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How collective agreements are established

Through collective bargaining, the trade union representing workers in the sector and the employers’ association representing companies in the sector negotiate minimum terms of employment, such as wages and working hours. The trade union can also negotiate these with an individual company.

A collective agreement is always the result of negotiations in which both parties – workers and employers – focus on aspects that are important to them. PAM’s role in negotiations is to promote the interests and position of workers in service sectors.

How are terms of employment negotiated?

Union-specific agreements on terms of employment mean that the provisions of collective agreements are agreed between trade unions and employers’ associations. Union-specific agreements differ from local and centralised agreements.

For example, PAM negotiates union-specific terms of employment with the following member associations of the Confederation of Finnish Industries (EK):

  • Finnish Commerce Federation
  • Finnish Hospitality Association MaRa
  • Service Sector Employers Palta
  • Real Estate Employers

Negotiations with the associations result in a collective agreement for a fixed period (collective agreement period). For example, the collective agreement determines wages for different jobs for that period. When the agreement expires, negotiations start again. 

The establishment of collective agreements is regulated by the Collective Agreements Act. Other labour legislation, such as the Working Time Act, the Annual Holidays Act and the Employment Contract Act, determines the framework for the content of collective agreements.

How are collective agreements established at PAM?

The Executive Committee of PAM is in charge of collective bargaining in accordance with PAM’s rules.

When the collective agreement period is nearing its end, PAM requests proposals for content for collective agreements from its local branches. PAM’s contract experts prepare a summary of the local branches’ proposals for the sector commissions to discuss.

Member organisations, workplace meetings and members of the Council can also suggest content for collective agreements.

Sector commissions consisting of active members of PAM in various fields process and further specify the proposals submitted by local branches. They also process proposals made to the Council of PAM on amending the content of collective agreements.

Current collective agreements must be terminated. PAM’s Executive Committee decides on the termination of agreements. Current agreements are usually terminated two months before the end of the agreement period.

Based on the proposals made, the Executive Committee sets goals for negotiations.

Negotiations start before the end of the current collective agreement period.

Negotiations are conducted by representatives of PAM and the employers’ association, both of which have their own goals and interests. The negotiations are about coordinating them.

The negotiations usually begin by discussing qualitative contractual objectives. In practice, these refer to aspects other than those related directly to wages – that is, the text content of the collective agreement. Negotiations on salary increases are usually carried out towards the end of the negotiations.

During the negotiations, a consensus should be reached on complex issues consisting of many elements. This is why it’s often said that nothing has been agreed until everything has been agreed.

During the negotiations, the sector commissions and PAM’s Executive Committee discuss the negotiation situation.

When collective agreements have been terminated, a period without an agreement begins unless new agreements have been made by then. During the period without an agreement, the provisions of the old collective agreement apply until a new collective agreement is made. This is called the aftereffect.

During the period without an agreement, there is no labour market peace obligation, meaning that industrial action is possible – and probable if the period without an agreement is prolonged.

When the negotiators reach agreement on a collective agreement as a whole, this is called the negotiation result, which is signed by the negotiators.

The negotiation result is discussed at the sector commissions. It is then transferred for discussion by PAM’s Executive Committee.

The Executive Committee approves or rejects the negotiation result based on the proposals of the sector commissions. The Executive Committee may also organise an advisory vote among the members covered by the agreement to be negotiated. The Executive Committee may also delegate the discussion and decisions concerning matters related to collective bargaining to the Council of PAM.

The negotiation result needs to be approved by the employers’ association as well. Once this has happened, a new collective agreement has been established.

The National Conciliator becomes involved if the negotiators fail to reach agreement on new minimum terms, and industrial action such as strikes, overtime bans or lockouts is taken in an effort to reach agreement.

In such a case, the National Conciliator seeks to build a proposal for a settlement based on the views of the parties. The proposal is also dealt with by the sector commissions and PAM’s Executive Committee, as well as by the employers’ association.

The proposal for a settlement can either be accepted or rejected. The approval of the proposal requires the approval of both parties. If either party rejects the proposal, it will expire.

The new collective agreements enter into force. Members of PAM can order the collective agreement for their sector in print from the online store.

Once the new agreements come into force, it’s important that the agreed improvements are implemented in workplaces, and that each worker benefits from them.

Every worker should therefore always check that their wages are paid in accordance with the new collective agreement, for example.

Last updated: 07.08.2023