Sharing in the gains: Negotiating for Decent Wage- Decent Work Actrav-ITC-ILO, Turin

FoA & Right to CB: Pathway to Decent Work ILO C 87 & C 98: a fundamental right – promotes Voice, Representation & Participation – facilitates representative social dialogue, help reach mutually agreeable solutions while respecting each others needs Role of law v/s Collective bargaining: law can force compliance but not cooperation between parties C-87 & C-98: Development policy? money in workers pockets promotes domestic growth & employment

So, what is Collective Bargaining Agreement? Image v/s concept CBA is like a ‘constitution’ for a company /industry – it 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, including union right to information & negotiate ‘management policy’ So – need for union vision – for the workers, for the Company, – then a strategy and actions to achieve that vision

Issues dealt by CB – what do you negotiate for? Traditional issues – wage rates/pay, working hours & other working conditions, employment policies, productivity agreement New areas: Company management issues such as: - demanding equity in matters relating to work norms, staffing standards & employment levels, - environmental hazards/green jobs issues, - Outsourcing, sub-contracting clauses, - Investment policies, management decisions over diversification choice of technologies, etc. ….since all these affect workers employment and working conditions

Labour rates v/s Labour 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 labour costs. How can this be? Productivity plays a major role. Company N makes 1 car in 40% less time than Company G Focus on costs, not Wages - what are major costs in a company? What do Managers spend their maximum time on?

Global Financial Crisis & Company’s Response Company Management, taking advantage of Global Financial Crisis, demanded the Union to accept wage cut of 20% or reduce workforce by 20%. Cost structure as per the company balance sheet: 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.

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) Deferred income (Bonus, social security) Income equivalent payments (allowances) Health, accident and Liability Protection Company performance bonus

Value Added = Income – Non Factor Expenditure. Are profits a good basis for basing wage demands? Focus on value added – what is it? Value Added = Income – Non Factor Expenditure. (Here non-factor expenditure means expenditure other than employee cost, depreciation and interest).

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 Survey Market Pay & Compensation Practices What else?

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 (value added) produced in the company 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? Balance Sheet and Profit & Loss Account of the Company for last 3-4 years.

Balance Sheet Analysis - Example 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

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 systems 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