The Concept of Industrial Relations and

Background
Last updated on August 17th, 2022 at 08:28 pm

The term ‘Industrial Relations’ comprises of two terms: ‘Industry’ and

‘Relations’. “Industry” refers to “Any productive activity in which an
individual (or a group of individuals) is (are) engaged”. By “relations” we
mean “the relationships that exist within the industry between the employer
and his workmen.”

Concept of Industrial Relations

The term industrial relations explain the relationship between employees

and management which stem directly or indirectly from union-employer
relationship.Industrial relations are the relationships between employees
and employers within the organizational settings.

The field of industrial relations looks at the relationship between

management and workers, particularly groups of workers represented by a
union. Industrial relations are basically the interactions between
employers, employees and the government, and the institutions and
associations through which such interactions are mediated.

The term industrial relations have a broad as well as a narrow outlook.

Originally, industrial relations were broadly defined to include the
relationships and interactions between employers and employees. From
this perspective, industrial relations cover all aspects of the employment
relationship, including human resource management, employee relations,
and union-management (or labor) relations.

Now its meaning has become more specific and restricted. Accordingly,
industrial relations pertains to the study and practice of collective
bargaining, trade unionism, and labor-management relations, while human
resource management is a separate, largely distinct field that deals with
nonunion employment relationships and the personnel practices and
policies of employers.

The term industrial relations have a broad as well as a narrow outlook.

Originally, industrial relations were broadly defined to include the
relationships and interactions between employers and employees. From
this perspective, industrial relations cover all aspects of the employment
relationship, including human resource management, employee relations,
and union-management (or labor) relations.
Now its meaning has become more specific and restricted. Accordingly,
industrial relations pertains to the study and practice of collective
bargaining, trade unionism, and labor-management relations, while human
resource management is a separate, largely distinct field that deals with
nonunion employment relationships and the personnel practices and
policies of employers.

Industrial relations is used to denote the collective relationships between

management and the workers. Traditionally, the term industrial relations is
used to cover such aspects of industrial life as trade unionism, collective
bargaining, workers’ participation in management, discipline and grievance
handling, industrial disputes and interpretation of labor laws and rules and
code of conduct

In the words of Lester,Industrial relations involve attempts at arriving at

solutions between the conflicting objectives and values; between the profit
motive and social gain; between discipline and freedom, between authority
and industrial democracy; between bargaining and co-operation; and
between conflicting interests of the individual, the group and the
community”.

The National Commission on Labor (NCL)also emphasize on the same

concept. According to NCL, industrial relations affect not merely the
interests of the two participants- labor and management, but also the
economic and social goals to which the State addresses itself. To regulate
these relations in socially desirable channels is a function, which the State
is in the best position to perform.

Importance of Industrial Relations

Industrial relations seek to protect the rights of managers too. Managers

expect workers to observe codes of discipline, not to join illegal strikes, not
to indulge in damage to company’s property, not to assault supervisors or
peers, and not to come inebriated to the workplace. Where a worker’s
behavior deviates from expected lines, it is the management’s prerogative
to take action.

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

on the part of an employee, and if the management satisfies the procedure,
it is justified in taking action or even dismissing the employee from service.

Role:
 • To help establish and maintain true industrial democracy
which is a prerequisite for the establishment of a socialist
society.
• To help in the economic progress of a country. The problem
of an increase in productivity is essentially the problem of
maintaining good industrial relations. That is why they form
an important plank of the economic development plan of
every civilized nation.
• To help management both in the formulation of informed
labour relations policies and in their translation into action.
• To encourage collective bargaining as a means of self-
regulation. They consider the negotiation process as an
educational opportunity, a chance both to learn and to teach.
• To help government in making laws forbidding unfair
practices of unions and employers. In a climate of good
industrial relations, every party works for the solidarity of
workers’ movement. Unions gain more strength and vitality.

In narrow sense, the term ‘industrial relations’ means relations between

parties in industrial establishments. That means, nature of relationship
established amongst the parties in the industry. Dictionary meaning of
industrial relations is the relations between management and employees in
industrial concerns. In short, the term, ‘industrial relations’ means the
relations between employees and management arising out of day to day
work in industry.

The healthy industrial relations are key to the progress and success. Their
significance may be discussed as under:

Uninterrupted production

The most important benefit of industrial relations is that this ensures

continuity of production. This means, continuous employment for all from
manager to workers. The resources are fully utilized, resulting in the
maximum possible production. There is uninterrupted flow of income for
all. Smooth running of an industry is of vital importance for several other
industries; to other industries if the products are intermediaries or inputs;
to exporters if these are export goods; to consumers and workers, if these
are goods of mass consumption.

Reduction in Industrial Disputes:

Good industrial relations reduce the industrial disputes. Disputes are

reflections of the failure of basic human urges or motivations to secure
adequate satisfaction or expression which are fully cured by good industrial
relations. Strikes, lockouts, go-slow tactics, gherao and grievances are
some of the reflections of industrial unrest which do not spring up in an
atmosphere of industrial peace. It helps promoting co-operation and
increasing production.

Mental Revolution:

The main object of industrial relation is a complete mental revolution of

workers and employees. The industrial peace lies ultimately in a
transformed outlook on the part of both. It is the business of leadership in
the ranks of workers, employees and Government to work out a new
relationship in consonance with a spirit of true democracy. Both should
think themselves as partners of the industry and the role of workers in such
a partnership should be recognized. On the other hand, workers must
recognize employer’s authority. It will naturally have impact on production
because they recognize the interest of each other.

High morale:

Good industrial relations improve the morale of the employees. Employees

work with great zeal with the feeling in mind that the interest of employer
and employees is one and the same, i.e. to increase production. Every
worker feels that he is a co-owner of the gains of industry. The employer
in his turn must realize that the gains of industry are not for him along but
they should be shared equally and generously with his workers. In other
words, complete unity of thought and action is the main achievement of
industrial peace. It increases the place of workers in the society and their
ego is satisfied. It naturally affects production because mighty co-operative
efforts alone can produce great results.

Reduced Wastage:

Good industrial relations are maintained on the basis of cooperation and

recognition of each other. It will help increase production. Wastage of man,
material and machines are reduced to the minimum and thus national
interest is protected.

Thus, it is evident that good industrial relations is the basis of higher

production with minimum cost and higher profits. It also results in
increased efficiency of workers. New and new projects may be introduced
for the welfare of the workers and to promote the morale of the people at
work. An economy organized for planned production and distribution,
aiming at the realization of social justice and welfare of the massage can
function effectively only in an atmosphere of industrial peace. If the twin
objectives of rapid national development and increased social justice are to
be achieved, there must be harmonious relationship between management
and labor.

Objectives of Industrial Relations:

• To safeguard the interest of labour and management by

securing the highest level of mutual understanding and good-
will among all those sections in the industry which participate
in the process of production.
• To avoid industrial conflict or strife and develop harmonious
relations, which are an essential factor in the productivity of
workers and the industrial progress of a country.
• To raise productivity to a higher level in an era of full
employment by lessening the tendency to high turnover and
frequency absenteeism.
• To establish and promote the growth of an industrial
democracy based on labor partnership in the sharing of profits
and of managerial decisions, so that ban individuals
personality may grow its full stature for the benefit of the
industry and of the country as well.
• To eliminate or minimize the number of strikes, lockouts and
gheraos by providing reasonable wages, improved living and
working conditions, said fringe benefits.
• To improve the economic conditions of workers in the existing
state of industrial managements and political government.
• Socialization of industries by making the state itself a major
employer
• Vesting of a proprietary interest of the workers in the
industries in which they are employed.

History
Industrial relations got its roots in the industrial revolution and the spread
of capitalism which created the modern employment relationship by
spawning free labour markets and large-scale industrial organizations with
thousands of wage workers. Kaufman, the Global Evolution of Industrial
Relations.

As both societies wrestled with these massive economic and social changes,
labour problems arose. Low wages, long working hours, monotonous and
dangerous work, and abusive supervisory practices led to high employee
turnover, violent strikes, and the threat of social instability and due to
confluence of these event and ideas associated with rise of democratic
governments in the western world of the late nineteenth and twentieth
centuries. It emerged from both negative and positive impulses

The negative aspect, industrial relations was a reaction against deplorable

working condition and with unrepressed profit making and employee clout
in the nine teeth century and twentieth century capitalism and this led to
the deplorable situations a conflict between capital and labour and hardship
for employee of that time

So we come to the conclusion that industrial relation was part of the reform
wing. Industrial relations arose from the conviction that cordial relationship
between workers and employer could be improvised through a combination
of scientific discovery, education, legal reform.

Current situation

Therefore, the maintenance of a good human relationship is a must in today

business environment, because in case of its absence the organizational
structure may crumble. Employees constitute the most valuable assets of
any organization.

Any neglect of the important factor is likely to result in increased cost of

production in term of wage and salaries, benefits and services; working
conditions, increased labour turn-over, absenteeism, indiscipline and
cleavages, strikes and transfer on the ground of discontent and the like,
besides deterioration in the quality of the goods produced and strained
relations between labour and management.

The Germans practice co-determination which gives workers of the

organization representation at the management of the companies these
known as the law allows workers to elect representatives (usually trade
union representatives) for the supervisory board of directors.

Evolution of industrial Relations in INDIA

Last updated on December 5th, 2019 at 03:16 pm

IR is dynamic in nature. The nature of IR can be seen as an outcome of complex

set of transactions among the major players such as the employers, the
employees, the trade union, and the state in a given socio-economic context. In
a sense, change in the nature of IR has become sine quo non with change in the
socio-economic context of a country.

Keeping this fact in view, IR in India is presented under the following two
sections:
 1. IR during Pre- Independence
2. IR during Post-Independence

1. IR During Pre-Independence

The structure of the colonial economy, the labour policies of colonial

government, the ideological composition of the political leadership, the
dynamics of political struggle for independence, all these shaped the colonial
model of industrial relations in pre-independent India”. Then even union
movement was an important part of the independence movement.

However, the colonial dynamics of the union movement along with the
aggressiveness of alien capital, the ambivalence of the native capital and the
experience of the outside political leadership frustrated the process of building
up of industrial relations institutions.

Other factors like the ideology of Gandhian class harmony, late entry of leftists
and the bourgeois character of congress also weakened the class approach to the
Indian society and industrial conflict”.

Till the Second World War, the attitude of the colonial government toward
industrial relations was a passive regulator only Because, it could provide, that
too only after due pressure, the sum of protective and regulative legal
framework for industrial relations Trade Union Act 1926 (TL A) Trade Disputes
Act 1929 (TDA). It was the economic emergence of the Second World War that
altered the colonial government’s attitude on industrial relations.

The state intervention began in the form of introduction of several war time
measures, viz. the Defense of India Rules (Rule 81- A), National Service
(Technical Personnel) Ordinance, and the Essential Service (Maintenance)
Ordinance As such in a marked contrast to its earlier stance, the colonial
government imposed extensive and pervasive controls on industrial relations by
the closing years of its era-. Statutory regulation of industrial relations was on
plank of its labour policy. The joint consultative institutions were established
primarily to arrive at uniform and agreeable labour policy.

The salient features of the colonial model of IR can be summarized as close

association between political and trade union movement, dominance of
‘outsiders’ in the union movement, state intervention and federal and tripartite
consultations.

The eve of Independence witnessed several instances that served as threshold

plank for IR during post Independence era. The prominent instances to mention
are passing of Indian Trade Unions (Amendment) Act, 1947, Industrial
Employment (Standing Orders) Act 1946, Bombay Industrial Relations Act,
1946, and Industrial Disputes Act, 1947 and split in AITUC and formation of
INTUC.

2. IR During Post-Independence:

Though Independent India got an opportunity to restructure the industrial

relations system the colonial model of IR remained in practice for sometimes due
to various reasons like the social, political and economic implications of
partition, social tension, continuing industrial unrest, communist insurgency,
conflict, and competition in the trade union movement. In the process of
consultation and confrontation, gradually the structure of the industrial
relations system (IRS) evolved.

State intervention in the IRS was a part of the interventionist approach to the
management of industrial economy.

Several considerations like unequal distribution of power in the labour market,

neutrality of the state, incompatibility of free collective bargaining institution
with economic planning etc. provided moral justification for retaining state
intervention in the IRS. State intervention in the IRS is logical also when the state
holds large stakes in the industrial sector of the economy.

However state intervention does not mean suppression of trade unions and
collective bargaining institution. In fact, state intervention and collective
bargaining were considered as complementary to each other.

Gradually, various tripartite and bipartite institutions were introduced to

supplement the state intervention in the IRS.

The tripartite process was considered as an important instrument of involving

participation of pressure groups in the state managed system. Non formal ways
were evolved to do what the formal system did not legistate, for one reason or
other.

The political and economic forces in the mid 1960s aggravated industrial conflict
and rendered non-formal system ineffective. In the process of reviewing the
system, National Commission on Labour (NCL) was appointed in 1966.

Now the focus of restructuring shifted from political to intellectual. However, yet
another opportunity was lost when there was an impasse on the NCL
recommendations in 1972. The Janta Government in 1978 made, of course, a
half-hearted attempt to reform industrial relations. Unfortunately, the attempt
met with strong opposition from all unions. The BMS, for example, termed it as
“a piece of anti-labour, authoritarian and dangerous legislation””.
Several committees were appointed to suggest measures for reforming die IRS.
In the process, tripartism was revived in 1980s. Government passed the Trade
unions and the Industrial Disputes (Amendment) Bill, 1988.

But, it also proved yet another legislative disaster. The bill was severely criticised
by the left parties. It was even viewed by some as a deliberate attempt to destroy
“autonomous; organised or militant trade union movement”.

Industrial Relations and Technological Change

Last updated on December 5th, 2019 at 03:25 pm

Technical change and industrial relations are becoming inextricably linked

together. There is a need for a clear-sighted understanding of all the effects of
technical change at the workplace. This would entail a conceptual framework in
which the interaction between social and technical factors could be properly
identified. At establishment level the innovation process typically involves a
balancing of the social, economic and technological vectors of change. Three
short case studies into the innovation process at one of the key manufacturing
plants of a major British vehicle producer are presented, examining a Machine
Monitoring System, Team Working and Maintenance Function. It is clear that the
linked issues of work practices and labour productivity which are to the forefront
of workplace industrial relations exert a significant impact on the economic
consequences of technical change. Where technological innovation involves
significant change in work practices, such change will be facilitated when the
forms of co‐operation it demands and the costs and benefits it creates are
congruent with the respective power and policies of management and unions.

• Technological change (TC) is a term that is used to describe the

overall process of invention, innovation and diffusion of
technology or processes.
• Technology is an instrument of development.
• It affects various aspects of economic and social life

Impact of Technological Change on Industrial Relations

The two major concerned factors are :

The impact of technological change on levels of employment and the nature of

skills.

The growing resistance of trade unions to technological changes .

 • Trade Union Response
• Fear of Unemployment
• Redundancy and Problems of Retraining
• Major Benefits of Improved Technology
• Workers Hardest Hit by Modernization
• Negotiated Change
• Appropriate Training
• Accent on Team Work
• Supportive Management Practices

Rationalization & Automation

Rationalization

Implies a basic change in the structure and control of industrial activities. Its
techniques can be applied to methods, material and men.

Automation

Technology itself controls the operations. The machine provides data from its
operations and feeds it back to its own controls which governs the production
process.

Response in India

(I) Cotton-textile- Workers accepted it.

Introduced in the form of efficiency measures.

Additional strain & Inadequate increase in earnings.

(II) Jute- International Competition

Progress slow, Dependence on foreign country for Raw Material

(III) Coal- Rationalization in larger mines, old methods in small mines

Globalization and the National Economy

Last updated on December 5th, 2019 at 03:16 pm
Globalization can usefully be conceived as a process or set of processes which
embodies a transformation in the spatial organization of social relations and
transactions, generating transcontinental or interregional flows and networks
of activity, interaction and power.

Globalization has four types of change. Firstly, globalization includes growing

social, political and economical actions across political limits of countries and
continents. Secondly, it recommends the growth of inter bondness and flows of
trade, investment, finance, and society. Third, it is developing extensity and
intensity of global inter bondness can be depended to a speeding up of global
connections and developments as the progress of world wide actions of
transport and communication speed up the flow of ideas, goods, information,
investment and communities. Fourthly, the growing extensity, intensity and
speed of global communications can be attached with their developing
impression such that the results of indistinct actions can be very important else
where and yet all the local growth may come to have massive global
consequences. It makes the sense, that the boundaries between local affairs and
global matters can become increasingly blurred.

In total globalization can be consideration of as expanding, increasing speed up,

and developing influence of world wide inter connections. In sum globalization
in this way, it makes possible to draw observe patterns of world wide contacts
and business across all type of fields of human activity, from the military to the
cultural.

Effects of globalization on national economies

Globalization creates major change on the economic environment of any nation;

it changes any nation in terms of economic development policies under national
government. The globalization provides the free movement of trade and
investment, labour and assets. Through globalization nation’s economy growth
globally so it opening up the barriers of international trade which increase the
stability and creates positive impact on quality of life with in a nation’s
individuals.

Economic growth through Globalization has both positive and negative impacts
on the society. One of the main benefits of economic growth is the higher
incomes per capita and higher living standards due to an increase in output. It
increase in output has also created employment opportunities which takes the
nation towards prosperity.

Example

The best example of Globalization is Microsoft Windows which is done in United

State of America but the technical support is provided in India which provides
support to Indian economy. Job opportunities create in India for IT professionals
and government’s income increases in terms of Taxes. In same way Toyota cars
made some cars others are made in United State of America.

The animation on cartoons is done in South Korea. The characters voices are
done in the United State of America or in country who buys these cartoons.

The native impact of Globalization is that the revenue earned in the nation is not
spend in that particular country for growth of this country’s economic conditions
of its people, this revenue is spend in other countries along the globe and the
ultimate benefit goes to the company’s home country, For Example the
American based company Nike is one of the company around the glob where ever
in the world Nike products sale the ultimate benefit goes to America but the Nike
enjoys the cheep labour and resources of that country. It also eliminates the
difference of skilled and unskilled persons.

Other main weakness of Globalization is that it increases possibilities of

unintentional motion of diseases between the countries. Globalization gives
attraction towards the money oriented lifestyles and selfish attitudes, which
suppose to consumption to be a mean to manage overall economic affluence.

As Amartya Sen said in 2002 “The market economy does not work by itself in
global relations indeed, it cannot operate alone even within a given country”

Some believer of globalisation has the aim to expand market relations, push
back state and interstate interference, and create a global free market. It is a
political plan that seen at work in the activities of transnational organizations
like the World Trade Organization (WTO), the International Monetary Fund
(IMF), and the Organization for Economic Cooperation and Development
(OECD), and has been a significant objective of United States involvement. Part
of the impetus for this project was the limited success of corporate/state
structures in planning and organizing economies. However, even more
significant was the growth in influence of neo-liberal ideologies and their
promotion by powerful politicians like Reagan in the USA and Thatcher in the UK.

Globalization and the National Economy

Last updated on December 5th, 2019 at 03:16 pm

Globalization can usefully be conceived as a process or set of processes which

embodies a transformation in the spatial organization of social relations and
transactions, generating transcontinental or interregional flows and networks
of activity, interaction and power.
Globalization has four types of change. Firstly, globalization includes growing
social, political and economical actions across political limits of countries and
continents. Secondly, it recommends the growth of inter bondness and flows of
trade, investment, finance, and society. Third, it is developing extensity and
intensity of global inter bondness can be depended to a speeding up of global
connections and developments as the progress of world wide actions of
transport and communication speed up the flow of ideas, goods, information,
investment and communities. Fourthly, the growing extensity, intensity and
speed of global communications can be attached with their developing
impression such that the results of indistinct actions can be very important else
where and yet all the local growth may come to have massive global
consequences. It makes the sense, that the boundaries between local affairs and
global matters can become increasingly blurred.

In total globalization can be consideration of as expanding, increasing speed up,

and developing influence of world wide inter connections. In sum globalization
in this way, it makes possible to draw observe patterns of world wide contacts
and business across all type of fields of human activity, from the military to the
cultural.

Effects of globalization on national economies

Globalization creates major change on the economic environment of any nation;

it changes any nation in terms of economic development policies under national
government. The globalization provides the free movement of trade and
investment, labour and assets. Through globalization nation’s economy growth
globally so it opening up the barriers of international trade which increase the
stability and creates positive impact on quality of life with in a nation’s
individuals.

Economic growth through Globalization has both positive and negative impacts
on the society. One of the main benefits of economic growth is the higher
incomes per capita and higher living standards due to an increase in output. It
increase in output has also created employment opportunities which takes the
nation towards prosperity.

Example

The best example of Globalization is Microsoft Windows which is done in United

State of America but the technical support is provided in India which provides
support to Indian economy. Job opportunities create in India for IT professionals
and government’s income increases in terms of Taxes. In same way Toyota cars
made some cars others are made in United State of America.
The animation on cartoons is done in South Korea. The characters voices are
done in the United State of America or in country who buys these cartoons.

The native impact of Globalization is that the revenue earned in the nation is not
spend in that particular country for growth of this country’s economic conditions
of its people, this revenue is spend in other countries along the globe and the
ultimate benefit goes to the company’s home country, For Example the
American based company Nike is one of the company around the glob where ever
in the world Nike products sale the ultimate benefit goes to America but the Nike
enjoys the cheep labour and resources of that country. It also eliminates the
difference of skilled and unskilled persons.

Other main weakness of Globalization is that it increases possibilities of

unintentional motion of diseases between the countries. Globalization gives
attraction towards the money oriented lifestyles and selfish attitudes, which
suppose to consumption to be a mean to manage overall economic affluence.

As Amartya Sen said in 2002 “The market economy does not work by itself in
global relations indeed, it cannot operate alone even within a given country”

Some believer of globalisation has the aim to expand market relations, push
back state and interstate interference, and create a global free market. It is a
political plan that seen at work in the activities of transnational organizations
like the World Trade Organization (WTO), the International Monetary Fund
(IMF), and the Organization for Economic Cooperation and Development
(OECD), and has been a significant objective of United States involvement. Part
of the impetus for this project was the limited success of corporate/state
structures in planning and organizing economies. However, even more
significant was the growth in influence of neo-liberal ideologies and their
promotion by powerful politicians like Reagan in the USA and Thatcher in the UK.

Role of Trade union in Industrial Relations

Last updated on December 5th, 2019 at 03:17 pm

Trade unions, also known as labor unions in the United States, are organizations
of workers in a common trade who have organized into groups dedicated to
improving the workers’ work life. A trade union generally negotiates with
employers on behalf of its members, advocating for improvements such as
better working conditions, compensation and job security. These unions play an
important role in industrial relations — the relationship between employees and
employers.

History
The origins of trade unions can be found in guilds and fraternal organizations
composed of people practicing a common trade, which date back hundreds of
years. However, the modern conception of trade unions, in which unions
represent a specific set of workers in negotiations with employers, dates back
only to the 18th century. Membership in unions only became widespread in the
United States and Europe in the 19th century.

Trade unions are associations of workers formed to represent their interests and
improve their pay and working conditions.

Types

There are four main types of trade unions.

Craft unions

These represent workers with particular skills e.g. plumbers and weavers. These
workers may be employed in a number of industries.

General unions

These unions include workers with a range of skills and from a range of
industries.

Industrial unions

These seek to represent all the workers in a particular industry, for instance,
those in the rail industry.

White collar unions

These unions represent particular professions, including pilots and teachers.

Unions in a country, often belong to a national union organization. For example,
in India, a number of unions belong to the All India Trade Union Congress
(AITUC).

This is the oldest and one of the largest trade union federations in the country. A
number of them also belong to international trade union organizations such as
the International Confederation of Free Trade Unions, which has more than 230
affiliated organizations in 150 countries.

Role of Trade Unions:

Unions carry out a number of functions. They negotiate on behalf of their
members on pay scales, working hours and working conditions. These areas can
include basic pay, overtime payments, holidays, health safety, promotion
prospects, maternity and paternity rights and job security.

Depending on the circumstances, unions may try to protect or improve workers’

rights. They also provide information on a range of issues for their members, for
instance on pensions. They help with education and training schemes and may
also participate in measures designed to increase demand for the product
produced and hence for labour.

Some also provide a range of benefits to their members including strike pay,
sickness pay and unemployment pay. In addition many get involved in
pressurizing their governments to adopt a legislation, which will benefit their
members or workers in general, such as fixing a national minimum wage.

Role of Trade union in Industrial Relations

Last updated on December 5th, 2019 at 03:17 pm

Trade unions, also known as labor unions in the United States, are organizations
of workers in a common trade who have organized into groups dedicated to
improving the workers’ work life. A trade union generally negotiates with
employers on behalf of its members, advocating for improvements such as
better working conditions, compensation and job security. These unions play an
important role in industrial relations — the relationship between employees and
employers.

History

The origins of trade unions can be found in guilds and fraternal organizations
composed of people practicing a common trade, which date back hundreds of
years. However, the modern conception of trade unions, in which unions
represent a specific set of workers in negotiations with employers, dates back
only to the 18th century. Membership in unions only became widespread in the
United States and Europe in the 19th century.

Trade unions are associations of workers formed to represent their interests and
improve their pay and working conditions.

Types

There are four main types of trade unions.

Craft unions

These represent workers with particular skills e.g. plumbers and weavers. These
workers may be employed in a number of industries.

General unions

These unions include workers with a range of skills and from a range of
industries.

Industrial unions

These seek to represent all the workers in a particular industry, for instance,
those in the rail industry.

White collar unions

These unions represent particular professions, including pilots and teachers.

Unions in a country, often belong to a national union organization. For example,
in India, a number of unions belong to the All India Trade Union Congress
(AITUC).

This is the oldest and one of the largest trade union federations in the country. A
number of them also belong to international trade union organizations such as
the International Confederation of Free Trade Unions, which has more than 230
affiliated organizations in 150 countries.

Role of Trade Unions:

Unions carry out a number of functions. They negotiate on behalf of their

members on pay scales, working hours and working conditions. These areas can
include basic pay, overtime payments, holidays, health safety, promotion
prospects, maternity and paternity rights and job security.

Depending on the circumstances, unions may try to protect or improve workers’

rights. They also provide information on a range of issues for their members, for
instance on pensions. They help with education and training schemes and may
also participate in measures designed to increase demand for the product
produced and hence for labour.

Some also provide a range of benefits to their members including strike pay,
sickness pay and unemployment pay. In addition many get involved in
pressurizing their governments to adopt a legislation, which will benefit their
members or workers in general, such as fixing a national minimum wage.
Why Employees Join Trade Unions
Researchers have devoted a great deal of time and effort to study “why do
employees choose to join a union.” They have failed to report a common list of
reasons that apply to all organising efforts.

Human beings are rational creature. They usually act upon rationally in different
spheres of their lives. Similarly, workers join a union with a rational approach
whether joining a union will be beneficial or not. This can simply be decided by
making a cost-benefit analysis in this regard. The excess of benefits over costs,
i.e., profit or reward, justifies workers’ joining to a trade union.

Wages and Benefits:

Employees work for livelihood, i.e., bread-and-butter. Obviously, bread-and-

butter issues of employees are always important issues in their unionization.
The employees may think that the union, with its united strength, will ensure
fair wages at par with those of other workers in the community, benefits such as
medical facility, pensions, paid sick leave, vacations and holidays for them.

Betterment of relationships

Another reason for employees joining unions is that employees feel that unions
can fulfill the important need for adequate machinery for proper maintenance of
employer-employee relations. Unions help in betterment of industrial relations
among management and workers by solving the problems peacefully.

Job Security:

Employees need to have a sense of job security and want to be sure that
management will not make unfair and arbitrary decisions about their
employment. They look unions to ensure that their jobs are duly protected
against lay offs, recall, promotion, etc.

Sense of Belongingness

Many employees joins a union because their co-workers are the members of the
union. At times, an employee joins a union under group pressure; if he does not,
he often has a very difficult time at work. On the other hand, those who are
members of a union feel that they gain respect in the eyes of their fellow workers.
They can also discuss their problem with’ the trade union leaders.

Working Conditions:
Employees like to work in a healthy and safe environment. Although there are
statutory provisions for providing employees a safe work environment
employees still feel more secured knowing that trade union is directly involved
in safety and health issues relating to them.

Sense of Security

The employees may join the unions because of their belief that it is an effective
way to secure adequate protection from various types of hazards and income
insecurity such as accident, injury, illness, unemployment, etc. The trade union
secure retirement benefits of the workers and compel the management to invest
in welfare services for the benefit of the workers.

Fair and Just Supervision:

The days are long gone when managers / leaders could rule employees with an
iron fist. Thanks to the trade unions that brought about a change or shift in
leadership styles from autocractic to democratic, or say, people oriented to
ensure that the managers treat their employees fairly, justly, and respectfully.
Employees can only be disciplined for “just cause.” In case of mistreatment from
the employer, the employee may file a written grievance against the employer.

Greater Bargaining Power:

The individual employee possesses very little bargaining power as compared to

that of his employer. If he is not satisfied with the wage and other conditions of
employment, he can leave the job. It is not practicable to continually resign from
one job after another when he is dissatisfied. This imposes a great financial and
emotional burden upon the worker. The better course for him is to join a union
that can take concerted action against the employer. The threat or actuality of a
strike by a union is a powerful tool that often causes the employer to accept the
demands of the workers for better conditions of employment.

Platform for self-expression:

The desire for self-expression is a fundamental human drive for most people. All
of us wish to share our feelings, ideas and opinions with others. Similarly the
workers also want the management to listen to them. A trade union provides
such a forum where the feelings, ideas and opinions of the workers could be
discussed. It can also transmit the feelings, ideas, opinions and complaints of the
workers to the management. The collective voice of the workers is heard by the
management and give due consideration while taking policy decisions by the
management.
Sense of Participation:

The employees can participate in management of matters affecting their

interests only if they join trade unions. They can influence the decisions that are
taken as a result of collective bargaining between the union and the
management.

Minimize Discrimination:

The decisions regarding pay, work, transfer, promotion, etc. are highly
subjective in nature. The personal relationships existing between the supervisor
and each of his subordinates may influence the management. Thus, there are
chances of favouritisms and discriminations. A trade union can compel the
management to formulate personnel policies that press for equality of
treatment to the workers. All the labour decisions of the management are under
close scrutiny of the labour union. This has the effect of minimizing favouritism
and discrimination.

Politics and Trade Unions

MUCH of the controversy over the political involvement of trade unions in India
involves a problem in semantics. Those who blame unions for their relations with
politics have in mind the commitment which many unions and union leaders
have to particular political parties. Nor can it be seriously denied that this party
commitment is at the root of the bitter mutual rivalries which characterise the
trade union scene in our country and which sap the strength and effectiveness of
the unions.

The setting up of textile and clothing mills around the port cities of Bombay (now
Mumbai), Calcutta (now Kolkata), Madras (now Chennai) and Surat in the second
half of the 19th century led to the beginnings of the industrial workforce in India.
Several incidents of strikes and protests by workers have been recorded during
this time. The credit for the first association of Indian workers is generally given
to the Bombay Mill-Hands Association founded by N.M. Lokhande in 1890. This
was in the period just after the passing of the ‘First’ Factories Act in 1881 by the
British Government of the time. The following years saw the formation of
several labour associations and unions. The first clearly registered trade-union
is considered to be the Madras Labour Union founded by B.P. Wadia in 1918, while
the first trade union federation to be set up was the All India Trade Union
Congress in 1920.

Following the rapid growth of unions around the time of the First World War, the
Russian Revolution and the setting up of the ILO industrial conflict began to
increase and over 1,000 strikes were recorded between 1920 and 1924. The
waves of strikes boiled over with the arrest of prominent leaders and trade-
unionists in the infamous ‘Cawnpore Conspiracy case’ in 1924 with the union
leaders being arrested and accused of attempting a Communist revolution to try
and overthrow the ruling British government. Subsequently, the Trade Union
Act (1926) was passed which created the rules for the regulation and closer
monitoring of Trade Unions. In the first year of the law’s operation, 28 unions
registered and submitted returns with a total membership 100,619. The number
of unions grew rapidly after that and by the time of Independence of India in
1947, there were 2,766 unions registered which had a combined membership of
over 1.66 million. This resulted in a wide influence of unions and workers’
organisations and led to significantly favourable social legislation being enacted
in the first decade of Independence. Several important labour laws were passed
during this time.

Apart from these there are various community associations in India. These
community groups are organised on the basis of caste, class and religion. Some
examples of caste organisations are Scheduled Caste Federation, Backward
Caste Federation, etc. Amongst other organisations there are some like Vishwa
Hindu Parishad, Northern and Southern India Christian Conference, etc. which
represent interests that are supposed to safeguard their respective religions.

The rise of peasants groups in India has been mainly due to abolition of
Zamindari System, implementation of Panchayati Raj, land reform measures,
Green Revolution Movement. They gained power since 1960s. In 1936, the All
India Kisan Sabha was established and after 1942 the Communist Party of India
acquired control over it.

Different parties have got their own peasant organisations. Even though there
are some important All India Kisan Associations like All India Kisan Congress, All
India Kisan Kamgar Sammelan, Akhil Bharatiya Kisan Sangh, peasant groups
have been mainly organised on territorial basis.

Their demands relate to procurement prices of agricultural products, fertiliser

subsidy, tenancy rights, electricity charges, etc. The Bharatiya Kisan Party (BKP)
in Western U.P. is considered the most significant pressure group.

Problems & Suggestive Remedial Measures of

Trade Unions
Last updated on December 8th, 2019 at 10:40 am

The new corporate ‘mantras’ productivity, performance, efficiency, survival of

the fittest have virtually pushed them to the wall-where their very survival looks
uncertain. Let’s recount the factors responsible for their ever-increasing woes
and depreciated status thus as below:

1. Trade Union leadership: The nature of leadership significantly influences the

union-management relations as the leadership is the lynch-pin of the
management of trade unions. The leadership of most of the trade unions in India
has been outside leadership mainly drawn from political parties.

Reasons for emergence of outside leadership: Outside leadership has been

playing a pivotal role in Indian Trade Union Movement due to the inability of
insiders to lead their movement. In view of low education standards and poor
command over English language which is still the principal language of labour
legislation and negotiations, low level of knowledge about labour legislation,
unsound financial position, fear of victimisation by the employer and lack of
leadership qualities-outside leaders have come to stay. The main reason for
this trend is that the Trade Unions Act, 1926,[India] itself provided the scope
for outside leadership.

Section 22 of the Act requires that ordinarily not less than half of the officers of
the re-registered union shall be actively engaged or employed in an industry to
which the union relates.

Thus, this provision provides the scope for outsiders to the tune of 50% of the
office bearers. The Royal Commission of Labour (RCI) 1931, recommended for
the reduction of the statutory limit of outsiders from 1/2 to 1/3 but no efforts
were taken in this direction.

The evil effects of outside leadership: The evil effects of outside leadership
analysed by National Commission on Labour are as follows:

1. Outside leadership undermined the purposes of Trade Unions and

weakened their authority. Personal benefits and prejudices
sometimes weighed more than unions.
2. Outside leadership has been responsible for the slow growth of
Trade Unions.
3. Internal leadership has not been developed fully.
4. Most of the leaders cannot understand the worker’ problems as
they do not live the life of a worker.

Even though outside leadership is permissible in the initial stages it is

undesirable in the long run because of many evils associated with it. Political
differences of leaders have been inhibiting the formation of one union in one
industry. Most of the Trade Union leaders fulfil their personal aspirations with
their knowledge and experience gained in the Trade Unions.
Measures to minimise the evil effects of outside leadership: In view of the
limitations of outside leadership, it is desirable to replace the outside leaders
progressively by the internal leaders. The National Commission on Labour,
1969, also stated that outsiders in the Trade Unions should be made redundant
by forces from within rather than by legal means. Both the management and
trade unions should take steps in this direction. The steps may be:

• Management should assure that the victimisation will be at zero

level, even if the
• trade unions are led by insiders;
• Extensive training facilities in the areas of leadership skills,
management
• techniques and programmes should be provided to the workers;
• Special leave should be sanctioned to the office bearers.

Union rivalry has been the result of the following factors:

1. The desire of political parties to have their basis among the

industrial workers;
2. Person-cum-factional politics of the local union leader;
3. Domination of unions by outside leaders;
4. Attitude and policies of the management, i.e., divide and rule
policy; and
5. The weak legal framework of trade unions.

Measures to minimise union rivalry: In view of the evil effects of inter-union

rivalry and the problem of formation of one union in one industry, it may be
necessary to consider the recommendations of National Commission on Labour,
1969. The recommendations of NCL to minimise union rivalry are:

1. Elimination of party politics and outsiders through building up of

internal leaders;
2. Promotion of collective bargaining through recognition of sole
bargaining agents;
3. Improving the system of union recognition;
4. Encouraging union security; and
5. Empowering labour courts to settle inter-union disputes if they
are not settled within the organisation.

2. Multiple unions: Multiple unionism both at the plant and industry levels pose
a serious threat to industrial peace and harmony in India. The situation of
multiple unions is said to prevail when two or more unions in the same plant or
industry try to assert rival claims over each other and function with overlapping
jurisdiction. The multiple unions exist due to the existence of craft unions,
formations of two or more unions in the industry. Multiple unionism is not a
phenomenon unique to India. It exists even in advance countries like UK and USA.
Multiple unionism affects the industrial relations system both positively and
negatively. It is sometimes desirable for the healthy and democratic health of
labour movement. It encourages a healthy competition and acts as a check to the
adoption of undemocratic practice, authoritative structure and autocratic
leadership. However, the negative impacts of multiple unions dominate the
positive impacts. The nature of competition tends to convert itself into a sense
of unfair competition resulting in inter-union rivalry. The rivalry destroys the
feeling of mutual trust and cooperation among leadership. It is a major cause for
weakening the Trade Union Movement in India. Multiple unionism also results in
small size of the unions, poor finances, etc.

3.Union Rivalry: The formal basis for Trade Union Organisation is provided by
the Indian Trade Union Act, 1926. The relevant article reads as follows: “Any
seven or more members of a trade union may be subscribing their name to the
roles of the trade union and by otherwise complying with the provisions of this
act with respect to the registration, apply for registration of the trade union
under this Act.”

This provision has led to the formation of multiple unions and resulted in
interunion rivalry in different industries. But the inter-union rivalry breaks the
very purpose of the trade unions by weakening the strength of collective
bargaining. On the other hand, the existence of a single, strong union not only
protects the employee interests more effectively but also halts the various
unproductive activities of the unions and forces the leaders to concentrate on
the strategic issues. Further, it helps to bring about congenial industrial
relations by bringing about a system of orderliness in dealing with the
employees and by facilitating expeditious settlement of disputes.

The state of rivalry between two groups of the same union is said to be inter
union rivalry. Inter and intra-union rivalries have been a potent cause of
industrial disputes in the country. They are responsible for weal bargaining
power of trade unions in collective bargaining. These rivalries are responsible
for slow growth of trade union movement in the country.

4.Finance: Sound financial position is an essential ingredient for the effective

functioning of trade unions, because in the process of rendering services or
fulfilling their goals, trade unions have to perform a variety of functions and
organise programmes which require enormous financial commitments. Hence,
it is imperative on the part of a trade union to strengthen its financial position.

But it is felt that the income and expenditure of trade unions in India over the
years is such, with few exceptions, that the financial position of the union is
generally weak, affecting their functioning. It is opined that, “trade unions
could be more effective, if they paid more attention to strengthening their
organisations and achieving higher attention of financial solvency.”

The primary source of income to the unions is membership subscription. Their

other sources of union finances are donations, sale of periodicals, etc. The items
of expenditure include: allowances to office bearers, salaries to office, annual
convention/meeting expenses, rents, stationery, printing, postage, telegrams,
etc.

Most of the trade unions in India suffer from inadequate funds. This unsound
financial position is mostly due to low membership and low rate of membership
fee. Trade Union Act, 1926, prescribed the membership fee at 25 paise per
member per month. But the National Commission on Labour recommended the
increase of rate of membership subscription from 25 paise to Re. 1 in the year
1990. But the Government did not accept this recommendation.

As the National Commission on Labour observes, “ an important factor limiting

the effective functioning of unions in our country has been their financial
weakness.. In most unions, poor finances are the result of inadequate
membership strength. This in turn, can be traced to the small size of units. In a
majority of unions, the rate of contributions required of members is also small.
With a relatively low rte of unionisation, total funds collected are small. The
general picture of finances of unions is disappointing.”

5.Low membership: The average membership figures of each union are quite
depressing. In 1992-93 the average membership figure was 632, a steady fall
from 3,594 per union from 1927-28. “Because of their small size, unions suffer
from lack of adequate funds and find it difficult to engage the services of
experts to aid and advise members in times of need’. They can’t bargain with
the employer effectively on their own.

6.Heterogeneous nature of labour: Since workers come to the factory with

varying backgrounds, it is difficult for them to put a joint front in case of
trouble. Employers exploit the situation, under the circumstances, by dividing
workers on the basis of race, religion, language, caste, etc.

7.Lack of Interest: For a large majority of workers, unionism even today

remains a foreign issue. In fact, workers avoid union activities out of sheer
disinterestedness. Those who become part of the union, do not also participate
in the union work enthusiastically. In such a scenario, it is not surprising to find
outside political leaders exploiting the situation serve their own personal
agenda.
8.Absence of paid office bearers: Weak finances do not permit unions to
engage the services of full time, paid office bearers. Union activists, who work
on a part time basis, neither have the time nor the energy to take up union
activities sincerely and diligently.

9.Other problems: The other factors responsible for the unsound functioning
of trade unions in India are:

1. Illiteracy: Workers in India fail to understand the implications of

modern trade unionism. Their illiteracy coupled with ignorance
and indifference account for the predominance of outside
leadership.
2. Uneven growth: Trade unionism activities are, more or less,
confined to major metros in India and traceable only in large scale
units (especially cotton textile. The membership fees should be
raised as the amount of wages of the workers increased
significantly, compared to the situation in 1926 when Trade
Union Act provided for the collection of 25 paise per month per
member as subscription fee. Even amended Rs.l/- is not
sufficient. Some other source of finance may also explored to
make trade union financially healthy.

The Trade Union Act 1926 & Amendment

Last updated on September 19th, 2021 at 11:00 pm

The trade Unions Act, 1926 provides for registration of trade unions with a view to
render lawful organisation of labour to enable collective bargaining. It also confers on
a registered trade union certain protection and privileges.

The Act extends to the whole of India and applies to all kinds of unions of workers and
associations of employers, which aim at regularising labour management relations. A
Trade Union is a combination whether temporary or permanent, formed for regulating
the relations not only between workmen and employers but also between workmen
and workmen or between employers and employers.

Registration

Registration of a trade union is not compulsory but is desirable since a registered trade
union enjoys certain rights and privileges under the Act. Minimum seven workers of
an establishment (or seven employers) can form a trade union and apply to the
Registrar for it registration.
 • The application for registration should be in the prescribed form and
accompanied by the prescribed fee, a copy of the rules of the union
signed by at least 7 members, and a statement containing
• the names, addresses and occupations of the members making the
application, the name of the trade union and the addresses of its head
office, and the titles, names, ages, addresses and occupations of its
office bearers.
• If the union has been in existence for more than a year, then a
statement of its assets and liabilities in the prescribed form should be
submitted along with the application. The registrar may call for further
information for satisfying himself that the application is complete and
is in accordance with the provisions, and that the proposed name does
not resemble
• On being satisfied with all the requirements, the registrar shall register
the trade union and issue a certificate of registration, which shall be
conclusive evidence of its registration.

Objectives of Trade Union:

The following are the objectives of trade union:

(1) To improve the economic lot of workers by securing them better wages.

(2) To secure for workers better working conditions.

(3) To secure bonus for the workers from the profits of the enterprise/organization.

(4) To ensure stable employment for workers and resist the schemes of management
which reduce employment opportunities.

(5) To provide legal assistance to workers in connection with disputes regarding work
and payment of wages.

(6) To protect the jobs of labour against retrenchment and layoff etc.

(7) To ensure that workers get as per rules provident fund, pension and other benefits.

(8) To secure for the workers better safety and health welfare schemes.

(9) To secure workers participation in management.

(10) To inculcate discipline, self-respect and dignity among workers.

(11) To ensure opportunities for promotion and training.

(12) To secure organizational efficiency and high productivity.

(13) To generate a committed industrial work force for improving productivity of the
system.

Functions of Trade Unions:

(1) Collective bargaining with the management for securing better work environment
for the workers/ employees.

(2) Providing security to the workers and keeping check over the hiring and firing of
workers.

(3) Helping the management in redressal of grievances of workers at appropriate level.

(4) If any dispute/matter remains unsettled referring the matter for arbitration.

(5) To negotiate with management certain matters like hours of work, fringe benefits,
wages and medical facilities and other welfare schemes.

(6) To develop cooperation with employers.

(7) To arouse public opinion in favour of labour/workers.

Benefits of Trade Union:

Workers join trade union because of a number of reasons as given below:

1. A worker feels very weak when he is alone. Union provides him an

opportunity to achieve his objectives with the support of his fellow
colleagues.
2. Union protects the economic interest of the workers and ensures a
reasonable wage rates and wage plans for them.
3. Union helps the workers in getting certain amenities for them in
addition to higher wages.
4. Union also provides in certain cases cash assistance at the time of
sickness or some other emergencies.
5. Union organize negotiation between workers and management and
are instruments for settlement of disputes.
6. Trade union is also beneficial to employer as it organizes the workers
under one banner and encourages them follow to peaceful means for
getting their demands accepted.
7. Trade union imparts self-confidence to the workers and they feel that
they are an important part of the organization.
 8. It provides for promotion and training and also helps the workers to go
to higher positions.
9. It ensures stable employment for the workers and opposes the motive
of management to replace the workers by automatic machines.
10. Workers get an opportunity to take part in the management and
oppose any decision which adversely effects them.

Amendment of Trade unions act, 1926

The Trade Unions (Amendment) Bill, 2019 was introduced in Lok Sabha by the
Minister of Labour and Employment, Santosh Kumar Gangwar, on January 8, 2019.
The Bill amends the Trade Unions Act, 1926, which provides for the registration and
regulation of trade unions.

The Bill seeks to provide for recognition of trade unions or a federation of trade unions
at the central and state level by the central and state government, respectively. Such
trade unions or the federation of trade unions will be recognised as Central Trade
Unions or State Trade Unions, as the case may be.

The central or state government may make rules for:

(i) The recognition of such Central or State Trade Unions.

(ii) The authority to decide disputes arising out of such recognition, and the manner of
deciding such disputes.

Industrial Democracy & Participative

Management
Last updated on December 8th, 2019 at 10:40 am

One of the important requirements of industrial relation is industrial democracy.

Worker’s participation in management (WPM) is essentially a step in promoting
industrial democracy. This is the modem trend in industrial world both in
developed and developing countries. This is a concept of extending democracy
of political systems in government to the industries.

The form, structure and the content of WPM vary with social norms and nature
of government in each country. WPM takes the shape of self- management, co-
determination, worker director and joint management councils. Despite
variation in interpretation, all agree that participation means sharing the
decision making power between management and workers.
Participate may protect the interests of both parties. But more than this
protection, participation is a system of checks and balances which prevents
exploitations and provides equity and fairness. This requires great awareness,
education and conceptual skill from both the parties, to make WPM, a success.

Industrial democracy through WPM achieves the following

1. Performance of both groups is evaluated objectively.

2. Respect workers as free persons of equal value.
3. Rule of law and natural justice.
4. Discipline through self control and self direction
5. Morale, motivation and a sense of belongingness.
6. Productivity and high quality in work.
7. Better compensation.

In other words the objectives of WPM are as follows

1. To enlighten and involve workers to know better about their role

in meeting the organisational objectives.
2. To know about importance of productivity and quality aspects in
sustenance and growth of the organisation.
3. To help improve the supervisor-worker relations and
management union relations.
4. Involve workers in subjects like safety and environment care.
5. Assist in team building and HRD activities.
6. Develop a culture of self involvement to reduce vigilant
supervision.
7. Improve employee pride, morale and integrity.

Level of Participation:

(a) Informative Participation

This is merely information sharing of major aspects like product mix,

productivity, balance sheet etc. Workers are not allowed close scrutiny of
accounts.

(b) Consultative Participation

Here workers are consulted on such aspects like welfare, work methods, safety
programmes. Worker’s body or joint councils can make recommendation. It is
left to management to accept the recommendations or not.
(c) Associative Participation

Here, the consultation is extended to more areas. In addition, management has

a moral responsibility to implement recommendation made by joint councils.

(d) Administrative Participation

Here, management having accepted the recommendations of joint councils

refers alternatives of implementation plans or strategies for the consideration
of the councils to suggest the best one. Here authority of decision making is
delegated.

(e) Decisive Participation

Here decisions are taken jointly by management and workers on all important
matter concerning the firm. Here both are equally responsible and accountable
for the success or failure based on such decision. This, in a true sense, is the
sharing of “profits” and “pains”.

A number of analysis have shown that significant changes of human behaviour

is possible rapidly if persons who are expected to change are allowed to decide
“what” and “how” about such changes.

Significance, Features of Collective Barganing

Last updated on December 8th, 2019 at 10:43 am

Industrial disputes between the employee and employer can also be settled by
discussion and negotiation between these two parties in order to arrive at a
decision. This is also commonly known as collective bargaining as both the
parties eventually agree to follow a decision that they arrive at after a lot of
negotiation and discussion.

According to Beach, “Collective Bargaining is concerned with the relations

between unions reporting employees and employers (or their representatives).
It involves the process of union organization of employees, negotiations
administration and interpretation of collective agreements concerning wages,
hours of work and other conditions of employees arguing in concerted economic
actions dispute settlement procedures”.

According to Flippo, “Collective Bargaining is a process in which the

representatives of a labor organization and the representatives of business
organization meet and attempt to negotiate a contract or agreement, which
specifies the nature of employee-employer union relationship”.
“Collective Bargaining is a mode of fixing the terms of employment by means of
bargaining between organized body of employees and an employer or
association of employees acting usually through authorized agents. The essence
of Collective Bargaining is bargaining between interested parties and not from
outside parties”.

According to an ILO Manual in 1960, the Collective Bargaining is defined as:

“Negotiations about working conditions and terms of employment between an

employer, a group of employees or one or more employers organization on the

It is also asserted that “the terms of agreement serve as a code defining the
rights and obligations of each party in their employment relations with one
another, if fixes large number of detailed conditions of employees and during its
validity none of the matters it deals with, internal circumstances give grounds
for a dispute counseling and individual workers”.

Collective Bargaining Involves:

(i) Negotiations

(ii) Drafting

(iii) Administration

(iv) Interpretation of documents written by employers, employees and the union

representatives

(v) Organizational Trade Unions with open mind.

Forms of Collective Bargaining:

The working of collective bargaining assumes various forms. In the first place,
bargaining may be between the single employer and the single union, this is
known as single plant bargaining. This form prevails in the United States as well
as in India.

Secondly, the bargaining may be between a single firm having several plants and
workers employed in all those plants. This form is called multiple plants
bargaining where workers bargain with the common employer through
different unions.
Thirdly, instead of a separate union bargaining with separate employer, all the
unions belonging to the same industry bargain through their federation with the
employer’s federation of that industry. This is known as multiple employer
bargaining which is possible both at the local and regional levels. Instances in
India of this industry-wide bargaining are found in the textile industry.

The common malady of union rivalry, small firms and existence of several
political parties has given rise to a small unit of collective bargaining. It has
produced higher labour cost, lack of appreciation, absence of sympathy and
economic inefficiency in the realm of industrial relationships. An industry-wide
bargaining can be favourable to the economic and social interests of both the
employers and employees.

Essential Pre-Requisites for Collective Bargaining:

Effective collective bargaining requires the following prerequisites:

(i) Existence of a strong representative trade union in the industry that believes
in constitutional means for settling the disputes.

(ii) Existence of a fact-finding approach and willingness to use new methods and
tools for the solution of industrial problems. The negotiation should be based on
facts and figures and both the parties should adopt constructive approach.

(iii) Existence of strong and enlightened management which can integrate the
different parties, i.e., employees, owners, consumers and society or
Government.

(iv) Agreement on basic objectives of the organisation between the employer

and the employees and on mutual rights and liabilities should be there.

(v) In order that collective bargaining functions properly, unfair labour practices
must be avoided by both the parties.

(vi) Proper records for the problem should be maintained.

(vii) Collective bargaining should be best conducted at plant level. It means if

there are more than one plant of the firm, the local management should be
delegated proper authority to negotiate with the local trade union.

(viii) There must be change in the attitude of employers and employees. They
should realise that differences can be resolved peacefully on negotiating table
without the assistance of third party.
(ix) No party should take rigid attitude. They should enter into negotiation with
a view to reaching an agreement.

(x) When agreement is reached after negotiations, it must be in writing

incorporating all term of the contract.

It may be emphasised here that the institution of collective bargaining

represents a fair and democratic attempt at resolving mutual disputes.
Wherever it becomes the normal mode of setting outstanding issues, industrial
unrest with all its unpleasant consequences is minimised.

Main Features of Collective Bargaining:

Some of the salient features of collective bargaining are:

1. It is a Group Action:

Collective bargaining is a group action as opposed to individual action. Both the

parties of settlement are represented by their groups. Employer is represented
by its delegates and, on the other side; employees are represented by their trade
union.

2. It is a Continuous Process:

Collective bargaining is a continuous process and does not end with one
agreement. It provides a mechanism for continuing and organised relationship
between management and trade union. It is a process that goes on for 365 days
of the year.

3. It is a Bipartite Process:

Collective bargaining is a two party process. Both the parties—employers and

employees— collectively take some action. There is no intervention of any third
party. It is mutual given-and-take rather than take-it-or-leave-it method of
arriving at the settlement of a dispute.

4. It is a Process:

Collective bargaining is a process in the sense that it consists of a number of

steps. The starting point is the presentation of charter of demands by the
workers and the last step is the reaching of an agreement, or a contract which
would serve as the basic law governing labour-management relations over a
period of time in an enterprise.
 5. It is Flexible and Mobile and not Fixed or Static:

It has fluidity. There is no hard and fast rule for reaching an agreement. There is
ample scope for compromise. A spirit of give-and-take works unless final
agreement acceptable to both the parties is reached.

6. It is Industrial Democracy at Work:

Collective bargaining is based on the principle of industrial democracy where the

labour union represents the workers in negotiations with the employer or
employers. Industrial democracy is the government of labour with the consent
of the governed—the workers. The principle of arbitrary unilateralism has given
way to that of self-government in industry. Actually, collective bargaining is not
a mere signing of an agreement granting seniority, vacations and wage increase,
by sitting around a table.

7. It is Dynamic:

It is relatively a new concept, and is growing, expanding and changing. In the

past, it used to be emotional, turbulent and sentimental, but now it is scientific,
factual and systematic.

8. It is a Complementary and not a Competitive Process:

Collective bargaining is not a competitive process i.e., labour and management

do not coopt while negotiating for the same object. It is essentially a
complementary process i.e., each party needs something which the other party
has, namely, labour can put greater productive effort and management has the
capacity to pay for that effort and to organise and guide it for achieving the
enterprise’s objectives.

The behavioural scientists have made a good distinction between “distributive

bargaining” and “integrative bargaining”. The former is the process of dividing
up the cake which represents what has been produced by the joint efforts of
management and labour.

In this process, if one party wins something, the other party, to continue the
metaphor of the cake, has a relatively smaller size of the cake. So it is a win-lose’
relationship. The integrative bargaining, on the other hand, is the process where
both the parties can win—each party contributing something for the benefit of
the other party.

9. It is an Art:
Collective bargaining is an art, an advanced form of human relations.

Means of Collective Bargaining:

Generally, there are four important methods of collective bargaining, namely,

negotiation, mediation, conciliation and arbitration for the settlement of trade
disputes. In this context R.F. Hoxie said that arbitration is often provided for in
collective bargaining under certain contingencies and for certain purposes,
especially when the parties cannot reach agreement, and in the interpretation of
an agreement through negotiation.

Conciliation is a term often applied to the art of collective bargaining, a term

often applied to the action of the public board which attempts to induce
collective bargaining.

Mediation is the intervention usually uninvited, of some outside person of body

with a view of getting conciliation or to force a settlement, compulsory
arbitration is extreme mediation. All these things are aids or supplement to
collective bargaining where it breaks down. They represent the intervention of
outside parties.

Constituents of Collective Bargaining:

There are three distinct steps in the process of collective bargaining:

(1) The creation of the trade agreement,

(2) The interpretation of the agreement, and

(3) The enforcement of the agreement.

Each of these steps has its particular character and aim, and therefore, each
requires a special kind of intellectual and moral activity and machinery.

1. The Creation of the Trade Agreement:

In negotiating the contract, a union and management present their demands to

each other, compromise their differences, and agree on the conditions under
which the workers are to be employed for the duration of the contract. The
coverage of collective bargaining is very uneven; in some industries almost all
the workers are under agreement, while in others only a small portion of the
employees of the firms are covered by the agreement.
The negotiating process is the part of collective bargaining more likely to make
headline news and attract public attention; wage increases are announced,
ominous predictions about price increase are reduction in employment are
made.

2. The Interpretation of the Agreement:

The administrative process is the day-to-day application of the provisions of the

contract to the work situation. At the time of writing the contract, it is impossible
to foresee all the special problems which will arise in applying its provisions.
Sometimes, it is a matter of differing interpretations of specific clause in the
contract, sometimes; it is a question of whether the dispute is even covered by
the contract. Nevertheless, each case must somehow be settled. The spirit of the
contract should not be violated.

3. Enforcement of the Agreement:

Proper and timely enforcement of the contract is very essential for the success of
collective bargaining. If a contract is enforced in such way that it reduces or
nullifies the benefits expected by the parties, it will defeat basic purpose of
collective bargaining. It may give rise to fresh industrial disputes. Hence, in the
enforcement of the contract the spirit of the contract should not be violated.

However, new contracts may be written to meet the problems involved in the
previous contract. Furthermore, as day-to-day problems are solved, they set
precedents for handling similar problems in future. Such precedents are almost
as important as the contract in controlling the working conditions. In short,
collective bargaining is not an on-and-off relationship that is kept in cold
storage except when new contracts are drafted.

Theories, Importance, Hindrance of Collective

Bargaining
Last updated on December 13th, 2022 at 07:13 pm

Theories of Collective Bargaining:

There are three important concepts on collective bargaining which have
been discussed as follows:

1. The Marketing Concept and the Agreement as a

Contract:
The marketing concept views collective bargaining as a contract for the sale
of labour. It is a market or exchange relationship and is justified on the
ground that it gives assurance of voice on the part of the organised workers
in the matter of sale. The same objective rules which apply to the
construction of all commercial contracts are invoked since the union-
management relationship is concerned as a commercial one.

According to this theory, employees sell their individual labour only on

terms collectively determined on the basis of contract which has been made
through the process of collective bargaining.

The uncertainty of trade cycles, the spirit of mass production and

competition for jobs make bargain a necessity. The trade union’s collective
action provided strength to the individual labourer.

It enabled him to resist the pressure of circumstances in which he was

placed and to face an unbalanced and disadvantageous situation created
by the employer. The object of trade union policy through all the maze of
conflicting and obscure regulations has been to give to each individual
worker something of the indispensability of labour as a whole.

It cannot be said whether the workers attained a bargaining equality with

employers. But, collective bargaining had given a new- relationship under
which it is difficult for the employer to dispense without facing the relatively
bigger collective strength.

2. The Governmental Concept and the Agreement as Law:

The Governmental Concept views collective bargaining as a constitutional

system in industry. It is a political relationship. The union shares
sovereignty with management over the workers and, as their
representative, uses that power in their interests. The application of the
agreement is governed by a weighing of the relation of the provisions of
the agreement to the needs and ethics of the particular case.

The contract is viewed as a constitution, written by the point conference of

union and management representative in the form of a compromise or
trade agreement. The agreement lays down the machinery for making
executing and interpreting the laws for the industry. The right of initiative
is circumscribed within a framework of legislation.

Whenever, management fails to conform to the agreement of constitutional

requirements, judicial machinery is provided by the grievance procedure
and arbitration.
This creates a joint Industrial Government where the union share
sovereignty with management over the workers and defend their group
affairs and joint autonomy from external interference.

3. The Industrial Relations (Managerial) Concept as

Jointly Decided Directives:

The industrial relations concept views collective bargaining as a system of

industrial governance. It is a functional relationship. Group Government
substitutes the State Government. The union representative gets a hand in
the managerial role. Discussions take place in good faith and agreements
are arrived at. The union joins with company officials in reaching decisions
on matters in which both have vital interests. Thus, union representatives
and the management meet each other to arrive at a mutual agreement
which they cannot do alone.

To some extent, these approaches represent stage of development of the

bargaining process itself. Early negotiations were a matter of simple
contracting for the terms of sale of labour. Developments of the latter
period led to the emergence of the Government theory. The industrial
relations approach can be traced to the Industrial Disputes Act of 1947 in
our country, which established a legal basis for union participation in the
management.

Importance of Collective Bargaining:

The collective bargaining advances the mutual understanding between the
two parties i.e., employees and employers.

The role of collective bargaining may be evaluated from the following point
of view:

(1) From Management Point of View:

The main object of the organisation is to get the work done by the
employees at work at minimum cost and thus earn a high rate of profits.
Maximum utilization of workers is a must for the effective management.
For this purpose co-operation is required from the side of the employees
and collective bargaining is a device to get and promote co-operation. The
labour disputes are mostly attributable to certain direct or indirect causes
and based on rumors, and misconceptions. Collective bargaining is the best
remedial measure for maintaining the cordial relations.

(2) From Labour and Trade Union Point of View:

Labour has poor bargaining power. Individually a worker has no existence
because labour is perishable and therefore, the employers succeed in
exploiting the labourers.

The working class in united form becomes a power to protect its interests
against the exploitation of the employers through the process of collective
bargaining.

The collective bargaining imposes certain restrictions upon the employer.

Unilateral action is prevented. All employees are treated on equal footings.
The conditions of employment and rates of wages as specified in the
agreement can be changed only through negotiations with labour. Employer
is not free to make and enforce decisions at his will.

Collective bargaining can be made only through the trade unions. Trade
unions are the bargaining agents for the workers. The main function of the
trade unions is to protect the economic and non- economic interests of
workers through constructive programmes and collective bargaining is one
of the devices to attain that objective through negotiations with the
employers, Trade unions may negotiate with the employer for better
employment opportunities and job security through collective bargaining.

(3) From Government Point of View:

Government is also concerned with the process of collective bargaining.

Government passes and implements several labour legislations and desires
it to be implemented in their true sense. If any person violates the rules
and laws, it enforces them by force.

Collective bargaining prevents the Government from using the force

because an amicable agreement can be reached between employer and
employees for implementing the legislative provisions. Labour problems
shall be minimised through collective bargaining and industrial peace shall
be promoted in the country without any force.

Collective bargaining is a peaceful settlement of any dispute between

worker and employers and therefore it promotes industrial peace and
higher productivity resulting an increase in the Gross National Product or
the national income of the country.

Main Hindrances for Collective Bargaining:

The main objective of developing collective bargaining technique is to
improve the workers-management relations and thus maintain peace in
industries. The technique has developed in India only after India got
independence and got momentum since then.
The success of collective bargaining lies in the attitude of both management
and workers which is actually not consistent with the spirit of collective
bargaining in India. There are certain problems which hinder the growth of
collective bargaining in India.

The following factors or activities act as hindrances to effective collective

bargaining:

(1) Competitive Process:

Collective bargaining is generally becoming a competitive process, i.e.,

labour and management compete each other at negotiation table. A
situation arises where the attainment of one party’s goal appears to be in
conflict with the basic objectives of the other party.

(2) Not Well-Equipped:

Both the parties—management and workers—come to the negotiation table

without doing their homework. Both the parties start negotiations without
being fully equipped with the information, which can easily be collected
from company’s records. To start with, there is often a kind of ritual, that
of charges and counter charges, generally initiated by the trade union
representatives. In the absence of requisite information, nothing concrete
is achieved.

(3) Time to Protest:

The immediate objective of the workers’ representatives is always some

kind of monetary or other gains, accrue when the economy is buoyant and
the employer has capacity to pay. But in a period of recession, when
demand of the product and the profits are falling, it is very difficult for the
employer to meet the demands of the workers, he might even resort to
retrenchment or even closure collective bargaining is no answer to such a
situation.

(4) Where Prices are Fixed by the Government:

In industries, where the prices of products are fixed by the Government, it

becomes very difficult for the employer to meet the demands of workers
which would inevitably lead to a rise in cost of the products produced.
Whereas the supply price to the consumers cannot be increased. It will
either reduce the profits of the firm or increase the loss. In other words, it
will lead to closure of the works, which again is not in the interest of the
workers.
(5) Outside Leadership:

Most of the Indian trade unions are led by outsiders who are not the
employees of the concerned organisations. Leader’s interests are not
necessarily to be identical with that of the workers. Even when his bonafides
are beyond doubt, between him and the workers he leads, there cannot be
the degree of understanding and communication as would enable him to
speak on behalf of the workers with full confidence. Briefly, in the present
situation, without strong political backing, a workers’ organisation cannot
often bargain successfully with a strong employer.

(6) Multiplicity of Trade Unions:

One great weakness of collective bargaining is the multiplicity of trade

unions. In a multiple trade union situation, even a well recognised, union
with long standing, stable and generally positive relationship with the
management, adopts a militant attitude as its deliberate strategy.

In Indian situation, inter-union rivalries are also present. Even if the unions
combine, as at times they do for the purpose of bargaining with the
employer they make conflicting demands, which actually confuse employer
and the employees.

(7) Appointment of Low-Status Executive:

One of the weaknesses of collective bargaining in India is that the

management deputes a low-status executive for bargaining with the
employees. Such executive has no authority to commit anything on behalf
of the management. It clearly indicates that the management is not at all
serious and the union leaders adopt other ways of settling disputes.

(8) Statutory Provisions:

The constraints are also imposed by the regulatory and participative

provisions as contained in the Payment of Wages Act, the Minimum Wages
Act, and Payment of Bonus Act etc. Such provisions are statutory and are
not negotiable.

(9) Fresh Demands at the Time of Fresh Agreement:

At the time when the old agreement is near expiry or well before that,
workers representatives come up with fresh demands. Such demands are
pressed even when the industry is running into loss or even during the
period of depression. If management accepts the demand of higher wages
and other benefits, it would prefer to close down the works.
(10) Agreements in Other Industrial Units:

A prosperous industrial unit in the same region may agree with the trade
unions to a substantial increase in wages and other benefits whereas a
losing industry cannot do that. There is always pressure on the losing
industries to grant wages and benefits similar to those granted in other
(relatively prosperous) units in the same region.

Scope, Growth, Issue, Reasons of Collective

Barganing
Last updated on December 8th, 2019 at 10:45 am

Scope of Collective Bargaining

Collective bargaining broadly covers subjects and issues entering into the
conditions and terms of employment. It is also concerned with the development
of procedures for settlement of disputes arising between the workers and
management.

A few important issues around which collective bargaining enters in this

developing country are as follows:

“Recognition of the union has been an important issue in the absence of any
compulsory recognition by law. In the under-developed countries in Asia,
however, on account of the tradition concept of management functions and the
immaturity of the industrialist class there is much resistance from the
employers to recognise the status of the unions.”

Bargaining upon wage problems to fight inflation or rising cost of living and to
resist wage cuts during depression has resulted in several amicable agreements.
But, no statistics are available for such amicable settlements. Therefore, Daya,
points out, “It has been customary to view collective bargaining in a pattern of
conflict; the competitively small number of strikes and lock-outs attract more
attention than the many cases of peaceful settlement of differences.”

Another issue on which bargaining takes place is seniority, but in India, it is of

less importance than in western countries. But, in India, lay-off, retrenchment,
dismissal, rationalisation and participation in the union activities have been
important issues for collective bargaining.

Regarding bargaining on hours of work, it has recognized that “in one form or
another subject of working time will continue to play an important part in
collective bargaining; although the crucial battles may be well fought in the
legislative halls.”

Overtime work, holidays, leave for absence and retirement continue to be issues
for bargaining in India, although they are not regarded as crucial.

The union security has also been an issue for collective bargaining, but it could
not acquire much importance in the country, although stray instances are found.
The Tata Workers union bargained with M/s Tata Iron and Steel Co. Ltd.,
Jamshedpur, on certain issues, one of which was union security and in the
resulting agreement some of the union security clauses were also included.

The production norms, technical practices, details of working rules, standards of

performance, allowance of fatigue, hiring and firing, protection of life and limb,
compensation for overtime, hours of work, wage rates and methods of wage
payments, recognition of unions, retrenchment, union security, holidays and
competence of workmen form the subjects of negotiations and agreements
through collective bargaining. Customary practices are evolving procedures to
extend the area of collective bargaining. Collective bargaining has been giving
official sanction to trade experiences and agreements.

Collective bargaining, thus, covers the negotiation, administration,

interpretation, application and enforcement of written agreement between
employers and unions representing their employees setting forth joint
understanding, as to policies and procedures governing wages, rates of pay,
hours of work and other conditions of employment.

The collective bargaining reached has been of three types:

(1) Agreement arrived at after voluntary direct negotiations between the parties
concerned. Its implementation is purely voluntary;

(2) Agreements between the two parties, though voluntary in nature, are
compulsory when registered as settlement before a conciliator; and

(3) Agreement which have legal status negotiated after successful discussion
between the parties when the matter of dispute is under reference to industrial
tribunal/courts.

Many agreements are made voluntarily but compulsory agreements are not
negligible. However, collective bargaining and voluntary agreements are not as
prominent as they are in other industrially advanced countries. The practice of
collective bargaining in India has shown much improvement after the passing of
some legislation like The Industrial Disputes Act 1947 as amended from time to
time. The Bombay Industrial Relations Act 1946 which provided for the rights of
workers for collective bargaining. Since then, a number of collective bargaining
agreements have been entered into.

Issues Involved in Collective Agreements:

A study conducted by the Employer’s Federation of India revealed that out of 109
agreements, ‘wages’ was the most prominent issue in 96 cases (88 percent)
followed by dearness allowance (59 cases) retirement benefits (53 cases), bonus
(50 cases) other issues involved were annual leave, paid holidays, casual leave,
job classification, overtime, incentives, shift allowance, acting allowance, tiffin
allowance, canteen and medical benefits.

A study of various collective agreements entered into in India, certain trends in

collective bargaining are noticeable.

These are:

(i) Most of the agreements are at plant level. However, some industry-level
agreements are also there;

(ii) The scope of agreements has been widening now and now includes matters
relating to bonus, productivity, modernisation, standing orders, voluntary
arbitration, incentive schemes, and job evaluation;

(iii) Long term agreements ranging between 2 to 5 years, are on increase;

(iv) Joint consultation in various forms has been provided for in a number of
agreements; and feasible and effective.

Reasons for the Growth of Collective Bargaining:

(1) Statutory Provisions:

Which have laid down certain principles of negotiations, procedure for collective
agreements and the character of representation of the negotiating parties?

(2) Voluntary Measures:

Such as tripartite conferences, joint consultative boards, and industrial

committees at the industry level have provided an ingenious mechanism for the
promotion of collective bargaining practices.

(3) Several Governments Measures:

Like schemes for workers’ education, labour participation in management, the
evolution of the code of Inter-union Harmony, the code of Efficiency and
Welfare, the Code of Discipline, the formation of Joint Management Councils,
Workers Committees and Shop Councils, and the formulations of grievances
redressal procedure at the plant level— have encouraged the collective
bargaining.

(4) Amendments to the Industrial Disputes Act:

The Amendments to the Industrial Disputes Act in 1964 provided for the
termination of an award or a settlement only when a proper notice is given by the
majority of workers. Agreements or settlements which are arrived at by a process
of negotiation on conciliation cannot be terminated by a section of the workers.

(5) Industrial Truce Resolution:

The Industrial Truce Resolution of 1962 has also influenced the growth of
collective bargaining. It provides that the management and the workers should
strive for constructive cooperation in all possible ways and throws responsibility
on them to resolve their differences through mutual discussion, conciliation and
voluntary arbitration peacefully.

Government Policy to Encourage Collective Bargaining:

Ever since independence, it has been the declared policy of the Central
Government to encourage trade unions development and the settlement of
differences in industry by mutual agreement.

Article 19 of the constitution guarantees for all citizens the right to form
associations or unions, only by reserving to the state powers in the interest of
public order to impose reasonable restrictions on the exercise of this right.

The Industrial policy Resolution of 1956 declared that, “in a socialist democracy
labour is a partner in the common task of development”, thus following out the
resolution of the Lok Sabha of 1954 which set India on the path towards a
“‘socialistic pattern of society.”

The Industrial Employment (Standing Orders)

Act 1946,1961
Last updated on December 5th, 2019 at 03:23 pm
Section 2(g) “Standing orders” means rules relating to matters set out in the
Schedule;

‘Standing Orders’ means rules of conduct for workmen employed in industrial

establishments.

The object of the Act is to require employers in industrial establishments to

formally define conditions of employment under them.
Misconduct, Disciplinary Action, Types of
Punishments, Code of Discipline, Domestic
Enquiry
Last updated on December 8th, 2019 at 10:49 am

Disciplinary Enquiry

The disciplinary enquiry is carried out by the disciplinary committee of the

respective establishment in relation to the matters of misconduct of the
employees. Such committee generally comprises of:

1. Workers Representative, such as the member of Trade Union, as

specified underRule 14 (4)(b-a) of the Industrial Employment
(Standing Orders) Central Rules, 1946.
2. Employers Representative, such as the head of the department
where the workman was employed, and
3. An Independent Officer, i.e. an enquiry officer.

An internal hearing, to ascertain the guilt of the workmen of the alleged

misconduct, is conducted by the administrative officer. Domestic Enquiry is
mandatory in order to dismiss an employee; however, it is not necessary for
suspending him by way of punishment.

Administrative Rules for Disciplinary Enquiry

The Principle of Natural Justice

The management of the industrial establishments must satisfy the principles of

natural justice while maintaining a neutral attitude towards the workmen. The
delinquent employee must be apparently informed about the charges levelled
against him and shall be provided with an opportunity to be heard so he can
refute them and establish his innocence. He must be given an occasion to cross-
examine the witnesses in his defence and evidence at the enquiry should be
adduced in his presence. The punishment awarded, if proven guilty, should be in
proportion to the misconduct committed. These principles of natural justice are
specified in Sections 2(b), 5(2), 10A (2) and 13A of The Industrial Employment
(Standing Orders) Act, 1946.

In Union of India vs. T. R. Verma, 1957 AIR 882 (1958 SCR 499), the court laid
down that the principles of natural justice require the charge sheeted employee
shall have an opportunity of adducing the relevant evidence and that the
evidence of the employer should be taken in his presence; he should be given the
opportunity of cross-examining the witnesses examined on behalf of the
management, and that no materials should be relied upon against him without
giving him an opportunity to explain to them. Following the procedure, the
evidence recorded at an enquiry is not open to attack.

Right to Make Representation

A delinquent workman should have a right to represent against the findings

recorded in the enquiry report to the disciplinary authority. The right has been
laid down in the case of Union of India vs. Mohd. Ramzan Khan, 1991 AIR 471,
1990 SCR Supl. (3) 248.

Procedure for a Disciplinary Enquiry

Fig 1: Procedure for a Disciplinary Enquiry

The principle of natural justice clarifies that no man shall be punished or

condemned without giving an opportunity to justify himself. The Industrial
Tribunals, based on this, have laid down the following procedure:

Preliminary Enquiry

In a landmark judgment of Amulya Ratan Mukharjee Vs. Eastern Railway,

(1962) LLJ- 11- 540, Cal- H.C., it observed by the Hon’ble High Court of Calcutta
that:

• “Before making a charge, the Authorities are entitled to have a

preliminary investigation or a “Fact-Finding enquiry” when they
receive a complaint from an employer. This is not considered to be
 a formal enquiry at all and in such an enquiry, no rules are
observed.
• There can be ex-parte examination or investigation and ex-parte
report. All this is to enable the authority to apprise themselves of
the real facts and to decide whether the employee should be
charge-sheeted.
• But the departmental enquiry starts from the charge sheet. The
charge sheet must be specific and must set out all the necessary
particulars. It is no excuse to say that the delinquent who had
knowledge of previous proceedings should be taken to have
known all about the charge sheet.”
• Charge Sheet

A charge-sheet essentially contains detailed particulars of the misconduct,

specific charges against the workman and the relevant clauses of the Standing
Order under which the workman is liable to the punished.

In Sur Enamel and Stamping Works (P) Ltd. vs. Their Workmen,1963 SC
1914, the Hon’ble Supreme Court, in an attempt to lay down the procedure for
conducting an enquiry for industrial adjudication, provided that an enquiry
cannot be said to have been properly held unless:

1. the workman proceeded against must be informed clearly of the

charges levelled against him;
2. the witnesses must be examined in the presence of the workman;
3. the workman must be given a fair opportunity to cross-examine
the witnesses including himself if he so wishes; and;
4. the Enquiry Officer must record his findings with reasons in his
report. (see here)

Generally, standing orders provide the manner of serving the charge sheet on
the workman concerned and where it is prescribed the procedure should
invariably be followed. It can be given personally or by post to the delinquent
worker.

Appointment of Enquiry Officer

Saran Motors Pvt. Ltd., New Delhi Vs. Vishwanathan 1964 11.LLJ 139, it was
observed that:

• “Enquiry Officer should be properly and duly authorised by the

competent authority to hold a domestic enquiry into the charges
alleged against an employee. Any person, even an outsider, may
 be appointed as an enquiry officer, provided rules or Standing
Orders do not bar such an appointment.
• The Enquiry Officer has the obligation to explain the procedures
of enquiry and chargesheet against the concerned workman.”

Suspension Pending Enquiry

• In the case where a workman who is placed under suspension by

the employer pending investigation or inquiry into complaints or
charges of misconduct against him, the employer shall pay to
such workman subsistence allowance in accordance with the
provisions ofSection 1O-A of the Industrial Employment
(Standing Order) Act, 1946 which provides:

“Where any workman is suspended by the employer pending inquiry into

complaints or charges or misconduct against him, the employer shall pay to such
workman subsistence allowance:

• at the rate of 50% of the wages which workman was entitled to

immediately preceding the date of such suspension, for the first
90 days of suspension and;
• at the rate of 75% of such wages for the remaining period of
suspension if the delay in the completion of disciplinary
proceedings against such workman is not directly attributable to
the conduct of such workman.”

Explanation by Employee

After a charge sheet has been served on the accused workman, he may send his
explanation cum reply in this manner:

1. admitting the charges and pleading for mercy.

2. denying the charges in totality.
3. requesting for more time to submit the explanation.

Notice of Enquiry

On receipt of the charge sheet, the employee sends his reply to the Authority. If
the Authority found the reply to be unsatisfactory, he may get a show cause
notice from the Authority. This procedure is applied in the case of Associated
Cement Co. Ltd vs. Their workmen and Other 1964 65 26 FJR 289 SC. which
further states that:
“The workman should be given due intimation of the date on which the enquiry
is to be held so that he has an opportunity to prepare his defence at the enquiry.”

Supply of relevant materials

Management may ask for any document in proof of charge. So, according to the

principles of natural Justice, such copies of those documents should be supplied

to the delinquent workman. A workman who is to answer to charge must not only
know the accusation but also the testimony by which the accusation is supported
as enumerated in the case of Meenglass Tea Estate vs. workmen, 1963 11, L.L.J,
392 (S.C.)

Examination of Witnesses

There is no provision of law under which the Enquiring officers holding domestic
enquiries can compel the attendance of witnesses as under the Codes of Civil
Procedure or Criminal Procedure.

Further, some general rules for examination of the witness are mentioned in the
judgment of Tata Engineering and Locomotive Co. Ltd. vs. S.C. Prasad, (1969)
11 L.L.J. 799 (S.C.)

It was observed by the Hon’ble Supreme Court that:

• “If the allegations mentioned in the charge sheet are denied by

the workman in the domestic enquiry proceedings, the onus for
proving those allegations will be upon the shoulders of the
management and;
• the witnesses, called by the Management, must be allowed to be
cross examined by the workman and;
• the workman must also be given a reasonable opportunity to
examine himself and can add any further pieces of evidence that
he might choose in support of his plea.”

Report of Enquiry Officer

• Once the employer and the workman have been heard, the Officer
is required to prepare a reasoned enquiry report which contained
every findings in the enquiry and submit it with the Authority.
• Lastly, it is the duty of an enquiry officer to send the Report to the
Accused.
Any act or omission of an employee, whether amounts to the misconduct or not,
is to be governed in accordance with the provided list in the Industrial
Establishments (Standing Order) Rules. Although no statute or law specifically
lays down the procedure to conduct the disciplinary enquiry, the various
judgements of the Industrial Tribunals, however, have laid down a basic idea of
the procedure that ought to be followed while conducting such an enquiry. The
prime principle that is to be taken care throughout the procedure of the enquiry
is the principles of the natural justice that shall be ensured at every step and
action to assure the delivery of justice.

Grievance Function in IR: Grievance

Settlement Procedure
Last updated on December 8th, 2019 at 10:47 am

Grievance means any type of dissatisfaction or discontentment’s arising out of

factors related to an employee’s job which he thinks are unfair. A grievance arises
when an employee feels that something has happened or is happening to him
which he thinks is unfair, unjust or inequitable. In an organization, a grievance
may arise due to several factors such as:

1. Violation of management’s responsibility such as poor working

conditions
2. Violation of company’s rules and regulations
3. Violation of labor laws
4. Violation of natural rules of justice such as unfair treatment in
promotion, etc.

Various sources of grievance may be categorized under three heads: (i)

management policies, (ii) working conditions, and (iii) personal factors

1.Grievance resulting from management policies include:

• Wage rates
• Leave policy
• Overtime
• Lack of career planning
• Role conflicts
• Lack of regard for collective agreement
• Disparity between skill of worker and job responsibility

2. Grievance resulting from working conditions include:

 • Poor safety and bad physical conditions
• Unavailability of tools and proper machinery
• Negative approach to discipline
• Unrealistic targets

3. Grievance resulting from inter-personal factors include

• Poor relationships with team members

• Autocratic leadership style of superiors
• Poor relations with seniors
• Conflicts with peers and colleagues

It is necessary to distinguish a complaint from grievance. A complaint is an

indication of employee dissatisfaction that has not been submitted in written.
On the other hand, a grievance is a complaint that has been put in writing and
made formal.

Grievances are symptoms of conflicts in industry. Therefore, management

should be concerned with both complaints and grievances, because both may be
important indicators of potential problems within the workforce. Without a
grievance procedure, management may be unable to respond to employee
concerns since managers are unaware of them. Therefore, a formal grievance
procedure is a valuable communication tool for the organization.

Grievance Procedure:

Grievance procedure is a Step by step process an employee must follow to get his
or her complaint addressed satisfactorily. In this process, the formal (written)
complaint moves from one level of authority (of the firm and the union) to the
next higher level.

Grievance procedure is a formal communication between an employee and the

management designed for the settlement of a grievance. The grievance
procedures differ from organization to organization.

1. Open door policy

2. Step-ladder policy

Open door policy: Under this policy, the aggrieved employee is free to meet the
top executives of the organization and get his grievances redressed. Such a
policy works well only in small organizations. However, in bigger organizations,
top management executives are usually busy with other concerned matters of
the company. Moreover, it is believed that open door policy is suitable for
executives; operational employees may feel shy to go to top management.
Step ladder policy: Under this policy, the aggrieved employee has to follow a step
by step procedure for getting his grievance redressed. In this procedure,
whenever an employee is confronted with a grievance, he presents his problem
to his immediate supervisor. If the employee is not satisfied with superior’s
decision, then he discusses his grievance with the departmental head. The
departmental head discusses the problem with joint grievance committees to
find a solution. However, if the committee also fails to redress the grievance,
then it may be referred to chief executive. If the chief executive also fails to
redress the grievance, then such a grievance is referred to voluntary arbitration
where the award of arbitrator is binding on both the parties.

How to handle an employee grievance?

1. Establish whether the grievance needs to be resolved formally or

informally.
2. Choose an appropriate manager to deal with the grievance.
3. Carry out a full investigation and gather all relevant evidence,
sending it to the employee in advance of the meeting.
4. Arrange the grievance meeting, inviting the employee and
reminding them of their statutory right to be accompanied.
5. Make sure accurate notes are taken throughout by a person who is
not involved in the case.
6. Give the employee the opportunity to explain the details of their
grievance and what they would like the outcome to be.
7. Adjourn the meeting consider the evidence before making a
decision.
8. Inform the employee in writing of the decision, explaining how
and why the decision was reached.
9. Notify the employee of their right to appeal against the outcome
of the grievance procedure.

GRIEVANCE PROCEDURE IN INDIAN INDUSTRY

The 15th session of Indian Labor Conference held in 1957 emphasized the need
of an established grievance procedure for the country which would be
acceptable to unions as well as to management. In the 16th session of Indian
Labor Conference, a model for grievance procedure was drawn up. This model
helps in creation of grievance machinery. According to it, workers’
representatives are to be elected for a department or their union is to nominate
them. Management has to specify the persons in each department who are to
be approached first and the departmental heads who are supposed to be
approached in the second step. The Model Grievance Procedure specifies the
details of all the steps that are to be followed while redressing grievances.
These steps are:

STEP 1: In the first step the grievance is to be submitted to departmental

representative, who is a representative of management. He has to give his
answer within 48 hours.

STEP 2: If the departmental representative fails to provide a solution, the

aggrieved employee can take his grievance to head of the department, who has
to give his decision within 3 days.

STEP 3: If the aggrieved employee is not satisfied with the decision of

departmental head, he can take the grievance to Grievance Committee. The
Grievance Committee makes its recommendations to the manager within 7
days in the form of a report. The final decision of the management on the report
of Grievance Committee must be communicated to the aggrieved employee
within three days of the receipt of report. An appeal for revision of final decision
can be made by the worker if he is not satisfied with it. The management must
communicate its decision to the worker within 7 days.

STEP 4: If the grievance still remains unsettled, the case may be referred to
voluntary arbitration.
Settlement Machinery for Industrial Disputes
Last updated on August 17th, 2022 at 08:33 pm

The definition of Industrial disputes is as follows:

According to Section 2(k) of the Industrial Disputes Act, 1947 “industrial

dispute” is defined as, “Any disputes or differences 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”.

Does this sound very confusing? Let me simplify this for you. Let us
understand that the definition identifies three parties to disputes.

They are:

1. Employers
2. Employees
3. Workmen

In narrow sense industrial dispute means conflict between parties in

industrial establishments. Dictionary meaning of ‘dispute’ is ‘disagreement’,
‘mutual antagonism as of ideas, interests etc.’ So, industrial dispute is
disagreement/mutual antagonism as of ideas, interests etc. between
parties in industry. In industrial setting parties are invariably workers and
management.

In the process of working, workers express their need, expectation, desire

for fulfilment and satisfaction. They want more money i.e., attractive
wages, allowances, monetary incentive which the management may not be
agreeable to pay. Workers demand of better fringe benefits, health benefits
but management may provide less than that of their requirement.

They want recognition, status, power, advancement, higher quality of work

life but management may be reluctant to give. Under such situation, a state
of disagreement/mutual antagonism between workers and management
develops which gives birth to industrial conflict.

So, industrial dispute is a general concept, and this conflict gets the shape
of industrial dispute in a specific dimensional situation. Basically, there is
no difference between ‘industrial conflicts’ and ‘industrial dispute’, variation
lies only in scope and coverage.
Analysis of the provision of the Act reveals the following:

1. Industrial dispute is a dispute or difference:

(i) Between employers and employers, or

(ii) Between employers and workmen or

(iii) Between workmen and workmen.

2. Industrial dispute is connected with:

(i) Employment or

(ii) Non-employment or

(iii) Terms of employment or

(iv) Conditions of labour of any person

Industrial Disputes have the following characteristics or essentials:

(1) Parties:

Industrial disputes may be among different parties.

Ordinarily, it is among the following parties:

(i) Employers and employers,

(ii) Employers and workmen and

(iii) Workmen and Workmen.

(2) Relation:

Matter of dispute may relate to worker or to employer or to both. Normally,

it relates to an appointment or termination of a person; conditions of
employment or conditions of work.

(3) Forms:
Industrial disputes may manifest themselves in different forms, such as
strikes, lock-outs, Gheraos, go slow tactics, pens down strike, etc.

(4) Oral or Written:

Industrial dispute need not be written. It may be oral.

(5) Real:

It should be real. It should relate to employment of the worker, termination

of employment, terms of employment, conditions of employment, etc.
Matters relating to the personal life of the worker do not constitute
industrial dispute.

(6) Substantial Interest:

In matter relating to industrial dispute interest either of the employer or

the worker must be involved.

(7) Related to Industry:

A dispute can be included in industrial dispute when it concerns with

industry. Usually, disputes must belong to an industry which is functioning.
Disputes belonging to an industry that has since been closed down should
not be included in it.

(8) Clarification:

Industrial disputes should relate to matters which are clear. Unless, it is a

transparent case its settlement is not possible. Matters which are clear find
settlement easily. Concerned party can protect its interest when the issue
is crystal clear.

(9) Origin:

Ordinarily, dispute arises when the workers or trade unions put up their
demands before the employer and the latter refuses to consider them.

In short, it can be said that industrial dispute means lack of peace in

industry. When in an industry, requirements of the two parties contradict
each other industrial dispute raises its ugly head.

Conciliation, Arbitration & Adjudication

Some of the major industrial dispute settlement machinery are as follows:

1. Conciliation
2. Court of Inquiry
3. Voluntary Arbitration
4. Adjudication (Compulsory arbitration).

This machinery has been provided under the Industrial Disputes Act, 1947.
It, in fact, provides a legalistic way of setting the disputes. As said above,
the goal of preventive machinery is to create an environment where the
disputes do not arise at all.

Even then if any differences arise, the judicial machinery has been provided
to settle them lest they should result into work stoppages. In this sense,
the nature of this machinery is curative for it aims at curing the aliments.

1. Conciliation:

Conciliation, is a form of mediation. Mediation is the act of making active

effort to bring two conflicting parties to compromise. Mediation, however,
differs from conciliation in that whereas conciliator plays only a passive and
indirect role, and the scope of his functions is provided under the law, the
mediator takes active part and the scope of his activities are not subject to
any statutory provisions.

Conciliation is the “practice by which the services of a neutral party are

used in a dispute as a means of helping the disputing parties to reduce the
extent of their differences and to arrive at an amicable settlement of agreed
solution.”

The Industrial Disputes Act, 1947 provides for conciliation, and can be
utilised either by appointing conciliation officers (permanently or for a
limited period) or by constituting a board of conciliation. This conciliation
machinery can take a note of a dispute or apprehend dispute either on its
own or when approached by either party.

With a view to expediting conciliation proceeding, time-limits have been

prescribed—14 days in the case of conciliation officers and two months in
the case of a board of conciliation, settlement arrived at in the course of
conciliation is binding for such period as may be agreed upon between the
parties or for a period of 6 months and with continue to be binding until
revoked by either party. The Act prohibits strike and lock-out during the
pendency of conciliation proceedings before a Board and for seven days
after the conclusion of such proceedings.
Conciliation Officer:

The law provides for the appointment of Conciliation Officer by the

Government to conciliate between the parties to the industrial dispute. The
Conciliation Officer is given the powers of a civil court, whereby he is
authorised to call the witness the parties on oath. It should be remembered,
however, whereas civil court cannot go beyond interpreting the laws, the
conciliation officer can go behind the facts and make judgment which will
be binding upon the parties.

On receiving information about a dispute, the conciliation officer should give

formal intimation in writing to the parties concerned of his intention to
commence conciliation proceedings from a specified date. He should then
start doing all such things as he thinks fit for the purpose of persuading the
parties to come to fair and amicable settlement of the dispute.

Conciliation is an art where the skill, tact, imagination and even personal
influence of the conciliation officer affect his success. The Industrial
Disputes Act, therefore, does not prescribe any procedure to the followed
by him.

The conciliation officer is required to submit his report to the appropriate

government along with the copy of the settlement arrived at in relation to
the dispute or in case conciliation has failed, he has to send a detailed
report giving out the reasons for failure of conciliation.

The report in either case must be submitted within 14 days of the

commencement of conciliation proceedings or earlier. But the time for
submission of the report may be extended by an agreement in writing of
all the parties to the dispute subject to the approval of the conciliation
officer.

If an agreement is reached (called the memorandum of settlement), it

remains binding for such period as is agreed upon by the parties, and if no
such period is agreed upon, for a period of six months from the date on
which the memorandum of settlement is signed by the parties to the
dispute, and continues to be binding on the parties after the expiry of the
period aforesaid, until the expiry of two months from the date on which a
notice in writing of an intention to terminate the settlement is given by one
of the party or parties to the settlement.

Board of Conciliation:

In case Conciliation Officer fails to resolve the differences between the

parties, the government has the discretion to appoint a Board of
Conciliation. The Board is tripartite and ad hoc body. It consists of a
chairman and two or four other members.

The chairman is to be an independent person and other members are

nominated in equal number by the parties to the dispute. Conciliation
proceedings before a Board are similar to those that take place before the
Conciliation Officer. The Government has yet another option of referring
the dispute to the Court of Inquiry instead of the Board of Conciliation.

The machinery of the Board is set in motion when a dispute is referred to

it. In other words, the Board does not hold the conciliation proceedings of
its own accord. On the dispute being referred to the Board, it is the duty of
the Board to do all things as it thinks fit for the purpose of inducing the
parties to come to a fair and amicable settlement. The Board must submit
its report to the government within two months of the date on which the
dispute was referred to it. This period can be further extended by the
government by two months.

2. Court of Inquiry:

In case of the failure of the conciliation proceedings to settle a dispute, the

government can appoint a Court of Inquiry to enquire into any matter
connected with or relevant to industrial dispute. The court is expected to
submit its report within six months. The court of enquiry may consist of
one or more persons to be decided by the appropriate government.

The court of enquiry is required to submit its report within a period of six
months from the commencement of enquiry. This report is subsequently
published by the government within 30 days of its receipt. Unlike during
the period of conciliation, workers’ right to strike, employers’ right to
lockout, and employers’ right to dismiss workmen, etc. remain unaffected
during the proceedings in a court to enquiry.

A court of enquiry is different from a Board of Conciliation. The former aims

at inquiring into and revealing the causes of an industrial dispute. On the
other hand, the latter’s basic objective is to promote the settlement of an
industrial dispute. Thus, a court of enquiry is primarily fact-finding
machinery.

3. Voluntary Arbitration:

On failure of conciliation proceedings, the conciliation officer many

persuade the parties to refer the dispute to a voluntary arbitrator. Voluntary
arbitration refers to getting the disputes settled through an independent
person chosen by the parties involved mutually and voluntarily.
In other words, arbitration offers an opportunity for a solution of the dispute
through an arbitrator jointly appointed by the parties to the dispute. The
process of arbitration saves time and money of both the parties which is
usually wasted in case of adjudication.

Voluntary arbitration became popular as a method a settling differences

between workers and management with the advocacy of Mahatma Gandhi,
who had applied it very successfully in the Textile industry of Ahmedabad.
However, voluntary arbitration was lent legal identity only in 1956 when
Industrial Disputes Act, 1947 was amended to include a provision relating
to it.

The provision for voluntary arbitration was made because of the lengthy
legal proceedings and formalities and resulting delays involved in
adjudication. It may, however, be noted that arbitrator is not vested with
any judicial powers.

He derives his powers to settle the dispute from the agreement that parties
have made between themselves regarding the reference of dispute to the
arbitrator. The arbitrator should submit his award to the government. The
government will then publish it within 30 days of such submission. The
award would become enforceable on the expiry of 30 days of its publication.

Voluntary arbitration is one of the democratic ways for setting industrial

disputes. It is the best method for resolving industrial conflicts and is a
close’ supplement to collective bargaining. It not only provides a voluntary
method of settling industrial disputes, but is also a quicker way of settling
them.

It is based on the notion of self-government in industrial relations.

Furthermore, it helps to curtail the protracted proceedings attendant on
adjudication, connotes a healthy attitude and a developed outlook; assists
in strengthening the trade union movement and contributes for building up
sound and cordial industrial relations.

4. Adjudication:

The ultimate remedy for the settlement of an industrial dispute is its

reference to adjudication by labour court or tribunals when conciliation
machinery fails to bring about a settlement. Adjudication consists of settling
disputes through intervention by the third party appointed by the
government. The law provides the adjudication to be conducted by the
Labour Court, Industrial Tribunal of National Tribunal.

A dispute can be referred to adjudication if hot the employer and the

recognised union agree to do so. A dispute can also be referred to
adjudication by the Government even if there is no consent of the parties
in which case it is called ‘compulsory adjudication’. As mentioned above,
the dispute can be referred to three types of tribunals depending on the
nature and facts of dispute in questions.

These include:

(a) Labour courts,

(b) Industrial tribunals, and

(c) National tribunals.

The procedure, powers, and provisions regarding commencement of award

and period of operation of award of these three bodies are similar. The first
two bodies can be set up either by State or Central Government but the
national tribunal can be constituted by the Central Government only, when
it thinks that the adjudication of a dispute is of national importance. These
three bodies are into hierarchical in nature. It is the Government’s
prerogative to refer a dispute to any of these bodies depending on the
nature of dispute.

(а) Labour Court:

A labour court consists of one person only, who is normally a sitting or an

ex-judge of a High Court. It may be constituted by the appropriate
Government for adjudication of disputes which are mentioned in the second
schedule of the Act.

The issues referred to a labour court may include:

(i) The propriety or legality of an order passed by an employer under the

Standing Orders.

(ii) The application and interpretation of Standing Orders.

(iii) Discharge and dismissal of workmen and grant of relief to them.

(iv) Withdrawal of any statutory concession or privilege.

(v) Illegality or otherwise of any strike or lockout.

(vi) All matters not specified in the third schedule of Industrial Disputes
Act, 1947. (It deals with the jurisdiction of Industrial Tribunals).
(b) Industrial Tribunal:

Like a labour court, an industrial tribunal is also a one-man body. The

matters which fall within the jurisdiction of industrial tribunals are as
mentioned in the second schedule or the third schedule of the Act.
Obviously, industrial tribunals have wider jurisdiction than the labour
courts.

Moreover an industrial tribunal, in addition to the presiding officer, can have

two assessors to advise him in the proceedings; the appropriate
Government is empowered to appoint the assessors.

The Industrial Tribunal may be referred the following issues:

1. Wages including the period and mode of payment.

2. Compensatory and other allowances.
3. Hours of work and rest intervals.
4. Leave with wages and holidays.
5. Bonus, profit sharing, provident fund and gratuity.
6. Shift working otherwise than in accordance with the standing
orders.
7. Rule of discipline.
8. Rationalisation.
9. Retrenchment.
10. Any other matter that may be prescribed.

(c) National Tribunal:

The Central Government may constitute a national tribunal for adjudication

of disputes as mentioned in the second and third schedules of the Act or
any other matter not mentioned therein provided in its opinion the
industrial dispute involves “questions of national importance” or “the
industrial dispute is of such a nature that undertakings established in more
than one state are likely to be affected by such a dispute”.

The Central Government may appoint two assessors to assist the national
tribunal. The award of the tribunal is to be submitted to the Central
Government which has the power to modify or reject it if it considers it
necessary in public interest

It should be noted that every award of a Labour Court, Industrial Tribunal

or National Tribunal must be published by the appropriate Government
within 30 days from the date of its receipt. Unless declared otherwise by
the appropriate government, every award shall come into force on the
expiry of 30 days from the date of its publication and shall remain in
operation for a period of one year thereafter.

Objectives, Employee Participation

Last updated on December 8th, 2019 at 10:51 am

Participative management is a tool that is used to motivate the employees.

When subordinates are involved in decision-making at all levels it is known as
participation. According to New-storm and Davis, ‘participation is the mental
and emotional involvement of people in group situations that encourages them
to contribute to group goals and share responsibility for them’.

Objectives

1. Participation involves mental as well as emotional involvement of

the employees.
2. It instills teamwork among the employees.
3. It is a motivational technique.
4. An employee can identify his own strengths as well as
weaknesses.
5. It is an all-pervasive function.
6. Employees become better through contribution in the decision-
making process.

The participation of workers can be applied under various methods, such as

participation at board level, through work committees and quality circles.

Whatever be the nature, participation can give the following significant

results:

1. Participation tends to improve motivation because employees

feel more involved and committed to the organizational tasks.
2. Their self-esteem, job satisfaction, and cooperation with the
higher authorities also improve.
3. Participation can reduce stress and conflict among the
employees.
4. Employee turnover and absenteeism may reduce when
employees realize that they are a part of the organization.
5. It can boost up the morale of the employees.
6. The values and dignity of employees are protected through
participation.
 7. The mental and physical health of employees can be improved by
minimizing the effect of alienation at work place.
8. It is a democratic process in contradiction to authoritarian
organization.
9. A sense of self-respect can be inculcated among every
employee.10. Finally, the act of participation in itself establishes
better communication, as employees mutually discuss all
problems.
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Advantages of Employee Participation

Advantages

Motivation: Participation creates a positive work environment. Employees may

have the chance to show creativity and analytical ability. These opportunities
make them more motivated.

Increases Goodwill: Participation helps to build a good relationship between

management and employees. It increases employee’s efficiency and they can
produce quality products and services for the customers. A good working
condition is available at work. All this increases the goodwill of the organization.

Work Enthusiasm: The manager may accept the employee’s idea or not. When
their ideas are accepted they feel proud and become more enthusiastic about
their work. When management does not accept their ideas and shows the logic
behind refusal work enthusiasm will not reduce.

Better operations: Organizations will run better if staffs are more loyal, feel
needed, and wanted. They feel that they are respected, and their opinions count.
If management proactively seeks their input into decision-making, decisions
tend to be better when they can call on a wider range of knowledge, information,
and experience.

Positive work environment: Mangers listen to staff, ask their opinions, and take
them seriously. For these employees consider themselves a part of the
organization. This results in a positive environment in the workplace.

Increases creativity and innovation: Creativity and Motivation are two

important benefits of participative management. By allowing and diverse group
of employees to have input into decisions, the organization benefits from the
synergy that comes from a wider choice of options. When all employees, instead
of just managers or executives, are given the opportunity to participate, the
chances are increased that a valid and unique idea will be suggested.

Accept of Decision: Employees accept any kind of decision without showing an

argument. Because management asks their suggestions and proposal while
making a decision. As they participate in the decision process so workers accept
the decision and work to implement it.

Increase trust: Trust is an important factor in leadership. Participatory

approaches usually mean that decision making is more transparent. That, in
turn, increases the trust of the staff, and the leadership of the manager is
increased. And transparency itself tins an added benefit to this approach.

Effective decision: Decision is the process of selecting the best alternative. For a
single problem, different people may give different solutions, even thousands of
solutions. So participation facilitates the decision process.

Increase capacity & influence of management: Participation creates mutual

faith, understanding, and cooperation. So, employees hardly disagree with the
manager’s decisions. It indicates that the manager can easily influence the
employees to implement various decisions.

Less cost and time: There are a few costs, however, to obtaining participatory
input. A participatory decision is a group decision. So, less time is required to
implement it. And the cost of participation is less than its benefit in case of
successful participation.

Disadvantages

Communication Complexity

More lines of communication and the potential for inconsistent decision making
are disadvantages with employee involvement systems. When more employees
have input and decision-making ability, more communication is necessary to
make certain that decisions are consistent across the organization. This
consistency is critical to brand recognition and consistency. Managers may have
a hard time monitoring decisions and activities with employee involvement to
protect against negative consequences and to restrict the potential for chaos.

Manager-Employee Boundary

One potential challenge of encouraging employee involvement is the risk that

the line of distinction between the management level and employee level
becomes blurred. Though managers may value employee involvement, a
disciplined structure with clear reporting lines have long been vital to stability in
organizations. Allowing employees to share ideas and make decisions without
having them push the envelope and try to take on responsibilities that are
reserved for management levels is a real risk.

Employee Participation in India

Last updated on December 8th, 2019 at 10:52 am

Workers’ Participation in Management After Independence:

In fact, the first major step in the direction of workers’ participation in

management in India was the enactment of the Industrial Disputes Act, 1947
with the dual purpose of prevention and settlement of industrial disputes. The
Industrial Policy Resolution, 1948 advocated WPM by suggesting that labour
should be in all matters concerning industrial production. Article 43 A of the
Constitution of India has provided for WPM in these words:

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

The First Five-Year Plan and the successive plans emphasised the need for
workers’ participation in management. For example, the Second Five-Year Plan’
stressed the need for WPM in the following words:

“It is necessary in this context that the worker should be made to feel that in his
own way he is helping build a progressive state. The creation of industrial
democracy, therefore, is a prerequisite for the establishment of a socialist
society”.

The Government of India set up a ‘Study Group on Workers’ Participation in

Management’, in 1956, consisting of representatives of the government,
employers, and workers to examine the system of WPM in the UK, Sweden,
France, Belgium, West Germany and Yugoslavia and make recommendations for
the Indian case.

The Group submitted its report in May 1957 with the following
recommendations:

1. WPM schemes should be introduced in selected undertakings on a

voluntary basis.
 2. A sub-committee consisting of representatives of workers,
employers and government should be set up for considering the
WPM in India.

The above recommendations, among other things, were accepted by 15th Indian
Labour Conference held in July 1957. The Conference appointed a 12 member
sub-committee to look into further details of the scheme. The
recommendations made by the sub-committee were discussed in a “Seminar on
Labour-Management Co-operation” held in New Delhi on January 31 and
February 1, 1958. It drew up a “Draft Model Agreement” between labour and
management for the establishment of the Joint Management Councils (JMCs)
which would have the following three sets of functions:

First, to fulfill its functions as an advisory body.

Second, to receive information on certain matters.

Third, to fulfill administrative responsibilities.

Besides, the Seminar on Labour Management Co-operation also took the size of
the Councils, its office bearers, term of office, etc. Thus, the Joint Management
Councils (JMCs) were set up in 1958.

Following the recommendations of the Administrative Reforms Commission,

the Government of India accepted the inclusion of the representatives of
workers on the Board of Directors of public sector undertakings. Following this,
the Nationalised Banks (Management and Miscellaneous Provisions) Scheme
1970 also provided for the appointment of worker director to their Board. One
director was from among employees (who are workmen) and another from
among officers for tenure of 3 years.

Thus up to July 1975, there had been three forms of workers’ participation in
management introduced in India: Works Committees, Joint Management
Councils and Workers-Directors (public sector) on Boards of Directors.

Under the Government of India’s 20-Point Economic Programmes, a new

scheme of shops and plants councils was introduced in 1975 after the emergency
was declared in June 1975. In the following year 1976, the Government of India
amended the constitution to incorporate workers participation in management
as one of the Directive Principles of State Policy.

In June 1977, the Government of India set up a high-powered Expert

Committee on Companies and MRTP Acts under the Chairmanship of Rajinder
Sachar with terms of reference to:
(i) Consider the provisions of the Companies Act and MRTP Act and

(ii) To suggest measures participation in management and share capital of

companies can be brought about. The Sachar Committee submitted its report in
August 1978.

Meanwhile, the Janata Government also set up a “Committee Workers’

Participation Management and Equity” in September 1977 under the
Chairmanship of Ravindra Varma the then Union Minister of Labour The
Committee consisted of 18 members representing Central Organisations of
trade unions and employers and some of the States and professional institutions
of management.

The strength of Committee increased to 21 by nominating three additional

members in January 1978. The terms of reference of the Committee were to
consider, among other things, the need for a statutory scheme for workers’
participation in management. The Committee was also to study and recommend
an outline of a comprehensive scheme of workers participation at different
levels of management in industrial establishments and undertakings

The Committee submitted its report to the Government in March 1979. The
report showed that the majority of the members favoured adoption of a three-
tier system of participation, viz., at the shop, plant and corporate or board levels.
However, the employer of private sector did not favour board or corporate level
participation in management. It also recommended to enact legislation on
workers participation in management covering all undertakings, be public or
private, employing 500 or more workers.

The Government accepted the recommendations made by the 21-Member

Committee on Workers’ Participation in Management and Equity. Based on a
review of the working of the various schemes of workers’ participation in
management and experiences so gamed the Government formulated and
notified a new comprehensive scheme on a voluntary basis for ‘Workers’
Participation in Management’ on 30th December, 1983.

The salient features of the scheme were:

1. The scheme will be non-legislative.

2. It will apply to all central public sector enterprises, expect those
specifically exempted.
3. It envisaged constitution of bipartite forums at shop and plant
levels.
4. The mode of representation of workers representatives was to be
determined by consultation with the concerned unions.
 5. A wide range of work related issues were brought within the ambit
of the councils.

However, a host of constraints such as multiplicity of unions, inter-union rivalry,

lack of proper knowledge on the part of workers about the scheme, etc., served
as stumbling blocks in the successful working of the scheme.

Participation of workers in management bill 1990 (Bill No. XXVIII of 1990):

So far, all the schemes pertaining to the workers’ participation in management

have been non-statutory which failed to provide meaningful participation to
workers in management.

To remedy the situation, the Government has, therefore, introduced a Bill in

the Parliament on 25th May 1990 to provide for:

1. Meaningful three-tier participation of workers in management in

all industrial establishments.
2. Formulation of scheme specifying criteria regarding nomination
of representatives from workers.
3. The principle of secret ballot for determining the representation
of workers on the shop floor and establishment level councils.
4. Rules for monitoring the scheme.
5. Deletion of Section 3 of the Industrial Dispute Act, 1947.
6. Rules for appointment of Inspector.
7. Imprisonment up to 2 years or a fine up to Rs. 20,000 or both for
contravention of the provisions.

Methods of Participation
Last updated on December 8th, 2019 at 10:52 am

Participation of workers in decision-making process has resulted in successful

value creation in many organizations. Though the extent to which employees
should participate in organizational decision making is still a matter of debate.
Some say that workers’ union should participate with management as equal
partners while some believe in restricted or bounded participation, that is,
participation of employees or workers to a limited extent. However, there are a
number of ways through which employees can participate in decision-making
process of any organization.

• Participation at the Board Level: Representation of employees

at the board level is known as industrial democracy. This can play
 an important role in protecting the interests of employees. The
representative can put all the problems and issues of the
employees in front of management and guide the board members
to invest in employee benefit schemes.
• Participation through Ownership: The other way of ensuring
workers’ participation in organizational decision making is
making them shareholders of the company. Inducing them to buy
equity shares, advancing loans, giving financial assistance to
enable them to buy equity shares are some of the ways to keep
them involved in decision-making.
• Participation through Collective Bargaining: This refers to the
participation of workers through collective agreements and by
deciding and following certain rules and regulations. This is
considered as an ideal way to ensure employee participation in
managerial processes. It should be well controlled otherwise each
party tries to take an advantage of the other.
• Participation through Suggestion Schemes: Encouraging your
employees to come up with unique ideas can work wonders
especially on matters such as cost cutting, waste management,
safety measures, reward system, etc. Developing a full-fledged
procedure can add value to the organizational functions and
create a healthy environment and work culture. For instance,
Satyam is known to have introduced an amazing country-wide
suggestion scheme, the Idea Junction. It receives over 5,000 ideas
per year from its employees and company accepts almost one-
fifth of them.
• Participation through Complete Control: This is called the
system of self management where workers union acts as
management. Through elected boards, they acquire full control of
the management. In this style, workers directly deal with all
aspects of management or industrial issues through their
representatives.
• Participation through Job Enrichment: Expanding the job
content and adding additional motivators and rewards to the
existing job profile is a fine way to keep workers involved in
managerial decision-making. Job enrichment offers freedom to
employees to exploit their wisdom and use their judgment while
handling day-to-day business problems.
• Participation through Quality Circles: A quality circle is a group
of five to ten people who are experts in a particular work area.
They meet regularly to identify, analyze and solve the problems
 arising in their area of operation. Anyone, from the organization,
who is an expert of that particular field, can become its member.
It is an ideal way to identify the problem areas and work upon
them to improve working conditions of the organization.

Employees can participate in organizational decision making through various

processes mentioned above. However, there are other ways such as financial
participation, Total Quality Management, participation through empowered
teams and joint committees and councils through which they can contribute
their share in making the organizations a better place to work.

Employee Empowerment
Last updated on December 8th, 2019 at 10:53 am

Empowerment is the process of enabling or authorizing an individual to think,

behave, take action, and control work and decision-making in autonomous
ways.

Empowerment has become necessary due to the following reasons:

1. Time to respond has become much shorter.

2. First-line employees must make many decisions.
3. An employee feels much more control in their life since authority
is given to individual decision-making.
4. There is great untapped potential among employees, which can
be revealed through empowerment.

Definitions:

1. According to Richard Kathnelson, ’empowerment is the process

coming to feel and behave as if one is in power and to feel as if they
owned the firm’.
2. According to Bowen and Lawler, ’employee empowerment refers
to the management strategies for sharing decision-making
power’.

Employee empowerment can be done by:

1. Seeking opinions from the employees.

2. Facilitating the employees to try their ideas.
3. Encouraging for sharing of resources and information.
 4. Improving the communication skills of the employees.

Importance of Employee Empowerment:

1. The investment in employees can improve productivity, which

can reduce the costs.
2. Individual employees experience a feeling of self-esteem, self-
efficacy and self-confidence.
3. Employee empowerment also helps in making employees more
self-reliant.
4. It allows independent decision-making by the employees.
5. Empowerment of employees helps a firm to assign different
projects to hone the competence of employees.
6. More freedom given to employees can be utilized for taking
judicious decisions.
7. Assigning proper authority can improve the organizational
effectiveness.
8. Independent decision-making can improve self-confidence
among the employees.
9. It can boost up the morale of the employees.
10. The overall efficiency of an organization can be multiplied
due to empowerment of the employees.

The Factories Act 1948

Last updated on December 1st, 2019 at 03:34 pm

There has been rise of large scale factory/ industry in India in the later half of
nineteenth century. Major Moore, Inspector-in- Chief of the Bombay Cotton
Department, in his Report in 1872-73 first of all raised the question for the
provision of legislation to regulate the working condition in factories; the first
Factories act was enacted in 1881. Since then the act has been amended on many
occasions. The Factories Act 1934 was passed replacing all the previous
legislation in regard to factories. This act was drafted in the light of the
recommendations of the Royal Commission on Labour. This Act has also been
amended suitably from time to time.

The experience of working of the Factories Act, 1934 had revealed a number of
defects and weakness which have hampered effective administration of the Act,
and the need for wholesale revision of the act to extend its protective provisions
to the large number of smaller industrial establishments was felt. Therefore, the
Factories Act, 1948 consolidating and amending the law relating to labour in
factories, was passed by the Constituent Assembly on August 28, 1948. The Act
received the assent of Governor General of India on 23 September 1948 and came
into force on April 1, 1949.

Objective of Factories Act ,1948

The main objectives of the Indian Factories Act, 1948are to regulate the working
conditions in factories, to regulate health, safety welfare, and annual leave and
enact special provision in respect of young persons, women and children who
work in the factories.

1. Working Hours

According to the provision of working hours of adults, no adult worker shall be

required or allowed to work in a factory for more than 48 hours in a week. There
should be a weekly holiday.

2. Health

For protecting the health of workers, the Act lays down that every factory shall
be kept clean and all necessary precautions shall be taken in this regard. The
factories should have proper drainage system, adequate lighting, ventilation,
temperature etc.

Adequate arrangements for drinking water should be made. Sufficient latrine

and urinals should be provided at convenient places. These should be easily
accessible to workers and must be kept cleaned.

3. Safety

In order to provide safety to the workers, the Act provides that the machinery
should be fenced, no young person shall work at any dangerous machine, in
confined spaces, there should be provision for manholes of adequate size so that
in case of emergency the workers can escape.

4. Welfare

For the welfare of the workers, the Act provides that in every factory adequate
and suitable facilities for washing should be provided and maintained for the use
of workers.

Facilities for storing and drying clothing, facilities for sitting, first-aid
appliances, shelters, rest rooms’ and lunch rooms, crèches, should be there.

5. Penalties
The provisions of The Factories Act, 1948, or any rules made under the Act, or any
order given in writing under the Act is violated, it is treated as an offence. The
following penalties can be imposed:-

(a) Imprisonment for a term which may extend to one year;

(b) Fine which may extend to one lakh rupees; or

(c) Both fine and imprisonment.

Applicability of Factories Act, 1948

The Act is applicable to any factory whereon ten or more workers are working, or
were working on any day of the preceding twelve months, and in any part of
which a manufacturing process is being carried on with the aid of power, or is
ordinarily so carried on, or whereon twenty or more workers are working, or were
working on any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power, or is
ordinarily so carried on; but this does not include a mine, or a mobile unit
belonging to the armed forces of the union, a railway running shed or a hotel,
restaurant or eating place.

Importance of Factories Act, 1948

The Factories Act, 1948 is a beneficial legislation. The aim and object of the Act
is essentially to safeguard the interests of workers, stop their exploitation and
take care of their safety, hygiene and welfare at their places of work. It casts
various obligations, duties and responsibilities on the occupier of a factory and
also on the factory manager. Amendments to the Act and court decisions have
further extended the nature and scope of the concept of occupier, especially vis-
a-vis hazardous processes in factories.

Duties of Factory Manager

The Duties of Factory Manager are mentioned in the following Sections of

Factory Act, 1948: –

1. Right of Workers to be warned about imminent danger (Section 41-H)

It shall be the duty of such occupier, agent, manager or the person in charge of
the factory or process to take immediate remedial action if he is satisfied about
the existence of such imminent danger in the factory where the worker is
engaged in any hazardous process and send a report forthwith of the action
taken to the nearest Inspector.
2. Notice of periods of work for adults (Section 61)

The manager of the factory shall display correctly and maintained in every
factory in accordance with the provisions of sub-section (2) of section 108, a
notice of periods of work for adults, showing clearly for every day the periods
during which adult workers may be required to work, fix the periods during which
each relay of the group may be required to work, classify them into groups
according to the nature of their work indicating the number of workers in each
group, shall draw up a scheme of shifts where under the periods during which any
relay of the group may be required to work.

3. Register of Adult Workers (Section 62)

The manager of every factory shall maintain a register of adult workers, to be

available to the Inspector at all times during working hours, or when any work is
being carried on in the factory.

4. Annual Leave with Wage (Section 79)

For the purpose of ensuring the continuity of work, the occupier or manager of
the factory, in agreement with the Works Committee of the factory constituted
under section 3 of the Industrial Disputes Act, 1947 (14 of 1947), or a similar
Committee constituted under any other Act or if there is no such Works
Committee or a similar Committee in the factory, in agreement with the
representatives of the workers therein chosen in the prescribed manner, may
lodge with the Chief Inspector a scheme in writing whereby the grant of leave
allowable under this section may be regulated.

5. Notice of Certain Dangerous Occurrences (Section 88A)

Notice of certain dangerous occurrences. —Where in a factory any dangerous

occurrence of such nature as may be prescribed occurs, whether causing any
bodily injury or disability or not, the manager of the factory shall send notice
thereof to such authorities, and in such form and within such time, as may be
prescribed.

6. Notice of Certain Disease (Section 89)

Where any worker in a factory contracts any disease specified in 1[the Third
Schedule], the manager of the factory shall send notice thereof to such
authorities, and in such form and within such time, as may be prescribed.

7. Safety and Occupational Health Survey (Section 91-A)

The occupier or manager of the factory or any other person who for the time
being purports to be in charge of the factory, undertake safety and occupational
health surveys, and such occupier or manager or other person shall afford all
facilities for such every, including facilities for the examination and testing of
plant and machinery and collection of samples and other data relevant to the
survey.

8. Notice of Certain Accidents (Section 88)

Where in any factory an accident occurs which causes death, or which causes any
bodily injury by reason of which the person injured is prevented from working for
a period of forty-eight hours or more immediately following the accident, or
which is of such nature as may be prescribed in this behalf, the manager of the
factory shall send notice thereof to such authorities, and in such form and within
such time, as may be prescribed to the Chief Inspector.

Conclusion

The present Factories Act in operation

for the last 37 years has provided
ample benefits to the factory workers.
It has considerably improved their
working and employment conditions.
The Government is actively
considering the introduction of some
vital amendments to the Act to keep it
in tune with time and make it more
effective While dealing with the
duties of the Occupier and Factory
Manager under Factories Act 1948,
altogether we can conclude that the
Occupier and Factory Manager has a
vital role to play in assuring the
health, safety and welfare of the
workers as they are the backbone of
the industrial sector. It is, however
necessary that the workers and their
representatives make themselves
aware of the various provisions of the
Act and safeguard their interests on
their own and force the defaulting
employer to be conscious of his legal
obligations. The Factories (Amendment)
Bill, 2016
The Factories (Amendment) Bill, 2016 was introduced in Lok Sabha on August 10,
2016 by the Minister for Labour and Employment, Mr. Bandaru Dattatreya.

The Bill amends the Factories Act, 1948. The Act regulates the safety, health and
welfare of factory workers. The Bill amends provisions related to overtime hours
of work.

The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given
its ex-post facto approval for amendment of Section 64 and section 65 and
consequential amendment of section 115 of the Factories Act, 1948 by
introducing the Factories (Amendment) Bill, 2016 in the Parliament.

The approved amendments will give boost to the manufacturing sector and
facilitate ease of doing business with an aim to enhance employment
opportunities.

These amendments relate to increase in overtime hours from the existing 50

hours per quarter to 100 hours (Section 64) and existing 75 hours per quarter to
125 hours (Section 65).
Power to make rules on various matters: The Act permits the state government
to prescribe rules on a range of matters, including double employment, details
of adult workers to be included in the factory’s register, conditions related to
exemptions to certain workers, etc. The Bill gives such rule making powers to the
central government as well.

Powers to make rules for exemptions to workers: Under the Act, the state
government may make rules to:

(i) Define persons who hold management or confidential positions

(ii) Exempt certain types of adult workers (e.g. those engaged for urgent repairs)
from fixed working hours, periods of rest, etc. The Bill gives such rule making
powers to both, the central and state governments.

Under the Act, such rules will not apply for more than five years. The Bill modifies
this provision to state that the five-year limitation will not apply to rules made
after the enactment of this Bill.

Overtime hours of work in a quarter: The Act permits the state government to
make rules related to the regulation of overtime hours of work. However, the
total number of hours of overtime must not exceed 50 hours for a quarter. The
Bill raises this limit to 100 hours. Rules in this regard may be prescribed by the
central government as well.

Overtime hours if factory has higher workload: The Act enables the state
government to permit adult workers in a factory to work overtime hours if the
factory has an exceptional work load. Further the total number of hours of
overtime work in a quarter must not exceed 75. The Bill permits the central or
state government to raise this limit to 115.

Overtime in public interest: The Bill introduces a provision which permits the
central or state government to extend the 115-hour limit to 125 hours. It may do
so because of (i) excessive work load in the factory and (ii) public interest.

The Payment of Wages Act 1923, 1936 &

Amendment
Last updated on September 19th, 2021 at 09:59 pm

The Payment of Wages Act, 1936 regulates payment of wages to employees

(direct and indirect). The act is intended to be a remedy against unauthorized
deductions made by employer and/or unjustified delay in payment of wages. The
main objective for the introduction of the Payment of Wages Act, 1936, is to
avoid unnecessary delay in the payment of wages and to prevent unauthorized
deductions from the wages.

Purpose of the Act

The main objective of the Act is to avoid unnecessary delay in the payment of
wages and to prevent unauthorized deductions from the wages. Every person
employed in any factory, upon any railway or through sub-contractor in a railway
and a person employed in an industrial or other establishment.The State
Government may by notification extend the provisions to any class of persons
employed in any establishment or class of establishment. The benefit of the Act
prescribes for the regular and timely payment of wages (on or before 7th day or
10th day of after wage period is greater than 1000 workers) and Preventing
unauthorized deductions being made from wages and arbitrary fines.

Salary statics

Wages are averaging less than Rs. 6500.00 per month only are covered or
protected by the Act by the amendment in 2005 by {Section 1(6)}.Wages means
contractual wages and not overtime wages. They are not to be taken into account
for deciding the applicability of the Act in the context of section 1(6) of the Act.
Wages must be paid in current coin or currency notes or in both and not in kind.
It is, however, permissible for an employer to pay wages by cheque of by
crediting them in the bank account if so authorized in writing by an employed
person.

Summary of the provisions of the Act

The provisions of the Act regarding the imposition of fines on the employed
person are as follows such as, The employer must exhibit on his premises a list of
acts or omissions for which fines can be imposed, Before imposing a fine on an
employed person he must be given an opportunity of showing cause against the
fine, The amount of fine must not exceed 3 percent of the wages, A fine cannot
be imposed on an employed person who is under the age of 15 years, A fine
cannot be recovered by installments or after 90 days from the day of the act or
omission for which it is imposed, The moneys realized from fines must be
applied to purposes beneficial to employed persons.

Subsection 8(3), 10(1-A) & Rule 15} deals with Any person desiring to impose a
fine on an employed person or to make a deduction for damage or loss shall
explain personally or in writing to the said person the act or omission, or damage
or loss in respect of which the fine or deduction is proposed to be imposed, and
the amount of fine or deduction, which it is proposed to impose, and shall hear
his explanation in the presence of at least one other person, or obtain it in
writing.

Amendment Payment of Wages Act, 1923

The Payment of Wages (Amendment) Bill, 2016 was introduced in Lok Sabha on
December 15, 2016 by the Minister of Labour and Employment, Mr. Bandaru
Dattatreya. The Bill amends the Payment of Wages Act, 1936.

Method of payment of wages: Under the 1936 Act, all wages must be paid either
in coin or currency notes, or both. However, the employer may pay his
employee’s wages either by cheque or by crediting it into his bank account, after
obtaining his written authorization.

The Bill amends the 1936 Act to permit the employer to pay an employee’s
wages:

(i) In coin or currency notes

(ii) By cheque

(iii) By crediting them into his bank account.

The Bill removes the requirement of obtaining written authorization for

payment of wages by cheque or through a bank account.

However, the relevant central or state government may specify certain

industrial or other establishments where the employer should pay his
employees only by:

(i) Cheque

(ii) Crediting the wages in his bank account.

The Workmen Compensation Act 1923

Amendment Act 1972
Last updated on December 5th, 2019 at 03:24 pm

The Workmen’s Compensation Act, 1923 provides for payment of compensation

to workmen and their dependants in case of injury and accident (including
certain occupational disease) arising out of and in the course of employment and
resulting in disablement or death. The Act applies to railway servants and
persons employed in any such capacity as is specified in Schedule II of the Act.
The schedule II includes persons employed in factories, mines, plantations,
mechanically propelled vehicles, construction works and certain other
hazardous occupations.

The amount of compensation to be paid depends on the nature of the injury and
the average monthly wages and age of workmen.The minimum and maximum
rates of compensation payable for death (in such cases it is paid to the
dependents of workmen) and for disability have been fixed and is subject to
revision from time to time.

A Social Security Division has been set up under the Ministry of Labour and
Employment , which deals with framing of social security policy for the workers
and implementation of the various social security schemes. It is also responsible
for enforcing this Act. The Act is administered by the State Governments
through Commissioners for Workmen’s Compensation.

The main provisions of the Act are

• An employer is liable to pay compensation:- (i) if personal injury

is caused to a workman by accident arising out of and in the course
of his employment; (ii) if a workman employed in any
employment contracts any disease, specified in the Act as an
occupational disease peculiar to that employment.
• However, the employer is not liable to pay compensation in the
following cases:-
• If the injury does not result in the total or partial disablement of
the workman for a period exceeding three days.
• If the injury, not resulting in death or permanent total
disablement, is caused by an accident which is directly
attributable to:- (i) the workman having been at the time of the
accident under the influence of drink or drugs; or (ii) the willful
disobedience of the workman to an order expressly given, or to a
rule expressly framed, for the purpose of securing the safety of
workmen; or (iii) the willful removal or disregard by the workman
of any safety guard or other device which has been provided for
the purpose of securing safety of workmen.
• The State Government may, by notification in the Official
Gazette, appoint any person to be a Commissioner for Workmen’s
Compensation for such area as may be specified in the
notification. Any Commissioner may, for the purpose of deciding
 any matter referred to him for decision under this Act, choose one
or more persons possessing special knowledge of any matter
relevant to the matter under inquiry to assist him in holding the
inquiry.
• Compensation shall be paid as soon as it falls due. In cases where
the employer does not accept the liability for compensation to the
extent claimed, he shall be bound to make provisional payment
based on the extent of liability which he accepts, and, such
payment shall be deposited with the Commissioner or made to
the workman, as the case may be.
• If any question arises in any proceedings under this Act as to the
liability of any person to pay compensation (including any
question as to whether a person injured is or is not a workman) or
as to the amount or duration of compensation (including any
question as to the nature or extent of disablement), the question
shall, in default of agreement, be settled by a Commissioner. No
Civil Court shall have jurisdiction to settle, decide or deal with any
question which is by or under this Act required to be settled,
decided or dealt with by a Commissioner or to enforce any liability
incurred under this Act.
• The State Government may, by notification in the Official
Gazette, direct that every person employing workmen, or that any
specified class of such persons, shall send at such time and in such
form and to such authority, as may be specified in the notification,
a correct return specifying the number of injuries in respect of
which compensation has been paid by the employer during the
previous year and the amount of such compensation together
with such other particulars as to the compensation as the State
Government may direct.
• Whoever, fails to maintain a notice-book which he is required to
maintain; or fails to send to the Commissioner a statement which
he is required to send; or fails to send a report which he is required
to send; or fails to make a return which he is required to make,
shall be punishable with fine

The Industrial Dispute Act 1947

Last updated on December 1st, 2019 at 03:36 pm

The Industrial Disputes Act 1947 extends to the whole of India and regulates
Indian labour law so far as that concerns trade unions as well as Individual
workman employed in any Industry within the territory of Indian mainland. It
came into force 1 April 1947.

The objective of the Industrial Disputes Act is to secure industrial peace and
harmony by providing machinery and procedure for the investigation and
settlement of industrial disputes by conciliation, arbitration and adjudication
machinery which is provided under the statute. The main and ultimate objective
of this act is “Maintenance of Peaceful work culture in the Industry in India”
which is clearly provided under the Statement of Objects & Reasons of the
statute. The laws apply only to the organized sector.

The Act also lays down:

• The provision for payment of compensation to the workman on

account of closure or lay off or retrenchment.
• The procedure for prior permission of appropriate Government
for laying off or retrenching the workers or closing down
industrial establishments
• Unfair labour practices on part of an employer or a trade union or
workers.

Objective and Applicability of Industrial Disputes Act, 1947

The main objective of the industrial Disputes Act, 1947 is to investigate and
thereafter come to a settlement of any industrial disputes, primarily between
employers and employees. A workman having no supervisory or administrative
capacity can raise an industrial dispute before the competent authority.
Furthermore, collective disputes can also be raised by the union.

The Industrial Disputes Act was enacted with the purpose of providing a
permanent machinery for the settlement of industrial disputes which had
become a common feature due to industrial unrest in the wake of post-war
problems arising out of constant strife between employers and employees.

The results were industrial unrest and fall in production. An attempt was made
to achieve the objective

(i) By improving the service conditions of industrial labour so as to provide for

them the ordinary amenities of life and

(ii) By that process to bring about industrial peace which would in turn increase
the pace of productive activities in the country and result in prosperity.
Principal objects of the Act are

(1) The promotion of measures for securing amity and good relations between
the employer and workmen;

(2) An investigation and settlement of industrial disputes between employers

and employees, employers and workmen and between workman and workmen,
with a right of representation by a registered Trade Union orFederation, of Trade
Unions or association of employees or a federation or association of employers;

(3) The prevention of illegal strikes and lockouts; and

(4) Relief to workers in the matters of layoff and retrenchment.

The Payment of Wages Act 1923, 1936 &

Amendment
Last updated on September 19th, 2021 at 09:59 pm

The Payment of Wages Act, 1936 regulates payment of wages to employees

(direct and indirect). The act is intended to be a remedy against unauthorized
deductions made by employer and/or unjustified delay in payment of wages. The
main objective for the introduction of the Payment of Wages Act, 1936, is to
avoid unnecessary delay in the payment of wages and to prevent unauthorized
deductions from the wages.

Purpose of the Act

The main objective of the Act is to avoid unnecessary delay in the payment of
wages and to prevent unauthorized deductions from the wages. Every person
employed in any factory, upon any railway or through sub-contractor in a railway
and a person employed in an industrial or other establishment.The State
Government may by notification extend the provisions to any class of persons
employed in any establishment or class of establishment. The benefit of the Act
prescribes for the regular and timely payment of wages (on or before 7th day or
10th day of after wage period is greater than 1000 workers) and Preventing
unauthorized deductions being made from wages and arbitrary fines.

Salary statics

Wages are averaging less than Rs. 6500.00 per month only are covered or
protected by the Act by the amendment in 2005 by {Section 1(6)}.Wages means
contractual wages and not overtime wages. They are not to be taken into account
for deciding the applicability of the Act in the context of section 1(6) of the Act.
Wages must be paid in current coin or currency notes or in both and not in kind.
It is, however, permissible for an employer to pay wages by cheque of by
crediting them in the bank account if so authorized in writing by an employed
person.

Summary of the provisions of the Act

The provisions of the Act regarding the imposition of fines on the employed
person are as follows such as, The employer must exhibit on his premises a list of
acts or omissions for which fines can be imposed, Before imposing a fine on an
employed person he must be given an opportunity of showing cause against the
fine, The amount of fine must not exceed 3 percent of the wages, A fine cannot
be imposed on an employed person who is under the age of 15 years, A fine
cannot be recovered by installments or after 90 days from the day of the act or
omission for which it is imposed, The moneys realized from fines must be
applied to purposes beneficial to employed persons.

Subsection 8(3), 10(1-A) & Rule 15} deals with Any person desiring to impose a
fine on an employed person or to make a deduction for damage or loss shall
explain personally or in writing to the said person the act or omission, or damage
or loss in respect of which the fine or deduction is proposed to be imposed, and
the amount of fine or deduction, which it is proposed to impose, and shall hear
his explanation in the presence of at least one other person, or obtain it in
writing.

Amendment Payment of Wages Act, 1923

The Payment of Wages (Amendment) Bill, 2016 was introduced in Lok Sabha on
December 15, 2016 by the Minister of Labour and Employment, Mr. Bandaru
Dattatreya. The Bill amends the Payment of Wages Act, 1936.

Method of payment of wages: Under the 1936 Act, all wages must be paid either
in coin or currency notes, or both. However, the employer may pay his
employee’s wages either by cheque or by crediting it into his bank account, after
obtaining his written authorization.

The Bill amends the 1936 Act to permit the employer to pay an employee’s
wages:

(i) In coin or currency notes

(ii) By cheque
(iii) By crediting them into his bank account.

The Bill removes the requirement of obtaining written authorization for

payment of wages by cheque or through a bank account.

However, the relevant central or state government may specify certain

industrial or other establishments where the employer should pay his
employees only by:

(i) Cheque

(ii) Crediting the wages in his bank account.

The Contract Labor (Abolition & Regulative)

act 1970
Last updated on December 8th, 2019 at 10:56 am

The Contract Labour (Regulation and Abolition) Act, 1970 is an important piece
of social legislation as it is for the welfare of labourers whose conditions of
services are generally not at all satisfactory.

It is meant to regulate the employment of contract labour and where necessary

to abolish the same. It protects the contract labour from various abuses.

This Act applies to the whole of India.

It applies (a) to every establishment where twenty or more workmen are

employed as contract labour and (b) to every contractor who employs or who
employed on any day of the preceding twelve months twenty or more workmen.

However, the Act can be applied to any establishment or contractor employing

even less than twenty workers, in case the appropriate Government gives a two
months’ notice by issuing a notification to this effect in the Official Gazette.

Where it does not apply?

The Contract Labour (Regulation and Abolition) Act, 1970 shall not apply to
establishments in which work only of an intermittent or casual nature is
performed.

Whether the work is of intermittent or casual nature shall be decided by the

appropriate Government, in consultation with the Central Board or a State Board
and its decision shall be final.

Important Provisions of this Act

1. Constitution of Advisory Boards

To advise the Central Government on matters relating to this Act, a Central

Advisory Board is constituted. Similarly State Advisory Boards are also
constituted.

The Central Advisory Boards and the State Advisory Boards have the powers to
constitute committees for this purpose.

2. Registration of Establishments Employing Contract Labour

Every principal employer of an establishment to which this Act applies is

required to apply for registration of the establishment with the registering
officer as notified by the Government.

If he fails to do so within the prescribed time fixed for this purpose, he cannot
employ contract labour in the establishment, under the provisions of this Act.

3. Prohibition of Employment of Contract Labour

The appropriate Government may, after consultation with the Central Board or
a State Board, prohibit employment of contract labour in any process, operation
or other work of any establishment, as per the provisions of this Act.

4. Licensing of Contractors

According to this Act, no contractor to whom this Act applies, shall undertake or
execute any work through contract labour except and in accordance with a
licence issued by the licencing officer.

The licencing officer, according to the provisions of this Act, has the authority to
revoke, suspend or amend the licence granted by him.
The Act also contains provision for appeal by the contractor within thirty days
from the receipt of order.

5. Welfare and Health of Contract Labour

(a) Canteens

The Act also contains provisions for making rules that every establishment to
which this Act applies, wherein contract labour is of 100 workmen or more, shall
provide and maintain one or more canteens for the benefit of contract labour.

These rules may also provide for the date, number of canteens, standards in
respect of construction, accommodation, furniture and other equipment and
the foodstuffs as well as the charges.

(b) Rest-rooms

There is a provision for providing rest-rooms, or alternative accommodation by

the contractor to the contract labour in establishments to which this Act applies
and in which workers (contract labour) is required to halt at night in connection
with the work.

The rest-rooms or the alternative accommodation shall be provided and

maintained by the contract.

It shall be sufficiently lighted and ventilated and shall be maintained in a clean

and comfortable condition, the Act lays down.

(c) Other facilities

The Act also provides for other facilities such as :

(i) A sufficient supply of wholesome drinking water for the contract labour at
convenient places;

(ii) A sufficient number of latrines and urinals of the prescribed types so situated
as to be convenient and within reach to the contract labour in the establishment;
and

(iii) Washing facilities.

(d) First-aid facilities:

The contractor is also required to provide and maintain first-aid facilities. These
should be readily accessible during all working hours.

A first-aid box having prescribed medicines, etc. should be available at the place
of work for the benefit of the contract labour employed by him.

(e) Liability of principal employer

In case a contractor does not provide any amenity for the benefit of contract
labour, such amenity shall be provided by the principal employer (one who has
given contract to the contractor).

The expenses on this account can be recovered by the principal employer, as per
provisions of this Act.

(f) Responsibility for payment of wages

The Act provides that a contractor shall be responsible for payment of wages to
each worker employed by him as contract labour and such wages shall be paid
before the expiry, of prescribed period.

Representatives of the principal employer are required to certify that the wages
have been paid in the prescribed manner. The contractor is required to pay the
wages in the presence of the representatives of the principal employer.

If the contractor fails to make payment of wages within the prescribed time or
makes short payment, then the principal employer shall be liable to make
payment to the contract labour employed by the contractor and recover such
amount from the contractor.

6. Penalties and Procedure

A penalty of imprisonment for a period up to three months or fine up to five

hundred rupees or both can be imposed on the person who obstructs an
inspector in the discharge of his duties under this Act.

Similar punishment can also be imposed on whoever willfully refused to produce

documents required by the inspector.

For contravention of provisions regarding employment of contract labour,

imprisonment for term up to three months or a fine up to one thousand rupees
or both can be imposed.
If one continues contravention additional fine up to one hundred rupees for
every day can be imposed under this Act.

7. Miscellaneous

In addition, the Act also provides for appointment of inspecting staff, registers
and other records to be maintained, power to exempt in special cases, protection
of action taken under this Act, power to give directions, power to remove
difficulties and powers to make rules for carrying out the purposes of this Act.

The ESI Act 1948 & Amendment

Last updated on September 19th, 2021 at 10:57 pm

The employees State insurance act (ESI) extends to the whole of India,
including the state of Jammu and Kashmir. the insurance scheme contained in
the act has up till date, been applied to a few selected localities. The act of 1948
was amended by the amendment acts of 1966,1975,1984,1989, and 1997.

The Employees State Insurance Act of 1948 has been enacted with the objective
of securing financial relief in cases of sickness, maternity, disablement and for
providing medical benefits to employees of factories and establishments, and
their dependents. The act is also applicable to non-seasonal factories using
power and employing 10 or more employees, and non- power using factories and
certain other establishments employing 20 or more employees. Employees and
employers contribute to the scheme, and various benefits are given to eligible
employees like, sickness benefit, maternity benefit, disablement benefit, etc.
All benefits are delivered thereof ESIs hospitals, clinics and approved
independent medical practitioners.

DEFINITION

• “appropriate government” means, in respect of establishment

under the control of the central government or (a railway
administration) or a major port or a mine or oilfield, the central
government, and in all other cases, the state government;
• “Contribution” means the sum of money payable to the
corporation by the principal employer in respect of an employee
and includes any amount payable by or on behalf of the employee
in accordance with the provisions of this Act;
• “Sickness” means a condition which requires medical treatment
and attendance and necessitates abstention from work on
medical ground.
OBJECT OF THE ACT

The Employees State Insurance Act (ESI Act) was enacted with the object of
introducing a scheme of health insurance for industrial workers. The scheme
envisaged by it is one of compulsory State Insurance providing for certain
benefits in the event of sickness, maternity and employment injury to workmen
employed in or in connection with the work in factories other than seasonal
factories. The ESI Act, which has replaced the Workmen’s Compensation.

Duties of the ESI corporation

1. Budget estimates

The corporation shall in each year frame a budget showing the probable receipts
and the expenditure which it proposes to incur during the following year and
shall submit a copy of the budget for the approval of the central govt. before such
date as may be fixed by it in that behalf.

2. Accounts

The corporation shall maintain correct accounts of its income and expenditure in
such from and in such manner as may be prescribed by the central govt.

3. Audit

The account of the corporation shall be audited , at such time and in such manner
as may be prescribed by the auditor by the central govt.

4. Annual report

The corporation shall submit to the central govt. an annual report of its work and
activities .

5. Placement to parliament

The annual repot the audited accounts of the corporation and the budget as
finally adopted by the corporation shall be placed before and published in the
official gazettes.

Types of benefits under the act

1. Sickness benefit
Sickness benefit represents periodical payments made to an insured person for
the period of certified sickness after completing nine months insurable
employment. To quality for this benefits, contribution should have been paid for
at least 78 days in the relevant contribution period. The maximum duration for
availing sickness benefit is 91 days in two consecutive benefit periods. There
is waiting period of 2 days which I waived if the insured person is certified sic
within 15 days of the last spell for which sickness benefit period was last paid.
The daily rate of sickness benefit in respect of a person during any benefit period
shall be 20 percent more than “ standard benefit rate”.

2. Maternity benefit

Maternity benefit implies cash payment to an insured woman in case of

confinement or miscarriage or sickness arising out of pregnancy, premature
birth of child as certified by a duly appointed medical officer or midwife. For
entitlement to maternity benefit, the insured woman should have contributed
for not less than 70 days in the immediately preceding two consecutives
contribution periods corresponding to the benefit period in which the
confinement occurs or is expected to occur. The daily rate of benefit double the
standard sickness benefit rate i.e full wages.

Maternity benefit is normally payable for a maximum period of 12 weeks in case

of confinement , 6 weeks in case of miscarriage or medical termination of
pregnancy which can be extended up to one additional month in case of sickness
arising out of confinement and duly certified by an authorized medical officer.
Maternity benefit continues to be payable even in the event of the death of an
insured woman, during her confinement, or during the period of 6 weeks
immediately following her confinement leaving behind a child for the whole of
that period , and in case the child also dies, during the said period, until the death
of the child.

3. Disablement benefit

In case of temporary disability arising out of an employment injury, disablement

benefit is admissible to an insured person for the entire period so certified by an
insurance medical officer/ practitioner for which the insured person does not
work for wages. the benefit is not subject to any contributory condition and is
payable at the daily rate of 15 percent more than the standard benefit rate. The
benefit is, however, not payable if the incapacity is less than 3 days excluding the
rate date of accident.

4. Dependent’s benefit
Periodical pension is paid to the dependent of a deceased insured person where
death occurs as a result of an employment injury or occupational diseases.
The daily rate of dependent’s shall be 15 percent more than the standard benefit
rate. The widow receives monthly pension for life or until remarriage, at a fixed
rate equivalent to 3/5th of the disablement benefit rate and each dependent
child is paid an amount equivalent 2/5th there of until he/she attains 18 years of
ages, provides that , in case of infirmity, the benefit continues to be paid till
infirmity.

However, it is subject to the condition that the total dependents’ benefit

distributed among the widow and legitimate or adopted children of the
deceased insured persons, does not exceed , at any time, the full rate of
disablement benefit. In case it exceeds the given ceiling, the share of each of the
dependents is, proportionately reduced. The benefit is not payable to married
daughter.

5. Medical benefit

An insured person and his family member become entitled to medical care from
the date he enters the insurable employment and the entitlement continues as
long as the insured person is in insurable employment or is qualified to claim
sickness, maternity, or disablement benefit. The entitlement to medical care is
extended up to two years to persons suffering from any specified chronic or
long-term diseases. medical treatment to persons , who go out of coverage
during the period of treatment, is not discontinued till the spell of sickness ends.
All insured persons and member of there are entitled to free, full and
comprehensive medical care under the scheme.

The package covers all aspects of health care from comprehensive medical
care facilities, such as

• Out- patient treatment.

• X- ray and laboratory investigation.
• Ambulance service or conveyance.
• Family welfare services and other national health programmes
services.
• Medical certification and
• Special provision including super-specialty treatment

6. Funeral benefit

Funeral expenses are in the nature of a lump sum payment up to three thousand
rupees made to defray the expenditure of the funeral of deceased insured
person. The amount is paid either to the eldest surviving member of the family
or, in his absence , to the person who actually incurs the expenditure on the
funeral.

ESI Act, 1948 amendment

Evidently, the provisions of the Employees’ State Insurance Act 1948, provide for
financial assistance to workers. Such assistance is accessible to the workers of an
organization having ESI registration, in case of certain health-related issues that
the workers might face, such as:

• An illness
• Maternity leaves
• Acute or chronic disablement
• Occupational injury or ailment
• Sudden demise while at the job

Often such issues impact the immediate loss of wages and resultantly financial
crisis.

Certain social securities benefits under the ESI Act intend to balance or nullify the
subsequent physical or monetary loss in such mishappenings.

Recently, the government has amended the ESI Act 1948 and has introduced
certain new provisions for the workers and employers. These new provisions are
made effective from 1st October 2019.

Compulsory ESI registration of employees

As per the new provision, the employees of the organized sector are now
compulsorily required to obtain ESIC registration online within 10 days from the
date of their appointment. Henceforth, the ESIC online portal shall now allow a
maximum 10 days only to the employers for providing ESI registration to their
new joinee.

Compulsory ESI Registration Card

Another new provision of the ESI Act states that the employees who have already
obtained the esic registration will now have to collect their Biometric scanned
ESI registration Permanent Card from the nearest ESIC Branch Office. The
employers are now required to provide the ESI registration Card to all their
employees, which will serve as the evidence of ESI registration.

Timely deposit of ESI contribution

As per the ESI Act, a certain contribution has to be deposited against employees
as well as employers within the due date. Now a new rule suggests that ESI
contribution against employees has to be deposited within 42 days from the end
of the month of the ESI contribution. The employer shall not be able to deposit
the employee’s ESI contribution after 42 days, and shall have to bear the penalty
of ₹10,000/-.

Threshold limit for employee’s ESI Contribution

Another new provision has now introduced a threshold limit for employee’s ESI
contribution. Accordingly, the employees whose salary is ₹176/- per day or less
need not to pay ESI contribution. Their share of ESI contribution shall be born by
the Government. Nevertheless, the Employer shall still have to bear their share
of ESI contribution.

Special ESI registration programme

The Government with a view to widening the ESI Social Security Coverage to
more individuals has also begun an initiative for ESI registration. Within this
Programme, special ESI registration will be conducted of the employers as well
as employees from December 2016 to June 2017. Moreover, the coverage of the
ESI scheme shall be extended to all the districts of India, but in a phased manner.

Along these lines, the government has planned to enhance the coverage of the
ESI scheme to provide financial assistance to more & more employees of the
organized sector in India.

The Trade Union Act 1926 & Amendment

Last updated on September 19th, 2021 at 11:00 pm

The trade Unions Act, 1926 provides for registration of trade unions with a view to
render lawful organisation of labour to enable collective bargaining. It also confers on
a registered trade union certain protection and privileges.

The Act extends to the whole of India and applies to all kinds of unions of workers and
associations of employers, which aim at regularising labour management relations. A
Trade Union is a combination whether temporary or permanent, formed for regulating
the relations not only between workmen and employers but also between workmen
and workmen or between employers and employers.

Registration
Registration of a trade union is not compulsory but is desirable since a registered trade
union enjoys certain rights and privileges under the Act. Minimum seven workers of
an establishment (or seven employers) can form a trade union and apply to the
Registrar for it registration.

• The application for registration should be in the prescribed form and

accompanied by the prescribed fee, a copy of the rules of the union
signed by at least 7 members, and a statement containing
• the names, addresses and occupations of the members making the
application, the name of the trade union and the addresses of its head
office, and the titles, names, ages, addresses and occupations of its
office bearers.
• If the union has been in existence for more than a year, then a
statement of its assets and liabilities in the prescribed form should be
submitted along with the application. The registrar may call for further
information for satisfying himself that the application is complete and
is in accordance with the provisions, and that the proposed name does
not resemble
• On being satisfied with all the requirements, the registrar shall register
the trade union and issue a certificate of registration, which shall be
conclusive evidence of its registration.

Objectives of Trade Union:

The following are the objectives of trade union:

(1) To improve the economic lot of workers by securing them better wages.

(2) To secure for workers better working conditions.

(3) To secure bonus for the workers from the profits of the enterprise/organization.

(4) To ensure stable employment for workers and resist the schemes of management
which reduce employment opportunities.

(5) To provide legal assistance to workers in connection with disputes regarding work
and payment of wages.

(6) To protect the jobs of labour against retrenchment and layoff etc.

(7) To ensure that workers get as per rules provident fund, pension and other benefits.

(8) To secure for the workers better safety and health welfare schemes.

(9) To secure workers participation in management.

(10) To inculcate discipline, self-respect and dignity among workers.

(11) To ensure opportunities for promotion and training.

(12) To secure organizational efficiency and high productivity.

(13) To generate a committed industrial work force for improving productivity of the
system.

Functions of Trade Unions:

(1) Collective bargaining with the management for securing better work environment
for the workers/ employees.

(2) Providing security to the workers and keeping check over the hiring and firing of
workers.

(3) Helping the management in redressal of grievances of workers at appropriate level.

(4) If any dispute/matter remains unsettled referring the matter for arbitration.

(5) To negotiate with management certain matters like hours of work, fringe benefits,
wages and medical facilities and other welfare schemes.

(6) To develop cooperation with employers.

(7) To arouse public opinion in favour of labour/workers.

Benefits of Trade Union:

Workers join trade union because of a number of reasons as given below:

1. A worker feels very weak when he is alone. Union provides him an

opportunity to achieve his objectives with the support of his fellow
colleagues.
2. Union protects the economic interest of the workers and ensures a
reasonable wage rates and wage plans for them.
3. Union helps the workers in getting certain amenities for them in
addition to higher wages.
4. Union also provides in certain cases cash assistance at the time of
sickness or some other emergencies.
5. Union organize negotiation between workers and management and
are instruments for settlement of disputes.
 6. Trade union is also beneficial to employer as it organizes the workers
under one banner and encourages them follow to peaceful means for
getting their demands accepted.
7. Trade union imparts self-confidence to the workers and they feel that
they are an important part of the organization.
8. It provides for promotion and training and also helps the workers to go
to higher positions.
9. It ensures stable employment for the workers and opposes the motive
of management to replace the workers by automatic machines.
10. Workers get an opportunity to take part in the management and
oppose any decision which adversely effects them.

Amendment of Trade unions act, 1926

The Trade Unions (Amendment) Bill, 2019 was introduced in Lok Sabha by the
Minister of Labour and Employment, Santosh Kumar Gangwar, on January 8, 2019.
The Bill amends the Trade Unions Act, 1926, which provides for the registration and
regulation of trade unions.

The Bill seeks to provide for recognition of trade unions or a federation of trade unions
at the central and state level by the central and state government, respectively. Such
trade unions or the federation of trade unions will be recognised as Central Trade
Unions or State Trade Unions, as the case may be.

The central or state government may make rules for:

(i) The recognition of such Central or State Trade Unions.

(ii) The authority to decide disputes arising out of such recognition, and the manner of
deciding such disputes.

Child Labor (Prohibition & Regulation) Act,

1986 and its amendment
Last updated on December 8th, 2019 at 10:57 am

The Child Labour (Prohibition and Regulation) Amendment Act, 2016 receives
the assent of the President on 29th July, 2016. The Act came into force in order
to amend Child Labour (Prohibition and Regulation) Act, 1986. Mentioned below
are following amendments which have taken place due to the amendment Act.

• AMENDMENT IN LONG TITLE: “An Act to prohibit the engagement of

children in all occupations and to prohibit the engagement of adolescents
 in hazardous occupations and processes and the matters connected
therewith or incidental thereto.”
• AMENDMENT IN SHORT TITLE: “the Child Labour (Prohibition and
Regulation) Act, 1986”, the words, brackets and figures “the Child and
Adolescent Labour (Prohibition and Regulation) Act, 1986” shall be
substituted.
• SUBSTITUTION OF NEW SECTION FOR SECTION 3: (1) No child shall be
employed or permitted to work in any occupation or process. (2) Nothing
in sub-section (1) shall apply where the child,— (a) helps his family or
family enterprise, which is other than any hazardous occupations or
processes set forth in the Schedule, after his school hours or during
vacations; (b) works as an artist in an audio-visual entertainment
industry, including advertisement, films, television serials or any such
other entertainment or sports activities except the circus, subject to such
conditions and safety measures, as may be prescribed: Provided that no
such work under this clause shall effect the school education of the child.
Explanation.—For the purposes of this section, the expression, (a)
‘‘family’’ in relation to a child, means his mother, father, brother, sister
and father’s sister and brother and mother’s sister and brother; (b) ‘‘family
enterprise’’ means any work, profession, manufacture or business which
is performed by the members of the family with the engagement of other
persons; (c) ‘‘artist’’ means a child who performs or practices any work as
a hobby or profession directly involving him as an actor, singer, sports
person or in such other activity as may be prescribed relating to the
entertainment or sports activities falling under clause (b) of sub-section
(2).
• INSERTION OF NEW SECTION 3A: No adolescent shall be employed or
permitted to work in any of the hazardous occupations or processes set
forth in the Schedule: Provided that the Central Government may, by
notification, specify the nature of the non-hazardous work to which an
adolescent may be permitted to work under this Act.
• AMENDMENT OF SECTION 14: (a) for sub-section (1), the following sub-
sections shall be substituted, namely:— “(1) Whoever employs any child
or permits any child to work in contravention of the provisions of section 3
shall be punishable with imprisonment for a term which shall not be less
than six months but which may extend to two years, or with fine which
shall not be less than twenty thousand rupees but which may extend to
fifty thousand rupees, or with both: Provided that the parents or
guardians of such children shall not be punished unless they permit such
child for commercial purposes in contravention of the provisions of
section 3. (IA) Whoever employs any adolescent or permits any adolescent
to work in contravention of the provisions of section 3A shall be
punishable with imprisonment for a term which shall not be less than six
months but which may extend to two years or with fine which shall not be
less than twenty thousand rupees but which may extend to fifty thousand
rupees, or with both: Provided that the parents or guardians of such
 adolescent shall not be punished unless they permit such adolescent to
work in contravention of the provisions of section 3A. (1B)
Notwithstanding anything contained in sub-sections (1) and (1A) the
parents or guardians of any child or adolescent referred to in section 3 or
section 3A, shall not be liable for punishment, in case of the first offence.”.
(b) for sub-section (2), the following sub-sections shall be substituted,
namely:— “(2) Whoever, having been convicted of an offence under
section 3 or section 3A commits a like offence afterwards, he shall be
punishable with imprisonment for a term which shall not be less than one
year but which may extend to three years. (2A) Notwithstanding anything
contained in sub-section (2), the parents or guardian having been
convicted of an offence under section 3 or section 3A, commits a like
offence afterwards, he shall be punishable with a fine which may extend
to ten thousand rupees.”. (c) clauses (a), (b) and (c) of sub-section (3) shall
be omitted.
• Insertion of new sections 14 A, 14 B, 14 C, 14 D & 17 A and 17 B.
• AMENDMENT OF SECTION 18: (i) clause (a) shall be relettered as clause (b)
thereof and before clause (b), as so relettered, the following clause shall
be inserted, namely:— (a) the conditions and the safety measures under
clause (b) of sub-section (2) and other activities under clause (b) to
Explanation of sub-section (2) of section 3; (ii) in clause (b), as so
relettered, for the words “Child Labour Technical Advisory Committee”,
the words “Technical Advisory Committee” shall be substituted. (iii)
clauses (b), (c) and (d) shall be relettered as clauses (c), (d) and (e) thereof
and in clause (c) as so relettered, for the word “child”, the word
“adolescent” shall be substituted; (iv) after clause (e), as so relettered, the
following clauses shall be inserted, namely:— “(f) the manner of payment
of amount to the child or adolescent under sub-section (4) of section 14B;
(g) the manner of composition of the offence and payment of amount to
the appropriate Government under sub-section (1) of section section 14D;
(h) the powers to be exercised and the duties to be performed by the
officer specified and the local limits within which such powers or duties
shall be carried out under section 17A.”.

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The Payment of Bonus Act 1965 &

Amendment
Last updated on September 19th, 2021 at 11:04 pm

The Payment of Bonus Act, 1965 provides for the payment of bonus to persons
employed in certain establishments, employing 20 or more persons, on the basis of
profits or on the basis of production or productivity and matters connected there with.
The minimum bonus of 8.33% is payable by every industry and establishment under
section 10 of the Act. The maximum bonus including productivity linked bonus that can
be paid in any accounting year shall not exceed 20% of the salary/wage of an
employee under the section 31 A of the Act.

Applicability

• Payment of Bonus Act, 1965 extends to whole of India.

• Payment of Bonus Act, 1965 applies to every factory and to every other
establishment in which 20 or more persons are employed on any day
during an accounting year;
• The Government may also apply the act on any factory or
establishment in which has less than 20 but not less than 10 persons
are employed;
• Payment of Bonus Act, 1965 is applicable on every employee whether
doing any skilled, unskilled, manual, supervisory, managerial,
administrative, technical or clerical work for hire or reward and whether
the terms of employment are express or implied.

Eligibility

• Payment of Bonus Act, 1965 is applicable on employees drawing

wages / salary up-to 10,000/- per month.
• Only those employees are entitled for bonus, who have worked for at
least 30 working days in an accounting year.

Rate of Bonus

• 33% of the salary or wages earned by an employee in a year or Rs.

100/-, whichever is higher.
• In case allocable surplus exceeds the amount of provision of minimum
bonus, the employer shall be bound to pay maximum bonus not
exceeding 20% of the salary or wages earned by employees.
• In case allocable surplus exceeds the maximum bonus (20% of the
salary or wages earned by employees), the excess surplus shall be
carried forward for being set on in the succeeding accounting years up
to and inclusive of the 4th accounting year.

Amendment of payment of Bonus Act, 1965

The Payment of Bonus Act, 1965 (Bonus Act) has been recently amended to bring
about certain key changes (the Amendments).

(a) Revision of wage threshold for eligibility: The wage threshold for determining
eligibility of employees has been revised from INR 10,000 to INR 21,000 per month,
covering a larger pool of employees.
(b) Change in the wage ceiling used for calculation of bonus: Previously the
maximum bonus payable was 20% of INR 3500 per month. The minimum bonus
payment was also capped at 8.33% of INR 3500 per month or INR 100, whichever is
higher. The calculation ceiling of INR 3500 has now been doubled to INR 7000 per
month “or the minimum wage for the scheduled employment, as fixed by the
appropriate Government” (whichever is higher). Therefore, the cost associated with
bonus payments could double (or be greater still, depending on applicable minimum
wages), based on the organization’s performance.

(c) Retrospective Effect: The amendment has been brought into effect from 1 April
2014.

The Bonus Act applies to every factory and every establishment that employs 20 or
more persons, and unlike other performance linked incentives offered by companies,
the bonus payable under this law is not linked to the performance of the employee. All
employees earning up to the wage threshold (increased to INR 21,000 by the
Amendments), and who have worked in the establishment for not less than 30 working
days in the year are eligible to receive this statutory bonus. Therefore, the
Amendments could have a significant financial bearing for establishments, especially
those in the medium and small scale sectors. We have analyzed the Amendments in
some more detail below.

Impact of the Amendments and Potential Challenges

(a) INR 10,000 to INR 21,000: As with many other labour statutes, the Bonus Act also
contains a separate definition of ‘wages’. Broadly, ‘salary or wage’ under the Bonus
Act includes all guaranteed components of an employee’s salary (not just the basic
salary) and specifically excludes certain allowances and concessions. Salary
structures adopted by organizations these days can be fairly complex, with multiple
allowances and incentives built into the compensation structure. With the increase in
the wage threshold, employers would have to undertake a more detailed assessment
to determine which components of their existing salary structure would fall with the
definition of ‘wages’ under the Bonus Act, and accordingly determine which employees
are eligible to receive the statutory bonus.

(b) Reference to minimum wages under the Minimum Wages Act (MW Act): The
insertion of a reference to the minimum wage under the MW Act to calculate bonus
payments has created an additional challenge for companies. The appropriate
Governments (i.e. State Governments) fix different minimum wages for various
scheduled employments. Further, even within a particular scheduled employment,
different minimum wages are notified for different categories of employees. Thus,
employers would have to carry out an assessment of the applicable wage rates for
different categories of employees in order to calculate the statutory bonus payable.
This issue would be even more significant for employers having offices in multiple
States since the minimum wages for the same scheduled employment also vary from
one State to another, and the variation can sometimes be quite significant. For
instance, the monthly minimum wage for a skilled employee in a shop or commercial
establishment in Delhi is INR 11,154 while the monthly minimum wage for a skilled
employee in a shop or commercial establishment in Maharashtra is INR 8,440.
Another consequence of including this reference to minimum wages is that it creates
an additional level of unpredictability in the calculation of the bonus amount. A lot of
companies (especially MNCs) currently follow a practice of calculating the maximum
statutory bonus (i.e. 20% of INR 3,500) and paying this to employees on a monthly
basis through the year. However, since there is now a reference to the minimum wages
under the MW Act and since the minimum wages are updated on a periodic basis (i.e.
once or twice a year), there would be an increased variability in the bonus amount,
and it would therefore be difficult for employers to predict the maximum bonus payable
under the Bonus Act.

(c) Complexities in paying the bonus retrospectively: Under the Bonus Act, an
employer is required to pay bonus within 8 months from the close of the accounting
year. Employers in India usually follow a financial year from 1 April to 31 March and
close their books of accounts accordingly. Therefore, most companies would have
already determined the allocable surplus for the financial year 2014 – 15 (i.e. 1 April
2014 to 31 March 2015) and distributed bonus to eligible employees. Since the
Amendments are retrospective, it would impact the distribution of bonus in relation to
the financial year 2014 – 15 as well. The allocable surplus would need to be re-
assessed to account for the increased pool of covered employees and the bonus
eligibility re-determined based on the revised calculation ceilings and available
surplus. This would then have to be redistributed among this larger pool of employees,
which may result in various outcomes – (i) companies could now be required to pay
an additional bonus to employees who have already been paid, if the bonus amount
that was paid earlier is lower than the bonus payable after the Amendments; or (ii) if
the bonus already paid was higher than the bonus payable after the Amendments,
there may even be a reduction of bonus entitlement for some individuals (either in
terms of the amount payable or in the context of percentage of bonus received), to
accommodate bonus payments to the newly covered staff using the allocable surplus.

Therefore, there would be an increase in the financial burden and greater accounting
complexities for employers, and in some cases, there may also be issues around
recovery of amounts from employees.

It is therefore critical that the government issues clarifications, further amendments or

exemptions to ease the operational complexities with the retrospective amendments.
The requirement to consider the minimum wages under the MW Act while calculating
bonus will create uncertainty and disparity around bonus payments, which was best
avoided at this stage. We have been working with various industry associations to
approach the government to offer solutions in relation to the financial and operational
hardships that companies will face due to the Amendments. However, at present, the
obligation to pay statutory bonus in accordance with the amended eligibility threshold
and wage ceiling in relation to financial year 2014 – 15 continues to exist.

Gratuity and Maternity Benefits

Last updated on September 19th, 2021 at 11:06 pm
Gratuity is a part of salary that is received by an employee from his/her employer
in gratitude for the services offered by the employee in the company.

Gratuity is given by the employer to his/her employee for the services rendered by him
during the period of employment. It is usually paid at the time of retirement but it can
be paid before provided certain conditions are met.

A person is eligible to receive gratuity only if he has completed minimum five years of
service with an organization. However, it can be paid before the completion of five
years at the death of an employee or if he has become disabled due to accident or
disease.

There is no set percentage stipulated by law for the amount of gratuity an employee
is supposed to get – an employer can use a formula-based approach or even pay
higher than that. Gratuity payable depends on two factors: Last drawn salary and years
of service. To calculate how much gratuity is payable, the Payment of Gratuity Act,
1972 has divided non-government employees into two categories:

(a) Employees covered under the Act

(b) Employees not covered under the Act

An employee will be covered under the Act if the organization employees at least 10
persons on a single day in a preceding 12 months. And once an organization comes
under the purview of the gratuity Act, then it will always remain covered even if the
number of employees is falls below 10.
Let us understand more about the eligibility, payment option and more on Gratuity Act
in India.

1. Eligibility

An individual who has completed 5 years of continuous service in an organization is

eligible for gratuity benefit. However, this is not applicable in the case where the
employment is terminated due to death or any disability. The amount will be paid to
the nominee or legal heir. An employee could leave his job for various reasons, after
which receiving his gratuity.

2. Calculation

Calculation depends on whether an employee is covered under the payment of

Gratuity Act, 1972 or it is a voluntary step on the part of a company etc. If an employee
is covered under the Act, then he is entitled to a gratuity amount of 15 days salary or
wages, multiplied by the number of years he has put in. Then in that case your
calculation would be as follows:

Gratuity = Last drawn basic salary x 15/26 x No. of years of

3. Taxation
When gratuity is received by the employee within the duration of his service then
gratuity is taxable and falls under the head of “salaries”. But when gratuity is received
by the employee at the time of his retirement, death or superannuation then tax
exemption rules for government employees differs from private employees to
government employees.

The gratuity amount is payable at the time of:

• On Superannuation or retirement
• On resignation
• On termination
• On death
• Disablement due to accident or disease
• On retrenchment
• On layoff
• Voluntary Retirement Scheme

The maternity benefit Act

The maternity benefit Act 1961 protects the employment of women during the
time of her maternity and entitles her of a ‘maternity benefit’ – i.e. full paid
absence from work – to take care for her child. The act is applicable to all
establishments employing 10 or more persons. The amendments will help 3 million
(approx.) women workforce in organized sector in India.

The Maternity Benefit Act, 1961 (MB Act) was amended by the Maternity Benefit
(Amendment) Act, 2016 (MB Amendment Act) which became effective on April 1st,
2017 (except for the provision that required a crèche facility to be provided by the
employer, which came into effect on July 1st, 2017).

Applicability of the Act

• Every factory, mine or plantation (including those belonging to

Government),
• An establishment engaged in the exhibition of equestrian, acrobatic
and other performances, irrespective of the number of employees, and
• Every shop or establishment wherein 10 or more persons are
employed or were employed on any day of the preceding 12 months.

Amendment payment of Gratuity Act, 1972

The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more

persons. The main purpose for enacting this Act is to provide social security to
workman after retirement, whether retirement is a result of superannuation, or physical
disablement or impairment of vital part of the body. Therefore, the Payment of Gratuity
Act, 1972 is an important social security legislation to wage earning population in
industries, factories and establishments.
The present upper ceiling on gratuity amount under the Act is Rs. 10 Lakh. The
provisions for Central Government employees under Central Civil Services (Pension)
Rules, 1972 with regard to gratuity are also similar. Before implementation of 7th
Central Pay Commission, the ceiling under CCS (Pension) Rules, 1972 was Rs. 10
Lakh. However, with implementation of 7th Central Pay Commission, in case of
Government servants, the ceiling has been raised toRs. 20 Lakhs.

Therefore, considering the inflation and wage increase even in case of employees
engaged in private sector, this Government decided that the entitlement of gratuity
should also be revised in respect of employees who are covered under the Payment
of Gratuity Act, 1972. Accordingly, the Government initiated the process for
amendment to Payment of Gratuity Act, 1972 to increase the maximum limit of gratuity
to such amount as may be notified by the Central Government from time to time. Now,
the Government has issued the notification specifying the maximum limit to Rs. 20
Lakh.

In addition, the Bill also envisages to amend the provisions relating to calculation of
continuous service for the purpose of gratuity in case of female employees who are
on maternity leave from ‘twelve weeks’ to ‘such period as may be notified by the
Central Government from time to time’. This period has also been notified as twenty
six weeks.

Impact: The Bill as passed by both the Houses of Parliament, andassented to by the
Hon’ble President and notified by the Government. This will ensure harmony amongst
employees in the private sector and in Public Sector Undertakings/ Autonomous
Organizations under Government who are not covered under CCS (Pension) Rules.
These employees will be entitled to receive higher amount of gratuity at par with their
counterparts in Government sector.

The amendments to Maternity Benefit Act, 1961 are as follows:

• Increase Maternity Benefit from 12 weeks to 26 weeks for two surviving

children and 12 weeks for more than two children.
• 12 weeks Maternity Benefit to a ‘Commissioning mother’ and ‘
Adopting mother’.
• Facilitate ‘Work from home’.
• Mandatory provision of Creche in respect of establishment having 50
or more employees.

Justification

• Maternal care to the Child during early childhood – crucial for growth
and development of the child.
• The 44th, 45th and 46th Indian Labour Conference recommended
enhancement of Maternity Benefits to 24 weeks.
• Ministry of Women & Child Development proposed to enhance
Maternity Benefit to 8 months.
 • In Tripartite consultations, all stake holders, in general supported the
amendment proposal.

The Maternity Benefit Act 1961

Last updated on December 5th, 2019 at 03:25 pm

The maternity benefit Act 1961 protects the employment of women during the
time of her maternity and entitles her of a ‘maternity benefit’ – i.e. full paid
absence from work – to take care for her child. The act is applicable to all
establishments employing 10 or more persons. The amendments will help 3
million (approx.) women workforce in organized sector in India.

The Maternity Benefit Act, 1961 (MB Act) was amended by the Maternity Benefit
(Amendment) Act, 2016 (MB Amendment Act) which became effective on April
1st, 2017 (except for the provision that required a crèche facility to be provided
by the employer, which came into effect on July 1st, 2017).

Applicability of the Act

The Act applies to:-

• Every factory, mine or plantation (including those belonging to

Government),
• An establishment engaged in the exhibition of equestrian,
acrobatic and other performances, irrespective of the number of
employees, and
• Every shop or establishment wherein 10 or more persons are
employed or were employed on any day of the preceding 12
months.

The amendments to Maternity Benefit Act, 1961 are as follows

• Increase Maternity Benefit from 12 weeks to 26 weeks for two

surviving children and 12 weeks for more than two children.
• 12 weeks Maternity Benefit to a ‘Commissioning mother’ and ‘
Adopting mother’.
• Facilitate ‘Work from home’.
• Mandatory provision of Creche in respect of establishment having
50 or more employees.

Justification
 • Maternal care to the Child during early childhood – crucial for
growth and development of the child.
• The 44th, 45th and 46th Indian Labour Conference
recommended enhancement of Maternity Benefits to 24 weeks.
• Ministry of Women & Child Development proposed to enhance
Maternity Benefit to 8 months.
• In Tripartite consultations, all stake holders, in general supported
the amendment proposal.

The Employee Provident fund and

Miscellaneous Provision Act 1952
Last updated on December 1st, 2019 at 03:40 pm

The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 has been
enacted with the main objective of protecting the interest of the employees after
their retirement and their dependents after death of the employee. The Act
provides insurance to workers and their dependents against risks of old age,
retirement, discharge, retrenchment or death.

The objective of this act is to provide substantial security and timely monetary
assistance to the employer and their family members. This act covers all the
state of India except Jammu and Kashmir. It applies to any factory or any other
establishment employing 20 or more persons with the permission of central,
according to central government’s official gazette. But the central government
is empowered to apply this provision to any employing less than 20 persons with
prior notification at least 2 months before.

EPF Applicability

• The Employees’ Provident Funds & Miscellaneous Provisions Act,

1952 extends to whole of India except the state of Jammu &
Kashmir.
• It applies on every establishment employing 20 or more persons
& engaged in industry specified in Schedule I of the Act or any
other activity notified by the Central Government.
• It applies to all departments / branches of an establishment
wherever situated.
• Any establishment employing even less than 20 persons can be
covered voluntarily under section 1(4) of the Act.

EPF Eligibility
 • Employees drawing salary / wages at the time of joining up-to Rs.
6,500/- per month are governed by the provisions of the Act;
• Employees drawing salary / wages more than Rs. 6,500/- per
month may also be brought under the purview of the Act at the
discretion of the management and by furnishing a joint
undertaking to the Provident Fund Commissioner;
• Employees engaged through the Contractor in or in connection
with the work of an establishment are also covered under the
purview of the Act.

This act covers three major scheme, they are

(i) Employees provident fund scheme.

(ii) Employees pension scheme.

(iii) Employees deposit linked insurance scheme.

Employee’s Contribution

An employee is eligible for membership of Employee Provident Fund from the

very 1st date of joining in any establishment getting salary up to Rs6500
Provident fund contribution is recovered at 12% of wages from employee salary.
The pension is that which represents a person has retired. To avail pension a
person should have 10years of continues service and with age of 50years or more
will receive pension amount on monthly basis after the age of 58. A member is
eligible to apply for withdrawing his provident and pension fund only after 2
months from the date of registration, provident that he/she is not employed
during those 2months. Employer’s Contribution: Employer is also required to
contribute towards provident fund, the deduction rate is same as employee’s
contribution i.e. 12% of the wages. Of this 12%, 3.67% goes to Provident Fund
and the balance of 8.33% goes to Pension Fund.

Thus Employee Provident Fund grants the employee to have a regular income
through a pension. These are the important facts of Employee Provident Fund
and Miscellaneous Provisions Act,1952.