunities. The most important of these was Bill 18.065, which extended social protection to domestic workers, regulated their working hours and ensured unemployment benefits and compensation for dismissal. Crucially, this bill gave domestic workers access to Uruguay’s tripartite Wage Council, the national bargaining forum for sectoral wages.

In 2008, domestic workers representing the Sindicato Único de Trabajadoras Domésticas (SUTD) and employers represented by the Liga De Amas de Casa (Housewives’ League - LAC) began their first round of negotiations on the issue of salaries. Since both parties had no bargaining experience, the process was initially slow, but the success of these early negotiations is already apparent.

As of 2013, not only have average monthly salaries increased significantly, but social security coverage for domestic workers has doubled since 2005 and stands at 73 per cent. Less quantifiable but no less important is the fact that union members have the gained skills and momentum necessary to continue organizing and advocating for their rights. Backed by a nationwide government campaign for greater regulation of their sector, domestic workers in Uruguay are no longer an invisible workforce.

Dialogue and equity are at the heart of collective bargaining and help to build stable, decent societies

Key to sound labour relations

With commitment from policy-makers, and the organizing efforts and actions of employers and trade unions, collective bargaining can create a fairer economy.