How mediation helps in inflation adjustment negotiations
August 2022 saw the highest inflation rate ever recorded in The Netherlands: 13.6%. Everything is more expensive and your salary is worth less and less. Companies' margins are under pressure, costs are skyrocketing, things are creaking and squeaking. Sooner or later, employees and employers will start negotiating salary adjustments: inflation adjustments. But how do you do that? And can mediation help with inflation adjustment negotiations? We tell you in this article.
Inflation is higher than ever, so this situation is new
In normal times (with inflation in recent years), inflation adjustment was an important detail. Important, but also a detail. Employers could price increases with the inflation adjustment and employees could demand it for their salaries. People did agree. With inflation the way it is now, that is no longer so easy. And that’s nobody’s fault! We tend, when things are not going our way, to look for culprits. There are none, at least among employers and employees. Compare it to a flood: we all expect the government to maintain the levees and make sure we can live safe and dry. However, if a flood does occur due to force majeure (heavy rains, flood flows), you have to solve it together at that time. Then you cannot as a government say “we have done everything we can, we don’t have to do anything now” and as a citizen you cannot say “we demand a dry house, today”. You have to adapt together to the new situation and find the best solution. And yes, in retrospect you can see what can be learned.
Similarly now: inflation is here, which creates a new situation with problems and risks for everyone. In an inflation adjustment negotiation mediation, you will search together for solutions to all those problems.
This is how inflation adjustment negotiations go wrong
In this situation, it makes no sense as an employer to linger on “we haven’t agreed on an inflation adjustment,” and as an employee it makes no sense to linger on “I demand 13.6% wage increase due to inflation.” You may do that, but chances are it will be at the expense of the relationship, the company or your job satisfaction.
Imagine it: from the management comes a message that inflation is unfortunately not within their control and that they expect everyone to pull together. The Works Council responds with a joint message with the union stating that the inflation adjustment is an acquired right, because it has been applied consistently for ten years. The management responds with a letter, drafted by the company lawyer, that in their view this cannot be the case and that a weighty business interest prevents them from going along with this. The positions are taken, everyone is extra cranky and they achieve nothing.
How do you properly address inflation adjustment negotiations?
So how can you do this? In mediation in inflation adjustment negotiations, you will work together to find a solution that is as good as possible for both parties. You do this by going through a series of steps associated with Harvard Negotiation.
Step 1: Separate the people from the problem
Make sure you keep in touch. Sit down with each other (not via e-mail) and during those meetings talk about things other than just the problem: How are you doing? Did you do anything fun? How are your kids? Yes, you have a problem together, but no, that other person is not just that problem. That other person is not getting up in the morning to bother you. That image does arise naturally, because that makes it easier to wage war, that is programmed in us.
The mediator keeps “checking in” on everyone, sometimes ad nauseam: how are you? How are you sitting? How are you feeling? And count on that when you experience resistance from the other side again. In a negotiation, everyone is concerned that they will be “screwed” by the other side. That worry can cause people to flee (run away) or fight (become completely unreasonable). That fear and reaction is often not rational, but emotional. The mediator will make sure that you and the others know where you stand in it, which will make the intense reactions give way to rational decisions.
Step 2: Look for interests behind the positions
Talking together about the interests behind the positions makes more possible. So don’t immediately start cowering over 13% versus 3%, but talk about the larger themes: being able to make ends meet, security, business continuity, good cooperation, trust. Perhaps employees can contribute to cost savings in many ways or know how to sell to customers the price increase.
This conversation can be difficult at first. It sometimes feels unsafe to put your own wishes on the table in those situations: who knows, it might not be listened to or used against you. You can influence that by also listening carefully yourself and taking the other person seriously.
Step 3: create choices
In an inflation adjustment mediation negotiation, several options will be devised. For example, we recently did a mediation where three different options were devised in three different groups:
- An inflation adjustment linked to the company’s results
- A limited fixed inflation adjustment
- A full inflation correction with the possibility of a deflation correction should prices fall again.
After this, the parties parted ways and discussed the options with their constituencies. Eventually an agreement was reached on option 2. Precisely because the other two options had also been there, all involved were satisfied with this, after all, they had chosen it themselves.
When to start?
It is important to start mediation in inflation adjustment negotiations on time. So don’t wait until everyone is already angry and frustrated, until the first lawyers are involved and the Works Council is already threatening strikes. At that point there is already a lot of “collateral damage” that is preventable. You already know this conversation is coming, so get it right the first time. You also know it’s going to be a difficult conversation. The situation as it is now is not normal! There are uncertainties, risks and competing interests. These cannot be denied. But don’t let those lead the conversation! After all, there are also common interests, relationships and solutions. When the conversation is about these, so much more can be done in an inflation adjustment mediation negotiation!
Result Mediation and inflation adjustment negotiations
Our mediators guide these negotiations at every level: from the local construction company with 26 employees to the healthcare institution with 3,000 FTEs. Contact our case management and ask for a free intake meeting with a mediator. Together with the mediator, you will decide what is the best process in your situation. If the group is large, the mediator may bring a colleague to ensure that everyone is seen and a solution-oriented process ensues.