Labour relations FINAL 0312-2016 by Zoltan Juhasz

Labour relations
PECS, March 12. 2016
Mr Zoltan Juhasz

Mr Zoltán Juhász
2
2013-2015: E.ON Hungary, Fraud-prevention
2011-2012 : Schneider Electric, HR
2005-2010: Elcoteq Hungary, HR
1999-2005 : HR consulting
1998: Budapest Corvinus University,
MSc in HR and Social Policy

Agenda
• 8.00-09.30 Introduction, clarification and foundations, (Q&A)
• 09.30-10.00 Break
• 10.00-11.30 General models in EU, (Q&A)
• 11.30-12.30 Break
• 12.30-14.00 Business Cases - Toolkit, (Q&A)
• 14.00-14.30 Break
• 14.30-16.00 Diversity
• + Take away(s) for an essay

Objective of the course
• to introduce the system of labour relations, their
logical structure and the idea of social
partnership as well.
• to introduce representative forms of employee
and also to the possible forms of participation in
the employer’s decision making.
• to analyse the process of collective bargaining
with special regard to the parties’ influencing
toolkit.
• the course has a great emphasis on the issue of
discrimination.

5
Explained by
Executives
Understood by
Management
Demanded by union Delivered by HR Presented by
Consultants
Level of
Documentation
Live in Operation Invoice received Level of daily
feedback
Real demand
(ENPS)
How do we partner employees?

Literature (compulsary)
• Michael R. Carrell, Christina Heavrin: Labor Relations and
Collective Bargaining (Private and Public Sectors) – (51 pages)
• Milan Jevtic: The Role of Works Councils and Trade Unions in
Representing Interests of the Employees in EU Member States
(Partnership or Competition) – (75 pages)
• Bernard Gernigon, Alberto Odero, Horacio Guido: ILO
principles concerning the Right to strike (64 pages)
• Equality Act 2010 Statutory Code of Practice Employment
(326 pages)

Literature (recommended)
• Tonia Novitz : International and European protection of the right to
strike : A comparative study of standards set by the International
Labour Organization, the Council of Europe and the European Union
/2005. Oxford University Press, 2005./
• Walter Block: Labor relations, unions and collective bargaining:
political economic analysis (16 pages)
• The employment relationship: A comparative overview. Edited by
Giuseppe Casale (4 pages)

Topics
1. The labor relations concepts, objectives, roles, and basic dimensions
2. The general models of labor relations
3. The micro level of labor relations
4. Trade unions as workers' representatives
5. The formation, development and types of trade unions
6. Purpose of the collective bargaining. The collective agreement.
7. The collective bargaining process, negotiation strategies and tactics
8. The participation, the role and functions of works councils
9. The appearance of conflicts, types of labour relations. The ways to
resolve the conflicts.
10. Theoretical questions of strike. The specific forms and tools of strikes
11. The requirement of equal treatment.
12. Forms of discrimination, the protected characteristics and the special
rules of the burden of proof.

Part 1
• The Legal Environment of Human Resource
Development
• Corporate culture and Labor relations
• Concepts, objectives, roles, and basic
dimensions
• The general models of labor relations
• The micro level of labor relations

The Legal Environment of Human
Resource Development
• Relation between Works Councils and Trade Unions
• Personnel leasing trends
• Occupational health requirements
• Work safety requirements
• Micro level relations: motivations, protection, time utilization, etc.
• Feedback and escalation cycles
• Minimum wages
• Equal treatment
• Diversity

Corporate culture and Labour relations
• GLOBE study (1991): „Culture, Leadership, and Organizations” by interviewing 17,300
middle managers from 951 organizations in 58 countries
• Leader effectiveness is contextual: "When in Rome do as the Romans do."
• Cultural similarity is greatest among societies that constitute a cluster; cultural difference
increases the farther clusters are apart. For example, the Nordic cluster is most dissimilar
from the Eastern European.
Eastern European cluster:
- Highly group collectivism oriented
- Dominated by hierarchical practice
and power distance
- Strong expectation toward
participative leaders and large
consultative bodies (asking the
opinion of others)
Anglo cluster:
- Jack Welch: The Role of HR
- Steve Jobs talks about managing people

Business Games (Who is who)
12
Motivation
Power
Business
Status quo
Celebrating
success
Interested
Honor
Involvement in Planning
Empower
Overload
hesitating
Support

Workforce management (games)
• Direct or indirect staff (Sizing)
– Inactive management (maternity leave ?)
– External vs outsourced people (hidden staff or flexibility?)
• Recruitment
– Reference check, validation of diplomas, employee referrals
– Equal opportunities for internals (Compa ratio)?
• Turnover („different formulas”)
1l blood out of 5l – 39,2 degree in fever – 80% COPQ
• Exit management
2k USD laptop is missing - > investigation
100k USD employee leaves -> ???

People Development (games)
• Performance Management
– Give me your passwords …
– Nobody can be over 80% …
– It is about money … and not about feedback (click and completed)
• Talent Management (blue and white collar)
- Quick and easy visualisation (Performance vs behaviour/competence)
- Personal touch (international lunch)
- Forced ranking (no room for Swedish sauna effect)
• Training (without budget)
- Induction for blue and white collars
- Lean: White Boards, rotations, skill-matrix

Compensation and benefit (games)
• Annual salary adjustment
– CPI + no market adjustment + no Compa ratio adjustment
– More job titles („senior” customer relationship manager = receptionist)
– More invoices (tax „optimalization”)
• Pay or leave?
- Retention is a financial issue before replacement?
- Externals paid better than internal HiPos
- Job enrichment (overloading)
• Benefits
– Social events (BC dinner, employee idea rewards, etc.)
- Corporate assets used for private purposes (car, phone, xerox, etc.)
- Cafeteria is not about ENPS

Scoping Labour Relations
• Safety champions and representatives
• First aid volunteers
• Work councils (social welfare, consultation, etc)
• Trade unions (collective bargaining, negotiation)
• Focus groups (ENPS)
• Event managers (family day, safety day, etc.)
• Employee forum representatives
• HR and line leaders
• SA 8000 standards

Concepts, objectives, roles
• Partnership or competition ?
• Knowledge to influence decisions or to reach personal interests?
• Knowledge about:
– budget, processes, norms
– forums, contacts
– Initiatives, plans
• Decisions for
– Cooperation
– Employee satisfaction
– Change management
– Continuous improvement
• Global, national and micro level aspects
– Conflict of interests

Business „differences”
1. Social, corporate and personal values
2. Integrity (survey by E&Y in 2011, Hungary)
- 10% would report bribery to police
- 22% of managers would not reject bribery
- 46% replied Compliance with laws is relative
- 51% reported personal „trust” is key to state affairs (subsidies)
- 61% reported zero Compliance incidents
Tell me whom you partner to and I can tell you who you are.

Topics
4. Trade unions as workers' representatives
5. The formation, development and types of
trade unions
6. Purpose of the collective bargaining. The
collective agreement.
7. The collective bargaining process, negotiation
strategies and tactics
8. The participation, the role and functions of
works councils

General Models in EU
• Western countries
• Nordic countries
• V4 countries

Germany
• Trade unions, beside the right of information and consultation have a unique right of co-deciding.
Co-deciding operates on three levels:
– Board of Managers: has an equal number of representatives of the management and of the
workers without neutral members. The President of the Board stands for the interests of the
owner of the company and with his vote he can decide on some issue, in case of equally
divided votes.
– Management: Workers’ representative is in the management and has the authorization of a
HRM. He is elected by majority votes in the Board of Managers. (Hire & Fire)
– Workers’ Boards: it has two main functions – to elect a representative in the Board of
Managers and act as an advisory body for the trade unions regarding the conditions of work,
insurance, economic aid and related issues.
• The most important role in workers’ representation belongs to Works Councils, having in mind that
trade unions do not have formal bodies in a company. The Works Council can be elected by
employees in companies that have 5 or more permanently employed workers. Manual and other
workers are represented in proportion to their share in total labour force.
• The Employer he has to undertake the expenses of the election, as well as the expenses of the
functioning of the Works Council. During the mandate and one year after its expiration, the members
of the Council are protected from dismissal, and a certain number of Council members are
completely exempt from the work at their regular jobs.
• Committees for occupational health and safety can be formed.

Germany
Co-deciding in Germany provides accomplishment of the following goals:
– Democratic control of economic power;
– Support of the social sustainability of the company activities;
– The realization of social peace in the company;
– Support of a good company management through wider acceptance of
decisions of the management by the workers;
– Reduction of possible expenses due to disagreement between the
management and the workers, through negotiation with the Works Council or
through
– workers’ activities in the Supervisory Body;
– Support to the structural changes;
– Provides favorable environment of cooperation in a company, as an
important instance for negotiation;
– Reduction of fluctuation of the workers and greater readiness of
management and workers to undergo further professional training

Germany
The first and main task of the Works Council is a concern about safety of the employees and
improvement of the position of employees, and the tasks associated with it are:
– Shaping the workplace environment and work procedures;
– Personnel issues, such as dismissal, employment, restructuring and transfer of a
business;
– Economic issues, such as making a social program;
– Control of compliance with the law, other national legislation, Collective Bargaining
Agreements and contracts at the level of the company, prevention of injuries at the
workplace, environmental protection...;
– Diversity issues: Assistance in promotions of older employees, support of the disabled
and foreigners; Equal treatment of men and women;
– Co-deciding on the issues that are not regulated by the law or Collective Bargaining
Agreement, such as work hours, award system, and introduction of devices for control
of the employees (e.g. cameras)
Almost all companies with more than 250 employees have also the Works Councils, while in
companies with less than 100 employees there are Councils only in 30 to 40% of them.
Both parties benefit from the Works Councils, and the level of productivity and salaries in
companies where such a body is formed are higher than average, and there is less fluctuation of
the work force.

France
• Employees are represented through trade union which are directly elected by all workers.
Due to the low percentage of union membership, many companies with fewer workers have
no unions. In companies with more than 50 employees representative trade unions have the
right to appoint their representatives with many rights. Under the new regulations, even such
representatives must have the support of 10% of the workforce.
• The Council is a legal entity, which, as a collegial body, is composed of members elected by
the employees and members of the management of the company, as well as of representatives
nominated by the unions. Responsibilities of the Works Council are related to the welfare of
the company and cultural activity, with possibility of consultation without formal
negotiation power.
• In practice, the border between consultation of the Works Council and collective negotiation
of the trade union is very narrow. and therefore, many agreements concluded between the
management and the Works Council, received legal force of a Collective Bargaining
Agreement by the Court.
• Each company with minimum 11 employees has to organize elections for trade union
representatives, and when the number of employees reach 50, a Works Council has to be
formed. Once elected or even just candidates for election, representatives become protected.
Due to such legal provisions many small French companies limit their number of
employees to 10 or 49.

France
• Trade union representatives deal with following issues:
– Submit to the employer all individual and collective complaints regarding wages,
compliance with the Labour Law and other regulations concerning health, safety,
hygiene and other forms of social protection.
– Inform Labour Inspection about all unaccepted complaints dealing with application of
laws and regulations in an enterprise, where they are obliged to provide control.
– When a Labour Inspector performs control, he informs trade union representatives about
it, and they have a right to be present during the inspection.
– Employer has the obligation to consult them on all changes in annual holidays, changes
of weekly or monthly working hours, reimbursement of the employee who was a victim
of injury at work place
• Works Council consists of a higher member of the management, who acts as a President of
the Council, and representatives, who are elected for period of 2 years. Each representative
trade union in the company can nominate representatives in the Works Council, which has the
status of a legal entity.
• The Works Council is a joint body chaired by the employer or his representative,while the
Secretary of the Council is the representative of the employees.

France - Works Council
1. Contributes to a satisfactory life in the company, which can be labeled as "social and
cultural activities." These are not mandtory activities just useful for employees, their
families and retired company employees. In that sense, they organize travels, entertainment
for children of employees, theatre plays, etc..;
2. Informed and consulted on all daily working conditions related to the change of working
time, new technologies, changes in working conditions, responsibilities, training, methods
of compensation and changes in career paths;
3. each year the Council must be consulted on the training plan for the next year. It also gives
its opinion on how the training plan for the previous year has been completed.
4. The management is obliged to inform the Council about trends in employment,
qualifications of employees by gender, the termination of the contract for definite and
indefinite period of time and explain why someone is employed as a part-time employee;
5. regarding the introduction of new technologies, the Council must be informed before any
such action about its impacts on working conditions, salaries, responsibilities, training, and
the total working life within the company.
6. regarding the financial condition of the company, the Council must be given new data; it
must be consulted on the development of new and old markets, as well as about all
economic developments that may affect the company.

Austria
• Workers’ Representation in Austria is done through Works Councils. They have an important
role in the right of information and consultation, even with the right to veto in several areas.
Since it represents all employees, in its elections even employees who are not members of a
union participate. In most cases however more than three-quarters of its members are
union members.
• The Council is composed only of workers’ representatives, with no participation of
representatives of the employer.
• The meetings of the Council are held at least once a month, and joint meetings with the
employer are held at least quarterly.
• Responsibilities of the Council are mainly related to social and employment issues and less
on economic and financial issue. When it comes to economic and financial issues, the main
rights are the rights of information and consultation at least once in every 3 months.
• Sometimes, the right to veto is absolute, such as the disciplinary procedures, the monitoring
system, such as closed circular TV (CCTV), as well as systems of payment.
• The Works Council is not included in negotiations on wages at industry level.
• They can also collect the necessary funds from the employees, and the maximum deduction
from gross salary of workers cannot exceed ½%.

Great Britain
• The most common way of representing the interests of workers is through trade unions.
• An official review of 2004 showed that 30% of workplaces with more than 10 employees were
covered by trade unions, or in other words, employers have recognized them as partners.
• Unlike some EU countries, in the UK there are no Works Councils elected by all employees,
nor are there regulations on the legal commitment of Collective Bargaining Agreements. Where
there are no unions, there is no general right or request for workers’ representatives.
• The employer must begin with introduction of the process of information and consultation if he
receives a request from at least 10% of employees. When determining the number of employees in
the company the average number of employees in the previous 12 months is taken into account. If
the employer has a written agreement according to which he is supposed to provide information to
the employees or their representatives, then the employer does not have to accept the demand unless
it is requested by minimum 40% of the employees. The deadline for this is 3 months starting from
the receipt of the demand.
• Information and consultation procedure must cover: recent and possible development of business
activity and economic situation, state, structure and possible evolution of employment in the
company, the planned measures, particularly those that may jeopardize employment, any decision
related to the transfer of employment or collective dismissals.
• Representatives for safety have the right to consultation on health and safety issues.

Sweden (Nordic)
• There are only European Works Councils, while consultation and participation of the employees is
done exclusively through creation of trade unions and workers’ representation in boards. The main
reason for such role of trade union is a high level of workers’ membership in them. There is no
limit in number of employees for application of these rules, so in almost all companies there is a
trade union, or two or three members of a union who want to establish a local union. Nevertheless,
if there is no local trade union at work place, trade union organizations at regional or national level
are then authorized to negotiate or to receive information on behalf of all members of the union at
the workplace.
• A special characteristic of these rules is that participation in decision making is granted to trade
unions, who sign Collective Bargaining Agreements with employers.
• Before the employer undertakes any activity that introduces significant changes in the company, he
has to initiate negotiations with union representatives. Trade Union representatives must be enabled
to have insight into financial reports, invoices and other documents.
• They have an important role in negotiating wages and working conditions. The employer must
inform the union about the general economic situation, production levels and personnel policy. They
must be provided with an access to accounts and other documents of the company while at the
request of the union other documents must be also submitted to them.
• They have a right to veto when it comes to hiring of subcontractors who are not directly employed.

Denmark (Nordic)
• Trade union is the main representative structure. This priority in representation has legal
background in the binding Collective Bargaining Agreements. The number of
representatives depends on the number of employees at the workplace.
• There are special arrangements for agriculture and finance, and in the public sector.
• The main body for information and consultation is the Cooperation Committee instead of
Works Council. Committees for Cooperation are joint bodies comprising of an equal number
of representatives of employees and management. These bodies exist in 70% of enterprises
to promote cooperation. Representatives of the management are partly appointed by the
management and partly by the supervisory staff, which means that this position can be
occupied by union members who are in the Supervisory Board.
• The Committee is chaired by a representative of the management, and his deputy is the
representative of employees. The Committee meets at least six times a year, and emergency
meeting is possible when it is required by one of the parties due to some pressing issues.
• Trade union representatives exercise their role of representing the interests of employees in
daily contact with the employer, and they have the usual authorization to negotiate at the
local level on wages, work hours and other issues.
• The role of trade union representative is: to ensure proper implementation of the existing
Collective Bargaining Agreement, to discuss individual issues with the employer.

Finland (Nordic)
• Workers’ representation at the workplace is provided by trade union bodies, rather than through
legislation. Such situation is primarily the consequence of the high percentage of union
membership (e.g. even among management), and therefore, union representatives have the right to
information and consultation.
• The choice of trade union representatives is regulated by a legally binding Collective Bargaining
Agreements at the national level.
• National unions seek to negotiate equal pay increases among employers in the same industry
(i.e. steel, paper, agriculture, etc.). This practice known as pattern bargaining which can be
hihgly succesful for both management and labor.
• Union leaders may begin negotiations with a company most open for wage increases and continue
with others to agree on with equal changes.
• Others start negotiations with the largest employers and extend it to the rest.
• In some cases a single union can use joint bairgaining.
• At the workplaces with more than 10 employees a representative for safety issues must be elected.
• The employer must consult them about major changes in organization and methods of work,
investment plans, closure and relocation of the production, company mergers, proposals for
rationalization, layoffs and mass layoffs, changes in work hours, employment policy, the use of
workers outside the company and the mechanisms for internal communication.

Czech Republic (V4)
• Local unions are still the main way of representing employees at the workplace, but when
they are not present, the Works Council with rather narrow scope of rights can be formed.
This position of the Works Council in the regulations resulted from the fear of trade unions
that this body could weaken their position at the workplace.
• The right to collective bargaining belongs only to trade unions. It is the right of unions to be
informed about the changes of wages and the level of average salary for specific
occupations.
• Only trade union representatives are consulted about the economic situation, payment
systems, training, changes in work organization, labour standards and agreements for the
employment of the young and the disabled.
• The exclusive right of trade unions is to agree on many issues, such as the use of funds for cultural
and social needs, rules of operation, plans to use annual holidays and the circumstances when
there is no work, in which case the employees will receive a compensation of salary amounting
from 60 to 80% of their average salary.
• Workers’ representatives are informed about the economic and financial situation of the
company, planned changes in the structure and organization.
• Most companies do not have any kind of workers’ representation and in those where
unions exist, representatives for health and safety can be elected.

Poland (V4)
• Representation at the workplace is primarily done through trade unions. Their exclusive right
is signing Collective Bargaining Agreements and organization of industrial action.
• However, the relatively low level of union membership means that the majority of
employees do not belong to unions.
• The regulations which implement EU Directive stipulate that if there is an agreement of
comparative level for information and consultation, then there is no need to form a Works
Council. New regulations were adopted at the end of the first half of 2009. Due to the short
period of time it is not yet clear whether these changes of the legislation have influenced a
change in practice.
• Rights of the Works Council have been reduced to information about the "recent and
possible development of activities and economic situation of the employer"
• There are also "workers’ councils" in some state companies, which in theory have great
power, while in practice the major role belongs to trade unions.
• For the purpose of negotiation, trade unions are entitled to information about the economic
situation, and if there is any danger to health at the workplace, the union informs the
Labour Inspection.
• Consultation of trade unions are made when it comes to massive layoffs, but there is no
obligation to reach an agreement.

Slovakia (V4)
• Until 2002, local unions were the only representative body of employees. Regulations of
2002 allowed the introduction of the Work Council, but only where there were no unions.
• A year later, the legislation was amended, and it allowed the founding of the Works Council
in all workplaces and in such a way they take over the responsibility for information and
consultation from the trade unions, and gave them to the Works Council.
• New rules have been applied since 2007, and they regulate, in a more favorable way, the
position of trade union representatives. Amendments to the Labour Law of 2007, reduced the
authorities of the Works Council, and some of the responsibilities were given back to the local
unions. Since September 2007 there is a right of co-deciding in some areas, such as when
negotiating on the issues that are not contained in the CBA, or in case of inspection and
control This is in relation to the planned and future employment level, especially when it is at risk,
issues of health and safety and changes in work organization.
• Only a trade union is authorized to negotiate Collective Bargaining Agreements (CBA).
• Works Council has to be formed in organizations with more than 50 employees, if it is
required in writing by at least 10% of the workers. Where there are less than 50 employees,
"workers' shopstewards," are elected with the same rights. The Works Council is given the
right to information and consultation.
• Most medium and small sized enterprises have neither trade union nor Works Councils.
• The law does not stipulate the frequency or organization of meetings.

Hungary
• Our trend is about less protection for employees to attract investments and to create 1
million new workplace in 10 years (Somalia vs Germany)
• Level of HR services linked to forms of employee representation
• Workers’ representatives are elected if there are 15 to 50 workers in the company
• only a third of workplaces with more than 50 employees have a Works Council
• Presidents of Works Councils in companies that employ more than 1,000 workers are
completely exempt of their regular work duties.
• Councils have the rights of information and consultation
• employer must inform the Council about a range of issues at least twice a year so in practice,
meetings are relatively rare. It often happens that some information is only communicated at
the meeting when the Council should decide on its position on certain issue. Communication
lines are sensitive and important part of these social interactions.
• The Works Council has the right to decide together with the employer on the use of social
funds or equipment or buildings for social purposes.
• representation through the Works Council is directly connected with trade unions
• the exclusive right of trade unions is to negotiate Collective Bargaining Agreements
• unions have the rights of negotiation and consultation

Hungary
• Trade Union representatives have to be consulted on major issues concerning employment,
including job cuts and organizational changes, such as transfer of the work.
• Trade unions have a right to intervene when they believe that the rights of employees have
been violated , and then arbitration process is performed -> disciplinary actions
• The employer is obliged to inform the Works Council about the following issues:
the general economic situation of the employer, important changes in planned activities and
investments, earnings trends, the impact of payment of wages on employer’s financial
situation, characteristics of the labour force, use of work hours and working conditions.
• The Council may request insight into documents related to the above issues and, in general,
about everything that relates to economic and social interests of employees.
• The employer must consult the Council on: planned measures which will affect a large
number of employees, such as restructuring, layoffs or privatization, the introduction of a
system for storing data on employees and a scope of data to be stored; training, including
measures to promote employment and preparation for retirement; rehabilitation of disabled
workers, the annual plan of annual holidays, new methods of work organization and
performance standards; planned regulations, tenders and contests that have an impact on
employees

Working time by region
*OECD data for 2005
„The countries
that work longer
hours are the
less productive
countries. So, in
a sense, they are
making up for
lower productivity
per hour by
just doing more
hours.” - Chris
Brewster

Cost and productivity by region
"Labour costs alone
are not motive
enough to set up
business in a country.
The advantages
related to hourly
labour costs alone
must be put into
perspective. Studies
have already shown
that Poland and
Hungary are no
longer competitive in
some sectors.„ - prof.
Filip Abraham

The collective bargaining process,
negotiation strategies and tactics
Business cases:
- disciplinary actions
- mass lay off
- new performance standards
- CBA
- ENPS
- premium pay rate for overtime
- incentive pay
- scheduling Saturday as part of the workweek

Business Case on
disciplinary actions
• Compliance & Security
– Behavioural deviations (Sexual harrashments, mobbing, etc.)
– Fraud (Corruption, Thefts, cheating, etc.), insider information, etc
• Damages
• Non-compliance on processes, procedures or work instructions (e.g.: safety, purhasing, etc.)
• Exercise: act on sample escalation from beginning to end as trade union representative / HR
generalist

Business Case on
mass lay off
• Exercise: Act as President of Work Council

Business case on
new performance standards
• Exercise: Act as a Line Manager

Business Case on
a Collective Bargaining Agreement
• Exercise: Act as an HR Business Partner

Business Case on
ENPS
• Survey
• Communication
• Focus Groups
• Actions planned and taken on White Boards

ENPS and Communication
• Surveys (w/o extra sheets and control)
• Forums with top management attendance
• Focus groups for real feedback and employee representation
• White boards for periodic feedback (pictures, time, agenda)
• Levels of systematic communication
Would you recommend „smart” practices to your friend ?
Have you discussed latest results with your manager
in the last 6 months?
0 … 10

The collective bargaining process,
negotiation strategies and tactics
• Cost of Labour
– Wages and salary issues
– Product Labour overhead (PLVO)
– Employee benefits
– Job security and seniority

Wages and salary issues
• The core issue for court cases is overtime (US). # cases doubled from 2001 to 2007.
• Spirit of law: encourage employers to hire more people than to pay overtime
• The most important Collective Bargaining topic is how to link them to employee satisfaction
• Emloyees consider pays as a primary indicator of organizational goodwill
• The largest single cost factor for the employer (hourly / piece work)
• Competitors can secure less expensive labour
• Most important source of tax revenue to state
The total economic package of wages and benefits may be negotiated as a complete
item rather than treated individually, enabling both sides to estimate accurately
the total cost of the contracts.
As the nature of job changes, more agreements provides annual salaries expressed in
pay grades.
Labor intensive industries can provide lower increase than capital intensive ones.

Union wage concerns
• „A fair days pay for a fair days work”, „Equal pay for equal job”
• Employees demand to be treated fairly and honestly
• Employees understand different value of work leads to different pay grades as long as grades
are fairly structured (no favourites, no misuse by realignment, etc.).
• Unfarfair perceptions may cause
– Absenteeism, Turnover
– Scrap, lower quantity
– Accepting inequity can become a permanent morale factor
• Indicator for perceptions:
– the worker / CEO pay gap,
– seniority and loyalty awareness (job security and incentives in two-tier pay grades)
– Union/non-union wage differential
– CPI adjustments
• Actions for alternative corporate/management feedback:
– random employee dinners by pay grades, monthly employee rewards
– Lean actions like periodic forums, gemba

Management wage concerns
• How wage increase impact on production cost and competitiveness?
• Employees are not appreciated?
- high unemployment rate, oversupply of labour, downsizing, transfer, management
turnover, low employee representation, etc.
- thousands of immigrants work 7 days a week sewing clothes for pennies per garment.
They are often treated as machines (e.g. EMS in APAC) with minimum meal breaks
and maximum overtime. (e.g. Nike does not own a single piece of sewing machine)
• Focus on long run success (labor intensive industries) or current competitive position?
• What is the Value Added by the labour to the product / service?
– Sometimes subcontracting bids for specific work can estimate the true value that labour has
added
• Overtime compensation is the primary duty of the management of the organization. Overtime often
considered as an additional opportunity for extra earnings so just as other benefits (e.g. games with
working time frames).
• Employees earning over 100k dollar per year do not receive overtime in US. Assumptions for even
middle management/senior professonal salaries in CEE countries linked to no need for overtime
payment.
• Buy employee representatives with extra payments, excemptions from work and by weekly
F2F meetings
• Preferred compensation: profit sharing or bonus-plans with an agreed-on specicific formula

Toolkit - Two tier wage systems
PRO CONS
Significantly reduced labour costs Resentment, anger, low quality and productivity
by low-tier employees
Maintenance of higher employment levels Higher turnover and absenteeism of low-tier
employees
Relief from wage compression between senior
and junior employees on the same job
Intensification of low-tier employee problems
as they increase in number
Easy to start with as few people belongs to the
low-tier
In 5 yrs time it has higher probability for
potential strikes as more people belongs to
lower tiers.
• Temporary two-tier wage systems allow newly hired employees to reach the higher tier in 90
to 180 days or more (can be linked to special exams).
• Some two tier systems are permanent. If these are included in job contracts than it puts great
pressure on union representatives to merge some tiers into one. The system can save a lot
during poor economic times.
• Low tier people can be transferred to locations where there are a few high tier people or
employeed in part-time instead of full time. It can cause tension if people work side by side on
the same jobs but being paid different wage rates.

Wage negotiation tools
• Lump sum payments: a method of providing general wage increase as a onetime payment
rather than adding the increase to the annual salary (i.e. lower wage rates in manufacturing)
• Two-tier systems: by negotiating lump sum payments for current employees and two-tier
system for new ones, an employer can lower base wage rates and total labour costs.
• Productivitiy theory: employees should share in increased profits caused by greater
productivity. Managemen requests a value added approach while union proposes a fair share.
If specific production standards (quality, quantity, cost, waste, individual or group
productivity, etc.) are set during negotiations than it is easier to negotiate accepted wage
increases.
• Ability to pay: unions will not press this issue consistently during good and hard times.
Management would argue that higher profits should be spent on Capex. Altough profit levels
fluctuate greatly but wage rates do not vary accordingly. What is the estimated profit during
the term of the new contract? Management may estimate an absolute maximum costs.
• Job evaluation (re-classification of jobs): It is input based and not analyzing job
performance. This is to explain paid differentials to employees. Unions shall maintain a job
evaluation advisory committee.
• Wage surveys: public data (min.,avg.), market data, focused private research
• Costing wage proposals: cost per employee per year, wage costs per hour, % payroll, total
annual cost, hourly rate -> cost of change ?, cost of roll-up ? (benefits, taxes, overtime, shift
premium, etc.)
• Total negotiated costs: accurate costing is critical to successful bargaining

Business Case : Premium pay rates
• 200% overtime paid in the last 21 yrs for work after 50hrs. In CBA it is guaranteed only with
4/10 work schedule and not for 5/8 weekly schedules. The company changes it from next
year.
• Union: no employee shall suffer any deduction by CBA updates as CBA provision guarantees.
The length of time qualifies it as a past practice (e.g. 5 CBA updates).

Topics
9. The appearance of conflicts, types of labour
relations. The ways to resolve the conflicts.
10. Theoretical questions of strike. The specific
forms and tools of strikes

ILO PRINCIPLES CONCERNING
THE RIGHT TO STRIKE
• Respect for freedom of association around the world is a fundamental and unavoidable
requirement for the ILO.
• The right to strike to be one of the principal means by which workers and their associations
may legitimately promote and defend their economic and social interests
• The legitimate exercise of the right to strike should not entail prejudicial penalties of any sort
• Any work stoppage, however brief and limited, may generally be considered as a strike. This
is more difficult to determine when there is no work stoppage as such but a slowdown in work
(go-slow strike) or when work rules are applied to the letter (work-to-rule);
• Objectives through strike action may be categorized as being occupational (seeking to
guarantee or improve workers’ working or living conditions), trade union (seeking to
guarantee or develop the rights of trade union organizations and their leaders), or
political/sympathy strike.

Workers who enjoy the right to strike
and those who are excluded
• Public services: officials in the employ of ministries and other comparable government
bodies may be subject to major restrictions or even prohibitions
• Essential services: such services as those the interruption of which would endanger the life,
personal safety or health of the whole or part of the population. There can be no doubt that a
non-essential service may become essential if a strike lasts beyond a certain time or extends
beyond a certain scope. The following do not constitute essential services: media, oil sector,
education, banking, department stores, transport, hotels, construction; posts; agriculture; etc.
Nevertheless, a “minimum service” “would be appropriate in situations in which a substantial restriction would not appear
to be justified, without calling into question the right to strike of the large majority of workers, one might consider ensuring
that users’ basic needs are met and that facilities operate safely or without interruption”
• Compensatory guarantees: If the right to strike is subject to restrictions or a prohibition,
workers who are thus deprived of an essential means of defending their socio-economic and
occupational interests should be afforded compensatory guarantees, for example conciliation
and mediation procedures.
• a general prohibition of strikes can be justified “in the event of an acute national
emergency

Conditions for exercising
the right to strike
1. obligation to give prior notice
2. obligation to have conciliation, mediation and (voluntary) arbitration procedures and parties
concerned can take part at every stage
3. obligation to obtain the agreement of a specified majority
4. obligation to take strike decisions by secret ballot (e.g. wage deductions like stand-by time ?)
5. adoption of measures to comply with safety requirements and for the prevention of accidents
6. establishment of a minimum service in particular cases
7. the guarantee of the freedom to work for non-strikers (e.g. closing down, police actions ?)
+ protection against acts of anti-union discrimination may take various forms
Responsibility for declaring a strike illegal should not lie with the government, but with an
independent body which has the confidence of the parties involved.
If legislation prohibits strikes during the term of collective agreements, this major restriction on the basic
right of workers’ organizations must be compensated by having rapid arbitration.
A special problem rises when legislation or practice allows enterprises to recruit workers
to replace their own employees on legal strike.

Global practices
• Azerbaijan: Restrictions on workers’ rights to participate in collective action which disturbs
transport operations, state or public institutions or undertakings, with the possibility of severe
sanctions, including up to three years’ imprisonment.
• Bolivia: Penal sanctions in cases of strikes ; a majority of three-quarters of the workers
required to declare a strike; strikes prohibited in banks and for public servants / services.
• Germany/Switzerland: Denial of the right to strike to public servants who do not exercise
authority in the name of the State.
• Norway: Compulsory arbitration may be imposed in strikes in the oil industry (the
Government has indicated it is working on proposals for new legislation).
• Romania: Compulsory arbitration procedure at the sole initiative of the Ministry of Labour
when a strike has lasted more than 20 days and its continuation is likely to affect the interests
of the general economy; up to six months in prison and fines for organizing an illegal strike.
• United Kingdom: Restrictions on participation in sympathy strikes.
Today the right to strike is essential to a democratic society. But social
standards and policies are only as strong as national policymakers want and
national interests allow them to be.

Statements and facts
• social dialogue is an EU mainstay and has been explicitly acknowledged in the EU Treaty
since Maastricht (1992). The Commission goes out of its way to advocate social dialogue as a
value, a “force for innovation and change,” and a “condition for successful social and
economic reforms” (EC 2002a).
• Union membership densitiy rates trends to decreasing.
/Jelle Visser: The Five Pillars of the European Social Model of Labor Relations/
• Union density rate has declined betwen 2001 and 2012 from 20 % to 10,7% in Hungary.
/International Database and Manual updated by University of Amsterdam:
Click here for the ICTWSS Database 5.0, November 2015/

Diversity in practice
• Cultural diversity
• Transparency on protected characteristics: Microsoft, GE and supplier diversity, etc.
• Sexual harrashment, pregnancy an maternity
Example: In front of her male colleagues, a female electrician is told by her supervisor that
her work is below standard and that, as a woman, she will never be competent to carry it out.
The supervisor goes on to suggest that she should instead stay at home to cook and clean for
her husband. This could amount to harassment related to sex as such a statement would be self-
evidently unwanted.
• Why have an equality policy?
– it can give job applicants and workers confidence
– it can set the minimum standards of behaviour expected of all workers
– it can minimise the risk of legal action being taken
– it can increase productivity: A diverse workforce can help the development of better
services or products, open up market opportunities and broaden the customer base. Being
able to draw upon different ideas and experience supports this. In addition, employees
who feel valued and are comfortable being themselves at work are more productive.
• Toolkit: Equal opportunities and diversity toolkit by the union of electricity industry

„Investor’s guide on labour relations”
Scoping your essay
1. Make your own research out of ICTWSS database for min. 5 countries, min. 5 KPIs and for
min. 5 years trend to highlight your view on a specific problem with your comparison
behind. Research can be extended to other sources upon your own proposal by keeping its
comparative approach based on our subjected presentation.
2. Integrate your research into an essay /5-10 pages/ what describes your proposal for a new
strategic investor in Hungary how to deal with employee relations within our industrial and
labour enviroment compared to other countries where they have already invested/aquisited.
e.g. Austrian banking investor, US manufacturer, etc., .
3. Your potential investor might come from any selected country (ICTWSS database) so it is
worth to compare their home country and other/alternative locations to Hungary as well.
4. You decide on your Scope so it is up to you if you limit your focus on unions and works
councils or you extend it to other labour dimensions for promoting our country with
necessary pros and contras.
5. Deadline: 29th April, 2016., 14.00 pm. by e-mail to z_juhasz@t-online.hu .

Essay evaluation criteria
• Good: Comprehensive and effective answer to the question, analytical, aware of methodology,
conceptually sound, wide-ranging knowledge and understanding, flair and originality of thought,
excellent use and evaluation of evidence, extensive and well digested reading, effective criticism of
other arguments, cogent relevant argument, well organised structure, clear writing and accurate
English style, professional presentation, footnotes and bibliography of a professional, scholarly
standard.
• Average: Adequate answer to the question, covers main aspects, adequate knowledge and
understanding; errors balanced by sound work, some use of evidence, fair amount of reading, some
awareness of different viewpoints, adequate and generally relevant argument, generally coherent
structure, adequate English style, moderate presentation, typical weaknesses: over-reliant on one or
two authors; some irrelevance; some incoherence; more description than analysis, footnotes and
bibliography of an adequate standard.
• Poor: Failure to address important aspects of the question, limited knowledge with serious errors
and/or omissions, descriptive not analytical, little use of evidence, limited reading; heavy reliance
on lecture notes, weak structure and argument, irrelevance, poor style and presentation, footnotes
and bibliography of an inadequate standard.
*plagiarism is not tolerated and earns a failing grade.
Format: 2,5 cm margins; fonts: Ariel 13;
row space: 1,5; 30 rows per page, 60 characters per row, 5-10 pages

Labour relations FINAL 0312-2016 by Zoltan Juhasz

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