The Importance of  Construction Industry Collective Agreement

The Importance of  Construction Industry Collective Agreement

The construction industry is one of the pillars of the economy, yet both workers and employers often face uncertainty and inconsistencies. A Construction Industry Collective Agreement (CICA) could provide stability, transparency, and predictability for the sector. This would be particularly crucial in countries with high tax burdens, such as Hungary. A well-designed collective agreement would not only define how much companies must pay to the state but also establish a minimum price for services in the market, ensuring that businesses can cover their costs.

Current Challenges Without a Unified Regulation

If regulations balanced both revenues and expenses, they would not only define how much tax should be paid, but also set a minimum fee that everyone must charge. This would also contribute to reducing the informal economy in the construction sector. Unfortunately, the industry is notoriously prone to undeclared work, but if a state-determined minimum hourly wage were well-calculated, it could help combat this issue.

High labor and operational costs (such as workplace safety, insurance, legal fees, and depreciation) often flow through to contractors who perform the actual work, while profits accumulate elsewhere in the construction value chain. As a result, those who bear the greatest workload and responsibility receive the least financial compensation.

Additionally, wages, working conditions, and employment terms vary significantly depending on which company, project, or region a worker is employed in. This creates uncertainty for workers and unpredictable costs and legal risks for employers.

The lack of a unified collective agreement leads to administrative obstacles, contract disputes, and an unclear legal environment, all of which hinder efficiency. These issues also affect project planning, budget predictability, and industry stability.

International Examples and Potential Benefits of a Construction Industry Collective Agreement

In countries with a developed construction industry, collective agreements not only protect workers' rights but also create a stable economic foundation for the sector. Here are some key examples:

• Austria: Construction collective agreements clearly define minimum wages and service fees, ensuring that companies can cover high tax burdens while maintaining sustainability.

• Germany: The nationwide construction tariff agreement ensures transparency and predictability for businesses, reducing industry tensions and legal issues.

• France: Strictly regulated construction collective agreements contribute to workplace safety and tax revenue predictability, promoting long-term industry stability.

• United States: There is no nationwide construction collective agreement, which creates a competitive disadvantage for companies due to imbalances in labor costs and tax obligations. The decentralized system often results in unpredictable labor market conditions.

• Hungary: Due to high tax burdens, a unified collective agreement would be particularly necessary to protect workers’ rights and ensure construction companies generate sufficient revenue to cover state obligations. The Austrian and German models demonstrate that such agreements do not hinder growth but rather foster economic stability.

Why Do Companies Resist?

Despite the clear benefits, many companies resist the introduction of a unified agreement due to:

• Short-term cost increases – Businesses fear that regulated wages and benefits would reduce profitability.

• Increased administrative burden – Adapting to new regulations can be time-consuming and expensive.

• Loss of flexibility – Companies worry that moving from individual agreements to a rigid contractual framework could hinder competitiveness.

However, these concerns reflect a short-term mindset. In countries with high tax burdens, a unified collective agreement would ensure that companies can cover their costs while keeping the market healthy and predictable.

Moving Toward a More Sustainable Construction Industry

The question is not whether a unified collective agreement is needed, but how it can be effectively implemented. Some countries have already successfully introduced such agreements, with clear positive results: greater stability, lower turnover, and more predictable operations.

Leading construction industry experts believe that a well-designed, mutually beneficial (CICA) would not restrict competition but rather create a framework where companies compete through innovation and efficiency, rather than worker exploitation.

In countries with high tax burdens, such an agreement would provide economic stability and ensure that businesses do not go bankrupt due to excessive state levies.

An Inevitable Change?

The challenges facing the construction industry are becoming more urgent. Either the sector proactively shapes its future, or external regulations will impose the necessary changes.

A well-functioning collective agreement is not just an option, but a tool that can support the industry's sustainable growth.

What Do You Think?

Would the construction industry support the introduction of a unified collective agreement, or would it pose too great a risk? Share your thoughts and help shape the future of the sector!