In smaller businesses, if employees have any problems they can talk directly to their employer. However, in larger businesses that employs many people, it becomes extremely hard to do so. It is also hard for the Human Resources department to make decisions when they have about 500 employees (e.g. who will get a pay rise?). It becomes much easier if decisions are negotiated with a trade union, and employee association that represents them. This saves the management a lot of time because they do not have to see individual employees to discuss problems.

Employees might not be treated fairly at work. They may be overworked and underpaid. Trade unions has the role of bargaining with the HR department for better working conditions, conditions of employment and better pay,

Trade Unions

Employees with similar interests (higher pay) form a trade union. Trade unions are a form of pressure group with has the ability to influence business activity. There are four main types of trade unions:

  • Craft union: For workers skilled at a particular job.

  • General union: For unskilled and semi-skilled workers from different industries.

  • Industrial union: For all types of workers in an industry.

  • White-collar union: For non-manual or office workers.

Why do workers join a trade union?

Unions have a shop steward, who is an unpaid representative of the union. When someone is new to a job they may ask if they may want to join. If the person joins, they will have to pay an annual subscription. This money will be use for employing union officials who will represent the views of the employees.

Advantages of a union

  • Strength in numbers.

  • Improved conditions of employment.

  • Improved working conditions.

  • Improved sickness benefitspensions, and retrenchment benefits.

  • Improved job satisfaction and encourage training.

  • Advice/Financial support if a worker is dismissed unfairly/made redundant or is asked to do something not part of their job.

  • Improved fringe benefits.

  • Employment where there is a closed shop, which is when all employees in a business must belong to the same union.

Trade unions need to:

  • Put forward their views in the media to influence government decisions on pay, employment, etc…

  • Improve communications between workers and managers.

Closed shop

closed shop is when all employees must join one union in order to be employed. It is because its members feel that the union is doing nothing when non-members receive the same pay rises as them. They think it is unfair. Trade unions also gain greater strength if all the employees are members of the union. However, many people think that it is unfair since they are forced to join – they should be able to make their own decisions.

Single union agreement

Some companies have a single union agreement, when a business only agrees to deal with a single union. Any employees who want to join a union can join this union. It is becoming more popular nowadays because many employees are becoming multi-skilled, and do not know which union to join.

Advantages to the employee:

  • Discussions are clearer if there is only one union to deal with.

  • The union has greater power.

  • No disagreements between different unions.

  • A better working relationship should develop between the union and the management.

  • Disputes are solved more quickly.

Advantages to the employer:

  • Discussions are clearer.

  • A better working relationship should develop, meaning that there would be less industrial disputes, benefiting both employees and employers.

  • Disputes are solved more quickly.

  • It is easier to agree to changes

The structure of a trade union

The structure of different unions vary, but most elect a President or General Secretary to work full-time for and get paid by the union. They work at the union’s headquarters. If the union is large, there will be union officials to take cared of members in different branches. Each branch represents its members in one work site, one factory, or one employer. Each branch has a representative. Unions are usually democratic and their union officers are voted up by the members.

Employer associations

Employers join what are called employer associations/employer federations/trade associations. Like trade unions, employer associations are made up of businesses and employers and who all pay annual fees for their benefits.

Advantages of joining an employer association:

  • They negotiate with trade unions on behalf of their members.

  • They give advice on employment lawshealth and safetytaxation laws etc…

  • Strength in numbers, they want to influence government decisions.

  • They can share ideas and research facilities.

  • They can organise bulk buying for members and get discounts

Employer associations and the government.

Employer associations represent similar wants of businesses, and will try to influence the governments to give better conditions for businesses to prosper:

  • They want the government to control things such as inflation, law and order, health and safety, and education for the workforce.

  • Lower taxes.

  • More freedom for businesses.

  • Fair competition.

  • Good transport infrastructure.

  • Access to overseas markets.

  • Reliable source of power.

Collective bargaining

This is when representatives of different interest groups negotiate and a collective agreement is made. The bargaining can be with businesses or with the governmentCollective bargaining in businesses usually means that the representatives of one or more trade unions negotiate with one or more employers or employer associations to come up with a mutually acceptable agreement on conditions of employment.

Why trade unions want wage increases:

  • Inflation.

  • It is difficult to recruit qualified workers (so pay them more!).

  • Pay differentials need to be maintained (everybody’s wages should rise when the minimum wage rises).

  • Changes in the workplace, e.g. new machinery.

  • If there are increased productivity, wages should increase too. There are productivity agreements, when managers and trade unions agree to raise prices for increased productivity.

Often agreements take place and the “middle path” is taken. However, this does not always happen and if the workers and unsatisfied with the agreements, they will use industrial action.

Industrial action

There are various forms of industrial action that try to influence the decisions of employers. Here are some of their most comment forms.


Strikes are when workers stop working and leave the workplace to protest against things.

  • Token strike: Stoppage for an hour, a few hours or half a day to show strong feelings.

  • Selective strike: Only a few workers go on strike. They are chosen by the union to cause as much disruption as possible.

  • All out strike: All union members stop working and wait until a dispute has been settled.

Unions have to pay their members out of strike funds as long as the strike has been approved by the union. All members vote to see if the strike is favourable or not.


This is when workers stand outside the factory holding signs to protest and stop any people going in and out as well as goods. This can halt the production process. The strikers gain publicity and gives the firm a bad image. This puts pressure on the firm to settle the dispute.

Work to rule

This is when workers stick rigidly to every rule and regulation in the business so that it slows down the production process. They still get paid since they are technically doing nothing wrong, but this still causes a lot of disruption in the workplace.

Go slow

All workers deliberately do things very slowly.


Workers refuse to work with any new rules or follow any new practices they do not approve of.

Overtime ban

Workers refuse to do any overtime. This might damage the business if they need to complete some orders quickly.

Possible harmful consequences of industrial action:

  • For employers:

    • Loss of output.

    • Loss of profit.

    • Loss of customers.

    • Poor reputation.

    • Bad image.

  • For employees:

    • Loss of wages.

    • They might lose their jobs if the company suffers low profits.

  • For customers:

    • They need to find another supplier which might cost more (production is stopped)

    • Shortage of products.

    • Deliveries not made.

    • For other businesses:

      • May lose income.

      • May not have materials to produce goods.

  • For the economy:

    • Workers have less money to spend.

    • Less tax revenue.

    • Country gain bad reputation for late deliveries.

    • Workers may be made redundant.

    • Exports may be lost and imports increased.

Employer’s powers

However, employers can do something about the situation. Usually, they will sign a no-strike agreement with the union which also involves pay rises. The pay rises are determined by an arbitrator, an independent person who represents both sides and decides on the best decisions possible. Again, he will most likely choose the “middle path”.

Nevertheless, if strikes do happen, here are some things employers can do:

  • Dismiss all workers: This leave the company in a very terrible position since they can’t produce goods or deliver goods.

  • Lock-out the workersStop workers from coming to work or get paid. Used to counter work to rule and go slow strategies.

  • Institute a pay freeze: Used if employees are refusing to follow new rules, practices or operate new machinery.

Worker participation:

The management needs to let everyone feel that they are part of the business. This means that managers will let workers participate in business decisions. There are several ways of doing this:

  • Worker directors: Some workers become directors, but they are not allowed to attend all board meetings.

  • Works councils: These are where representatives of employees get together and discuss matters that affect employees with managers. Works councils are called European committees in Europe, and are becoming more common there. Multinationals with more than 1000 workers or 100 workers per branch will have to create a works council and will have to always consult it when making decisions affecting employees.

  • Quality circles: This is often used in Japanese companies, where workers regularly debate on how to improve quality and efficiency.

  • Using a democratic style of leadership: Workers are delegated tasks and are consulted in business decisions.

Advantages of worker participation

  • It increases the flow of information and improve relationships between the employer and the employee.

  • It increases motivation.

  • It increases job satisfaction.

  • It benefits the company since it can use knowledge from experienced workers.

Disadvantages of worker participation

  • It is time consuming.

  • Workers may lack necessary technical knowledge.

  • If representation is done via trade unions, non union members won’t be affected.

  • There could be conflict of interests.