Collective Bargaining

Collective Bargaining refers to the discussion and negotiation between an employer and the employees on the terms of employment, including the working environment, conditions of employment, shift length, work holidays, vacation time, sick leave, and health care benefits, as well as compensation-based items like basic pay, overtime pay and retirement benefits.

The demands put forth in the name of collective bargaining may be a valid requirement or maybe not. The categories these terms classify into are – mandatory, voluntary, and illegal. These bargaining terms are specified in a collective bargaining agreement where the people involved decide on fulfilling demands for a particular period.

Collective bargaining, as the name implies, is the negotiation and agreement reached upon by the group of employees who want transformation in the employment terms and facilities. The International Labor Organization (ILO) makes collective bargaining a fundamental right for the employees. The ILO makes it feasible for employees to bring forth their concerns, including their demands and grievances, to their employers.

In the collective bargaining process, employees form a union and negotiations occur between the employer’s management and the labor union leaders, who represent the trade union workers. The union members pay the labor union leaders for representing the latter. The negotiations result in the collective bargaining agreement, which describes the rules of employment for a certain number of years. Collective bargaining is very important because dissonance between employer and employees can result in various antagonistic events, such as labor strikes, lockouts, etc.

The process allows the management and the employee groups to come to a conclusion on mutual agreement on the terms and suggestions reached after a healthy discussion. In case, the management finds the demands and suggestions acceptable, they try to accept it with their conditions, if any. In case of grievances, the management tries to identify the loopholes and ensure smooth functioning of the business organization.

Therefore, it can be said that through collective bargaining, the management and employee union ensure settling disputes, preserve employee rights, and negotiate on salaries, wages, benefits, facilities, job safety measures, etc.

A collective bargaining contract includes all employment terms that a group of employees discuss with the employer, who have worked on those found suitable demands. The purposes that these agreements serve include the following:

• To foster a pleasant and cordial relationship between employer and employees.
• To equally safeguard the interests of both employer and employees.
• To ensure that the government intervention is maintained at a minimum level.
• To encourage the maintenance of a democratic environment at the workplace.

Collective bargaining exists in various forms, thereby ensuring serving different functions. It can be broadly classified into five major types –

1. Distributive Bargaining: In this type of negotiation process, one party benefits at the expense of others. It discusses redistribution of profit sharing to increase wages, bonuses, or financial benefits.
2. Integrative Bargaining: In this type of bargaining, the agreement is reached so that both the participating sides tend to benefit – a win-win situation. In other words, both parties consider each other's needs and concerns.
3. Productivity Bargaining: In this type of bargaining, the negotiations revolve around productivity and pay. The two parties agree to certain changes that promise to boost productivity in exchange for higher wages.
4. Composite Bargaining: This type of negotiation emphasizes various factors not directly related to pay but rather focused on employee welfare and job security. It ensures the long-term relationship between employer and employee that is mutually beneficial.
5. Concessionary Bargaining: In this type of bargaining, the union sacrifices some benefits to bail out the employer during the stressed economic situation, which benefits the employees in the long run.

The process involves a series of steps to be taken into consideration by the parties involved so that they come to a conclusion they mutually agree on. From listening to the grievances and demands to implementing the legible ones, the employers have a great role to play. However, putting forth the improvement suggestions in the employment conditions, compensation, and other points in a proper way is a must for employees.

The stages of collective bargaining are as follows. Let us have a look at them:

1. Negotiation: In this process, two conflicting parties or their representatives discuss among themselves, without the involvement of a third party, to settle themselves. However, most involved parties hire seasoned lawyers themselves to settle such matters.
2. Mediation: In this process, a neutral third party acts as the mediator between the conflicting parties to settle. The mediator aids communication between the two parties and ensures that it occurs fairly, honestly, and impartial. They help identify and clarify the underlying issues of the dispute.
3. Arbitration: In this process, the third party, known as the arbitrator, decides on the settlement. The arbitrator listens to the arguments of the conflicting parties and then makes an informed decision, similar to what a Judge does in the court.

Let us consider the following instances to understand what is collective bargaining and how it all works:

Example #1

In 1968, the National Football League Players Association (NFLPA) players went on a strike to pressure the National Football League (NFL) team owners to increase the minimum salaries and pension benefits offered to the players. Eventually, after 11 days of strike, a collective bargaining agreement was reached between NFLPA and NFL team owners. The salaries of both rookies and veterans were increased along with the pension benefits.

Example #2

In 2018, a 4-year collective bargaining agreement was reached between the United Steelworkers (USW) and United States Steel Corp (USSC). As per the agreement, each member will be given a signing bonus of $4,000, a 14% wage hike over the next four years, and increased pension benefits. The agreement ensured that the employees' share in the profit distribution increased. It resulted from the pressure created by the union after years of stagnant pay growth as USSC suffered due to low steel prices.

The importance of collective bargaining can be ascertained from the point of view of – management, trade union, and government.

• Management: The primary objective of the management is to make maximum utilization of the workforce and earn higher profits. It can only be achieved if the workforce co-operates, where collective bargaining comes into play.
• Trade Union: Each labor at the individual level has poor bargaining power against the management. Hence, the working class united to form a powerful union and protect their interests through collective bargaining.
• Government: Typically, collective bargaining keeps the Government at bay, and they are not required to employ force to resolve disputes.

The provision of collective bargaining gives employees a feeling of being valued as they are able to put forth their grievances and their requirements to the employers directly. In addition, when they see their demands or suggestions being accepted by their employers, it appears to be a reward of their months and years of loyalty. For employers, it is the way in which they can retain their set of employees who have been the pillar of their success.

Besides these, there are other benefits of collective bargaining that one must be aware of. Let us have a look at some of them in brief:

• Both parties get to understand what to expect from each other.
• Employees are safeguarded from exploitation by employers.
• The management has to deal with a small number of people (trade union leaders).

Though the number of advantages of this process are many, there are flaws in it that must be recognized. Listed below are some of the limitations of the process:

• Only a few people decide on the settlement.
• It is costly, both in terms of money and time, as representatives have to discuss the same thing multiple times.

This has been a guide to Collective Bargaining & its definition. We explain its types, importance, advantages, disadvantages, objectives, steps & examples. You can learn more about it from the following articles –

• Dual Aspect Concept
• Bargain Purchase
• Best Negotiation Books
• Price Fixing