Collective Bargaining Agreement in EU: Explained

    Last updated: 21 September 2023

     

    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?

     

    Collective Bargaining Agreements (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 Collective Bargaining Agreements Have an Effect?

     

    While the manner in which collective bargaining agreements 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 the United Kingdom (or a combination of both systems).

     

    • Once these basic standards are determined, collective bargaining agreements can either direct how these standards are interpreted or can improve upon them and further 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.

     

    What is collective bargaining agreement

     

    France Collective Bargaining Agreements Example

     

    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.

    The minimum wage starts at €10.25 and climbs to €11.32 at the coefficient 150M (for highly qualified drivers of heavy vehicles) with 15 years of 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 national law.

     

    The Three Collective Bargaining Categories

     

    Collective bargaining agreements fall into three different categories of subjects:

    • Mandatory,
    • Voluntary, or
    • Permissive and illegal subjects.

     

    Mandatory CBAs

     

    Mandatory subjects relate to topics determined by national laws, such as minimum wages, overtime, health and safety or layoff procedures.

     

    Voluntary CBAs

     

    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 their members at the workplace.

     

    Permissive and illegal CBAs

     

    Illegal subjects relate to topics that are unlawful from the onset, such as illegal discrimination or certain forms of union busting.

     

    How Do CBAs Differ From Region to Region?

     

    While the above information works as a general outline of the collective bargaining agreements 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 provide only minimum terms, with improvements negotiated at the company level or individually with employees, such as in the transport collective bargaining 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 company level.
    Italy 80% Industry Industry-wide collective bargaining agreements are very common and usually introduce specific requirements 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 between the nationwide employer’s federations and their nationwide 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 collective bargaining agreements.

     

    Collective Bargaining Agreement Closing Points

     

    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 experience and, in some cases, a combination of these previous three points.

    These collective bargaining agreements 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.

     

    How we can help you

     

    Professional Employer Organizations (PEO), such as EuroDev, can provide invaluable assistance in navigating these complex mazes of rules and ensure complete legal compliance.

    In case you would like to have more information about collective bargaining agreements, do not hesitate to connect with Monique Ramondt-Sanders – Executive VP of Human Resource Outsourcing at EuroDev. For more information concerning our HRO services, please look at our HR Outsourcing page.

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