An economic study shows that legal regulations are largely complied with.
Payments of several hundred thousand Euros per year to works council members, particularly in connection with VW and Porsche, made waves in the news. Media reports and legal proceedings on the alleged overpayments reinforced the public impression that this practice is widespread in order to make works council members "more willing to compromise" on matters of interest to employers.
However, a study from Prof. Dr. Laszlo Goerke (IAAEU and Trier University) and Prof. Dr. Markus Pannenberg (Bielefeld University of Applied Sciences) has found that works council members in Germany are paid, on average, the same as or only slightly better than comparable employees. "To put it bluntly, the excessive earnings of VW works council members are not the tip of the iceberg, but rather isolated cases," conclude Goerke and Pannenberg.
In contrast, trade unions' criticism of cases of financial mistreatment of works council members receives little attention from the public. "Both over- and underpayment can influence the way the German system of co-determination works," say the economists Goerke and Pannenberg in their study. According to the Works Constitution Act, employees may be neither financially rewarded nor disadvantaged for serving on a works council. Works council members must, therefore, be paid according to the role and associated development opportunities that they had before becoming an employee representative.
Until now, the public discussion around preferential or discriminatory treatment has suffered from a lack of comprehensive information on works council members' pay. Laszlo Goerke and Markus Pannenberg have closed this gap with their study, and thus also made an important contribution to the discussion on the need for law reform. "Our findings indicate that payments to works council members are largely in line with legal provisions," the researchers explain. They therefore consider reform of the rules of the Works Constitution Act on the payment of works council members to be unnecessary.
In their study, Goerke and Pannenberg investigate wages paid to works council members in Germany over the time period from 2001 to 2015. They conclude that, in comparison to equivalent employees without works council membership, remuneration is on average the same or at most 3 to 7 percent higher. The difference depends on whether individual characteristics, such as education or motivation at work, are taken into consideration. Laszlo Goerke and Markus Pannenberg find their results confirmed for various groups of employees as well as different types of businesses.
Furthermore, the study suggests that, on average, works council membership does not pay off in terms of significant wage benefits. "This could explain why employees often refrain from initiating the election of a works council at their firm. The potential costs of conflicts with and sanctions by the employer are not offset by the expected financial returns of works council activity," write Goerke and Pannenberg. Moreover, the lack of wage mark-ups for works council members could be one of the reasons why many works councilors give up their positions early, according to the researchers.
Reference: Laszlo Goerke und Markus Pannenberg (2023), Wage Determination in the Shadow of the Law: The Case of Works Councilors in Germany. Economic and Industrial Democracy, forthcoming.
Payments of several hundred thousand Euros per year to works council members, particularly in connection with VW and Porsche, made waves in the news. Media reports and legal proceedings on the alleged overpayments reinforced the public impression that this practice is widespread in order to make works council members "more willing to compromise" on matters of interest to employers.
However, a study from Prof. Dr. Laszlo Goerke (IAAEU and Trier University) and Prof. Dr. Markus Pannenberg (Bielefeld University of Applied Sciences) has found that works council members in Germany are paid, on average, the same as or only slightly better than comparable employees. "To put it bluntly, the excessive earnings of VW works council members are not the tip of the iceberg, but rather isolated cases," conclude Goerke and Pannenberg.
In contrast, trade unions' criticism of cases of financial mistreatment of works council members receives little attention from the public. "Both over- and underpayment can influence the way the German system of co-determination works," say the economists Goerke and Pannenberg in their study. According to the Works Constitution Act, employees may be neither financially rewarded nor disadvantaged for serving on a works council. Works council members must, therefore, be paid according to the role and associated development opportunities that they had before becoming an employee representative.
Until now, the public discussion around preferential or discriminatory treatment has suffered from a lack of comprehensive information on works council members' pay. Laszlo Goerke and Markus Pannenberg have closed this gap with their study, and thus also made an important contribution to the discussion on the need for law reform. "Our findings indicate that payments to works council members are largely in line with legal provisions," the researchers explain. They therefore consider reform of the rules of the Works Constitution Act on the payment of works council members to be unnecessary.
In their study, Goerke and Pannenberg investigate wages paid to works council members in Germany over the time period from 2001 to 2015. They conclude that, in comparison to equivalent employees without works council membership, remuneration is on average the same or at most 3 to 7 percent higher. The difference depends on whether individual characteristics, such as education or motivation at work, are taken into consideration. Laszlo Goerke and Markus Pannenberg find their results confirmed for various groups of employees as well as different types of businesses.
Furthermore, the study suggests that, on average, works council membership does not pay off in terms of significant wage benefits. "This could explain why employees often refrain from initiating the election of a works council at their firm. The potential costs of conflicts with and sanctions by the employer are not offset by the expected financial returns of works council activity," write Goerke and Pannenberg. Moreover, the lack of wage mark-ups for works council members could be one of the reasons why many works councilors give up their positions early, according to the researchers.
Reference: Laszlo Goerke und Markus Pannenberg (2023), Wage Determination in the Shadow of the Law: The Case of Works Councilors in Germany. Economic and Industrial Democracy, forthcoming.
