Collective Bargaining Definition Objectives Examples

Collective Bargaining Definition

Objectives of Collective Bargaining

To foster a pleasant and cordial relationship between employer and employees.To equally safeguard the interests of both employer and employees.To ensure that the government intervention is maintained at a minimum level.To encourage the maintenance of a democratic environment at the workplace.

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How does it Work?

In collective bargaining, negotiations occur between the employer’s management and the labor union leaders, who represent the trade union workers. The union members pay the labor union leaders for representing the latter. The negotiations result in the collective bargaining agreement, which describes the rules of employment for a certain number of years. Collective bargaining is very important because dissonance between employer and employees can result in various antagonistic events, such as labor strikes, lockouts, etc.

Collective Bargaining Examples

Example #1

In 1968, the National Football League Players Association (NFLPA) players went on a strike to pressure the National Football League (NFL) team owners to increase the minimum salaries and pension benefits offered to the players. Eventually, after 11 days of strike, a collective bargaining agreement was reached between NFLPA and NFL team owners. The salaries of both rookies and veterans were increased along with the pension benefits.

Example #2

In 2018, a 4-year collective bargaining agreement was reached between the United Steelworkers (USW) and United States Steel Corp (USSC). As per the agreement, each member will be given a signing bonus of $4,000, a 14% wage hike over the next four years, and increased pension benefits. The agreement ensured that the employees’ share in the profit distribution increased. It resulted from the pressure created by the union after years of stagnant pay growth as USSC suffered due to low steel prices.

Types of Collective Bargaining

It can be classified into five major types –

Distributive Bargaining: In this type of negotiation process, one party benefits at the expense of others. It discusses redistribution of profit sharing to increase wages, bonuses, or financial benefits.Integrative Bargaining: In this type of bargaining, the agreement is reached so that both the participating sides tend to benefit – a win-win situation. In other words, both parties consider each other’s needs and concerns.Productivity Bargaining: In this type of bargaining, the negotiations revolve around productivity and pay. The two parties agree to certain changes that promise to boost productivity in exchange for higher wages.Composite Bargaining: This type of negotiation emphasizes various factors not directly related to pay but rather focused on employee welfare and job security. It ensures the long-term relationship between employer and employee that is mutually beneficial.Concessionary Bargaining: In this type of bargaining, the union sacrifices some benefits to bail out the employer during the stressed economic situation, which benefits the employees in the long run.

Models

Negotiation: In this process, two conflicting parties or their representatives discuss among themselves, without the involvement of a third party, to settle themselves. However, most involved parties hire seasoned lawyers themselves to settle such matters.Mediation: In this process, a neutral third party acts as the mediator between the conflicting parties to settle. The mediator aids communication between the two parties and ensures that it occurs fairly, honestly, and impartial. They help identify and clarify the underlying issues of the dispute.Arbitration: In this process, the third party, known as the arbitrator, decides on the settlement. The arbitrator listens to the arguments of the conflicting parties and then makes an informed decision, similar to what a Judge does in the court.

Importance of Collective Bargaining

The importance of collective bargaining can be ascertained from the point of view of – management, trade union, and government.

Management: The primary objective of the management is to make maximum utilization of the workforce and earn higher profits. It can only be achieved if the workforce co-operates, where collective bargaining comes into play.Trade Union: Each labor at the individual level has poor bargaining power against the management. Hence, the working class united to form a powerful union and protect their interests through collective bargaining.Government: Typically, collective bargaining keeps the Government at bay, and they are not required to employ force to resolve disputes.

Advantages

Both parties get to understand what to expect from each other.Employees are safeguarded from exploitation by employers.The management has to deal with a small number of people (trade union leaders).

Disadvantages

Only a few people decide on the settlement.It is costly, both in terms of money and time, as representatives have to discuss the same thing multiple times.