Collective agreement in a nutshell
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Many people may be puzzled by collective agreements. What do they contain? Who do they concern? What you should know about them? In summary, a collective agreement specifies the terms and conditions under which people will work for the next few years.
A collective agreement defines the minimum terms and conditions for salaries, working hours, sick leave practices and holidays, for example. Its purpose is to ensure that the various parties in the labour market are treated equally. Different industries have their own agreements. Each agreement reached in a collective bargaining process remains in force for a specific period. When you sign an employment contract, it must specify which collective agreement will be applied to your employment.
The collective agreement guarantees to the employee, for example, that the employer will pay them at least the minimum wage in the industry. The agreement is binding on the employers. So, it is not possible to agree on any inferior terms and conditions in the employment contracts. Trade unions monitor compliance with collective agreements. Sometimes, the collective agreement may allow local bargaining. In such a case, the terms and conditions can be negotiated between the employer and the employee.
A collective agreement may bind all employers in the industry or only those who are members of an employers' association. Confusion may arise from the terms universally binding collective agreement, normally binding collective agreement and company-specific collective agreement. What is the difference between these three concepts?
- A universally binding collective agreement obliges all employers operating in the industry it concerns to apply its regulations to all their employees. Universally binding collective agreements must be complied with regardless of whether the employer is organised or not. The employer is organised when it belongs to an employer's association. You will find universally binding collective agreements on Finlex.
- A normally binding collective agreement obliges the employer if the employer is a member of an employers' association that has signed the agreement or has signed the collective agreement itself. The collective agreement must be applied to all employees who work in the company and fall within the scope of application of the agreement. It does not have a bearing on the matter whether the employee is a member of a trade union or not. Trade unions keep records of normally binding collective agreements within their industry.
- A company-specific collective agreement is an alternative to collective agreements signed by national associations. It concerns only a specific company. Even then, the trade union usually negotiates an agreement with the employers' association, if one exists. Typically, the negotiations are also attended by a representative of the company which the collective agreement concerns. The same terms and conditions apply to all employees of the company.
Employment contracts of those not belonging to a trade union are also often subject to the terms and conditions of the collective agreement, but there are certain exceptions. For example, self-employed persons, senior managers or those in managerial roles may be excluded from the collective agreement.