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wiseGEEK: What is Collective Bargaining?

Collective bargaining is a tool people use to end conflict and get things going again in business. Occurring in either continuous or periodic forms, its aim is to make things better for both the employer and employee overall, or to initiate social changes. The disadvantages such as expense and creating divisions in companies are significant, but this technique also provides some big advantages such as giving workers a safe way to voice their concerns and opinions.


The term collective bargaining refers to a good-faith business mechanism people use to reach an agreement. Through basic negotiation and other techniques, the people involved find solutions to work-related issues such as vacation time, pay, work hazards, training and work hours that ultimately benefit everyone. People call these processes “collective” because the opinion and well-being of the whole group, or collective, is involved. The Universal Declaration of Human Rights formally recognizes the ability of people to use this strategy.

The primary objective of this bargaining system is to improve conditions in some way to make things more efficient, economical, safe or enjoyable. Going through these processes therefore keeps employers or employees from being taken advantage of or hurt. In some cases, people use this strategy specifically to set a precedent and send a message about an overall social change they want to happen. In these cases, more than one company or group of workers might be involved.


Two types of collective bargaining are available: periodic and continuous. The first kind happens at irregular intervals as problems or needs come up. It doesn’t have a predefined schedule, and the business leaders and general workers pick representatives that best fit the immediate need. With the continuous or rolling style, both sides are always working to fix or head off issues, and there usually are permanent committees that represent both sides over many different areas.

Connection to Unions

Unions typically represent employees when there is a need for this mechanism. Leaders bring needs or wants to the attention of the employer. They carry responses from the employer back to the workforce and assist with putting together a draft of a formal contract called a collective bargaining agreement.


A major drawback to using this type of negotiation system is that, even though everyone gets a say in what happens, ultimately, the majority rules, with only a few people determining what happens to many. This means that a large number of people, particularly in the general workforce, can be overshadowed and feel like their opinion doesn’t really matter. In the worst case scenario, this can cause severe division and hostility in the group.

Secondly, it always requires at least two parties. Even though the system is supposed to pull both parties together, during the process of trying to reach an agreement, people can adopt an us-versus-them mentality. When the negotiations are over, this way of looking at each other can be hard to set aside, and unity in the company can suffer.

Collective bargaining can also be costly, both in terms of time and money. Representatives have to discuss everything twice—once

at the small representative meetings, and again when they relay information to the larger group. Paying outside arbitrators or other professionals quickly can run up a fairly big bill, and when someone else is brought in, things often get slower and more complex because even more people are involved.

Some people point out that these techniques have a tendency to restrict the power of employers. Employees often see this as a good thing, but from the company’s perspective, it can make even basic processes difficult. It can make it a challenge to deal with individual workers, for example.

The goal of the system is always to reach a collaborative agreement, but sometimes tensions boil over. As a result, one or both parties might feel they have no choice but to muscle the other side into giving up. Workers might do this by going on strike, which hurts operations and cuts into profits. Businesses might do this by staging lockouts, which prevents members of the workforce from doing their jobs and getting paid, negatively effecting income and overall quality of living.

Lastly, union dues are sometimes an issue. They reduce the amount of take-home pay a person has, because they usually are deducted right from his paycheck. When things are good in a company and people don’t feel like they’re getting anything from paying the dues, they usually become unhappier about the rates.


Perhaps the biggest advantage of this system is that, by reaching a formal agreement, both sides come to know exactly what to expect from each other and are aware of the rights they have. This can decrease the number of conflicts that happen later on. It also can make operations more efficient.

Employees who enter collective bargaining know they have some degree of protection from employer retaliation or being let go from the job. If the employer were dealing with just a handful of individuals, he might be able to afford to lose them. When he is dealing with the entire workforce, however, operations are at risk and he no longer can easily turn a deaf ear to what his employees are saying.

Even though employers might need to back down a little, this strategy gives them the benefit of being able to deal with just a small number of people at a time. This is very practical in larger companies where the employer might have dozens, hundreds or even thousands of workers on his payroll. Working with just a few representatives also can make the issues at hand seem more personal.

Agreements reached through these negotiations usually cover a period of at least a few years. People therefore have some consistency in their work environment and policies. This typically benefits the company’s finance department because it knows that fewer items related to the budget might change.

On a broad scale, using this method well can result in more ethical way of doing business. It promotes ideas such as fairness and equality, for example. These concepts can spill over into other areas of a person’s life, inspiring better general behavior towards others.

Category: Bank

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