INDUSTRIAL

RELATIONS
(As Per the New Syllabus 2018-19 of Mumbai University for T.Y.BMS, Semester V)

Prof. Dr. A M SARMA

Former Member of the Faculty
Tata Institute of Social Sciences
Deonar, Mumbai-400088.
arsola1939@hotmail.com.

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 PREFACE

Industrial relations is a major force which influences the social, political and economic
development of a country. Managing industrial relations is a challenging task because it deals
with a highly complex, fast developing, ever-changing and expanding field. There are certain
factors such as composition of working class, work environment, socio-economic status of
the workers and their attitude to work, management’s ideology, role of the state and thinking
of the community, which have a considerable bearing on the state of relationship between
labour and management. Different labour enactments and judicial decisions play a major role
in regulating the employer-employee relationship.
The course material is divided into four units: (a) Industrial Relations – An Overview;
(b) Industrial Disputes; (c) Trade Unionism and Collective Bargaining; and (d) Industrial Relations
Related Laws in India.
I hope the students and faculty members of T.Y.BMS, Sem. Vth, Mumbai University,
will find the course material useful and interesting.

A M Sarma
 SYLLABUS

Sr. No. Modules No. of Lectures

1 Industrial Relations – An Overview 15
2 Industrial Disputes 15
3 Trade Unions and Collective Bargaining 15
4 Industrial Relations Related Laws in India 15
Total 60

Objectives
Sr. No. No. of Lectures
1 To understand the concept of performance management in organizations
2 To review performance appraisal systems
3 To understand the significance of career planning and practices

1. Industrial Relations – An Overview

(a) Meaning, Objectives, Characteristics of a good Industrial Relations System/Principles
of a good IR/Essentials of good IR, Scope, Significance/Need and Importance of IR,
Major Stakeholders of IR, Evolution of IR in India, Factors affecting IR, Role of State,
Employers and Unions in IR, Changing Dimensions of IR in India, Impact of Liberalisation,
Privatisation and Globalisation on Industrial Relations, Issues and Challenges of industrial
relations in India
2. Industrial Disputes
(a) Industrial Disputes:
 Meaning of Industrial Dispute, Causes, Forms/Types, Consequences/Effects, Methods
of Settling Industrial Disputes (Arbitration, Joint Consultations, Works Committee,
Conciliation, Adjudication, etc.)
 Concepts Related to Industrial Disputes (Relevant Examples): Strike, Layoff, Lockout,
Retrenchment
(b) Employee Discipline:
 Meaning, Determinants, Causes of Indiscipline, Code of Discipline and its Enforcement
 (c) Grievance Handling:
 Meaning of Grievances, Causes of Grievances, Guidelines for Grievance Handling,
Grievance Redressal Procedure in India
(d) Workers’ Participation in Management:
 Meaning and Types with Respect to India
3. Trade Unions and Collective Bargaining
(a) Trade Unions:
 Meaning, Features, Objectives, Role of Trade Unions, Functions/Activities, Types,
Evolution of Trade Unions across Globe, Evolution of Trade Unions in India, Structure
of Trade Unions in India, Recognition of Trade Unions, Rights and Privileges of
Registered Trade Unions, Impact of Globalisation on Trade Unions in India, Central
Organisations of Indian Trade Unions: INTUC, AITUC, HMS, UTUC, Problems of
Trade Unions in India
(b) Collective Bargaining:
 Meaning, Features, Importance, Scope, Collective Bargaining Process, Prerequisites
of Collective Bargaining, Types of Collective Bargaining Contracts, Levels of Collective
Bargaining, Growth of Collective Bargaining in India, Obstacles to Collective Bargaining
in India
4. Industrial Relations Related Laws in India
(a) Role of Judiciary in Industrial Relations: Labour Court, Industrial Tribunal, National
Tribunal
(b) The Trade Unions Act, 1926
(c) The Industrial Employment (Standing Orders) Act, 1946
(d) The Industrial Disputes Act, 1947
(e) The Factories Act, 1948
(f) The Minimum Wages Act, 1948
 PAPER PATTERN

Maximum Marks: 75
Questions to be Set: 05
Duration: 21 /2 Hours
All questions are compulsory 15 Marks each.

Question Particular Marks

No.

1 Objective Questions 15
(A) Sub-questions to be asked (10) and to be answered (any 08)
(B) Sub-questions to be asked (10) and to be answered (any 07)
(*Multiple Choice/True or False/Match the Columns/Fill in
the Blanks)
2 Full Length Question 15
OR
2 Full Length Question 15
3 Full Length Question 15
OR
3 Full Length Question 15
4 Full Length Question 15
OR
4 Full Length Question 15
5 (A) Theory Question 08
(B) Theory Question 07
OR
5 Short Notes 15
To be asked (05)
To be answered (03)

Note: Theory question of 15 Marks to be divided into two sub-questions of 7/8 and 10/5
Marks.
 CONTENTS

Unit 1: Industrial Relations – An Overview 1

 Introduction
 Meaning
 Dunlop’s Approach
 Objectives
 Characteristics of a Good Industrial Relations System
 Principles and Essentials of Good IR
 Scope and Coverage
 Importance – Why IR?
 Major Stakeholders of IR
 Evolution of IR in India
 Factors Affecting IR
 Role of the State/Government, Employers and Unions
– Role of the State
– Role of the Employers
– Role of the Unions
 Changing Dimensions of IR in India
 Impact of Globalisation, Privatisation and Liberalisation
 Issues and Challenges of IR in India
– Issues
– Challenges
 Summary
 Discussion Questions
 References
 Check Your Progress

Unit 2: Industrial Disputes, Discipline and Grievance Handling 25

 Introduction
 Industrial Disputes
– Meaning
– Causes
 – Forms/Types
– Consequences/Effects
– Methods of Settling Industrial Disputes
 Employee Discipline
– Meaning
– Aims and Objectives
– Causes of Indiscipline
– Discipline Maintenance System
– Approach to Discipline Enforcement
– Disciplinary Procedures
– Code of Discipline in Industry
 Grievance Handling
– Meaning
– Causes
– Effects
– Guidelines for Handling Grievances
– Grievance Redressal Procedure
– Model Grievance Procedure in India
 Workers’ Participation in Management
– Meaning
– Elements
– Objectives
– Levels
– Prerequisites
– Participative Arrangements in India
 Summary
 Discussion Questions
 References
 Check Your Progress

Unit 3: Trade Unionism and Collective Bargaining 59

 Introduction
 Trade Unions
– Meaning
– Features
 – Objectives
– Role of Trade Unions
– Functions/Activities
– Structure/Types
– Evolution of Trade Unions in India
– Recognition of Trade Unions in India
– Rights and Privileges of Registered Trade Unions
– Impact of Globalisation on Trade Unions in India
– Central Trade Union Organisations in India
– Problems of Trade Unions in India
 Collective Bargaining
– Meaning
– Features
– Importance
– Scope
– Process
– Prerequisites
– Types
– Growth of Collective Bargaining in India
– Obstacles to Collective Bargaining
 Summary
 Discussion Questions
 References
 Check Your Progress

Unit 4: Industrial Relations Related Laws in India 86

 Introduction
 Role of Judiciary in IR
 The Trade Unions Act, 1926
– Object
– Definitions
– Registration
– Rules
– Registrar of Trade Unions
 – Cancellation
– Appeal
– Legal Status
– General Fund
– Political Fund
– Immunity
– Miscellaneous
 The Industrial Employment (Standing Orders) Act, 1946
– Object
– Applicability
– Definitions
– Certification
– Certifying Officer
– Acts of Misconducts
– Offences and Penalties
– Obligations
 The Industrial Disputes Act, 1947
– Object
– Definitions
– Authorities
– Notice of Change
– Grievance Redressal Committee
– Reference of Disputes
– Duties of Authorities
– Settlements and Awards
– Strikes and Lockouts
– Lay-off, Retrenchment and Closure
– Miscellaneous
 The Factories Act, 1948
– Object
– Definitions
– Factory Inspectorate
– Health
 – Safety
– Welfare
– Hours of Work
– Annual Leave with Wages
– Exemption
– Abstracts and Notices
– Obligations of Workers and Employers
 The Minimum Wages Act, 1948
– Introduction
– Object
– Applicability
– Definitions
– Fixing of Minimum Rates of Wages
– Registers, Notices, Abstracts and Returns
– Authorities under the Act
– Obligations of Employers
– The Schedule
– Summary
– Discussion Questions
– Check Your Progress

Bibliography 142
Industrial Relations – An Overview 1

UNIT 1
INDUSTRIAL RELATIONS
– AN OVERVIEW

1.1 INTRODUCTION
Industrial relations constitute one of the most delicate and complex problems of the modern
industrial society which is characterised by rapid change, industrial unrest and conflicting ideologies
in the national and international spheres. It is a dynamic concept which depends upon the pattern of
society, economic system and political set-up of a country and changes with the changing economic
and social order. It is an art of living together for the purposes of production, productive efficiency,
human well-being and industrial progress. It comprises of a network of institutions, such as, trade
unionism, collective bargaining, employers, the law, and the state, which are bound together by a set
of common values and aspirations. A knowledge of such institutions is important if we are to understand
everydays industrial relations’ phenomena. These institutions are a social network of organisations,
participants, processes and decisions, all of which interact and inter-relate together within the industrial
relations environment and even beyond it.

1.2 MEANING
There is no unanimity on the meaning and scope of “industrial relations” since different terms,
such as labour-management relations, employer-employee relations, union-management relations,
personnel relations and human relations, are in use and are used synonymously. In its wider sense,
the term “industrial relations” means relationship between management and workmen in a unit or an
industry. In its wider connotation, it means the organisation and practice of multi-pronged relationships
between workers and management, unions and workers, and the unions and managements in an
industry.
Dale Yoder defines it as a “whole field of relationship that exists because of the necessary
collaboration of men and women in the employment process of an industry.”1
Tead and Metcalfe observe that “industrial relations are the composite result of the attitudes and
approaches of employers and employees towards each other with regard to planning, supervision,
direction and co-ordination of the activities of an organisation with a minimum of human efforts and

1
2 Industrial Relations

frictions with an animating spirit of co-operation and with proper regard for the genuine well-being
of all members of the organisation.”2
According to Allan Flanders, the subject of industrial relations deals with certain regulated or
institutionalized relationships in industry. Personal or in the language of sociology, “unstructured”
relationships have their importance for management and workers, but they lie outside the scope of
a system of industrial relations.”3
H.A. Clegg defines industrial relations in the broadest terms as encompassing “the rules governing
employment, together with the ways in which the rules are made and changed and their interpretation
and administration.”4
In the words of Lester, “Industrial relations involve attempts at arriving at solutions between
the conflicting objectives and values; between the profit motive and social gain; between discipline
and freedom; between authority and industrial democracy; between bargaining and co-operation; and
between conflicting interests of the individual, the group and the community.”
Industrial relations is a comprehensive and total concept embracing the sum total of relationships
that exists at various levels of the organisational structure. More specifically, it connotes relations
among workers themselves within the class of employees, relations among the managements within
the managerial class, and relations between the two distinct classes of workers and management. It
denotes all types of inter-group and intra-group relations within industry, both formal and informal.
It consists of a complex network of relations that arise out of functional interdependence between
workers and managements and between industrial organisations and society. Industrial relations is a
social concept because it deals with social relationships in different walks of life. It is also a relative
concept because it grows and flourishes or stagnates and decays in accordance with the economic,
social and political conditions prevailing in a society and the laws made by the state to regulate them.
The state of industrial relations is also influenced by the advances made in the field of science and
technology. There is greater divergence in industrial relations’ systems as a result of the divergent
economic, social, political and cultural environments.

1.3 DUNLOP'S APPROACH

Dunlop5 defines an industrial relations system in the following way:
An industrial-relations system at any one time in its development is regarded as comprised of
certain actors, certain contexts, an ideology which binds the industrial-relations system together, and
a body of rules created to govern the actors at the workplace and work community. There are three
sets of independent variables: The ‘actors’, the ‘contexts’ and the ‘ideology’ of the system.
The Actors in a System: The actors are: (a) hierarchy of managers and their representatives
in supervision, (b) a hierarchy of workers (non-managerial) and any spokesmen, and (c) specialised
governmental agencies (and specialised private agencies created by the first two actors) concerned
with workers, enterprises, and their relationships. These first two hierarchies are directly related to
each other in that the managers have responsibilities at varying levels to issue instructions (manage),
and the workers at each corresponding level have the duty to follow such instructions.
The Contexts of a System: In an industrial relations system, the contexts or the determinants
are of greater importance. The significant aspects of the environment in which the actors interact
are the technological characteristics of the workplace and work community, the market or budgetary
constraints which impinge on the actors, and the locus and distribution of power in the larger society.
Industrial Relations – An Overview 3

The technological features of the workplace have a very far-reaching consequence for an
industrial relations system influencing the form of management and employee organisation, the
problems posed for supervision, many of the features of the required labour force and the potentialities
of public regulation.
The market or budgetary constraints are a second feature of the environmental context which
is fundamental to an industrial relations system. These constraints often operate, in the first instance,
directly upon the managerial hierarchy, but they necessarily condition all the actors in a particular
system. The context may be a market for the output of the enterprise or a budgetary limitation or
some combination of the two.
The locus and distribution of power in the larger society, of which the particular industrial relations
complex is a sub-system, is a third analytical feature of the environmental context. The relative
distribution of power among the actors in the larger society tends to a degree to be reflected within
the industrial relations system. At this juncture, the concern is not with the distribution of power within
the industrial relations system, the relative bargaining powers among the actors, or their controls over
the processes of interaction or rule setting. Rather the concern is to the distribution of power outside
the industrial relations system which is given to that system.
The Ideology of an Industrial Relations System: The ideology is a philosophy or a
systematized body of beliefs and sentiments held by the actors. An important element which completes
the analytical system of industrial relations is the ideology or a set of ideas and beliefs commonly
held by the actors that helps to bind or to integrate the system together as an entity. Each industrial
relations system contains its ideology or shared understandings. The ideology defines the role and
place of each actor and the ideas which each actor holds toward the place and function of the others
in the system.
The Establishment of Rules: The actors in a given context establish rules for the workplace and
the work community, including those governing the contracts among the actors in an industrial relations
system. This network or web of rules consists of procedures for establishing rules, the substantive
rules, and procedures for deciding their application to particular situations. The establishment of these
procedures and rules is the centre of attention in an industrial relations system.

1.4 OBJECTIVES
Apart from the primary objective of bringing about sound and healthy relations between employers
and employees, industrial relations aim:
1. To facilitate production and productivity;
2. To safeguard the rights and interests of both labour and management by enlisting their
co-operation;
3. To achieve a sound, harmonious, and mutually beneficial labour-management relations;
4. To avoid unhealthy atmosphere in the industry, especially work stoppages, go-slows,
gheraos, strikes, lockouts; and
5. To establish and maintain industrial democracy.
The state endeavours to correct through effective industrial relations, an imbalanced, disordered,
and maladjusted social and economic order with a view to reshaping the complex socio-economic
4 Industrial Relations

relationships following technological and economic progress. It also controls and disciplines the parties
concerned and adjusts their conflicting interests. In this process, it protects some and restrains others,
depending upon the situation.6
According to Kirkaldy, industrial relations in a country are intimately connected with the form
of its political government; and the objectives of an industrial organisation may vary from purely
economic to purely political ends. He divides the objectives of industrial relations into four categories:
(a) Improvement in the economic conditions of workers in the existing state of industrial
management and political government;
(b) Control exercised by the state over industrial undertakings with a view to regulating
production and promoting harmonious industrial relations;
(c) Socialisation or rationalisation of industries by making the state itself a major employer; and
(d) Vesting of a proprietary interest of the workers in the industries in which they are employed.
The industrial relations objectives must follow the determination of business objectives of an
organisation. In this context, the industrial relations policies and practices should not negate its
intentions in other areas. For instance, if a company wishes to encourage voluntary retirement, its
salaries, pensions, working conditions and so on should not encourage its employees to stay at all
costs.

1.5 CHARACTERISTICS OF A GOOD INDUSTRIAL RELATIONS SYSTEM

In order that a proper climate for industrial harmony is created, it is essential that both the parties,
viz. employers and employees develop an open mind and come together on a common platform to
resolve conflicts and share areas of mutual concern and interests. In order that this is achieved both
the parties must regard themselves equal to one another, trust one another, and respect each other.
Employers will have to develop an open mind and accept the employees as partners of the industry.
Employees in turn will also have to acquire right knowledge, strength through unity, and matured
self-reliant minds.
The key elements of harmonious relationship are:
1. Trust
2. Mutual respect; lack of prejudices, accepting differences
3. Open and honest communications, especially effective listening
4. Efforts to resolve conflicts constructively
5. An understanding and acceptance of each other’s roles and goals
6. Keeping “politics” to a minimum; having no hidden agendas
7. Not allowing bad mouthing/back stabbing of others
8. Adequate interaction with each other
9. A willingness to try new things
10. Following through on promises
Industrial Relations – An Overview 5

11. Seeking input and involvement in decision-making

12. Having relatively equal power
13. Reliability/dependability
14. A focus on issues and interests, not personalities or positions
15. Recognition of mutual interests
16. A willingness to generate options
17. A sense of fairness
18. Actions to promote a long-term relationship
19. Balance of emotionality and rationality
20. Efforts to build commitment rather than gain compliance.
The following measures will go a long way in promoting harmonious relations between
management and unions:
Tips for Harmonious Relationship
Management
 Demonstrate signs of institutional and personal respect for unions.
 Administer terms and conditions of employment in good faith, taking into account the views
of the unions.
 Provide sufficient information on matters in which both the parties have a common stake.
 Seek union involvement on problems/issues confronting the management in successful
running of the organisation.
 Inform the union of planned changes in advance and bargain in good faith.
 Establish joint advisory committees with closely circumscribed roles in areas of mutual
interest such as health, safety and welfare.
 Involve union leaders and employees as key participants in external and social activities.
 Give credit to unions and employees where it is due.
 Demonstrate real respect for union members and help union leaders to solve their problems.
 Provide information, education and training to both employees and union leaders to fulfil
company’s expectations, and to ensure their co-operation.
 Develop personal relationship of trust with union leaders.
 Limit the use of coercive power.
Union
 React constructively to company proposals and where there are disagreements, try to work
them out.
 Attempt to resolve problems before they reach the formal grievance procedure.
 Participate in co-operative processes proposed by management.
 Support the company activities that do not negatively affect it or its membership.
 Limit the overt use of coercive power.
6 Industrial Relations

Both Management and Union

 Maintain and promote trust relationship at all levels.
 Agree on rules of conduct and adhere to them.
 Ensure that the disagreement between the management and union should be confined only
to ideas, beliefs, and institutions, but should not become personal.
 Get to know employees and union leaders on a personal level, and respect them.
 Remember that even if you don’t want a union, your employees do.
 See things through the eyes of employees and the union, and share in their emotions and
feelings.
 Remember that unions and employees can make a real contribution only if they are allowed
the freedom and flexibility to do so.
 Meet an employee at a union office or workplace when feasible.
 Eat together and exchange pleasantries at the common workplaces.
 Trust the judgement of the employees and be willing to share information with them beyond
that required by the bargaining obligation.

1.6 PRINCIPLES AND ESSENTIALS OF GOOD IR

Industrial relations is not an ‘objective’ science. It is concerned with subjective, value judgements
about concepts for which there are no universally accepted criteria. Different individuals and groups
have different perceptions of what is ‘good’/‘bad’, and ‘right’/‘wrong’:
Fairness and equity: Fairness and equity are used synonymously in industrial relations. Although
the concept of ‘fairness’ or ‘equity’ implicitly underlies the entire conduct of industrial relations, it
is explicitly most frequently associated with considerations of salary differentials and termination of
the contract of employment. Equity can be viewed from three different perspectives. Individual equity
is the perception of individual employee about the fairness of the employer in compensating him
commensurate with his skills and contribution. Internal equity is the perception of the employee about
the fairness of the employer in compensating him relative to other employees who are similarly placed
in terms of knowledge, experience, skill, and performance. External equity is the perception of
employees as to the fairness of their employer in compensating them relative to what is being paid
for similar level of knowledge and skills by other organisations in the region.
Power and authority: The concepts of ‘power’ and ‘authority’ occupy a central position in
industrial relations. The employment relationship is inherently a ‘power/authority’ relationship. The
expressions ‘power’ and ‘authority’ though used interchangeably, are different. Power is a wider
concept and can be defined as the ability to influence others, whereas authority means the formal
power possessed by, or delegated to a person by virtue of the office he holds in an organisational
setting. In the industrial relations context, power is primarily exercised over people in the service of
collective interests. People frequently make judgements regarding trade unions having too much or
too little power in relation to management and government; or unions having too little authority within
its own organisation. In practice both the concepts are intricably linked: power is achieved through
authority and vice versa.
Industrial Relations – An Overview 7

Individualism and collectivism: A frequently expressed value in modern industrialised society

is the importance of the individual and human dignity. In the employment sphere this is reflected in
a belief that employees are not to be treated impersonally. Rather they should be seen as individual
human beings each with his or her own aspirations, attitudes and beliefs; and employees can make
a unique and significant contribution to the successful operation of the organisation. This philosophy
appears to be at variance with the collective nature of industrial relations to a great extent. Obviously,
a number of very important aspects of industrial relations centre on the question of how much freedom
should be allowed to the individual or how far the needs of a collective system should predominate.
Rights and responsibilities: A right is generally defined as ‘a just or legal claim or title’ or
‘that which is due to any one by law, tradition or nature’. A right is something that a person is legally
entitled to from certain other person or persons or the world at large. Perhaps one of the most
fundamental ‘rights’ issues in industrial relations is that of managerial prerogative or management’s
right to manage. The term responsibility is defined as ‘a duty, obligation or burden’ or ‘having control
over something’. Right is the correlative of duty in so far as, a right, in its strict sense, has a
corresponding duty. In other words, the existence of a right in one person means that some other
person is under a corresponding duty.
Integrity, trust, and transparency: Integrity can be defined in terms of the individual acting
in accordance with his or her personal values and beliefs rather than in terms of the individual acting
according to some universally accepted code of conduct. The essential quality of integrity is that the
individual’s words and actions should be seen by others to coincide and express a consistent set of
values. A problem may often arise for the indvidual employee where his personal beliefs and values
come into direct conflict with the organisational demands placed on him. Trust may be established
amongst people themselves or people engaged within an organisation. Interpersonal trust exists where
individuals have confidence in, and able to rely upon one another, and not to seek actively or even
passively to harm each other. Transparency is promoted through sharing of information, openness
in communication, and willingness to explain and reason out the motives behind decisions and actions.
Employment relations is regulated by certain ethical principles, where:
1. Employment is freely chosen – no forced labour.
2. Freedom of association and the right to collective bargaining are respected.
3. Working conditions are safe and hygienic.
4. Child labour is not exploited.
5. Living wages are paid to employees.
6. Working hours are not excessive.
7. Non-discrimination is practiced in employment.
8. Regular employment is provided to workers.
9. No harsh or inhuman treatment is allowed.
10. The principle of equal pay for equal work is adhered.
11. Occupational health and safety is promoted.
12. Migrant workers are protected from exploitation.
8 Industrial Relations

1.7 SCOPE AND COVERAGE

The substance of industrial relations covers a wide range of aspects such as the following:
1. The structure of the economy and labour market.
2. Constitutional provisions, legal frameworks, and labour standards (international and national;
statutory and voluntary).
3. The structure of trade unions and employers organisations and their linkages, attitudes, and
approaches.
4. The nature and degree of government intervention.
5. Policies on industrial relations at international, national, industry, firm, and workplace levels.
6. Labour market policies and labour market institutions, labour law administration, and dispute
resolution mechanisms.
7. Collective bargaining and workers’ participation.
In fact, industrial relations encompass all such factors that influence behaviour of people at work.
A few such important factors are detailed below:
Institutions: They include government, employers, trade unions, union federations, employers
federations or associations, governmental bodies, labour courts, tribunals, and other organisations
which have direct or indirect impact on the industrial relations system.
Parties: It aims to study the role of workers, unions and employers’ federation, shop stewards,
industrial relations officers/manager, mediator/conciliator/arbitrator, and judges of labour courts and
tribunals.
Methods: Here the focus is on collective bargaining, employee participation, grievance redressal
procedure, discipline maintenance, disputes settlement machinery, activities of unions, formulation and
revision of existing rules and regulations, and so on.
Contents: They include matters pertaining to employment conditions like monetary and non-
monetary payments of the workers, hours of work, leave with wages, health and safety lay-off,
dismissals, and retirement. They also cover legislation governing labour welfare, social security,
industrial relations; issues concerned with workers’ participation in management, collective bargaining,
and sharing gains of productivity.
Thus, the system of industrial relations is a multi-variant and multi-dimensional that covers many
interrelated issues pertaining to institutional, organisational, interpersonal, and various other aspects.

1.8 IMPORTANCE – WHY IR?

(a) To ensure social justice to both employers and employees and advance the progress of
industry by bringing about harmony and cordial relationship between the parties.
(b) To settle disputes arising between employers and employees through the machinery of
conciliation and/or arbitration and/or adjudication.
(c) To workout along with the management, an effective grievance redressal machinery for
settlement of grievances and disputes.
Industrial Relations – An Overview 9

(d) If disputes are not settled amicably, there would be conflicts, work stoppages, strikes and
lockouts, which would entail dislocation of work, and hamper production and productivity
essential to the life of the community.
(e) To protect and safeguard the interest and well-being of the working class, through their
trade unions, against arbitrary and unilateral actions of the employers.

1.9 MAJOR STAKEHOLDERS OF IR

The four main parties who are actively associated with any industrial relations system are the
workers, the managements, the organisations of workers and managements, and the state.
Fundamentally, the term industrial relations refers to an organised relationship between two organised
parties representing employers and employees regarding matters of collective interest. With the growth
of professional management, the industrial relations scene is represented by the representatives of
employers and representatives of the employees. But the scope of industrial relations cannot merely
be confined to common labour-management relations or employer-employee relations.
Those involved in the industrial relations processes are:
1. Individual employees who contribute services under the employment contract in expectation
of remuneration;
2. Individual employers who pay remuneration to the employees under that contract in return
for services;
3. The separate associations of individual employees (for example the trade unions) which seek
to influence the terms and conditions of employment under which their members will be
employed;
4. The separate associations of individual employers which seek to influence the terms and
conditions of employment which members will be required to offer in the future; and
5. The central organisations of workers and employers which seek to create the appropriate
climate and ethos among their affiliated units and co-ordinate their activities.

1.10 EVOLUTION OF IR IN INDIA

India was greatly advanced in the field of industry and commerce in the past, as evidenced from
its ancient literature. In ancient times, the highest occupation in our country was agriculture followed
by trading. Manual services formed the third rung of occupation. A large number of occupations was
carried on by small manufacturers in their cottages, mostly on hereditary basis. Ancient scriptures
and laws of our country laid emphasis on the promotion and maintenance of peaceful relations between
capital and labour. From the very early days, craftsmen and workers felt the necessity of being united.
The utility of unions has been stated in Sukla Yajurveda Samhita, “If men are united, nothing can
deter them.” The description of unions of workmen in different occupations is found at many places
in the Vedic literature and Shastras. Kautilya’s Arthashastra gives a comprehensive picture of the
organisation and functions of the social and political institutions of India and a good description of
unions of employees, craftsmen or artisans.
During the period of Harsha we hear of “Shrenis” and “Sanghs” as well as unions of labourers
and employers at Kanauj. During the days of Vikramaditya (of Ujjain), there were well-organised guilds
10 Industrial Relations

known as “Shrenis” or “Kula.” These guilds worked according to their own bye-laws for the
management of the unions. However, there were no organisations of workers during the Mughal rule.
The labourers were entirely dependent on their masters and forced work was taken from them.
Historical evidence further shows the existence of rules of conduct and prescribed procedure for the
settlement of disputes for promoting cordial relations between the parties. The working relations,
however, in those days were more or less of a personal character and are very much distinguishable
from the present-day industrial relations as have gradually developed with the growth of large-scale
industries.
A study of modern industrial relations in India can be made in three distinct phases. The first
phase can be considered to have commenced from about the middle of the nineteenth century and
ended by the end of the First World War. The second phase comprises the period thereafter till the
attainment of the independence in 1947, and the third phase represents the post-independence era.

First Phase
During the first phase, the British Government in India was largely interested in enforcing penalties
for breach of contract and in regulating the conditions of work with a view to minimising the
competitive advantages of indigenous employers against the British employers. A series of legislative
measures were adopted during the latter half of the nineteenth century which can be considered as
the beginning of industrial relations in India.
The close of the First World War gave a new twist to the labour policy, as it created certain
social, economic and political conditions which raised new hopes among the people for a new social
order. There was intense labour unrest because workers’ earnings did not keep pace with the rising
prices and with their aspirations. The constitutional developments in India led to the election of
representatives to the Central and Provincial legislatures who took a leading role in initiating social
legislation. The establishment of International Labour Organisation (ILO) in 1919 greatly influenced
the labour legislation and industrial relations policy in India. The emergence of trade unions in India,
particularly the formation of All India Trade Union Congress (AITUC) in 1920 was another significant
event in the history of industrial relations in our country.

Second Phase
The policy after the First World War related to improvement in the working conditions and
provision of social security benefits. During the two decades following the war, a number of laws
were enacted for the implementation of the above policy. The Trade Disputes Act, 1929, sought to
provide a conciliation machinery to bring about peaceful settlement of disputes. The Royal Commission
on Labour (1929-31) made a comprehensive survey of labour problems in India, particularly the
working conditions in the context of health, safety, and welfare of the workers and made certain
recommendations of far-reaching consequences.
The Second World War gave a new spurt in the labour field. The exigencies of the war made
it essential for the government to maintain an adequately contented labour force for maximising
production. The Government of India had, therefore, to step in and assume wide powers of controlling
and regulating the conditions of work and welfare of industrial workers. It embarked upon a
two-fold action in this regard, namely: (i) statutory regulation of industrial relations through the Defence
of India Rules and the orders made thereunder; and (ii) bringing all the interests together at a common
forum for shaping labour policy.
Industrial Relations – An Overview 11

The Government of India took several steps for evolving measures conducive to industrial peace.
It convened an All India Conference in January 1940. This conference and also the succeeding two
conferences held in January 1941 and January 1942 included only government representatives from
the centre, the provinces, and the then existing Indian states. It also held separate consultations with
the representatives of employers and workers regarding post-war labour problems. The experience
of these conferences showed that better results could be achieved only if the representatives of
governments, workers, and employers meet on a common platform for resolving differences through
discussions and mutual understanding. Accordingly, the 4th Labour Conference, held in August 1942,
included the representatives of employers and workers in addition to officials from the centre, the
provinces, and the states. This marked the beginning of tripartism in industrial relations on an all-
India basis.
Tripartite consultative system was one of the important developments in the sphere of industrial
relations in India. Tripartite consultation epitomises the faith of India in the ILO’s philosophy and
objectives. The need for tripartite labour machinery on the pattern of ILO was recommended by the
Royal Commission on Labour as early as in 1931. But the first step in this direction was taken only
in the year 1942, when the first tripartite labour conference was held at New Delhi under the
Chairmanship of B.R. Ambedkar. The conference consisted of two organisations, namely, the Indian
Labour Conference (ILC) and the Standing Labour Committee (SLC). The ILC originally consisted
of 44 members involving 22 government representatives, 11 employers’ representatives, while the SLC
consisted of 20 members comprising 10 government representatives, 5 employers’ and 5 employees’
representatives. In the state sphere, State Labour Advisory Boards were also set up for consultation
on labour matters. Gradually, tripartism developed into a full-fledged system, a kind of parliament for
labour and management.
The objectives set before the two tripartite bodies at the time of their inception in 1942 were:
(a) “Promotion of uniformity in labour legislation; (b) laying down of a procedure for the settlement
of industrial disputes; and (c) discussion of all matters of all-India importance as between employers
and employees.” The function of ILC, as viewed by Dr. Ambedkar, was to advise the Government
of India on any matter referred to it for advice, taking into account suggestions made by various
State Governments and representatives of employers and workers. These tripartite bodies were
essentially deliberative, recommendatory and advisory in nature and the area of their operation depended
on the discretion of the Central Government.
The national tripartite system enabled the government to bring the parties together on important
national issues. It provided a forum for trade unions and managements for offering their respective
points of view to the government and influencing the latter’s policy through constitutional means.
The positive action of this new tripartite arrangement was in the following four areas: (i) the discussions
on the proposed legislation and amendments to existing enactments among the interested parties with
a view to obtaining a consensus on principles for drafting legislation; (ii) the setting up of normative
guidelines for resolving labour-management disputes, for voluntary adoption by the two parties;
(iii) the codification of their rights and duties through mutual agreement, in regard to important matters
pertaining to welfare and conduct; and (iv) advising the government on the ratification of ILO
Conventions.
The ILC/SLC have immensely contributed in achieving the objectives set before them. They
facilitated enactment of central legislation and enabled discussion on all labour matters of national
importance. Different social, economic and administrative matters concerning labour policies and
programmes were discussed in the various meetings of ILC/SLC. Tripartite deliberations helped to
12 Industrial Relations

reach consensus, inter alia, on statutory minimum wage fixation (1944), constitution of tripartite
industrial committees (1944), introduction of a health insurance scheme (1945), and a provident funds
scheme (1950). Thus, it led to the passing of three important central labour laws, namely, the Minimum
Wages Act, 1948, the Employees’ State Insurance Act, 1948, and the Employees’ Provident Funds
Act, 1952. The 15th session of ILC (1957) presided over by Shri Gulzari Lal Nanda was instrumental
in adopting two voluntary schemes, namely, workers’ participation in management and workers’
education scheme. It also laid down the wage policy to be pursued during the Second Five-Year Plan
and the norms for fixing a minimum wage. The conference accepted the principle of appointing
industry-wise tripartite wage boards to help in the process of wage determination within the broad
framework of the government’s economic and social policy. The 16th session of ILC (1958) adopted
a voluntary code of discipline as an instrument to regulate industrial relations on a peaceful basis.
The 19th session of ILC (1961) suggested various measures for the welfare and other programmes
in India, including consumer co-operatives, fair price shops, industrial housing schemes, etc.
Between 1942 and 1992, ILC met on thirty occassions. In the initial years, i.e., between 1942
and 1968, ILC had 23 meetings. The ILC sessions were less frequent in the subsequent period and
only seven meetings were held including 30th session in September 1992 when the draft of the proposed
Industrial Relations and Trade Unions Bill was presented. The spirit behind the tripartite consultation
process being absent, ILC meetings were held intermittently as a matter of formality due to lack of
purpose. After the introduction of the structural changes under economic reforms, the tripartite
consultation forums have been revived since 1991.
In 1993, ILO workshop on tripartism in India was held. A special tripartite committee constituted
to focus on social and labour issues arising on account of structural changes met eight times between
1991 and 1996. Tripartite committees have also been set up for six industries.
The 31st session of ILC was held at Delhi on 3rd-4th January, 1995. In this session various
problems of industrial relations in the context of changed economic environment were discussed.
The 32 session of the Standing Labour Committee was held in New Delhi on October 27, 1994.
It discussed various issues concerning employment, vocational training, child labour, bonded labour,
labour standards, and international trade.
The 40th sesion of the ILC was held in Delhi on December 10, 2005. It debated two important
issues - one on the future of labour reforms, and the second on the urgent need for legislation on
social security for the vast mass of unorganised sector workers.
The key recommendations of 44th session of ILC (2012) include: (a) the coverage of the
Minimum Wages Act for all employees; (b) enhancing the wage ceiling in the EPF Act and increasing
the pension under the Act; and (c) raising maternity leave under the Maternity Benefit Act from the
present level of 12 weeks to 24 weeks.
According to the National Commission on Labour, the contribution of ILC/SLC to some labour
matters has suffered, because certain far-reaching decisions were taken by them apparently without
adequate internal consultation within the groups forming the tripartite. The distance between the
spokesmen of employers’ and workers’ organisations at these forums, on the one hand, their members,
on the other, and even the lack of control of the central organisations over their affiliates illustrates
the failure on the part of the other constituents of the tripartite. There is also a measure of dissatisfaction
over the nature of consensus arrived at in these bodies. Increasing absence of unanimity in tripartite
conclusions in recent years has been a cause of concern. The workers’ organisations have criticised
Industrial Relations – An Overview 13

the procedure in reaching consensus as an exercise in semantics, leaving the basic contradictions
unresolved. The employers have similarly held the view that the usefulness of tripartite bodies, will
be enhanced if official conclusions are based not merely on the views summed up by the Chairman,
but on the points emphasised by all the parties.
Even though the Defence of India Rules lapsed after World War II, Rule 81A which regulated
industrial relations during the war was kept alive for six months by an ordinance. Meanwhile, the
tripartite deliberations during 1942-46 on the revision of Trade Disputes Act, 1929, helped the Union
Government in enacting the ID Act, 1947, which laid down a comprehensive dispute settlement
machinery to be applicable to all States. The Act retained one of the principal features of the Defence
of India Rules, namely, compulsory adjudication of industrial disputes. However, a few States, e.g.,
Maharashtra (formerly Bombay), Madhya Pradesh, Uttar Pradesh, Rajasthan, and Gujarat, enacted their
own legislations which were operative within their state boundaries along with the Central legislation.
This duality of labour administration could not be mitigated by the Indian Labour Conference due to
limitation set on it by the inclusion of labour in the Concurrent List of the Constitution.

Third Phase
After independence, an Industrial Truce Resolution was adopted in 1947 at a tripartite conference
which invited “the labour and management to assist the Government to secure, promote, and guarantee
such agreements between the parties as will usher in a period of contented and orderly advancement
towards a co-operative commonwealth.”
The Conference emphasised the need for respecting the mutuality of interests between labour
and capital in industrial development and recommended to the parties the method of “mutual discussion
of all problems, common to both and the determination to settle all disputes without recourse to
interruption in or slowing down of production.” The Resolution also laid down the principles which
should govern the relative share of labour and management in the product of industry.
The post-independece period of industrial relations policy aimed at the establishment of peace
in industry, and grant of a fair deal to workers. These aims were sought to be achieved by the state
through appropriate labour legislation, labour administration, and industrial adjudication. State
intervention in industrial relations was justified on the ground that it “helped to check the growth of
industrial unrest and brought for the working class a measure of advance and a sense of security
which could not otherwise have been achieved.” However, it was noticed that the spirit of litigation
grew and delays attendant on legal processes gave rise to widespread dissatisfaction. Hence, since
1958 a new approach was introduced to counteract the unhealthy trends of litigation and delays in
adjudication. Its emphasis was based on the principles of industrial democracy, on prevention of unrest
by timely action at the appropriate stages, and giving of adequate attention to root causes of industrial
unrest.

1.11 FACTORS AFFECTING IR

Industrial relations are influenced by various factors, viz., institutional factors, economic factors
and technological factors:
1. Institutional factors: These factors include government policy, labour legislation, voluntary
codes, collective agreements, employers’ federations, social institutions like community,
caste, joint family, creed, system of beliefs, attitudes towads work and system of power
status.
14 Industrial Relations

2. Economic factors: These factors include economic organisations, like capitalist, communist,
the structure of labour force and demand for and supply of labour force.
3. Technological factors: These factors include mechanisation, automation, rationalisation and
computerisation.
4. Social and cultural factors: These factors include population, religion, customs and
traditions of people, ethnic groups and cultures of various groups of people.
5. Political factors: These factors include political system in the country, political parties and
their ideologies, their growth, mode of achievement of their policies and involvement in trade
unions.
6 Governmental factors: These factors include governmental policies like industrial policy,
economic policy, labour policy and export policy.

1.12 ROLE OF THE STATE/GOVERNMENT, EMPLOYERS AND UNIONS

Role of the State
The role of the state in industrial relations is determined by its political, ideological, and socio-
economic orientation. The role varies depending on the stage and level of development and the strategy
of industrialisation. In the latest phase of industrialisation, the state is adopting a neo-liberal policy.
The dominant model is that of market economy where the state will let the market forces take charge.
The economic policies of the government influence behaviours of people at work, their conditions
of employment, security, and incidences of industrial conflict. The policies have major implications
for firm’s employment relations. If the policy focuses on creating conditions for full employment,
it strengthens unions’ bargaining power, whereas if it focuses on containing price inflation, it
strengthens employers’ bargaining power (Farham, 2000).
Are there some core eternal values and principles concerning the role of the state in industrial
relations? A good industrial relations system is one that: (a) harmonises the economic growth with
social justice, (b) ensures observance of labour standards, (c) is change friendly, and (d) promotes
a culture of non-interference by one party into the affairs of another.
The state should facilitate the factors and processes that ensure the effectiveness of industrial
relations institutions and employment practices that fit into the different cultural settings of developing
nations.
Sound labour-management relations require building trust and co-operation through bipartite and
tripartite dialogue. The relationship between the state and multinational co-operations is often caught
between different historical paradigms - liberal, neo-liberal, and neo-imperial traditions. One of the
more complex issues involving the interface between government and industrial relations is centre-
state relations and the relative distribution of power and authority regarding policy making, legislation,
and enforcement of labour laws. In our federal set-up, competition between states results in pluralism
and diversity, which at times, can become counter-productive and unhealthy in terms of maintaining
basic labour standards across the country.
In future, the role of the state will increasingly come under scrutiny not only by social partners
at the national level, but by pressure groups at the regional and international levels. In a civil society,
Industrial Relations – An Overview 15

the role of the state will come under heavy scrutiny by several institutions, and in future, societies
may not necessarily accept uncritically the proposition that the state always acts in public interest.
Governance will remain a challenging issue.

Role of the Employers

There has also been a shift in the nature of the workforce in industry. The labour force in many
industrialized countries is now well educated and no longer satisfied with merely fulfilling first order
needs. There have also been structural changes in the workforce. Female participation rates have
increased in many countries. So too has the number of casual and part-time workers. There has been
a resurgence of home work and of other forms of self-employment. Thus, an increasing number of
workers are outside the ‘typical’ contract of employment.
There has been a reduction in the labour force in manufacturing with a simultaneous increase
in services. The blue-collar workers of the 1970s and earlier decades have been giving way to white-
collar workers. There has developed a new configuration of industries within manufacturing with the
growth of micro-electronics, consumer and capital goods and a simultaneous fall in textiles, steel and
heavy engineering.
Rapid changes in the technology, the paradigm shifts in the workplace and significant changes
in the demographic profile of workers meant that blue-collar workers are progressively replaced by
white-collar knowledge-professional employees. The focus is shifting from collective to individual
rights, from union to employee participation, and from union to employee communication. With the
proliferation of knowledge employees, the focus is shifting towards expansion of information and
consultation rights of individual employees.
To sum up, some of the changes/issues which are going to affect workplace and industrial
relations of tomorrow are:
1. New industries with new technology vastly different from the past,
2. Change in production technology – JIT, TOM, etc.,
3. Excess capacities and acquisitions,
4. Mergers and acquisitions,
5. Industrial sickness and downsizing,
6. Privatization of public sector undertakings,
7. Information technology advances,
8. Knowledge workers,
9. Income disparities.

Role of the Unions

The Indian trade union movement has come of age. What began as a fragmented protest against
low wages and oppression by employers, has gradually evolved into a large and impressive movement
with a distinct place of its' own in the national scene. The saga of Indian trade union movement is
one of perseverance against many odds, towards stability and strength. There was a time when trade
unions were regarded as instruments of class war; latter, these were regarded as agencies for collective
16 Industrial Relations

bargaining. In the present, trade unions have outgrown these restrictive definitions through a gradual
expansion of their functions. A trade union is now essentially a social organisation looking after the
all-round interest of workers as a social group. In the new era, trade unions cannot be said to be
effective merely by playing a negative role of criticizing, and condemning employers and the
government. They have also to play the positive role of sharing in the developing of industries and
of preparing and training workers to discharge their responsibilities as citizens.
Trade unions have emerged from society. Hence, though this emergence was the result of special
circumstances and their character was essentially as pressure organisations, their interests could never
be contradictory to or, at the cost of community interest. To the extent that the trade unions succeed
in effecting an improvement in the economic conditions of the members, they are serving the cause
of community at large. However, that is no longer enough. Trade unions have a far more complex
and diverse role to play in several areas as an organised pressure group, to bring about positive changes
in the fabric of society. In the ultimate analysis, there is a basic commonality of interest between
that of trade unions and that of the industry. The prosperity of the workers of an industry is directly
related to the prosperity of an industry; therefore, it is as vital to the trade unions as to the employers
that the industry is nourished and developed. Thus, higher productivity and adherence to work ethics
are principles that need to be taken seriously by trade unions. Wastage in production needs to be
discouraged; technological advances will have to be tackled skilfully in order to guard the interest
of members, consistently with the need for development.
Trade unions have often been accused, not without some justification, of holding the general
public to ransom by their tactics of confrontation in basic service industries and public utilities. Strikes
by teachers, doctors, hospital employees, postal employees, water supply employees, transport
workers, and so on put the community to endless inconvenience, which serves to alienate the trade
union cause in the eyes of society. The issue at stake is not the legitimacy of the cause of striking
workers, but whether trade unions have some obligations to general public, their normal role is
consistent with community interest. Perhaps, if the public is taken into confidence regarding the
problems of these groups, public sympathy could give more weightage to the union's cause. The media
could be used effectively to mobilise public opinion so that it may exert pressure on behalf of unions
to get legitimate demands of workers redressed in essential industries.
The growing consumer movement in our country poses a new responsibility on trade unions
as guardians of social welfare, and protectors of the interests of consumers. As producers of consumer
goods, the workers have a moral responsibility to see that the goods and services produced by them
are of good quality. Workers are also consumers, therefore there is no conflict of interest in ensuring
quality in production of goods and services provided.
The issue of environment is a global issue now and here again the trade union has a crucial
role to play in creating awareness among its members about protecting the environment. Good
housekeeping in the work environment, treatment of industrial waste and effluents, monitoring air
pollution by the unit, all need to be taken seriously by the trade unions from the point of view of
community welfare. Trade unions must give their whole hearted co-operation in every voluntary effort,
besides their own, that promotes environmental cleanliness and safety.
Trade unions have traditionally viewed themselves more as economic and industrial organisations
rather than educational, cultural and welfare institutions. It is in the interests of trade unions to extend
their scope of activities beyond the workplace and look into the betterment of social and educational
problems of the workers. This participation of unions in community services would: (a) strengthen
Industrial Relations – An Overview 17

the membership base of unions; (b) provide much needed benefits to members by providing access
to various welfare amenities; (c) provide opportunities to union leaders to be community leaders; and
(d) result in a favourable public opinion about the unions. Family welfare is one area that offers
tremendous scope for unions in this direction.
Trade unions need to develop new strategies and competencies to initiate new membership and
organisational drives. They should focus on managing the expectations of the successive new
generations of employees. There is a need for greater democratisation in the functioning of trade unions.
Trade unions in the country are faced with a dilemma that is typical of increasing industrialisation
in any developing economy. They are torn between conflicting objectives like improvement of wages
versus capital formation, strikes versus production, grievances versus acceptance of discipline, and
organisational prestige versus political subservience. However, the basic truth remains that the trade
unions themselves have a great stake in rapid economic development since that alone can create a
basis for their growth and strength.
Trade unions in India resisted the implementation of economic liberalisation as they do not
generally favour multinationals getting free access into the Indian industrial field. They do favour the
growth of small-scale sector, oppose privatisation of public enterprises and do not want absence of
sick industrial units.
Most of the private sector organisations have been seeking to promote labour-management
cooperation through consultation rather than collective bargaining.
Under the present scenario, the role of trade unions should be as follows:
1. Shared commitment to the success of the business.
2. Employment security for workers, and workforce flexibility coupled with appropriate training.
3. An emphasis on the quality of working life.
4. Informing and consulting employees.
5. Employee representation at different levels.
6. Sharing of organisational success.

1.13 CHANGING DIMENSIONS OF IR IN INDIA

 Under the impact of restructuring process, the large-sized firms are downsizing their activities
and shifting their production to other smaller allied units.
 The restructuring process, production reorganization, and technology changes/upgradation
have made the problems of unemployment of labour more widespread and acute.
 The focus of industrial relations has shifted from the region/industry level to the enterprise
or even plant level.
 The foremost issue for the industrial relations system in India is that it has come under
pressure to adapt to the new environment that has emerged after the introduction of structural
changes envisaged under economic reforms.
18 Industrial Relations

 Various economic reforms have distinctly affected the industrial relations system in the
country as it has limited its institutions and practices to the formal organised sector in the
large-sized units.
 In a decentralised sector of small and medium sized units and enterprises in the services
sector and high-tech segment there is a wide differential in wage determination and benefits
across the industries.
 A series of personnel problems normally occur when one company acquires another.
 People aspect is very important in the process of acquisition.
 The labour relations considerations, when one company acquires another, are union relations
history, representation of employees in unions, history of work stoppages, strikes and
lockouts, grievance settlement, and collective bargaining and signing of agreements and
settlements.
 One of the biggest problems of downsizing is poor employee morale and low job satisfaction
of the employees who remain after downsizing. In case of downsizing employees who are
likely to be affected should be informed sufficiently in advance.
 The role and importance of trade unions has declined in most countries including India.
 The decline in the role of the trade unions has led to a simultaneous decline in collective
bargaining.
 Changing composition of the labour force and increase in female participation rates is one
of the challengs in industtrial relations.
 Ascendancy in managerial rights and the weakening of trade unions gave greater flexibility
to management in utilisation of labour and in handling industrial conflicts.

1.14 IMPACT OF GLOBALISATION, PRIVATISATION AND

LIBERALISATION
1. Globalisation and technological changes proved disruptive for the system in terms of
displacement of labour, i.e., job losses, destabilising the wage structure, and a shift in
skill/occupation and composition of labour.
2. In the process of globalisation the power of trade unions, as measured by trade-union density,
has declined almost everywhere around the world, in developed as well as in developing
countries. Evidently, some other factors have contributed to the evolution of trade union
membership such as the demise of state socialism in Central and Eastern Europe, the process
of economic restructuring, and the shift from manufacturing to service employment.
Nevertheless, globalisation as such has an impact on labour and labour relations, which has
contributed considerably to the significant decline of trade-union density in general. Only
some developing countries have benefited from globalisation. In many countries, including
the advanced economies, income inequality and poverty has grown considerably.
3. Privatisation is one of the major elements of structural adjustment process taking place in
different parts of the world. It involves complex social and labour issues, and apprehensions
about potential loss of present and future jobs. However, there is not enough evidence to
Industrial Relations – An Overview 19

suggest that privatisation per se destroys jobs. The trade unions are concerned about
privatisation because of its potential adverse effects on the dynamics of trade unions and
their rights.
4. Liberalisation includes liberalising the industry, business, and trade, both domestic and
foreign.
5. Winds of liberalisation is blowing hard over Indian corproate sector. This sector is undergoing
a process of restructuring to gain competitive strength. But to achieve this goal, unrestricted
mergers and takeovers may prove counter-productive.
6. Economic liberalisation and globalisation have their impact on all segments of economic
activities including human resource management and industrial relations. They demand highly
skilled and committed workforce and provide the scope for high quality of worklife. Though
they result in unemployment to less skilled personnel in short-run, continuous development
of human resources along with setting-up of a number of new industries would provide
better employment opportunities.

1.15 ISSUES AND CHALLENGES OF IR IN INDIA

Issues
(a) How best industrial relations can contribute to enterprise performance and competitiveness?
(b) How to ensure greater worker involvement in decision-making process in enterprises?
(c) How to deal with employees from different backgrounds and cultures?
(d) How to deal with employees on an individual basis and with unions on a collective basis?
(e) How to negotiate with unions particularly on demands relating to wage hikes and minimum
wage increases?
(f) How to maintain a balanced approach between the current human resource management
and traditional industrial relations?
Challenges
Trade unions are organisations of employees. They have their structure, rules, activities,
communication system, and leadership. They interact with the environment and strive to respond to
its pressures/challenges not for mere survival, but to remain effective organisationally.
Like other organisations, trade unions too have been facing several challenges like:
Global competition: Most companies resort to cost cutting while very few opt for value addition.
Neo-liberal policies are focussing more on profit than people, cut-throat competition is resulting in
massive workforce reductions. Though there are instances of trade union co-operation and
collaboration with management to make companies survive and grow in the midst of global competition,
in many cases the mindset of both parties is still frozen. Mostly, managements also find it difficult
to deal with unionised workers.
Changing technology: Rapid changes in technology and the resultant phenomenon of drastic
decline in employment and workers’ loss of control over jobs is a major challenge for trade unions.
They find it hard to accept rapid technological changes.
20 Industrial Relations

Trade unions need to establish what they consider a desirable pattern and follow it. They also
need to adapt themselves fast to the rapid changes, for if they are slow they might seize to be relevant
to their own members and to society. Technological obsolescence will lead to skill downgrading forcing
workforce redundancies. Without continuous adoption of new tools, methods, and products,
companies would find it difficult to survive. If the companies do not survive, the employees would
lose their jobs and trade unions their membership.
Government policies: There is a marked shift in state policies worldwide from being labour
friendly to investor friendly. When governments are union friendly, unions grow; when they are neutral,
unions and unionism stagnate; when they adopt anti-union policies, unions and unionism decline.
HRM Policies: With the advent of HRM, the managements have initiated human resource
practices that emphasise individualism rather than collectivism, direct participation of workers rather
than their indirect representation, and decentralised rather than centralised collective bargaining. All
these have weakened union power and enhanced managerial authority.
The linkage between HRD and industrial relations also needs to be properly appreciated. HRD
efforts should not be construed as managerial strategies to wean employees away from their unions.
There should be proper recognition of and mutual respect for each other’s roles and rights. Meaningful
HRD interventions should be directed at dealing with problems of employee alienation; dissonance with
intrinsic and extrinsic aspects of work; improving quality of work life; and in essence improving
employee relations.
Other challenges include:
(a) High and rising levels of unemployment and severe underemployment in many parts of the
world.
(b) Large scale recession in industry.
(c) Shrinkage of jobs in the organised sector leading to casualisation, and contractualisation.
(d) Increase in rationalisation, retrenchment, closure and displacement of labour.
(e) Marginalisation of trade union movement and loss of empowerment of workers.
(f) Increasing proprotion of white-collar employees as a result of shift from manufacturing to
service sector.
(g) Increasing properation of highly educated and highly skilled workers who have little or no
affinity to trade union movement.
Trade unionism is in recession today and India is no exception. The decades of the 1980s and
1990s have been bad years for trade unionism all over the world. Union membership has been declining
in most developed countries, with the USA and UK leading, and even Japan not far behind. Worker
apathy is not a small factor either. The reassertion of capitalism under the new economic policy (1991)
has been a major reason but a wedge also appears to be operating between trade unionists and their
rank and file members. The overall trends are of declining unionised workforce, increased
unemployment, unfavourable public sentiment and management and government pressure on unions.
This combination is certainly ominous.
Industrial Relations – An Overview 21

1.16 SUMMARY
 The term “industrial relations” refers to the complexity of human relationships which emerge
in work situations.
 The field of industrial relations is highly sensitive and complex.
 The subject of industrial relations deals with certain regulated and institutionalised
relationships in industry.
 The employment relationship in any work situation provides the setting for industrial relations.
 With specific objectives, the workers as a group form trade unions, the employers form
their own associations, and the state provides institutions for the regulation of employment
relations.
 The field of industrial relations has a multi-disciplinary base that draws upon concepts from
the established disciplines in social sciences, such as economics, sociology, and psychology.
 These disciplines have developed theories of industrial relations, but they differ considerably
in their theoretical framework and practical application.
 The prominent contribution to the industrial relations literature is the ‘systems’ approach
developed by John T. Dunlop who views industrial relations system as a sub-system of
society.
 The major participants in industrial relations are the workers and their organisations, the
managements and their associations, and the agencies of the government.
 Industrial system has brought about a number of complexities which have rendered the
management of people in an enterprise more difficult and complicated than ever before.
 Traditional industrial relations gradually giving place to modern industrial relations posing
a variety of complex and complicated problems covering both shop floor employees as well
as executives at various levels of management.
 Obviously, the industrial relations scene in different countries have shown different
characteristics and trends signifying dynamic relationship between the parties.
 The forces of change are operating with such intensity and velocity that it is indeed very
difficult to predict the future, more so now than ever before.
 The industrial relations policy of the Government of India enunciated in various Five Year
Plans incorporates principles and guidelines for the prevention and resolution of industrial
disputes.
 Industrial relations in India, as elsewhere, are in a state of transition due to a variety of
changes occurring at a rapid pace.
 The structural changes taking place in the economy since the middle of 1991 brought to
the fore the need to adjust labour policy in line with the changes in the industrial policies.
 This apart, the liberalisation and deregulation, privatisation, encouragement to multinationals,
new technologies, and return to market economy have profound implications for labour
management relations.
22 Industrial Relations

 The emerging issues and current developments which have a considerable impact on
industrial relations are cross-cultural issues, structural changes in organisations, outsourcing,
mergers and acquisitions, globalisation, decline in trade unionism and collective bargaining,
and emergence of blue-collar and knowledge workers.
 One major future challenge in industrial relations revolves around the changing nature of
the labour force, government and the trade union.

1.17 DISCUSSION QUESTIONS

1. What is industrial relations?
2. Discuss the Dunlop’s approach to industrial relations.
3. What is the future of industrial relations in India?
4. Give a historical review of industrial relations in India.
5. What is the recent trend of industrial relations in India?
6. What are the recent developments in industrial relations in India?
7. Employee relations in future will be both competitive and co-operative Discuss.

1.18 REFERENCES
1. Yoder, Dale, Personnel Management and Industrial Relations, p. 19.
2. Tead and Metcalfe, Personnel Administration, p. 2.
3. Flanders A. Industrial Relations: What is Wrong with the System? Faber, 1965, p. 10.
4. Clegg H. A. The System of Industrial Relations in Great Britain, Blackwell, 1970, p. 1.
5. Dunlop, John T., Industrial Relations Systems, Southern Illinois University Press,1958. p. 7.
6. Kirkaldy, H.S., The Spirit of Industrial Relations, pp. viii-ix.

1.19 CHECK YOUR PROGRESS

(A) Choose the appropriate answer from the options given below:
1. What are the objectives of industrial relations?
(a) To safeguard the rights and interests of workers
(b) To achieve sound industrial relations
(c) To maintain industrial democracy
(d) All of the Above
2. Which of the following are the different parties to industrial relations?
(a) Workers (b) Management
(c) Trade Unions (d) All of the Above
Industrial Relations – An Overview 23

3. Which of the following are the factors affecting industrial relations?

(a) Attitudes of management towards employees
(b) Attitudes of employees towards management
(c) Inter-Union Rivalry
(d) All of the Above
4. Who was the first Labour Minister of independent India?
(a) V.V. Giri (b) Jagjivan Ram
(c) G.L. Nanda (d) N.M. Joshi
5. The International Labour Organisation (ILO) was established in the year
(a) 1919 (b) 1910
(c) 1915 (d) 1905
6. The need for tripartite labour machinery on the pattern of ILO was recommended by the
(a) Royal Commission on Labour, 1929
(b) First National Commission on Labour, 1969
(c) Labour Investigation Committee, 1944
(d) Committee on Labour Welfare.
7. The All India Trade Union Congress (AITUC) was established in the year
(a) 1930 (b) 1925
(c) 1923 (d) 1920
8. The objects of the Indian Labour Conference (ILC) are to
(a) Promote uniformity in labour legislation
(b) Lay down a procedure for the settlement of industrial disputes
(c) Discuss all matters of all India importance between employers and employees
(d) All of the above
9. The measures for avoiding downsizing in India are
(a) Restrictions on hiring for a limited period
(b) Internal transfers
(c) Reduction of normal hours of work
(d) All of the above
Ans.: 1. (d), 2. (d), 3. (d), 4. (b), 5. (a), 6. (a), 7. (d), 8. (d), 9. (d).
24 Industrial Relations

(B) State whether the following statements are True or False:

1. “Industrial Relations” in its wider connotation means the relationship between workers and
management in a unit or an industry.
2. Only internal factors influence industrial relations strategy.
3. Any problem in industrial relations has to be approached on a multi-disciplinary basis, drawing
from the contributions of different disciplines.
4. The technological features of the workplace have a very far-reaching consequence for an
industrial relations system influencing different factors.
5. The actors in a given context establish rules for the workplace and the work community
in an industrial relations system.
6. Industrial relations encompass certain important factors such as institutions, actors, methods,
and contents that influence behaviour of people at work.
7. Tripartite consultative system was one of the important developments in the sphere of
industrial relations in India.
8. The legal framework, the structure of trade unions and employers’ organisations, and
industrial relations practices are similar across countries.
9. HRM approaches emphasise the individual rather than the collective regulations of the
employment relationship and the direct relationship between management and its employees.
10. One of the biggest problems of downsizing is poor employee morale and low job satisfaction
of the employees who remain after downsizing.
11. Under the changed economic scenario, the trade unions in our country have no role to play
in an industrial set-up.
12. One major future challenge in employee relations revolves around the changing nature of
the labour force.
13. The industrial relations system need not transform itself and adapt its institutions and
practices to cope up with the emerging challenges.
14. The emerging industrial relations will not pose any challenge to the future industrial relations
scenario.
Ans.: 1. False, 2. False, 3. True, 4. True, 5. True, 6. True, 7. True, 8. False, 9. True, 10. True,
11. False, 12. True, 13. False, 14. False.

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