(Last Updated On: 08/06/2017)

You ask yourself what a collective agreement is and why you need it? If your employment contract is regulated by a collective agreement, this topic will be of interest to you. In USA, more than 68 percent of the employees work in a company with a tariff. There are currently around 85,450 collective bargaining agreements in USA, 854 of which are currently publicly binding. CareerThoughts.com explains what a collective agreement is, why this is a factor in your salary increase and which includes a framework agreement.

Definition of collective agreement
For whom a collective agreement applies
Functions of a collective agreement
Collective agreement and salary
The various collective agreements at a glance
Mantle and frame contract
Land and household tariff agreement
Wage and salary wage agreement

What is a collective agreement?
Collective agreements are usually concluded between a trade union and an employers’ association or a single entrepreneur and apply to the members of both collective bargaining parties.
Tariff agreements stipulate minimum standards for all important working and income conditions, such as wages, salaries, working hours, holidays, holiday and Christmas allowances, as well as periods of notice.
Typically, collective bargaining agreements are for whole sectors, which are also called area tariff agreements, for example for the metal and electrical industry, the chemical industry or the public service, but also for smaller areas like private broadcasting institutions.
Tariff agreements with individual companies are called domestic or corporate collective agreements.

The legal basis for the collective agreement is the National Labor Relations Act (1935,) which regulates the tariff autonomy. Collective bargaining and the conclusion of collective agreements between the Contracting Parties should therefore be conducted without any State interference.

For whom is a collective agreement?
In principle, only those employees have a legal right to the agreements from the collective agreement who are also members of the respective trade union. However, non-unionized workers also grant wage conditions to workers with no union membership in order to prevent workers’ misgivings and trade union membership.

Many unorganized employers are also based on collective bargaining agreements, even if they are not legally obliged to do so. This is particularly true if a declaration of general agreement has been signed in the collective agreement. Then all companies, whether or not members of the employers’ association, have to stick to the agreements from the collective agreement. In most cases, the job advertisements also indicate whether the company pays by collective agreement.

Function of the collective agreement and why are collective agreements good?
Collectively, collective bargaining regulates the labor market by establishing binding specifications for individual employment contracts. In this way, they provide points of reference for the Mart relationship between employees and employers. In addition, both sides have certain advantages through collective agreements.

Benefit for employer & advantages 4 the employee
The framework conditions of employment contracts need not be negotiated individually for each employee.
Through the unions, workers have the opportunity to co-ordinate their working conditions.
Labor costs can be better calculated.
The competition situation in salary questions is limited and the negotiating position is strengthened against the employer.
Collective agreements take over a cartel and create a level playing field.
They also participate in the economic development through short-term wage and salary bargaining agreements.
During the period of collective bargaining there is a peace requirement, which means that it cannot be punished.
The long-term maturity of framework and mantle tariff contracts protects against rapid changes in individual employment contracts.
And even the state benefits from collective bargaining; apart from setting the minimum wage, the legislature does not have to interfere in the negotiations for the amount of salary. In the case of the dispute between employers’ and workers’ organizations, the state may only be a mediator.

Collective agreement and salary
A collective agreement helps you get an idea of the initial salary you can count on. But even in your future career, when it comes to salary negotiations, the collective agreement will help you further. Particularly in the preparation for a salary negotiation, a collective agreement for the respective industry can provide first indications for the personal “market value.” It should be noted that only the minimum wages are indicated in the collective agreement. The salary can therefore be higher. All in all, the tariff-agreed hourly wages in USA change every quarter and one can compare the change with the previous year.

The various collective agreements at a glance:

Mantle/frame contract
The framework for all other collective agreements is usually the mantle tariff agreement or the framework agreement. It regulates general points such as, for example, working hours, notice periods, leave entitlements, probationary period, wage/salary groups/ and wage payment in case of illness. The term is usually several years. However, individual points in the context of wage and salary negotiations, for example working hours, can be redefined before the end of the term.

Area agreement
Area agreements govern the working conditions of one or more sectors. An area agreement can apply to a federal state or a certain region of a federal province. It ensures comparable working conditions in the individual companies. In general, area agreements are considered to be easy to handle. Nevertheless, more and more employers are about to negotiate house agreements, as they are better adapted to economic developments.

Household agreements only regulate the working conditions of a particular company which makes arrangements with the relevant trade union. Well-known example is BMW. In most cases, these are recognition agreements, which, subject to a few individual points, are subject to the area tariff agreement. So-called opening clauses in the area agreement ensure that the building contract can be adapted to the individual situation of the company.

Wage and salary agreement
The wage and salary scale agreement is made by the exact amount of the wages and the classification of the individual professions and activities in the relevant remuneration groups. In doing so, the criteria of the work assessment apply, which are intended to ensure a fair salary which corresponds to the requirements of the activity. In some cases, business affiliation, professional years, and company loyalty are also taken into account.

The wage rate corresponds to the minimum wage, which must be paid and not be undercut. However, it is possible to pay over tariffs. In most cases, wage and salary agreements are re-negotiated annually.