Collective Bargaining Agreements: How do they work in Europe?

If you wish to expand your business to the European market through a PEO or Payroll model, it may be necessary to comply with Collective Bargaining Agreements (CBA) or as it is sometimes known, collective labor agreements. In this blog you will read all about the European guidelines regarding Collective Bargaining Agreements.

What is a Collective Bargaining Agreement?

CBAs are written joint agreements between employers (or employers' organizations) and trade unions about wages and other conditions of employment, most commonly in specific industries or sectors. Unlike in the USA, which has a relatively low union impact on organizational policies, European businesses must often adjust their HR and employment contracts in each country where they have a presence in order to ensure compliance with these binding agreements.

When do CBAs have an effect?

While the manner in which CBAs work differs from country to country, the following rule-of-thumb can be used to understand this complex aspect of industrial relations:

  • The most fundamental aspects of the employment relationship are determined at a national level by the host country’s legal system. Usually either through a labor code/legislation in civil law countries, such as France or Germany, or through a process where legal precedent is adapted and applied in traditional common law countries, such as in the United Kingdom (or a combination of both systems).
  • Once these basic standards are determined, CBAs can either direct how these standards are interpreted or can improve upon them, and further can be extended to the entire industry.
  • Following the interpretation, application or extensions of CBAs, work councils, contracts of employment and finally company policies can all further improve upon the required aspects of these agreements.

HRO blog - Collective bargaining agreements Europe model

CBA example France

An example of the above: The minimum wage in France is €10.25 per hour. However, the minimum wage set by the Transport of Goods' Collective Bargaining Agreement further specifies the minimum wages by vehicle group coefficient as well as organizational tenure. With the minimum wage starting at €10.25 and climbing to €11.32 at the coefficient 150M (for highly qualified drivers of heavy vehicles) with 15 years tenure. Contract of employment can further increase these rates above the minimum requirements, but can never go below the standards set by the CBA or by the national law.

3 CBA categories

CBAs fall into three different categories of subjects: mandatory, voluntary or permissive and illegal subjects.

  1. Mandatory subjects relate to topics determined by national laws, such as minimum wages, overtime, health and safety or layoff procedures.
  2. Voluntary subjects relate to negotiable but not mandatory points such as the percentage of employee representation on boards, procedures relating to how leave is applied, or how unions may communicate with its members at the workplace.
  3. Illegal subjects relate to topics which are unlawful from the onset such as illegal discrimination or certain forms of union busting.

How do CBA’s differ from region to region?

While the above information works as a general outline on the CBA process, the coverage and application vary in the different European regions. The following table provides some further information on how these CBAs are utilized.

Country CBA coverage (%) Collective bargaining level Quick tips
France 98% Industry and company Almost all employees are covered by industry-level agreements, but these often only provide only minimum terms, with improvements negotiated at company level or individually with employees, such as in the transport collective agreement example used above.
Germany 59% Industry (with company level further specifying) Germany has over 70,000 CBAs and around 8.1 million union members. Of these 70,000 CBAs, around 30,000 are at the sectoral level, while around 40,000 are at the companies level.
Italy 80% Industry Industry wide CBAs are very common and usually introduce specific requirements on points relating to salary, training and development, employee classification, benefits and pensions.
Netherlands 84% Industry and company In the Netherlands, agreements do not apply to whole industries automatically, but government action in extending collective agreements adds around 15% to bargaining coverage.
Sweden 89% Industry – but much left to company negotiations Agreements are normally entered in between the nation-wide employer’s federations and their nation-wide central trade union counterparts for fixed periods, most often 24 months. Because of the high level of CBA collaboration, industrial actions are very uncommon and are not permitted during the term of an agreement with the objective of altering the same agreement.
United Kingdom 29% Company The United Kingdom has seen a decrease in union influence in the recent past with union membership falling to 25% in 2014. However, around 29% of employees are still covered by CBAs.

 

Conclusion

CBAs are a potential minefield for foreign employers when expanding into Europe due to the wide range of variance in the different countries, industries, employee’s experience and in some cases, a combination of these previous three points. These CBAs can set complex rules on various aspects of employment such as overtime compensation, pensions, collective terminations and holiday entitlements, all of which legally require compliance from the employer. Professional Employer Organizations such as EuroDev can provide invaluable assistance in navigating these complex mazes of rules and ensure complete legal compliance.


More information

In case you would like to have more information, do not hesitate to connect with Monique Ramondt-Sanders - Executive VP of Human Resource Outsourcing at EuroDev. Interested in more information concerning our HR Outsourcing services? Please have a look at our HR Outsourcing page

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About EuroDev

EuroDev, established in 1996 with offices in The Netherlands and France, has a single, defined purpose to help mid-sized North American companies expand their business in Europe. We have created a proven, successful business development model and since our founding, have partnered with over 300 companies to help them define and meet their European business goals. Services provided include Sales Outsourcing, HR Outsourcing and Digital Marketing.

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