What is Collective Bargaining?
Collective bargaining involves discussions and negotiations between two groups as to the terms and conditions of employment. It is called ‘collective’ because of both the employer and the employee act as a group rather than as individuals. It is known as ‘bargaining’ because the method of reaching an agreement involves proposals and counter-proposals, and other negotiations.
Collective Bargaining is the most dynamic area of industrial relations, often described as the “heart” of industrial relations.
In other words, it is the process in which the representatives of the employer and of the employees meet and attempt to negotiate a contract governing the employer-employee union relationship.
Table of Contents
- 1 What is Collective Bargaining?
- 2 Collective Bargaining Meaning
- 3 Features of Collective Bargaining
- 4 Objectives of Collective Bargaining
- 5 Bargaining Issues
- 6 Types of Bargaining
- 7 Steps in Collective Bargaining
- 8 Importance of Collective Bargaining
- 9 Collective Bargaining in India
Jucious defines it as, “Collective bargaining refers to a process by which employers on the one hand and representatives of employees on the other, attempt to arrive at agreements covering the conditions under which employees will contribute and be compensated for their services“.
Collective Bargaining Meaning
Collective bargaining “extends to all negotiations which take place between an employer, a group of employers or one or more employers’ organisations, on the one hand, and one or more workers’ organisations, on the other, for:
- determining working conditions and terms of employment; and/or
- regulating relations between employers and workers; and/or
- regulating relations between employers or their organisations and a workers’ organisation or workers’ organisations”.
This definition comes from Article 2 of the Collective Bargaining Convention, 1981 (No. 154).
Features of Collective Bargaining
These are features of collective bargaining:
- Group Action
- Representation by Union Leaders
- Continuous Process
- Bipartite Process
- Dynamic Process
It is a group process where one group represents employers and another group represents employees. The representatives of both the parties participate in it. Employers are represented by its delegates and employees are represented by their trade unions. Both groups sit together to discuss the terms of employment.
Representation by Union Leaders
Unions typically represent employees when there is a need for collective bargaining. Leaders bring complaints, needs or want of the employees to the attention of the employer. They transmit responses from the employer back to the employees and assist in putting together a draft called a collective bargaining agreement.
Collective bargaining is a continuous process. It does not always start with negotiations and end with an agreement. The process is continuous as it includes negotiations to arrive at an agreement, implementation of the agreement and also further negotiations.
Collective bargaining is a two way process. There are always two parties involved i.e., employers and employees involved in it to take some action. There is no involvement of any third party.
It is a process which transforms leading into negotiations, which permits employees dignity as they participate in the formulation of their terms and conditions of employment.
It is a group activity where representatives of workers and management expand energies in order to arrive at consent. Negotiations are not subject to hard and fast rules for reaching an agreement, thus providing ample flexibility. There is sufficient scope for compromise unless a final agreement is acceptable to both parties is reached.
Objectives of Collective Bargaining
Promote industrial democracy
Collective bargaining is a pragmatic and democratic method of regulating the terms and conditions of employment. It provides a method for the regulation of conditions of employment by those directly concerned.
Improve employer-employee relationship
Collective bargaining leads to mutual understanding. The employers gain a greater insight into the problems and aspirations of the workers while employees become more aware of the economic and technical factors involved in industrial management which helps to improve the employer-employee relationships.
It provides for the efficient and smooth operation of the plant It promotes stability and prosperity as it helps in avoiding interruptions, strikes, go slow and other crises in industry.
Avoid Third Party Intervention
It eliminates the entry of third parties between workers, and management by setting a system of industrial democracy. A prompt and fair system of handling grievances will boost morale in the industry.
- Wages and incentives: It includes issues such as cost of living adjustments and overtime rates.
- Working conditions: It includes issues such as illumination, temperature, ventilation etc. at the workplace.
- Health and Security: Includes issues like safety and security, medical aid etc.
- Impact of technology and procedural changes on employees: Includes issues like changes in technology etc.
- Regulations and practices pertaining to employees: Includes the issues such as rights and duties of the employers, employees, unions and QWL programs.
- Employee benefits: Includes issues such as pension plans and paid vacations etc.
- Grievance handling: Includes issues like what are the procedures for handling grievances etc.
Types of Bargaining
It is also known as distributive bargaining. It is the most common type of bargaining and involves zero-sum negotiations. In this type of bargaining, employers and employees try to maximize their gains.
They try to settle economic issues like wages, bonus, benefits etc. It is based on the principle “my gain is your loss and your loss is my gain”. For e.g., trade unions negotiate for the maximum wages and the management wants to keep it minimum while getting things done through workers.
In cooperating bargaining, both parties focus on survival in difficult situations like recession and are willing to negotiate the terms of employment in a flexible way. Employees may accept a reduction in salaries in return for job security. They may demand higher wages and benefits only when things get improved.
In this method worker’s wages and incentives depends on the level of productivity the worker is able to attain. In this management offers workers a rise in wages in response to alterations in worker’s working practices for raising productivity.
A standard productivity index is prepared for the workers. If the workers are able to go above the standard productivity norms, workers get a substantial incentive or bonus.
In composite bargaining method, labor bargains for the rise in wages as usual but also demand equity in matters relating to work norms, employment levels, manning standards etc.
Steps in Collective Bargaining
- Acknowledging and identifying the problem
- Collection of facts and data
- Selection of representatives
- Starting the negotiation process
- Bargaining Strategy
- Reaching to an agreement
- Formalizing and Enforcing the agreement
Acknowledging and identifying the problem
The first step in the collective bargaining process is to acknowledge and identify the problem. The severity of the problem determines the size and selection of representative, period of negotiations and agreement. Hence, it is important for both the parties to be clear about the problem before entering into the negotiations.
Collection of facts and data
After identification of the problem, the parties are required to collect facts and figures that can be used as defense while negotiating. The data is collected in consultation with the members.
Selection of representatives
The preparation starts with the selection of representatives. When representatives are selected for negotiations, the following points should be kept in mind:
- He should be able to carry out negotiations with patience.
- He should be able to present his views effectively.
- He should know the problem in detail.
- His authority and power should be clearly spelt out.
Starting the negotiation process
It is very important that representatives reach the negotiating table with calm and positive attitude. During negotiations the representatives should be attentive as to find out what the other party is arguing for.
In this phase, the initial demands of both the employer and employees are determined. This negotiation process continues until the final agreement is obtained.
Skillful negotiators always prepare elements of bargaining well before the commencement of negotiations; by organizing the points they want to present and work out alternatives with reasons for accepting one and rejecting the others.
Reaching to an agreement
After completing the negotiation process, the next step in the process of bargaining is to reach a consensus about the solution of the problem leading to an agreement.
Formalizing and Enforcing the agreement
After reaching an agreement, the next step is to examine the agreement and identify whether or not both the issues mentioned by each party are acceptable.
If acceptable, then finally it needs to be converted into a legal contract. Lastly, it should be ensured that the agreement is implemented according to the issues mentioned in it.
Importance of Collective Bargaining
Collective Bargaining not only includes negotiation, administration and enforcement of the written contracts between the employees and the employers, but also includes the process of resolving labour-management conflicts.
Importance to Employees
Collective Bargaining helps the employees:
- To develop a sense of self-respect and responsibility among the employees.
- To increase the strength of the workers. Their bargaining capacity as a group increases.
- To increase the morale and productivity of employees.
- To restrict management‘s freedom for arbitrary action against the employees. Unilateral actions by the management are discouraged.
- To strengthen the trade union movement.
Importance to Employers
- The workers feel motivated as they can talk to the employers on various matters and bargain for higher benefits. As a result, their productivity increases.
- It is easier for the management to resolve issues at the bargaining table rather than taking up complaints of employees individually.
- Collective bargaining promotes a sense of job security among the employees and thereby tends to reduce cost of labour turnover to management, employees as well as the society at large.
- Collective bargaining opens up the channels of communications between the top and bottom levels of organization which may be difficult otherwise.
Importance to society
Collective Bargaining helps the society:
- To attain industrial peace in the country.
- To establish a harmonious industrial climate which supports the pace of a nation‘s efforts towards economic and social development since the obstacles to such development can be largely eliminated or reduced. As a vehicle of industrial peace or harmony, collective bargaining has no equal.
- To extend the democratic principle from the political to the industrial field. It builds up a system of industrial jurisprudence by introducing civil rights in industry and ensures that management is conducted by rules rather than by arbitrary decisions.
- To check the exploitation of workers by the management.
- To distribute equitably the benefits derived from industry among all the participants including the employees, the unions, the management, the customers, the suppliers and the public.
Collective Bargaining in India
The collective bargaining in India over last one decade or so has undergone a gradual but definite change. Nowadays collective bargaining is not only limited to “traditional issues” like wages, dearness allowance, bonus, employment conditions, safety and security etc but also demands for “non-traditional issues” like additional and better welfare facilities, fringe benefits, enriching jobs etc. It is because of the following reasons:
- Now the working class is well educated and aware about the industrial role. Under such circumstances, when the workers economic needs are fully satisfied, the union representatives hardly bring such issues in the bargaining sessions.
- The employers are willing to concede the demands of higher benefits like fringe benefits and welfare amenities as most of them do not call for direct or indirect financial involvement.
- With the entry of Multinational Company’s in India, workers have started to get better pay packages and other lucrative facilities. So instead dealing with traditional issues, the collection bargaining discussion surrounds more important issues like modernization, employment conditions, productivity etc.
A few common items that have become the part of collective bargaining in India nowadays are as follows:
- House Rent Allowance (H.R.A): With effect from fourth pay commission in India, all the government employees are getting fixed H.R.A on the basis of the city where they reside. Since then, private employees too bargained over this issue.
With the change in the society, now private employees are also getting H.R.A. It is interesting to note that the employees of chemical, electronics, pharmaceutical industries are getting 10 to 25% of their basic salary as H.R.A .
- Leave Travel Concession (L.T.C): This facility has been started by Central Government for their employees but now it has been adopted in most of the private undertakings.
The details of such benefit is decided at the collective bargaining meeting; generally workers are paid one or one and half month salary, which they can utilize for ten or fifteen days L.T.C. if the employee is not willing to enjoy the L.T.C. facility then he is paid 80 percent of the L.T.C amount in cash.
- Educational Allowance: The fourth pay commission has made a specific reference to payment of educational allowance for the children of employees. This allowance generally covers the cost of tuition fees, books, uniform etc. In case where such facility is not available, employee can bargain over it.