Subject: Industrial Relations & Labour Laws

BCHR-03
B.Com-6th Semester

UNIT-1st
Lesson No. 1

INDUSTRIAL RELATIONS PERSPECTIVE; IR IN THE EMERGING SOCIO-

ECONOMIC SCENARIO

STRUCTURE

1.0 Objectives

1.1 Introduction

1.2 Presentation of Contents

1.2.1 Nature of IR

1.2.2 Importance of IR

1.2.3 Approaches to IR

1.2.4 Parties to IR

1.2.5 IR strategy

1.2.6 IR Decisions

1.2.7 Industrial Relations and Emerging Socio-economic scenario

1.3 Summary

1.4 Keywords
1.5 Self Assessment Questions

1.6 References/Suggested Readings

1.0 INTRODUCTION

Industrial Relations (IR) has traditionally been a fire-fighting function in

our country. The IR man comes into full play only after the crisis erupts. This is
so much the case that some IR men are actually known to have stoked the fire
to reinforce their own relevance to the organisation "....... the MD of a large
corporation remarking that his personal manager was so much of a fire fighter
that he felt uneasy when there was no fight", so goes the perception about IR.

Thus, the scenario relating to IR is a mixed one, Sparks between

enlightened managers and motivated workforce coexists with large scale
violence leading to destruction and closures. But the scenario must change.
Unionization, job security, protective legislation and other measures are loosing
there relevance. The catch words now relevant are productivity,
competitiveness, downsizing and union free plans.

1.1 PRESENTATIONS OF CONTENTS

1.2.1 Nature of IR

Essentially, IR is concerned with the relationship between management

and workers and the role of regulatory mechanism in resolving any industrial
dispute. A formal definition is:

" .... concerned with the systems, rules and procedures used by unions
and employers to determine the reward for effort and other conditions of
employment, to protect the interests of the employed and their employers, and
to regulate the ways in which employers treat their employees."
 Specifically, IR covers the following areas:

1. Collective bargaining.

2. Role of management, unions, and government.

3. Machinery for resolution of industrial disputes.

4. Individual grievance and disciplinary policy.

5. Labour legislation.

6. Industrial relations training.

1.2.3 Importance of IR

IR is the key for increased productivity in industrial establishment. For

example, at the Alwar plant of Eicher Tractors, productivity went up from 32%
between 1994 and 1996 to 38% in 1997, the production of Engine cylinders
has gone up from 29390 (in 1995-96) to 32501 (in 1996-97). This increase has
been possible because of peaceful IR. IR has moral dimensions, too. It is
unethical on the part of any management to take advantage of the helplessness
of workers and exploit them. Unemployment compels workers - particularly
illiterate and unskilled - to accept jobs, inhuman working conditions and wages
notwithstanding.

IR assumes relevance in this context. One of its objectives is to protect

workers interest and to improve their economic conditions.

IR seeks to protect the right of managers too. Managers expects workers

to observe code of discipline, not to join illegal strikes, not to indulged in
damaging the companies properties, not to assault supervisors or peers, and
not to come inebriated the workplace. Where workers behaviour deviates from
expected lines. It is management's prerogative to take action.

There is a set procedure for handling any act of indiscipline or

indiscretion on the part of an employee and if the management satisfied the
procedure, it is justified in taking action or even removing the employee from
service.
 Little do all of us realise that it is the people who creates problem
everywhere and it is only who can find solutions too. If there is a problem from
employees, there is a solution also. Viewing every problem seriously and
resorting the manipulative style of IR which emphasis the need the labour is
check by floating stooge unions, buying up unions, and striking clandestine
deals with powerful politicians do no good to managers or to the organisation
they represent. The field of IR needs a new look, a look which is free from
suspicion, prejudice and ill will towards workers.

1.2.4 Approaches to IR

The scenario of IR is perceived differently by different people. For some,

IR is related to class conflict, other perceive it in terms of mutual cooperation
and still others understand it in terms of competing interests of various groups.
HR managers are expected to understand these varying approaches because
they provide the theoretical understanding for much of the role of HRM.

The three popular approaches to IR are unitary approach, pluralistic

approach and Marxist approach.

UNITARY APPROACH

Under unitary approach, IR is grounded in mutual cooperation, individual

treatment, teamwork and shared goals. Workplace conflict is seen as a
temporary aberration, resulting from poor management, from employees who
do not mix well with the organisations culture. Unions cooperate with the
management and the managements rights to manage is accepted because
there is no "we-they" feeling. The underline assumption is that everyone
benefits when the focus is on common interest and promotion of harmony.
Conflict in the form of strikes is not regarded as necessary but destructive.

Advocates of the unitary approach emphasise on a reactive IR strategy.

They seek that negotiations with employees. Participation of government,
tribunals, and unions is not sought or are seen as been necessary harmonious
employee relations.
 The unitary approach is being criticized as a tool for seducing employees
away from unionism and socialism. It is also criticized as manipulative and
exploitative.

PLURALISTIC APPROACH

The pluralistic approach totally departs from the unitary approach.

The pluralistic approach perceives:

1. Organisations as coalition of competing interest, where the

managements role is to mediate amongst the different interest groups.

2. Trade unions as legitimate representatives of employee interests.

3. Stability in IR as the product of concessions and compromises between

management and unions.

Legitimacy of the management authority is not automatically accepted.

Conflict between the management and workers is understood as inevitable and
in fact, is viewed as conductive for innovation and growth. Employees join
unions to protect their interest and influence decision making by the
management. Unions thus balance the power between the management and
employees. In the pluralistic approach, therefore, a strong union is not only
desirable but necessary. Similarly, society's interests are protected by state
intervention through legislation and industrial tribunals which provide orderly
process for regulation and resolutions of conflict.

The theories on pluralism were evolved in the mid-sixties and early

seventies when England witnessed a resurgence of industrial conflicts.
However, the recent theories of pluralism emanate from British scholars, and in
particular from Flanders and Fox. According to pluralists, industrial conflict is
inevitable and it needs to contain within the social mechanism of collective
bargaining, conciliation and arbitration.

MARXIST APPROACH

Marxist, like the pluralistic, regard conflict between employers and

employees as inevitable. However, pluralists believe that the conflict is
inevitable in all organisations. Marxists see it as a product of the capitalist
society.

Adversarial relations in the workplace are simply one aspect of class

conflict. The Marxist approach focuses on the type of society in which an
organisation functions. Conflict arises not just because of competing interest
within the organisation, but because of the division within society between those
who own or manage the means of production and those who have only their
labour to offer. Industrial conflict is thus seen as being synonymous with political
and social unrest.

Trade unions are seen both as labour reaction to exploitation by capital,

as well as a weapon to bring about a revolutionary social change. Concern with
wage related disputes are secondary. Trade unions focus on improving the
position of workers within the capitalist system and not to overthrow. For the
Marxist, all strikes are political. Besides, Marxists regards state intervention via
legislation and the creation of industrial tribunals as supporting managements’
interest rather than insuring a balance between the competing groups. This
view is in contrast to the belief of the pluralists who argue that state intervention
is necessary to protect the overall interest of society. To Marxists, the pluralists
approach is supportive of capitalism, the unitary approach anathema.
Consequently, enterprise bargaining, employee participation, cooperative work
culture, and the like which help ushers in cordial IR and are not acceptable to
Marxists. Such initiatives are regarded as nothing more than sophisticated
management techniques designed to reinforce management control and the
continuation of the capitalist system.

1.2.4 Parties to IR

The major parties to IR are the employees, employees representatives,

employer, associations of employers, government, and courts and tribunals.

EMPLOYEES

There are about 268.19 lakh employees working in the organised sector
in our country. The figure will be a staggering one if the number of the
employees in the unorganized is added. It is, therefore, useful to certain
observation about the Indian workers:

(a) Commitment to Industry

Labour is committed to industrial setting, thus contributing to stable

workforce. True, the worker might have his or her mooring in the villages. But
is it unlikely that he or she would go back to his or her village. He or she is
settled in the industrial city, his or her children are put in school in the city, and
except himself or herself, and no one else in his or her family has any nostalgic
feelings to the village. Besides the present generation of young workers is
mostly born and brought up in the urban areas and has accepted industrial
employment as a way of life. But, commitment is only to industrial jobs, and not
to work. Hence, low productivity of labour.

(b) Protective Legislation

From time to time, the government has enacted a variety of labour Acts,
Perhaps, ours is the only country in world which has so many Acts to protect
workers interests. Thanks to the enormous protective legislation, wages,
benefits, and working conditions, safety and health of workers have improved
considerable.

(c) Status of the worker

The economic and social status of today's workers is vastly improved.

Industrial employment is no longer the undesirable alternative left for those
drive out from villages. Improved skill contents of the jobs and increased
emoluments have made industrial employment the first attraction among young
job aspirants. Industrial is not restricted now to the socially low castes. The
dynamic changes in the industrial sphere have, as the National Commission on
Labour has observed, brought about a "social amalgam". The status of the
industrial worker of today is enhanced as a result of the readjustment in the
value system in favour of industrial employment which is, in turn, the aggregated
effect of his or her improved skills and his or her enlarged pay packet. The
stigma once attached to factory life has disappeared.
(d) Employment pattern

Another feature noticed in the industrial labour is the change that has
come about in the employment pattern owing to changes in industrial activity,
which has tremendously expanded and diversified and has undergone a
technical transformation. In the early days unskilled workers predominated in
industrial employment, so long as traditional industries like textiles and mining
were in the forefront. In the process of expansion and diversification, new
avenues of industrial enterprises in engineering, chemical, pharmaceuticals,
and so forth assumed importance and changed the composition of industrial
employment.

The improved technology of these new industries created new jobs with
greater content, raising the minimum standard of education required. Industrial
employment, in spite of being blue collared in nature, is no more looked down
upon as an inferior mode of earning a living. The employment pattern has
further changed in the service industries and electronic wherein the
employment has become more and more white collared and sophisticated.

Now the employees perceive industrial relations in term of the

opportunity to:

1. Improved their conditions of employment

2. Voice any grievance

3. Exchange views and ideas with management

4. Share in decision making

The tendency of managers is to blame the worker whenever a dispute

occurs. While it is true that workers are a party to a conflict, but to hold them
responsible for stocking the fire may not be correct. The role of managers in
igniting a conflict to serve their selfish interests can not be overlooked.
TRADE UNIONS

Unions have a crucial role to play in IR. Unions have broad objectives
which are:

1. To redress the bargaining advantage of the individual worker vis-à-vis

the individual employer, by substituting joint or collective action for
individual action.

2. to secure improved terms and conditions of employment for their

member and the maximum degree of security to enjoy these terms and
conditions.

3. to obtained status for the worker in his work.

4. to increase the extent to which unions can exercise democratic control

over decisions that affect their interests by power sharing at the national,
corporate, and plant levels.

The union power is exerted primarily at two levels at the industrial level,
to establish joint regulation on basic wages and hours with an employers
associations or its equivalent; and at the plant level, where the shop stewards
organisations exercise joint control over some aspect of the organisation of the
work and localized terms and conditions of employment. Unions are a party to
national, local and plant procedure agreements which govern their actions to a
greater or lesser extent, depending on their power, and on local circumstances.

EMPLOYERS

Employers too, are directly involved in any dispute between the

employers and the employees. Employers are endowed with certain inalienable
rights vis-à-vis labour. The management has the right to hire and fire any
worker, notwithstanding union restrictions. It is not just firing a worker here of
there, but the management's ability to control the economic destiny of the
workers that matters. The management has the right to relocate, close, merge,
takeover or sell a particular plant - these actions affect workers interests. The
management has another powerful weapon - introducing or
threatening to use technological change. Technological change can displace
labour or reduce skills.

Armed with these rights, the management resorts to several tactics to

break a strike, some of them even unethical. The management is known to
adopt dubious mean to forego a strike, all of a strike, or tone down union
demands. The management often break a powerful union, sets one faction
against another, and favour the most satisfied and the less militant workers.
Loyal workers from sister concern are brought in, on the pretext of a factory
visit, and are induced into a plant and advised to break the strike.

Another tactic employed by the management is to gain the loyalty of

employees. The aim of this tactic is to convince the worker that the management
has his or her interests at heart and can provide him or her with much the same
benefit as the union. In part, this tactic is a revival of the "welfare capitalism" of
the 1920s. High wages, pension plans, profit sharing plans, programmes of
stock ownership by workers - all these schemes have been revived, though
often in modernized form, and with considerable effect in the resistance of the
new industries to unionization can be taken as evidence.

Employees’ loyalty is sought to be gained through another method, a

positive one. The management seeds to find out the sources of dissatisfaction
and eliminates those irritants. Workers are encouraged to form informal small
groups, psycho-therapy is conducted on a plant-wide scale, and interaction
between the management and employees and among the employees are
structured and practiced.

A militant but incorruptible union is co-opted in routine functions of the

organisation. For instance, the union may be used as a channel of information
to the employees. It may be used for meeting certain production problem. In
some plants, the management has even brought union leaders into process of
decision making.

In general, managers tend to see employee relations in term of the

following activities:
 1. Creating and maintaining employee motivation

2. Obtaining commitment from the workforce

3. Establishing mutually beneficial channels of communication

throughout the organisation

4. Achieving of high level of efficiency

5. Negotiating terms and conditions of employment with employee

representatives

6. Sharing decisions making with employees

7. Engaging in a power structure with trade union

EMPLOYERS' ASSOCIATIONS

Employers' associations operate at local, industry and all India levels.

The Confederation of Indian Industries (CII) is a powerful body at the national
level which is doing an admirable fob in protecting and promoting the legitimate
interests owners of industries.

The major objectives of employers' associations include:

1. Representing employers in collective bargaining

2. Developing machinery for the avoidance of disputes

3. Providing information on employee relations and to give advice

4. Representing members on national issue

The specific objectives of CII are:

1. Identifying and strengthening industry role in the economic

development of the country.

2. Acting as a catalyst in bringing about growth and development of

the Indian industry.

3. Reinforcing industries commitment to society.

4. Working towards globalization of Indian industry and its

 integration into world economy.

5. Providing upto date information and data to industry and

government.

6. Creating awareness and support industry efforts on quality,

environment and consumer protection.

7. Identifying and addressing special needs of the small scale

sector.

8. Promoting cooperation with counterpart organisations.

The other major all India employers associations are ASSOCHAM,

FICCI, AIMO, WASME, FASSI, and FIEO.

GOVERNMENT

In a sense, government intervention in IR is as old as the industry itself.

However, till the 19th century, governments everywhere followed the laissez
faire policy - they left IR to the managers and workers who were required to
solve the problems themselves. Towards the end of the 19th century, the
attitude of the governments changed. And intervention became a reality. The
state, as of today, regulates the relationship between the management and the
labour and seeks to protect the interest of both the groups. The government
has setup wage boards, labour courts, tribunals, and enacted laws to lay down
norms and to enforce their compliance.

JUDICIARY

The powers of the judiciary are of a dual type:

1. The authority of the Courts to settle legal disputes;

2. Judicial review - the authority of the Court to rule on the constitutionality
of legislation.

As far as second is concerned, the judiciary gets activated when the

legislator passes laws repugnant to the constitution and when the government
implements the enactment improved by the legislature in a manner opposed to
the provision of the legislation. In other word, the courts of justice protect the
citizen from unlawful Acts passed by the legislature and arbitrary Acts done by
the executives.

It is the power of the judiciary to settle the legal disputes, referred to

them, that affect IR considerably. The judicial pronouncements will have a far
reaching impact because:

i. Judicial errors do occur, though infrequent,

ii. Possibility of wrong assessment of penalty, "judges notoriously
vary in the severity of punishment inflicted",
iii. Judges are known for pronouncing conflicting verdicts on the
same or similar disputes, and
iv. Confusion in turn.
v. The role of judiciary in IR has not been always positive.

The result is that indiscipline in the industry has spread like wild fire and
sapped the national production and productivity. The classic case is the textile
industry which has been wrecked by indiscipline. The conflagration is
continuing to engulf various industries one by one.

1.2.5 IR Strategy

It is necessary to have a clear cut strategy for IR, although the

management of IR is essentially a knee jerk reaction to events and problems
and is, therefore, far removed from the world of strategic thinking and planning.
Since employer-employee relations are usually presumed to be satisfactory
until they get out of hand, managers, rarely, feel the need to act before the
trouble breaks out.

But the reactive strategy cannot continue for long. Growing competition,
difficult economic environment, rising labour cost, and low productivity compel
business leaders to think and plan proactive strategies towards IR.
 Where organisations have proactive strategies, the goal should be to
ensure that corporate objective can be achieved by gaining the maximum
amount of cooperation from employees and by minimising the amount of
industrial unrest.

Factors Affecting Employee Relations Strategy

Two sets of factors, internal as well as external influence an IR strategy.

The internal factors are:

1. The attitude of management to employees and unions.

2. The attitude of employees to management.

3. The attitudes of employees to unions.

4. The inevitability of the differences of opinion between management

and union.

5. The extent to which the management can or wants to exercise

absolute authority to enforce decision affecting the interests of
employees.

6. The present and likely future strength of the union.

7. The extent to which there is one dominating union or the existence of

multiple unions leading to inter-union rivalry.

8. The extent to which effective and agreed procedures for discussing

and resolving grievances or handling disputes exists with in the
company.

9. The effectiveness of managers and supervisors in dealing with

problems and disputes related to IR.

10. The prosperity of the company, the degree to which is expanding,

stagnating or running down and the extent to which technological
changes are likely to affect employment conditions and opportunities.
The external factors affecting IR strategy are:

1. The militancy of unions - nationally or locally.

2. The effectiveness of the union and its officials and the extent to which
the officials can and do control the activities of supervisors within the
company.

3. The authority and effectiveness of the employers association.

4. The extent to which bargaining is carried out at national, local or plant

level.

5. The effectiveness of any national or local procedures, agreements that

may exist.

6. The employment and pay situation - nationally or locally.

7. The legal framework within which the IR exists.

1.2.6 IR Decisions

A proactive IR strategy programme must cover the following decisions:

1. Communication - how best we can convey our philosophy to

employees?

2. Relationship - how well can we improve our relationship with employees

and unions?

3. Competence - how to improve of competence of managers and

supervisors in dealing with IR matters?

4. Discipline and conflict - how shall we deal with it?

Communication

The core of an IR programme is the personnel manual. The manual sets

out the rules and policies within which managers and employees must operate.
The manual tells how the management awards recognition to the union and
offers facilities, how it recognizes the officers associations, how to handle a
grievance, code of discipline in the industry and the like.
 The manual needs frequent updating, must be published to all
employees, and all supervisors must be familiar with it. HAL, Bangalore, has a
well drafted personnel manual running into 94 pages of printed matter. The
manual covers, in addition to aspects of employees relations, other topics like
welfare, medical facilities, and gratuity rules. All employees and supervisors are
fairly familiar with the contents of the manual.

Relations

Relationship with the employee may be improved through joint

consultation. Relationship with union or staff associations may be developed
through collective bargaining and other IR procedures or by improving the
operation of existing procedures.

Competence

Managers and supervisors need to develop competence in handling IR.

Such competence may be developed by training managers and supervisors in
IR. Suffice it is to say that a training programme must be conducted after
assessing the training needs of the managers and supervisors. Each training
programme must have specific objectives and the contents must help the
trainees realise the goals.

Negotiating skills must form a part of the training offered to managers.

Negotiating skills are best acquired by experience, but it is dangerous to allow
inexperienced managers to meddle with negotiations. Training in negotiating
skills is most effective if it is through case analysis. A case study based on an
actual problem of the company may assign to the managers who will be
required to analyse the case and offer remedies.

Training should not be confined to managers and supervisors alone.

Union leaders and employees also must be associated with the programme, as
they are as much a party to a conflict managers or supervisors.
Discipline and conflict

If both employees as well as employers adhere to well laid out norms,

dispute do not occur. Where a conflict occurs, the management must resolve it.
There are set procedures to resolve disputes.

1.2.7 Industrial Relations in Emerging Socio - Economic Scenario

In 1991 with declaration of new economic policy, a series of Industrial,

fiscal and trade reforms were announced by the Government. It was presumed
that these structural changes would arrest growing inertia that has set in the
economy due to its mismanagement and continuance of unrealistic economic
policies for more than our decades. It is heartening to note that the new
economic policy has altogether generated a new business environment, where
in the private sector was liberated from the clutches of excessive Government
controls, the P.S.U's lost their monopolistic position, industries were freed from
tariffs and custom duties, the threshold limit of MRTP remarked FERA was
considerably relaxed, accessibility of foreign capital has become easy etc.

At the same time this N.E.P. has given a serious jolt to the interest of
working class. In fact, the workers are securing the brunt of liberalization - a
situation hard to be adjusted. Which is obvious from the fact that even presently
the employment opportunities of working class has considerably shrunk and
would further squeeze in the years to come, as with the ever changing methods
of work by which employers would be forced to lay off obsolete employees. So
not only employability of additional workforce but present one would be
minimized considerably.

In fact, ever since the declaration of new economic policy, a heated

debate is going on between the various industrial relations participants
regarding the desirability of continuance of such a policy. In this context, every
party has its own perception and apprehensions, but all of them agree on one
basic fact that sustained economic growth cannot take place in a disturbed
industrial relations environment.

The inculcation of harmonious industrial relations requires that all the

participants be motivated to work whole heartedly for making the system to
work. There are various factors pointing towards the emerging socio-
economic scenario.

One of the major factors is the changing image of workers. The modern
worker have come a long way in 54 years from the exploited, illiterate poverty
stricken, rural linked group that once were. The industrial labour of today is no
longer the migrant rural worker of yesterday, shuttling between his village and
the city. It is totally urban in its economic outlook.

Socially, too, workers have changed. They have absorbed the urban
industrial culture. They are capable of handling semi-skilled and highly skilled
industrial operations. Above all, they are usually not the sole supporters of large
joint families. Changes in the worker's life have given rise to a new attitudinal
and behavioural pattern.

There has also been a transformation of Indian society - from a "society

of subjects to that of citizens." The modernisation of economy has brought in
advances in technology, organisational complexities and increasing economic
interdependence. Consequently, the worker is increasingly called upon to rely
on discretion, initiative and self management, instead of waiting for commands
from old style bosses. The traditional culture of being 'looked after' as subjects
has yielded place to one in which industrial labour wants to 'look after' itself.

Yet another change, whose challenges is being evaded instead of being

faced, is the need felt making quicker decisions because of the high stakes
involved in a technologically sophisticated industry. Our industries, particularly
those in the public sector, suffer from the widespread empire of the owners.
Insisting on managing and controlling the system without having the adequate
competence or the freedom to make quick strategic decisions. A fundamental
change in approach is needed if these challenges are to be met.

So far as the dispute settlement machinery is concerned, it is to be noted

that the Industrial Dispute Act, 1947 was enacted by the Central Government
and is based on section 81 and 82 of the Defence of India Rules framed by the
British Indian Government for the management of industry during war time. The
entire process was politicised. Therefore, unless these
provisions of the defence of India Rules are removed, there will be no lasting
solution of industrial unrest. The Industrial Dispute Act have to be amended in
the light of emerging socio-economic scenario. It is obvious that the machinery
of Industrial Relations should tackle disputes within the framework and the spirit
of a dynamic 'partite approach' like husband and wife solving their problem
themselves within the framework of the marriage.

1.2 SUMMARY

IR has always been a fire-fighting function in our country simultaneously

is the key for increased productivity in Industrial establishment. There are three
approaches and strategies to IR. There has been transformation of Indian
society from a society of subjects to that of citizens. The inculcation of
harmonious industrial relations requires that all the participants be motivated to
work whole heartedly for making the system to work. Industrial relations are
highlighted as highly significant from the socio-economic development of
Industry.

1.3 KEYWORDS

Collective bargaining – negotiating process between employees and

employers

Tribunals – Industrial tribunal and National tribunal

1.4 QUESTIONS

1. What are the emerging trends in industrial relations in the era of

globalisation. Examine significant transition and transformation in
industrial relations in this context.
2. "There is need to redefine industrial relations as in its present conception
it has became too narrow to do justice to the varied factors and
processes which have a direct bearing on its subject matter." Discuss.
3. Discuss in detail various approaches and parties to industrial relations.
UNIT 1
LESSON NO 2

INDUSTRIAL RELATIONS AND THE STATE; LEGAL FRAMEWORK

STRUCTURE

2.0 Objectives

2.1 Introduction

2.2 Presentation of contents

2.2.1 Changing Role of the State (Government)

2.2.2 Evolution of Labour Policy

2.2.3 National Commission on Labour’ Recommendations

2.2.4 New Industrial Policy

2.2.5 Legal Framework of Industrial Relations

2.3 Summary

2.4 Key words

2.5 Self Assessment Questions

2.6 References/Suggested Readings

2.0 OBJECTIVE

The present lesson is an attempt to provide an overview of:

 the changing role of Government in Industrial Relations in India,

 the Role of Labour Policy

 subsequent objectives and implementation of five year plans

 the legal framework of Industrial Relations.

2.1 INTRODUCTION

In the system of industrial relations, State (Government) acts as a regulator and

judge. Further, not only Central Government but the governments at the state
and regional level do influence the system of industrial relations, also the other
functionaries of the states like the executives and judiciary has a definite impact
on the system. Now let us see how the system of government intervention
evolved.

2.2 PRESENTATION OF CONTENTS

2.2.1 The Changing role of the State (Government)

Historically the Government has played at least six roles in industrial

relations in India. These are:

i. Laissez Faire

ii. Paternalism

iii. Tripartism

iv. Encouragement of voluntarism

v. Interventionism

vi. Employer

(i) Laissez Faire:

During the nineteenth century, the government played a laissez faire

role in industrial relations. It was reluctant to intervene to settle any dispute or
indicate any interest in the welfare of the workers. The workers and employers
were left alone to manage their affairs. Virtually in a socio-economic and
political system where workers were relegated to a very low status with no
organisation of their own, it amounting to taking the side of employers. If the
workers resorted to any work stoppages, they were crushed by the government
machinery.

(ii) Paternalism:

By the end of nineteenth century, the laissez faire role of the government
was replaced by paternalism. Thinkers like Robert Oven, Ruskin and others
attracted the attention of the public and the government towards the inhuman
working conditions in factories, mines and plantations. The government tended
to make several enactments to govern working conditions, wages & benefits
and formation of trade unions. The government had also set up a Royal
Commission on labour (1929-1931) to conduct a study on the working
conditions of Indian Labour and make relevant recommendations.

(iii) Tripartism:

Even prior to independence, there existed tripartite form of consultation

on the model of the ILO conferences. After independence several such forums
were formed. The major tripartite bodies formed included Indian Labour
Conference, Standing Labour Committee, Industrial Committees for specific
Industries, Short lived National Apex body (1975) etc. The government
promotes consultation with concerned parties prior to taking any policy decision
in industrial relations to bring out any legislation.

(iv) Encouragement on Voluntarism:

The government also promotes voluntarism involving a series of codes

to regular labour management relations. These codes include codes of
discipline, code of conduct and code of efficiency and welfare. Specifically the
code of discipline encourages voluntary arbitration and helps in maintaining
discipline at workplace.
(v) Interventionism:

The government also plays an interventionist role. The intervention is in

the form of conciliation and adjudication. The Industrial Dispute Act, 1947
provides such measures to intervene in industrial disputes.

(vi) Employer:

The government also plays the role of the largest employer. The
performance of this role influences labour policy also. Obviously the
government takes into consideration the interest of public sector while framing
its policy.

2.2.2 Evolution of Labour Policy

The labour policy has been influenced by changing situations of course its core
factors have remained unchanged. In India, labour organisations have been
relatively weak and lacking trust in employers considering them profit making
exploiters. The government visualised that rapid industrial growth and
productivity demanded its major role in evolving a suitable framework to prevent
industrial disputes. The major source documents of Indian Labour Policy of the
government include the following:

i. Directive Principles of State Policy

ii. The Plan Documents

(i) The Directives Principles of State Policy

The article 39, 41, 42, 43, and 43A relate to the governments policy
pertaining to the labour.

The Article 39 asserts as follows:

“The state shall in particular direct its policy towards securing:

a) That there is equal pay for equal work for both men and women.

b) That the health and strength of workers, men and women, and the
 tender age of children are not forced by economic necessity to enter
avocations, unsuited to their age or strength… ..... ”

The Article 42 specifies as follows:

“The state shall make provision for securing just and human conditions
of work and maternity relief.” The Article 43 asserts as follows: “The state shall
endeavour to secure by suitable legislation or economic organisation or in any
other way, to all workers, agricultural, industrial or otherwise, work, a living
wage, conditions of work ensuring a decent standard of life and full enjoyment
of leisure and social and cultural opportunities and in particular, the state shall
endeavour to promote cottage industries on an individual and cooperative basis
or rural areas.”

The Article 43A reads as follows:

“The state shall take steps, by suitable legislation or in any other way, to
secure the participation of workers in the management of undertakings,
establishments or other organisations engaged in any industry.”

Thus, workers participation in management has become a part of the

Directive Principles.

(ii) The Plan Documents

First Five Year Plan (1951-56)

The first plan recognised the importance of the industrial labour in the
fulfillment of planned targets and in creating an economic organisation in the
country which would best serve the needs of social justice. The plan envisaged:

a. adequate provision for the basic needs of the workers;

b. securing improved health facilities and wider provision of social

securities;

c. providing access to better educational opportunities;

 d. improving conditions of work to safeguard the health of labour;

e. the right to recognise and to take lawful action in furtherance of the

rights and interests of labour;

f. the right to be treated with consideration by the management and

access to impartial machinery if he fails to get a fair deal.

The plan called for the steps to improve productivity, emphasised the
need for the bilateral settlement of disputes, provide for state intervention in the
event of failure of bilateral processes. The plan document also made a
commitment for full and effective implementation of social security measures as
also minimum wage legislation. The Industrial Dispute Act was amended, in
1950 itself, providing for a three-tier system of Labour Court, Industrial Tribunals
and National Tribunal.

Second Five Year Plan (1956-61)

The second plan recognised that “creation of industrial democracy is a

pre- requisite for the establishment of a socialist society”. It also emphasised
the importance of industrial peace. A series of voluntary arrangements were
provided through tripartite consultation; code of conduct, code of discipline,
workers’ committees, joint management councils, voluntary arbitration, etc. It is
a different thing that because these are purely voluntary they were not taken
seriously by the parties.

Apart from emphasising workers’ participation in management, a

programme of workers’ education was also started in 1958. The need to
strengthen the trade union movement and living and fair wage, by linking the
wage increase with increases in production were also stressed.

Third Five Year Plan (1961-66)

The third plan emphasised the economic and social aspects of industrial
peace and elaborated the concept that workers and management were partners
in a joint venture to achieve common ends. Adherence to Codes, not going to
courts, was emphasised to regulate union-management relations. However this
was of little avail.
Fourth Five Year Plan (1969-74)

The fourth plan stressed the need to improve legislation concerning

safety and welfare of workers, review of workers’ participation in management,
workers’ education programmes, arrangements for skills training, labour
research, etc.

Several new legislation and improvements to existing legislation were

made during the period. The Payment of Bonus Act, 1965, Shops and
Commercial Establishments Act, and Labour Welfare Fund Act were among the
important legislative initiatives during the period. The National Safety Council
was set up in 1966.

Fifth Five Year Plan (1974-79)

The fifth plan called for strengthening professional management

particularly in the public enterprises and also underlined the need to raise labour
productivity. For this, the plan envisaged “better food nutrition and health
standards, higher standards of education and training, improvement in
discipline and moral and more productive technology and management
practices”. The period also saw the declaration of emergency during which
certain labour rights were curtailed.

Sixth (1980-85) and Seventh (1985-90) Five Year Plans

The sixth and seventh plans reiterated the earlier programmes,

expressed concerns over the shortcomings in realising the important goals of
improving the conditions of working class, workers’ participation, productivity
improvement, etc. During the period, important legislative amendments were
made to enhance the protection to workers, besides the introduction of a 20-
point programme, new schemes of workers’ participation in management and
attempted radical overhaul of labour legislation.

Eighth Five Year Plan (1992-97)

The eighth plan echoed concerns raised in the earlier plans with
particular reference to workers’ participation in management, skills training,
productivity, equitable wage policy, informal sector, etc. It also, for the first time,
expressed concern about the need to rationalize the regulatory framework with
a view to ‘providing reasonable flexibility for workforce adjustment for effecting
technological upgradation and improvement in efficiency”. At the same time, the
plan document emphasised the need to “ensure that the quality of employment
in the unorganized sector units improves in terms of earnings, conditions of
work and social security”.

The major problem with our five year plan is that the intentions are pious
and noble. But, only little guidance or clue are provided as to how these shall
be achieved and measured. The goals being abstract, the inspection and
database being weak the daunting tasks in each of the successive plans left
more to be achieved.

2.2.3 The National Commission on Labour’ Recommendations

One of the major recommendations of the National Commission on

Labour, 1969 relates to the establishment of the Industrial Relations
Commission. As recommended by the commission it has to be entrusted with
the full work of conciliation, adjudication and certification of the sole bargaining
agent and the reorganization of the tripartite forums ruling out government
“overrepresentation” in attempting to evolve consensus etc. Implementation of
this recommendation could contribute significantly towards eliminating the
governments’ intervention in industrial relations. However, since 1969 no effort
has been made to implement it.

The reasons for not implementing the above recommendation are

obvious. There is built-in complexity and contradiction in Indian industrial
relations system. This is highlighted by the Ministry of Labour in its agenda for
the twenty seventh session of the Indian Labour Conference. The more
important recommendations were discussed again at 29th session of the
Standing Labour Committee, held in July 1970. While appropriate action was
being taken to promote legislation in the light of the consensus reached at the
29th session of Standing Labour Committee, representations were received by
government from two central worker organisations, asking for a fresh review of
the entire industrial relations policy. In the context of the major
recommendations of National Commission on Labour, the basic aspects of
governments’ industrial relations policy were therefore considered separately
at the conference with the representatives of trade unions and employers’
organisations. The recognised central workers organisations were requested to
meet among themselves and evolve some broad consensus. The Indian
National Trade Union Congress, All India Trade Union Congress and Hind
Mazdoor Sabha met thrice and agreed to continue discussions and meet again
for this purpose.

National Commission on Labour, at its different sessions, has given

recommendations on various issues of industrial relations such as collective
bargaining, recognition of trade unions, workers’ education, workers’
participation in management, industrial discipline and industrial disputes.

2.2.4 New Industrial Policy

The Industrial Policy of July 1991 has widely been acknowledged as a

departure from several fundamental aspects of the earlier policy regime as
observed by Sawant and Rao. This policy is considered as a package of
reforms initiated by the government with a view to overcome the crisis facing by
the economy and the industry. The basic thrust of the new policy relates to the
opening of the Indian industry to competition from abroad, and in running public
sector along with commercial lines.

The government has repeated claimed that the interests of the workers
will be fully protected. This policy has two main proposals:

i. Workers displaced from their present jobs will be retrained and

deployed on alternative better jobs.
ii. Those who cannot be retrained or redeployed will be provided a
safety net in the form liberal compensation.

For retraining and compensation government has set up the National

Renewal Fund (NRF) with an initial appropriation of Rs. 200 crores.
Government also proposed to increase this corpus from allocations from
foreign contribution and employment generation programmes. It is visualised
that speedier industrial growth will itself generate more jobs in the long run and
employment will keep expanding.

Today with the greater emphasis on liberalisation and privatisation, the

private entrepreneurs are entering in various areas of business consequently
the problems of workers have increased manifold as the system needs highly
skilled workforce and there is no place for the workers in industry with low
technical expertise. It is alleged that the privatisation has raised many problems,
such as lay off, discharge, voluntary retirement, under employment etc. In fact,
it has become difficult for the government to strike a fair balance between the
demand of liberalisation and expectation of its workforce. The regulatory role of
the government has now become more crucial and demanding than before
which is likely to complicate with the passage of time.

Management Perspective

 Rajan Mehrotra provided a management perspective on the new

industrial policy. It was mentioned that the Government of India on 24th
July 1991 released the much awaited policy and it is only articles 15,
16, and 17 of the policy objectives which mention the items that will
have a bearing on labour. These are:

 Government will ensure that Public Sector Organisation must run on

business line as envisaged in the Industrial Policy Resolution, 1956.

 Government will fully protect the interest of labour, enhance their

welfare and equip them in all respects to deal with the inevitability of the
technological change.

 Government will ensure that the labour be made an equal partner in

programmes and prosperity.

 Workers’ participation in management will be promoted by government.

 Workers’ Cooperatives will be encouraged by government so as to

participate in packages designed to turn around sick companies.

 Intensive training, skill development and upgradation programmes will

be launched by government.
  The pursuit of the objective will be tempered by government by the
need to preserve the environment and ensure the efficient use of
available resources.

As Mehrotra concludes, the policy is framed by government but

interpreted by various levels at macro level. The problem arises at the micro
level of implementation wherein the bureaucracy, the management and trade
unions all tend to interpret it towards their advantage rather than interpreting it
based on the intentions at macro level. The challenge to medium and large
undertakings is to perform in the face of constraints and learn to not only
manage the mismanagement environment but to survive and grow in the
context of mismanaged environment.

Labour Perspective

Duggal analysed historical antecedents, crisis of capitalism, impact on

working class and economic and social impacts. The newness of the present
policy is with regard to the redefinition of the role of the State which is now
tended to be minimised. However, the globalisation dimension is clearly a
radical departure from the earlier policies. The impact on the economy in
general and the working class in particular is going to be of an unprecedented
severity.

The current macro changes, being executed, are component of the

global historical process whereby imperialism seeks to consolidate its position
further under the cover of liberalisation and democratization. For the first time,
India has made a substantial macro changes which has done away with the
protection enjoyed by the Indian workforce. This has now exposed India to the
adverse effects of any global crisis that may precipitate.

There are varied pressures on the working class as a result of these

macro changes being pushed. However, what is discussed in mainstream
debates are issues related to employment, wages and trade union
organisations. The workers perspective in India must necessarily emerge from
the micro experiences of the non formal sector.
 The first direct visible impact of the present policy has been on
employment. Employment in the organised sector has dropped in real terms
during the eighties. The present policy will only accelerate the increase in
unemployment rates. The organised sectors’ unemployment gets easily noticed
and its impact is more severe because of the lack of the safety net. Rise in
unemployment always depresses wages because of the increase in the reserve
workforce. With employment and wages on the downtrend, the general social
impact becomes a major concern. This is pronounced especially if
unemployment, wage rate decline and inflationary trends become chronic.

2.2.5 Legal Framework of Industrial Relation

The government of India has also given some legislative provisions for
maintaining better industrial relations at workplace. All these labour legislatives
are based on the recommendations of International Labour Organisation (ILO)
to which India is a member country. Thus the role of ILO has also been
explained.

Role of International Labour Organisation in Industrial relations:

The International Labour Organisation (ILO) is a tripartite organisation

consisting of representatives of the government, employers and workers of the
member countries. India has been an active member of the ILO since inception.
As one of the ten countries of “chief industrial importance” India holds a non-
elective seat on ILOs’ Governing Body. It is a member of five committees of the
Governing Body viz.

i. Programme, Finance and Administrative;

ii. Legal Issues and International Labour Standard;

iii. Employment and Social Policy;

iv. Technical Cooperation; and

v. Sectoral and Technical Meetings and Related Issues.

Purpose and Function of ILO

The purpose of the organisation is to promote the objectives set forth in

the preamble to the constitution and in the Declaration adopted in Philedelphia
in 1944. The preamble to the constitution declares that universal that universal
and lasting peace can be established only if it is based upon social justice.
Purpose of the organisation is improvement of conditions urgently required in
varied particulars:

 The regulation of hours of work (including the establishment of

maximum working day and week);

 The regulation of labour supply;

 The prevention of unemployment;

 The provision of adequate living wage;

 The protection of the worker against sickness, disease and injury arising
out of employment;

 The protection of children, young persons and women;

 Provision for old age and injury;

 Protection of toe interests of workers when employed in countries other

than their own;

 Recognition of the principle of equal remuneration for work equal value;

 Recognition of the freedom of association and the organisation of

vocational and technical education.

The fundamental principles on which the ILO is based include:

 Labour is not a commodity

 Freedom of expression and of association are essential to
sustained progress
 Poverty any where constitute a danger to prosperity everywhere
 The representatives of workers and employers enjoying equal
status with those of governments, join with them in free discussion
and democratic session with a view to the promotion
 of common welfare. The organisation seeks to improve the
working and living conditions through the adoption of the
International Labour Conventions (generally in the form of
recommendations) setting international minimum standards.
These conventions are adopted in the International Labour
Conference which is held every year. Every member country is
expected to adopt these conventions to improve the living and
working conditions of the workers.

Since 1945, the ILO has expanded its work in three major directions:

 The establishment of tripartite international committees to deal with the

problems of some of the major industries.
 The holding of regional conferences and meetings of experts to study
special regional problems, particularly those of under developed
regions.
 The development of operational activities.

ILOs’ Conventions in India

Till 1994, the ILO prescribed 176 conventions out of which it has ratified
36 conventions. ILO conventions encompass a vast span of subjects which
include basic human rights, employment, social policy, labour administration,
migrant workers etc. In February 1992 the Government of India agreed to ratify
the ILO convention on employment policy, welfare at sea and in ports, labour
administration, minimum wages and protection and facility to Indian workers.
The government has conveyed to ILO that Indian laws and practices on these
subjects are identical to what has been prescribed by ILO.

While addressing the 79th session of ILO in Geneva on June 11, 1992
the Union Minister of State for Labour P A Sangama urged ILO to take up steps
to adopt a flexible convention to protect the interests of workers in case of
insolvency of employers or closure of industry. He said India has initiated a
number of changes in the macro economic policies as a part of the process of
structural adjustment in order to meet the challenges both external and internal.
These included restructuring of industry, trade and budgetary policies
and public sector policy. He emphasised that successful and sustained
structural adjustments called for a sound industrial relations system and
commitment to tripartite negotiations and mentioned that India has established
tradition for tripartite consultation on all the matters having a bearing on the
welfare of workers. He also stressed that government constitute special
tripartite committee at national level to examine the effects of new industrial
policy on labour and to suggest measures to facilitate industrial restructuring.

Labour Legislations in India

The law has a very substantial impact on regulating industrial relations

globally. In India, the law forms the most powerful instruments through which
the government regulates industrial relations between the employers and
employees. The Trade Unions Act, 1926; The Industrial Employment (Standing
Order) Act, 1946; The Industrial Disputes Act, 1947; Payment of Wages Act,
1936, Minimum Wages Act, 1936; Payment of Bonus Act, 1965; The Factories
Act, 1948 with their amendments and modifications constitute the main legal
framework for regulating labour management relationship.

The Trade Unions Act, 1926

The act was enacted with the object of providing for the registration of
trade unions and verification of the membership of trade unions registered so
that they may acquire a legal and corporate status. As soon as a trade union is
registered, it is treated as an artificial person in the eyes of law, capable of
enjoying the rights and discharging liabilities like a natural person. In certain
respects, the Act attempts to define the law relating to the registered trade
unions. The Act, apart from the necessary provisions for administration and
penalties, makes provisions for:

(a) conditions governing the registration of trade unions;

(b) laying down the obligations of a registered trade union; and

(c) fixing the rights and liabilities of registered trade unions.

UNIT-3rd
The Industrial Employment (Standing Orders) Act, 1946

The preamble of the Act clearly says that the “Standing Orders shall deal
with the conditions of employment of workers in an industrial establishment. It
is obligatory upon all employers/covered by this Act to define precisely the
employer and the employees and to make the said conditions known to the
workmen employed by them.” The Act provides uniformity of terms of
employment in respect of all employees belonging to the same category and
discharging the same or similar work in an industrial establishment.

The standing orders bring home to the employers and the employees as
on what terms and conditions the workmen are offering to work and the
employer is offering to engage them. This Act requires the employers to define
the conditions of service in their establishments and to reduce them to writing
and to get them compulsorily certified with a view to avoid unnecessary
industrial disputes. In other words, Standing Orders are intended to be the
nature of “shop rules” promulgated be employers under statutory obligations.
They may be described as an act of misconduct. In actual practice, they also
represent a form of compulsory collective bargaining agreement with a built- in
device for compulsory arbitration, if any dispute relating to the fairness and
reasonablesness of the rules, as also their application and interpretation arises.

The aims of the Act have been:

1) To define, with sufficient precision, the principal conditions of

employment in industrial establishments under them and to make the
said conditions known to workmen employed by them.

2) To regulate standards of conduct of the employers and employees so

that labour-management relations could be improved.

3) To maintain proper discipline, harmonious working conditions and

achieve higher productivity by providing satisfactory employment and
working conditions.
 4) To provide for redressal of grievances arising out of employment or
relating to unfair treatment of wrongful exaction on the part of the
employers against the employees.

5) To specify the duties and responsibilities of both the employers and the
employees.

6) To provide statutory sanctity and importance to the Standing Orders.

In sum, the purpose of Standing Orders is to create an attitude of mind

among both the parties so that industrial harmony is achieved in and industrial
establishment. The Orders form part of the contract between management and
every one of its employees. These are reduced in writing and they are to be
compulsorily certified with a view to avoid unwanted industrial disputes. Once
the Standing Orders come into force, they bind all those presently in
employment of the concerned establishment as well as those who are
appointed thereafter; and also those who were employed previously.

The Act makes provision for certification of Standing Order, which after
certification from competent authority under the Act, constitute the statutory
terms and conditions of employment in industrial undertakings. They specify
duties and responsibilities on the part of both employers and employees. They
make both of them conscious of their limitations. They require, on the one hand,
the employers to follow certain specified rules and regulations as laid down
regarding working hours, pay days, holidays, granting of leave to the
employees, temporary stoppages of work, termination of employment,
supervision of dismissal in certain conditions. On the other hand, they require
that the employees should adhere to rules and regulations mentioned in the
Standing Orders. Standing Orders try to create an attitude among both the
parties which is beneficial for achieving industrial harmony.

The Industrial Disputes Act, 1947

According to the Notification in the Official Gazette of India, 1946, Pt. V.,
the Act was enacted to achieve the following object:

“Experience of working of the Trade Disputes Act of 1929, has revealed that its
main defect is that while restraints have been imposed on the rights of stride
and lockout in public utility services, no provision has been made to render the
proceedings institutable under the Act for the settlement of an industrial dispute,
either by reference to a Board of Conciliation or to a Court of Inquiry conclusive
and binding on either parties to the dispute.” The defect was overcome, during
the war, by empowering under Rule 18-A of the Defence of Indian Rules, the
Central Government to refer industrial disputes to adjudicators and to enforce
the awards. Rule 81-A is being kept in force by the Emergency Power
(Continuancy) Ordinance, 1946, for a further period of six months, as industrial
unrest in checking, which this rule has proved useful, is gaining momentum due
to stress of post-war industrial readjustments, the need of permanent legislation
in replacement of this Rule 81-A which has proved generally acceptable to both
employers and workmen retaining impact for the most part, the provision of the
Trade Disputes Act, 1929.

The Preamble of the Act reads,” An Act to make provision for the
investigation and settlement of industrial disputes and for certain other
purposes.”

This is a special legislation, which applies to workmen drawing wages

not exceeding a specified amount per month and which governs the service
conditions of such persons. It may be regarded as a supplement to the Indian
Contract Act, 1872, whose aim is to regulate the contractual relationship of
master and servant in ordinary sense. This Act deals with the prevention and
settlement of conflict between the two parties and thereby try to improve
relationship between them. Thus, the purpose of this Act is to harmonize the
relations between the employer and the workmen; and to afford a machinery to
settle disputes that arise between the management and the workmen which, if
not settled, would undermine the industrial peace and cause dislocation and
even collapse of industrial establishments, essential to the life of the
community. This industrial peace is secured through voluntary negotiations and
compulsory adjudication.

On the basis of the judgements given from time to time, by the Supreme
Court, the principal objectives of the Act may be stated as below:
 a) To promote measures for securing and preserving amity and good
relations between the employers and the employees, to minimise the
differences and to get the dispute settled through adjudicatory authorities

b) To provide a suitable machinery for investigation and settlement of

industrial disputes between employers and employees, between
employers and workmen; or between workmen and workmen with a right
of representation by a registered trade union of by an association of
employers;

c) To prevent illegal strikes and lockouts;

d) To provide relief to workmen in matters of lay-offs, retrenchment,

wrongful dismissals and victimization;

e) To give the workmen the right of collective bargaining and promote

conciliation.

The purpose of the Act, according to Patna High Court, is “amelioration

of the conditions of workmen in an industry.

The Payment of Wages of Act, 1936

Prior to the enactment of this Act, the employees/workers suffered

many evils at the hands of the employers, such as

i. the employers determined the mode and manner of wage payment as

they liked;

ii. even when paid in cash, wages were paid in illegal tender and in the form
of depreciated currency;

iii. a large number of arbitrary deductions were made out of the wages paid
to the workers; and

iv. the payment was usually irregular and sometimes there was non-
payment altogether. These grave evils attracted the attention of the
Royal Commission on Labour which recommended for a suitable
legislation to check these evils.
Consequently the Payment of Wages Act was passed on 23rd April 1936. it
came into force from 28th March 1937. It was amended in 1937, 1940, 1957,
1964, 1967, 1972 and 1982 with a view to make it more comprehensive. The
Act seeks to remedy the evils in wage payment:

a) Ensuring regularity of payment;

b) ensuring payment in legal tender;

c) preventing arbitrary deductions;

d) restricting employers right to impose fines; and

e) providing remedy to the workers.

The Minimum Wages Act, 1948

The object of the Act is to secure the welfare of the workers in a

competitive market by providing a minimum rate of wages in certain
employments. In other words, the object is to prevent exploitation of the workers
and for this purpose it aims at fixation of minimum rates of wages which the
employer must pay. This minimum wages must provide not merely for the bare
subsistence life but also for the preservation of the efficiency of the worker, and
so it must provide for some measure of education, medical requirements and
amenities. The capacity of the employer to pay is not a consideration in fixing
wages.

The Payment of Bonus Act, 1965

The Bonus act is the outcome of the recommendation made by the

tripartite commission which was set up by the Government of India way back in
1961. The commission was asked to consider the question of payment of bonus
based on profit to the employees by the employer. On September 2, 1964 the
government implemented the recommendations of the commission with certain
changes. Accordingly the payment of Bonus Ordinance 1965 was promulgated
on May 26, 1965. Subsequently it was accepted by the parliament and
accordingly in the year 1965, the payment of Bonus act was enacted. The Act
was amended in 1968, 1969, 1975, 1976, 1977, 1978, 1980,
1985, and 1995. The main objectives of the Act are as under:

a) To impose statutory obligation on the employer of every

establishment defined in Act to pay bonus to all eligible
employees working in the establishments.

b) To outline the principles of payment of bonus according to

prescribed formula.

c) To provide for payment of minimum and maximum, bonus and

linking the payment of bonus with the scheme of “set off” and “set
on” and

d) To provide machinery for enforcement of bonus.

The Factories Act, 1948

The Factories Act came into force on April 1, 1949. It was enacted with
a view to removing a number of defects, revealed in the working of the Act of
1934. The Act of 1948 not only consolidates but also amends the law regulating
labour in Factories. It extends to the whole of India. Section 116 provides that
unless otherwise provided, this Act also applies to factories belonging to the
Central or any State Government.

The object of this Act is, to secure health, welfare, proper working hours,
leave and other benefits for workers employed in factories. In other words, the
Act is enacted primarily with the object to regulate the conditions of work in
manufacturing establishments coming within the definition of the term ‘factory’
as used in the Act.

2.4 KEYWORDS

Billateral - Involvement of two parties

Lay-off - Temporary refusal for work

Retrenchment - Permanent refusal for work

2.5 SELF ASSESSMENT QUESTIONS

1. Discuss the role of state in industrial relations in India.

2. Write notes on -

(a) the plan documents and industrial labour

(b) New Industrial Policy and Industrial Relations

3. Discuss the legal framework of Industrial Relations.

2.6 REFERENCES/SUGGESTED READINGS

1. Dwivedi, R.S. (2002) “Managing Human resources and Industrial

Relations in Indian Enterprises’, Galgotia Publishing company, New
Delhi
2. Manappa, Arun (1996) industrial Relations” Tata-McGraw Hill
Publishing Company. Ltd., New Delhi
Unit-2nd

TRADE UNION – ROLE AND FUTURE

STRUCTURE

3.0 Introduction

3.1 Presentation of Contents

3.1.1 Definition of trade union

3.1.2 Features of trade unions

3.1.3 Types and structure of trade unions

3.1.4 Employees and trade union

3.1.5 Role of the trade unions

3.1.6 Future of trade unions

3.2 Summary

3.3 Keywords

3.4 Self Assessment Questions

3.5 References/Suggested Reading

 INTRODUCTION

It is a well known fact that in every industrial community there are two
distinct classes the Employees and the Employers, without whom production at
a large scale is not possible. Both these parties usually have contradictory
motives, which creates many problems. Over the ages, the teeming millions
which constituted a sizeable chunk of industrial society have struggled hard to
achieve a greater measure of protection against inhuman treatment meted out
to them by employers. They have learned to make themselves secure against
ills over which they believed to have little control. In fact individually the
labourers can do little to bring about the kind of reforms they believe desirable.
They are effective only if they act in united ways. The very idea of joint action,
laid down the foundation of the instrument of struggle for security and
advancement – “Trade Union”.

The Trade Union came into existence as an agent of workers and

working class at large. It performed and still performs two functions: one to work
for the redistribution of some of the nation’s wealth by raising wages and
earning of its members. This enable workers at their own to improve their living
standard and in the process become better equipment to deal with unfavorable
economic conditions. The second objective of union is more directly related to
their security role in esprit of here and now. Through various types of union
welfare funds and later through pressure for employer welfare programme and
the governmental social security measures, the union aim to obtain greater
benefits for its members. In liberalized economic environment the union is
looked upon as a facilitator of change.
 3.0 PRESENTATION OF CONTENTS

3.2.1 Definition of trade unions

According to Webb, “A trade Union is the continuous association of

wage earners for the purpose of maintaining or improving the conditions of their
working lives.”

According to Section 2(h) of Indian Trade Union Act, ”Trade union is

an combination whether temporary or permanent formed primarily for the
purpose of regulating the relation between workmen & employers workers &
workers or between employers & employers or for imposing restrictive
conditions or conduct of any trade or business and include any federation of
two or more trade unions.”

It seems that this definition is very wide in which association of

employers are also included but generally trade unions are referred to
association of workers. Hence, we can say that trade unions are continuous
associations of wage earners for maintaining and improving the condition of
workers life, better health and status in the industry and as well as in society.

The Characteristics of trade unions: -

1. Trade unions have a statement specifying that organization is a trade

union.

2. Trade unions have a statement of its principle objectives.

3. Registration with Registrar of Trade Union.

4. Independence from employer, which may be evident from the certificate

issued by the Registrar of Trade Union.

5. Affiliation with central trade union organization.

All the trade union does not necessarily show these characteristics, yet
many of the large trade unions do.
3.2.2 General features of trade unions

Coming out of a vast definition of the concept, let us put a light on some
features of trade union which are as follows: -

1. The trade union is voluntary association: Trade union is not a

compulsory association but voluntary association of workers, who may
be in one or more industries and occupations.

2. Common interest: There is certain common interest of the member

workers. The leader of the trade union is supposed to pursue and protect
the economic and other interest of the members which leads to their
welfare.

3. Collective action: After thorough discussions in the meeting of trade

union the leader of the union takes collective steps to press their demand
before the management.

4. Permanent & continuous association: A trade union is a permanent

and continuous organization. They persistently pursue their purpose
conceive of their purpose as one, which is not merely immediate but
continuous and long term as well. They do not expect to attain their
purpose in a day because they anticipate and contemplate a continuing
stream of additional objectives to be adopted from time to time.

5. Association engaged in securing economic benefits: Trade unions

attempts is to secure control of supply of labour in one or more markets
and to maintain that control as a mean of fixing the price of labour as well
as the conditions under which they works.

6. The origin and growth of trade union have been influenced by a

number of ideology: The socio economic and even political movement
have influenced trade union in one or other way

7. Other benefits: Trade union is not only confined to economic benefits,

but other benefits such as cultural, political, social and psychological are
also within their broader preview.
3.2.3 Types and structure of the trade union

Ever since the dawn of industrialization there has emerged a wide variety
of unions across the globe these unions can be classed under two heads

 The purpose for which unions are formed

 The variation in the composition of their membership

(A) Union classification according to the purpose

Under this head normally two type of union have been kept.

1) Reformist

2) Revolutionary

Reformist unions

Such unions don’t believe in the destruction of economic, social and

management structure of the state or concern but want only to modify them and
to have favorable response for their members through negotiation and other
peaceful manners. The reformist union is subdivided in two parts:

(a) Business unionism: Business unions are those unions that are
maintained primarily to represent the workers in collective bargaining
with the employers. They are distinct form other reformist which try to
bring economic advantage to their members.

(b) Friendly or Uplift unionism: Idealistic in nature and aspires to elevate

the moral, intellectual and social life of the workers and advocate
idealistic plans for social regeneration. They emphasise such other
consideration as education, health, insurance etc.

Revolutionary Unions

Such unions aim at destroying the present structure and replacing it with
the new and different institution according to the ideals that are regarded
as preferable. The revolutionary unionism generally seeks to destroy capitalist
industry to abolish the wage system and substitute it with some other system
generally socialist and communist. These unions are further classified in two
classes:

a) Anarchist unions: The unions which try to destroy the existing

economic system by revolutionary means called anarchist Unions. Such
unions exists no more in presently scenario.

b) Political unions: The unions which gain power through political action
called political unions. The main function of such unions is to eliminate
the power of capital and capitalists, redistributing wealth and giving
effective power to workers.

(B) Union classification on the basis of membership structure

The union can also be classified according to variations in the

composition of the members. On this basis unions have been classified in four
categories:

Craft union: It is an organisation of workers employed in a particular craft and

trade or in a single or few occupations. Such organizations link together those
workers who have similar skills, craft training and specialization, aiming to
safeguard their interest.

Industrial union: It is an organisation of workers which links all craftsmen and

skilled workers in any industry. It is organized upon the industry wise basis
rather than the craft wise basis.

Staff union: The term staff union is popularly used to both craft and industrial
union. It is organized the workers on the basis of craft working in same industry.

General union: It is an organisation which covers various industries and

labourers having different skills. They have numerical superiority (large
membership), for they are open to all classes of workers and this is the source
of their strength.
3.2.4 Trade union & Employees

Let us discuss now the relationship between the trade unions and the
employees and why employees join the trade union and how the trade union
helps them.

(a) Objectives of trade union

Some important reason as to why workers organize themselves to form

trade union are as follows: -

1) To safeguard their interests: Workers often join trade union in order

to have a stronger voice to resist those actions of the management
which are against their interest. When employers cut wages or pay low
wages; when working conditions are unsafe or too unpleasant; when
management. Interfere in worker’s personal lives, workers resist by
forming unions. Through the unions they petition management for
change and if don’t succeed, they may resort to a concerted work
stoppage “a strike”.

2) To participate in union activities: Workers may join unions to obtain

certain health or insurance benefits or to participate in educational
program or to learn about their own business and occupation. They
may also join to engage in social and community activities.

3) To exercise leadership: Some workers join union as an outlet for their

own ambitions. They have leadership traits and to explore the power
of the trade union to be a leader they joins the trade unions.

4) To get hike in wage rate : One of the important objective behind

workers joining a union has been their belief that they would get wages
increased and have stronger impact through collective action.

5) To maintain good relation: Another reason of employees joining

trade unions may be broader realization on their part that trade unions
maintain the employer – employee or labour management relation.

6) To maintain adequate working conditions: Employee may join trade

union because of their belief that unions are effective way to
 secure adequate protection from various hazards and financial security
during situation like accident injury, illness, unemployment etc.

7) To get a media of communication: The employees may join the

unions because of their feeling that this would enable them to
communicate their views, ideas, feeling and frustrations to the
management and exercise an effective voice to the management
decision on the matter concerning their welfare.

8) To do fair dealing: The employees may join trade union to ensure a

just and fair dealing by management and well planned actions.
Through collective strength restrain the management from taking any
such action which may be irrational or contrary to their interest.

9) To get employment: Sometimes workers join trade union because it

is a precondition to their getting employment. This is known as the
‘closed shop’ system and was prevalent in America till1947.

10) To get strengthen: Since the employee alone as an individual feel

specially weak in a world of mass production and mass movement, he
prefers to join an organization that may offer him an opportunity to join
other for the achievement of those objectives that he consider as
socially desirable.

(B) Function of Trade Unions

For the attainment of above objectives trade union performs two types of
functions

o Militant functions

o Ministrant or Federal functions

Militant function

One of the main aim of the unions is to secure better conditions of work
and employment and more recently, the trade union have an aim to secure
some share of productivity gains and participation in the management or even
control over industry. When the union fail to accomplish these objectives by the
method of negotiations they adopt aggressive methods and put a fight with the
management in the form of strike, boycott etc.

Federal function

A trade union is also a federal association or a mutual benefit

organization supporting the member out of their own funds during the period of
work stoppage due to strike or lockout. It also provides financial assistance to
the member during the period when they are unfit for their work because of
illness or employment injury or when they are temporary unemployed.

Some another function of the trade unions may be summarized as under:

1) Infra-mural activities: - Such functions of unions leads to the

betterment of employment condition of employees such as adequate
salary, sanitary etc. by collective bargaining, negotiation etc.
2) Extra-mural activities: -Such activities help the employee to maintain
and improve their efficiency such as promote friendly relation, education
and culture among members.
3) Political activities: - That may be related to the function of a political
labour party or those reflecting an attempt to seek influence on public
policy relating to matter connected with the interest of members.

However, one cannot take a static view of the functions that trade unions
perform today in the large interest of the community. In every country the
functions of trade unions have to change depending on the stage of economic
and social development. It also depend on the strength of the trade union, both
organizational as well as financial and up to a great extent on the institutional
set up of the society in which they have to operate.

3.2.5 Role of the trade unions

Trade union performs various roles regarding the various classes of the
society as follows: -
  Role towards the members of union

 Role towards the organization

 Role towards the union

 Role towards the society

Let us explain these roles in details:

(A) Role towards the trade union member

The trade union performs following duties regarding their members

employees:

1) To safeguard the workers against all sort of exploitation by the

employers, by union and by political parties.

2) To protect workers from the unfair labour practices of the

management.

3) To ensure healthy, safe and conducive work conditions.

4) To exert pressure for the enhancement of reward associated with the

work only after making a realistic assessment of its practical
implication.

5) To ensure a desirable standard of living by providing various type of

services such as health, housing, education, recreational, co-
operative etc.

6) To guarantee a fair deal and social justice to workers.

7) To remove the dissatisfaction and redress the day-to-day grievances

and complaints of workers.

8) To encourage the worker’s participation in the management of

organization.

9) To make the workers aware about their rights and duties.

10) To settle the disputes through negotiation, joint consultation and

voluntary arbitration and through adjudication.
(B) Role toward the Industrial organization

Trade unions perform following functions for the industrial organization

in which they are working:

1) To highlight the organization as a joint enterprise between workers and

management and to promote identity of interest.

2) To increase production quantitatively as well as qualitatively, by laying

down the norms of production and ensuring their adequate
observance.

3) To help in maintenance of discipline.

4) To help in removal of dissatisfaction and redressal of day-to-day

complaints and grievances and ensure workers loyalty.

5) To create opportunity for worker’s participation in management and

strengthen the co-operation.

6) To promote harmonic relationship between workers and management

by setting disputes through negotiation, joint consultation and avoiding
litigation.

7) To create favorable opinion of the management towards trade union

and improve their status in industrial organization.

8) To exert pressure on the employers to enforce legislative provision

beneficial to workers, to share the profit equitably and keep away from
various type of unfair labour practice.

9) To facilitate communication with management.

10) To impress upon the management the need to adopt reformative and
not punitive approach towards worker’s fault.

(C) Role toward the trade union organization

1) To improve financial position of the concern by fixing higher

subscription, by realizing the union dues and by organizing special
fund raising campaigns.
 2) To preserve and strengthen trade union democracy.

3) To train members to assume leadership position.

4) To improve workers network of communication between union and its

members.

5) To promote harmonic relationship between different unions to create a

unified trade union movement.

6) To resolve the problem of factionalism and promote unity within the

union.

7) To prepare and maintain the necessary records.

8) To manage the trade union organization on scientific lines.

9) To publicise the trade union objectives and functions, to know

people’s reaction toward them and make necessary modification.

(D) Role toward society

1) To render all sort of constructive co-operation in the formulation and

implementation of plans and policies relating to national development.

2) To actively participate in the development of the programs of national

development such as family planning, forestation, national integration
etc.

3) To launch special campaigns against the social evils of corruption,

casteism etc.

4) To enable unorganized sector to organize itself.

5) To create public opinion favorable to government’s policies and plans

and to mobilise people’s participation for their effective implementation.

6) To create public opinion favorable to trade unions thereby raising their

social and public image

7) To exert pressure, after realistically ascertaining its practical

implication on the government to enact legislation conducive to the
development of trade unions and their members.
 So in above way the trade union plays an important role toward the various
concerned parties.

3.2.6 Future of trade union

Before studying the future of trade union it is must to know the present
condition of trade unions. Let us discuss the present condition of trade unions
in India.

Present condition of trade union in India

In India trade unions are regulated by the Indian trade union act 1926.
At present there are about 48000 registered workers’ unions and 10 central
labour organizations in our country. Some important features of these unions
are as follows:

a) As the National Commission on Labour in India points out the structure

of our unions and their types do not admit of any simple generalization.
Of the three types of unions (viz., general union, craft union and industrial
union), Industrial union is most prominent in our country. But workers in
India are unionized mostly on the bases of plants rather than on the basis
of industry. Craft unions are found among non-industrial and
professional workers only. Thus we have the unions of taxi-drivers,
tonga-drivers, rickshaw-pullers, journalists, teachers, bank employees,
etc. On the basis of hierarchy we may classify our unions into the
following 3 categories:

i. Primary unions which operate at the plant level,

ii. Regional federations which work at the regional level, and

iii. Central labour organisatons which operate at the national

level.

b) The extent of unionization in our country has not been uniform in all
industries. Some industries are better unionized than others. Thus in the
cotton textile industry nearly 70% of its workers are unionized whereas
this percentage is only 24 in jute and 21 in chemicals. In fact, our textile
 industry has given rise both to some of the worst strikes in the country
and to some of the best trade union leaders and labour organizations.

c) The State-wise distribution of unions in our country also does not seem
to follow any pattern. In some States there is very heavy concentration
of unions but in some others there are only a few unions. The following
table gives figures of the number of unions and the estimated average
daily number of workers employed on factories, in respect of some
States in the country:

Sr. State Average daily number of Number of workers

No. workers employed in submitting returns
unions factories (‘000)

1 ASSAM 110 170

2 GUJARAT 695 1025
3 HARYANA 245 356
4 KARNATAKA 752 850
5 MAHARASHTRA 1220 1649
6 ORISSA 138 115
7 PUNJAB 347 476
8 KERALA 283 1882
9 TAMIL NADU 859 2529

Source: Compiled from Pocket Book of Labour Statistics, 1994

(d) There is very close alliance between our trade unions and politics. This
is because in the Pre-Independence days our trade union movement
could not remain aloof from the country’s struggle for freedom. Motivated
by a strong nationalistic sentiment it had close alliance with the congress.
Leaders like C.R. Das, Subhas Bose and Pandit Jawahar Lal Nehru
acted as President of both the Indian National Congress and the All-India
Trade Union Congress. But several splinter groups have now developed
which have weakened the movement.
(e) Being of the ‘one shop’ variety our unions are small in size. The average
membership of a union has come down to 953 from over 1500 nearly 5
decades ago.

(f) With the membership of the unions becoming smaller, their financial
condition has also become more and more weak with the average annual
income per union being under Rs. 4000. Financial weakness has made
several unions militant in their approach to their problems. Conscious of
their inability to carry on prolonged fights with their employers, unions
become prone to violence.

(g) Our shop unions are loosely affiliated to different central unions. We
have 10 central organizations. As such it still continues to be the most
dominant of the 10 central organizations. Our central organizations
maintain their affiliations with international organizations. At present
there are two such organizations-one communist-dominated World
Federation of Trade Unions with its headquarter in Paris and the other
non-communist dominated International Confederation of Free Trade
Unions with its headquarter in Brussels. Two of our central organizations
(viz., INTUC and HMS) are affiliated with the international confederation
of Free trade Unions. AITUC is affiliated with the World Federation of
Trade Unions.

A few of our national organizations such as All India Bank Employees

Federation , the national federation of Indian railway employees and the
national federation of post and telegraph employees are not affiliated to any of
the above central organization.

Future role

Historically, unions in our country have been playing the role of agitators and
bargainers. The thrust of their activities has been towards the economic well
being of the workers. In future unions should be encouraged to make a thrust
towards the psychological and social well being of the workers. Some important
areas in which they can be asked to participate as follows:
 Name of central union Unverified Percentage of
membership total membership
claim (in lakhs)

1 Indian National Trade Union 54 23.3

Congress

2 Bhartiya Mazdoor Sangh 41 17.7

3 Hind Mazdoor Sabha 44 18.9

4 United Trade Union 12 5.2

5 Congress(L.S.) Center of Indian 24 10.3

Trade Unions

6 All India Trade Union Congress 30 13

7 National Labour Organisation 7 3

8 United Trade Union Congress 8 3.4

9 Trade Union Coordination 5 2.2

Centre

10 National Front of Indian Trade 7 3

Union

232 100

a) Communication: Unions can pass on greater and more varied

information to the workers about themselves and the organization. At
present they only communicate on service conditions and related issues
under the belief that workers are not interested in receiving information
on other issues. This is wrong.

b) Counseling: Union can play a very positive role in providing counseling

services to employees regarding the social evils.
 c) Education and training: Another important area in which unions can
play a development role is education of workers. Unions can help them
acquire new human relations and work-related skills such as skills of
collaboration, empathy, collective action, etc.

d) Welfare: Unions can help management in developing innovative welfare

schemes for employees such as workers’ cooperatives, workers banks,
nursery schools, etc.

e) Family and vocational guidance: Unions can help workers families in

several ways. For example, they can provide guidance in respect of the
education and career of workers children. They can help in creating jobs
for the wives of workers and so on.

f) Research: Unions can play a very significant role in generation of data

in various dimensions of workers needs aspirations, standard of living,
etc. For this purpose they can launch research projects either
independently or in collaboration with academic institutions.

Obstacles in the future growth of trade unions

Our trade unions are not so developed as in the western countries due
to following reasons:-

1) Outside Leadership: In India Trade unions has been dominated by

outside leadership. It is a notable feature of Trade Union in India. Now-
a-days these leaders are professional political Leaders. Hence, they
exploit the sentiments of people for their political purpose. They are not
generally interested to solve the problems of workers but exploit them
for their political benefits. Most of the negotiations with the employers fail
due to such political leadership. The interests and welfare of labours are
generally ignored. Therefore, outside leadership is major weakness of
Trade Unions in India.

2) Low membership: Though the number of Trade Unions in India has

considerably increased but membership per union has declined. With the
help of these data it can be proved. That in 1927-28 the average number
of members per union was near about 3500. it was reduced to
 about 1400 in 1946-47 and further it decreased to 675 in 1985. The union
having low membership would not be more effective.

3) Uneven growth of Trade Unions:- The degrees of unionization varies

from Industry to industry in coal industry it is 6.1%, cotton textile 56%,
tobacco manufacturing 70%, Electricity and gas it is 39% , hence, it can
be said that In India Trade Unison activities are concentrated in large
scale Industries but in small scale industries it is nominal.

4) Multiplicity of Trade Unions: It is also a major problem of Trade Union in

India. It has been generally seen that there are many Trade Union in the
same Industry. There are sometime as many as 20 unions in the same
plant. As the Trade Union act, 1926 permits that any association of seven
workers can be registered as unions. Multiplicity of unions instead
solving the problems of workers are fighting among themselves. So, the
purpose of Trade Unions Fails.

5) Absence of paid office Bearers: In India, majority of Trade Unions do not

have whole time paid office bearers. Many of them work on honorary
basis. Since, they are not paid. They devote only limited time and energy
to Trade Union activities. In the absence of full time workers generally
political leader dominates unions. Moreover the office bears are not
trained properly.

6) Weak financial position: In India, most of the Trade Union’s financial

positions is very weak because their average yearly income is
inadequate, as subscription rates are very low. The reason for weak
financial position is also multiplicity of unions. The leaders of different
unions try to attract workers towards their unions comparatively at low
rate of subscription. It is the wrong notion that the Indian workers
financially are not too good. Over the years the average income of
workers has been on increase hence, it is wrong plea that they cannot
afford higher rate of subscription.

7) Lack of interest: In India a large number of workers have not joined trade
union. About 2/3 of the workers have no link with any union. Moreover
all the members of the trade union do not show interest in their affairs.
Their attendance at the general meeting of the union is very
 low. Under such circumstances trade union cannot be expected to make
such progress. In order to make the trade union movement succeed the
members of trade union have to take keen interest in the affairs.

8) Lack of public support: As most of the trade union believes in the

pressure tactics such as strike and demonstration and give limited
attention to peaceful methods for the settlement of demands and
disputes. The general public is affected due to strike, go slow policy and
other practices of unions. As a result public support or sympathy is not
available to the unions.

9) Limited stress on welfare: Most of the Trade Unions in India undertake

only limited welfare activities. They feel that their major activity is to fight
with the employer for more wages and allowances.

Corrective measures to improve the Trade Unions

1) There should be a strong base to develop the Trade Union by

safeguarding the interest of the members and by achieving the target of
production.

2) To make effective unionism there should be one union in one industry.

3) As most of the unions are influence by political parties. Hence, there

interference should be eliminated.

4) There should be training programmes to develop the internal leadership.

5) It will be more effective if office bearers of the Trade Unions are well
paid.

6) As most of the Trade Unions in India are financially weak. This problem
can be solved by raising the membership and collecting more funds for
unions.

7) Most of the unions are engaged in industrial disputes they do not

undertake economic, social and cultural activities which are equally
important for raising welfare of the working class.
 As a considerable number of Trade Unions are not recognized. Hence,
the proper recognition of unions will make them more effective.

3.1 SUMMARY

Trade unions are the associations of employees working as an agent of

working class. These unions not only safeguarding the financial interest of the
workers but also providing the other benefits such as cultural, political, social
and psychological within their broader preview. Trade unions adopts both the
aggressive as well as federal measures to solve the problems. In India the trade
union activities is regulated by the Trade Union Act 1926. But Indian trade union
movement is suffering from several problems such as low membership,
multiplicity of trade unions and financial crisis etc. If workers want to strengthen
the trade union movement in India and want to ensure better condition of the
labour then they have to take corrective measures specified in the text.

3.2 KEYWORDS

Trade Unions - Continuous association of wage earners and

employees

Reformist Unions - Who don’t believe in the destruction of economy

Revolutionary Unions - who believe in destruction of the present

structure and replace it with the new one.

Multiplicity of Unions - when there are more numbers of unions in the

same unit.

QUESTIONS

1. Define the term Trade Union and its features.

2. What do you mean by Trade Union? Describe the various types of the
trade unions.

3. Why the employees unions the Trade Unions and what functions a
Trade Union performs for their employees?
 4. Describe the role of the Trade Unions.

5. Write a note on the current condition of trade union in India? Put a light
on its future.

.
UNIT-3

DISCIPLINE AND GRIEVANCE MANAGEMENT

4.1 Introduction.

4.2 Presentation of Contents

4.2.1 Code of discipline

4.2.2 Indiscipline, causes, sign and symptoms of misconduct

4.2.3 The remedial measures, prerequisites for indisciplinary actions.

4.2.4 Approaches, principles and procedure for disciplinary actions.

4.2.5 Red hot-stove rule

4.2.6 Definition, nature, causes of grievance

4.2.7 Management of grievance, Steps for managing grievances

4.2.8 Grievance procedure under code

4.2.9 Grievance procedure in India

4.3 Summary

4.4 Keywords

4.5 Self Assessment Questions

4.6 References/Suggested Readings

4.0 OBJECTIVE

This lesson is intended to impart knowledge about:

 the discipline and grievance management.

 the process and prerequisites for discipline and grievance management

 principles of management indiscipline and grievance

4.1 INRODUCTION

Discipline is very essential for a healthy industrial atmosphere and the

achievement of organizational goals. An acceptable performance from
subordinates in an organization depends upon their willingness to carry out
instructions and the orders of their superiors, to abide by the rules of conduct
and maintain satisfactory standards of work.

The term ‘discipline’ can be interpreted. It connotes a state of order in an

organization. It also means compliance with the proper appreciation of the
hierarchical superior-subordinate relationship. The concept of discipline
emerges in a work situation from the interaction of manager and workers in an
organization. Formal and informal rules and regulations govern the relationship
between a manager and workers, the formal rules and regulations are codified
in the company’s manual or standing order. Informal rules, on the other hand,
are evolved from convention and culture in the organization.

Webster’s dictionary has defined discipline as “first, it is the training that

corrects, mould, strengthen or perfect individual behaviour. Second, it is control
gained by enforcing obedience, and third it is punishment or chestisement.”
According to Bremblett, “discipline does not mean a strict and technical
observance of rigid rules and regulations. It simply means working, co-operating
and behaving in a normal and orderly way, as any responsible person would
expect an employee to do.” In other words, it may be noted that discipline is
employee self control which prompts him to willing cooperate with the
organizational standards, rules, objectives, etc. It is essentially an attitude of
the mind, a product of culture and environment and requires, along with
legislative sanction, persuasion on a moral plane.
 There are two basic concept of discipline; one of them being negative
while the other is a positive aspect of discipline. The negative approach to
discipline is traditional concept and is identified with ensuring that subordinates
adhere strictly to the rules, and punishment is meted out in the event of
indiscipline. In other word, for the violation of rules strict penalties are levied
and the fear of punishment works as a deterrent in the mind of the employee.
In organizations where workers are unskilled and illiterate, it is easier to enforce
this kind of discipline this concept uses ‘fear’ as a means to secure compliance
to present norms. While a positive aspect of discipline implies a sense of duty
to observe the rules and regulations. It is also called self- discipline. It involves
creation of an atmosphere in the organisation whereby employees willingly
conform to the established rules and regulations. Positive discipline can be
achieved through rewards and effective leadership. Positive discipline
promotes cooperation and coordination with a minimum of formal organisation.
It reduces the need for personal supervision required to maintain standards.

The code of discipline defines duties and responsibilities of employers

and employees/workers. The objectives of the code of discipline are:

1. To ensure that employers and employees recognize each others rights

and obligations,

2. To promote constructive cooperation between the parties concerned at

all levels,

3. To secure settlement of disputes and grievances by negotiation,

conciliation, and voluntary arbitration,

4. To eliminate all forms of coercion, intimidation, and violence in industrial

relation,

5. To avoid work stoppages,

6. To facilitate the free growth of trade unions, and

7. To maintain discipline in industry.

 The third five year plan document noted that the code lays down specific
obligations for the management and the worker with the objective of promoting
constructive cooperation between their representatives at all levels, avoiding
stop-pages as well as litigation, securing settlement of grievances by mutual
negotiations and eliminating all forms of coercion and violence in industrial
relation.

4.2 PRESENTATION OF CONTENTS

4.2.1 Code of Discipline

Code of discipline forms the Gandhian approach to industrial relations to

bind employees and trade unions to a moral agreement for promoting peace and
harmony. It was an outcome of the efforts of Guljari Lal Nanda, the then Union
Labour Minister in 1957 to 1958. G.L. Nanda was the true Gandhian. It was at
his instance that code was formulated. It was formally adopted at the 16th
session of the Indian labour conference (1958). National representatives of both
employers and trade unions were parties to it. This code was a unique
formulation to voluntarily regulate labour management relations. Indian Labour
Conference discussed three draft codes including:

1. A ‘code of Conduct’ to regulate inter-union relations.

2. A ‘code of Discipline’ to regulate labour management relations.

3. A ‘code of Efficiency and Welfare’ for laying down norms of productivity

and labour welfare.

The third code was never formally adopted and did not take off. The inter
union ‘code of conduct’ was voluntarily adopted, after a great deal of persuasion
by G.L. Nanda on may 21, 1958. The four central organisations of labour then
representing on the Indian Labour conference (including INTUC, AITUC, HMS
and UTUC) agreed to comply with the code.

The adoption of the ‘code of Discipline’ was announced in June, 1958.

All the representative central organizations of employers and labour accepted
it. There were difficulties in persuading the ministries, defense and railways,
employing a large number of industrial workers to accept it in toto. Some
adaptations were later on agreed to here and there.

The main features of this code are:

1. Both employer and employees should recognise the rights and

responsibilities of each other and should willingly discharge their
respective obligations.

2. There should be no strike or lockout without proper notice and efforts

should be made to settle all disputes through existing machinery.

3. A mutual agreed grievance procedure will be setup and both the parties
will abide by it without taking arbitrary

4. Both employers and trade unions will educate their member regarding
their mutual obligations.

5. Management will not increase workloads without prior agreement or

settlement with the workers.

6. Employer will take prompt for the settlement of grievances and for the
implementation of all awards and agreements.

7. Management will take immediate action against all officers found guilty
of provoking indiscipline among workers

8. Union will avoid demonstrations, rowdyism all form of physical duress

and workers will not indulge in union activity during working hours.

9. Union will discourage negligence of duty, damage to property, careless

operation, insubordination and other unfair labour practices on the part
of workers.

Thus, the ‘code of discipline’ consists of three sets of principles, namely

(a) obligation to be observed by management, (b) obligations to be observed
by trade unions, and (c) principles binding on both the parties.

The code of discipline has been helpful in improving industrial relation in

the country. It has focused the attention of employers and workers on their
respective obligations. In 1967 the Central Implementation and Review
Committee of the Union Ministry of Labour and Employment made an evolution
of the code. With the passage of time the spirit of the code has been lost and
the code has not been very effective in ensuring harmonious relations among
employers and employees due to their self-discipline and self- commitment.

The National Commission on Labour recommended that the following

provisions of the code should be made statutory: (a) recognition of the
representative union as the sole bargaining agent; (b) setting up of a grievance
machinery; (c) prohibition on strikes and lockouts without prior notice; (d)
penalties for unfair labour practices; and (e) provision for voluntary arbitration.

However, the code by itself cannot maintain discipline in industry unless

the parties subscribing to it have full faith in it.

4.2.2 Indiscipline, causes, sign, and symptoms of misconduct

Indiscipline or Misconduct

The term ‘indiscipline’ can be described as non-conformity to formal and

informal rules and regulations. It is an act or conduct, which is prejudicial to the
interest of the employer or is likely to impair the reputation of the employee. It
is necessary to correct indiscipline in an organization as soon as it is observed
because of its adverse influence on the morale and motivation of the employee
as well as organization. Indiscipline results in chaos, confusion and diffusion of
results. It gives rise to strikes, ‘go-slows’, and absenteeism, leading to loss of
production, profits and wages.

Causes of Indiscipline

Basically, indiscipline may arise due to poor management, errors of

judgment by employees about their union leaders or a lack of understanding of
management policy. This problem could also develop when an individual
behaves in indisciplinary manner or as an outcome of the managements
ignorance to his grievance. It can occur due to lack of commitment towards the
work, by an employee in an organization. Various other factors are also
responsible for indiscipline such as: unfair labour practices, victimization by
management, wage differentials, wrong work assignment, defective grievance
procedure, payment of very low wages (giving rise to poverty, frustration and
indebtedness), poor communication, ineffective leadership, result in
indiscipline. Thus, various socio-economic and cultural factors play a role in
creating indiscipline in an organization.

Sign and Symptoms of Misconduct

Every act of indiscipline is called misconduct. The main acts of

misconduct are given as:

1 Disobedience or willful insubordination.

2 Theft, fraud or dishonesty in connection with the employers

business or property.

3 Willful damage or loss of employers goods or property.

4 Taking or giving bribe or any illegal gratification.

5 Habitual absence without leave or absence without leave for more

than ten days.

6 Habitual late attendance.

7 Frequent repetition of any act or omission for which fine may be

imposed.

8 Habitual negligence or neglect of work.

9 Habitual breach of any law applicable to the establishments.

10 Disorderly behaviour during working hours at the establishment.

11 Striking of work or inciting others to strike in contravention of the

provisions of any law.

These are not exhaustive but illustrative examples of misconduct under

the model standing orders, framed as a part of the rules made under this
Industrial Employment (Standing Orders) Act, 1946.
4.2.3 The remedial measures, prerequisites for indisciplinary actions

Remedial Measures for Indisciplinary Actions

The labour is the most important factor of production. Therefore, an

organisation can prosper only if labour is properly motivated towards the
attainment of specific objectives. A tactful human relations approach becomes
necessary if management wants to extract more and efficient honest work from
its employees. It is therefore, obligatory on the part of management to analyze
and study the causes of indiscipline and then take the necessary action in the
matter.

Each worker as an individual, need a fair or reasonable wage to maintain

him and his family in good health and spirits. Therefore, the wages should be
adequate so that the worker may meet the economic needs of his family.

When a worker joins an organization, he agrees, under a contract of

employment, to give a certain amount of work and loyalty, and in return expects
suitable economic reward, security of employment, fair treatment and other
kinds of support from his employer. To encourage him to stay in his job and to
allow him the necessary security, amenities and freedom to express his feelings
and sentiments, a human relation approach should be adopted.

The trade union leadership should be developed from with in the rank
and file workers. A leader who comes from within is part of the workmen’s
associations and is in a better position to know the feelings and reaction of his
follow-workers so that he may be able to put their demands in a right way.
Finally, the various human resource management policies be made more
realistic and progressive.

Prerequisites

The essential prerequisites for using this approach to manage

indiscipline are:

1. Reasonable, legitimate and clear rules and regulations.

 2. Workers should be involved in framing rules and regulations so that
they willingly accept the rules.
3. Prior notice of the consequences of breaking rules.
4. Consistency and uniformity of punishment.
5. Respect for the human personality.
6. Management personnel should set high standards.

Indiscipline could be dealt with using formal and informal systems

through which it is corrected. In case an informal system is being used, either a
transfer, an informal warning, or a non-hierarchical but status demotion are the
remedies to correct indiscipline. Managements, in order to avoid the legal
complexities of the formal system, resort to informal systems.

4.2.4 APPROACHES, PRINCIPLES AND PROCEDURE FOR

DISCIPLINARY ACTION

Approaches

Basically, there are five approaches regarding to manage indiscipline or

misconduct. All these approaches briefly explain here.

1 Judicial Approach:

It is commonly followed in India. The present day manager has to handle

a variety of disciplinary issues. His right to hire and dismiss is curbed to
a great extent, especially where unionized employees are concerned.
The complexity is increasing in this arbitrary managerial function due to
intervention by the government, by providing legislation for governing
terms of employment. The need for legislation arose as India is faced
with a chronic problem of unemployment and illiteracy among industrial
labour. In order to secure security of jobs, the govt. has tried to ensure
protection to industrial labour from likely misuse of managerial power to
hire and fire.

2 The Human Relation Approach:

It calls for treating an employee as a human being and considers the

 totality of his personality and behaviour while correcting faults that
contribute to indiscipline. His total personality is considered, as is his
interaction with his colleagues, his family background, etc. and then
appropriate punishment for misconduct is awarded.

3 The Human Resources Approach:

The approach calls for treating every employee as a resource and an

asset to the organization before punishing the workers, the cause for
indiscipline has to be ascertained. An analysis of the cause is made, to
find out whether indiscipline is due to the failure of his training and
motivating system or the individual’s own failure to meet the
requirements, and accordingly corrections are made.

4. The group Discipline Approach:

The management in this approach sets and conveys well established

norms and tries to involve the groups of employees. The group as a
whole control Indiscipline and awards appropriate punishments. The
trade union may also act as a disciplinary agency.

5. The leadership Approach:

In this case, every supervisor or manager has to guide, control, train,

develop, lead a group and administer the rules for discipline.

Principles for Disciplinary Action

Despite, best efforts, acts of indiscipline occur and it becomes necessary

to take a disciplinary action. While taking disciplinary action the following
principles must be considered.

1 Principles of natural justice: This principle must guide all enquires

and actions. This means that no person should be appointed to
conducting an enquiry who himself is interested in the outcome –
either as an aggrieved party or because he is hostile to the person
proceeded against, or for any other reason.
 2 Principles of impartiality or consistency: There should be no marked
difference in the action taken under identical situations where all the
factors associated to situations are alike.

3 Principle of impersonality: The disciplinary authority should not

encourage a person who is failing to fulfill his duty. He should be
impartial to every one.

4 Principle of reasonable opportunity to the offender to defend himself.

Article 311 of the constitution of India says: No “person employed by
the union or a state govt. shall be dismissed or remove until he has
been given a reasonable opportunity showing cause against the
action proposed to be taken in regard to him.”

Procedure for Disciplinary Action

The procedure for taking disciplinary action involves the following steps:

1. Preliminary Investigation

First of all a preliminary enquiry should be held to find out the misconduct
behaviour or situation.

2. Issue of a charge sheet

Once a misconduct or indiscipline is identified, the authority should proceed

to issue of charge sheet to the employee. Charge sheet is merely a notice
of the charge and provides the employee an opportunity to explain his
conduct. Therefore, charge sheet generally called as show cause notice. In
the charge sheet each charge should be clearly defined and specified.

3. Suspension Pending Enquiry

In case the charge is grave a suspension order may be given to the

employee along with the charge sheet. According to the industrial
employment (Standing orders) Act, 1946, the suspended worker is to be
paid a subsistence allowance equal to one-half of the wages for the first 90
days of suspensions and three-fourths of the wages for the remaining
 period of suspension if the delay in the completion of disciplinary
proceedings are not due to the workers conduct.

4. Notice of Enquiry

In case the worker admits the charge, in his reply to the charge sheet,
without any qualification, the employer can go ahead in awarding the
punishment without further enquiry. But if the worker does not admit the
charge and the charge merits major penalty, the employer must hold enquiry
to investigate into the charge. Proper and sufficient advance notice should
be given to the worker of the enquiry.

5. Conduct of Inquiry

The inquiry should be conducted by an impartial and responsible officer. He

should proceed in a proper manner and examine witnesses. Fair opportunity
should be given to the worker to cross- examine the management
witnesses.

6. Recording the findings

The enquiry officer must record all the conclusion and findings. As far as
possible he should refrain from recommending punishment and leave it to
the decision of the appropriate authority.

7. Awarding Punishment

The management should decide the punishment on the basis of finding of

an enquiry, past record of worker and gravity of the misconduct.

8. Communicating Punishment

The punishment awarded to the worker should be communicated to him

quickly. The letter of communication should contain reference to the charge
sheet, the enquiry and the findings. The date from which the punishment is
to be effective should also be mentioned.
4.2.5 RED - HOT STOVE RULE

Douglas McGregor has suggested this rule to guide managers in

enforcing discipline. The rule is based on an analogy between touching a red-
hot stove and violating rules of discipline. When a person touches a hot- stove,

1. The burn is immediate

2. He had warning that he knew that he would get burn if he touched it.

3. The effect is consistent everybody who touches red-hot stove would be

burned.

4. The effect is impersonal. A person is burned because he touches the hot

stove not because of who he is.

5. The effect is commensurate with the gravity of misconduct. A person who

repeatedly touches the hot stove is burnt more than one who touched it
only once.

The same should be with discipline. The disciplinary process should

begin immediately after the violation of rules/regulations is noticed. It must give
a clear warning that so many penalties would be imposed for a given offence.
The same kind of punishment should be consistently imposed for the same
offence. Punishment should be impersonal i.e. it should be imposed regardless
of the status of the offender. Punishment should be commensurate with the
gravity of the offence. For instance, a worker guilty of minor misconduct e.g.
irregular attendance should be given less punishment than that given to a
worker found guilty of major misconduct like the theft of employers property.

4.2.6 DEFINITION, NATURE, CAUSES OF GRIEVANCE

While working together, some time employees feel uncomfortable,

aggrieved or disappointed about certain managerial decisions, policies and
service conditions. There can be a feeling of ignorance altogether. With this
ignored approach employees remains unhappy and unsatisfied with working
conditions. If this dissatisfaction of employees goes unattended, the increased
irritation of the employees may cause unfavourable attitude towards
supervisors, colleagues and the organisation and ultimately a disturbed
relationship maintain in an organization. To a large extent, the approach will be
governed by several variables such as style of management, size of enterprise,
level of education of the workforce, technology of the plant and the extent of
unionization of the workforce.

In this present setup, especially in democratic system where an

employee can express their frustration, dissatisfaction, whether it is a minor
problem, or a serious problem, or a difference of the opinion with the supervisor
over terms and conditions of employment. In India, the government has been
making a plea for grievance machinery at the plant level ever since 1956-58
when the standing committee of the Indian Labour conference submitted a draft
on the various aspects of grievance procedure. The National commission of
Labour set up by the Government as a tripartite body in 1969 also spelt out the
nature of grievance and a model grievance procedure. However, this remains
a recommendation and is not a statute yet.

The grievance procedure is one of the more important instruments

available for employees to express their dissatisfaction. It is also a means
available to management to keep a check on relevant diagnostic data on the
state of organizations health.

Grievance Defined

The term “grievance” has been defined by different researchers in

different ways. Mondy and Noe defined grievance as “employees
dissatisfaction or feeling of personal injustice relating to his or her employment.”

Jucius defines grievance as “any discontent or dissatisfaction, whether

expressed or not and whether valid or not, arising out anything connected with
the company which an employee thinks, believes, or even feels, is unfair, unjust
or inequitable”. Thus above definitions describes grievance as any
dissatisfaction of an employee which is based on his or her perception about
the situation with in an organization.
 The term ‘grievance’ varies from company to company, which would
include any discontent, which affects the organizational environment. As such,
grievance can be real or imaginary, written or oral, legitimate or illegitimate.
Keith Davis defines grievance as “any real or imagined feeling of personal
injustice which an employee has about the employment relationship.” In case
of real grievance, the grievance is genuine which may be due to behaviour of
supervisor, or employments terms and conditions that have been ignored or
violated by management. In case of imaginary grievance, the grievance is not
genuine which may be due to employees his or her own perception that they
have been some what neglected or ignored by supervisors, or their rights have
been violated by management.

There can be formal and informal grievance when an employee put the
cause of dissatisfaction in a written form and present it before appropriate
Authority. This is known as “formal” or “written” grievance. On the other hand,
when an employee goes on talking about cause of dissatisfaction, this type of
grievance is called as “informal” or “oral” grievance.

In case of “legitimate” grievance, the employees contractual right with

respect to terms and conditions of employment or spirit of collective bargaining
are violated. On the other hand dissatisfaction over supervisory behaviour,
peer’s ignorance or any other situation can cause grievance in employee is
“illegitimate” grievance.

From the above discussion different types of grievance can be known.

But some times grievance can be interchangeably used with complaints.
Several executives of real world distinguish between complaint and grievance.
A complaint is a written or oral dissatisfaction, brought to the attention of the
supervisors and the shop steward.

While differentiating complaints from grievance, Flippo defines a

complaint as a discontent or dissatisfaction, which has not, as yet, assumed
great significance to the individual. It can be converted into grievance when an
individual feels that an injustice has been caused to him. Thus any type of
grievance is not in the interest of employee as well as organization.
Nature of grievance

A grievance may be submitted by workers, or several workers, in respect

of any measure or situation, which directly affects, or is likely to affect, the
conditions of the employment of one or several workers in the organization.
Where a grievance is transformed into a general claim either by the union or by
a large number of workers, it falls outside the grievance procedure and normally
comes under to purview of collective bargaining.

From a study conducted by Chandra, the following areas were causes

of employee grievance:

1. Promotions

2. Amenities,

3. Continuity of Service,

4. Compensation,

5. Disciplinary action,

6. Fines,

7. Increments,

8. Leave,

9. Medical Benefits,

10. Nature of Job,

11. Payment,

12. Acting promotion,

13. Recovery of dues,

14. Safety appliances,

15. Superannuation,

16. Supersession,

17. Transfer Victimization,

18. Condition of work.

 The International Labour Organization (ILO) classifies a grievance as a
complaint of one or more workers with respect to wages and allowances,
condition of work and interpretations of service stipulations, covering such
areas as overtime, leave, transfer, promotion, seniority, job assignment and
termination of service. Chandra found that policy issues relating to hours of
work, incentives, wages, DA, and bonus are beyond the scope of the grievance
procedure-they fall under preview of collective bargaining.

Causes of Grievance

There are several causes, which leads to employee grievance in an

organization.

Management Practices

1. The behaviour of supervisor, peer’s group can cause grievance.

2. The improper division of work among employees lead to employee

grievance.

3. The negligence of one’s efforts towards the organization.

4. The autocratic organizational environment can cause grievance.

5. The implementation of personnel policies is not intended policies, it

well lead to grievance.

6. If task objective is not clearly defined to employee, then also the

employee get frustrated and ultimately grievance arises.

7. Matters such as employee compensation, seniority, overtime and

assignment of personnel to shifts are illustrations of ambiguities
leading to grievance.

8. Poor communication between management and employees is

another cause of grievance.

Union Practices

In firms where there are multiplicities of unions, many of whom may have
political affiliation, there is constant jostling and lobbying for numerical
strength and support. Where unions are not formed on the basis of specialized
craft but are general unions, the pressure to survive is great and, hence there
is a need to gain the support of workers. Under such circumstances the
grievance machinery could be an important vehicle for them to show their
undeniable concern for workers welfare.

The fact that a union can provide a voice for their grievance is an
important factor in motivating employees to join a union. Realizing that
members expect action and only active unions can generate membership,
unions some time incline to encourage the filing of grievance in order to
demonstrate the advantage of union membership. It makes union popular that
it is the force to solve out the grievance with the management.

Individual Personality Trait

Sometimes mental tension, caused perhaps by ill health also contributes

to grievance. Some are basically predisposed to grumble and find fault with
every little matter, seeing and looking out only for faults. On the other hand,
there are employees who are willing to overlook minor issues and discomforts
and get on with the job. A study by Sulkin and Pranis reveals that poor performer
tend to use grievance procedure more often than employees who are high
performance the union activists, highly educated workers, workers with a high
incidence of absenteeism, and worker in lower job classification tend to file more
grievances than other employees.

4.2.7 Management of grievance, steps for managing grievances

Management of Grievance

It has been widely recognized that there should be appropriate

procedure through which the grievance of workers may be submitted and
settled. The main aim to solve out grievance with fairness and justice, so that
workers dissatisfaction about various aspects can be properly examined and
solved out. For this grievance resolution machinery is an urgent need to
manage. Grievance resolution machinery permits employee to express
complaints without affecting their job, and encourages and facilitates the
settlement of misunderstanding between management and labour. The
existence of grievance resolution machinery builds confidence in employees to
express their discontent, enhance their morale, and satisfy them and also
protects them from the injustice, proper and effective communication between
management and workers facilitates review and correction. Thus, presence of
grievance machinery explains the organizational health, projects the shop floor
cultures and shows leadership quality.

Steps for Managing grievances

Flippo describes five steps for managing a grievance. These are

following as:

1. receiving and defining the nature of the dissatisfaction;

2. getting the facts;
3. analyzing the facts and reaching a decision;
4. applying the answer; and
5. follow-up.

1. Receiving and defining the nature of dissatisfaction

The supervisor should receive the grievance in a way which it self is

satisfying to the individual. It involves his leadership style. It has been that
employee-centered supervisors cause fewer grievances than production –
centered supervisors.

2. Getting the facts

Efforts should be made to separate facts from the opinions and

impressions. Facts can be obtained easily if proper records are maintained by
supervisors regarding specific grievances and individual attendance, rating and
suggestions.

3 Analyzing the facts and reaching an decision

The supervisor must analyze the facts carefully to reach a specific

decision, so that grievance can be solved out fruitfully.
4 Applying the answer

The supervisor has to effectively communicate the decisions to the

individuals even if they are adverse in nature. The answer to the aggrieved
individuals must be based on legitimate ground.

5. Follow-up

The following of the grievance should be made to determine as to

whether or not clash of interest has been resolved. In situation where follow- up
indicates that the case is not resolved satisfactorily, the former four steps should
be repeated.

The frequent errors in processing of grievance break the whole process.

The management should attempt to avoid these errors. Indeed, effective
handling of grievance facilitates the integration of interests.

In large undertakings, a common type of grievance procedure involves

successive steps at different levels, a workers grievance being first discussed
with the immediate supervisor and then, if no solution is found, with higher
levels of management. The number of levels and steps in the procedure usually
increases with the size of undertakings. Sometime, when an important question
of principle, which would involve a number of workers, is concerned, the matter
may go directly to higher level of management. Under some procedures,
bipartite or joint grievance committees with in the undertaking hear grievances
after they have been considered at lower levels at a number of earlier stages in
the procedure. A settlement reached jointly by workers and management
representatives at any level is generally regarded as final and binding on both
the parties. A grievance is also deemed to be settled if an appeal is not lodged
at the next highest level with in a given time.

4.2.8 The Grievance Procedure under Code

Grievance Machinery

Grievance machinery will be required to set up in each under takings to

administer the grievance procedure. For the purpose of constituting a fresh
grievance machinery, workers in each department (and where a department is
too small, in a group of departments) and each shift, shall elect, from amongst
themselves and for a period of not less then one year at a time, departmental
representatives and forward the list of persons so selected to the management.
Where the union in the undertaking is in a position to submit an agreed list of
names, recourse to election may not be necessary. Similar is the case, where
work committees are functioning satisfactorily, since the work committee
member of a particular constituency shall act as the departmental
representative correspondingly, the management shall designate the persons
for each department who shall be approached at the first stage and the
departmental heads for handling grievances at the second stage. In the case of
appeals against discharges or dismissal, the management shall designate the
authority to whom appeals could be made.

Grievance Procedure

While adaptations have to be made to meet special circumstances such

as those obtaining in the Defense Undertaking, Railways, Plantations and also
small undertakings employing few workmen, the procedure normally envisaged
in the handling of grievances should be as follows:

1. Aggrieved employee shall first present his grievance verbally in person

to the officers designated by management for this purpose. An answer
shall be given with in 48 hours of the presentation of complaint.

2. If the worker is not satisfied with the designated officer, he shall, either
in person or accompanied by his departmental representatives, present
his grievance to the head of the department designated by management
for this purpose. The time allotted to reply with in 3 days. If the action
can not be taken with in that period, the reason for this delay should be
recorded.

3. If the decision by departmental head is unsatisfactory, then the grievant

may request the forwarding of his grievance to the grievance committee
which shall make its recommendations to the managers with in 7 days
of the workers request. The management shall implement unanimous
recommendations of the Grievance Committee.
 Grievant Management
Stage -I Officer designated by management to
deal with grievance at this initial stage.
Grievant-Conveys verbally
To reply in 48 hours.

Not satisfied go to
Stage-II Head of department (meet at
preallocated time daily for
Grievant and Departmental
grievance handling). Reply in 3 days.
representatives

Decision unsatisfactory
Stage-III Grievance committee to decide in 7
days and report to the manager. If the
Grievant+
decision is unanimous, then it should
be implemented by the management.
Departmental representatives
Time limit is 3 days.

Decision not in time or not satisfactory

Stage-IV

Grievant and Departmental Appeal to management for revision. A

representatives week for appeal to be considered.

No agreement
Stage-V

Grievant Management may refer Voluntary arbitration within a week

to union after decision from STAGE-IV.

Fig. 4.2.8.1 Grievance Procedure

4. In case of different opinions of the members of Grievance Committee,
the whole episode shall be transferred to the manager for final
decision. In either case time limit for management to accept and
communicate its decision in 3 days.

5. If the decision is not in time and not satisfactory, the grievant has right
to appeal for a revision. And management shall communicate their
decision with in a week of workmen’s revision petition.

6. If no agreement is still possible, the union and the management may

refer the grievance to voluntary arbitration with in a week of receipt by
the worker of management decision.

7. Where a worker has taken up a grievance for redressal under this

procedure the formal conciliation machinery shall not intervene till final
step.

8. If a grievance arises out of an order given by management, the side

order shall be complied with before the women concerned invoke the
procedure laid down for redressal of grievance. If, however, there is
time lag between the issue of order nevertheless must be complied
with in the due date, even if all the steps in the grievance procedure
have not been exhausted.

9. Worker’s representatives on the grievance committee shall have the

right of access to any document connected with the inquiry mentioned
in the department. On the other hand, management representative
shall have right to refuse to show any document which they consider
to be of a confidential nature.

10. In case of any grievance arising out of discharge or dismissal of a

workman, the above mentioned procedure shall not apply. Instead, a
discharged worker shall have right to appeal either to the dismissing
authority or to a senior authority who shall be specified by the
management with in a week from the date of discharge.
4.2.9 Grievance Procedure in India

Till the enactment of Industrial Employment Act, 1946 the settlement of

day-to-day grievances of workers in India did not receive much attention.
Clause 159 Industrial Employment Act, 1946, emphasized to meet successfully
any type of grievance arising out of employment by the management. They
must show their moral honesty towards this. Under the factories Act, 1948 state
government had framed rules requiring Labour welfare officers to ensure
settlement of grievances; but this provision did not prove substantially helpful
because of the dual role of these officers.

In the past, a detailed grievance procedure worked out by mutual

agreement only in a few units. Most of these units did not have any machinery
for redressal of grievances. When day-to-day grievances piled-up, the industrial
disputes.

Davar describes grievance procedure at TELCO and Sandoz (India) Ltd.

The TELCO had developed detailed procedure for handling individual and
collective grievances since its very inception with the involvement of the
recognized union. The union representatives are involved in making decisions
at proper stages.

The company also has a detailed consultative machinery to resolve

problems relating to productivity, safety and welfare activities. There exits an
Industrial Relations Board consisting of equal number of top company
executives and union leaders to make final decisions regarding different
industrial relations issues.

The Sandoz (India) limited also recognized since the beginning that even
unimportant grievance might cause lack of employee interest and make a
individual a problem employee. The company stresses the settlement of
grievances at the foreman level. In the case of grievances against any
supervisory personnel, a higher official has to elaborate procedure for handling
grievances.

The procedure has several steps stated with putting the individual at
ease, listening with sincere interest, avoiding argument during discussion,
getting the story straight, getting all the facts, considering the individual view
point, willingness to admit mistakes, avoiding the “passing the buck”, providing
the benefits of doubt, avoiding “snap judgment”, timing decisions and taking
prompt decisions.

4.3 SUMMARY

The various aspects of the complex topic, Discipline, positive and

negative dimensions of discipline have been examined in the present chapter.
However, in a particular situation, it is the manager, who has to apply his mind,
taking into consideration the context and the environment and then decide on
the punishment. The managers prerogative is tempered justice, the holding of
the enquiry following the complete procedure is a very important aspect in entire
process. Enforcement of discipline and the award of a punishment is very much
the responsibility of a manager. Therefore a manager has to be aware of a
variety of approaches and use the appropriate one at the appropriate time.

While describing the nature of grievances, attempt has been made to

define grievance and indicates its causes and symptoms. The major
determinant of grievance includes the management practices, personal factors
and personality trait of an employees and union strategies and practices.
Management literature provides varied techniques to manage grievances
effectively. There is arrangement for model grievance procedure under the code
of discipline.

4.4 KEYWORDS

Strike - Ceasation of work by employees

Lockout - Lock down the premises of workers

4.5 QUESTIOS

1. What is discipline? Describe the various types of discipline.

2. What is meant by discipline? Discuss the objective and prerequisites

 for discipline.

3. “Too often discipline is thought of only in the negative sense. In

reality, positive discipline is more effective and plays a larger role in
business.” Discuss the statement and point out the principles to be
borne in mind while taking the disciplinary action.

4. Explain the procedure for taking disciplinary action.

5. Define grievance. Why do grievances arise?

6. Describe the grievance redressal machinery.

7. Write a short note on :

(a) code of discipline

(b) Hot-stove Rule
(c) Principle of natural justice
(d) Grievance
(e) Misconduct

8 What are the major determinants of grievance? How can you manage
grievance in organizational setting?
UNIT-2ND

NEGOTIATION AND COLLECTIVE BARGAINING

STRUCTURE

5.0 Introduction

5.1 Presentation of Contents

5.1.1 Scope of collective bargaining.

5.1.2 Characteristics of collective bargaining.

5.1.3 Objectives of Collective Bargaining

5.1.4 Types of Collective Bargaining

5.1.5 Process of Collective Bargaining

5.1.6 Prerequisites for Collective Bargaining

5.1.7 Collective bargaining between developed and developing

countries - A comparison

5.1.8 Collective bargaining in India.

5.1.9 Role of collective bargaining in tea plantations in Tamil Nadu – A

case study

5.1.10 Collective bargaining in Indian Railways – A case study

5.2 Summary

5.3 Keywords

5.4 Self Assessment Questions

5.5 References/Suggested Readings

5.0 OBJECTIVE

This lesson is intended to familiarize the student with

 the concept of collective bargaining

 strategy & tactics of collective bargaining

 the process and prerequisites for collective bargaining

 explore factors that contribute to successful agreement

5.2.1 INTRODUCTION

Industrial Relations is inherently a bipartite relationship. Parties to this

relationship include union and management, representing workers and the
employers, respectively. Similar to other relationships, the union and
management relationship is also highly fragile and complex. It is because of the
divergence of interests, perspective, expectations, value systems and goals of
the two parties. Consequently, there is a immense possibility of
misunderstanding and conflict at any point of time in organizational setting over
the terms and conditions of employment. As the organization find it difficult to
survive and grow in an environment of conflict and misunderstanding, it is
desirable that both the parties sit together to resolve their differences and
conflicts through mutual discussions and negotiations without the intervention
of the third party. This process of resolving the differences between union and
the management in the absence of any third party may be called as collective
bargaining.

Perhaps, the term “Collective Bargaining” was identified by Sydney and

Beatrice Webb in 1897. Probably, it means, “to bar the gains (of others),
collectively.” Collective Bargaining – Contract Negotiation and administration –
involves the relations between employers operating through their
representatives and the organised labour. It can be defined as the process
through which representatives of management and union meet to negotiate a
labour agreement. This means that both management and labour are required
by law to negotiate wages, hours, and terms and conditions of employment “in
good faith”. Good faith bargaining is a term that means both parties are
communicating and negotiating and that are being matched with counter
proposals with both parties making every reasonable effort to arrive at
agreements. It does not mean that either party is compelled to agree to a
proposal.

According to Harbinson, collective bargaining is “a process of

accommodation between two institutions which have both common and
conflicting interests.” The Asian Regional Conference of ILO held in 1953,
asserts that collective agreements are usually the best measures for the
determination and adjustment of wages and that attempt should be made as
early as possible to develop systems of collective negotiations based on free
associations of employers and workers.

In the National labour Relations Act of the United States, collective

bargaining finds a place. The Act, in section 8(d), defines collective bargaining
as “the performance of the mutual obligation of the employer and representative
of the employees to meet at a reasonable time and confer in good faith with
respect to wages, hours and other terms and condition of employment, or the
negotiation of an agreement, or any question arising thereunder, and the
execution of the written contract incorporating any agreement reached if
requested by either party, but such obligation does not compel either party to
agree to a proposal or require the making a concession.”

5.2 PRESENTATION OF CONTENTS

5.2.1 Scope of Collective Bargaining

The scope of collective bargaining is quite vast because of the delicacy

of the employer, employee relationship, changing necessity of the organization
and its employees, changes in the business environment and competition with
in the industry and across industry.

According to Monappa, the scope of collective bargaining agreements

now covers issues such as wages, bonus, overtime, paid holidays, paid sick
leave, safety wear, production norms, hours of work, performance appraisal,
workers participation in management, hiring, fixing of job evaluation norms and
modernization. The scope of collective bargaining varies from organization to
organization and industry to industry depending upon existence of strong and
matured union and its leadership trust and confidence between union and
management, past history and present status of organization with respect to
negotiation and their implementation.

5.2.2 Characteristics of Collective Bargaining

Randle observes: “A tree is known by its fruit. Collective bargaining may

best be known by its characteristics.”

The main characteristics of collective bargaining are:

1. It is a group action as opposed to individual action and is initiated through

the representatives of workers. On the management side are its
delegates at the bargaining table; on the side of workers is their trade
union, which may represent local plant, the industry membership or
nation-wide membership.

2. It is flexible and mobile, and not fixed or static. It has fluidity and ample
scope for a compromise, for a mutual give-and-take before the final
agreement is reached or the final settlement is arrived at.

3. It is a bipartite process. The employers and the employees are the only
parties involved in the bargaining process. There is no third party
intervention. The conditions of employment are regulated by those
directly concerned.

4. It is a continuous process which provides a mechanism for continuing

and organised relationships between management and trade unions.
“The heart of collective bargaining is the process for a continuing joint
consideration and adjustment of plant problems.”

5. It is industrial democracy at work. Industrial democracy is the

governance of labour with the consent of the governed workers. The
principle of arbitrary unilateralism has given way to that of self-
government in industry. Collective bargaining is not a mere signing of an
agreement granting seniority, vacations and wage increases. It is not
 a mere sitting around a table, discussing grievances. Basically, it is
democratic: it is a joint formulation of company policy on all matters
which directly affect the workers.

6. Collective bargaining is not competitive process but is essentially a

complementary process, i.e. each party needs something that the other
party has, namely, labour can make a greater productive effort and
management has the capacity to pay for the effort and to organize and
guide it for achieving its objectives.

In the words of Davey: “Collective bargaining is a complex process. It

involves psychology, politics and power of the work group. It frequently involves
a contest between sovereign institutional entities whose survival requirements
are, in some instances related and in other instances, independent of, or in
conflict with, one another.”

5.2.3 Objectives of Collective Bargaining

The objectives of collective bargaining, according to the Guide, include

the recognition of union as an authority in the workplace, improvement of
workers standards of living and enlargement of their share in the profit of the
enterprise, expression of the worker’s desire in a concrete form to be treated
with due respect and attainment of democratic participation in decision
influencing their working conditions, development of orderly practices for
sharing in these decisions and settlement of disputes which may stem in the
day-to-day working of the enterprises and accomplishment of broad general
objectives including defending and promoting the workers interest through out
the country.

According to DeCenzo and Robbins, the objective of collective

bargaining is to agree upon an acceptable contract to management, union
representative and the union membership. The purpose of collective bargaining
is to attain industrial peace not at any price. Rather, it aims at the commonly
held goals of a free society. In fact, the major function of collective bargaining
is to generate pressures for enhancement of the dignity, worth and freedom of
individual workers.
5.2.4 Types of Collective Bargaining

Collective bargaining can be classified on different basis. It can be

classified in terms of level of work place as “plant or work place bargaining”
between the shop stewards and the plant management representatives.
Moreover, at the level of enterprise, there may occur “company bargaining”
between representatives of union(s) and management. Further a “national
bargaining” may occur at the level of industry between the representative of a
union or a federation of unions and those of employer’s association or
federation of employer’s associations.

It may be noted that some times there occurs “effort bargaining” where
the amount of work to be accomplished for a predetermined wage becomes
negotiable alike the wage itself. In addition, there is also a trend of “productivity
bargaining” irrespect of financial system involved. Productive bargaining is a
process by which employers minimize or at least or stabilize unit labour cost by
getting more effective work done and by which employees obtain greater
rewards for doing it.

Bargaining can be “formal” as well as “informal” forms. Formal bargaining

involves only very limited range of issues including basic wage rates and basic
conditions of work, the informal bargaining may embrace the wider issues such
as financial incentives, disciplines, work practices, recruitment and redundancy.

5.2.5 Process of Collective Bargaining

Collective bargaining has two facets:

a) The negotiation state; and

b) The stage of contract administration.

The process of collective bargaining involves six major steps (also see
in fig. (5.3.1)
 1. Preparing for negotiations

2. Identifying bargaining issues.

3. Negotiating

4. Settlement and contract agreement

5. Administration of the agreement.

As in the figure (5.3.1), the environment influences the collective

bargaining process. One bargaining environment is the type of bargaining
structure that exists between the union and the company. The four major types
of structures are:

(i) one company dealing with a single union,

(ii) several companies dealing with single union,

(iii) several unions dealing with a single company, and

(iv) several companies dealing with several unions. The bargaining

process is comparatively simple and easy if the structure is of
first type and becomes difficult and complicated in the
remaining.

Negotiation Stage

At the negotiation stage, certain proposals are put forward which explore
the possibility of their acceptance and have the way to mutually agreed terms
after careful deliberation and consideration. The negotiation stage itself involves
three steps namely preparation for negotiation, identifying bargaining issues
and negotiating.

1. Preparation for negotiation

Careful advance preparations by employers and employees are necessary

because of the complexity of the issue and the broad range of topic to be
discussed during negotiations. Effective bargaining means preparing an orderly
and factual case to each side. Today, this requires much more skill and
sophistication than it did in earlier days, when shouting and expression of strong
emotions in smoke filled rooms were frequently the keys to getting one’s
proposals accepted.
 Environment

Preparing for
Negotiation

Bargaining
Issues

Negotiating

Yes
Negotiation Overcoming
Breakdown Breakdowns

Reaching the
Agreement

Ratifying the
Agreement

Administration of
the Agreement

Source: Adapted from R. Wathe Mondy and Robert M. Noe III, Personnel: The Management of
Human Resources, p. 47.

Fig. 5.2.5 The Collective Bargaining Process

From the management side the negotiations are required to:

i. Prepare specific proposal for changes in the contract language.

ii. Determine the general size of the economic package the company
proposes to offer.

iii. Prepare statistical displays and supportive date for use in negotiations,
and

iv. Prepare a bargaining book for company negotiations, a compilation of

information on issues that will be discussed, giving an analysis on the
effect of each case, its use in other companies, and other facts.

From the employee’s side, the union should collect information in at

least three areas:

 The financial position of the company and its ability to pay.

 The attitude of the management towards various issues in past

negotiation or inferred from negotiations in similar companies.

 The attitudes and desires of the employees.

The other arrangements to be made are selecting the negotiators from

both sides and identifying a suitable site for negotiation.

2. Identifying Bargaining Issues:

The major issues discussed in collective bargaining fall under the

following four categories:

a. Wage related issues:

This includes such topics as how basic wage rates are determined, cost
of living adjustments, wage differentials, overtime rates, wage
adjustments and the like.

b. Supplementary economic benefits:

These include such issues as pension plans, paid vacations, paid

 holidays, health insurance plans, retrenchment pay, Unemployment
pension, and the like.

c. Institutional issues:

These consist of the rights and duties of employers, employees, unions,

employee’s stock ownership schemes, and the like.

d. Administrative issues:

These include such issues as seniority, employee discipline and

discharge procedures, employee health and safety, technological
changes, work rules, job security, and the like.

While the last two categories contain important issues, the wage and
benefit issues are the ones which receive the greatest amount of attention at
the bargaining table.

3. Negotiating:

Preparations have been made and issues being identified, the next
logical step in collective bargaining process is negotiation. The negotiating
phase begins with each side presenting its initial demands. The negotiation
goes on for days until the final agreement is reached. But before the agreement
is reached, it is a battle of wits, playing on words, and threats of strikes and
lockouts. It is a big relief to every body when the management representatives
and the union finally sign the agreement.

The success of negotiation depends on skills and abilities of the

negotiators. At times, negotiations may breakdown even through both the
labour and the management may sincerely want to arrive at an amicable
settlement. In order to get negotiations moving again, there are several
measures that are usually adopted by both the parties, which sometimes even
includes unethical measures:
 a. Through third party intervention such as arbitration and
adjudication,

b. Unions tactics likes strikes and boycotts, and

c. Management strategies such as lockouts, splitting the union,

bribing union leaders and using political influence.

(B) Contract Administration

When the process of negotiation has been completed, it is time to sign

the contract, the terms of which must be sincerely observed by both the parties.
The progress in collective bargaining is not measured by the more signing of
an agreement rather, it is measured by the fundamental human relationships
agreement. Once an agreement is signed, both the trade union and the
management are required to honour it in letter and spirit. The union officers and
company executives should explain the terms and implications of the contract
to employees and supervisors with a view to ensuring that the day to day
working relationship between workers and management is guided by that
contract. It is important that contract must be clear and precise. Any ambiguity
leads to grievances or other problems.

The whole process of contract administration is identified by two steps,

namely settlement and contract agreement i.e. settlement of disputes by
collective bargaining and find a solution as an contract agreement between
union and management and administration of agreement i.e. implementation
according to the letter and spirit of the provisions of the agreement.

5.2.6 Prerequisites for Collective Bargaining

1. There should be careful selection of negotiation teams and issues.

The team should have a mixed composition, including productions
finance and IR experts. It should be headed by personnel and
industrial relations specialists of sufficient seniority, who has
adequate authority to commit the enterprise and take decisions,
without frequent referrals to top management. For instance, many
organizations have a vice-president personnel or director-personnel
 heading the team with a brief to commit the organization up to a
certain amount which can be spread out depending on the
negotiating depending on the negotiating situation based on union
demands.

2. It is important for the management to recognize the union and to

bargain in more good faith, in unionised situations. This can put
pressure on the union to formulate plans and demands in a
systematic way. Strong unions and progressive managements can
help create an atmosphere of mutual confidence.

3. The negotiating teams should have open minds, to listen and

appreciate the other’s concern and point of view and also show
flexibility in making adjustments to the demands made.

4. The need to study adequately or do ‘homework’ on the demands

presented, i.e. to gather data on wages and welfare benefits in similar
industries in the geographical area.

5. Both the management and union should be able to identify

grievances, safety and hygiene problems on a routine basis and take
appropriate remedial steps.

6. Trade unions should encourage internal union democracy and have

periodic consultations with the rank and file members.

7. Trade unions should show their equal concern regarding both

quantity of work output as agreed upon and quality of work. They
should show their full commitment towards the viability of the firm and
its products/services.

Periodic discussions may be necessary between the management and

the unions to interpret the provisions of the contract and clarify doubts.

5.2.7 Collective Bargaining in Developed and Developing Countries: A

Comparison

Based on a discussion initiated by Morris Weisez at a meeting of the

Delhi Management Association, Chatterjee presents a comparative analysis of
bargaining behaviors in developed and developing economies. As it emerged,
the bargaining behaviour in a developing economy and in a developed economy
may be different in their approach: ideological, political and social.

Ideological Differences

In developed countries, labour has gained considerably in earning and

in accomplishing a standard of living. What is shared with the employer is a
cake of big size. Thus, labour, becomes interested in a continuous relationship
with the employer rather than in frequent conflicts. However, in developing
countries the cake to be shared is of a small size and the conflict is frequent
and has at times ideological flavor. In several of these countries the habit of
conflict still persists and the idea of class struggle is still appealing to labour.

Political Differences

In developed economies, the industrial revolution emerged much earlier.

In some of them, along with the revolution, some kind democratic government
was also formed. This has happened in USA and U.K. The democratic
government provided gradually the political base to labour which it used for its
economic gains. However, the labour organizations, try even today to keep the
trade union activities separate from their political activities. This is true even of
the UK and France. On the other hand, in developing economies, there may be
immense interest in political activities on the part of labour than in activities
which directly promote heir economic gains.

Social Differences

In developed countries, practically all-available manpower is used

for production. There is generally full employment. As productivity is high
because of superior technology, less labour is needed. In this process labour
become expensive, both highly skilled and highly paid. This explains the
migration of cheap labour from less developed countries to developed
countries. Within a developing country itself, there may be certain pockets of
prosperity which similarly attracts labour from less developed areas. For
instance, the green revolution in the Punjab caused for some time a shortage
of labour. In developing countries much more workers are available than that
can be utilized. Accordingly, efficiency tends to be low.

Some Possibilities Common to both Developed and Developing

Countries

Since the bargaining leads to the joint decisions to regulate working

conditions, wage etc., generally it makes for peace and harmony in both
developed and developing countries. This is likely to occur especially where
such an agreement is entered into with a recognized trade union having a
majority following. These joint decisions establish a kind of rule of law in labour-
management relations and remove arbitrariness on the part of the employer or
militancy on the part of the workers. In an industry where such bargaining take
place, a sound mutual understanding is achieved between parties. Each
understands the position of the other and a genuine negotiation takes place on
the basis of such mutual understanding. Some of e.g. quoted over here are, the
TISCO agreements, agreements between the Textile labour Association and
Mill-Owners Association of Ahmedabad.

Collective bargaining with its flexible and adjusting behaviour opens with
the knowledge and consent of all the parties concerned. Thus, under certain
conditions some clauses of agreement can be opened for negotiation.

Collective bargaining reflects a willingness approach towards dispute

resolution. So that it is considered as constructive approach towards
organizational conflict.

5.2.8 Collective Bargaining in India

Historical Development

Collective Bargaining on voluntary basis in India has developed after

independence, although we find some examples of collective bargaining earlier
in textile industry in Ahmedabad. As Sur M. observes, this system is a result of
mutual voluntary effort of certain management and trade unions that realized
that disputes can be solved easily by discussion rather than industrial court.
The pioneer collective agreements were those made by Dunlop Rubber
Company in West Bengal in 1947 for three years embracing the three
categories of employees. Thereafter, the Bata Shoe Company in West Bengal
made its agreements for two years incorporating a grievance procedure. In
1951, the Indian Aluminum Company made its five-year agreements with
employees union in Belur.

The Imperial Tobacco Company negotiated during 1952-54 one of its

three series of agreements ranging from four to give years in Bombay and
elsewhere. During 1955-56, numerous collective bargaining agreements were
made in the Tata Iron and Steel Company, Jamshedpur; lever Brother, Calcutta;
the Hindustan lever, Bombay; National Newsprint and Paper Mills Nepanagar.

A study conducted by the Employers Federation of India in 1962

indicates that in all 114 agreements were made during 1954-61 by 49
enterprises involving nearly 4.5 lakhs of employees. These agreements largely
related to the issues of pay and allowances as well as annual bonus. It may be
noted that collective bargaining agreements are largely obtained in private
sector than public sector exception of Railways.

Emergence of Independent Unions and Unit Agreements

The emergence of ‘independent’ trade union leaders changed the scene

of collective Bargaining. Independent Union leader like R.J.Mehta and Datta
Samant in Mumbai were a big challenge to the centralized trade unions. The
trade union movement entered a more militant phase. The slowly changing
equations with in the industrial setting were bringing about a change in employer
and employee relationship.

Traditional industries like textiles and jute proved totally uneconomical

and their industrial relations were deteriorating. It witnessed the historic strike,
which was not success. Its failure changed the scene of trade unionism in India
as well as the equations between employers and employees. Industry level
wage negotiations were reducing and were being replaced by unit level
agreements. This resulted in increase of independent unions.
Unions as Irritants than Threats

During the regimes of Rajiv Gandhi and V.P.Singh, when economic

liberalization was introduced, there was depoliticalization of the working class
movement. It is evident from the fact that out of 554 seats of parliament, only
40 seats were decided by workers votes. The 1980’s witnessed the weakening
of labour movement as it completely lost its focus. The higher failure rate of
strikes and the rising frequency of lockouts were responsible for fasts
deteriorating labour scenario and unions were seen more as an irritant than as
a serious threat to the employers.

Changed Concept of Collective Bargaining and Compromise

There was a big change in the concept of collective bargaining in 1980’s,

though it actually began in the 1960’s. The new concept was based on the
phenomenon of linking of wages to productivity spread to all major industries.
In Premier Auto, the workers were able to accomplish six-fold increase in
production during 1978 to 1991 without any major changes in technology or
significant capital investment with the existing staff.

Growing Employer Activism and Dwindling Fortunes of Employer Union

It is evident from the fact that between 1976 to 1996 the number of
employees unions rose only by 76 percent. With the decreased number of
labour unions, the need to bring reforms in laws was felt. The labour unions
were not happy with this industrial sector reforms due to economic liberalization.
It appears that the employers associations become more assertive in direct
contrast to the dwindling fortunes of the employees unions.

Need for Reorienting Unions Goals

As the situation have not changed significantly. Unions must reorient

their goals and aspirations. Unions are emerging at floor level. But it is restricted
to organized sector only. So there is a need to reorient union’s goals in
unorganized sector to improve wages and quality of life using collective
bargaining.
Difficulties

There are two major difficulties, which include prerogative of

management, and multiple and rival unions. The term ‘prerogative’ implies that
the unrestricted right of the sovereign. Indeed, theoretically, management
prerogative is peculiar right to do what it likes with the men, metal and money
that it employs. However this concept is changing significantly. In a socialistic
democracy, labour is considered as a partner in the common table of
development. Moreover, management prerogative has no sense in the face of
new developments in the field.

Another difficulty is caused due to the rival trade unions. Trade unions
are more political than economic in character. The employers frequently exert
a pressure on the rival union and to sign the agreement, which is already being
negotiated with representative union. Because they want to avoid conflict as
well as adopt a tactful approach to take the employees in conference who are
already confused by the conflict itself. The management may recognize all
unions, negotiate separate agreements with them and persuade them to accept
identical clauses in different agreements. Although unions are largely instable
and subject to shifting allegiances and political influences, the negotiation
should concentrate on the economic issues which is major concern of the rank
and file members.

What contributes to successful agreements?

There are several factors examined by Sur influencing successful

collective bargaining in India. The size of the company has no relevance to the
effective bargaining because it is frequently conducted at the unit level. Both
large as well as small enterprises can have successful collective bargaining
because at plant level, they have through under standing of local events.
Moreover, while linking wages to productivity, some employers have provided
the unions and employees a realization of their role in industry. Rational and
technological changes contribute to voluntary agreements. The urgent need for
increased productivity has forced management to find out measures to
introduce changes with the minimum of conflict and provisions for retaining
and absorption of surplus workers in other jobs. The introduction of collective
bargaining has been more effective in a relatively new industry.

In addition, the introduction of new management with knowledge of

production process and labour relations and a willingness to experiment with
them have facilitated the development of effective collective bargaining. A
formal recognition of the union should also have a stable and responsible
leadership, recognition of the function of management and a desire to discuss
problem contribute to effective bargaining process and agreement. Finally,
personalities of the leaders on both sides form effective facilitators of collective
bargaining. Thus, there are many factors conducive to collective bargaining.
However, the management must give a lead towards the development of
effective collective bargaining.

5.2.9 Role of Collective Bargaining in Tea Plantations in- Tamil Nadu - A

Case Study

The trade union movement in South Indian Plantations in general, and

in Tamil Nadu Plantations in particular, is of recent origin. The entry of political
parties and the en-actment of the Plantations Labour Act, 1951, has contributed
for the growth of the plantation labour unions in tea plantation in Tamil Nadu.

In Tamil Nadu, at present, the tea plantation workers are affiliated under
the banners of the three major national trade unions including INTUC, AITUC,
and HMS. Besides, the two state level political parties (namely, the DMK and
AIADMK) have also their own unions. Whenever negotiations take place,
representatives of 14 unions, from all districts tend to participate..

In Tamil Nadu, next to agriculture, tea plantations are the largest single
employer providing regular employment to 1,00,000 rural unemployed.
Plantation workers of the state are the best-organised sections of rural workers.
Plantations being labour intensive, the share of wages is an important element
of cost for the planters. The important wage institutions such as Minimum Wage
Fixation and Tripartite Wage Boards till 1968 influenced their wages. However,
when the two institutions failed to provide not even a need
based minimum wage, the workers started looking for a better alternative
system. Accordingly, there emerged bipartism and tripartism as wage setting
forces since 1969. In this section based on Meenakshisundarajan’s study, an
attempt has been made to analyze the role of collective bargaining in the tea
plantations in Tamil Nadu since 1969 embracing the period of 25 years (1969-
1994).

Wage Settlements in Tea Estates

As per the Wage Board recommendations, the wages of the tea

plantation workers were to remain in force till December 31, 1970. However, in
the face of workers’ agitation, the employers were forced to enter into a wage
settlement in June 1969. Inclusive of this settlement, a total of 15 negotiated
settlements took place between the Planters’ Association of Tamil Nadu and
the 14 Union leaders representing the tea workers in Tamil Nadu.

Apart from these settlements, six agreements relating to incentive rates

for pluckers, and payment of annual bonus were also entered into between the
parties. For arriving at these settlements and agreements, the workers had to
resort to strike threats. Out of fifteen, nine settlements were signed only after
the workers actually struck work. These were caused by steep rise in the cost
of living index. During the period 1969-89, cost of living index had increased
annually at the rate of 45.87 with a growth rate of 9.43, which were statistically
significant. Due to the wage settlements, the dearness allowance part of the
wage component had been increasing more proportionately than the increase
in basic wage rate. Accordingly, the present day wage structure resembles a
pyramid of which the main base is the ever growing dearness allowance
component, whereas the basic wage rate had become progressively less
significant. For instance, the share of basic wage in the total wage had declined
from 72.76 percent in 1975 to 44.44 percent in 1989. On the other hand, the
dearness allowance component had increased from 27.24 per cent to 59.56 per
cent in the same period. Thus, the disproportionately large share of dearness
allowance had grossly undermined the basic purpose underlying the structure
of wages.
Money and Real Wages

Due to these settlements, the percentage increases in money wage for

the field workers were at the rate of Rs. 732 for men, Rs. 917 for women, Rs.
774 for adolescents and 880 for children. These increases did not show the real
position. It is because the real wages had not increased much. The percentage
increase of real wages was at the rate of 38 for men, 69 for Payment of Bonus.

Taking into account the past industry wise settlement on bonus, a long
term agreement was reached in respect of the year 1968,1969 and 1970
providing for bonus at 9 percent, 8.75 percent and 8.75 percent respectively to
the workers in the tea estates as per the settlement of 1969. In the mean time,
on 3’d September 1977, the Payment of Bonus (Amendment) Ordinance, 1977
was promulgated which was later replaced by an Act according to which the
minimum bonus payable was fixed at 8.33 per cent whether an establishment
made a profit or not.

Trend and Growth Rate Estimates

The trend and growth rate estimates for the area in tea shows an annual
increase of 194.01 hectares with a compound growth rate of 0.54, production
of tea at the rate of 2.135 million kilograms with a growth rate of
3.04 and the yield per hectare increased annually at the rate of 48.28 kilograms
with the compound growth 2.50. The income to he planter showed an annual
income of Rs. 2,951 per hectare with compound growth rate of
10.69. All these figures are statistically significant.

Average Daily Employment

For this period also, the daily employment in tea plantations in the state
showed significant increase from 77,983 to 85,145 (an increase of 9.18
percent). This significant increase was due to a very significant increase in the
area under tea (11 percent). Thus, it also confirms the contention that optimum
land-labour ratio was not at all maintained and the plantations could have
employed more labourers. The trend and growth rate estimates of the labour
employed show that it annually increased at the rate of 807 with a growth rate
of 1.01.
Significance of Collective Bargaining as a Wage Setting Force

The present study on the role of collective bargaining shows, that of the
three institutional forces which influenced the process of fixation of wages in the
tea plantations, collective bargaining had a major and positive influence. Thus,
the period from 1969 to 1989 can be considered as the best period of wage
fixation for the workers in the tea plantations. The researcher also conducted
the analysis to prove this point in terms of the wage structure and wage rates
in real terms.

Wage Structure

The minimum wage fixation machinery devised a wage structure

consisting of a basic wage and dearness allowance, but in the
recommendations, only an all inclusive wage rate was proposed with no
provision for protecting the workers from escalating cost of living index. The
same is the case with the award of the Wage Board though it recommended
annual increase of wages but with a ceiling. However, from the second
negotiated settlement of 1975, the basic wage rate and variable dearness
allowance were fixed. Again, the rates of dearness allowance were increased
in the settlement of 1978. The dearness allowance rates were enhanced
upwards during the settlements of 1980 and 1987. Accordingly, in addition to
the revision of dearness, in an effort to neutralize the increase in the cost of
living, upward revision of basic wage rates were accomplished at least once in
two years in a total of 12 wage revisions.

Wage Differentials and Rates

In making recommendation on the wage rates, both minimum wage

fixation and wage board award had recommended lower rates for women
workers in field and factory work. Labour unions had been demanding equal
wages for equal work irrespective of sex differential. Yet this was denied.
However, this long standing demand was met and same rates of wages were
fixed for men and women under the settlement of 1978.
 It was under the collective bargaining that both real and money wages
had registered significant increases. The alarming rate of rise in the cost of
living index was also a reason for this trend. The period of collective bargaining
revealed marked increase in the real wage rates of all categories of workers.

Conclusion

As Meenakshisundarajan concluded, there were a series of wage

settlements. The result of these settlements was a considerable increase in
money wages and separate calculation of basic wage and dearness allowance.
Payment of bonus and other benefits became possible.

However, a close scrutiny of all these wage settlements reveals that

despite their strength, the workers could not accomplish all their just demands
during the negotiations and some important issues were postponed from
settlement after settlement till these issues became the cardinal points. At
times, the negotiations went on for long and the workers forced to agree for
postponement of some of their demands. Though it is claimed by the planters
that they have been paying fair wages to the workers, it is a fact that cent
percent neutralization is yet to be provided. Compared to the periods of
previous wage institutions, the period of collective bargaining represents a more
alarming rate of increase in the cost of living index, the result of which was that
the increase in the real wage of the workers during the last two decades was
only marginal.

Further, during this period, the prosperity of the plantations was far
higher than the earlier periods. Accordingly, it is only justifiable that the workers
should at least have been paid a need based minimum wage in tune with the
increase in cost of living. It is sure that, as long as the present system of wage
settlements continues, there is no possibility for the workers to earn a wage,
based on their minimum requirements.

Therefore, under the circumstances, the workers have to continuously

fight in order to protect the existing level of their living standards. They are not
likely to demand the wage rates based on justifiable calculation of minimum
requirements. A need-based system of wage payment is yet to be evolved and
it remains a dream for the tea plantation workers.
5.2.10 Collective Bargaining In Indian Railways - A Case Study

As Subba Rao and Narayana based on their study (described in this

section) observe, the economic liberalizations announced by the Government
of India and consequent programmes implemented could not shake the railway
industry in India. Of course, these programmes could bring the management
and trade unions of Indian Railways closer to each other by changing their
attitudes to meet the challenges of competition from other modes of
transportation and thereby create favourable climate for collective bargaining
and participative management.

The Government of India adopted a number of industrial relations

strategies to facilitate the process of industrialization. It accorded legal
recognition to collective bargaining in 1952, which had been in practice since
1920. The scheme of workers’ participation in management adopted by the
government (Resolution No. S 61011 (4) 75-DK-l (B)) on October 30,1975 as
part of its Twenty point Economic Programme, forms one such industrial
relations promotion strategy. The important objectives of the scheme were
reduction of industrial conflict and improvement of productivity.

Three schemes of collective bargaining and workers’ participation in

management are in operation at present in Indian Railways (viz., Permanent
Negotiating Machinery, Joint Consultative Machinery and Compulsory
Arbitration and Participation of Railway Employees in Management - formerly
known as Corporate Enterprise Group).

The Structure of Indian Railways

Indian Railways, the core of nation’s transport system forms Asia’s

largest and World’s forth-largest rail system. It is largest employer in the country
with an average employment of 1.60 million by the end of 1994-95. It is also the
largest undertaking in the country with an invested capital of Rs. 177, 125 million
and with route kilometers of 82.458 (by the end of 1991- 92) spread
geographically throughout the length and breath India. Railways in India is
owned and managed by the Union Government except a few branch lines on
the narrow gauge which are owned and managed by private companies and
municipal bodies. The management responsibilities of the Railways vest with
the Railway Board headed by a chairman who is a functional member. It is
divided into nine zones, each headed by a general manager. The chief
personnel manager at this level assists the general manager in bargaining and
workers’ participation the management. Every zone is divided into several
divisions headed by a divisional manager who is helped by a division personnel
officer.

Formation and Recognition of Trade Unions

In view of the failure of individual unions and to strengthen the railway

trade union movement, the concept of an All India Railway Employees Union
was first evolved in the year 1921. Accordingly, the All India Railwaymen’s
Federation (AIRF) with the, affiliation of union at company level was constituted
in 1925. The Federation was granted recognition by the Railway Board in 1930.

The railway management was criticised for refusing recognition to most

of the in unions at company / zonal level with large-size membership during
1924 and 1947. The plethora of rules imposed made recognition a sore point
for the unions.

A rival federation emerged in 1948 under the leadership of the Congress

Party (by dividing the workers). It was designated as The Indian National
Railway Workers the Federation (INRWF). This federation was also recognised
by the Railway Board in the same year. The formation and recognition of
INRWF was questioned by the AIRF. With the formation of INRWF grave
rivalries came into existence in the railway trade union movement. This led to
the formation of two rival unions in each zone.

After the co-existence of the two rival camps for about four years, the
AIRF and of the INRWF were merged into a new federation called National
Federation of Indian Railwaymen. However, this unity could not exist for long
and the federation was divided into All India Railwaymen’s Federation (AIRF)
and National Federation of Indian Railwaymen (NFIR). Thus, currently, there
are two recognised federations. AIRF and NFIR. Instead of improving industrial
relations, recognition of the second federation is responsible for inter-union
rivalries and non-settlement of grievances. This has hampered their bargaining
strength with the formation of craft unions.

Working of Permanent Negotiating Machinery and Joint Consultative

Machinery

In this section an attempt will be made to examine two schemes of

collective bargaining in Indian Railways including Permanent Negotiating
Machinery and Joint Consultative Machinery. Permanent Negotiating
Machinery (PNM) has been functioning at the Railway Board level, Zonal level
and divisional level since 1952, whereas Joint Consultative machinery (JCM)
has been functioning at the National level since 1967 and at the Railway Board
level since 1968.

The performance of’ PNM during the period 1991-92 to 1994-95

compared to that of 1970-71 to 1990-91 has been improved. The percentage
of issues settled in favour of employees to total was 29.48 during the period
1970-71 to 1990-91 and 33.41, during the period 1991-92 to 1994-95. This is
most probably due to the fact that the trade unions referred the issues like hike
in wages, dearness allowance, recruitment 991 promotions and transfers to the
PNM before 1991-92 whereas the issues relating to railway safety, gauge
conversion, employee training in business handling and passenger service,
competition with other modes of transport etc., were referred to the PNM by the
trade unions during and after 1991-92.

It has been charged that management before 1991 generally favoured

the NFIR while settling the issues; the percentage of items settled in favour of
the NFIR being 35.11 as against 25.45 percent in case of AIRF during the period
1970-71 to 1990-91. This further aggravated inter union rivalry between AIRF
and NFIR. It has been further charged that the machinery, which was set up to
resolve disputes and differences, was itself becoming the source of disputes
and differences. It is also observed that though the management continued
favouring NFIR while settling the issues during the period 1991-92 to 1994-95
also, the scheme was not targeted for criticism as the percentage
of items settled in favour of NFIR being 33.23 as against 31.14 percent in case
of AIRF during the period. This is mostly due to the fact that AIRF referred more
of the issues relating to passenger service, business handling, etc., to the PNM
meetings.

Although it is claimed that the Joint Consultative Machinery did not

contribute inter-union rivalry as the management met both the federations jointly
and its functioning was relatively better, it could also not solve major problems
of workers. Thus, the functioning of the two machineries did not lead to
settlement of major grievances of the workers including shortage of staff of
crucial categories such as station masters, drivers, guards and train examiners
(Railway Accidents Inquiry Committee, 1978) leading to overload of work of the
existing employees and abnormal delay in confirmation of services resulting in
employees’ dissatisfaction. The most crucial demands employees for parity of
wages with those of other public sector organizations, payment of bonus based
on the Payment of Bonus Act, 1965, extension of employee benefits and
services adequately to all employees have not been accomplished at the time
of the study. The NFIR criticized that the management created crisis in industrial
relations by not implementing the agreed decisions regarding re- classification
of staff and cadre structuring. Non-implementation of the decisions of the cadre
and restructuring of the committee created a deadlock in the functioning of PNM
and JCM during the period from August, 1982 to July 1983.

Both the federations criticised that from the management side meetings
were conducted with least seriousness; there was always a tendency to brush
off subjects without resolving the issues. More than anything else, bureaucratic
and highhanded behaviour of the officers had almost spoiled the purpose for
which these machineries were constituted. The federations further felt that the
machineries did not accomplish their objectives, because of the non-
cooperation on the part of the management.

The management, on the other hand, holds that absence of cooperation

and coordination between the federations in conducting meetings were
responsible for the limited success of PNM and JCM. It has been charged that
industrial unrest arose It of the management’s attitude towards the labour in
respect of amicable settlement their problems. It is observed that the JCM has
contributed to the inter-union cooperation after 1991 as both the unions referred
the items relating to the increase in productivity, strength of railways compared
to other modes of transport, energy conservation and modernisation. Again, the
management tended to seek the cooperation between the two unions in view
of the challenges posed by globalization.

Union-Management Conflicts

The failure of the Railway Management to settle employee problems

such as retrenchment of temporary staff, delay in confirmation, anomalies
arising out of the implementation of the recommendation of the First Pay
Commission and uniformity of conditions of services in all Zonal Railways was
responsible for conflicts and loss of 760.90 mandays per 1000 workers
employed during the period from 1950-51 to 1959-60.

High incidence of loss of mandays (0.81 million) during the year 1960-
61 was the result of non-settlement of the grievances including payment of
dearness allowance on the basis of the First Pay Commission’s
recommendations, grant of a national minimum wage, appointment of a
permanent wage board and recognition of unions. Strikes were launched during
the period from 1961-62 to 1973-74 (except in 1961-62, 1965-66 and 1966-67)
in order to demonstrate the discontent of the employees in the matter of wages,
dearness allowance and problems of the craft unions.

An All-India strike was organised in May, 1974 for 18 days due to the
absence of cooperation from the management regarding the demand for the
payment of bonus, parity in wages between railway employees and those in
other public sector undertakings, etc. This strike was launched by the AIRF and
all other unrecognized unions and federations. This strike resulted in a loss of
14.84 million of mandays. The inter-union rivalry between the AIRF and the
NFIR was also aggravated. Thus, the cooperation between the two recognised
federations and between the labour and management was altogether non-
existent during the period.
 However, it was observed that labour extended their cooperation to the
management during 1965-66 and 1966-67 despite their discontent regarding
economic standards and working conditions. The railway management stated
that labour also extended their cooperation during 1981-82 and 1985-86 in view
of the settlement of the problem of the payment of bonus and due to the
enlightened approach in the matters of cadre restructuring re-classification of
artisan workers and in issues raised by organised-labour, which were
pragmatically resolved. However, the railway unions felt that they extended their
cooperation to the management after 1979-80, though the management did not
implement the agreed decisions relating to the varied issues until July, 1983
which caused a deadlock of PNM and JCM meetings. However, craft unions
organised strikes in 1986-87. NFIR tended to criticise that .the management
was not interested in settling issues through consultation. However, it did not
participate in strikes because (as claimed) it strongly believed in consultation,
Thus, labour federations criticised that labour management cooperation in
Indian Railways before 1991 meant cooperation from the labour to the
management and vice-versa.

As Subba Rao and Narayana conclude, the challenges posed by the

economic liberalisations created a positive climate for cooperation between
trade unions and railway management. Trade unions and management have
taken initiative to discuss the issues for strengthening railways and cooperating
with each other consequently there were no industrial conflict in Indian Railways
after the liberalisation.

5.3 SUMMARY

While describing the nature of collective bargaining, attempt has been

made to present its definition, characteristics, objectives, functions, process
and types. The widening scope of collective bargaining embraces various
issues. The collective bargaining procedure involves variation, preparation,
stages, critical situations, drafting and designing of contract and contract
administration. It reveals several prerequisites for collective bargaining. It also
reveals several similarities and dissimilarities across developed and developing
countries. At present, trade unions are irritant rather than threat to
 management. Accordingly, concept of collective bargaining has changed with
growing power of employers and dwindling fortunes of trade unions.

5.4 KEYWORDS

Collective Bargaining - To bar the gains collectively

Class Bargaining - Bargaining for their own community

QUESTIONS

1. What is collective bargaining? What are its major functions?

2. Describe the nature and scope of collective bargaining?

3. Describe the characteristics & classification of collective bargaining.

4. Describe various strategies and tactics of collective bargaining.

5. Describe the procedure of collective bargaining.

6. Explain the major similarities and dissimilarities of collective

bargaining in developed and developing countries.

7. Explain the historical background of collective bargaining in India.

 UNIT-2ND

PARTICIPATIVE MANAGEMENT

STRUCTURE

6.0 Introduction

6.1 Presentation of contents

6.1.1 Meaning of Workers’ Participation in Management

6.1.2 Objectives and Aims of WPM

6.1.3 Forms of Employee Involvement and Participation

6.1.4 Kinds of Involvement and Participation of Employee at Different

Levels

6.1.5 Government Policies and Participation

6.1.6 Hurdles in the way of Workers Participation in India

6.2.7 Requirements for Successful Employee Involvement and

Participation

6.3 Summary

6.4 Keywords

6.5 Self Assessment Questions

6.6 References/Suggested Readings

6.0 OBJECTIVES

The present Lesson is an attempt to overview the concept of participative

management. After reading the Lesson the students will be able to understand:

 meaning, essence and objectives of Workers Participation in

Management (WPM)

 various forms, levels and varieties of WPM

 history and present scenario of workers participation in India

 government view point and efforts towards WPM

 hurdles in participative management

 requirements for successful employee involvement and participation

6.1 INTRODUCTION

It is almost a matter of common sense that human will take greater pride
and pleasure in their work if they are allowed participatory freedom in shaping
the policies and decisions which affect their work.

Management of the employment relationship has been subject to

significant change in the last two decades, as the process of globalization has
intensified competition in product and labour markets. In this context, modern
management theorists and practitioners have commonly emphasised the
importance of two-way communication and cooperation between management
and labour in determining the success of HRM strategy and maximizing
workplace efficiency. Cooperation relies upon building employee commitment,
and employee consultation and participation are intrinsic to this process.

Industrial democracy and participative management or workers’

participation in management, as it is popularly known, has gained recognition
in developed and developing countries. The concept is extension of political
process to workplace. It emphasizes that workers and employees should feel
that in their work they would be evaluated and respected as free persons of
equal value within the rules, order and discipline. In the atmosphere of co-
operation, mutual respect and tolerance, they should have the right to influence
conditions and measures that affect them directly and the enterprise as a whole.

The term ‘participation’ is derived from Latin word ‘participare’ that

means taking part or sharing. Sharing is a bilateral process involving
motivational and functional manifestations. The term workers’ participation
involves sharing, in an appropriate manner, the decision-making power with the
lower ranks of the organization. Participation has a unique motivational power
and a great psychological value. It generates a we-feeling among workers and
promotes harmony and peace between workers and management. When
workers participate in organizational decisions, they are able to see the big
picture clearly, i.e. how their actions would contribute to the overall growth of
the company. They can offer feedback immediately based on their experiences
and improve the quality of decisions significantly. Since they are involved in the
decisions from beginning, they tend to view the ‘decisions’ as ‘their own’ and try
to translate the rhetoric into concrete action plans with zeal and enthusiasm.
Participation makes them more responsible. They are willing to take initiative
and come out with the quality-suggestions and growth- oriented ideas. With the
feeling of being treated ‘as equals’ they begin to view the job and organization
as their own and commit themselves to organizational activities wholeheartedly.
Bilateral decisions help in bringing out radical changes in organizational
systems, plans and procedures more easily. Employees do not feel threatened
by such moves as they understand and appreciate the reasons behind such
‘strategic shifts’.

6.2 PRESENTATION OF CONTENTS

6.2.1 Meaning of Workers’ Participation in Management

The concept of workers’ participation in management is a broad and

complex one. Depending on the socio-political environment and cultural
conditions, the scope and content of participation may change. Various terms
have come to be used to denote different forms and degree of participation.
For example, joint consultation, labour-management cooperation, co-
determination, joint decision making, workers’ participation in industry and
workers’ participation in management. These terms or their variants have been
interpreted and explained differently. In any case, a common thread running
through all interpretations is the idea of associating employees in managerial
decision- making. The International Institute for Labour Studies defined WPM
as “the participation resulting from practices which increase the scope for
employee’s share of influence in decision-making at different tiers of
organizational hierarchy with concomitant assumption of responsibility”.

In the words of Gosep, Workers’ Participation may be viewed as:

 an instrument for increasing the efficiency of enterprises and

establishing harmonious industrial relations;

 a device for developing social education for promoting solidarity among

workers and for tapping human talent;

 a means for achieving industrial peace and harmony which leads to

higher productivity and increased production;

 a humanitarian act, elevating the status of a worker in the society;

 an ideological way of developing self-management and promoting

industrial democracy.

A clear and more comprehensive definition is

Workers’ Participation, may broadly, be taken to cover terms of

association of workers and their representatives with decision-making process,
ranging from exchange of information, consultation, decisions and negotiations
to more institutionalized forms such as the presence of workers’ member on
management or supervisory boards or even management by workers
themselves.

6.2.2 Objectives and Aims of WPM

It would be more appropriate to classify the objectives of Workers

Participation in Management in the following broad categories:
Ethical or Moral Objectives

In an ethical or moral context, participation in decision making is

designed to promote individual development or fulfillment in accordance with
the conception of human rights and dignity to which the Universal Declaration
of Human Rights (1948) probably gives the most widely published expression.
The declaration reads-“All human beings are born free and equal in dignity and
rights. They are endowed with reason and conscience and should act towards
one another in a spirit of brotherhood. Further, everyone, as a member of
society… is entitled to realization…of the economic, social and cultural rights
indispensable for his dignity and the free development of his personality”.

The Special Advisory Committee, set up by the Government of Jamaica,

defined “Workers’ Participation” as “the extension of the individual’s human
rights at the work place” and stressed that “the procedures, institutions, rules
and styles of management should bring the worker’s recognition, treatment and
attention as a human being rather than as a mere statistical unit of production”.

Socio-Political Objectives

Political democracy ceases to have much significance in the absence of

democracy in economic life. A citizen cannot be regarded as sufficiently mature
for political democracy if he is denied democratic rights in his economic life. The
industrial democracy programme adopted by the Swadeshi Trade Union
Confederation in 1971 emphasised: “Industrial democracy is part of the effort
made by the labour movement to extend democracy throughout society…Life
away from the workplace has developed in one way and life at the workplace in
another. The difference constantly grows and is at the root of the increasing
need which employees feel to exert an influence on conditions of work and on
management…If arbitrary situations are allowed to persist in one sector of
society, they are an obstacle to the progress of democracy in the other
sectors…Industrial democracy should be regarded as part of the general
process of democratization.”
 In our own country, the Second Five Year Plan, which was directed to
the establishment of a socialist society, stated that a socialist society was based
not only on cash incentives but also on the idea of serving the community and
its willingness to recognize such service. So, individual workers must be
induced to feel that in their own way they were helping to build a state directed
towards progress. Consequently, the introduction of industrial democracy was
a prerequisite for the establishment of a socialist society.

Economic Objectives

Economic objectives relate directly or indirectly to increasing the

efficiency of the undertaking. By associating the workers with the decisions
taken, it is hoped to improve the quantity and quality of output and the utilisation
of labour, raw materials, equipment and introduction of new techniques. There
is growing awareness of the fact that the knowledge, experience and
intelligence of those who actually do the work are not sufficiently used for
improving industrial organisation and methods. Through participation, it is also
hoped to reduce the areas of conflict of interest between management and
labour and to improve labour relations.

The implications of workers’ participation in management have been

summarized in a publication of the International Institute for Labour Studies:

 Workers have ideas, which can be useful.

 Effective upward communication facilitates sound decision-making at the

top.

 Workers may accept decisions better if they participate in them.

 Workers may work harder if they share in decisions that affect them.

 Workers may work more intelligently if, through participation in decision-

making, they are better informed about the reasons for and the intention
of decisions.
  Workers’ participation may foster a more cooperative attitude amongst
workers and management, thus, raising the efficiency by improving team
spirit and reducing the loss of efficiency arising from industrial disputes.

 Workers’ participation may act as a spur to managerial efficiency.

Conversely, it has been pointed out that the absence of participation

results in misunderstanding, resistance, low morale and suspicion.

The CIPD in its Code on Employee Involvement and Participation in the

United Kingdom (1993) states that the involvement of, and participation by,
employees in any organization, should aim to:

 generate commitment of all employees to the success of the

organization;

 enable the organization better to meet the needs of its customers and
adapt to changing market requirements and hence to maximize its future
prospects and the prospects of those who work in it;

 help the organization to improve performance and productivity and adopt

new methods of working to match new technology, drawing on the
resources of knowledge and practical skills of all its employees;

 improve the satisfaction the employees get from their work ; and

 provide all employees with the opportunity to influence and be involved

in decisions, which are likely to affect their interests.

6.2.3 FORMS OF EMPLOYEE INVOLVEMENT AND PARTICIPATION

Worker participation is a situation where workers are involved in some

way with decision-making in a business organization. Worker participation can
take many forms. There might be a Consultative Council in the Company, where
trade unions and management meet regularly to discuss points of mutual
interest. Workers can be organized in quality circles and meet regularly in small
groups to discuss ways in which their work could be better organized.
 Decision-making may be further pushed down the line so that even the
most junior worker has some say in how work is organized. On a financial level,
workers may be invited to buy or be given shares in the Company, encouraging
them to participate in the affairs of the Company as shareholders. In a worker
cooperative the shares and control of the company lie with its workers.

Marchington (1995) has identified five forms of employee involvement

and participation:

Downward communications

Downward communications (team briefing and meetings) take place

from managers to employees in order to inform and ‘educate’ staff so that they
accept management plans.

Upward problem solving

Upward problem solving is designed to tap into employee knowledge

and opinion, either at an individual level or in small groups. The aims are to
increase the stock of ideas in an organization, to encourage cooperative
relationship at work, and to legitimize change. Attitude surveys, quality circles,
suggestion schemes and, total quality management/customer care committees
come into this category.

Task participation

Task participation and job redesign processes engage employees in

extending the range and type of tasks they undertake. Approaches to job
design, such as horizontal job redesign (extending the range of tasks
undertaken at the same level) job enrichment, vertical role integration (taking
greater responsibility for supervisory duties) and team working (where the team
organizes its own work so that it becomes ‘self managed’) may be used.
Consultation and representative participation

Consultation and representative participation enables employees to take

part through their representatives in management decision-making. One of the
aims of management in encouraging this form of participation is to use it as a
safety valve - an alternative to formal disputes - by means of which more deep-
seated employee grievances can be addressed. Joint Consultative Committees
and the appointment of worker directors falls into this category.

Financial involvement/participation

Financial involvement or participation takes the form of such schemes

as profit sharing and employee share ownership. Some companies also use
gain sharing as a means of involvement. The general purpose of Financial
Participation is to enhance employee commitment to the organization by linking
the performance of the firm to that of employee. Employee is more likely to be
positively motivated as he or she has a financial stake in the company by having
a share of profit or by being a shareholder.

Co-ownership

In this scheme, the workers are involved in management by making them

shareholders of the Company. Thus, workers share the capital as well as profit.
This may be done by inducing them to buy equity shares. The management
may promote the scheme by allowing the worker to make payment in
installments. It may also advance loans or even give financial assistance to
such workers to enable them to buy equity share. Workers may also be allowed
to leave their bonus with the Company as shares (bonus shares).

Participation through ownership has the distinct advantage of making the

worker committed to the job and to the organization. It also offers recognition of
the claim of the dignity of labour as the worker is viewed as partner in the
business. This would, in turn, create a sense of belongingness among workers
and stimulate them to contribute their best for the continued progress of the
Company.
Productivity Bargaining

In this scheme workers’ wage & benefits are linked to productivity.

Information on Company performance is provided to employees as part of the
scheme and they are encouraged to discuss with their managers or team
leaders the reasons for success or failure and methods of improving
performance. A standard productivity index is finalized through negotiations
initially. Workers do not have to perform at exceptionally high levels to beat the
index. If they are able to exceed the standard productivity norms, they will get
substantial benefits. The aim of such schemes is to educate employees and
gain their commitment. Without such agreement, workers may not realize the
importance of raising productivity for organizational survival and growth.

Gainsharing

A form of contingent compensation where owners and employees share

in productivity gains, as an incentive for improvement. Gains are determined by
agreed-upon measures of organizational performance. Gain sharing typically
provides for a long term distribution to manufacturing or similar units of a set
percentage of the costs saved through the often substantial revamping of
production processes. Gain sharing programs encourage teams within a firm to
solve fundamental problems within their specific area of expertise.

6.2.4 KINDS OF INVOLVEMENT AND PARTICIPATION OF EMPLOYEE

AT DIFFERENT LEVELS

Employee involvement and participation can vary according to the level

at which it takes place, the subject matter of participation, the degree to which
decision making is shared, and the extent to which the mechanisms are formal
or informal.

Levels

Involvement and participation takes various forms at different levels in

an enterprise. These levels are described below.
 The job level involves team leaders and their teams and the processes
include the communication of information about work and interchange of ideas
about how the work should be done. These processes are essentially informal.

The management level can involve sharing information and decision

making about issues, which affect the way in which work is planned and carried
out, and working arrangements and conditions. There are limits. Management
as a whole, and individual managers must retain authority to do what their
function requires. Involvement does not imply anarchy. But it does require some
degree of willingness on the part of management to share its decision- making
powers. At this level, involvement and participation may become more
formalized, through consultative committees, briefing group or works councils
involving management and employees or their representatives. At the policy
making level, where the direction in which the business is going, is determined,
total participation would imply sharing the power to make key decisions.

At the ownership level, participation implies a share in the equity, which

is not meaningful unless the workers have sufficient control through voting
rights to determine the composition of the Board.(also see Box-6.1)

Subject matter of Participation

The range of subjects covered by participative managements can vary.

At one extreme the matter discussed could include issues of strategic
importance to the whole enterprise, such as product range, investment
decisions and other commercial and financial matter of similar significance. At
the other, the subject matter may be more restricted to issues relating to items
quite peripheral to the running of the business, for example the state of the car
parking or canteen. Between these two extremes are issues of varying degrees
of operational importance, such as those concerned with production or service
decisions.
 Box-6.1

Levels of Worker Influence on Company Decision Making

(Center for Labor Education and Research, Florida International University)

7. Workers’ Council or Assembly SUPERIOR to managers (and if out- side

constituencies have representatives on this body, they must be approved by the
workers). Known as FULL WORKER CONTROL or “SELF MANAGEMENT”
(WORKERS AUTONOMY)

6. Joint power or PARTNERSHIP (workers and managers co-decide on joint board).

This has many different voting proportions in existence and is considered JOINT
MANAGEMENT or CODETERMINATION.

5. Workers wait until management has decided; then may VETO or AP- PROVE: if veto,
then management submits modifications. Also known as “collective bargaining.”

4. MANAGER DELEGATES some decisions generally to workers, reserving ultimate

veto, which is rarely used.

3. Workers initiate CRITICISMS AND SUGGESTIONS and discuss them face-to-face

with managers. Latter still have sole power to decide, but usually adopt workers’
proposals.

2. Same as immediately above but managers usually reject workers proposals.

1. Managers give PRIOR NOTICE of a change, workers have a chance to voice their
views, and perhaps stimulate reconsideration.

0 Impersonal SUGGESTION BOX system; managers accept or reject without giving

reasons.
The degree to which decision-making is shared

At the one end of the scale, management makes decisions unilaterally;

at the other end, in theory, but never in practice except in a workers’
cooperative, workers decide unilaterally. Between these extremes, there is a
range of intermediate points, which can be expressed as a scale (Figure 6.1)

Employees
Degree to which
decide
management prerogative unilaterally
is preserved
Management
joins with
employees in
making
Management decisions
consults
employee
before making
Management final decision
communicates
decision to
Management employees
decides Degree to which
unilaterally employees are involved

Fig 6.1 Scale of participation

The point on this scale at which participation should or can take place at
any level in an organization depends on the attitudes, willingness and
enthusiasm of both management and employees. Management may be
reluctant o give up too much of its authority except under pressure from the
unions (which is unlikely today), or from Government Directives on workers’
consultation.

Mechanisms for involvement and participation

At the job level, involvement and participation should be as informal as

possible. Teams may be called together on an ad hoc basis to consider a
particular problem, but formal committees should be avoided. Team briefing
can be used to provide for informal two – way communications.
 At the next higher level, more formality may be appropriate in larger
organizations. There is scope for the use of consultative committees or
departmental councils with carefully defined terms of reference on the matters
they can discuss. At the enterprise level, company or works councils can be set
up.

At the policy-forming level, company or works councils may be given the chance
to discuss policy issues, but if the final decision on any matter, which is clearly
not negotiable, is made at board level, the works council may be seen as an
ineffectual body.

Further mechanisms for involvement on an organization wide basis can be

provided by quality circles and suggestion scheme.

6.2.5 GOVERNMENT POLICIES AND PARTICIPATION

The participation of workers in management in India is not a novel idea,

imported from outside. Advocating the idea, Mahatma Gandhi insisted that
“capital and labour should supplement and help each other; they should be a
great family, living in unity and harmony”. Since independence, several
schemes have been formulated by the Government of India to promote workers’
participation in management, which are discussed below.

Mill Committees

Instances of informal joint consultation can be traced back to the second

decade of the 20th century, in cotton textile industry. The employers in the
textile industry stated joint consultation with the workers, by establishing ‘Mill
Committees’ which were merely to ascertain and represent the grievances of
workers. But the management did not accept the committees as spokesmen on
behalf of the emerging trade unions, the existence of which they preferred to
ignore. Though such consultation was of a rudimentary type, yet it was
significant, as it was first of its kind in the country.
Royal Commission on Labour and Workers’ Participation in Management
(1920)

The Government of India, in 1920, constituted joint committees in their

Printing Presses and Railways. During the same period such committees were
formed in Tata Iron and Steel Company, Jamshedpur. At the instance of
Mahatma Gandhi, the workers and employers of the textile mills in Ahmedabad
agreed in 1920 for mutual discussions and consultation of issues failing which
they were to be resolved by arbitration. There was a permanent

Arbitration Board consisting of a nominee each from the association of

labour and employers. Although the scope of mutual consultation was confined
largely to grievances of workers, yet the Ahmedabad Agreement may be
regarded as a milestone in the history of joint consultation in our country. The
Royal Commission on Labour opined that the system is admirable in its intention
and has had a substantial measure of success.

From 1922 onwards, joint committees of workers and management were

formed in Bengal, Madras and other states. One of the examples was the
formation of Workers Welfare Committee in Buckingham and Carnatic Mills,
Madras (now Chennai). The Committee had the object of securing close contact
with the workers by discussion on matters relating to their work and welfare and
proved useful in maintaining sound relations between the management and the
workers.

Assessing the performance of such committees, the Royal Commission

on Labour recommended the formation of works committees and viewed that if
they are given proper encouragement and past errors are avoided, these
committees can play a useful part in the Indian industrial relations system.
Along with the work’s committee, the Commission also stressed the setting up
of a joint machinery for the internal settlement of disputes on the pattern of the
informal consultative machinery of Ahmedabad textile industry.

These recommendations of the Commission have had no impact on the

system of joint consultation for the settlement of disputes. This is because of
the economic depression in the 1930s, which led to deterioration in industrial
relations because of wage cuts, rationalization and emergence of militant trade
unionism under communist leadership. Further, with the outbreak of the World
War II, the Government under the Defence India Rules prohibited strikes and
lockouts and required compulsory reference of disputes to conciliation or
arbitration. This again gave a setback to the movement.

Developments during 1940s

With all these setbacks, joint consultation did not entirely die out, but had
receded to the background at the plant level. The wartime developments,
however, led the labour management and Government to come closer. Around
the same time the Indian Labour Conference was held to promote closer ties
between the two parties of the Indian Labour Conference in August 1942. The
conference was modelled on the pattern of the International Labour
Organisation and was advisory in nature.

The National Planning Committee of the Indian National Congress, as

far back as 1940, had recommended the nationalisation of industries like
engineering and heavy explosives. Also, the committee had suggested that
both in the interest of industry and community, it was desirable to associate
workers progressively with control and management. The Indian Federation of
Labour also endorsed the policy of nationalization. The All India Trade Union
Congress also raised similar demands.

After attaining Independence, India attempted to introduce workers

participation in management. One of the earliest attempts to promote this was
the enactment of the Industrial Disputes Act, 1947 and the Factories Act 1948,
for the establishment of bipartite committees. Another type of scheme that was
introduced is the Joint Consultative Machinery in government undertakings to
facilitate cooperation between the government and its employees. Government
also tried another form of having workers’ representatives on the Boards of
Management in certain public sector undertakings.
Works Committees (1947)

The Industrial Disputes Act, 1947, provides for the setting up of bipartite
Works Committees as a scheme of workers participation in management, which
consists of representatives of employers and employees. The Act provides for
these bodies in every undertaking employing100 or more workmen. The aim of
setting up of these bodies is to promote measures for maintaining harmoniums
relations in the work place and to sort out differences of opinion in respect of
matters of common interest to employers and employee. The Bombay Industrial
Relations Act, 1946, also provides for these bodies, but under the provisions of
this Act they can be set up only in units that have a recognised union and they
are called Joint Committees. The workers directly elect their representatives
where there is a union.

Functions

The Works Committees /Joint Committees are consultative bodies. Their

functions include discussion of conditions of work like lighting, ventilation,
temperature, sanitation, etc., amenities like water supply for drinking purposes,
provision of canteens, medical services, safe working conditions, administration
of welfare funds, educational and recreational activities and encouragement of
thrift and savings. It shall be the duty of the Works Committee to promote
measures for securing and preserving amity and good relations between the
employers and workmen and to comment upon matters of their common
interest or concern and endeavour to reconcile any material difference of
opinion in respect of such matters.

Structure

The Works Committees have, as office bearers, a President, a Vice-

President, a Secretary and a Joint Secretary. The President is a nominee of the
employer and the Vice-President is the workers’ representative. The tenure of
these bodies is two years. The total strength of these bodies should not exceed
20. The employees’ representatives have to be chosen by the employees.
 These committees functioned actively in some organisations like Tata
Iron and Steel Company, Indian Aluminum Works at Belur and Hindustan Lever.
In all these, the managements have evolved Joint Committees independently
of the statutory requirements.

Joint Management Councils (JMCs1958)

The Second Five-year Plan recommended the setting up of Joint

Councils of Management consisting of representatives of workers and
management. The Government of India deputed a study group (1957) to study
the schemes of workers’ participation in management in countries like UK,
France, Belgium and Yugoslavia. The Indian Labour Conference (ILC)
considered the report of the study group in its 15th session in 1957 and it made
certain recommendations:

(i) Workers’ participation in management schemes should be set up in

selected undertakings on a voluntary basis.

(ii) A sub-committee consisting of representatives of employers, workers

and government should be set up for considering the details of workers’
participation in management schemes. This committee should select the
undertakings where workers’ participation in management schemes
would be introduced on an experimental basis.

Objectives

The objectives of Joint Management Councils are as follows:

(i) to increase the association of employers and employee there by

promoting cordial industrial relations;

(ii) to improve the operational efficiency of the workers;

(iii) to provide welfare facilities to them;

(iv) to educate workers so that they are well prepared to participate

in these schemes; and

(v) to satisfy the psychological needs of workers.

 A tripartite sub-committee was set up as per the recommendations of
Indian Labour Conference, which laid down certain criteria for selection of
enterprises where the JMCs could be introduced. They are:

(i) The unit must have 500 or more employees;

(ii) It should have a fair record of industrial relations;

(iii) It should have a well organise trade union;

(iv) The management and the workers should agree to establish

JMCs;

(v) Employers (in case of private sector) should be members of the

leading Employers’ Organisation; and

(vi) Trade unions should be affiliated to one of the central federations.

It was observed by the sub-committee that if the workers and employers

mutually agree they could set up JMCs even if these conditions are not met.
The sub-committee also made recommendations regarding their composition,
procedure for nominating workers representatives, the membership of JMCs
etc. The details of these aspects have to be worked out by the parties
themselves. A draft model was drawn up regarding the establishment of JMCs.
This sub-committee was later reconstituted as the “ Committee on Labour-
Management Co-operation” to advise on all matters pertaining to the scheme.

Functions

The following are the important functions of JMCs:

(i) To be consulted on matters like standing orders, retrenchment,

rationalisation, closure, reduction of operations etc.
(ii) To receive information, to discuss and offer suggestions.
(iii) To shoulder administrative responsibilities like maintaining
welfare measures, safety measures, training schemes, working
hours, payment of rewards.
Working of JMCs

Over the years, there has been a good growth in number of units
adopting JMCs in public sector. JMCs in some of the public sector undertakings,
for example, Bharat Heavy Electricals Limited, have provided an appropriate
forum for effective communication and managements unreservedly furnished all
facts and information sought for. The unions have responded by moderation
their enthusiasm and exercising reasonable restraint in demanding information,
disclosure of which could be detrimental to the interest of the organisation.
Deliberations in the JMCs are characterised by mutual understanding and a
high level of objectivity in the appreciation of problems without acrimony or
emotionalism.

But the working of the JMCs indicates that they have not been successful
both in private and public sectors. JMC was first introduced in Hindustan
Machine Tools in 1958 among the public sector units but survived less than one
year. The scheme has also failed in other public sector units like Posts and
Telegraphs, Railways, Hindustan Insecticides, Indian Airlines Corporation, Air
India and Fertilizer and Chemical Corporation.

It is often criticised by different quarters that the scheme of employee

participation in management did not make headway though it was initiated with
much enthusiasm. The National Commission on Labour observed that “mental
reservations which operated against it are the same both in the ranks of
management and among the workers”.

Board Level Participation (1970)

Following the recommendations of Administrative Reforms Commission,

the Government has accepted that representatives of workers be taken on the
Board of Directors of public sector undertakings. It was introduced in Hindustan
Antibiotics Ltd, Hindustan Organic Chemicals Ltd, National Coal Mines
Development Corporation, BHEL, National Textile Mills, Newsprint and Paper
Mills, etc. The worker Director was supposed to be elected by all the workers
of the company through secret ballot. After the nationalization of banks, the
government advised all nationalized banks to
appoint employee directors to their boards – one representing employees and
the other representing officers – having a tenure of 3 years. The scheme
required verification of trade union membership, identification of the
representative union and the selection of a worker director who is chosen out
of a panel of three names furnished to the government by the representative
union within a prescribed period. In some of the banks, the scheme could not
be introduced smoothly after 1971 owing to difficulties in verifying union
membership figures. A study of the scheme in the nationalised banks by the
National Labour Institute has indicated that it has failed in promoting cordial
relations between labour and management.

Shop and Join Councils (1975 and 1977)

The 1975 scheme has come into existence after the emergency was
declared in June 1975. It had envisaged the setting up of Shop Councils at the
shop/ departmental level and Joint Councils at the enterprise level. These were
to be introduced in manufacturing and mining units employing 500 or more
workers – whether in public, private or cooperative sector.

The actual number of Shop Councils in an enterprise was to be decided

by the employer after consultations with the recognised union/ workers. The
chosen workers’ representatives must be actually working in the shop or
department concerned .The Chairman of the council will be elected by
management and the Vice-Chairman by the workers’ representatives. The
council shall function for 2 years and will meet regularly to discuss matters
relating to safety, discipline, physical working conditions, welfare measures,
productivity norms and targets, absenteeism, flow of communication etc.

The Joint Council, having a tenure of two years, shall be constituted for
the whole enterprise consisting of representatives of both the management and
the labour. The chief executive shall be the Chairman of the council and the
representatives of workers shall nominate the Vice-President. The Council will
meet once in a quarter to discuss matters which remain unsolved by shop
councils including: schedules of working hours, holidays, optimum use of
materials, productivity standards, training facilities to develop skills of workers,
awards to workers for creative suggestions, general health, safety and welfare
of workers, etc.

Apart from manufacturing and mining units, commercial and service

organisations (such as railways, hospitals, P&T, state electricity boards) were
also covered in the 1977 scheme. Both the schemes evoked considerable
interest and were introduced with a lot of enthusiasm, covering a wide spectrum
of public and private sector units. However, after the emergency was lifted, most
of the councils became defunct. Several operational problems surfaced from
time to time, including: (a) inadequate sharing of information, (b) absence of a
participative culture, (c) indifferent attitude of management, (d) lack of interest
on the part of workers, (e) failure to clarify the norms for the nominations of
representatives, (f) absence of a single union interested in a bipartite
consultative process etc.

Adding Article 43A in the Indian Constitution

In view of the growing acceptance of the importance of workers’

participation in management for increasing productivity, maintaining industrial
peace and accelerating the pace of economic development, Article 43A was
inserted in the Indian Constitution under the Directive Principles of the State
Policy in 1977. The Article provides that the State shall take steps, by suitable
legislation or any other way, to secure the participation of workers in the
management of undertakings, establishments or other organisations engaged
in any industry.

The New Scheme (1984)

A new scheme of workers’ participation in management was prepared

and notified in 1984 after reviewing the progress of various schemes in industry.
It was applicable to all central public sector enterprises. It was decided that
workers would be allowed to participate at the shop level, the plant level and
the board level. The mode of representation of workers’ representatives was to
be determined by consultations with the concerned unions. A wide range of
work related issues (personnel, welfare, plant, operations, financial matters,
etc.) were brought within the ambit of the
councils. The Ministry of Labour constituted a tripartite committee to review the
working of the scheme and to suggest corrective measures.

Participation of Workers in Management Bill, 1990

The Participation of workers in Management Bill was introduced in the

Rajya Sabha on 30th May 1990. This Bill had been referred to the Parliamentary
Standing Committee on Labour and Welfare. This Bill is still under consideration
of the Standing Committee.

The bill aims at providing participation of workers in management at shop

floor level, establishment level and board of management level.

Provisions

I. Shop floor council

Except for industries having one shop floor, all other industries are required to
have shop floor council in accordance with the rules.

Functions: It carries out functions specified in Schedule I of the Bill which

include:

(i) production facilities

(ii) storage facilities
(iii) materials economy
(iv) operational problems
(v) wastage control
(vi) hazards and safety problems
(vii) quality improvement
(viii) cleanliness
(ix) monthly targets and production schedule
(x) cost reduction programme
(xi) formation & implementation of work systems
(xii) design group working
(xiii) welfare measures.
II. Establishment council

Every industry is required to set up an establishment council at establishment

level.

Functions: An establishment council can exercise powers as specified in

Schedule II of the Bill, which includes:

(A) Operational Area:

(i) evolution of productivity schemes

(ii) planning, implementation, fulfillment and review of monthly

targets and schedules

(iii) material supply & its shortfall

(iv) storage and inventories

(v) house keeping

(vi) improvement in productivity

(vii) encouragement and consideration of suggestion

(viii) quality of technological improvement

(ix) machine utilisation, knowledge and development of new product

(x) operational performance figure, etc.

(B) Economic and Financial Areas:

(i) profit & loss statement and balance sheet

(ii) review of operating expenses, financial result and cost of sales
(iii) plant performance in financial terms.

(C) Personnel Matters:

(i) absenteeism
(ii) problems of women workers
(iii) initiation of supervision of workers’ training programme
(iv) administration of social security schemes.
(D) Welfare Areas:

(i) operational details

(ii) implementation of welfare schemes

(iii) safety measures etc.

(E) Environmental Areas:

(i) extension activities and community development projects

(ii) pollution control.

III. Representation of Board of Management

“The representatives of workmen are to constitute 13% and those of

other workers 12% of the total strength of the Board of Management.” The bill
provides for a monitoring committee to advise on matters of administration of
the Act and scheme under it.

6.2.6 HURDLES IN THE WAY OF WORKERS PARTICIPATION IN INDIA

The foregoing discussions reveal that ever since the independence of

the country, Government has been keen on promoting workers’ participation in
management in the country. There has been a growing realisation in the
country, especially in the Government circles, that promotion of workers’
participation would lead to increase in productivity and would be helpful in
maintaining industrial peace and accelerating the pace of economic
development. With the adoption of planning as an instrument of economic and
industrial development, maintenance of cordial relations between labour and
management is considered all the more desirable. To achieve these objectives,
Government embarked upon different programme of workers participation at
different intervals of time, for example, Works Committee (1947), Joint
Management Councils (1977), Shop Floor and Plant Councils (1983) and so
on. However, experience has shown that these schemes, which were launched
so enthusiastically, have on the whole proved to be a failure. This has been
supported by the findings of the studies conducted in regard to
their functioning. The failure of the schemes of workers’ participation in
management may be attributed to several factors:

Employer-related

Employers, by and large, were not very enthusiastic about schemes of

workers’ participation in management. They feared dilution of their powers,
participation would take away from them their right to manage. Also, they felt
that workers might not be able to contribute much in discussions relating to
matters where they lack a broad perspective. When employers tried to
substitute trade unions with the bipartite bodies, conflicting situations
developed, vitiating the atmosphere of give and take.

Worker-related

By and large, workers’ representatives were not fully equipped to

participate in discussions relating to organisational issues. Factors, such as
illiteracy, lack of knowledge, lack of enthusiasm to update their viewpoints, have
often come in the way of extending wholehearted support to the schemes of
workers’ participation in management.

Union-related

Trade union movement in India is largely fragmented, poorly organised,

characterized by intense inter union rivalry and colored by various political
ideologies. In such an atmosphere, the union representatives are not expected
to act in the best interests of workers and the organisations.

Macro level factors

All the schemes of workers participation in India are non-statutory. The

different pieces of labour legislation have complicated matters further. There is
no central law on the subject. Some of the forms of participation envisaged by
the government like Works Committees, Joint Management’s Councils –
appear to be similar in scope and function. The multiplicity of such bipartite
bodies with loosely defined structure and purpose, not surprisingly have failed
to deliver the goods.
 Box-6.2

Workers’ Participation at TISCO

Since Tata Iron and Steel Company are the pioneers in establishing joint consultation in India,
it is worthwhile to look at workers’ participation at TISCO.

Close association of employees with management at TISCO, began in 1919 and was
formalized in August 1956. The purpose was to promote increased productivity, provide a
better understanding to the employees of their role and importance, and to satisfy the urge
for self-expression. The scheme as set up at TISCO consists of a three-tier system with Joint
Department Councils (JDCs) constituted at the department level. Next, Joint Works Council
(JWC) for the entire work, and at the top the Joint Consultative Council of Management
(JCCM). The specific functions of these bodies were as follows:

JDCs were “to study operational results and production problems, advise on the steps
deemed necessary to promote and rationalize production, improve productivity and discipline
and economize cost. Promotion of welfare and safety, encouragement of suggestions and
improvement of working conditions also fell within their purview”. JWCs were “to discharge
special function of reviewing every month the working of JDCs and other committee such as
Suggestion Box Committee, Safety Committee, Canteen Managing Committee, etc.”

JCCM was given the task of advising management on production and welfare and also looking
at matter referred to by JDCs and JWCs.

In order to ensure that these committees did not overlap the functions of other committees,
separate task groups were formed. Special courses were offered to prepare both
management and union representatives to effectively utilize the facility. TISCO’s experience
with workers’ participation has been satisfactory. From 1957 to the middle of 1972, JDCs have
discussed a total of 14,104 suggestions of which 70.3 per cent have been implemented.
These suggestions have covered a wide range of topics and issues, but the most important
point to remember, perhaps, is that the councils have been
successful in involving workers equally in the process of production.
 Box- 6.3

Necessary Elements for Effective Worker Participation in Decision Making

(Center for Labor Education and Research, Florida International University)

From an article by Dr. Paul Bernstein, Journal of Economic Issues, Vol. X No. 2 June 1976

In this classic article on work place democracy efforts Bernstein identifies six
necessary components for successful programs on worker participation in decision making:

1. Workers must have an increased degree of power vis-a-vis management regarding

various levels of decision making in the company.

2. Workers must have access to and sharing of management level information. If

employees are to make decisions on the issues that go on in areas outside their
normal jobs, they will need information such as engineering reports and company
economic information that was previously only available to accounting or finance
departments. A corollary to this component is that workers must be trained to
understand and use this information in a correct and effective manner.

3. A guaranteed right of protection from reprisal for employees who voice criticisms of
management.

4. An independent board of appeals to settle disputes between labor and management

(grievance procedure).

5. A participatory/democratic consciousness or a set of beliefs and traits among the

work force and among management that tends to worker participation in decision
making. The belief that workers have the ability to make good decisions or a strong
feeling of self-reliance are two such traits.

6. A guaranteed economic return on cost savings or surplus produced above the

employee’s regular salary. This sometimes is labeled as “gainsharing.”
Moreover as pointed out by Sheth (1972), mere creation of institutions and
structures does not guarantee success. In some cases even elementary
procedures for ensuring the success of the schemes were not clearly laid down:
such as selection of representatives, recognition of union, procedures for
holding meetings, etc. (Sheth 1977). As far as public sector is concerned, Lall
(1984) concluded that apart from other factors, absence of genuine bargaining
platforms also leads to lack of trust between the labour and management
leading to eventual breakdown of meetings.

6.2.7 REQUIREMENTS FOR SUCCESSFUL EMPLOYEE INVOLVEMENT

AND PARTICIPATION

The overall success of workers’ participation (employee involvement)

depends fundamentally on:

 building trust;
 eliminating status differentials;
 committing the organization to vigorous training and envelopment;
 breaking down barriers to change the organization’s culture.

Armstrong suggested the following 10 basic requirements for success:

i. The objectives of participation must be defined, discussed and agreed

upon by all concerned.

ii. The objectives must be related to tangible and significant aspects of

the job, the process of management or the formation of policies that
affect the interests of employees.

iii. Management must believe in and must be seen to believe in involving

employees. Actions speak louder than words and management must
demonstrate that it will put into effect the joint decisions made during
discussions.

iv. The unions must believe in participation as a genuine means of

advancing the interests of their members and not simply as a way of
getting more power.
 v. Joint consultation machinery should be in line with any existing system
of negotiation and representation. It should be regarded as a process
of integrative bargaining complementary to the distributive bargaining
that take place in joint negotiating committees.

vi. If management does introduce joint consultation in a non-union

environment, it should be prepared to widen the terms of reference as
much as possible to cover issue concerning company employment
policies and plans and working arrangements and conditions (e.g.,
health and safety matters).

vii. Consultative committees should always relate to a defined working

unit, should never meet unless there is something specific to discuss,
and should always conclude their meetings with agreed points which
are implemented quickly.

viii. Employee and management representatives should be properly

briefed and trained and have all the information they require.

ix. Managers and team leaders should be kept in the picture and, as
appropriate, involved in the consultation process – it is clearly highly
undesirable for them to feel that they have been left out.

x. Consultation should take place before decisions are made.

6.3 SUMMARY

As evident from various studies conducted in different countries,

participative management can be a very effective tool in the hands of managers
in solving various problems, as also achieving the other organisational
objectives. Decisions based on “collective wisdom” of the concerned people
could prove to be superior in many cases and also there would be fewer
problems in the matter of their implementation. Participative management does
not alter the “balance of control” in any significant way. Experts would continue
to influence the final outcome of the discussions.

Past studies indicate that participation and consultation can become a

way of working even in a vast organization, like TISCO, because there has
been a genuine desire on the part of both top management and the union to
give the experiment on “working together” a fair trial. If the management policies
and methods are oriented not only towards better performance and higher
profitability, but also towards concern for employees and if the management is
sincere in its approach to evolve an internal climate, where employees can
freely express their views on all relevant issues without fear of reprisal, the
psychological barrier from the side of employees against participation could be
largely overcome. People learn from the failures, not only of their own, but also
of others. If the commitment to the concept is strong, initial setbacks in the
functioning of the scheme need not cause frustration, or deter the parties from
going ahead. In due course, a kind of culture for working together would grow
and develop as a natural process. While the scheme is at its initial stages,
“nurturing” by both management and the union would help it in taking a proper
shape. However, it should be left to the management and the union to discuss
and decide the framework, scope and powers of such a scheme and to modify
same as warranted by the local conditions and needs from time to time.

Thus, it can be said that even under Indian conditions, participative

management that is “home-grown” and oriented towards the culture and needs
of the organisation can be workable. Better, if it is introduced after necessary
preparation and understanding with the trade union of workmen, and in stages:
first at the department or “shop floor” level and after acquiring necessary
experience, it can be extended to all departments at the “plant level”. While
finalising the scope of such a forum, matters coming within the area of
“collective bargaining” should be specifically excluded. A “law” may be useful in
providing the basic framework and breaking the inertia, but it should leave
enough freedom for individual organisations to formulate their own scheme to
suit their individual needs and requirements.

The present “band” of workers, here and elsewhere, it should be

realized, are more knowledgeable in terms of skills and professional
attainments. They are also more conscious of their rights. They belong to a
generation where respect for the “values” of yesteryears based on the laws,
custom, authority and discipline are often questioned. They are also impatient.
 In the coming years, managers will be expected not only to deal with “militant”
trade union leaders but also with a different kind of workforce that is more
demanding and volatile. And this is the “perspective”.

Participation is like a “child” and it requires only two willing partners to

make it a reality. In industries, participation requires both “willingness” and
“capability” of the two partners to participate. Third party intervention of
extraneous influence of pressure, in both cases, tantamounts to interference
and tends to prove counter- productive.

It is, therefore, imperative that participation should be viewed by

managers as an “opportunity” rather than a “threat”, irrespective of the fact
whether there is any law requiring it or not. Perhaps, Drucker (1980), was right
when he said: “The one certainty about the times ahead, the times in which the
mangers will have to work and to perform, is that there will be turbulent times.
And in turbulent times, the first task of management is to make sure of the
institution’s capacity to survive a blow, to adapt to sudden change and to avail
itself of new opportunities”.

6.4 KEYWORDS

Coownership - Joint ownership

Participative - Associating employees in management decision

management making

QUESTIONS

(i) “Employee participation is a must today” Comment.

(ii) What is meant by workers’ participation in management? Describe the
objectives of WPM.
(iii) What are different forms of WPM?
(iv) Discuss different varieties of workers’ participation/involvement.
(v) Examine various schemes of workers’ participation in India. What are
your suggestions to improve them?
(vi) “The concept of WPM is facing tough times today and reason lies on
 part of all those involved”. Discuss
(vii) “Workers’ participation in India has not been a resounding success”.
Do you agree? Give reasons.
“
LESSON NO. 8

QUALITY MANAGEMENT: AN INTRODUCTION

Author: Mr. Anil Kumar

Vetter: Prof. H.L. Verma

Structure:

8.0 Objectives

8.1 Introduction

8.2 Presentation of Contents