Through social dialogue, structural improvement of working conditions can be achieved. For example, by abolishing wage disparity based on sex, within the company, sector or even in a whole country. Another example is an introduction of minimum wage in a certain sector. Moreover, agreements reached through social dialogue are sustainable because of their negotiated nature and legitimacy.

Bipartite dialogue (between employer and employee– often through a labour union) and tripartite dialogue (also including the government) are particularly effective means to give employees a voice in decision-making on their labor conditions. For example, through collective bargaining employees get to choose their own representative of the union and/or health and safety standards.

A possible outcome of a tripartite dialogue are existing laws or policies to be changed, or new ones to be made. This is not only a benefit for the employees that were involved, but also for employees of other companies in the country of the same sector. Namely, in the future, strikes will not be needed because laws against these matters are adopted.

It is a workers’ right to express their problems, concerns, and demands without fear of oppression or discrimination. Joining trade unions or other organizations, if the right to FoA is respected, offers workers protection against discrimination, interference, and harassment.

It empowers workers as represented by a trade union, they are recognized as an equal partner in the production process and not viewed as a powerless production factor. It empowers workers to determine their own needs and priorities and to participate in decision making with management. It promotes the emancipation of the workers and self-respect.

It provides the possibility to negotiate and act collectively to realize an equal and fair power balance.

Better Working Conditions:

The potential of social dialogue to contribute to better working conditions has been demonstrated in both OECD countries and globally. This is because the preferences of employees are better taken into account and because they can better identify with the eventual solution. In turn, improved working conditions caused by social dialogue lead to an increase in employee satisfaction and motivation.

An increased motivation reduces both absenteeism and employee turnover since motivated employees are more likely to come to work and less likely to quit. An increased motivation directly leads to a better productivity, since it makes employees work harder, and indirectly, due to the effects on absenteeism and employee turnover. Reduced absenteeism decreases lost working hours. Companies need to pay less to sick workers (if they offer sick leave) and operational efficiency is higher. A reduced turnover leads to a more experienced and thus more productive workforce.

Improved Conflict Management

A second way in which social dialogue contributes to harmonious working relations: through improving conflict management. Minor conflicts are bound to exist in any workplace. Social dialogue has a potential to resolve these in a way that employees perceive as more fair, even when they do not get their desired outcome. This prevents grudges and latent conflicts from taking hold.
Consequently, many studies find that employee motivation is improved by perceived managerial responsiveness to employees’ issues, good or harmonious working relations after conflicts and the collective voice that unions provide for employees to manage conflicts. Such increased motivation has the same effects as with the improved working conditions: decreasing absenteeism and turnover finally leading to increased productivity.

On the Cases page, you will find examples of evaluations that demonstrate the link between better working conditions and productivity.

Social dialogue also increases the productivity of companies by improving company policy. As shown in Figure 1, this takes effect both through improved policy design and improved policy implementation. Firstly, policy design improves because social dialogue provides managers with more information, which leads to better policies and increased innovativeness. Specific policy areas benefited by this include operations, human resources, health and safety, and product design. Secondly, social dialogue improves policy implementation by creating trust within the company. This results in increased cooperation from employees and more effective reforms. Taken together, the improvements in policy design and implementation result in improved productivity as well as in increased resilience to shocks.

Figure 1. Social dialogue effect flow of Improved Policy

On the Cases page you will find a case study in Sri Lanka that illustrates the advantages of social dialogue for company policy, as well as their connectedness to employee motivation (Cases-Sri Lanka).

Another value driver through which social dialogue can affect financial capital is through the avoidance of conflicts and their resolution. Social dialogue provides employees with a way to address conflicts in a constructive manner. This removes the perceived need to resort to destructive means, i.e., overt or covert conflict.

Overt – or open – expressions of conflict, include large, visible expressions of conflict like strikes and walk-outs. They often receive a lot of attention, which gives the false impression that their absence means there are no conflicts in a company. However, some degree of conflict is unavoidable in companies. Not all expressions of labour conflict are clearly visible, but that does not mean they are not present. Next, to overt expressions of conflict, there are covert expressions. Examples include pilferage and sabotage, or – less extreme – inaction and non-cooperation.

By reducing the amount of overt conflict, social dialogue contributes to the avoidance of lost production, executive time and employee turnover. Reducing covert conflict leads to the avoidance of losses of product quality and production, which could otherwise result in the loss of product and company value. See Figure 2 for the complete effect flow. The value drivers of social dialogue are presented in Figure 3.

An example of failed dialogue is the USA car manufacturing case on the Cases page.

Figure 2. Social dialogue effect flow of Absence of Conflict

Figure 3. The benefits of social dialogue driven by three important value drivers

Social dialogue is an inclusive and democratic way of decision-making. Tripartism and social dialogue can benefit inclusive and democratic ways of decision-making through negotiation, information-sharing, and consultation. This way to address challenges has worked not just in more industrialized countries, but also in other situations, for example, Panama and South Africa.

In a democratic society, any unilateral action by the state without the consent of employees’ and employers’ organisations often results in confrontation. By having a dialogue and listening to the representatives of the employees and employers, governments demonstrate its willingness to take former’s needs into account. Consequently, such actions empower employees and employers in the political process. The process increases the chances to ensure effective implementation and improves chances of buy-in (ownership) by both, the government and other social stakeholders.

Social dialogue can minimize confrontational relationships through collaboration and partnership. It can develop a shared understanding of problems, can facilitate discussion of policy alternatives and their implications, and the finding of compromises to achieve common responses. Mutual understanding and development of further action steps are important if multiple parties are involved in the process, especially if one of them is a governmental body.

Social dialogue can be a very effective means to ease economic and social tensions during economic crisis or transition. In addition, it also has a potential to resolve economic and social challenges, as well as advancing stability. Social dialogue can play a central role in mediating social conflicts and finding compromises amongst diverse economic and social interests. But to truly work during the difficult times, social dialogue must also be used during times of prosperity.

Suppliers that engage with unions find that they have fewer worker grievances to deal with, a more motivated workforce, as well as fewer strikes. Where there are strong trade unions with positive working relationships with management, they allow continuous resolution of problems as they occur, rather than letting them escalate and potentially become explosive media stories. Social dialogue is key to managing conflict in fair and stable workplaces.

• Research done by Cornell University in the framework of the New Conversations Project and the Strategic Partnership for Garment Supply Chain Transformation, concluded that brands that produce at or buy from factories that have active, democratically operating trade unions, demonstrated better performances on labour rights. Find these conclusions in the research reports.
• Global buyers such as H&M, global unions such as IndustriALL and several NGOs promoted the development of social dialogue in the garment industry in Myanmar. Investments in training programmes, raising awareness of fundamental principles and rights at work and supporting social dialogue resulted in structures and processes helping to resolve workplace conflict. See this social dialogue and economic performance review.

The presence of unions contributes to sustainable business growth. Unions help build high-trust workplaces where workers are healthier, better skilled, happier, and more able to resolve grievances – all of which lead to a more committed and productive workforce. This, in turn, leads to less absenteeism, lower turnover, on-time delivery, and retained/new clients/orders.

• In 2019, Better Work Haiti prioritized worker-management relations by introducing platforms for participation in social dialogue within factories. Such initiatives contributed to the promotion of more advanced HR management systems and demonstrated that worker-manager communication could be an essential competitive asset for factories.
• The benefits of effective dialogue at the workplace and improvements in working conditions and worker wellbeing translate into business gains: factories participating in the ILO/IFC Better Work programme see an increase in profitability by up to 25% as a result of their participation in the programme.

Unions provide a mechanism for dialogue between workers and employers, which helps build trust and commitment among the workforce and ensures that problems can be identified and resolved quickly and fairly. This brings significant productivity benefits for companies.

Recognizing a union also means that negotiating terms and conditions for workers, becomes more efficient for the employer and fairer than dealing with numerous workers individually.

By giving employees a voice, supporting them when they are unhappy at work, and improving working conditions, unions significantly improve staff retention and reduce absenteeism.

Social dialogue also provides access to learning and skills: helping members to access education and training is a key priority for unions. Having more highly skilled employees brings productivity benefits for employers.

Early identification of problems in the workplace can lead to significant savings, for example, by reducing the costs employers face as a result of ill health (including reduced productivity, sick pay, temporary staff cover, and compensation payments for accidents). It also reduces staff turnover. Unions also have a strong record of working with employers to identify efficiencies and cost savings – both employers and employees have a shared interest in business success.

Informing and consulting with experienced union representatives can also – with input from workers – help companies take better informed business decisions, for example, in relation to shift patterns or the type of equipment to invest in.