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What is a collective agreement?

A collective agreement is a binding agreement between employers and trade unions in which they lay down the employment terms of employees in a certain sector of industry or company. A collective agreement is valid for no more than two years.

Initially, only employers that are members of a party to the collective agreement need apply the agreement in their companies. All their employees, whether or not they are union members, must be covered by the agreement. The Minister of Social Affairs and Employment can, however, declare a collective agreement binding on an entire industry. In that case, the collective agreement covers all employers and employees in that industry, even those employers – and their employees – that were not involved in negotiating the agreement. Declaring a collective agreement binding on an industry prevents employers from competing on employment terms. More than 84 percent of employees are covered by a collective agreement.