Works Councils and Other Forms of Employee Representation

Alternatives Prevail

Employee interest representation at the establishment level in Germany is commonly said to be conducted by works councils. Evidence from the IW-Zukunftspanel, however, reveals that alternative modes of interest representation are even more widespread among companies in manufacturing and affiliated industries than works councils. The prevalence of the latter rises as the firm size increases. Voluntarily established joint committees, in which employee representatives and the employer share information and debate and jointly decide on important company policies and strategies, predominately exist in companies with up to 100 employees. Other forms of employee representation, such as staff spokesmen or worker committees, are relatively often established in companies with 101 to 199 workers. Moreover, alternative modes of interest representation are often complemented by flexible wage arrangements, such as profit-sharing and incentive schemes. The evidence provided also suggests that works councils are rather reluctant to introduce flexible wage systems for the majority of employees.