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Labour Management and Employment Relations in Organisations


Discuss About The Centralised And Decentralised Bargaining?

The sustainability of any business depends on the management of labour and employment in the workplace. Structure of labour management and employment relations construct the pathway of fewer amounts of conflicts in industrial relations of any organisation (Hirsch et al., 2014). Issue associated with labour management are the issues related with industrial relations and employment relations embedded in the core structure of an organisation. Progress of any organisation can occur effectively minimising the negative effects caused by different industrial and employment issues associated with each and every operation level of the organisation. Resolution system is a concept that manages industrial relations and notifies the employees of their job roles (Hessami and Baskaran 2015). Various organisations operate in various fields, consisting of different employees coming from different background. Therefore in order to manage the industrial and employment relations properly within an organisation, one resolution system is not enough.

Sometimes it is observed that resolution systems of an organisation incorporate many disputes that ultimately affect industrial relations and employment relations (McBride, Hebson and Holgate 2015). Due to discontent among employees certain negative impacts occur in the organisation, like strikes actions and others. These disputes in resolutions can be eliminated through different approaches (Townsend, Wilkinson and Burgess 2013). One of the common approaches is collective bargaining that allows both the employer and the employee to negotiate a satisfactory employment relationship and to reduce any kind of labour disputes.

Purpose of this assessment is to find out the effectiveness of bargaining in industrial and employment relations. The advantages and disadvantages of two kind of bargaining process have been discussed in the following assessment.

Terms and conditions of employment relationships are built on the basis of negotiations (Pekarek and Gahan 2016). This process of negotiation between the employer and employee is called bargaining. Bargaining comes into play when there is a substantial amount of dispute in the resolution system of an organisation. Various conflicting interests are reconciled through collective bargaining (Dahl, Le Maire and Munch 2013). Bargaining process constructs the labour relations of an organisation by recognizing the goals and objectives of the organisation and realising general and mutual interests.

The process of bargaining in an organisation depends on the structure of bargaining, since the information about indirect and direct members of labour accord are detailed in the structure (Addison, Portugal and Vilares 2015). The structure is also helpful roles and outcomes of the management and unions are reflected through it. Often it has been seen that employers and unions prefer the centralised model of bargaining and the employees prefer decentralised model of bargaining (McBride, Hebson and Holgate 2015).

The Importance of Resolution Systems and Collective Bargaining

The bargaining is a process of negotiation, where employers and employees present in a group to negotiate various terms and conditions. Through the negotiation process scopes for compromise, discussion and mutual exchange increase (Cazes, Khatiwada and Malo 2012).

 In the process of resolving an issue, the bargaining process follows an exclusive format that starts with a proper presentation of demands of the employees, channels through analysis and discussions between the authority and union of employees and ends with the formation of an agreement which develops the regulations for management of employees for a certain period of time (Bailey and Peetz 2013). Bargaining is a dynamic process that keeps changing at certain intervals. The process is complementary as well as continuous. Both the parties of negotiation have some requirements from the other parties, like employees require better pay structure from the employers and the employers require better labour from the employees. The process elevates industrial democracy within an organisation, using understanding and collaboration between different operational bodies.

Bargaining process follows 5 general phases. These phases are preparation, discussion, proposal, negotiation and settlement (Van Wanrooy et al. 2013.). In preparation phase, negotiation team from both the parties have been developed the topics of negotiation have been finalised by examining the situations of respective parties and raising the issues. Discussion phase is associated with preparation of terms that will guide the negotiations (Traxler and Brandl 2012). Proposal phase is related with the beginning statements related with the issues and issue resolving proposals. In bargaining phase, both negotiation parties present their requirements and discuss how to resolve the conflicts providing benefits for both groups. Finally settlement phase comes, where one or several beneficial decisions have been taken and the issues are completely resolved.

Bargaining process can be categorized into two sectors, centralised bargaining and decentralised bargaining (Boeri 2014.). Social bodies are the channels for conduction of centralised bargaining process. These social bodies are government, employer and trade union groupings and more. Individualism is a part of centralisation or centralised bargaining process ((Pries and Seeliger 2013). Reaching to an agreement with a collaborative and easy approach, cost reduction associated with the negotiation and ease of application of decisions is the procedures to obtain individualism (Brue, McConnell and Macpherson 2016). However, smaller enterprises are avoided in this approach as the financial pressure has been neglected in this bargaining process.

Centralisation combines the employers and union of employees together in a more focused way (Cazes, Khatiwada and Malo 2012). To eliminate the disputes in wages, employment relations and industrial relations, the importance of greater responsibility is reflected through this process and it helps to set the terms and conditions for the organisation (Hirsch et al., 2014).

The Phases of Bargaining Process

Application of centralisation in condition of work, employment relations and wages by the government creates awards (Jimeno and Thomas 2013). An example of this approach can be given from the central bargaining system of Australia from 1904 to 1990 (Dahl, Le Maire and Munch 2013). Awards can be defined as legal agreements on the basis of least wages and good working conditions for the employees. This is the result of combination of submission of both employers and union of employees.

There are various advantages of centralized bargaining process. The process provides a fix in wages that elevates workers’ equality and degree of justice of work (Hessami and Baskaran 2015). Economy management can be well maintained by any organisation due to more control over wage system and balance in employment relations. Introduction of awards within almost every sector in the organisation reduces the disputes among employees (Addison, Portugal and Vilares 2015). Wide scale implementation of this process increases the cost efficient benefits to the organisation and makes the employee training more efficient and it also causes dilution in the power of individual employee (Faia and Rossi 2013). Powers of abusive employees are reduced through this process. Main advantage of the process of collective bargaining that it significantly reduces the amount of strikes performed in the organisation. In this case this bargaining provides the employees protection in their work sectors as the end of the bargaining results in an agreement creating benefits for both employers and employees. The process also provides stability and security to the employees as probability of unlawful termination reduces and the employees of an organisation have a well constructed support system.

Flexibility of this bargaining system is not appropriate comparing to its theoretical model. The bargaining process for large organisations and for small organisations is almost comparable, which reduces the distinguishable components (Townsend, Wilkinson and Burgess 2013). Individual businesses are not being provided with enough opportunities, so that the organisation can make improvements in their employment and industrial relations and increase their productivity and profitability. Favours are achieved only by the large organisations due to availability of enough resources and capital (Jimeno and Thomas 2013). Amount of incentives for management participation is since the decisions are made outside of the organisation (Traxler and Brandl 2012).

Decentralisation means the distribution of responsibilities and authorities to the management at low level by the management of high level (Pekarek and Gahan 2016). As an opposition of centralisation the decision is made by the managers associated with each department or division regarding the whole organisation (Boeri 2014). Any issues within the organisation can easily be found out since each department have the allowance to determine the issues and take decisions to counter them. Organised economies contain decentralisation. Involvement of lower level authorities allows the functional level managers to enhance their performance and increases their freedom of work. Due to the collaboration of high level managers with low level managers, reduction occurs in the decision making time for an organisation (Dahl, Le Maire and Munch 2013). Allowance of more people into the decision making system of an organisation creates opportunity for more innovative input in the functionality of an organisation. Expansion of business processes through merging and new acquisitions can be explained thoroughly by decentralisation.

Centralised and Decentralised Bargaining

Relationship standards are improved between employer and employee through this process due to industry level dealings between these two (Van Wanrooy et al. 2013). Team construction and workplace democracy is enhanced and thus optimization occurs in employee participation within the organisation (Bailey and Peetz 2013). Major focus of this process is specifically the sector of individual working. The process reduces the amount of disputes in resolution since individual workplaces have individual modes of operation and any dispute that is developed is solved individually (Hirsch et al., 2014).

 Main advantage of decentralised bargaining process or decentralisation is that it constructs a flexible system that fixes the issues in employment conditions taking account of every workplace characteristics (Faia and Rossi 2013). Communication between employees and employers get enhanced due to the distribution of decision making ability to the low level authority. Decision making becomes easier and fast and can be adopted within the working sector of the organisation within a quick span of time (McBride, Hebson and Holgate 2015). It improves the overall motivation of the employees and their co-operation. Rewards are given to individual employee for their better productivity. Maintaining the employment, an enhancement in the competitiveness in global context is promoted.

Decentralised bargaining creates inequality between different skilled employee groups. The difference between skilled and unskilled employee is clearly observed from here (Brue, McConnell and Macpherson 2016). Economy management becomes difficult as the control of government over the wages diminished. Sometimes the process cannot resolve the issues of disputes in industrial relations (Pries and Seeliger 2013). Wide dispersion of the authority throughout the organisation develops co-ordination problems. Financial burden increases in an organisation and the result of it can be seen from less involvement of small scale enterprise (Addison, Portugal and Vilares 2015). The main disadvantage is that uniform policies cannot be followed throughout the whole organisation as different department of an organisation needs to follow different set of policies.


Therefore, the discussion clearly explains the concepts of bargaining regarding employment relations and industrial relations. Progress of any organisation depends on its employees as well as authorities. Therefore, it is very important that the employment relationship within an organisation remains balanced. Often it has been seen that many issues generates within an organisation regarding labour wages and others that result in a strike and affects the reputation and productivity of the company. These issues can be solved in the primary stages with the implementation of proper negotiation which can be termed as bargaining. Two types of bargaining process have been discussed in the report, which targets specific size of organisations. These bargaining processes form proper negotiation regarding every issue between the two negotiating bodies, employer and employee. In any negotiation, generally both the negotiating parties contain requirements, which are discussed and analysed according to the issues and ultimately a solution is developed which is beneficial for both the negotiating parties. Centralised and decentralised bargaining processes have several advantages and disadvantages. The small enterprises are benefited by centralisation whereas large enterprises are benefited by decentralisation. Advantages of centralisation are leadership and proper collaboration and decentralisation are responsibility and burden sharing. Difference between the controls of both processes is that the first process provides inadequate control and the second process provides considerable control over the organisation. Depending on the structure of an organisation the bargaining process should be built up. The ultimate goal of this process is to balance the employment relationship within an organisation so that no dispute remains within and the organisation does not have to face employee problems like strikes and other issues.


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Bailey, J. and Peetz, D., 2013. Unions and collective bargaining in Australia in 2012. Journal of Industrial Relations, 55(3), pp.403-420.

Boeri, T., 2014. Two-tier bargaining. Browser Download This Paper.

Brue, S.L., McConnell, C.R. and Macpherson, D.A., 2016. Contemporary labor economics. McGraw-Hill Education.

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Dahl, C.M., Le Maire, D. and Munch, J.R., 2013. Wage dispersion and decentralization of wage bargaining. Journal of Labor Economics, 31(3), pp.501-533.

Faia, E. and Rossi, L., 2013. Union power, collective bargaining, and optimal monetary policy. Economic Inquiry, 51(1), pp.408-427.

Hessami, Z. and Baskaran, T., 2015. Has Globalisation Affected Collective Bargaining? An Empirical Test, 1980–2009. The World Economy, 38(12), pp.1880-1911.

Hirsch, B., Merkl, C., Müller, S. and Schnabel, C., 2014. Centralized vs. decentralized wage formation: The role of firms' production technology.

Jimeno, J.F. and Thomas, C., 2013. Collective bargaining, firm heterogeneity and unemployment. European Economic Review, 59, pp.63-79.

McBride, A., Hebson, G. and Holgate, J., 2015. Intersectionality: are we taking enough notice in the field of work and employment relations?. Work, employment and society, 29(2), pp.331-341.

Pekarek, A. and Gahan, P., 2016. Unions and collective bargaining in Australia in 2015. Journal of Industrial Relations, 58(3), pp.356-371.

Pries, L. and Seeliger, M., 2013. Work and employment relations in a globalized world: The emerging texture of transnational labour regulation. Global Labour Journal, 4(1), pp.26-47.

Townsend, K., Wilkinson, A. and Burgess, J., 2013. Is enterprise bargaining still a better way of working?. Journal of Industrial Relations, 55(1), pp.100-117.

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