MANAGEMENT

OF

MBAFT - 7811 : MANAGEMENT OF INDUSTRIAL RELATIONS (Semester - IV)

INDUSTRIAL RELATIONS
Master of Business Administration (MBA)
Core Course - MBAFT - 7811
Semester - IV Course Credit - 4.5

Department of Distance and Continuing Education Department of Distance and Continuing Education
University of Delhi University of Delhi
MANAGEMENT OF INDUSTRIAL RELATIONS

Editorial Board

Dr. Aniruddh Vijay

Assistant Professor, School of Open Learning, University of Delhi

Content Writers

Dr. Abhishek Janvier Frederick,

Dr. Priyanka Singh, Ms. Komal Goyal,
Ms. Vandana Yadav, Ms. Jagrati Asija
Academic Coordinator

Mr. Deekshant Awasthi

© Department of Distance and Continuing Education

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 MANAGEMENT OF INDUSTRIAL RELATIONS

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 Contents

PAGE
Lesson 1: Industrial Relations
1.1 Learning Objectives 1
1.2 Introduction to Industrial Relations 2
1.3 Nature of Industrial Relations 3
1.4 Scope of Industrial Relations 3
1.5 Importance of Industrial Relations 4
1.6 Theories and Models of Industrial Relations 6
1.7 History of IR in India 8
1.8 Contemporary Issues of IR and the Labour Force 9
1.9 Economic Environment of IR 11
1.10 Political Environment of IR 13
1.11 Social Environment of IR 14
1.12 Summary17
1.13 Answers to In-Text Questions 18
1.14 Self-Assessment Questions 18
1.15 References18
1.16 Suggested Readings 19

Lesson 2: Trade Unions

2.1 Learning Objectives 20
2.2 Introduction: Trade Union Act, 1926 21
2.3 Legal Framework Related to Trade Unions in India 25
2.4 Forms of Trade Union 27
2.5 Theories of Trade Union 31
2.6 Landmark Judgments and Case Laws Related To TU 34

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2.7 Managerial Associations; Employer Associations 35
2.8 Registered Trade Unions: Rights and Liabilities 36
2.9 Summary42
2.10 Answers to In-Text Questions 43
2.11 Self-Assessment Questions 43
2.12 References43
2.13 Suggested Readings 44

Lesson 3: Collective Bargaining

3.1 Learning Objectives 45
3.2 Introduction45
3.3 Nature and Legal Framework of Collective Bargaining 47
3.4 Levels of Collective Bargaining 50
3.5 Negotiating Techniques and Skills 59
3.6 Summary62
3.7 Answers to In-Text Questions 62
3.8 Self-Assessment Questions 63
3.9 References63
3.10 Suggested Readings 63

Lesson 4: Tripartism, Social Dialogue and Role of Government in IR

4.1 Learning Objectives 45
4.2 Introduction: Tripartism 66
4.3 Social Dialogue and Role of Government in IR  71
4.4 Types and Levels of Tripartism; Social Dialogue and Reform Process 73
4.5 Bipartism’s Link with Tripartism  75
4.6 Types and Means of Government Interventions 76
4.7 Role of State at the State IR Level; Future Role of Government 81
4.8 Summary86

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4.9 Answers to In-Text Questions 86
4.10 Self-Assessment Questions 86
4.11 References 87
4.12 Suggested Readings 87

Lesson 5: Contract of Employment

5.1 Learning Objectives 88
5.2 Contract of Employment 89
5.3 Industrial Employment (Standing Orders) Act, 1946 91
5.4 Shops and Establishment Act 93
5.5 Inter-State Migrant Workmen Act, 1979 97
5.6 The Contract Labour Act, 1970 99
5.7 Voluntary Retirement Scheme 102
5.8 Summary105
5.9 Answers to In-Text Questions 106
5.10 Self-Assessment Questions 106
5.11 References106
5.12 Suggested Readings 107

Lesson 6: Public Policy and Wage Reward System

6.1 Learning Objectives 108
6.2 Wage and Reward System 109
6.3 Components of Wage and Reward System  110
6.4 Wage Theories 110
6.5 Wage System in India 113
6.6 Profit Sharing and Stock Option  117
6.7 National Wage Policy  119
6.8 Wage Policy at the Company Level 121
6.9 Pay Structures 122
6.10 Contemporary Issues 124
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6.11 Summary127
6.12 Answers to In-Text Questions 127
6.13 Self-Assessment Questions 128
6.14 References  128
6.15 Suggested Readings 128

Lesson 7: Social Security

7.1 Learning Objectives 130
7.2 Working Conditions 131
7.3 Concept of Workers’ Safety 133
7.4 Health and Environment of Workers 135
7.5 Concept of Social Security 137
7.6 Factories Act, Workers Compensation Act, Employees’ State Insurance
Act and Workers Education 139
7.7 Medical Care of Workers 141
7.8 Occupational Health 143
7.9 Welfare Funds 145
7.10 Social Security Reforms during the Period of Structural Adjustment 148
7.11 Social Security Conventions of ILO 150
7.12 Summary152
7.13 Answers to In-Text Questions 153
7.14 Self-Assessment Questions 153
7.15 References153
7.16 Suggested Readings 154

Lesson 8: Dispute Resolution and Industrial Harmony

8.1 Learning Objectives 156
8.2 Introduction156
8.3 Dispute Resolution and Industrial Harmony: Industrial Conflict 160

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8.4 The Industrial Disputes Act, 1947 165
8.5 Role of Labour Boards, Courts and Tribunals in Dispute Resolution
and Industrial Harmony 169
8.6 Appointments, Powers and Duties of Authorities under the
Industrial Disputes Act, 1947 172
8.7 General Prohibition of Strikes and Lockouts 176
8.8 Unfair Labour Practices 180
8.9 Recommendations of National Commission of Labour 183
8.10 Guiding Framework for Sound Labour Management Relations 191
8.11 Labour Administrative Machinery 192
8.12 Summary195
8.13 Answers to In-Text Questions 196
8.14 Self-Assessment Questions 196
8.15 References197
8.16 Suggested Readings 197

Lesson 9: Employee Participation and Labour-Management Cooperation

9.1 Learning Objectives 199
9.2 Introduction to Employee Participation 199
9.3 Labour-Management Cooperation 201
9.4 Labor Participation Schemes 202
9.5 Constitutional and Legal Framework of Labour Participation 205
9.6 Difference between Indirect Representation and Direct Participation 208
9.7 Levels of Indirect Participation 210
9.8 Participation versus Collective Bargaining 212
9.9 Suggestion Scheme 213
9.10 Quality Circles 214
9.11 Labour Management Cooperation 216
9.12 Summary219

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9.13 Answers to In-Text Questions 219
9.14 Self-Assessment Questions 220
9.15 References 220
9.16 Suggested Readings 221

Lesson 10: Grievance and Discipline Handling

10.1 Learning Objectives 222
10.2 Introduction 223
10.3 Nature, Causes and Types of Grievances 224
10.4 How to Manage Employee Grievances 225
10.5 Grievance Procedure  227
10.6 Guiding Principles of Grievance Procedure 229
10.7 Interest Issues and Right Issues 230
10.8 Managing Discipline 231
10.9 Different Types of Approaches 234
10.10 Different Types of Punishments 237
10.11 Summary 240
10.12 Answers to In-Text Questions 241
10.13 Self-Assessment Questions 241
10.14 References 241
10.15 Suggested Readings 242

Lesson 11: HRM and IR in India

11.1 Learning Objectives 222
11.2 Introduction 244
11.3 Historical Overview of HRM and IR in India 244
11.4 Management Philosophy and Approaches in India 246
11.5 Integrative Approaches to Human Resource Management 250
11.6 Practical Implications of HRM-IR-HRD Integration 252

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11.7 ILO, India, and International Labour Standards 255
11.8 Summary 262
11.9 Answers to In-Text Questions 262
11.10 Self-Assessment Questions 262
11.11 References 263
11.12 Suggested Readings 263
Glossary265

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 L E S S O N

1
Industrial Relations
Dr. Abhishek Janvier Frederick
Assistant Professor
Department of Business Studies, JSBS&C
SHUATS
Email-Id: abhishek.frederick@shiats.edu.in

STRUCTURE
1.1 Learning Objectives
1.2 Introduction to Industrial Relations
1.3 Nature of Industrial Relations
1.4 Scope of Industrial Relations
1.5 Importance of Industrial Relations
1.6 Theories and Models of Industrial Relations
1.7 History of IR in India
1.8 Contemporary Issues of IR and the Labour Force
1.9 Economic Environment of IR
1.10 Political Environment of IR
1.11 Social Environment of IR
1.12 Summary
1.13 Answers to In-Text Questions
1.14 Self-Assessment Questions
1.15 References
1.16 Suggested Readings

1.1 Learning Objectives

 Identify common causes of industrial disputes and conflicts in the workplace.
 Explore various mechanisms and strategies for resolving conflicts, including negotiation,
mediation, and arbitration.

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Notes  Examine different models of employee participation and involvement

in decision-making processes.
 Analyse the challenges and opportunities presented by international
labor standards and multinational corporations.

1.2 Introduction to Industrial Relations

1.2.1 Concept
Industrial Relations (IR) refers to the complex interplay of relationships
between employers and employees within the organizational context, en-
compassing the dynamics of their interactions, negotiations, and collective
decision-making processes. This field of study and practice explores the
structures and processes that govern the employment relationship, seeking
to maintain a harmonious and productive working environment.
Industrial Relations extend beyond the individual employment contract to
include broader aspects such as collective bargaining, workplace dispute
resolution, employee representation, and the impact of labour laws and
regulations. The discipline aims to strike a balance between the interests
of employers and employees, fostering cooperation, equity, and effective
communication within the workplace. Through the study of Industrial
Relations, organizations seek to enhance productivity, job satisfaction, and
overall well-being, recognizing the pivotal role that a positive employ-
ment relationship plays in the success of both employers and employees.

1.2.3 Definition of Industrial Relations

Industrial Relations (IR) can be defined as the multidisciplinary field of
study and practice that examines the relationship between employers and
employees within the workplace. It encompasses the interactions, negoti-
ations, and collective agreements that shape the terms and conditions of
employment. Industrial Relations also extend to the broader societal and
legal context, including labour laws, regulations, and the role of labour
unions or employee representatives in influencing workplace dynamics.
The primary goals of Industrial Relations are to establish and maintain a
balanced and productive relationship between employers and employees,

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 Industrial Relations

ensuring fairness, equity, and effective communication within the organi- Notes
zation. This field seeks to address issues such as employment contracts,
wages, working conditions, dispute resolution, and the overall well-being
of the workforce, contributing to a harmonious and cooperative work
environment.

1.3 Nature of Industrial Relations

Dynamic Interaction: Industrial relations involve dynamic interactions
and negotiations between employers, employees, and their representatives.
The relationship is influenced by changing economic, social, and legal
factors.
Conflict and Cooperation: It encompasses both conflict and cooperation.
While conflicts may arise over issues like wages or working conditions,
the goal is to achieve cooperation for the mutual benefit of employers
and employees.
Multifaceted Relationships: Industrial relations extend beyond the in-
dividual employment contract to include collective relationships, such
as those between trade unions and employers’ associations, shaping the
broader industrial climate.
Continuous Process: Industrial relations are an ongoing and continuous
process, requiring constant attention to adapt to changing circumstances
and maintain a harmonious work environment.
Legal Framework: The nature of industrial relations is influenced by
the legal framework, including labor laws and regulations that define the
rights and responsibilities of employers and employees.

1.4 Scope of Industrial Relations

Employment Contracts: Industrial relations cover the negotiation, for-
mation, and administration of employment contracts, outlining the terms
and conditions of employment for individual workers.
Collective Bargaining: The scope extends to collective bargaining,
where representatives of employees (often trade unions) negotiate with
employers to establish collective agreements on issues such as wages,
working hours, and benefits.

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Notes Trade Unions and Employers’ Associations: Industrial relations involve

the formation and functioning of trade unions representing employees and
employers’ associations representing the interests of employers, influencing
workplace policies and decisions.
Dispute Resolution: Addressing workplace conflicts is a significant as-
pect of industrial relations. The scope includes mechanisms for dispute
resolution, ranging from informal negotiations to formal mediation or
arbitration.
Government Intervention: Industrial relations also involve government
intervention through labor laws and regulatory bodies. These provide a
framework for the conduct of employers and employees and may include
mechanisms for resolving disputes.
Employee Participation: Encouraging employee participation in deci-
sion-making processes is part of the scope. This may involve mechanisms
such as work councils or joint labor-management committees to enhance
communication and collaboration.
Social Dialogue: Beyond the organizational level, industrial relations
extend to social dialogue at the national or industry level, influencing
policies related to employment, labor market conditions, and social welfare.
Human Resource Management: Industrial relations are closely linked
to human resource management practices, as both contribute to creating
a positive work environment, managing conflicts, and fostering effective
communication between employers and employees.

1.5 Importance of Industrial Relations

The importance of industrial relations lies in its profound impact on the
overall functioning and success of organizations, as well as the broader
socio-economic fabric. Here are key aspects underscoring its significance:
Workplace Harmony: Industrial relations contribute to the establishment
of harmonious relationships between employers and employees. This har-
mony is essential for maintaining a positive work environment, reducing
conflicts, and promoting a sense of mutual trust and respect.
Increased Productivity: Positive industrial relations are often associated
with increased productivity. When there is a collaborative and supportive

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relationship between employers and employees, it fosters a conducive Notes

working environment that enhances overall organizational efficiency.
Conflict Resolution: Industrial relations play a crucial role in managing
and resolving conflicts that may arise between employers and employ-
ees. Effective dispute resolution mechanisms contribute to a stable work
environment, preventing disruptions and potential negative impacts on
productivity.
Employee Satisfaction: A favourable industrial relations climate is closely
linked to higher levels of employee satisfaction. When employees feel
their concerns are heard, and their rights and interests are protected, it
positively influences their job satisfaction and commitment to the orga-
nization.
Compliance with Labor Laws: Industrial relations ensure organizations
comply with labor laws and regulations. This legal framework establishes
the rights and responsibilities of both employers and employees, providing
a basis for fair and ethical employment practices.
Collective Bargaining: Through collective bargaining, industrial rela-
tions enable the negotiation of fair employment terms, including wages,
working hours, and benefits. This process ensures that the interests of
both parties are considered, leading to agreements that are acceptable to
both employers and employees.
Employee Welfare: Industrial relations contribute to the promotion of
employee welfare. This includes considerations for health and safety
standards, social security benefits, and other aspects that contribute to
the overall well-being of the workforce.
Attraction and Retention of Talent: Organizations with positive industrial
relations are often more attractive to talented individuals. A reputation for
fair employment practices and a supportive work environment enhances
the ability to attract and retain skilled and motivated employees.
Social Stability: Industrial relations extend beyond individual organizations
to influence social stability. By managing workplace relations effectively,
industrial relations contribute to broader societal stability and harmony,
reducing the likelihood of labor unrest or strikes.
Adaptability to Change: A positive industrial relations framework facilitates
organizational adaptability to change. When there is open communication

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Notes and collaboration, employees are more likely to embrace and contribute
to organizational changes, fostering innovation and competitiveness.
IN-TEXT QUESTIONS
1. What is the primary objective of industrial relations?
(a) Maximizing profits
(b) Ensuring employee satisfaction
(c) Facilitating collective bargaining
(d) Minimizing production costs
2. Collective bargaining is a process that involves negotiations
between:
(a) Employees and competitors
(b) Employers and suppliers
(c) Employers and employees or their representatives
(d) Government and trade unions
3. Which legal framework governs the employment relationship
and industrial relations in many countries?
(a) Business Ethics Act
(b) Labor Harmony Law
(c) Industrial Relations Code
(d) Workplace Fairness Legislation
4. Trade unions are organizations formed to:
(a) Promote employer interests
(b) Represent the interests of employers and employees
(c) Advocate for the rights and interests of employees
(d) Monitor government regulations

1.6 Theories and Models of Industrial Relations

Several theories and models have been developed to understand and analyze
the dynamics of Industrial Relations. These theories provide frameworks
for comprehending the relationships between employers and employees,

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 Industrial Relations

the role of institutions, and the factors influencing workplace interactions. Notes
Here are some prominent theories and models of Industrial Relations:
Pluralist Model: The pluralist model views industrial relations as a
complex interplay of various groups, including employers, employees,
trade unions, and government bodies. It acknowledges the existence of
multiple interests and recognizes the importance of negotiation and col-
lective bargaining to address conflicts.
Unitarist Model: The unitarist model assumes that all members within
an organization share common goals and interests. It emphasizes the im-
portance of teamwork and collaboration, viewing conflicts as temporary
and resolvable through effective communication and shared objectives.
Systems Theory: Systems theory considers the workplace as a dynamic
system where various components, such as employers, employees, and
the environment, interact. It examines how changes in one part of the
system can impact the entire organization and aims to achieve equilibrium
for effective functioning.
Marxist Model: Rooted in Marxist philosophy, this model sees industrial
relations as a struggle between the bourgeoisie (owners) and the proletariat
(workers). It emphasizes class conflict, exploitation, and the role of the
state in maintaining the interests of the capitalist class.
Human Relations Model: The human relations model focuses on the
social aspects of the workplace, emphasizing the importance of interper-
sonal relationships and employee satisfaction. It suggests that satisfied
employees are more productive and that positive interactions contribute
to overall organizational success.
Psychological Contract Theory: This theory explores the unwritten ex-
pectations and obligations that exist between employers and employees.
It emphasizes the psychological and emotional aspects of the employment
relationship, beyond the formal employment contract.
Institutional Theory: Institutional theory examines the impact of formal
and informal institutions on industrial relations. It considers how laws,
regulations, and social norms shape the behavior of organizations and
individuals within the workplace.
Stakeholder Theory: Stakeholder theory expands the focus beyond em-
ployers and employees to include other stakeholders, such as customers,

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Notes suppliers, and the community. It recognizes the influence of various

groups on organizational decisions and actions.
Negotiation Models: Various negotiation models, such as distributive bar-
gaining and integrative bargaining, provide frameworks for understanding
the negotiation processes in industrial relations. These models guide how
parties can reach agreements and resolve conflicts.
High-Performance Work Systems (HPWS): HPWS models emphasize
creating work environments that encourage employee involvement, skill
development, and empowerment. These systems are designed to enhance
organizational performance by aligning human resource practices with
strategic objectives.

1.7 History of IR in India

The history of Industrial Relations (IR) in India is marked by significant
developments, influenced by historical, social, and economic factors.
Here is an overview of the key milestones in the history of IR in India:
Pre-Independence Era (Before 1947): The industrialization efforts during
British colonial rule led to the emergence of factories, and the workforce
faced harsh working conditions. Labor movements, protests, and strikes
were common as workers sought better wages and improved working
conditions. The Trade Union Act of 1926 provided legal recognition to
trade unions.
Post-Independence Period (1947-1991): After gaining independence in
1947, the Indian government focused on economic development through
industrialization. The First Five-Year Plan (1951-1956) emphasized the
need for labor welfare and protection. The Industrial Disputes Act (1947)
was enacted to regulate employer-employee relations, providing mecha-
nisms for dispute resolution and prohibition of unfair labour practices.
Labor Movements and Strikes: The post-independence era witnessed
several labor movements and strikes, demanding better working condi-
tions, higher wages, and job security. The struggles of workers in various
industries, including textiles and railways, played a crucial role in shaping
labour laws and policies.
Committees and Commissions: The government appointed various com-
mittees and commissions to study and recommend measures for industrial
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 Industrial Relations

relations and labor reforms. The National Commission on Labor (1969) Notes
and the Second National Commission on Labor (2002) were significant
in this regard, providing recommendations for updating labour laws.
Codification of Labor Laws: Over the years, labour laws were codified
and amended to address changing industrial and economic dynamics.
The Factories Act (1948), Minimum Wages Act (1948), and Employees’
Provident Funds and Miscellaneous Provisions Act (1952) were among
the key legislations.
Emergence of Trade Unions: Trade unions played a crucial role in
shaping industrial relations in India. The formation of major trade unions,
such as All India Trade Union Congress (AITUC) and Indian National
Trade Union Congress (INTUC), contributed to collective bargaining and
representation of workers’ interests.
Liberalization and Economic Reforms (1991 Onward): The economic
reforms initiated in 1991 led to liberalization, privatization, and globalization.
These changes had implications for industrial relations, with an increased
emphasis on flexibility, competitiveness, and market-oriented policies.
Labor Law Reforms: In recent years, there have been discussions and
efforts towards labor law reforms to simplify and rationalize existing
laws. The Code on Wages, 2019 and the Industrial Relations Code, 2020,
are part of the government’s initiatives to consolidate and modernize
labour laws.
Challenges and Future Directions: Industrial relations in contemporary
India face challenges related to informal labor, contract work, and the gig
economy. The need for balancing the interests of employers and employ-
ees while adapting to a dynamic global economy remains a focal point.

1.8 Contemporary Issues of IR and the Labour Force

As of my last knowledge update in January 2022, several contemporary
issues in Industrial Relations (IR) and the labor force continue to shape
discussions and policies globally. It’s important to note that the status
of these issues may have evolved since then. Here are some key con-
temporary issues:
Informal Labor and Precarious Work: A significant portion of the glob-
al workforce is engaged in informal and precarious work arrangements,
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Notes characterized by lack of job security, minimal social protection, and limited
access to employment benefits. Addressing the rights and well-being of
workers in such arrangements is a pressing concern.
Gig Economy Challenges: The rise of the gig economy has brought forth
challenges related to the classification of workers, access to traditional
employment benefits, and concerns about job security. Many gig workers
face issues such as inconsistent income, lack of social protection, and
limited bargaining power.
Technology and Automation: The increasing integration of technology
and automation in workplaces poses challenges related to job displacement,
re-skilling needs, and the potential erosion of traditional employment
relationships. Balancing the benefits of technological advancements with
the protection of workers’ rights is crucial.
Remote Work and Flexible Arrangements: The COVID-19 pandemic
has accelerated the adoption of remote work and flexible arrangements.
While this offers new opportunities, it also raises concerns about work-
life balance, mental health, and the need for appropriate regulations to
ensure fair treatment of remote workers.
Gender Pay Gap and Workplace Equality: Gender disparities persist
in various workplaces, including the gender pay gap, unequal representa-
tion in leadership roles, and issues related to workplace harassment and
discrimination. Achieving gender equality remains a priority in many
discussions on labour force issues.
Labor Market Disparities: Disparities in access to opportunities, wages,
and social protection persist, particularly for marginalized groups. Ad-
dressing issues of social and economic inequality in the labor market is
a key consideration for promoting inclusive growth.
Workplace Health and Safety: Ensuring a safe and healthy work envi-
ronment has become increasingly important, especially in the context of
the COVID-19 pandemic. Workplace health and safety measures, including
vaccination policies, have gained prominence in IR discussions.
Skill Mismatch and Lifelong Learning: Rapid technological advancements
require continuous upskilling and reskilling of the workforce. Addressing
the gap between the skills workers possess and the skills demanded by
evolving industries is a challenge that necessitates a focus on lifelong
learning and education.
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Notes
1.9 Economic Environment of IR
As of my last knowledge update in January 2022, India’s economic
environment is characterized by a mix of opportunities and challenges,
reflecting the country’s diverse and dynamic economic landscape. With
a population exceeding 1.3 billion and a burgeoning middle class, India
presents significant market potential. The country has witnessed sustained
economic growth over the past few decades, positioning itself as one of
the world’s fastest-growing major economies. However, this growth has
been accompanied by persistent challenges, including income inequality,
a large informal sector, and complex regulatory structures.
The economic environment of Industrial Relations (IR) encompasses a
range of factors that influence the relationships between employers and
employees within the context of the broader economy. This environment
shapes the conditions under which labor is employed, wages are deter-
mined, and businesses operate. Here are key aspects of the economic
environment of IR:
1. GDP Growth and Economic Performance: The overall economic
health, as measured by factors like Gross Domestic Product (GDP)
growth, impacts the demand for labor and job creation. A growing
economy generally provides a more favorable backdrop for positive
industrial relations.
2. Employment Levels and Unemployment Rates: Economic conditions
dictate employment levels and influence the job market. High
levels of unemployment may result in increased competition for
jobs, affecting wage negotiations and the balance of power between
employers and employees.
3. Inflation and Cost of Living: Inflation rates and the cost of living
are critical economic factors affecting industrial relations. Inflation
can impact real wages and purchasing power, leading to discussions
on compensation and potentially influencing industrial disputes.
4. Global Economic Trends: The interconnectedness of the global
economy means that economic trends worldwide can affect IR.
Global economic slowdowns, trade tensions, or fluctuations in
commodity prices may have repercussions on industries, jobs, and
employment relationships.
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Notes 5. Technological Advancements and Automation: Economic trends

related to technological advancements and automation influence the
nature of work. Automation can lead to shifts in skill requirements,
changes in job roles, and discussions around workforce adaptation
and retraining.
6. Income Inequality: Economic disparities, including income inequality,
can be a source of tension in industrial relations. Demands for
fair wages, benefits, and efforts to address income inequality may
become focal points in labour-management negotiations.
7. Government Fiscal and Monetary Policies: Fiscal policies (taxation,
government spending) and monetary policies (interest rates) set
by the government impact economic stability. Changes in these
policies can affect business operations, investment decisions, and
employment conditions, influencing industrial relations.
8. Business Cycles: Economic cycles, characterized by phases of
expansion, contraction, and recession, influence industrial relations
dynamics. During economic downturns, organizations may face
challenges such as layoffs, cost-cutting measures, and negotiations
with labour unions.
9. Globalization and Trade Policies: Economic globalization and trade
policies shape the international economic environment. Changes in
trade agreements, tariffs, and global market conditions can impact
industries, affecting employment levels, labor market dynamics, and
industrial relations.
10. Entrepreneurship and Start-up Culture: The economic environment
is influenced by entrepreneurship and the prevalence of a start-up
culture. Emerging businesses may introduce innovative approaches
to employment, potentially impacting traditional industrial relations
practices.
11. Social Security and Welfare Programs: Government initiatives
related to social security and welfare programs have economic
implications for industrial relations. Policies addressing healthcare,
unemployment benefits, and social safety nets can impact overall
employee well-being.

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12. Government Subsidies and Incentives: Economic policies that include Notes
government subsidies and incentives for specific industries or sectors
can affect industrial relations. These measures may influence business
decisions, employment practices, and negotiations with workers.

1.10 Political Environment of IR

The political environment significantly influences Industrial Relations (IR)
as it shapes the legal and regulatory framework within which employers
and employees interact. Government policies, legislation, and political
ideologies play a crucial role in defining the rules of engagement in the
workplace. Here are key aspects of the political environment of IR:
1. Labor Laws and Regulations: Political decisions and legislative
actions impact the formulation and amendment of labor laws. These
laws govern employment relationships, working conditions, minimum
wages, collective bargaining, and dispute resolution mechanisms.
Changes in political leadership or ideology can lead to modifications
in labor regulations, affecting the rights and obligations of both
employers and employees.
2. Government Policies and Reforms: The political environment shapes
government policies and reforms related to labor and employment.
Initiatives such as labor market reforms, skill development programs,
and social security measures are often influenced by the political
ideology in power. Policies may also address issues like job creation,
workers’ welfare, and industrial growth.
3. Trade Unions and Political Affiliation: The political affiliations of
trade unions can influence their priorities, strategies, and interactions
with employers and the government. In some cases, trade unions
align with specific political ideologies, impacting their stance on
labor issues, negotiations, and collective bargaining.
4. Political Stability and Industrial Harmony: Political stability
contributes to industrial harmony by providing a predictable and
consistent regulatory environment. A stable political climate is conducive
to constructive social dialogue, effective policy implementation,
and sustained economic development, all of which influence IR
positively.

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Notes 5. Government Intervention in Disputes: Political authorities often

play a role in intervening and mediating during industrial disputes.
The form and extent of government involvement can vary based
on political ideologies, with some governments favoring a more
interventionist approach to maintain industrial peace.
6. Global Political Economy: The global political economy, including
international relations, trade agreements, and geopolitical tensions,
can impact IR. Changes in diplomatic relations, trade policies, or
global economic conditions can influence cross-border labor issues,
international labor standards, and the movement of labour.
7. Labor Market Policies: Political decisions shape labor market policies
related to employment generation, job security, and workforce
development. Policies may include incentives for industries, vocational
training programs, and measures to address unemployment concerns,
reflecting the political leadership’s priorities.
8. Environmental and Social Policies: Political agendas related to
environmental sustainability and social justice may influence
workplace practices. Governments may introduce policies encouraging
sustainable business practices, corporate social responsibility, and
inclusive employment policies.

1.11 Social Environment of IR

The social environment plays a pivotal role in shaping Industrial Relations
(IR) by influencing the attitudes, expectations, and behaviors of individ-
uals and groups within the workplace. It encompasses a range of social
factors that impact the dynamics between employers and employees. Here
are key aspects of the social environment of IR:
1. Cultural Diversity: The social environment is enriched by cultural
diversity, reflecting the presence of individuals from various
backgrounds, ethnicities, and cultures within the workforce. Managing
cultural diversity is essential for fostering inclusivity, preventing
discrimination, and promoting a harmonious workplace.
2. Social Values and Norms: Social values and norms shape the
expectations and behaviors of individuals in the workplace. These
may include attitudes towards work, gender roles, and ethical

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considerations. Understanding and respecting these values are crucial Notes

for maintaining positive IR.
3. Education and Skill Levels: The education and skill levels of the
workforce influence the nature of employment relationships. A
well-educated and skilled workforce may seek more autonomy,
challenging traditional hierarchical structures. Continuous learning
and development programs contribute to positive IR by addressing
skill mismatches.
4. Work-Life Balance: The social environment influences perceptions
of work-life balance. As societal norms evolve, there is an increased
emphasis on flexible work arrangements, family-friendly policies,
and employee well-being. Organizations that prioritize work-life
balance often experience improved employee satisfaction and
engagement.
5. Demographic Trends: Demographic trends, such as an aging
workforce or the influx of younger generations, impact IR. Different
age groups may have distinct expectations, preferences, and work
styles. Managing generational diversity is essential for building
cohesive and collaborative workplace relationships.
6. Social Media and Technology: The prevalence of social media
and technology has transformed communication within the social
environment of IR. Information spreads rapidly, and employees
are more connected than ever. This dynamic landscape requires
organizations to adapt their communication strategies and engage
with employees through digital platforms.
7. Attitudes towards Unionization: Social attitudes towards trade
unions influence the level of unionization within a workforce. Some
societies may view unions as essential for protecting workers’ rights,
while others may see them as disruptive. These attitudes impact the
landscape of collective bargaining and worker representation.
8. Corporate Social Responsibility (CSR): Increasingly, there is a
social expectation for organizations to engage in socially responsible
practices. CSR initiatives that address environmental sustainability,
community welfare, and ethical business conduct contribute to
positive perceptions both internally and externally.

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Notes 9. Gender Dynamics: Gender dynamics within the social environment

play a crucial role in IR. Efforts to address gender disparities,
promote diversity and inclusion, and prevent workplace harassment
contribute to fostering a more equitable and respectful workplace.
10. Social Justice and Equity: Social justice considerations influence
workplace policies and practices. Organizations that prioritize equity
in hiring, promotions, and compensation contribute to a more just
and inclusive social environment within the workplace.
11. Public Opinion and Activism: Public sentiment and societal activism on
various issues, including labor rights, can influence IR. Organizations
may face public scrutiny for their employment practices, emphasizing
the importance of aligning with social expectations.

CASE STUDY
As the company grew rapidly, the workforce diversified, comprising
employees with different skill sets, backgrounds, and expectations.
The challenge emerged in harmonizing the diverse workforce and
aligning their expectations with the company’s goals. To address
this, the company implemented a comprehensive industrial relations
strategy that included initiatives such as employee engagement
programs, skill development workshops, and a revamped commu-
nication system.
The company fostered an inclusive environment by encouraging open
dialogue between management and employees. Regular town hall
meetings, feedback sessions, and surveys were conducted to under-
stand the concerns and aspirations of the workforce. The introduction
of flexible work arrangements and comprehensive employee benefit
packages aimed to address individual needs and enhance job satisfac-
tion. Moreover, the establishment of an employee assistance program
and a dedicated grievance redressal mechanism provided avenues for
resolving personal and professional issues. Trade unions were also
actively involved in the process, collaborating with management to
ensure that the evolving needs of the workforce were considered in
decision-making. The negotiations focused on fair compensation,
career growth opportunities, and mechanisms for addressing work-re-
lated stress.

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QUESTIONS: Notes

1. What were the various challenges before the company as per

the case given?
2. What were the methods adopted by company to resolve the
issues and challenges related to industrial relations? Explain.

1.12 Summary
Industrial Relations (IR) constitute the complex network of interactions and
negotiations between employers and employees within the organizational
context. At its heart, IR involves the establishment and management of
the employment relationship, encompassing a spectrum of practices, reg-
ulations, and mechanisms. Key components include collective bargaining,
where representatives of workers negotiate with employers to determine
terms and conditions of employment, addressing crucial aspects like wages,
benefits, and working conditions. Trade unions play a pivotal role in this
process, advocating for the rights and interests of the workforce, negoti-
ating on their behalf, and fostering a collective voice. Integral to IR are
the legal frameworks that govern the employment relationship, including
labour laws and regulations that ensure fairness, safety, and protection
of workers’ rights. Dispute resolution mechanisms, ranging from griev-
ance procedures to mediation and arbitration, contribute to maintaining
industrial peace by addressing conflicts in a timely and equitable manner.
Beyond the confines of the workplace, industrial relations are deeply
intertwined with the broader social and economic environment. Economic
trends, technological advancements, and societal expectations influence
the dynamics of IR, necessitating adaptability and responsiveness from
both employers and employees. Human resource management practices,
encompassing recruitment, training, and employee development, play a
vital role in shaping the overall landscape of industrial relations. Moreover,
the participation of employees in decision-making processes, coupled with
ethical considerations in workplace governance, contributes to building
trust and fostering a positive organizational culture.
Workers’ rights form a foundational element of IR, encompassing protec-
tion against discrimination, provision of safe working conditions, and the
right to engage in collective action. Ethical considerations underscore the

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes importance of fairness, transparency, and integrity in dealing with work-

place issues, ensuring a just and respectful treatment of all stakeholders.
In summary, effective industrial relations go beyond mere transactional
interactions; they embody a strategic and holistic approach to creating a
collaborative, harmonious, and productive work environment, where the
interests of both employers and employees are considered and balanced
within the ever-evolving dynamics of the modern workplace.

1.13 Answers to In-Text Questions

1. (c) Facilitating collective bargaining
2. (c) Employers and employees or their representatives
3. (c) Industrial Relations Code
4. (c) Advocate for the rights and interests of employees

1.14 Self-Assessment Questions

1. Define the concept of Industrial Relations. Elaborate its nature and
scope.
2. What are the various theories and models of IR? Explain.
3. How do social and political factors influence the Industrial Relations
of any organization? Elaborate.

1.15 References
 Kouzes, J. M., & Posner, B. Z. (2017). The Leadership Challenge:
How to Make Extraordinary Things Happen in Organizations. John
Wiley & Sons.
 Sen, A. (2000). Development as Freedom. Oxford University Press.
 Tripathi, P. C. (2008). Personnel Management and Industrial
Relations. Sultan Chand & Sons.
 Pareek, U. (2003). Understanding Organizational Behaviour. Oxford
University Press.
 Rao, T. V. (2010). Human Resource Development: The New Trainer’s
Guide. Sage Publications.

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Notes
1.16 Suggested Readings
 Bhatnagar, J. (2007). “Managing Human Resources in the Emerging
Knowledge Economy: Challenges, Strategies, and Solutions.” ICFAI
University Press.
 Boxall, P., & Purcell, J. (2011). Strategy and human resource
management. Palgrave Macmillan.
 Hegde, R. S. (2006). “Industrial Relations in India: A Review.” Indian
Journal of Industrial Relations, 41(3), 307-319.
 Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and
Organizations: Software of the Mind. McGraw-Hill.
 Dwivedi, R. S. (2019). “Human Resource Management in the New
Millennium.” PHI Learning Pvt. Ltd.

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 L E S S O N

2
Trade Unions
Dr. Priyanka Singh
Assistant Professor
Sri Sukhmani Institute of Management
Sri Sukhmani Group of Institutions
Email-Id: Priyanka.singh.0415@gmail.com

STRUCTURE
2.1 Learning Objectives
2.2 Introduction: Trade Union Act, 1926
2.3 Legal Framework Related to Trade Unions in India
2.4 Forms of Trade Union
2.5 Theories of Trade Union
2.6 Landmark Judgments and Case Laws Related To TU
2.7 Managerial Associations; Employer Associations
2.8 Registered Trade Unions: Rights and Liabilities
2.9 Summary
2.10 Answers to In-Text Questions
2.11 Self-Assessment Questions
2.12 References
2.13 Suggested Readings

2.1 Learning Objectives

 Understand the meaning of Trade Union.
 Review the Objective of Trade union.
 Discuss the Types, Rights and Issues of Trade Union.
 Learn about various Theories of trade union.
 Analyse the paradigm shift in Industrial Relation.

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Notes
2.2 Introduction: Trade Union Act, 1926

Introduction
The Trade Union Act of 1926, a seminal legislation in India, was enacted
to regulate the establishment and operation of trade unions, safeguarding
the interests of workers and facilitating their collective bargaining with
employers. This pivotal act defines a trade union as an entity formed to
regulate relations between workers and employers, laying the foundation
for legal recognition and protection. Mandating registration for trade
unions, the Act outlines eligibility criteria, emphasizing a minimum of
seven members in the relevant industry. Registered unions enjoy certain
rights, including representation in employment matters and immunity from
specific legal actions during trade disputes. The Act also addresses the
utilization of general funds, providing guidelines for conducting strikes
and lockouts, and prescribing penalties for offenses committed by unions
or their members. Serving as a cornerstone for industrial relations in India,
the Trade Union Act, 1926, strikes a delicate balance between protecting
workers’ rights and maintaining industrial harmony.

Forms of Trade Unions

The forms have been classified into three parts:
 Revolutionary Change: Framing the rules for the working class by
using the means like use of force, violence.
 Neo-classical: This form focuses on improving the other wider issues
like raising saving rates, tax- reliefs etc.
 Classical: The main objective of trade union is to collectively protect
the interest of its member in a socio-economic-political system.
Trade union has been framed to express real needs, aspirations and
needs of the workers.

Functions of Trade Unions

 Negotiating with employers on behalf of workers to secure better
wages, working conditions, and benefits.
 Acting as a representative of workers in discussions with management,
ensuring their concerns and interests are effectively communicated.

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Notes  Mediating and resolving disputes between workers and employers,

contributing to the maintenance of industrial peace.
 Providing legal assistance and support to members in matters related
to employment, including disputes, disciplinary actions, and contract
negotiations.
 Advocating for the rights and welfare of workers, ensuring fair
treatment, and promoting safe and healthy working conditions.
 Offering educational programs and training sessions to enhance the
skills and knowledge of union members, empowering them in the
workplace.
 Engaging in political activities to influence legislation and policies
that impact workers and their rights.
 Undertaking initiatives for the social and economic well-being of
workers, such as healthcare, housing, and other welfare programs.
 Fostering a sense of solidarity among workers, promoting unity to
strengthen their collective bargaining power.
 Representing workers in joint consultation processes and participating
in decision-making related to workplace policies and practices.
 Monitoring and challenging unfair employment practices, discrimination,
and exploitation in the workplace.
 Keeping members informed about their rights, changes in labor laws,
and other relevant information affecting their employment.
 Organizing and conducting strikes or protests to address grievances
and compel employers to meet the demands of the workers.
 Building alliances and fostering solidarity with trade unions at the
international level to address global labor issues and promote
workers’ rights globally.

Objectives of Trade Unions

 Trade unions serve a multitude of objectives aimed at safeguarding
the rights and interests of workers within the complex dynamics of
the labor market. One primary objective is collective bargaining,
wherein trade unions negotiate with employers to secure favorable
terms for workers, encompassing aspects such as wages, working

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conditions, and benefits. These negotiations aim to create a fair and Notes
equitable balance of power between employers and employees. Trade
unions also play a pivotal role in worker protection by advocating
for their rights, ensuring that employees are treated justly in the
workplace, and addressing any grievances or disputes that may arise.
Job security is another key objective, with trade unions working
to establish measures that prevent arbitrary dismissals and protect
employees from unfair labour practices.
 Additionally, trade unions focus on improving working conditions,
advocating for safety measures, reasonable working hours, and
adequate facilities. They provide legal support to members, offering
representation and assistance in navigating complex employment-
related issues, including disputes and negotiations. Social and
economic welfare feature prominently in the objectives, as trade
unions work towards enhancing the overall well-being of workers.
This involves advocating for benefits such as healthcare, housing,
and education, recognizing the holistic needs of employees beyond
the workplace.
 Trade unions also emphasize training and skill development to
enhance the capabilities and employability of their members. The
promotion of unity and solidarity among workers is a crucial objective,
fostering a collective approach to addressing common concerns and
issues. Ensuring the participation of workers in decision-making
processes related to workplace policies and practices is another
aim, empowering employees to have a voice in matters that directly
affect them. Conflict resolution is inherent in their objectives, as
trade unions mediate and resolve disputes between workers and
employers, contributing to the maintenance of industrial peace.
 Beyond the immediate workplace, trade unions engage in political
advocacy, influencing legislation and policies to protect workers’
rights and interests. They disseminate information to keep members
informed about their rights, changes in labour laws, and other
pertinent details impacting their employment. Furthermore, trade
unions extend their objectives globally by building alliances and
fostering solidarity with international trade unions to address global
labour issues. The promotion of fair employment practices, monitoring

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Notes against discrimination and exploitation, and the organization of strikes

or protests as legitimate means to address grievances also feature
among the multifaceted objectives of trade unions. Collectively,
these objectives underscore the vital role that trade unions play in
shaping a just and equitable work environment for employees across
various industries.

Role of Trade Unions

 Trade unions play a crucial role in safeguarding the rights and
interests of workers within the framework of industrial relations.
One of their primary functions is collective bargaining, wherein trade
unions negotiate with employers to secure favorable employment
terms for their members, encompassing aspects like wages, working
hours, and benefits. By acting as representatives of the workforce,
trade unions contribute to maintaining a balance of power and
ensuring that employees have a collective voice in decisions that
affect their working conditions. Beyond negotiations, trade unions
serve as advocates for worker protection, addressing issues of unfair
labor practices, discrimination, and arbitrary dismissals. They play
a pivotal role in enhancing job security, striving to create a stable
and secure employment environment for their members.
 Trade unions also focus on improving overall working conditions,
advocating for safety measures and appropriate facilities. In the realm
of social and economic welfare, they champion benefits such as
healthcare, housing, and education, recognizing the broader well-being
of workers. The role of trade unions extends to legal support, offering
assistance to members in navigating complex employment-related
matters, including dispute resolution and contractual negotiations.
By promoting unity and solidarity among workers, trade unions
create a cohesive force that empowers employees to collectively
address common concerns and challenges in the workplace.
 Participation in decision-making processes is another significant
aspect of their role, as trade unions work to ensure that workers
have a say in shaping workplace policies and practices. Conflict
resolution is inherent in their function, as they mediate disputes
and contribute to maintaining industrial peace. Trade unions also

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engage in political advocacy, lobbying for favourable labour laws and Notes
policies that protect workers’ rights and interests. They disseminate
information to keep members informed about their rights, changes in
labour laws, and relevant developments affecting their employment.
Additionally, trade unions extend their influence globally, building
alliances and fostering solidarity with international counterparts to
address broader labor issues. In summary, the role of trade unions is
multifaceted, encompassing negotiation, representation, advocacy, and
solidarity to create a fair, equitable, and secure work environment
for employees across diverse industries.

2.3 Legal Framework Related to Trade Unions in India

Trade Union Act, 1926
“Short title, extent and commencement [Section - 1]
1. This Act may be called the Trade Union Act, 1926.
2. It extends to the whole of India.
3. It shall come into force on such date as the Central Government
may by notification in the Official Gazette, appoint”.
Definitions [Section 2] In this Act “the appropriate government refers as,
in relation to trade unions whose objects are not confined to one State,
the Central Government, and in relation to other trade unions, the State
Government, and], unless there is anything repugnant in the subject or
context,”:
(a) “executive means the body, by whatever name called, to which the
management of the affairs of a trade union is entrusted;”
(b) “[office-bearer] in the case of a trade union, includes any member
of the executive thereof, but does not include an auditor;”
(c) “prescribed means prescribed by regulations made under this Act;
(d) “registered office means that office of a trade union which is
registered under this Act as the head office thereof;”
(d) “registered trade union means a trade union registered under this
Act”;

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Notes (e) “Registrar means:

(i) a Registrar of Trade Unions appointed by the appropriate
government under section 3, and includes any Additional or
Deputy Registrar of Trade Unions, and
(ii) in relation to any trade union, the Registrar appointed for the
state in which the head or registered office, as the case may
be, of the trade union is situated”;
(f) “trade dispute” means any dispute between workmen and employers,
or between employers and employers, or between workmen and
workmen, which is associated with non- employment or employment,
or in terms of employment and “workmen” means the individual
employed in industry or trade whether or not, in employment of
the management with whom the trade dispute arises;
Trade Union [Section 2(h)]: “Trade Union means any combination,
whether temporary or permanent, formed primarily for the purpose of
regulating the relations between workmen and employers or between
workmen and workmen or between employers and employers for impos-
ing restrictive conditions on the conduct of any trade or business and
includes any federation of two or more Trade Unions.
Provided that this Act shall not affect:
(i) any agreement between partners as to their own business;
(ii) any agreement between an employer and those employed by him as
to such employment; or
(iii) any agreement in consideration of the sale of the goodwill of a
business or of instruction in any profession trade or handicraft.”
Appropriate Government [Section 2]: With reference to the trade union,
the appropriate government is the Central Government in case the union’s
objects are not confined to one state and if it is confined to one state
only then the appropriate government if the State Government.
Executive [Section 2(a)]: The entrusted body by the management for all
the affairs of the trade union is Executive.
Registered Trade Union [Section 2(e)]: This refers to the trade union
registered under the trade Union Act 1926.

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Notes
2.4 Forms of Trade Union
Forms of Trade Unions:
1.1.1 On the basis of Trade
1.1.2 On the basis of Ideology
1.1.3 On the basis of Agreement

2.4.1 On the Basis of Trade

Trade unions can be classified based on the trade or industry they rep-
resent. These classifications help to categorize unions according to the
type of work or sector in which their members are employed. Here are
common classifications based on the trade or industry:

2.4.1.1 Craft Unions

Represent workers with specific skills or crafts, such as electricians,
plumbers, or carpenters. These unions focus on the unique needs and
concerns of workers in a particular craft.

2.4.1.2 Industrial Unions

Encompass workers across various crafts and skills within a particu-
lar industry. Unlike craft unions, industrial unions aim to organize all
workers, regardless of their specific skills, within a given sector, such
as automobile manufacturing or steel production.

2.4.1.3 General Unions

Represent workers from diverse industries and occupations. These unions
do not specialize in a particular trade or craft but instead aim to organize
a broad spectrum of workers across different sectors.

2.4.1.4 White-Collar Unions

Represent professionals and office workers, such as those in managerial,
administrative, or clerical positions. These unions focus on the specific
needs and concerns of white-collar workers.

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Notes 2.4.1.5 Blue-Collar Unions

Represent manual or industrial workers engaged in manual labor, of-
ten in manufacturing, construction, or similar industries. Blue-collar
unions address the issues faced by workers involved in physical or
manual work.

2.4.1.6 Service Unions

Represent workers in the service industry, including sectors such as hos-
pitality, healthcare, or retail. These unions advocate for the rights and
interests of service sector employees.

2.4.1.7 Public Sector Unions

Represent employees working in the public sector, including government
offices, education, healthcare, and public services. These unions focus on
the unique challenges faced by public sector workers.

2.4.1.8 Transport Unions

Represent workers in the transportation industry, including those involved
in aviation, railways, road transport, and shipping. These unions address
the specific concerns of workers within the transportation sector.

2.4.1.9 Agricultural Unions

Represent workers engaged in agriculture and related activities. These
unions address issues such as farm labor conditions, wages, and agri-
cultural policies.

2.4.1.10 Mining Unions

Represent workers in the mining industry, addressing concerns related to
safety, working conditions, and fair compensation for those involved in
extracting minerals and resources.

2.4.2 On the Basis of Ideology

Trade unions can also be classified based on their ideological orientation
or underlying principles. The ideological basis of a trade union influences

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its goals, strategies, and the broader socio-political context in which it Notes
operates. Here are common classifications based on ideology:

2.4.2.1 Craft Unionism

Emphasizes the protection of skilled workers and their specific trades.
Craft unions often prioritize issues related to job skills, training, and
maintaining the privileges of skilled workers within their respective crafts.

2.4.2.2 Industrial Unionism

Advocates for the organization of all workers, irrespective of their specific
skills or crafts, within a particular industry. Industrial unions focus on
solidarity among workers in broader sectors and industries.

2.4.2.3 Business Unionism

Primarily concerned with negotiating better wages, working conditions, and
benefits for its members without delving extensively into broader social or
political issues. Business unions focus on improving economic outcomes for
their members within the existing economic system.

2.4.2.4 Socialist or Marxist Unions

Rooted in socialist or Marxist principles, these unions often seek to go
beyond economic goals and challenge the broader capitalist system. They
may advocate for social and economic transformation, workers’ control
of production, and collective ownership of resources.

2.4.2.5 Anarcho-Syndicalism
Embraces anarchism and seeks to establish a society based on voluntary
cooperation and workers’ self-management. Anarcho-syndicalist unions
often emphasize direct action, worker control, and opposition to hierar-
chical structures.

2.4.2.6 Revolutionary Unionism

Aims to bring about significant social or political change through revolu-
tionary means. These unions may advocate for the overthrow of existing
power structures and the establishment of a new societal order.

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Notes
2.4.3 On the basis of Agreement

2.4.3.1 Union Shop

When the is a provision for newly joined worker have to join the union
within the fixed period after joining then such union is known as Union
shop.

2.4.3.2 Closed Shop

When the union and the management make an agreement of makes an
agreement that union must have individually have the authority and re-
sponsibility for the recruitments. The worker only joins the union to be
part of the shop. Such shops are though banned in country like USA yet
it exists in construction and printing trades.

2.4.3.3 Open Shop

Trade union where the membership is not compulsory at all at any stage
before or after joining the organization. So, it is least desirable by the
unions and is known as the open shop.

2.4.3.4 Preferential Shop

When vacancies are filled by the trade union member is preferred in filling,
such agreement is known as Preferential shop.

2.4.3.5 Maintenance Shop

In this category of union shop the membership is not compulsory in the
union before and after the recruitment. However, if the employees choose
to be member of the union, then his membership remain compulsory
throughout the tenure of his employment with that particular employer.
This is also known as the maintenance of membership shop or mainte-
nance shop.

2.4.3.6 Agency Shop

The type of shop includes the agreement between the management and
the union, where a non-union member has to pay the union a sum equal
to member’s subscription in order to continue in employment with the
employer which is known as agency shop.
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 Trade Unions

Notes
2.5 Theories of Trade Union
Trade unions, which are pivotal components of industrial relations, have
been analyzed and interpreted through various theoretical perspectives.
Here are some prominent trade union theories:

2.5.1 Power Resources Theory

This theory emphasizes the role of power dynamics in industrial relations.
It suggests that the effectiveness of trade unions is contingent on their
ability to mobilize resources, including the support of members, political
influence, and the strategic use of strikes or other forms of industrial
action. The power resources theory views trade unions as entities that
gain strength through resource mobilization.

2.5.2 Collective Action Theory

Rooted in the works of sociologists like Olson, the collective action theory
focuses on the factors influencing collective behavior. It examines how
individuals come together to form trade unions, highlighting the role of
shared interests, incentives, and the overcoming of collective action prob-
lems. This theory explores the dynamics of cooperation among workers
to achieve common goals.

2.5.3 Social Movement Unionism

Drawing inspiration from social movement theories, this perspective
views trade unions as social movements that go beyond workplace issues.
Social movement unionism emphasizes the broader societal impact of
trade unions, linking their activities to larger social justice and economic
equality goals. It sees unions as agents of social change.

2.5.4 Resource Mobilization Theory

Similar to the power resources theory, resource mobilization theory fo-
cuses on how trade unions gather and utilize resources. It examines the
financial, organizational, and human resources that unions can access

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Notes to pursue their objectives, including bargaining for better wages and
working conditions.

2.5.5 Institutional Theory

Institutional theory explores how formal and informal institutions influence
the behavior of trade unions. It considers the impact of legal frameworks,
societal norms, and organizational practices on the formation and func-
tioning of trade unions. This theory helps understand how institutional
contexts shape the strategies and actions of trade unions.

2.5.6 Bargaining Model

The bargaining model emphasizes the negotiation process between em-
ployers and trade unions. It assumes that both parties seek to maximize
their gains through a rational exchange of concessions and demands. The
bargaining model is often used to analyze collective bargaining processes
and outcomes.

2.5.7 System Theory

System theory views trade unions as integral parts of larger social systems.
It analyzes how trade unions interact with employers, the state, and other
societal elements. The theory explores the interdependencies and feedback
mechanisms that exist within the broader industrial relations system.

2.5.8 Dualist Theory

The dualist theory posits that industrial relations involve a dual structure,
where employers and employees have conflicting interests. It views trade
unions as essential for balancing the power dynamics between employers
and workers. Dualist theory often highlights the importance of collective
bargaining as a means to address power imbalances.
These theories offer diverse perspectives on the nature, functions, and
impacts of trade unions, contributing to a comprehensive understanding of
their role in shaping industrial relations and the broader socio-economic
landscape. Researchers and practitioners often draw on these theories to

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analyze specific aspects of trade union behavior and their implications Notes
for workers and organizations.
IN-TEXT QUESTIONS
1. Who is not a part of Trade Union definition.
(a) Workers and workers
(b) Workers and employers
(c) Employers and employers
(d) Community and cultural association.
2. Structure of ILO includes
(a) A governing body
(b) An international labour conference
(c) International labour office
(d) All of above
3. Who was the founder of Madras labour union
(a) B. P. Wadia
(b) N. M. Lokhande
(c) Ansuya Ben Sarabhai
(d) Sanarkar lal Banker
4. The Trade union act 1926 from
(a) 1 June 1960
(b) 1 June 1965
(c) 1 June 1970
(d) 1 June 1927
5. The act was enacted with the objective 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. (True/false)
6. What are the minimum number of members requiring for a
trade union?
(a) 10 (b) 7
(c) 5 (d) 10
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Notes 7. A person who has attained the age of 10 years can be a member
of a registered trade union subject to any rules of the trade
union. (True/False)
8. The registrar has the right to cancel the registration of the union
if he is satisfied that the certificate has been obtained by fraud
or mistake. (True/False)

2.6 Landmark Judgments and Case Laws Related To TU

Case Studies
1. “Sarva Shramik Sangh v. Indian Hume Pipe Co. Ltd. (1978),”
Where the Supreme Court clarified the distinction between “wages”
and “bonus” under the Payment of Bonus Act, 1965. This judgment
had far-reaching implications for the calculation of bonus payments
and the interpretation of labor laws concerning financial benefits
for workers.
2 “Bangalore Water Supply and Sewerage Board v. A. Rajappa and
Others (1978),” Commonly known as the “Rajappa Case.” This
judgment addressed the fundamental right of workers to strike and
set the legal framework for industrial actions. The court ruled that
the right to strike is not a fundamental right but a statutory right,
subject to conditions outlined in the Industrial Disputes Act, 1947.
This decision provided clarity on the limitations and conditions
surrounding the right to strike, emphasizing the need for industrial
peace.
3 “State of Madras v. C.N. Annadurai (1952)” Is noteworthy for
recognizing the fundamental right of government employees to
form associations or unions. The judgment affirmed the right of
government employees to collectively bargain and form associations
within reasonable restrictions. This decision played a crucial role in
establishing the legal standing of trade unions in the public sector,
ensuring that government employees have the right to organize and
protect their interests through collective action.
4 “Bangalore Water Supply and Sewerage Board v. A. Rajappa and
Others (1978),” Commonly known as the “Rajappa Case.” This

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judgment addressed the fundamental right of workers to strike and Notes

set the legal framework for industrial actions. The court ruled that
the right to strike is not a fundamental right but a statutory right,
subject to conditions outlined in the Industrial Disputes Act, 1947.
This decision provided clarity on the limitations and conditions
surrounding the right to strike, emphasizing the need for industrial
peace.

2.7 Managerial Associations; Employer Associations

Managerial associations and employer associations play distinct but in-
terconnected roles within the realm of industrial relations. Managerial
associations, often referred to as associations or unions representing man-
agerial or executive employees, are organizations formed by individuals
in supervisory or leadership roles within companies. These associations
advocate for the professional interests, rights, and working conditions of
managerial staff. Their focus may include negotiations on issues such as
executive compensation, professional development, and managerial pre-
rogatives. Managerial associations contribute to fostering a collaborative
and productive relationship between management and the workforce.
On the other hand, employer associations, also known as employers’
organizations or business associations, represent the collective interests
of employers across various industries. These associations are typically
formed to address common concerns, negotiate with labor unions, and
engage with regulatory bodies on matters affecting employers. Employer
associations play a crucial role in shaping employment policies, influencing
labor laws, and promoting a favorable business environment. They often
engage in collective bargaining with trade unions, striving to achieve
agreements that balance the interests of employers and employees.
Both managerial associations and employer associations contribute to the
broader framework of industrial relations by fostering communication and
cooperation between different stakeholders in the workplace. While man-
agerial associations focus on the specific needs of executives and leaders
within organizations, employer associations take a more comprehensive
approach, advocating for the interests of businesses as a whole. The
relationship between these associations and other stakeholders, such as
trade unions and government bodies, is dynamic and reflects the complex
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Notes interplay of interests in the world of work. Ultimately, their collaborative

efforts aim to create a harmonious and equitable work environment that
benefits both employers and employees.

Women in Trade Union

The rising industrialisation and the increase in welfare schemes of the
organisation the increase in Trade Union activity in private sector. Near-
ly, thirty percent of the registered Trade Union are women membership.
Generally, the contribution of the women trade union worker is low.

Problems of Women in Trade Unions

 Fear of retaliation from employers
 Strong bias against women participating in trade union
 Male-dominated nature of the trade union
 Family responsibilities.
 Religious taboos and cultural inhibitions

Paradigm Shift in Industrial Relation

The industrial relations fields have two different, one original which
centre on the employment relations and other is modern paradigm which
centred on the union and labour management relations. The narrow la-
bour management paradigm, this has created a bigger challenge for for
the survival in the field of Industrial relation.

2.8 Registered Trade Unions: Rights and Liabilities

A registered trade union must maintain a general fund and a separate fund
for political purposes and unions are bound to utilise the funds only for
the purposes specified in the Act.

2.8.1 Objects on which General Funds may be Spent

[Section 15]
Section 15 of the Trade Union Act, 1926, outlines the objects on which
the general funds of a registered trade union may be spent. These ob-
jects are specified to ensure that the funds are utilized for legitimate and
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relevant purposes that contribute to the welfare and functioning of the Notes
trade union. According to Section 15, the general funds of a trade union
may be spent on the following objects:
 The Act allows for the use of funds to pay salaries, allowances,
and expenses to the office bearers and members of the trade union.
 General funds can be utilized for the conduct of trade disputes on
behalf of the trade union members. This includes expenses related
to negotiations, legal representation, and other activities associated
with resolving disputes between workers and employers.
 Funds may be spent on the promotion of industrial education among
members of the trade union. This can include training programs,
workshops, and educational initiatives aimed at enhancing the skills
and knowledge of union members.
 Expenditure on the publication of journals, periodicals, and other
communication materials is allowed. This helps in disseminating
information about the activities of the trade union, relevant labor
issues, and other matters of interest to the members.
 The Act permits the use of funds for the maintenance of premises
owned or occupied by the trade union. This may include expenses
related to the upkeep, repair, and necessary facilities for the
functioning of the union.
 Funds can be spent on the payment of compensation to members for
loss arising out of trade disputes. This provision aims to provide
financial support to members who may suffer economic consequences
due to their involvement in trade disputes.
 The Act allows for the spending of funds on objects that are
reasonably contingent on or ancillary to the objects specified in
the union’s rules. This provides flexibility for the trade union to
address emerging needs and challenges.

2.8.2 Construction of Separate Fund for Political Purposes

[Section 16]
 Section 16 of the Trade Union Act, 1926, pertains to the construction
of a separate fund for political purposes by trade unions. This section

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Notes delineates the conditions under which trade unions are allowed to
establish and maintain a fund for political activities. Here are the
key points outlined in Section 16:
 Section 16 permits a registered trade union to construct a separate
fund specifically for political purposes. This fund is distinct from
the general funds of the trade union and is intended for financing
political activities.
 Members of the trade union are not automatically contributors to the
political fund. According to the Act, members must give their consent
before any contributions from their subscriptions or contributions
are diverted to the political fund.
 If a trade union decides to establish a political fund, it can use the
check-off system. This involves obtaining the written consent of
members to deduct a specified amount from their subscriptions for
the political fund.
 The accounts of the political fund are subject to auditing. The trade
union is required to maintain separate accounts for the political
fund, and these accounts must be audited by a qualified auditor.
 Trade unions with a political fund are obligated to submit an annual
return to the appropriate authority. This return must include details
of income and expenditure related to the political fund.
 The appropriate authority, as specified by the Act, has the power to
make regulations regarding the administration and auditing of the
political fund. These regulations are designed to ensure transparency
and accountability in the use of funds for political purposes.

2.8.3 Immunity from Punishment for Criminal Conspiracy

[Section 17]
Section 17 of the Trade Union Act, 1926, provides immunity from pun-
ishment for criminal conspiracy for certain actions carried out by trade
unions. This section is designed to protect trade unions and their mem-
bers from legal repercussions related to actions that might be considered
criminal conspiracy under certain circumstances. Here are the key aspects
of Section 17:

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 Trade Unions

 Section 17 grants immunity from punishment for criminal conspiracy Notes

to trade unions and their members when the following conditions
are met.
 The immunity is applicable if the alleged criminal conspiracy is
committed by a trade union or its members in contemplation or
furtherance of a trade dispute.
 The term “trade dispute” includes any dispute between employers and
workmen, or between workmen and workmen, which is connected
with the employment or non-employment, or the terms of the
employment, or with the conditions of labor of any person.
 The immunity provided by Section 17 covers actions taken by trade
unions or their members in pursuit of their legitimate objectives
related to industrial relations and collective bargaining. It is intended
to safeguard the rights of trade unions to engage in activities that
are intrinsic to the resolution of disputes between workers and
employers.
 It’s important to note that the immunity granted by Section 17 is not
absolute. The protection is contingent on the actions being undertaken
within the scope of a trade dispute, and any actions falling outside
this framework may not be covered by the immunity.
 This section aims to provide legal clarity and protection to trade
unions, ensuring that they can effectively carry out their functions
without facing criminal charges for conspiracy in situations directly
related to trade disputes.

Immunity from Civil Suit to Certain Cases [Section 18]

Section 18 of the Trade Union Act, 1926, provides immunity from civil
suits in certain cases for trade unions and their members. This section
aims to shield trade unions and their officials from legal actions in specific
situations, allowing them to carry out their legitimate activities without
facing civil liability. Here are the key features of Section 18:
 Section 18 grants immunity from civil suits to registered trade unions
and their members in certain cases. The purpose is to protect them
from legal actions that may otherwise impede their ability to function
and advocate for the rights and interests of their members.

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Notes  The immunity applies specifically to actions taken by a trade

union or its members in contemplation or furtherance of a trade
dispute. A “trade dispute” includes conflicts related to employment
conditions, terms of employment, non-employment, or conditions
of labor between employers and workmen or among workmen.
 The immunity under Section 18 extends to civil suits arising from
the acts done by trade unions or their members during the course
of a trade dispute. This includes actions such as strikes, picketing,
and other forms of industrial action that are part of legitimate trade
union activities.
 While the immunity is intended to protect trade unions, it is not
absolute. The protection is contingent on the actions being carried
out within the context of a trade dispute. Acts outside the scope
of a trade dispute may not be covered by the immunity provided
by Section 18.
 By providing immunity from civil suits in specific situations, Section
18 ensures that trade unions have the freedom to engage in activities
inherent to the resolution of industrial disputes without the fear of
facing civil liabilities for their actions.

Enforceability of Agreements [Section 19]

Section 19 of the Trade Union Act, 1926, pertains to the enforceability of
agreements made between a registered trade union and its members. This
section lays down provisions regarding the legal status and enforceability
of agreements, particularly those related to subscriptions, between trade
unions and their members. Here are the key points outlined in Section 19:
 Section 19 specifies that any agreement made between a registered
trade union and its members, concerning the payment of subscriptions
or other matters, shall not be subject to legal challenges merely on
the grounds that the agreement is in restraint of trade.
 The provision offers statutory protection to agreements made between
trade unions and their members, shielding them from legal challenges
that might otherwise arise due to allegations of restraint of trade.
 The primary focus of Section 19 is on agreements related to the
payment of subscriptions by members to the trade union. Such

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 Trade Unions

agreements are considered valid and enforceable, and members are Notes
bound by the terms agreed upon.
 The term “restraint of trade” generally refers to agreements that limit
the freedom of individuals to engage in certain trades, professions,
or employment. Section 19 clarifies that agreements related to trade
union subscriptions, even if they may impose a financial obligation
on the members, will not be invalidated on the grounds of being a
restraint of trade.
 The inclusion of Section 19 is in line with the recognition that trade
unions require financial support from their members to effectively
carry out their activities. The section provides legal protection to the
agreements that secure this financial support, ensuring the stability
and sustainability of trade union operations.
Right to inspect books of Trade Union [Section 20]: “The account
books of a registered Trade Union and the list of members thereof shall
be open to inspection by office-bearer or member of the Trade Union
at such times as may be provided for in the rules of the Trade Union.”
Rights of minors to membership of Trade Unions [Section 21]: “Any
person who has attained the age of 15 years may be a member of a
registered Trade Union and enjoy all the rights of a member.” Disqual-
ifications of office-bearers of Trade Unions [Section 21A] “person shall
be disqualified for being chosen as, and for being member of the execu-
tive or any other office-bearer of a registered Trade Union if he has not
attained the age of 18 years; he has been convicted by a Court in India
of any offence involving moral turpitude and sentenced to imprisonment,
unless a period of 5 years has elapsed since his release”.
Change of name [Sec 23] “Any registered Trade Union may, with the
consent of not less than 2/3rd of the total number of its members can
change its name.”

CASE STUDY
A manufacturing company experiencing a surge in employee dissat-
isfaction due to concerns related to working conditions, inadequate
wages, and a lack of job security. Frustrated by these issues, a group
of workers decides to form a trade union to collectively address their
grievances. Upon the formation of the trade union, tensions arise between

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Notes the union representatives and the company’s management. The is-
sues raised by the trade union become focal points of negotiation,
with disputes arising over the terms of employment contracts, safe-
ty protocols, and fair compensation. The company, facing financial
challenges, may resist the proposed changes, leading to a protracted
conflict between the two parties.
Legal complexities come into play as the trade union asserts its rights
under labour laws, while the company seeks to maintain operational
efficiency and financial stability. The case study may delve into the
challenges of striking a balance between the legitimate concerns of
the workers and the company’s need for economic viability.
As the conflict unfolds, the study may explore the impact on the
overall work environment, employee morale, and productivity. It
could also examine how external factors, such as public opinion,
government regulations, and the competitive landscape, contribute
to shaping the resolution of the issues between the trade union and
the company. In conclusion, a case study on trade union issues in a
company would offer insights into the complexities of labour-man-
agement relations, shedding light on the challenges, negotiations, and
potential resolutions that emerge when collective bargaining becomes
a significant factor in the workplace.
Q.1. What are the tentative possible initiatives taken by manufactur-
ing company to reduce the level of dissatisfaction related to working
conditions among employees?
Q.2. How to maintain the balance between the legitimate concerns
of the workers and the company’s need for economic viability?

2.9 Summary
Trade Union is also known as Union Labour. They play a very significant
role in any organisation. They were formed for stopping the exploitation
of the labour and later on the whole picture changed as the concept of
place of labour in any organisation changed. They become important for
the organisation too. Hence, the Trade union meant for the welfare of
the labour and work as bridge for both the organisation and the workers.

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 Trade Unions

The chapter covers the role of women in trade union and also discusses Notes
various case studies in detail which helps to understand the Trade Union
in detail.

2.10 Answers to In-Text Questions

1. (d) Community and cultural association.
2. (d) All the above
(a) B. P. Wadia
(a) 1 June 1965
5. (b) 7
6. (a) Section 8
7. (a) True
8. (b) False

2.11 Self-Assessment Questions

1. Explain the various types of trade unions.
2. What are the different roles of trade unions for the welfare of the
workers? Explain.
3. Elaborate the important theories related to trade unions.
4. What are different sections under trade union act, 1926? Discuss.

2.12 References
 Begega, S.G. and Aranea, M. (2018), «The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?», Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R. and Cao, Q. (2021),
«What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany», Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes  Valizade, D., Cook, H., Forde, C. and MacKenzie, R. (2023),

«Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work
systems?», Journal of Organizational Effectiveness: People and
Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278
 Yuan, L., Yu, Y., Li, J. and Ning, L. (2014), «Occupational
commitment, industrial relations and turnover intention: Empirical
evidence from China», Chinese Management Studies, Vol. 8 No. 1,
pp. 66-84. https://doi.org/10.1108/CMS-08-2011-0065

2.13 Suggested Readings

 Dunlop, J.T., and Healy, J.J., Collective Bargaining, Richard D. Irwin,
1955.
 Whitney, F., and Sloana, A.A., Labour Relations, Prentice Hall,
Englewood Cliffs, New Jersey, 1991.
 Gottoschalk, A.W., The Background to the Negotiating Process,
Gower Press,1973.
 Thorn, J., How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai,1992.
 Walton, R.E., and McKersie, R.B. A Behavioural Theory of Labour
Negotiations, McGraw-Hill, 1965.

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 L E S S O N

3
Collective Bargaining
Dr. Priyanka Singh
Assistant Professor
Sri Sukhmani Institute of Management
Sri Sukhmani Group of Institutions
Email-Id: Priyanka.singh.0415@gmail.com

STRUCTURE
3.1 Learning Objectives
3.2 Introduction
3.3 Nature and Legal Framework of Collective Bargaining
3.4 Levels of Collective Bargaining
3.5 Negotiating Techniques and Skills
3.6 Summary
3.7 Answers to In-Text Questions
3.8 Self-Assessment Questions
3.9 References
3.10 Suggested Readings

3.1 Learning Objectives

 Understand the concept of Collective Bargaining.
 Understand the Nature and Legal Framework of Collective Bargaining.
 Learn the various Levels of Bargaining and Agreements.
 Analyse the Negotiating Techniques and Skills.

3.2 Introduction

Collective Bargaining
Collective bargaining is a fundamental process in labor relations where representatives of
workers negotiate with employers to establish mutually agreed-upon terms and conditions

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes of employment. Typically facilitated by labor unions, this negotiation

encompasses various aspects of the employment relationship, including
wages, working hours, benefits, and workplace conditions. Through col-
lective bargaining, employees seek to voice their concerns and interests,
while employers aim to address operational needs. The negotiated outcome
is formalized in a collective bargaining agreement (CBA), a legally bind-
ing document that outlines the agreed-upon terms. This process promotes
fair labor practices, ensures a balance of power between employers and
employees, and provides a structured mechanism for resolving workplace
issues. Good-faith bargaining is a cornerstone of this process, emphasizing
the sincere effort of both parties to reach a mutually beneficial agreement.
Overall, collective bargaining is a crucial mechanism for shaping the
employment landscape and fostering a collaborative relationship between
workers and management.

History of Collective Bargaining in India

The term collective bargaining was coined by English sociologist, labour
historian and social reformer named Martha Beatrice Webb. This term
gained prominence in the writings of Beatrice and Sydney. This move-
ment began in Great Britain as early as 1874 among the coal miners.
However, over the period of time, it has evolved with major changes
acquiring various characteristics and patterns around the world. Unlike
developed countries like the USA and Great Britain where industrialisa-
tion began much earlier than India, the process of collective bargaining
in India started lately. It gained importance in India only after the inde-
pendence although it started around the 1920s in the Ahmedabad textile
Mills movement initiated by Mahatma Gandhi. According to the Royal
Commission on Labour in 1931, collective bargaining was practiced in
Ahmedabad textile Mills only.
The importance of collective bargaining began to rise when the unions
realised that the settlement of disputes through the industrial tribunals
was a cumbersome process and also an obstacle to the industrial harmony.
After independence, the first collective bargaining agreement was made
by Dunlop Rubber Company in West Bengal in 1947, thereafter, by the
Bata shoe company.

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In 1951, the Indian Aluminium Company made its five-year agreement Notes
with the employees union in Belur. Around 1955, many big companies
like Imperial Tobacco Company, Tata Iron and Steel Company, Hindustan
Lever etc. began collective bargaining.

3.3 Nature and Legal Framework of Collective Bargaining

Principles of Collective Bargaining

The principles of collective bargaining revolve around fostering fair and
constructive negotiations between employers and workers to establish
mutually acceptable terms of employment. Central to this process is the
principle of good faith, which requires both parties to engage sincerely
in negotiations with the genuine intent of reaching an agreement. The
negotiation discussions typically cover a wide array of employment-re-
lated matters, such as wages, working hours, benefits, and workplace
conditions. Equality and non-discrimination are fundamental principles,
ensuring that the bargaining process respects the rights and interests of
all parties involved. Flexibility is also crucial, allowing for adjustments
to accommodate changing circumstances. Additionally, the principle of
voluntarism underscores that both parties enter into negotiations willingly,
without coercion. Ultimately, the principles of collective bargaining aim
to create a balanced and cooperative framework that addresses the needs
of workers while recognizing the operational requirements of employers,
contributing to the establishment of fair and sustainable employment
relationships.

Collective Bargaining Principles for Management

For management, engaging in collective bargaining involves adherence
to certain principles that facilitate constructive and mutually beneficial
negotiations with labour representatives.
1. Strategic Planning: Management should approach collective bargaining
with a strategic mindset, aligning negotiation goals with the
organization’s overall objectives. A clear understanding of the company’s
financial position, market conditions, and industry benchmarks is
essential for making informed decisions during negotiations.

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Notes 2. Communication: Transparent and effective communication is crucial

throughout the bargaining process. Management should convey
information regarding the company’s financial health, challenges, and
proposed changes in a clear and timely manner. Open communication
fosters trust and helps build a cooperative atmosphere.
3. Preparation and Information Sharing: Management must come
to the bargaining table well-prepared with relevant data, facts, and
proposals. Sharing information about the company’s financial situation,
industry trends, and competitive benchmarks helps create a shared
understanding and facilitates more informed decision-making.
4. Flexibility: Flexibility is key for successful collective bargaining.
Management should be willing to consider alternative proposals
and adjust initial positions based on the evolving dynamics of the
negotiations. This adaptability enhances the likelihood of reaching
a mutually satisfactory agreement.
5. Respect for Legal Requirements: Management must conduct
negotiations in compliance with labour laws and regulations.
Understanding legal obligations ensures that the bargaining process
is conducted ethically and minimizes the risk of legal disputes.
6. Long-Term Relationship Building: Viewing collective bargaining as
an ongoing relationship-building process is important. By fostering
a positive and collaborative relationship with labour representatives,
management can create an environment that encourages cooperation
and minimizes potential conflicts.
7. Employee Welfare and Engagement: Recognizing and addressing
the welfare of employees is a principle that contributes to successful
collective bargaining. Demonstrating a commitment to employee
well-being, safety, and job security can build trust and create a
more constructive negotiation environment.
8. Focus on Productivity and Efficiency: Management should emphasize
proposals that enhance workplace productivity and efficiency.
Demonstrating a commitment to improving overall organizational
performance can strengthen the case for certain proposals during
negotiations.

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Collective Bargaining Principles for Trade Union Notes

Trade unions, representing the interests of workers, follow a set of princi-
ples during collective bargaining to ensure the protection and advancement
of their members’ rights and well-being.
1. Solidarity: Trade unions operate on the principle of solidarity,
emphasizing unity among workers. During collective bargaining,
unions prioritize the common interests of their members and seek to
achieve fair and equitable outcomes that benefit the entire workforce.
2. Equality and Non-Discrimination: Trade unions advocate for equality
and non-discrimination in the workplace. During negotiations, they
emphasize the importance of fair treatment, irrespective of factors
such as gender, race, age, or other protected characteristics.
3. Good Faith Bargaining: Similar to management, trade unions are
expected to engage in collective bargaining in good faith. This
involves approaching negotiations with sincerity and a genuine
intent to reach a mutually acceptable agreement.
4. Worker Participation: Trade unions uphold the principle of worker
participation, ensuring that the voices and concerns of their members
are actively included in the negotiation process. They may conduct
surveys, hold meetings, and seek feedback to accurately represent
the views of the workforce.
5. Transparency: Transparency is crucial in building trust between
unions and their members. Unions strive to keep their members well-
informed about the negotiation process, the status of discussions,
and any proposed agreements. Clear communication helps maintain
solidarity among union members.
6. Fair Wages and Working Conditions: Central to collective bargaining
for trade unions is the pursuit of fair wages and improved working
conditions for their members. Negotiations often focus on securing
competitive salaries, reasonable working hours, benefits, and health
and safety measures.
7. Social Justice and Job Security: Trade unions advocate for social
justice within the workplace and society at large. They may negotiate
for measures that promote job security, such as provisions against
arbitrary layoffs or unfair dismissals.

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Notes 8. Training and Skill Development: In addition to traditional employment

terms, trade unions may negotiate for opportunities for training
and skill development. This can enhance the employability and
advancement prospects of their members.
9. Grievance Resolution: Trade unions often include procedures for
resolving workplace grievances in collective bargaining agreements.
Establishing a fair and efficient mechanism for addressing disputes
helps maintain a harmonious working environment.
10. Legislative Compliance: Trade unions ensure that collective bargaining
efforts align with applicable labour laws and regulations. Adhering
to legal requirements strengthens the legitimacy of the bargaining
process and the resulting agreements.

3.4 Levels of Collective Bargaining

Collective bargaining occurs at different levels, reflecting the scope and
participants involved in the negotiation process. The main levels of col-
lective bargaining are:
1. Enterprise or Workplace Level
Scope: Negotiations occur at the individual company or workplace
level.
Participants: Representatives from the specific company or workplace,
including both management and employee representatives (often a
labor union).
Focus: The negotiations address issues specific to that workplace, such
as wages, working conditions, benefits, and other terms of employment.
2. Industry or Sector Level
Scope: Negotiations involve multiple companies within a particular
industry or sector.
Participants: Representatives from various companies within the
industry, along with representatives from relevant trade unions.
Focus: The focus is on establishing industry-wide standards, such as
common wage scales, working hours, and industry-specific regulations.
Industry-level agreements provide a framework for enterprise-level
negotiations.
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3. Regional or Local Level Notes

Scope: Negotiations take place at the regional or local level, involving
companies and workers within a specific geographic area.
Participants: Representatives from companies in the region, regional
business associations, and local trade unions.
Focus: Agreements at this level may address issues relevant to the
economic and social conditions of a particular area. They complement
higher-level agreements by considering regional or local concerns.
4. National Level
Scope: Negotiations involve representatives from employers and
employees on a national scale.
Participants: National business associations, trade unions, and
government representatives may participate.
Focus: National agreements set broad standards applicable across the
entire country. They may address fundamental labor laws, industry
regulations, and overarching economic policies. National agreements
serve as a foundation for lower-level negotiations.
5. International or Global Level
Scope: Negotiations occur at an international or global level, involving
multinational corporations and global union federations.
Participants: Representatives from companies operating globally,
international business associations, and global union organizations.
Focus: Global agreements address issues that transcend national
boundaries, such as international labor standards, corporate social
responsibility, and cross-border labor mobility. These agreements
aim to ensure consistency and fairness across different regions.

Some Problems in the Growth of Collective Bargaining

The growth of collective bargaining, while a cornerstone of modern labor
relations, faces several challenges that impede its expansion and effec-
tiveness. One notable problem is the decline in union membership and
influence in some regions. As union membership wanes, the collective
strength and bargaining power of organized labor diminish. This de-
cline can be attributed to factors such as changes in the economy, shifts

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Notes in workforce composition, and, in some cases, anti-union sentiments.

Additionally, the rise of non-traditional work arrangements, such as gig
work and temporary employment, poses challenges to the traditional
structures of collective bargaining, as these workers often lack the same
bargaining power and protections as their counterparts in more traditional
employment arrangements. Legal and regulatory constraints also hinder the
growth of collective bargaining, as some jurisdictions have implemented
policies that restrict the ability of workers to organize or place limitations
on the scope of collective bargaining agreements. Moreover, globalization
has introduced complexities, as companies expand across borders, making
it challenging for national or local agreements to address the intricacies
of an interconnected global workforce. Finally, shifts in the nature of
work, including increased automation and the rise of the digital economy,
pose new challenges for bargaining around issues like job security and
the impact of technological change on employment. Addressing these
challenges requires a re-evaluation of existing structures, a commitment
to adapt to evolving economic realities, and the development of innova-
tive approaches to ensure the continued relevance and effectiveness of
collective bargaining in the ever-changing landscape of labour relations.
Integrative Bargaining: Integrative bargaining is a cooperative negotiation
strategy in which both parties seek to maximize their mutual gains by
collaboratively identifying and addressing shared interests. Unlike distrib-
utive bargaining, where the focus is on dividing a fixed set of resources,
integrative bargaining aims to create value and expand the pie for both
sides. This approach involves open communication, active listening, and a
willingness to explore creative solutions that meet the needs and concerns
of both parties. Integrative bargaining often leads to “win-win” outcomes,
fostering long-term relationships and mutual trust. Key elements include
joint problem-solving, the exchange of information, and a focus on common
goals. Successful integrative bargaining requires a collaborative mindset,
an understanding of each party’s underlying interests, and a commitment
to finding solutions that satisfy the broader set of needs. This approach is
particularly effective when the parties involved have ongoing relationships
or when preserving a positive working relationship is crucial for future
interactions. Overall, integrative bargaining promotes a cooperative and
constructive negotiation environment, emphasizing the shared interests
that can lead to outcomes beneficial for all parties involved.

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Concessionary Bargaining: Concessionary bargaining refers to a negoti- Notes

ation strategy in labor relations where one party, typically labour unions
or workers, makes significant concessions to the other party, usually
employers or management, often in response to economic challenges,
financial difficulties, or the perceived need for job preservation. Unlike
integrative bargaining, which seeks to create mutual value, concessionary
bargaining involves trade-offs that are more favourable to one party over
the other. Common concessions may include wage freezes, reductions in
benefits, increased employee contributions to healthcare plans, or changes
in working conditions. Employers may request these concessions to cut
costs, avoid layoffs, or adapt to changing market conditions. While conces-
sionary bargaining can help organizations navigate economic downturns, it
often leads to strained labour-management relationships, decreased morale
among workers, and potential long-term negative impacts on employee
well-being. Striking a balance between addressing financial challenges
and maintaining a positive work environment is crucial to minimizing
the negative consequences associated with concessionary bargaining.
Successful implementation of this strategy requires clear communication,
transparency, and a commitment to rebuilding trust between labor and
management once economic conditions improve.
Productivity Bargaining: Productivity bargaining is a negotiation ap-
proach in labor relations where employers and employees collaborate to
enhance workplace efficiency and output. Unlike traditional bargaining
that primarily focuses on wages and benefits, productivity bargaining
aims to improve overall productivity, performance, and competitiveness.
In this strategy, both parties work together to identify and implement
measures that lead to increased efficiency, cost-effectiveness, and inno-
vation within the organization. These measures may include changes in
work processes, the introduction of new technologies, training programs
to enhance skills, and improvements in workplace practices. The goal is
to create a win-win situation where both the employer and the employees
benefit from the resulting improvements in productivity. While productivity
bargaining can lead to positive outcomes such as job security, skill de-
velopment, and sustained economic viability for the company, its success
hinges on open communication, collaboration, and a shared commitment
to achieving common goals. To foster a positive environment for produc-
tivity bargaining, organizations often engage in transparent discussions,

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes involve employees in decision-making processes, and offer incentives that

reward increased productivity. This approach reflects a proactive stance
toward addressing challenges in the workplace and promoting a culture
of continuous improvement.
Cooperative Bargaining: Cooperative bargaining is an approach to
negotiations that emphasizes collaboration and mutual problem-solving
between employers and employees. Unlike adversarial bargaining, which
often involves competing interests and rigid positions, cooperative bar-
gaining seeks to build positive relationships and achieve common goals.
In this process, both parties work together to identify shared interests,
concerns, and solutions that benefit the organization and its workforce.
Cooperative bargaining encourages open communication, active listening,
and a willingness to understand each other’s perspectives. This approach
often leads to creative and flexible agreements that address the evolving
needs of both parties. Key elements of cooperative bargaining include joint
decision-making, transparency, and a focus on long-term relationships. The
aim is to create a positive work environment, foster trust, and enhance
overall organizational performance. Successful cooperative bargaining
requires a commitment to fairness, respect, and a shared understanding
of the challenges faced by both labour and management. By fostering
a culture of cooperation, organizations can build stronger partnerships,
improve morale, and create agreements that contribute to the well-being
of both employees and the company.

Collective Bargaining and National Commission on Labour

Collective bargaining and the National Commission on Labour (NCL)
are both integral components of labour relations in many countries, and
they play complementary roles in shaping the employment landscape and
ensuring fair and productive working conditions.
Collective Bargaining: Collective bargaining is a process through which
representatives of workers, often in the form of labour unions, negotiate
with employers to establish mutually agreed-upon terms and conditions of
employment. These negotiations cover a wide range of issues, including
wages, working hours, benefits, and workplace conditions. Collective bar-
gaining agreements, once reached, serve as legally binding documents that
govern the employment relationship and contribute to the establishment

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of fair labour practices. The process is characterized by good-faith ne- Notes

gotiations, where both parties work towards reaching compromises that
meet their respective needs and concerns.
National Commission on Labour (NCL): The National Commission on
Labour, found in some countries, is a governmental or quasi-governmental
body that is responsible for examining and making recommendations on
various aspects of labor policy, industrial relations, and related matters.
The commission often conducts comprehensive reviews of labour laws,
employment practices, and social security measures. It aims to ensure
that labour legislation remains relevant, equitable, and responsive to the
evolving needs of the workforce and employers. The NCL may also play
a role in addressing disputes, promoting social dialogue, and formulating
policies that contribute to the overall well-being of the labour force.
Interplay between Collective Bargaining and NCL: The relationship
between collective bargaining and the National Commission on Labour
is symbiotic. While collective bargaining operates at the micro-level,
addressing specific concerns of individual workplaces or industries, the
NCL operates at a macro-level, shaping and guiding the overarching
labour policies that provide a framework for these negotiations. The
recommendations and findings of the NCL can influence legislative
changes, which, in turn, may impact the dynamics and parameters of
collective bargaining.

The National Commission of Labour on Collective Bargaining

The National Commission on Labour (NCL) plays a significant role in
shaping and influencing collective bargaining practices within a country.
This commission, often established by the government, is tasked with
examining and making recommendations on various aspects of labor
policy, industrial relations, and related matters. When it comes to col-
lective bargaining, the NCL can have several implications: The National
Commission on Labour (NCL) plays a significant role in shaping and
influencing collective bargaining practices within a country. This commis-
sion, often established by the government, is tasked with examining and
making recommendations on various aspects of labor policy, industrial
relations, and related matters. When it comes to collective bargaining,
the NCL can have several implications:

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes The National Commission on Labour (NCL) plays a significant role in

shaping and influencing collective bargaining practices within a country.
This commission, often established by the government, is tasked with
examining and making recommendations on various aspects of labour
policy, industrial relations, and related matters. When it comes to col-
lective bargaining, the NCL can have several implications:
Policy Formulation: The NCL, through its research and analysis, con-
tributes to the formulation of labour policies that may impact the overall
framework within which collective bargaining occurs. The commission’s
recommendations and findings can influence the legal and regulatory
environment, shaping the permissible scope and procedures of collective
bargaining.
Legislative Changes: Based on the recommendations of the NCL, leg-
islative changes may be proposed and implemented. These changes can
impact the legal landscape surrounding collective bargaining, addressing
issues such as the recognition of unions, dispute resolution mechanisms,
and the enforceability of collective bargaining agreements.
Promotion of Social Dialogue: The NCL often promotes social dialogue
between employers and workers. By fostering communication and un-
derstanding between these two parties, the commission contributes to an
environment conducive to effective collective bargaining. Social dialogue
can lead to more constructive negotiations, reducing the likelihood of
industrial disputes.
Addressing Disputes: In cases where collective bargaining leads to dis-
putes or conflicts, the NCL may play a role in dispute resolution. The
commission can provide a platform for mediation or arbitration, helping
to facilitate a resolution between the conflicting parties and maintain
industrial peace.
Guidance on Best Practices: The NCL may provide guidance on best
practices in collective bargaining. This can include recommendations
on negotiation techniques, dispute avoidance, and approaches to ensure
that the bargaining process is fair, transparent, and adheres to legal and
ethical standards.
Monitoring and Evaluation: The NCL may monitor and evaluate the
effectiveness of collective bargaining agreements and their impact on both

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employers and workers. This assessment can inform future recommen- Notes
dations and policies related to the improvement of collective bargaining
practices.

Elements of Collective Bargaining

Collective bargaining, a fundamental component of labour relations,
involves a set of essential elements that guide the negotiation process
between employers and employees or their representatives. The nego-
tiating parties, consisting of employer representatives and employee
representatives, engage in discussions on a range of issues, collectively
setting the agenda for the bargaining sessions. Good-faith bargaining,
marked by sincerity and a genuine intent to reach an agreement, under-
pins the process. Open communication is crucial, allowing both sides
to express concerns and propose solutions. The negotiation involves the
exchange of proposals and counterproposals, addressing both economic
factors like wages and benefits, as well as non-economic issues such as
working conditions and job security. The agreement may also establish
procedures for handling grievances, mechanisms for resolving disputes,
and the duration of the agreement itself. Elements like union security,
strike and lockout procedures, and ratification by the affected parties
contribute to the comprehensive nature of the collective bargaining
agreement. Ultimately, successful collective bargaining requires a col-
laborative spirit, a willingness to compromise, and a commitment to
achieving an agreement that balances the interests of both employers
and employees.

IN-TEXT QUESTIONS
1. Which of the departments has maximum interest in harmonious
relationship among the organisational workers?
(a) Finance
(b) Human Resource
(c) Marketing
(d) IT

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Notes 2. IR covers the area

(a) Labour legislation
(b) Industrial relation
(c) Collective bargaining
(d) All of these
3. Temporary close down of the organisation with an intention to
forcing people for accepting all the demands of the management
is known as
(a) Layoff
(b) Retrenchment
(c) Lockout
(d) Strike
4. The dispute and conflict between the employer and employees
on any organisational matter is known as
(a) Human relations
(b) Conflict relations
(c) Industrial disputes
(d) All of these
5. Collective bargaining which is considered as an apex of Industrial
Relation System is concerned with
(a) Systems approach
(b) Gandhian approach
(c) Oxford approach
(d) All of these
6. The following is considered as the ultimate remedy for the
settlement of Industrial dispute through the third party’s intervention
appointed by the government
(a) Adjudication
(b) Collective bargaining
(c) Conciliation
(d) Voluntary Arbitration

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7. The objectives of trade union include Notes

(a) Recognition and participation

(b) Employee compensation
(c) Working condition
(d) All of these
8. Which of the following is the method of trade union?
(a) Political action
(b) Mutual insurance
(c) Collective bargaining
(d) All of these

3.5 Negotiating Techniques and Skills

Skills and Traits of Negotiating Team

A successful negotiating team is characterized by a combination of skills
and traits that contribute to effective communication, problem-solving,
and relationship building. Communication skills, encompassing active lis-
tening and effective verbal expression, are fundamental for understanding
the concerns and perspectives of the other party and conveying messages
clearly. Interpersonal skills, including empathy and relationship-building
abilities, create a positive negotiation environment and foster collabora-
tive problem-solving. Analytical and problem-solving skills, coupled with
thorough preparation and research, allow the team to navigate complex-
ities and anticipate challenges. Flexibility, adaptability, and resilience
are essential traits that enable the team to adjust strategies, persevere in
challenging situations, and stay focused on positive outcomes. Negotia-
tion skills, such as assertiveness and the ability to compromise, are vital
for advocating interests while maintaining a cooperative atmosphere. A
strong sense of teamwork, collaboration, and effective delegation optimiz-
es the team’s efficiency and productivity. Ethical conduct, integrity, and
cultural sensitivity contribute to building trust and credibility throughout
the negotiation process. Time management skills ensure that the team ad-
dresses key issues within the available timeframe, preventing unnecessary
delays. Collectively, these skills and traits empower a negotiating team to

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Notes navigate complexities, foster positive relationships, and reach agreements

that align with the interests of all involved parties.

Attributes of a Successful Negotiator

A successful negotiator is characterized by a unique blend of interper-
sonal skills, strategic thinking, and ethical conduct. First and foremost,
effective communication is a cornerstone, as negotiators must articulate
their thoughts clearly while actively listening to the concerns of others.
Empathy is another crucial attribute, enabling negotiators to understand
the emotions and perspectives of all parties involved. Thorough prepa-
ration is a hallmark trait, with successful negotiators dedicating time to
research, anticipate scenarios, and identify creative solutions. Patience and
flexibility are essential, allowing negotiators to navigate the intricacies of
the process and adapt to changing circumstances. Confidence, grounded
in humility, empowers negotiators to assert their positions without arro-
gance. Ethical conduct is non-negotiable, fostering trust and integrity in
the negotiation arena. The ability to employ various negotiation strategies,
coupled with resilience in the face of setbacks, is pivotal. Cultural sen-
sitivity, organization, risk assessment, and problem-solving skills round
out the repertoire of attributes that contribute to a negotiator’s success.
In essence, a successful negotiator is a multifaceted professional who
combines strategic acumen with interpersonal finesse to navigate complex
negotiations and achieve mutually beneficial agreements.

Attributes of Negotiating Team

A successful negotiating team possesses a dynamic blend of attributes that
collectively contribute to effective collaboration and positive outcomes.
Effective communication skills are fundamental, ensuring clear expression
of ideas and active listening to understand the perspectives of the other
party. The team’s adaptability and flexibility allow for the adjustment
of strategies in response to changing circumstances, fostering resilience
and maintaining focus even in challenging situations. Analytical thinking
and problem-solving skills enable the team to navigate complexities and
find innovative solutions that meet the needs of all parties involved.
Strong negotiation skills, marked by assertiveness and a willingness to
compromise, facilitate the advocacy of team interests while maintaining a
cooperative atmosphere. Patience and resilience are crucial, contributing

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to composure under pressure and persistent efforts to overcome obstacles. Notes

Thorough preparation, research, and ethical conduct uphold the team’s
credibility and integrity throughout the negotiation process. Cultural sen-
sitivity ensures an awareness of diverse backgrounds, fostering effective
communication in international or cross-cultural negotiations. A collabo-
rative and well-coordinated teamwork approach, with effective delegation
and efficient time management, optimizes the team’s overall performance.
Confidence, emotional intelligence, and a commitment to continuous learn-
ing further enhance the team’s ability to adapt, strategize, and achieve
successful negotiation outcomes. These attributes collectively empower
a negotiating team to navigate complexities, build positive relationships,
and reach agreements that align with the interests of all parties involved.

CASE STUDY: XYZ MANUFACTURING COMPANY

In a recent collective bargaining case involving XYZ Manufacturing
Company, employees, represented by their labour union, entered ne-
gotiations with the company’s management to renew their collective
bargaining agreement (CBA). The primary issues under discussion
included wage adjustments, improvements in healthcare benefits,
and enhanced workplace safety measures. The company, recogniz-
ing the importance of maintaining positive labor relations, engaged
in a transparent and collaborative negotiation process. Both parties
conducted thorough research and analysis, with the union gathering
employee feedback through surveys to inform their bargaining po-
sitions. Negotiations unfolded through multiple rounds, marked by
a commitment to good-faith bargaining. The union emphasized the
need to align wages with industry standards and address concerns
related to working conditions. Management, while acknowledging
the financial constraints of the business, prioritized maintaining a
competitive edge in the market. After a series of deliberations and
concessions on both sides, a comprehensive agreement was reached.
The finalized CBA outlined terms on wages, benefits, working hours,
and established a framework for dispute resolution. This case study
illustrates how a collaborative approach, rooted in open communica-
tion and a mutual understanding of each party’s priorities, can lead to
successful outcomes in the collective bargaining process, ultimately
benefiting both the employees and the company.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes QUESTIONS:
1. Explain the collective bargaining process with reference to the
XYZ company.
2. What is the negotiation process? Explain.

3.6 Summary
Collective bargaining is a structured negotiation process between employ-
ers and employees, typically represented by labour unions, to establish
mutually agreed-upon terms and conditions of employment. It involves a
series of discussions and compromises on various issues such as wages,
working hours, benefits, and workplace conditions. The negotiating parties
engage in good-faith bargaining, seeking to find common ground while
representing their respective interests. The resulting collective bargaining
agreement (CBA) serves as a legally binding document that governs the
employment relationship for a specified period. The process is characterized
by open communication, active listening, and a collaborative approach
to problem-solving. Through collective bargaining, both employers and
employees aim to achieve fair and balanced agreements that contribute
to a positive working environment and the overall well-being of the
workforce. Successful collective bargaining requires a combination of
negotiation skills, effective communication, and a commitment to reaching
compromises that benefit both parties.

3.7 Answers to In-Text Questions

1. (b) Human Resource
2. (d) All of these
3. (c) Lockout
4. (d) All of these
5. (b) Gandhian Approach
6. (c) Conciliation
7. (d) All of these
8. (d) All of these

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 Collective Bargaining

Notes
3.8 Self-Assessment Questions
1. Discuss the various steps in bargaining process.
2. What are the conditions for success of collective bargaining in
India?

3.9 References
 Begega, S. G., & Aranea, M. (2018). “The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?”, Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151.
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R., & Cao, Q. (2021).
“What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany”, Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090.
 Valizade, D., Cook, H., Forde, C., & MacKenzie, R. (2023).
“Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work
systems?”, Journal of Organizational Effectiveness: People and
Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278.

3.10 Suggested Readings

 Yuan, L., Yu, Y., Li, J., & Ning, L. (2014). “Occupational commitment,
industrial relations and turnover intention: Empirical evidence from
China”, Chinese Management Studies, Vol. 8 No. 1, pp. 66-84. https://
doi.org/10.1108/CMS-08-2011-0065.
 Dunlop, J. T., & Healy, J. J. Collective Bargaining, Richard D. Irwin,
1955.
 Whitney, F., & Sloana, A. A. Labour Relations, Prentice Hall,
Englewood Cliffs, New Jersey, 1991.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes  Gottoschalk, A. W. The Background to the Negotiating Process,

Gower Press, 1973.
 Thorn, J. How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai, 1992.
 Walton, R. E., & McKersie, R. B. A Behavioural Theory of Labour
Negotiations, McGraw Hill, 1965.

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 L E S S O N

4
Tripartism, Social
Dialogue and Role of
Government in IR
Dr. Priyanka Singh
Assistant Professor
Sri Sukhmani Institute of Management
Sri Sukhmani Group of Institutions
Email-Id: Priyanka.singh.0415@gmail.com

STRUCTURE
4.1 Learning Objectives
4.2 Introduction: Tripartism
4.3 Social Dialogue and Role of Government in IR
4.4 Types and Levels of Tripartism; Social Dialogue and Reform Process
4.5 Bipartism’s Link with Tripartism
4.6 Types and Means of Government Interventions
4.7 Role of State at the State IR Level; Future Role of Government
4.8 Summary
4.9 Answers to In-Text Questions
4.10 Self-Assessment Questions
4.11 References
4.12 Suggested Readings

4.1 Learning Objectives

 Understand the meaning of Tripartism.
 Review the Role of Government with IR.
 Analyse the relation of Bipartism with Tripartism.
 Discuss the types and means of government interventions.
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Notes
4.2 Introduction: Tripartism

Industrial Relations
 The term “industrial relations” implies the relationship that exists
in an industrial organization between an employer and employees.
However, “industrial relations” has a broader definition. The broader
definition of industrial relations encompasses the interactions between
various unions, between a state and a union, and between employers
and the government. The relationships that exist between all parties
involved in an industry could be referred to as industrial relations. The
International Labour Organization (ILO) defines industrial relations as
the interaction of employers, workers’ organizations, and the state, as
well as the interaction of occupation organizations with one another.
The words “industry” and “relations” make up the phrase “industrial
relations.” Any productive activity that employees participate in within
the organization is referred to as the “industry.” Conversely, the word
“relations” describes the working relationship that exists in the sector
between employers and workers. Industrial relations define the relation-
ship between management and employees within an organization within
its organizational settings. Management-trade union relations give rise to
industrial relations, either directly or indirectly. The key components of
industrial relations are as follows:
 Employment relationships in industrial enterprises give rise to industrial
relations.
 The idea and practice of balancing and cooperating were introduced
through industrial relations.
 To preserve cordial relations, industrial relations create rules and
regulations.
 The government uses laws, agreements, rules, charters, and other
mechanisms to intervene in the labour relations system.
 Individual and collective relationships are both a part of industrial
relations.
 A number of stakeholders are involved in labour relations. The
government, employers’ association, and employees’ organization
make up the major parties.

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Systems for industrial relations are tripartite. The majority of industrial Notes
relations systems consist of three parties, or are tripartite. They are as
follows:
 The employer
 The employees
 The government

Tripartism
Tripartite, which means made between or involving three parties, is where
the term “tripartism” originates. Tripartism is a policy of industrial relations
decision-making in which each of the three major parties—employers,
employees, and governments—plays an equal and just role. Tripartism
encourages the three major stakeholders to work together effectively
and meaningfully at every stage of industrial relations decision-making.
Tripartism aims to unite governments, employers, and employees on a
single platform to resolve labour disputes. It guarantees that all three
parties will take part in the dispute resolution procedure. By involving
representatives of the parties in the process, this involvement is guar-
anteed participation of employer and worker representatives (business
organizations and trade unions)

Tripartism and ILO

Since its establishment in 1919, the International Labour Organization
(ILO) has embraced and upheld the tripartite principle, which calls for
communication and collaboration between employers, workers, and gov-
ernments in the development of labour-related standards and policies.
The only tripartite U.N. agency comprising government, employer, and
worker representatives is the International Labour Organization (ILO).
The ILO’s tripartite structure allows governments and the social partners
of its member states’ economies to freely and transparently discuss and
develop labour standards and policies, making it a unique forum. Tripar-
tism’s primary characteristics include:
1. Social Dialogue: Tripartism places a strong emphasis on the value of
organized, transparent communication between employers, government,
and labour unions. It gives these parties a forum to talk about and
work out agreements on issues of shared interest, including labour

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Notes laws, employment regulations, salary structures, social security, and

labour market changes. There are many ways to engage in social
dialogue, such as through joint consultations, collective bargaining,
and involvement in tripartite commissions or councils.
2. Consensus-Building: Tripartism promotes compromise and negotiation as
a means of achieving agreements between the parties. It acknowledges
that when all parties have a voice and participate in decision-making,
sustainable labour relations and successful labour policies are most
likely to be achieved. The goal of tripartite cooperation is to create
win-win situations that benefit employees, companies, and society
at large by cooperating and finding common ground
3. Policy Formulation: Trade unions, employers, and government
representatives frequently collaborate in tripartite cooperation when
creating labour-related laws and policies. To create policies that are
fair and take into account the interests of all parties involved, the
government consults and requests feedback from these groups. In
an effort to foster an atmosphere that supports fair labour standards
and long-term economic expansion, tripartite talks play a key role
in forming labour laws, rules, and social security policies.
4. Conflict Resolution: Tripartism offers a method for settling disagreements
and labour disputes. The tripartite system can offer mediation,
conciliation, or arbitration services to help resolve conflicts and
avoid protracted labour disputes when trade unions and employers
disagree. This contributes to the labour market›s industrial peace
and stability. Many nations and international organizations have
embraced tripartism as a means of fostering social discourse,
improving labour relations, and guaranteeing inclusive and well-
informed policies. It acknowledges the mutual reliance and joint
accountability of employers, trade unions, and the government in
attaining just and fair labour standards and encouraging decent
work for all.

Types of Tripartism
 The involvement of three parties in the development and execution of
social and economic policies is known as tripartism. Typically, there
are three parties involved: the government, employer associations,

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 Tripartism, Social Dialogue and Role of Government in IR

and labour unions. Tripartism can exist in a variety of forms, Notes

including:
 Tripartite Consultation: In order to come to a consensus or agreement
on matters of mutual interest, the three parties exchange facts,
viewpoints, and opinions. Formal or informal tripartite consultation
is possible, and it can address a variety of subjects, including
social protection, economic development, labour standards, and
labour market policies. There are various levels at which tripartite
consultation can occur, including national, regional, sectoral, and
enterprise levels. The International Labour Organization (ILO), the only
organization under the United Nations that is founded on tripartism,
is an illustration of tripartite consultation. In addition to requiring
tripartite consultations at the national level for the implementation
of ILO standards, the ILO uses the discussions amongst the three
groups in the drafting of its standards and conventions.
 Tripartite Negotiation: This is the process by which the three
parties negotiate or converse in order to come to a legally binding
agreement or contract regarding particular matters or the terms and
conditions of employment. Tripartite negotiations can be formal or
informal, and they can address a range of topics related to labour
relations, including pay, hours worked, health and safety, and
training. Tripartite negotiations can lead to settlements or collective
agreements with legal standing that can be upheld by the parties
or by the courts. The national income policy agreement in Finland,
which was reached by the government, the employers’ federation,
and the central trade union organization, is an illustration of tripartite
negotiation. It covers a wide range of topics, including wages, taxes,
social benefits, and economic policies.
 Tripartite Participation: This occurs when the three parties take part
in the administration or decision-making of specific organizations,
laws, or initiatives that have an impact on their respective interests.
Tripartite participation can take the form of the three parties’
co-management, representation, or consultation in a variety of
organizations or mechanisms, including funds, committees, councils,
boards, and so forth. In addition to fostering a sense of ownership
and responsibility among the parties, tripartite participation can

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes improve the institutions, policies, or programs’ efficacy, transparency,

and accountability. The social security system in many nations,
where the government, employers, and employees are involved in
the funding, administration, and oversight of the social security
funds or schemes, is an example of tripartite participation.

Levels of Tripartism
 Tripartite contracts between trade unions, employers’ groups, and the
government of a nation form the foundation of a tripartite economic
system known as tripartism. Each is expected to collaborate, consult,
negotiate, and make concessions as a social partner in the creation
of economic policy. The International Labour Organization (ILO)
states that tripartism can occur at various levels, including:
 National Level: The representatives of the three parties gather here
to deliberate and reach a consensus on matters of national concern,
including minimum wages, social security, labor laws, and economic
development, among other things. The Indian Labour Conference,
which is called by the Ministry of Labour and Employment and
is made up of representatives from employers’ federations, trade
unions, and the federal and state governments, is an illustration of
a tripartite body at the national level.
 Sectoral Level: Here, the representatives of the three parties get
together to talk about and reach a consensus on matters pertaining
to particular economic sectors, like services, manufacturing, and
agriculture. The National Coal Wage Agreement, a collective
bargaining agreement between the coal industry employers and the
coal workers’ unions, with government participation, is an example
of a tripartite body at the sectoral level.
 Regional Level: Here, the representatives of the three parties get
together to talk about and reach a consensus on matters pertaining
to a particular area or region, like a state, province, district, etc.
The West Coast Employers’ Federation, an association of employers
in the states of Kerala, Karnataka, Goa, and Maharashtra, is an
example of a tripartite body at the regional level. It participates in
social dialogue on labour and industrial relations issues with the
government and trade unions.

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 Tripartism, Social Dialogue and Role of Government in IR

 International Level: participation and representation of tripartite Notes

in international forums and organizations, like the ILO—the only
United Nations agency founded on tripartism. The three groups’
discussions are used by the ILO to draft and implement labour and
social standards and conventions.
 Tripartism is viewed as a tool for promoting social justice, inclusive
growth, and decent work as well as a type of good governance. It is
also a fundamental tenet of the International Labour Organization,
the sole tripartite United Nations agency.

4.3 Social Dialogue and Role of Government in IR

Social Dialogue
According to the ILO, social dialogue encompasses all forms of negotia-
tion, consultation, or information sharing between government, employer,
and worker representatives regarding shared interests in economic and
social policy. It may be a three-way process in which the government is
an official participant, or it may only involve two-way relations between
labor and management (or employers’ and trade unions’ organizations),
with or without oblique government intervention. Social dialogue pro-
cedures can be formalized or informal, and frequently they combine the
two. It may occur at the enterprise, regional, or national levels. It may
be sectoral, interprofessional, or a mix of the two.
Promoting democratic engagement and consensus-building among the
key players in the workplace is the primary objective of social dialogue
itself. Structures and procedures for social dialogue that are effective have
the power to resolve significant social and economic problems, promote
good governance, enhance social and industrial peace and stability, and
accelerate economic growth.
The Enabling Conditions of Social Dialogue: For social discourse to
occur, the following conditions must be met:
 Robust, self-governing associations representing both employers
and employees that possess the necessary technical know-how and
information access to engage in social discourse.
 The political will and dedication of all involved parties to participate
in social discourse.
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes  Adherence to the essential liberties of association and collective

bargaining.
 Appropriate institutional support.

Social Dialogue Includes:

 Information sharing, consultation, and negotiation between and among
government, employer, and labour groups;
 Collective bargaining between worker organizations and employers/
employers’ organizations;
 Dispute prevention and resolution; and
 Other strategies include social discourse within the framework of
regional economic communities, international framework agreements,
and workplace cooperation.

The Role of the State in Social Dialogue

Even though it is not a direct participant in the process, the State cannot
be passive for social dialogue to succeed. It is in charge of fostering a
political environment that is stable and civil enough to allow independent
employers’ and workers’ organizations to function freely without wor-
rying about retaliation. Even in cases where the dominant relationships
are formally bipartite, the State plays a crucial role in establishing the
institutional, legal, and other frameworks that allow the parties to par-
ticipate in the process in an efficient manner.
Social Dialogue and the ILO: The ILO seeks to support member states
in creating or bolstering institutions, machinery, legal frameworks, and
procedures for tripartite and bipartite social dialogue. Additionally, it
seeks to advance social discourse as a tool for consensus-building, social
and economic development, and good governance among member states
and regional or sub-regional organizations.
Social Dialogue and Tripartism: Effective social dialogue is essential
for governments, employers’ and workers’ organizations, and industrial
relations specialists to promote social justice, inclusive economic growth,
better wages and working conditions, and sustainable businesses. As
instruments of good governance in every domain, from the local to the
global, they support the creation of an atmosphere that is conducive to
the realization of decent work for everybody.
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4.4 Types and Levels of Tripartism; Social Dialogue and Notes

Reform Process

Social Dialogue and Reform Process

 Social dialogue is the process through which different social actors,
including employers, employees, governments, and civil society,
consult, negotiate, and work together on matters of shared interest
in the social and economic domains.
 The term “reform process” describes the adjustments or modifications
made to enhance the effectiveness, efficiency, and calibre of public
institutions, services, or policies.
 By guaranteeing the involvement, representation, and voice of the
impacted parties, establishing social consensus and legitimacy, boosting
the efficacy and sustainability of the reforms, and advancing social
justice and democracy, social dialogue can play a critical role in
the reform process. Some examples of social dialogue in the reform
process are:
 South Africa: A peak-level tripartite organization called the National
Economic Development and Labour Council (NEDLAC) was founded
in 1994 to promote social discourse on lab or market, economic,
and social policies. A number of reforms, including the national
budget, trade policy, social security system, employment equity act,
labor relations act, basic conditions of employment act, and skills
development act, have been formulated and implemented with the
help of NEDLAC.
 India: The Indian Labour Conference (ILC) is a tripartite forum that
convenes trade unions, employers’ associations, and representatives of the
federal and state governments to deliberate and offer recommendations
on labour and social issues. The Industrial Disputes Act, the Minimum
Wages Act, the Contract Labor Act, the Social Security Programs,
the National Employment Policies, and the Labor Law Reforms are
just a few of the reforms that the ILC helped to start and shape.
 Poland: Trade unions, employers’ associations, and government
representatives make up the consultative and advisory Tripartite
Commission for Social and Economic Affairs (TCS). Since 1989,

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Notes the TCS has participated in the social dialogue surrounding Poland’s
economic and political transition. Through this dialogue, agreements
have been reached on a number of reforms, including the tax
system, pension system, labour code, minimum wage, privatization
of state-owned enterprises, and restructuring of the coal and steel
industries.

IN-TEXT QUESTIONS
1. The following is (are) included in ILO’s standards with regard
to industrial relations
(a) Right of association
(b) Right to organize and collective bargaining
(c) Tripartite consultants
(d) All of the above
2. According to Indian Labour Commission (ILC) major
recommendations, Union once recognised should be valid for
a period of _____ years to be co-terminus with the period of
settlement.
(a) Two (b) Three
(c) Four (d) Five
3. The amendment which is used for provisions of Workers’
Participation in Management was incorporated in the Indian
Constitution
(a) 41 (b) 42
(c) 43 (d) 45
4. The communication of government, workers and employers
through their representative as even and in dependent partners
to seek for the solutions to issue of common concern is called
(a) Bipartism
(b) Tripartism
(c) Government agreement
(d) Collective Bargaining

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 Tripartism, Social Dialogue and Role of Government in IR

5. Under unitary approach, industrial relation is grounded in Notes

(a) Mutual co-operation

(b) Individual treatment
(c) Team work and shared goals
(d) All of the above
6. Pluralistic approach perceives the legitimate representative of
employee interests
(a) Trade unions
(b) Management
(c) Board of Directors
(d) None of the above
7. Parties to Industrial Relations are
(a) ILO, Board of Directors, Association of employers
(b) ILO, Government, Association of employers
(c) ILO, Government, IMF
(d) Government, Board of Directors, Association of employers
8. ILO full form

4.5 Bipartism’s Link with Tripartism

Bipartism’s Link with Tripartism

Both tripartism and bipartism are types of social dialogue, which is the
process of different social actors collaborating, negotiating, and consulting
on issues of shared interest in the social and economic domains. Tripar-
tism describes a discourse that also includes the government as a third
party, whereas bipartism refers to the conversation between employers’
organizations and workers’ organizations (or trade unions). There are
various connections between tripartism and bipartism. Bipartite dialogue
can also prepare the ground for tripartite dialogue, or follow up on the
implementation of tripartite agreements.
 It is possible for tripartism and bipartism to coexist and interact at
various levels, including national, sectoral, regional, and global.

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Notes For instance, in certain nations, sectoral or enterprise-level bipartite

bodies handle particular industrial relations issues, while peak-level
tripartite bodies handle general economic and social policy issues.3.
There are bipartite agreements on labour and social issues between
multinational corporations and global union federations, as well as
the International Labour Organization (ILO), a tripartite institution
that brings together governments, employers, and workers in the
creation and application of labor standards and conventions.
 Depending on the setting and goals of the social discourse, tripartism
and bipartism can serve distinct purposes. For instance, tripartism
may be more appropriate for consultation on labor laws and social
security, whereas bipartism may be more appropriate for collective
bargaining on wages and working conditions3. Tripartism can be
more formalized and institutionalized, whereas bipartism can also
be more adaptable and independent.
 Social dialogue, reform process, and the role of government in
international relations: types and levels of social dialogue; Tripartism’s
connection to bipartism; forms and methods of interventions by
the government; function of the state in internal relations; The
government’s future role

4.6 Types and Means of Government Interventions

Types of Government Intervention in Industrial Relations

Governmental actions or policies that impact the relationships between
employers and employees, or between their organizations, are referred to
as government intervention in industrial relations. The government can
intervene in labour relations in a variety of ways, including:
 Regulatory Intervention: This is the process by which the government
passes and implements laws and rules that define the guidelines and
requirements for labor relations, including social security, minimum
wages, health and safety, and labor laws. In addition to advancing
social welfare and public order, regulatory intervention can safeguard
the rights and interests of employers and employees.
 Facilitative Intervention: In this case, the government provides the
parties involved in labour relations with information, legal counsel,

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training, mediation, conciliation, arbitration, and other forms of Notes

support and assistance. It is possible to enhance the parties’ capacity
and expertise, foster better cooperation and communication, and
ease the resolution of disputes.
 Substitutive Intervention: In industrial relations, this is the situation
where the government takes over or replaces the role of the parties
by enforcing settlements, outlawing strikes, stating emergencies, etc.
In addition to undermining the parties’ legitimacy and autonomy,
substitute intervention can be used to advance specific political or
economic goals or to preserve stability and security.
 Participatory Intervention: This occurs when the government
includes the parties in the development and execution of programs
and policies that impact labor relations, like social dialogue, tripartite
consultation, social partnerships, etc. In addition to fostering social
consensus and legitimacy, increasing the representation and voice of
the parties and improving the efficacy and sustainability of policies
and programs are all possible outcomes of participatory intervention.
The state is implementing neo-liberal policies in the most recent stage
of industrialization. The prevalent framework is a market economy, in
which the government relinquishes control to the forces of the market.
The early success of newly industrializing nations in Asia was attributed
to macroeconomic development models that prioritized investment and
export-oriented growth strategies, rather than the fundamental values of
collective bargaining, freedom of association, and basic labour standards
(Kochan 1996).

Specific Guarantees
Type of Intervention and Policies Examples
Right to associate and Workers can form labour
organize unions
Right to bargain Workers can negotiate wages
Establishment and
collectively and working conditions with
protection of work-
employers
ers’ rights
Right to engage in in- Workers can strike or use
dustrial action (strike) other non-violent means to
achieve their demand

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Notes Specific Guarantees

Type of Intervention and Policies Examples
Minimum working age Children under the age of
fifteen are not allowed to
work; if the work poses a
risk to one’s health, safety,
or morals, one must be at
least eighteen years old.
Equality of wages and No employee may receive
employment opportu- a lesser salary or be denied
Protection for the
nities employment because of their
vulnerable
gender, race, religion, ethnicity,
national origin, or sexual ori-
entation. Disadvantaged groups
may use affirmative action.
Special provisions for Maternity leave must be
women granted to female employees;
they should not be forced to
work at night.
Minimum wages Workers must receive a min-
imum hourly wage.
Minimum non-wage Workers must receive hous-
Establishment of
benefits and overtime ing or health benefits, a set
minimum compen-
pay number of paid holidays
sation for work
annually, and overtime pay
for working more than the
allotted number of hours.
Minimum occupation- In addition to providing ad-
al health and safety equate lighting and ventila-
tion, workplaces must shield
employees from potentially
Assurance of decent dangerous activities.
working conditions Maximum hours of Workers must typically have
work at least one day off each
week and cannot be required
to work more than a set
number of hours.
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Specific Guarantees Notes

Type of Intervention and Policies Examples
Social security Workers who are unable to
work due to an illness, retire-
ment, or old age are eligible
to transfer payments based
on their previous employment
history.
Provision of income Job security and sev- Workers have some rights
security erance pay not to be dismissed at will,
and a right to compensation
when laid off
Public works When there is little demand
for labour, those who are
willing to work are given
temporary jobs.

Means of Government Intervention in Industrial Relations

The following are some of the main ways that the state intervenes in
labour relations.
(a) Policies: The nation’s stage and level of development can be taken
into consideration when modifying the policy framework concerning
labor and labor-management relations. Three general trends can be
used to classify state intervention in labor relations in developing
countries:
(i) The rationale for harmony and collaboration amid the era of
deliberate economic growth and import-substitution-focused
industrialization.
(ii) The rationale behind competition as economies liberalize in
order to become more integrated into the world economy.
Saving money and adding value are crucial in this situation.
The emphasis is on markets, not labor and efficiency, nor is
equity given as much weight.
(iii) The logic of competition highlights glaring inequality and
rising unemployment as the dogmatic pursuit of competition.
In this case, equity and efficiency are the main concerns.
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Notes (b) Legislation: Hard laws and soft laws are two types of laws. National
laws pertaining to various facets of employment and industrial relations
are based on the International Labour Standards. These laws are
strict. Voluntary agreements include codes of conduct, framework
agreements, etc. The bare minimum standards are typically provided
by the legal framework. Professional and progressive managements
ought to aim to go beyond what the law requires of them.
Periodically reviewing the legal framework is necessary to ensure
that laws are rationalized and simplified, and to ensure that they
are in line with new requirements. In the area of labor and labor
management relations, the legal framework should combine equity
considerations with the necessity for efficiency while balancing the
demands of the labor and product markets. It ought to respect the
values outlined in the International Labor Standards. For example,
laws pertaining to freedom of association and the right to collective
bargaining should ensure that the establishment, registration, and
operation of trade unions are not unduly impeded, and that the right
to collective bargaining is not restricted.
(c) Institutions: The three types of institutions that deal with labour
relations are judicial, executive, and facilitative.
(i) Facilitative: Different types of institutions can serve as
facilitators. For example, they consist of institutional mechanisms
that facilitate the provision of skills. The establishment of
proactive labour market policies will involve the establishment
of a national employment service that goes beyond simply
registering job seekers and fulfilling a mechanical function.
Instead, it will identify the skills gap between acquired and
required knowledge, offer opportunities to close the gap, and
connect job seekers with employers.
It might include tripartite institutions for establishing and
enforcing minimum wages in terms of minimum wage setting.
Statutory and voluntary institutional mechanisms for worker
involvement, representation, say, and stake are possible
examples of workplace democracy. It could cover systems
and procedures for handling discipline, resolving grievances,
and resolving disputes, among other things.

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(ii) Executive: The laws enacted by the state come into effect Notes
only upon gazette notification for the purpose. The executive
is also responsible for enforcing the laws through the labour
administrative machinery appointed by the central and
state governments. The executive’s role can be visualized
as a source of authority or service. If it is perceived as a
service function, its effectiveness can be judged in terms
of knowledge, accessibility, and attitude of the incumbents.
Are they knowledgeable? Are they accessible? Are they
helpful?
(iii) Judicial: The judicial apparatus includes the powers to interpret
and decide cases that are outlined in the Industrial Disputes Act.
Whether or not these institutions are autonomous, independent,
and specialized is the main question at hand. State discretionary
power will be negatively impacted by judicial independence
and autonomy of the type envisioned by the first and second
national commissions on labour. Having discretionary power
can be arbitrary and abused.

4.7 Role of State at the State IR Level; Future Role of

Government

The Role of State at the State IR Level

In the field of industrial relations, which is the study of the interactions
and conflicts between employers, employees, and their representatives
in the workplace, there is interest in the role of the state at the state
level. Economic, social, political, and legal contexts are just a few of
the variables that can affect industrial relations, which can have a big
impact on welfare, equity, and productivity.
The way a state or region’s government influences labour relations inside
its borders is referred to as the state IR level. Along with the interna-
tional, national, industry, enterprise, and shop-floor levels, the state IR
level is one of the industrial relations analysis levels. State-level investor
relations (IR) is significant because various states may have unique laws,
organizations, and customs that influence how employees and employers

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Notes interact or interact. In industrial relations, the state can take on a number
of roles and duties, including:
 Legislator: Labor laws, minimum wages, health and safety requirements,
social security, and other regulations that establish guidelines and
standards for industrial relations are all subject to enactment and
enforcement by the state. Together with advancing social welfare
and public order, these laws and regulations can safeguard the rights
and interests of employers and employees.
 Labour-market Regulator: In order to control competition over
worker compensation and working conditions, the state may set
and enforce legal minimum standards pertaining to wages, working
hours, health and safety, etc. In addition to preventing unfair or
damaging employer practices, these standards can guarantee workers
a fair and decent work environment.
 Conciliator, Arbitrator, and Mediator: The state may offer assistance
in the form of information, counsel, training, mediation, conciliation,
arbitration, and other services aimed at assisting employers and
employees in resolving labour disputes. These services can assist
the parties in resolving conflicts, strengthening their ability and
skills, and enhancing cooperation and communication.
 Employer of Labour: In a variety of fields, including public
administration, education, health care, and defence, the state can
be a major employer. The state, in its capacity as an employer, has
the ability to shape the atmosphere and results of labor relations by
modeling ethical hiring practices, such as offering competitive pay,
benefits, and training. Along with social discourse and collective
bargaining, the state may also interact with its own workers and
their representatives.
 Participant and Representative: Employers’ and workers’ organizations
may be involved by the state in the development and execution of
policies and programs pertaining to labour administration, social
protection, economic development, and other areas that impact
industrial relations. In these processes, the state can also speak for
the general public’s interests and policy goals. This can strengthen
social partners’ voice and participation, promote social consensus

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 Tripartism, Social Dialogue and Role of Government in IR

and legitimacy, and improve the efficacy and long-term viability Notes
of the policies and initiatives.
 The political, economic, social, and legal context of each state, as
well as the inclinations and concerns of the state actors and the
social partners, can all influence the state’s role at the state IR level.
The state can work with the industrial relations system in a variety
of ways by implementing various tactics and plans, including:
 Laissez-faire: The state can adopt a minimal or passive role in
industrial relations, and leave the matters to the market forces and
the parties themselves. The state can refrain from intervening or
regulating the industrial relations system, and respect the autonomy
and freedom of the employers and workers to determine their own
terms and conditions of employment. This approach can be based
on the assumptions of economic liberalism, individualism, and self-
regulation.
 Interventionist: The state can adopt an active or dominant role in
industrial relations, and impose its will and authority on the parties.
The state can intervene or regulate the industrial relations system, and
dictate the outcomes and processes of the industrial relations. This
approach can be based on the assumptions of economic nationalism,
collectivism, and state control.
 Facilitative: The state can adopt a supportive or cooperative role in
industrial relations, and assist and encourage the parties to reach
their own agreements and solutions. The state can facilitate or
promote the industrial relations system, and provide the framework
and incentives for the industrial relations. This approach can be
based on the assumptions of economic pragmatism, pluralism, and
social partnership.

The Role of State at the State IR Level

The state’s involvement in industrial relations at the state level can have
a number of effects and ramifications for the system, including:
 Conflict and Cooperation: The degree and type of cooperation
and conflict between workers’ and employers’ organizations can
be influenced by the state. Depending on its role and approach,

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Notes the state can either increase or decrease the conflict or promote or
obstruct cooperation. Depending on its objectives and deeds, the
state may also be a source of conflict or a target of cooperation.
 Power and Influence: The distribution and balance of power and
influence between employers and employees, or between their
organizations, can be impacted by the state. Depending on its role
and approach, the state can either strengthen or weaken the parties,
or favour or disadvantage the parties. In addition, the state may have
its own power and influence based on its assets and competencies.
 Performance and Outcomes: The productivity, efficiency, quality,
innovation, and other outcomes of the industrial relations system are
all subject to state influence. Depending on its role and approach,
the state can either improve or worsen the outcomes, or enhance or
impair performance. In addition, the state may have its own results
and performance based on its objectives and successes.
At the state IR level, the role of the state is a dynamic and complex
phenomenon that needs to be carefully and thoroughly analysed and
evaluated. The state can play a variety of roles, use a variety of tactics,
and have a variety of effects and ramifications on the labor relations sys-
tem. The other levels and elements of industrial relations, including the
national, international, industry, enterprise, and shop floor levels as well
as the economic, social, political, and legal contexts, can also interact
and change with the state. Therefore, a significant and fascinating area
of research in the field of industrial relations is the role of the state at
the state IR level.

The Future of Government Involvement in Industrial Relations (IR)

It is a dynamic and complex subject that is dependent on a number of
variables, including the degree of economic development, political and
ideological stance, social and cultural context, effects of globalization,
and new technological advancements. Here are some key interventions
 In an environment that is changing and becoming more competitive,
the government’s role in IR is changing from that of a controller
to one of an enabler, facilitator, and regulator.
 The government must take a proactive and inclusive stance on IR,
encouraging strong labour laws, collective bargaining, and workplace

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 Tripartism, Social Dialogue and Role of Government in IR

democracy as well as social dialogue and tripartism with the social Notes
partners.
 The Fourth Industrial Revolution has both opportunities and challenges
that the government must address. These include the emergence of
new forms of work, the need for new skills, the effects of automation
and digitalization, and the requirement for agile governance and
innovation.
 In order to ensure that the costs and benefits of development are
distributed equitably among all stakeholders, the government should
work toward achieving both social equity and economic efficiency.
The rule of law, democracy, and respect for human rights should
all be upheld by the government in IR.
There is discussion and conjecture surrounding the government’s poten-
tial role in industrial relations (IR), particularly in light of globalization,
economic liberalization, and technological advancements:
 While guaranteeing the observance of labour laws, human rights,
and social justice, the government may need to strike a balance
between the interests of various stakeholders, including employees,
employers, consumers, and society at large.
 It might be necessary for the government to take on a more
supportive and enabling role in order to encourage sensible and
cooperative investor relations practices, like social dialogue, worker
participation, and collective bargaining, as opposed to a controlling
and interventionist one.
 In order to make the current legal and institutional framework of
IR more adaptable, flexible, and relevant to the shifting demands
and obstacles of the labor market and the economy, the government
may need to review and reform it.
 The government may need to encourage the IR actors to resolve
conflicts and disputes through mutual consultation and negotiation
rather than litigation and coercion. This will require fostering a
culture of trust, transparency, and accountability among them.
 To improve the employability, productivity, and general well-being
of workers in both the formal and informal sectors, the government
may need to create and carry out efficient policies and programs

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes for workforce adjustment, skill development, social security, and

labour welfare.
 In order to handle the transnational and worldwide issues impacting
IR, such as migration, trade, the environment, and human rights,
the government may need to cooperate and coordinate with other
governments, international organizations, and civil society organizations.

4.8 Summary
The chapter primarily focused on concept of industrial relations with
the help of its characteristics. Along with this concept of tripartism, its
types and levels of settlement of tripartism has also been discussed. The
overview of social reforms, the role of the state in social dialogue and
social reform process have also been discussed in the given chapter. The
relationship between bipartism and tripartism and types and means of
government intervention in industrial relations is also one of the required
topics in this domain. The role of state at the State IR Level and future
role of government in the area of industrial relations are also much dis-
cussed topic of the chapter.

4.9 Answers to In-Text Questions

1. (d) All of these.
2. (c) Four
3. (b) 42
4. (b) Tripartism
5. (d) All of these.
6. (a) Trade Union
7. (c) Educational Development
8. (c) ILO, Government, Association of employers

4.10 Self-Assessment Questions

1. What is Tripartism?
2. Explain the link between Bipartism and Tripartism.

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3. Elaborate the role of government. Notes

4. How tripartism helps in industrial dispute?

4.11 References
 Arun Monappa. Industrial Relations, Tata McGraw Hill, New Delhi.
 Pramod Verma. Management of Industrial Relations – Reading and
Cases, Oxford University Press, New Delhi.
 Sivarethinamohan. Industrial Relations and Labour Welfare, PHI
Learning, New Delhi, 2010.

4.12 Suggested Readings

 Thorn, J. How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai, 1992.
 Walton, R. E., & McKersie, R. B. A Behavioural Theory of Labour
Negotiations, McGraw Hill, 1965.

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 L E S S O N

5
Contract of Employment
Dr. Priyanka Singh
Assistant Professor
Sri Sukhmani Institute of Management
Sri Sukhmani Group of Institutions
Email-Id: Priyanka.singh.0415@gmail.com

STRUCTURE
5.1 Learning Objectives
5.2 Contract of Employment
5.3 Industrial Employment (Standing Orders) Act, 1946
5.4 Shops and Establishment Act
5.5 Inter-State Migrant Workmen Act, 1979
5.6 The Contract Labour Act, 1970
5.7 Voluntary Retirement Scheme
5.8 Summary
5.9 Answers to In-Text Questions
5.10 Self-Assessment Questions
5.11 References
5.12 Suggested Readings

5.1 Learning Objectives

 Understand the meaning of Contract workers.
 Review the Objective of framing the Shop and Establishment Act.
 Analyse the Migrant Workers.
 Analyse the Voluntary Retirement Scheme.

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 Contract of Employment

Notes
5.2 Contract of Employment

Contract of Employment
Contract of employment is an agreement on all types of employment cir-
cumstances made between the employee and the employer. The agreement
can be in both the form verbally as well as in the written form and that
means includes both express and implied terms. Both, Employees and
Employers feel free to negotiate and agree on various terms and condi-
tions of employment providing that people do not breach or violate the
provision made under the Employment Ordinance. Any term of an employ-
ment contract that is significances to extinguish or reduce any benefit or
protection conferred upon the employee by this ordinance shall be void.

Conditions of Service
Generally, at the time of orientation, employees must inform clearly under
which they have been employed that is the conditions of employment
with which he works with regards to:
1. Wages (including rate of wages, overtime rate and any allowance,
whether calculated by piece, job, hour, day, week or otherwise);
2. Period of Wage;
3. Period of notice required to terminate the contract;
4. The payment to be made at end of the year of payment, entitled to
end of the year and proportion of payment period.
The employer shall give a copy of the written statement to their employee
for the employee retention and reference, if the contract of employment is
in written form. In case, the employment contract is not in written form,
the employer shall provide the employee with all detailed information in
written form and is liable to make a written request only.
In case of change in the services of working condition even if in the
proposed manner for an employee or actually implemented, the employer
shall be liable to inform them in advance. If such change in conditions
of services working then the modified statement shall also be shared with
the employees, a written copy of amendment.
Essential documents of statutory entitlement like annual leave pay, holi-
day pay, maternity leave pay, paternity leave pay and maternal leave pay
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes are generally calculated on the basis of wages particularly of which are
framed by the terms of employment contracts. Employees and employers
should clearly recognise the wages component (Allowances, commission,
benefits etc.) Conditions, arrangement of payments and wage rate, etc.

Employment Contract Duration

Every continuous contract is considered to be a contract for one month
and shall be renewed from month to month, in case of absence of any
express agreement to the contrary.

Records of Employment and Wages

All the employers of the organisation must keep a record of setting out
the employment and wage history all the time that covers the details of
the period of his employment during the preceding twelve months.
The record should include information of the employees which are as follows:
1. Identity card number and Name
2. Job title
3. Date of joining of employment
4. Wage paid to the employee of each wage tenure
5. Period of wages
6. Leaves detail like annual leave pay, holiday pay, maternity leave pays,
paternity leave pay and maternal leave pay are generally entitled
and taken all together with the detail of payment made duly with
respect of such periods
7. Total number of working hours in each wage period (If Applicable)
8. Notice period for the span of termination of the contract
9. Date of Termination of Employment (if applicable)
10. Amount to be paid at the end of the period and the end-of-year
payment to which it relates (If Applicable)
11. Total number of hours worked in each period of wage in case it is
applicable
The government of India has facilitated its official websites to give clear
picture of the provision to take reference and spread information among
the Employees to take help and understand the rules for them.
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 Contract of Employment

The employment and wages records should be kept at either the employer’s Notes
place of Business or the employer may keep the records at the premises
where the employees are employed or work, the documents should also
be kept for the tenure of six months even after the employee ceases to
be employed.

Penalties and Offences

The penalties of the above said is if any employer is not able to keep
the record of the same avail the, he is liable with a conviction of fine
of rupees ten thousand and also to prosecution. According to the Em-
ployment Ordinance, Labour Department Officer has full responsibility
to enquire time, to inspect the related records and seize anything which
may appear as the evidence of an offence. The Labour Department
officer is liable for prosecution and conviction with a fine of money or
imprisonment for a year if found any person fails to comply with the
necessary documents demanded.

5.3 Industrial Employment (Standing Orders) Act, 1946

The Industrial Employment (Standing Orders) Act, 1946

According to section 2(g), any rule which is related to the issues set
out in the schedule is known as the Standing Orders; “Standing Orders
means the rules of conduct for a workman employed in Industrial Estab-
lishment.” The main objective of the Act is to formally define conditions
of employment which should be defined by the employer in Industrial
organisation.
The Act is applicable on the following:
The industrial establishment that employs 100 or more than 100 workmen,
the Act is applicable on such organisations. If any organisation fails to
do so then the appropriate government afterwards have a right for giv-
ing not less than two months’ notice of its intention, so to do by giving
notification in the Official Gazette, the provision of this Act is applied
to any industrial establishment that employs number of workers less than
one hundred, as may be specified in the notification.
“Industrial Establishment” is defined as per different definitions:
(i) Payment of Wages Act, section 2(i) defined as an Industrial Establishment
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes (ii) Railway

(iii) Factories Act in section 2(m) has defined it as Factory
(iv) According to section 2(e) Establishment of contractor who all
employees or workers for establishing the contract with possessor
of the Industrial Establishment.
The word Industrial establishment involves Construction work, Factory,
Mines, Workshop, Transport Services, Transmission of Power, Building
Activity etc. The present Act does not apply to certain Industrial es-
tablishments. The Act shall be considered not to apply to an Industrial
establishment worker employed in case of their employment therein for
the person to whom Civil Services (Classification, Control and Appeal)
Rules, Revised Leave Rules, Fundamental and Supplementary Rules,
Civil Service Regulations, Civilians in Defence Service (Classification,
Control and Appeal), Rules, Civil Services (Temporary Service) Rules,
Indian Railway Establishment Code or any other unsaid rule or regula-
tions that may be notified in this, on the behalf of the Official Gazette
of the Appropriate Government.

Standing Orders under this Act has discussed the matter to be Provided
(a) Shift working.
(b) Attendance and Late coming update.
(c) Division of workers as per job role that is apprenticeship, temporary,
contract, badly, probation or permanent.
(d) Process of important information update to the workers like wage
rates, holidays, hours of work, workmen periods and pay days.
(e) Requisites to enter premises by certain gates that is a responsibility
to search.
(f) The eligibility to take leave, under what all circumstances, procedure
followed to take holiday and the appropriate authority to grant
holidays and leave.
(g) Temporary work stoppage, rights and liabilities of the employer and
workmen rising from there to, also the reporting of section and
closing of the industrial establishment.
(h) Dismissal on misconduct, acts or omissions which make misconduct
or dismissal on misconduct from work.
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 Contract of Employment

(i) Prior notice to the worker and employees in case of termination so Notes
that they can find safe option for them.
(j) Redressal for the workers in case of any unfair means treatments or
wrongful exactions by the employer or servants or its agents.
(k) Mater that are other than the above-mentioned reasons.

5.4 Shops and Establishment Act

Shops and Establishment Act

Introduction
It is important for the manager to have better understanding about the
law before joining the establishment especially before joining the shops
and establishments. Before discussing about the Shop and Establishment
Act one should understand the in-depth of the initial stage of the Act.

Evolution of Shops and Commercial Establishments

The State Acts and rules are generally framed according to regulate the
working conditions of the employed person in the shops and establish-
ments. The Act usually covers the information regarding holidays, min-
imum working hours, annual leave, rest or intervals, opening as well as
the closing hours of establishment, overtime wages and for restrictive
employment regarding welfare of children and women. An Act named
the Weekly Holiday Act, 1942 is a central Act, not a state government
Act that provides weekly holiday to the employees working in shops
and commercial establishments. This Act applies to people employed in
the place that jurisdictionally has a status of special area and will be
notified in that area.
Whereas the Shops and Establishment Act is extended to different states
and even covers whole of the country like state and within the state, it
usually covers entire areas where the state government may notify from
time to time. “The provisions are more or less similar and usually has also
a provision for granting exemptions, either permanently or for a specified
period of time, any establishment or class of establishment, persons or
classes of persons from all or any provisions of Act, subject to conditions.
Registration of establishments may or may not be compulsory”.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes The National Commission on Labour has clearly explained the imple-
mentation of these Acts. The central government may again consider the
issue of enacting a central law, that limits its coverage to establishments
with the required minimum numbers of employees. These sections have
been framed to deal with the provision of the Delhi Shops and Estab-
lishments Act, 1954.

Scope and Objects of the Act

The main objective of the Delhi Shops and Establishment Act, 1954 is
to dampen the malpractices of the employers against their workers and
employees so as to secure them, their services, ensure prompt payment
of wages, create healthy relations between employers and employees in
shops, regulate the working hours, grant various types of leave, safeguard
their service conditions, commercial establishments mean residential hotel,
theatre, restaurant hotel, motel, amusement park, entertainment park and
other places etc.

Establishment Registration
(a) Section 5 of this Act imposes a responsibility upon the occupier
of each and every establishment for sending report to the Chief
Inspector a statement during the stated time in a prescribed form,
together with prescribed fees that contain the following information:
 Name of the Manager and the employer (if any)
 Name of the commercial establishment (if any)
 Postal address of the commercial establishment
 Details and Number of the employees working in that particular
premisses and such other information as may be prescribed
 Classification of the shop; belongs to what category should also be
mentioned like the Shop, Residential Hotel, commercial establishment,
eating house, theatre or amusement park, entertainment park and
other places etc.
(b) After receiving the detailed information from the employer, the chief
Inspector checks and verifies whole information on his level. Once
the chief Inspector is satisfied with the information shared then he
registers the establishment in the manner as may be prescribed by

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 Contract of Employment

the lawful manner and shall issue in the prescribed form and also Notes
provide the registration certificate to the employer or occupier.
(c) The Commercial establishment shall display the certificate prominently
at the workplace and shall also renew it at certain interval that is
mentioned in this respect.
(d) In case of any doubt or dis-satisfaction between the Chief
Inspector and occupier as to the category to which the establishment
may belong, The Chief Inspector can refer the matter to the
Government which may proceed with further inquiry as they think
is a right then may decide thereto the final for the purpose of
this Act.
(e) The Shops and Commercial establishments are liable to pay the fees
together with ninety days of the date of registration and the type
of the establishment which the chief Inspector has given.

IN-TEXT QUESTIONS
1. India is a member of ILO
(a) Only
(b) Banned
(c) Founding
(d) Sole
2. ILO’s overarching objective is
(a) High Wages
(b) Employment
(c) Education
(d) Decent work
3. India is a member of ILO since the year
(a) 1933
(b) 1918
(c) 1928
(d) 1922

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Notes 4. The government that has responsibility for implementation of

Labour Law
(a) State government
(b) Central government
(c) ILO
(d) Industries
5. The Contract Labour Act, 1970, prohibits the use of Labour
function in a company
(a) Financial
(b) Effective
(c) Core
(d) Day to day
6. One of the objectives of the Contract Labour Act, 1970 is
(a) Increase
(b) Decrease
(c) Promote
(d) Develop
7. Usually, the contract worker is paid what to the permanent
workers?
(a) Less than
(b) More than
(c) At Par
(d) None of the above
8. The Contract Labour Act, 1970, prohibits the use of Labour
core function in a company. The purpose was to insure the
interest of
(a) Factories
(b) Contract workers
(c) Trade Union
(d) Permanent Workers

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Notes
5.5 Inter-State Migrant Workmen Act, 1979

Inter-State Migrant Workmen Act, 1979

The Act which is a collection of laws in India that manages the working
and employment condition of migrant workers from other places is known
as the Inter-State Migrant Workmen Act, 1979. The Act was framed to
guard the interest and rights of a worker and to arrange an outline for
the regulation of the employment of migrant workers in India. Inter-State
Migrant Workmen Act, 1979 is considered as one of the masterpieces of
laws that talks about the rights and laws for the support of workers who
left their places for the sake of their living. It also ensures that migrant
workers must be treated equally with all importance at their workplace
and dynamic safeguard must be provided to them.

Role of Inter-State Migrant Workmen Act, 1979

The Act details about the workers that he/she must register himself/her-
self first with the concerned district magistrate before getting employed
in any of the establishments. The Act also mandates every employer to
take licence from the concerned authority before employing any migrant
worker.

Important Features of the Inter-State Migrant Workmen Act, 1979

The Inter-State Migrant Workmen Act, 1979 is a regulation in India which
regulates the working conditions of migrant workers and their equal
treatment at the workplace. The Act also covers the following features:
 The Act discusses the minimum wage limit and working conditions
of the workers.
 Every migrant worker must register himself/herself first with the
concerned district magistrate before getting employed in any of the
establishments.
 Every employer has to take licence from the concerned authority
before employing to any migrant worker.
 The Act was framed to provide a base to the guidelines of the
employment of migrant workers in India and to protect their interest
and rights.

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Notes  It also gives the establishment of legal panel to resolve any type of
conflict between the employers and their migrant workers.

Scope of the Inter-State Migrant Workmen Act, 1979

 Every employer and contractor in a state shall be audited by the
State government authorities on an annual basis to ensure whether
the workers have been deployed lawfully and submit an annual
compliance status or review the implementation report of the State
Legislature.
 Migrants’ workers should always be given equal benefits as the
other local people. This will help them to save their money by
saving extra spendings on the essentials like Food grains and
Kerosene.
 For collecting general detail of public information and verification,
every state government should also operate an internet portal which
has detailed list of registered Contractors, Businesses, Principal
Employers and Inter-State Workmen.
 The details of all registered Inter-State workers must be supplied
instantly by the Main Contractors and employers. Non-compliance
of the regulation will be treated as an Offence of the Act and they
will be liable for a punishment.
 With the flow of the framework, some measure for how the social
protection architecture should be developed. In addition to this, a
mechanism for transferring services like health insurance, education
and equal access for migrants, to guarantee and easy access for the
migrant workers.

Advantages of Inter-State Migrant Workmen Act, 1979

The Inter-State Migrant Workmen Act, 1979 has both merits and demerits.
The Act does save interest of the migrant worker and discusses about
their rights. It also discusses about the equal status and fair treatment
at their workplace. On the other hand, due to the migrant Act there is a
discrimination between the local workers and migrant workers. And also
due to the rigid law in the Act, it becomes difficult for the employer to
adapt work process and practices appropriately.

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Critical analysis of Inter-State Migrant Workmen Act, 1979 Notes

(a) The present situation where the migrant workers were unhappy due
to COVID condition they had to return to their home, as a result
of the shutdown; it was due to shortcomings of the welfare system.
Though, the Act has been passed from both the houses of the State
Legislature in the year 2017, and “despite its inclusion of language
allowing it to be used against any non-compliant entity, there is
still no indication that it has been implemented”.
(b) In spite of it being well-intentioned legislation due to lack of
Government’s preparedness and improper implementation of the Act
into effect, as mandated, “requiring not simply the maintenance of
interstate worker records but also all other conditions relating to
remuneration allowances, housing and medical care to be met”.
(c) As a result of such improvements the regulation can become logical
and rationalised enough for the contractors and the workers have
incentives for coming forward and register the workers without
having fear of high penalties or burdensome social safety necessities.
In spite of the increasing number of migrant workforces every year nearly
4.5% each year between the states, migrants still face a lot of difficulties
in the destination places in sustaining themselves. Certainly, the con-
temporary situation has been inevitable which proves the inefficiency of
mitigating the Social and Economic marginalisation of migrant workers
because of the shutdown. Further led to the ineffectiveness of the legisla-
tion from the examples and created a doubt on the overall success of the
Inter-State Migrant Workmen (Regulation of Employment and Conditions
of Service) Act, 1979.

5.6 The Contract Labour Act, 1970

Contract Labour (Regulation and Abolition) Act, 1970

The Contract Labour (Regulation and Abolition) Act, 1970 is Act no. 37
of 1970 (5 September, 1970). It is an Act to regulate the employment
conditions of the contract workers in various establishments and to pro-
vide for its abolition in certain circumstances and also for matters that
are connected therewith. It was enacted in the Twenty-first Year of the
Republic of India by the Parliament.

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Notes Contract Labour

A worker or an employee who does not join the organisation directly
rather he works under a contractor who gives him opportunity, wages and
all other benefits is known as a Contract Labour. The Contract Labour
Act is framed to regulate the employment terms of the contract labour in
the establishments and gives right in certain circumstances to avoid the
exploitation of the workers and for other related matters. “Be it enacted by
Parliament in the Twenty-first Year of the Republic of India” as follows:
(a) Preliminary
(i) Short Title: The Act may be known as “Contract Labour
(Regulation and Abolition) Act, 1970”.
(ii) Extent: It is applicable to whole nation (India).
(iii) Commencement: It shall consider to come into the force from
such date as the “Central Government may, by notification
in the Official Gazette, appoint and different dates may be
appointed for different provisions of this Act”.
(iv) Application: It is applicable to:
 To any establishment where the number of contract labour
is twenty or more than twenty workmen are presently
employed or were employed on any day preceding one
year tenure as contract labour only.
 The condition of twenty or more workers employed has
to take permission or give a notice in not less than two
months about its intentions to do so to the appropriate
government, by notification in the Official Gazette. To
apply the provision of the Act to any establishment, the
notification should clearly mention the information of
the condition of twenty or more workers.
(v) Not Applicable: It is not applicable to:
 It shall not be applied in case the establishments that work
for short span of time where the work is intermittent or
casual nature.
 If the question arises whether the work performed in an
establishment is of an intermittent or casual nature, then
the Appropriate Government shall decide.
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 The Appropriate Government may decide about the Notes

condition of work for contract labour whether it is a
work of casual nature for short span after consultation
with the Central Board or, as the case may be a State
board and its decision shall be final.

Explanation
For the objective of the sub-section (1), the work performed in an Es-
tablishment shall not be deemed to be likely as an intermittent nature:
“if it was performed for more than one hundred and twenty days in the
preceding twelve months, or if it is of a seasonal character and is per-
formed for more than sixty days in a year”.

Appointment of the Registering Officers

The appropriate Government may, by an order notified in the Official
Gazette that “appoint such persons, being Gazetted Officers of Govern-
ment, as it thinks fit to be registering officers for the purposes of this
Chapter; and define the limits, within which a registering officer shall
exercise the powers conferred on him by or under this Act”.

Registration of Certain Establishments

(a) The registration process involves various steps; every principal manager
of the establishment to which this Act applies shall, “within such
period as the appropriate Government may, by notification in the
Official Gazette, fix in this behalf with respect to establishments
generally or with respect to any class of them, make an application
to the registering officer in the prescribed manner for registration
of the establishment:
Provided that the registering officer may entertain any such application
for registration after expiry of the period fixed in this behalf, if the
registering officer is satisfied that the applicant”.
(b) The Registering Officer shall provide a certificate of establishment
registration containing all the details of regulations prescribed to
employer, if the application for the registration is completed in all
the aspects and the officer is satisfied by the information.

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Notes Prohibition of Employment of Contract Labour

(a) Nevertheless, anything that is prescribed in the Act, the appropriate
Government will discuss with the central board or the state board
as per the demand of the case may be “prohibit, by notification in
the Official Gazette, employment of contract labour in any process,
operation or other work in any establishment”.
(b) For the objective of the sub-section (1) before issuing any notification
in regards to the establishment, the appropriate government firstly
shall have regard to the benefits and conditions of work provided
for the contract worker in that establishment or other relevant factors
like:
 Whether the work is generally done by the regular worker of
that establishment or a similar establishment thereto;
 Whether it is of perennial nature or not, which means, it
should be of sufficient duration which are having regard to the
nature of business, trade, industry, occupation or manufacture
carried on in that particular establishment;
 Whether it is adequate to employ substantial number of full-
time workers;
 Whether the operation, process, or other work is related to,
or necessary for the business, trade, industry, occupation or
manufacture that is carried on in the establishment.

5.7 Voluntary Retirement Scheme

Voluntary Retirement Scheme or VRS can be availed by employees who
have been working with the company for more than 10 years and are
above the age of 40 years. This scheme that is offered by the companies
can be availed by all employees of the company including executives,
workers, and so on. In the landscape of Human Resource Management, Vol-
untary Retirement Schemes (VRS) emerge as strategic tools that pro-
vide employees with an opportunity to exit the organization voluntarily.
These schemes are designed to align the organization’s workforce with
its evolving needs while offering employees a dignified transition into
the next phase of their lives. Let’s delve into the concept of VRS, its
benefits, and how it contributes to both employees and organizations.
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Unveiling Voluntary Retirement Schemes Notes

Voluntary Retirement Schemes enable employees to choose for retire-
ment before the standard retirement age of retirement:
 Attraction: VRS provides financial incentives to motivate employees
to consider about early retirement.
 Employee Choice: Employees decide by themselves to participate
in VRS based on their personal conditions.
 Organizational Goals: Through VRS organization aligns the workforce
with the changing requirements of organization and market.

Mutual Benefits
Voluntary Retirement Schemes give advantages to both employees and
employers:

For Employees:
 Financial Security: VRS provides a financial support to employees
who are entering the next phase of their lives.
 Flexibility: It provides the scope of new opportunities to Employees
to explore other fields and to spend time on their personal pursuits.
 Dignified Transition: VRS keeps the self-esteem of employees with
a dignified exit.

For Organizations:
 Workforce Alignment: Through VRS organization aligns the workforce
with the changing requirements of organization and market needs.
 Cost Savings: It helps in cost savings by saving big salaries,
accumulated benefits of old employees, and operational expenses.
 Talent Management: VRS opens the way for young talent to grow
as per changing market requirement.

Implementation and Considerations

Implementing Voluntary Retirement Schemes requires careful planning:
 Fairness: It should be fair and transparent, with attractive and
justifiable benefits to encourage participation.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes  Communication: All communications should be transparent with

logical reasons, good benefits, and implications of VRS to employees.
 Legal Compliance: It should be designed and implemented as per
labor laws and regulations.
 Support: Proper counselling and support services should be given
to employees who are considering VRS.
Voluntary Retirement Schemes is a very important tool from the point
of view of Human Resource management for an organization consider-
ing the evolving market needs and parallelly it also facilitates a smooth
transition for employees.
It is a kind of win-win scenario for both employees and organization.
On one hand, it provides an opportunity to employees to retire on their
terms with good financial and other benefits and on the other hand, it
offers organization a means to manage their talent pool effectively. If it is
implemented with fairness, empathy and transparent communications then
it shows a commitment of an organization to both employee well-being
and organizational efficiency.

CASE STUDY
In a technology firm, an experienced software developer, Alice, is
offered a position. The company provides her with a contract of
employment outlining the terms and conditions of her engagement.
The contract specifies her role, responsibilities, working hours, salary,
benefits, and the duration of the employment.
After joining the company, Alice discovers that the actual working
conditions differ from what was outlined in her contract. She is re-
quired to work overtime regularly without additional compensation,
and her job responsibilities extend beyond the initial scope outlined
in the agreement. Feeling dissatisfied and concerned about the breach
of the employment contract, Alice decides to raise the issue with the
company’s human resources department. The company’s HR department
initiates discussions with Alice to address her concerns and rectify
the discrepancies. Potential resolutions might involve renegotiating
the terms of the contract, providing compensation for overtime, or
adjusting her job responsibilities to align with the original agreement.

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 Contract of Employment

QUESTIONS: Notes

1. What is the role of communication and negotiation in resolving

disputes related to employment contracts? Explain.
2. What are the possible challenges in enforcing the terms of the
contract and maintaining a harmonious employer-employee
relationship?

5.8 Summary
This present chapter includes various Acts and provisions related to
contract labour, migrant labour, shops and establishment etc. Contract of
employment is an agreement on all types of employment circumstances
made between the employee and the employer. The agreement can be
in both the form verbally as well as in the written form and that means
includes both express and implied terms. Both, Employees and Employ-
ers feel free to negotiate and agree on various terms and conditions of
employment providing that people do not breach or violate the provision
made under the Employment Ordinance. In spite of the increasing number
of migrant workforces every year nearly around 4.5% each year between
the states, migrants still face a lot of difficulties in the destinations places
in sustaining themselves. Certainly, the contemporary situation has been
inevitable which proves the inefficiency of mitigating the Social and
Economic marginalisation of migrant workers because of the shutdown.
Further led to the ineffectiveness of the legislation from the examples and
created a doubt on the overall success of the Interstate Migrant Work-
men (Regulation of Employment and Conditions of Service) Act, 1979.
Voluntary Retirement Schemes is a very important tool from the point of
view of Human Resource management for an organization considering the
evolving market needs and parallelly it also facilitates a smooth transition
for employees. It is a kind of win-win scenario for both employees and
organization. On one hand, it provides an opportunity to employees to
retire on their terms with good financial and other benefits and on the
other hand, it offers organization a means to manage their talent pool
effectively. If it is implemented with fairness, empathy and transparent
communications then it shows a commitment of an organization to both
employee well-being and organizational efficiency.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes
5.9 Answers to In-Text Questions
1. (c) Founding
2. (d) Decent work
3. (c) 1928
4. (b) Central Government
5. (c) Core
6. (d) Develop
7. (a) Less Than
8. (d) Permanent employees

5.10 Self-Assessment Questions

1. Explain the contract workers.
2. When an organisation can register for migrant worker?
3. Discuss the Voluntary retirement scheme.

5.11 References
 Begega, S. G., & Aranea, M. (2018), «The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?”, Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151.
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R., & Cao, Q. (2021).
“What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany”, Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090.
 Valizade, D., Cook, H., Forde, C., & MacKenzie, R. (2023),
“Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work
systems?”, Journal of Organizational Effectiveness: People and
Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278.

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 Contract of Employment

 Yuan, L., Yu, Y., Li, J., & Ning, L. (2014), «Occupational commitment, Notes
industrial relations and turnover intention: Empirical evidence
from China», Chinese Management Studies, Vol. 8 No. 1, pp. 66-
84. https://doi.org/10.1108/CMS-08-2011-0065.

5.12 Suggested Readings

 Dunlop, J. T., & Healy, J. J. Collective Bargaining, Richard D. Irwin,
1955.
 Whitney, F., & Sloana, A. A. Labour Relations, Prentice Hall,
Englewood Cliffs, New Jersey, 1991.
 Gottoschalk, A. W. The Background to the Negotiating Process,
Gower Press, 1973.
 Thorn, J. How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai, 1992.
 Walton, R. E., & McKersie, R. B. A Behavioural Theory of Labour
Negotiations, McGraw Hill, 1965.

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 L E S S O N

6
Public Policy and Wage
Reward System
Dr. Komal Goyal
Research Scholar
Department of Management Studies
J. C. Bose University of Science and Technology, YMCA, Faridabad
Email-Id: komalgoel2090@gmail.com

STRUCTURE
6.1 Learning Objectives
6.2 Wage and Reward System
6.3 Components of Wage and Reward System
6.4 Wage Theories
6.5 Wage System in India
6.6 Profit Sharing and Stock Option
6.7 National Wage Policy
6.8 Wage Policy at the Company Level
6.9 Pay Structures
6.10 Contemporary Issues
6.11 Summary
6.12 Answers to In-Text Questions
6.13 Self-Assessment Questions
6.14 References
6.15 Suggested Readings

6.1 Learning Objectives

 Explore different models of compensation structures used in organizations.
 Understand the legal provisions aimed at promoting equal opportunities and fair
compensation.

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 Public Policy and Wage Reward System

 Apply theoretical knowledge to real-world scenarios through case Notes

studies.
 Evaluate the effectiveness of public policies in addressing challenges.
 Critically assess existing public policies and propose reforms for
more effective wage systems.

6.2 Wage and Reward System

Organisations use wage and reward systems as a framework to pay workers
for their contributions and work. It covers the procedures and standards
used to decide on an employee’s pay as well as any other incentives or
bonuses they could be eligible for. Organisations use both monetary and
non-monetary components in their reward systems. A carefully designed
pay and benefit plan is necessary for attracting, preserving, and inspiring
workers. There are two types of rewards schemes: intrinsic and extrinsic.
Benefits like financial payouts and comfortable working atmosphere that
an employee gets for the sake of their job are known as extrinsic re-
wards. Intrinsic rewards are those that result from doing the work itself,
including a sense of achievements and making an impact to community.
Bratton defined “Any financial, non-financial, and psychological compen-
sation that a company offers its workers in exchange for the work they
do is referred to as a reward system”. A well-designed and fair reward
system has overall good organization performance, and should follow:
1. To assist the organization’s aims by coordinating employees’ goals
and align the reward system with their performance and productivity.
2. To guarantee that the organization can hire and retain an adequate
number of workers with the appropriate expertise. Selection of
employees should be based on their skills and expertise.
3. To inspire workers from time to time by offering monetary and
non-monetary rewards.
4. To match the organization’s risk preferences with those of managers
and staff.
5. Reward system should be abided by the law, fair and ethical.
6. Reward system should be flexible and adaptability.

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Notes
6.3 Components of Wage and Reward System

6.3.1 Financial (Monetary) Benefits

Monetary benefits are crucial for meeting both physiological and social
needs. Workers receive rewards from their employer for their hard work
if they do it effectively. Additionally, if an employee needs more mo-
tivation to put up their best efforts, the organisation offers bonuses for
completing specific tasks. Financial incentives include bonuses, wage
hikes, profit-sharing, benefits and allowance, stock option and periodic
rises in employee pay or salaries.

6.3.2 Non-Financial Benefits

Non-monetary rewards can benefit both organisations and employees
in many ways. These benefits include raising engagement, satisfaction,
employee well-being, improving retention, and performance, productivity,
and loyalty. It may include recognition, praise, flexible work arrangement,
employee well-being programs, promotion etc.

6.4 Wage Theories

6.4.1 Subsistence Theory

David Ricardo has propounded this theory and also called Iron Law Wages.
The premise behind the development of this theory was that workers are
treated as commodities that are traded on the open market; their wages
are set by their subsistence level. An increase in wages that surpasses the
subsistence level will lead to a rise in the labour force population, which in
turn will increase the labour supply, wages will be reduced. Conversely, if
worker earnings drop below the subsistence level, a decline in the popula-
tion will result in a reduction in the labour supply, thus wages will go up.

6.4.2 Wages Fund Theory

Adam Smith and J.S. Mill presented this theory in 1930 and relied on the
notion that workers are paid from a pre-established wealth fund which is

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created from the surplus funds from the organization’s operations in the Notes
previous year. A wage fund’s total amount and the number of employees
altogether define the wage level or wage rate. This theory asserts that
more wages will be provided to employees if the wage fund is larger.
Further, the wage rate will rise in the case of a drop in the workforce.

6.4.3 Surplus Theory of Wages

Karl Marx has proposed this theory. The fundamental premise of this
theory is that labour is a product that can be acquired by paying its
price (i.e. wages) just like any other product. Marx argued that labour
is a product that may be had for a cost. And any product’s cost is based
on the length of time and energy required to make it.

6.4.4 Residual Claimant Theory

This theory explained land, labour, capital, and entrepreneurship are the
four elements that make up production, or business activity. Wages are
regarded as a remnant/leftover or it is merely a small fraction of total
revenue that remains left. Francis A. Walker presented this notion and
stated that workers receive their wages from what’s left over after de-
ducting other expenses like rent, interest, and profits have been taken into
account. Hence, the worker is the remaining claimant under this notion.
This theory is optimistic as the wages of employees may increase if they
become more productive or generate more revenue.

6.4.5 Marginal Productivity Theory

J.B. Clark has propounded this theory and holds that wages are decided
by taking into account the last worker’s productivity contribution (the
marginal worker). The notion of this theory presupposes that a specific
number of workers are seeking employment. A worker can obtain employ-
ment at a wage rate that is equal to the addition to overall production.
As a result, the marginal unit of workers is employed. It is also assumed
that the production process operates under the constraint of decreasing
labour returns. This theory states that under perfect competition, the worth
of the marginal result of a certain type of labour will be paid to each

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes individual in that category who is equally competent and efficient. The
marginal net result of worker is the amount by which output would rise
with the addition of one more worker and the proper inclusion of other
production variables. One of the shortcomings of this theory is that it is
unable to account for wage disparities.

6.4.6 The Bargaining Theory of Wages

First proposed this theory by John Davidson and holds that the ability
of employees, including trade unions, to negotiate effectively determines
how wages are fixed.
Wages typically tend to be low when employers play a bigger role in
the negotiation process, and high when workers are stronger. This theory
further states that wage rates have an upper and lower bound, and the
actual rates that fall between these bounds are decided by the workers’
and employers’ bargaining strength. The rate below which employees
decline to work is known as the lower limit, whereas the upper limit is
the rate above which an employer refrains from hiring a particular class
of workers.

6.4.7 Supply and Demand Theory

Alfred Marshall provided this theory. He asserts that the supply and de-
mand for employment have a significant impact on how much labourers
are paid. This theory states that a single or individual worker’s margin-
al productivity determines the worker’s demand price. The quantity of
workers looking for work to earn a wage is known as the labour supply.
The quantity of labour required by the organisation is referred to as the
demand for labour. As the number of working hours and wage rate rise,
correspondingly supply of labour tends to increase. Whereas the demand
for labour is influenced by factors like labour productivity, technological
advancements, consumer demand for goods, and capital input costs.

6.4.8 National Income Theory

The National Income Theory (Full Employment Wage Theory) which was
put forth by John Maynard Keynes. Full employment is a function of a

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nation’s national income according to this theory. Total consumption plus Notes
either public or private investment equals national income. The federal
government is responsible for adjusting any one or all of the three factors
to raise the national income and bring the country back to full employ-
ment if it falls below the level that requires full employment.

IN-TEXT QUESTIONS
1. Which theory states that a worker can obtain employment at a
wage rate that is equal to the addition to overall production?
As a result, the marginal unit of workers are employed.
(a) Marginal productivity theory
(b) Residual claimant theory
(c) National Income theory
(d) None of the above
2. Which theory states that a single or individual worker’s marginal
productivity determines the worker’s demand price? As the
number of working hours and wage rate rise, correspondingly
supply of labour tends to increase and vice versa.
(a) Demand and Supply Theory
(b) Marginal Productivity Theory
(c) National Income Theory
(d) All of these

6.5 Wage System in India

India’s wage system consists of several parts and is controlled by a mix
of regulations and legislation. Protective and employment legislation is
defined as legislation whose main goals are to enhance the working atmo-
sphere and maintain basic labor laws; legislation that provides minimum
labor standards for things like safety, child and woman employment,
work hours, and so forth. Various Indian labour laws failing under this
category are as follows:
1. Payment of Wages Act, 1936
2. Minimum Wages Act, 1948

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Notes 3. Factories Act, 1948

4. Mines Act, 1952
5. Payment of Bonus Act, 1965 and many more.

6.5.1 Payment of Wages Act, 1936

To govern the distribution of pay or wages to employees working in
industries and to provide them with a prompt and efficient solution to-
wards unlawful deductions and inexcusable delays in wage payments, the
Payment of Wages Act, 1936 was passed. This act pertains to the persons
employed in any factory, railways, industrial settings. Objectives of this
act are as follows:
1. The purpose of this act was to control the regularity with which
specific employee groups would get their payments and to prevent
any unauthorized deductions.
2. It is basically intended to benefit industrial workers who do not
receive particularly high earnings; the act’s provisions were put in
place to protect their interests.
3. It safeguards against wage irregularities and unauthorized deductions
by employers.
4. It guarantees wage payment in a specific format and at regular
intervals.
In 1982, the Payment of Wages Act, 1936’s basic wage ceiling of
Rs. 1600/-pm was set. The Ministry of Law and Justice notified the
Payment of Wages (Amendment) Act, 2005, Act 41 of 2005, on Sep-
tember 6, 2005. This Act was passed by both Houses of Parliament to
raise the wage ceiling to Rs. 6500/- p.m. for the Act’s applicability,
empowering the Central Government to hike the ceiling in the future
through notification, and improving the penal provisions, etc. Further,
the Payment of Wages (Amendment) Act, 2005 became operative on
November 9, 2005, with the Ministry of Labour and Employment issuing
Notification No. S.O. 1577(E). Additionally, the Central Government,
exercising the authority granted by sub-section (6) of section 1 of the
Act, increased the wage ceiling to Rs. 18,000/- per month via gazette
notification No. S.O. 2260 (E) dated September 11, 2012, based on

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data from the Consumer Expenditure Survey published by the National Notes
Sample Survey Organisation.

6.5.2 Minimum Wages Act, 1948

The concept of a minimum wage is to maintain workers’ productivity in
addition to covering their basic needs for survival. The Geneva Conven-
tion on Minimum Wage Fixing was convened in 1928. This act’s primary
goal is to thwart the plundering of labour in industries. This act enables
the central and state governments to fix minimum wages rate from time
to time in a selected number of sweated industries and this act applies
to the whole of India.
On April 11, 1946, the Minimum Wages Bill, which fixed minimum wages
for certain positions, came up in the Central Legislative Assembly based
on the suggestion of the Eighth Standing Labour Committee. The Indian
Dominion Legislature enacted the Minimum Wages Bill, which went into
effect on March 15, 1948. According to the Act, the government sets the
minimum wage and update it every five years. The purpose of this Act is
1. To prevent employees against exploitation and guarantees a minimum
wage for them.
2. To strengthen the welfare of employees by establishing minimum
wage rates in specific sectors where unorganized labour is most
common and sweatshop labour is prevalent.
3. To allow for the maximum amount of time spent working each day,
weekly rest, and overtime.
4. To offer statutory minimum wages for scheduled employment.

6.5.2 Procedure for Fixing and Revising Minimum Wages

There are two separate modes of procedure provided in Section 5 for
setting and amending minimum wages which allows the Government to
arrive at a fair decision when it comes to minimum wage fixation.

First Method: Appointment of Committee

The appropriate government will designate as many committees and
subcommittees as it deems required to conduct inquiries and provide

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Notes advice about the establishment or revision of minimum wage rates,

as applicable.

Second Method: Publication of Proposals in the Official Gazette

To the knowledge of those who might be impacted by the setting or re-
vision of minimum wage rates, the appropriate Government must publish
its proposals through notice in the official gazette. In addition, it must
include a deadline for reviewing the ideas, which cannot be less than
two months from the notice date.
Then, an advisory board will be appointed by the appropriate government
with the following goals in mind:
(a) Advising the appropriate government generally on how to fix and
revise minimum wage rates;
(b) Organizing the tasks of committees and subcommittees appointed under
section 5 (for grasping concerns and providing advice regarding the
fixation and revision of minimum wage rates).

6.5.2 Safeguard in Payment of Minimum Wages

1. The minimum wage required by this act must be paid in cash.
2. However, if it has been customary to pay wages in kind, the appropriate
government may authorize the payment of minimum wages in kind
by publishing a notification in the official gazette.
3. Through an official announcement in the gazette, the appropriate
government may also authorize the shipment of essential goods at
discounted prices.
4. The prescribed methodology shall be employed to evaluate the
monetary worth of in-kind wages and concessions related to the
provision of necessities at the conventional rates permitted by
sections 11(2) and (3).

6.5.3 Payment of Bonus Act, 1965

On September 25, 1965, the President ratified the Payment of Bonus Bill,
which had been approved by both Houses of Parliament known as the

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Payment of Bonus Act, 1965 (21 of 1965), it was added to the Legislative Notes
Book. This Act stipulates that employees of specific establishments may
receive bonuses based on output or productivity, profitability, or other
relevant factors. It covers all of India and is applicable to all factories
and other establishments with 20 or more employees on any day in the
accounting year.
Bonuses are regarded as “rewards” or any extra money that a company
gives an employee in any setting in addition to their monthly salary.
Offering bonuses is done to distribute the company’s profits to the staff.
A minimum bonus of 8.33% of the annual pay will be awarded, or 100
rupees for employees above the age of 15 and 60 rupees for those under
the age of 15, whichever is greater. The highest bonus amount for the
accounting year is 20% of the salary.
For every financial year, if an employee works for at least 30 working
days, he is eligible to get a bonus. This applies to all employees receiving
salary or wages up to Rs. 10,000 per month, regardless of their type of
work—skilled, unskilled, managerial, supervisory, etc.

Purpose of this Act

1. To levy legal responsibility on an employer of each business
covered by the Act for the payment of bonuses to workers within
the establishment.
2. To clarify the concept of bonus payment using the specified formula.
3. To establishing the smallest and highest bonus payment schedule
and connecting it to the set-off and set-on scheme.
4. To offer the machinery needed to enforce the obligation to pay
bonuses.

6.6 Profit Sharing and Stock Option

Paying employees, a portion of net earnings in addition to their wage or
salary is known as profit sharing. Considering the overall financial per-
formance of the organisation, profit sharing enables employees to earn a
direct cash benefit. With stock options, a person can invest for the future
and turn a profit when the stock is sold after it vests. An equity com-
pensation plan that companies offer to their managers and staff members

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Notes is known as an employee stock option. The corporation offers derivative

options on the stock in place of direct stock grants. The employee is
granted the ability to purchase business stock at a predetermined price
for a limited time under these options, which take the form of standard
call options.
Offering stock options to employees could be beneficial to an employer
because it may increase staff inspiration to give their best work. Although,
both (Profit sharing and stock option) improve the overall performance
of the organization but still there is difference between the two:

Basis of
Difference Profit Sharing Stock Option
Meaning An organisation can pay its Employees who have stock
employees a percentage of its options are entitled to purchase
profits through an arrange- a predetermined number of
ment called profit sharing shares of the company’s stock
at a set price.
Interval It is distributed on a regular Stock options vest gradually
schedule, such a quarterly and can be realised at a future
or annually date, usually subject to specific
requirements and following a
vesting period.
Ownership Profit sharing does not grant Employees can become share-
ownership to the employees holders of the company by
in the organization. exercising their stock options,
Risk Factor Since profit sharing is de- Stock options carry greater risk
pendent on the company’s because the stock’s value is
profits, which are subject to subject to fluctuations. If the
change, it is typically a less stock price does not rise above
hazardous type of pay. the exercise price, the employee
may not get any compensation
from the options. But if the
stock price rises sharply, stock
options also have the potential
to yield greater benefits.

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Basis of Notes
Difference Profit Sharing Stock Option
Tax It is typically taxed as ordi- Stock options may be eligible
Treatment nary income. for preferential tax treatment,
depending on the type of option
and the conditions surrounding
its exercise.
Types It is simply a distribution Stock options include restricted
of profits among employees. stock grants, stock appreciation
rights, phantom stock, employee
stock purchase plan.

Types of Stock Options:

1. Restricted Stock Grants: These allow workers to purchase or
obtain shares upon the fulfilment of specific requirements, such
as completing a certain number of years of employment or hitting
performance targets.
2. Stock Appreciation Rights: It allows workers to purchase or obtain
shares upon the fulfilment of specific requirements, such as completing
a certain number of years of employment or hitting performance
targets.
3. Phantom Stock: This provides a future financial bonus in the amount
of a specified number of shares; normally, there is no formal
transfer of ownership of the shares, but in the event that certain
trigger conditions are met, this type of stock option may become
convertible into actual shares.
4. Employee Stock Purchase Plan: These plans allow employees to
buy company stock, typically at a discounted price.

6.7 National Wage Policy

Laws or other government initiatives aimed at controlling the pay scale,
structure, or both to accomplish particular goals of socioeconomic policy
are referred to as wage policies. The government’s systematic attempts
to regulate pay and salary levels and structures to achieve economic and
social goals are encompassed under this. These efforts include legislation,

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Notes a national wage and salary system, and other related measures. The Pay-
ment of Wages Act of 1936 was the first move towards the emergence of
wage policy. The Act’s primary goal is to outlaw any lawful withholding or
postponement of an employee’s wages. The Minimum Wages Act of 1948
was a significant piece of legislation that contributed to the advancement
of wage policy. The Act’s goal is to set minimum pay rates for labourers
in sweated industries that produce wool, carpets, flour mills, tobacco prod-
ucts, oil mills, plantations, mica mining, agriculture, and similar businesses.
For social and economic reasons, a reasonable wage policy is necessary.
In the absence of it, there is a risk of unjustified worker exploitation,
which could cause unhappiness and strain relations between employees
and management. To protect the interests of employers, employees, the
government, and the nation as a whole, a fair wage policy is required.
There are three concepts to discuss about the wage policy namely mini-
mum wages, living wages, and fair wages. A minimum wage is defined
as an amount that is adequate to cover the essential needs of a diligent
and thrifty worker. The Committee on Fair Wages defines the minimum
wage as an inescapable or necessary sum that is thought to be required
for both the worker’s and his family’s basic needs and the maintenance
of the worker’s productivity at work. Living wage is a wage that ought
to motivate workers to put in enough hours and accomplish enough work
in a sufficient amount without compromising quality, so that the industry
can justify paying such a rate. Workers should be paid a liveable wage
that covers both their personal maintenance and family support expenses.
Living wages include workers are enable to bear economical comfort ex-
penses such as children’s education; safeguarding against illness; meeting
basic social necessities; insurance against more significant tragedies, such
as after retirement age along with the basic needs. Lastly, fair wage rate
is reasonable if it is the same as what is being paid in the same region
and sector of the economy. Broadly speaking, a fair wage is the going
rate for comparable positions across the nation or across all industries.
It is the same amount of money paid to workers who do equivalent job
that requires same expertise, effort, and discomfort and based on the slo-
gan: “Equal pay for equal work”. Work in similar and comparable jobs
is also taken into consideration when determining equal work. Although
it could be less than the living wage, the fair salary is always greater
than the minimum wage.

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Notes
6.7.1 Purpose of National Wage Policy
(a) Minimum Wage: A minimum wage ensures that employees get paid
at least a certain amount. This is frequently modified on a regular
basis to take the cost of living and inflation into consideration.
(b) Anti-poverty Program: Provide maximum employment opportunities
and eliminate the poverty of the lowest segment of society.
(c) Labour Standards: These are guidelines that are established to
safeguard the rights and welfare of employees on working conditions,
hours worked, pay for overtime, and other areas of employment.
(d) Collective Bargaining: Aiding in the settlement of equitable agreements
on pay and working conditions between labour unions and employers
through negotiation.

6.8 Wage Policy at the Company Level

Wage policy is the set of rules and judgement an organisation or a com-
pany adopts about paying its workers. This policy describes the wage
scale, the methods used to determine compensation, and any other benefits
or perks offered by the company to its workers. Here are a few crucial
facets of the company’s salary policy:
(a) Fair and Transparent Wage Structure: Establish a visible and
unambiguous pay system that incorporates base pay, bonuses, and
other types of remuneration. To determine wage levels, factors
such as employees’ performance, their knowledge, tasks, and work
responsibilities should be taken into account.
(b) Ensure Competitive Rewards: To make sure that the company’s
pay levels are competitive in the surrounding region and industry,
conduct regular market analysis. To attract and maintain top personnel,
compare compensation to positions comparable to yours in other
organisations.
(c) Performance-based Wage System: Adopt a performance-based pay
plan that aligns incentives or raises in salary to particular or team
successes. It is important to express precisely the standards for
performance reviews and how they affect pay.

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Notes (d) Benefits: Specify the advantages and privileges that are provided
to staff members, including paid time off, retirement programmes,
medical insurance, and other non-cash incentives. To draw in and
keep top talent, consider the entire employee value proposition.
(e) Adherence to the Law: Make sure the wage policy of the company
conforms to all applicable local, state, and federal rules and
regulations about minimum wage, overtime, and other employment-
related requirements.
(f) Adaptability and Communicate: Create a pay policy that can be
easily adjusted to reflect shifting market conditions, economic
shifts, and industry norms. Employees should be made aware of the
company’s wage policy clearly and concisely, which should include
information on how wages are set, performance reviews conducted,
and any modifications to compensation plans.
(g) Employee Feedback and Continuously Update: To make sure that the
wage policy satisfies the needs and demands of the workforce, think
about asking for employee feedback. Also, the pay policy should be
reviewed and updated regularly to reflect changes in the company’s
environment, standards within the sector, and market dynamics.
A clear and well-executed wage plan may boost employee motivation,
satisfaction, commitment, and overall organisational performance.

6.9 Pay Structures

Pay structure is a set of arranged pay grades, bands, or levels for workers
categorised according to the kinds of jobs they do within an organisational
structure. Salary grades or bands, which bundle related jobs according
to their evaluation outcomes, are typical characteristics of pay structure.
Salary grades provide a clear framework for employee advancement and
streamline the management of pay system. There is usually a minimum,
midpoint, and maximum compensation range for each salary grade. Ranges
are meant to give employers flexibility when determining pay within a
grade by taking efficiency, expertise, and market conditions into account.
Organizations often create pay structures with the following goals in mind:
1. To promote equity and openness in deciding on and awarding
salaries.

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2. To provide structure and clarity to the management of career Notes

advancement and pay increases.
3. Assist in the implementation of incentive and pay advancement
processes.

Types of Pay Structure

Task-based Pay Structure: Compensation is determined by the partic-
ular work or position held inside the company under the terms of the
task-based pay structure. It takes into account elements like job duties,
intricacy, and demand from the marketplace.
Skill-based Pay Structure: Employees are rewarded according to the
abilities they learn or acquire, which promotes lifelong learning and
growth.
Industry-based Pay Structure: Guarantees compatibility with industry
norms by basing salary determinations on current market prices for des-
ignated roles.
Step-based Pay Structure: In a pay system that is graded or has steps,
employees advance through predetermined wage levels or stages accord-
ing to several characteristics such as length of service, performance, or
experience. It offers a clear route for raising pay and advancing in one’s
profession.
Productivity-based Pay Structure: It is widely used in organizations,
directly connecting compensation to individual or group performance.
Sharing of profits schemes, bonuses, and perks are a few examples of this.
Cafeteria-based Pay Structure: Certain firms implement pay structures
that are flexible or cafeteria-style, enabling their employees to select from
a range of reward packages. This personalization meets the demands and
interests of each individual.
Along with different styles of pay structures, the organizations present
pay structures include advantages like medical care, psychological sup-
port, and work-life harmony initiatives to prioritize the well-being of its
employees. Designing equitable and viable compensation schemes across
a variety of markets is an issue faced by multinational corporations.
Furthermore, ethical factors should be taken into account like fair labor
standards and preventing exploitation etc.

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Notes
6.10 Contemporary Issues
Today’s workers demand extra benefits, in addition to their wages to
improve their quality of life, make them feel more important at work,
and make them useful members of the team. Labor relations encompass
more than just a rigid reading of the terms of the employment agreement
between an employer and its worker. But it denotes the collection of
relationships between opportunities, standards, and abilities in the work-
place. Over time, the significance and diversity of the employee function
in an organization have increased. In an organization, there are a number
of employees who come from different backgrounds, religions, cultures,
and atmosphere. Workplace relations have become a means of existence,
personal growth, and recognition for them. Employers understand that
retaining devoted and driven employees requires more than just a high
wage. In addition to discussing monetary benefits, it also touches on
security, rights, responsibilities, and the most important healthy environ-
ment at work. Benefits are required to guarantee employee contentment
at work. There are several challenges are linked to the wage system in
industries and these issues include:
The Feeling of Disparity/Inequality: There is inequality and discrepancy
between workers from different industries with varying or similar skill
levels. In many organizations, there is a noticeable pay gap between the
regular worker and the management team. The disparity has been grow-
ing, provoking concerns about the equity and fairness of compensation
schemes.
Gender Pay Gap: Women are still paid less for doing equivalent jobs
than males, which is a serious problem. Revaluating wage scales, ad-
vancements, and growth opportunities are necessary to close this gap.
Ethnic and Racial Gap: There are still ethnic and racial wage disparities,
which are a reflection of structural injustices. There is a growing demand
for organizations to close these inequalities and advance the principles
of equity, diversity, and inclusion.
Gig Economy: The emergence of the gig economy poses issues with
how gig workers should be classified and paid. Since gig workers in
India are usually hired on a project or assignment basis rather than as
permanent employees, they frequently lack job security. They experience

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financial volatility, income instability, or lack of commitment toward the Notes

organization.
Outsourcing: The increasing outsourcing of jobs brought about by glo-
balization has affected wages across different geographic areas. Global
salary disparities must be managed by organizations while fair labor
practices problems are taken care of.
Performance Measurement: Metrics that are used to evaluate worker
performance and calculate pay may be random, which could unintention-
ally lead to inequities. It is imperative to guarantee equitable and lucid
mechanisms for evaluating performance.
Post-COVID-19 Work Challenges: The transition to working remotely
or in hybrid mode during and after the COVID-19 outbreak has prompted
concerns about how to pay remote employees appropriately. Pay equity
for workers in various geographic places is a complicated matter.
Taking into account both external and internal elements, a holistic approach
is necessary to address these modern concerns. Companies are realising
more and more how crucial it is to have fair and open compensation
policies, not just for moral reasons but also to draw and keep talent and
preserve a positive company image.
IN-TEXT QUESTIONS
3. Pay structure is a set of arranged pay grades, …., or levels for
workers categorised according to the kinds of jobs they do
within an organisational structure.
(a) Motivation
(b) Bands
(c) Wishes
(d) None of these
4. Compensation is reward to the employees for their______
(a) Performance
(b) Contribution to organization
(c) Work
(d) Attendance

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Notes 5. The Geneva Convention on Minimum Wage Fixing was convened

in _________
(a) 1948
(b) 1942
(c) 1965
(d) 1928
6. Which benefits give ownership to the employees while working
in the organization?
(a) Profit sharing
(b) Bonuses
(c) Stock Option
(d) All of these

CASE STUDY
Alexei Hall JR., CEO Bridgewater Interiors, An Auto Seat Maker
in USA
Prior to COVID, our company had extremely low employee turnover.
However, during the past two years, at our largest location, our company
has likely had to replace two-third of our personnel due to voluntary
terminations. As a result, recruiting has required more effort than
before. Our best-trained and most tenured staff members have had to
take up the slack, putting in record-breaking overtime and adjusting
to less stable production schedules. However, many employees have
complimented me for continuing our tuition compensation program
and medical insurance during the pandemic. From what I’m hearing
from recent hires, greater pay in cash is more important to them
than perks. We’ve long bragged about our advantages, such as our
larger medical coverage and competitive 401(k) matching, but we’re
discovering that the lure isn’t as strong as it was ten years ago. I’ve
therefore posed the following question to my team:
We have also considered collaborating with other organizations to
provide childcare services for any centre built close to our facilities.
In this scenario, we might offer an organization stipend or secure
a minimum attendance requirement. One issue with it is that the

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automotive industry operates around the clock, so you would need a Notes
daycare centre that could open around the clock and offer all those
kids legal, regulated, and benchmark-standard care while they’re not
in school.
QUESTION:
1. Should we consider a hybrid model wherein we shift funds from
the benefits side to the wages side and offer higher wages to
individuals who desire them?

6.11 Summary
Public policy and wage reward systems play crucial roles in shaping a fair
and equitable work environment. Public policy encompasses government
regulations and initiatives aimed at promoting social welfare, economic
stability, and justice. In the context of employment, public policy often
influences labor laws, workplace safety standards, and anti-discrimination
measures. The wage reward system, on the other hand, reflects the compen-
sation structure within an organization, encompassing salaries, bonuses, and
benefits. Effective public policy seeks to ensure that wage systems are just,
preventing exploitation and discrimination, and promoting equal opportunities.
It may address issues like minimum wage laws, equal pay for equal work,
and social security benefits. A well-designed wage reward system aligns
with societal values, fostering employee motivation, productivity, and job
satisfaction. Together, public policy and wage reward systems contribute to
creating a balanced and ethical framework that benefits both employers and
employees, fostering a healthy and sustainable work environment.

6.12 Answers to In-Text Questions

1. (c) Bargaining Theory of Wages
2. (b) Wage Fund Theory
3. (b) Bands
4. (b) Contribution to organization
5. (d) 1928
6. (c) Stock Option

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Notes
6.13 Self-Assessment Questions
1. Write a short note on the Payment of Bonus Act, 1965.
2. Describe the National Wage Policy and also discuss the challenges
linked to the wage system in industries.
3. Differentiate between Profit sharing and Stock Option.

6.14 References
 Begega, S. G., & Aranea, M. (2018). “The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?”, Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151.
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R., & Cao, Q. (2021).
“What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany”, Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090.
 Valizade, D., Cook, H., Forde, C., & MacKenzie, R. (2023),
«Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work
systems?», Journal of Organizational Effectiveness: People and
Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278.
 Yuan, L., Yu, Y., Li, J., & Ning, L. (2014). “Occupational commitment,
industrial relations and turnover intention: Empirical evidence from
China”, Chinese Management Studies, Vol. 8 No. 1, pp. 66-84. https://
doi.org/10.1108/CMS-08-2011-0065.

6.15 Suggested Readings

 Arm Dunlop, J. T., & Healy, J. J. Collective Bargaining, Richard
D. Irwin, 1955.
 Whitney, F., & Sloana, A. A. Labour Relations, Prentice Hall,
Englewood Cliffs, New Jersey, 1991.

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 Public Policy and Wage Reward System

 Gottoschalk, A. W. The Background to the Negotiating Process, Notes

Gower Press,1973.
 Thorn, J. How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai, 1992.
 Walton, R. E., & McKersie, R. B. A Behavioural Theory of Labour
Negotiations, McGraw Hill, 1965.

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 L E S S O N

7
Social Security
Dr. Abhishek Janvier Frederick
Assistant Professor
Department of Business Studies, JSBS&C
SHUATS
Email-Id: abhishek.frederick@shiats.edu.in

STRUCTURE
7.1 Learning Objectives
7.2 Working Conditions
7.3 Concept of Workers’ Safety
7.4 Health and Environment of Workers
7.5 Concept of Social Security
7.6 Factories Act, Workers Compensation Act, Employees’ State Insurance Act and
Workers Education
7.7 Medical Care of Workers
7.8 Occupational Health
7.9 Welfare Funds
7.10 Social Security Reforms during the Period of Structural Adjustment
7.11 Social Security Conventions of ILO
7.12 Summary
7.13 Answers to In-Text Questions
7.14 Self-Assessment Questions
7.15 References
7.16 Suggested Readings

7.1 Learning Objectives

 Understand the concept of social security for workers in an organization.
 Analyse the requirement of ideal working condition for labours.

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 Critically analyse the work culture of an organization. Notes

 Formulate the ideal environment and working conditions for workers.

7.2 Working Conditions

7.2.1 Introduction
Working conditions, encompassing the environment, circumstances, and
arrangements under which individuals carry out their professional du-
ties, represent a critical aspect of the contemporary labour landscape.
The quality of working conditions profoundly influences the well-being,
productivity, and overall satisfaction of employees. It extends beyond
the physical aspects of the workplace to include factors such as hours
of work, job security, compensation, and the psychological and social
dimensions of the work environment. A positive working environment is
characterized by safe and healthy surroundings, equitable remuneration,
reasonable working hours, and opportunities for skill development. Con-
versely, adverse working conditions, marked by factors like inadequate
safety measures, excessive working hours, and discriminatory practices,
can lead to employee dissatisfaction, compromised mental and physical
health, and reduced productivity. Recognizing the pivotal role of work-
ing conditions in shaping the employee experience, organizations and
policymakers increasingly emphasize the importance of creating envi-
ronments that prioritize the well-being of the workforce, foster diversity
and inclusion, and adhere to international labour standards. As the nature
of work evolves in response to technological advancements and societal
changes, ensuring conducive and equitable working conditions remains a
fundamental component of creating a sustainable, humane, and thriving
workforce in the 21st century.

7.2.2 Characteristics of Effective Working Organization

Creating an effective working organization is a multifaceted endeavour
that involves various elements ranging from leadership and communica-
tion to organizational culture and employee engagement. An organization
is deemed effective when it efficiently achieves its goals, ensures the

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Notes well-being of its members, and adapts to change. Here are key aspects
that contribute to the effectiveness of a working organization:

7.2.2.1 Strong Leadership

Effective organizations are often characterized by strong and visionary
leadership. Leaders who inspire, guide, and empower their teams contribute
significantly to organizational success. They set clear goals, communicate
effectively, and foster a positive work culture.

7.2.2.2 Clear Communication

Open and transparent communication is a cornerstone of effective work-
ing organizations. Employees need to understand organizational goals,
individual roles, and the broader context of their work. Regular and clear
communication channels facilitate collaboration, reduce misunderstand-
ings, and build trust.

7.2.2.3 Defined Roles and Responsibilities

Each member of the organization should have well-defined roles and re-
sponsibilities that align with the overall objectives. This clarity ensures
that everyone understands their contribution to the organization’s success
and helps prevent duplication of efforts.

7.2.2.4 Flexible Organizational Structure

An effective organization is adaptable to change. A flexible organization-
al structure allows for innovation, responsiveness to market shifts, and
the ability to embrace new opportunities. This adaptability is crucial in
today’s dynamic and rapidly evolving business environment.

7.2.2.5 Employee Engagement

Actively engaged employees are more likely to contribute their best
efforts. Organizations that prioritize employee well-being, professional
development, and work-life balance foster a positive and productive
workplace. Employee engagement initiatives, such as recognition programs
and feedback mechanisms, play a vital role in this regard.

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7.2.2.6 Team Collaboration Notes

Encouraging collaboration and teamwork enhances creativity and prob-
lem-solving. Effective organizations create a culture that values and facil-
itates collaboration, breaking down silos and promoting cross-functional
communication.

7.2.2.7 Adherence to Ethical Standards

Upholding ethical standards and values is fundamental to the credibility
and sustainability of an organization. Ethical behavior builds trust among
employees, customers, and other stakeholders, contributing to the long-
term success of the organization.

7.2.2.8 Continuous Learning and Development

Organizations that invest in the learning and development of their em-
ployees stay ahead in a rapidly changing business landscape. Providing
opportunities for skill enhancement and professional growth ensures that
the organization remains competitive and its workforce remains engaged.

7.2.2.9 Innovative Culture

Cultivating a culture that values innovation encourages employees to
think creatively and contribute fresh ideas. Organizations that embrace
innovation are better positioned to adapt to industry changes, improve
processes, and stay ahead of the competition.

7.2.2.10 Effective Use of Technology

Leveraging technology for efficiency and productivity is crucial in today’s
digital age. Adopting and integrating relevant technologies into daily
operations can streamline processes and improve overall organizational
performance.

7.3 Concept of Workers’ Safety

The concept of worker safety is a fundamental and paramount aspect
of occupational health and safety, representing the commitment to safe-
guarding the well-being and physical integrity of individuals engaged in
various professions. Worker safety encompasses a comprehensive range of

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Notes measures, policies, and practices designed to minimize risks and prevent
harm in the workplace. Central to this concept is the recognition that
every employee has the right to a safe and secure work environment,
free from hazards that could potentially cause injuries, illnesses, or fa-
talities. This entails identifying potential risks associated with specific
tasks or work conditions, implementing preventive measures, and ensuring
that employees receive adequate training to mitigate risks effectively.
Worker safety extends beyond physical well-being to encompass mental
health considerations, recognizing the importance of addressing stressors,
work-related anxiety, and psychological health in the workplace. Effec-
tive worker safety programs involve creating a safety culture within the
organization, where safety is not just a set of rules but a shared value
embraced by everyone from top leadership to individual employees. This
culture encourages open communication about safety concerns, reporting of
incidents or near misses, and continuous improvement in safety protocols.
Regulatory compliance with occupational health and safety standards
is a crucial component of the worker safety concept. Governments and
international bodies, such as the Occupational Safety and Health Ad-
ministration (OSHA) in the United States or the International Labour
Organization (ILO) globally, establish guidelines and regulations to en-
sure that workplaces adhere to minimum safety standards. Employers are
typically mandated to conduct risk assessments, provide necessary per-
sonal protective equipment (PPE), implement emergency response plans,
and educate employees about potential workplace hazards. Worker safety
also involves recognizing the specific needs and vulnerabilities of differ-
ent industries. For instance, manufacturing environments may deal with
machinery-related risks, construction sites may face hazards associated
with heights and heavy equipment, and office settings may contend with
ergonomic concerns. Tailoring safety measures to the unique challenges
of each industry is essential for a comprehensive and effective worker
safety program.
Ultimately, the concept of worker safety underscores the ethical and legal
responsibility of employers to prioritize the protection of their workforce.
Beyond regulatory compliance, organizations that prioritize worker safety
tend to experience enhanced productivity, reduced absenteeism, and im-
proved employee morale. By fostering a culture of safety, investing in
training, and continuously assessing and mitigating risks, organizations can
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create environments where workers feel secure, valued, and empowered Notes
to contribute their best efforts to the success of the organization. Worker
safety, therefore, is not just a legal obligation but a moral imperative that
reflects an organization’s commitment to the health, dignity, and overall
well-being of its workforce.

7.4 Health and Environment of Workers

The health and environment of workers are critical aspects of occupa-
tional well-being, emphasizing the intersection of workplace conditions
and individual health. Ensuring a safe and healthy work environment is
not only a legal requirement but also a moral and ethical obligation for
employers. The concept encompasses various dimensions that contribute
to the overall well-being of workers:

7.4.1 Occupational Health and Safety (OHS)

A core component involves addressing workplace hazards and implement-
ing measures to protect workers from accidents, injuries, and exposure
to harmful substances. This includes providing proper training, safety
equipment, and enforcing protocols to minimize risks. OHS initiatives
are designed to create a secure environment across diverse industries,
from construction sites to office spaces.

7.4.2 Physical Health

The physical health of workers encompasses factors such as ergonomics,
proper ventilation, and access to clean water and sanitation facilities.
Employers must consider the impact of the physical work environment
on employees’ health, ensuring that it supports their well-being and min-
imizes the risk of occupational diseases or injuries.

7.4.3 Mental Health

Recognition of mental health as an integral aspect of overall well-being
is increasingly gaining prominence. The workplace environment, work-
load, job demands, and organizational culture can significantly impact

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Notes the mental health of workers. Employers are encouraged to create sup-
portive environments, promote work-life balance, and offer resources for
managing stress and mental health challenges.

7.4.4 Environmental Health

The concept extends beyond individual health to include the broader en-
vironmental impact of work activities. Sustainable and environmentally
friendly practices in the workplace contribute to a healthier planet and,
consequently, the well-being of communities. Minimizing pollution, waste,
and harmful emissions aligns with a responsible approach to both worker
health and environmental conservation.

7.4.5 Occupational Medicine

This field specializes in the prevention, diagnosis, and treatment of
occupational diseases and injuries. Regular health check-ups, monitor-
ing exposure to workplace hazards, and early intervention contribute to
maintaining and improving the health of workers.

7.4.6 Health Promotion Programs

Employers can foster a culture of health by implementing wellness and
health promotion programs. These initiatives may include fitness programs,
nutrition education, smoking cessation support, and stress management
resources. Such programs not only contribute to the health of individual
workers but also enhance overall productivity.

7.4.7 Regulatory Compliance

Adherence to occupational health and safety regulations is paramount.
Governments and international bodies establish guidelines to ensure that
workplaces provide adequate protection to workers. Compliance includes
regular inspections, reporting of incidents, and continuous improvement
in safety and health protocols.
An integrated approach to the health and environment of workers recogniz-
es the interconnectedness of these elements. Organizations that prioritize

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the well-being of their workforce not only fulfill legal obligations but Notes
also cultivate a positive workplace culture, resulting in increased job
satisfaction, higher productivity, and a positive organizational reputation.
Ultimately, valuing the health and environment of workers is an invest-
ment in the long-term sustainability and success of both individuals and
the organizations they serve.

7.5 Concept of Social Security

The concept of social security for workers is rooted in the principles of
providing financial protection, support, and a safety net to individuals
and their families during various life circumstances, including periods
of unemployment, illness, disability, maternity, old age, or in the event
of the loss of a breadwinner. Social security is designed to ensure that
workers can maintain a basic standard of living and dignity, promoting
social justice and reducing poverty. The key components of the concept
of social security for workers include:

7.5.1 Financial Protection

Social security programs aim to provide financial assistance to workers
during times when they are unable to work or earn income due to cir-
cumstances beyond their control. This can include unemployment benefits,
sickness benefits, disability benefits, and pensions.

7.5.2 Inclusivity
The concept of social security is inclusive, encompassing a wide range of
workers, from formal sector employees to those in informal or precarious
employment. It extends coverage to vulnerable populations, recognizing
the diversity of work arrangements and ensuring that all individuals have
access to essential social protection.

7.5.3 Prevention of Social Risks

Social security is proactive in addressing and preventing social risks that
can lead to economic insecurity. By providing benefits such as health care,

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Notes maternity leave, and unemployment benefits, these programs contribute to

mitigating the impact of unexpected events on workers and their families.

7.5.4 Retirement and Old Age Security

One crucial aspect of social security is providing income support to
workers during their retirement years. Pension schemes and retirement
benefits help workers maintain their standard of living after they cease
active employment, promoting a dignified and secure old age.

7.5.5 Healthcare Coverage

Many social security systems include provisions for healthcare coverage,
ensuring that workers and their families have access to necessary medical
services without facing financial hardship. This contributes not only to
individual well-being but also to public health outcomes.

7.5.6 Social Solidarity

Social security is founded on the principle of social solidarity, emphasizing
the shared responsibility of society to care for its members. Contributions
from both employers and employees, often mandated by law, fund these
programs, creating a collective approach to addressing societal challenges.

7.5.7 Family and Maternity Benefits

Social security often extends support to families, providing benefits for
maternity leave, child allowances, and other family-related circumstances.
This recognizes the role of families in social development and ensures
that workers can balance their work and family responsibilities.

7.5.8 Adaptability to Changing Work Environments

The concept of social security evolves to adapt to changing work en-
vironments, recognizing the gig economy, part-time work, and other
non-traditional employment arrangements. Efforts are made to extend
social protection to workers in various forms of employment.

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IN-TEXT QUESTIONS Notes

1. What is the primary objective of the Factory Act?

(a) To regulate the quality of products in factories
(b) To ensure fair wages for factory workers
(c) To provide guidelines for the establishment and operation
of factories
(d) To promote environmental sustainability in factory operations
2. Which of the following aspects is typically covered by the
Factory Act?
(a) Taxation of factory income
(b) Regulation of working conditions and safety in factories
(c) Distribution of profits among factory workers
(d) Setting the prices of goods produced in factories
3. What is the primary goal of the International Labour Organization
(ILO)?
(a) Promoting global economic competition
(b) Ensuring fair labour practices and social justice
(c) Facilitating international trade agreements
(d) Advocating for political ideologies in the workplace
4. Which of the following is a core tripartite structure of the ILO,
representing governments, employers, and workers?
(a) Duopoly
(b) Bipartite
(c) Tripartite
(d) Monopoly

7.6 Factories Act, Workers Compensation Act, Employees’

State Insurance Act and Workers Education

7.6.1 Factories Act

Objective: The Factories Act aims to ensure the health, safety, welfare,
and working conditions of factory workers.
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes Provisions: It establishes guidelines for the maintenance of basic ame-

nities, regulates working hours, and mandates safety measures within
factories to prevent accidents and occupational hazards.
Social Security Impact: By ensuring safe and healthy working conditions,
the Factories Act indirectly contributes to the social security of workers
by preventing workplace injuries and illnesses.

7.6.2 Workers Compensation Act (Employees’ Compensation

Act)
Objective: The Workers Compensation Act provides compensation to
workers or their dependents in case of work-related injuries, disabilities,
or death.
Provisions: Employers are required to provide financial compensation
for medical expenses, loss of wages, and rehabilitation. It facilitates a
no-fault system to quickly compensate workers without requiring them
to prove employer negligence.
Social Security Impact: This act directly enhances social security by
providing financial support to workers affected by occupational injuries
or disabilities, ensuring their economic well-being during challenging
times.

7.6.3 Employees’ State Insurance Act

Objective: The Employees’ State Insurance (ESI) Act establishes a social
security system by providing medical and cash benefits to employees and
their families.
Provisions: It mandates both employers and employees to contribute to
the ESI fund, which then offers medical care, sickness benefits, maternity
benefits, disability benefits, and more.
Social Security Impact: The ESI Act directly contributes to the social
security of workers by offering comprehensive health and financial
protection, reducing the economic burden associated with health-related
issues.

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Notes
7.6.4 Workers Education
Provisions: Various programs, workshops, and campaigns are conducted
to educate workers about their rights, occupational health and safety, and
legal frameworks.
Social Security Impact: Worker’s education is a preventive measure,
empowering workers with the knowledge needed to advocate for their
rights, contributing to a safer work environment and overall social security.

7.7 Medical Care of Workers

Ensuring the medical care of workers is a crucial component of work-
place well-being, reflecting the commitment to safeguarding the health
of employees and promoting a safe and supportive work environment.
Medical care for workers encompasses a range of provisions aimed at
preventing, treating, and managing health-related issues arising from oc-
cupational factors. Several key aspects contribute to the effective medical
care of workers:

7.7.1 Occupational Health Services

Preventive Measures: Comprehensive occupational health services include
preventive measures such as health screenings, vaccinations, and regular
health check-ups to identify and address potential health risks early.
Workplace Assessments: Occupational health professionals conduct as-
sessments to evaluate workplace hazards, exposure to harmful substances,
and ergonomic considerations, contributing to a safer work environment.

7.7.2 First Aid and Emergency Response

Immediate Assistance: Workplaces are equipped with first aid facilities
and trained personnel to provide immediate assistance in case of injuries
or emergencies.
Emergency Protocols: Clearly defined emergency response protocols and
evacuation plans ensure that workers receive timely medical attention
when needed.

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Notes
7.7.3 Employee Assistance Programs (EAPs)
Mental Health Support: Recognizing the importance of mental health,
many organizations implement EAPs that offer counseling services and
support for employees dealing with stress, anxiety, or other mental health
challenges.
Crisis Intervention: EAPs can provide crisis intervention services to help
workers cope with traumatic events or difficult personal circumstances.

7.7.4 Health Insurance and Benefits

Coverage for Medical Expenses: Employers often provide health insur-
ance coverage to employees, ensuring that they have access to medical
care without facing financial barriers.
Wellness Programs: Some organizations incorporate wellness programs
that encourage healthy lifestyles and preventive care, contributing to the
overall health of workers.

7.7.5 Rehabilitation Services

Return-to-Work Programs: In the event of work-related injuries or ill-
nesses, rehabilitation services and return-to-work programs help employees
recover and reintegrate into the workforce.
Adaptive Measures: For workers with disabilities, adaptive measures and
accommodations may be provided to enable them to continue working in
a manner that suits their capabilities.

7.7.6 Occupational Health and Safety Training

Health Awareness: Training programs on occupational health and safety
raise awareness among workers about potential risks, safe work practices,
and the proper use of personal protective equipment.
Education on Hazards: Workers are educated on recognizing workplace
hazards and taking preventive measures to reduce the likelihood of ac-
cidents or health issues.

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Notes
7.7.7 Compliance with Health Regulations
Legal Standards: Employers are required to comply with health and
safety regulations set by government authorities to ensure that workplaces
meet established standards.
Regular Audits and Inspections: Regular audits and inspections
help verify compliance with health regulations and identify areas for
improvement.

7.8 Occupational Health

Occupational health refers to the multidisciplinary field dedicated to en-
suring the well-being of workers in their work environments, focusing on
the prevention of work-related illnesses and injuries, and the promotion
of overall health and safety. Several key aspects contribute to the occu-
pational health of workers:

7.8.1 Risk Assessment and Hazard Identification

Workplace Evaluation: Regular assessments of workplace conditions
help identify potential health hazards, including exposure to chemicals,
noise, ergonomic stress, and physical dangers.
Risk Mitigation: Occupational health professionals work to mitigate
identified risks through engineering controls, administrative measures,
and the provision of personal protective equipment (PPE).

7.8.2 Health Surveillance

Regular Health Check-ups: Periodic health screenings and medical
examinations are conducted to monitor the health status of workers and
identify any early signs of occupational diseases or conditions.
Monitoring Exposure: Health surveillance includes monitoring workers
who are exposed to specific occupational hazards to ensure that their
health is not adversely affected.

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Notes
7.8.3 Workplace Ergonomics
Design and Organization: Ensuring that workstations are ergonomically
designed helps prevent musculoskeletal disorders and reduces physical
strain on workers.
Training: Workers are trained on proper ergonomic practices to minimize
the risk of injuries related to repetitive tasks or poor posture.

7.8.4 Health Promotion Programs

Wellness Initiatives: Organizations implement health promotion programs
that encourage healthy lifestyles, physical fitness, and mental well-being
among workers.
Nutritional Support: Providing access to nutritious food options and
promoting a healthy diet contributes to overall worker health.

7.8.5 Mental Health Support

Stress Management: Addressing workplace stressors and providing stress
management programs contribute to the mental health of workers.
Counseling Services: Access to counseling services and mental health sup-
port helps workers cope with work-related stress and personal challenges.

7.8.6 Occupational Health and Safety Training

Education on Hazards: Workers are educated about potential workplace
hazards and trained on safety protocols, emergency response, and the
proper use of protective equipment.
Empowerment: Providing workers with knowledge about their rights and
responsibilities in terms of occupational health and safety empowers them
to actively participate in maintaining a safe work environment.

7.8.7 Rehabilitation and Return-to-Work Programs

Recovery Support: In the event of workplace injuries or illnesses, reha-
bilitation programs support workers in their recovery process.

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Modified Duties: Return-to-work programs involve modifying work tasks Notes

to accommodate employees recovering from injuries, facilitating their
gradual return to full duties.

7.8.8 Legal Compliance and Regulatory Standards

Adherence to Regulations: Employers are required to comply with
occupational health and safety regulations to create a safe and healthy
work environment.
Regular Audits: Audits and inspections ensure ongoing compliance and
identify areas for improvement.

7.8.9 Work-Life Balance

Flexible Schedules: Offering flexible work arrangements and promot-
ing a healthy work-life balance contributes to both physical and mental
well-being.
Leave Policies: Adequate vacation and sick leave policies allow workers
to rest and recover when needed.
Occupational health is a dynamic and evolving field that requires
collaboration between employers, workers, and health professionals
to create and maintain a safe and healthy work environment. Priori-
tizing occupational health not only fulfills legal obligations but also
enhances worker satisfaction, productivity, and the overall success of
organizations.

7.9 Welfare Funds

Welfare funds for workers refer to financial resources set aside by em-
ployers or established through various mechanisms to provide additional
benefits and support to employees beyond their regular compensation.
These funds are designed to enhance the overall well-being of workers
and may cover a range of areas, including health, education, housing,
and social activities. Here are some common types of welfare funds for
workers:

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Notes
7.9.1 Provident Funds
Objective: Provident funds are long-term savings accounts that both
employers and employees contribute to, building a financial cushion for
employees during retirement.
Benefits: Employees receive a lump sum amount at retirement, ensuring
financial security post-employment.

7.9.2 Gratuity Funds

Objective: Gratuity funds are created to provide employees with a lump
sum amount as a token of appreciation for their long-term service upon
retirement, resignation, or termination.
Benefits: This fund serves as a financial acknowledgment of an employ-
ee’s dedicated service to the organization.

7.9.3 Health and Medical Welfare Funds

Objective: These funds are dedicated to covering medical expenses and
healthcare-related needs of employees and their families.
Benefits: Employees receive financial assistance for medical treatments,
hospitalization, and other healthcare expenses.

7.9.4 Education Funds

Objective: Education funds support employees and their dependents in
pursuing educational endeavors, including scholarships, tuition assistance,
and support for skill development.
Benefits: Employees can access financial aid to enhance their educational
qualifications or support their children’s educational pursuits.

7.9.5 Housing Funds

Objective: Housing funds assist employees in acquiring or maintaining
housing, often through low-interest loans or housing subsidies.

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Benefits: This type of fund promotes employees’ access to safe and af- Notes
fordable housing, contributing to their overall well-being.

7.9.6 Social and Recreational Funds

Objective: Social and recreational funds are allocated for organizing
events, activities, and facilities that enhance the social and recreational
aspects of employees’ lives.
Benefits: Employees can participate in events, clubs, and recreation-
al activities that contribute to a positive work culture and work-life
balance.

7.9.7 Emergency and Relief Funds

Objective: These funds are created to provide financial assistance to
employees facing unexpected emergencies or disasters.
Benefits: Employees receive support during challenging times, such as
natural disasters, accidents, or personal crises.

7.9.8 Employee Assistance Programs (EAPs)

Objective: EAPs encompass various welfare initiatives, including coun-
seling services, wellness programs, and support for mental health.
Benefits: Employees can access resources to address personal and
work-related challenges, promoting their mental and emotional well-
being.

7.9.9 Workers’ Welfare Cess

Objective: In some regions, a welfare cess is imposed on employers,
and the funds collected are utilized for the welfare of workers in the
respective industry or sector.
Benefits: These funds may be allocated to various welfare initiatives,
such as health and safety programs, skill development, or community
projects.

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Notes 7.10 Social Security Reforms during the Period of Structural

Adjustment
The period of structural adjustment, often associated with the im-
plementation of economic reforms and austerity measures, has had
significant implications for social security systems in various coun-
tries. Structural adjustment programs, typically initiated in the 1980s
and 1990s, were often pursued in response to economic crises or as
conditions for receiving financial assistance from international finan-
cial institutions like the International Monetary Fund (IMF) and the
World Bank. The reforms during this period aimed at addressing fiscal
imbalances, reducing public debt, and promoting economic stability.
However, the impact on social security systems varied, and several
key trends emerged:

7.10.1 Fiscal Austerity and Reduction in Social Spending

Objective: Structural adjustment programs frequently emphasized fiscal
austerity, leading to a reduction in public spending, including social
expenditures.
Impact: Social security systems, which are typically funded through
public budgets, experienced cutbacks in funding for programs such as
healthcare, education, and social assistance. This led to concerns about
the adequacy and accessibility of social security services.

7.10.2 Privatization of Social Security

Objective: Some countries introduced reforms to shift from state-managed
social security systems to more privatized models.
Impact: Pension systems, in particular, saw a move toward privat-
ization, with the introduction of individual retirement accounts and
private pension schemes. While this aimed to reduce the burden on
public finances, it also introduced market volatility and risk for indi-
vidual retirees.

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 Social Security

Notes
7.10.3 Targeted Social Assistance Programs
Objective: In response to reduced overall social spending, some countries
implemented targeted social assistance programs to focus on the most
vulnerable populations.
Impact: The emphasis shifted from universal social security coverage to
more targeted interventions, potentially leaving certain groups without ad-
equate protection. This approach aimed to address poverty and inequality
but raised concerns about exclusionary practices.

7.10.4 Reforms in Healthcare Systems

Objective: Structural adjustment programs often involved reforms in
healthcare systems to make them more efficient and financially sustainable.
Impact: While attempts were made to improve cost-effectiveness, there
were concerns about reduced access to healthcare services for marginalized
populations. User fees and cost recovery mechanisms were implemented
in some cases, potentially limiting access for lower-income individuals.

7.10.5 Labor Market Reforms

Objective: Reforms in labor markets were pursued to enhance flexibility
and competitiveness.
Impact: Changes in labor market regulations affected workers’ rights and
job security. In some cases, these reforms led to increased informality
in employment, challenging traditional social security systems based on
formal employment relationships.

7.10.6 Social Dialogue and Resistance

Objective: Social dialogue and consultation with stakeholders were often
encouraged as part of the reform process.
Impact: However, in many instances, there was resistance from labor
unions and civil society against social security cuts and privatization.
Protests and advocacy efforts sought to protect social security rights and
prevent the erosion of social safety nets.

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Notes
7.11 Social Security Conventions of ILO
The International Labour Organization (ILO), a specialized agency of the
United Nations, has played a pivotal role in developing and promoting
international labor standards, including conventions related to social se-
curity. The ILO’s Social Security Conventions constitute a comprehen-
sive framework aimed at establishing globally recognized principles and
guidelines for the provision of social security. These conventions address
fundamental aspects of social security, encompassing areas such as old
age, unemployment, sickness, maternity, employment injury, and family
benefits. One of the key conventions in this domain is the ILO Social
Security (Minimum Standards) Convention, 1952 (No. 102), which sets
forth fundamental principles for social security schemes, emphasizing
the need for comprehensive and adequate protection. It outlines essen-
tial elements such as basic income security for various contingencies,
accessibility of benefits, and the adaptability of social security systems
to changing circumstances.
The ILO also has conventions specifically focused on certain aspects of
social security, such as the Maternity Protection Convention, 2000 (No.
183), which emphasizes the need for maternity benefits and protection
for pregnant and nursing workers. Another significant convention is the
Employment Injury Benefits Convention, 1964 (No. 121), which address-
es compensation and medical care for workers suffering from employ-
ment-related injuries. The adoption and ratification of these conventions
by member states signify a commitment to providing a social security
framework that meets the needs of workers and their families. The ILO’s
tripartite structure, involving governments, employers, and workers, en-
sures a collaborative approach in the development and implementation of
these conventions. Furthermore, the conventions promote social dialogue
and cooperation among nations, fostering a shared understanding of the
importance of social security as a fundamental human right. While the
ILO conventions provide a valuable framework, their effectiveness de-
pends on the commitment of member states to incorporate these standards
into their national legislations and policies. The conventions serve as a
reference point for countries seeking to establish or improve their social
security systems, emphasizing the importance of social protection as a

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cornerstone of social and economic development. As global challenges Notes

evolve, the ILO continues to play a crucial role in adapting and expanding
its social security conventions to address emerging issues and ensure that
workers worldwide enjoy adequate and comprehensive social protection.

CASE STUDY
In the modern organizational landscape, ensuring the social secu-
rity of workers has become a paramount concern, exemplifying a
commitment to employee well-being beyond mere compensation.
Consider XYZ Corporation, a multinational company with a diverse
workforce. Recognizing the significance of social security, XYZ has
implemented a robust framework encompassing various aspects of
employee welfare. XYZ Corporation prioritizes financial stability for
its employees through a comprehensive Provident Fund and Gratuity
scheme. The Provident Fund ensures long-term savings for employ-
ees, with both the employer and employees contributing, fostering
a sense of financial security and promoting a culture of long-term
commitment. Additionally, the Gratuity scheme acknowledges and
rewards employees for their dedicated service, offering a lump sum
amount upon retirement or completion of a substantial tenure. Health
and medical welfare form a cornerstone of XYZ’s social security
initiatives. The organization provides extensive health insurance cov-
erage, encompassing medical expenses, hospitalization, and preventive
care for employees and their families. Regular health check-ups and
wellness programs further underline the commitment to maintaining
the physical well-being of the workforce.
In addressing the educational needs of employees and their depen-
dents, XYZ Corporation has instituted an Education Fund. This fund
supports continuous learning and skill development through scholar-
ships, tuition assistance, and professional development programs. By
investing in education, XYZ not only empowers its workforce but also
contributes to the overall growth and development of its employees.
XYZ Corporation goes beyond financial considerations and recog-
nizes the importance of work-life balance and mental health. Social
and recreational funds are allocated to organize events, clubs, and
activities that promote a positive work culture and foster camaraderie
among employees. Moreover, an Employee Assistance Program (EAP)

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes is in place, offering counseling services and mental health support to

address the diverse challenges faced by the workforce. In times of
unforeseen emergencies or crises, XYZ Corporation demonstrates its
commitment to employees through an Emergency and Relief Fund.
This fund provides financial assistance, ensuring that employees
facing unexpected challenges receive the support needed to navigate
difficult circumstances.
To ensure the effectiveness of these initiatives, XYZ Corporation
actively engages in social dialogue with employee representatives and
labour unions. This collaborative approach helps in understanding the
evolving needs of the workforce and tailoring social security programs
accordingly. Regular audits and assessments ensure compliance with
international labour standards and legal regulations, reflecting XYZ’s
commitment to ethical business practices.
QUESTIONS:
1. Explain the holistic approach for ensuring social security adopted
by the XYZ corporation.
2. What were the steps taken by XYZ corporation to ensure the
effectiveness of various initiatives taken by the organization?
Explain.

7.12 Summary
Social Security is a government-sponsored program designed to provide
financial support and security to individuals and families facing various
life events, particularly in retirement, disability, or death. Funded through
contributions from both employees and employers, Social Security typi-
cally includes old-age pensions, disability benefits, survivorship benefits,
and, in some cases, healthcare assistance.
The program aims to alleviate economic hardships associated with aging,
illness, or the loss of a wage earner. Social Security benefits are calculated
based on an individual’s work history and contributions to the system.
While the specifics may vary by country, the fundamental purpose is to
create a safety net that ensures a basic standard of living for citizens
during times of need, enhancing social and economic stability.

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Notes
7.13 Answers to In-Text Questions
1. (c) To provide guidelines for the establishment and operation of
factories
2. (b) Regulation of working conditions and safety in factories
3. (b) Ensuring fair labour practices and social justice
4. (c) Tripartite

7.14 Self-Assessment Questions

1. What do you mean by ILO? Elaborate its various functions.
2. What are the various provisions as per the law for workers’ safety?
Elaborate.
3. What is social security convention of ILO? Explain.
4. Discuss the characteristics of effective working organization.

7.15 References
 Begega, S. G., & Aranea, M. (2018). “The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?”, Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151.
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R., & Cao, Q. (2021).
“What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany”, Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090.
 Valizade, D., Cook, H., Forde, C., & MacKenzie, R. (2023).
“Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work
systems?”, Journal of Organizational Effectiveness: People and
Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278.
 Yuan, L., Yu, Y., Li, J., & Ning, L. (2014), «Occupational commitment,
industrial relations and turnover intention: Empirical evidence from
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes China», Chinese Management Studies, Vol. 8 No. 1, pp. 66-84.

https://doi.org/10.1108/CMS-08-2011-0065.

7.16 Suggested Readings

 Dunlop, J. T., & Healy, J. J. Collective Bargaining, Richard D. Irwin,
1955.
 Whitney, F., & Sloana, A.A. Labour Relations, Prentice Hall,
Englewood Cliffs, New Jersey, 1991.
 Gottoschalk, A. W. The Background to the Negotiating Process,
Gower Press, 1973.
 Thorn, J. How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai, 1992.
 Walton, R. E., & McKersie, R. B. A Behavioural Theory of Labour
Negotiations, McGraw Hill, 1965.

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 L E S S O N

8
Dispute Resolution and
Industrial Harmony
Dr. Vandana Yadav
Research Scholar
Department of Management Studies
J. C. Bose University of Science and Technology, YMCA, Faridabad
Email-Id: vandanayadav@jcboseust.ac.in

STRUCTURE
8.1 Learning Objectives
8.2 Introduction
8.3 Dispute Resolution and Industrial Harmony: Industrial Conflict
8.4 The Industrial Disputes Act, 1947
8.5 Role of Labour Boards, Courts and Tribunals in Dispute Resolution and
Industrial Harmony
8.6 Appointments, Powers and Duties of Authorities under the Industrial Disputes
Act, 1947
8.7 General Prohibition of Strikes and Lockouts
8.8 Unfair Labour Practices
8.9 Recommendations of National Commission of Labour
8.10 Guiding Framework for Sound Labour Management Relations
8.11 Labour Administrative Machinery
8.12 Summary
8.13 Answers to In-Text Questions
8.14 Self-Assessment Questions
8.15 References
8.16 Suggested Readings

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Notes
8.1 Learning Objectives
 Elaborate on the goals of Industrial Relations and enumerate the
various factors influencing IR, while providing a rationale for the
significance of labor boards, courts, and tribunals in the process.
 Examine the notions of Industrial Disputes, Strikes, and Lockouts
in relation to pertinent legislations.
 Explore the origins of grievances, underscore the importance of
maintaining discipline, and delve into the necessary punitive measures
for addressing instances of indiscipline.
 Explore the necessity of collective bargaining, workers’ participation
in management, and the associated procedural aspects.

8.2 Introduction
Industrial relations encompass the dynamic between employees and em-
ployers, with workers providing their services in exchange for wages.
Beyond monetary compensation, the quality of work is influenced by the
working conditions and the manner in which management interacts with
its workforce. The crux of industrial relations lies in how both parties,
employees and employers, engage in a mutually beneficial manner. In
contemporary organized industries, workers often unite through unions
to collectively advocate for their shared interests, utilizing this collective
strength to ensure favourable working conditions. Employers, in turn,
may find it advantageous to contribute to a positive work environment,
provided that the associated costs lead to increased productivity, thereby
offsetting the incurred expenses.
At the individual or micro level, the evolution of an industrial unit and
the implementation of technological advancements within it can signifi-
cantly impact the working conditions. Factors such as capacity expansion
have the potential to create more opportunities for workers, garnering
their support and encouragement. However, technological changes that
replace human labour with machines may enhance worker productivity
while simultaneously leading to job cuts, posing a potential conflict of
interest unless accompanied by overall expansion. Consequently, the realm
of industrial relations encompasses multiple facets, including the dynamics

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between workers and management, interactions among workers, and the Notes
relationships between management and workers’ unions.

Features of Industrial Relations

 Co-existence of Two Parties: Industrial relations do not arise
in isolation; rather, they originate from the employment
dynamics within an industrial context. The symbiotic interaction
between labour and management is essential for the exist­
ence of this relationship, and it is within the framework of the
industry that the conducive environment for industrial relations
is established.
 Involves Both Cooperation as well as Conflict: Industrial relations
encompass a dynamic interplay of conflict and cooperation, forming
the foundation of intricate relationships within the workplace, wherein
the primary emphasis lies in studying the attitudes, relationships,
practices, and procedures adopted by conflicting parties to effectively
resolve or mitigate disputes.
 Considers Macro Factors: Since labour and management do not
function in isolation but are integral components of a broader
system, the examination of Industrial Relations encompasses
crucial environmental factors such as workplace technology, the
socio-economic and political context of the country, national
labour policies, and the perspectives of trade unions, workers, and
employers.
 Conditions and Terms of Employment: The field of Industrial
Relations encompasses the examination of factors influencing
collaboration between labour and management, including the analysis
of conditions, practices, and procedures essential for fostering desired
cooperation from both parties.
 Involves Legislation: Industrial Relations explore legal frameworks,
encompassing laws, regulations, court awards, customs, traditions, and
government policies, aiming to foster collaboration between labour
and management. Additionally, it conducts a thorough examination
of how executive and judiciary interventions shape the landscape
of labour-management relations.

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Notes Factors Influencing Industrial Relations

The scope of Industrial Relations is expansive, deriving inspiration from
diverse fields such as social sciences, humanities, behavioral sciences,
and law, encompassing all elements that impact the conduct of individ-
uals in a workplace, with a closer examination of several pivotal factors
outlined below:
1. Institution: This encompasses governmental entities, employers, trade
unions, federations or associations of unions, government agencies,
labour courts, tribunals, and various organizations that exert a direct
or indirect influence on industrial relations systems.
2. Characters: The objective is to examine the functions of labour
unions, employers’ federations officials, managers, mediators,
conciliators, arbitrators, and labour court judges.
3. Methods: Emphasizing collective bargaining, employee engagement in
industrial relations frameworks, disciplinary processes, mechanisms
for addressing grievances, dispute resolution procedures, union
restructuring, and advocating for protests through avenues such as
revising current rules, regulations, policies, procedures, and seeking
redressal through labour courts and tribunals.
4. Contents: Addresses various aspects of employment, such as
compensation, working hours, paid leave, health and safety measures,
disciplinary procedures, layoffs, dismissals, retirements, encompassing
the legal frameworks, regulations on labour welfare, social security,
industrial relations, and matters pertaining to workers’ involvement
in management through collective bargaining and participation.

Need/Importance of Industrial Relations

The management of industrial relations has evolved into an intricate and
crucial challenge in contemporary industrial societies, where achieving
industrial advancement hinges on the collaborative efforts of labour and
the cultivation of harmonious relationships between employees (labour)
and employers(management), making it imperative for all parties to
foster and sustain positive relations. Cultivating a collaborative rapport
between employers and employees is essential to safeguard the mutual
interests within the production process, underscoring the significance of
organizations taking proactive measures to prevent conflicts or swiftly

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address them, thereby ensuring industrial harmony and bolstering overall Notes
productivity. The following points elucidate the necessity of effective
Industrial Relations:
1. Uninterrupted Production: The primary benefit of industrial relations
resides in its capacity to ensure uninterrupted production, offering
continuous employment opportunities across various roles, optimizing
resource utilization, and promoting efficient production levels. This
operational coherence is not only essential for the industry but also
holds critical significance for interconnected sectors, exporters, and
the welfare of consumers and workers, especially in the realm of
mass-consumption goods.
2. Reduction in Industrial Disputes: Establishing constructive relationships
in the workplace is vital for addressing conflicts and preventing
disruptions such as strikes, lockouts, go-slow tactics, gherao, and
grievances, as these issues often arise from unmet human needs or
motivations; a harmonious industrial environment is instrumental
in averting such unrest, promoting collaboration, and enhancing
overall productivity.
3. High Morale: Positive connections between employers and employees
enhance staff morale, creating a shared commitment to boosting
productivity. This cooperative approach fosters a sense of collective
ownership among workers, underlining the importance of equitable
sharing of industrial gains. Striving for unity in thinking and
action becomes a key element in establishing industrial harmony,
raising the societal standing of workers and fulfilling their sense of
value, thereby positively influencing production through joint and
collaborative endeavours.
4. Mental Revolution: The primary goal of industrial relations is to
foster a profound shift in the mindset of both workers and employers,
aiming for a collaborative partnership within the industry where
mutual recognition of roles and authority leads to industrial peace
and positively influences production.
5. Reduced Wastage: Effective industrial relations thrive on collaboration
and mutual acknowledgment, fostering heightened productivity
while minimizing wastage of manpower, resources, and machinery,
consequently ensuring optimal operational efficiency.

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Notes Objectives of Industrial Relations

 Ensuring the well-being of both labour and management is achieved
through fostering a deep level of mutual understanding and goodwill
among all stakeholders involved in the production process within
the industry.
 In order to prevent industrial discord and foster amicable relationships,
crucial for enhancing worker productivity and promoting the industrial
advancement of a nation.
 Elevating productivity to new heights in a period of full employment
involves mitigating the challenges associated with high turnover
and frequent absenteeism.
 Minimizing the occurrence of strikes, lockouts, and gheraos is
the objective, achieved through the provision of fair wages and
enhancements in both living and working conditions.
 Enhancements in the economic well-being of workers within the
current landscape of industrial management and political governance.
 The state administers control over industrial enterprises to oversee
production and foster a climate of cooperative industrial relations.

8.3 Dispute Resolution and Industrial Harmony: Industrial

Conflict
The legal framework governing industrial relations in India is outlined
by the Industrial Disputes Act of 1947, offering a structured mechanism
for the resolution of industrial conflicts and fostering a harmonious re-
lationship between employees and employers.

8.3.1 Industrial Disputes

The term ‘Industrial Dispute’ as defined in section 2(k) of the Industrial
Disputes Act, 1947, encompasses any disagreement between employers and
workers, or employers and employers, or workers and workers, pertaining
to employment or non-employment, terms of employment, or conditions
of labour for any individual. This definition originated from the concept
of ‘trade dispute’ in section 8 of the Industrial Court Act, 1919 in the

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United Kingdom and the definition of ‘trade disputes’ under section 2(j) Notes
of the now-repealed Trade Disputes Act, 1929.
The definition implies three possible types of disputes among the in-
volved parties:
1. Between employers,
2. Between workers and employers, and
3. Between workers.
Additionally, industrial disputes can be categorized into monetary, non-mon-
etary, and personnel disputes based on the issues involved. Monetary
disputes typically revolve around matters such as wages and bonuses,
while non-monetary disputes encompass issues like rest, holidays, and
fringe benefits. Personnel disputes, on the other hand, involve matters
like regularisation of service, transfer, and promotion.
Differences in the workplace can be classified into two main types, name-
ly ‘interest disputes’ and ‘rights disputes.’ Typically viewed as ‘interest
disputes,’ industrial conflicts involve both parties striving to optimize
their individual interests through negotiations on employment terms.
Nevertheless, certain cases revolve around the rights of the disputing
parties, such as disputes concerning the application and understanding of
employment conditions or cases involving the termination of employment.

8.3.2 Industrial Disputes Resolution Mechanism

Industrial disputes can either be settled through:
1. Collective bargaining. or
2. Third party intervention, in the form of Conciliation, Arbitration or
Adjudication.
The Act provides for following methods of industrial disputes resolution:
1. Collective Bargaining
2. Conciliation
3. Investigation
4. Arbitration and
5. Adjudication

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Notes Collective Bargaining

Mrs. Beatrice Webb coined the term “collective bargaining” in 1891, de-
fining it as the organized effort of a group of workers to secure improved
wages and benefits beyond what individual negotiations could achieve. In
essence, collective bargaining involves negotiations between a united body
of workers and management, where they collaboratively address disputes
related to employment, working conditions, terms of employment, and
other relevant matters, utilizing their respective legal rights. This process
facilitates the voluntary and peaceful resolution of conflicts, ultimately
contributing significantly to industrial peace and societal advancement.
Negotiating the terms of employment through a process known as collec-
tive bargaining, this method facilitates the amicable resolution of indus-
trial disputes related to employment conditions. It involves discussions
between workers and management, employing various persuasive tech-
niques like argument, horse-trading, bluff, cajolery, and threats to reach
a mutually agreed-upon resolution. As articulated by Justice Jagannatha
Shetty, collective bargaining is characterized by a voluntary and peaceful
settlement of disputes, emphasizing mutual agreement over coercion and
third-party intervention.
The statutory acknowledgment of collective bargaining as a bipartite
negotiation emerged in 1956 through the amendment of section 2(p) of
the Industrial Disputes Act, 1947, providing legal standing to collective
agreements. Without legal recognition, such agreements transform into
informal gentlemen’s agreements, lacking legal validation. As per section
2(p), a settlement refers to a written agreement between workers and
management, distinct from conciliation proceedings. Viewed as a demo-
cratic decision-making process, collective bargaining plays a crucial role
in industrial relations.

Conciliation
In instances where collective bargaining encounters an impasse, parties
involved may seek recourse through the mechanisms of conciliation, as
outlined in the Industrial Disputes Act of 1947. Termed as assisted collective
bargaining, this process involves a neutral, independent conciliation officer
who serves as a mediator to facilitate constructive dialogue between the
conflicting parties. The officer intervenes to foster an agreement, often in

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a setting removed from the workplace, acknowledging the global recog- Notes
nition of conciliation’s efficacy in resolving industrial disputes. Societal
interests in maintaining a seamless flow of goods and services underscore
the need for investing in such mechanisms. Conciliation not only provides
an alternative to work stoppages but also mitigates the risk of capital loss
and unemployment, benefiting both employees and employers. Although
bipartite negotiations are preferred, circumstances may necessitate the
involvement of an impartial third party with a more objective and less
emotionally vested stance, capable of acting as a sincere mediator. The
intricate role of a conciliation officer involves skilfully bringing disput-
ing parties together, reconciling differences, and resolving disputes in
emotionally charged situations, often amidst existing or emerging crises.
The term “Conciliation” originates from the Latin root word ‘Concilia-
tus,’ denoting the act of fostering friendliness, uniting conflicting parties,
or persuading. A conciliator, maintaining a neutral stance, initiates the
process of bringing disputing parties together, guiding them toward a
mutually agreeable compromise or resolution. This involves facilitating
orderly and rational discussions, resembling a continuation of collective
bargaining with third-party assistance, often organized by governmental
machinery to ensure a free and expedited process.

Investigation
Section 6 of the Industrial Disputes Act, 1947, outlines the provisions
for the establishment of Courts of Inquiry by the respective appropriate
governments, enabling an investigation into pertinent matters concerning
industrial disputes as they arise. Additionally, section 12(2) of the same
Act assigns the Conciliation Officer the responsibility of probing industrial
disputes, encompassing all relevant aspects. While the findings of such
inquiries or investigations are non-binding, the involvement of an impartial
external party facilitates dispute resolution. In situations where disputed
matters involve inaccessible facts for trade unions and confidentiality
concerns for management, a neutral and credible investigative body aids
trade union representatives in gaining a comprehensive understanding of
the issues at hand.

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Notes Arbitration
In the Industrial Disputes Act, there exists a provision allowing the
voluntary submission of industrial disputes to arbitration by an impar-
tial third party agreed upon by both parties involved. For this process
to occur, the disputing parties must be willing to accept the final and
binding verdict of the arbitrator, focusing on adjudication rather than ne-
gotiation or compromise. It is improbable for parties unable to reach an
agreement through conciliation to opt for arbitration, as the latter lacks
the conciliator’s role in reconciling conflicting expectations and demands,
potentially going against their own discretion.
Arbitration, a judicial process wherein conflicting parties voluntarily opt
for resolution by presenting their dispute to an impartial arbiter of their
choosing, binds them to accept the arbiter’s decisions as conclusive. For
arbitration to proceed, both parties must reach a consensus on the terms
of reference and the arbitrator’s selection, emphasizing its nature as a
judicial procedure. Despite its typical effectiveness in resolving disputes,
particularly in legal contexts, its efficacy in the realm of industrial relations
remains questionable. This method involves external neutral individuals
who objectively decide the dispute’s merits after hearing arguments from
both sides, with the parties committing to abide by the arbitrators’ ruling,
usually precluding any further appeal.

Adjudication
In the event that attempts at conciliation prove unsuccessful, and the
disputing parties forego voluntary arbitration as a means of resolving
their disagreement, the final legal recourse lies in adjudication, wherein
a Judge from an industrial tribunal or labour court renders a decision
on the dispute.
Adjudication in industrial disputes involves the resolution of conflicts
through a judicial forum. Following the 1959 agreement at the 17th ses-
sion of the Indian Labour Conference, disputes were to be referred for
adjudication upon request from either party. However, the awards from
Industrial Tribunals, often based on conflicting principles, resulted in
confusion and unrest. In response, the Industrial Disputes Act of 1947,
amended in 1950, established the Labour Appellate Tribunal, which was
later abolished in 1956. When conciliation fails to resolve an industrial

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dispute, a conciliation officer submits a report to the government detailing Notes

the dispute’s facts, reasons for unresolved issues, and recommendations
on whether adjudication is warranted. The appropriate government then
decides whether to refer the dispute to an Industrial Tribunal or Labour
Court for adjudication.
In the process of adjudication, the adjudicating body resolves industrial
disputes by issuing a decision or order known as an award, following a
thorough examination of arguments from both conflicting parties. Unlike
conciliation, adjudication takes on a judicial nature, and upon referring a
dispute for adjudication, the government may, in rare instances, mandate
the cessation of any ongoing lockout or strike. The government defines
the specific issues for adjudication, and the adjudicating authority is
bound to focus solely on the referred issues during the proceedings.
Beyond the resolution of individual industrial disputes, adjudication has
significantly shaped the landscape of industrial jurisprudence in India,
with adjudicating bodies adopting a pragmatic approach and establishing
fundamental principles in the realm of industrial relations.

8.4 The Industrial Disputes Act, 1947

The Industrial Disputes Act of 1947 establishes mechanisms for the ex-
amination and resolution of industrial conflicts, aiming to facilitate an
agreeable settlement between employers and employees; it further outlines
procedures for dispute resolution in cases where collective bargaining
fails, and encompasses provisions related to lay-offs, retrenchment, strikes,
lockouts, and related matters.

Objectives of the Act

The Act aims to achieve various objectives, including:
1. Fostering amicable industrial relations between employees and
employers.
2. To resolve disputes through settlement mechanisms.
3. To establish a machinery for investigating and settling industrial
disputes.
4. To prevent illegal strikes and lockouts by employees and employers.

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Notes 5. To implement rules and regulations to offer relief to workers during

layoffs and retrenchments.
6. To set guidelines for fair labour practices.
7. To promote collective bargaining.

Short title, extent and commencement (Section 1)

 This Act is known as the Industrial Disputes Act, 1947.
 There are 8 chapters and 40 sections under this Act.
 It extends to the whole of India.
 This Act came into force on the 1st April, 1947.

Case Law - Bangalore Water Supply and Sewage Board v. A. Rajappa

and others
In the case of Bangalore Water Supply and Sewage Board v. A. Rajappa
and others, an expansive understanding of the term “industry” was es-
tablished, emphasizing that a profit motive or the intention to generate
income is not a prerequisite for an undertaking to fall within the ambit
of industry. It was determined that any organized systematic activity,
facilitated through collaboration between employers and employees for
the production and/or distribution of goods and services intended to fulfil
human wants and desires, qualifies as an industry.
Hence, numerous entities such as hospitals, educational institutions, uni-
versities, charitable organizations, welfare institutions, clubs, cooperatives,
research institutions, and more fall under the definition of industries as
per the Industrial Disputes Act, 1947.
It is important to note that the Industrial Disputes (Amendment) Act, 1982
incorporated legal consultancy firms into the scope of the term “Indus-
try” based on the Supreme Court’s ruling in Bangalore Water Supply v.
Rajappa, although this redefined definition has yet to be enforced.
According to section 2(k) of the Industrial Disputes Act, 1947, “Industrial
dispute” means any dispute or difference:
 Between employers and employers or;
 Between employers and workmen or;

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 Between workmen and workmen, which is connected with the Notes

employment or non- employment or the terms of employment or
with the conditions of labour, of any person;

Who can Raise Dispute

 Industrial Disputes Act provides that a dispute between an employer
and a single workman does not fall within the definition of Industrial
Dispute,
 But if the workman as a body or a considerable section of them
make a common cause with the individual workman, then such a
dispute will be an Industrial Dispute.
Thus, an Industrial Dispute is a collective dispute supported by either a
trade union or a substantial number of fellow workers.
 However, in respect of certain disputes relating to dismissal, discharge,
retrenchment or termination of services, even a single workman can
raise dispute.

Section 2K - Collective Dispute Means any Dispute or Difference

 Between employers and employers,
 Or between employers and workmen,
 Or between workmen and workmen, which is connected with the
employment or non-employment or the terms of employment or
with the conditions of labour, of any person.

Section 2A – Dismissal, etc., of an individual workman to be deemed

to be an industrial dispute
Means where any employer
 Discharges,
 Dismisses,
 Retrenches,
 Or otherwise terminates the services of an individual workman,
“In the event of any disagreement or conflict between a worker and their
employer related to the termination, dismissal, retrenchment, or discharge,

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Notes it shall be considered an industrial dispute, regardless of the absence of

any other worker or labour union participating in the dispute.”

8.4.4 Adjudication of Disputes

The act provides for constitution of Works Committee in Industrial es-
tablishments employing 100 or more workers.
 First of all, the Works Committee will try to settle the disputes.
 If the dispute is not settled, it will be referred to the Conciliation
Officer. The Conciliation Officer will try to arrive at fair and
amicable settlement acceptable to both the parties.
 If he is unable to do so, he will send the report to the Central Government.
 The Government may then refer the industrial dispute to the Board
of Conciliation.
(Here the employer and employees can voluntarily refer the matter to
arbitration.)
 If no settlement is arrived at then there is that three-tier system of
adjudication i.e., Labour Court, Industrial Tribunal and National
Tribunal. The order made by them is called Award.

IN-TEXT QUESTIONS
1. Before the industrial disputes act was implemented in the year
1947, which Act took care of the industrial disputes?
(a) Trade Disputes Act, 1929
(b) Royal Commission on Labour, 1934
(c) Labour Management Relations Act, 1947
(d) None of the above
2. Choose the correct objective of the Industrial Disputes Act, 1947.
(a) To prevent illegal strikes
(b) To promote measure of securing and preserving good
relations between the employers and the employees
(c) To provide relief to workmen in the matters of lay-offs,
retrenchment, wrongful dismissals
(d) All of these
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 Dispute Resolution and Industrial Harmony

3. To which settlement machinery can the central government refer Notes

the disputes under rule 81-A?
(a) Conciliation
(b) Arbitration
(c) Adjudicator
(d) Supreme Court
4. The industrial peace is secured through voluntary _____ and
compulsory ____
(a) Compromise and Arbitration
(b) Adjudication and Arbitration
(c) Work Committee and Industrial Tribunal
(d) Negotiation and Adjudication
5. The Act was first amended in the year ___
(a) 1929
(b) 1946
(c) 1947
(d) 1949
6. Industrial Disputes Act can be described as the milestone in the
historical development of industrial law in India. (Tue/False)

8.5 Role of Labour Boards, Courts and Tribunals in

Dispute Resolution and Industrial Harmony
1. In accordance with any regulations established for this purpose, an
arbitrator, Board, Court, Labour Court, Tribunal, or National Tribunal
is required to adhere to a procedure determined by the arbitrator
or relevant authority.
2. A conciliator, Board member, court representative, or presiding
officer of a Labor Court, Tribunal, or National Tribunal has the
authority, upon providing adequate notice, to enter the premises
of the relevant establishment for the purpose of investigating any
current or anticipated industrial dispute.

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Notes 3. Every Board, Court, Labour Court, Tribunal and National Tribunal
shall have the same powers as are vested in a Civil Court under
the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit,
in respect of the following matters, namely:
(a) enforcing the attendance of any person and examining him on
oath;
(b) compelling the production of documents and material objects;
(c) issuing commissions for the examination of witnesses;
(d) in respect of such other matters as may be prescribed, and
every inquiry or investigation by a Board, Court, Labour
Court, Tribunal or National Tribunal shall be deemed to be
a judicial proceeding within the meaning of sections 193 and
228 of the Indian Penal Code (45 of 1860).
4. Conciliation officers, Board or Court members, and presiding officers
of a Labour Court, Tribunal, or National Tribunal are considered
public servants under the definition of section 21 of the Indian
Penal Code (45 of 1860).

8.5.1 Duties of Conciliation Officers (Section 12)

1. In situations where there is an ongoing or anticipated industrial dispute,
the conciliation officer has the authority to initiate conciliation
proceedings as per the prescribed procedures; alternatively, if the
dispute pertains to a public utility service and a notice under section
22 has been issued, the conciliation officer is obligated to conduct
such proceedings.
2. The Conciliation Officer is tasked with promptly examining the
dispute and all relevant aspects to facilitate a resolution, employing
any necessary measures to encourage the parties to reach a just and
harmonious settlement.
3. In the event that a resolution to the conflict or any of the contentious
issues emerges during the conciliation process, the conciliation
officer is required to submit a report to the relevant government
[or an authorized officer designated by the pertinent government],
along with a memorandum of the settlement bearing the signatures
of the involved parties.
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4. In the absence of a mutually agreed settlement, the conciliation Notes

officer must promptly submit a comprehensive report to the relevant
government, detailing the actions taken to investigate the dispute,
the facts and circumstances uncovered, and the reasons, in their
judgment, that a resolution could not be achieved.
5. Upon reviewing the report mentioned in sub-section (4), if the
relevant government determines that there is a basis for referral
to a Board, be it a Labor Court, Tribunal, or National Tribunal, it
retains the authority to initiate such a reference; however, in the
event of non-referral, the government is obligated to document and
convey its rationale to the concerned parties.
6. A document falling within this category must be presented within
fourteen days from the initiation of the conciliation process or within
any abbreviated timeframe determined by the relevant governing
body.

8.5.2 Duties of Board (Section 13)

1. Upon the referral of a dispute under this Act to a Board, it is
incumbent upon the Board to make diligent efforts to facilitate a
resolution, conducting a prompt and thorough investigation into the
dispute and relevant factors, and employing any necessary measures
to encourage the involved parties to reach a just and harmonious
settlement.
2. In the event that a resolution to the disagreement or any of its
contested issues is reached during the conciliation process, the
Board is required to submit a report to the relevant Government,
accompanied by a memorandum detailing the settlement endorsed
by the disputing parties.
3. In the absence of a mutually agreed settlement, the Board is
required to promptly submit a comprehensive report to the relevant
government, detailing the investigative process, actions taken to
ascertain the facts and circumstances surrounding the dispute, a
complete account of those facts, the Board’s findings, reasons
for the inability to reach a settlement, and recommendations for
resolving the dispute.

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Notes 4. If the appropriate Government fails to refer a dispute concerning

public utility service to a Labour Court, Tribunal, or National
Tribunal under Section 10 upon receiving a report under sub-section
(3), it is obligated to document and convey the reasons for such a
decision to the involved parties.
5. The Board is required to present its report within a two-month
period from the date of referral of the dispute or within a shorter
timeframe determined by the relevant Government.

8.5.3 Duties of Courts (Section 14)

A tribunal is mandated to examine the issues brought before it and submit
its findings to the relevant governmental body, typically within a six-
month timeframe starting from the initiation of the investigation.

8.5.4 Duties of Labour Courts, Tribunals and National

Tribunals (Section 15)
In cases where an industrial dispute has been submitted to a Labor Court,
Tribunal, or National Tribunal for resolution, it is mandated to conduct its
proceedings promptly and, within the timeframe specified in the referral order
or any extended period as allowed under the second proviso to sub-section
(2-A) of section 10, present its award to the relevant Government.
The Industrial Disputes Act establishes a framework for various authorities,
including works committees, conciliation officers, conciliation boards, courts
of inquiry, labor courts, tribunals, and national tribunals. These entities aim
to foster and maintain amicable relations between employers and work-
ers by addressing and resolving significant differences through legalistic
means. Additionally, the Act emphasizes preventive machinery to cultivate
an environment that minimizes the occurrence of disputes altogether.

8.6 Appointments, Powers and Duties of Authorities under

the Industrial Disputes Act, 1947
The legal framework governing labour and employment in India falls under
the umbrella of Industrial Law, a relatively recent development spurred

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by the heightened awareness of workers’ rights, especially post-Indepen- Notes

dence, encompassing intricate relationships among workers, employers,
and the government to define employment terms and labor conditions.
1. Works Committee (Section 3): In the event that an industrial
establishment employs one hundred or more workers in a day
or the preceding year, the relevant government has the authority
to mandate the establishment to form a works committee. This
committee, comprising representatives from both the employees
and the employer, is obligated to maintain harmonious relations
and address common concerns or strive to resolve any substantial
differences between them, as outlined by the prescribed regulations.
2. Conciliation Officers (Section 4):
(i) The government is authorized to designate, through an
announcement in the Official Gazette, a suitable number of
individuals to serve as conciliation officers, responsible for
facilitating and encouraging the resolution of industrial disputes.
(ii) A conciliation officer can be designated to oversee a designated
region, specific industries within a designated area, or one or
more specified industries, with the appointment being either
permanent or for a defined duration.
3. Board of Conciliation (Section 5):
(i) The relevant authorities have the authority, as needed, to
establish a Conciliation Board through an official announcement
in the Official Gazette, aimed at facilitating the resolution of
industrial disputes.
(ii) A board will comprise a chairperson and either two or four
additional members, as deemed appropriate by the relevant
government.
(iii) The chairman must be an impartial individual, while the
remaining members should be appointed in equitable proportions
to advocate for the involved parties in the dispute; if a party
fails to make a timely recommendation, the relevant government
shall appoint suitable representatives on their behalf.
(iv) With the requisite quorum in place, a Board is authorized to
function even in the absence of the chairman, any member, or

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Notes a vacancy in its composition; however, upon notification by

the appropriate Government regarding the unavailability of the
chairman or any other member, the Board is prohibited from
taking action until a new chairman or member, as applicable,
is appointed.
4. Courts of Enquiry (Section 6):
(i) The relevant authorities have the discretion to establish a
Court of Inquiry through an official notification in the Official
Gazette, tasked with investigating any issue deemed connected
to or pertinent to an industrial dispute.
(ii) A judicial tribunal can be composed of a solitary autonomous
individual or a varying number of independent individuals at
the discretion of the relevant government, and if the tribunal
comprises multiple members, one among them must be
designated as the chairman.
(iii) In the presence of the required quorum, a Court is authorized
to function even if the chairman or any members are absent,
or if there is a vacancy, unless the relevant Government
notifies the Court of the chairman’s unavailability, in which
case the Court must refrain from acting until a new chairman
is appointed.
5. Labour Courts (Section 7):
(i) The governing authority has the discretion to establish one or
multiple Labor Courts through an official announcement in
the Official Gazette, tasked with resolving industrial disputes
pertaining to issues outlined in the Second Schedule and
undertaking additional responsibilities as designated by the
provisions of this Act.
(ii) A Labour Court shall consist of one person only to be appointed
by the appropriate Government.
(iii) To be eligible for the position of presiding officer in a Labour
Court, an individual must meet certain criteria, including
having served as a Judge of a High Court, held the position
of District Judge or Additional District Judge for a minimum
of three years, possessed at least seven years of experience in

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any judicial office in India, or served as the presiding officer Notes

of a Labour Court established under a Provincial Act or State
Act for a period of no less than five years.
6. Tribunals (Section 7A):
(i) Tribunals, when adjudicating on matters specified in the Act,
possess the authority equivalent to that of a Civil Court as
per the provisions of the Code of Civil Procedure, 1908 (5 of
1908). All inquiries or investigations conducted by Tribunals
are considered judicial proceedings within the purview of
sections 193 and 228 of the Indian Penal Code (45 of 1860).
(ii) Exercising their authority under section 11A, Tribunals can annul
a discharge or dismissal order, and mandate the reinstatement
of the employee, or provide alternative remedies, including
imposing a lesser punishment.
(iii) In cases where an industrial dispute is referred to a Tribunal for
resolution, the Tribunal is obligated to conduct its proceedings
promptly and deliver its award to the relevant government
without undue delay.
7. National Tribunals (Section 7B):
(i) The ‘National Tribunals’ possess the authority akin to a Civil
Court under the Code of Civil Procedure, 1908 (5 of 1908)
when adjudicating on matters delineated in the Act. Each
inquiry or investigation conducted by a ‘National Tribunals’ is
to be regarded as a judicial proceeding as per the definitions
laid out in sections 193 and 228 of the Indian Penal Code
(45 of 1860).
(ii) Under the jurisdiction granted by section 11A, ‘National Tribunals’
hold the power to overturn orders of discharge or dismissal,
directing the reinstatement of the worker or providing other
remedies, including the imposition of a milder penalty.
(iii) In cases where an industrial dispute is referred to a ‘National
Tribunals’ for resolution, it is mandated to conduct its proceedings
with promptness and is obligated to submit its award to the
appropriate government.

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Notes
8.7 General Prohibition of Strikes and Lockouts
Work stoppages and industrial disputes present complex and evolving
situations intricately tied to labour statutes, carrying extensive implica-
tions that can deeply impact the welfare of workers, the sustainability
of enterprises, and the overarching stability of sectors. As a result, it is
essential for all involved parties—employees, employers, labour authorities,
and the legal framework—to approach these labour-related events with
thoughtful deliberation, comprehensive comprehension, and an unyielding
dedication to equity.
Strike: According to the Industrial Disputes Act, 1947, section 2(q)
precisely characterizes a strike as the “collective cessation of work
by a group of workers in an industry or the unified rejection of work
continuation or acceptance of employment by any number of current or
former workers.”

A Strike is Illegal if it:

 Violates the Contract of Employment.
 Occurs in Public Utility Services.
 Doesn’t follow the notice requirement of section 22(1).
 Begins during an Award or settlement period.
 Begins during or within 7 days of completing Conciliation Proceedings.
 Begins during or within Two months of completing Adjudication
Proceedings.
Lockouts: Section 2(I) of the Industrial Disputes Act, 1947, delineates a
lockout as the “temporary closure of a workplace, the suspension of work,
or an employer’s refusal to continue employing any number of workers
during their period of employment.” Essentially, a lockout occurs when an
employer temporarily shuts down operations or halts work, distinguishing
it from the permanent closure of a business. Prior to 1860, this temporary
work stoppage was commonly known as a “turn-off.”

Essentials of a Lockout
To constitute a lockout in labour law, the following conditions must be met:

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 Temporary closure of the workplace by the employer or the Notes

suspension of work by the employer or the employer’s refusal to
continue employing any number of workers.
 These actions should be motivated by coercion.
 It should relate to an industry as defined in the Act.
There should be a dispute in the industry.

Provisions for General Prohibition of Strikes and Lockouts

Provisions within sections 22 and 23 of the Industrial Disputes Act, 1947
establish a general prohibition on strikes and lockouts. Specifically, Section
22 pertains to Public Utility Services, prohibiting strikes, while section
23 broadly restricts strikes in industrial establishments, rendering such
actions generally unlawful. In relation to strikes, Section 22(1) specifies
that individuals employed in public utility services are barred from going
on strike, thereby violating their employment contracts—
 “Employees must refrain from initiating a strike without prior
notification to the employer, as stipulated henceforth, with a minimum
six-week notice period before commencing any strike action; or
 Within fourteen days of giving such notice; or
 Before the expiry of the date of strike specified in any such notice
as aforesaid; or
 Throughout the duration of conciliation proceedings with a conciliation
officer and for a period of seven days following the conclusion of
said proceedings.”
Section 22(1) explicitly forbids workers from engaging in a strike unless
specific conditions are met, necessitating the issuance of a mandatory
notice of strike, with the stipulation that the strike date falls within six
weeks from the notice’s issuance and not within 14 days thereof; any
strike occurring before the specified date in the notice is deemed illegal
under section 22(1).
Section 22(2) of the Industrial Disputes Act, 1947 provides that no em-
ployee of any public utility service shall lock-out any of his workmen-
 Without giving them notice of lock-out as hereinafter provided,
within six weeks before locking out; or

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Notes  Within fourteen days of giving such notice; or

 Before the expiry of the date of lock-out specified in any such notice
as aforesaid; or
 During the pendency of any conciliation proceedings before a
conciliation officer and seven days after the conclusion of such
proceedings.
Hence, the Industrial Disputes Act, 1947, under section 22(2), expressly
forbids employers from initiating a lockout unless they adhere to the
stipulated conditions, making any lockout conducted without meeting
these criteria illegitimate.
In instances where a strike or lockout is already underway in a public
utility service, formal notification of the lockout or strike is deemed
unnecessary; however, the employer or workers, as applicable, must
promptly communicate the occurrence of the lockout or strike on the
day it is declared to the designated authority specified by the relevant
government, either in a general context or for a specific area or class of
public utility services.
It means that if there is already in existence a strike, the notice of lockout
is not necessary and if there is already in existence a lockout, the notice
of strike is not necessary. In such cases, the parties concerned have to
send intimation of such lockout or strike to such authority as may be
specified in this behalf by the appropriate Govt. on the day of which it
is declared.
Clause 23 specifically addresses strikes and lockouts in non-public utility
industries, allowing employees and employers in such sectors to initiate
strikes or lockouts without the requirement of providing prior notice.
Nevertheless, in accordance with section 23 of the Industrial Disputes
Act, 1947, it is stipulated that no worker employed in an industrial es-
tablishment shall engage in a strike violating their employment contract,
and no employer of such workers shall declare a lock-out under the
following circumstances:
 During ongoing conciliation proceedings before a Board and seven
days following their conclusion; during proceedings before a Labour
Court, Tribunal, or National Tribunal, and two months after their
conclusion;

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 During arbitration proceedings before an arbitrator and two months Notes

after their conclusion, provided a notification has been issued under
sub-section (3A) of section 10(A); and
 During any period when a settlement or award is in effect pertaining
to the matters covered by the settlement or award.
The regulations outlined in section 22, pertaining to strikes and lockouts
in public utility services, do not extend to industrial establishments outside
the scope of public utility services. Conversely, section 23, being of a
general nature, is applicable to both public utility services and general
industries, allowing for the initiation of strikes or lockouts during the
conciliation proceedings before a conciliation officer in the case of gen-
eral industries, whereas section 22 imposes a prohibition on strikes or
lockouts in public utility services if conciliation proceedings are underway
before a conciliation officer.

Provisions for Considering Strikes and Lockout as Illegal

Section 24 of the Industrial Disputes Act, 1947 outlines the circumstances
under which a strike or lock-out can be deemed illegal, encompassing
scenarios such as:
 Defiance of orders pursuant to section 10(3),
 Commencement or declaration in violation of section 22 or section
23, and
 Persistence in contravention of an order issued under section 10-A
(4-A).

Provisions for Penalty for Illegal Strikes and Lock-Outs

Section 26 of the Industrial Disputes Act delineates consequences that
Act as a deterrent to participating in unauthorized strikes and lockouts,
including penalties such as a maximum one-month imprisonment, a fine
of up to fifty rupees, or both for illicit strikes, as well as a potential
one-month imprisonment, a fine of up to one thousand rupees, or both
for unauthorized lockouts.
The primary objective of the Industrial Disputes Act is to regulate the
prerogatives of both labourers to engage in strikes and employers to
enforce lockouts, safeguarding the equitable exercise of their respective

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Notes rights, while also instituting avenues for amicable investigation, resolution,
arbitration, and adjudication of conflicts.

8.8 Unfair Labour Practices

Employees hold a crucial position in the economic progress of countries,
actively participating in the creation of goods and services, and in turn,
earning remuneration. The intricate interdependence between employers
and workers, essential for financial growth, frequently faces complica-
tions. Issues such as equitable wages, working hours, and demands from
trade unions surface in both public and private sectors. To tackle these
issues, the Industrial Disputes Act of 1947 was introduced, with the ob-
jective of promoting tranquillity, improving welfare, nurturing amicable
relations between employers and labourers, settling industrial conflicts,
and preventing unlawful strikes or unfair trade practices.

Practices that can be Considered Unfair Labour Practices

Before the enactment of labour regulations, employers wielded con-
siderable influence over workers; however, a series of labour welfare
initiatives, such as the Trade Union Act of 1926, the Factories Act of
1948, and the Minimum Wages Act of 1948, were established, recog-
nizing the rights of labourers and protecting them from exploitation and
unfair labour practices.
In simplified terms, unfair labour practices involve deceptive manoeuvres
by employers or employees, seeking financial gains that contravene legal
prohibitions, as specified in the Industrial Disputes Act of 1947. These
prohibited actions are explicitly detailed in the Fifth Schedule, Section
2(a), incorporated by the Industrial Disputes (Amendment) Act of 1982,
with further provisions outlined in Sections 25-T and 25-U.
Section 25-T addresses prohibited unfair labour practices, prohibiting
employers and workers from engaging in activities detrimental to the
welfare and harmony of both parties, including the registration and dereg-
istration of trade unions. Meanwhile, Section 25-U imposes penalties,
such as imprisonment, fines, or a combination thereof, for engaging in
unfair trade practices.

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Unfair Labour Practices by the Employer Notes

In accordance with the provisions of the Industrial Disputes Act, 1947,
unfair labour practices extend to actions committed by both employers
and trade unions. The Fifth Schedule outlines specific activities classified
as unfair labour practices.
1. Employers are prohibited from engaging in various practices, including
preventing employees from joining or establishing trade unions,
2. Harassing or controlling employees who join unions,
3. Intimidating workers involved in legal lock-outs or strikes,
4. Imposing penalties or making threats of dismissal,
5. Practicing discrimination against workers’ trade unions,
6. Promoting ineligible workers over eligible ones, and
7. Engaging in actions that undermine collective bargaining with trade
unions, such as refusing to award recognition or compensation for
work performed.
8. Firing any employee on false allegations, and little technical mistakes
made by the workers,
9. Maliciously transferring workers.
10. Appointing contract workers to cut down on the wages and
compensation that permanent workers must receive.
11. Creating violence among the workmen.
12. Paying fewer wages concerning the work assigned to workmen.
13. Demotion of the workmen because they took part in trade union
activities.

Unfair Labour Practices by Trade Unions

Employers are not solely responsible for unfair labour practices; trade
unions can also play a role in contributing to such issues. According to
the Fifth Schedule of the Industrial Disputes Act, certain practices are
prohibited for trade unions.
1. Engaging in activities such as promoting and supporting illegal
strikes,
2. Coercing workers to join trade unions through threats,

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Notes 3. Prohibiting non-participating workers from entering the workplace

during illegal strikes,
4. Using criminal force against those not participating in unauthorized
strikes or lockouts,
5. Neglecting workers’ welfare,
6. Rejecting collective bargaining as representatives,
7. Invading employers’ residences and damaging personal property,
8. Encouraging workers to demolish industrial assets,
9. Imposing unlawful tactics like ‘going slow’ or ‘gherao’ (surrounding
employers to meet worker demands), and
10. Threatening or harassing workers choosing to work constitute a
range of unacceptable behaviors.

State Legislations on Unfair Labour Practices

In India, the majority of labour legislations are promulgated by the Cen-
tral Government; however, in addition to these, individual states have
also implemented their own sets of laws to regulate labour, with some
notable state labour laws being:

Bombay Industrial Relations Act, 1946

Enacted in April 1946 and applicable throughout Maharashtra, this legisla-
tion endeavours to oversee and address issues arising between employers
and their employees. Its scope includes the regulation of employer-em-
ployee relationships, the facilitation of labour dispute resolutions, and the
fulfilment of various other objectives, acknowledging the need to adapt
and consolidate provisions in specific situations.

The Madhya Pradesh Industrial Relations Act, 1960

Enacted in 1960, this legislation prohibits employers from penalizing
employees engaged in lawful trade union activities, such as strikes or
lock-outs, and additionally provides provisions for the resolution of in-
dustrial disputes while regulating specific aspects of employer-employee
relations.

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The Maharashtra Recognition of Trade Unions and Prevention of Notes

Unfair Labour Practices Act, 1971
Enacted in 1971 and enforced in September 1975, this legislation, sanc-
tioned by the Indian government, aimed to regulate specific businesses,
fostering a desired level of empathy between employees and employers.
The primary objectives include granting recognition to –
 The trade unions
 Promote collective bargaining, and
 Prevent unfair labour practices.

Legislation to Prevent and Punish Unfair Labour Practices

The Industrial Disputes Act of 1947 includes section 25-U, which stipu-
lates penalties for unfair labour practices. Any employer or organization
engaging in prohibited practices outlined in the Fifth Schedule of the Act
may face consequences, such as six months’ imprisonment, a fine of one
thousand rupees, or both, as specified in the relevant section.

8.9 Recommendations of National Commission of Labour

The initial National Labour Commission of 1929 pledged significant
advancements in areas such as social security, social welfare, wages,
social insurance, industrial relations, industrial adjudication, collective
bargaining, among others. Following the recommendations outlined in the
inaugural commission’s report, a series of labour enactments were subse-
quently enacted. After a hiatus spanning nearly 72 years, the formation
of the Second National Labour Commission took place, culminating in
the submission of its report to the Government of India in 2002.

Main Recommendations of the National Commission on Labour

1. It is suggested that a consistent holiday policy between the Central
Government and State Government should be established, with only
three national holidays officially designated – Independence Day,
Republic Day, and Gandhi Jayanti Day. Additionally, each state may
choose two more days based on its unique traditions. Moreover,
individuals should be granted 10 discretionary holidays annually,

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Notes and it is recommended to separate government holidays from those

specified in the Negotiable Instruments Act.
2. Flexibility in the hours of work per week and compensation for
overtime.
3. Efforts to shift the fundamental nature of job security from permanent
to contractual arrangements, applicable to both permanent and
non-permanent positions, signify a profound shift in mindset and
perception. If altering the foundation of employment is deemed essential
due to economic imperatives faced by industrial and commercial
entities, establishing social acceptance for such a transformation
and implementing supportive social institutions becomes equally
imperative.
4. The committee suggests that the government could establish a list
of well-compensated positions currently classified as “workman”
and, therefore, exempt from labor laws, incorporating them into the
forthcoming legislation safeguarding non-workmen. Alternatively,
the government might set a significant remuneration threshold, like
Rs.25,000/- per month in the current scenario, beyond which an
employee would no longer be categorized as an ordinary “workman.”
5. Existing set of labour laws should be broadly grouped into four or
five groups of laws pertaining to:
(i) Industrial relations
(ii) Wages
(iii) Social security
(iv) Safety
(v) Welfare and working conditions and so on
6. Ensuring a baseline of safeguarding for both managerial and excluded
employees from unjust termination is imperative, necessitating
resolution through labour court, Labour Relations Commission, or
arbitration.
7. The current framework, comprising the ID Act, 1947, TU Act,
1926, Industrial Employment (SO) Act, 1946, and Sales Promotion
Employees (Conditions of Service) Act, 1976, alongside state-level
legislation, should be thoughtfully amalgamated into a comprehensive

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statute named “The Labour Management Relations Law” or “Law Notes

on Labour Management Relations.”
8. The Commission advocates for the repeal of the Essential Services
Maintenance Act, and
9. Commission proposes the identification of a bargaining agent via
a check-off system, where 66% support qualifies a union as the
sole negotiating representative; in the absence of such majority,
unions garnering over 25% support should receive proportionate
representation.
10. The mandatory implementation of the check-off system in establishments
with 300 or more workers is recommended for all registered trade
unions.
11. The commission further proposed that once recognition is conferred,
its validity should extend for a duration of four years, aligning with
the settlement period, and during this time, no consideration should
be given to claims from any alternative Trade Union, Federation,
or Centre seeking recognition until at least four years have passed
since the previous acknowledgment.
12. Each organization is required to form a grievance redressal committee,
comprising an equal representation of both workers and employers,
to address and decide upon any employment-related grievances
raised by workers within a specified timeframe.
13. The commission has recommended for maintenance of panel of
arbitrators by the LRC concern, to settle the disputes.
14. Decisions regarding individual employees, such as employment
termination, transfers, or any related issues, should be resolved
through the Grievance Redressal Committee, conciliation, and
arbitration/adjudication by the Labour Court; thus, it is suggested
that Section 2a of the ID Act be modified accordingly.
15. A mechanism for providing legal assistance to employees and trade
unions through a Public Fund should be established to guarantee
that workers and their associations are not unfairly disadvantaged
due to their inability to engage legal representation.
16. A strike ought to be initiated exclusively by the officially acknowledged
negotiating representative, and solely following a conducted strike

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Notes ballot encompassing all workers, with a minimum requirement of

51% of workers expressing support for the strike.
17. Worker’s participation in management - the legislative teeth should
be provided.
18. The Commission strongly advocates for the comprehensive adoption
of these recommendations, emphasizing the importance of addressing
them collectively rather than in a fragmented manner that could
compromise the interconnected context and holistic approach.
19. The safeguards for small establishments may be established through
a dedicated legislation such as the Small Enterprises (Employment
Relations Act) or incorporated within the broader legal framework
as a distinct section, aiming to safeguard the rights of workers while
concurrently alleviating managerial responsibilities and maintaining
oversight in their exercise of managerial functions.
20. The Commission suggests that no employee should be retained in
an ongoing capacity as a casual or temporary worker for a period
exceeding two years for a permanent position.
21. The Commission suggests that each employer should grant a one-
month bonus to every employee before a significant festival, such
as Diwali, Onam, Puja, Ramzan, or Christmas, with any request for
a bonus beyond this amount, up to a maximum of 20% of wages,
subject to negotiation. Additionally, the Commission proposes an
increase in the current wage ceilings for entitlement and bonus
calculation to Rs. 7500/- and Rs. 3500/-, respectively.
22. A national minimum wage, subject to periodic revision, should be
established by the Central Government, with a dearness allowance
component declared every six months based on the consumer
price index. Additionally, the minimum wage ought to undergo a
reassessment every five years, as suggested by the Commission,
which also advocates for the elimination of the current practice of
notifying scheduled employments and periodically fixing or revising
minimum wage rates for each scheduled employment, emphasizing
the importance of extending the benefits of a minimum wage to all
workers across various employments.

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23. There is no need for any wage board, statutory or otherwise, for Notes
fixing wage rates for workers in any industry.
24. The Commission proposed the implementation of a comprehensive
legislation addressing working hours, leave policies, and working
conditions at the workplace, emphasizing the need for a unified
law that covers various aspects of safety in different activities.
25. To enhance the effective deployment of manpower and vital skills
essential for planned economic advancement, it is imperative to
reinforce and cultivate the National Employment Service, fostering
its national character.
26. Promoting the creation of meaningful job opportunities for individuals
with physical disabilities is an essential component of a progressive
social policy. Employers are encouraged to embrace the responsibility,
guided by industrial ethics, of facilitating the rehabilitation of
those disabled due to workplace accidents, and collaborative efforts
between employers and the government should be undertaken to
establish Rehabilitation Homes for individuals facing physical
handicaps.
27. A resolution to the challenge posed by “sons of the soil” requires
addressing it through the prioritization of shared citizenship,
geographical flexibility, and economic viability in the establishment
of industrial facilities, while also considering and respecting local
aspirations.
28. Youth from families affected by the acquisition of land for industrial
purposes should receive training opportunities tailored to the potential
job openings in the newly established units on those lands.
29. The suggested guidelines outlined previously are applicable to
private sector hiring as well; however, it is essential to note that the
regulatory mechanisms for private sector recruitment will inherently
vary from those employed in the public sector.
30. The state’s labour department should oversee Training and Employment
Organizations, ensuring consistent minimum qualifications, equitable
advancement opportunities for instructional staff, and uniform vocational
training standards across all states. Additionally, there should be a
continuous effort to publicize the programs and accomplishments

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Notes of employment and training services, emphasizing their significance

to employers, trainees, and the general public.
31. The primary responsibility for the training of workers must be borne
by the industry, with the role of the States being one of support
rather than substitution for the efforts of employers. State intervention
should be limited to fields and areas where employers are unable
to initiate training programs, and the State Apprenticeship Adviser
should serve as the designated Authority for registering training
schemes organized by employers.
32. The advent of innovative machinery can make longstanding skills
outdated, potentially leading to shortages in emerging competencies;
it is imperative for the plant authority to establish facilities that
support the retraining of employees. Implementing a scheme that
allows workers to take study leave for acquiring the skills necessary
for higher levels of responsibility can enhance internal promotions
and foster improved industrial relations.
33. Enhancing the contentment of a new employee is achieved through
effective induction, where the management directly communicates
pertinent information about the workplace, its policies, and leadership.
34. In cases where promotion criteria are not clearly defined, it is advisable
for management to develop a promotion policy in collaboration
with the recognized union, if present; generally, for positions in
the lower ranks, promotion should be primarily based on seniority,
while middle-management roles require a combination of seniority
and merit, and higher managerial positions should prioritize merit
alone.
35. The existing workers’ education initiative, akin to any other program,
is not flawless, necessitating enhancements and reinforcement. The
Central Board of Workers’ Education should not only intensify
but also refine its literature production initiative. Additionally,
the government should embark on a comprehensive adult literacy
campaign to eradicate illiteracy among workers, further supporting
the workers’ education program.
36. The expeditious facilitation of workers’ education programs by the
Central Board of Worker’s Education necessitates the streamlining
and adjustment of existing procedures and regulations for aiding
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unions, ensuring alignment with union structures and needs while Notes
maintaining accountability for public funds; concurrently, employers
should collaborate with unions by providing the necessary facilities
for the program as offered by the Board.
37. Trade union federations must collaboratively develop a comprehensive
program for union officials and organizers in partnership with
academic and research institutions, encompassing hands-on fieldwork
and educational modules on essential aspects of trade unionism,
industrial relations, labour laws, and the nation’s economic evolution.
Authorities should actively support universities in offering extension
courses to enhance the knowledge and skills of union leaders and
organizers.
38. (a) The leadership of the Board of Governors for the Central Board
of Workers’ Education ought to be headed by a representative
chosen by the trade unions. Additionally, the Director of the
Scheme should also be nominated by a trade union representative.
(b) It is recommended that the Central Board include a representative

from the public sector. While incorporating this representation,
the current system ensuring the largest representation for workers
on the Board should be maintained
(c) Pending the suggested alterations in the constitution and roles of

the Board, efforts should be made to establish the Board on a
sustained basis in terms of its tenure.
39. Employees deserve fair compensation for the income they lose when
mines are closed due to safety standard violations.
40. Each port must designate a duly certified Safety Officer, while
consolidating the Dock Workers’ (Safety, Health and Welfare)
Scheme, 1961, and the Indian Dock Labourers’ Regulations, 1948
into a unified legislation to encompass all workers.
41. (a) The prevailing demands of the economy make it impractical to
promptly decrease the standard working hours; however, as
circumstances ameliorate, a phased reduction to 40 hours per
week is recommended, with an initial reduction to 45 hours.
(b) Reduction of working hours during night shifts is proposed, with

a ten-minute credit for each hour worked during this shift,

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Notes granting additional compensation for one hour after six hours
of work.
(c) There is no imperative need to ease constraints on the duration

or nature of overtime work.
42. The Plantations Labour Act of 1951 ought to undergo an amendment,
advocating a reduction in the stipulated working hours from 54 to
48.
43. The Railway Administration ought to conduct a comprehensive review
every five years to assess the classification of railway personnel
under the Hours of Employment Rules in Railways.
44. Consistency in the allocation of paid national and festival holidays
is beneficial, ensuring that each employee is granted three national
holidays and five festival holidays within a calendar year.
45. Strengthening the penal provisions is essential to ensure a tangible
deterrent impact, necessitating the categorization of serious offenses
as cognizable for effective enforcement.
46. The dynamic nature of labour welfare is evident as its substance
varies across regions, exhibiting differences even within a single
country.
47. Temporary workers deserve the right to access the welfare amenities
designated for permanent employees as per the prevailing laws,
ensuring that the quality of facilities provided for permanent staff
remains unaffected.
48. Examining the welfare aspects of the law does not necessitate technical
expertise or engineering qualifications, and the optimal approach
involves collaboration with a recognized union or the support of a
works committee where applicable.
49. The welfare officer serves as a human-side maintenance engineer,
currently experiencing a lack of job satisfaction due to insufficient
emphasis on welfare within the industrial unit; rather than being
valued, their presence is often treated as a mandatory obligation,
and it is crucial that they are not burdened with mediating disputes
between management and workers on behalf of the organization.

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8.10 Guiding Framework for Sound Labour Management Notes

Relations

A Guiding Framework for Sound Labor Management Relations

Establishing and maintaining positive labour management relations is
paramount for fostering a harmonious and productive work environment.
A guiding framework for sound labour management relations serves as a
crucial foundation for effective communication, mutual understanding, and
conflict resolution between employers and employees. This framework
encompasses key principles and practices aimed at creating a collaborative
atmosphere that benefits both parties.
1. Communication Transparency: Open and transparent communication
is the bedrock of sound labor management relations. Employers
should actively communicate organizational goals, policies, and
decisions to employees, while also providing avenues for feedback
and suggestions. Regular and clear communication helps build trust
and reduces misunderstandings.
2. Employee Involvement and Participation: Involving employees
in decision-making processes that affect their work conditions and
well-being is essential. This can be achieved through mechanisms
such as employee forums, suggestion boxes, and regular meetings.
Including employees in the decision-making process fosters a sense
of ownership and commitment.
3. Conflict Resolution Mechanisms: Establishing effective conflict
resolution mechanisms is critical for addressing disputes promptly
and fairly. Having a structured process for conflict resolution, such
as mediation or arbitration, can prevent issues from escalating and
promote a culture of problem-solving rather than confrontation.
4. Fair Compensation and Benefits: Ensuring fair and competitive
compensation and benefits is vital for employee satisfaction and
engagement. A comprehensive and equitable rewards system motivates
employees, reduces grievances, and enhances the overall relationship
between labour and management.
5. Training and Skill Development: Investing in the continuous training
and skill development of employees demonstrates a commitment to

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Notes their professional growth. This not only enhances the organization’s
overall capabilities but also contributes to a positive perception of
the employer’s commitment to employee welfare.
6. Compliance with Labor Laws and Standards: Adhering to local
and international labour laws and standards is non-negotiable. A
commitment to legal compliance demonstrates respect for employees’
rights and contributes to a positive perception of the organization’s
ethical standing.
7. Promoting Work-Life Balance: Recognizing the importance of
work-life balance contributes to employee well-being and job
satisfaction. Implementing flexible work arrangements and policies
that support a healthy work-life balance can enhance morale and
productivity.
8. Employee Recognition and Appreciation: Acknowledging and
appreciating employees for their contributions fosters a positive
work environment. Recognizing achievements, milestones, and hard
work reinforces a culture of appreciation and motivates employees
to excel in their roles.
In conclusion, a guiding framework for sound labour management rela-
tions revolves around principles of communication, fairness, employee
involvement, and continuous improvement. By adopting and implementing
such a framework, organizations can cultivate a positive workplace culture
that benefits both employers and employees, ultimately contributing to
long-term success and sustainability.

8.11 Labour Administrative Machinery

ILO Convention No. 150, established in 1978 and enforced on June 26 of
the same year, governs international labour administration. This conven-
tion, fully operational since October 11, 1980, outlines a comprehensive
framework for the functioning of labour administration, encompassing
tasks such as preparation, implementation, supervision, coordination, and
periodic evaluation. While the convention provides the overall structure,
the specific regulation of labour administration is also influenced signifi-
cantly by the respective government of a given country.

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Labour Administration Notes

The international labour administration, established to safeguard the well-be-
ing of workers, oversees the equitable provision of wages, resources, and
holidays, regulating the overall management of labour and preventing the
misinterpretation of fundamental rights. Its primary objective is to foster
a global environment where both male and female workers can engage
in their activities with security, freedom, fairness, and human dignity,
incorporating special rules to assist millions of workers worldwide in
leading peaceful lives.

Labour Administration Functions

The main function of labour administration is to implement the policies
that work for labourers’ welfare. Let’s understand its functioning in detail.
Its functioning is divided into four different domains. These are:
 Labour
 Employment
 Information and research
 Labour management research

Labour
The Labour administration decides the working conditions of the labour.
 The labour administration decides the wages of labourers.
 It regulates the employment conditions.
 It takes care of labourers’ security and their health at work.
 It provides social security to labourers.
 The labour administration also periodically introspects the functioning
of labourers, it ensures that the employers do not conduct any kind
of mean act on labourers.
 It facilitates the best working environment for labourers.

Employment
 It regulates the national employment policy.
 It passes and implements various unemployment insurance schemes.

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Notes  It provides vocational guidelines to unemployed youngsters.

 It regulates vocational training programs throughout the world.
 It ensures that the best employment services should be given to
capable individuals.

Information and Research

 Labour administration plays a major role in collecting information
related to the labourers.
 It organises surveys to check the working conditions of employees.
 It plays a major role in policy development and statistics related to
labourers.
 It facilitates the dissemination of information.
 It releases its forecast periodically based on collected data.

Labour-management Relations
 Labour administration plays a major role in designing the framework
of rules for the proper management of labourers.
 It helps in settling labour-related issues in various organisations.

Some Other Functions of Labour Administration

The above-written functions are based on the welfare of labourers. Let’s
understand more labour administration functions based on governmental
bodies. These are:
1. Labour administration facilitates the assessment of labour institutions
and organisations. Along with this, it also regulates their management.
2. It follows all the administrative rules of the specific country. It also
provides support to the tripartite bodies of the country.
3. It also facilitates the promotion of various ILO policies and standards.
4. Labour administration also facilitates the management of international
networks.
5. It plays a major role in researching information and publications of
news.

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Features of Labour Administration Notes

The labour administration convention is a very powerful body in itself. It
regulates the functioning of labourers of the entire world. Due to this, its
features are slightly distinctive compared to other connections. These are:
Transparency: The regulations and guidelines governing labour ad-
ministration aim to ensure that various entities and workers have the
opportunity to express their perspectives, with participation from diverse
organizations and individuals in the decision-making process, extending
the reach of its policies and services on a global scale.
Credibility: All the rules and policies of labour administration are designed
for the welfare of labourers. All these rules and policies are implemented
sincerely with proper management.
Responsibility: The labour administration, as a governmental entity,
holds a significant responsibility, actively engaging in the resolution of
conflicts between labourers and employers, and steadfastly overseeing
the impartial enforcement of laws and policies.
Services: The labour administration’s offerings contribute to the well-being
of numerous workers, ensuring fair wages for employees and preventing
any mistreatment by employers, thereby fostering a peaceful and harmo-
nious work environment.
The International Labour Organization (ILO) Convention, designed to
safeguard the well-being of workers globally, governs the Labour Ad-
ministration Convention. In 2021, despite numerous nations adopting and
implementing the convention’s regulations to support their labour force,
only 78 countries worldwide officially ratified its application. Moreover,
the labourers in various nations rely on the principles and regulations
established by the Labour Administration Convention, aiming to guarantee
the provision of essential services to employees, thereby preserving their
dignity and self-respect, and fostering a life of contentment and peace.

8.12 Summary
In this section, we explore the nuances of industrial disputes, delving
into various definitions associated with Industrial Relations, including
ID, and scrutinizing the origins of conflicts within the industrial realm.

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Notes Our examination encompasses an in-depth analysis of the concept and

determinants of Industrial Relations, specifically focusing on the position
of Industrial Relations in India. Additionally, we dissect the causes of
industrial unrest and their repercussions, shedding light on the arsenal
available to both employers and employees. Recognizing the evolving
industrial landscape, we emphasize the imperative shift from traditional
personal management to the more adaptive Human Resource Management
(H.R.M.) approach, emphasizing flexibility, worker-centric practices, and
enlightenment. It is posited that heightened worker satisfaction inherently
correlates with increased productivity, consequently mitigating industrial
conflicts along with that it also gives the recommendations of national
commission of labour through which sound labour management relations
get established.

8.13 Answers to In-Text Questions

1. (a) Trade Dispute Act, 1929
2. (d) All of these
3. (c) Adjudicator
4. (d) Negotiation and Adjudication
5. (d) 1949
6. (a) True

8.14 Self-Assessment Questions

1. Define the concept of industrial relation and explain its factors and
discuss about the future of industrial relations in India.
2. Explain briefly about Industrial Disputes Act, 1947.
3. Explain the various methods for the settlement of industrial disputes.
4. Discuss the Role and importance of labour boards, courts and tribunals
in dispute resolution and industrial harmony.
5. Discuss the nature, structure and role of Collective Bargaining.
6. What are the important contents of a Collective Bargaining Agreement?
7. Examine the role and limitations of Collective Bargaining in India.

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8. What are the recommendations of national commission of labour Notes

on industrial harmony?
9. What is the framework advised by the government for the sound
labour management relations?
10. Describe the concept of labour administrative machinery.

8.15 References
 Sharma, A. M. (1993). ‘Labour administration in India’, Himalaya
Publishing House.
 Giri, V. V. (1972) ‘Labour problem in Indian industry’, Asia Publishing
House, Bombay.
 Sinha, P.R.N. (2000) ‘Industrial Relations, Trade Unions, and Labour
Legislation’, Pearsons’s educations.
 LO: Labour Administration, Function and Organization, Report V(i),
International Labour Conference, 61st session, 1976, p.14.

8.16 Suggested Readings

 Arun Monappa, Industrial Relations, Tata McGraw Hill Publishers,
New Delhi.
 T. C. Tripathi, Personnel Management & Industrial Relations, Sultan
Chand & Sons, New Delhi.
 K. K. Ahuja, Personnel Management, Kalyani Publishers, New Delhi.
 C. B. Memoria & S. Memoria, Dynamics of Industrial Relations in
India, Himalaya Publishing House, Delhi.
 S. C. Srivastva, Industrial Relations and Labour Laws, Vikas Publishing
House, New Delhi.

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 L E S S O N

9
Employee Participation
and Labour-Management
Cooperation
Dr. Abhishek Janvier Frederick
Assistant Professor
Department of Business Studies, JSBS&C
SHUATS
Email-Id: abhishek.frederick@shiats.edu.in

STRUCTURE
9.1 Learning Objectives
9.2 Introduction to Employee Participation
9.3 Labour-Management Cooperation
9.4 Labor Participation Schemes
9.5 Constitutional and Legal Framework of Labour Participation
9.6 Difference between Indirect Representation and Direct Participation
9.7 Levels of Indirect Participation
9.8 Participation versus Collective Bargaining
9.9 Suggestion Scheme
9.10 Quality Circles
9.11 Labour Management Cooperation
9.12 Summary
9.13 Answers to In-Text Questions
9.14 Self-Assessment Questions
9.15 References
9.16 Suggested Readings

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 Employee Participation and Labour-Management Cooperation

Notes
9.1 Learning Objectives
 Understand the concept and requirement of employee engagement.
 Differentiate between participation and collective bargaining.
 Assess the level of quality in the product and services.

9.2 Introduction to Employee Participation

9.2.1 Concept
The concept of employee participation refers to the involvement of
employees in decision-making processes and organizational activities,
recognizing their contribution, insights, and perspectives as valuable
assets. Employee participation is not merely a form of involvement but
a broader concept that encompasses various mechanisms, ranging from
participation in decision-making at the managerial level to involvement
in day-to-day work processes. The aim is to create a workplace culture
that values collaboration, empowers employees, and enhances overall
organizational effectiveness. Several key aspects define the concept of
employee participation:

9.2.2 Decision-Making Involvement

Strategic Decisions: Involving employees in strategic decisions, such as
business planning and goal-setting, ensures that their diverse perspectives
contribute to the overall direction of the organization.
Operational Decisions: Employees are also encouraged to participate in
decisions related to their daily work, providing insights into improving
processes and workflow.

9.2.3 Team Collaboration

Cross-Functional Teams: Encouraging employees to work in cross-func-
tional teams promotes collaboration, enabling individuals from different
departments to contribute their expertise and insights to specific projects.

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Notes Brainstorming Sessions: Regular brainstorming sessions and team meet-

ings provide platforms for employees to voice their ideas and concerns,
fostering a culture of open communication and collaboration.

9.2.4 Employee Representation

Works Councils or Labor Unions: Some organizations establish works
councils or collaborate with labor unions to ensure that employees have
formal representation in discussions related to workplace policies, con-
ditions, and negotiations.
Employee Committees: Establishing committees or forums where em-
ployees can express their views on specific issues, such as health and
safety or employee benefits, allows for structured representation.

9.2.5 Suggestion Programs

Feedback Mechanisms: Creating channels for employees to submit sug-
gestions, feedback, and ideas ensures that their opinions are considered
in continuous improvement initiatives.
Recognitions of Contributions: Acknowledging and implementing valu-
able suggestions reinforces the idea that employee input is integral to
organizational success.

9.2.6 Employee Ownership and Profit-Sharing

Stock Options: Offering employees opportunities for stock ownership
can align their interests with the organization’s success, fostering a sense
of ownership and accountability.
Profit-Sharing Programs: Incentivizing employees through profit-sharing
programs ties individual and collective success to the financial well-being
of the organization.

9.2.7 Training and Development Opportunities

Skill Enhancement: Providing employees with opportunities for train-
ing and development allows them to acquire new skills and knowledge,

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 Employee Participation and Labour-Management Cooperation

contributing to their professional growth and enhancing their capacity to Notes

participate effectively.

9.2.8 Open Communication Channels

Regular Meetings: Conducting regular meetings, town halls, or forums
where leadership communicates organizational updates and employees
have the chance to ask questions and provide input fosters transparency
and inclusivity.
Digital Platforms: Leveraging digital platforms for communication, such
as intranets or collaborative tools, allows for continuous interaction and
information sharing.
Employee participation, when effectively implemented, contributes to
increased job satisfaction, employee engagement, and organizational in-
novation. It recognizes employees as valuable stakeholders and empowers
them to contribute actively to the success and growth of the organization.
Furthermore, a culture of employee participation aligns with principles
of workplace democracy, promoting a more inclusive and dynamic or-
ganizational environment.

9.3 Labour-Management Cooperation

Labour-management cooperation refers to the collaborative and constructive
relationship between workers and management within an organization. This
concept emphasizes the importance of open communication, mutual respect,
and joint decision-making to enhance the overall work environment and
organizational effectiveness. At its core, labour-management cooperation
seeks to bridge the traditionally perceived divide between workers and
management by fostering a culture of teamwork and shared goals.
One key aspect of labour-management cooperation is the establishment
of forums and mechanisms for dialogue, such as joint committees, works
councils, or employee representatives, where both parties can discuss
workplace issues, policies, and strategic decisions. These forums serve
as platforms for employees to voice their concerns, suggestions, and
feedback, while management can communicate organizational goals and
decisions transparently. Regular meetings and ongoing communication

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes channels ensure that the relationship is dynamic and responsive to the
evolving needs of both parties. Collaboration in decision-making is another
fundamental component of labour-management cooperation. By involving
employees in the decision-making process, particularly in matters that
directly impact their work, such as changes in work processes, health
and safety policies, or benefits packages, organizations can harness the
collective wisdom and experience of their workforce. This not only leads
to better-informed decisions but also instills a sense of ownership and
commitment among employees.
Effective labour-management cooperation goes beyond conflict resolution
and includes proactive efforts to improve working conditions, employee
satisfaction, and productivity. Initiatives such as joint training programs,
skill development opportunities, and wellness programs underscore a
commitment to the well-being and professional growth of the workforce.
Profit-sharing programs and employee ownership schemes are also com-
mon in environments that emphasize cooperation, aligning the interests
of workers with the success of the organization. In addition to tangible
benefits, labour-management cooperation contributes to the creation of a
positive workplace culture characterized by trust, mutual understanding,
and a shared commitment to organizational success. This collaborative
approach is particularly crucial during periods of organizational change,
such as restructuring or technological advancements, as it helps manage
transitions more smoothly and minimizes resistance.
Ultimately, labour-management cooperation is not a one-size-fits-all model
but requires a customized approach based on the unique characteristics of
the organization, industry, and workforce. Successful implementation often
depends on leadership commitment, effective communication strategies,
and a genuine recognition of the value that both workers and manage-
ment bring to the table. When done well, labour-management cooperation
fosters a harmonious and productive work environment, contributing to
the long-term success and sustainability of the organization.

9.4 Labor Participation Schemes

Labor participation schemes, also known as employee participation pro-
grams, are initiatives that encourage and facilitate the involvement of
workers in decision-making processes, creating a more inclusive and
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 Employee Participation and Labour-Management Cooperation

collaborative work environment. These schemes are designed to engage Notes

employees in various aspects of organizational functioning, from daily
operations to strategic planning. Here are some common types of labor
participation schemes:

9.4.1 Works Councils

Works councils are representative bodies elected by employees to engage
in discussions with management on matters such as working conditions,
organizational policies, and other workplace issues. Works councils
provide a formalized channel for employees to voice their concerns,
negotiate collective agreements, and contribute to decision-making
processes.

9.4.2 Joint Consultative Committees

Joint consultative committees bring together representatives from both
management and employees to discuss and collaborate on specific issues,
fostering dialogue and cooperation. These committees serve as forums
for exchanging information, addressing concerns, and finding mutually
agreeable solutions, enhancing overall workplace communication.

9.4.3 Employee Representatives on Boards

In some countries, employee representatives have the opportunity to sit
on the company’s board of directors, providing a direct voice in strategic
decision-making. This scheme ensures that employees’ perspectives are
considered at the highest levels of organizational governance.

9.4.4 Profit-Sharing Programs

Profit-sharing programs involve distributing a portion of the company’s
profits among employees, creating a sense of shared success and financial
alignment. By linking financial rewards to organizational performance,
profit-sharing programs motivate employees to actively contribute to the
company’s success.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes
9.4.5 Employee Stock Ownership Plans (ESOPs)
ESOPs allow employees to become partial owners of the company by ac-
quiring shares, fostering a sense of ownership, and aligning their interests
with the organization’s success. ESOPs encourage a long-term perspec-
tive and commitment among employees, as their financial well-being is
directly tied to the company’s performance.

9.4.6 Quality Circles

Quality circles involve small groups of employees who voluntarily meet
to identify and solve work-related problems, contributing to continuous
improvement. Quality circles empower employees to actively participate
in problem-solving, enhancing productivity and quality in their respective
areas.

9.4.7 Task Forces and Project Teams

Task forces and project teams bring together employees from different
departments to collaborate on specific projects or initiatives. By involving
employees with diverse skills and perspectives, organizations can leverage
collective intelligence to address challenges and drive innovation.

9.4.8 Employee Surveys and Feedback Mechanisms

Conducting regular employee surveys and establishing feedback mech-
anisms provide a platform for employees to express their opinions and
contribute ideas. Feedback mechanisms help organizations understand
employee sentiments, identify areas for improvement, and involve em-
ployees in decision-making processes.
Implementing effective labor participation schemes requires a commit-
ment to open communication, transparency, and a culture that values the
contributions of all employees. These schemes contribute not only to
better decision-making but also to increased employee engagement, job
satisfaction, and overall organizational success.

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IN-TEXT QUESTIONS Notes

1. A Society is a group of people who___

(a) Jargons live together in an organized way
(b) Making decisions about how to do things
(c) Sharing the work that needs to be done
(d) All of these.
2. Modern Society comprise of_______
(a) Agricultural Society
(b) Industrial Society
(c) Information Society
(d) All of these.

9.5 Constitutional and Legal Framework of Labour

Participation
The constitutional and legal framework for labor participation varies across
countries and is influenced by each nation’s legal system, constitution,
and labor laws. The foundation for labor participation typically rests on a
combination of constitutional provisions, labor laws, and regulations that
govern the relationship between employers and employees. Below are key
aspects of the constitutional and legal framework for labor participation:

9.5.1 Constitutional Provisions

9.5.1.1 Right to Association

Many constitutions recognize the right of workers to associate freely and
form trade unions. This right allows employees to collectively bargain
with employers and participate in the decision-making processes affecting
their working conditions.

9.5.1.2 Freedom of Speech and Expression

Constitutional guarantees of freedom of speech and expression often ex-
tend to the workplace, enabling employees to voice their opinions and
contribute to discussions on workplace matters.
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes
9.5.2 Labor Laws and Industrial Relations Legislation

9.5.2.1 Trade Union Laws

Most countries have specific laws that govern the formation, registration, and
functioning of trade unions. These laws often outline the rights and respon-
sibilities of unions and provide a legal framework for collective bargaining.

9.5.2.2 Collective Bargaining Laws

Legal provisions may establish the framework for collective bargaining
between employers and trade unions, defining the scope of negotiations
and the resolution of disputes.

9.5.2.3 Industrial Disputes Act

Many countries have legislation addressing industrial disputes, providing
mechanisms for dispute resolution, including conciliation, arbitration, and
strikes or lockouts.

9.5.3 Worker Representation Laws

9.5.3.1 Works Councils and Joint Consultative Committees

Some countries have laws that mandate or facilitate the establishment of works
councils or joint consultative committees. These bodies provide a structured
platform for worker representation and participation in decision-making.

9.5.3.2 Employee Representation on Boards

In certain jurisdictions, laws may require or allow for employee repre-
sentation on corporate boards, ensuring that workers have a direct role
in high-level organizational decision-making.

9.5.4 Occupational Health and Safety Regulations

9.5.4.1 Worker Participation in Health and Safety

Occupational health and safety regulations may include provisions for
worker participation in safety committees, inspections, and the develop-
ment of safety policies to ensure a safe working environment.

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 Employee Participation and Labour-Management Cooperation

Notes
9.5.5 Non-Discrimination Laws

9.5.5.1 Equal Opportunities and Anti-Discrimination Laws

Legal frameworks often include provisions aimed at preventing discrim-
ination in the workplace. These laws contribute to creating an inclusive
environment where all employees have an equal opportunity to participate
in decision-making processes.

9.5.6 Labor Standards and Working Conditions

9.5.6.1 Minimum Wage Laws

Regulations setting minimum wages may be in place to ensure fair com-
pensation for workers, contributing to discussions on remuneration.

9.5.6.2 Working Hours and Conditions

Laws regulating working hours, breaks, and conditions of employment
may be designed to protect workers’ well-being and provide a basis for
worker input.

9.5.7 Whistleblower Protection Laws

9.5.7.1 Protection for Reporting Wrongdoing

Laws protecting whistleblowers create an environment where employees
feel secure reporting unethical or illegal practices, contributing to orga-
nizational transparency and accountability.

9.5.8 Privacy Laws

9.5.8.1 Employee Privacy Protections

Legal frameworks may include provisions protecting the privacy of em-
ployees, ensuring that information shared during participation processes
is treated confidentially.
The effectiveness of the constitutional and legal framework for labor
participation depends on factors such as enforcement mechanisms,

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes adherence to international labor standards, and the cultural context

within each jurisdiction. Organizations, employees, and trade unions
often navigate this framework to establish constructive labor-man-
agement relations, fostering a work environment that values collab-
oration, employee voice, and fair representation in decision-making
processes.

9.6 Difference between Indirect Representation and Direct

Participation

Basis Indirect representation Direct participation

1. Nature of Involves the representation Involves the direct involve-
Involvement of employees by designat- ment of individual employ-
ed representatives, such as ees or groups of employees
trade unions, works coun- in decision-making process-
cils, or employee represen- es. It emphasizes a more
tatives. These representa- hands-on approach, allow-
tives act as intermediaries ing employees to express
between the employees and their opinions, contribute
the management, conveying ideas, and participate di-
the views and concerns of rectly in discussions and
the workforce decisions
2. Representa- Relies on established struc- Does not necessarily rely
tion Mechanism tures and mechanisms, such on intermediaries. In-
as trade unions or works stead, it encourages di-
councils, to represent the rect engagement between
collective interests of em- individual employees or
ployees. These represen- employee groups and the
tative bodies negotiate on management, fostering
behalf of employees in mat- open communication and
ters such as wages, working collaboration
conditions, and workplace
policies

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Basis Indirect representation Direct participation Notes

3. Decision- Involves a more formalized Encourages a more decen-
Making process where representa- tralized and participatory
Process tives negotiate and bargain decision-making process.
with management on behalf Employees have a direct
of the entire workforce. role in providing input,
Decisions are often made sharing feedback, and in-
through collective bargain- fluencing decisions that
ing, and the outcomes affect impact their specific roles
all employees represented or departments
by the designated body
4. Flexibility May offer less individu- Provides more room for
and Individual al flexibility, as decisions individual employees or
Involvement are often negotiated collec- groups to express their
tively, and the focus is on unique perspectives and
broader workforce interests. preferences. It recognizes
Individual preferences may the diversity of views within
be subsumed under collec- the workforce and allows
tive agreements for a more tailored approach
to employee involvement
5. Communica- Involves a hierarchical Emphasizes a more hori-
tion Flow communication flow, where zontal communication flow,
information is transmitted fostering direct communi-
from employees to represen- cation between employees
tatives and then to manage- and management. This ap-
ment. Similarly, decisions proach facilitates quick-
and outcomes flow back er and more immediate
through the same channels exchanges of ideas and
feedback
6. Conflict Representatives play a Promotes a culture where
Resolution crucial role in resolving conflicts can be resolved
conflicts and negotiating through direct communi-
solutions. Disputes are often cation and collaboration.
addressed through collective Employees may have a more
bargaining or established active role in finding resolu-
grievance procedures tions to issues that arise in
their specific work context

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes
9.7 Levels of Indirect Participation
Indirect participation of employees involves representation through in-
termediaries or representative structures rather than direct involvement
in decision-making. The levels of indirect participation can vary based
on the type of representative bodies or mechanisms in place within an
organization. Here are different levels of indirect participation:
Trade Unions: Trade unions are organizations formed by workers to
represent their collective interests and negotiate with employers on issues
such as wages, working conditions, and benefits.
Level of Indirect Participation: Trade unions operate at a high level
of indirect participation, representing the collective interests of their
members in negotiations and discussions with employers. They play
a vital role in shaping policies and agreements that affect the entire
workforce.

Works Councils
Description: Works councils are representative bodies elected by em-
ployees to discuss and negotiate matters related to working conditions,
health and safety, and other workplace issues.
Level of Indirect Participation: Works councils operate at an inter-
mediate level of indirect participation. While they represent employees
collectively, their focus is often on specific workplace issues. Works
councils may have a role in shaping policies at the organizational level
but with a more localized impact.

Employee Representatives
Description: Some organizations designate individual employees as
representatives to voice the concerns and opinions of their peers during
discussions with management.
Level of Indirect Participation: Employee representatives operate at
a more localized level of indirect participation. They often participate
in decision-making processes that impact specific departments or teams
within the organization.

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Joint Consultative Committees Notes

Description: Joint consultative committees bring together representatives
from both management and employees to discuss and collaborate on
specific issues or policies.
Level of Indirect Participation: Joint consultative committees operate
at a moderate level of indirect participation. They provide a structured
forum for dialogue between management and employee representatives,
facilitating input on various workplace matters.

Advisory Boards
Description: Advisory boards may include employee representatives along
with other stakeholders, providing advice and input on organizational
strategies or decisions.
Level of Indirect Participation: Advisory boards operate at a higher
level of indirect participation, as they contribute to strategic discussions
and decision-making. While not decision-makers themselves, employee
representatives on advisory boards offer valuable perspectives.

Employee Surveys and Feedback Mechanisms

Description: Organizations may utilize surveys and feedback mechanisms
to gather input from employees on various aspects of the workplace,
without necessarily having designated representatives.
Level of Indirect Participation: Employee surveys and feedback mecha-
nisms operate at a lower level of indirect participation. While they allow
for the collection of employee opinions, the influence on decision-making
is indirect and may not involve a formal representative structure.

Profit-Sharing Committees
Description: In organizations with profit-sharing programs, committees
may be formed to discuss and decide on the distribution of profits among
employees.
Level of Indirect Participation: Profit-sharing committees operate at
a moderate level of indirect participation, involving representatives or
committee members in decisions related to financial incentives for em-
ployees.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes The effectiveness of these levels of indirect participation depends on the

organizational context, legal frameworks, and the extent to which em-
ployees feel their interests are adequately represented. A well-designed
system of indirect participation can contribute to better workplace relations,
improved decision-making, and a more inclusive organizational culture.

9.8 Participation versus Collective Bargaining

Participation and collective bargaining are two distinct approaches to em-
ployee involvement in decision-making processes within an organization.
While both aim to give employees a voice, they differ in their nature,
scope, and mechanisms.
Participation: Participation refers to a broader concept that involves em-
ployees in discussions, decision-making, and collaborative efforts without
necessarily involving formal negotiations or bargaining. It emphasizes
creating a workplace culture where employees have the opportunity to
contribute ideas, share feedback, and influence decisions that affect their
work and the overall organization. Participation can take various forms,
such as employee suggestion programs, regular team meetings, and
involvement in decision-making committees. It aims to foster a sense
of ownership, engagement, and mutual respect between employees and
management. Participation is often more inclusive and decentralized, en-
couraging employees to actively contribute to the organization’s success
by providing their insights and perspectives.
Collective Bargaining: Collective bargaining, on the other hand, is a
more specific and formalized process typically associated with labour
unions or worker representatives negotiating with employers on terms and
conditions of employment. It is a structured dialogue focused on reach-
ing agreements, usually in the form of collective bargaining agreements
(CBAs), which outline terms related to wages, working hours, benefits,
and other employment conditions. Collective bargaining is often legally
regulated, with both parties obligated to negotiate in good faith. This
process is common in industries where unions play a significant role in
representing the interests of workers. While collective bargaining is a
powerful tool for addressing specific labour issues, it may not encompass
the broader range of topics covered in participation initiatives.

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 Employee Participation and Labour-Management Cooperation

Notes
9.9 Suggestion Scheme
Employee suggestion schemes, also known as suggestion programs or
idea programs, are initiatives implemented by organizations to encourage
employees to contribute innovative ideas, improvements, and solutions
for the betterment of the workplace. These programs create a platform
for employees to share their insights, foster a culture of continuous im-
provement, and enhance overall organizational performance. Here are key
components and benefits of suggestion schemes:

Components of Suggestion Schemes

Open Communication Channels: Establish open and accessible channels
through which employees can submit their suggestions. This can include
suggestion boxes, digital platforms, or designated suggestion submission
forms.
Recognition and Rewards: Recognize and reward employees for their
valuable contributions. Acknowledging and appreciating the efforts of
employees who submit successful suggestions can motivate others to
participate.
Clear Guidelines: Provide clear guidelines on the types of suggestions
sought, the submission process, and the criteria for evaluation. Clarity
ensures that employees understand what is expected and how their ideas
will be assessed.
Feedback Mechanism: Implement a feedback mechanism to keep em-
ployees informed about the status of their suggestions. Whether accept-
ed or rejected, providing feedback fosters transparency and encourages
ongoing participation.
Cross-Functional Involvement: Encourage suggestions that span vari-
ous departments and functions. Cross-functional involvement ensures a
diverse range of perspectives and promotes holistic improvements across
the organization.
Periodic Reviews and Assessments: Conduct regular reviews and as-
sessments of submitted suggestions. Periodic evaluations help prioritize
actionable ideas and ensure the continuous flow of innovation.

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Notes Integration with Organizational Goals: Align the suggestion scheme with
organizational goals and priorities. This ensures that the ideas submitted
are in line with the strategic objectives of the organization.

Benefits of Suggestion Schemes

Employee Engagement: Suggestion schemes enhance employee engage-
ment by involving them in the decision-making process and making them
feel valued for their contributions.
Continuous Improvement: Organizations can leverage employee sug-
gestions to make incremental improvements in processes, products, or
services, contributing to overall organizational excellence.
Innovation and Creativity: Fosters a culture of innovation and creativ-
ity as employees are encouraged to think outside the box and contribute
ideas that can drive positive change.
Increased Productivity: Implementing successful suggestions can lead
to increased efficiency, streamlined processes, and ultimately, improved
productivity within the organization.
Employee Empowerment: Suggestion schemes empower employees by
giving them a platform to share their ideas, fostering a sense of ownership
and pride in contributing to the success of the organization.
Improved Workplace Morale: Recognition and rewards associated with
successful suggestions positively impact workplace morale, creating a
positive and collaborative work environment.
Cost Savings: Implementing cost-saving suggestions can lead to financial
benefits for the organization, making the suggestion scheme a strategic
tool for operational efficiency.
Talent Retention: Engaged and empowered employees are more likely
to stay with the organization. Suggestion schemes contribute to talent
retention by creating a positive and innovative workplace culture.

9.10 Quality Circles

Quality Circles (QCs) represent a participatory and collaborative approach
to quality management within an organization. Originating in Japan in
the 1960s, QCs are structured groups of employees who come together

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 Employee Participation and Labour-Management Cooperation

voluntarily to identify, analyse, and solve work-related issues, particularly Notes

those related to quality improvement. The primary goal of Quality Circles
is to tap into the collective knowledge, skills, and insights of frontline
workers, empowering them to actively contribute to the continuous im-
provement of processes and products.
Typically comprising 6 to 12 members, Quality Circles operate on the
principle that those closest to the work processes are often best positioned
to identify opportunities for improvement. The structure of these circles
is democratic, with members engaging in regular meetings to discuss
challenges, brainstorm solutions, and implement changes. The activities
of Quality Circles are often guided by a systematic problem-solving ap-
proach, such as the Plan-Do-Check-Act (PDCA) cycle.
Quality Circles address a wide range of issues, from production inef-
ficiencies and defects to workplace safety concerns. The emphasis is
not only on problem-solving but also on preventive measures to ensure
sustained improvements. These circles operate independently of the
traditional hierarchy, fostering a sense of ownership and responsibility
among employees for the quality of their work. Effective Quality Cir-
cles exhibit several key characteristics. First, they require management
support to create an environment conducive to open communication and
experimentation. Second, successful circles have clear objectives aligned
with organizational goals, ensuring that their efforts contribute to broader
strategic objectives. Third, Quality Circles thrive on continuous learning,
often engaging in training programs to enhance problem-solving skills
and team dynamics.
The benefits of Quality Circles extend beyond immediate problem-solv-
ing. They contribute to increased employee engagement, job satisfaction,
and skill development. By involving employees in decision-making
processes, Quality Circles create a culture of shared responsibility and
collaboration. Additionally, organizations that implement Quality Circles
often observe improvements in efficiency, reduced defects, and a more
proactive approach to quality management. However, challenges may
arise in implementing and sustaining Quality Circles, including resistance
to change, lack of management commitment, and the need for contin-
uous support and recognition. Overcoming these challenges requires a

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Notes long-term commitment to the principles of employee involvement and

continuous improvement.

9.11 Labour Management Cooperation

Labour-management cooperation at both the shop floor level and the com-
pany level is crucial for fostering positive workplace relations, improving
productivity, and creating a harmonious working environment. These two
levels of cooperation involve distinct strategies and mechanisms, each
playing a vital role in ensuring effective communication, resolving con-
flicts, and enhancing overall organizational performance.

Labour Management Cooperation at the Shop Floor Level

At the shop floor level, labour-management cooperation is often more
immediate and involves collaboration between frontline workers and their
immediate supervisors or team leaders. Key elements of cooperation at
this level include:
Team Meetings and Huddles: Regular team meetings and huddles pro-
vide a platform for shop floor employees to discuss work-related issues,
share updates, and contribute ideas for process improvement.
Problem-Solving Teams: Forming small problem-solving teams at the
shop floor level allows employees to address specific challenges or in-
efficiencies in their daily work. This collaborative approach promotes
shared responsibility for solutions.
Suggestion Programs: Implementing suggestion programs encourages
shop floor employees to submit ideas for improving processes, safety, or
efficiency. Recognizing and implementing valuable suggestions reinforces
a culture of collaboration.
Training and Skill Development: Providing opportunities for training
and skill development enhances the capabilities of shop floor workers,
making them more equipped to contribute to the improvement of work
processes.
Health and Safety Committees: Establishing health and safety com-
mittees involving both workers and management ensures a cooperative
approach to maintaining a safe working environment. This collaborative
effort contributes to the well-being of employees.

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 Employee Participation and Labour-Management Cooperation

Labour Management Cooperation at the Company Level Notes

At the broader company level, cooperation involves higher-level man-
agement and representatives of workers or their unions. Key elements
of cooperation at this level include:
Collective Bargaining: Engaging in collective bargaining negotiations
addresses issues related to wages, benefits, and working conditions. This
formalized process ensures that both workers and management have a
say in shaping the terms of employment.
Works Councils and Joint Committees: Works councils or joint com-
mittees provide a structured platform for representatives of workers and
management to discuss broader organizational policies, strategic goals,
and other matters affecting the entire workforce.
Employee Representation on Boards: Including employee representatives
on the company’s board of directors ensures that the voice of the workforce
is heard at the highest decision-making levels. This enhances transparency
and aligns organizational strategies with the interests of employees.
Strategic Planning Sessions: Involving representatives from both labour
and management in strategic planning sessions ensures that the organi-
zation’s goals are understood and supported by all stakeholders. This
cooperation is essential for achieving long-term objectives.
Employee Assistance Programs (EAPs): Implementing EAPs addresses
broader concerns related to employee well-being and work-life balance.
This cooperation at the company level demonstrates a commitment to
supporting employees beyond their immediate work responsibilities.
Training for Leadership and Communication: Providing training for
both management and employee representatives in effective leadership
and communication fosters a collaborative environment, ensuring that
both parties can engage in constructive dialogue.
Effective labour-management cooperation at both levels requires a commit-
ment to open communication, mutual respect, and a shared understanding
of organizational goals. It is an ongoing process that involves building
trust, addressing concerns, and continually adapting to the evolving needs
of the workforce and the organization as a whole. Successful cooperation
contributes to a positive workplace culture, increased employee satisfac-
tion, and improved organizational performance.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes CASE STUDY: ABC MANUFACTURING

In the manufacturing sector, ABC Manufacturing stands out as an
exemplary model in implementing a robust quality circle within its
operations. Committed to continuous improvement and excellence, the
company established a quality circle program that has significantly
impacted its production processes and employee engagement. The
quality circle at ABC Manufacturing comprises cross-functional teams
of employees from various departments, encouraging a diverse range
of perspectives. These teams meet regularly to identify, analyse, and
solve quality-related issues in the production line. This collaborative
approach not only enhances problem-solving capabilities but also fosters
a sense of ownership and teamwork among employees. One notable
success of the quality circle was the reduction in product defects by
30% within the first year of implementation. The team identified bot-
tlenecks in the manufacturing process, proposed innovative solutions,
and collaborated with management to implement changes swiftly. This
not only led to cost savings but also improved the overall quality of
the final products, enhancing customer satisfaction.
The company has also prioritized training and development for qual-
ity circle members, providing them with tools and methodologies to
enhance their problem-solving skills. This investment in employee
skills not only contributes to the success of the quality circle projects
but also empowers employees to take on more significant respon-
sibilities within the organization. Furthermore, ABC Manufacturing
has established a feedback loop between the quality circle teams and
upper management, ensuring that the insights and recommendations
from the front lines are considered in strategic decision-making.
This transparent communication channel has facilitated a culture of
continuous improvement and innovation throughout the organization.
QUESTIONS:
1. What is the role of quality circle concept for ABC manufacturing?
Elaborate.
2. What were the benefits of establishing feedback loop between
quality circle teams and upper management? Explain.

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 Employee Participation and Labour-Management Cooperation

Notes
9.12 Summary
Employee participation and labour-management cooperation are integral
components of fostering a positive and collaborative work environment
within organizations. Employee participation encompasses various initia-
tives aimed at involving individuals in the decision-making processes that
directly impact their work and the overall functioning of the organization.
This may include mechanisms such as team meetings, suggestion programs,
and feedback channels that empower employees to contribute ideas, share
insights, and actively engage in discussions related to workplace policies,
processes, and improvements. The essence of employee participation lies
in creating an inclusive culture where every employee feels valued, heard,
and connected to the broader goals of the organization.
Labour-management cooperation extends this collaborative spirit to the
relationship between employees and management, operating at both the
shop floor and company levels. It involves mechanisms such as collective
bargaining, works councils, joint committees, and regular communication
forums where representatives from both labour and management collabo-
ratively address challenges, negotiate fair terms of employment, and align
organizational strategies with the interests of the workforce. The goal is to
create a cooperative and harmonious working environment, ensuring that
decisions are made through mutual understanding and that the interests
of both parties are taken into account. Successful labour-management
cooperation is characterized by open communication, trust-building, and
a shared commitment to the overall success and sustainability of the
organization. Together, employee participation and labour-management
cooperation contribute to improved workplace relations, increased employee
satisfaction, and a culture of collaboration that enhances organizational
effectiveness and performance.

9.13 Answers to In-Text Questions

1. (d) All of these.
2. (c) Information Society
3. (a) Liber

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes 4. (d) All of these.

5. (a) Social Institution
6. (c) Educational Development

9.14 Self-Assessment Questions

1. Explain the constitutional and legal framework of labour participation.
2. Discuss the various labour participation schemes.
3. What do you mean by suggestion scheme? Elaborate its various
components.
4. What is role of labour-management cooperation for an organisation?
Explain.

9.15 References
 Begega, S. G. and Aranea, M. (2018). “The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?”, Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151.
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R., & Cao, Q. (2021).
“What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany”, Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090.
 Valizade, D., Cook, H., Forde, C., & MacKenzie, R. (2023).
“Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work
systems?”, Journal of Organizational Effectiveness: People and
Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278.
 Yuan, L., Yu, Y., Li, J., & Ning, L. (2014), «Occupational commitment,
industrial relations and turnover intention: Empirical evidence
from China», Chinese Management Studies, Vol. 8 No. 1, pp. 66-
84. https://doi.org/10.1108/CMS-08-2011-0065.

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 Employee Participation and Labour-Management Cooperation

Notes
9.16 Suggested Readings
 Bhatnagar, J. (2007). “Managing Human Resources in the Emerging
Knowledge Economy: Challenges, Strategies, and Solutions.” ICFAI
University Press.
 Boxall, P., & Purcell, J. (2011). Strategy and human resource
management. Palgrave Macmillan.
 Hegde, R. S. (2006). “Industrial Relations in India: A Review.” Indian
Journal of Industrial Relations, 41(3), 307-319.
 Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and
Organizations: Software of the Mind. McGraw-Hill.
 Dwivedi, R. S. (2019). “Human Resource Management in the New
Millennium.” PHI Learning Pvt. Ltd.

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 L E S S O N

10
Grievance and
Discipline Handling
Dr. Jagrati Asija
Assistant Professor
Dr. Bhim Rao Ambedkar University, Agra
Email-Id: asijajagrati94@gmail.com

STRUCTURE
10.1 Learning Objectives
10.2 Introduction
10.3 Nature, Causes and Types of Grievances
10.4 How to Manage Employee Grievances
10.5 Grievance Procedure
10.6 Guiding Principles of Grievance Procedure
10.7 Interest Issues and Right Issues
10.8 Managing Discipline
10.9 Different Types of Approaches
10.10 Different Types of Punishments
10.11 Summary
10.12 Answers to In-Text Questions
10.13 Self-Assessment Questions
10.14 References
10.15 Suggested Readings

10.1 Learning Objectives

 To discuss the nature and causes of grievance.
 To understand the role of grievance handling procedure within an organization.

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 To understand different approaches of discipline. Notes

 To describe methods to managing discipline.

10.2 Introduction
A word used to describe situations in which an employee is dissatisfied
with their working conditions is “employee grievance.” Employee com-
plaints may result from a variety of issues, including excessive work
hours, broken promises from management, discriminatory treatment during
promotions, and unfavourable working conditions. Employee grievanc-
es, which reflect circumstances in which workers feel unsatisfied with
their working conditions, are an important part of workplace dynamics.
When an employee believes that anything unfair or inaccurate is occur-
ring or is likely to occur in their workplace, they have the right to file
an employee grievance. It’s more than simply being unhappy. When an
employee’s expectations of their employment are not met, they might
file an employee grievance.
Unhappiness and dissatisfaction among employees can take many differ-
ent forms. Employees who feel that something unfair or inappropriate is
happening may not always express it openly. They think it may affect
the person as well as the whole organization. Employee grievances are
signs of possible problems inside the company. It is not merely individ-
ual complaints.
Building a secure, open, and equitable work environment is mostly the
responsibility of all organizations. Grievances arise when workers and
employees feel that their expectations and the actual conditions of their
workplace are not aligned. Irrespective of the validity of the complaints,
they must be handled carefully, as they may have a harmful effect on an
employee’s motivation and create a hostile work environment. Employee
complaints that remain unresolved might become bigger problems for the
organization.
Having efficient procedures to address such issues quickly is crucial for
organizations. Maintaining employee relations requires a well-established
grievance procedure that offers a systematic approach for grievances to
be presented to the attention of management. Organizations may promote
a work culture that prioritizes employee well-being and guarantees a

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Notes more peaceful, effective, and productive workplace by recognizing these

issues and resolving them through a proper grievance system. Reducing
employee complaints requires firms to develop a culture of trust, happi-
ness, and creativity among their workforce. Its ignorance can lead to a
harmful work atmosphere and negatively impact employees’ performance.

Definitions
1. A grievance is any unhappiness or sense of unfairness regarding
one’s work conditions that has been brought to management’s
concern.—Dale S Beach.
2. Any unhappiness or discontent, whether voiced or not, and regardless
of its validity, resulting from anything related to the business that
an employee perceives as unfair, unjust, or insufficient.—Michael
Jucius.
3. A grievance is a formal complaint that an employee files to protest
about unjust treatment.—Dale Yoder.
4. A grievance is any actual or imagined personal unjust treatment an
employee feels in his working connection. Keith Davis 5. Grievances
include complaints about compensation, overtime, leaves, promotions,
transfers, seniority, work assignments, and terminations that impact
one or more specific employees.—The National Labor Commission.

10.3 Nature, Causes and Types of Grievances

Nature
1. Grievance refers to an employee’s sense of unhappiness and dissatisfaction.
2. The source of the unhappiness must be related to work and the
workplace.
3. There are both imagined and genuine causes for the unhappiness.
4. The reasons for employee grievances may be valid or invalid,
reasonable or illogical, and justifiable or ridiculous.
5. There are formal channels in organizations where employees can voice
grievances or feelings of injustice about their working conditions.
6. There are two methods to communicate employee grievances: oral
and written.
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7. It is very important to solve grievances. Unresolved grievances can Notes

result in decreased employee morale and productivity.
8. Employee grievances can create an unhealthy work environment.
9. Acknowledging and addressing employee grievances is crucial for
a harmonious work culture.
10. Employee grievances can be personal or professional.

Causes of Grievance
There are many causes for grievances, and the classification is as follows:
1. Economic causes: Bonuses, salary modifications, extra hours, salary
fixation, increments, payments, pending dues, etc.
2. Workplace Dynamics: The nature of the job, safety equipment,
the state of the physical office space, strict production standards,
disciplinary measures, unjust rules, employment conditions, the
impact of trade unions, low-quality materials, rule compliance, etc.
3. Management Policy: Salary schedules, vacation time, extra hours,
shifts, incentives, downsizing, terminations, uncertain roles, fines,
management duties, company policies and procedures, and so on.
4. Supervision: This refers to the supervisor’s behavior toward the
employee, including training, mentoring, coaching, leading, and
perceived prejudice, favoritism, and regional sentiment.
5. Work Group Causes: Disagreement in the work group, disregard,
disarray, victimization, humiliation, psychological factors, etc.
6. Personal Causes: This includes things like over ambition, an
unrealistic sense of self-worth, an impractical outlook on life, low
self-esteem, etc.
7. Other Causes: Medical facilities, hazards, conditions of work, stability
of service, sanctions, leave, retirement, supersession, relocation,
unfair treatment by society, collective bargaining agreements, federal
or state laws, etc.

10.4 How to Manage Employee Grievances

Employee complaints are fundamentally human problems, whether they
are imagined or real. Regardless of the reason, a humane approach should

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Notes be taken. Sensitivity and empathy are necessary for handling grievances
carefully and thoughtfully. There is no set formula or method for han-
dling them, but there are some tried-and-true strategies that can be used:
First and foremost, employee grievances must be handled promptly. An
employee who feels unfairly treated suffers from a sense of injustice.
Remember the proverb, “Justice delayed is justice denied?” So organi-
zations should handle grievances promptly.
Secondly, it is important to resolve employee issues at the source to
prevent a sense of unfairness within the interacting group. Employees
who have grievances against or with supervisors and who are not able to
address them at the supervisor’s level—rather, one or two levels above
it—remain dissatisfied with the supervisor in question. Since someone
else carried out the action, the loyalty shifts. Supervisory power gets
compromised in the process. Therefore, it is essential that the issues get
addressed, ideally at the level where they arise.
Thirdly, it is crucial to record issues as soon as they arise in order to
ensure that they don’t happen again. The emphasis should move from the
individual and the grievance method to the policy and procedures if the
same issue consistently arises and more employees are experiencing the
same concern. It means a number of employees are still irritated by an
outdated regulation. Instead of getting weighed down in resolving each
and every issue, it is therefore appropriate to review the specific features
of the policy and adjust or modify the same. If a certain complaint has a
tendency to repeat, prevention is a better course of action than treatment.

IN-TEXT QUESTIONS
1. Unresolved grievances can result in _________
(a) Satisfaction
(b) Sense of happiness
(c) Decreased employee morale and productivity
(d) Healthy work culture
2. Negative discipline means using _________ to compels employees
to follow policies and procedures.
(a) Rewards
(b) Punishments

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(c) Force Notes

(d) All of these

3. In the grievance procedure, who takes the final decision if the
grievance is not solved by the Central Works Committee and
top management and union officials?
(a) Departmental Head
(b) Shift in-charge
(c) Union Representatives
(d) Chairman of the Company
4. Which disciplinary action is an advancement of the corrective
disciplinary action?
(a) Progressive Discipline
(b) Hot Stove Rule
(c) Negative Discipline
(d) None of the Above
5. Which is not the economic cause of Grievance?
(a) Salary
(b) Extra Hours
(c) Management Policy
(d) Increments

10.5 Grievance Procedure

Grievance procedures are the most significant means of communicat-
ing disappointment and unhappiness. An employee has a channel and
a chance to express their issues through a grievance procedure. Most
managers struggle with deciding whether and to what extent to support
or discourage grievances. Unions will raise issues on behalf of employees
if management fails to push them to do so. Ignoring complaints involves
discouraging staff members from filing them. Management finds it difficult
to handle them effectively when they heat and boil. In order to handle
grievances, it is crucial to set up a good grievance procedure. Following
is a grievance procedure suggested by Monaappa (1985):
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Notes Stage I: The worker files the grievances and submits them to shift
in-charge.
Stage II: Worker, if unsatisfied approaches, the department head.
Stage III: If the worker is not satisfied, a unanimous decision binding
on both parties goes to management and five union representations.
Stage IV: No unanimous decisions binding on both parties approaches
the Central Works Committee and top management and union officials.
Stage V: Final Decision taken by the Chairman of the Company
In order to manage and resolve worker issues, our organization has a multi-
stage grievance system. When a worker encounters a problem in Stage
I, they must submit a formal grievance and give it to the shift in-charge
right away. In Stage II, the employee approaches the department head to
discuss the issue if they are still not satisfied with the Stage I agreement.
If the employee is still not pleased at Stage II, they take their issue to
management with the help of five union members, which is Stage III.
At this point, a decision that is agreed upon by all parties is final. If
a majority decision is not reached, the issue is raised with the Central
Works, and Stage IV is started. In order to aid in the settlement, union
representatives and upper management are involved at this point.
The last step, known as Stage V, is reached if a conclusion that is agreed
upon by all parties is not achieved at Stage IV. The company’s chairman
is responsible for reaching the ultimate decision. This thorough grievance
procedure offers several chances for settlement at different levels of the
organizational hierarchy, ensuring a methodical and equitable approach
to issue resolution.

Importance of Grievance Procedure

Organizations in India have the option to address or redress issues through
established grievance processes and procedures. Open communication is
the means by which issues can be resolved through a formal grievance
procedure. It gives employees an opportunity to express appreciation
to management in front of the group. Managers and supervisors are in
charge of handling grievances. They must get training on how to address
complaints. Understanding the various types of management and employee
concerns is beneficial.

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For the benefit of the organization, a formal grievance procedure should Notes
be adopted or followed.

10.6 Guiding Principles of Grievance Procedure

Employees have the option to file a grievance with their employer if they
believe they have been wronged in any way, including by an improper
pay check, a difficult task, or sexual harassment.
The investigator is required to abide by certain rules as part of this offi-
cial grievance procedure. The procedures and rules of various companies
vary. Contracts frequently specify grievance procedures, and as such, they
must be adhered to.
The following guidelines should be considered in a grievance procedure:
1. Adherence to the current law: an integrated plan designed to foster
positive relationships between employers and employees includes a
grievance procedure. This procedure may, where practical, make use
of any machinery already provided by law and should be intended
to supplement the current statutory provisions.
When a worker receives an order that gives rise to a grievance, they are
eligible to use the grievance machinery. However, the implementation
has to wait until all of the grievance channels have been used. Whenever
possible, efforts should be made to finish the grievance process in the
interim between the passing and its implementation.
2. The machinery must be made quick and easy to use: Grievances
should, whenever feasible, be resolved at the lowest level. Normally,
only one appeal should be made, meaning that no matter should be
pursued at more than two levels. Various grievances may be directed
to the proper authorities. A grievance must be resolved as soon
as possible, and in order to do this, the employer and employees
should determine the time frame within which a grievance must be
resolved.
3. Authority classification: It should be the responsibility of management
to identify the authorities who can be contacted at different levels
so that employees are aware of which authorities to approach.
Sorting grievances according to their source—personal relationships versus
employment conditions—might be helpful. When it comes to the former
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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes scenario, the person who is directly above the officer who is the subject
of the complaint should be the first to address a grievance. The issue may
then be brought before the Grievance Committee, which is made up of
representatives of the workforce and management. The person assigned
by management to handle other grievances should be contacted first. A
referral to the Grievance Committee may then be made.
Initially, an appeal will be filed with the senior management when the
case is brought before the Grievance Committee.

10.7 Interest Issues and Right Issues

As we all know grievance is a formal oral or written complaint sub-
mitted by an employee regarding their working conditions, actions, or
any other employment-related issue. In order to maintain fair collective
labour relations at work, grievance management is crucial. The ultimate
objective of grievance management is to maintain the current norms and
regulations. It is not about establishing new law or regulation for every
new grievance.

Interest Issues
In the framework of labour relations, an interest grievance occurs when
there is dissatisfaction or discontent among employees over their condi-
tions of work, especially when such issues go beyond simple contractual
violations. An interest grievance arises when workers, while adhering to
rules and agreements, argue that more general aspects of their job cir-
cumstances, such as salaries, are inadequate.
For example, if an organization fails to pay employees at the appropriate
rates as specified in a collective bargaining agreement that governs its
operations. This may result in interest issues of grievance. Even if an
organization complies with all legal requirements for pay rates, employees
may still think that these pays are excessively low then the employees
engage in an interest dispute, which is a distinct type of conflict, rather
than a grievance, if the employer refuses to raise salaries.

Right Issues
Recognising and understanding certain rights is necessary when handling
grievances in the organizational culture. The following are some of the
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most important rights related issues an organization should concern oth- Notes
erwise these all may result in grievances.
This issue is related to the right of being heard. The right to have their
complaints heard by the relevant parties is guaranteed to all individuals.
This includes the freedom to offer evidence, present witnesses, and dis-
cuss their points of view.

10.8 Managing Discipline

The control and modification of human behavior to achieve a predetermined
performance is known as discipline. The true goal of discipline is really
straightforward. Its goal is to motivate staff members to uphold the defined
benchmarks for job performance and act responsibly and safely while on the
job. Any planned collective action requires discipline. Employee education
that fosters self-control, devotion, and proper behavior is known as discipline.
Discipline is just orderly behavior put simply. It suggests that worker
conduct lacks the presence of disorder, irregularity, and ambiguity. Work-
ers who follow policies and procedures are rewarded with recognition,
job stability, and frequent promotions. Individuals who fail to adhere to
established guidelines or meet performance standards face consequences
that make it evident to them what constitutes appropriate behavior and
performance. The majority of workers accept this method as a valid
means of maintaining law and order as well as ensuring that everyone
is working toward the same standards and objectives of the company.
An effective hospitality organization’s foundation is its employees’ dis-
cipline. Actually, maintaining an organization’s profitability, efficiency,
and smooth operation is management’s primary responsibility. This can
only be accomplished if the workforce is willing to adhere to a set of fair
workplace behaviour standards. When subordinates are willing to follow
the guidelines and directives of their superiors and adhere to the policies
and procedures of the company, they can perform their jobs effectively.

Definition
1. “Discipline is the force that prompts an individual or a group to
observe the rules, regulations and procedures which are deemed to
be necessary to the attainment of an objective.”—Dr. Spriege.

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Notes 2. “Discipline is the force that prompts individuals or groups to observe

rules, regulations, standards and procedures deemed necessary for
an organization.”—Richard D. Calhoon.
3. “Discipline is the orderly conduct of affairs by the members of an
organization who adhere to its necessary regulations because they
desire to cooperate harmoniously in forwarding the end which the
group has in view, and willingly recognize that, to do this, their
wishes must be brought into a reasonable unison with the requirements
of the group in action.”—Ordway Tead.
4. “Discipline is a procedure that corrects or punishes a subordinate
because a rule of procedure has been violated.”—Dessler.
5. “Discipline should be viewed as a condition within an organisation
whereby Employees know what is expected of them in terms of the
organization’s rules, Standards and policies and what the consequences
are of infractions.”—Rue and Byars.

Features
From the above definition we can conclude discipline has following
features:
1. Organized behavior is the goal.
2. The group’s objective is for organized behavior.
3. Maintaining order helps the company achieve its objectives.
4. Members do not require disciplinary action when they follow the
rules and behave responsibly. This demonstrates self control.
5. Punitive measures are required to address rule and regulation violations
by certain individuals.

Objectives
Following are the main objectives of maintaining discipline:
1. To establish guidelines and directives.
2. To encourage an employee to adhere to the performance requirements
set up by the company.
3. To make sure that the organization operates efficiently.
4. To boost productivity.

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5. To create an environment at work where performance is enhanced. Notes

6. Promote industrial peace.
Discipline is the employees’ adherence to the policies, procedures, guide-
lines, and standards set by the management. When there are deviations
from the norm—misconduct—especially from the previous standing orders,
the management takes disciplinary action.
Disciplinary Actions: Every instance of misconduct or lack of discipline
will require a manager to take disciplinary action against the offending
employee. To deal with indiscipline, there isn’t a set rule, though.
Following are some forms of disciplinary actions:
1. Corrective Discipline: Given the employee’s past misbehaviour,
they are released from some form of corrective disciplinary action.
A warning, suspension, or other action could be taken. The higher
level manager grants authority, but the immediate supervisor
typically takes the action. By disciplining the unruly employee
and ensuring that no other unruly behaviour occurs from that
co-worker, the corrective action is a positive action designed to
promote employee discipline consequently resulting in efficient
group norms.
2. Hot Stove Rule: It is an advancement of the corrective action. It
implies that the wrongdoing calls for a response of the same kind
to what happens when someone touches a hot stove. The corrective
measure ought to be swift, impersonal, and consistent in its delivery.
However, a formal warning must be given so that each employee
is aware of the repercussions. Since the employee(s) are facing
immediate disciplinary action, record the offense and the penalty.
In order to prevent any sense of discrimination among the staff,
the corrective action must also be consistent.
3. Progressive Discipline: When we talk about progressive discipline,
we mean that repeated offenses and disciplinary issues will result
in harsher penalties. This is intended to motivate staff members to
carry out self-corrective measures in order to avoid incurring any
additional penalties. The organization has an opportunity to resolve
the employee issue through this process.

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Notes Types of Discipline

Discipline is classified into two types – positive and negative.
Positive Discipline: This type of discipline fosters an environment in
the workplace where staff members voluntarily follow set policies and
procedures. Successful management combined with rewards can lead to
positive discipline. It is worth noting that positive discipline encourag-
es collaboration and cooperation while minimizing the need for formal
structure. It lessens the requirement for the stringent monitoring needed
to uphold standards and adhere to laws and guidelines. Since each person
is responsible only to himself, they are not accountable to anybody else.
Negative Discipline: Negative discipline means using punishments to
compel employees to follow policies and procedures. Put differently,
employees strive to follow policies and procedures because they fear
being warned, fined, or subjected to other types of consequences. This
method of discipline is known as the punitive or negative approach. This
is an undesirable situation that makes the workers unhappy and lowers
their morale as a result.

10.9 Different Types of Approaches

Positive Approach
Discipline in the workplace may be seen as the voluntary adoption of the
organization’s standards of behavior as well as a promise to behave or
act in a way that is suitable and desired in order to support the overall
performance of the business.
For the purpose of desirable behavior, organizations should involve em-
ployees in creating targets and goals, establishing performance standards,
and creating suitable regulations. Employees should be acknowledged. Or-
ganizations should reduce the period of time until remedial action is taken
with early monitoring, warning, and detection techniques. They should
concentrate on time orientation, process orientation, and output orientation.
Instead of using a harsh approach to discipline, proactive managers use
a positive strategy. The positive approach aims to teach employees the
importance of discipline. Self-discipline should be imparted to the employ-
ees. Disciplinary action needs to be reserved for extraordinary situations
in which there is no other option.
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In the context of contemporary management processes, discipline must Notes

be seen as a kind of behavioral control. Like any other type of control,
behavioral control is a crucial managerial function.
The organization should continuously monitor employee behavior and
make adjustments if necessary to ensure that they are performing up to
the organization’s expectations.
Ensuring that employees conduct or behave appropriately at work is an
essential part of modern management. It goes beyond enforcing laws and
regulations. Setting goals and objectives, determining the standards or
criteria for acceptable performance and behavior, and routinely assessing
whether everyone is acting in accordance with expectations are just a few
things to control the behavior.

Judicial Approach
This method determines the sort of offense committed in a particular
situation by closely examining all proof that is available and according
to the disciplinary procedure standards.
Natural justice is maintained, allowing the guilty party to make their
case, provide justification, and make a request for pardon. This is a fair
procedure, but it is time-consuming and leads to delays.
The judicial approach has significant limitations when it comes to effec-
tively addressing the issues of indiscipline. It is always used as a reaction,
that is, once the disorderly state has already materialized. As a result, the
time gap between the incidence of disciplined behavior and the start of the
required action is caused by the remedial measure. In Indian businesses,
this strategy is widely used, despite a number of drawbacks. There are
benefits to this as well, such as adherence to the law of natural justice
and giving those accused every chance to present their case.

Humanist Approach
Owing to the aforementioned issues, there is an additional school of
thought that supports a more humane strategy for addressing the issues
associated with indiscipline. The focus of this strategy, which is some-
times referred to as a “human relations” approach, is on developing
positive working relationships between the manager and the workforce.
The misbehaving workers’ entire personality and behavior are taken into

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Notes consideration, and they are regarded as human people. An effort is made
to delve more into the reasons behind actions of indifference. Causes
originating from individual variables are also deemed significant. Changes
in assignments, shifts, or other circumstances are examples of remedial
measures that show consideration for the workers and assist them in
overcoming personal challenges.
As far as possible, harsh penalties are avoided. This strategy, which is
essentially focused on building strong bonds and showing empathy for
subordinates, is frequently seen as being too kind. Human and individ-
ual characteristics, such as prejudices, preconceptions, and interpersonal
attractiveness, can affect the decision-making process and cause other
workers to perceive a lack of consistency in how deviations are handled.

Human Resource Development Approach

The human resources development model is another method that is rel-
atively new to the field of management. This strategy places a strong
focus on seeing employees as the most important asset of a company.
Human resources, like any other resource, may be developed and used to
an organization’s advantage or disadvantage. People are often thought of
as being disciplined, responsible, hardworking, and energetic. Instead of
indiscipline and disorder, most individuals prefer and appreciate settings
that are characterized by discipline and order.
Employee dedication to company goals may be strengthened and their
productivity level boosted through a system of suitable work allocation,
multi-pronged motivating techniques, training, and education systems.
When seen in this light, the reasons behind employee indiscipline can
be attributed to improper and insufficient training, a deficient system of
incentive, and personnel policies that are understood and used by both
individual and group members of the workforce.
Indiscipline can also result from one’s inability to live up to the standards
of behavior that are set out in the established norm. The disciplinary pro-
cess’s goals are to provide an environment in which workers may freely
and voluntarily contribute to the company’s goals while adhering to its
rules. In order to identify the root causes of indiscipline, a proactive step
analysis is conducted, which includes a review of the working conditions,
managerial perspectives, styles, and practices, the compatibility between

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technology and the employee, etc. The severe forms of punishment, such Notes
as dismissal and discharge, are rarely used. Instead of focusing on out-
side control, the emphasis is on self-discipline and control over oneself.
With this method, a specific behavior or action—rather than the entire
person—is penalized.
The goal of the penalty is primarily to serve as a reminder to the em-
ployee that, as a person, they have a number of choices regarding how
to behave in a way that is not in the best interests of the company or
of themselves. The main goals are to educate and make corrections, not
to punish.
Groups are becoming more and more popular as useful tools for handling
issues with indiscipline and misconduct. Both formal and informal groups
have a great deal of impact upon its members and need strict adherence
to a set of fundamental principles in order to be allowed to stay in the
group. It is a well-known truth that learning new behavioral patterns and
managing one’s own behavior are more influenced by peer groups. Sim-
ilarly, groups of reference serve as impetuses for workers to adopt the
standards and conduct of such organizations. As a result, groups within
an organization, both official and informal, may be tasked with upholding
organizational standards if they agree with them. This is probably going
to be more successful than official executives or managers attempting to
monitor compliance with rules from a distance and enforcing infrequent
punishments. There exist several instances when work groups have pro-
ficiently and efficiently established absenteeism and helpful relationship
standards, and have faithfully followed them. Because members are highly
attracted to the group and would hate to lose it, the sense of honor and
prestige that come with belonging to it are effective tools for getting
them to follow its standards.

10.10 Different Types of Punishments

Punishment is the process of punishing an individual for any wrongdoing,
and it also acts as a warning to others not to break the law.
The two main goals of punishment are to: (1) penalize the offender di-
rectly for their actions; and (2) serve as a warning to others not to break
the regulations.

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Notes Kinds of Punishments

Different penalties/punishments apply to misbehavior or actions of in-
discipline. The severity of the punishment must match the indiscipline.
As a result, the severity of the offense determines the punishment. The
following categories of punishments are as follows:
1. Oral Reprimand: For minor violations this kind of discipline is
applied. This is the least severe form of reprimand where a higher-
up tells an employee not to do something again. The employee’s
actions are not acceptable, and management expresses its disapproval
to him. Such a penalty is typically meted out for mistakes such as
poor performance, disregarding safety regulations, etc.
2. Written Reprimand: Written reprimands may be necessary in the
future if workers continue to engage in wrongdoing and do not
make an effort to change their behaviors. If an employee keeps
up his current behavior, the reprimand may additionally specify
which benefits will be denied or what serious punishment would
be meted out. A written reprimand serves as both a warning and an
opportunity for the employee who is in default to behave better.
3. Loss of Perks: If an employee engages in major misconduct, such
as abandoning their job without permission or departing early, their
perks may also be revoked. The employees who are in default may
not be granted advantages such as choosing a machine or being
offered overtime, among others.
4. Fines: Employees may be subject to certain fines, which may be
deducted from their pay. Since it is not covered by the standard
employment contract, the employer ought to have a right to deduct
compensation that is expressly stated.
5. Punitive Suspension: If the charge is extremely severe, the employee
may get a suspension order in addition to the charge sheet. The
Industrial Employment (Standing Order) Act, 1946 states that if the
worker’s conduct is not the reason for the delay in the completion
of disciplinary proceedings, the suspended worker is entitled to
a subsistence allowance equal to half of his wages for the first
ninety days of suspension and three-fourths of his wages for the
remaining period of suspension. The administration will decide what

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constitutes a severe situation. The discipline code must be followed Notes

when making the decision.
6. Demotion: Demotion is the process of lowering a person from
their current job to a lesser grade. This kind of discipline entails
denouncing a worker because they believe they are unfit for their
current position. Only in cases when the individual is unfit for the
position they are holding should this penalty be meted out. He could
receive a different punishment than a demotion if he is suitably
suited for the position.
7. Withdrawing of Increments: Major violations are punished in
this way. The misbehavior must be really significant in character.
While imposing a significant penalty, due process must be adhered
to. Before imposing such sanctions, employees must be heard.
8. Discharge: Discharge means the act of removing a worker from their
line of work. It could occur both as a kind of discipline and not.
If a person’s performance and behavior are below par, they may be
discharged. If an employee’s contract expires and is not extended,
they may potentially be discharged. The term “discharge” is not
stigmatized; rather, it is contingent upon the specific circumstances
surrounding an employee’s termination.
9. Dismissal: The worst penalty that can be inflicted on a worker is
dismissal. The individual is no longer eligible for employment after
losing their position with the company. These days, it is unusual
to administer this kind of sentence.
Discharge and dismissal have comparable meanings. When it comes to
losing the position one holds, they mean the same thing, but otherwise
they signify different things. Dismissal is a clear indication of punishment,
even though discharge itself may not be.
CASE STUDY
JSA is a well-established automobile factory with a good history of
labor-management relations. Its main office is in Haridwar, Uttarakhand.
It has three stories that hold around 1,000 employees. A senior
manager of human resources once noticed some female staff mem-
bers washing their hands at the third-floor water cooler after lunch.
The HR manager notified the supervisor of the issue, who has the

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Notes responsibility to convey a notice to all the employees. That was as

follows:
“At the water cooler, some staff members were seen cleaning their
hands. Water coolers are used to supply drinking water. They are not
intended for use in hand or cutlery cleaning. From now on, anyone
seen cleaning their hands or cutlery at the water coolers will face
the appropriate consequences.”
That next evening, a few workers went to the chamber of the con-
cerned officer and said, “What else are you expecting us to do?
There are no sinks or washbasins on the third floor, and there is no
elevator in the building.” Make use of the stationery.
From then on, more and more individuals started using water coolers
liberally throughout the course of the following two days to wash
their hands and even cutlery.
QUESTIONS:
1. According to you, is this case an example of grievance or
indiscipline?
2. What is the main reason for the problem?
3. What is the solution to the above-mentioned problem?
4. What rights does an employee who has been charged have?

10.11 Summary
Grievance refers to an employee’s sense of unhappiness and dissatis-
faction. Grievances may be expressed orally or in writing, verbally or
silently. Political, imagined, legitimate, individual, and group grievances
are the five categories. When employees believe a provision has been
broken or that management has not applied it appropriately, they are
filing imagined grievances. Real grievances are those that arise from
actual contract violations. Political issues frequently include unions and
are challenging to resolve. Group grievances deal with generic concerns
with wider interests and policy effects, whereas individual grievances are
limited to particular employees.

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 Grievance and Discipline Handling

Discipline is the force that prompts an individual or a group to observe Notes

the rules, regulations and procedures which are deemed to be necessary
to the attainment of an objective.
It guarantees that everyone is working toward the same company ob-
jectives, rewards obedience to rules, and encourages orderly actions.
Managing employee discipline is essential for successful, profitability,
and seamless operations.

10.12 Answers to In-Text Questions

1. (c) Decreased employee morale and productivity.
2. (b) Punishment
3. (d) Chairman of the Company
4. (b) Hot Stove Rule
5. (c) Management Policy

10.13 Self-Assessment Questions

1. Library as a Social Institution. Elaborate.
2. Describe the role of Library in the society.

10.14 References
 Begega, S. G., & Aranea, M. (2018). “The establishing of a European
industrial relations system: Still under construction or chasing a
chimera?”, Employee Relations, Vol. 40 No. 4, pp. 600-616. https://
doi.org/10.1108/ER-07-2017-0151.
 Dörrenbächer, C., Tüselmann, H., Meissner, H.-R., & Cao, Q. (2021).
“What shapes industrial relations in foreign affiliates? Comparative
case study results from Germany”, Critical Perspectives on International
Business, Vol. 17 No. 4, pp. 481-501. https://doi.org/10.1108/
cpoib-07-2020-0090.
 Valizade, D., Cook, H., Forde, C., & MacKenzie, R. (2023),
«Do union strategic influence, job security and the industrial
relations climate matter for the adoption of high performance work

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes systems?», Journal of Organizational Effectiveness: People and

Performance, Vol. ahead-of-print No. ahead-of-print. https://doi.
org/10.1108/JOEPP-09-2022-0278.
 Yuan, L., Yu, Y., Li, J., & Ning, L. (2014), «Occupational commitment,
industrial relations and turnover intention: Empirical evidence
from China», Chinese Management Studies, Vol. 8 No. 1, pp. 66-
84. https://doi.org/10.1108/CMS-08-2011-0065.

10.15 Suggested Readings

 Dunlop, J. T., & Healy, J. J. Collective Bargaining, Richard D. Irwin,
1955.
 Whitney, F., & Sloana, A. A., Labour Relations, Prentice Hall,
Englewood Cliffs, New Jersey, 1991.
 Gottoschalk, A. W. The Background to the Negotiating Process,
Gower Press, 1973.
 Thorn, J. How to Negotiate Better Deals, IBH Publishers Pvt. Ltd.,
Mumbai,1992.
 Walton, R.E., & McKersie, R. B. A Behavioural Theory of Labour
Negotiations, McGraw Hill, 1965.

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 L E S S O N

11
HRM and IR in India
Dr. Abhishek Janvier Frederick
Assistant Professor
Department of Business Studies, JSBS&C
SHUATS
Email-Id: abhishek.frederick@shiats.edu.in

STRUCTURE
11.1 Learning Objectives
11.2 Introduction
11.3 Historical Overview of HRM and IR in India
11.4 Management Philosophy and Approaches in India
11.5 Integrative Approaches to Human Resource Management
11.6 Practical Implications of HRM-IR-HRD Integration
11.7 ILO, India, and International Labour Standards
11.8 Summary
11.9 Answers to In-Text Questions
11.10 Self-Assessment Questions
11.11 References
11.12 Suggested Readings

11.1 Learning Objectives

 Understand the historical evolution of HRM and IR in the context of India.
 Analyse the cultural factors influencing traditional approaches.
 Understand integrative HRM models.
 Understand the interplay between HRM, IR, and HRD.
 Examine India’s engagement with and adherence to ILO standards.

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Notes
11.2 Introduction
In the intricate tapestry of India’s organizational landscape, the inter-
twining threads of Human Resource Management (HRM) and Industrial
Relations (IR) form a crucial narrative. The synergies and complexities
of these two domains are particularly pronounced in the Indian milieu,
where a rich tapestry of history, culture, and economic dynamics shapes
the paradigms of organizational functioning.
Historically, the development of HRM and IR in India has been influ-
enced by a unique blend of indigenous practices and global influences.
From the Gandhian philosophy of trusteeship to the challenges posed by
economic liberalization, the journey has been dynamic and multifaceted.
Understanding this evolution is pivotal for comprehending the current
state of affairs and envisioning the future landscape.
As we delve into the chapters of this exploration, it is imperative to
consider the seminal works that have laid the foundation for our under-
standing of HRM and IR in India. Scholars such as P. C. Tripathi, Udai
Pareek, and T. V. Rao have illuminated the intricacies of human resource
practices in the Indian context. Additionally, the works of economists
and sociologists like Amartya Sen and Andre Beteille provide valuable
insights into the socio-economic factors influencing industrial relations.

11.3 Historical Overview of HRM and IR in India

11.3.1 Introduction
Human Resource Management (HRM) and Industrial Relations (IR) in
India have evolved significantly, mirroring the economic and social chang-
es in the country. The roots of industrial relations can be traced back to
the pre-independence era when labor disputes were addressed through
legislation such as the Trade Union Act of 1926. The focus then was on
maintaining industrial peace.
Post-independence, the socio-economic landscape of India underwent
transformative changes. The Industrial Policy of 1956 laid the foundation
for the public sector, leading to a complex industrial scenario. The 1970s
and 1980s witnessed a rise in labor activism, with workers demanding

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better rights and working conditions. The period saw the emergence of Notes
labor unions as powerful entities negotiating with both the government
and private employers.
The liberalization policies of the early 1990s brought a paradigm shift.
The emphasis moved from protectionism to globalization, impacting
the nature of industrial relations. The role of HRM gained prominence
as organizations aimed for efficiency and competitiveness in the global
market.

11.3.2 Significance of Studying Integrated Perspectives of

HRM and IR
Studying the integrated perspectives of HRM and IR is crucial in un-
derstanding the dynamic relationship between employers and employees
in the Indian context. It provides insights into the challenges and op-
portunities arising from the coexistence of traditional labor relations and
modern HR practices.
Firstly, this integration is essential for addressing contemporary workplace
issues. As India continues to experience economic growth and industrial
expansion, the synergy between HRM and IR becomes vital for man-
aging a diverse and skilled workforce. Integrated perspectives enable
organizations to navigate complexities arising from cultural, legal, and
technological changes.
Secondly, the study is significant for fostering harmonious industrial re-
lations. By understanding historical precedents, organizations can develop
HRM strategies that align with the socio-cultural fabric of the country.
Effective employee relations are critical for organizational success, and
an integrated approach ensures a balance between the interests of labor
and management.
A historical overview of HRM and IR in India illuminates the evolution
of labor practices and policies. The significance of studying integrated
perspectives lies in its practical application for contemporary challeng-
es, contributing to a holistic understanding of the intricacies involved
in managing human resources within the industrial landscape of India.

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Notes
11.4 Management Philosophy and Approaches in India

11.4.1 Introduction
Management philosophy in India has evolved over centuries, deeply rooted
in its cultural and historical context. Traditional management approaches
have played a significant role in shaping organizational structures and
leadership styles. In this exploration, we delve into the rich tapestry of
India’s management philosophies, examining their historical origins and
the profound influence of culture on these approaches.

11.4.2 Traditional Management Philosophies

(a) Ancient Wisdom: India’s management philosophy finds its roots
in ancient texts like the Vedas and Arthashastra. The concept of
‘Dharma,’ emphasizing duty and righteousness, laid the foundation
for ethical leadership. Leaders were expected to uphold moral values
and prioritize the well-being of their teams and the society at large.
(b) Gurukul System: The Gurukul system, where students lived with
their gurus (teachers), provided a unique management environment.
The emphasis was on experiential learning, with gurus imparting
not just academic knowledge but also practical skills and ethical
values. This fostered a holistic approach to leadership development.
(c) Arthashastra and Chanakya Niti: Chanakya, an ancient Indian
economist and political strategist, authored the Arthashastra, a seminal
work on statecraft and economics. His principles of governance
and leadership, known as Chanakya Niti, outlined the importance
of strategic thinking, diplomacy, and effective decision-making,
shaping management philosophies for centuries.

11.4.3 Cultural Influences on Traditional Approaches

(a) Collectivism vs. Individualism: India’s collectivist culture has
significantly influenced management approaches. Team harmony
and consensus-building are prioritized over individual achievements.
Decision-making often involves group discussions and consensus,
fostering a sense of belonging and shared responsibility.
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 HRM and IR in India

(b) Hierarchy and Respect: The hierarchical nature of Indian society Notes
is reflected in organizational structures. Respect for authority
and age is deeply ingrained, impacting communication patterns
within organizations. Leaders are expected to embody qualities
of wisdom and experience, and employees are expected to show
deference.
(c) Spirituality and Work-Life Balance: India’s spiritual heritage has
shaped a unique perspective on work-life balance. Many management
philosophies emphasize the holistic development of individuals,
encouraging practices like meditation and yoga to enhance employee
well-being. This holistic approach extends beyond professional
success to encompass personal growth and fulfillment.
(d) Long-Term Perspective: The cyclical nature of time in Indian
philosophy has influenced a long-term perspective in management.
Decision-making often considers the impact on future generations,
fostering sustainability and responsible business practices.

11.4.4 Challenges and Modern Adaptations

(a) Globalization and Technology: In the era of globalization, Indian
businesses have had to adapt traditional philosophies to align with
a more globalized and technology-driven world. The challenge
lies in preserving cultural values while embracing innovation and
efficiency.
(b) Diversity and Inclusion: The traditional management approaches,
rooted in a specific cultural context, face challenges in addressing
the diverse workforce in contemporary India. Inclusivity and
diversity are gaining prominence, and organizations are adapting their
philosophies to create more equitable and inclusive environments.
(c) Entrepreneurship and Start-up Culture: The rise of entrepreneurship
in India has brought forth a dynamic shift in management philosophies.
Start-up culture, characterized by agility, risk-taking, and innovation,
challenges some traditional notions, leading to a fusion of old and
new management principles.

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Notes
11.4.5 Modern Management Philosophies
The management philosophy and approaches in India showcase a har-
monious blend of ancient wisdom and cultural values. While traditional
philosophies have stood the test of time, the modern era demands adap-
tation to meet the challenges of a rapidly changing world. The key lies
in preserving the essence of cultural influences while embracing innova-
tion and inclusivity, ensuring a resilient foundation for India’s evolving
management landscape.
In the dynamic landscape of Indian business, modern management philos-
ophies have undergone a transformation, integrating global practices to
enhance organizational effectiveness. This evolution reflects a pragmatic
approach to address the challenges of a rapidly changing world.

Overview of Modern Management Philosophies

(a) Agile Management: The agile management philosophy, originating from
the software development sector, has gained widespread acceptance
in India. Characterized by flexibility, adaptability, and iterative
processes, agile methodologies empower organizations to respond
swiftly to market changes. This approach fosters collaboration and
innovation, aligning well with the demands of the modern business
environment.
(b) Human-Centric Leadership: A departure from traditional authorit­
ative leadership, modern management emphasizes human-centric
approaches. Leaders are encouraged to be empathetic, focusing on
employee well-being and engagement. This shift recognizes the
significance of a motivated workforce in driving organizational
success.
(c) Design Thinking: Design thinking has emerged as a powerful
problem-solving tool in Indian management. This user-centric
approach encourages organizations to understand the needs of
their stakeholders deeply. By integrating empathy and creativity
into decision-making processes, businesses can develop innovative
solutions that resonate with their target audience.

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Notes
11.4.5 Integration of Global Practices in the Indian Context
(a) Cross-Cultural Competence: As India continues to be a hub for
global businesses, cross-cultural competence has become a critical
aspect of modern management. Organizations are investing in training
programs to equip employees and leaders with the skills necessary
to navigate diverse work environments and collaborate effectively
with international counterparts.
(b) Technology Adoption: The integration of global practices is most
evident in the widespread adoption of cutting-edge technologies.
Indian businesses are leveraging artificial intelligence, data analytics,
and automation to enhance efficiency and stay competitive on the
global stage. This technological integration not only streamlines
operations but also opens new avenues for innovation.
(c) Corporate Social Responsibility (CSR): The global trend of corporate
social responsibility has found resonance in India. Companies
are increasingly aligning their business practices with ethical and
socially responsible initiatives. This integration not only reflects a
commitment to sustainable development but also resonates with a
socially conscious consumer base.
(d) Lean Management: Originating from Japanese management principles,
lean management has found a firm footing in the Indian context.
The emphasis on minimizing waste, continuous improvement, and
efficient resource utilization aligns with the need for operational
excellence in today’s competitive business environment.
The evolution of management philosophies in India encapsulates a jour-
ney from traditional approaches to embracing modern, globally influ-
enced practices. The integration of global management trends reflects
a strategic effort to leverage the strengths of diverse philosophies for
enhanced organizational performance. As India continues to navigate a
dynamic business landscape, the amalgamation of modern management
philosophies with traditional values positions organizations for sustained
success on the global stage.

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Notes 11.5 Integrative Approaches to Human Resource

Management

11.5.1 Introduction
Human Resource Management (HRM) has evolved beyond traditional
models, embracing integrative approaches that align with the complexities
of the modern business landscape.
(a) Resource-Based View (RBV): The RBV posits that an organization’s
competitive advantage lies in its unique resources, and human
capital is a critical component. Integrative HRM, within the RBV
framework, focuses on aligning human resources with organizational
strategy to create a sustainable competitive advantage.
(b) Strategic Human Resource Management (SHRM): SHRM emphasizes
the strategic role of HR in achieving organizational goals. Integrative
approaches within SHRM involve aligning HR practices with overall
business strategies, ensuring that human capital contributes directly
to the achievement of organizational objectives.
(c) High-Performance Work Systems (HPWS): HPWS integrates various
HR practices to enhance employee skills, motivation, and performance.
It involves a holistic approach, encompassing recruitment, training,
performance management, and employee involvement. Integrative
HRM, within the HPWS framework, strives for a synergistic alignment
of these practices.

11.5.2 Integration of Global Practices in the Indian Context

(a) Cross-Cultural Competence: With the increasing globalization
of businesses, Indian organizations are integrating cross-cultural
competence into HRM. This involves understanding and adapting HR
practices to diverse cultural contexts, fostering inclusive workplaces
that leverage the strengths of a multicultural workforce.
(b) Technology-Driven HRM: Global HR practices often leverage
technology for streamlined processes. In the Indian context, the
integration of HR technology, such as HRIS (Human Resource

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Information System) and AI-driven recruitment tools, enhances Notes

efficiency, data-driven decision-making, and employee experience.
(c) Remote Work Policies: The global shift towards remote work has
prompted Indian organizations to integrate flexible work policies.
Integrative HRM in this context involves designing policies that support
remote work while ensuring employee engagement, productivity,
and work-life balance.

11.5.3 In-Depth Exploration of Integrative HRM Models

(a) Harvard Model of HRM: The Harvard model integrates various HR
policies to align the interests of employees and organizations. It
considers situational factors, stakeholder interests, and HR outcomes.
In the Indian context, organizations are adopting this model to
create a balance between employee well-being and organizational
effectiveness.
(b) Guest Model of HRM: The Guest model focuses on HR practices
that enhance organizational and individual performance. Integrative
HRM within this model involves aligning HR practices with business
strategy, fostering flexibility and innovation, and ensuring employees
are motivated and engaged.

Example
(i) Rocket Consultancy Services (RCS): TCS, a global IT services
company, employs an integrative HRM approach by aligning employee
development with business goals. TCS invests significantly in
training and development programs, ensuring its workforce remains
adaptable to technological advancements, reflecting a commitment
to both employee growth and organizational success.
(ii) Hindustan Unilever Limited (HUL): HUL, a consumer goods giant,
embraces integrative HRM through its employee-centric policies.
The company prioritizes diversity and inclusion, provides flexible
work arrangements, and invests in employee well-being programs.
HUL’s HR practices align with global standards while addressing
the specific needs of its Indian workforce.

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Notes Integrative approaches to HRM provide a holistic framework for managing

human capital in today’s dynamic business environment. In the Indian
context, the integration of global practices reflects a strategic effort to
balance the cultural nuances of the region with the efficiency and inno-
vation demanded by a globalized economy. The practical application of
integrative HRM models, as illustrated by case studies such as TCS and
HUL, demonstrates the effectiveness of aligning human resources with
organizational strategies for sustained success. As Indian organizations
continue to evolve, the integration of diverse HR practices will play a
pivotal role in shaping the future of workforce management.

11.6 Practical Implications of HRM-IR-HRD Integration

11.6.1 Introduction
Human Resource Management (HRM), Industrial Relations (IR), and
Human Resource Development (HRD) are integral components of or-
ganizational success. This section explores the conceptual framework
of HRM-IR-HRD integration, emphasizing the importance of a holistic
approach in achieving organizational goals. Real-world examples will be
examined to showcase successful integration, followed by an assessment of
the benefits and challenges associated with this comprehensive approach.

11.6.2 Conceptual Framework of HRM-IR-HRD Integration

(a) HRM: HRM focuses on managing people within the organization,
covering areas such as recruitment, training, performance management,
and employee relations. It is concerned with aligning human resources
with organizational goals and ensuring employee well-being.
(b) IR: Industrial Relations deal with the relationship between employers
and employees, encompassing issues like negotiations, disputes, and
maintaining a harmonious workplace. IR aims to create a conducive
environment for collaboration between management and employees.
(c) HRD: HRD is centered on enhancing employee skills, knowledge, and
abilities through training and development initiatives. It contributes to
individual and organizational growth, aligning workforce capabilities
with evolving business needs.

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Notes
11.6.3 HRM-IR-HRD Integration
Integration of HRM, IR, and HRD involves aligning these functions to
create a cohesive and strategic approach to managing human capital.
This integration ensures that policies and practices across these areas are
complementary and synergistic, contributing collectively to organizational
success.

11.6.3.1 Importance of a Holistic Approach in Organizational Success

(a) Strategic Alignment: An integrated approach ensures that HRM,
IR, and HRD strategies are aligned with organizational goals. This
strategic alignment maximizes the impact of human resources on
overall business performance.
(b) Enhanced Employee Engagement: A holistic approach fosters a
positive work environment, leading to increased employee engagement.
When HRM practices are aligned with IR and HRD initiatives,
employees feel supported, valued, and motivated to contribute to
organizational success.
(c) Adaptability to Change: Integration allows organizations to adapt to
changes in the external environment more effectively. Coordinated
efforts in HRM, IR, and HRD enable organizations to be agile,
responsive, and better equipped to navigate challenges.

11.6.3.2 Real-world Examples Showcasing Successful Integration

(i) IBM: IBM is known for its successful integration of HRM, IR, and
HRD. The company’s HRM practices focus on talent acquisition
and development, while IR initiatives emphasize collaboration
and communication. HRD programs at IBM are designed to
upskill employees, ensuring alignment with the company’s strategic
goals.
(ii) Siemens: Siemens has achieved seamless integration by aligning
HRM practices with its IR efforts and HRD initiatives. The company
emphasizes employee well-being, engages in constructive industrial
relations, and invests in continuous learning and development to
stay competitive in the dynamic technology sector.

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Notes
11.6.4 Benefits and Challenges of Integrated Approach

11.6.4.1 Benefits
(a) Increased Innovation and Creativity: Integration fosters an environment
where employees feel empowered and supported, leading to increased
innovation and creativity within the organization.
(b) Effective Conflict Resolution: A well-integrated approach to IR
ensures effective conflict resolution, minimizing disruptions and
maintaining a positive workplace atmosphere.
(c) Holistic Employee Development: Integration allows for a holistic
approach to employee development, addressing both immediate skill
requirements and long-term career goals.

11.6.4.2 Challenges
(a) Balancing Competing Priorities: Integrating HRM, IR, and HRD
requires balancing competing priorities and ensuring that the
integrated approach does not compromise the effectiveness of
individual functions.
(b) Resistance to Change at Different Levels: Different levels of the
organization may exhibit varying degrees of resistance to change.
Managing this resistance across departments and hierarchies poses
a challenge to seamless integration.
(c) Continuous Alignment: Achieving integration is an ongoing process,
and maintaining alignment across HRM, IR, and HRD functions
requires continuous efforts and adaptability to changing organizational
dynamics.
The integration of HRM, IR, and HRD is essential for achieving organi-
zational success in today’s complex and dynamic business environment.
Real-world examples such as IBM, Siemens, Microsoft, and P&G show-
case the effectiveness of this approach. While there are challenges in
the integration process, the benefits, including improved organizational
performance, enhanced employee satisfaction, and strategic decision-mak-
ing, outweigh the difficulties. As organizations continue to evolve, the
holistic integration of HRM, IR, and HRD will play a pivotal role in
shaping resilient and sustainable workplaces.

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Notes
11.7 ILO, India, and International Labour Standards

11.7.1 Introduction
The International Labour Organization (ILO) plays a crucial role in setting
and promoting international labor standards. As a founding member of
the ILO, India has been actively involved in aligning its labor policies
with these standards, reflecting a commitment to fair and just working
conditions. This article explores the relationship between the ILO, India,
and the significance of adhering to international labor standards.

ILO and International Labour Standards

The International Labour Organization (ILO) stands as a preeminent
international agency dedicated to promoting social justice and fair la-
bour practices worldwide. Established in 1919 as a part of the Treaty of
Versailles that concluded World War I, the ILO is the first specialized
agency of the United Nations. Its foundation was laid on the belief that
social justice is crucial for ensuring lasting peace, and this conviction
remains at the core of its mission today.
One of the distinctive features of the ILO is its tripartite structure, bring-
ing together representatives from governments, employers, and workers.
This unique model fosters a collaborative decision-making process, where
all stakeholders contribute to shaping policies and standards related to
the world of work. Through international labour standards encapsulated
in conventions and recommendations, the ILO addresses a diverse array
of issues, including freedom of association, collective bargaining, forced
labour, child labour, and equal opportunities.
The ILO’s commitment to fundamental principles and rights at work is
encapsulated in its core conventions, which provide a global framework
for ensuring the dignity and well-being of workers. Notable among these
are conventions related to the abolition of child labor, elimination of
forced labour, and the right to organize and bargain collectively. These
principles form the basis for the ILO’s advocacy, technical assistance,
and capacity-building efforts in collaborating with member states. The
organization’s impact extends beyond normative frameworks; the ILO
actively engages in research, policy development, and technical assistance

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Notes to address contemporary challenges in the world of work. This includes

adapting to technological advancements, globalization, and the evolving
nature of employment. By facilitating dialogue and cooperation on a
global scale, the ILO plays a pivotal role in shaping a future where work
is not merely an economic activity but a means to promote social justice,
equality, and decent living standards for all. In essence, the International
Labour Organization stands as a beacon for promoting a world of work
that is fair, inclusive, and respectful of the inherent rights and dignity
of every individual.

11.7.2 India’s Engagement with the ILO

India’s engagement with the International Labour Organization (ILO)
has been robust and multifaceted, reflecting the nation’s commitment to
promoting decent work and social justice. As a founding member of the
ILO since its establishment in 1919, India has actively participated in the
organization’s tripartite structure, which involves collaboration among the
government, employers, and workers. The country has ratified numerous
ILO conventions, thereby signalling its adherence to international labour
standards and principles. One significant aspect of India’s engagement with
the ILO lies in its efforts to address complex labour challenges within
its diverse and vast workforce. The ILO has worked closely with the
Indian government to address issues such as child labour, forced labour,
and gender equality in the workplace. Through technical assistance and
capacity-building programs, the ILO has supported India in implementing
and enforcing labour laws that align with international standards.
India’s participation in the ILO extends beyond normative frameworks
to active involvement in policy discussions and initiatives. The country
has contributed to shaping global labor policies and practices by sharing
its experiences and insights on topics ranging from social security to in-
dustrial relations. Additionally, India has played a vital role in promoting
South-South cooperation, sharing best practices with other developing
nations to address common labour challenges.
Furthermore, India has actively engaged with the ILO in addressing emerg-
ing issues in the world of work, such as the impact of technology and the
informal economy. The collaboration has involved discussions on creating
an inclusive and sustainable job market, ensuring social protection for
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all workers, and fostering entrepreneurship. India’s commitment to social Notes

justice and inclusive development aligns with the ILO’s core values, and
the country has been an advocate for the organization’s role in shaping a
future where work is not only productive but also respects the rights and
dignity of every worker. Through its sustained engagement with the ILO,
India contributes to the global dialogue on labour issues, showcasing the
nation’s dedication to fostering a fair and equitable working environment
that uplifts the socio-economic conditions of its citizens. In summary,
India’s relationship with the ILO exemplifies a collaborative approach
to address the complexities of the contemporary world of work while
upholding the principles of social justice and human rights.

11.7.3 Significance of Adhering to International Labour

Standards
Adhering to international labour standards holds significant importance
for countries, businesses, and workers alike, contributing to the establish-
ment of fair, inclusive, and humane working conditions globally. Here are
several key reasons why adherence to these standards is crucial:
Protection of Workers’ Rights: International labour standards, set by
organizations like the International Labour Organization (ILO), encom-
pass fundamental principles such as freedom of association, collective
bargaining, elimination of forced labour, and prohibition of child labour.
Adhering to these standards ensures that workers are treated with dignity
and respect, enjoying essential rights in the workplace.
Global Economic Stability: Consistent adherence to international labour
standards promotes stability in the global economy. By preventing unfair
labour practices and creating a level playing field, countries can foster trust
and cooperation in international trade. This stability contributes to sustainable
economic development, attracting investments and enhancing the reputation
of countries as responsible members of the international community.
Social Justice and Equality: International labour standards play a crucial
role in advancing social justice and equality. By addressing issues such as
gender discrimination, equal pay, and workplace harassment, these stan-
dards contribute to building societies where opportunities are accessible
to all, irrespective of gender, ethnicity, or background.

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Notes Improved Working Conditions: Adherence to international labour

standards promotes the establishment of safe and healthy working en-
vironments. This includes guidelines for occupational safety, reasonable
working hours, and social protection. Improved working conditions not
only benefit the well-being of individual workers but also contribute to
increased productivity and job satisfaction.
Competitive Advantage for Businesses: Businesses that adhere to inter-
national labour standards often gain a competitive advantage. Responsible
business practices are increasingly valued by consumers, investors, and
partners. Companies that prioritize the well-being of their workforce and
respect international labour standards are more likely to attract customers,
retain skilled employees, and build sustainable long-term relationships.
Strengthening Social Dialogue: International labour standards encour-
age social dialogue among governments, employers, and workers. This
collaboration fosters understanding, cooperation, and the development
of effective policies that balance the interests of all stakeholders. Social
dialogue is crucial for resolving disputes, negotiating fair wages, and
creating a harmonious work environment.
Addressing Global Challenges: Adhering to international labour stan-
dards helps address global challenges such as poverty, inequality, and the
exploitation of vulnerable populations. By setting a common framework,
these standards provide guidance for countries to develop policies that
contribute to the achievement of broader global development goals.

11.7.4 Realizing the Vision: Case Study of India’s Efforts

India has made substantial progress in aligning its labor policies with
international standards. For instance, the Maternity Benefit (Amendment)
Act, 2017, increased maternity leave to 26 weeks, aligning with ILO
Convention No. 183. This amendment reflects India’s commitment to
ensuring the well-being of working mothers.
Additionally, the Occupational Safety, Health and Working Conditions
Code, 2020, seeks to consolidate and amend laws related to the working
conditions of both industrial and non-industrial workers. This initiative
aims to enhance safety standards and aligns with ILO conventions related
to occupational safety and health.

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Benefits Notes
1. Enhanced Worker Productivity: Adhering to international labor
standards contributes to improved worker productivity. When
employees feel secure and are treated fairly, they are more likely
to be motivated and dedicated to their work.
2. Foreign Direct Investment (FDI): Countries that adhere to international
labor standards often attract more FDI. Investors are inclined to
operate in environments where there is a commitment to fair labor
practices, contributing to economic growth.

Challenges
1. Implementation Challenges: The main challenge lies in the effective
implementation of international labor standards at the national level.
Developing and enforcing policies that align with these standards
requires substantial administrative and regulatory efforts.
2. Diverse Economic Realities: Countries, including India, face the challenge
of balancing international labor standards with their diverse economic
realities. Implementing certain standards may pose difficulties in regions
with varying economic conditions and labor market structures.
The relationship between the ILO, India, and international labor standards
exemplifies a commitment to creating a fair and just global working
environment. India’s active engagement with the ILO, ratification of
conventions, and alignment of national legislation showcase its dedica-
tion to upholding international labor standards. While challenges exist,
the benefits, including enhanced global reputation, improved worker
productivity, and increased FDI, underscore the importance of continued
efforts to align with and implement these standards. As India navigates
the complexities of its labor landscape, adherence to international la-
bor standards remains integral to fostering social justice and inclusive
economic growth.
IN-TEXT QUESTIONS
1. What is the main objective of the International Labour Organization
(ILO)?
(a) Promoting world trade
(b) Ensuring international peace

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Notes (c) Protecting workers’ rights and promoting decent work

(d) Facilitating global economic growth
2. When was the International Labour Organization (ILO) founded?
(a) 1919
(b) 1945
(c) 1960
(d) 1990
3. Which tripartite structure is a hallmark of the ILO’s decision-
making process?
(a) Unilateral
(b) Bureaucratic
(c) Bipartite
(d) Tripartite
4. Which of the following conventions specifically addresses the
abolition of child labor?
(a) Convention No. 87
(b) Convention No. 98
(c) Convention No. 138
(d) Convention No. 182
5. Which of the following is NOT one of the core conventions of
the ILO’s fundamental principles and rights at work?
(a) Freedom of association and the right to collective bargaining
(b) Elimination of forced labor
(c) Equal pay for equal work
(d) Abolition of child labor

CASE STUDY
The company, facing increased competition and technological advance-
ments, decides to implement a restructuring plan to enhance efficiency
and competitiveness. The HRM department plays a central role in
managing this transition, while simultaneously navigating complex

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industrial relations dynamics. As the restructuring plan unfolds, HRM Notes

initiates a transparent communication strategy to keep employees
informed about the changes. This involves town hall meetings, reg-
ular updates, and open channels for feedback. Simultaneously, the
HRM team collaborates with the IR department to address concerns
raised by the workforce and labour unions. The industrial relations
specialists engage in dialogue with union representatives to negotiate
fair terms for employees affected by the restructuring, ensuring that
their rights and interests are safeguarded.
HRM takes a proactive approach to talent management during the
restructuring. This includes identifying and developing the skills
required for the new organizational structure, providing training pro-
grams, and facilitating internal mobility where possible. The HRM
team works closely with line managers to ensure that the workforce
is adequately prepared for the changes, minimizing resistance and
enhancing overall employee satisfaction. In the realm of industrial
relations, the company aims to maintain a positive working relation-
ship with the labour unions. The IR specialists facilitate negotiations
on issues such as job roles, compensation packages, and working
conditions. Through a collaborative approach, the company and the
unions work together to establish a framework that balances the
organization’s needs with the welfare of its employees. This collab-
orative effort helps build trust and mutual understanding between
management and the labour force. However, challenges arise during
the implementation phase, leading to occasional work stoppages and
disputes. The IR team plays a crucial role in mediating conflicts,
employing dispute resolution mechanisms, and fostering a culture of
open communication. HRM, in tandem with IR, introduces employee
assistance programs and well-being initiatives to mitigate the impact
of stress and uncertainty on the workforce.
QUESTIONS:
1. What were the different strategies implemented by manufacturing
company to deal with increased competition and technological
advancements? Elaborate.
2. What was the role of industrial relation specialists? Explain.

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Notes
11.8 Summary
Human Resource Management (HRM) and Industrial Relations (IR) in
India are integral components of organizational practices and the broader
labor landscape.
HRM involves the strategic management of an organization’s workforce,
encompassing recruitment, training, performance appraisal, and employee
relations. In India, HRM has evolved to align with global best practices,
emphasizing talent development and employee engagement. Industrial
Relations, on the other hand, deals with the interactions between employ-
ers, employees, and trade unions. In India, IR has a significant historical
context, with a tradition of collective bargaining and negotiation. The
country has a complex legal framework governing industrial relations,
including the Industrial Disputes Act and the Trade Unions Act. Harmoniz-
ing HRM and IR is critical for fostering positive workplace environments
and addressing issues related to employment conditions, ensuring a bal-
ance between organizational objectives and the welfare of the workforce.
The evolving economic landscape and labor market dynamics in India
continually influence HRM and IR practices, emphasizing the need for
adaptability and compliance with evolving regulatory frameworks.

11.9 Answers to In-Text Questions

1. (c) Protecting workers’ rights and promoting decent work
2. (a) 1919
3. (d) Tripartite
4. (d) Convention No. 182
5. (a) Equal pay for equal work

11.10 Self-Assessment Questions

1. Elaborate the importance of a holistic approach in organizational
success.
2. Briefly highlight the historical background of HRM and IR in India.

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3. What are the management philosophy and approaches in India? Notes

Discuss.
4. What are the various Indian modern management philosophies?
Explain.
5. Elaborate the various benefits and challenges of integrated approach.

11.11 References
 Kouzes, J. M., & Posner, B. Z. (2017). The Leadership Challenge:
How to Make Extraordinary Things Happen in Organizations. John
Wiley & Sons.
 Sen, A. (2000). Development as Freedom. Oxford University Press.
 Tripathi, P. C. (2008). Personnel Management and Industrial Relations.
Sultan Chand & Sons.
 Pareek, U. (2003). Understanding Organizational Behaviour. Oxford
University Press.
 Rao, T. V. (2010). Human Resource Development: The New Trainer’s
Guide. Sage Publications.

11.12 Suggested Readings

 Bhatnagar, J. (2007). “Managing Human Resources in the Emerging
Knowledge Economy: Challenges, Strategies, and Solutions.” ICFAI
University Press.
 Boxall, P., & Purcell, J. (2011). Strategy and human resource
management. Palgrave Macmillan.
 Hegde, R. S. (2006). “Industrial Relations in India: A Review.” Indian
Journal of Industrial Relations, 41(3), 307-319.
 Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and
Organizations: Software of the Mind. McGraw Hill.
 Dwivedi, R. S. (2019). “Human Resource Management in the New
Millennium.” PHI Learning Pvt. Ltd.

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 Glossary
Blue-Collar Unions: It refers to the section of the labor force that works manual labor.
 Collective Bargaining
 Negotiations
 Collective Process
 Tripatism
 Bipartism
 State Intervention
 Role of Government
Brainstorming: To solve a problem or make a decision by thinking of as many ideas as
possible in a short time.
Collaborative Approach: It involves pupils working together on activities.
Collective Dispute: A matter concerning several employees who have raised their concerns
in writing (including email) to their trade union.
Commercial Establishment: An establishment used for commercial purposes.
Conflict Resolution: It is a way for two or more parties to find a peaceful solution to a
disagreement among them.
Critical Economic Factor: Economic factors are variables internal and external to the com-
pany that can have an effect on the profitability and efficiency of the company’s process.
Discrimination: Treating one person or group worse than others.
GDP: Gross domestic product (GDP) is the total monetary or market value of all the
finished goods and services produced within a country’s borders in a specific time period.
HRD: Human Resource Development (HRD) is a crucial aspect of any organization, which
involves the process of developing and nurturing the skills, knowledge, and abilities of
employees to improve their performance and productivity.
HRM: Human resource management (HRM) is the practice of recruiting, hiring, deploying
and managing an organization’s employees.
ILO: These are legal instruments drawn up by the ILO’s constituents (governments, em-
ployers and workers) and setting out basic principles and rights at work.

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 MANAGEMENT OF INDUSTRIAL RELATIONS

Notes Industrial Dispute: Any dispute of difference between employees and

employers or between employers and workmen or between workmen and
workmen.
Industrial Harmony: It implies a healthy and cooperative working re-
lationship between employers and employees.
Labour Participation Schemes: The participation rate refers to the total
number of persons or individuals either in jobs or looking for a job.
Marginal Worker: Often engaged in irregular or part-time employment
with characteristics such as low wages and limited job security.
Medical Care: It refers to any medical service provided by medical
professionals to individuals.
Migrant Worker: Any person who is recruited by or through a contractor.
Non-Compliance: The meaning of Non-compliance is failure or refusal
to comply with something.
Occupational Health: An area of work in public health to promote and
maintain highest degree of physical, mental and social well-being of
workers in all occupations.
Offence: The act of upsetting or insulting somebody.
Official Gazette: A government gazette is a periodical publication that
has been authorised to publish public or legal notices.
Retrenchment: Cutting down expenditures by relieving employees to
become financially solvent.
Stock Options: The right to buy a specific number of shares of company
stock at a pre-set price.
Sustainability: The quality of being able to continue over a period of time.
Trade Agreement: A trade agreement is a contractual arrangement be-
tween states concerning their trade relationships.
Transformative Changes: It refers to significant and impactful shifts
or innovations that bring about substantial and often revolutionary
developments.
Unions: The action of joining or the situation of being joined.
VRS: It stands for voluntary retirement scheme.

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 Glossary

Vulnerable Population: It includes patients who are racial or ethnic mi- Notes
norities, children, elderly, socioeconomically disadvantaged, underinsured
or those with certain medical conditions.
Work-life Balance: It refers to maintaining a healthy equilibrium between
one’s professional responsibilities and personal life, promoting overall
well-being.

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 MANAGEMENT
OF

MBAFT - 7811 : MANAGEMENT OF INDUSTRIAL RELATIONS (Semester - IV)

INDUSTRIAL RELATIONS
Master of Business Administration (MBA)
Core Course - MBAFT - 7811
Semester - IV Course Credit - 4.5

Department of Distance and Continuing Education Department of Distance and Continuing Education
University of Delhi University of Delhi