Workers in the key auto industry and other industrial sectors will receive 4.2 percent more money in two phases starting in February.
The breakthrough came after all-night talks in Sindelfingen in the German state of Baden-Württemberg between union officials and employers, who had balked at a hefty wage hike amid a time of economic uncertainty.
The negotiations affect more than 800,000 workers in the state – but the agreement will also serve as an example to other states in Germany with some 3.6 million people working nationwide in the metal and electronics industries.
“I can live with the outcome fair enough, but it's not an outcome that puts me into a state of euphoria,” said IG Metall chairman Berthold Huber. “But we couldn't have gotten a significantly better result with a labour dispute.”
Thousands of workers across Germany have staged warning strikes in recent weeks, walking off their jobs in demand of higher wages. The country's largest industrial union pressured employers to raise wages by eight percent – the most it has asked for in 16 years.
IG Metall argued that after several years of meagre wage agreements, workers were due a bigger increase to their pay packets this year. However, after the union staked out its aggressive wage demands, the world economy quickly began to unravel this autumn.