Unit 3 Collective Bargaining

Concept of Collective Bargaining

Initially, Individual employees negotiated directly with a potential employer on the

wages they would receive for the service provided. With the growth of population,
however, and the pace of industrialization large number of people entered the
labour market. This brought about several changes. Individual employers and
employees did not find convenient any more to negotiate individually, owing to the
pressure of time, variances in rewards for the service rendered and significantly,
the ability to push for more as a group on the employees’ apart. Employers also
found it more convenient to deal with a group rather than individuals.

This led to the phenomenon of ‘collective bargaining’, a concept first identified by

Sidney and Beatrice Webb in Britain and also by Gompers in the USA.

The ILO Workers Manual defines collective bargaining as:

Negotiation about working conditions and terms of employment between an

employer, a group of employers or one or more employers’ organization on the one
hand, and one or more representative workers’ organizations on the other with a
view to reaching agreement.

Collective bargaining is the process in which working people, through their unions,
negotiate contracts with their employers to determine their terms of employment,
including pay, benefits, hours, leave, job health and safety policies, ways to
balance work and family, and more. Collective bargaining is a way to solve
workplace problems. It is also the best means for raising wages in America.
Indeed, through collective bargaining, working people in unions have higher
wages, better benefits and safer workplaces.

The concept of collective bargaining is not merely a replacement of the

marketplace haggling by a group of workmen with a employer. Flander identifies
the distinctive nature of collective bargaining to be basically a political institution
in which the rules are made by the trade union of workers, employers and
corporations/organizations.

It consists of two aspects of administration and legislation are interlinked. There is

considerable degree of joint regulation by both parties, governed by the
conventions and customs that prevail at the enterprise level.

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It is not merely an economic process but more a socio-economic process.

According to Flippo, “Collective Bargaining is a process in which the

representatives of a labor organization and the representatives of business
organization meet and attempt to negotiate a contract or agreement, which
specifies the nature of employee-employer union relationship”.

Nature of Collective bargaining

1. It is a Group Action:
Collective bargaining is a group action as opposed to individual action. Both the
parties of settlement are represented by their groups. Employer is represented by its
delegates and, on the other side; employees are represented by their trade union.

2. It is a Continuous Process:
Collective bargaining is a continuous process and does not end with one
agreement. It provides a mechanism for continuing and organised relationship
between management and trade union. It is a process that goes on for 365 days of
the year.

3. It is a Bipartite Process:
Collective bargaining is a two party process. Both the parties—employers and
employees— collectively take some action. There is no intervention of any third
party. It is mutual given-and-take rather than take-it-or-leave-it method of arriving
at the settlement of a dispute.

4. It is a Process:
Collective bargaining is a process in the sense that it consists of a number of steps.
The starting point is the presentation of charter of demands by the workers and the
last step is the reaching of an agreement, or a contract which would serve as the
basic law governing labour-management relations over a period of time in an
enterprise.

5. It is Flexible and Mobile and not Fixed or Static:

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It has fluidity. There is no hard and fast rule for reaching an agreement. There is
ample scope for compromise. A spirit of give-and-take works unless final
agreement acceptable to both the parties is reached.

6. It is Industrial Democracy at Work:

Collective bargaining is based on the principle of industrial democracy where the
labour union represents the workers in negotiations with the employer or
employers. Industrial democracy is the government of labour with the consent of
the governed—the workers.

7. It is Dynamic:
It is relatively a new concept, and is growing, expanding and changing. In the past,
it used to be emotional, turbulent and sentimental, but now it is scientific, factual
and systematic.

9. It is an Art:
Collective bargaining is an art, an advanced form of human relations.

Collective bargaining process

There are three distinct steps in the process of collective bargaining:

(1) The creation of the trade agreement,

(2) The interpretation of the agreement, and

(3) The enforcement of the agreement.

Each of these steps has its particular character and aim, and therefore, each
requires a special kind of intellectual and moral activity and machinery.

1. The Creation of the Trade Agreement:

In negotiating the contract, a union and management present their demands to each
other, compromise their differences, and agree on the conditions under which the
workers are to be employed for the duration of the contract. The coverage of
collective bargaining is very uneven; in some industries almost all the workers are

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under agreement, while in others only a small portion of the employees of the firms
are covered by the agreement.

The negotiating process is the part of collective bargaining more likely to make
headline news and attract public attention; wage increases are announced, ominous
predictions about price increase are reduction in employment are made.

2. The Interpretation of the Agreement:

The administrative process is the day-to-day application of the provisions of the

contract to the work situation. At the time of writing the contract, it is impossible
to foresee all the special problems which will arise in applying its provisions.
Sometimes, it is a matter of differing interpretations of specific clause in the
contract, sometimes; it is a question of whether the dispute is even covered by the
contract. Nevertheless, each case must somehow be settled. The spirit of the
contract should not be violated.

3. Enforcement of the Agreement:

Proper and timely enforcement of the contract is very essential for the success of
collective bargaining. If a contract is enforced in such way that it reduces or
invalidates the benefits expected by the parties, it will defeat basic purpose of
collective bargaining. It may give rise to fresh industrial disputes. Hence, in the
enforcement of the contract the spirit of the contract should not be violated.

However, new contracts may be written to meet the problems involved in the
previous contract. Furthermore, as day-to-day problems are solved, they set
precedents for handling similar problems in future. Such examples are almost as
important as the contract in controlling the working conditions. In short, collective
bargaining is not an on-and-off relationship that is kept in cold storage except
when new contracts are drafted.

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Collective bargaining as the method of wage fixation

Collective Bargaining is a technique by which an attempt is made to reconcile the

needs and objectives of workers and employers and is therefore an integral part of
an industrial society. Collective Bargaining is a process whereby standards are
created to govern labour relations including wages & working conditions.

Collective Bargaining as Wage Fixation method Significant feature of collective

bargaining. It is the wages that will be paid for the work done by the employees.
Union is rarely involved in setting the original job rates; management does this
union is actually involved in enhancing, or, at least, preventing a decrease of
wages. The major criteria used by unions and management in setting wage levels
can be classified as: (i) measures of equity; (ii) measures of need; and (iii)measures
of contribution.

Most commonly used criteria in setting wage levels are:

 Comparable wages
 Cost of living
 Ability to pay
 Productivity
 Purchasing power

Another area of significance is that of productivity bargaining and has gained

increasing attention in the Indian industrial relations system. In such agreements
advantages such as higher wages or increased leisure are given to workers for
accepting changes on established work practices and organization of work itself,
thus reducing/eliminating waste and leading to more effective working Collective
Bargaining as Wage Fixation method.

Randle and Wortman state: “Productivity usually refers to output in physical units
per man-hour of work. It is a measure of the relationship between the volume of
goods produced and one factor of input-labour time.” However, labour is only an
input and there are several other variables such as “more efficient utilization of
fuel, more economical materials; technical improvements in machines; in
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organization and in processes; the skill and effort of the work force; the efficiency
of management and the state of Labour Relations”. Increased productivity is
usually reflected in increased ability to pay and therefore industries with high or
increasing productivity are generally able to pay high wages.

PREREQUISITE FOR COLLECTIVE BARGAINING:

A successful collective bargaining process must have the following prerequisites:

 Careful thought and selection of the negotiating team is imperative. The

team should have a mixed composition, including production, finance and
IR experts. It should be headed by a person, preferably a personnel and
industrial relations specialist of sufficient seniority who has an adequate
brief to commit the enterprise and take decisions without frequent referrals
to top management.

 It is necessary for the management to recognize the union and bargain in

more good faith, in unionized situations. Unions as representatives of the
workers’ interests are a growing phenomenon. This also puts pressure on the
union to formulate plans and demands in a systematic manner. Strong unions
and progressive managements can help create an atmosphere of mutual
confidence.

 The necessity of having open minds, to listen and appreciate the other’s
concern and point of view and to have some flexibility in making
adjustments to the demands made.

 The need to study adequately or do ‘homework’ on the demands presented,

i.e., to gather data on wages and welfare benefits in similar industries in the
geographical area.

 Both the management and the union should be able to identify grievances,
safety and hygiene problems on a routine basis and take appropriate
remedial steps.

 Trade unions should encourage internal union democracy and have periodic
consultations with its members.
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 Trade unions should equally be concerned with both quantity of work output
as agreed upon and quality of work, both leading up to a consistent concern
for the feasibility of the firm and its products/services.

 Strikes/lockouts should be resorted to, in the ultimate analysis. Periodic

discussions may be necessary between the management and the unions to
interpret the provisions of the contract and clarify doubts.

 The parties must attain a sufficient degree of Organization. If the workers’

organization is weak, employers can say that it does not represent the
workers and will refuse to negotiate with it. Unless the workers are able to
form strong and stable unions, collective bargaining will not be successful.

 Freedom of association is essential for collective bargaining. Where there is

no freedom of association, there can be no collective bargaining. Freedom of
association implies that the workers as well as the employers will have the
right to form an organization of their own to protect their interests.

 There should be mutual recognition between both the groups. Collective

bargaining cannot begin if the employers do not recognize the workers’
organization. The conflict of interests makes the two groups hostile to each
other. They must recognize each other and realize that adjustment and
understanding is essential for the achievement of organizational goals.

 There must exist a favorable political climate, essential for successful

collective bargaining. If the government encourages collective bargaining as
the best method of regulating conditions of employment, it will be
successful. Where the governments restrict trade union activities, there can
be no collective bargaining.

 Agreement must be observed by those to whom they apply. The workers’

organization must be strong enough to exercise its authority over its
members. If the trade union has no power over its members, collective
bargaining will not be effectively implemented.

 A give and take policy must prevail in the organisation. The difference
between two parties can be adjusted only by compromise so that an
agreement can be reached. Neither side should be too rigid on its demand.

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Their attitudes should be flexible and both sides should be ready to give up
some of its demands. Unions should not rigidly insist upon unreasonable
demands and should be ready to reduce its demands to come to an
agreement.

 Sometimes unfair labour practices are resorted to by both the employers

and the trade unions. These will restrict the development of collective
bargaining. Unfair labour practices should be avoided by both the sides, as
this will create an atmosphere of goodwill.

Negotiating techniques and skills

 NEGOTIATING SKILLS
A Successful negotiation requires the two parties to come together and hammer
out an agreement that is acceptable to both.

1. Problem analysis: Effective negotiators must have the skills to analyze a

problem to determine the interests of each party in the negotiation. A detailed
problem analysis identifies the issue, the interested parties and the outcome
goals.
2. Preparation: Before entering a bargaining meeting negotiator should prepares
for the meeting. Preparation includes determining goals and alternatives to the
stated goals. In addition past precedents (examples) and outcomes can set the
tone for current negotiations.
3. Active listening: Negotiator must have the skills to listen actively to the other
party during the debate. Active listening involves the ability to read body
language as well as verbal communication.
4. Emotional control: It is vital that a negotiator have the ability to keep his
emotions in check during the negotiation.
5. Verbal communication: Negotiators must have the ability to communicate
clearly and effectively to the other side during the negotiation.
Misunderstanding can occur if the negotiator does not state his case clearly.
6. Collaboration and teamwork: Effective negotiator must have the skills to
work together as a team and foster a collaborative atmosphere during
negotiations.
7. Problem solving: Individuals involved in negotiation must have the ability to
seek a variety of solutions to problems.

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8. Decision making ability: Leaders in negotiation process should have the

ability to act decisively during a negotiation.
9. Interpersonal skills: Effective negotiators must have the interpersonal skills to
maintain a good working relationship with those involved in the negotiation.
10.Ethics and reliability: Ethical standards and reliability in an effective
negotiator promote a trusting environment for negotiations. A negotiator must
have the skills to execute on his promises after bargaining ends.

 NEGOTIATING TECHNIQUES
Negotiating isn’t about getting what you want or giving in to what the other
party wants. It’s not an “either/or situation”. It is about having both parties walk
away satisfied.

1. Do your homework: Never come to the table unprepared. Sufficient research

must be done in advance so that we can identify exactly what we want and have
the data to back-it-up.
2. Don’t focus just on winning: Negotiation is not a competition. If we think of it
as ‘winning’ we will think about beating them and if we do that, we will not
collaborate as much.
3. Be prepared to give something up: We are not going to get everything that we
want. We must be sure of the areas where we’re willing to be flexible and where
we are not.
4. Use your emotional intelligence: Having emotional intelligence allows us to
manage our emotions, show empathy and prevent us from getting distracted.
5. Pay attention to timing: Timing is important in any negotiations. We must
know what to ask for, but also be sensitive to when you ask for it.
6. Stick to your principles: As an individual we all have a set of guiding
principles and values that we just won’t compromise.
7. Close with confirmation: At the close of meeting all the points covered and
any areas of agreement must be recapped. We must sure everyone confirms
following with appropriate letters or emails. Don’t leave behind loose ends.

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TYPES OF COLLECTIVE BARGAINING CONTRACTS

There are four types of collective bargaining classified on the basis of their
nature and the objectives.

1. Conjunctive or distributive bargaining: In this form of collective bargaining,

both the parties the employee and the employer try to maximize their respective
gains, i.e. one party wins over the other. The economic issues such as wages,
bonus, and other benefits are discussed.
In this type of bargaining, the trade union needs to have enough market power
to win the negotiation. The employer will want to pay as little in wages. Yet in
order to convince them to pay more, the trade unions need enough members to
provide a significant incentive.

2. Cooperative or integrative bargaining: Both the employee and the employer

sit together and try to resolve the problems of their common interest and reach
to a solution. In the case of economic crises, such as recession, which is beyond
the control of either party, may enter into a mutual agreement with respect to
the working terms.
Integrative bargaining is whereby both sides aim to benefit in what is seen as
‘win-win’ bargaining. Both parties may bring together a list of demands by
which an agreement is reached that benefits both parties.
For example, unions may advocate for greater levels of staff training. Now this
may cost the business more, but it will benefit from greater levels of
productivity in the long run.

3. Productivity bargaining: This type of bargaining is done by the management,

where the workers are given the incentives or the bonus for the increased
productivity. Both the employer and the employee enjoy the benefits in the form
of increased production and the increased pay respectively.
Simply put, productivity bargaining is where the two parties look to agree to
changes that would boost productivity in return for higher wages or other
benefits.
Unions may suggest new ways of organising the worker force than may
increase productivity and therefore create value to the firm. In turn, employers
would look to increase employees wages as a result.

4. Composite bargaining: In this type of collective bargaining, along with the

demand for increased wages the workers also express their concern over the
working conditions, recruitment and training policies, environmental issues,
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mergers with other firms, pricing policies, etc. with the intention to safeguard
their interest and protect the dilution of their power.
The aim is to ensure a mutually beneficial long-term relationship between the
employer and employee. It does this by highlighting issues that employees may
have, which may impact their long-term future at the company.

5. Concessionary Bargaining
Concessionary bargaining is based on unions giving back previous benefits to the
employer. For instance, trade unions may agree to lower wages in return for job
security.
This may come during an economic decline whereby job security is more
important to the unions than higher wages. Overall, this may actually benefit the
company as they won’t have to pay for so many redundancies and can keep
workers on.
The main aim of concessionary bargaining is to strengthen the business in order to
ensure its survival alongside its employees. So unions give back previous benefits
in order to secure the businesses’ long-term future and therefore its members.

PROVISIONS OF COLLECTIVE BARGAINING IN NEPAL

 Authorized Trade Union shall be recognized for the collective bargaining with
the management on behalf of the worker of the Trade Union.
 The working committee of the Authorized Trade Union on behalf of the
workers may present claims in written form with the number and names of its
representative to the management for collective bargaining.
 Right dispute should be settled through the Labour Office and Court and not a
matter of collective dispute.
 Only dispute related to ‘interest’ issues other than those provided by Act, rule
and collective agreement shall be subject matter of collective bargaining.
 Collective demand should be submitted through CB Committee
 Collective Bargaining involves a negotiation between an organization’s
management and Trade Union for salary, working condition and other matters
and mutual interest.
 Collective bargaining is the fundamental principle on which the trade union
system is based.
 No demand in relation to the provisions mentioned in collective agreement is
permitted to put again for two years from the date of its commencement.

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 The labour Act excludes certain matters from collective demand such matter
include, if it is contrary to the Constitution of Nepal, against interest of others
due to being baseless allegation/claim, prejudicial/harmful to the personal
conduct of any worker or employee, unrelated to the entity, without expiry of
the time of the collective bargaining agreement and about the rate and benefit
prescribed for social security.
 Trade union can proceed a proposal of the employee to the management
 Management are given 21 days to fulfill the proposed presentation
 If not within 21 days then additional 15 days is added for negotiations
 If not fulfilled then the trade union member can go for protest and negotiate.
 In case the collective agreement entered is not implemented, the concerned
party may lodge a complaint in the Labour Office. The Labour Office may
implement the collective agreement by following the procedures as mentioned
in law.

COLLECTIVE BARGAINING ISSUES

Any issue that has relevance to management and workers becomes the subject
matter of bargaining. Traditionally, wages and working conditions have been
the primary focus area of collective bargaining. However in recent times the
process of collective bargaining has extended to almost any area that comes
under employer-employee relations, covering a large territory.

Broadly these issues can be categorized into two types:

 Issue of rights: It is a participative right of both the parties, e.g. wage fixation
and productivity norm/standard settings are the rights of workers.

 Issues of interest: These issues do not have participative rights and may only
be granted as a sign of goodwill, e.g. providing transport facilities to the work
place is not binding on the management. It is provided only for the convenience
of the workers and the benefit of the company.

The major collective bargaining issues in Nepalese organizations are:

 Due to the dominance of outsiders in trade unionism in the country, there is
multiplicity of unions which are weak and unstable, and do not represent
majority of the employees. Moreover, there are inter-union rivalries, which
further hinder the process of collective bargaining between the labor and the
management.
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 Trade unions are having political affiliations; they continue to be dominated by

politicians, who use the unions and their members to meet their political ends.
 There is a lack of definite procedure to determine which union is to be
recognized to serve as a bargaining agent on behalf of the workers
 There has been very close association between the trade unions and political
parties. As a result, trade union movement has leaned towards political
orientations rather than collective bargaining.

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