Collective agreement

What is a collective agreement?

A collective agreement is a contract between parties to a collective agreement, such as employers or employers’ associations on the one hand and trade unions for employees on the other. They are concluded within the framework of collective bargaining autonomy, which is fundamentally guaranteed in Germany.

According to the German Collective Bargaining Act, the contracting parties can define legal standards for the structure of employment relationships. In particular, regulations on the content, conclusion and termination of employment relationships can be defined. These then apply to all organizations and persons who are bound by the collective agreement.

“The collective agreement regulates the rights and obligations of the parties to the collective agreement and contains legal norms that can regulate the content, conclusion and termination of employment relationships as well as operational and works constitution issues.” from §1 of the Collective Agreement Act TVG.

Collective agreements can be used to represent and negotiate rights and obligations for many people, often employees. Trade unions often take on the role of employee representatives in order to protect their interests. By bundling the interests of many employees, greater pressure can be exerted on employers to achieve more for employees.

What are the tasks of a collective agreement?

Protect members

Employees are protected by collective agreements. In the sense of one for all and all for one, employees and their interests have a greater voice with employers. Without the help of trade unions or collective agreements, employees would probably have worse working conditions,

Pacifying the contracting parties

A collective agreement is often limited in time. Within this time limit, the contracting parties are usually prohibited from taking industrial action, e.g. going on strike. The parties cannot demand or change any new conditions or regulations during this period. This creates peace of mind and planning security for all parties.

Structuring

Collective agreements often reflect an industry standard. Even companies that have not concluded collective agreements are often guided by the provisions of collective agreements. Collective agreements thus often structure entire industries.

Distribution

Collective agreements often apply to a large number of people. In particular, the regulations on salary, pay grade, payments and other benefits distribute wealth among many people,

Distinction between employment contract and collective agreement

Direct individual employment relationships are concluded between employers and employees by means of an employment contract. This regulates the specific conditions such as salary, wages, working hours, sickness regulations or vacation days in the individual case.

A collective agreement, on the other hand, is always concluded between the trade union and employers or employers’ associations. This collective agreement with the conditions agreed therein is then equally valid for a defined group of employees.

A collective agreement applies to the parties to the collective agreement who have concluded it. These are, on the one hand, the members of the employers’ associations and, on the other hand, the members of the concluding trade union, the employees. This establishes framework conditions for many people and entire industries. In practice, however, employees who are not members of a trade union often also benefit from the terms of an agreed collective agreement.

Another important aspect is the influence of the Collective Bargaining Act (TVG). This means that no further agreement or reconfirmation between employer and employee is necessary. If terms and conditions are concluded that are outside the provisions of the collective agreement, they automatically become invalid.

What is the principle of favorability of a collective agreement?

The principle of favorability of a collective agreement serves the welfare of the employees. If worse conditions are agreed in an individual employment contract than in the collective agreement, these are invalid. The better provisions for the benefit of the employee always apply automatically. In this case, the provisions of the collective agreement would apply.

However, if better conditions are agreed in a direct employment contract than in the collective agreement, the better conditions also apply here.

Is a collective agreement valid for my employees?

Whether a collective agreement is valid must be checked individually. If there are any open questions, information should be obtained directly from the employer or the trade union in the respective sector. An overview and further information can be found at the German Trade Union Federation.

Tariff effect

If the employee is a member of the trade union and the employer is part of the employers’ association with a corresponding collective agreement, these regulations apply to the employee.

Contractual agreement

The employment contract explicitly stipulates the validity of the provisions of the collective agreement

General applicability

The Federal Minister of Labor has the right to set a collective agreement as generally binding for an industry. This can happen if various employees in an industry need to be protected, but the collective agreement affects too few people.

Typical components of collective agreements

A collective agreement sets out standards under the law of obligations and labor law. The following elements are often important for employees:

Working time models

The number of working hours, break times and corresponding working time models such as flexitime or trust-based working hours are agreed.

Wage and salary

The amount and development stages of wages and salaries are agreed.

Working conditions

Working conditions have a major influence in each sector. Among other things, protective measures are agreed to reduce dust, noise and pollutants.

Vacation and sick leave regulations

The Federal Leave Act regulates the minimum requirements for leave entitlements. These can be extended at any time, e.g. by collective agreements.

Termination regulations

Regulations on extended notice periods, e.g. depending on length of service, can also be agreed.

Additional services

Other benefits such as Christmas bonuses, vacation pay, company pension schemes or other benefits for the benefit of employees are also agreed.

What is collective bargaining autonomy?

To ensure that collective agreements and the resulting regulations are valid and cannot be attacked by the state, collective bargaining autonomy was enshrined in the German Basic Law:

Article 9(3) of the Basic Law Freedom of association and collective bargaining autonomy: “The right to form associations for the protection and promotion of working and economic conditions shall be guaranteed to everyone and to all professions. Agreements that restrict or seek to impede this right shall be null and void, and measures aimed at this shall be unlawful.”

The Basic Law thus guarantees freedom of association for trade unions and employers. This allows them to agree working conditions autonomously and independently of the state.

What is a warning strike?

Warning strikes are temporary work stoppages. Trade unions can use this means to emphasize their demands in the course of collective bargaining. Warning strikes are recognized by the Federal Labour Court.

Is there a collective agreement for temporary workers?

The provision of equal pay and equal treatment applies to temporary employment. This means that personnel service providers undertake to remunerate temporary staff in exactly the same way as their colleagues at the respective place of work. In addition, there are also corresponding collective agreements between the German Trade Union Confederation (DGB) and the Federal Employers’ Association of Personnel Service Providers (BAP) as well as the German Temporary Employment Agency Association (iGZ).

Well-known examples of collective agreements

Here is a list of known collective agreements in Germany:

• Collective agreement for the public sector – TvöD
• Collective wage agreement for medical assistants/physician assistants (MFA
• Collective agreement for trade – Tv-H
• Collective agreement for the insurance and financial services industry – TVF
• Federal Framework Collective Agreement for the Construction Industry – BRTV
• Remuneration framework agreement in the metal and electrical industry – ERA

Different types of collective agreements

According to contracting parties

Association collective agreement – This is the most common form of collective agreement. A collective agreement is concluded for an entire industry and a geographical area, e.g. a federal state.

Company collective agreement – An individual company can also conclude a collective agreement directly with a trade union. This is also known as a company collective agreement.

Multi-party collective agreement – This special form of collective agreement can be negotiated and concluded simultaneously between several parties, i.e. several trade unions and employers’ associations. Each party continues to stand alone and can, for example, terminate the agreement. This joint approach is also referred to as a single collective agreement.

By content

General collective agreement – Also known as a framework collective agreement, this covers important conditions of employment relationships such as working hours, vacation entitlement and notice periods over a long period of time.

Collective wage agreement – The focus here is on remuneration in the employment relationship. Remuneration is regulated by wage and salary groups, also known as “pay scales”. It also regulates how and when employees can change to a new pay scale level, e.g. due to qualifications or length of service.

Follow-up collective agreement – If a collective agreement is terminated and a new collective agreement is then concluded seamlessly, this is referred to as a follow-up collective agreement.

There are also other forms of contract, but these are rarely used.

Advantages of collective agreements

Advantages for employees:in

Higher pay – Compared to employees who fight alone, an employee with a collective agreement often receives higher pay.

A greater voice – As trade unions bring together hundreds or thousands of people, they have a greater voice. This is because it is very quickly noticeable for companies when, for example, hundreds or thousands of employees walk off the job during a warning strike.

Fairness and transparency – collective agreements are publicly accessible and all parties are aware of their contents. This creates transparency. It also reduces envy among colleagues, as everyone is remunerated fairly according to the same standards.

Duration – Collective agreements provide planning security for all parties, including employees, who do not have to reckon with spontaneous salary cuts.

More vacation – As with pay, employees with a collective agreement often receive more vacation in comparison.

Better working conditions – In addition to salary and vacation, collective agreements often include elements related to working conditions such as cleanliness, health protection, etc. Employers cannot simply ignore the public and contractually guaranteed conditions here.

Advantages for the companies

Better predictability – Thanks to clear agreements and terms, labor costs and therefore product prices can often be better calculated in the medium and long term.

No industrial action – During the period of the valid collective agreement, the described obligation to maintain peace applies. A company therefore does not have to expect work stoppages.

Fair competition – All companies bound by the collective agreement accept and live by these minimum regulations. This prevents companies from gaining competitive advantages, e.g. through lower personnel costs. This in turn ensures fair competition within an industry.

Less administration – one collective agreement covers many people. This saves an enormous amount of time, as not every individual agreement has to be negotiated.

Benefits for society

Market neutrality – The autonomy of collective bargaining clearly regulates that the state does not intervene in market conditions and leaves it up to the trade unions and employers’ associations. This creates market neutrality. In cases such as the Minimum Wage Act, however, the legislator intervenes in working conditions. This is why collective bargaining autonomy is also controversial in some cases.

Mediator only – The state does not have to intervene proactively. If it does, then it takes on the role of a mediator at most.

Sample comparison with and without collective agreement

The following table shows why a collective agreement often has advantages for employees