Abstract
The decentralization of collective bargaining raises important issues, especially in the Nordic countries, where collective bargaining is centralized at industry level. These countries also have a ‘single channel’ of representation through trade union structures at both national and workplace levels, in contrast to much of Europe where there is a formal separation between works councils (as bodies for consultation and codetermination) and trade unions (as bodies for collective bargaining). This article reports research findings from Finland, where strong union branches have better capabilities in conducting the simultaneous tasks. If unions cannot actively develop the agenda for local bargaining, further experimentation in joint consultation can be expected, and this will provide a real test for the authority of local unions. The findings have broader implications for Nordic industrial relations.
Introduction
This article compares and contrasts local bargaining and codetermination in Finland with other countries, especially Scandinavian. Although Finland is a latecomer compared to other Nordic countries in terms of industrial relations (Bergholm, 2003; Kettunen, 2004), it has converged with them in recent decades. Union density has recently fallen in the Nordic countries, but remains comparatively very high: in 2008, 70 percent in Finland, 71 percent in Sweden, 75 percent in Denmark and 55 percent in Norway (Kjellberg, 2010).
In much of Europe, statutory regulation plays a key role in industrial relations; but the Nordic model places greater emphasis on self-regulation though collective bargaining (Due et al., 2000). Sweden is a prime example: wage negotiations and union structures have traditionally been largely free from state intervention (Elvander, 2002). Generally speaking in all Nordic countries, sectoral agreements prescribe national standards and wage increases, while also laying down procedural and economic guidelines for local or firm-level pay arrangements. However today, there is a today great variety of two-tier bargaining models within Scandinavia; Sweden has seen the most far-reaching changes in this respect, with only a few sectors now bargaining over actual wage increases at central level (Stokke, 2008).
The historical trajectory of collective bargaining has evolved from local to central, and back to local. Collective bargaining was highly centralized at cross-sectoral level from the 1950s to the 1970s, but the dominant bargaining level has shifted back to the sector. The sectoral bargaining system has been under increasing pressure from employers since the beginning of the 1980s. In Denmark and Norway there was some stabilization in the late 1990s, and even a certain strengthening of tripartite negotiations in Denmark (Elvander, 2002), but in Sweden there was considerable decentralization (Huzzard and Nilsson, 2004).
In Finland there was also a vigorous attack by employers against the centralized bargaining system during the 2000s. For 40 years, Finnish industrial relations system involved centralized level income policy agreements (tulopoliittinen sopimus, TUPOs), complemented by collective bargaining at sectoral level; but In 2007, the Confederation of Finnish Industries (Elinkeinoelämän keskusliitto, EK) decided to end the system, under pressure from the large multinational corporations (Sailas, 2011). The Finnish bargaining system now involves coordination between the central, industry, local and individual levels (Pekkarinen and Alho, 2005).
Thus the Finnish framework for industrial relations at workplace level is in flux: employers have an opportunity to introduce management-led human resource management (HRM) functions into the sphere of employment relations, the latter having originally been jointly shaped with the unions. Codetermination procedures offer a platform for such interference: the Yhteistoimintalaki (Act on Cooperation within Undertakings), the backbone of the codetermination process in Finnish workplaces, obliges the employer to discuss such HRM issues as principles of remuneration, recruitment, training and the timing, application and reasons for dismissals with employee representatives. If shop stewards have sufficient skills to handle the negotiations, this allows them to contain the introduction of HRM, which until recently has remained largely irrelevant for Nordic firms because of the restricted managerial room to manoeuvre for recruitment, remuneration and termination of the employment contract. For example, an increase in performance-related pay has occurred while maintaining relatively strong union control (Lindeberg et al., 2004; Rogaczewska et al., 2004).
Processes of codetermination are often shaped by the ideology of social partnership (Huzzard and Nilsson, 2004). In Sweden, the distinction between ‘distributive’ negotiations and ‘partnership’ codetermination has recently become blurred, as unions have adopted more cooperative approaches in the distributional arena, and a number of new local social partnerships have developed alongside the traditional codetermination procedures. In the Nordic context, codetermination was originally considered merely an extension of employee consultation, a culmination of joint decision-making processes between representatives of employees and management (Knudsen, 1995). In Sweden, for example, the functions of codetermination have traditionally complemented those of local bargaining (Brulin, 2006).
Despite some Nordic studies of workplace partnership arrangements and codetermination mechanisms and their relation to union structures (Brulin, 2006; Huzzard and Nilsson, 2004), little is known of the division of labour between codetermination and collective bargaining, though Hassel (2002) has discussed such issues in the German context. Haipeter and Lehndorff (2005) have also investigated whether German works councils have become agents of the erosion of the industrial relations system, with the evident shift of regulatory competences from industry to the workplace level. Are Nordic codetermination committees, arising from cooperation within undertakings, up to their task in this competence shift?
Below I first outline the processes of local bargaining, codetermination and the intertwining of these two in Finland. Then I explain my research setting (five engineering workshops) and methods. My analysis examines the data from the workplaces in terms of codetermination and local bargaining. The conclusion discusses the implications for the Finnish labour market regime and the Nordic model more generally.
Workplace bargaining in Finland
Finnish employers are following the trend of total quality management and lean production, with associated HRM policies. While the whole industrial relations system is still based on industry-level agreements, technological innovations and globalization have advanced the flexibility and deregulation of work and encouraged the growth of collective bargaining at enterprise level (Gernigon et al., 2000). Viewed positively, company bargaining can be an effective instrument for maintaining employment and allowing companies to find flexible ways of coping with increasing pressures from the market. Viewed more critically, such bargaining decentralization may undermine the solidaristic Nordic model and undermine trade unionism.
However, in contrast to ‘disorganized decentralization’ characteristic of countries such as the UK and the USA, the Nordic countries have undergone a form of ‘organized decentralization’, a consequence of their high union densities, the scope of collective agreements, and the presence of union shop stewards (Ilsøe, 2010). Even if there may be a spectre of ‘internal erosion’ involving a shift of regulation from industrial to company level, as has occurred in Germany (Haipeter and Lehndorff, 2005), large-scale ‘external erosion’ (declining union membership) is unlikely in the Nordic countries. Furthermore, though the erosion of Modell Deutschland has been associated with works council representatives agreeing concessions which contravene collective agreements (Whittall, 2005), the presumption in the Nordic context is the enduring involvement of union representatives in both collective bargaining and codetermination processes.
Since the collapse of TUPOs in 2007, the Finnish industrial relations realm has been dominated by industry-level collective agreements, which still set very strict boundaries for increasingly prevalent company bargaining. At company level, it is now possible to conclude agreements which substitute elements of sectoral agreements, but such agreements remain rare. As in Sweden, company bargaining is encouraged but if it fails, the sectoral agreement is the fall-back (Huzzard and Nilsson, 2004). In Finland this has meant that overall, there has been less emphasis on company bargaining, even if such negotiations have indeed increased since the early 1990s (Finnish Work Environment Fund, 2008).
A special feature in Finnish industry is that while a general wage increase is set by industry-level agreement, the way it is allocated to workers is determined at company level. For example, in 2008 the general wage increase in the metal industry was 2.5 percent, while an additional 1.6 percent was allocated in accordance with the individual worker’s skills and competences. If company negotiators were unable to agree the differentiated allocation of this sum, every worker received 0.9 percent in addition to the overall increase.Although the employers view sectoral wage floors as inhibiting the creation of low-wage jobs, they do not seek a completely decentralized system (Pekkarinen and Alho, 2005).
Company bargaining is used in 44 percent of Finnish workplaces, but 28 percent of these have difficulties in applying the terms of the agreement. Problems are more widespread concerning wage agreements than relating to working hours (Ihalainen et al., 2007; SAK Shop Steward Survey, 2010). In a study commissioned by the key employers’ associations and union confederations, the idea of company bargaining was generally supported by both sides, although this form of agreement has provoked controversy (Finnish Work Environment Fund, 2008). The problems may reflect differing bargaining goals between employers and employee representatives. Trade unions would like to extend the scope of bargaining over issues concerning work design, and they seek greater involvement for shop stewards in company decision-making (Kairinen and Uhmavaara, 2007). This would fit well with the spirit of the Cooperation Act, amended in 2007. The employers, however, have rejected such initiatives on the grounds that these would diminish management power.
In Finland, company bargaining is typically conducted within three domains of work organization: wage incentives, flexible working hours and job descriptions. The idea of company bargaining has become more widely accepted since the early 1990s, and the 2000s witnessed an increase in the application of wage incentives (Kairinen and Uhmavaara, 2007). During the 2000s a variety of other new topics were included in the company bargaining agenda, including numerical labour flexibility, use of labour, change management, flexicurity, equality, safety at work, staff development and productivity enhancement. Nowadays, one of the parties most strongly advocating company bargaining is EK, which is, generally speaking, opposed to centralized collective bargaining.
Codetermination
The history of cooperation (yhteistoiminta, the usual Finnish term) or codetermination (myötämäärääminen), dates back to the turbulent industrial relations of the 1960s and 1970s, when the unions adopted the ideology of industrial democracy (Kahri, 2003). There was then no codetermination law but rather various agreements between employers’ associations and unions upon such issues as workplace rationalization and company housing. In the drafting of the codetermination, one model considered in bipartite negotiations was German works councils (Lappalainen, 2003). The negotiation process between the labour market parties partially resembled that in Germany three decades earlier, when the works council legislation was established as a compromise sought by employers to preserve their managerial prerogative inside the firm (Rogers and Streeck, 2006). However in Finland, industrial democracy did not involve a dual-channel organization for employee representation at the workplace, but invested enterprise union representatives with powers of codetermination (Kahri, 2003).
Negotiations between the labour market parties, promoted by the government in the face of economic recession, were successful in 1977, and the first law on cooperation within firms was passed in June 1978 (Lappalainen, 2003). Although this roughly coincided with the Swedish Medbestämmandelagen (MBL), the Finnish development occurred independently and reflected the unstable political and industrial relations situation. The original law moved some issues that were previously regulated by the Employment Contracts Act (Työsopimuslaki) into the sphere of codetermination, such as the grounds and timing of dismissals. In practice, the law has simply provided a procedure for dismissals, although the original intention was to incorporate employees into the design of organizational changes.
As the regulation of industrial relations in Finland progresses, demands for amendments to the 1978 Cooperation Act increased, and in 2007 a new, more detailed Act defined the scope for codetermination procedures in firms with more than 20 employees (previously 30). This specified information to be given to employee representatives and required consultation and codetermination on such issues as the general principles and objectives of the company, business transfers, the impact on personnel and on work arrangements of changes in business operations, personnel decisions and labour force reductions.
Cooperation is to be undertaken by a body consisting of both employee and management representatives. These procedures fit quite well the definition of works councils by Rogers and Streeck (2006: 6): ‘institutionalized bodies for representative communication’. However, the outcomes are not binding to the same extent as agreements made by German works councils. The cases of redundancies and company restructuring offer an illuminating example. In Germany, if disagreements occur the employer must postpone implementation until an amicable solution is found or a Tribunal issues a ruling. In Finland, the employer has fulfilled its ‘obligation for negotiation’ when consultations have been completed in the prescribed manner. For example, an employer merely has to negotiate for 14 days in the case of layoffs for less than 90 days, or for six weeks for more extended periods. If there is no agreement, the employer retains the right to dismiss on economic grounds.
One difference between Finnish codetermination procedures and the institution of works councils derives from the fact that these procedures do not assume any established body for negotiations; ‘cooperation talks’ can occur within an ad hoc framework. This strengthens the local presence of the trade unions, since no competing institution exists (Pekkarinen and Alho, 2005).
The intertwining of company bargaining and codetermination in the Finnish workplace
According to the 2007 Cooperation Act and the 2007 metalworking collective agreement, there is a clear distinction between the processes of company bargaining and codetermination. Traditionally understood, the issues of wages and remuneration, working hours and schedules, job descriptions and job evaluation are included in company bargaining. On the other hand, formal procedures arising from codetermination concern such issues as dismissals and labour force reductions, use of labour (e.g. agency work) and changes in organization. In some cases, the scope for codetermination may be extended to job evaluation.
While there has been an increasing push for company bargaining on the part of Finnish employers, new themes appeared on the bargaining table in the 2000s (Kairinen and Uhmavaara, 2007): matters formerly regarded as subject to codetermination or cooperation within undertakings, including the use of labour, organizational changes and flexicurity issues. Simultaneously, the demarcation line between codetermination and company bargaining is blurring. This poses a problem for employee representation at non-union workplaces: cooperation within undertakings does not guarantee union participation. According to the 2007 Act, the codetermination procedure is subordinate to collective bargaining: cooperation discussions cannot be started, or must be interrupted, if the issue under consideration belongs to the sphere of collective bargaining. But though the processes of company bargaining and codetermination have been different, they have been increasingly intertwining in scope (Kairinen and Uhmavaara, 2007).
One source of confusion surrounding the Nordic-type relationship between company bargaining and codetermination originates from the 2002 EU Directive which ‘established a regulatory framework for information and consultation system between the employer and employee representatives organized in works councils-type structures’ (Carley et al., 2005: 3). EU regulations put pressure on Nordic collective bargaining mechanisms as early as the 1990s (Due et al., 2000). Arguably, the creation of a statutory basis for information and consultation is not particularly relevant to countries such as Finland and Sweden, where employee participation and representation are based on the role of the trade unions and their codetermination rights (Broughton, 2005). Unlike the German dual representational system, the Nordic system is typically based on a unified representational framework in which the trade unions are formally involved (Due et al., 2000).
The development of Finnish industrial relations towards more bipartite decision-making at company level poses three questions: to what extent is the demarcation line between the two processes adhered to, and is the line becoming blurred; how are local union branches reacting to any such blurring of the demarcation line, if such a blurring exists; and how skilful are union negotiators in managing the simultaneous tasks of bargaining and codetermination?
Research setting
This research involves a case study approach. Although quantitative studies have the potential to discern trends in company bargaining, they do not provide full explanations of why particular tendencies prevail, or of the underlying processes behind the phenomena in question. The case study method is capable of filling this gap.
The five companies chosen for the study are from the North Karelia region, the easternmost province of Finland close to the border with Russia. The region has traditionally been one of the worst affected by unemployment, with a rate of 15.6 percent of the workforce in February 2010 compared to the national average of 9 percent. The local environment is not very favourable for business activity, since markets and suppliers are distant, and transport is consequently more expensive than in the south-west of Finland. On the other hand, market opportunities in Russia can potentially offer added value to the firms operating here. Wages do not differ radically from other regions since industry agreements are usually extended to all workers in Finland. Another adverse factor is that firms face the challenge of attracting skilled workers: the eastern corner is located in the periphery, whereas professional workers see the Helsinki region as desirable if they wish to develop their careers. Pseudonyms are used for all case firms, and basic information about each is given in Table 1.
Characteristics of the case study plants
All firms except Wood Harvest are suppliers to mainly Finnish manufacturing chains. Two were established during the 1970s and one in the 1980s, a favourable period for Finnish export industries. These companies suffered from the recession at the start of the 1990s, while those established in the 1970s actually went bankrupt, but restarted their operations within one year. Two firms were founded at the start of the 1990s, when Finland experienced its worst post-war economic recession, mainly as a result of the end of bilateral trade with the Soviet Union. However, the current recession has caused an unforeseen drop in turnover in the industrial sector, comparable to that of the previous economic recession: by 30 percent year-to-year in 2009 in North Karelia. In this respect the manufacturing sector performed worse than others, since the overall decrease was 20 percent year-to-year.
The case study companies were chosen from the metalworking sector, which is traditionally highly unionized, normally exceeding the general level in Finland. This implies that if problems occur in these firms in dealing with codetermination and company bargaining, they are very likely to be encountered in less unionized sectors as well. One must also note that the metal industry – especially the shipbuilding branch – has been famous for its militancy, although this trend has abated since the 1970s (Kahri, 2003). Metalworking is a flagship industry in terms of the current policy of sectoral collective bargaining, covering five different sub-sectors with 250,000 workers altogether. In 2009, the yearly wage increase (0.5%) negotiated between Teknologiateollisuus (Federation of Technology Industries) and Metalli (Metalworkers’ Union) was used by EK as a benchmark for all other sectoral agreements.
In the spring of 2010 I interviewed two managers in each company from the managing director, personnel manager, production manager or plant manager, selected according to the size and organizational structure of the company. The senior shop steward was also interviewed, as were four to eight employees, depending on the size of the site. It must be noted that the sample of workers at Wood Harvest was not as representative as at the other plants, given the far greater size of that factory. However, the selection of interviewees was systematic, with the respondents chosen so as to represent different sections or processes. The manager and shop steward interviews lasted about one hour, and those with employees 30–45 minutes.
Below I outline codetermination and firm-level bargaining in each company. I start with Wood Harvest, far the largest case with the strongest local union. The situation in the smaller firms is then discussed and contrasted to the first case.
Codetermination and plant bargaining in the case companies
Wood Harvest
At Wood Harvest, the trade union representatives are involved in weekly meetings concerning orders and processes, as well as bimonthly codetermination meetings, where the agenda allows a dialogue between management and union. Another subject of consultation or codetermination has been the scheduling of jobs: all scheduling planned by job inspectors is subject to verification and approval by shop stewards. In this process, the opinions of the workers are heard, with further checking of the calculations by the shop stewards. This indicates a relatively high level of workers’ control over the labour process.
According to the industrial relations manager, the factory has a long tradition of company bargaining, dating from the 1970s. The agreements reached ‘have not always been good’ but have been the result of strong pressure from the employee side. A number of the agreements have dealt with wages. In addition, a few locally bargained agreements have been terminated. The shop steward described the agreements at Wood Harvest as follows: ‘we have plenty of local agreements, oh dear, if I start giving a list of these, flexible working time is one of them, then as regards the wages system, we have adopted it in our own way and agreed on it . . . there are probably five or six written agreements’.
One agreement that can be considered beneficial for the employees has been a form of profit-related pay, evenly distributed among all employees. During the 1990s, management engaged in many years of experimentation with a piece-rate agreement before they realized that this would not work. Thereafter, the current wage agreement was concluded. The employee representative regarded plant agreements as useful for workers:
Have these company agreements been a good thing on the whole?
Yes, otherwise we wouldn’t have made them. At least, it isn’t our intention to make any bad agreements, since they are meant to improve things. . . . At the moment, we’re driving a hard bargain, we’ve been talking about an agreement on working time accounts, but we haven’t reached any agreement on that, since the conditions they’ve offered to us aren’t acceptable. For example they’ve been talking about the payment and conditions for Saturday work, and how we would put these hours into the account, the limits applied to the account system, all these things are still open questions.
A specific issue for company bargaining has been the suggestions bonus scheme in which employees may participate. The shop steward said: ‘now when we have this suggestion scheme, or the continuous improvement scheme, we’ve had to fix the amount of compensation and what it will be paid for, and the task descriptions and all that’. The ‘continuous improvement’ measures seem to be double-edged: the scheme has been cultivated in order to eliminate bottlenecks in the labour process which have provided the workers with necessary breaks in their work patterns. This may have contributed to a general increase in fatigue, a phenomenon reported by the workers interviewed.
However, the issue of company bargaining is uncertain. The employer is apparently seeking to determine the level of negotiation on labour issues with a view to implementing effective HRM policies. Wood Harvest belongs to a multinational company, meaning that issues of personnel management come under the general jurisdiction of the overseas headquarters. This has meant that some issues formerly negotiated at plant level are now subject to administration by the Finnish principal company (located in a town several hundred kilometres from Wood Harvest) or even at divisional headquarters. As described by the chief shop steward, a paradoxical situation has resulted, with genuine company bargaining actually decreasing. An employee shared the same concern:
I have no idea how strict are the boundaries set up for the factory manager, how much discretion he has locally . . . . For example, the change in the salary system, at one time, was determined by means of local powers, but now such issues are very easily subjected to [the Finnish principal company] and [the overseas headquarters] . . . . It has got quite complicated.
Elevator
Codetermination at this company seems to be on a fairly ad hoc basis rather than systematically organized. Nevertheless, the list of issues subject to codetermination procedures is quite long, involving dismissals, lay-offs, temporary agency workers, job specifications, job evaluation, wage structures and flexible working hours. Working time accounting is a clear topic of company bargaining, and another theme mentioned by the production manager was weekend shifts for machinists. In fact, it was not clear whether the chief shop steward was talking about ‘traditional’ company bargaining when he was asked a question concerning codetermination procedures:
We have not had codetermination talks as such, but there have been occasions when we’ve taken things up more vigorously . . . when we had temporary agency workers. That was when we had negotiations between the shop steward and production manager, mainly . . . .
How did they go?
The agreement was not renewed. It was about . . . we had Latvian temporary agency workers, and their wages were a bit of a grey area.
In a way, you were able to participate in decision-making, in so far as the agreement was not renewed. At least your efforts had an impact . . . .
I’m not sure whether my efforts had any influence or not. Anyway, the agreement was not renewed.
Another excerpt from the same interview supports the idea that the terms ‘codetermination’ and ‘local bargaining’ were used interchangeably at Elevator:
Have you any codetermination procedures on job specifications, job evaluation, and the like?
When we were putting our wage structures into practice, I don’t remember which year it was, then we had that kind of . . . . There was a set of discussions lasting about six months on that theme. Then about the same time, there were similar discussions on flexible working hours. The white-collar workers approved it but the manual workers didn’t. Since then it’s been almost forgotten, sometimes it’s talked about, flexible working hours, but . . . .
The reason why the workers did not accept the flexible working hours proposal was that it was the employer who had initiated the negotiations and wanted to determine the terms. Indeed, some features of the paternalism typical of rapidly growing family enterprises were apparent in the bargaining culture of the factory. When asked about the bargaining atmosphere, the production manager responded:
Sure, we have been able to agree on all sensible matters. But if the point of departure is that people know right from the beginning that one party is taking something away from another without offering anything in return, nothing will be achieved. In that situation it’s better not to start any negotiations . . . . Whenever we’ve had to lay off people, we haven’t negotiated about that, we’ve just fixed who would keep their job and who wouldn’t.
In other words, even though dismissals and lay-offs are in theory subject to codetermination with the employees’ negotiators, in real terms the employer is not required to consult employees. Furthermore, negotiations on flexible working hours and wage structures seemed to be conducted in the ‘grey area’ between company bargaining and codetermination. This raises the spectre that the local union branch would lack sufficient power for conducting both processes of company bargaining and codetermination, whereas the employer tends to be more favourably inclined towards consulting employees on bonuses and working hours rather than introducing the issues onto the company bargaining agenda.
Spare Parts
The agenda for codetermination at Spare Parts at the time of the interviews was fairly simple: lay-offs and dismissals. Two workers had recently been dismissed, and various options for laying off workers had been tried out. The chief shop steward had a high level of trust in the managing director’s way of handing the situation within the codetermination process, which began towards the end of 2008: the managing director ‘did his best’. He maintained that management’s arguments had been well explained to the employee negotiators, and that the process itself had been a two-way dialogue. The intention now was to start negotiations on job specifications and job evaluation.
Spare Parts had achieved a company agreement on work schedules, which made it possible for employees working the evening shift to do four 10-hour shifts per week and have Fridays free. Another locally-agreed issue was that the employer would provide free coffee during breaks. In a small engineering shop like Spare Parts, there is a fear of taking up further issues such from the bargaining agenda, as illustrated in the following comments by a shop steward:
Have you observed an increase in local bargaining?
It cuts two ways, the idea that an increase in certain company bargaining issues is a good thing.
Are flexible wages an issue of that kind?
Well, flexibility in wages is a good thing, if the movement is upwards.
There’s an overall principle that wage increases can be agreed locally, isn’t there?
Exactly.
Are you ready to be flexible about, say, working hours?
We’ve already been flexible about working hours, we’re ready to do three days a week. And also four days and five days a week. It depends on the job situation the following month.
Although management at Spare Parts has introduced a comprehensive system for controlling production, the question of potential control of the labour process has not arisen at the bargaining table. It seems that the small size of the company supports consensual industrial relations. This is illustrated in a remark by the shop steward: ‘they [management] respect the union here, and in fact they always ask the opinion of the union on various issues, when it’s been necessary to interpret some aspects’.
Light Parts
One reason for an almost total absence of codetermination is that in this factory there have not been any lay-offs during the 2008–09 recession. Although most of the information and consultation with workers goes through the chief shop steward, there are only a few issues that are subject to company bargaining. One issue between management and union representatives involved the clause relating to a general wage increase in the industry collective agreement, the precise allocation of which was to be determined at the company level. The workers at Light Parts had decided to allocate the 0.5 percent wage increase equally to everybody. Working-time accounts have been another question in company bargaining; this matter was due for discussion at the time of the interview with the chief shop steward:
How about . . . if working-time accounting has been in operation, have you had any negotiations on that?
We discussed the limits [of the working time accounts], in a busy period, when we were in a hurry, we raised the limits of the hours that could be put onto the account, but we came back to the current system of plus or minus forty hours. . . . We’ve had talks on why some people have got that many hours credited to them, we discussed that.
At Light Parts, there is a special group called ‘group for profit-related pay’ that meets four times a year and that includes three members of management and four employee representatives. It discusses matters related to work organization, but the emphasis is on the follow-up of a company agreement on profit-related pay and working time accounts. These two issues are intertwined within the system: a worker who has signed an agreement on profit-related pay is supposed to join the account system. The managing director assured me that those not involved in the system would be the first to be laid off, should this be necessary – but fortunately for the workers no lay-offs had been needed during the current recession. If we take the words of the managing director literally, the application of lay-offs seems rather arbitrary. In reality, this issue is subject to negotiation, and such an arbitrary allotment of lay-offs is unlikely. However, neither the 2007 Metalworking collective agreement nor the Cooperation Act provides any reference to, for example, the principle of seniority during lay-offs.
In fact, the ‘group for profit-related pay’ is not based on union representation. In the words of the chief shop steward, ‘this group has nothing to do with the trade union’. The managing director confirms this:
it has representatives from the ranks of the employees. It has been freely elected by the workers. It does not have any representation from the trade union shop steward. True, he is also a member of the group, but not on the basis of that [trade union] mandate. They are all elected members.
All in all, the group is responsible for following up the de facto company agreement concluded between representatives of the company and the employees. There are separate agreements for manual workers, white-collar staff and managers. The managing director himself initiated talks with the company board in order to introduce profit-related pay: the concept was first applied to the managing director himself, then extended to white-collar workers, and finally to shop-floor workers.
With regard to the research setting, this firm is an interesting case, in the sense of possibly proving an exception to the rule of union hegemony in managing company bargaining. On the one hand, the ‘group for profit-related pay’ is meant to be a means of HRM, the aim being to enhance worker flexibility and save labour costs. To some extent, the employer has entered into a grey area between codetermination and company bargaining, and has managed to avoid defining whether or not it is the union’s responsibility to take part in the group’s activities. On the other hand, the chief shop steward seemed to be favourably disposed towards the group, because it granted the workers a ‘summer vacation bonus’ that may account for as much as one month’s salary. His attitude is neutral, despite the fact that the group is basically separated from trade union representation.
Obviously, the ‘group for profit-related pay’ represents a sophisticated human resource style, discerned at Nordic subsidiaries in the Baltic States, which does not require trade unions (Sippola, 2009). Accordingly, the case of ‘Light Parts’ may serve as a warning concerning future cooperation between management and the union. The chief shop steward has indeed been elected to the ‘group for profit-related pay’, a move which seems to be due to his own personal abilities, but what would happen if the shop steward was not re-elected (which, it should be noted, has a real mandate in negotiations over work-related issues)? A conflict with the trade union could be envisaged in the future, if this body turns from a mere consultative council into a representative one (Rogers and Streeck, 2006).
Conveyor
The firm started its codetermination process in 2008, when the recession began. At this juncture management invited all the workers to a general meeting. The process continued with consultation talks with the chief shop steward. The plant manager insisted that the managing director really looks after the workers, saying that the firm does not initiate lay-offs until the process can no longer be delayed. The managing director described what took place in 2008:
When there were lay-offs we got everyone together and told everybody the situation, and as well as that, we provided information in written form. No one had any questions they needed to ask.
Was the procedure successful?
In our opinion, yes. It didn’t take long.
How long did it take, then?
The meeting took about one hour. We told the workers the situation, what was going on, and then announced that we would have a normal six-week period of negotiations ahead. Although we didn’t actually have anything to agree on after this.
Conveyor has very limited scope for company bargaining. The plant manager mentioned only topic, involving working schedules. Management had introduced a new monitoring system for working hours, making starting and finishing more flexible: workers can start between 7.00 and 7.30 and leave between 15.30 and 16.00. At one time they had discussed the issue of working time accounts; but according to the shop steward, the idea ‘did not catch on’ – ‘the gentlemen [meaning the workers] were against any kind of flexibility’.
Conveyor was the smallest company in the sample, and although a number of issues were put on the bargaining table, and although the workers seemed to have considerable shop-floor power, the workers’ representative seemed to have an instinctive distrust of any increase in company bargaining:
Should wages be agreed on a more individual basis nowadays, or is it a good thing that an industry agreement exists as a basis?
I think it’s a good thing that there’s an [industry] agreement as a foundation. The way I see it, small firms would be in a weak position in terms of these kinds of bargaining issues.
Conclusions and discussion
This research aimed to determine how unions are accommodating to their roles as mechanisms for codetermination and company bargaining, taking five Finnish engineering shops as case studies. In more specific terms, the study aimed to investigate: first, how closely the demarcation between the two processes was adhered to, and to what extent it was becoming blurred; second, how local union branches were reacting to any blurring of the demarcation line; third, how skilful union negotiators were simultaneously conducting bargaining and codetermination.
The main finding is that the local union organizations had, generally speaking, and up to the present, been fairly successful in reconciling the two roles, with the processes of company bargaining and codetermination running smoothly alongside each other. In this sense, the present study extends to the Finnish context Levinson’s (2000) findings on the ‘participative skills’ of Swedish managers and unionists. There is a constant negotiation process at the local level (although narrower in scope in smaller firms), in which ‘genuine’ union bargaining and codetermination usually alternate. In general, no particular conflict of interest emerged with regard to union authority.
The issues connected with flexible working hours were a prominent area of company bargaining. Working time accounts have recently been introduced into company negotiations, which raises questions among employees whether they are genuinely meant for improving the conditions of labour or, rather, for gaining increased flexibility for the company as German evidence shows (Haipeter and Lehndorff, 2005). As expected, dismissals and layoffs constituted an important topic of codetermination, reflecting the economic depression of 2008–09, which hit most case study companies badly. The Finnish system does not allow much variation in wages within firms – something that occurs in the two-tier bargaining systems operating elsewhere in Scandinavia (Stokke, 2008) – since the benchmark for wage increases is set at sectoral level. A general wage increase of at least 0.5 percent set by the industry agreement was, in terms of its precise allocation, to be determined at company level. Hence it was automatically subject to company negotiations at all factories.
Nevertheless, wage premia were negotiated locally. A curious aspect of this is that these pay schemes (bonus payments at Wood Harvest, wage structures at Elevator, and profit-related pay at Light Parts) seemed to be negotiated in different forums. As regards wage bargaining and flexible hours at Elevator, the demarcation line between codetermination and ‘traditional’ company bargaining was blurred. Profit-related pay was subject to joint consultation at Light Parts, which may simply indicate a degree of underdevelopment in the trade union presence and a lower union density, as compared to Wood Harvest, where bonuses fell within the domain of company bargaining. However, the union increasingly experiences bargaining constraints of ‘strategic HRM’ cultivated by the headquarters, located in another country. The local union branch may find itself involved in the tightening grip of localized HRM, which is in turn subordinated to corporate strategic HRM.
The decentralization of collective bargaining will not pose any sizable threat to the Finnish industrial relations system as long as it is ‘organized’ (Ilsøe, 2010) – in other words, if it is associated with high union membership. In addition, part of the success story is the unified representational framework instead of two separate power bases as is the case in Germany, where a growing tension between works councils and trade union interests have led to plant-level deviations from collective agreements (Whittall, 2005). In the Finnish industrial relations system, the simultaneous conduct of codetermination procedures and company bargaining fits naturally into the functions of trade unions. Consequently, there is no real argument that a works council form of codetermination would give added value to the Finnish industrial relations system, even though interest in works councils is increasing following the 2002 EU information and consultation directive and the decentralization of employment relations (Rigby et al., 2009). Furthermore, as long as union densities remain high, it is unlikely that separate representation bodies will develop (Brewster et al., 2007).
Codetermination laws have provided Finnish employees with relatively strong rights of participation in company decision-making, thus allowing them a relatively high level of influence. Examples can be seen in the manner in which dismissals and lay-offs are subject to codetermination between management and employee representatives. However, ‘partnership’ codetermination can serve as a platform for negotiations on workplace restructuring – an issue that became reality in the case of works councils in the Netherlands throughout the 1980s (Visser, 2006). There is a genuine concern among the unions about the nature of the entire cooperation procedures: sometimes it is far from clear whether real codetermination occurs in case of dismissals, since the employer does have the power to dismiss workers on economic grounds.
It is clear that Finnish companies are becoming increasingly enthusiastic about shaping employment relations, wages and other terms of employment at the company level. In this way they hope to respond to increasing global competition, in the context of which they regard the traditional model of centralized national income agreements (TUPOs) as obsolete. One can anticipate that in the not too distant future, the employers will seize the initiative with regard to company bargaining – that is unless industry-level agreements lay down benchmarks for this activity. If unions are not able actively to develop the agenda for company bargaining, more experimentation in new types of social partnership – as in the Light Parts case – can be expected, and this will provide a real test for the authority of local unions. Even in plants with a long tradition of company bargaining (resulting, it must be noted, in considerable benefits for the workers), management has a desire for more ‘partnership’ codetermination that replaces traditional ‘distributive’ negotiations.
There is another possibility. Much depends on the development of national cross-sectoral agreements between labour market actors, which shows signs of revitalization in Finland. There is indeed a scenario that supports further divergence of Nordic labour market regimes (Elvander, 2002). In Sweden, the employers’ confederation withdrew from central wage negotiations at the beginning of the 1990s and the employers have maintained this position ever since. In Finland, a framework agreement between the SAK (Central Organization of Finnish Trade Unions) and EK in autumn 2011 might imply a return to TUPOs. This would mean a new impulse for traditional ‘distributive’ bargaining. And if simultaneously shop stewards remain involved in cooperation within the undertakings, as occurred in most cases in this study, trade union-based codetermination will be preserved also in the future. This makes a strong case for a ‘single-channel’ representation of workers in such a small and dynamic economy as Finland.