THE CATHOLIC UNIVERSITY OF MALAWI

FACULTY OF COMMERCE

DEPARTMENT OF HUMAN RESOURCE MANAGEMENT

COURSE TITLE: LABOUR RELATIONS MANAGEMENT

COURSE CODE: HRLR 3205N

FROM : GERTRUDE MUKAWERA

REG NUMBER : BCOM/ADM/NE/2022/0239

TO : MR LIMAN

ASSIGNMENT : BRIEFLY EXPLAIN WHY COLLECTIVE BARGAINING IS

IMPORTANT IN ORGANISATIONS

DUE DATE : 23rd SEPTEMBER, 2024

IMPORTANCE OF COLLECTIVE BARGAINING IN AN ORGANIZATION

Collective bargaining is an important element in an organisation, it refers to the discussion

and negotiations between management and employees in terms of employment including the
working environment, conditions of employment, shift length, work holidays and retirement
benefits (Vaidya, 2024). Collective bargaining is a key means through which employers and
their employees establish fair wages and working conditions and equality through their
representatives which are the employer organization and trade unions. This write up will
discuss the importance of collective bargaining in an organization.

Allows voicing interest, the process of collective bargaining allows the interests of both
workers and employers to be voiced, for common interests to be identified, different interests
to be balanced against one another and trade-offs to be negotiated (OECD, Negotiating Our
Way Up: Collective Bargaining in a Changing World of Work, 2019). For example, in respect
of working time, collective bargaining has been used in some countries to balance worker
interests for work and life balance with employer interests for flexible working time
schedules and a reduction in the cost of overtime. The result of engaging in a process of
bargaining in good faith is that the outcomes of collective negotiations are more likely to be
perceived as fair and are more equitable than those arrived at through individual bargaining.
This has positive benefits for an organization in terms of worker commitment, stability and
productivity; and for workers in terms of improved wages and working conditions.

Fair distribution of productivity gains, through collective bargaining, workers tend to receive
a greater share of productivity gains as wages (OECD, 2019). When workers and employers
negotiate through collective bargaining, they often agree on terms that ensure workers receive
a fair share of the productivity gains. These productivity gains can include higher wages,
bonuses and other improved benefits. This can in turn promote cooperation and increase
productivity in the enterprise and contribute to higher demand in the economy (Hayter, 2011).
For example, in a manufacturing company where a new technology increases production
efficiency. Through collective bargaining, the union negotiates a deal where part of the cost
saved from this increase in production efficiency is passed on to workers as bonuses. This
motivates the workers to embrace the new technology and work more efficiently, knowing
they will directly benefit from the productivity gains. Thus in so doing increasing the growth
and profitability of the organization.

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Furthermore, improves labor relations climate, according to the (OECD, OECD Employment
Outlook 2018, 2018) collective bargaining improves the labor relations climate by providing
an institutionalized and agreed way of managing conflict. Collective bargaining establishes a
formal process for resolving disputes between employees and employers. This process is
institutionalized, in a sense that it is embedded within the organizational framework and
recognized by both parties as the legitimate way to handle conflicts. The benefits of
institutionalized conflict management include predictability and stability, reduced workplace
tensions, enhanced trust and cooperation and efficient resolution of disputes. Collective
agreements may include peace clauses during the duration of a collective agreement and set
out grievance procedures for addressing grievances. This can provide for more stable and
sound labor relations in an organization. For example, in a company disputes over wage
increase arise. Instead of this dispute to lead to strike, the collective bargaining agreement
provides a clear procedure for addressing these issues. These procedures might include
scheduled negotiation meetings and mediation sessions. By following this agreed-upon
process, both parties can resolve conflicts in a structured manner reducing the likelihood of
disruptive actions. Furthermore, by providing an institutionalized and agreed and upon-way
of managing conflict, collective bargaining does not only improve labor relations climate but
also contribute to the overall stability and productivity of the organization.

Collective bargaining gives legitimacy to the rules regulating labor relations, where the terms
and conditions of work and of employment have been negotiated, they are more likely to be
complied with, because collective bargaining fosters a sense of ownership acceptance among
workers and employers (OECD, Negotiating Our Way Up: Collective Bargaining in a
Changing World of Work, 2019). For example, when a union of a company negotiate a
collective agreement that include provisions for regular safety and training and fair wages
with the employers. The resulting rules are seen as legitimate and are more likely to be
respected and followed by all involved, because both parties have agreed to these terms
through a structured negotiations process. Therefore, the legitimacy of these rules are
reinforced because they are the result of a collaborative process. Furthermore, collective
agreements have a legal standing. This means that collective bargaining is recognized by law
and must be adhered to both parties (Liukkuen, 2019). This recognition further legitimizes
the rules and ensures that they are enforced. Additionally, the social recognition that comes
from a fair negotiation process strengthens the perceived legitimacy of these rules.

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Lastly, collective bargaining tailors collective agreements, collective bargaining allows the
parties to tailor a collective agreement governing the employment relationship to their
particular organization. It also allows parties to solve problems that may be specific to their
organization this is according to (InternationalLabourOrganization, 2012) . Parties are known
to negotiate agreements that may facilitate adaptability of the enterprise during a downturn or
the introduction of technological and organizational change in a manner that protects workers
against risk and delivers the results desired (Liukkuen, 2019). For example, considering a
logistics company that operates 24/7 to manage global supply chains and through collective
bargaining, the union and management negotiate a tailored agreement that includes specific
provisions for shift work, overtime pay and rest periods that reflect the unique demands of the
logistics industry. This tailored approach ensures that the agreement is practical and addresses
the specific needs of the workforce and the business. The benefits of tailored agreements are
improved compliance, better employee satisfaction and reduced conflicts.

In conclusion, collective bargaining plays a crucial role in labor relations by fostering a

collaborative environment where employers and employees can negotiate terms that benefit
both parties. This process helps establish fair wages, reasonable working hours, and safe
working conditions, which are essential for maintaining a motivated and productive
workforce. Additionally, collective bargaining promotes equality and reduces workplace
disparities by ensuring that all employees have a voice in the negotiation process. Moreover,
it contributes to industrial peace by providing a structured mechanism for resolving disputes,
thereby minimizing the likelihood of strikes and other forms of industrial action. This
stability is beneficial not only for the employees but also for the employers and the economy
as a whole. In essence, collective bargaining is a fundamental aspect of sound labor relations,
leading to more harmonious and productive workplaces.

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References
Hayter, S. (2011). THE ROLE OF COLLECTIVE BARGAINING IN THE GLOBAL
ECONOMY. Cheltenham: Edward Elgar Publishing Limited.

InternationalLabourOrganization. (2012, February 12). Business and Collective Bargaining.

Retrieved from International Labour Organization: http://www.ilo.org/resources/qas-
business-and-collective-bargaining-0#

Liukkuen, U. (2019). Collective Bargaining in Labour Law Regimes. Cham: Springer Nature
Switzerland.

OECD. (2018). OECD Employment Outlook 2018. Paris: OECD Publishing.

OECD. (2019). Negotiating Our Way Up: Collective Bargaining in a Changing World of
Work. Paris: OECD Publishing.

V, v. (2024). Collective Bargaining: Definition, Types, Features and Importance. Retrieved

from Economics Discussions,net: http://www.economisdiscussion.net/collective-
bargainingcollective-bargaining-definition-types-features-and-importance/31375

Vaidya, D. (2024, August 21). Collective Bargaining. Retrieved from WallStreetMojo.com:

http://www.wallstreetmojo.com/collective-bargaining/

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