European Foundation for the Improvement of Living and Working Conditions

Developments in the Financial services sector

An analysis of EIRO articles

Introduction Industrial disputes Overview of developments Collective bargaining

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Introduction
Financial services are a significant factor to economic flows within a country. Increasing internationalisation of the economy has rifted the boundaries between national financial services and affected the functioning of the financial services and as a consequence the economy. The European Parliament voted recently (5/2/02) overwhelmingly in favour of a key financial services reform that will lead to a single market by the middle of the next decade. This gives the green light to the legislative process, so that Europes financial regulations can be adapted more rapidly to the constant developments in the international financial markets and this will in turn lead to greater protection for investors. The financial services sector encompasses financial intermediation as offered by credit institutions, investment firms, leasing enterprises, insurance and pension funding services as well as activities providing auxiliary services, such as the administration of financial markets, security brokering or fund management. Their main functions can be identified as offering payment and saving products; fiduciary services, corporate and private lending services; underwriting and issuance of equity and debt; as well as insurance and risk 1 management products . The most significant change the sector has faced in recent years has been the creation of the Single Market. This culminated in 1999 with the introduction of the euro as the common currency for eleven of the member states. The sector has been experiencing deregulation and the abolition of protectionist market structures, which were then followed by the removal of administrative barriers in order for the systems to become more open and susceptible to mergers and acquisitions. Therefore the markets became more globalised. Products become more homogeneous across borders while competition increases as markets are opened and liberalised. It appears that issuers have increased access to foreign markets to raise capitals and investor tend to internationalise their portfolios. Technological advances made home, internet banking and on-line stock exchange possible. The sector numbered 308,000 financial services enterprises in 1996 which represents 2,7% of the services. More than half of these enterprises (56,3%) have no employees and over a third (37,8%) had between 1 and 9 employees. It is significant to note that the small enterprises accounted for 12,2% of employment and 3,9% of turnover. The few large companies employing more than 250 employees (0,2% of all enterprises in 1996) attracted almost three quarters (73,2%) of the sectors employment and generated over two thirds (66,8%) of 2 its turnover . The present report, drawn on EIRO material, presents a chronicle of events, a snapshot of developments in the European financial services sector since 1999. The developments in the collective bargaining round are those reported in the year 2001, last part.

Industrial disputes
National level In Italy and as early as in March 1999, the trade union organisations called a general strike in the banking sector in which - according to the organisers - 85% of workers participated, as did a remarkable proportion of
1

EUROSTAT, Panorama of European Business 1989-1999

2

ibid

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executive personnel. A three-day strike was also planned in all Abi and Acri member companies by April 1999, which would have been organised at territorial level. The Italian government intervened in a conflict that had been going on for several weeks between the Italian Banking Association (Associazione Bancaria Italiana, Abi), the Italian Saving Bank Association (Associazione delle casse di risparmio italiane, Acri) and the banking sector trade unions affiliated to the Cgil, Cisl and Uil confederations. The organisations negotiations over a new collective agreement for the banking sector had broken down amid threats of industrial action The bitter conflict in banking had been on the point of compromising the framework agreement signed by the partners on 28 February 1998 on managing the reorganisation of the sector. The government was afraid that the seriousness of the dispute might jeopardise the contents of the 1998 agreement which - according to the signatories - should allow the reorganisation of Italian banking, while minimising the impact of the major process of structural adjustment on employment and on public expenditure. The possibility of mergers between some of the most important Italian banking groups, probably resulting in thousands of redundancies, has since become more concrete. This is why the government decided to intervene to create a favorable climate for the conclusion of the negotiations over the new national sectoral agreement. The government intervention led to the unions calling off the strikes, the companies resuming the blocked payments and the government issuing the decree on the management of redundancies provided for in the February 1998 agreement. In January 2002, trade unions in the Spanish banking sector held demonstrations to protest at what they claim is a high level of unpaid overtime linked to the introduction of the euro. The union state that the euro has added to existing problems in this area. Banking employers dispute the overtime figures put forward by the unions. All the trade unions in the banking sector held demonstrations on 30 January 2002 in many Spanish cities against what they claim is the banking employers practice of demanding unpaid overtime, a situation that has been aggravated with the introduction of euro notes and coins from January 2002. The demonstrations were successful - 20,000 people attended the one held in Madrid, for example. Furthermore, the unions have presented a letter to parliamentary political groups, calling on them to bring the issue up with the government. According to the unions, in the first two weeks after the introduction of the euro over 2 million hours of overtime were worked in banks, for which the companies have paid neither wages nor social security contributions. However, the unions claim that this situation is not new, because since the beginning of 2001 the amount of unpaid overtime in the sector has totalled 31 million hours. The unpaid wages for these hours, it is stated, amount to EUR 1,020 million and unpaid social security contributions to EUR 340 million. The unions state that for some time they have been trying to reach agreements with the banks to cover the extra effort required by the introduction of the euro, but no solution has been found. The initial proposal made by the unions involved recruiting 15,000 workers temporarily and paying each employee a bonus of EUR 1,000. The debate on overtime in banking has led to a dispute over the real level of overtime between the employers and the trade unions, as it has in other sectors. The banks state that the amount of overtime being performed is not as great as the unions claimed, and that the problem must be resolved in each bank rather than in a sectoral collective agreement, because situations vary greatly. The unions, on the other hand, state that not only is an increasing amount of overtime being done, but an increasing amount of it is unpaid or is paid as normal time. It is argued that the overtime represents a large potential source of employment, but the employers are unwilling to turn it into new jobs.

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On 26 April 2001, Greeces main trade union confederations, GSEE and the public sector ADEDY, called a 24-hour nationwide general strike in protest at the governments proposals for social security reform. The strike received unprecedented levels of support, and the government has announced a freeze of its plans pending dialogue with the unions. The Greek General Confederation of Labour (GSEE) and the Confederation of Public Servants (ADEDY) called a 24-hour nationwide general strike on 26 April 2001 in opposition to government proposals to reform the social security system, and especially pensions. The unions view the proposed changes, announced on 17 April, as being to the detriment of those covered by the social security system. Participation in the strike was unprecedentedly high, with workers striking in all areas and sectors of the private and public sector. Indicative of the wide participation in the strike was the organisation by GSEE and ADEDY in Athens of the largest rally of workers seen in Greece in the post-war period. Rallies called by the Labour Centres and the local ADEDY organisations in practically all of Greeces big cities were also very well attended. Banks participation in the strike across the country was as high as 100%(state and private). EU level On 19 June 2001, a demonstration was organised at the headquarters of the European Central Bank (ECB) in Frankfurt by UNI-Europa Finance and UNI-Europa Graphical (the finance and graphical industry sections of the European regional organisation of Union Network International), along with the European Federation of Public Service Unions (EPSU) and the Standing Committee of European Central Bank Trade Unions. The action followed a meeting between trade union representatives and representatives from the European System of Central Banks (which includes the ECB and all the national central banks of EU Member States), at which the printing of euro notes was discussed. Some 14.5 billion notes will need to be printed in time for the launch in January 2002 of the euro in the 12 countries which have joined the third stage of EU Economic and Monetary Union (EMU), and a further 4.8 billion notes will be produced during 2002. However, this is around one-third of current note production and, moreover, each EU Member State will, under a system of decentralised pooling, be responsible for printing one or two denomination notes only. In addition, no targets have been set for note production after 2002. Trade unions are concerned that this decrease in activity will result in job losses - the banknote-printing sector currently employs some 7,000 workers - and that the specialisation between Member States will lead to the deskilling of print workers. They are therefore demanding guarantees that jobs will be protected. They argue that the ECB, as a European institution which took part in the decision to introduce a single currency, has a direct responsibility to maintain employment and working conditions in the national banknote centres which will be printing the euro notes. Specifically, the unions are demanding the following:
n n n n n n

the maintenance of national printing quotas; European responsibility for the social consequences of introducing the euro; as few job losses as possible and, where this is unavoidable, negotiation with trade unions; the establishment of a European social plan, including a compensation package for job losses; a European agreement on retraining for workers who lose their jobs; and the establishment of a European fund to finance social demands.

However, the ECB has, according to UNI-Europa, indicated that it cannot guarantee current job levels and that it is not willing to contemplate setting up a dismissals fund or a retraining plan. The unions estimate that

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several hundred protestors took part in the 19 June protest. Trade unions are also engaged in an ongoing dispute with the ECB over union recognition. UNI-Europa has claimed that although the ECB has committed itself to a regular dialogue with trade unions, so far nothing has happened. It states further that employees are currently seeking through the European Court of Justice to establish an obligation on the ECB to recognise core international labour standards on workers rights - including the right of association

Overview of developments
Restructuring The completion of the internal banking market, the liberalisation of financial services resulted in the privatisation of a number of organisations previously owned by the state. The sector has experienced Europewide an uprecedent wave of restructuring in the 1980s while a second wave of mergers and acquisitions has taken place in the 1990s followed by upheavals in some cases. The sector is struggling for greater productivity and profitability in a bid to preserve independence and market share. Increasing concentration is the characteristic of the sector. The constant flow of mergers has changed significantly the finances sector. This wave of mergers especially in the banking sector, has had an impact on both the employment and the employees working conditions (reports indicate show deterioration, http://www.eurofound.ie/print/1999/11/inbrief/BE9911310N.html). The trade unions are eager to secure employment for their members while the employers are concerned over cost cutting consequences and profitability. While it is true that the financial markets play their role in the success of a merger plan, the trade unions themselves also try to intervene and have their voices heard when the job losses entailed are numerous. It is that combination that makes a merger impossible; that was the case in the failure of the BNP-Societe Generale merger in 1999 in France. The trade unions considered the restructuring to be only for the sole benefit of the shareholders. The new group created in January 1999 following a merger between the Societ Gnrale and Paribas banks in the form of a security swap was applauded by the financial press as the springboard for a process of restructuring in the French finance sector, which had hitherto been relatively unaffected by the vast process of concentration which has recently affected the industry worldwide. The new group is the fourth largest in the world in terms of stockholders equity and has a workforce of 80,000, of whom 30,000 are employed outside France. The trade unions view this increase in size as a positive step, given the prevailing competitive environment (according to CFTC) and also welcome the fact that it is two French companies which are merging. Hostile takeovers have profound effects for employment security and firms performance. Evidence shows that even large companies are not free from the prospect of a hostile takeover (i.e. the large Nat West bank in the UK: http://www.eiro.eurofound.ie/2000/03/feature/uk0003160f.html). Advocates of such an active market in corporate control argue that it pressurises managers into operating in the most efficient way possible, keeping them on their toes and preventing complacency. Critics, however, argue that it creates a preoccupation with short-term profitability, often at the expense of long-term goals, as managers seek to fend off the threat of takeover by avoiding any course of action that could depress the share price and by distributing a large proportion of profits in the form of dividends to shareholders. The critics also argue that research into the performance of firms which have been involved in a merger suggests that in the years following merger such firms perform below the average for their sector. Indeed, NatWest management cited such research as part of its defence. One plausible explanation for this poor relative performance is that the productivity of the

European Foundation for the Improvement of Living and Working Conditions, 2002

An analysis of EIRO articles

workforce is adversely affected by the job insecurity and changed reporting relationships that are apparent in mergers such as that between NatWest and RBS. The takeover battle has also illustrated the continuing consolidation in the banking sector, something which is occurring across Europe. France, for instance, has recently experienced a protracted hostile takeover battle involving three banks. It is apparent that the tendency for mergers to be associated with substantial numbers of redundancies is something common to banking mergers in many different European countries though in some countries unions have been able to minimise the scale of these redundancies. As yet, the majority of these mergers have been domestic in nature, principally because of the fiscal, regulatory and cultural differences in banking between European countries which restrict the ability of banks to develop standardised services internationally. One possible future development, however, is for European integration in general and Economic and Monetary Union in particular to erode these differences, opening up scope for cross-border mergers and acquisitions in the banking sector. Redundancies Restructuring is often followed by redundancies which in some cases reflect not only structural changes but also value changes in company culture and amongst the management. This is for instance, the case of the Finish Pojhola insurance company which announced (1999) redundancies despite high profits. Redundancy plans may include pre-retirement of employees as it is the case in the Spanish banking sector where employees over the age of 52 without replacing them by younger workers. This is a measure widely used in the Spanish banking sector; BBVA wishes to pre-retire 1,500 employees, SCH 1,300 and Banco Popular 200. Another `gentle form of reducing the workforce is flexible working time, which in recent years has been introduced through the annualisation of working time, the introduction of irregular working hours, the application of `availability clauses, and the compensation of overtime with time off. The introduction of flexible working time has adapted workforce management to variations in demand and situations of uncertainty. In the Paribas and Societe Generale merge the management had given assurance that there would be no forced redundancies in France. However, job losses would have to take place in the financial markets outside France in particular in London where a cut of almost 800 in the two companies combined workforce of 4,100 has been suggested. Apart from the above, the temptation to challenge past compromises to make structural savings and to introduce full-scale reorganisation in order to strengthen control and influence and make savings in employment are subjects of concern to the unions. The UK NatWest bank has had to shed 18,000 jobs as a result of a hostile takeover by the Royal Bank of Scotland (2000). The role and influence of trade unions in the financial sector in the UK has changed significantly over the last two decades. The system of multi-employer bargaining collapsed in the late 1980s, and the company-level bargaining which replaced it was subsequently displaced by bargaining at the level of business units within the banks. More recently, the ability of unions to shape pay rates has been eroded by the introduction of performance-related pay schemes. These changes in collective bargaining have been accompanied by a fall in union membership. Employees of the large banks could either join the Banking Insurance and Finance Union (BIFU), affiliated to the Trades Union Congress, or the banks own staff associations. The danger of the unions being marginalised led to moves to alter the fragmented nature of employee representation, and in July 1999 BIFU and the NatWest and Barclays staff associations merged to form UNIFI.

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One of UNIFIs first tasks was to respond to the hostile bid for NatWest. The unions response was to seek an assurance of no compulsory redundancies and to imply that industrial action was a strong possibility if this was not obtained. As with most restructuring and redundancy plans, employment security is a priority issue for the trade unions but it is not an easy negotiating point. A positive development vis--vis employment security in the banking sector is the job security agreement introduced in the UKs Cooperative Bank and the banking trade union as long ago as 1983, committing the parties to explore a range of prior options before invoking compulsory redundancy as a last resort. Large-scale voluntary redundancies and a small number of compulsory redundancies in the early 1990s undermined the credibility of the agreement, as well as souring relationships between the bank and the union. The perceived need by both parties to put industrial relations on a new footing resulted in the conclusion of an innovative partnership agreement in March 1997. A central feature of the agreement is a strengthened commitment to employment security. However there was a time limit in the agreement. The role of the employment security commitment in facilitating change was recognised, but its maintenance for a further period was not addressed. In determining whether or not it is renewed, much may hinge on assessments of business circumstances and the nature of anticipated changes in service provision over the coming period. The advent of internet banking (the Co-operative Bank has just launched a separate internet banking subsidiary) and continued growth of, and technological advances in, telephone banking underline the extent of the changes in products and processes that still lie ahead. The sector is also in the throes of an unprecedented period of restructuring amongst its major players. How far employment security agreements and commitments can be maintained in the face of such market and organisational turbulence, at the Co-operative Bank or elsewhere in the sector, remains to be seen. Other issues of industrial relations importance In all cases of restructuring there is a concern over the mergers affects on the social dialogue since each of the establishment has its own tradition of social dialogue and culture of negotiation and management. Furthermore, representation issues come up quite often as controversial issue (i.e. Fortis group in Belgium). In terms of industrial relations there has been a tendency towards decentralisation of collective bargaining in the finances sector in some countries or a move towards a new bargaining structure (i.e. Belgium, Denmark, France, Germany, the Netherlands, UK). In Belgium, the banks had been accustomed for more than 10 years to negotiating collective agreements with the union on a bank-by-bank basis. The lack of a national sectoral agreement in not an unusual occurrence in the banking sector and the unions have been arguing that the current sustained wave of reorganizations and mergers, together with a creeping trend towards compulsory self-employment within the sector mean that a national agreement is more necessary than ever. As early as in 1999 the collective bargaining agreements sought a decentralised approach. Flexibility was the key word in the collective pay agreements concluded between January and March 1999 in Denmarks public sector, finance sector and independent baking sector One important aspect is a tendency towards decentralisation, with decisions on pay, working hours and arrangements for the additional holidays being deferred to local negotiations and decisions, within the central frameworks set out in the national agreements. Following those development the social partners in the Danish finance sector agreed (in the end of 2000) a new bargaining structure providing for greater flexibility and allowing the development of individualised

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An analysis of EIRO articles

agreements. The simplified, though not exactly simple, bargaining structure to be introduced in finance is a compromise between the employers wish for a high degree of decentralisation and the wish of the FF trade union to maintain elements of existing bargaining rights at the central level. The trend on the Danish labour market is in the direction of local negotiating rights, and the new bargaining structure in the finance sector is a step in this direction. There will be room for a wide degree of company-level individualisation in negotiations, but if an enterprise does not want to conclude its own agreement, it may base its pay and conditions on the sectors standard agreement. There is little doubt that many enterprises in the finance sector will opt for enterprise agreements with a high degree of flexibility, in relation to both remuneration and working time. This structure also seems to be tailormade for the information technology sector, which has in many ways fallen outside the normal bargaining framework. There may be a risk of very diverse conditions for the employees. Employees who are not willing to conclude agreements involving elements of risk may end up as second class employees, but will, on the other hand, be covered by centrally agreed conditions. The advantage of the system may very well be that it can solve the possible conflict between: the employers and the employees interest in been organised and working under orderly, contractual conditions; and, on the other hand, having the possibility of agreeing on more flexible pay and working conditions at enterprise level. Such a solution will require a departure from the very centralised, traditional bargaining system with its roots in the September compromise and the Danish model, in the direction of a more framework-oriented bargaining system which still upholds the concept of collective agreements. Evidence of decentralization is found also in France. Decentralisation of pay bargaining from sector to company level was already agreed in a collective agreement signed in January 2000. In early 2002, companylevel pay bargaining has been occurring in French banks, with varying results. The trade unions in the banking sector have been attempting to mobilise employees, calling a strike and other action with mixed success from bank to bank. As well as pay, employment and working conditions, the unions are seeking improvements in the safety of bank employees. The differing strike turn-out figures demonstrate the varying levels of success in decentralised pay bargaining from one institution to another. For example:
n

the management of Crdit du Nord took the unilateral decision to increase wages by 1% on 1 April 2002, combined with two bonus payments of EUR 240 and EUR 460 respectively; Socit Gnrale has reached an agreement with SNB, CFTC and CGT-FO, which provides for a 0.7% wage rise and a bonus of EUR 600; BNP Paribas signed an agreement with SNB and CFDT prior to the 2 January strike action, providing for a 0.9% wage increase and a minimum bonus of EUR 700; Crdit Commercial de France has reached a deal with SNB, CFTC and CGT providing for wage increases of between 1% and 0.5% for the highest and lowest pay brackets respectively, with a minimum raise of EUR 400 per year for technicians and EUR 560 for management staff, plus a bonus of between EUR 400 and EUR 460; and to date, trade unions and management have failed to reach an agreement at Crdit Lyonnais, where talks are turning out to be difficult.

The next step is the forthcoming meeting with AFB, at which the unions hope to address the three key issues of wages, working conditions and security. For employers, security is perceived as a particularly thorny issue, since the management of some banks are concerned that employees could be prompted to take immediate

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major industrial action should there be a repeat performance of a major incident such as a fatal hold-up, like the one that occurred in summer 2001 at a branch of Caisse dEpargne. Brinks security guards in the Cte dAzur area have refused to stock Caisse dEpargne ATM machines on the grounds that the bank has failed to take heed of their security concerns. Similarly, in Germany, a study published in December 2001, based on establishment-level data for 2000, found that a declining share of German companies are covered by industry-wide collective agreements. Although there is still a significant number of companies which voluntarily apply the terms of collective agreements, without being legally bound by them, the speed of decline of bargaining coverage is increasing. While larger companies and their subsidiaries are more inclined to be covered, smaller, unincorporated and newly-established firms tend to fall outside industry-wide collective agreements. Collective bargaining coverage in the banking and insurance sector declined significantly. However, a majority of the workforce is still covered by industry-wide collective bargaining and even many of those companies which choose not to be party to an agreement cannot afford to stand on the sidelines. Thus, many of them apply collectively agreed standards voluntarily. There are, however, major reasons for concern. First of all, because it is mostly new start-ups and foreignowned companies (at least in west Germany) which refrain from participation in collective bargaining, this tends to remove new, growth industries from coverage by collective agreements. Second, the process of erosion of bargaining coverage has picked up speed lately and there is not much time left before collective agreements will apply to a minority of workers only. While researchers have made some progress in explaining the reasons for decline, there is still not a visible strategy which would help unions and employers associations to reverse the trend. After years of moderate wage increases, however, there seems to be one safe bet: wage restraint and flexibilisation alone will not do the job. The 1999 Dutch collective bargaining round has seen moves by employers in sectors like construction, healthcare and banking towards replacing their relatively detailed sector-level collective agreements with either a framework agreement or a series of company agreements. The most fervent supporters of a different bargaining structure are the larger firms in the financial services sector. An earlier proposal to steer towards a single agreement for the financial services sector met opposition from both insurers and smaller banking institutions. This indicated a strong possibility that the larger firms would make the transition to separate company agreements, leaving the industry-wide deal in force for the remaining small-scale banks and insurers. The financial conglomerate Achmea has already reached a grouplevel agreement. Other major financial institutions, including ABN Amro, Fortis-Amev, ING and Rabo, also seem poised to abandon the industry-wide agreement. Nowadays, these companies are striving to increase flexibility in terms and conditions of employment. One reason is to remove higher-level personnel from the coverage of the sectoral agreement. In addition, a group-level agreement offers greater potential to integrate privatised social insurance organisations such as Gak and Cadans. The Allied Unions (FNV Bondgenoten), representing a relatively high proportion of employees with lower levels of education, are most opposed to splitting up the industry-wide agreement. The tendency towards decentralisation in the area of terms and conditions of employment continues. The splitting up of industry-wide agreements and the rise of framework agreements, are but a manifestation of this tendency. The legislature contributes by passing framework acts on working conditions, employee participation and working hours. On top of this, there is the relatively new appearance of competing collective

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agreements: some industries now have two agreements, one reached by the established employers and employee organisations, and another by fairly new competing organisations. Similarly, in the UK the system of multi-employer bargaining collapsed (as mentioned above) in the late 1980s, and the company-level bargaining which replaced it was subsequently displaced by bargaining at the level of business units within the banks. Those changes led to fall in the union membership. Collective Bargaining The sector restructuring or rationalization measures are also reflected on the collective bargaining agreements. Since 1999, the collective bargaining rounds have covered the traditional industrial relations issues while others, more specific to the finances developments have emerged. The emerging issues have been the trade union representation status, particularly following mergers and acquisitions (i.e Belgium); mergers of unions was another issue that has been going on for some years now; the existing bargaining structure has been questioned in some countries (i.e. DK) as it was considered unsuitable for the developments of the sector. It is important to highlight the tendency for international comparisons (i.e Luxembourg) in the negotiations rounds indicating some few (though) signs of europeanisation of the industrial relations systems. In Italy and as early as 1999 the government and the trade unions was suggesting (renewal of the industrial relations system while the French National Assembly passed (2002) the controversial modernisation law which includes measures making redundancies more onerous for employers. Moreover, the debate on overtime and increased workload started off early in the year 2002 as employees of the banking sector protested at what they claim as high level of unpaid overtime linked to the introduction of euro. The following tables summarise the developments on time and pay in the finances sector.
Pay Austria In January 2001, a new collective agreement was signed for the banking sector, providing for an average pay rise of 2.91%. Negotiations were dominated by debates on pay flexibility. The banking bargaining round followed the traditional practice of social partnership in Austria. The key issue was the question of how collective agreements on pay should relate to economic performance. The sector's employers argued for a one-off bonus as a means of enhancing pay flexibility. From the union's point of view, this was an attempt to downgrade the basic pay system. GPA fears that a bonus system might in the long run lead to an arrangement that allows for regular pay increases only in line with the inflation rate, whereas the sector's economic growth will be reflected only in bonuses. Since bonuses do not affect the long-term development of pay, such an arrangement is seen as involving a substantial deterioration of the employees' situation. Since the demand for bonuses reflects a general employer preference for more pay flexibility, this issue is likely to remain on the agenda of coming bargaining rounds. At the end of 2000 Belgium's central trade union and employers' organisations formally signed an intersectoral collective agreement for 2001-2. The accord provides for an indicative pay norm of an increase of 6.4% over two years (or up to 7% in well-performing sectors), as well as provisions on matters such as training, working time, older workers, reductions in employers' social security contributions and the harmonisation of blue- and white-collar status.

Belgium

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Denmark

The 2001 collective bargaining round in the Danish financial sector took place in a peaceful atmosphere and in accordance with the timetable fixed for the negotiations. In early 2001 agreements were concluded for insurance and for banks/mortgage institutions. Both agreements provide for relatively high wage increases and improvements in occupational pensions. The finance sector did not follow the trend towards concluding four-year agreements set elsewhere in the private sector, as the new settlements were concluded for the usual two-year period. The new finance sector agreements contain significant increases in occupational pension contributions for the employees with the lowest pension contributions, while new employees will be covered by such schemes earlier than under the existing rules. Furthermore, the door has been opened for variable pay schemes. An October 2000 agreement in the private services sector concerning deviation from the normal rules on rest periods in connection with telework seems to have had a knock-on effect on the financial sector. No concrete agreements have been concluded, but the parties have agreed to await a proposal from the Minister of Labour concerning teleworking. Flexibility is thus a key factor in current developments in the financial sector, a point which is also emphasised by a more active role for employee representatives. No changes were made to the duration of the finance sector collective agreements, which will still be two years. This is mainly due to the fact that the sector is covered by the "normal wage system" which does not allow for local negotiations. However, this is also undergoing change. New bargaining structures and pay systems have introduced flexibility in the system, and the possibilities for concluding agreements at enterprise level may turn out to have far-reaching implications in a longer-term perspective. It is possible that the four-year agreement period which now exists in the dominant LO/DA private sector bargaining area may be tempting for the social partners in finance in two years' time when the new structures have been tested. Denmark is heading towards uncontrollable wage increases, due to the fact that the various collective bargaining rounds have been out of step since 1995. The four-year duration of the current agreements in the trend-setting bargaining area covered by the LO trade union confederation and DA employers' confederation - which was intended to provide a long period of peace with room for a steady development in costs - risks becoming the source of unrest, politicisation and a more rapid increase in wages. These are the finding of an analysis published in September 2001 by researchers at the University of Copenhagen. I 2003, the financial sector will n enter a new bargaining round.

Finland

Finland's new comprehensive incomes policy agreement was signed formally at the end of 2000. The two-year wage agreement will mean an increase in labour costs of 3.1% in 2001 and 2.3% in 2002. The agreement covers about 2 million wage earners, or some 90% of Finnish employees. An odd feature of this incomes policy round was AKAVA's decision to remain outside the agreement as a confederation. However, almost all its member unions signed up to the agreement.

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France

In July 2001, four French trade union confederations and three employers' organisations agreed a 'common position' setting out their wishes for a reform of the rules governing collective bargaining. The central plank of this proposed reform is the introduction of the 'majority principle, whereby company-level agreements would be valid only with the support of unions which together won a majority of votes at the most recent workplace elections of employee representatives. This common position came at the same time as the Prime Minister, Lionel Jospin, announced a government plan for the 'renovation' of industrial relations, to be implemented in consultation with the social partners. In May 2001 the Unified Service Sector Union and the Employers' Association for Private Banking concluded a new collective agreement for the 470,000 employees in the banking sector. The agreement, which runs for 13 months, contains the following provisions on pay:

Germany

a pay increase of 2.8% from 1 May 2001; a flat-rate payment of DEM 280 for April 2001 an increase in vocational training payments by DEM 40 per month from 1.4.01

during the currency changeover from the Deutschmark to the euro (euro notes and coins will start circulating from 1 January 2002), additional pay for shiftwork will be increased by an average of 5% from 1 January 2001. This is equivalent to an annual pay increase of EUR 250 for those involved in three-shift work, EUR 120 for two-shift work and EUR 80 for Saturday work; and employers' capital-forming payments under the employee savings scheme will be increased to EUR 40 per month. In the insurance sector, in a third round of talks on 29 May 2001 the Confederation of Insurance Companies and ver.di concluded a new collective agreement for the industry's 220,000 employees. This agreement, which also runs for 13 months, includes similar provisions on pay to the banking deal: a pay increase by 2.8% from 1 June 2001; a flat-rate payment of DEM 200 for May 2001; and an increase in vocational training payments of DEM 40 per month

Greece

In late June 2001, a new one-year collective agreement for the Greek banking sector was signed by employers' representatives and the OTOE trade union. The deal increases basic pay and allowances by 4.2%. After five months of hard bargaining, the Greek Federation of Bank Employee Unions and the representatives of banking employers signed a new sectoral collective agreement for banks and similar institutions on 28 June 2001. The accord, covering more than 70% of the sector's workers, was in effect for one year from 1 January 2001 (retroactively) to 31 December 2001. With regard to economic issues, basic wages in the pay scale for each category of staff are increased by 4.2% of basic pay from 31 December 2000. The increase is effective retroactively from 1 January 2001 and covers the period from 1 January 2001 to 31 December 2001. It was agreed that allowances, both those expressed in cash and those expressed as a percentage of pay, will also be increased by 4.2%.

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Developments in the Financial services sector

Ireland

Ireland's new national minimum wage, introduced in April 2000, directly caused wage increases for far fewer employees than had been anticipated according to a government-sponsored study published in autumn 2001. Wage inflation in tight labour market conditions may be the major reason. The percentage of employees who had a wage increase as a direct result of the minimum wage varied from sector to sector, according to the new study. In banking, finance and business it was 2.4%. In March 2001, Ireland's largest trade union and its main employers' organisation clashed over the criteria to be used in paying the additional wage increases provided for by the recent revision of the national agreement, the Programme for Prosperity and Fairness. Ireland's current national agreement, the Programme for Prosperity and Fairness, was "revised" in December 2000, in the light of rising inflation in 2000 and as an acknowledgement that wage expectations were not being fully met by the phased increases worth 15% over 33 months under the original terms of the PPF. As part of the revised terms, there is to be an additional 2% wage rise from April 2001, plus a lump-sum payment, worth 1%, made on a one-off basis in 2002. In late 2001, compensation payments for the extra duties involved in the changeover period to the euro single currency in early 2002 were agreed by several major Irish employers. Special lump-sum payments for extra duties arising from the changeover to the euro have been agreed by two Irish security firms, as well as by at least two retail banks. A claim by the Irish Bank Officials' Association (IBOA) for lump-sum compensation was supported by a special tribunal which deals with banking sector disputes. The first claim, at AIB Bank, resulted in: an IEP 600 payment for 4,500 staff directly involved with the new currency; an extra day of leave which can be `bought back from the employee for IEP 150, applying to all 6,500 staff; and a 30% increase in overtime payments for a short period of over a week. A similar formula was supported by the banking tribunal for Ulster Bank, affecting 2,000 workers.
According to recent research, Italy's national tripartite incomes policy agreement of 23 July 1993 has helped to protect the purchasing power of wages, although the 1990s were a decade of pay restraint. However, it appears in autumn 2002 that the reemergence of inflation and the disparity between the growth o f productivity and of wages may reopen conflict on income redistribution. Average annual % real contractual wage growth in the banking and insurance sector: 1983-1987 1988-1992 1993-1995 1996-1999 2000 1.4 0.5 - 1.2 0.1 - 0.9

Italy

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An analysis of EIRO articles

Luxembourg

In a display of new-found unity, in October 2001 the three representative trade unions in the Luxembourg banking and insurance sectors made a joint claim for bargaining over new collective agreements. The demanded a large pay rise and abolition of the system of payment based on performance criteria. The unions asked for the abolition of the performance-related pay system in favour of a new salary scales that will give employees longer-term pay rises. The union's pay claims include salary rises of 4% a year, a new end-of-summer-holiday bonus, and an improved June bonus. The unions have stated that they do not e xpect the employers to agree to their demands, because they will cite the unfavourable economic climate. According to the Finance Sector Supervisory Commission published spectacular figures on growth in financial market in June 2001: during 2000, total balance sheets rose by 8.17%, gross profits before allocations by 20% and net profits by 27%. In summer 2001, debate over wage moderation has dominated Dutch industrial relations, with inflation reaching 5.4% in May - the highest rate in the "euro-zone". The government, the president of the Dutch Bank and employers' organisations have called for pay restraint, but the social partners differ over what constitutes "sensible" wage increases, with employers calling for 2% rises and trade unions sticking to 4%. The debate was further fuelled by reports that executive salaries were rising at an annual rate of 14%. The annual spring discussions between the social partners and the government unfolded in a tense atmosphere, given the combination of the calls on unions to lower wage demands and allow for sensible pay increases, and the revelations of unacceptably high executive salary increases. The demands and offers on the negotiating table were not very spectacular, especially taking into consideration the relatively small amount of the government's "sweeteners" on pay flexibility, education, training and older people. External factors played the key role in making the discussions strained - lagging economic growth, the low value of the euro and rising energy prices. Taking a gloomy view, a simultaneous negative development in these areas may harm the Dutch economy and labour market, with the usual downward effect on wages.

Netheralands

Portugal

Negotiations on wages are more and more being connected to other demands of an economic nature, or those concerning quality of life. These demands were presented at the same time as an announcement that there have been delays and difficulties in the work of the Standing Committee for Social Concertation of the Economic and Social Council in preparing a national agreement on productivity and pay scheduled for October 2001. In October 2001, a commission set up by the Portuguese government issued its report on individual employment law. It proposes the creation of a new framework law, setting out in a systematic way the regulatory norms concerning the employment relationship, which are currently organised in a chaotic fashion. In January 2002, an innovative company-level collective agreement was signed at Portugal's BCP banking group. The deal: creates institutionalised mechanisms for the resolution of conflict (such as arbitration); allows for more a flexible organisation of working time; improves supplementary pension provisions; and enhances career development. Innovative aspects of this agreement concern improvements in service-related pay increments, and in mortgage entitlement conditions for employees.

European Foundation for the Improvement of Living and Working Conditions, 2002

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Developments in the Financial services sector

Spain

The tendency to diversify the pay structure of agreements at company level is leading to division between the trade unions and the employers' organisations in the current discussions on the reform of the structure of collective bargaining in Spain. This is a central question for the development of the social dialogue after the labour reform introduced by the government in March 2001 and for the start of a new bargaining round over a large number of collective agreements. Studies carried out by CC.OO and UGT indicate that the average pay rise provided for in agreements signed in 2000 was between 3.3% and 3.6% On 27 April 2000, the Financial Sector Union of Sweden (Finansfrbundet) and the Association of the Swedish Banking Institutions (BankinstitutensArbetsgivarorganisation, BAO) concluded a new 21-month sectoral agreement for 34,700 union members in banking. From 1 April 2000, salaries are raised by 1.5 %, or at least SEK 400, per month. This also applies to employees on fixed-term contracts. The actual pay increase for 2000 and 2001 will decided through local negotiations, though the sectoral agreement means a 5.8% overall paybill rise during the period of the agreement. All workers are guaranteed a pay increase of at least 2.8% over the whole period. In early February 1997, in response to five independent pay review bodies' reports recommending pay awards for 1.3 million public service employees, the UK Government announced that the increases should be paid in two stages. These awards influenced significantly the level of pay settlements for more than five million public sector employees which, for the last four years, have had to be accommodated within a government policy that pay increases should be financed by efficiency gains within an overall paybill freeze.

Sweden

United kingdom

Working time Austria A great number of female employees in the banking sector works part-time. This fact has a negative impact on their income which extends beyond the lower number of hours worked, compared with full-time jobs and it is due to reduced opportunities for advancement. This is especially relevant in banking as a result of its elaborate internal labour market. As a rule, part-time employees have no opportunity either to participate in their enterprise's qualification and training programmes, or to achieve leading positions. A shift from full-time work to part-time work may also cause a loss of income when this affects the job profile so significantly that the employee moves back to a lower pay grade. For all these reasons, female employees are strongly under-represented in the banking sector's leading positions, which in turn translates into lower overall pay levels. In Belgium the collective agreement for the banking sector signed in December 1999, which also deals with the move to a working week of an average maximum of 35 hours from 1 January 2001, was implemented on a company-by-company basis. The agreement also provides for a `neutral sectoral survey on workloads, stress and shortcomings in work organisation, and the systematic recording of attendance with a view to identifying, and better managing, overtime.

Belgium

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European Foundation for the Improvement of Living and Working Conditions, 2002

An analysis of EIRO articles

Denmark

Danish professional staff work many more hours than the standard 37-hour week. In most cases, such overtime does not attract additional pay, and the phenomenon is widely seen as a new trend. It is claimed that working overtime is a new trend, seen as a sign of responsibility, importance and prestige. The problem - for the employees as well as trade unions - is that voluntary extra working hours may undermine the pay and other employment conditions fixed by collective agreements. The 2001 collective bargaining round in the Danish financial sector did not follow the trend towards concluding four-year agreements set elsewhere in the private sector, as the new settlements were concluded for the usual two-year period. The EU working time Directive would probably have been implemented through legislation, if the social partners had not sat down at the negotiating table every second year instead four. An agreement on introducing the 35-hour week in the French insurance sector was signed by the FFSA employers' association and CFDT trade union in July 2001. The organisations which did not sign had until 21 September to do so. However, they did not sign. The GEMA employers' association, which includes most mutual insurance groups, refused to sign due to the agreement's provisions on Saturday working, while the other four unions threatened to take the matter to court. The agreement provides for a reduction of working time to 1,580 hours, or 213 days per year, instead of 1,600 hours, or 217 days, as laid down in the January 2000 `Aubry law on working time reduction. The sector-level agreement on the 35-hour working week signed in the insurance industry allows for companylevel agreements to provide for annual working time of 1,590 or 1,600 hours, which would be more than laid down in the sector-level agreement. Additionally, the agreement allows firms to open on Saturdays, if agreed at company level.
In a third round of talks on 22 May 2001, the Unified Service Sector Union and the Employers' Association for Private Banking concluded a new collective agreement. For the first time, the agreement includes framework provisions on "long-term working time accounts", which will be developed in detail at company level. Employees are entitled to save up to 175 hours per year or the equivalent in money in such working time accounts. The saved overtime can be used for longer periods of time off or for early retirement. Ver.di rejected the employers' proposal to allow employees also to transfer unused holidays into their account, arguing that regular periods of time off work for recreation are necessary and such leave should therefore not be saved up for later use. The provisions on working time accounts run initially until 30 June 2006. The banking social partners also agreed on exceptional rules for overtime work for the period between 17 December 2001 and 28 February 2002, relating to the introduction of the euro.

France

Germany

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Developments in the Financial services sector

Greece

After five months of hard bargaining the Greek Federation of Bank Employee Unions (OTOE) and the representatives of banking employers signed a new sectoral agreement for bank and similar institutions on 28 June 2001. The accord, covering more than 70% of the sectors workers, was in effect for the whole year 2001. Despite the agreement, OTOE has pointed out that on the majority of nonpay ("institutional") issues, and working time in particular (OTOE had, notably, demanded a 35-hour working week), there was complete disagreement on all levels. However, in OTOE' s view, the content of the new agreement is the best possible outcome, given the strong pressure exerted by the banks and their perceived negative attitude throughout most of the bargaining. In late 2001 compensation payments for the extra duties involved in the changeover period to the euro single currency in early 2002 were agreed by several major Irish employers. However, claims by trade unions in respect of the euro changeover have been criticised by the Irish Business and Employers Confederation (IBEC). The largest deal agreed so far has been at two security firms Securicor and Brinks-Allied - which have divisions specialising in the movement of cash by road. These companies agreed extra payment for about 350 workers for extra workload for having to deal with two currencies, and for providing a high degree of working time flexibility during the four-month changeover period. Despite this background of division, on 2 October 2001, ALEBA, OGB-L and LCGB tabled a single list of demands for the renewal of the collective agreements in the banking and insurance sectors. The unions suggested to ABBL and the Association of Insurance Companies (Association des compagnies d'assurance, ACA) that the new agreements should last for three years. They also claimed that working time in Luxembourg is longer than in other countries, and called for annual working time to be reduced by 32 hours. Another new element in the unions' claims involved the introduction of `longterm accounts whereby staff can save additional hours for use in more flexible working time models. The president of the ABBL described the trade union demands as `disproportionate and unrealistic, and said that they would represent an increase in costs of about 30% over three years. Although banking turnover rose appreciably during 2000, the employers unquestionably insist on the changed situation that has applied since the terrorist attacks in the USA on 11 September 2001.
The annual spring discussions between the social partners and the government unfolded in a tense atmosphere, given the combination of the calls on unions to lower wage demands and allow for sensible pay increases, and the revelations of unacceptably high executive salary increases. External factors played the key role in making the discussions strained - lagging economic growth, the low value of the euro and rising energy prices. The main parties in the ruling coalition believe that the government should reach a new agreement with employers and unions in order to prevent a wage explosion. The Labour Party (Partij van de Arbeid, PvdA) in particular is calling for a new version of the 1982 "Wassenaar agreement" between social partners and government, whereby limitations on wage demands were trades for reduced working time and the creation of jobs. Today, additional investments in healthcare and education and training would be the incentive offered by the government in exchange for putting the brakes on excessive wage demands.

Ireland

Luxembourg

Netherlands

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European Foundation for the Improvement of Living and Working Conditions, 2002

An analysis of EIRO articles

Portugal

In January 2002, an innovative company-level collective agreement was signed at Portugal's BCP banking group. The deal consists in the creation of institutionalised mechanisms for the resolution of conflict; allowance for a more flexible organisation of working time; improvement of supplementary pension provisions, enhancement of career development. Innovative aspects of this agreement include the introduction of a system of working time organisation with increased timetable flexibility. The seven-hour day and 35-hour week (already in effect for several years) may be varied around this average over a reference period of two months, though working time may not exceed 45 hours per week and nine hours per day. The working hours of establishments have been fixed between 08.00 and 20.00. These measures have resolved long-standing disagreements over the issue of overtime. The new agreement at BCP affects 11,430 current employees, plus over 11,000 retired pensioners.
The irregular distribution of working time, mainly through the annual calculation of working hours, is increasingly common in Spain. It has been introduced through a more flexible calculation of annual working hours, and is increasingly being used as a strategy for the structural management of working time. This annual calculation of working time is being introduced through collective bargaining. Annual calculation is the key element in consolidating and regulating flexible working time, as against monthly or daily calculation, which places clearer limits on the distribution of working time. This mechanism allows a more flexible management of working time, increasing the availability and adaptability of the workforce without resorting to overtime, which is generally subject to restrictions and more expensive. However, real working time tends to be far higher than that laid down in collective agreements. The irregular distribution of annual working time has spread to all levels of bargaining, though it is most common in company or workplace agreements. In the service sector, it has been introduced most in financial mediation firms (banks, savings banks, insurance companies etc), though it has also had a major impact in sectors with a high level of temporary employment. The irregular distribution of working time is one of the mechanisms for flexible regulation of working time (along with overtime, part-time recruitment, etc). The general tendency towards a full mobilisation of human resources is also seen in their flexible use by employers, and in the establishment of employment conditions under which workers offer greater availability. The importance of irregular distribution of working time as a mechanism for introducing flexibility is growing with the increasing introduction of annually calculated working time as an alternative to overtime. The irregular distribution of working time therefore helps to increase productivity by making workers available at high periods of demand or seasonal production peaks, compensated by time off in other periods.

Spain

European Foundation for the Improvement of Living and Working Conditions, 2002

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Developments in the Financial services sector

Sweden

During the year 2000 a working group established by the Swedish government presented its report which will be the basis of discussion regarding the possible reduction of working time, either by law or through collective agreements. The working group clearly rejects compulsory legislation to cut working time. This the fourth governmental study on the working time issue to be concluded during the past 10 years and it deals with long-term assessments, looking at up to 15 years ahead. A consultative group composed by representatives of the social partners has been also linked to the working group. The task of this working group is to examine the conditions and consequences of different kinds of working time reduction, dealing with both economic and welfare aspects and to stimulate public debate. It is possible that the government, with the support of the majority of the social partners, will opt for the collective bargaining route. On the other hand, and if the social partners do not object, a compromise could be reached in parliament resulting in a progressive legal reduction of the 40 hours weekly norm over five to 10 years. Research published in April 2001 by the Department of Trade and Industry suggests that the Working Time Regulations 1998 have had a limited effect, if any, on most UK organisations. Long hours continue to be worked consistently by a significant minority of employees, facilitated by voluntary exemptions from the legislation. The Regulations are seemingly a matter of little concern for most employers and their workers. However, there is also evidence of some employers flouting the law and exploiting ignorance about the Regulations to deprive vulnerable workers of their rights.

United Kingdom

For more information about Foundation research on this subject, please contact: Camilla Galli da Bino Information Liaison Officer Telephone: (353 1) 204 31 25 Fax: (353 1) 282 64 56 E-mail: gdb@eurofound.eu.int

EF/02/42/EN
The European Foundation for the Improvement of Living and Working Conditions is a tripartite EU body, whose role is to provide key actors in social policy making with findings, knowledge and advice drawn from comparative research. The Foundation was established in 1975 by Council Regulation EEC No 1365/75 of May 1975.

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European Foundation for the Improvement of Living and Working Conditions, 2002