Local agreement can reveal its strength

The ink had barely dried on the latest collective labour agreements (in Finnish: työehtosopimus, TES) of the Technology Industries of Finland and The Federation of Professional and Managerial Staff YTN when Minna Helle, Executive Director of Industrial Relations at the Technology Industries of Finland, started wondering out loud whether the agreements should be ripped open.

Helle complained about the poor state of companies in the June issue of Suomen Kuvalehti magazine. According to Helle, the COVID-19 slump may become so deep that employers can no longer stick to the agreements.

You can always agree locally on better terms than the ones given in the collective labour agreements, and also on worse terms in exceptional cases.

At the end of August, Helle had already given up the idea of reopening the agreements, but stated in an interview by Yle that few companies can afford the increases that the agreements require. Helle anticipated that the upcoming winter would be quite a test to local agreement, but hoped that the positive culture of local agreement would pull companies through and flexibility options could be utilized.

Labour Market Director of TEK and Chair of YTN Teemu Hankamäki believes that local agreement can be successful when there is a clear need for such agreement and the parties can trust each other.

– It has been years since we first agreed in the collective labour agreements concluded with the Technology Industries of Finland that several terms of employment can be agreed locally. This also applies to annual salary increases. You can always agree locally on better terms than the ones given in the collective labour agreements, and also on worse terms in exceptional cases.

Next year’s salary settlements must be negotiated by mid-January, but discussions can already begin now, if needed.

Negotiations are a must, but agreements are not

According to the collective agreements between the Technology Industries of Finland and YTN, salary settlements shall be negotiated locally, allowing for the financial, order book and employment situation of the enterprise or workplace, and for cost competitiveness in the market.

In practice, this means that the employer shall provide the employee representative (in Finnish: luottamusmies) with the information concerning the financial, order book and employment situation of the enterprise or workplace in good time.

After this, the employer and the employee representative settle the manner of implementing salary revisions, their timing and their size. 

– The agreement contains the obligation to negotiate, but there is no obligation to contract.

The employer or the employee representative can therefore state that nothing is agreed when it comes to salaries. However, Hankamäki encourages the parties to always hold genuine negotiations, even if they do not ultimately lead to an agreement.

According to Hankamäki, this ensures that the financial situation of the company has at least been discussed with the personnel and the common understanding is certainly better than without any negotiations at all.

– We must now trust in local agreement and the fact that if companies are not doing well, the parties have the ability to take this into consideration locally. On the other hand, some companies are faring quite well and can agree on a raise of, say, five percent. The collective agreement does not prevent this.

Protected by a safeguard

The collective labour agreements concluded by YTN usually include a safeguard for salary increases.

The safeguard (in Finnish: perälauta) refers to a clause in the collective agreement whereby employees are given a specific, pre-determined raise, if a local salary settlement is not reached.

According to the collective agreements of YTN and the Technology Industries of Finland for 2021, in such cases everyone’s salary will increase by 1.2 percent and the employer can decide how to pay the remaining 0.8 percent.

Especially the employers were concerned about the safeguard in the autumn. On the other hand, the safeguard protects the employees, because even if agreements are not reached, the employees still get a raise.

It may be reasonable for employees to also settle for a salary that is lower than the safeguard level, if the survival of the company is at stake, for example.

– Another option is to reach an agreement that postpones the salary increase, says Hankamäki.

According to Hankamäki, the collective agreement generally gives companies more leeway when it comes to agreements, compared to what labour legislation alone enables.

– Labour legislation provides relatively limited local agreement options compared to collective agreements. The law imposes a certain minimum so that the employee would at least have some basic terms that they cannot give up, even if the employer suggests it.

Trust between employees and employers is always a good thing, but it is best to play it safe. This is what Hankamäki’s last reminder is all about.

– A local agreement should always be made in writing and it must state who and what it concerns and what has been agreed. A local agreement can be fixed-term or permanent, in which case the term of notice is usually three months.