Western Europe

An Overview of Collective Bargaining Agreements in Europe: Part II

By September 17, 2019 October 15th, 2019 No Comments
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In the first post of this two-part series, we provided an overview of collective bargaining agreements in Europe. Generally speaking, it is imperative when hiring or acquiring an employee to affiliate them into a collective bargaining agreement. This is very similar to the way unions work in countries like the United States and United Kingdom.

However, these agreements are somewhat complex—if not difficult—to navigate in many circumstances. Now, we’ll dive deeper into collective bargaining agreements in Europe and detail actionable information firms need to make well-informed decisions to hire top talent in Europe.

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Collective Bargaining Agreements in Europe: Facts and Figures

According to one recent study, about six out of every ten employees in the European Union are currently covered by collective bargaining. However, that coverage is not distributed equally among all countries.

As of 2019, there are currently nine countries where coverage levels are at 80% or above. These include top markets for expanding tech firms like Sweden, Finland, Denmark, and others. In many of these countries, the strength of collective bargaining reflects the significant legal framework that has been built to support it.

In Austria, for example, some of the negotiators who operate on behalf of employers include the chambers of both commerce and industry. All employers must belong to these two groups, which means that almost all employees are covered.

In countries like Norway and Spain, however, collective bargaining coverage comes in at between 50% and 75%. Slovenia comes in at the bottom of the list, as coverage in the country has fallen from 96% in 2005 to just 65% today.

All of this is important to note because the actual expectations of collective bargaining also vary wildly depending on which particular country in the European Union that one is referencing. Overall, expectations are impacted by a number of different considerations, including but not limited to factors like:

  • The prioritization of innovation within a country
  • Employers’ products and processes
  • Political decentralization and more

Centralized and Decentralized Collective Bargaining

One of the main issues under discussion in any collective bargaining agreement is the choice between centralized and decentralized bargaining. Trade unions are far more likely to choose centralized bargaining because it usually strengthens the position of their workers. It’s usually responsible for promoting greater market coverage and employment, along with factors like equality in wages and working conditions. Decentralized bargaining, on the other hand, is usually the choice of employers as they often prefer company-level agreements.

The Challenges of Collective Bargaining and the Cost of Getting It Wrong

Much collective bargaining’s difficulty also stems from some of the issues inherent in bargaining itself. Consider the following:

  • Negotiations can appear fragmented as there are many different bargaining units at play
  • When innovation replaces old activities with new ones, this can easily give rise to diversification in collective bargaining. This could result in overlaps between agreements and even confusion in many circumstances.
  • The work of employees is usually impacted by the ways in which different companies work together and collaborate with one another. This is especially true in the global economy of which many businesses are (or will soon be) a part. This too brings many more bargaining units to the table, which can cause delays to any global expansion.

Go Global with an Experienced Expansion Partner

While it’s certainly true that collective bargaining is beneficial for employees and employers alike, it’s hard to argue against the idea that it is nothing if not complicated. This is why many organizations seek the support of an International Professional Employer Organization (PEO) like Velocity Global.

With global expansion capabilities in more than 185 countries (including each EU, EEA, and non-EU European region country), Velocity Global’s expansion experts can help you realize your global expansion goals—from helping you determine the top markets for your firm to ensuring compliance with local employment regulation in those markets.

If you’d like more information about the mechanics of collective bargaining agreements in Europe, or if you’d like to learn more about how Velocity Global’s International PEO solution has changed the way companies establish presence overseas, get in touch with us today.