Korea Institute for International Economic Policy

 

Indian Industrial Relations

Mai Thi Nguyet Anh

Vietnam

Seoul, January 28th 2013

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Table of Contents

1 Introduction.........................................................................................................................2

1.1 Definition.....................................................................................................................2

1.2 Features........................................................................................................................2

1.3 Objectives of Industrial Relation.................................................................................3

1.4 Main aspect of Industrial Relations.............................................................................4

2 Indian industrial relation......................................................................................................4

2.1 The six phases of industrial relations in India.............................................................5

2.1.1 The first phase (Mid 19th century – 1920)................................................................5

2.1.2 The second phase (1920 – Independence 1947)......................................................5

2.1.3 The third phase (1947 to mid 1960s).......................................................................6

2.1.4 The fourth phase (1970s).........................................................................................8

2.1.5 The fifth phase (1980s)............................................................................................9

2.1.6 The sixth phase (1990-2000).................................................................................10

2.2 Importance of industrial relations..............................................................................11

2.3 The future of industrial relation in India...................................................................12

3 Recommendation...............................................................................................................13

4 Conclusion.........................................................................................................................13

5 References.........................................................................................................................14

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1 Introduction

In the modern industrial society, it is clear that industrial relation is one of the most

complicated issues which attracts the attention and concern of authorities, governments and

researcher all over the world. This phenomenon of a new complex industrial set-up directly

contributes to the emergence of ‘Industrial Revolution”. Simple manufacture process, small

scale investment, local markets and small number of employees are all the characteristics of

the pre-industrial revolution. Industrial relations system is built by the process of

industrialization with three main factors: management, labor union and the government. They

develop a number of rules, codified in the institutions, which are used to govern the

workplace. Industrial relations assume that labor markets are not perfectly competitive and

thus, employers typically have more power than employees. It is clear that that there are

apparent conflicts of interest between employers and employees (for example, higher wages

versus higher profits) under the policy environment. Therefore, the challenge for industrial

relations nowadays is to reestablish the connection among those factors with broader

academic, policy, and business worlds.

1.1 Definition

Industrial relations is the relation between the management of an industrial enterprise and its

employees or trade union. It is necessary that both parties promote a harmonious relationship

to maximize the performance of the production process in the organization. There are many

ways to sustain a good relation between employer and employee such as avoiding any dispute

or conflict and nurturing the mutual understanding. It is significantly crucial to maintain a

good industrial relation within the organization to create a favorable environment for better

performance and higher productivity.

In fact the concepts of Industrial Relations are very broad-based, drawing heavily from a

variety of discipline like social sciences, humanities, behavioral sciences, laws etc.

1.2 Features

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The existence of two parties, management and labor is an indispensable condition for the

emergence of industrial relations. Without the interaction of those two parties, this

relationship cannot exist. In another word, it is the industry, which provides the environment

for industrial relations.

It is clear that conflict and cooperation exist together within industrial relations. Therefore the

purpose of industrial relation study is analyzing attitudes, relationships, practices and

procedure developed by those two parties to diminish or find an effective solution for the

conflicts.

The coexistence of labor and management makes it clear that both parties do not work

separately but do work as parts of a big organization. It is an interactive relationship, one

parties have a noticeable influence on the other. Therefore, country’s socio-economic and

political environment, nation’s labor policy, rules regulations agreements, attitude of trade

unions workers and employers are also included in industrial relations study.

Industrial Relation also involves the issues about conditions of labor - management’s co-

operations as well as the requirement to activate and promote the desired co-operation from

both the parties.

1.3 Objectives of Industrial Relation

Encourage the mutual understanding between two parties to preserve the interest of labor and

management.

Develop the harmonious relations and minimize the industrial disputes (strike, lockouts, etc.)

to ensure the highest productivity of workers as well as the industrial progress of a country

Diminish the turnover and absenteeism to raise productivity, especially when the national

economy reaches the full employment situation.

Promote the quality and democracy among parties based on profit sharing and managerial

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decisions to guarantee the benefit of the industry and the country as well.

Utilize the efficiency of government control in term of imposing policy, regulation as well as

building the national plans.

Improve the economic conditions of workers in the context of industrial managements and

political condition.

1.4 Main aspect of Industrial Relations

- Labor Relations (between union and management).

- Employer-employees relations (between management and employees)

- Group relations (between various groups of workmen).

- Community or Public relations (between industry and society).

- Promotions and development of healthy labor-managements relations.

- Maintenance of industrial peace and avoidance of industrial strife

- Development of true industrial Democracy

2 Indian industrial relation

In the area of globalization and international economic cooperation, the industrial relations

system in India has encountered many problems for decades which make the country under

the pressure. The main pattern of the whole system which was established before

independence remains almost unchanged. It is undeniable that government which historically

has a close relationship with unions plays a vital role as the coordinator of this highly

centralized system. However, the broad influence of the government on the system has shown

a negative impact in developing experience in collective bargaining.

This research provides an overview about the evolution of industrial relations in India in the

context of economic change. Indian industrial relations nowadays has to face to a variety of

challenges including the structure of the Indian labor market, the overwhelming size of the

informal or `unorganized' workforce, and its location outside the industrial system. Women

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workers, union movement failure and how to address their needs is also one of the essential

issues in concern. It is significantly important and imperative to build a system that involves

all workers and increase the number of working age people over the next decade.

2.1 The six phases of industrial relations in India

2.1.1 The first phase (Mid-19th century – 1920)

It was the time India was under the British Government control. The British Government

released many regulation and policy such as enforcing penalties for violating or breaking

contract to limit the competitive advantages of indigenous employers against the British

employers. A variety of policies and legislation were adopted during the latter half of the

nineteenth century which became the basis of the emergence of industrial relations in India.

Many changes arose in social, economic and political conditions after the end of the First

World War. Since the workers wage was not able to cover the rising living expense, there was

intense labor unrest. The constitutional development in India led to the election of

representatives to the Central and Provincial legislatures who took a leading role in initiating

social legislation. The establishment of International Labor Organization (ILO) in 1919 as

well as the emergence of trade unions in India, especially the foundation of All India 'Trade

Union Congress (AITUC) in 1920 had a great and substantial influence on the labor

legislation and industrial relations policy in India.

2.1.2 The second phase (1920 – Independence 1947)

Improving working condition as well as providing the social security benefits was the main

focus of the government policy after the First World War which brought out the

implementation of a range of new policies. The Trade Disputes Act, 1929 aimed at providing

conciliation machinery for the industrial disputes. During that time, The Royal Commission

on Labor (1929-31) made a survey to enquire the problem of Indian worker in term of

working condition (health, safety, and welfare) and gave out some specific recommendations

to solve the shortcomings.

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The Second World War and its serious situation forced the government to maintain the

satisfied labor force to ensure the highest performance of production. The government control

therefore had a broader influence and power on industrial workers in term of regulating the

condition of work and welfare. There were two-fold action in this regard namely, (i) statutory

regulation of industrial relations through the Defense of India rules and the orders made

thereunder; and (ii) bringing all the interests together at a common forum for creating labor

policy

One of the most important developments in Indian industrial relation was the tripartite

consultative system which showed the faith of India in the ILO's philosophy and objectives.

The need of tripartite labor machinery on the pattern of ILO was emphasized by the Royal

commission of Labor in the early of 1931 but the first step to make it enforced was not taken

until 1942. 1942 was marked with the first tripartite labor conference held at New Delhi

under the Chairmanship of Dr. B.R. Ambedkar. Two organizations, namely, the Indian Labor

Conference (ILC) and the Standing Labor Committee (SLC) attended this conference to

develop a full-fledged system for labor and management.

The objectives set at the time of their inception in 1942 were: (a) promotion of uniformity

labor legislation, (;b ) laying down of a procedure the settlement of industrial disputes; and

(c) discussion of all matters of all-India importance as between employers and employees.

The ILC/SLC has immensely contributed in achieving the objectives. They facilitated to

enact central legislation as well as discussed about all labor matters in the various meetings of

ILC/SLC.

2.1.3 The third phase (1947 to mid 1960s)

After independence, an Industrial Truce Resolution was adopted in 1947 at a tripartite

conference. The conference emphasized the need for respecting the common interest of labor

and capital as well as reducing the conflicts or disputes between the parties

The relationship between the government and its affiliated union federation during this time

seemed to tighten as the result of the Industrial Disputes Act (ID Act) of 1947. The provision

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in the act prevented employers from bargaining with union as well as from determining the

representative union which made it impossible to involve either party in collective

bargaining. Additionally, there was no provision for union recognition while it allowed any

seven workers to register their union. The ID Act also made it difficult for the union to call a

legal strike. During the late 1950s, however attempts were made to introduce labor legislation

which promoted collective bargaining through various voluntary arrangements such as the

Code of Discipline and the inter-union Code of Conduct. Since government greatly

intervened in the determination of wages and working conditions the structure of bargaining

was mainly focused on the national level.

The first phase of the Indian union movement corresponds to the first three five-year plans

(1951-56, 1956-61, 1961-66), a period of “national capitalism”.

The approach to labor problem in the First Five-Year Plan (1951-56) was based on the

wellbeing of the working class and its crucial contribution to the economic stability and

progress of the country. The workers were considered an extremely important factor to

achieve the targets of the Plan and in the achievement of economic progress. The Plan stated

the worker rights of collective bargaining in organization should be fulfilled in order to have

a mutual relationship.

The Second Plan (1956-1961) stated that union movement was an indispensable factor to

ensure the interest of labor as well as to attain the production target. Multiplicities of trade

unions, political rivalries, lack of resources were the major challenges facing existing unions.

The plan also emphasized on avoiding disputes at all levels and achieving industrial peace.

The Third Five-Year Plan (1961-66) highlighted the need for increasing application of the

principle of voluntary arbitration in resolving differences between workers and employers

and recommended that the works committees should be empowered to be an active and

effective agency for the democratic administration of labor matters

The post independence period of industrial relations policy aimed at the establishment of

peace in industry, and grant of a fair deal to workers. The first phase represented the period of

a state intervention that had the government guide and control on the labor movement

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through appropriate labor legislation, labor administration, and industrial adjudication. The

interaction between capital and labor was restricted and coordinated by the government.

During this period, few strategic choices were open to either union or employers as labor

relations outcomes were over determined by the state. The institutional structures to boots

efficient collective bargaining remained underdeveloped.

2.1.4 The fourth phase (1970s)

The second phase corresponds with the 1967-69 Annual Plans, the fourth (1969-74) and the

Fifth (1974-79) Five Year Plans. This is associated with overall industrial stagnation with the

suffering from two oil price shocks, in 1973 and in 1978. As a result, the level of employment

in the economy decreased which affected union activity, collective bargaining practices and

labor market. The number of disputes, the number of workers involved in these disputes as

well as the number of mandays lost increased phenomenally from 1966 to 1974.

There was no change in term of the system of regulating labor relations in The Fourth Five-

Year Plan (1969-74). It made an attention to employment and training as well as to strengthen

labor administration for better enforcement of labor laws, research in labor laws, and

expansion of training programmes for labor officers.

The Fifth Five-Year Plan (1974-79) paid much attention on employment, both in rural and

urban sectors. The government devised a new pattern of bipartite consultative process to

create a favorable industrial relations as well as to raise the productivity by avoiding lay-offs,

retrenchments, closures, strikes and lockouts. The new machinery implemented policies at the

national, state, and industry levels to quickly solve the industrial conflicts and encourage

industrial harmony.

The failure of INTUC’s internal practices as well as its ineffectiveness in representing union

voice at the enterprise level made the workers seek more skilled politicians and negotiators to

lead their union struggles. This period showed a rise in the number of disputes involving

multiples union. The establishment of the National Apex Body, composed of twelve union

federations and eleven employer representatives and the 1976 amendment of ID Act which

force the firm employing more than 300 workers had to seek government permission before

retrenching workers, were the two interventions which had a noticeable impact on the 9

industrial relations during this time.

Overall, comparing to the other phases, this phase faced to a maximum industrial conflicts

both in term of the number of disputes and the number of worker involved.

2.1.5 The fifth phase (1980s)

This phase correspond to the sixth (1980-85) and the Seventh (1985-90) Five Year Plans as

well as the two Annual Plans (1990-92). Employment in major sectors, especially in services,

faced a considerable drop during this time since the economy suffered from severe internal

and external shocks. The economy moved away from an import-substituting inward looking

growth strategy towards strategies that encouraged both export promotion and domestic’s

competition. The changes made a significant impact on the trade unions, labor market and the

structure of industrial relations. This period was characterized by the rise of independent

unions against the traditional party-affiliated unions.

The Sixth Five-Year Plan (1980-85) emphasized on building a healthy industrial relations

basing on the cooperative attitude of the two parties employers and employees. The plan

stated that disputes (strikes and lockouts) should be considered only on the last stage and

effective arrangements should also be delivered to conciliate the conflicts and to eliminate

unfair practices and irresponsible conduct. The plan also focused on the responsibility of

labor unions in nation building activities as well as improving living standard of workers.

Additionally, it showed a need of changing the existing laws on trade unions to encourage

harmonious industrial relations

The Seventh Five-Year Plan (1986-91) stated that an effective policy to fix the shortcomings

of the industrial system has to be implemented while maintaining the interest of workers. It

was undeniable the need of strikes and lockouts in some cases which is the considerable

scope for improving the industrial relations. Since the government cannot bear the huge

burden of losses, in the proper management of industrial relations the responsibility of unions

and employees has to be identified and disputed or conflicts should be minimized.

In the late 1970s there was a phenomenal rise in the number of disputes led by unaffiliated

unions and the importance of traditional party-affiliated unions decreased. In 1989, the Labor 10

Ministry listed nine major union federations and a number of small independent unions in

their registry.

2.1.6 The sixth phase (1990-2000)

In June 1991, the government decided to adopt the World Bank – IMF’s stabilization and

structural adjustment program. The economy had to experience the devaluation of rupee. At

the same time import quotas were reduced, tariffs were lowered and the government no

longer had a monopoly power on the import and export. A statement on industrial policy with

an attempt to lower the fiscal deficit was presented. This fourth phase corresponds to the

eighth (1993-97) and the Ninth (1997-2002) Five Year Plans.

The Eighth Five-Year Plan (1992-97) emphasized the important of labor participation in

decision making and management to promote industrial democracy. The government made an

attempt in introducing workers' participation in administration. The result, however was

unsatisfied, the effort to bring out an effective legislation and implementation had been

failed. It required a more attention in activating a proper education and training as well as the

cooperation from both employers and employees to promote the participative management.

Ninth Five-Year Plan (1997-2002) showed an effort to make a favorable condition for

improving labor productivity as well as providing social security in the operations of the

labor market. A pool of resource was developed which included skill formation, information

exchange about job opportunities. The plan also highlighted on improving working condition,

delivering insurance for the workers as well as creating an industrial harmony. According to

the plan, labor surplus together with employment in unorganized segments of the economy

were the causes of social issues such as bonded labor, child labor, poor working condition.

During the time, many meetings were held raising the urgent need for tripartite consultation

to resolve all the concerning labor matters under economic reform. The unions had serious

concern about the present of a proper consultation at industrial or enterprise level. In addition,

the unions experience a drop in sectional interest group during this phase. It was necessary

that government policy should be carried out to protect consumers from sectional interests of

many unrepresentative trade unions.

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On October 1999 the government set up the second National Labor Commission. The terms

of reference made a suggestion of realization of existing labor laws in the organized sector

and also of enforcing and adding more number of legislation in order to give a minimum

protection for unorganized workers as well as for the workers under an improper

management.

In the context of continuing economic liberalization, the industrial relations will show

reforms toward greater employment flexibility, greater decentralization in bargaining,

decrease in government control over the bargaining process, reduction in the number of

disputes. Employment and efficient union voice, therefore, could be promoted both at micro

and macro level.

2.2 Importance of industrial relations

It is obvious that the healthy industrial relations are the key of success of all organization.

With healthy industrial relations, a favorable environment is created for organizations to

achieve long term goals while maintaining the interest of the parties.

Uninterrupted production: A healthy industrial relation ensures the continuity of production

and smooth running of an industry as well as the other ones. Both employees and employers

will not be out of work which utilize all the potential resource and encourage the higher

productivity to achieve organization’s goals. This positively contributes to the development

of national economy.

Reduction in Industrial disputes - The industrial disputes are diminished and decreased in the

condition of good industrial relation which fulfills all the basic needs and motivation of the

workers as well as ensure the reasonable benefit of the employers. It helps promoting co-

operation and increasing production.

High morale – Good industrial relations promote the morale of the employees with the

mindset that they and their employers are sharing the same interest and aiming at the same

goals (higher performance in production for example). This morale make the workers feel

that they are part of organization’s success and make the employers realize that the benefits

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are not for them alone but should be shared equally and generously with his workers. In short,

the high morale is an important factor to develop the cooperation and industrial peace.

New facilities – New facilities for workers development are provide in the condition of

industrial peace such as training facilities, labor welfare facilities etc. Those facilities help

worker increase the productivity and show the best result in term of production at lower costs.

Higher performance – Good industrial relations are maintained on the basis of cooperation

and recognition of each other. It will help increase production, reduce cost and activate all the

potential and resource of the organization for the best outcomes..

Thus, from the above discussion, it is evident that good industrial relation 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.

2.3 The future of industrial relation in India

The future of industrial relation in India has to adapt to the new environment that emerged

after the structural changes under economic reforms.

The first issue relates to promoting collective bargaining by selecting a bargaining agent for

negotiations and imposing new labor law support the foundation of bargaining agency in

every unit and industry. Collective bargaining helps the both parties develop the mutual

understanding to reach a common agreement and limit or quickly settle the conflict between

them.

The second issue lies in the weakness of state legislations concerned about labor matters.

Although a range of attempts are made to improve the efficiency of the legislation and labor

law, India still has to solve problems that the legislation process is facing.

The third issue, another challenge for the industrial relations system is the workers

participation in management. Many organizations have realized the importance of the

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workers participation and applied many forms of workers-participation schemes but the result

came out not as good as expected due to the improperness when running the scheme. It has

raised a new issue and required a change to fix the problem and utilize the benefit of worker

participation in management.

3 Recommendation

Both management and unions should develop cooperative attitudes towards each other. The

participation of workers in the management of the industrial unit should be encouraged by

making effective use of works committees, joint consultation and other methods

All basic policies and procedures relating to Industrial Relation should be widely informed to

everybody in the organization. The manager must ensure that people will understand and

agree with these policies.

Although the management doesn’t intervene in union activities, it is better that management

should implement the attitude of encouraging the judicious union leadership to improve the

industrial relation. The employers must recognize the right of collective bargaining of the

trade unions.

The manager should eliminate any suspicion and misunderstanding by encouraging the union

integrity and solidarity. Distrust, rumors and doubts should all be removed in the organization

environment.

4 Conclusion

To conclude, it is obvious that industrial relations in India are governed by certain forces-

economic, social and political. Industrial relations can improve only if there is a convincing

change in the attitudes of employers and employees and they take responsible, surrender their

sectional interests and dedicate for the mutual goals. The Government should play an active

role in encouraging and supporting healthy industrial relations through legislation reform,

adopting new policies as well as the effective control over industrial disputes. It takes great 14

effort of all the actors, management, workers and government to face and handle all the

existing issues to achieve the long term industrial harmony.

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