A raise or a four-day week; biggest German union seals new deal

By Tom Käckenhoff and Matthias Inverardi

DUESSELDORF, Germany (Reuters) - Germany's largest trade union, IG Metall, agreed a 2.3% wage increase, to be paid either in full or as part of a switch to a four-day week, in a key industrial region, setting the benchmark for 3.9 million metal and engineering workers nationwide.

Salaries will increase from July, but the additional money will not be paid out until February next year, as 18.4% of a single monthly salary, according to IG Metall.

An equivalent payment in February 2023 will be worth 27.6% of a monthly salary.

There will also be a one-time "coronavirus premium" of 500 euros ($588).

The package is structured with the aim of allowing some workers to move to a four-day week without a significant loss of earnings. Employers and local works councils will consult on which option to take.

"This agreement offers answers to the pressing problems of our time: the acute consequences of the coronavirus pandemic and the structural challenges of our industries," said the influential North Rhine-Westphalia branch of the union, covering Germany's Ruhr Valley industrial heartland.

IG Metall, which represents 2.2 million workers nationwide, had originally demanded a 4% wage increase.

Employers had argued there was no leeway on wages due to the effects of the coronavirus pandemic. The German economy contracted by 5% last year.

However, Stefan Wolf, president of the Gesamtmetall employers' association, said it was a good solution that could be adopted nationwide.

Deals agreed in NRW, home to a fifth of Germany's 83 million population, traditionally serve as a template for agreements across the country.

The VDMA engineering association criticised the deal given the uncertain economic outlook. As the pandemic drags on, economists are cutting this year's forecasts.

"The agreement in the metal and electrical industry is based on the optimistic assumption that companies will recover quickly from the coronavirus crisis. There are only tentative signs of this so far," said VDMA managing director Thilo Brodtmann.

($1 = 0.8504 euros)

(Additional reporting by Katharina Loesche; Writing by Thomas Escritt and Madeline Chambers; Editing by Kevin Liffey)