Overtime Practices in Germany - Case Study Example

Overtime practices in Germany Introduction The standard or the concept of over time is different in Germany and this thesis will try to explain the striking difference between the other countries and the principles that has been followed in Germany. The investment nature of overtime will be studied and the concept of whether workers used unpaid extra work to increase productivity in fear of losing work. The fact that United States market has been regulated when it comes to labor market and United Kingdom and German market has been unregulated when it comes to labor market. Overtime is usually related positively to fix non labor wage costs and decreases in wage rate and standard hours. The concept of overtime is that excess of working hours beyond the normal establishment hours .There should be provision for meeting the demands of overtime and that can be agreed by collectively or by individual agreement. There has to be provision for normal pay and pay supplements will be agreed for extra work that has been done. The employment law in Germany has not been consolidated into a single labor code and it is normally based on the service contract provision of German Civil code and there will be lot of individual statute. The collective agreements will have legal status and there has been collective labor law and the precedent taken by judicial has helped to develop a systematic body of rights. The human resource policy that has been followed in the land of Germany has helped in to develop a healthy economy. The sound Human resource policy in the company of Germany has helped the sustainable growth in economy and has been development in political and economic structure of Germany. The perfect balance of the company has been maintained by sound economic policy. The Human resource policy should be done in such a way that the employer and employee have been benefitted. There should be clear provision for paying overtime. There has been comparative change in the formal policy of Human resource across Europe. CHANGES IN SELECTED HRM PRATICSE IN GERMANY Formal representation of hr on board 1991 1995 2000 Spain 86 75 75 France 86 82 87 Germany 30 42 46 (Wächter, 2002) The term of wages and benefits can be said to vary considerably among industries and depending on whether or not the company is subjected to collective bargaining environment. The normal working time in most industries in Germany is 35-40 hours per week with senior managers working more to accommodate the business needs. The concept of minimum wage has been debated on the political circles in Germany. The collective bargaining agreements will establish minimum terms and conditions for employment only for those companies that are bound by agreements and collective bargaining agreements will not be establishing a maximum wage and that means many companies will be paying wages above the agreed pay scale. The regular staff will be receiving the overtime pay in excess of the basic hourly pay that has been fixed and the case of middle and senior management is that they will not be receiving any overtime pay. The employment law in Germany will be applicable to all employees and federal Vacation Act in Germany will be providing for a minimum of 24 days paid leave of absence per year and that will be based on a six day week and the 20 days that will be based on five day week. There will be 28 to 30 paid leave absence per year and that will be based on five day week which can be termed as common. The medical and employment insurance will be normally covered using compulsorily state plans and the cots which will be shared on equal plans or basis between the employer and employee. The company plans in this area is normally uncommon. There is strict state pension plan that will be working on the same principle and the benefits under this plan are considered to be insufficient and that means company will be offering additional employer sponsored plans. The German labor unions will be negotiating collective bargaining on wages and hours and other terms of agreement. The employment structure in Germany The employment persons in Germany are normally divided into following groups like the managing directors in private limited company, executives, workers,employees,apprentinces,self employed person, home worker, business men, and sales agents that are not employees. The children from the age of 13 have been allowed to perform easy work and that has been restricted for two hours daily. The adolescents from the age of 15 have been allowed to work a maximum of 4 weeks and that has been allowed to be done in school vacation. There is provision for employing the disabled persons. The employers having 20 work places monthly must be employing 5% of disabled persons in work place. The regulation of working time The working time that an employee has to work will be stipulated by the aw on working hours and will be valid for all employess.There will be certain exceptions and that has been extended for executives and persons aged under 18.The exemptions will also extend to civil servants and people in military service. The definition of working time has been said as the time that is from beginning to the end of the work and that too without resting periods. The working time of an employee may not be extending beyond 8 hours and that can be temporarily extended up to 10 hours daily. That should be done within six months or within twenty four weeks and the frame work that has been given by law on working hours will be extended by agreements and that will be made by the collective bargaining parties or the business parties and there will be special approval by the responsible authority. The normal procedure is that working in Sundays and holidays are not allowed and there would be exceptions for enterprises having different shifts. There would be exceptions for enterprises having constant work and essential work that can be classified as paramedics, doctors, nurses and firemen. There will be exceptions allowed for urgent works that cannot be postponed to workdays. There will be modifications to regulation in collective agreements, bargaining agreements and there should be approval of regulatory authority. There are specific regulations that are provided for night and shift working. The overtime that has meant working over the regular stipulated time has got meaning in Germany. The collective agreements has defined the overtime as those exceeding the regular working time and that has been due to collective agreement that can be defined as extra work. There is no special statutory provision for the payment of overtime and extra work. The normal course is that there will be no special statutory provision for the payment of overtime and the payment will be subjected to agreements in the working contract. The employment relations that have been tied to the collective agreements and collective agreements usually contain detailed regulation about the payment of overtime and extra work that the employer will be taking. The general term is that there will be a surcharge of twenty five per cent that will be paid for overtime work in normal days and there will be bonus of 50% for Sundays and holidays. The overtime that has been undertaken by apprenticeship will be normally compensated by time in lieu. The salary structure The gross wage will be representing the agreed amount of compensation and the net wage can be calculated by deducting the amounts from gross wage There have been taxes and that can be said as employment tax and that can be said as income tax prepayment. There is another form of tax that can be said as solidarity tax and that means surcharge to income tax and corporate tax. That has been introduced for garnering financial support for new states. The current amount of solidarity tax will be 5.5 % of the income and corporate tax.( Müller,2005) The constitution of solidarity tax will be currently subjected to a procedure at the supreme federal constitutional court and tax assessments concerning solidarity tax will be made provisional until the court will be saying a final decision. The employee will be made to pay a tax in the form of church tax that can be said as employees of Roman Catholic and Evangelical church and in Baden –Wurttemberg and in Bayern 8 per cent. The other states will be having 9 per cent of wage and income tax. There will be social security contributions. The employer will pay the employer contribution to the social contributions and that will also cover the insurance based on the gross wage. There should be assessment for payment of maternity grant and there will be assessment for partial payment of wage to the employee in case of illness. This will be happening in enterprises having less than 30 employees. The annual contributions that have been made for responsible indemnity association and the wage cost will be having 20per cent to 25 per cent higher than the gross wage.( Schmitt,2003) There are many conditions or situations in which the worker may be working unpaid overtime There are conditions in which the work may be complex and there will be uncertainty to the additional time that will be required to execute the job and the company may be hoping to continue with present employee rather than taking a new hire. There are conditions in which the employer and the employee will be bargaining not over the additional wage but about the additional time that is needed to complete the job or task in hand. The contract should be done in such a way that the participation constraints from both parties will be solved. There has to be provision for overtime as the worker may be taking unpaid overtime work in order to complete the task and that is not happening through the fault of employee. The managers and professional workers will be undertaking complexity jobs with the help of multi task human capital and organizational skills. There are some firms that will be allowing the workers to compete in order to perform certain job tasks and that competition can take in form of bidding process. That will surely put pressure on less productive workers as the pressure of doing the work on time will create additional pressure and the bid will be taking place on the length of the time that is required to complete the task in hand. The extra time that will be spend to complete the task will be creating a situation of overtime work without payment. There are situations in which the leaders may be working overtime without receiving payment and there are enterprises that will be organizing workers based into specific group productivity. The group may be facing a situation in which the workers may be absent and that can create a situation in which the team leaders may be forced to work extra without overtime. That has to be solved using performance appraisal in which the employee contributions to the project should be understood by the contributions made and suitable remunerations has to be made through it. The concept of minimum wage The principle of contractual liberty states that the amount of the payment that the employee can be given can be freely agreed on the contract. (Matiaske, 2002) The legislation will also assume a structural imbalance between the employer and employee and that can lead to unethical low wage and that can also lead to unrestricted liberty of contract. There has been regulation regarding the amount of compensation and the wage that does not comply with the usual payment will be resulting in 1/3 less than usual and the wage agreement is unethical and can be termed as null and void. The compensation in such a case will result in void wage agreement. The hourly minimum wages as per July 2007 can be represented as follows Segment wage Building trade 8,40 € to 12,40 €, Roofing trade 10,00 € Painter and Varnished trades 7,15 € to 10,73 € Demolition trade 8,80 € to 11,60 € Commercial cleaning 6,36 € to 7,87 € Electrician trade 7,70 € eastern states, 9,20 € western states (Gooderham, 1999) The structure has been that it has changed for the unified Germany. There is an element of overtime policy that has been changed over the years and it has to be discussed in little bit detail. The human resource will have to look at the concept of overtime not only from the legal point but also from the human resource point There should be transparency from the point of the human resource department that can tell the employee or group of employees are working overtime and why this has been made possible. There should be clear guidelines whether the overtime will be compensated or not and if the answer is no what are the reasons for not compensating. If compensation is given, what will be the compensation given and how much should be the payment made? The main aim should be that employees should be wholeheartedly to the task in hand. There should be periodic updates about the situation to employees so that they will not feel disillusioned. There should be clear guideline on rewarding the employee who has taken in overtime work and that should be even by cash or without cash. There should be clear guideline on the top management to put that extra work and that means everyone in the company should be contributing. Keep them in the loop. After you've explained the situation to your employees, continue to give them periodic updates about the situation, particularly if you reassured them that the situation is temporary. If they can see light at the end of the tunnel, they will be less likely to complain and more likely to work harder to complete the job. The concept of overtime has strengthened the fact that the human resource policy in Germany is unique in its approach and that means other country Human resource policy like from America cannot be transferred to German context. The demands have to be met through meeting the socio economic context. The managerial demands have been met by institutional framework that has been in Germany. This is different from other countries.( Jacobi, 1998) The human resource policy has seen that there is adequate basic compensation and performance related pay. There has to be understanding of German compensation system and that has to be distinguished from regular or tariff employees and exempt. The power of collective bargaining will ensure a high minimum wage for tariff employees and the concept of variable pay account will be less for overall salary. The bonuses have been not fixed as motivational tool as the bonuses are fixed and the other types of bonuses are distributed normally on a annual basis. There has been concept of strengthening the concept of individualized performance and Unions has accepted the concept of individualized pay. In certain industry in Germany, the employee associations and unions has started to have a model developed that has been linked on performance appraisal and compensation. There has been different approach in work councils and employee representations in which there is strong resistance against in converting collective compensation into individualized system and that may lead to decreasing solidarity between the employees and wages. The concept of compensation has been based strongly based on the developments in the labor market and change in company policy and individual negotiation. The concept of variable and performance related pay will be playing an important role with increasing hierarchical level and that has been low when compared with other countries. It has to be considered important for German labor market institutions and that has to seen as compensation by drawing sharp line between tariff employees and exempt. The concept of collective bargaining and that will be providing a stable frame for individual compensation and that will be strongly reducing the managerial autonomy with regard to tariff wages.There has to be some negotiations between the company and work council and agreements in collective bargaining has been somewhat flexible in the recent times. There has been certain industry that has been allowed to pay wages that can be said as minimum level for new employee. The Unions has been supportive implementation of more variable and work council has been critical about development. There is very little limited influence of market labor instructions and Employee related pay has become more important these times. Conclusion The labor market institutions have been restraining managerial autonomy on human resource issues to a large extent. That does not mean that the principle of overtime has been rejected. It can be argued that there has been support for training and communication principle .The principle of German Human resource principle has been taking shape in the year 1980 and there has been still inhibition of applying Human resource management principles and practice and that means appraisal and performance related pay. The resistance has been changing over the years and that has given way to more innovative solutions. The Human resource presences in the executive board of German companies that are having more than two thousand employees are small and that has also been changing in recent years. Reference Gooderham, 1999," Institutional and Rational Determinants of Organizational Practices: Human Resource Management in European Firms", Administrative Science Quarterly, Vol.44,pp. 507-531. Jacobi, 1998," Germany: Facing New Challenges? ", Changing Industrial Relations in Europe, pp. 190-238. Matiaske, 2002," On the Organization of the Academic Field of HRM in Germany", Tijdschrift voor HRM, Vol.2,pp. 115-117. Müller,2005," Changes in Academic Work and the Chair Regime: The Case of German Business Administration Academics",Organization Studies, Vol.26(2),pp. 269-288. Schmitt, 2003,"A Cost-Minimization Approach to the International Transfer of HRM/IR Practices: Anglo-Saxon Multinationals in the Federal Republic of Germany", International Journal of Human Resource Management, Vol.14 (3), pp. 409-430. Wächter, 2002," Co-Determination and Strategic Integration in German Firms", Human Resource Management Journal, Vol 12(3), pp. 76-87. Read More