Different kinds of collective agreements

When a collective agreement is universally binding, all employers in the sector in question must comply with it. All workers in the sector have the same minimum terms of employment, such as wage classes. These minimum terms must always be met, and they can also be exceeded.  

The universally binding nature of a collective agreement is confirmed by the Board for the Ratification of Validity of Collective Agreements. Collective agreements that are deemed to be representative are confirmed as universally binding. 

The criteria for assessment include the proportion of employees working in companies belonging to the employers’ association in the sector. The universally binding nature of a collective agreement is affected by the number of companies belonging to the employers’ association and the number of workers belonging to the trade union in the sector.

The provisions of a normally applicable collective agreement are only binding on employers who have either entered into an agreement or are members of the employers’ association which has entered into an agreement. 

A normally applicable collective agreement applies to all workers who work in the company and fall within the collective agreement’s scope of application. 

A company-specific collective agreement applies to only one company. Even in such cases, the trade union usually negotiates the agreement with the employers’ association if the sector has one.  

A representative of the company in question typically also attends the negotiations. Avecra’s collective agreement is an example of a company-specific agreement negotiated by PAM. PAM negotiates the terms of employment for railway onboard services staff with the Finnish Hospitality Association MaRa, which represents Avecra Oy. 

As a result of negotiations between trade unions and employers’ associations, collective agreements include provisions concerning holiday pay, pay during maternity and paternity leave, annual leave/midweek holidays, and pay during sick leave for periods longer than 1+9 days. Without universally binding collective agreements, employers would not have to provide their employees with these benefits.  They would only be required to comply with the law, and these aspects are not mentioned in the law.

The universal nature of collective agreements prevents wage dumping by ensuring minimum terms of employment for all workers in the same sector, regardless of whether the employer is a member of an employers’ association. It prevents the emergence of a two-tier labour market: without collective agreements, the exploitation of the most vulnerable participants (e.g. young people and immigrants) in the labour market would increase. In other words, the universal nature of collective agreements prevents pay discrimination and pay inequality.

Employers who comply with the collective agreement based on its universally binding nature cannot deviate from the agreement. Such employers are not members of employers’ associations that advise their members on the application of their agreements and settle any disagreements with trade unions. However, companies not belonging to employers’ associations can agree some aspects related to working hours and, of course, any terms of employment exceeding the requirements of the collective agreement.

Thanks to the universally binding nature of collective agreements, companies in the same sector are on an equal footing in the market in terms of personnel costs. They cannot compete with other companies by undermining terms of employment. However, they can compete with other companies for employees by offering terms of employment exceeding the collective agreement’s minimum requirements.

A collective agreement that is not universally binding is called normally applicable. The provisions of a normally applicable collective agreement apply to employers who have either entered into an agreement or are members of the employers’ association which has entered into an agreement.

An employer belonging to an employers’ association can also agree local exceptions to the terms of employment specified in the collective agreement if such an option is mentioned in the collective agreement.