IR Chapter 6 | Collective Bargaining

Collective Bargaining
Collective bargaining refers to the negotiation, administration, and interpretation of a
written agreement between employers and employees for a specific period. It is a process
where employers and a group of employees (represented by trade unions) negotiate to reach
an agreement that regulates working conditions.

In this process, representatives of management and the union meet to discuss and finalize a
labour agreement.
The final agreement includes provisions related to:
• Wages
• Working hours
• Working conditions

Example: A union and company management agree on a fixed salary increase and standard
working hours for a two-year period.
Thus, collective bargaining is a formal process through which employers and employees reach
mutually agreed terms regarding employment conditions.

Features of Collective Bargaining

Collective bargaining has certain characteristics that define its nature as a structured and
effective process of negotiation between management and workers.

1. It is a collective process: The bargaining is carried out by representatives of both

workers and management, not individuals. Example: Trade union leaders negotiate on behalf
of all employees in an organization.

2. It is a continuous process: Collective bargaining does not end with an agreement; it also
includes implementation and administration of the contract. Example: After signing an
agreement, both parties ensure the agreed wage structure is properly followed.

3. It is a flexible and dynamic process: Both parties must maintain a flexible attitude and
adapt to changing situations during negotiation. Example: If a company faces financial issues,
the union may temporarily adjust its demands.

4. Bipartite process: Collective bargaining is a two-party (management and trade union)

process without third-party involvement, conducted face-to-face. Example: Direct discussions
between company executives and union representatives without external mediation.

Thus, collective bargaining is a collective, continuous, flexible, and bipartite process that
facilitates effective negotiation between workers and management.
 Characteristics of Collective Bargaining
Collective bargaining possesses certain key characteristics that define its nature as a
systematic, cooperative, and evolving process of negotiation between management and
employees. These characteristics explain how the process is conducted, the relationship
between the parties, and the principles under which agreements are reached. Understanding
these features is important to grasp how collective bargaining contributes to effective industrial
relations.
1. Equality in strength: Collective bargaining is based on the idea that both parties have
relatively equal bargaining power. This balance ensures fairness in negotiation, as no party
can completely dominate the other, leading to more acceptable agreements.
2. Voluntary Endeavour: It is a voluntary process, meaning both management and workers
participate willingly. The success of bargaining depends on the readiness of both sides to
negotiate and cooperate.
3. Flexibility: Collective bargaining is not rigid; it allows both parties to adjust their positions,
demands, and strategies according to the situation. This flexibility helps in reaching
compromises.
4. Joint and Amicable Settlement: The main objective is to achieve a mutually agreed and
peaceful settlement. It emphasizes cooperation, understanding, and compromise rather than
conflict.
5. Continuous affair: Collective bargaining is a continuous process. It does not end with
signing an agreement but continues through implementation, administration, and future
renegotiations when needed.
6. Dynamic process: It is a dynamic and changing process, influenced by economic
conditions, organizational needs, and social factors. The nature of bargaining evolves over
time.
7. Power relationship: Collective bargaining reflects the power relationship between
management and workers. Both sides use their strength, strategies, and resources to influence
the outcome of negotiations.
8. Bipartite process: It is mainly a two-party (bipartite) process involving management and
trade unions, where negotiation is carried out directly between them without external
interference.
Thus, collective bargaining is characterized by voluntary participation, flexibility,
continuity, and balanced power relations, making it an effective method for achieving
mutual agreement and maintaining industrial harmony.

Objectives of Collective Bargaining

The objectives of collective bargaining are centered on improving industrial relations by
resolving conflicts, protecting workers’ rights, and ensuring cooperation between management
and employees.

1. To settle disputes and conflicts: Collective bargaining provides a structured

mechanism to resolve disputes related to wages, working conditions, and other
employment issues through mutual agreement.
 2. To protect workers’ interests: It enables workers to safeguard their rights and
benefits through collective strength, ensuring fair treatment in the workplace.
3. To ensure participation of trade unions: The process ensures that trade unions
actively participate in decision-making, representing the voice and interests of
employees.
4. To resolve differences between workers and management: Collective bargaining
promotes dialogue and mutual understanding, helping to bridge gaps and reduce
tensions between both parties.
5. To avoid third-party intervention: It encourages direct negotiation between
employers and employees, minimizing the need for external involvement in
employment matters.
6. To maintain cordial relations: The process helps in building harmonious and
cooperative relationships, ensuring long-term stability in industrial relations.

Therefore, collective bargaining aims to create a balanced environment where conflicts are
resolved effectively and positive relationships between workers and management are
maintained.

Collective Bargaining Participants

Collective bargaining involves different participants who play specific roles in the negotiation
process, ensuring that the interests of both employees and employers are properly represented
and maintained.

1. Management

Management is represented by senior industrial relations officers, corporate executives, and

company lawyers, who negotiate on behalf of the employer. In smaller organizations, this role
is often performed by the company president.

2. Union

The union is represented by a bargaining team consisting of local union officers, shop
stewards, and representatives from national or international unions. They act on behalf of
the workers in the negotiation process.
3. Government

The government plays a supervisory role, ensuring that the bargaining process follows
established rules and legal guidelines, though it does not directly participate in negotiations.

4. Financial Institutions

Financial institutions influence the process by setting limits on the financial aspects of the
agreement, such as the affordability of wage increases, although they are not directly involved
in negotiations.

Thus, collective bargaining involves multiple participants, each contributing in different ways
to ensure a balanced, lawful, and economically feasible negotiation process.
 Impact of Collective Bargaining
Collective bargaining has a significant impact on both employees and employers, as well as on
the overall industrial environment. It not only improves working conditions but also promotes
efficiency, stability, and fairness in the workplace. The following points highlight the major
impacts of collective bargaining.

1. Improved Working Conditions: Collective bargaining helps in establishing better

working conditions, including reasonable working hours, safe environment, and fair treatment
of employees. It ensures that workers’ needs are properly addressed.

2. Higher Productivity: Through mutual understanding and cooperation, workers become

more motivated, which leads to increased efficiency and productivity. Agreements on
incentives and work norms also support better performance.

3. Stable Industrial Relations: It creates a system for resolving disputes peacefully, leading
to harmonious relationships between management and workers. This reduces conflicts
such as strikes and lockouts.

4. Economic Benefits: Collective bargaining helps in achieving fair wages, benefits, and
proper distribution of income. It contributes to the economic well-being of workers while
maintaining organizational balance.

5. Legal Protection: The agreements reached through collective bargaining are often formal
and legally recognized, providing protection to both workers and employers against unfair
practices.

Thus, collective bargaining has a positive impact by promoting better working conditions,
higher productivity, stable relations, economic fairness, and legal protection, making it
essential for effective industrial relations.

Collective Bargaining Process

The collective bargaining process is a systematic and
continuous procedure through which employers and
workers negotiate, reach an agreement, and implement
it. It involves several stages starting from preparation to
final implementation, and it does not end with signing
the agreement but continues through its administration.

Stages of the Process

1. Preparation for Negotiation

Both parties prepare themselves before entering negotiation. This includes identifying the
problem, selecting representatives, and developing negotiation strategies. Representatives
are chosen who can negotiate effectively with patience and clarity, and they must be fully
informed about the issues and their implications.
2. Contract Negotiation
This is the core stage where management and union representatives meet and exchange
demands and proposals. Usually, the union presents its demands first, and both sides engage
in discussions, arguments, and trade-offs to reach a mutually acceptable solution. The aim is to
balance opposing interests through compromise.

3. Agreement
When both parties reach a common understanding, an agreement is formed and put into
written form. This agreement includes all the negotiated terms and becomes binding once
accepted by both sides.

4. Union Ratification
After the agreement is reached, it is submitted to the union members for approval. If the
members accept it, the agreement proceeds further; if not, it may go back to negotiation again.

5. Contract Administration (Implementation)

Once approved, the agreement is implemented and administered. Both parties must follow
the terms of the contract, and it governs their relationship during its validity. Implementation
is a crucial part of the process, as bargaining is incomplete without it.

If Negotiation Fails (Breakdown)

If an agreement is not reached at any stage, it may lead to:
• Third-party intervention (conciliation/mediation)
• Strikes or lockouts by workers or employers

Thus, the collective bargaining process is a continuous cycle of preparation, negotiation,

agreement, and implementation, aimed at achieving mutually acceptable solutions and
maintaining industrial harmony.

Levels of Collective Bargaining

Collective bargaining is carried out at different levels
depending on the scope of workers covered and the extent
of negotiation. Generally, it is structured at three main levels:
plant level, industry (sectoral) level, and national (economy-
wide) level.

1. Plant (Enterprise) Level

This is the basic or micro-level of collective bargaining. At
this level, negotiations take place between the management of a particular plant or company
and the union of that same plant.

The agreements at this level are usually specific to the organization, focusing on issues
directly related to that workplace. Trade unions here are mainly centered within the plant itself,
with limited involvement from external bodies.
2. Industry or Sectoral Level
At this level, employers of several organizations within the same industry come together
and negotiate with a federation of trade unions.

The aim is to standardize employment conditions across the entire industry, making
agreements broader in scope compared to plant-level bargaining. It may cover multiple firms
and can be organized nationally or regionally depending on the industry.

3. Economy-wide (National) Level

This is the highest level of collective bargaining, where negotiations occur between national-
level trade union confederations, employers’ associations, and sometimes government
agencies.

The agreements at this level are wide in scope, often focusing on general employment policies
and macroeconomic considerations. It provides a framework or guideline for lower-level
bargaining.

Thus, collective bargaining operates at different levels—plant, industry, and national—each

varying in scope, coverage, and influence, but together contributing to an organized system
of industrial relations.

Conditions for Successful Bargaining

For collective bargaining to be effective, certain conditions must exist that promote
cooperation, trust, and proper functioning of the negotiation process between employers and
employees.

1. Freedom of association: Workers and employers must have the right to freely form unions
or associations to represent their interests. This ensures proper representation and strengthens
the bargaining process.
2. Stability of union: The trade union should be stable, organized, and responsible so that it
can effectively negotiate and also ensure that the agreement reached is properly implemented.
3. Recognition of union by employer: The employer must officially recognize the union as
the representative of workers, as collective bargaining can only take place when both parties
acknowledge each other’s legitimacy.

4. Good faith: Both parties should engage in bargaining with honesty, sincerity, and a
genuine willingness to reach an agreement, rather than trying to delay or avoid the process.

5. Mutual respect: There should be mutual trust and respect between the parties, avoiding
unfair practices such as victimization, which can make the bargaining process difficult and
hostile.
6. Supportive legal system: A well-defined legal framework and labor laws should exist to
guide the bargaining process and ensure that agreements are enforceable and fairly
implemented.
 Bargainable Issues
Bargainable issues are the matters that are subject to negotiation between management and
workers in the process of collective bargaining. In practice, any issue that affects both parties
can be discussed, although traditionally the main focus was on wages and working conditions.
Over time, the scope has expanded to include a wide range of employment-related aspects.

1. Wages: Wages are the most important issue in bargaining, covering basic salary,
allowances, and pay structures, as workers seek fair compensation for their work.

2. Working conditions: These relate to the overall environment in which employees work,
including working hours, leave policies, workplace facilities, and physical conditions.

3. Work norms: Work norms refer to the standards of performance, workload, and
productivity levels expected from employees, which management often tries to regulate.

4. Incentives and payment: This includes bonus systems, overtime pay, and performance-
based rewards, which motivate employees and link pay with productivity.

5. Job Security: Job security is concerned with protection from layoffs, retrenchment, or
arbitrary dismissal, ensuring stability for workers.

6. Transfer and promotion: These issues involve policies regarding movement of

employees within the organization and opportunities for career growth, which affect
employee satisfaction and motivation.
7. Grievances: Grievances refer to employee complaints or disputes, and bargaining
establishes procedures to handle and resolve them fairly.
8. Disciplinary issues: These include rules of conduct, penalties, and disciplinary
procedures to ensure fairness and prevent misuse of authority.

9. Health and safety: This focuses on protecting workers from accidents and hazards,
ensuring a safe and secure working environment.

10. Insurance and benefits: These include social security, medical facilities, insurance
coverage, and other welfare benefits provided to employees.

Therefore, bargainable issues cover a broad range of topics affecting employees and employers,
enabling both parties to negotiate and establish fair and balanced working conditions.

Types of Collective Bargaining

Collective bargaining can take different forms depending on the approach, objectives, and
relationship between management and workers. Over time, four main types have evolved:
distributive, cooperative, productivity, and composite bargaining—each focusing on different
goals and strategies.

1. Distributive Bargaining
Distributive bargaining is a competitive type of bargaining where both parties try to
maximize their own gains. It is known as a zero-sum game, meaning the gain of one party is
the loss of the other. This type mainly focuses on economic issues such as wages, bonuses, and
benefits.
Example: A trade union demands a 20% wage increase, while management tries to limit it to
5%. After negotiation, they agree at 10%, where each side compromises but still tries to secure
the best possible outcome.

2. Cooperative Bargaining
Cooperative bargaining is based on mutual understanding and cooperation between workers
and management. Both parties realize that their long-term survival and success depend on
each other, so they adopt a flexible and problem-solving approach.

Example: During a financial crisis, workers agree to a temporary wage reduction in exchange
for job security, while management promises future wage increases and invests in improving
business performance.

3. Productivity Bargaining
Productivity bargaining focuses on linking wages and benefits to productivity levels. In this
type, both parties agree on a standard productivity index, and workers receive additional
benefits if they exceed the set targets.
Example: A company and union agree that if workers produce 100 units per day, they will get
basic wages, but if production exceeds 120 units, they will receive extra bonuses or
incentives.

4. Composite Bargaining
Composite bargaining is a comprehensive and proactive form of bargaining that goes
beyond wages and includes broader issues such as job security, working conditions,
environmental safety, and employment levels. It focuses more on overall welfare rather than
only financial gains.

Example: A union negotiates not only for wages but also for safe working conditions, limits
on workload, and protection against job loss due to automation.

Therefore, the different types of collective bargaining reflect various approaches—from

conflict-based (distributive) to cooperative and welfare-oriented (composite)—helping
both parties address diverse workplace issues effectively.

Pre-requisites for Successful Collective Bargaining

The success of collective bargaining does not depend only on negotiation itself, but also on
certain essential preconditions that must exist before and during the process. These pre-
requisites help create an environment of trust, cooperation, flexibility, and effective
communication between management and workers. Without these conditions, bargaining may
become rigid, conflict-oriented, and unsuccessful. Therefore, fulfilling these requirements is
crucial for achieving mutually beneficial and stable agreements.
1. Flexibility in bargaining: Collective bargaining is essentially a give-and-take process,
which requires both parties to remain flexible. Proper preparation and skillful handling are
necessary, and rigid or extreme positions can prevent settlement.

2. Constructive attitude: A positive and constructive attitude is necessary for both parties
so that they can focus on solving problems rather than creating conflicts. This helps in reaching
agreements through mutual understanding.

3. Ability of union leaders: Union leaders should be competent, experienced, and well-
informed about industrial realities. Their effectiveness in negotiation and their ability to
secure benefits for workers play a key role in successful bargaining.

4. Non-involvement of political parties: Political interference should be avoided, as it can

create unnecessary tension and militancy. A neutral environment helps both parties negotiate
freely and fairly.

5. Bargaining attitude of management: Management must adopt a cooperative and open-

minded attitude instead of being defensive or aggressive. A willingness to negotiate and make
reasonable concessions improves the chances of success.

6. Bargaining procedure: The bargaining process should follow a clear, systematic, and
well-defined procedure. Agreements must be carefully drafted so that they are precise and
easily understood by both parties.

7. Bargaining role of the lawyers: The role of lawyers in bargaining should be clearly
defined, whether they act as advisors or representatives. Proper understanding of their role
prevents confusion and ensures smooth negotiation.

8. Role of observers: Observers may be present during bargaining sessions to ensure

transparency and fairness. They help monitor the process and ensure that neither side acts
against the interests of their group.

Thus, successful collective bargaining requires not only negotiation skills but also proper
conditions, capable leadership, cooperative attitudes, and a well-structured process, all
of which ensure effective and meaningful agreements.

Tactics to be Followed in Collective Bargaining

In collective bargaining, negotiation is not only about demands and agreements but also about
how the negotiation is conducted. Both management and trade unions use certain practical
tactics during bargaining sessions to influence discussions, strengthen their position, and
move the process toward settlement. These tactics are situational and require careful use, as
they help in avoiding deadlock, reducing conflict, and achieving mutually acceptable
outcomes.

1. Counter Proposal: Counter proposal is a common tactic where one party responds to the
other’s demand by offering an alternative proposal instead of outright rejection. This helps
keep the negotiation process ongoing and constructive.
Example: If a union demands a 20% wage increase, management may counter with 8%, which
opens the door for further negotiation and compromise.

2. Trade-off: Trade-off involves giving up one benefit to gain another. Since collective
bargaining is based on compromise, this tactic helps both parties reach a balanced agreement.

Example: Workers may agree to accept lower overtime rates in exchange for improved job
security or better working conditions.

3. Recess: Recess means taking a temporary break during negotiation sessions. It allows
both parties to rethink their positions, reduce tension, and return with a clearer perspective.
Example: When bargaining becomes tense or arguments escalate, both sides pause the
discussion and resume later with a more flexible attitude.

4. Wait and See: In this tactic, one party delays decision-making to observe the behavior,
strength, or reaction of the other side. It is often used strategically when the situation is
uncertain.

Example: Management may delay accepting union demands, hoping that workers will weaken
their position or reduce their expectations over time.

5. Getting Public Support: Sometimes, one party tries to gain public sympathy or external
support to strengthen its bargaining power and put pressure on the other side.

Example: Workers may organize demonstrations or media campaigns to highlight unfair

treatment, forcing management to respond more seriously.

6. Use of Mediator: When negotiations reach a deadlock, a neutral third party (mediator
or conciliator) may be involved to facilitate communication and help both sides reach an
agreement.

Example: A government mediator steps in during a labor dispute to help both management and
union find a middle ground without conflict escalation.

Thus, these tactics are essential tools in collective bargaining, enabling both parties to manage
negotiation effectively, handle conflicts strategically, and reach mutually beneficial
agreements in a practical manner.

Collective Bargaining Practices in Bangladesh

Legal Framework of Collective Bargaining (Bangladesh Labor Act 2006)

• Requires a registered trade union to become nominated as Collective Bargaining

Agent (CBA)
• If there is only one trade union in an enterprise with at least 30% of workers as
members, it is declared as the CBA for that enterprise
• If there is more than one registered trade union, one of them is elected as CBA through
a secret ballot by all workers
• The tenure of the CBA is two years
Collective Bargaining Process (Bangladesh Labor Act 2006)
• The CBA is legally entitled to raise labor disputes on behalf of workers and bargain
collectively with employers
• Collective bargaining negotiations must be completed within 21 days after the official
demand
• If a settlement is reached, a memorandum of settlement is recorded in writing,
signed by both parties, and forwarded to the appropriate government authority
• If no settlement is reached, either party (CBA or employer) may refer the dispute to a
conciliator in writing
• A plant-level trade union elected as CBA can raise a written dispute and initiate
bargaining, which must start within 15 days of submission
• As per the Labor Act 2006, sectoral bargaining is not allowed; only bargaining at the
enterprise or group level is permitted
• Collective bargaining is not allowed in industries located in EPZs