About Virke

A simple guide to collective bargaining

• What is a collective agreement?

  Utvid

  A collective agreement is a written agreement on pay and working conditions or other terms of employment. Collective agreements are entered into between a trade union and you as the employer, or between a trade union and an employers’ organisation.

  A collective agreement is a binding agreement between the employer and the employees’ organisations. This kind of agreement establishes co-determination, stability and influence for the employees. For employers, it makes everything simpler and more predictable. Collective agreements are one of the main reasons why working life functions so well in Norway.

  A collective agreement has two parts. The first part, the basic agreement, contains provisions such as rules on co-determination and cooperation between the employees’ representatives and you the employer. The second part, the agreement, contains rules on wages, overtime pay, working hours, contractual early retirement pension (AFP) and other arrangements that will apply to the individual employment relationship. Some agreements also contain rules on occupational pensions.

• What is the frontline model?

  Utvid

  In Norway, wages are negotiated using the “frontline model”. The Norwegian economy is dependent on wage growth remaining within the limits of what industry can accommodate. This means that the sector exposed to international competition defines the wage growth that businesses exposed to international competition can accommodate.

  All other collective bargaining areas must then generally align with the financial parameters negotiated there.

  This kind of model ensures that the numbers on our payslips are not too different. Employers and employees both take responsibility for ensuring that individual groups do not benefit from disproportionately stronger wage growth compared with other groups. Together, we also facilitate wage growth that is well adapted to those business sectors that are subject to global competition.

  The frontline is the Confederation of Norwegian Enterprise (NHO) and the Federation of Norwegian Industries (Norsk Industri) on one side, and the Norwegian Confederation of Trade Unions (LO) and the Norwegian United Federation of Trade Unions (Fellesforbundet) on the other.

• What is a main settlement?

  Utvid

  All elements of a collective agreement can be negotiated in a main settlement – from the wage level to the specific wording of a provision relating to working time arrangements, for example.

  The collective agreements apply until the next main settlement, i. e. in two years’ time, but they contain provisions which stipulate that a meeting must take place in the intermediate settlement year in order to regulate wage rates.

• What is the basic agreement?

  Utvid

  The basic agreement is the “constitution” of organised working life and it governs the basic rules for cooperation between the organisation and between the employer and the employees’ representatives. The basic agreement acts as a tool for ensuring interaction and good procedure between the parties in negotiations.

  The basic agreements regulate a number of non-statutory issues but, unlike the agreements, they do not address pay and other working conditions. It is important to note that the basic agreement applies only to workplaces where a collective agreement has been entered into between the parties.

  The basic agreement is not part of the collective bargaining settlement, but is negotiated every four years. The most recent negotiation was in 2018.

• What is an intermediate settlement?

  Utvid

  A collective agreement period is (typically) two years in Norway, but negotiations take place every year: a main settlement every two years and an intermediate settlement every two years.

  An intermediate settlement means that Virke meets several employees’ organisations for wage negotiations. This settlement is known as a coordinated settlement, which means that we negotiate with LO on all the collective agreements we have with the member associations of LO all together. We do the same with the Confederation of Vocational Unions (YS) and other main employees’ associations.

• Who are the labour market parties?

  Utvid

  The labour market parties is a term that refers to employees or their organisations on the one hand, and employers or their organisations on the other.

  In the Nordic countries, these parties often alternate seamlessly between being fierce opponents and loyal partners. The right to organise is firmly established in Norwegian law. The labour market parties therefore represent many people on both the employee and employer sides.

• What are local negotiations?

  Utvid

  Wage assessments also take place at local level, of course. Many of the collective agreements in Norway provide for a combination of central and local wage formation. Often the centrally agreed rates are minimum wage rates and the management and employees at the company also have leeway to discuss local wage determination. This is what is meant by local negotiations.

  The parties may also decide centrally to set aside funds for local negotiations. This is wage growth that is included within the same parameters, but where the individual employers and employees at the companies are given the opportunity to negotiate within these parameters and decide how the funds are to be allocated. The downside of this is the time and resources that the companies have to spend. The benefit is that the companies themselves have a bigger say. The circumstances of some companies may nevertheless mean that the centrally agreed pay increases are considered the most appropriate for both management and employees.

• What are wage drift and wage overhang?

  Utvid

  Wage overhang

  Wage overhang describes the extent to which the wage level at the end of a year is above the average level for the year. This indicates how much wage growth will be from one year to the next if there are no pay increases or structural changes in the second year. If all wage settlements took place simultaneously at the beginning of the year and the wage level did not change over the course of the year, the wage overhang would be zero by definition and no such calculations would then be needed.

  Wage drift

  Wage drift is the difference between the overall wage increase during a particular period and the collectively agreed wage increase for the same period. This makes wage drift a residual item. It is a complex wage concept that may include pay increases awarded through local negotiations at individual workplaces, increased earnings due to greater piece work or structural changes in employment, for example through changes in person-hours between industries with different wage levels or changes in the use of shift work. Pay increases through local negotiations in the private sector and for positions that only have local wage formation are considered wage drift.

• What is required in order for the company to have a collective agreement?

  Utvid

  It is usually the trade union(s) which organise employees at the company that submit a request for the application of a collective agreement at the company.

  Virke has entered into basic agreements with most well-known trade unions in Norway. The basic agreements stipulate the conditions for when a trade union is entitled to have a collective agreement applied at a company that is a member of Virke. In most cases, there is a requirement for at least 10% of the employees within the collective bargaining area to be members of the trade union, but there are a number of exceptions to this rule.

• What do I do if I receive a collective agreement request?

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  As a member, you can receive help from Virke with setting up and administering the collective agreement. The trade union should submit the request for a collective agreement to Virke. If the trade union submits the request directly to the company, the request should be rejected and you should ask the trade union to submit the request to Virke. 

  If Virke receives a collective bargaining request from a trade union, we will contact the relevant member by e-mail. This will indicate which kind of collective agreement has been requested. You will also be asked to provide us with information about your company and the number of employees.

  If you are not a member of Virke, you will have to deal with the collective agreement request yourself. If you would like Virke’s assistance with this, you can apply for membership of Virke.

• Will the entire company be bound when a collective agreement is established?

  Utvid

  A collective agreement applies to each individual entity of a company that is registered under its own company number at the Brønnøysund Register Centre (separate organisation numbers for sub-entities). All employees are associated with a specific sub-entity through the A-ordning.

  Only those employees whose employment is associated with a company number that is bound by collective agreement will be covered by the collective agreement.

  This means that there may be sub-entities and employees at a company that are bound by collective agreement, while other entities and employees at the same company are not.

• What does it mean for my company to be bound by a collective agreement?

  Utvid

  Being bound by a collective agreement means that, as an employer, you have an obligation to comply with the provisions of the basic agreement and the agreement. The collective agreement gives both you the employer and your employees rights and obligations. Together with the provisions of the Norwegian Working Environment Act and other legislation, the collective agreement establishes the framework of the employment relationship between you the employer and your employees.

• Does the company also have to apply the collective agreement to employees who are not organised?

  Utvid

  Yes, the provisions of the collective agreement must be applied to both organised and unorganised employees. No employee who comes under the scope clause of the collective agreement can have individual pay and working conditions that are contrary to the collective agreement.

• What are the economic consequences of the company becoming bound by a collective agreement?

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  The company may incur increased expenses if the wages currently paid are below the minimum wage rates of the collective agreement. The collective agreements also contain provisions relating to AFP. The company is required to pay a premium to the Joint Scheme for AFP.

  On the other hand, the collective agreement enables an extended framework for the average calculation of working hours to be agreed, among other things. As an employer, you are also guaranteed predictability through the collective agreement’s rates for wages and increases, as well as simplification and binding agreement.

• When does the collective agreement begin to apply and how long does it apply?

  Utvid

  The collective agreement applies from the time when the request for a collective agreement is submitted. 

  In principle, the collective agreement applies for two years at a time, but it will be extended for a new period as long as there are still organised employees within the relevant collective bargaining area. 

• What happens to the collective agreement in the event of organisational changes?

  Utvid

  If changes are made to your business, for example if you close down, acquire or sell all or part of the business, it is extremely important that you notify Virke of this. You should send notification to  and kundeservice@virke.no.

  Business transfer

  One type of organisational change is a business transfer. This is where there is a change in which legal entity is the employer of some or all of the employees at the company.

  The rights of the employees in the event of a business transfer are stipulated in Chapter 16 of the Norwegian Working Environment Act. Section 16-2, paragraph (2) of the Norwegian Working Environment Act stipulates that the new employer is in principle bound by any collective agreement that was binding upon the former employer. The new employer is able to opt out of this, however, within three weeks after the date of transfer.

  If the new employer opts out and does not take over the collective agreement that was binding upon the former employer, the individual working conditions and rights of the employees under the collective agreement will nevertheless be transferred. These rights shall remain in effect until this collective agreement expires or until a new collective agreement is entered into that is binding on the new employer and the transferred employees. For example, the parties may agree that an existing collective agreement with the new employer will also apply to the transferred employees.

  The purchase and sale of shares does not constitute a transfer under the rules on business transfers because this does not involve a transfer of the business from one owner to another and the same legal entity will remain the employer of the employees. The purchase and sale of shares therefore has no bearing on the collective agreement.

  Internal organisational changes

  Organisational changes internally within a company, such as the transfer of employees from one sub-entity to another or the merging of sub-entities, do not constitute business transfers because the same legal entity will remain the employer. Those departments and entities that are bound by a collective agreement remain bound by the collective agreement after the organisational change. If new sub-entities/departments are established, the collective agreement will generally only apply if the trade union that organises the employees submits a request for this to Virke.

  When transferring employees from a department with a collective agreement to a department without a collective agreement or vice versa, it is important to be aware that this has an impact on the rights of the employees. This is particularly the case in relation to the right to AFP. In order to retain their rights to AFP, employees must be employed at an entity bound by collective agreement.

  If the company has a collective agreement, organisational changes are a matter that must be discussed with both the employees’ representatives and the employees themselves before the employees can be transferred.

• Can a collective agreement lapse?

  Utvid

  A collective agreement can lapse if there are no longer several organised employees within the relevant collective bargaining area. The collective agreement can then lapse at the end of the collective agreement period.