Outsourcing in the Netherlands : challenges to traditional sector boundaries

Outsourcing in itself does not need to be problematic for collective bargaining coverage. Transportation of goods, for example, is a service that has a long history of being outsourced, but also has a sectoral collective bargaining agreement (CBA) that is habitually extended to cover the entire sector. This means outsourced truck drivers are by definition covered by a CBA, whereas truck drivers employed for example by a chemical processing company without a company CBA are not. This does not mean there are no problems, however. In this study we encountered numerous examples of CBA 'gaps' and 'clashes', related in differing degrees to the phenomenon of outsourcing. First of all, we encountered several employer strategies that lead to lower CBA coverage. For a company, coverage by a sectoral CBA is determined by the activity that accounts for the largest share of profits. One strategy we encountered is for companies to split up their activities into several legal entities, e.g. into transport and logistical services, which removes the logistical workers from the scope of the transport CBA. Another example is 'CBA shopping', in which a company self-identifies with a sector with low CBA standards, or identifies new groups of workers as falling in a category with lower CBA standards. Finally, hiring workers through temporary work agencies (TWAs) or subcontracting self-employed workers allows employers to avoid coverage of CBAs. These strategies, however, are not restricted to situations of outsourcing. A problem more closely related to the outsourcing phenomenon arises from the fact that outsourcing is not seldom motivated by costs. In non-organised sectors in which only minimum wage applies, there is very little incentive for employers to negotiate anything above it, which would harm their ability to compete. Cost pressures are intensified by the temporary nature of outsourcing contracts, providers having to tender or renegotiate contracts periodically. Not only are they competing against their competitors in these situations, but also against their clients' ability to insource more cheaply. The pressure on costs only exacerbates more institutional barriers to collective bargaining in relatively 'new' sectors that have been developing partially as a result of outsourcing. Trade unions lag behind in organisational structure and resources being targeted at these sectors. Also, social partners are often reluctant to identify a new sector for collective bargaining as it might impinge on already existing sectors, putting at risk their ability to extend sectoral CBAs. This policy paper elaborates on and gives examples of these problems as they were encountered for the activities studied in the Netherlands: logistical services, employment services, and services provided by a facility management company. It furthermore expounds on social partner efforts to address these issues, and offers some policy recommendations