Industrial Relations

Part One:Multiple choices:

1. Workers participation in management decision-making is a highly________ conceptb. Complex

2. The origin of industrial relations in India can be traced in to the:b. First world war

3. Under the payment of wages act, 1936, no wages period shall exceed for onec. One month

4. Collective bargaining is the process of bargaining between________a. employees & employer

5. Layoff can also cause a ________d. none of the above

6. As per payment of bonus act, accounting year for a company is _____a. One year

7. WPM stands for_________a. Workers’ Participation in Management

8. Causes of Industrial disputes are_________d. All of the above

9. Trade unions of workers in an organization formed by workers to protect their________None of the above

10. A grievance causes in any organization are_________d. All of the above

Part two:1. What are the steps of Grievances handling Process? Explain it.

GRIEVANCES AND GRIEVANCE HANDLING Grievances Or Conflicting Thoughts Are Part Of Industrial Life. It Is Essential To Bring This Conflict To The Surface. All Conflicts Cannot Be Eliminated But Their Exposure Will Contribute Towards their

Reduction. Such Exposures Lead To Adjustments And Further Improved Organizational Effectiveness.

METHODS OF BRINGING CONFLICT TO SURFACE Grievance Procedure Direct Observation Suggestion Boxes Personal Counselor Exit Interviews Miscellaneous Channels

GREIVANCE Dissatisfaction Is Any State Or Feeling Of Discontent Dissatisfaction Orally Made Known By One Employee To Another Is A Complaint. A Complaint Becomes A Grievance When Brought To The Notice Of The Management.

According To Fillipo, “The Term Would Include Any Discontent And Dissatisfaction that Affects Organizational Performance. It Can Either Stated Or Unvoiced, Written Or Oral, Legitimate Or Ridiculous.

A Complaint Is A Discontent That Has Not Assumed Importance. A Complaint Becomes Grievance When The Employee Feels That Injustice Has Been

Committed.

CHARACTERISTICS OF GRIEVANCES It May Be Unvoiced Or Expressly Stated. It May Be Written Or Oral It May Be Valid, Legitimate Or Untrue Or False. It May Relate To The Organizational Work. An Employee May Feel An Injustice Has Been Done. It May Affect The Performance Or Work.Grievances Generally Give Rise To Unhappiness, Frustration, Indifference, Discontent, Poor

Morale, And Poor Efficiency THAT IS CHANGE IN ATTITUDE, PERCEPTION AND BEHAVIOR.

TYPES OF GREIVANCE Visible Grievances Hidden Grievances

An Employee May Feel That There Has Been An Infringement Of His Rights.Grievances Exist In The Minds Of Individuals.Grievances May Be Concerning Employment, Working Conditions, Change Of Service

Conditions, Biased Approach, Non-Application Of Principle Of Natural Justice, Work Loads And Work Norms.

NEED FOR GRIEVANCE PROCEDUREIdentification And Analysis Of Grievances, Nature Nod Causes.

Helps At Formulating And Implementing The Policies And Programmes. It Is Problem Solving, Dispute-Settling Mechanism. Strengthen Good Industrial Relationship. It Detects The Flaws In Working Conditions And Helps To Take Corrective Measures. Build Good Morale, Maintains Code Of Discipline. Brings Uniformity In Handling Grievances. It Develops Faith Of Employees. Reduces Personality Conflicts. It Acts As A Pressure Valve. Provides Judicial Protection To The Employees. Provides Avenues To Present The Problems.

GRIEVANCE REDRESSAL SYSTEMEnables The Parties To Resolve Differences In Peaceful, Orderly And Expeditious Manner.Enables The Parties To Investigate And Discuss The Problem

Open-Door Policy Step Ladder Type Grievance Handling Committee

BASIC ELEMENT OF GRIEVANCE PROCEDURE Existence Of Sound Channel. The Procedure Should Be Simple, Definite And Prompt. It Should Be Clearly Defined. Helpful Attitude Of Management. Fact-Oriented System. Respect For Decisions. Adequate Publicity. Periodic Review.

STEPS IN HANDLING GRIEVANCES Receive And Define The Nature Of Dissatisfaction.

o Manner And Attitude When Complaint Is Receivedo Assessment Must Be Made That The Complaint Is Presented Fairly.o Statement And Issues Must Not Be Pre-Judged.o Proper Time And Attention Is Given.

Get The Factso Facts Be Separated From Impressions And Opinions.o Consult The Policies.o Consult The Records.

Analyze And Decide. Apply The Answer. Follow-Up

DO’S IN HANDLING GRIEVANCES Investigate And Handle Each Case Carefully Talk To The Employee. Enforce The Time Limit. Visit The Work Area Or Place Of Grievance. Determine Witnesses. Examine Records. Examine Witnesses. Evaluate Grievance. Permit Full Hearing. Identify The Relief An Employee Is Expecting.

Command The Respect Of All. All Discussions Privately. Keep Superiors Informed. Ensure Proper Productivity. Stick To Labor Agreements

2. What are the objectives of ‘Industrial Relations’?The main objectives of industrial relations system are:- 

To safeguard the interest of labor 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.

3. Briefly explain the term ‘evolution of Trade unions in India’.Trade unions are organizations of workers formed to protect the rights and interests of

workers through collective action.In India, the first quarter of the 20th century gave the birth of the trade union movement. A

series of strikes were declared in India in the twenties. The success of most of these strikes led to the organization of many unions.

In 1920, the All India Trade Union Congress (AITUC) was set up. In 1926, the Trade Unions Act was passed which gave a legal status to the registered trade unions.Subsequently many trade unions were formed such as:

Indian National Trade Union Congress (INTUC), Centre of Indian Trade Unions (CITU), Hind Mazdoor Sabha (HMS), Bharatiya Mazdoor Sangha (BMS), United Trade Union Congress (UTUC), and National Federation of Independent Trade Unions (NFITU).

Growth of Trade Unions in IndiaIt was not until the close of First World War, that the modern trade Union movement really

took permanent roots in Indian Soil.The establishment of Bombay Mill Hands’ Association is considered as the first phase of the

trade union movement in India. In 1905, the Printers Association of Calcutta and Dock Union Board in Bombay were formed.

There was labor unrest in India at the end of the First World War. In several industries, the workers went on strikes to secure wage increases. The Russian Revolution and the Industrial Labor Organization have inspired the Indian laborers to launch trade unions like the Spinners Union and Weaver’s Union which had been established in Madras and Ahmedabad respectively.

But the important step in the history of Indian trade unionism was the foundation of All India Trade Union Congress in 1920. There had been a steady progress of trade union movement in India. However, the decision of the Madras High Court that the formation of trade union is illegal stood in the way of its development.

In 1926, the Trade Unions Act was enacted to give legal recognition to the different trade unions. The said Act also .conferred certain privileges on the registered trade unions in an industrial unit. The Trade Unions Act has made it compulsory on trade unions to use their funds for workers interests and to prescribe a fee of at least 25 paisa per works. Most of the members of the executive committee of a trade union must be employed in the factory.

In 1930, the climate was not favorable to the growth of trade Union movements in India. The prosecution of the communists involved in Meerut conspiracy case and the failure of Bombay Textile strike of 1929 retarded the trade union movement. Moreover the serious economic depression was added with it, during the period.

In the next phase, the Second World War gave a great impetus to the trade union movement in India. The rising cost of living forced laborers to organize themselves into trade unions. At the same time the Second World War split the trade union leaders on the question of participating in the war. Industrial unrest was also increased during this period. As a result; there was a marked increase in both the number of trade unions and of organized workers.

With independence and partition, the country was plunged into growing unemployment. A series of strikes occurred, in the country. The All India Trade Union Congress was split up as a result of which the Indian National Trade Union Congress (INTUC) was formed in 1947 under the control of congress party. The Hind Mazdoor Sabha (HMS) was formed by the socialist Party in 1948, and United Trade Union congress (UTUC) was formed in 1949. Recently, Centre of Indian Trade Unions (CITU) has been formed by the Communist Party (Marxists).

There are more than fourteen thousand registered trade unions in India. The steady growth of trade unions in India is due to the political consciousness among the laborers as well as the governmental measures to facilitate collective bargaining through appropriate legislation.FeaturesThe main characteristics of the trade unionism are:

o Small size of membership,o Lack of adequate finance,o Non fulfillment of welfare schemes,o Control of political parties,

o Outside interference in the activities of labor unions.

4. Explain the ‘workers’ participation in management’.Like other behavioural terms, WPM means different things to different people depending

upon their objectives and expectations. Thus, WPM is an elastic concept. For example, for management it is a joint consultation prior to decision making, for workers it means co-determination, for trade unions It is the harbinger of a new order of social relationship and a new set of power equation within organisations, while for government it is an association of labour with management without the final authority or responsibility in decision making.Let us also go through some important definitions of WPM.

According to Keith Davis, “Workers’ participation refers to the mental and emotional involvement of a person in a group situation which encourages him to contribute to group goals and share in responsibility of achieving them”.

In the words of Mehtras “Applied to industry, the concept of participation means sharing the decision-making power by the rank and file of an industrial organisation through their representatives, at all the appropriate levels of management in the entire range of managerial action”.

A clear and more comprehensive definition of WPM is given by the International Labour Organisation (ILO).According to the ILO:

“Workers’ participation may, broadly be taken to cover all terms of association of workers and their representatives with the decision-making process, ranging from exchange of information, consultations, decisions and negotiations to more institutionalized forms such as the presence of workers’ members on management or supervisory boards or even management by workers themselves as practised in Yugoslavia”.

In Yugoslavia, WPM is governed by the Law on Workers’ Management of State Economic Enterprises and Higher Economic Association. The Act consists of a three-tier participation struc-ture: collective bargaining, workers’ council, and hoard of management.

In fact, the basic reason for differences in perception of WPM is mainly due to the differential pattern of practices adopted by various countries while implementing workers’ participation in management.

For example, in Great Britain and Sweden, WPM is in the form of Joint Consultation through Joint Consultative Committees, Works Committees in France, Co-determination Committees in West Germany, Joint Work Council in Belgium, Workers’ Council and Management Board in Yugoslavia and Union Management Co-operation in USA.

In India, WPM is in the form of, what we call Labour Management Cooperation and Workers’ Participation in Management. It is implemented through the agencies like Works Committees, Joint Management Councils (JMCs) Shop Councils, Unit Councils and Joint Councils. Notwithstanding, these different forms of WPM differ only in degree, not in nature.

Be the perceptual differences as these may, WPM is a system of communication and consultation, either formal or informal, by which the workers of an organisation are kept informed, as and when required, about the affairs of the undertaking and through which they express their opinion and contribute to decision-making process of management.

Characteristics:The following are the main characteristics of WPM:

1. Participation implies practices which increase the scope for employees’ share of influence in decision-making process with the assumption of responsibility.

2. Participation presupposes willing acceptance of responsibility by workers.3. Workers participate in management not as individuals but as a group through their

representatives.4. Worker’s participation in management differs from collective bargaining in the sense that

while the former is based on mutual trust, information sharing and mutual problem solving; the latter is essentially based on power play, pressure tactics, and negotiations.

5. The basic rationale tor worker’s participation in management is that workers invest their Iabour and their fates to their place of work. Thus, they contribute to the outcomes of organization. Hence, they have a legitimate right to share in decision-making activities of organisation.Objectives:

The objectives of WPM are closely netted to the ration-able for WPM. Accordingly, the objectives of WPM vary from country to country depending on their levels of socio-economic development political philosophies, industrial relations scenes, and attitude of the working class.

To quote, the objective of WPM is to co-determine at the various levels of enterprises in Germany, assign the final to workers over all matters relating to an undertaking in Yugoslavia, promote good communication and understanding between labour and management on the issues of business administration and production in Japan, and enable work-force to influence the working of industries in China, for example.

In India the objective of the government in advocating for workers’ participation in management, as stated in the Industrial Policy Resolution 1956, is a part of its overall endeavour to create a socialist society, wherein the sharing of a part of the managerial powers by workers is considered necessary.

The objective of WPM, as envisaged in the Second Five Year Plan of India is to ensure:1. Increase in productivity for the benefit of all concerned to an enterprise, i.e., the

employer, the employees and the community at large.2. Satisfaction of worker’s urge for self-expression in the matters of enterprise management.3 Making employees better understood of their roles in the organisation.In ultimate sense, the objective of WPM in India is to achieve organizational effectiveness

and the satisfaction of the employees.Accordingly, the objectives of WPM in India are to:

1. Promote mutual understanding between management and workers, i.e., industrial harmony.

2. Establish and encourage good communication system at all levels.3. Create and promote a sense of belongingness among workers.4. Help handle resistance to change.5. Induce a sense among workers to contribute their best for the cause of organisation.6. Create a sense of commitment to decisions to which they were a party.

Levels of Participation:Having known the objectives of WPM, the question then is to what extent workers can

participate in decision-making process. In other words, it is important to know the extents/levels of co-determination in an organisation.

Viewed from this angle, Mehtras has suggested five levels of workers’ participation ranging from the minimum to the maximum. Since these levels of workers’ influence the process and quality of decision making in an organisation. We are therefore highlighting here these levels briefly ranking them from the minimum to the maximum level of participation.Informative Participation:

This refers to management’s information sharing with workers on such items those are concerned with workers. Balance Sheet, production, economic conditions of the plant etc., are the examples of such items. It is important to note that here workers have no right of close scrutiny of the information provided and management has its prerogative to make decisions on issues concerned with workers.Consultative Participation:

In this type of participation, workers are consulted in those matters which relate to them. Here, the role of workers is restricted to give their views only. However the acceptance and non-acceptance of these views depends on management. Nonetheless, it provides an opportunity to the workers to express their views on matters involving their interest.Associative Participation:

Here, the role of the workers’ council is not just advisory unlike consultative participation. In a way, this is an advanced and improved form of consultative participation. Now, the management is under a moral obligation to acknowledge, accept and implement the unanimous decision of the council.Administrative Participation:

In the administrative participation, decisions already taken are implemented by the workers. Compared to the former three levels of participation, the degree of sharing authority and responsibility by the workers is definitely more in this participation.Decisive Participation:

Here, the decisions are taken jointly by the management and the workers of an organisation. In fact, this is the ultimate level of workers’ participation in management.

Section B:

Caselet 1

1. Did the personnel manager handle the issue properly?- In this case the personal manager did not handle the issue properly. - Mr. Tiwari who has been a part in reputation of business during competitive period. He was very

good at his area of work for the past two years as far as business concern, he worked good by contacting with the people to market and sell the product.

- In this condition, the personal manager of the company, who is satisfied with his performance, decided to give a paid trip to him, should have known the interest of mr. Tiwari. As if this paid trip been arranged for encouraging and appreciating the employee of the company, if he is not satisfied should consider mr. Tiwari’s needs as a family man, mr. Tiwari have some personal needs, he doesn’t have idea for trip, as the personal manager, who has not consider all these, he has lost an efficient employee in his work.

2. What is your recommendation to avoid such situations in future?The personal manger who is been appointed as a mediator between the company

and working persons should have known better the needs of both the sides.If a person who is working according to the regulations of the company, and plays a

major role in increasing the profit, should be appreciated properly, according to the needs each and every persons need differ by all means. So it should be noted and discussed properly, the company norms can be liberalized according to the efficient employee needs.

As far as company needs its profit and reputation should not be spoiled, so for that reason the regulations can be liberalized according to the person, or the employee who is playing a major role in the company

Caselet 2

1. If you were Malik, what strategies would you adopt to solve the problem?2. With high employee turnover in insurance industry, how can the company retain a person like Malik?

Section C:

1. What is the Collective Bargaining? Explain the Characteristics and types of Collective Bargaining and write down the different levels of Collective Bargaining?

Collective bargaining is a tool people use to end conflict and get things going again in business. Occurring in either continuous or periodic forms, its aim is to make things better for both the employer and employee overall, or to initiate social changes. The disadvantages such as expense and creating divisions in companies are significant, but this technique also provides some big advantages such as giving workers a safe way to voice their concerns and opinions.

DEFINITIONThe term collective bargaining refers to a good-faith business mechanism people use to

reach an agreement. Through basic negotiation and other techniques, the people involved find solutions to work-related issues such as vacation time, pay, work hazards, training and work hours that ultimately benefit everyone. People call these processes “collective” because the opinion and well-being of the whole group, or collective, is involved. The Universal Declaration of Human Rights formally recognizes the ability of people to use this strategy.

PURPOSEThe primary objective of this bargaining system is to improve conditions in some way to

make things more efficient, economical, safe or enjoyable. Going through these processes therefore keeps employers or employees from being taken advantage of or hurt. In some cases, people use this strategy specifically to set a precedent and send a message about an overall social change they want to happen. In these cases, more than one company or group of workers might be involved.

Collective bargaining is specifically an industrial relations mechanism or tool, and is an aspect of negotiation, applicable to the employment relationship. As a process, the two are in essence the same, and the principles applicable to negotiations are relevant to collective bargaining as well. However, some differences need to be noted.

In collective bargaining the union always has a collective interest since the negotiations are for the benefit of several employees. Where collective bargaining is not for one employer but for several, collective interests become a feature for both parties to the bargaining process. Innegotiations in non-employment situations, collective interests are less, or non-existent, exceptwhen states negotiate with each other. Further, in labor relations, negotiations involve thepublic interest such as where negotiations are on wages which can impact on prices.

This is implicitly recognized when a party or the parties seek the support of the public,especially where negotiations have failed and work disruptions follow. Governments intervenewhen necessary in collective bargaining because the negotiations are of interest to thosebeyond the parties themselves.

In collective bargaining certain essential conditions need to be satisfied, such as the existence of the freedom of association and a labor law system. Further, since the beneficiaries ofcollective bargaining are in daily contact with each other, negotiations take place in the background of a continuing relationship which ultimately motivates the parties to resolve thespecific issues.

The nature of the relationship between the parties in collective bargaining distinguishes the negotiations from normal commercial negotiations in which the buyer may be in a strongerposition as he could take his business elsewhere. In the employment relationship the employeris, in a sense, a buyer of services and the employee the seller, and the latter may have the morepotent sanction in the form of trade union action.

Unfortunately the term "bargaining" implies that the process is one of haggling, which is more appropriate to one-time relationships such as a one-time purchaser or a claimant to damages.

While collective bargaining may take the form of haggling, ideally it should involve adjusting the respective positions of the parties in a way that is satisfactory to all, for reasons explained in the Paper entitled "Principles of Negotiation".

NATURE OF COLLECTIVE BARGAININGThe ILO Right to Organize and Collective Bargaining Convention (No. 98), 1949 describes

collective bargaining as:"Voluntary negotiation between employers or employers' organizations and workers'

organizations, with a view to the regulation of terms and conditions ofemployment by collective agreements."

Collective bargaining could also be defined as negotiations relating to terms of employment and conditions of work between an employer, a group of employers or an employers' organization on the one hand, and representative workers' organizations on the other, with a view to reaching agreement.

There are several essential features of collective bargaining, all of which cannot be reflected in a single definition or description of the process:

i. It is not equivalent to collective agreements because collective bargaining refers to theprocess or means, and collective agreements to the possible result, of bargaining.

Collective bargaining may not always lead to a collective agreement.ii. It is a method used by trade unions to improve the terms and conditions of employment

of their members.iii. It seeks to restore the unequal bargaining position between employer and employee.iv. Where it leads to an agreement, it modifies, rather than replaces, the individual contract

of employment, because it does not create the employer-employee relationship.v. The process is bipartite, but in some developing countries the State plays a role in the

form of a conciliator where disagreements occur, or where collective bargaining impinges on government policy.

CONDITIONS FOR SUCCESSFUL COLLECTIVE BARGAINING

PLURALISM AND THE FREEDOM OF ASSOCIATIONA pluralistic outlook involves the acceptance within a political system of pressure groups

(e.g. religious groups, unions, business associations, political parties ) with specific interests withwhich a government has dialogue, with a view to effecting compromises by making concessions. Pluralism implies a process of bargaining between these groups, and between one or more of them on the one hand and the government on the other. It therefore recognises these groups as the checks and balances which guarantee democracy. It is natural that in labour relations in a pluralist society, collective bargaining is recognised as a fundamental tool through which stability is maintained, while the freedom of association is the sine qua non because without the right of association the interest groups in a society would be unable to function effectively. Thus pluralism's "theme is that men associate together to further their common interests and desires; their associations exert pressure on each other and on the government; the concessions which follow help to bind society together; thereafter stability is maintained by further concessions and adjustments as new associations emerge and power shifts from one group to another."There can, therefore, be no meaningful collective bargaining without the freedom ofassociation accorded to both employers and workers.

TRADE UNION RECOGNITIONThe existence of the freedom of association does not necessarily mean that there would

automatically be recognition of unions for bargaining purposes. Especially in systems wherethere is a multiplicity of trade unions, there should be some pre-determined objective criteriaoperative within the industrial relations system to decide when and how a union should berecognised for collective bargaining purposes. The accepted principle is to recognise the most

representative union, but what criteria is used to decide it and by whom may differ from systemto system. In some systems the issue would be determined by requiring the union to have notless than a stipulated percentage of the workers in the enterprise or category in its membership.The representativeness may be decided by a referendum in the workplace or by an outsidecertifying authority (such as a labour department or an indepenedent statutory body). Therecould be a condition that once certified as the bargaining agent, there cannot be a change ofagent for a prescribed period (e.g. one or two years) in order to ensure the stability of theprocess.

OBSERVANCE OF AGREEMENTSEspecially in developing countries where there is a multiplicity of unions, unions are

sometimes unable to secure observance of agreements by their members. Where a labour lawsystem provides for sanctions for breaches of agreements, the labour administration authoritiesmay be reluctant to impose sanctions on workers. Where there is frequent non-observance ofagreements or understandings reached through the collective bargaining process, the party notin default would lose faith in the process.

SUPPORT OF LABOUR ADMINISTRATION AUTHORITIESSupport by the labour administration authorities is necessary for successful collective

bargaining. This implies that they will:i. provide the necessary climate for it. For instance, they should provide effective

conciliation services in the event of a breakdown in the process, and even provide thenecessary legal framework for it to operate in where necessary, e.g. provision for theregistration of agreements.

ii. will not support a party in breach of agreements concluded consequent to collectivebargaining.

iii. as far as is practicable, secure observance of collective bargaining agreements.iv. provide methods for the settlement of disputes arising out of collective bargaining if the

parties themselves have not so provided.

GOOD FAITHCollective bargaining is workable only if the parties bargain in good faith. If not, there will

be only the process of bargaining without a result viz. an agreement. Good faith is more likely where certain attitudes are shared among employers, workers and their organizations e.g. abelief and faith in the value of compromise through dialogue, in the process of collectivebargaining, and in the productive nature of the relationship collective bargaining requires anddevelops. Strong organizations of workers and employers contribute to bargaining in goodfaith, because there would be some parity in the bargaining strength of the two parties.Proper Internal Communication.

Both the management and union should keep their managers and members respectively well informed, as a lack of proper communication and information can lead to misunderstandingsand even to strikes. Sometimes managers and supervisors who are ill-informed may inadvertently mislead workers who work under them about the current state of negotiations, the

management's objectives and so on. In fact, it is necessary to involve managers in deciding onobjectives and solutions, and such participation is likely to ensure greater acceptance - andtherefore better implementation - by them.

ADVANTAGES OF COLLECTIVE BARGAININGFirst, collective bargaining has the advantage of settlement through dialogue and consensus

rather than through conflict and confrontation. It differs from arbitration where the solution is based on a decision of a third party, while arrangements resulting from collective bargaining usually represent the choice or compromise of the parties themselves. Arbitration may displease one party because it usually involves a win/lose situation, and sometimes it may even displease both parties.

Second, collective bargaining agreements often institutionalize settlement through dialogue. For instance, a collective agreement may provide for methods by which disputes between the parties will be settled. In that event the parties know beforehand that if they are indisagreement there is an agreed method by which such disagreement may be resolved.

Third, collective bargaining is a form of participation. Both parties participate in deciding what proportion of the 'cake' is to be shared by the parties entitled to a share. It is a form ofparticipation also because it involves a sharing of rule-making power between employers andunions in areas which in earlier times were regarded as management prerogatives, e.g. transfer,promotion, redundancy, discipline, modernisation, production norms. However, in somecountries such as Singapore and Malaysia, transfers, promotions, retrenchments, lay-offs andwork assignments are excluded by law from the scope of collective bargaining.

Fourth, collective bargaining agreements sometimes renounce or limit the settlement ofdisputes through trade union action. Such agreements have the effect of guaranteeing industrialpeace for the duration of the agreements, either generally or more usually on matters coveredby the agreement.

Fifth, collective bargaining is an essential feature in the concept of social partnership towards which labour relations should strive. Social partnership in this context may be described as a partnership between organised employer institutions and organised labour institutions designed to maintain non-confrontational processes in the settlement of disputes which may arisebetween employers and employees.

Sixth, collective bargaining has valuable by-products relevant to the relationship between the two parties. For instance, a long course of successful and bona fide dealings leads to thegeneration of trust. It contributes towards mutual understanding by establishing a continuingrelationship. The process, once the relationship of trust and understanding has been established,creates an attitude of attacking problems together rather than each other.

Seventh, in societies where there is a multiplicity of unions and shifting union loyalties,collective bargaining and consequent agreements tend to stabilise union membership. Forinstance, where there is a collective agreement employees are less likely to change unionaffiliations frequently. This is of value also to employers who are faced with constant changesin union membership and consequent inter-union rivalries resulting in more disputes in theworkplace than otherwise.

Eighth - perhaps most important of all - collective bargaining usually has the effect of

improving industrial relations. This improvement can be at different levels. The continuingdialogue tends to improve relations at the workplace level between workers and the union onthe one hand and the employer on the other. It also establishes a productive relationshipbetween the union and the employers' organization where the latter is involved in thenegotiation process.

CURRENT TRENDS IN COLLECTIVE BARGAININGColective bargaining may take place at the national, industry or enterprise level. In no

country does it take place exclusively at one level only. However, in many industrialized countries, especially in Europe, the existence of strong employers' organizations and trade unions have resulted in many important agreements being concluded at the national or industry level,supplemented by some enterprise level bargaining. In the USA, however, bargaining at theenterprise level has been the more usual practice, other than in specific sectors such as coal,steel, trucking and construction. In Japan national level bargaining has been the exception, andit has been supplemented by a substantial amount of enterprise level bargaining, facilitatedpartly by union structures which are enterprise-based. In many Asian countries relatively lowrates of unionisation have militated against national and industry level bargaining, andenterprise level bargaining has been more common. This accounts for the relative noninvolvement of some Asian employers' organizations in collective bargaining. Japaneseemployers and workers have demonstrated how a combination of enterprise level bargainingand shop floor mechanisms (such as joint consultation) enables the parties to take into accountspecific enterprise conditions and also to increase productivity.

The tendency during the last decade - and especially in the 1990s - even among industrialized countries with a highly centralised bargaining system, is towards enterprise level bargaining. This is true of even a country like Sweden with a strong employers' organization, a strong trade union movement, and a previous tradition of centralized bargaining. In the 1990s the avowed policy of the Swedish Employers' Confederation has been to move negotiation to the enterprise level. Decline in union membership and an increase in corporate power in Europe have contributed to this trend. But most importantly, restructuring of enterprises flowing fromintense competition has created the need to focus on enterprise level issues such as flexibleworking time, removal of narrow job classifications, new work organization, promotion ofmore worker involvement scemes and decentralised decision-making. Many employers viewcentralised bargaining as facilitating more equal distribution of incomes, but deprivingemployers of the ability to use pay as an instrument for productivity enhancement and tocompensate for skills and performance. The push by employers for flexibility in the context ofincreasing global competition has raised many issues which are more appropriately dealt withat the enterprise level. Some of the many concerns of employers such as productivity andquality, performance, and skills development to retain or gain competitive edge and to makerapid changes to adapt to the global marketplace, are likely to increase the movement towardsmore enterprise level negotation.

ISSUES OF CONCERN FOR EMPLOYERS

ADDRESSING PRODUCTIVITY AND EFFICIENCY ISSUESHistorically, collective bargaining has addressed equity issues from the point of view of

employees - issues such as a fair wage, working conditions and the equal distribution of wageincreases to all. Until recently, considerations of efficiency important to productivity wereeither not addressed, or were accorded relatively little importance. Increasingly employers wishto utilize the collective bargaining process to effect workplace changes in the interests ofcompetitiveness. Hence the view of employers that the process should address not only howthe gains of improved performance should be shared, but also how to increase the productivity'cake' so to speak, This is the only way in which regular pay increases can be absorbed withouteroding profitability and jeopardising competitiveness.

However, collective bargaining is relatively more conflictual than some other forms ofnegotiation and consultation. Therefore, to reduce the conflictual issues it is more effective foremployers and their employees to establish joint consultation mechanisms to achieve anunderstanding on how to increase the productivity 'cake'. In that event, in collective bargainingthe areas of dispute would be narrowed, and both parties would be likely to share a commonview about the issues and even arrive at a basic agreement on them. In this connection the jointconsultation system in the larger Japanese enterprises which fulfil this function is worth noting.

Collective bargaining in Japan results from constitutional guarantees, the Trade Union Act, the obligation to bargain in good faith and the right to strike. Joint consultation, on the other hand, is a voluntary system which is an outcome of arrangements between the parties based on the mutual acceptance of the need to avoid conflict through strikes or other similar actions. Jointconsultation schemes have been the corner-stone of information sharing between managementand labour and of labour-management cooperation in Japan where "unions and employers .... have long been aware of the importance of information sharing in an industrial relations system ... after bitter and protracted strikes in the forties and early fifties, both management and labourmade concerted efforts to restore industrial peace and to develop a stable industrial relations system ... these efforts led to the development of key aspects of the modern Japanese industrial relations system, including the joint consultation, a corner-stone of labour-management information sharing."

Japanese joint consultation systems had their origins in the 1950s when it was promoted by the Japan Productivity Centre. It is estimated that by 1990 about 84 per cent of unionizedenterprises had set up joint consultation schemes, and 44 per cent of the non-unionized oneshad joint consultation arrangements. These mechanisms, which are an aspect of two-waycommunication, deal with a variety of issues. In both unionized and non-unionizedestablishments the most common subjects which come within consultation are workingconditions, working hours, leave, safety and health, welfare and cultural activities, bonus,pension and retirement payments, work scheduling, education and training, recruitment,transfers, lay off, job assignment. There are also a range of management issues which fallwithin joint consultation, but on these matters management merely provides information andexplanations. These management issues include business plans and policies, introduction ofnew technology, organizational changes and production and sales plans. Many establishmentshave two levels of communication. Quality circles and shopfloor committees represent themechanisms at the shopfloor level, and joint consultation committees represent the mechanisms

at the corporate level. These committees supplement collective bargaining in the sense thatthey provide the forum for information-sharing prior to wage negotiations.

In Japan the frequency of joint consultations varies. But on an average in unionized firms there may be 15 meetings and in non-unionized firms about 8 per year. Research suggests thatinformation sharing through the joint consultation system has had a positive effect onprofitability, labour productivity and on reducing labour costs, especially in the manufacturingsector (ibid.). Recent evidence suggests that the larger American corporations "share morebusiness and financial information with their unions and employees than is required by law,and that information sharing within the non-union sector - where the statutory requirement forinformation disclosure is much less stringent - is as extensive as in the union sector”.

In Japan different views on the effectiveness of joint consultation exist in relation to unionized and non-unionized firms. About 75 per cent of unionized firms find joint consultation effective, while less than 50 per cent of non-unionized firms find it so. (Shozo Inoue "Building Better Industrial Relations: The Japanese Experience" in Report of the ILO/Japan Workshop for Asia- Pacific Employers' Organizations on Sound Labour Relations Practices, Singapore, 2-6 March 1992: ILO, Bangkok 33 at 40). According to Shozo Inoue (ibid.): "Effective areas of JC among the unionized establishments are: improved communication between the management and the union (78 per cent), followedby more smooth business operation, and improved work environments.

Improving job satisfaction and increasing interest in management did not score high points. In contrast, the non-union establishments report that employees developed greater interest in management (45 per cent), followed by improved business operation, communication and job satisfaction."

One of the significant characteristics of joint consultation in Japan is that collective bargaining and joint consultation serve different objectives and are therefore not in conflict with each other. Bargainable issues are dealt with under collective bargaining and non-bargainable ones under joint consultation. If during joint consultation some issues become bargainable (which could happen in relation to matters on which it is not clear whether they are bargainable ones or not), they will be transferred to the collective bargaining forum. It is also an importantcharacertistic of the joint consultation system that it does not handle individual grievances,which are dealt with under grievance handling procedures.

Joint consultation has made a significant contribution to enterprise level labour relations by creating mutual understanding on a range of management issues which impinge on the lives of employees. This in turn has had an effect on collective bargaining, which tends to take place in an atmosphere in which workers have been informed of management objectives, so that theareas for misunderstanding and conflict are considerably reduced. In effect, therefore, collective bargaining takes place from a point at which some degree of common objectives have been agreed upon. Since information on wage criteria is also shared, differences in wage negotiations (which in most countries are highly contentious) are narrowed, facilitating acceptable compromises and negotiations without disputes. Joint consultation has motivated employers and employees to generate gains and to share them for their mutual benefit.

In essence, joint consultation has become the means through which information is shared,mutual understanding is promoted, participation in arriving at decisions is facilitated, andworking conditions are negotiated. As such, it is an essential component of Japanese enterprise

level labour relations. The enterprise level union system significantly contributes to theworkability and effectiveness of the joint consultation system.

CRITERIA FOR WAGE INCREASESTraditionally, the factors or criteria which have influenced pay increases through collective

bargaining include enterprise profit, job evaluation, seniority, cost of living, manpowershortage or surplus, the negotiating strength and skills of the parties. Performance measuressuch as productivity or profit related to groups or individuals have not featured prominently incollective bargaining. Further, though wage rates negotiated through collective bargaining doreflect wage differentials based on skills, such differentials have not been geared to theencouragement of skills acquisition and application. Therefore a major concern for employersis the need to negotiate pay systems which are

• strategic in the sense that they achieve strategic objectives• flexible in the sense that their variable component can absorb downturns in business

and reduce labour costs• oriented towards better pderformance in terms of productivity, quality, profit or

whatever performance criteria are agreed upon• capable of enhancing earnings of employees through improved performance• capable of reducing the incidence of redundancies during times of recession or poor

enterprise performance through the flexible component of pay• able to reward good performance without increasing labour costs as a part of total costs

through enhanced productivity• able to attract and retain competent staff• able overall to control or stabilize labour costs.

These obectives have come to the forefront, particularly due to pressures flowing fromgloablization.

Therefore wage increases through collective bargaining need to be based on a wider range of criteria than has traditionally been the case. Otherwise once collective bargaining is over, the employer may be left without the financial capacity to adjust pay based on group or individual performance, as well as on skills acquisition and application.

LEVELS OF BARGAININGOriginally collective bargaining at the national or the industry level was viewed by

employers as a means of reducing competition based on labour costs through standardized wage rates.

Employers no longer view collective bargaining from this perspective. Instead, centralized and industry level negotiation is considered as depriving enterprises of the needed flexibility to compete on the basis of adjustments at the level of the enterprise in relation to pay, working hours and conditions, work organization, manpower utilization and so on. The efficiency gains are considerably greater - and more easily realizable - when negotiations take place at the enterprise level. Therefore, the major thrust in all countries where the pattern hitherto was national or industry level bargaining, towards increased enterprise-level bargaining, has been by employers. Not all unions favour this trend; their power position can be automatically

eroded by this trend, just as it is enhanced through centralized or industry level bargaining.

RECOGNITION CRITERIAEven where there is a single union structure, there should be recognition criteria applicable

to the union for collective bargaining purposes. The union should be representative of a minimum percentage of employees, as the employer cannot reasonably be expected to conclude an agreement with a union which is not representative.

The need for recognition criteria is all the greater where there is union multiplicity. In countries with union multiplicity and rivalry, recognition disputes have been a cause of major disputes, and practical problems often arise. One is the issue of the continued applicability of anagreement to workers who subsequently leave the negotiating union and join another union.

Another issue relates to the status of a collective agreement where, during the duration of the agreement, the union loses its membership and is replaced by another union in the workplace.

Employers expect the legal framework to provide for such issues, so as to overcomeuncertainty and avoid disputes.

EXTENSION OF AGREEMENTSThe principle of extension of collective agreements to cover employers and employees not

parties to, or covered by, such agreements, is embodied in some labour law systems. The issue can arise only where negotiations are above the level of the enterprise, but can nevertheless be undesirable from several points of view.

First, extension of collective agreements deprives an employer of the opportunity he would have had, had he been a party to the negotiations, to take account of workplace conditions and needs. This is particularly important at a time when enterprise level bargaining is the trend.

Second, it is inconsistent to speak of voluntary collective bargaining on the one hand andprovide for involuntary coverage on the other. An extension of coverage should occur, if at all,only where both parties agree to it.

Third, extensions are impractical - and can be harmful - in countries with large regionaldisparities.

DISPUTES ARISING OUT OF AGREEMENTSEmployers expect disputes connected with collective agreements, whether they relate to

interpretation or non-observance, to be settled in accordance with procedures agreed to andcontained in the agreement, or through other machinery with conciliation as a first step.

PRE-NEGOTIATION PREPARATIONS

OBJECTIVESA party wishing to arrive at a satisfactory conclusion or arrangement through collective

bargaining should first identify the objectives of the exercise. Some objectives common toemployers are the following:

i. Ensuring that the enterprise is not rendered uncompetitive

ii. The need to keep wage increases below the level of productivity increases and/or within the inflation rate.

iii. Guarantees of industrial peace during the period of operation of the agreementAs far as possible managers should be consulted in determining objectives; their priorities

should be solicited, and they should be aware of the company's views in regard to objectives sothat they could be tested against the managers' views.

It is insufficient to merely determine objectives. A tentative plan to achieve these objectives, which can be modified during the course of the negotiations, could be formulated. Such a plan should include the company's requests to the union. For instance, work reorganization to increase productivity to absorb the cost increases consequent upon collective bargaining may form part of the company's plan. Negotiations on the union's demands are generally an ideal setting in which management can achieve some of its objectives through agreement. In order to achieve this, the management must be clear about its own priorities. If there is an existing collective agreement, it would be a useful starting point. An analysis should be made of how it has worked, its unsatisfactory features from the company's point of view should be identified, and the changes necessary determined.

NEGOTIATING TEAMThe negotiating team, and the respective roles of the members, should be determined

before the negotiations. Employers would find it useful to include in the team people from different disciplines.

RESEARCH AND STUDYThe union's demands should be carefully studied. The following are some of the matters to

which attention should be paid:a. Assess the economic impact of the demands on the company.b. Make a comparative study, e.g. in a wage demand one should ascertain comparative

wage rates in the industry and in allied or similar businesses, the minimum wage, if any, and the rates applicable in other collective agreements.

c. Separate the demands which the company has no intention of fulfilling or giving, eitheron a question of principle or due to economic incapacity.

d. Prepare the company's position in regard to the other demands, e.g. the conditions onwhich the company may be prepared to grant them or compromise on them.

e. Identify the demands which may be of crucial importance to the union or to theemployees as the case may be. This is crucial to success in negotiations because, without a proper assessment of such demands, a negotiated settlement may not result or, if one results, it may lack durability because it has not addressed the main problems.

The issues which may be of crucial importance may not be the same in the case of both(union and employees) as they may have differing interests. Having identified the crucial demands the company should formulate its strategy in relation to them e.g. the possibility of trading some of the company's demands in return for the union's demands.

RESPONDING TO THE UNION'S REQUESTS

It is a matter of assessment in each situation as to whether the management should make an initial response in writing to the union before negotiations commence.

Usually it is desirable that written positions stated before negotiations commence should not contain a flat or blanket refusal. At this stage it is preferable to couch a refusal in languagewhich does not give the impression of an out-of-hand rejection or a rejection without consideration of the merits. Negative answers may sometimes be better given during thenegotiations because it affords greater opportunities for explanations of the reasons for thenegative answers. A rejection during negotiations would more likely give the impression to theunion and employees that such rejection was made only after negotiations and not before. It isalways useful from the point of view of reaching agreement on other matters to first listen tothe reasons adduced by the union for a demand which the company does not propose to accept.A rejection during negotiations also enables the employer to convince a union of at least someof the reasons why the demand is not acceptable. It also prevents a union from resorting totrade union action on the issue of a refusal to negotiate, as distinct from rejection of thedemands after negotiation.

INVENTING OPTIONS.Since negotiations may not proceed or take place in the way a party may plan, a party

should be able to provide alternative options to what he, or the other party, expects. For example, if it transpires that the wage increase sought is not acceptable, the employer should be preparedwith alternatives to cushion the impact of an increase in excess of what it had planned to agreeto.

STRATEGYA party to collective bargaining negotiations has to formulate a strategy for all stages of the

negotiation, including the pre-negotiation stage. Before negotiations commence, the strategyshould include matters such as;

a. options as referred to aboveb. how much to offer while leaving room for further negotiation if the offer fails. The

offer should be sufficiently attractive so as not to lead to a breakdown in negotiations.c. how to link one's requirements to the concessions one makes.

THE NEGOTIATIONS

PRINCIPLED NEGOTIATIONThe broad principles on which negotiations should be conducted are outlined in the Paper

entitled "Principles of Negotiation". This section will therefore underline some other matters towhich attention should be paid.

WHO COMMENCESThere is no inflexible rule as to who should open the negotiations. However, it is not

unreasonable for the management to claim that if the union has initiated the negotiations, itshould first outline its rationale and justification for doing so. Nevertheless, the management

should make it clear at the outset that agreement on any particular issue is subject to an overallsettlement, including its own expectations from the union.

MANAGEMENT'S REACTIONSIn outlining the employer's response, the following could be included:i. The context in which the employer is negotiating, such as the business environment,

and how this affects the employer's position in the negotiations.ii. A judgement will have to be made about the stage at which the union should be

informed about the items on which the employer will not make any concession.However, the impression should not be created that the union will not be allowed an

opportunity to present its case.iii. The basis on which the employer is prepared to negotiate. This could include the

employer's objectives and expectations from a collective agreement, and anyunsatisfactory features in the existing agreement (if there is one) which require to berectified.

INTERNAL COMMUNICATIONDuring the negotiations there should be good internal communication between the

company and its managers about the situation at any given time. This will help clarify misunderstandings and even eliminate disinformation especially where employees, as happens in developing countries, seek information or clarification from their managers.

NOTES OF DISCUSSIONNotes of the discussion should be maintained, and preferably issued and agreed on with the

other party, to avoid misunderstandings. Such notes could be useful in the event of disputesand a breakdown in negotiations.

STYLES OF NEGOTIATIONIt is an essential principle of negotiation - indeed of human relations - that one's style of

negotiation may need to be adapted to the style of the other party. The negotiator who adoptsonly one approach to negotiations may be puzzled when he finds that the approach in questionbears fruit in some cases but causes an adverse reaction in other cases. The ability to allow theattitudes of the other party or the facts or merits of the issue to fashion one's own particularstyle in a given negotiation requires a high degree of flexibility on the part of the negotiator, anabsence of a pre-conceived approach to negotiation, and recognition of the fact that unltimatelywhat matters is one's ability to secure one's objectives through dialogue. However, this shouldnot be understood to mean that there should not be a principled approach to negotiation. Whatit means is that often one has to take into account even the idiosyncracies of the other party andassess what form of presentation is likely to appeal best to the person whom one is trying toconvince.

SOME BASIC RULES IN COLLECTIVE BARGAINING NEGOTIATIONS

A negotiator should view negotiations as an exercise with both sides walking towards each other, rather than away from each other. This will enable the negotiator to keep in mind that the final objective is a satisfactory agreement. It will also lead to a search for, or identification of,common ground while also addressing the differences.

A negotiator should be good at listening carefully to the other party who will, otherwise, feel that disagreement with his position is due to a lack of understanding. This is also necessary to encourage the other party to listen to you. Some indication should be given to suggest that theparty has understood the other's position. Body language often communicates a party'sreactions.

A party should build its case in a logical sequence and, as far as possible, try to obtainagreement at each stage of the process. This will narrow the areas of disagreement andfacilitate focusing on those aspects.

Counter proposals and conditions attached to concessions should be indicated as early aspossible, so that the basis on which a party is prepared to agree or compromise is understood.Whenever possible, invite the other party to look at the problem from the opposite perspective,e.g. a wage increase as an additional cost which, due to competitive pressures, requiresmanagement to find ways to absorb it. It is sometimes useful to ask the union for suggestionson how it can cooperate to facilitate absorption of the increase.

It is usually preferable to avoid taking up at the outset the position that a particular item is not negotiable. It is more productive to request a party to justify its claim, and then point out whythat claim is unreasonable. Taking up a non-negotiable position can lead to the preception thatthe position has nothing to do with the merits and that the party is not willing to listen.

Skillful questioning is an effective way of compelling the other party to justify its claim on the merits, and even shifting the other party to a different point of view.

THE AGREEMENTWhen agreement is reached one of the following two courses may be adopted:i. Set out the agreement reached in a letter to the union and, on confirmation, prepare a

draft agreement.ii. Alternatively provide the union with a draft agreement. This would be the better course

of action as the actual agreement reached will be clearer. It also leaves less room forfurther negotiations between the time agreement is reached and the draft agreement isapproved.

Before the agreement is signed, the proper interpretation of clauses which have the potential to result in problems of interpretation should be agreed upon through, for example, an exchange of letters. Where there are understandings which affect the interpretation of the agreement, they should be reduced to writing (e.g. in a letter) before the agreement is signed. But wherever possible, the agreement should be self-contained, inclusive of definitions or interpretations.

The contents of the agreement would depend on what is agreed upon and on the subject matter.The following examples are of some general application:

i. The date of commencement of the agreement

ii. Its duration - when it will terminate or may be terminated, and how it can be terminatediii. A definition of terms which may otherwise be ambiguousiv. The procedure for settling disputes regarding interpretation, as well as other disputes.

This may also include the issue of trade union action and lock-out, i.e. in what circumstances such action may or may not be permitted.

v. The consequences in the event of breaches of the agreementvi. As regards wages, exactly how conversion of employees' wages to the new scales is to

be effected.The signing of an agreement does not ensure its successful implementation. Managers and

supervisors should be acquainted with the agreement through the most appropriate means. Acombination of written and oral communication is often useful.

TYPES OF COLLECTIVE BARGAINING:

CONJUNCTIVE/DISTRIBUTIVE BARGAINING:Distributive bargaining is the most common type of bargaining & involves zero sum

negotiations, in other words, one side win and other side loses.Both parties try to maximize their respective gains. They try to settle economic isues uch as

wages, benefits, bonus etc.For example, unions negotiate for maximum wages & the management wants to yield as

little as possible, while getting things done through workers.In distributive bargaining, unions and management have initial offers or demands, target

points (eg : desired wage level), resisyance points(unacceptable wage levels) & settlement ranges (eg : acceptable wage level). Another type for this type of bargaining is conjunctive bargaining.

COOPERATIVE / INTEGRATIVE BARGAINING ;Integrative bargaining is similar to problem solving sessions in which both sides are trying

to reach a mutually beneficial alternative, i.e, a win to win situation. Here both the employer & the union try to resolve the conflict to the benefit of both parties. Both sides share information about their interests and concerns and they create a list of possible solutions to best meet everyone’s needs. For eg ; when companies are hit by recession, they cannot offer kind of wages and benefits demanded by workers. At the same time they cannot survive without the latter’s support. Both parties realize the importance of surviving in such difficult times and are willing to negotiate the terms of employment in a flexible way.

PRODUCTIVITY BARGAINING :He concept of productivity bargain involves a good understanding of the following concepts.

Based on these concept both the parties must develop a productivity linked scheme.

COMPOSITE BARGAININGworkers believed that productivity bargaining agreements increased heir workloads. Rationalization, tight productivity norms have added to this burden and made the life of a

worker somewhat uneasy. As an answer to such problems, labor has come in favor of composite

bargaining. In this method, labor bargains for wages as usual, but goes a step further demanding equity in matters relating to work norms, employment levels, manning standards, environmental hazards, sub-contracting clauses etc., when unions negotiate standards they ensure the workload of workers don’t exceed.

CONCESSIONARY BARGAINING ;Quite opposite to the other forms of bargaining, where the unions demanded from the

employers, in concessionary bargaining, the objective is to giving back to management some the what it has gained in previous bargaining.

Why should labor be willing to give back what it has worked so hard to obtain? In some cases, despite a financial crisis, the union may not be willing to concede. This may be because the union doesn’t view management’s arguments as credible., the degree of trust and credibility between the management and the union may influence the extent to which concessionary bargaining occurs.

2. Discuss the wage policy in India with reference to detailed evaluation of the act.The wage and employment policies relating to the unorganised workers and in particular

the issue of minimum wages paid to them has been a subject of considerable discussion among union leaders and labour experts in India. While minimum wage legislation has to a large extent been effective in providing protection to workers in the organised sector, with periodic revision, this has not been the case with the unorganised workers, who largely remain outside the purview of minimum wage legislation. The paper highlights the issues and concerns relating to Minimum Wage Act, 1948 in India.

MINIMUM WAGES IN INDIA

The Indian economy is characterised by a dualism, i.e., the existence of comparatively well organised sector along with the decentralised sector with a large population which is self-employed. According to reports, 422.6 (94%) million workers out of the total workforce of 457.5 million belong to the unorganised/informal sector in India. These workers contribute to more than 60 per cent to India’s GDP growth.

The Constitution of India envisages a just and humane society and accordingly gives place to the concept of living wage in the chapter on Directive Principles of State Policy. The Minimum Wages Act, 1948 is based on Article 43 of the Constitution of India which states that, "The State shall endeavour to secure by suitable legislation or economic organisation or in any other way to all workers, agricultural, industrial or otherwise, work, a living wage (emphasis added) conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities".

The term 'Labour' is included in the 'concurrent list' of the Constitution which provides for labour legislation both by the central and the state governments. Labour laws for most workers in the informal sector are enforced by the state governments, while that for contractors and casual workers in establishments is regulated by the central government. All labour laws enacted by the central government directly or indirectly influence wage level and structure of wages in the

informal sector. Minimum wage legislation is the main labour legislation for the workers in unorganized

sector. In India, the policy on wage determination had been to fix minimum wages in sweating employments and to promote fair wage agreements in the more organised industries. Wages in the organised sector are determined through negotiations and settlements between employer and employees. On the other hand, in unorganised sector, where labour is vulnerable to exploitation due to illiteracy and does not have effective bargaining power, the intervention of the government becomes necessary.

The Minimum Wage Act, 1948 provides for fixation and enforcement of minimum wages in respect of schedule employments to prevent sweating or exploitation of labour through payment of low wages. The objective of the Act is to ensure a minimum subsistence wage for workers. The Act requires the appropriate government to fix minimum rates of wages in respect of employment specified in the schedule and review and revise the minimum rates of wages at intervals not exceeding five years. Once a minimum wage is fixed according to the provisions of the Act, it is not open to the employer to plead his inability to pay the said wages to his employees.

The minimum wage rate may be fixed at a) time rate, b) piece rate, c) guaranteed time rate and d) overtime rate. The Act provides that different minimum wage rate may be fixed for a) different scheduled employments, b) different works in the same employment, c) adult, adolescent and children, d) different locations or e) male and female. Also, such minimum wage may be fixed by a) an hour, b) day, c) month, or d) any other period as may be prescribed by the notified authority.

In order to protect the minimum wages against inflation, the concept of linking it to the rise in the consumer price index was recommended at the labour ministers' conference in 1988. Since then, the concept of Variable Dearness Allowance (VDA)linked to consumer price index has been introduced. The VDA is revised twice a year in April and October. While the Centre has already made provision in respect of all scheduled employments in the central sphere, 22 states and Union Territories have adopted VDA as a component of minimum wage.

NORMS FOR FIXING MINIMUM WAGESThe fixation of minimum wage in India, depends upon various factors like socio-economic

and agro-climatic conditions, prices of essential commodities, paying capacity and the local factors influencing the wage rate. It is for this reason that the minimum wages vary across the country.

In the absence of any criteria stipulated for fixing the minimum wage in the Minimum Wages Act, the Indian Labour Conference in 1957 had said that the following norms should be taken into account while fixing the minimum wage. The norms for fixing minimum wage rate are (a) three consumption units per earner, (b) minimum food requirement of 2700 calories per average Indian adult, (c) cloth requirement of 72 yards per annum per family, (d) rent corresponding to the minimum area provided under the government's Industrial Housing Scheme and (e) fuel, lighting and other miscellaneous items of expenditure to constitute 20 per cent of the total minimum wage (f) Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total Minimum Wages, (g) children education, medical requirement, minimum recreation including festivals/ceremonies and provision for old age, marriage etc. should further

constitute 25% of the total minimum wage. In September 2007, the national minimum floor level wage was increased to Rs 80 per day for all scheduled employments from Rs 66 in 2004 to Rs. 45 in 1999, Rs. 40 in 1998 and Rs. 35 in 1996.

ISSUES IN WAGE POLICYMinimum wages are expected to cover the essential current costs of accommodation, food

and clothing of a small family. The Minimum Wage Act, while being very progressive has led to specific problems. Doubts have been raised on the existence of a clear and coherent wage policy in India particularly in unorganized sector. This is mainly due to its poor norms of fixation, enforcement, implementation and coverage in various parts of the country. Some of the issues and concerns faced in India regarding minimum wages are summarized below:

A. NORMS FOR FIXING MINIM WAGESThe Act does not set out a minimum wage in rupee terms, but just stipulates that the wage

be a living wage which is to be decided by labour department in each state. Certain norms have been laid out including that of calorie requirements, yards of cloth per family and so on. The Act also stipulates that minimum wage rates are to be revised keeping in mind inflation. Additionally, the guidelines laid down for the minimum wage by the 15th Indian Labour Conference (ILC) and the Supreme Court suggest that a minimum wage for 8 hours of work should be high enough to cover all the basic needs of the worker, his/her spouse and two children. However, in many states while fixing the minimum wages, they are not linked to the payment of dearness allowance. As a result, real wages of workers keep eroding due to inflation, pushing them below the poverty line.

Another inadequacy is that though the MWA requires wages to be revised every five years, this rarely happens. The MWA also has a clause which states that if wages are not revised, the existing wages should continue. Such an arrangement has only led to greater laziness and unaccountability on the part of state labour departments, leaving some workers to live below poverty line. Further to overcome these inadequacies, the National Commission on Rural Labour in 1990, recommended that the MWA should be amended to compel timely revision of wages and it should be linked to VDA. It should also ensure enhancement of wages every six months on the basis of the Consumer Price Index. How far the amendment has been implemented in states is unknown. (For example, states like Rajasthan, Orissa etc. do not have provision for VDA).

Different wages are fixed for the same work in different sectors. For instance, a watchman in the shop or commercial establishment may be fixed higher or lower wages than a watchman in the plastic industry or in a construction or maintenance of roads or building operations, though a watchman’s job will be the same wherever he may work. To overcome these deficiencies, several states like Himachal Pradesh, West Bangal, Andhra Pradesh, etc., have rationalised all the different occupation categories into just four categories - unskilled, semi-skilled, skilled and highly-skilled. As per this system, only one notification is applicable to all industries, rather than the time-consuming system of notifying wages individually for various industries. Though the system gives a clear and detailed information of minimum wages, it has not been adopted by all states, including the Indian Labour Ministry website, which gives the minimum rate of wage (that is wages for unskilled workers) for each occupation.

B. COVERAGEIn order to have minimum wage fixed, the employment or industrial activity has to be

included in the schedule of Employments. Currently the number of scheduled employments in the Central government is 45 whereas in the state sphere the number is 1232. The criterion for inclusion in the list of scheduled employment is that there should be at least 1000 workers engaged in that activity in the state. Thus, many activities are excluded from the list. This criterion for inclusion has left a very large number of workers in the unorganised sector outside the purview of the Minimum Wage Act.

C. IMPLEMENTATIONThe main problem of minimum wage legislation in India is its poor implementation. The Act

empowers the appropriate government (Central, Sate or Local) to fix a minimum wage for workers in unorganised sectors. However, often exemptions from the payment of minimum wages have been granted to industries. In addition, minimum wage levels have been revised only at long intervals (where the actual prescribed limit is within 5 years). Such a failure in implementation of MWA is not only due to loopholes in policy design but is also an outcome of lapses in the administration.

Poor implementation of MWA does not affect organised workers as much as it does to workers in unorganized sectors. Unorganised workers are employed with millions of employers (generally small trade, enterprise, sole proprietor or household) who are scattered and hence becomes difficult to cover them under law. This diversity in locations and nature of work has left them vulnerable to exploitation in the absence of a broad legal standard. Also, many workers for the fear of losing their jobs do not report about payments lower than the minimum wage rate. At times, these workers are even forced by their employers to certify payments below minimum wages.

D. ENFORCEMENTPoor enforcement of the Act is another issue prevalent in most of the states in India. The

issue arises mainly due to lack of awareness amongst the workers about minimum wage provisions and their entitlement under the labour laws. Surveys have shown that almost 80 per cent of the workers in unorganized sector earn less than 20 rupees a day, or less than half the government-stipulated rural minimum wage of 49 rupees a day and urban wage of 67 rupees. This is particularly true in remote areas and in areas where workers are not unionized or otherwise organised. As a result their wages have long since failed to keep pace with rising costs and continue to diminish in real value over time.

NEED FOR MEANINGFUL MINIMUM WAGE POLICYIn spite of vast number of workers in unorganized sector, and their substantial contribution

to the national economy, they are amongst the poorest sections of India’s population. It is therefore imperative that urgent steps are taken to improve their condition. Infrequent revisions and inadequate cost of living adjustments have been a marked feature of minimum wages in India. The rates of minimum wages so fixed in few states, is not enough even for two times meal in a day, leave aside the needs of health, education and shelter. In specific terms, the issues and problems of the

wage policy in both organised and unorganised sector, relate to the elements like need based minimum wage, protection of the real wages through compensation for rise in the cost of living, incentives for increases in productivity, allowances for hazards of occupation, wage differentials for skills, etc.

The main objective to be considered while fixing or revising the minimum wage rate should be two fold - 1) Social objective: that is, by providing sufficient purchasing power to the worker, enable him/her to have a basic standard of living. In long run such a step would help in abolishing labour exploitation and poverty. 2) Economic objective: The rate of minimum wage should be fixed at such a level which would motivate workers and enable them to enjoy the benefits of economic growth, and thereby contribute to the economy. For example, the Sixth Central Pay Commission (CPC) has fixed the minimum wage of Central Government employees at Rs 5740. The first four scales of pay suggested by the Fifth CPC for the Group D Employees of the government have now been removed, under the Sixth CPC. The existing employees in these grades are to be moved to Group C cadres through a process oftraining thereby indicating that the unskilled functions in the governmental sector would be contracted or outsourced.

Two major and recent initiatives for providing social security to the workers in the informal sector have been passed in the parliament; a) the National Rural Employment Guarantee (NREG) Act 2005 and, b) the Social Security for Unorganised (Informal) Sector Workers. The National Rural Employment Guarantee (NREG) Act 2005 is meant for the working poor in villages to take care of the problem of underemployment and thus to enhance their income that would make them less poor or cross the officially determined poverty line. It entitles adult citizens in rural areas to seek work up to 100 days per household per year. With the implementation of National Rural Employment Guarantee Scheme, hopes are raised for meeting basic needs of workers in unorganised sector, by earning minimum wages at least.

On the other hand, Social Security scheme covers health (hospitalisation for self and family) and maternity, life and disability and old age security in the form of state pension for those belonging to poor households and a provident fund for others. The scheme is based on contributions from workers, employers and government in the ratio of 1:1:1.

Minimum Wage legislation in India requires the active support of workers, trade unions, and labour associations. It would also require sincerity on part of the labour departments in each state to determine minimum wage rate on the basis of ethical and humanitarian concerns in order to ensure basic subsistence to workers in unorganized sectors. Implementation of government policies and legislations is the main problem in the unorganized sector. Also, low productivity in unorganised sectors, limitation of avenues for gainful employment, lack of organisation on the part of workers, affects their bargaining capacity, accounting for their vulnerable situation. Hence, involvement of non government organizations and trade unions can play an important role in better enforcement of minimum wages act. For example, Self Employed Women Association (SEWA) in Ahmedabad.

SEWA is the 7th largest trade union organisation in India working towards organising women workers (mainly in informal sector) for full employment, which means employment whereby workers obtain work security, income security, food security and social security (at least

health care, child care and shelter). SEWA has been organising workers in the dyeing, chemical and screen-printing industry, agarbatti rollers, ragpickers, street vendors, etc for many years now. Involvement of such organisations gives a voice to workers in unorganised sectors in collective bargaining. Ignorance and illiteracy are the main reasons for exploitation of workers in unorganized sectors. Trade unions and NGOs can help by making the workers aware of the legal provisions of the minimum wage rate and the benefits to which they are entitled.

Also, minimum wage data is not readily available. Only limited official data is available from national labour ministry website which may or may not be updated on regularly basis. The information available does not permit extensive comparison on wages in formal and informal sector due to different formats of reporting or recording of wage rate in each state. Minimum Wage Checker on Paycheck website provides the information on minimum wages in each Indian state. The minimum wage data collected from labour department in each state is uploaded on the website in a detailed format enabling inter-state comparison easy.

The need of the hour is not only to increase the basic rates of minimum wages but the basic approach towards the whole issue also needs to be changed. The prevailing system of minimum wages, instead of abolishing the poverty, is in fact increasing it. Initiatives like strengthening the enforcement machinery, simplifying the procedure relating to coverage and revisions of minimum wage rate, linking the rates with the Consumer Price Index Numbers (CPI), and increasing the involvement of various workers' organisations in the implementation of the Minimum Wages Act, are some of the steps advocated to improve the situation.

UNORGANISED SECTOR IN INDIAAccording to reports, 422.6 (94%) million workers out of the total workforce of 457.5

million belong to the unorganised sector in India. These workers contribute to more than 60 per cent to India’s GDP growth. The term ‘unorganised' is often used in the Indian context to refer to the vast numbers of women and men engaged in different forms of employment. These workers are engaged in unorganized economic activities in small scale industries, cottage industries, construction, manufacturing units, textile and garment, horticulture, agriculture, rural occupations, forest based employments, fisheries, sweeping-cleaning, loading-unloading, mining, forestry, service sector, entertainment, temporaries, home workers, domestic servants, time rated or piece rated, casuals, part time workers, own account workers, and contractual workers. Unorganised sector work is often characterised by low wages that are often insufficient to meet minimum living standards including nutrition, long working hours, hazardous working conditions, lack of basic services such as drinking water and sanitation at the worksite, etc.

In India, workers in informal sector are distinguished from the workers in formal sectors in the following way: a) in the organised sector activities are regulated by legislation, while that in unorganised sector are not well regulated and b) workers in the organised sector are covered under social security legislations, while they do not cover the unorganised sector. As a rule of thumb the demarcation line between organized and unorganized enterprises is at 10 employees.

Unorganised sector workers are mostly employed in rural jobs and are increasingly migrating to the cities. Being migrant and casual in nature, they often remain outside the purview of India's tough labour laws and the collective bargaining strength of the unions. Workers engaged in the unorganised sector do not have the benefit of several laws such as the Minimum Wages Act

or the Factories Act. They are also not covered by statutory welfare measures such as maternity benefits, provident fund, gratuity, etc.