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Labour Q&A with Terry Bell
Is centralised bargaining still appropriate or is it a relic of apartheid? Follow this lively debate.
Fin24 user Clive Wood is asking a key question regarding the discussion on strikes and the impact on the South African economy.
"Is centralised bargaining still appropriate in the context of employer/labour negotiations? Or is it a relic of apartheid era labour relations and inward thinking business?
I would suggest that good business management recognise that performance of individual companies is determined by a wide variety of factors, one of which is having complete workforce engagement in the success of the business. In this case having to rely on centralised bargaining to negotiate employment terms and conditions seems flawed.
In years where they are profitable, successful companies can afford to reward and motivate employees by letting them share in the benefits by way of higher wage increases. At times of hardship negotiations have take place with regard to the need for austerity.
Some elements of labour will cry that employers just want to exploit labour and hence the desire to break up the centralised forums. Some employers want to avoid engaging with their own staff to debate and discuss the realities of fair wages for their jobs.
However it is reality that the people best placed to understand the state of the individual business and it's ability to pay wage increases are the employers and employees of that specific business."
Terry Bell responds:
Hi Clive. Thank you for your contribution. And I actually know of some privately owned enterprises that are run on an almost collective basis, with workers doing better in the good times and sharing the economic burdens in bad.
Unfortunately, they are a small minority and must remain so, because public (or larger private) companies, have the fiduciary duty to maximise returns to shareholders, not to workers or consumers.
In this situation, centralised bargaining in any sector allows unions and employers to establish a benchmark for wages and conditions. However, there are provisions for waivers of these agreements, depending on the financial status of individual industries with each sector. The bottom line is that it is not in the interests of either the employers or the unions to see companies close down.
What is required before negotiations commence is full disclosure of the financial position of companies and their remuneration and dividend policies. For listed companies, these are available in annual reports. Unions have, admittedly, frequently been remiss in accessing them.
But to read a balance sheet and to understand the often complex financial dealings listed requires considerable skill. At a centralised level, unions should possess this, but it is too much to expect every group of employees in
every factory or workshop to be able to manage this. Certainly not at this stage of our development.
Where the "big boys" do a deal that they can afford because of aspects such as economies of scale, it is up to the smaller enterprises to be open and honest with their workers and together to apply for a suitable waiver of whatever has been agreed centrally.
Anyway, that's how I see it at the moment.
Clive Wood: Terry, not sure I fully agree with all your sentiments and comments.
1. I'm not sure I can think of any enterprise I have worked in or with that attempts to maximise returns to shareholders by prioritisation of minimising wages. Shareholder return must be maximised over multiyear periods and for this to be achieved does require all employees to participate fully. Many companies allow employees at all levels to benefit when company performance is good through bonus schemes etc.
2. I disagree that centralised bargaining established a benchmark. It does establish a minimum rate of pay, however, I would be curious to see the outcome of research to establish across each bargaining council what is the actual rate of pay and the total cost of employment vs. the negotiated minimum. As an employer that certainly pays significantly above the minimum we find ourselves locked in to percentage increases that raise our employment costs further above the minimum.
3. I agree that there is provision to waiver out of agreements in any specific year if business conditions warrant this. However, I think the time frame to negotiate this is a significant challenge
I just feel that there needs to be a review of the system.
Terry Bell: I agree that the system needs to be reviewed; that the time frames in particular need looking at. I was using the term "benchmark" as the minimum wage level around which individual enterprises can negotiate.
Because wages are a major cost, it is always in the interests of any company facing a competitive environment to restrict these. That sometimes comes down to a matter of survival.
Bonus schemes and "social responsibility" programmes, unless they are of benefit to the bottom line should - as Milton Friedman advised - be done away with.
I know of no company that "in the good times" has handed out largesse to its employees. The simple - and hard - truth, as I see it is that good bosses go bust. But perhaps I am wrong.
* Share your take or just drop Terry a labour question.
- Fin24
* Follow Terry on twitter @telbelsa.
Disclaimer: All articles and letters published on Fin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.
Is centralised bargaining still appropriate or is it a relic of apartheid? Follow this lively debate.
Fin24 user Clive Wood is asking a key question regarding the discussion on strikes and the impact on the South African economy.
"Is centralised bargaining still appropriate in the context of employer/labour negotiations? Or is it a relic of apartheid era labour relations and inward thinking business?
I would suggest that good business management recognise that performance of individual companies is determined by a wide variety of factors, one of which is having complete workforce engagement in the success of the business. In this case having to rely on centralised bargaining to negotiate employment terms and conditions seems flawed.
In years where they are profitable, successful companies can afford to reward and motivate employees by letting them share in the benefits by way of higher wage increases. At times of hardship negotiations have take place with regard to the need for austerity.
Some elements of labour will cry that employers just want to exploit labour and hence the desire to break up the centralised forums. Some employers want to avoid engaging with their own staff to debate and discuss the realities of fair wages for their jobs.
However it is reality that the people best placed to understand the state of the individual business and it's ability to pay wage increases are the employers and employees of that specific business."
Terry Bell responds:
Hi Clive. Thank you for your contribution. And I actually know of some privately owned enterprises that are run on an almost collective basis, with workers doing better in the good times and sharing the economic burdens in bad.
Unfortunately, they are a small minority and must remain so, because public (or larger private) companies, have the fiduciary duty to maximise returns to shareholders, not to workers or consumers.
In this situation, centralised bargaining in any sector allows unions and employers to establish a benchmark for wages and conditions. However, there are provisions for waivers of these agreements, depending on the financial status of individual industries with each sector. The bottom line is that it is not in the interests of either the employers or the unions to see companies close down.
What is required before negotiations commence is full disclosure of the financial position of companies and their remuneration and dividend policies. For listed companies, these are available in annual reports. Unions have, admittedly, frequently been remiss in accessing them.
But to read a balance sheet and to understand the often complex financial dealings listed requires considerable skill. At a centralised level, unions should possess this, but it is too much to expect every group of employees in
every factory or workshop to be able to manage this. Certainly not at this stage of our development.
Where the "big boys" do a deal that they can afford because of aspects such as economies of scale, it is up to the smaller enterprises to be open and honest with their workers and together to apply for a suitable waiver of whatever has been agreed centrally.
Anyway, that's how I see it at the moment.
Clive Wood: Terry, not sure I fully agree with all your sentiments and comments.
1. I'm not sure I can think of any enterprise I have worked in or with that attempts to maximise returns to shareholders by prioritisation of minimising wages. Shareholder return must be maximised over multiyear periods and for this to be achieved does require all employees to participate fully. Many companies allow employees at all levels to benefit when company performance is good through bonus schemes etc.
2. I disagree that centralised bargaining established a benchmark. It does establish a minimum rate of pay, however, I would be curious to see the outcome of research to establish across each bargaining council what is the actual rate of pay and the total cost of employment vs. the negotiated minimum. As an employer that certainly pays significantly above the minimum we find ourselves locked in to percentage increases that raise our employment costs further above the minimum.
3. I agree that there is provision to waiver out of agreements in any specific year if business conditions warrant this. However, I think the time frame to negotiate this is a significant challenge
I just feel that there needs to be a review of the system.
Terry Bell: I agree that the system needs to be reviewed; that the time frames in particular need looking at. I was using the term "benchmark" as the minimum wage level around which individual enterprises can negotiate.
Because wages are a major cost, it is always in the interests of any company facing a competitive environment to restrict these. That sometimes comes down to a matter of survival.
Bonus schemes and "social responsibility" programmes, unless they are of benefit to the bottom line should - as Milton Friedman advised - be done away with.
I know of no company that "in the good times" has handed out largesse to its employees. The simple - and hard - truth, as I see it is that good bosses go bust. But perhaps I am wrong.
* Share your take or just drop Terry a labour question.
- Fin24
* Follow Terry on twitter @telbelsa.
Disclaimer: All articles and letters published on Fin24 have been independently written by members of the Fin24 community. The views of users published on Fin24 are therefore their own and do not necessarily represent those of Fin24.
