Employment Relations Coursework Assignment – SEM B 2013

Employment Relations Coursework Assignment – SEM B 2013

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What is meant by the term collective bargaining?

Evolution of the workplace relations between employees and employers led to the introduction of labour and trade unions to bargain on behalf of the employees and employers due to the weaknesses of the single employee to bargain for his or her employment terms sand conditions with the employer and also the weakness of a single employer to bargain effectively in the competitive market. Employers initially had immense powers to determine what terms to institute at the workplace and generally these terms did not favour the employees. Collective bargaining can thus be seen as the process through which terms of employment between the employer and the employees are negotiated, usually between labour union representing a group of employees and the employer or a trade union representing the employer. Among the employment terms negotiated under the collective bargaining include employment terms, conditions at the workplace that include safety and health or hygiene, workplace rules, wage rate and basic pay, work hours, vacation and sick leaves among other issues that might impact the employer-employee relations if not addressed. When a labour union engages in collective bargaining with the management of a firm or a company that employs its members, they establish an agreement referred to as a collective bargaining agreement. The agreement usually establishes employment rules for a set length of time, normally in terms of years and to review them both parties must be involved. The employees being represented by the union take care of costs of representation. It is important to note that employers are also represented in bargaining under their respective trade unions.

Why has the decentralisation of bargaining become a significant management objective?

Recent years have seen many economies and markets across the globe tend towards a decentralised collective bargaining strategy. While looking at the possible causes of decentralisation of bargaining in Europe, Katz (2005) argues that it is no longer relevant to refer to employment systems with the term “national systems” because there has been a huge disparity and variation in the arena of employment practices. Katz further questions whether the decentralisation is caused by stakeholder-focused model or shareholder-based approach. However, dynamics in the marketplace and a recent paradigm shit in the internal corporate human resources management function have played a major role in decentralisation of bargaining. Therefore, in cases where bargaining has been characterised by individual wage agreements there have been effects of moderate wage developments as opposed to situations where agreements are made at the production unit stage or even those made with individual firms where wage moderation effect is not witnessed as argued by Marginson and Keith (2002). As an effect of this decentralization, flexibility has increasingly become part of collective bargaining. With respect to why decentralization of bargaining has become an important objective for management, there are two dimensions to provide factors that lead to this. There are external factors and internal factors with respect to the organization or company.

A major factor on the internal perspective is the rigidity in nominal wages and contractual scales, which are caused by variations in employee qualifications. For instance, some employees may have high levels of qualifications while others may have low qualification levels and these diversities may call for decentralised approach in collective bargaining for employment terms. Wolfgang (2003) argues that in cases where collective bargaining is used and the employees have low levels of qualifications, the resulting agreements are characterized by very inflexible collective wage agreements.

Employers have increasingly made decentralization part of the management objective as a way of gaining from the various advantages that may not be available to individual employers. One of the factors that are external in nature relates to the operations of the state and labour unions, which presented a considerable threat to the employers through the pressure they unleashed and the demands they made. To gain from the advantage of representation, companies make it among their objectives to decentralize the bargaining. Establishing multi-employer collective bargaining associations brings an advantage of increased strength in lobbying with the government or employee labour unions.

In addition to the strength in bargaining, another pull factor for decentralisation the fact that bargaining through multi-employer association provides a sense of solidarity and shared moral cost. Besides, without decentralization there is likelihood of strong labour unions intruding into workplace issues thereby threatening or compromising managerial prerogatives. Decentralization has also been driven by the fact that it is easier for employers to lobby governments and other public organs than they would achieve if they had acted alone.

Cost as a subject and factor in the matter cannot be ignored. It can be viewed from different angles, which end up with indications that decentralization helps in cost management. To elaborate on this, and considering that some organizations may be strong while others are weak, decentralisation of bargaining is important in stabilising pressures that accompany labour costs. This is achieved through enforcement of wage floors, which in turn helps in removing wages from the list of items of competition.

With myriad of advantages associated with decentralization of bargaining that leads to generation of collective goods flow for the member employers, there are also challenges that come with employers who do not want to join but rather opt to free ride. Those who free ride do not want to take responsibilities that go along being a member of a particular association yet benefit from not only spill over but also the established wage floors. Sheldon and Louise (2004) argue that such employers present another challenge which relates to other members struggling to determine what inducements to use to attract free riders and other non-joiners.

Even though decentralisation has recently become an important aspect of most management objectives, literature and studies carried out (e.g. Sheldon & Louise 2004) show that it poses serious challenges for employer associations and these challenges include how to deal with free rider issue, reduction of the sense of collective identity, decreased attraction of union’s traditional collective goods, increase in exigency and range of specific member goods and the accompanying increase in the costs of servicing or facilitating them.

Reference:

Harry C. Katz (2005). The Causes and Consequences of Increased Within-Country Variance in Employment Practices. British Journal of Industrial Relations Volume 43(4): 577–583

Marginson, P. & Keith, S. (2002) European Collective Bargaining: A Virtual Prospect? Journal of Common Market Studies Volume 36(4): 505–528

Sheldon, P. & Louise, T. (2004) Business or association? The strategic responses of employer associations to the decentralisation of bargaining in Australia. Economic and Labour Relations Review Vol 15 (1)

Wolfgang, O. (2003) Decentralising Wage Bargaining in Germany – a way to increase employment? CESIFO working paper no. 1069 category 4: Labour Markets