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

2. 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

3. 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?

4. 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

5. 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

6. 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

7. 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

8. 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?

9. 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.

10. 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

11. 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?

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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 % 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.

18. 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?

19. 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?

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?

21. 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.

22. 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

23. 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?