Functions and Differences from Trade Unions - Essay Example

? Work councils: functions and differences from trade unions 10 March Work councils: functions and differences from trade unions Globalization has triggered sea changes, not only in transnational commerce, but in employment relations. The workforce has become more multicultural than ever, and more and more women are entering the workforce. The characteristics of the labour pool are vastly changing and diversifying, and the management continues to grapple with the shifting needs and demands of their human resources (Lumley 1995). The earlier concept of negotiating with a central trade union and implementing the issues agreed upon in workplace is no longer the norm nowadays. Work councils have been developed, which has similar and dissimilar functions to trade unions (Prahalad and Doz 1987). This essay discusses the functions of work councils, particularly in decision-making and employee participation. It also differentiates work councils from trade unions. This paper focuses on the German work councils and trade unions, so that a particular context will be explored in relation to the concepts of work councils and trade unions. It argues that the German work councils are supporting the social and cooperative model of work relations, which are not antagonistic with trade unions, but may soon lead to the inevitable decay of the latter. This essay discusses the modern-day background to the German system of employment relations, because it is the context of work councils. There are two major perspectives about the present German system of employment relations. The first school of thought stresses that Germany’s employment relations have become more “corporatist” because of the expansion of liberal welfare and decentralised employment policies (Brenke 2004; Seeleib-Kaiser & Fleckenstein 2007). “Corporatist” means that the employment system of Germany experiences weaker collective bargaining power, as evident in the lesser number of collective bargaining agreements (Brenke 2004). Moreover, the government also signed laws that liberalised and rationalised the employment relations system. Since the late 1960s, the Labour Promotion Law of 1969 aims to remove “substandard employment through various instruments of active labour market policy (ALMP)” (Seeleib-Kaiser & Fleckenstein 2007: 429). ALMP seek to offer social services to the unemployed, and help them find jobs. ALMP devices have lesser prevalence, after Germany’s unification, because the state decided to focus on making firms more cost-effective (Seeleib-Kaiser & Fleckenstein 2007: 429). The ALMP has then been changed to emphasise employment instead of training and employment standards, which is again a sign of liberalisation policies of the state (Seeleib-Kaiser & Fleckenstein 2007: 429). These articles also asserted that Germany’s state of employment relations is more decentralised and less unionised than in the 1980s (Seeleib-Kaiser & Fleckenstein 2007: 429). The school of thought of the German employment relations system argues that Germany experiments with employment relations system and is becoming more like a mixture of cooperative and social partnership system (Behrens & Jacoby 2004; Berg 2008; Marsden 2008). These sources stress that Germany is developing its own strain of employment relations with industrial relations character (Berg 2008; Brettschneider 2008; Doellgast 2009). Behrens and Jacoby (2004) studied Germany’s most globalised sectors: chemicals, metalworking and construction. Findings showed that each industry developed in relation to the experimentalist ideals and actions of trade unions, as they struggled to expand employment strategies that can progress their interests. Berg (2008) added that Germany is more flexible in many ways, and not standardised in its adaption of plant or industry agreements. These articles supply theoretical and empirical foundations for the evolution of the German employment relation system into something more simultaneously liberal and collective. The new economy witnesses the rise of multinational firms, which benefit from promoting work councils overs trade unions. Multinational companies do not, in general, promote trade unions; because the latter’s powers and authority tend to clash with the former’s (Doellgast 2008, 2009). Still, firms need some form of organizing their labourers, so that they would not feel disempowered in the new economy and feel the need for socialism and other ideologies that conflict with free-market capitalism (Behrens 2009; Behrens & Jacoby 2004; Berg 2008). One option open to multinational corporations is to set up work councils. Work councils are micro level labour representatives, who are elected by workers of a specific factory for a period of four years, or depending on the duration set by their organisations of industries (Berg 2008). The most vibrant forms of such work councils are observed in Germany, where once nation-wide agreements with recognized trade unions are completed by representatives of a particular industry. Each individual member firm of that particular industry undertakes negotiations with their respective work councils on the details of workplace agreements and how such an agreement has to be implemented in a particular work place (Behrens & Jacoby 2004). Members of work councils need not be members of recognized trade unions, and these councils can be formed even in those industries where there is no existing nationally recognized trade union (Lumley 1995). Work councils can then enjoy a great degree of flexibility and freedom from dogma or political influence associated with conventional trade unions (Keller 2004). This also provides an opportunity for both management and workers to strike out an agreement that factors in micro specifics and lead to a beneficial partnership to both the workers and that particular firm. The other benefit of having work councils is that the levels of interaction and the channels of communication between management and workers remain largely impervious to external influences and can then be more effective and direct than they are in situations where organized trade unions exist (Sadowski et al. 1995: 493). Employee participation, however, is voluntary, instead of being compulsory, as in trade unions. Nonetheless, work councils promote employee participation in its meetings and actions and all the workers are involved in selection of work council members (Sadowski et al. 1995: 493). These councils have the legitimacy and requisite strength to conduct successful collective bargaining and often are able to extract more concessions than management would have otherwise been readily prepared to concede (Sadowski et al. 1995: 493). This essay proceeds to discussing the work council system in Germany and its functions. The role of work councils in the German system of employment relations are regulated in detail by the Works Constitution Act (WCA), which provides the differences between the right to co-determination, consultation and information (Sadowski et al. 1995: 493). Works councils do not have the right to strike, in contrast to trade unions, but the former are legally authorised “to work together in a spirit of mutual trust . . . for the good of the employees and of the establishment” (Sadowski et al. 1995, p.493). Works councils cannot participate in any kind of industrial action, but they significantly participate in wage setting, individual work complaints, production issues, and application of plant-level collective bargaining agreements (Addison et al. 2010: 248). They also implement co-determination rights. These rights enable work councils to greatly participate in wage-setting decisions, as well as: “pay arrangements including the fixing of job and bonus rates, the regulation of overtime and reduced working hours, holiday arrangements, and health and safety matters (section 87 (1) WCA cited in Addison et al. 2010: 248). Work councils also possess consultation rights, which allow them to be involved in the following components of management: “the structuring, organization and design of jobs, as well as manpower planning (sections 90 (2) and 92 (1)” WCA cited in Addison et al. 2010: 248). Unlike trade unions then, work councils can be allies to strategic management planning. This enables work councils to see their jobs as one that balance organisational and labour interests. For them, they are not the enemies of the management; they can also be partners in attaining labour and firm competitiveness (Addison et al. 2010: 248). However, trade unions tend to have antagonistic relationships with the management, because they have opposing ideologies. Many early trade unions, for instance, have socialist or communist ideals. The management has market ideals. These ideologies conflict with one another and lead to win-lose agreements, instead of win-win solutions. Work councils can level at the management perspective. They can see labour forces as part of competitiveness and are more willing to accept concessions, if they will benefit the competitiveness of the firm and the security of jobs of the workers (Keller 2004). In order to be relevant stakeholders in the management, work councils also enjoy information rights, wherein the management must offer accurate and timely information to the work councils, so that they can get the work done and promote the interests of their members (Addison et al. 2010: 248). Information is critical for work councils to do their jobs effectively. For instance, they need honest information about the financial conditions of the company, so that they can design bargaining agreements in line with this factor too. When the firm is not performing well and incurring losses, work councils can concede and accept salary cuts, as long as there are no layoffs. Southwest Airlines, for examples, experienced financial problems when it started, but it worked with its people in accepting salary cuts, until the company turns around. The employees agreed and enhanced their performance to help the company. This is a good example of how work councils can also be partners of the management, when they know how to balance worker and management goals and interests. Work councils are also more open to experimenting with different work flows and work agreements (Behrens 2009: 278). They can use innovative ideas that may have roots in strategic human resource management or total quality management or both. Trade unions are often criticised as static and “old,” but work councils are ready to change the language game of employment relations, if it can benefit employees and organisations (Behrens 2009: 278). For example, there is a growing demand for telecommuting, or doing one’s work outside the office, such as at home or other locations. The demand mostly comes from women and men who want to spend more time with their family or enjoy their leisure time. Telecommuting is a new form of work that work councils can promote and advocate in organisations, because it offers flexible work and less operational expenses for companies. Many companies such as Best Buy and others are already experimenting in expanding telecommuting workers, because it is perceived to increase performance and morale, as long as certain performance parameters are set, well-communicated, and followed. Studies demonstrate that work councils, though they may not be that politically strong in the industry levels, as compared to trade unions at the start of the twentieth century, especially in former East Germany, can have major authority in plant and firm level bases of employment relations (Addison et al. 2010; Doellgast 2008). Work councils directly manage employment concerns and conditions at firm levels, which enable them to communicate with, coordinate, and unite employees toward common goals and interests (Addison et al. 2010; Doellgast 2008). Furthermore, the 2001 Works Constitution Reform Act also broadened the powers of work councils, by supporting the establishment of work councils and promoting higher numbers of full-time work council members (Addison et al. 2010: 248). Employers also prefer dealing with work councils, because they are perceived as more flexible than union officials (Addison et al. 2010, p. 248). Based on these references, the functions of work councils is to safeguard worker rights and interests, although with balance for competitive and strategic concerns of firms and plant levels. They are often ready to try out new workplace agreements and systems, so that they can bring into line different corporate and worker interests (Behrens & Jacoby 2004; Berg 2008; Brettschneider 2008; Doellgast 2009; Marsden 2008). The role of national, industry and enterprise bargaining in the German system of employment relations is connected to union strength for some industries, although work councils are experiencing greater authority in enterprise bargaining levels. Since the 1980s, collective bargaining through unions in Germany has decreased through the introduction of “managerial participation” through lean manufacturing practices and new concepts of production (Bamber et al. 2004: 228). Bilateral bargaining, instead of collective bargaining, created a tripartite negotiation system, wherein the management has become a more active actor of employment relations (Bamber et al. 2004: 229).For instance, Brenke (2004) studied the incidences of collective bargaining agreements. Findings showed that these agreements continue to be used and applied by the chemical industry, but not the metal industry, which is generally made of smaller firms. Collective bargaining agreements, nevertheless, are more industrial in nature, while work councils bargain more at firm levels (Keller 2004: 233). On the one hand, trade unions often aim for collective bargaining agreements at national and industry levels. They seek for across-the-board wage increases and work conditions. They believe that every employee should enjoy the same minimum wage and work conditions. Enterprise bargaining, on the other hand, applies more to small and medium-scale enterprises than for industries (SMEs) (Keller 2004: 233). Work councils are more involved with enterprise bargaining, because they are formed at company levels. They might work for company-wide employment relations, such as demanding the same working conditions in branches across the world. In the case of Germany, national bargaining is not present and instead, sectoral bargaining dominates its employment relations system (Keller 2004: 233). Two-thirds of all contracts are sectoral, while the rest are entrepreneurial, courtesy of work councils and trade unions (Keller 2004: 233). Nevertheless, many agreements have entrepreneurial dimensions, because of the cumulative role of employers in influencing company agreements, which will be discussed more in the following sections (Keller 2004: 233). The next to be assessed and discussed is the role of unions in firms. The role of unions in the German system of employment relations is to defend worker rights and social welfare entitlements for the unemployed and to prepare work councils for their functions of promoting worker rights and interests. Despite the mentor role of trade unions to work councils, union membership continues to decline after the unification of Germany and this became more marked in the East, when union membership was once 100% (Behrens 2009: 275). Though some unions noted that they should increase recruitment, many did not aggressively hire new members (Behrens 2009: 275). Instead, trade unions have become generally more focused on working with work councils to protect worker rights in organisational levels (Behrens 2009: 275). The WCA gave unions free access to establishments, as long as they work with work councils, and this started the “symbiotic” relationship between the two (Behrens 2009: 275). Furthermore, many work council members are also union members (Addison et al. 2010: 248). Trade unions also train work councils, so that the latter can accomplish their negotiation functions more effectively (Behrens 2009: 275). They also train the latter in promoting union membership, because they find it indispensable that strong unions are also needed to back up the functions of work councils (Behrens 2009: 275). Work councils are thankful of the training and education opportunities from unions, though it is not empirically clear from studies if they also organise members for union participation and membership (Behrens 2009: 275). The role of the employers in the German system of employment relations has changed into something that is more supportive of decentralisation of collective bargaining agreements and work councils (Behrens 2009: 278). Many firms are tinkering with their collective bargaining agreements to fit more enterprise levels and needs, and some are even doing this in unlawful manners (Keller 2004: 233). Numerous employers also want to interact more with work councils, whom they can influence to become more understanding of organisational strategies, compared to trade unions (Behrens 2009: 278; Keller 2004: 233). These articles showed that employers are gaining negotiation strength, by determining weaknesses on the WCA, but whether this is done spitefully serves should be further investigated by future studies. It can only be inferred that since employers cannot openly infringe on sectoral agreements, they can sway important agreement factors and make them more aligned with corporate aspirations. The future conditions of the German system of employment relations will merit further analysis. The role of trade unions and work councils continue to be complementary and they are foreseen as married in terms of advancing worker rights (Behrens 2009: 278; Keller 2004: 233). However, the state and employers endeavour for firm and industry competitiveness, even if it means undermining trade union powers in collective bargaining and other forms of bargaining systems (Behrens 2009: 278). The result of these actions and goals is a form of social partnership and cooperative model of employment relations, wherein trade unions and work councils, but more precisely, work councils, are experimenting in new kinds of work agreements and interrelations. It is argued that, if compared to Australian industrial relations, which is becoming massively individualised and entrepreneurial, German employment relations will remain true to its collective nature through cooperative and social partnerships among employers, the state trade unions and work councils. Trade unions will become less influential in the next ten years, if it cannot provide a more evocative mission for workers, particularly in the context of globalisation and competitiveness needs of Germany in national, sectoral, and firm levels. Work councils might soon completely replace trade unions, especially if they can balance worker and company rights and interests, for the benefit of all stakeholders. Furthermore, conducting experiments in the employment relations level will produce new variants of collective agreements that blend entrepreneurial, individual, and collective/sectoral interests, which is more appropriate in this constantly changing business world. The system of German employment relations will continue to be transformed to a social partnership and cooperative model of employment relations, where work councils play a large role in entrepreneurial levels. 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