Collective Bargaining (CB) is the negotiation between representatives of management and workers to produce a written agreement covering terms and conditions of employment.
Understand Collective Bargaining [Comprehensive Guide]
What is Collective Bargaining?
Collective Bargaining (CB) is a negotiation process between management and workers to establish written employment terms. This negotiation serves to balance opposing pressures and involves joint employer-union-management cooperation.
The practice aims to resolve disputes, protect worker interests, and avoid third-party intervention. Collective bargaining covers topics like wages, working conditions, transfers, training, promotions, and labor policy.
CB relies on equal bargaining power and flexibility to reach a joint settlement. The negotiation process is continual, dynamic, and covers pre and post-contract signing stages.
It is essentially a compromise and balancing of opposing pressures of two social groups who have enough mutual interests to work together. Pressures at the bargaining table are usually framed in economic and technical terms, but bargaining is fundamentally a social process.
According to Dale Yoder, much of today’s management of human resources or manpower is “Self-Management.” Individual employees, both as individuals and members of unions, take an active part in their management.
They participate in making many decisions that would otherwise have to be made for them by employers or their managers. In mature economies like that of the U.S.A., employees play a decisive role in their own promotions, transfers, training, and other conditions of employment.
They also participate in the formulation of labor policy. This participation takes place through unions in the process of collective bargaining. Joint Employer-Union-Management cooperation is relatively new.
To some employers, union participation is seen as interference with essential prerogatives of management. In some firms and public agencies, there is a major concern about “containment and resistance against worker participation in management.”
There is widespread discussion about the extent of the union’s role in management and how much Joint-Employer-Union-Management cooperation is desirable for enthusiastic teamwork, productivity, and a democratic society. The appropriateness of public rules is also being discussed.
Office employees, retail clerks, and janitorial staff are also forming associations. Once unionism was prohibited among white-collar employees, employers used to promote unmanageable union leaders and then fire them.
Today, officers, teachers, accountants, lawyers, journalists, and top-ranking bureaucrats have their associations to press for their rights and bargain with authorities.
Objectives of Collective Bargaining
The objectives of collective bargaining include, among others:
- Settling disputes/conflicts related to wages and working conditions.
- Protecting the interests of workers through collective action.
- Resolving differences between workers and management through voluntary negotiations and arriving at a consensus.
- Avoiding third-party intervention in matters related to employment.
Collective Bargaining Activities
Collective bargaining is the oldest form of labor-management negotiation in the industrial relations in Bangladesh.
Because of the doctrine of the multiple union system, the practice has developed to select a collective bargaining agent (CBA) from among the registered unions in an enterprise or group of enterprises to undertake collective bargaining with the employer on behalf of the workers in that enterprise or group of enterprises.
The main activities of CBA are as follows:
- Undertaking collective bargaining with the employer or employees on matters connected with employment, non-employment, terms of employment, or the conditions of work.
- Representing all or any of the workmen in any proceedings.
- Giving notice of and declaring a strike in accordance with the provisions of the law.
- Nominating representatives of workmen on the board of trustees of any welfare institution or provident fund and of the workers’ participation fund.
In any enterprise where there is only one registered union with membership equivalent to a minimum of one-third of the total number of workers employed, that union is legally authorized to work as the CBA without any election.
However, if there are more than one legal unions, a CBA is elected from among those unions based on secret balloting under the supervision of the Registrar of Trade Unions.
It is stipulated in the law that a union, even if it wins in the balloting, cannot be declared as the CBA unless the votes cast in its favor amount to at least one-third of the total number of workers employed in that enterprise or group of enterprises.
8 Characteristics of Collective Bargaining
The important characteristics of collective bargaining are as follows:
Equality in strength
Both parties come to the bargaining table with equal strength. In collective bargaining, the bargaining power of both parties is equal, reflecting industrial democracy in action.
Voluntary endeavor
Both workers and management willingly come to the negotiating table to engage in a meaningful dialogue on various pressing issues. They thoroughly explore each other’s viewpoints before arriving at an acceptable solution. The implementation of the reached agreement is also a voluntary process.
Flexibility
Collective bargaining involves group action, where representatives of employers and workers invest efforts to reach a consensus. It offers sufficient flexibility, as neither party can afford to be inflexible and rigid in such situations.
A unique feature of collective bargaining is that parties typically start negotiations with entirely different views but ultimately reach a middle ground that is acceptable to both. It is, therefore, a give-and-take process rather than a one-way street.
Joint and amicable settlement
It is collective in two ways. First, all workers collectively bargain for their common interests and benefits. Second, workers and management jointly arrive at an amicable solution through negotiations.
Continuous affair
Collective bargaining is an ongoing process. It does not begin and end with negotiations; rather, the agreement is just the beginning of collective bargaining. It encompasses the implementation of the agreement and further negotiations.
Dynamic process
Collective bargaining is dynamic because the way agreements are reached, the way they are implemented, and the mindset of the parties involved are constantly changing. The effort itself evolves and expands over time.
Power relationship
Workers aim to gain the maximum from management, while management seeks to extract the most from workers by offering as little as possible. To reach a consensus, both parties must retreat from extreme positions and accept compromises.
Unions aim to strengthen their influence over workers without significantly diluting their power, while management aims to retain control over workplace matters.
Bipartite process
Employers and employees directly negotiate the issues face to face across the table. There is no third-party intervention. Any dispute settlement using this method ensures harmonious relations between the parties involved.
4 Steps of the Collective Bargaining Process
Collective bargaining is essentially a compromise and balancing of opposing pressures between two social groups with considerable mutual interests in working together. While pressures at the bargaining table are typically framed in economic and technical terms, the overall bargaining process remains fundamentally social. It is not a one-time event but an ongoing, continuous process, particularly from a behavioral perspective.
While formal negotiations at the bargaining table occur periodically, a significant amount of pre and post-contract signing processes and procedures must be handled with care. The contract is shared with union leaders, employees, managers, and employers for review, analysis, and interpretation.
New situations that are not specifically outlined in the contract may always arise, requiring union representatives and managers to collaborate and resolve differences. Both parties watch for flaws and consider amendments. In the meantime, plans for negotiating a new contract are already in progress.
Union leaders continually brainstorm to identify new demands, while management devises strategies to address compliance issues. Both parties closely monitor developments in other local firms and organizations at the national and international levels. They also engage skilled negotiating experts to stay effective in the bargaining process.
Collective bargaining is not an isolated, annual or semi-annual event that allows managers to conduct business peacefully. Periodic negotiations are just a part of the overall process.
From a behavioral standpoint, collective bargaining is a continuous process, even though formal negotiations occur periodically around the bargaining table. Signing the contract marks a temporary end to the standoff, but numerous other aspects of the bargaining process must be carefully executed.
In collective bargaining, negotiation and agreement represent only half of the process. The other equally crucial aspect is the implementation of the contract. In summary, the following steps are involved in the collective bargaining process:
Identification of the Problem
Problem identification influences the entire process. It determines whether the problem is of utmost importance, requiring immediate discussion, or if it can be postponed to a more convenient time. It also helps assess whether the problem is minor and can be resolved with the other party’s agreement upon presentation, avoiding the lengthy process of collective bargaining. Additionally, it impacts the selection of representatives, their size, negotiation duration, and the ultimate agreement. Therefore, it is crucial for both parties to have a clear understanding of the problem before entering negotiations.
Preparing for Negotiations
When collective bargaining is deemed necessary, both parties prepare for negotiations. Preparation begins with the selection of representatives. Representatives should be chosen for their ability to negotiate patiently and sincerely and effectively present their viewpoints. After selection, they should receive comprehensive education about the problem and its pros and cons. Their roles and authority during negotiations should also be clearly defined. Other preparations include setting negotiation timelines. However, the negotiation period may vary depending on circumstances once negotiations commence.
Negotiation of Agreement
Negotiations typically start with the union presenting a long list of demands to management. By beginning with extreme demands, the union leaves room for concessions in later stages of the negotiation. This approach also conceals the union’s true position, requiring management to decipher which demands are non-negotiable, moderately important, or easily dropped.
Usually, a chief negotiator represents management during negotiations. The chief negotiator directs and leads the negotiation process, presenting the problem’s details, intensity, nature, and the perspectives of both parties. Subsequently, the representatives of both parties present their views. Throughout negotiations, representatives should pay close attention to the other party’s arguments and needs while formulating counterarguments effectively. This can be a significant challenge in the bargaining process. Each representative should remain attentive to the other party’s viewpoints and strive to reach a mutually acceptable solution.
When an agreement is reached, it is documented, considering relevant legislations. Both parties involved sign the agreement, transforming it into a binding contract. If, despite all efforts, no amicable solution is reached, both parties may turn to conciliation.
Implementation of the Contract
Once an agreement is agreed upon and ratified, it must be put into action. Agreements can be temporary, and before they expire, both parties may consult with each other to decide whether to terminate or renew the agreement based on circumstances.
The union may demand the renewal of agreements that benefit workers before they expire, while management may reject this demand, considering the organization’s financial position.
This could lead to further negotiations. Thus, collective bargaining is not a temporary arrangement but a continuous process.
Collective bargaining is a valuable tool for preserving labor-management autonomy in a free society. Disputes are natural, as workers may demand more than they deserve, while employers may be inclined to pay less to maximize profits.
Resorting to third-party intervention for dispute resolution could limit the freedom of both labor and management. Therefore, collective bargaining is expected to serve the long-term interests of both parties and is indispensable.
The practice of collective bargaining emerged from the recognition that individual employees lack the knowledge and resources to identify and seize the best opportunities on their own. Collective bargaining enables employees to secure better compensation.
The imbalance in the position of individual workers compared to their employers can be addressed in various ways.
Research organizations, through governmental agencies, can survey the demand for manpower in various industries, regions, and occupations, comparing them with the available supply. At times, the government can establish and regulate compensation rates.
In a democracy, this approach is widely supported as a “Democratic and Voluntary Settlement,” in contrast to bureaucratic or totalitarian means of achieving efficient allocation, composition, and compensation of human resources.
Collective bargaining serves as a means of labor marketing and manpower management. It has primarily developed because individual employees recognize the economic benefits of joint collective action. In many cases, employers also formed associations to engage in collective bargaining. Collective bargaining has advanced the interests of both parties.
Collective bargaining is often viewed as a reflection of the weaknesses of both sides. One theory of collective bargaining regards employer associations as symbols of “groupism,” where individuals with common interests band together to increase their power. Such a theory has been prevalent in North America and Europe.
Collective bargaining more precisely aligns with the economic theory of labor monopoly, which aims to explain the goals of union organization and exert pressure on employers to participate in determining employment conditions.
Economist Perlman views collective bargaining as workers’ attempts to resist the power of capitalist employers. Dale Yoder reported that union and employer programs focus on social, economic, and political needs.
In some cases and regions, unions have embraced reformist or revolutionary political goals, while in others, they have been content with economic goals, particularly wage rates, work hours, and working conditions.
Collective bargaining emphasizes adherence to rules rather than arbitrary and capricious decisions, as described by Silchter. This approach is referred to as “Industrial Jurisprudence” in employer and employee relations.
Human resource managers must consider that the role of collective bargaining is evolving with technological and managerial changes in the workplace and work methods.
The negotiation of collective bargaining and the establishment of a contract administration mechanism have significant implications for those involved in human resource management. Importantly, collective bargaining occurs directly between representatives of employers and employees without third-party intervention.
The scope of mutual settlement allows both parties to maintain positive relationships. Therefore, collective bargaining is considered the most effective method for resolving industrial disputes.
Bargainable Issues
What are the issues that could be bargained between employers and union representatives? Practically speaking, any issue relevant to management and workers may become the subject of bargaining.
However, in certain specific cases, both management and workers are reluctant to yield ground. Traditionally, management is not willing to negotiate work methods, arguing that it is management’s exclusive right to decide how the work is to be done.
However, over the decades, the nature and content of collective bargaining have changed quite dramatically, thanks to the pulls and pressures exercised by the bargaining parties.
Traditionally, wages and working conditions have been the primary focus areas of collective bargaining. However, in recent times, the scope of bargaining has extended to almost any area of labor-management relations.
Some of the important areas include:
- Wages and working conditions.
- Work norms.
- Incentive payments.
- Job security.
- Work tools, techniques, and practices.
- Staff transfers and promotions.
- Grievances.
- Disciplinary matters.
- Health and safety.
- Insurance and benefits.
- Union recognition.
- Management rights.
- Union activities/responsibilities.
- Changes in technology.
4 Types of Collective Bargaining
The types of bargaining that have evolved Over time are;
- distributive,
- cooperative,
- productivity,
- composite bargaining.
These are discussed below :
Distributive bargaining
The parties try to maximize their respective gains. They try to settle economic issues, such as wages, bonuses, etc., through a zero-sum game (where my gain is your loss and your gain is my loss).
Unions negotiate for maximum wages. Management wants to yield as little as possible while getting more benefits from workers.
Cooperative bargaining
There may be circumstances in which the very existence of the organization is at stake. Both parties realize the importance of surviving in such difficult times and are willing to negotiate the terms of employment in a flexible way.
Union may accept a cut in wages in return for security and higher wages when things improve. Management agrees to modernize and bring in new} technology and invest in marketing efforts in a phased manner:
Productivity bargaining
Sometimes, workers’ wages and benefits are linked to productivity. A standard productivity index is finalized through negotiations initially.
If the workers are able to exceed the standard productivity norms, they will get substantial benefits. Management gains control over workplace relations and is able to tighten the norms still further in future negotiations,
Composite bargaining
This is a proactive system of collective bargaining; labor bargains for wages as usual but goes a step further, demanding equity in matters relating to employment levels, environmental hazards, etc.
When unions negotiate manning standards, they ensure that the workload of workers does not increase. This helps to maintain the status quo as far as employment level is concerned.
Workers are no longer interested in monetary aspects to occupy the center stage in bargaining sessions. But there is a definite shift towards composite bargaining,
Without such a proactive stand, workers may spot be able to withstand the forces of liberalization, automation, and survival.
Through composite bargaining, unions are able to prevent the dilution of their powers and ensure justice to workers by putting certain limits on the freedom of employers. For the employer, this is a lesser evil when compared to strikes and lockouts.
Apart from periodic wage hikes and day-to-day tussles over productivity norms and other related issues there is at least no danger of workers striking work every now and then. Of course, even this situation may not continue for long.
3 Levels of Collective Bargaining
Collective bargaining is generally structured and conducted at three levels;
- plant level,
- industry level, and
- National level.
Plant Level
This is the basic or micro-level unit, where negotiations are conducted between the management of the plant concerned and the CBA union of the same plant. Generally, the unions are centered around the plant, with little or no involvement in other bodies, although they have political connections.
There are many plant-level agreements but the pioneers in this field are the agreements concluded in the public sector.
Industry Level
Employers of several units -in the same industry band together and form an association, which negotiates with a federation of trade unions, usually called craft federation, having a similar status.
The agreements are somewhat broader in scope and delineation than the plant-level settlements, which are very specific. The federations working in the jute industry, for example, bargaining with representatives of employers’ associations in the jute industry, are doing industry-level bargaining.
National level
Here, the terms of reference and shape are much wider though such agreements are not so common in India. The representatives of the trade unions and of the employers at the national level negotiate and arrive at a settlement.
8 Pre-requisites for Success in Collective Bargaining
Success in collective bargaining depends on the fulfillment of the following preconditions:
Flexibility in bargaining
Collective bargaining is a flexible, give-and-take group process. It depends on careful preparation and skillful maneuvering. It does not bode well if management takes an extreme stand with a rigid attitude.
Constructive attitude
Prudent employers try to build a constructive attitude so that the parties can discuss mutual problems and attempt to obtain an agreement.
The ability of union leaders
Union leaders should also be trained and exposed to the realities. The stability of the leader and success in the next election depends on their ability to exact more benefits for the workers who constitute their vote base.
Non-involvement of political parties
Militancy can be reduced if political parties do not take sides with any party.
Bargaining attitude of management
However, management’s bargaining attitude is important. No group should proceed with a defensive attitude and challenging mentality.
Bargaining procedure
Bargaining procedures have a significant influence on bargaining sessions, so the agreement should be drafted carefully. It should be clear and readily understandable to the parties.
Bargaining role of the lawyers
The bargaining role of lawyers at the bargaining table must be assessed carefully. The lawyer employed by the management has to consider whether he is a representative of the employer or acting as an advisor. The two roles are different, and this is also true for union lawyers.
Role of observers
At times, non-negotiating observers remain present during the bargaining session. Management and the union both may allow observers to keep them informed. Union observers act as watchdogs to ensure that union leaders do not “sell out” to management.
6 Tactics For Collective Bargaining Success
There may be several tactics used by bargainers to improve their bargaining. Six typical tactics are:
Counter Proposal
A counter-proposal is used in an effort to bring both sides closer together. It suggests an alternative offer to a previous proposal in the hope that both parties may find it acceptable upon consideration.
Trade-off
Another tactic is a trade-off, which involves offering to give up one issue in exchange for gaining another. For example, agreeing to paid holidays in exchange for flexibility in work rules. Counter proposals gradually move the parties closer, while trade-offs expedite the resolution of differences.
A specific form of trade-off is accepting wage or benefit cuts in exchange for job security in cases of economic downturns or poor economic conditions. This is known as concession bargaining.
Recess
Recess is another important tactic, especially when negotiations become fatigued. Members of the bargaining committee take a break to privately discuss any disagreements among themselves. This allows either party to work out problems in private and then return to the negotiating table.
Wait and See
In some cases, when certain issues are particularly troublesome to reach an agreement on, negotiators may request to set these issues aside and postpone a decision for a later meeting.
They hope that the situation may change in the meantime. A sub-committee may also be formed to study these issues in detail.
Getting Public Support
Sometimes, the parties find it useful to garner public opinion. They give publicity to the issue in the hope that additional pressure may be exerted on the opponent. Newspaper comments, as well as opinions of experts in the media, become important. In some cases, legal action, advertising, and street demonstrations are used.
Use of a Mediator
At times, a mediator is brought to the scene, either by one party or by the government. A mediator is an outside specialist who encourages negotiating parties to reach an agreement. They introduce fresh perspectives and help to reduce emotionalism through persuasion.
The mediator’s role is that of a confidential intermediary, carrying messages and viewpoints between the parties. This enables negotiators to communicate without making formal commitments.
If mediation fails, two options remain. One is a strike, which is the union’s tool for work stoppage to pressure management.
One fundamental difficulty of collective bargaining is that both labor and management enter the game with a firm desire to win, making the relationship more bitter. This is when governmental intervention becomes necessary.
There is a need for problem-solving bargaining in which economists, accountants, sociologists, financial experts, managers, psychologists, and development thinkers can make constructive contributions.
Impact of Collective Bargaining: 8 Challenges in Labor-Management Relations and Personnel Decisions
Loss of unilateral discretion of management on personnel matters
The discretion of management in decision-making about pay, promotions, transfers, dismissal, etc., is often curtailed under a collective bargaining agreement. Management’s rights are one of the most controversial issues in labor-management relations.
Most collective bargaining agreements stipulate that management retains the right to make decisions about corporate strategy, product lines, plant locations, and product pricing policy. But such decisions may affect union personnel, resulting in challenges for the union when dealing with management.
Activities like employee recruitment and selection, training, development, and absenteeism control do not usually produce conflicts in mature economies, but they may in developing countries.
Union leaders may push their own members into jobs and may spend much of their time on union activities, neglecting their normal duties.
Unions may also seek to interfere with personnel policies related to promotion, transfer, layoffs, compensation, job security, apprenticeship training, grievance procedures, and arbitration.
Benefits of Uniform Personnel Practices Through Collective Bargaining
Greater uniformity in personnel practices is achieved through collective bargaining agreements, standardizing wages, hours of work, and working conditions. The company is compelled to improve the way it administers its personnel functions, which can boost employee morale and productivity.
Employers’ Concerns with Collective Bargaining Agreements
Employers fear that collective bargaining agreements may put them at a competitive disadvantage compared to their non-unionized competitors.
Employers are concerned about the potential increase in labor costs, which may force them to raise product prices or cut profits. Price increases may result in the loss of customers.
Impact on Research, Development, and Performance Appraisals
Employers are also concerned that collective bargaining agreements may hinder research and development efforts and prevent them from taking advantage of technological advances. Unions have been observed to be hesitant about merit pay plans, individual and group incentives, and output-based performance appraisals.
Unions tend to favor joint control, safety and health programs, plant closing decisions, quality of work-life schemes, employee benefits, salary administration, and employee discipline.
Reduction of Favoritism, Nepotism, and Uncertainty
Collective bargaining reduces favoritism, nepotism, uncertainty regarding pay and hours, and poor working conditions. Uniform compensation and employee benefit packages, along with a set of work rules, leave less room for misunderstandings between employers and employees.
Protection of Employees and Establishment of Grievance Procedures
Collective bargaining reduces the fear of capricious and unfair treatment, and dismissed employees are assured of due process and equal protection in the workplace.
Collective bargaining agreements establish sensible grievance-handling procedures to which employers are contractually bound. However, there is a chance that incompetent or troublesome employees may take shelter behind the protective shield of the union.
Unity and Division in Collective Bargaining
Collective bargaining reflects the “united we stand and divided we fall” theme. Employers are often financially and organizationally stronger. They may hire individuals to disrupt worker unity, and in most cases, the police tend to favor employers.
Philosophy of Collective Bargaining: “One for All and All for One”
Collective bargaining implies “one for all and all for one.” This philosophy treats superior and moderate employees equally, which can hinder talented employees from demonstrating initiative and better performance.