Collective Bargaining

 Concept – ILO defines collective bargaining as: Negotiation

about working conditions and terms of employment between an
employer or one or more employers’ organizations, on one
hand and one or more representative workers organizations,
with a view to reaching an agreement.
 The process is ‘collective’ because issues relating to terms and
conditions of employment are solved by representatives of
employees and employers in groups rather than as individuals.
 The term ‘bargaining’ refers to evolving an agreement using
methods like negotiation, discussion, exchange of facts and
ideas, rather than confrontation.
 The process of collective bargaining is bipartite in nature, i.e.
the negotiations are between employers and the employees
without a third party intervention.
 The process of collective bargaining is that divergent
viewpoints are put forth by parties concerned, and through
negotiations, a settlement is arrived at.
 Some of the salient features of collective bargaining are:

1. It is a ‘group’ process, wherein one group representing the

employers and the other group representing the employees
sit together to negotiate terms of employment.

2. It is a process in the sense that it consists of a number of

steps. The starting point is the presentation of charter of
demands and the last stage is reaching an agreement or a
contract which will serve as the basic law governing labor
management relations over a period of time.
3. Negotiations form an important aspect of the process of
collective bargaining i.e. there is considerable scope for
discussion, compromise or mutual give and take in collective
bargaining deliberations rather than confrontations.
4. It is a bipartite process. The employers and the employees
are the only parties involved in the bargaining process. There
is no third party intervention. The conditions of employment
are regulated by those directly concerned.
Collective Bargaining Process
 Collective Bargaining process usually starts with a charter of
demands being presented to the management by the unions
on behalf of their constituent members. A fresh charter is
submitted on expiry of the earlier agreement.
 Before the actual negotiations begin management and the union
go through several intra organizational bargains. Management
has to prepare a set of intra-organizational policy issues, relating
to the concessions they would make, the wages they would pay
and the concessions that they are willing to make. While doing
this the organization’s expected profits, expected future costs
and environmental conditions, the shareholders expectations
etc, need to be reconciled.

 Similarly, the union team having gone through an intra-

organizational exercise and assessment, decide upon their
strategy and priorities so as to present a united front at the
negotiating table. They gather data to formulate their charter of
demands. The various groups of workers would like to enhance
wages and salaries, benefits and welfare measures. Employee
grievances and matters such as promotion policies are also
taken up.
 At the Bargaining Table
Generally, the union’s charter of demands ranging from wage
increase to personnel policies, are discussed at the bargaining
table.
1. Item by item the various demands are taken up, each side
presenting its case to the best of its ability.

2. The management gives its prognosis of the state of the

industry, the environment, the firm’s capacity to pay and its
constraints.

3. The union demands wage increases, to meet the increasing

cost of living, changes in the expectations of the workers in the
changed socio economic context, including increases in wages
of the of workers of other firms.
Result of Negotiations:
The following situations may be created –
1. Total rejection of all demands as unreasonable and therefore
deadlock.
2. Rejection of some (perhaps major demands like% increase in
wages) and offer to consider some others.
3. Management may work out cost and other implications of
demands and then re-start the negotiations.
4. While agreeing to consider union demands, management puts
forth counter demands.
Depending upon the strategy adopted a variety of sequential
actions may follow:
1. If there is a deadlock, and no further easing of ‘stands’ takes
place, industrial action may follow to force the issue towards a
settlement. Alternatively both the parties may be forced into
conciliation and attempt at a compromise settlement.
2. The second course of action could also lead to deadlock if
the more significant demands are not met but in that case
the possibility of conciliation still exists.

3. It is in the last two options that free play of collective

bargaining process operates. In this the channel of
communication are open, to the greatest extent possible

4. There can also be situation where the management puts

forth counter demands. In which case demands placement
becomes a two way process and there is a two way
communication and the agreement process becomes more
complex, at the same time it leads to a situation of greater
give and take between the two parties.
Individual Bargaining History:
 To start with, bargaining was an individual process
between the employer and individual employee in the USA,
form where the concept of industrial bargaining really
developed along with countries in Western Europe.

 During the Great Depression however, individual

bargaining started failing and could not meet the needs of
the workers. Accordingly, in 1935 the US congress passed
the Wagner Act, commonly known as National Labor
Relations Act, to promote “equity in bargaining power”
between the labor and the management.

 The idea was that although workers might not be able to

individually bargain with the employers to achieve higher
wages and benefits they could bind together to fulfill their
needs through collective bargaining agreements.
 In 50s Americans realized that Labor Unions were
becoming too strong under Wagner Act as many
industries became rifle with labor strikes and unrest.
As a result Landrum-Griffin Act was passed in 1959 to
uphold “right of the employees NOT to organize” and
to limit the union power. As a result of this, role of
unions began a long and steady decline in the
industrial relations in USA.
 Among the three primary means of addressing the
needs of the workers – individual bargaining, collective
bargaining and protective legislations – each has its
own advantages and disadvantage.
 Individual bargaining – looks after individual
needs, it is cost effective but during
recession it leaves the individual vulnerable
to improvised solutions.
 Collective Bargaining – allows individuals to
benefit from the workers union bargaining
power, but most workers in the unorganized
sector are deprived of any benefit from
bargaining.
 Protective legislations – does not cater for
individual needs, it is also costly. But it
provides some automatic relief to workers.