Unions and employers in Germany's powerful metalworking and engineering industries have reached agreement on a 4.8-percent pay hike for the 3.8 million workers in the sector, the IG Metall union said on Friday.
In a so-called pilot agreement for the regional state of North Rhine-Westphalia, that would serve as a benchmark for the rest of the country, workers would receive a one-off payment of 150 euros ($170) for the period from April to June 2016.
They would then see their pay rise by 2.8 percent on July 1 and again by 2.0 percent in April 2017, IG Metall said in a statement.
The wage agreement is valid for a period of 21 months but it entails a clause allowing companies in financial difficulty to delay the one-off payment and the second stage of the increase, IG Metall said.
The union insisted the pay increase would "strengthen consumer demand," which is currently one of the main pillars of economic recovery in Germany.
"At the same time, this is an agreement... which won't overstretch any firm," IG Metall said.
The previous wage agreement between the union and the employers' federation Gesamtmetall expired in March.
Since then, both sides had been negotiating to reach a new deal for a sector that covers a wide range of engineering industries.
IG Metall had been demanding pay increases of five percent in view of the comfortable profit situation of many companies in the sector, while Gesamtmetall had offered of a pay rise of 2.1 percent over a two-year period.
Wage negotiations in the metalworking industry act as a benchmark for most other sectors.