Trade Unions and Work Councils (AQA A Level Business): Revision Note

Types of trade unions

• A trade union is an organisation that represents the interests of its workers in negotiations with a firm’s management or owners

• The interests of the worker include

  • Wage and non-wage benefits of employment

  • Health and safety in the working environment

  • The reduction of discrimination and worker exploitation

• Trade unions are usually formed by the members of specific industries

  • Airline pilots have a pilots' union

  • Rail and sea workers have a rail and maritime union

• If there is no specialist union for an industry, most economies have a number of general unions which any worker can join e.g. In the UK, UNISON is the largest trade union, and it represents workers from across the public sector including those working in local government, education and health

• All trade unions can be classified into one of four categories
   

Types of trade unions

The work of trade unions

• Workers pay a monthly fee to join a trade union

  • The fee is called a subscription

  • Their membership ends when they stop paying this fee

• Benefits of union membership include

  • Collective bargaining

  • Job-specific training

  • Legal representation in disputes

  • Discounts on a wide range of goods/services 

• When collective bargaining fails and discussions break down, trade unions have several methods of forcing employers/governments to continue engaging with them

  • These methods are collectively referred to as industrial action and include

    • Strikes

    • Overtime bans

    • Work to rule

    • Go-slows
       

The focus of trade union efforts 

Factors influencing the strength of trade unions at work

• The higher the percentage of workers from a firm that belong to a trade union, the greater the collective bargaining power of that union with the employer

• The higher the percentage of workers from an economy that belong to trade unions, the greater the collective bargaining power of the unions with the government

• There are numerous other factors which influence the collective bargaining power of specific unions at different periods of time

1. The unemployment level - the higher the unemployment level the weaker the bargaining power as firms can more easily replace existing workers

2. Wage levels as proportion of total costs - the lower the percentage of total costs that a firms's wages represent, the higher the bargaining power

3. Swapping labour for capital - the nearer the replacement cost of capital for labour to meeting the increased costs demanded by the union, the weaker the bargaining power

4. The level of profits - higher profits strengthen the unions demands for higher wages

5. State of the economy - less bargaining power in a recession and more when the economy is booming

6. Overall size of the trade union - the larger the union the stronger their bargaining power

7. The productivity of labour - if the workers are extremely productive, generating high levels of output from low levels of input, they are more valuable to the firm and the union has stronger bargaining power

Works councils

• A works council is a formal group made up of employer and employee representatives who meet regularly to discuss workplace issues

• Works councils aim to encourage cooperation and two-way dialogue — without necessarily involving a trade union

Key features

• Often required by law in European countries for large employers (especially in Germany and France).

• In the UK, not legally required, but some large firms voluntarily adopt them — particularly those operating across Europe

• Usually involve elected employee representatives and HR or senior management

Role of a works council

• Discuss workplace matters such as:

  • Health and safety

  • Working conditions

  • Training needs

  • Technological changes

• They do not typically negotiate pay (that’s the role of trade unions)

• They act as a consultative, not confrontational, method of representation

Advantages and disadvantages of works councils