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Our View: Collective agreements are often bad for small businesses

Construction workers at the Peo offices in Nicosia on Wednesday

ON WEDNESDAY some 15,000 construction workers staged a 24-hour strike to protest against the refusal of building contractors to sign the collective agreement governing their working hours, pension fund, bonuses, holidays and pay. There was an agreement in principle, but when the representatives of the building contractors’ federation took it to its members it was rejected by the overwhelming majority. The builders voted in favour of stepping up their action if employers continued to oppose the collective agreement.

Without collective agreements, the Peo union boss, Bambis Kyritsis said, the labour market would become a jungle. The worker needed to know, when going to work, that he would be receiving what is stipulated by the collective agreement and the employer was obliged to implement all terms. It is perfectly reasonable to expect work relations to be governed by an agreement between worker and employer. What is unreasonable and needs to stop because it makes no economic sense, is having a single collective agreement that applies to all companies in a specific sector, based on the false assumption that all companies are the same.

By what logic must a small company, with a small workforce and limited profitability pay its workers the same wages, and give the same annual pay rises and bonuses as a big and highly profitable firm? This insistence of the unions on fixing wages for all employees and standardising work terms across a specific sector is simply absurd and puts less profitable firms under unnecessary economic strain. It also helps the big firms squeeze out their smaller competitors because the pay and terms unions usually secure are those that apply to the most successful firms.

The irrational system of collective agreements also applies to the banking sector, the hotel industry, printing shops, car importers etc and unions support it because it gives them more power over employers. Union bosses do not realise that this is not necessarily good for their workers. Work relations should be regulated but not in the bulldozer fashion of collective agreements. Unions should agree work terms with each business separately. If this is practically difficult because there may be too many companies and not enough union representatives, general guidelines could be agreed – working hours, holidays, pension funds etc – but pay and incentive schemes should be negotiated with every firm separately.

This would be a much more rational system as it offers flexibility. A firm that is not doing well could negotiate a lower or zero pay rises for a year rather than increase its financial difficulties by having to adhere to a collective agreement. This is the way forward, even though it might weaken the negotiating power of the unions a little.

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