What is meant by morning montage

ERa working aid No. 3 for shop stewards and works councils. ERa working aid No. 3: Remuneration principles and performance conditions

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1 District of Lower Saxony and Saxony-Anhalt No. 3 ERa working aid no. 3 for shop stewards and works councils ERa working aid no. 3: Remuneration principles and performance conditions Notes on the general wage agreement for the metal industry in Lower Saxony MI NDS

2 District of Lower Saxony and Saxony-Anhalt ERa working aid No. 3: Remuneration principles and performance conditions Notes on the general collective wage agreement for the metal industry in Lower Saxony MI NDS

3 Remuneration principles and methods Content 1. Preliminary remarks 3 2. Co-determination rights of the works council 6 3. Limiting performance pressure 8 4. Introduction of ERa: Transfer of remuneration principles Composition of the remuneration Time remuneration Piecework remuneration (phasing out regulation) Premium remuneration Target remuneration and target agreement Appendix: 44 Formulation information for company agreements: 45 Remuneration principles and remuneration methods 46 Exception: Uneven distribution of the performance bonus 48 Premium remuneration 51 Standard remuneration 55 Data determination in the premium remuneration 59 Target remuneration 64 Form for target agreement 68 2

4 Foreword 1. Preliminary remarks With the introduction of the general collective bargaining agreement, the structure of the wages will be restructured. The differences can be illustrated with two pillars: wage / salary pillar Remuneration pillar Other collectively agreed allowances Night and shift allowances Special payments Overtime allowances Load allowances Additional holiday allowances Other collectively agreed allowances Night and shift allowances Special payments Overtime allowances Overload allowances Additional holiday remuneration Performance allowances / performance wages Additional remuneration Piecework target pay - 10 wage groups - 7 wage groups with 3 levels of basic wage / salary each Basic pay 12 remuneration groups with 3 levels of remuneration each This work aid deals exclusively with the middle part of the pay column, i.e. the regulations on time pay and performance pay. The overall composition of the new remuneration is given in working aid no. 1. The special regulations for grouping are described in detail in working aid no. 2. Only the so-called 3

5 Payment principles and methods and its collective bargaining arrangements are explained. So the question of the charging principles and methods. The remuneration principles are to be understood as the overriding general regulations according to which the remuneration system is regulated in the company or in the individual departments. Two principles of remuneration are anchored in the general collective bargaining agreement: the time remuneration and the performance remuneration (cf. 6 (1) ERTV). The remuneration method is the narrower term, namely the way in which the remuneration principles are implemented, such as the way in which the performance bonus is distributed in the time remuneration. Three payment methods are agreed in the ERTV for the performance fee: the premium fee, the piecework fee and the target fee (cf. 8 (4) ERTV). There are some changes compared to the previous provisions in the collective wage and salary agreement. For example, time wages and salaries are combined to form time wages. A new pay method, namely the target pay, is planned for performance pay. Details can be found in the following overview: Overview of the remuneration principles in the collective wage and salary framework agreement. Remuneration principles 5 TODAY time wages 6 / salary 11 performance wages 8 performance bonus in time wages 7 / in wages 12 (5) only salary for employees! Piecework wages 8 I Premium wages 8 II Overview of the remuneration principles according to ERTV Remuneration principles 6 MORNING time remuneration 7 Performance allowance / performance assessment 7 Paragraphs 5 and 6 Performance remuneration 8 Premium remuneration 9 11 and 13 Piecework remuneration 9, 10, 12 and 13 Target remuneration 14 4

6 Working aid for shop stewards and works councils Holistic implementation of the framework collective wage agreement When introducing the framework collective wage agreement in the respective company, the new rules for grouping and the new rules for the wage principles must be considered at the same time. First of all, it should be clarified which wage principle and wage method should be agreed in the individual department or for the individual employees, before the categorization is specifically agreed with the employer. This has a direct influence on the respective wage level. In simple terms, it can be said that for the vast majority of former temporary workers there is an increase in basic wages, but the performance bonus will be reduced from 13 to 10 percent. For the majority of former piecework wage earners and premium wage earners, there are fewer changes, as so-called divisors have been agreed (see page 28 f). There are minor changes in the overall pay level for employees. In order to be able to assess the effects on the total wage level for the individual employees, both elements must be considered at the same time: which principle of remuneration, with which variable remuneration components apply to the individual employees and in which salary group or level they are classified. The following regulations deal exclusively with the question of the charging principles. Classification issues are mainly dealt with in Working Aid No. 2. 5

7 Remuneration principles and methods 2. Co-determination rights of the works council The works council has a comprehensive right of co-determination in the design of the remuneration principles and methods. This is ensured by the 87 BetrVG. 87 (1) (10) BetrVG: If there is no statutory or collective bargaining agreement, the works council has a say in the following matters: questions of company wage structures, in particular the establishment of remuneration principles and the introduction and application of new remuneration methods and changes to them; 87 (1) (11) BetrVG: If there is no statutory or collective agreement, the works council has a say in the following matters: (...) Determination of piecework and bonus rates and comparable performance-related remuneration, including monetary factors. On this basis, the co-determination rights of the works council are anchored in various places in the general collective bargaining agreement. E.g. 6 (1) ERTV: The fee principles for time or performance remuneration and the remuneration methods are to be specified in a company agreement. The spatial, technical and personal area of ​​application must be regulated. 8 (4) ERTV: As part of the performance fee, the following payment methods can be agreed in a company agreement: a) premium payment, b) piecework payment, c) target payment. The general wage agreement on remuneration refers to the co-determination rights of the works council in numerous other places or indicates that the matter must be regulated in a works agreement. According to both the Works Constitution Act and the general collective wage agreement, the works council has a comprehensive right of co-determination when determining the remuneration principles and methods. The employer must not determine remuneration principles and methods alone! These must be negotiated between the works council and the employer and set out in writing in a works agreement. In the event of a dispute, the arbitration board decides according to the BetrVG, which is replaced by the collective bargaining board in the Lower Saxony metal industry. This results from 87 (2) BetrVG: If an agreement on a matter according to paragraph 1 cannot be reached, the arbitration board decides. The ruling of the arbitration board replaces the agreement between the employer and the works council. According to 76 (8) BetrVG, the conciliation body in the Lower Saxony metal industry is replaced by the collective bargaining body. This is regulated in 30 of the MTV, there it says: 30 MTV: In the event of disputes between the works council and management over (...) 87 paragraph 1, items 10 and 11 BetrVG, including complaints about performance wages (...) takes place the arbitration board according to 76 paragraph 8 BetrVG 6

8 Working aid for shop stewards and works councils the collective bargaining body. The arbitration board consists of an impartial chairman and two assessors each from the works council and the employer. These are named by the parties to the collective bargaining agreement. If no agreement can be reached in the negotiations, a vote can be taken in the arbitration board and a decision can be brought about by means of a verdict (usually 3 to 2 votes). Before the arbitration board is called by the works council, it should consult the local IG Metall beforehand in order to clarify the prerequisites and to clarify the chances of asserting the position of the works council in the arbitration board. 7th

9 Remuneration principles and methods 3. Limiting pressure to perform The fundamental aim of the trade unions is that employees do not overwork themselves in their work. Trade unions therefore strive for humane working and performance conditions that do not lead to physical or mental health damage even in the course of a working life. However, the reality is different in many companies today. Entrepreneurs are constantly trying to increase the pressure to perform and work performance. In doing so, they also accept that employees will be pushed to their performance limits, which they can only hold out for a few years, but by no means an entire working life. The pressure to perform takes different forms in the different departments. It looks different in production than in administration or construction. It looks different for assembly work than for engineering work. However, there are many similarities. The common goal of all employees is humane working and performance conditions. The assessments of the level of pressure to perform in companies are varied and sometimes contradictory. The fee principles must also be observed here. The question of where the pressure to perform is higher is often discussed: in time pay or in performance pay. Until a few years ago, you could still hear the opinion in many companies: With time wages, you can take it easy, you stand better than when you are rushing to work. In the vast majority of companies, this view has long since become obsolete. In the past, entrepreneurs have managed to significantly increase the pressure to perform through direct or indirect performance specifications in earlier time wages and salaries. In classic piecework and bonus wages, the works council has a say in the amount of the required performance, i.e. over the standard time or the number of pieces that must be achieved per shift. There are no co-determination rights in terms of time wages and salaries. Attempts are increasingly being made to indirectly increase the pressure to perform by specifying business indicators (e.g. profit, return, etc.) for individual company departments. The employees are to be encouraged to orient their work performance to these economic key figures and thus to increase the pressure on themselves to perform, apparently of their own accord. In some companies, so-called target agreements that have not yet been regulated by collective agreements are used. The ERTV now provides regulations for this (see page 36 ff). For this reason, IG Metall recommends, wherever possible, to agree service pay instead of time pay. A change from performance pay to time pay should be prevented. Entrepreneurs try a trick, namely through direct or indirect specifications, to increase the pressure to perform in time wages. Since the works council does not have a right to co-determination in terms of time pay over the performance specifications, the employer can freely adjust the performance 8

10 Working aid for shop stewards and works councils further tighten conditions. For this reason, it makes more sense to agree performance remuneration in order to enforce reasonable, humane performance conditions through the co-determination rights of the works council. In practice, direct or indirect performance targets can often be observed. That is why IG Metall wants to enforce clear provisions on the separation of time pay and performance pay. The employers' association initially refused. In the end, it could be agreed. Two basic provisions are contained in the general collective bargaining agreement: 7 (2) ERTV: In the remuneration principle, time remuneration, apart from the company work regulations and planning parameters, no performance parameters may be used as a basis for the time or quantity of the activity. Planning variables are all variables that are not used to monitor the performance of employees. 8 (2) ERTV: Performance remuneration is to be agreed if countable and / or measurable performance parameters such as time, quantity, quality, etc. of the activity are used as a basis for the performance specification. This clearly stipulates that wherever measurable and countable performance indicators are used, performance fees must be agreed. Time remuneration can be agreed where no performance parameters are used, but only general planning parameters. There are some clarifications to this principle: Premium or piecework remuneration (6 (2) ERTV) must be agreed for assembly line and cycle work in the production area. This is a mandatory requirement. The parties to the collective bargaining agreement have thus expressly stipulated that the remuneration principles of time pay and target pay may not be applied to band and cycle work. Because the performance conditions of the employees can best be regulated here in the form of bonus payments or piecework payments. Since the principle of piecework remuneration is only used for a limited transition period, IG Metall recommends agreeing the principle of premium remuneration in accordance with 11 ERTV. A special form of premium payment is recommended, especially for band and cycle work: the standard payment according to 11 (3) ERTV (see page 34 f). In 6 (3) ERTV, an optional provision is agreed: When working with machines with a large proportion of process times and when working in production areas, the sequence of which is computer-controlled, performance fees can be agreed, in particular usage bonuses. This optional provision is based on the fact that in some areas employers have tried to convert machine workplaces, which were usually assigned to piecework or bonus pay, into time pay in order to lower the pay level and no longer have to agree the performance conditions with the works council . On machines with a high proportion of process times (so-called 9

11 remuneration principles and methods that cannot be influenced), some employers argued, that performance remuneration is not even possible at the workplaces, since the employees cannot influence the performance result. In order to get rid of this inappropriate argumentation, the parties to the collective bargaining agreement have expressly stipulated that performance fees can be agreed on such machines. The same applies to production areas, the process of which is computer-controlled (so-called production data acquisition systems, sophisticated, electronically supported production control systems, etc.). In these cases, the parties to the collective bargaining agreement make recommendations to agree on the sub-case of the usage bonus as part of the premium payment (see page 29 ff). A special case is dealt with in 6 (4): Employees who, due to their activity, usually work for time pay, but who are directly dependent on work for performance pay. IG Metall recommends that these employees be included in a performance remuneration system wherever possible. If this is not enforceable, a correspondingly higher performance bonus can be agreed according to 6 (4) due to the increased performance, e.g. 20 percent performance bonus instead of the usual minimum average figure of 10 percent in time pay. The number of these employees and the amount of the performance bonus are not included in the calculation of the average performance bonus according to 7 ERTV. Important: The employer cannot unilaterally order the group of people and the amount of the performance bonus. They must be agreed between the works council and the employer. 10

12 Working aid for shop stewards and works councils 4. Introduction of ERa: Transfer of remuneration principles When introducing the general collective wage agreement, it must be clarified at an early stage in which areas or departments which remuneration principles are to be applied. This requires a systematic inventory of the application of the old remuneration principles of time wages / salaries, piecework and premium wages. Usually the time wage and salary areas are transferred to the time wage. Piecework and premium payment principle today wage should be transferred to the premium payment, whereby it is possible to keep the piecework payment for a transitional period. When converting time wages, it is advisable to check whether individual time wage areas can be converted into premium remuneration, in exceptional cases also into target remuneration. When transferring the salary ranges, the possibility of using the target salary should be considered.Fee principle tomorrow Time wage Salary Piece wage Premium wage ü ü ü ü Time wage or premium wage Time wage or target wage Premium wage or piecework wage Bonus payment For individual departments of a company, the previous wage principles and the future wage principles must be listed, similar to the following sample list (see page 12). The allocation of the remuneration principles is regulated by a works agreement between the employer and the works council. This results from 6 (1) ERTV. In the event of a dispute, the collective bargaining body decides. In any case, this works agreement should be agreed in parallel with the introduction of the general collective wage agreement. Existing regulations are to be transferred. Department names or cost center changes must also be taken into account. The conclusion of this works agreement can only be waived in one single case: If for a long time in the company only time wages or 11

13 Remuneration principles and methods Department Remuneration principle today Remuneration principle tomorrow Assembly I Premium wage Premium remuneration for assembly II Piecework wage Piecework payment (transition) Assembly III Piecework wage Premium payment for toolmaking Time wages Time wages Milling Time wages Premium wages Shipping wages Time wages Construction wages Time wages ... are that on the occasion of the introduction of the ERa, performance remuneration is not to be introduced in some departments. If this is the case at a later point in time, an agreement according to 6 (1) must be made. A suggested wording for this company agreement can be found in the appendix. The transfer of the previous fee principles into the new fee principles should be carefully considered and discussed. 12th

14 Working aid for shop stewards and works councils The following overview can be used as a guide, which describes the different initial situations in the companies. Initial situation 1. Up to now there have only been time wages and salaries in the entire company. Transfer time wages and salaries into time wages Check handling of performance bonuses, IG Metall recommendation: uniform performance bonus for everyone of at least 10 percent. If there were previously company agreements on the uneven distribution of the performance bonus, it must be checked whether it is possible to agree on a uniform performance bonus for everyone. If this is not possible, a company agreement on performance bonuses must be concluded. This is only possible with the consent of the works council. In general, it should be checked whether parts of the time wage should be transferred to the premium payment. It could also be checked whether parts of the current salary are transferred to the target salary. 2. Up to now, three principles of remuneration have been applied in the company: parts of production, performance wages (piecework or bonus) parts of production time wages, salaried employees: salary Here, a differentiated approach must be taken. In principle, performance pay should be defended. Under no circumstances should you switch from piecework or bonus to time pay. It is also not advisable to transfer piecework or bonus to target remuneration. Time wages and salaries are transferred to time remuneration Check whether parts of the time wages are transferred to bonus remuneration and parts of the salary to target remuneration. 2. a) Time remuneration / performance allowance (cf. item 1, see above) 2. b) There is an acceptable piecework agreement There are two options for action: This piecework agreement is retained for a short time and the merit levels are corrected using the so-called divisors. In the medium term, this piecework agreement should be converted into premium remuneration, whereby care must be taken that the level of earnings does not deteriorate. 13th

15 Remuneration principles and methods 2. c) There is an acceptable premium wage agreement Here, too, there are two options for action: Either this agreement is retained, editorially adjusted and the earnings levels are corrected with the divisors prescribed by the collective agreement. It is also possible to redraft the premium pay line, whereby care should be taken that the level of earnings does not shift to the detriment of the employees. 2. d) There is a piecework or bonus agreement that is unfavorable for the employees. An attempt should be made here to convert these agreements into new company agreements on premium pay with acceptable conditions. 2. e) Band and cycle work In the case of band and cycle work, it is to be assumed that a permanently prescribed or agreed service is provided. The new remuneration method, standard remuneration, offers the option of regulating this in a company agreement. An agreed standard fee is paid for an agreed standard service. It is recommended here to convert existing agreements into standard remuneration. 2. f) Frozen piecework or bonus wage systems In some companies, all employees receive a fixed rate of earnings in piecework or bonus wages. Here, too, consideration should be given to regulating this situation by using the standard pay method. Here, all employees receive a fixed standard remuneration for an agreed standard service. In the standard remuneration method, this can be perfectly regulated in terms of collective bargaining law. 14th

16 Working aid for shop stewards and works councils 5. Composition of remuneration The monthly gross remuneration is made up of three components, the basic remuneration, the variable performance-related allowances and other collectively agreed allowances (see also the remuneration column on page 3). This principle is regulated in 8 (3) ERTV in the performance fee. For each remuneration method, the performance-related variable remuneration must be an average of at least 10 percent of the basic remuneration. The variable performance-related components are the performance bonus in the time remuneration, the level of earnings achieved in the premium or piece-rate remuneration and the target remuneration in excess of the basic remuneration in the case of target remuneration. The amount and details of these performance-related variable remuneration components are regulated in the collective agreement in the remuneration principles. In simplified terms, they amount to an average of at least 10 percent in terms of time pay. The premium remuneration and piecework remuneration result in earnings levels of approx. 120 to 130 percent (cf. the description of the so-called divisors on page 27 f). So far, there is hardly any experience with the target pay. It is recommended to agree amounts above 10 percent for target pay. These facts are regulated in two paragraphs: 7 (5) ERTV provides for the time pay that the performance bonuses for pay groups 2 to 4, pay groups 5 to 9 and pay groups 10 to 13 amount to at least 10 percent of the basic pay. In each of these three areas, an average of at least 10 percent performance bonus must be paid (see for more details on pages 19 22) When converting from the wage and salary framework agreement to the general wage agreement, the following considerations must be taken into account: and collective wage agreement, a performance bonus averaging 13 percent in addition to their basic pay. Since the basic wages of temporary workers in particular will be increased in the new framework collective wage agreement, in most cases the overall wages will be higher even with a performance bonus of 10 percent (performance bonus in the ERa). Up until now, employees had a performance bonus averaging 13 percent, of which 3 percent were guaranteed individually. This fact was taken into account when converting the wage groups to the wage groups, so that little changes in the wage level for most of the employees. The amount of the new pay group including the performance bonus will usually correspond to the amount of the new pay group including the performance bonus. If this is lower, the acquis will apply. A different regulation applies to the previous piecework and premium wage earners. In most companies, a fee has increased over the years

17 remuneration principles and methods were developed, according to which, with the same wage groups, the earning opportunities for temporary workers were around 13 percent, but for piecework and premium wages around 130 to 140 percent. This difference in the performance-related variable remuneration components can only be explained historically. It comes from a time when the pressure to perform in piecework and bonus wages was significantly higher than in time wages and salaries. As you know, this has changed. Today, most temporary workers are also required to work more heavily due to indirect performance targets. Such a large difference in earnings between temporary and performance wage earners is no longer justified today. The original objective of IG Metall was that performance-based wage earners and temporary wage earners should be treated equally not only in terms of pay groups, but also in terms of the amount of performance-related variable pay components. This goal could not be fully achieved because it would have exceeded the budget that existed during the negotiations of the collective wage agreement. The parties to the collective bargaining agreement have therefore agreed to agree on so-called divisors for the premium and piecework remuneration. Despite the increase in the basic salary, the divisors ensure that the total earnings for the performance-based wage earners neither rise nor fall. As a result, employees with bonus and piecework pay will generally earn around 10 percent more than their colleagues in time pay, even if both have the same pay bracket. 16

18 Work aid for shop stewards and works councils Pay relation between time pay and bonus pay Simplified example with the following assumptions: Pay group 7 corresponds to pay group 5 B. Performance bonus: formerly 13%, now 10% Bonus earnings rate: previously 135%, now 117% (arithmetically) of pay group 5 B Yesterday : Wage and salary framework wage agreement tomorrow: wage framework wage agreement time wage premium wage time wage premium wage 2,102 q 2,511 q 35% 2,363 q 2,511 q 17% (arithmetical) 13% 10% divisor wage group 7 Pay group 7 Pay group 5 B Pay group 5 B Time wage: Time wage: LG 7: LT (13%): Total: 1,860, - q 242, - q 2,102, - q EG 5 B: LT (10%): Total: 2,148.00 q 215.00 q 2,363.00 q Premium wage: LG 7: Premium (35%): 1,860.00 q 651.00 q Premium remuneration: EG 5 B: Premium (35%): 2,148.00 --q 751.80 total: (135% of LG 7) 2,511 .-- q Sub-total: Divisor (EG 5B): total: 2,899.80 q 1 .-- q 17

19 Remuneration principles and methods 6. Time remuneration The time remuneration principle is regulated in 7. In most cases, the employees previously paid with time wages or wages switch to the time wage principle. In the case of numerous temporary workers, it should make sense to transfer them to the premium pay. For some former wage earners, a transfer to the target salary is conceivable. The time fee principle may only be agreed if neither direct nor indirect performance parameters are specified. 7 (2) ERTV expressly regulates this: In the remuneration principle, time remuneration, apart from the company work regulations and planning parameters, no performance parameters may be used as a basis for the time or quantity of the activity. Planning variables are all variables that are not used to monitor the performance of employees. If the activities of the employees are based on performance parameters as time or quantity specifications, the principle of time pay must not be agreed, but one of the methods of performance pay must be selected, usually premium pay, in some cases also target pay. Employers often try to circumvent this collective agreement and present performance targets as general planning parameters. This does not correspond to the collective agreement. Work regulations and planning parameters mean the general tasks that exist for every activity. If, however, a specific and numerically defined workload is required of an employee with regard to time, adherence to deadlines, quantities, numbers of pieces, degree of use, etc., these are not planning parameters but rather performance parameters. In extreme cases, employers even try to give employees time wages, default times that were determined with the stopwatch. These time specifications were then declared as general planning parameters. This is not permitted and is a serious breach of the collective wage agreement. Should there be a dispute on this in individual cases, the works council can call on the collective bargaining body in accordance with 87 (1) 10 BetrVG in conjunction with 6 (1) framework collective wage agreement. If it can be proven that the activity is based on time or quantity specifications, the arbitration board has a good chance of agreeing a service fee for these activities. The disadvantage of time wages is that the workload, the pace of work or the intensity of work cannot be influenced by the works council or the employees. Employers often try to increase work intensity through direct or indirect performance targets. Since the works council does not have any co-determination rights regarding the amount of the required performance in terms of time remuneration, time remuneration is not recommended in all cases in which excessive work intensity can be observed. Since it seemed unrealistic to abolish time-based wages in general, the new general wage agreement 7 ERTV contains a new provision on the right to complain about unreasonable performance consolidation: 7 (3) ERTV 18

20 Working aid for shop stewards and works councils For employees, there must not be an unreasonable increase in performance. This is to be avoided through new appointments, a change in the distribution of work or in any other way. If the works council and / or the employees consider the planned measures to be inadequate, they have the right to complain. The necessary measures are to be negotiated between the employer and the works council with the will of an agreement. If no agreement can be reached, the conclusion of a works agreement on performance remuneration in accordance with 8 No. 4 must be checked. This collective bargaining agreement offers some new possibilities for action to defend oneself against unreasonable intensification of performance in the workplace. The works council or employees can complain about an unreasonable increase in performance at the workplace and insist that it be turned off, for example by hiring new staff in the department or changing the distribution of work. At the request of the works council or the employees, the employer and the works council must negotiate this matter with the will to reach an agreement. The works council can make specific proposals in consultation with the employee. However, he cannot force the employer to take the proposed measures. If there is no agreement on this, the collective agreement does not provide for any further regulations within the framework of the time pay principle. However, it is expressly advised to check whether a company agreement on performance remuneration makes sense for this area. The works council would then have the basic option for this area of ​​requesting performance remuneration instead of time remuneration, either in the form of bonus remuneration or target remuneration. This is discussed in the following chapters. Performance bonuses In addition to the basic pay, performance bonuses are to be paid in time wages. On average, they must be at least 10 percent of the basic salary. Employees who have been with the company for up to 6 months and employees with commission regulations are excluded. For the distribution of the performance bonus, the ERTV provides for a rule and an exception rule. The rule is the even distribution of the performance bonus. All employees who are paid time receive a uniformly high performance bonus of 10 percent, for example. It is also possible to pay a higher performance bonus for everyone, for example 11 percent, 12 percent or more. The exceptional case is a works agreement on the uneven distribution of the performance bonus (e.g. assessment procedure). Here the employees receive different performance bonuses in their time pay, which are determined by the employer. The average of the performance bonuses must be at least 10 percent for pay group 2 4, pay groups 5 9 and pay groups. The exceptional case cannot be introduced against the will of the works council. 19th

21 Remuneration principles and methods In the remuneration statement, the performance bonus must be shown in absolute terms in euros and as a percentage. It must be clearly distinguished from other allowances, including so-called extra-tariff allowances. The works council should review the current practice and the existing system of pay slips and, when agreeing pay slips on the basis of the new framework collective wage agreement, insist that the performance bonus be shown for each individual employee in absolute amounts in euros and as a percentage of their pay group / pay grade becomes. The basis for the claim is 7 (4) ERTV. Even distribution of performance bonuses As a rule, 7 (6) ERTV provides for an even distribution of performance bonuses. It must be at least 10 percent, i.e.an even performance bonus of 11, 12 or more percent is also conceivable. As a rule, however, employers are allowed to pay 10 percent, i.e. in this case all employees receive 10 percent of the pay amount for their respective pay group / pay grade according to the pay table. This regulation is recommended for the following reasons: It is the simplest regulation in terms of billing. There is no dispute or negotiation about the amount of the performance bonus, as is the case with an uneven distribution of the performance bonus. Some companies have used complex systems for the uneven distribution of performance bonuses with complicated point systems within the framework of the collective wage and salary agreement. These give the appearance of a fair distribution of the performance bonus. However, this is never achieved. Superiors, employees and the works council may have different opinions about the performance behavior of individual employees. Great discretion and different perspectives are common here, so that opposing views are inevitable. Some of the employees will then always be disadvantaged or feel they are disadvantaged. The uniform performance bonus has proven itself in practice for amicable and solidarity-based cooperation. In the applicable collective wage agreement, a table including a performance bonus of 10 percent has been agreed in addition to the table for the basic wages. The total fees can be read off there directly. In the view of IG Metall, the principle of even distribution of the performance bonus should not be deviated from, or only in very justified exceptional cases. Then the works council should consult closely with the local IG Metall and the employees. Under no circumstances should the works council take the initiative to agree on an uneven distribution of the performance bonus. 20th

22 Working aid for shop stewards and works councils If the employer takes the initiative and insists on an uneven distribution of the performance bonus, this cannot be introduced without the consent of the works council. In other words: If the works council says no, the introduction of an uneven distribution of the performance bonus is not possible, see 7 (6) ERTV. The collective bargaining body is not responsible for this. This means that an uneven distribution of the performance bonus can only be introduced within the framework of a voluntary company agreement. If an uneven distribution is introduced, a works agreement must be concluded in which the employee's right to complain about the amount of the performance bonus is to be regulated. In the event of a dispute about the amount of the performance bonus in individual cases, the parties to the collective bargaining agreement must be consulted before the collective bargaining body is called. Performance bonus: at least 10 percent each in three areas (bundle) If the performance bonus is unevenly distributed, it must be ensured that some groups of employees do not receive high performance bonuses and others extremely lower ones. It is therefore recommended to include a maximum and a minimum rate for performance bonuses in the works agreement: around at least 5 percent, but not more than 20 percent. To this end, a protective provision has been included in the collective agreement because in the past it was observed that employees in the upper salary groups received above-average performance bonuses and in the lower salary groups very lower performance bonuses. IG Metall originally aimed for the average performance bonus in each pay group to be at least 10 percent. This could not be enforced. The parties to the collective bargaining agreement have agreed on three areas (bundles). In the event of an uneven distribution, the performance bonus must therefore be at least 10 percent in each of the areas of pay groups 2 4 pay groups 5 9 pay groups. The employer must regularly prove to the works council that an average of at least 10 percent performance bonus is granted for the three pay group bundles. If this is not the case, the performance bonus must be increased immediately for all or individual employees. It is recommended that the works council checks this at regular intervals, e.g. once a quarter. Therefore, fixed appointments should be made with the employer. The uneven distribution of performance bonuses can be made on the basis of a general assessment by the superior. However, it can also be done using a points system based on several criteria. No more than four criteria should be agreed and the procedure should be kept as simple as possible. Some management consultants try to offer companies complex point systems, sometimes with complicated formulas. This only leads to apparent 21

23 remuneration principles and methods cash for a fair performance assessment, which is also time-consuming. Ultimately, it is mainly the management consultant who earns money from these complex systems. For the exceptional case of an uneven distribution of the performance bonus, suggestions for formulating a works agreement are listed in the appendix. Adjustment of existing performance bonuses Due to the previous wage and salary framework agreement, in some companies there are two separate works agreements for the distribution of performance bonuses in time wages and in the salary area. These works agreements must be adapted to the new collective wage agreement. In the companies in which there was a simplified regulation that provided for 13 percent for all temporary workers and 13 percent for all employees (10 percent plus 3 percent), there is no need to regulate this again in a works agreement, as this is the norm, which the collective wage agreement provides. However, if there are company agreements, these must be editorially adjusted. The transition collective agreement in 4 (1) ÜTV contains a regulation for this: Existing company regulations and agreements on the distribution of the performance bonus must be adapted to the ERTV as far as necessary (e.g. editorially within the scope or materially according to 7 (5) ERTV). In each case, the works council should work with the local IG Metall to develop a proposal for an even distribution of the performance bonus. If there were two works agreements in the past, one for temporary workers and one for salaried employees, these should be summarized. In this case, the works council should first check whether the standard ERTV case of a uniform distribution of the performance bonus of at least 10 percent is no better than a complicated works agreement on the distribution of the performance bonus. If the normal case and IG Metall's recommendation of a uniform performance bonus cannot be implemented, the previous separate company agreements for temporary workers and salaried employees must be combined into one company agreement (see also the proposed wording in the appendix). 22nd

24 Aid for shop stewards and works councils 7. Piecework payment (phasing out regulation) Of the three payment methods in the context of performance payment (piecework payment, premium payment, target payment), piecework payment is historically the most important. Understanding the logic of the piecework system is important in order to understand newer pay systems such as premium pay and target pay. For many decades, the piecework system was the dominant form of payment in the production areas. The principles of the American management consultant F.W. Taylor adopted and implemented in Germany by the REFA Association. Keywords such as piecework, time recording and REFA have shaped the debates about remuneration systems in industrial production for many years. IG Metall tried to pull the fangs of the piecework system through a collective agreement. In numerous collective wage agreements or wage framework agreements, it has been possible to agree on acceptable regulations for the piecework system in the company. The regulations were enforced in the 1960s and 1970s. They can be found in Lower Saxony's metal industry to this day in 5 and 8 of the wage and salary framework collective agreement. The importance of the chord system has gradually decreased in recent years. Fewer and fewer employees are paid according to the principle of piecework wages. New remuneration systems such as premium wages have taken the place of piecework wages in many areas. Nevertheless, around a third of the employees in production in Lower Saxony's metal industry are still paid according to the principles of piecework wages. In some companies, this system worked according to the agreed collective bargaining regulations to the satisfaction of all those involved. In other companies, the piecework conditions have been gradually watered down. Current standard times were no longer determined or only estimated times were used. In some cases, the earnings levels of the piecework workers, which vary from company to company in the range of 130 to 145 percent, were frozen, i.e. all employees in the company were paid a uniform percentage of 135 percent of the respective wage group, for example. A systematic comparison and billing with the provided and worked out standard times were no longer carried out. In a number of areas, the entrepreneurs have tried to switch from piece-rate wages to time wages, on the one hand to achieve a lower level of wages and, on the other hand, to bypass the works council's participation in the performance required. In many companies these attacks by the entrepreneurs could be repulsed. In many companies, the works councils, together with IG Metall, have succeeded in replacing the piece wage with bonus wages. Detailed regulations can also be found in the existing collective wage and salary agreement. During the collective bargaining negotiations, it was discussed for a long time whether the principle of piecework payment could not be dispensed with in principle with the introduction of ERa. Since a considerable number of companies still practice the piecework system, the parties to the collective bargaining agreement could not bring themselves to do this. But you have the 23

25 Remuneration principles and methods Recommendation agreed that the piecework system should be phased out and that primarily premium wage systems should be introduced in its place. If payment is introduced in the company, preference should be given to the premium payment method. The works councils are advised to insist that bonus pay be introduced. The parties to the collective bargaining agreement recommend transferring piece-rate systems to premium pay systems in the medium term. In the case of newly introduced performance fee systems, preference should be given to the premium fee method. (Protocol note on 8 (4) ERTV) In practice this means: All works councils should try to convert the piecework wage or the piecework payment into bonus payment. If this is not possible in the short term, the regulations in the ERTV offer options for maintaining the piecework system for a transitional period. Should be in a new department or for a new product Leis-wage-performance diagram Wages in% or wage group 130 The parties to the collective bargaining agreement have agreed to wait a few more years for the development. It is foreseeable that in a few years the piecework payment method will be completely eliminated from the general collective bargaining agreement and only premium payment and target payment can be agreed as methods in performance payment. Principles of piecework remuneration At this point the principles of piecework remuneration are only explained in their basic features. Please refer to the detailed description in the manual of collective bargaining in the work-pay-performance company (Bund-Verlag). While the logic of piecework remuneration is a matter of course for the pieceworkers, the regulations are initially difficult to understand for outsiders. The relationships can be clarified using the remuneration / performance diagram (see figure on the left). 110 Piecework rate 100 Reference performance performance (billed minutes) The following explanations, based on the wage and salary framework collective agreement of the Lower Saxony metal industry, are simplified in order to make the principle clear. It is assumed that a pieceworker is given a default time of 2 minutes to manufacture a part. This also means time per unit and is indicated on the piecework with the abbreviation TE = 2 min. 24

26 Work aid for shop stewards and works councils Sample calculation: piece rate wage group 7 = / month or 12.22 / hour performance billed minutes / month / hour 100%%,, 88 If the pieceworker now produces 30 parts per hour, he can do 2 X 30 = Account for 60 minutes. If he works faster and produces 33 parts, he can bill for 66 minutes per hour. 66 billed minutes correspond to an output of 110 percent, 78 minutes to an output of 130 percent. The relationship between remuneration and performance is proportional to piecework. With a performance of 100 percent, i.e. 60 billed piecework minutes, the pieceworker receives the piecework rate in the amount of 100 percent of his wage group. In the Lower Saxony metal industry in wage group 7, this is, for example, 1,860 euros per month or 12.22 euros per hour. With a performance of 110 percent, i.e. 66 billed piecework minutes, he receives 110 percent of the piecework rate for his wage group. Example: Wage group 7: € 2,046 per month or € 13.44 per hour. In terms of billing, one speaks of the time factor, also the minute factor on the one hand and the money factor on the other. The time factor corresponds to the default time. The money factor results from the collective hourly wage of the respective wage group divided by 60. So in this case 12.22 euros divided by 60 = 0.2037 euros per minute. Every billed minute is multiplied by this money factor and thus results in the piecework earnings. Example: 78 minutes X 0.2037 = 15.88 euros = 130 percent of the collective wage (deviation due to rounding). The decisive question when assessing operational piecework systems is that of the level of performance or the standard time. If the working conditions are reasonable and there is freedom, most pieceworkers achieve work rates of 140 percent or more. If the performance level is very high and the standard times are measured very tightly, the pieceworkers only achieve times of 120 percent, 125 percent or even less despite great efforts. In every company, a so-called sound barrier is formed in the chord system. This is the usual rate of work of the pieceworkers. This sound barrier is set at a certain level in every company, depending on the economy and labor market situation and depending on the balance of power between the entrepreneur and the workforce. In Lower Saxony's metal industry, earnings levels of piecework workers between 130 and 145 percent are common. In some companies, the earnings levels are below or above. In the case of the piecework system, it is of decisive importance how high the performance level of the standard times is and how they are determined. According to 25