Influence of Trade Unions in Employee Relationships- Industrial Relations in EU Countries - Essay Example

? The Public Sector: Influence of Trade Unions in Employee Relationships Analyses of Industrial Relations in EU Countries Table of Contents Introduction 3 Comparative Assessment of Labor Laws in Britain, France, Germany and Hungary 5 Analysis 9 Role of Trade Unions 13 Industrial Relations in the UK 14 References 17 Bibliography 19 Introduction Majority of the developed nations adhere to the prescribed labour standards in wages and working conditions; employment forms, compensations, incentives, bonuses, and allowances that are regulated, either by law or collective bargaining agreements. These joint accords, in turn, are covered by judicial or conventional decrees which explain processes, causes and results. However, the rationality of these pacts does not merely represent judgments made by national institutions and economies. It also takes into account the social factors and the aggregation of decisions which constitute the systems of industrial relations. Industrial relations have varied throughout the ages and differ in terms of concepts and implementation. Based on statistics presented by the Federation of European Employers, membership in the trade unions in Western parts of Europe declined over the last 20 years. Out of 27 members in the European Union, very few nations have more than half of their labor force in the trade unions. In fact, even the most populated states have only a moderate number of their population having membership. Italy has 30%, Germany has 29% and France has 9% of their respective populations having union membership. The reasons will be discussed in the middle portion of this analytical paper (Federation of European Employers, 2010). Ferner and Hyman (1998) have argued that “Europe developed certain unique features in their industrial selections during the end of nineteenth and twentieth century, and majority of them have remained in force till the present time. One of the major responsibilities of the employer’s association and the trade unions by sector or trade is collective bargaining and are coordinated by the confederations. Bargaining at the company levels came much later and has been growing, but still remains under the guidance of the federations. A distinction has been presented between collective bargaining, which mostly deals with working hours and wages, and participation of the wage earners which includes the working conditions, welfare, and also adaptation of the broader collective agreement (Ferner & Hyman, 1998). “Rapid industrialization has been going on in the industrial relations in Europe. Even during the process of integration, industrial relations and national politics will remain important in areas of social regulations of employment and work in Europe. The reason is that the European integration has evolved as the process of liberalization of the economy over the decades and this has happened through the international methods of opening up of the national economies through negotiated expansions of markets which remain beyond the national borders. Industrial relations therefore have always been governed by regulations and rules although to varying extent. This is not just the outcome of contracts but also of the status rules imposing obligations and rights and on the contracting parties, such that they cannot modify them even by mutual agreements (Wolfgang, 1998). Marshall’s views on industrial relevance bear relevance in this context. According to Marshall’s theory the social rights remain awarded according to the citizenship status rather than on the principle of classes or needs. His claim was that the extension of the social rights is not entailed by destroying social classes or inequality. Mundlak says that even though Marshall’s views of the industrial citizenship are on the decline, there are other labour-market institutions which bridge the gap between citizenship and the labour rights. These are workplace democracies, assuming the workers’ consistency in the organisation; and corporate citizenships which are used to entrust organizations with the obligations that are expected of human beings (Marshall, 1950). This dissertation will come up with critical analyses of the theories stated above and at the same time focus on the following countries belonging to the European Union namely: Britain, France, Germany and Hungary. There will be substantial discussion regarding the public sector being the only remaining sector wherein trade unions have influence in employment relationships. Likewise, the other points to be assessed are the labour laws in the four countries, labour markets and employment trends, role of the state and industrial relations in the public sector, European Social Model, European Union Law, European Community Labour Law and European Regulation of Working Time. Comparative Assessment of Labor Laws in Britain, France, Germany and Hungary Before we look into and make a comparative assessment of existing labour laws in the four member-nations of the EU, let us first consider one definition given to a union – It is a legal entity consisting of employees or workers having a common interest, such as all the assembly workers for one employer, or all the workers in a particular industry. A union is formed for the purpose of collectively negotiating with an employer (or employers) over wages, working hours and other terms and conditions of employment. Unions also often use their organisational strength to advocate for social policies and legislation favorable to their members or to workers in general. The European Industrial Relations Observatory On-line reported that the trade unions existing in organisations in Europe aspire to undertake collective bargaining through European social dialogues and also thrusts major efforts towards influencing the administrative and political processes at the European Union level (European Industrial Relations Observatory Online, 2007). In his discourse, Meyers put emphasis on the fact that the labor law forms the part of a system in which the consequence of changes of a particular aspect depends on the relationships existing between the other elements in the system. Since the relationships lack similarities between societies thus even the effects of the same legislations may have significant differences between two different settings (Meyers, 1967, p. 243). Another relevant concept comes from Kahn-Freund (1974), which says the usage of comparative legal methods require knowledge of not only the foreign laws, but also of their social and political contexts. The usage of comparative laws for practical purposes is regarded as an abuse if it is informed within a legalistic spirit ignoring this particular context in the law (Freund, 1974, pp.2-27). Regarding labour relations, Kahn-Freund has this to share. He appreciates the significance of this law saying that it can be helpful in distinguishing the three purposes of following the foreign law patterns while making the law. First, the foreign systems of law are to be considered which is aimed at unification of the international laws. Secondly, it is aimed at giving a legal effect to the changes that are shared between the foreign and the home country. Thirdly, it is objected towards promoting social change at home that the foreign laws are supposed to produce or impact (Freund, 1974, pp.2-27). Kahn-Freund concludes, and this is very vital to this thesis, by asking and giving the answers: “How great is this danger of a misuse of the comparative method in the field of labor relations which is my third and last example? Clearly there does not exist any field in human endeavor where greater importance is given to set up the international standards and to the principles and transplant institutions from more to the less developed countries. It is not only important but also possible as suggested by the International Labor Organisation (Freund, 1974, pp.2). Indeed, the aforementioned postulations will help us with our conclusions regarding the main points of this study: The public sector accounts for the only sector in which the trade unions have influence over the employment relationship. This statement has been discussed with regard to the outcomes and practices in the industrial relations of the public and the private sectors in four of the European nations To begin with, a comparison of the labor practices in the four nations that have been chosen in European Union. The following is a table that shows prominent features of the comparative features of the four EU Countries: Germany Britain France Hungary Relevant Provisions of the Civil Code Distinguishes employees from independent contractors Puts emphasis on subordination, socialization, integration and social criteria No national minimum wage but minimum pay levels in a business effectively set by any relevant and applicable collective agreement Also prohibition on wage dumping, precluding usurious wages that are 2/3 or less than agreed wage in collective agreement for particular sector or industry 24 days paid leave based on 6-day week 20 days paid leave based on 5-day week excludes bank holidays Various legal categories: employee, worker (in position of dependence analogous to employees, employment determine extent of statutory protection National minimum wage (currently ?5.93 for 21 and over; ?4.92 for 18-20 yr olds; ?3.64 rate for 16-17 yr olds) New rate for apprentices is set at ?2.50 an hour (applying to 16-18 year-old apprentices, and first-year apprentices aged 19 and above) Pay otherwise set by incorporation of collectively agreed terms or individual contracts In principle, 48-hour maximum working week 4.8 weeks’ paid annual leave (based on 5-day week) to 5.6 weeks on 1 April 2009 with maximum of 28 days includes bank holidays if employer wishes Distinguishes employees from independent contractors Puts emphasis on link of subordination or bond of obedience Employees in employment relationships established by employment contracts & governed by Labor Code Eemployee works in a position which is dependent on the employer, because he or she has to appear at the place and time specified, in a condition fit for work and spends working hours performing work, or at the employer’s disposal for the purpose of performing work Self-employed independent contractors engaged under appointment contracts governed by the Civil Code Following growing concern at the use of sham self-employment contracts, the Labor Code was amended in 2003 to provide: The type of employment contract may not be chosen with a view to restricting or violating provisions for the protection of the employee’s rightful interests. Provision for mandatory minimum wage to be set for a specific field or area if required in view of employment conditions 30 working days or five weeks paid leave per annum based on six-day week usually excluding Sunday while bank holidays are additional Labor Code (Act No. 22 of 1992) as subsequently amended Interpreted and applied in relevant domestic Labor Courts (see s.199 of Labor Code) Termination of employment: In case of ordinary dismissal statutory minimum notice from employer is 30 days In such cases, employees are entitled to a severance payment of: One month pay for at least three years service two months for at least five years three months for at least ten years four months for at least fifteen years five months for at least twenty years six months for at least twenty-five years Extraordinary dismissal (summary dismissal without notice) is permitted if other party has willfully or through gross negligence violated his or her essential contractual obligations, or behaved in such a way that the continuation of his or her employment becomes impossible Unfair dismissal In cases of ordinary dismissal, an employee may be dismissed only for reasons in connection with his/her ability, his/her behavior in relation to the employment relationship or with the employer's operations The employer must similarly prove the authenticity and substantiality of the reason for an extraordinary dismissal If the employer cannot justify a dismissal as required, the employee can seek reinstatement. If this is not possible or is not requested by the employee, the court can order the employer to pay the employee no less than two and no more than 12 months’ average earnings. The employee will additionally be reimbursed for lost wages and other emoluments and compensated for any damages arising from such loss unless these are recovered elsewhere this prevents double recovery. Employees who are unlawfully terminated other than by ordinary dismissal (those who are subject to extraordinary dismissal) are further eligible to receive the average earnings payable for the notice period and severance pay Analysis For Germany, the absence of a distinct law or policy on national minimum wages makes it seemingly unfair to the labourers or employees although there are minimum pay levels in a business effectively set by any relevant and applicable collective agreement. The country is strict regarding wage dumping to prevent usurious wages to protect welfare of workers. In the UK, there is a definite law on minimum wages to safeguard the interests of the work force. In France, while there are clear-cut labour laws and civil code provisions, the employees are subservient to employers based on the collective arrangements. Hungary has strict labour laws and places weight on termination issues. Wage structures for all the four nations are almost similar and in compliance with the labour standards. Role of the State – Industrial Relations in the Public Sector The attention is then shifted to the public sector which is the bigger segment and where trade unions have considerable influence on the contemporary employment relationships. The public or government sector has employees that come from national, local, state, federal, judiciary, police forces, military, health, education, public works, social services and other sectors. There may be almost 20 million coming from the countries of the UK, Germany, France and Hungary. There is an entirely different concept as well as practices in industrial relations in the public sector compared to that of the private domain mainly because of the varying parliamentary systems and institutions, legal interferences in industrial relations, economic goals and political conditions of nations. The concept alone of public management is very complicated. Based on the Paper for the Conference organized by the SOG and the QOG Institute, the World Bank has defined Governance in a manner where power is implemented in managing a nation’s social and economic of resources for development (World Bank, 1992), or “the way in which the institutions and public officials exercise and acquire authority to give shape to the public policies and provision of the public goods and services (World Bank, 2007). The latest definition given by the World Bank bears the mark of the New Institutional Economics (NIE): “Governance consists of the traditions and institutions by which authority in a country is exercised” (World Bank, 2007). This includes the processes in which the governments are selected, monitored and replaced. It also includes the extent to which the government is able to formulate and then implement the policies and the respect of citizens and the state for the institutions that govern economic and social interactions among them. According to Hemerijck et al, “the European Social Model is built up on the normative ambition that no individual shall be abandoned to cope by themselves in a competitive system of the market, which is a normative heritage related closely to the long term influence of the Christian Democratic and the Social Democratic thoughts in Europe. At the cognitive level, the policy theory that lies behind the European Social Model is based on the recognition that the normative objective of social justice can be made to contribute to economic progress. This is against the existing view of the trade-off between social justice and economic efficiency in an advanced welfare state (Hemerijck & Huiskamp & Boer, 2002, p.8). In short, the European Social Model provided a framework for the role of the state in the wide scope of industrial relations in the public sector. It is in the EU where governments exert a lot of influence on employment relations and collective bargaining. In the countries belonging to the European Union, crucial reforms or changes aimed at modifying for the better, public sector employment relations and industrial relations are being carried out. The main focus is through the implementation of major changes in labor laws and collective agreements. There is a difference in employment relations between the public and private sectors. It is in the form of a distinctive employment category attached to employees in the public sector as public servants or employees under a specific statute. Bercusson (2002) conducted a research on the aspect of representation of workplace in UK. The choice of nation assumes significance as UK does not have a framework workplace representation. This also assumes significance as other member nations of the European Union are preparing a comprehensive plan for workplace representation in their areas. The author in this study stated the role of the Tony Blair government in bringing about the draft amendment in the nation. The report also stated on a nine stage implementation process. So as to bring about effective labor polices in the nation (Bercusson, 2002, p. 216). This means that democracy is being practiced and as provided for in this framework adopted by the European Union where the workers are always represented to ensure that their voices, opinions and views concerning labor issues and most importantly, their rights and privileges are heard at all times (Bercusson, 2002, p. 216). With regards to the integration of political, legal, economic and social processes in the European Union, there are two opposing concepts that should also be understood. These aspects include regime based competition prevailing in the area and Europeanization of labor market regulation. Marginson (2006) states that the scope that an integrated European market and production space helps in opening up for countries and companies to engage in regime competition. The authors states that this aspect has the potential to induce widespread social dumping in which labor standards and wages and conditions are progressively undercut in the search for competitive advantage. This has been a continuing concern for trade unions, national governments and the European Commission. At macro-level, Economic and Monetary Union are expected to deepen European economic integration, as it has not been accompanied by parallel measures aimed at social integration. Instead, regime competition between the different labor market systems of member states is widely believed to be further exacerbated by the onset of EMU, from the beginning of 1999 (Marginson, 2006, pp. 4 -6). Collective Bargaining in the Public Services Sector It is not only in private companies where collective bargaining which is defined by the EIRO as the process of interaction that takes place between the unions and employers with regards to the terms and conditions of employment. It also defines the rights and responsibilities of trade unions with regards to framing rules and joint control (EIRO, 2002). According to the European Foundation for the Improvement of Living and Working Conditions (2007) the aspect of collective bargaining rights has greater restrictions than the right of constitution and freedom in selecting and joining unions. This is even more important in case of public sector organizations which also includes government officials. In UK the aspect of salary increment for the civil servants are determined through constitution of pay commissions rather than by the process of collective bargaining. The pay commissions normally functions and makes decisions on the basis of certain defined parameters which are again governed by a large number of agreements. There are widespread regional imbalances in this aspect with nations like Germany completely banning the aspect of bargaining by the civil servants with regards to the salary increments and the discussions associated with them (Eurofound, 2007). It has also been observed that the pattern of industrial relations adopted and approved by the European Union is a large scale reflection of the pattern of polices adopted by the member nations with regards to the aspect of industrial relations and collective bargaining. As reflected by the policy adopted by the European Union it is very clear that the aspect of collective representation of the employees is the most important aspect of the policy of industrial relations policy adopted by most of the member states of the European Union. The mode of application and implementation is largely assumed to be of a transnational nature which signifies the extent of similarity among the member states with regards to policy formulation of industrial relations. The aspect of being transnational also accentuates the importance of the individual stances taken by each of the member states with regards to implementation and formulation of national policies. Role of Trade Unions The analysis of the role of government generates a logical question with regards to the role of the trade unions in affecting policy and decision making. It assumes importance to study the level of involvement of the labor unions especially of those in the public sector to determine the role of these unions in the aspect of policy formulation. Departmental imbalances are also important in this regard as there have been major issues with regards to the uniformity of the policies in different departments like police, army etc which have entirely different roles and duties. In most of the nations of the European Union including the UK formation of labor unions is legalized in both public as well as private institutions. It has also been observed that the formation of unions is more profound in the public organizations as compared to the public and government agencies. This trend is uniform across all the nations of the European Union. Regional imbalances can be easily traced out as different nations have different rates of unionization. The rate of unionization and its patterns also follow a similar approach as most of nations show trends that lead to the conclusion that unionization process is more profound in the public as compared to the private sector. Research reports also state that approximately one third of the employees in the private sector resorted to unionization which was quite opposite with the public sector (EIRO-a, 2004). Industrial Relations in the UK In order to get a more comprehensive view of the present state of industrial relations in the United Kingdom, it is necessary to include the aspect of the industrial relations act which was passed by the government in the year 1971. This law was passed by the conservative government after a series of protests. This controversial law was again repealed in 1974. This law sought to remove the provisions of the earlier acts passed in this regard and made it mandatory for organizations to bring them under the legal ambit of labor unions. The new legislation enabled the unionized organizations to claim for legal damages under the ambit of tariff vale. In addition the employees had the option of seeking legal protection from business organization with regards to adoption of unfair practices (Lewis, 1976, pp.11-12). There have been numerous amendments made with regards to the controversial labor law in UK. Some of the most significant areas for amendment also included salaries and bonuses to be paid to the employees. Uniformity in this pattern was also observed among the other nations of the European Union where similar amendments were made by the policy makers. The aspect of National Minimum Wage was another significant area in the context of labor laws. It has been observed that apart from Sweden and Germany all the nations had adopted this framework. Germany and Sweden adopted a sector wised framework in which the minimum wages differed significantly on the basis of the sectors in which the organizations were operating. Another significant aspect was the non inclusion of age and other related demographic factors while determining a policy framework for minimum wages. This feature also had striking similarities across all the nations of the European Union. However in the later years France and UK also introduced the aspect of age of laborers and introduced slabs for a certain age group. Nations in European Union led by UK were also quick to determine the minimum age for laborers. This aspect sought to implement the provisions stated by the International Labor Organization with regards to the implementation of minimum wages as a mandatory policy framework (Grimshaw & Rubery, 2010, pp.7-8). Conclusion: The fight for rights among the organizations and laborers has been a matter that has been associated since time immemorial. All throughout the history there have been numerous issues of labor mismanagement and conflicts with managers and unions over the aspect of wage and other disputes. The role of the government was also very crucial in this regard. Studies have shown that the government bodies in most of the instances generally adopted a neutral standing with regards to the issue of conflict management between the managers and workers in an organization. This gave rise to a series of mutual distrust among the employees and the managers in the organization. Wide scale imbalances were also found in the nature of conflicts in the public and private sectors. The relationship between employers and employees was equated with the relationship between the relationship between the labor unions and the government. Unions are largely known to be vociferous in their demands which have linked to a series of mutual distrust among the organizations and employees as well as the government (Edwards, 1995, pp.9-10). The analysis of the topic of research reveals that the state has large scale powers while influencing the labor policies in a nation. Government policies are the most important factors that influence the well being of employees as well as the relationships between employees and employers. Trade unions are other significant aspects in the framework as they represent the voices of the laborers and workers. However the rigidity in their approach towards demanding their set of demands has raised many questions about the positive influence of these unions in the organizational framework. The study also reveals large scale imbalances in the manner of handling labor disputes and the manner of public relations including unionization in the context of public and private organizations. The aspect of collective bargaining has also been found to be another influencing factor as it has been observed that private sector employees have lower collective bargaining powers as compared to their counterparts in the private organizations. Regional imbalances are also notable in this regard as it has been observed that different nations have adopted different policies with regards to labor dispute handling and conflict management. Nations like UK, Hungary and France have shown much liberalization and openness with regards to the aspect of labor dispute management and collective bargaining. The study also reveals that public organizations generally are more flexible in their attitude towards aspects like collective bargaining and dispute management. The government also has an opinion that a good collective bargaining would not only help in creating a positive relationship between the employers and employees but would also help in building a sense of goodwill in the nation. Public organizations have been at the forefront with regards to formation of unions or the adoption of labor friendly policies. The environment at private organizations reveals a contrasting picture with organizations having an HR department that seems to be more rigid with regards o its response to labor welfare and labor management issues. It can easily be deduced from the findings of the study that the major stakeholders in the aspect of labor relations include employees, employers as well as the government. Each of these has an important role and plays a crucial role in seeking the betterment of the working conditions in organizations and with regards to the development of a good and congenial working environment. Hence it becomes essential to have a comprehensive framework that includes all the stakeholders of the process so as to ensure a spirit of goodwill and a congenial environment at the workplace. Using a comprehensive and well integrated plan would help in generating a general spirit of goodwill that would help in generating organizational efficiency which is very crucial in the turbulent business environment prevailing in the modern globalised economy. Close coordination would favor creating a set up that mutually benefits all the stakeholders of the process so as to bring about sustainable development. References Bercusson, B. (2002). The European Social Model Comes to Britain. [Online]. Available at: http://ilj.oxfordjournals.org/content/31/3/209.abstract [Accessed on April 7, 2011]. Industrial Law Journal, Vol. 31, No.3. Edwards, P. 1995. THE EMPLOYMENT RELATIONSHIP AND THE FIELD OF INDUSTRIAL RELATIONS. [Pdf]. Available at: http://www.blackwellpublishing.com/content/BPL_Images/Content_store/Sample_chapter/9780631222576/Edwards_C01.pdf [Accessed on April 7, 2011]. EIRO. (2002). Collective bargaining coverage and extension procedures. [Online]. 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