Firm-level agreements, employment strategies and temporary workers. Firm-level evidence from Italy

Published date06 January 2020
Date06 January 2020
AuthorSaverio Minardi
Subject MatterHr & organizational behaviour,Industrial/labour relations,Employment law
Firm-level agreements,
employment strategies and
temporary workers
Firm-level evidence from Italy
Saverio Minardi
Universita degli Studi di Trento, Trento, Italy
Purpose The purpose of this paper is to investigate the impact of two-tier firm-level collective agreements
on firmspropensity to use temporary employment, accounting for the process of self-selection of firms into
different bargaining levels in the Italian context. It further examines which firm-level characteristics drive this
process of selection.
Design/methodology/approach The empirical analysis uses a panel data set of Italian firms for the
years 2005, 2007, 2010 and 2015. Estimations are produced and compared through ordinary least square
regression, random-effects and fixed-effects models.
Findings Results show that enterprises adopting two-tier firm-level agreements (TTFA) are associated
with lower levels of temporary workers. However, a longitudinal analysis suggests that introducing a TTFA
does not impact firmspropensity to employ temporary workers. This novel finding highlights the presence of
a selection process based on firm-level time-constant characteristics. The paper argues that these
characteristics refer to management orientation toward high-road rather than low-road employment
strategies. Further evidence is brought in support of this claim, showing that firmspropensity toward the
provision of training for their labor force partially explain the process of selection.
Originality/value The study is the first to analyze the impact of secondary-level collective agreements on
firmsreliance on temporary employment, offering new evidence on the causes of the expansion of temporary
employment. It further highlights the relevance of employersstrategies in shaping the impact of the
bargaining structure.
Keywords Selection, Collective bargaining, Temporary workers, Employee relations, Flexible labour
Paper type Research paper
In recent decades, several European countries have experienced a steady increase in
precarious forms of employment, such as fixed-term contracts and temporary agency work.
This process usually defined as labor market segmentation or dualization has been
associated with the emergence of significant sets of social and economic inequalities
(Barbieri and Cutuli, 2010, 2016; Barbieri, 2009; Gash and Mcginnity, 2006; Scherer, 2004).
In the same years, many countries have undergone important transformations in their
collective bargaining structures, meaning increased reliance on firm-level collective
agreements rather than sectoral or inter-sectoral ones. In some contexts, this process has
taken the form of fully-fledged decentralization, with firm-level agreements slowly replacing
centralized ones. In others, changes have been described as a hybridization process,
meaning situations in which decentralized negotiations have grown in relevance without
disrupting existing arrangements (Brandl and Bechter, 2019; DAmuri and Giargiantonio,
2015; Freeman and Gibbons, 1995; Katz, 1993).
Some authors have underlined the growing relevance of multi-level arrangements, in
which firm-level agreements are structured on top of existing higher-level national or
sectoral agreements. These hybrid arrangements are becoming increasingly common
across European countries and, as a consequence, questions regarding their functioning
and outcomes have arisen. Several authors have investigated how these types of
arrangement influence firmspractices and outcomes, encompassing performance,
Employee Relations: The
International Journal
Vol. 42 No. 1, 2020
pp. 194-212
© Emerald PublishingLimited
DOI 10.1108/ER-01-2019-0062
Received 11 January 2019
Revised 28 May 2019
Accepted 3 July 2019
The current issue and full text archive of this journal is available on Emerald Insight at:
flexibility and wage levels (Bechter et al., 2019; Braakmann and Brandl, 2012, 2016; Kalmi
et al., 2012; Nergaard et al., 2009).
Still, while a great deal of attention has been dedicated to the dynamics of labor market
segmentation and the functioning of multi-level bargaining systems as separate entities,
little evidence is available on the possible interplay between the two phenomena. This paper
aims to investigate this relation. Through an empirical analysis of the Italian context in the
years 2005, 2007, 2010 and 2015, the paper aims to shed light on whether and how the
adoption of firm-level agreements influences firmsreliance on temporary employment[1].
Italy offers an interesting field of study since it stands out as a clear example of a multi-level
bargaining system, in which firm-level agreements are signed by employers and union
representatives on a voluntary basis within the limits set out by the national sectoral
agreement of reference. The core of the system are the sectoral collective agreements. Even
though sectoral agreements are not mandatory by law, social partners have been able to extend
their coverage to the whole economy. In fact, collective bargaining coverage is almost universal
(according to INAPP, 2011, 97 percent of firms with ten or more employees in the private sector
are covered by a sectoral agreement). Moreover, courts tend to honor minimum wage and
minimum working standards claims based on sectoral agreements for workers performing
similar work. Other than sectoral agreements, trade unions and employers can sign facultative
secondary-level agreements at the company and in some cases territorial level. Secondary
agreements must comply with and integrate pay and working conditions set out at the sectoral
level[2] (Leonardi and Pedersini, 2018; Leonardi et al., 2018; Pedersini, 2014; Colombo and
Regalia, 2011).
Firm-level agreements in the Italian context are, therefore, best described as being two tier.
This is an important distinction since firm-level negotiations can produce very different outcomes
depending on the broader structure of collective bargaining in which they are embedded.
Concerning their impact on the use of temporary employment, a long strand of
socio-economicliterature has argued that negotiations at the firm level are more suitedfor the
introduction of innovative and flexible employment strategies. According tothis perspective,
firm-level agreements allow a closer match between regulations and the actual needs of the
firm, giving access to a broader set of flexible employment strategies such as temporal
flexibility, wage flexibility or functional flexibility compared to sectoral or national
agreements. In this way any kind of firm-level negotiations can potentially reduce an
employers need to rely on a peripheral labor force to hire and fire in response to changing
product market conditions.
However, this dichotomous understanding between centralized and decentralized
agreements may be too simplistic, especially in contexts like the Italian one. In fact, recent
literature has highlighted the relevance of the interaction between different bargaining
levels in shaping the processes and outcomes of bargaining (e.g. Bechter et al., 2019;
Nergaard et al., 2009).
Bargaining parties at the firm level may enjoy much greater procedural and substantive
protection in multi-level bargaining contexts compared to their counterparts under
single-employer bargaining. This is because in multi-level bargaining systems core issues
such as minimum wage levels and basic working standards are settled at the industry or
national level, relieving local bargaining agenda from conflict-prone negotiations (Stokke,
2008; Marginson et al., 2003; Traxler, 2003). Under these conditions, two-tier firm-level
agreements (TTFA) may guarantee a broader set of flexibility options to be implemented at
the firm level allowing employers to adapt to fluctuations in demand without resorting to
external numerical flexibility, i.e., temporary workers.
The first objective of this paper is to assess whether firms covered by a TTFA in the
Italian context are indeed less reliant on temporary workers compared to their counterparts
which are covered exclusively by sectoral agreements.

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