Collective Bargaining Definition

Collective Bargaining Definition

What is Collective Bargaining

Collective bargaining is the process where a group of employees ‘collectively’ negotiate with the employer. This is generally to negotiate pay, working conditions, benefits, and other factors regarding the employees compensation package and rights.

Generally speaking, collective bargaining is conducted through a trade union which represents its members. There will be representatives from the union that negotiate on their behalf. This may be on a business by business basis, or there may be an industry wide negotiation.

For instance, USDAW, a retail trade union in the US, may sit down with all the big players such as Walmart, Target, and Costco, among others. It will then negotiate a retail wide agreement for its workers across the industry. For example, this may be a minimum wage, basic benefits, or certain working conditions.

Key Points
  1. Collective bargaining is where a group of employees get together to negotiate better terms with their employer.
  2. A collective bargaining agreement usually covers items such as pay, benefits, working conditions, and pensions.

What happens in Collective Bargaining

Collective bargaining is generally conducted through a trade union. Employees will pay the trade union a relatively small fee each month to be a member.

In return, the trade union hires has a negotiating team to bargain on the employees behalf. What happens next is a set of steps before the conclusion of the negotiation.

The process can be seen on the right – starting from preparing for negotiations, followed by proposal of key demands, negotiation, agreement reached, and the after work of administering the agreement.

1. Preparing for Negotiations

This may cover a number of areas that its members are most concerned with. It may include a survey of members or several focus groups.

Simply put, the trade union and negotiators look to find out the key points by which they are to negotiate on.

For instance, the lack of local canteen may be an issue, or alternatively, workers want to get paid extra to work Sundays. Whatever the key issues, the first stage would be to compile these ready for the negotiation.

2. Propose Key Demands

Once a list of key items are highlighted by the unions members, it compiles them down into an official document which is then passed onto the relevant party/parties. These are also known as ‘key demands’.

It may include items that are ‘red lines’ by which the negotiation must start with. Often this would be wages or key benefits to the employee. So if these are not met, negotiations will fall down.

There may also be some conditions by which the unions would ask their members to strike if certain criteria is not agreed upon or met. For instance, this may be a set minimum wage or a higher wage for overtime.

3. Negotiation

There may be sit down meetings, emails, or phone calls whereby the details of a deal are discussed. Both sides may request certain parts of the deal be left out, whilst the employer may request some to be included in.

As part of the process, both parties may take time to gather information on whether a specific course of action would be best. For instance, an increase in an employees salary by 10 percent is going to cost the company. So the negotiators would have to see whether this is financially possible.

In turn, the negotiation will continue in a circular fashion until an agreement is reached or negotiations completely break down.

4. Agreement Reached

An agreement is usually reached in principle and it is at this stage by which the more intricate details are hammered out.

Legal wording, and binding agreement are put into place so both parties are liable. Any legal documents are then signed.

In short, this stage is where the agreement is put into place and the final details are arranged.

5. Administration of Agreement

It is at this stage by which unions will look to hold the employer to account and ensure the agreement is being implemented. For instance, are workers getting paid the agreed minimum salary? Or, has the firm built the newly requested canteen on time and to an agreed upon quality.

Furthermore, some agreements may have a set expiry date by which another set of negotiations will take place. So the collective bargaining system can be seen as a continuous process.

Types of Collective Bargaining

When looking at the types of collective bargaining, it is important to distinguish it between a collective agreement. There are also different types of collective agreements, but these refer to the outcome of collective bargaining.

For instance, there are single union deals, procedural agreements, substantive agreements, and partnership agreements. All of which refer to the agreement that has taken place as a result of the collective bargaining process.

1. Distributive Bargaining

Distributive bargaining is defined as a negotiation process by which one party benefits at the others expense. This usually refers to the redistribution of income in the form of higher wages, higher bonuses, or higher financial benefits. Simply put; anything related to the transfer of money.

In this type of bargaining, the trade union needs to have enough market power to win the negotiation. The employer will want to pay as little in wages. Yet in order to convince them to pay more, the trade unions need enough members to provide a significant incentive.

In other words, a trade union that has 100 percent of the employers workforce has significant power. Should they call a strike, it would cause severe disruption to the employer. Consequently, any distributive bargaining will be skewed significantly in favour of the unions.

2. Integrative Bargaining

Integrative bargaining is whereby both sides aim to benefit in what is seen as ‘win-win’ bargaining. Both parties may bring together a list of demands by which an agreement is reached that benefits both parties.

To put it another way, integrative bargaining involves both parties considering the others point of view, needs, wants, fears, and concerns. As a result, both parties either lose or gain by the same amount. For example, unions may advocate for greater levels of staff training. Now this may cost the business more, but it will benefit from greater levels of productivity in the long run.

If workers are better trained, they are equally going to be more productive. So the business and the unions workers may gain as a result.

We can also look at integrative bargaining where both sides lose in order to gain. For example, the unions may be willing to give up yearly bonuses in order to have a higher annual salary. Or, alternatively, the union would accept a pay freeze in order to accept better working conditions. So the workers would lose out from lower real wages, whilst the employer would have to invest in better conditions.

3. Productivity Bargaining

Productivity bargaining involves both parties negotiating around productivity and pay. So unions may suggest that higher salaries would boost productivity. However, this is unknown to the business. So target-orientated bonuses may be suggested, or new ways of improving the process.

Unions may suggest new ways of organising the worker force than may increase productivity and therefore create value to the firm. In turn, employers would look to increase employees wages as a result.

Simply put, productivity bargaining is where the two parties look to agree to changes that would boost productivity in return for higher wages or other benefits.

4. Composite Bargaining

Composite bargaining refers to a negotiation that focuses on a number of elements that are not related to pay. They are generally related to employee welfare and job security. For instance, it covers factors such as working conditions, policies, recruitment, and disciplinary processes.

The aim is to ensure a mutually beneficial long-term relationship between the employer and employee. It does this by highlighting issues that employees may have, which may impact their long-term future at the company.

Businesses want to retain talent, particularly if they spend time and money training them up. Factors such as workload and working conditions can impact on this long-term relationship. So it is in the best interest of both parties to ensure that the employees are happy.

5. Concessionary Bargaining

Concessionary bargaining is based on unions giving back previous benefits to the employer. For instance, trade unions may agree to lower wages in return for job security.

This may come during an economic decline whereby job security is more important to the unions than higher wages. Overall, this may actually benefit the company as they won’t have to pay for so many redundancies and can keep workers on.

The main aim of concessionary bargaining is to strengthen the business in order to ensure its survival alongside its employees. So unions give back previous benefits in order to secure the businesses’ long-term future and therefore its members.

Collective Bargaining Examples

NFL Collective Bargaining Agreement

In 1968, the National Football League Players Association (NFLPA) and National Football League (NFL) came to its first collective bargaining agreement. The NFLPA was the first recognised players union and in 1968 they went on strike over pay and pensions.

After eleven days of strikes, an agreement was reached which increased salaries of rookie and veterans, whilst also guaranteeing them a pension.

Since then, there have been 6 sub sequential agreements which have since increased wages in the early years and introduced medical insurance in the later years. For instance, the 2006 agreement included the extension of medical expenses post-career after a players insurance ran out.

These agreements have largely changed away from minimum salary requirements as its key focus, and towards negotiations around salary caps instead. For instance the most recent 2011 agreement covered salary caps, free agency rules, rookie compensation, and franchise tags.

US Steel Collective Bargaining

In 2018, an agreement was reached between United States Steel Corporation and United Steelworkers (USW). It was a four-year agreement which will be reviewed in 2022. The agreement included a signing bonus of $4,000 per member, a 14 percent increase in wages over four years, and increased pension contributions.

It follows years of stagnant pay as the company suffered from low steel prices. However, it benefited from President Trumps steel tariffs which have pushed up steel prices in the subsequent years. In turn, the unions pressured the firm for greater distribution of its higher profits.


In Scandinavia there are no minimum wages. Instead, they are set by collective bargaining. This sets a minimum salary in the Scandinavian countries of Denmark, Norway, Sweden, and Finland. It is not to be confused with a minimum wage which is universal and dictated by government.

In Scandinavia, collective bargaining agreements are conducted on an industry by industry basis. For example, there may be a different minimum salary in retail than in hospitality. There are also variations that are agreed upon that allow for experience and age.

Unlike other minimum wages across the world, it is much more flexible and based on an agreement between employers and employees in the form of a union.

Collective Bargaining FAQs

What is an example of collective bargaining?

Collective bargaining is commonplace in Scandinavia which uses it instead of minimum wages to set a base salary for workers. So rather than having a universal minimum wage, employees unions agree on a wage structure.

What are the types of collective bargaining?

There are 5 main types of collective bargaining
1. Distributive Bargaining
2. Integrative Bargaining
3. Productivity Bargaining
4. Composite Bargaining
5. Concessionary Bargaining

What is the role of collective bargaining?

The role of collective bargaining is to give employees a greater negotiating power against the employer. It is then generally targetting a number of key areas such as wages, benefits, pensions, workers’ rights, working conditions, and protecting workers’ jobs.

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