Collective Bargaining Definition
Collective Bargaining refers to the discussion and negotiation between the employer and the employees on the of terms of employment including the working environment, conditions of employment, shift length, work holidays, vacation time, sick leave, and health care benefits, as well as compensation based items like basic pay, overtime pay and retirement benefits.
Objectives of Collective Bargaining
- To foster a pleasant and cordial relationship between employer and employees.
- To equally safeguard the interests of both employer and employees.
- To ensure that the government intervention is maintained at a minimum level.
- To encourage maintenance of democratic environment at the workplace.
How does it Work?
In collective bargaining, negotiations take place between the management of the employer and the labour union leaders, who represent the trade union workers. The negotiations result in what is called the collective bargaining agreement, which describes the rules of employment for a certain number of years. The labour union leaders are paid by the members of the union for representing the latter. Collective bargaining is very important because dissonance between employer and employees can result in various antagonistic events, such as labour strikes, lockouts etc.
Collective Bargaining Examples
In 1968, the players of the National Football League Players Association (NFLPA) went on a strike to pressurize the National Football League (NFL) team owners to increase minimum salaries and pension benefits offered to the players. Eventually, after 11 days of strike, a collective bargaining agreement was reached between NFLPA and NFL team owners, wherein the salaries of both rookie and veterans were increased along with the pension benefits.
In 2018, a 4-year collective bargaining agreement was reached between the United Steelworkers (USW) and United States Steel Corp (USSC). As per the agreement, each member will be given a signing bonus of $4,000, 14% wage hike over the next 4 years and increased pension benefits. It was the result of the pressure created by the union after years of stagnant pay growth as USSC suffered due to low steel prices. The agreement ensured that the employees’ share in the profit distribution increased.
Types of Collective Bargaining
It can be classified into five major types –
- Distributive Bargaining: In this type of negotiation process, one party benefits at the expense of others. Basically, it discusses redistribution of profit sharing to increase wage, bonus or financial benefits.
- Integrative Bargaining: In this type of bargaining, the agreement is reached in such a way that both the participating sides tend to benefit – a win-win situation. In other words, both parties consider each other’s needs and concerns.
- Productivity Bargaining: In this type of bargaining, the negotiations revolve around productivity and pay. Basically, the two parties agree to certain changes that promise to boost productivity in exchange for higher wages.
- Composite Bargaining: This type of negotiation emphasizes on various factors that are not directly related to pay, but rather focused on employee welfare and job security. Basically, it ensures the long-term relationship between employer and employee that is mutually beneficial.
- Concessionary Bargaining: In this type of bargaining, the union sacrifice some benefits to bail out the employer during the stressed economic situation, which in turn benefits the employees in the long run.
- Negotiation: In this process two conflicting parties or their representatives discuss among themselves, without the involvement of a third party, to reach a settlement between themselves. However, most of the involved parties hire seasoned lawyers for themselves to settle down such matters.
- Mediation: In this process, a neutral third party acts as the mediator between the conflicting parties to reach a settlement. The mediator aids communication between the two parties and ensures that it takes place in a fair, honest and impartial way. They help in the identification and clarification of the underlying issues of the dispute.
- Arbitration: In this process, the decision of settlement is taken by the third party, who is known as the arbitrator. The arbitrator listens to the arguments of the conflicting parties and then makes an informed decision, similar to what a Judge does in the court.
Importance of Collective Bargaining
The importance of collective bargaining can be ascertained from the point of view of – management, trade union and government.
- Management: The primary objective of the management is to make maximum utilization of the workforce and earn higher profits. This can only be achieved if the workforce co-operates and that is where collective bargaining comes into play.
- Trade Union: Each labour at the individual level has poor bargaining power against the management. Hence, the working class unite to form a powerful union and protect their interests through the process of collective bargaining.
- Government: Typically, collective bargaining keeps the Government at bay and they are not required to employ force to resolve disputes.
- Both parties get to understand what to expect from each other.
- Employees are safeguarded from exploitation by employer.
- The management has to deal with a small number of people (trade union leaders) at any time.
- Only a few people make a decision on the settlement.
- It is a costly process, both in terms of money and time, as representatives have to discuss the same thing multiple times.
This has been a guide to What is Collective Bargaining & its Definition. Here we discuss how it works, objectives, types, importance along with advantages and disadvantages. You can learn more about from the following articles –