COLLECTIVE

BARGAINING
CONCEPT
 Collective Bargaining is the technique that has been
adopted by unions & managements to reconcile their
conflicting interests. It is called collective because the
employees, as a group, select representatives to meet &
discuss differences with the employer.
 Collective bargaining is that arrangement where the
wages components of remuneration & conditions of
employment of workman are settled through a bargain
between the employer & the workmen collectively
whether represented through their union or by some of
them on behalf of all them.
Origin
 Collective bargaining has emerged throughout
the world, particularly in democratic countries,
as a major institutional mechanism for the
resolution of conflict of interests between labour
& management.
 Sidney & Beatrice Webb were the first to use
the term’ collective bargaining’ in 1891.
Subsequently , Samuel Gompers, the president
of American Federation of Labour in USA
considered, collective bargaining
DEFINITION
 Michael Jucius – “ Collective Bargaining refers
to a process by which employers on the one
hand & representatives of employees on the
other, attempt to arrive at agreements
concerning the conditions under which
employees will contribute & be compensated for
their services.”
 Richardson – “ Collective bargaining takes
place when a number of work-people enter into
negotiation as bargaining unit with an employer
or group of employers with the object of
reaching an agreement on the conditions of
employment of work-people.
 Encyclopedia of Social Sciences – “ Collective
Bargaining is a process of discussion &
negotiation between two parties, one or both of
whom is a group of persons acting in concert.
The resulting bargain is an understanding as to
the terms & conditions under which a continuing
service is to be performed…More specifically ,
collective bargaining is a procedure by which
employers & a group of employees agree upon
the conditions of work.
Nature of Collective bargaining
 It is carried out on a collective as distinct from an individual basis. That
is, collective bargaining is bargaining by groups of people.
 In the bargaining process, the main actors are employees, employers &
their associations.
 The object of collective bargaining is rule making. i.e reaching an
agreement by specifying the rules pertaining to employment
relationship.
 The main focus of these rules is on the terms & conditions of
employment.
 It is both device & a procedure used by wage earners to safeguard their
interests; it is an institution or instrument of an industrial organization for
discussion & negotiation between the two parties.
 It is moreover a technique by which an attempt is made to reconcile the
needs & objectives of workers & employers & is therefore, an integral
part of an industrial society.
 The essence of collective bargaining lies in the readiness of the two
parties to a dispute to reach an agreement or mutually satisfying
settlement. It is concerned about the emotions of the people involved in
it as well as with the logic of their interest.
Features of Collective
Bargaining.
1. It is group action as opposed to individual action & is
initiated through representatives of workers.
2. It is flexible & mobile, & not fixed or static.
3. It is a two-party process.
4. It is a continuous process.
5. It is dynamic & not static.
6. It is industrial democracy at work.
7. Collective bargaining is not a competitive process but is
essentially a complementary process.
8. It is an art, an advanced form of human relations
Importance of Collective
Bargaining
 Improvement in the Conditions of Workers – Collective
bargaining has considerably helped in securing a wide
variety of economic benefits for the workers in the form of
higher wages, liberal allowances, fringe benefits,
economic security, shorter hours of work, better terms &
conditions of employment & physical working conditions.
Collective Bargaining has helped workers in getting
economic benefits & facilities,
 Check on Autocracy in Industry – During early years of
industrialization, the employers unilaterally determined
the terms & conditions of employment of their workers.
Hiring & firing of workmen was considered their
prerogative. Collective bargaining has put an effective
check on employers autocracy in regard to the laying
down of terms & conditions of employment.
3) Promotion of lasting industrial peace.- It has been seen that a
lasting solution to the problems in an industry can be possible
only when the parties have a say in reaching decisions.
Collective bargaining provides this opportunity. The employer
and workers are in the better position to understand and
appreciate the problems and difficulties of each other.
Collective bargaining enables the parties to settle their
differences or disputes based on facts and realities of the
situation.
4) Favorable to managerial efficiency – Collective bargaining has
also contributed towards improving managerial efficiency and
solution of specific problems facing the management.
5) Development of industrial Rules. – Successful conclusion of
collective bargaining and incorporation of the terms in
collective agreement lead to establishment of rules or
standards to be observed by both the parties.
6) Significant for society and economy.
NEED FOR COLLECTIVE
BARGAINING
1. Collective Bargaining provides platform for
mgmt & employees which places them at par
so far as negotiations are concerned.
Therefore, any outcome of the negotiation is
perceived as mutually beneficial to each other
& has better acceptability among them.
2. It is a pragmatic & democrative process for
regulating the terms & conditions of
employment in which employees feel a part of
decision making process. This feeling
develops better understanding among them,
increases trust & mutuality of interests with the
organization.
3. Because of development of better
understanding between employees & mgmt,
collective bargaining may be used to adopt a
more flexible approach towards employment
conditions in dynamic environment.
4. Collective bargaining provides opportunity for
speedy implementation of decisions regarding
terms of employment as both parties are
involved in decision making process. A
participative decision making , particularly on
issues of continuous nature, provides in-built
mechanism for implementation of decisions.
Process of Collective
Bargaining
In Collective bargaining process following
steps are involved-
1. Preparation for Negotiation.
2. Issues for Bargaining.
3. Negotiation.
4. Negotiated Agreement.
5. Rectification of agreement.
6. Implementation of agreement.
1. Preparation for Negotiation
 Preparation for Negotiation in a collective bargaining is as important as the
negotiation process itself. Up to 83% of the outcomes of the negotiations are
influenced by pre-negotiation process. Such preparation is required both by
mgmt as well as union. From mgmt side, pre-negotiation preparation is
required as follows-
1. Mgmt should decide when to open the negotiation; sometimes, it is advisable
to open negotiation long before the expiry of previous settlement while, other
times, fre3ash negotiation may start after the expiry of previous settlement.
The mgmt must interpret the situation appropriately & make the decision.
2. Mgmt must decide the representatives to negotiate at the negotiation table.
These representatives should posses negotiating skills like, emotional
balance, communicative & listening, flexible attitudes, empathy & knowledge
of the issues involved in the bargaining.
3. There should be analysis of the impact of various decisions which may
emerge out of negotiations.
4. Draft for likely decisions should be prepared in advance so that final
agreement draft can be prepared as soon as the negotiation process is over.
 From the employees side, the preparation is required
on the following-
1. The union should collect the facts about the financial
position of the co. & its ability to pay.
2. It must also be aware of the various practices followed
by other co’.s in the same region or industry so that it
takes a more realistic approach on various issues of
bargaining.
3. The union must assess the attitudes & expectations of
the employees over various issues so that negotiation
outcomes do not face resistance from them.
4. It must also assess the likely stand that the mgmt may
take over various issues so that the union can adopt
suitable steps for more acceptable outcomes.
2. Issues for Bargaining
 The 2nd step in bargaining process is the determination of issues which
will be taken up for negotiation. Various issues which can be sorted
out through collective Bargaining fall into 4 categories-
1. Wage related issues- wage related issues include wage/salary
revision, allowances for meeting increased cost of living like dearness
allowances, overtime rates, financial incentives schemes, bonus etc.
2. Supplementary Economic Benefits- These include such issues as
pension plans, gratuity plans, paid vacations, paid holidays, lay-off
pay, retrenchment compensation, health insurance plan etc.
3. Institutional issues- These issues include the determination of rights &
duties of employers, employees & trade union with a view that each
group respects & protects the rights of others & performs its duties
accordingly.
4. Administrative Issues- These issues include determination of
seniority, basis of promotion, employee discipline & discharge
procedure, grievances procedure, employee health & safety
measures, work rules, job security & job changes, training,
technological changes etc.
3. Negotiation
 When the first 2 steps are completed both parties
engage in actual negotiation process at a time & place
fixed for the purpose. There are 3 types of negotiation
process-
1. Haggling bargaining- This is the oldest procedure of
negotiation between labour & mgmt. in this method 2
approaches can be adopted; piecemeal approach &
total approach. In piecemeal approach an issue can be
taken, deliberated 7 decided without linking it to
another. In this way, all issues are decided. In total
approach all the issues are discussed but the item-wise
decision is not arrived at, as no issues is settled
independently. Every issue is kept open until the whole
negotiating process is ready to crystallize into a total
agreement.
2. Boulwarism- In this method the co. itself takes an
initiative to find out through comprehensive research &
survey the needs of the employees. Based on the
analysis of findings, the co designs its own package
based on the issues of bargaining. Thereafter, a
change is incorporated only when new facts are
presented by the employees or their unions.
3. Continuous bargaining -Continuous bargaining involves
parties to explore particular difficult bargaining
problems in joint meetings over the long period of time,
sometimes throughout the life of each agreement.
4. Negotiated Agreement

 When 2 parties arrive at some mutually

acceptable agreement either at the initial
process or through overcoming
negotiation breakdown, the agreement is
entered into with a provision that the
agreement will be formalized after its
rectification by the respective
organizations.
5. Rectification of Agreement
 Rectification of negotiated agreement is required
because the representatives of both the parties may not
have ultimate authority to decide various issues referred
to for collective bargaining. The rectification of agreement
may be done by the appropriate managers authorized for
the purpose in the case of mgmt, trade union executive
or all the employees in the case of employees.
 The agreement is in written form indicating the various
issues settled . It usually consists of a preamble, a series
of clauses & appendices giving details of items wherever
required. It also includes the date from which it comes
into operation & the period for which it will remain in
operation, the mechanism of sorting out the differences
over the interpretation of clauses & signatories to the
agreement.
6. Implementation of
Agreement
 When the agreement is finalized, it
becomes operational from the date
indicated in the agreement. The
agreement must be implemented in
terms of its letters & sprit by both the
parties.
CAUSES FOR FAILURE OF
COLLECTIVE BARGAINING
1. Attitude of management
2. Legal Problems.
3. Political Interference
4. Problem with Unions.
5. Problems from Governments
 Employee Stock Option Plans
(ESOP)
 A plan established by a company whereby a certain
number of shares is reserved for purchase & issuance to
key employees. Such shares usually vest over a certain
period of time to serve as an incentive for employees to
build long term value for the company.
 Many companies use employee stock option plans to
compensate , retain, & attract employees. These plans
are contracts between a company & its employees that
give employees the right to buu a specific number of the
co’s shares at a fixed price within a certain period of time.
 Employees who are granted stock options hope to profit
by exercising their options at a higher price than when
they were granted.