Strategies for collective bargaining at enterprise level Actrav-ITC-ILO, Turin

FoA & Right to CB: Pathway to Decent Work A fundamental right & pre-requisite for democratic labour relations A development policy: Promotes sharing in the gains of growth, improves workers living & working conditions - creates conditions for sustained economic growth by widening ‘domestic market’ Better than law or ‘Court’ induced solutions - Law can force compliance but not cooperation between parties ILO C 87 & C 98 – facilitates representative social dialogue , between W & E organizations, help reach mutually agreeable solutions while respecting each others needs

ILO Conventions 87 & 98 Out 183 member States of ILO - 150 countries have ratified C 87 48 out of 53 African member countries have ratified; C 98: 160 countries have ratified, including 52 from Africa; But in practice?

Pre-requisites for CB RIGHT TO ORGANISE AND RIGHT TO COLLECTIVE BARGAINING A SUITABLE FRAMEWORK FOR EFFECTIVE FUNCTIONING OF IR. [Statutory bodies, machinery, established procedures] STRONG & STABLE TRADE UNIONS & Employers organization RECOGNITION OF TRADE UNIONS ATITUDE OF EMPLOYERS & UNIONS - Enlightened Self Interest GOOD FAITH = fair legal practices

Levels of Collective Bargaining Single Plant Bargaining: Unit Level Multiple Plants Bargaining: Company Plant Level Multiple Employers Bargaining: Industry Level National Level Bargaining: Have a large common concern

Forms of CB Conjunctive/Distributive Bargaining: one side wins and the other loses – Objective: maximize the gains Cooperative/Integrative Bargaining: a win-win situation – Objective: Achieving a mutually beneficial alternative Productivity Bargaining: both the parties must develop a productivity linked scheme – Objective: To reduce work intensity and increase productivity Concessionary Bargaining: the objective is to give back to management some of what the union has gained in previous bargaining in return for some other demand

So, what is Collective Bargaining Agreement? Image v/s concept CBA is like a ‘constitution’ for a company – it is not (or should not be) a mere document for just getting some wage rise BUT a document of rights & obligations of parties to the agreement – a means of joint regulation of workplace issues – a means to ensure that union has right to company information So – need for union vision – for the Company, workers – then a strategy and actions to achieve that vision

Capabilities needed For effective collective bargaining, Unions need capacity for Understanding country’s economic situation, impact of ‘external events’ Financial analysis of the company - understanding balance sheets, profit & loss statements Management systems and philosophy (Ex. German v/s American, Japanese, Korean, Chinese, Indian employers) Understanding productivity, work measurement techniques, changes in the company, in the economy What else?

What should you negotiate for? Issues of interest (thu CB) v/s issues of rights (as per law) - what is provided for by law – ideally should not be part of CB – employers are expected to abide by law (MW, rates of OT pay) – CB is for getting more than the law Negotiate compensation system & compensation package, not just wages (some companies pay more wages, less benefits, or vice versa) – total costs of the compensation package matter & should be calculated. Employment stability v/s wages question.

Elements of compensation Pay for work – 8 hours of work Pay for performance – productivity linked component Pay for time not worked (paid leave, Sundays, etc) Lay off compensation (for temporary situation – India: 50% of the pay, Korea: 70%) Deferred income Income equivalent payments (allowances) Health, accident and Liability Protection Company performance bonus

For effective CB, Unions need to Know What kind of company it is? Labour intensive? Capital intensive? Supplying directly to market or is in supply chain? Capacity to Pay of the company Share of labour in the wealth produced in the company (value added) Return on capital invested in the company (if it goes down too much, investors will withdraw & firm will close down) Where do you get this information from?

Information needed for effective CB Sales/turn over, Capital employed/capital size, Employment size, Value Added= Income – Non Factor Expenditure. (Here non-factor expenditure means expenditure other than employee cost, depreciation and interest). Material intensity/input intensity sales = -------------- value added

Information needed for effective CB Capital intensity/capital output ratio: capital =-------------------- value added Value added per man-day Return to capital per man-day Rate of profit: Share of Capital = ------------------------ Capital employed

Information needed for effective CB Employee cost (Bargainable/unionized) per man day Prize mark up i.e., value added per unit Trend of output prices and input prices. Capacity utilization of the plant and machinery Market share of the firm

Information needed for effective CB Ratio of debt/ratio of equity, Percentage of non-operational income, Break even point of sales and output, Balance Sheet & Profit & Loss Account of Last 3 Years of the Company. Productivity Data for each workstation including all elements. SURVEY MARKET PAY AND COMPENSATION PRACTICES

Balance Sheet Analysis PARTICULARS / YEARS 2007 2006 2005 2004 2003 2002 2001 2000   TOTAL CAPITAL EMPLOYED 168 199 113 110 105 95 80 INCOME 408 327 217 203 163 141 138 147 NON FACTOR EXPENDITURE 301 254 166 142 104 106 96 91 VALUE ADDITION 107 73 51 61 60 35 42 56 EMPLOYEES SHARE 33 32 23 26 25 21 CAPITAL SHARE 74 41 28 9 19 36 EMPLOYEES SHARE IN VALUE ADDITION (%) 31 44 45 75 37 CAPITAL SHARE IN VALUE ADDITION (%) 69 55 58 59 63 RETURN TO CAPITAL (%) 20

Global Financial Crisis & Company’s Response In one Company Management, taking advantage of Global Financial Crisis, asked Union to accept wage cut of 20% or reduce workforce by 20%. Union analysed company balance sheet and found the following: Material Cost ......... 78% Energy Cost .........  10% Admn. Cost ..........   4% Labour Cost........     8%  Reduction by 20% head count or wages meant only 1.6% savings (20% of 8%) BUT targeting saving in material & energy costs by 10% would give 8.8% cost savings.  Management had no answer but to accept union’s proposal and in this way Union saved the jobs as well as wages.

Labour rates v/s Labour costs Increased Wages do not mean increased wage costs! Example: Two companies in car Industry – for 8 hours work, Company N pays higher wages but has lower labour costs, while Company G pays lower wages but has higher costs. How can this be? Productivity plays a major role. Company G makes 1 car in 47 hours & Company N makes 1 car in 23 hours Focus on costs, not Wages - what are major costs in a company?

Typical cost structure of a Mfg company Material costs – about 70-80% Energy costs – ranging from 8 -10% Admn costs – from 3 - 5% - Other costs – 1-3% Labour costs – ranges between 3- 10% Now study the management time in a company – No. of Managers X 8 hours. What do Managers spend their maximum time on? Mostly on labour which does not account for biggest cost – for this they are paid high salaries? What kind of Managers does a Company need?

Group Discussion Workers want 20% wage hike – the situation facing the company is:     The input prices (Cost of raw material, electricity, water etc) has gone up by 10 % Due to competition the company has to reduce the product price by 10% At the same time the share holders are also expecting 5 % more returns from the existing 15 % How to develop a strategy to respond this situation? What are the areas that you can explore to find an answer?

Increase in input cost: Reduction in wastage Inventory management Change in design of the product to save more material Energy saving Competition in price: selling at lower margin but at a mass level. For this we need to improve productivity. Productivity improvement involves various factors such as:   process and system improvement updated technology application of various improvement tools Culture and attitudinal change etc Once productivity and sales increases it will generate more Revenues – that can go towards K & L.

Concluding Remarks FoA & CB are not just about workers rights but are also instruments of State policy to achieve objectives of social justice & for promoting sustainable economic growth It should also not be seen as something to be limited to industry or company level but this principle (of promoting social dialogue) should be extended to national level over issues of policies –labour, social and economic – this will promote social harmony and social stability. Importance of understanding financial numbers for countering management Need to move from mere collective bargaining over wages to ‘participatory rights in industry as also the economy

Collective Bargaining policies & Practices in your country Group Work Collective Bargaining policies & Practices in your country Do you a law or legal framework regulating collective bargaining? On what factors do you base your wage demands? Collective agreement is signed at what level - at company level? Industry-wide? Do federations of unions sign agreements? Or are the agreements signed only by company level unions? What do unions include in the collective agreement? What are the main difficulties in exercise of collective bargaining rights for unions?