1.

Introduction
Collective bargaining is a process of negotiation between employers and a group of employees
aimed at agreements to regulate working salaries, working conditions, benefits, and other aspects
of workers' compensation and rights. The interests of the employees are commonly presented by
representatives of a trade union to which the employees belong. The collective
agreements reached by these negotiations usually set out wage scales, working hours, training,
health and safety, overtime, grievance mechanisms, and rights to participate in workplace or
company affairs.

The union may negotiate with a single employer who is typically representing a company's
shareholders or may negotiate with a group of businesses, depending on the country, to reach an
industry-wide agreement. A collective agreement functions as a labour contract between an
employer and one or more unions. Collective bargaining consists of the process of negotiation
between representatives of a union and employers generally represented by management or in
some countries such as Austria, Sweden and the Netherlands by an employers' organization in
respect of the terms and conditions of employment of employees such as wages, hours of work,
working conditions, grievance procedures, and about the rights and responsibilities of trade
unions. The parties often refer to the result of the negotiation as a collective bargaining
agreement (CBA) or as a collective employment agreement (CEA).

2. History of Collective Bargaining

The term "collective bargaining" was first used in 1891 by Beatrice Webb, a founder of the field
of industrial relations in Britain. It refers to the sort of collective negotiations and agreements
that had existed since the rise of trade unions during the 18th century.
In the United States, the National Labor Relations Act of 1935 made it illegal for any employer
to deny union rights to an employee. The issue of unionizing government employees in a public-
sector trade union was much more controversial until the 1950s. In 1962 President John F
Kennedy issued an executive order granting Federal employees the right to unionize.

The right to collectively bargain is recognized through international human rights conventions.
Article 23 of the Universal Declaration of Human Rights identifies the ability to organize trade
unions as a fundamental human right. Item 2(a) of the International Labour
Organization's Declaration on Fundamental Principles and Rights at Work defines the "freedom
of association and the effective recognition of the right to collective bargaining" as an essential
right of workers. The Freedom of Association and Protection of the Right to Organise
Convention, 1948 (C087) and several other conventions specifically protect collective bargaining
through the creation of international labour standards that discourage countries from violating
workers' rights to associate and collectively bargain.

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In June 2007 the Supreme Court of Canada extensively reviewed the rationale for regarding
collective bargaining as a human right. In the case of Facilities Subsector Bargaining Association
v. British Columbia, the Court made the following observations:
The right to bargain collectively with an employer enhances the human dignity, liberty and
autonomy of workers by giving them the opportunity to influence the establishment of workplace
rules and thereby gain some control over a major aspect of their lives namely their work.
Collective bargaining is not simply an instrument for pursuing external ends…rather it is
intrinsically valuable as an experience in self-government. Collective bargaining permits workers
to achieve a form of workplace democracy and to ensure the rule of law in the workplace.
Workers gain a voice to influence the establishment of rules that control a major aspect of their
lives.

3. Nature of Collective Bargaining

The ILO Right to Organize and Collective Bargaining Convention (No. 98), 1949 describes
collective bargaining as: "Voluntary negotiation between employers or employers' organizations
and workers' organizations, with a view to the regulation of terms and conditions of employment
by collective agreements." Collective bargaining could also be defined as negotiations relating to
terms of employment and conditions of work between an employer, a group of employers or an
employers' organization on the one hand, and representative workers' organizations on the other,
with a view to reaching agreement. There are several essential features of collective bargaining,
all of which cannot be reflected in a single definition or description of the process:

i. It is not equivalent to collective agreements because collective bargaining refers to

the process or means and collective agreements to the possible result, of bargaining.
Collective bargaining may not always lead to a collective agreement.
ii. It is a method used by trade unions to improve the terms and conditions of
employment of their members.
iii. It seeks to restore the unequal bargaining position between employer and employee.
iv. Where it leads to an agreement, it modifies rather than replaces, the individual
contract of employment, because it does not create the employer-employee
relationship.
v. The process is bipartite but in some developing countries the State plays a role in the
form of a conciliator where disagreements occur or where collective bargaining
impinges on government policy.

4. Contents of Bargaining
The scope of sectoral or branch collective agreements scope is usually focused on the following
main topics.

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  Cooperation and communication between the trade union organization and the
management:
This covers matters such as: employers’ duties to consult inform and decide in cooperation with
the union; confidentiality clauses; and employers' support for trade union activities by providing
them with technical facilities etc.

 Employment and working conditions:

This covers matters such as: employment contracts and termination of employment; principles of
redundancy policy in collective redundancies; working time and working time schedules; and
holiday and paid leave.

 Wages and remuneration:

This covers matters such as: the wage system and minimum wage tariffs; payment for working
overtime and for working on holidays; extra payments for difficult and risky working conditions
and night work; and severance payments in the event of collective redundancies.

 Occupational safety and health:

This covers matters such as: employers' duties and cooperation with trade unions in safety and
health issues; preventive and corrective measures to improve working conditions and to reduce
risk at work; and the establishment of trade union safety and health delegates in companies.

 Human resource development and other social issues:

This covers matters such as: training and human resources development activities; and the
creation and utilization of the Social Fund in enterprises (the Social Fund is financed - under Act
No. 152/1994 in the Collection of Laws, as amended - by a minimum levy of 0.6% of paybill,
and is most commonly used to subsidize the cost of meals provided for employees).

 Resolution of conflicts between management and trade unions:

This covers the procedures to be applied in the event of serious disagreements between the social
partners.

Collective agreements at enterprise and organization level cover practically the same issues.
Some reduction in bargaining scope applies in the civil service, where only sectoral collective
agreements are concluded.

5. What is Wage?
A wage is monetary compensation or remuneration, personnel expenses, labor paid by
an employer to an employee in exchange for work done. Payment may be calculated as a fixed
amount for each task completed (a task wage or piece rate), or at an hourly or daily rate (wage

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labour) or based on an easily measured quantity of work done. Wages are part of the expenses
that are involved in running a business.
Payment by wage contrasts with salaried work, in which the employer pays an arranged amount
at steady intervals such as a week or month regardless of hours worked, with commission which
conditions pay on individual performance, and with compensation based on the performance of
the company as a whole. Waged employees may also receive tips or gratuity paid directly by
clients and employee benefits which are non-monetary forms of compensation. Since wage
labour is the predominant form of work, the term "wage" sometimes refers to all forms or all
monetary forms of employee compensation.
Wages and salaries are the remuneration paid or payable to employees for work performed on
behalf of an employer or services provided. Normally, an employer is not permitted to withhold
the wages or any part thereof, except as permitted or required by law. Employers are required by
law to deduct from wages, commonly termed "withhold", income taxes, social contributions and
for other purposes, which are then paid directly to tax authorities, social security authority etc. on
behalf of the employee. Garnishment is a court ordered withholding from wages to pay a debt.
Wages and salaries are typically paid directly to an employee in the form of cash or in a cash
equivalent, such as by cheque or by direct deposit into the employee's bank account or an
account directed by the employee. Alternatively, all or a part may be paid in various other ways,
such as payment in kind in the form of goods or services provided to the employee such as food
and board.
For tax purposes, wages and salaries normally do not include other non-cash benefits received by
an employee, such as flights, payment of school fees etc. These are usually referred to as fringe
benefits.
Wages and salaries in cash consist of such amounts payable at regular intervals, such as weekly,
monthly or other intervals, including payments by results and piecework payments; plus
allowances, such as those for working overtime; plus amounts paid to employees away from
work for short periods e.g. on holiday, sick leave, etc. plus ad hoc bonuses and similar payments;
plus commissions, gratuities and tips received by employees.
Wages and salaries in kind consist of remuneration in the form of goods or services that are not
necessary for work and can be used by employees in their own time, and at their own discretion,
for the satisfaction of their own needs or wants or those of other members of their households.
6. Objectives of Wages Fixation
A sound wage and salary fixation seeks to achieve the following objectives:

 To establish a fair and equitable remuneration: A sound wage and salary administration
ensures internal and external equity in remuneration paid to employees.

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  To attract competent personnel: Wage and salary administration helps to attract qualified
and hard-working people by ensuring an adequate payment for all jobs.
 To retain the present employees: By paying at competitive levels, the company can retain
its personnel. It can minimize the incidence of quitting and increase employee loyalty.
 To improve productivity: Sound wage and salary administration helps to improve the
motivation and morale of employees which in turn lead to higher productivity.
 To control costs: Through sound wage and salary administration labor and administrative
costs can be kept in line with the ability of the company to pay. It facilitates
administration and control of pay roll.
 To improve union-management relations: Wages and salary based on systematic analysis
of jobs and prevailing pay levels are more acceptable to trade unions. Therefore sound
wage and salary administration simplifies collective bargaining and negotiations over
pay. It reduces grievances arising out of wage inequities.
 To improve public image of the company: Wage and salary program also seeks to project
the image of a progressive employer and to comply with legal requirements relating to
wages and salaries.

7. Principles of Wages Fixation

The following guidelines should be followed in the administration of wages and salaries:

 Wage policy should be established keeping in view the interests of the employer, the
employees, the consumers and the community.
 Wage policy should be stated clearly in writing to ensure uniform and consistent
application.
 An adequate database and a proper organizational set up should be developed for
compensation determination and administration.
 Differences in pay should be based on differences in job requirements.
 Wage and salary level should be in line with those prevailing in the job market.
 Follow the principle of equal pay for equal work.
 Recognize individual differences in ability and contributions.
 The employees and the trade union should be informed about the procedure used to establish
wage rates.
 The wages should be sufficient to ensure for the worker and his or her family reasonable
standard of living.
 There should be a clearly established procedure for hearing and adjusting complaints
concerning wages.
 The wage and salary structure should be flexible.
 Wages due to employees should be paid correctly and promptly.
 A wages committee should review and revise wages from time to time in conformity with
changing needs.

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8. Factors Influencing Wages Fixation
The main factors influencing wage or salary levels are as follows:
 Labour Market:
Demand for and supply of labour influence wage and salary fixation. A low wage may be fixed
when the supply of labour exceeds the demand for it. On the other hand, a higher wage will have
to be paid when the demand exceeds supply, as in case of skilled labour.
 Ability to Pay:
An organization’s ability to pay its employees is an important determinant of wage level. Ability
to pay depends upon the profit earning capacity of the enterprise. Multinational organizations
pay relatively higher salaries due to their higher paying capacity.
 Labour Unions/Collective Bargaining Agreement:
Well-organized trade unions exert pressure for higher wages and allowances. This pressure is
exercised through collective bargaining. Salary levels in commercial banks are relatively high
due to higher bargaining power of bank unions.
 Cost of Living:
Due to inflation, the real wages decline affecting the purchasing power of workers. Therefore,
dearness allowance is given according to changes in consumer price index. Labour agreements
generally have a clause providing for automatic increase in pay as cost of living rises.
 Prevailing Wage Rates:
While fixing wages, prevailing wages in the particular industry/region are taken into account.
This is necessary to retain and attract qualified workers.
 Job Requirements:
Basic wages depend largely on the difficulty level and physical and mental effort required in a
particular job. The relative worth of a job can be estimated through job evaluation.
 Productivity:
Productivity of Labour also influences wage fixation. Greater effort of the worker is rewarded
through piece-rate or other forms of incentive payments. This form of productivity, due to
individual effort, cannot form a criterion of general wage movements. It can, at best, help
determine fair wages.
 Legislation:
Wage policy and laws of the Government exercise a significant influence on wage levels.
Government has enacted laws to protect the interests of the working class. No organization can
violate laws relating to minimum wage rates, overtime payments and time and method of
disbursing wage payments.

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 Business Strategy:
The overall strategy that a company pursues should determine the remuneration to its employees.
Where the strategy of the enterprise is to achieve rapid growth, remuneration should be higher
than what competitors pay. Where the strategy is to maintain and protect current earnings,
because of the declining fortunes of the company, remuneration level tends to be average or even
below average.
 The Employee:
Several employee-related factors interact to determine his or her remuneration. These include
performance, seniority, work experience, educational qualifications, potential, and so on.
All these factors are given above account for wage differentials between industries/regions and
occupations.

9. Labour Law Instruction

According to Chapter-11, Section 138 of Bangladesh Labour Law 2006 Every Organization
should have to establish Minimum wages board and the formation will be like the below:
According to Section 138 Establishment of the Minimum Wages Board:

1. The Government shall establish a Board to be called the Minimum Wages Board.

2. The Minimum Wages Board, hereinafter referred to in this Chapter as the Wage Board, shall
consist of the following members namely:-

(a) Chairman
(b) 1 (one) independent member
(c) 1 (one) member representing the employers and
(d) 1 (one) member representing the workers

3. For the purpose of discharging the functions mentioned in section 139, the following members
shall also be included in the Wage Board, namely:

(a) 1 (one) member representing the employers of the industry concerned;

(b) 1 (one) member representing the workers employed in the industry concerned.

4. The Chairman and the other members of the Wage Board shall be appointed by the
Government.

5. The Chairman and the independent member of the Wage Board shall be appointed from
among such persons who have adequate knowledge of industrial labour and economic conditions

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of the country, and who are not connected with any industry or associated with any trade union
of workers or employers.

6. The member representing the employers and the member representing the workers under sub-
section (2) or (3) shall be appointed after considering nominations, if any, of such organizations
as the Government considers to be representative organizations of such employers and workers:
Provided that if no nomination is received from the representatives of the employers or workers
in spite of more than one effort, the Government may, in its own opinion, appoint such persons
whom it considers to be fit to be representative of employers or workers.

10. "Collective bargaining is a method of wage fixation"

From the above discussion I can say that collective Bargaining is a way that is a part of Wages
Fixation Board. CBA can influence the Wages Fixation Board to fix the salary according to their
wish; CBA can propose their desire and can try to fulfill their demand. It can also be a method of
Wage fixation but wages fixation consider lot of things to fix wages and wages fixation is a step
by step process on which CBA a is a part to be considered.

11.Criteria for Wage Increases

Traditionally, the factors or criteria which have influenced pay increases through collective
bargaining include enterprise profit, job evaluation, seniority, cost of living, manpower shortage
or surplus, the negotiating strength and skills of the parties. Performance measures such as
productivity or profit related to groups or individuals have not featured prominently in collective
bargaining. Further, though wage rates negotiated through collective bargaining do reflect wage
differentials based on skills, such differentials have not been geared to the encouragement of
skills acquisition and application. Therefore a major concern for employers is the need to
negotiate pay systems which are

 Strategic in the sense that they achieve strategic objectives

 Flexible in the sense that their variable component can absorb downturns in business and
reduce labour costs
 Oriented towards better performance in terms of productivity, quality, profit or whatever
performance criteria are agreed upon
 Capable of enhancing earnings of employees through improved performance
 Capable of reducing the incidence of redundancies during times of recession or poor
enterprise performance through the flexible component of pay
 Able to reward good performance without increasing labour costs as a part of total costs
through enhanced productivity
 Able to attract and retain competent staff

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 Able overall to control or stabilize labour costs.

These objectives have come to the forefront, particularly due to pressures flowing from
globalization. Therefore wage increases through collective bargaining need to be based on a
wider range of criteria than has traditionally been the case. Otherwise once collective bargaining
is over, the employer may be left without the financial capacity to adjust pay based on group or
individual performance, as well as on skills acquisition and application.

12.Wage Determination under Collective Bargaining

Union wage effect is one of the frequently investigated issues in the empirical economic studies.
The labour unions try to raise wages for their members by using their collective bargaining
power.

From an economic point of view, unions attempt to raise the wages of their member above
competitive levels. They accomplish this goal in four ways:

(i) Restricting supply of labour

(ii) Using their collective bargaining power to raise standard wage rate directly
(iii) Increasing the demand for labour and
(iv) Impose Restriction on employers who possess monopoly power

(i) Restricting supply of labour:

One of the primary ways that union affects labour markets is by restricting supply of labour.
Immigration barriers, maximum hour legislation, long apprenticeship, racial and sex barriers, and
refusal to admit new members into the union or let non union member hold job all these
strategies are restrictive devices to reduce the supply of labour.

(ii) Using their collective bargaining power to raise standard wage rate directly:

Most union does not directly restrict labour supply. Rather, they attempt to force employers to
pay a standard wage higher than prevailing market wage. For example, if non union plumbers
earn tk.300 per day in an area, a union might bargain with a large construction firm to set the
wage at tk. 400 per day for that fir’s plumbers. Such an agreement is however valuable to the
union only if access to alternative labour suppliers can be restricted. Hence, under a typical
collective bargaining agreement, firms agree not to hire non-union plumbers; nor can they
contract out plumbing services; nor can they subcontract to non-union firms. Each of these
provisions helps prevention of erosion of the union’s monopoly lock on the supply of plumbers
to the firm.

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(iii)Increasing the demand for labour:

Labour unions also increase wages by increasing the demand for labour. This occurs either
because of increase in the labour’s marginal product or through the means that increase the
derived demand for the labour by shifting the demand for the final product toward the output of
union-made goods.

There are many ways to shift labour demand curve. Labour may help industry advertise its
product. Often, labour and management will lobby for an import quota on the product, thereby
raising the demand for domestic workers in the industry.

Sometimes, groups that function as unions such as professional association of doctors will lobby
for legislations that enforce the licensing of particular professions. By limiting the practice of
medicine, law, or other activities to specific groups, the supply of competing professionals is
reduced and the demand for the services of the preferred group is increased.

In addition, unions can raise labour demand through increasing the efficiency and therefore the
marginal productivity of labour. For example: a century ago, workers were paid so little that they
were malnourished and their work was physically inefficient. Higher wages might have made
them more efficient and resulted in lower production cost.

(iv)Impose Restriction on employers who possess monopoly power:

When union sympathizers workers they argued that unions were necessary as a countervailing
power to large employers. In essence, the union’s market power was necessary to offset the
employer’s market power. For example, suppose you live in a company town. The dominant firm
is the employer of the people who have jobs. As a employee, you must take what this employer
offers or go without work; your only alternative is to move to another region.

In this case, the employer is a monopolist. To maximize profits, a monopolist should hire
additional worker up to the point where its marginal revenue product is equal to the marginal
cost of labour which is greater than the wage rate. The monopolist therefore both depresses the
wages and restricts employment relative to competitive markets. Enter the labour union. After
organizing the worker, it settles with the employer for a standard wage that is above the
depressed monopolistic wage level. At that higher standard wage, the employer can hire all the
workers it needs at a given wage rate the firm become a wage taker rather than wage maker. It
will then become a competitive firm that hires workers up to the point where the marginal
revenue product equals the going standard wage rate. A union that exercises countervailing
power may produce higher wages and higher employment.

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13.Conclusion

Collective Bargaining is a factor of wage fixation. Collective Bargaining is a process of

negotiation about employment terms and conditions where wage is included. So through
collective bargaining process CBA agent can try to fix the wages according to the worker’s
demand. On the other hand CBA agent must be a member of Wage fixation board where CBA
agent will represent the workers and will influence the wage fixation process. To fix the wages
lots of matters are needed to be considered like Competitors pay offer, Business profit,
Shareholders’ opinion, Business cycle, Industry trends, Future plan of organization, technology,
Labour Market, Labour availability, Labour demand, Collective Bargaining etc. So Collective
Bargaining only can not be a separate method to fix wages. But it is a considering factor that
influence the Wage fixation process.

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