Ludger Westrick , former State Secretary in the Federal Ministry of Economics , developed (in 1963 on the occasion of a metal wage round ) a (simplifying) formula for collective agreements with a term of more than 12 months. If the term is longer than one year, the question of the medium-term real burden for the company regularly arises.
The formula assumes that tariffs are usually concluded for one year, but if they are longer, this results in long-term savings. The long-term real exposure is then calculated as well
Sometimes you will also find a simplified, but somewhat imprecise formula: