Introduction of New Union Pay Structure
During the 2002 pay negotiations, the employers in the German metalworking and electrical engineering industries and the unions agreed to abolish the distinction between salaries and wages. The employers and the unions laid down that they would merge the collective bargaining agreement for workers and the collective bargaining agreement for white-collar employees in a collective bargaining agreement on remuneration paid in the sector.
The parties fixed the dates on which the new collective bargaining agreement on remuneration would take effect in the different regions. The changeover period after the effective date is in most regions five years. Employers have the right to decide within this period when exactly the new remuneration system is introduced. Following the changeover period the new remuneration system must be applied.
In North-Rhine Westphalia negotiations on the new remuneration system continued until December 2003 and were finalized on 18 December 2003. The new system must be introduced by all members of the employers’ association between the beginning of 2005 and the end of 2008. GEA Group made the changeover on 1 March 2006.
After the introduction of the new remuneration system, the base pay of an employee is determined by a pay grade to which blue and white-collar staff are assigned depending on their jobs.
The description of each job is a substantial challenge. GEA Group has installed a scoring system for the assignment of jobs to pay grades. The score uses criteria such as the time required for instructions, learning and training, professional experience and the degree of independence at the job.
The evaluation produces an overall score for assigning jobs to pay grades. An employee in a job where requirements are simpler than in other jobs will be assigned to grade 1 and will receive the lowest base pay. Requirements are highest for grade 14 employees.
Apart from the base pay, the remuneration comprises a performance pay, an allowance for particular work loads as well as once-off payments such as the Christmas bonus and the vacation pay. The performance bonus is the first pay constituent in the sector that introduces modern performance thinking into the union-negotiated remuneration system.
The employers and the unions also agreed that the new remuneration system should not operate to increase cost. On the other hand, though, labor cost would have increased due to job upgrading. For this reason the 2002 collective bargaining agreements provided that part of the salary/wage increase would not be paid to staff, but transferred to a separate account to finance upgrading by the introduction of the new remuneration system. This mechanism ensures that remuneration under the new system can be exactly 2.79% higher than total payroll expenses under the old system without increasing cost.
The advantages of the new remuneration system are apparent. Contract terms are now the same for blue-collar and white-collar employees. The same criteria apply to pay and conditions of work. The transparency of the system has improved. The remuneration system finally allows the employer to reward good performance.
