In Germany, wages and working conditions of employees may be agreed either individually with each company, but can also be negotiated collectively for the entire sector.
Collective wage agreements are concluded by trade unions and employers associations for their entire industry, or by trade unions and an individual employer.
Such collective wage agreements determine the minimum standards applying to the essential terms of employment and income. These include in particular:
- Wages, salaries, trainee allowances;
- Working hours, vacation;
- Special vacation bonuses and Christmas allowances;
- Periods of notice for a termination.
Scope of application; obligation to comply with collective wage agreements
- Collective wage agreements only apply to the collective bargaining sector for which they were concluded, i.e. a specific industry, a specific collective bargaining district or an individual company.
- The German laws governing collective wage agreements apply to the members of both parties to the collective wage agreement, i.e. union members and those companies who are members of an employers association.
- Basically, only the members of the trade union concluding the agreement in the respective collective bargaining sector are entitled to the provisions made and benefits granted under collective wage agreements.
- As a general rule, non-union members working for a company subject to a collective wage agreement are granted the same benefits nonetheless; however, they have no entitlement in this regard.
- As a general rule, non-union members working for a company subject to a collective wage agreement are granted the same benefits as union members, since these benefits are covered in the collective bargaining contracts.
- Many companies that are not a member of an employers association adhere to the collective wage agreements concluded for their respective industry. However, there is no obligation to do so.
- Those collective wage agreements that the Federal Ministry of Labor and Social Affairs has declared as being "generally binding" apply to all employees and employers in the collective bargaining sector.
(Sources: Federal Ministry for Labor and Social Affairs, 2019)
Percentage of employees covered by collective wage agreements in 2018
|Industry collective wage agreement||49||34|
|Company collective wage agreement||8||10|
|No wage agreement||43||56|
Figures may not add up to 100% due to rounding
(Source: IAB-Betriebspanel, 02/03/2020)
Alternatives to the collective wage agreement
Salaries and wages may be agreed by the company directly with its employees in two ways. Either the collective wage agreement concluded with a trade union is applied, or individual employment agreements are concluded with the individual employees. Payment arrangements can be made with the works committee if no collective bargaining contract is signed.
In general, those companies whose work conditions are not standard and who employ a small number of staff prefer to conclude individual employment agreements with their employees.