1. Actrav-ITC-ILO, Turin

2. FoA & Right to CB: Pathway to Decent Work A fundamental right & a development policy Role of law v/s Collective bargaining: law can force compliance but not cooperation between parties ILO C 87 & C 98 – facilitates representative social dialogue, help reach mutually agreeable solutions while respecting each others needs

3. So, what is Collective Bargaining Agreement? Image v/s concept CBA is like a ‘constitution’ for a company – 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

4. On what basis do unions negotiate wages? Wages are set taking into account (generally speaking) – Productivity, company budgets, inflation rate, economic growth & prospects, rates of unemployment & employment, labour supply & demand & collective bargaining. Are profits a good basis for basing wage demands? What is value added?

5. 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.

6. 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 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? What do Managers spend their maximum time on?

7. 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.

8. 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

9. 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?

10. 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?

11. Information needed for effective CB  Total 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

12. 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

13. 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

14. Information needed for effective CB  Debt/equity ratio,  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

15. Balance Sheet Analysis PARTICULARS / YEARS 20072006200520042003200220012000 TOTAL CAPITAL EMPLOYED1681991131101059580 INCOME408327217203163141138147 NON FACTOR EXPENDITURE3012541661421041069691 VALUE ADDITION10773516160354256 EMPLOYEES SHARE3332232625262321 CAPITAL SHARE74412835 91936 EMPLOYEES SHARE IN VALUE ADDITION (%)3144454241755637 CAPITAL SHARE IN VALUE ADDITION (%)6956555859254463 RETURN TO CAPITAL (%)442025323392345

16. Negotiating Productivity What is productivity? Productivity v/s Work Intensity Productivity does not only mean increasing working time or speed of work; it can also mean finding ways to produce more output within the same time or same output within lesser time thru - -Technological improvement/innovations -Methods & Systems improvement -Line balancing

17. Typical problems a factory/company Rigid (and sometimes outdated) work norms Restrictive and narrow job descriptions Too many non value adding activities Idle manpower on one hand & high incidents of overtime on other hand Maladjusted production schedule Shortages of critical items on one hand & growing inventory on the other hand Unbalanced work load and bottlenecks Break-downs Rejection and reworks Absenteeism and labor turn over Lack of accountability Discontent, low morale and responsibilities. Mismatch between authority and responsibilities

18. Negotiating Productivity- pre-requisites Work study & line balancing – joint union-mgt exercise & decision making – not just consultation Deciding on allocable time in a shift, taking into account rest period, lunch, time off for personal needs, fatigue, hazardous jobs, down time and material handling time Commitment of the top mgt to invest in changes needed for improving productivity Sharing in the gains from productivity – share in value added, company performance allowance (over & above the CB agreement)

19. Working Time in a day General Norm: Out of 480 minutes (8 hours), at best 420 minutes of working time should be there – 60 minutes are set aside for rest, lunch break (half hour) and 2 breaks of 15 minutes each for tea-coffee, etc Out of 420 minutes available for work, following deductions from working time need to be considered: - personal needs allowance - fatigue allowance – differs for different job stations - hazard allowance – for certain hazardous jobs down time (disturbance in production cycle due to material not available, machine break down, etc – record should be kept of this by the workers)

20. Collective Bargaining policies & Practices in your country  Do you have 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?