German employers have agreed to a deal that allows millions of union workers more flexible working hours and a substantial pay hike, even as they said this was a “compromise with many painful elements”.
Employers association Südwestmetall - the employers' association that agreed the deal - said it would be "hard to bear for many firms” and warned it could lead to labour shortages, CNN reported.
Beginning next year, the 2.3 million members of labour union IG Metall can opt to work 28 hours a week for two years before returning to the standard 35-hour work week.
The union said the flexibility would allow workers to care for children or other relatives.
The members work in more than 700 firms – mostly top engineering companies – across southwest Germany, but observers say the deal will also affect non-unionized employees who would be offered the same terms by their employers.
"This sets the standard for everyone else," Megan Greene, chief economist at Manulife Asset Management, told CNN.
"You can expect similar deals to come in other sectors and regions soon," said Famke Krumbmüller, a partner at OpenCitiz, a political risk consultancy.
Daimler, for instance, will offer the new hours to all employees starting next year even as it already has many flexible working options.
Bosch, with 138,000 workers in Germany, would offer the same pay rises and perks to the majority of its German workers.
Flexible hours wouldn't be disruptive, as it already has “about 100 different working hour models to ensure an optimum work-life balance," said Simon Schmitt, a company spokesperson.
The union said workers’ pay will be reduced to reflect the shorter work week, but employees also have the option to work up to 40 hours if they want to earn more.
Südwestmetall’s spokesman Volker Steinmaier said most workers may instead want to work extra hours to make more money.
"A couple of companies [already] give their employees a choice to work 30, 35 and 40 [hours]. Most of the employees choose to work longer and earn more," he said
IG Metall said its members would get a 4.3% raise starting in April. That equates to a rise of about 3.5% on average in 2018, according to Florian Hense, an economist at Berenberg bank.
"[Workers will] see their pay rise by far more than inflation. This raises their disposable income and spending power," he said.
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