HUMAN RESOURCE MANAGEMENT

EVOLUTION OF INDUSTRIAL RELATIONS IN INDIA

Submitted to

Prof. Sunil Kumar Singh

By Group 2 Manish Jain (111024) Rahul R (111039) Satwik Jena (111045) Sonu Roshan Ekka (111052) Swati Arora (111055)

On

March 9th, 2012

INDIAN INSTITUTE OF MANAGEMENT

Introduction
Industry relations describe the relationship between the employer and the employee. It outlines the interaction between the employee, employer and the government and the institutions through which such an interaction is mediated. The Industrial Relation relations also called as labor - management, employee-employers relations. Definition:i. Industrial Relation is that part of management which is concerned with the manpower of the enterprise whether machine operator, skilled worker or manager. BETHEL, SMITH & GROUP ii. Industrial Relation is a relation between employer and employees, employees and employees and employees and trade unions. - Industrial dispute Act 1947 iii. While moving from jungle of the definitions, here, Industrial Relation is viewed as the process by which people and their organizations interact at the place of work to establish the terms and conditions of employment. The various parties involved are government, employers, trade unions, union federations or associations, government bodies, labor courts, tribunals and other organizations which have direct or indirect impact on the industrial relations systems.

Objectives of Industrial Relations

To resolve industrial conflicts and maintain congenial relations among the workers and the management which is 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 ensure that the workers are paid equitably and strives to improve their economic status. To empower the workers and ensure that their voice is heard. To ensure that the workers have a say in the major decisions concerning them To establish and nurse the growth of an Industrial Democracy based on labor partnership in the sharing of profits and of managerial decisions To eliminate, as far as is possible and practicable, strikes, lockouts by providing reasonable wages, improved living and working conditions, said fringe benefits. Socializations or rationalization of industries by making the state itself a major employer

Functions of Industrial Relations

Scope of Industrial Relations is quite vast. The major issues are: 1. 2. 3. 4. 5. Collective bargaining Machinery for settlement of industrial disputes Standing orders Workers participation in management Unfair labor practices

Approaches to Industrial Relations

Unitary - In unitarism, the organization is perceived as a big happy family with all the members of the organization pursuing the same objective. They have each others best interest in mind and thus work together to achieve that one common goal. This makes the need for a union unnecessary. It is basically a paternalistic approach which demands loyalty from the employees. For the employees, unitarism implies flexible working hours, participation in decision making, empowerment of the employees and support from the management. For the management it means that all the policies must motivate, foster to secure loyalty and commitment, all the objectives of the organization being properly communicated to the employees.

Pluralistic - In pluralism the organization is perceived as being made up of powerful and divergent sub-groups - management and trade unions. This approach sees the conflicts and disputes arising between the management and the workers as something very natural and cant be avoided. There is a greater propensity for conflict rather than harmony. So this leads to the need for a trade union whose main purpose is to resolve the conflicts mainly by collective bargaining. Trade Unions are encouraged and representatives are given scope to carry out their respective representative activities. Sometimes outside arbitrators are used to assist in the resolution of conflicts. Marxist Marxist theory argues that weakness and contradiction inherent in the capitalist system would result in revolution and the ascendancy of socialism over capitalism. This will be marked by fall of monopolies, more focus on the welfare of the workers, wages that may improve the economic conditions of the workers. It is concerned with the structure and nature of society and assumes that the conflict in employment relationship is reflective of the structure of the society. Conflict is therefore seen as inevitable and trade unions are a natural response of workers to their exploitation by capital.

Importance of Industrial Relation

Uninterrupted production One of the most important features of industrial relations is that it ensures continuity in production. It even leads to workers working to the best of their capability and all the resources being fully utilized. It ensures smooth running of the industry. There is uninterrupted flow of income for all. Reduction in Industrial Disputes Good industrial relations ensure smooth functioning with least number of disputes. Even when there are disputes, they are solved using methods like collective bargaining, arbitration etc. High morale Good IR give high morale to the employees, making them feel a part of the organization and doing some meaningful work. It naturally affects production because mighty co-operative efforts alone can produce great results. Mental Revolution - The main object of industrial relation is a complete mental revolution of workers and employees. The industrial peace lies ultimately in a transformed outlook on the part of both. It is the business of leadership in the ranks of workers, employees and Government to work out a new relationship in consonance with a spirit of true democracy. Both should think themselves as partners of the industry and the role of workers in such a partnership should be recognized. On the other hand, workers must recognize employers authority. It will naturally have impact on production because they recognize the interest of each other. Reduced Wastage Good IR helps to increase production and reduces wastage.

Thus, it is evident that good industrial relations are the basis of higher production with minimum cost and higher profits. It also results in increased efficiency of workers. New and new projects may be introduced for the welfare of the workers and to promote the morale of the people at work. An economy organized for planned production and distribution, aiming at the realization of social justice and welfare of the massage can function effectively only in an

atmosphere of industrial peace. If the twin objectives of rapid national development and increased social justice are to be achieved, there must be harmonious relationship between management and labor.

Industrial Relation Acts

For the effective implementation and building the industrial relations, there are various acts. These acts are passed by the Legislation of India. THE EMPLOYEES PROVIDENT FUND ACT, 1952 The Government of India enacted the Provident Fund Act in the year 1925. The act basically encouraged the employers to launch schemes for their employees. After the Indian independence, the Employees Provident Funds and Miscellaneous Provision Act was passed on 4th March 1952. There are provisions regarding the salary scheme, pension scheme, insurance scheme etc. Mutual agreement with the employer and the employees will be there in almost all cases, especially in private firms. According to the law, every employer has to keep a file of an employer. The application has to be dually filled and signed. All documents are enclosed along with the application. The PF remittance has to be made on or before 15th of every month. THE PAYMENT OF GRATUITY ACT, 1972 Gratuity is a form of retirement benefit. It is similar to that of pension or provident fund. After serving the organization faithfully for a longer period of time, the employee is entitled to claim a certain amount of benefits. So gratuity is basically similar to a reward for his long and meritorious service. The act which was passed in the Parliament has been amended to keep up with times. The Act provides a compulsory gratuity payment for the persons in the events of retirement, resignation, disablement or death due to accidents, disease etc. The nominee will be receiving the gratuity amount if the employee dies. The employer has to arrange the gratuity within 30 days from the date it becomes payable to the person whom the gratuity is payable. PAYMENT OF BONUS ACT, 1965 This bill was passed by both the houses of parliament on 25th September 1965. According to the act, the employers receive a certain amount as bonus depending on the productivity and for the matters connected with it. The main objective of the act is to maintain peace and harmony between labor and capital by allowing the employees to share a part of the profit or prosperity of the firm, in recognition to the efforts put by them. The minimum criteria for getting the bonus are the employee has to work for minimum of 30 days and should have a minimum salary of Rs.3500. In most cases, there will be a minimum and maximum bonus. The employer has to give the bonus within 8 months of the accounting year or within one month from the date of enforcement of the award. This period may extend if there are any solid reasons.

THE EMPLOYEES STATE INSURANCE ACT, 1948 The objective of the Act is to provide for certain benefits to employees in case of sickness, maternity and employment injury and to make provision for certain other matters in relation there to. The act provides for these benefits through compulsory state insurance. These benefits are secured by financial contributions to the scheme both by employers and employees, central and state government grants, donations &gifts. The act is designed to provide cash benefits to the worker in distress or to his dependents in case of death. All persons employed for wages in or in connection with work of a factory or establishment are entitled to disablement benefit provided their remuneration does not exceed Rs.2, 500 per month. The dependents of workers who died as a result of any employment injury were paid compensation in the form of a pension. TRADE UNIONS ACT, 1926 Trade unions are present in almost all companies, especially manufacturing companies. These trade unions stand as the representatives of the labor force and as a medium to raise the concerns of the employee issues. The Trade Union Act provides the registration of the trade unions with a view of rendering lawful organization of labor to enable collective bargaining. The trade unions thereby will have some protection and privileges. The Act extends to the whole of India and applies to all kinds of unions of workers and associations of employers, which aim at regularizing labor management relations. Even though the act doesnt strictly talks about registered unions, it will be desirable to get the trade unions registered as it provides some rights and privileges. Also they will be able to get legal status. THE INDUSTRIAL DISPUTES ACT, 1947 There may be cases where disputes occur between the management and its employees. The main objective of the industrial disputes act is to bring peace between these two. It aims to prevent and settle industrial disputes between these two. It also tries to secure and preserve amity and good relations between employers and the workmen through internal works and committee. There will be also the involvement of external bodies such as labor courts, courts of inquiry, tribunals etc. The act also tries to prevent industrial strikes, spread harmony and ensure social justice. The ultimate objective is to achieve industrial progress and economic growth. THE FACTORIES ACT, 1948 The Act came to existence from the 1st April 1949. The act has provisions of approval, licensing and registration of factories. It also ensures the health and safety conditions of workers. The welfare of the employees is the main objective of the act. It also has the provisions regarding the wages, working hours, holidays and about annual leave with wages. The act also grants the State governments the power to grant permission for the location of the factories and if the factory is hazardous to human life.

IR in the three stages of its evolution

Industrial relation in India can be briefly explained through the three distinct phases of evolution: 1. First Phase: Middle of nineteenth century till the end of 1st world war 2. Second Phase: After 1st phase till Independence of India in 1947 3. Third Phase: After Independence of India Before starting with the evolution of Industrial relation lets have a look at the labor relation during the ancient period. During the ancient period the main occupation of India was agriculture, second was trading and third was manual labor. And all these formed the main occupation of India which evolved during the various stages of era. During the ancient period the majority of the states were ruled by Mughal emperors and because of which India was greatly advanced in the industrial field during that period also. During the Mughal period most of the government factories operated in Agra, Ahmedabad, Fatehpur and where the employees went for manual work and learnt the basic techniques and skills. During the dictatorial era of the Muslim ruler, the economic conditions of the workers/employees were very appalling. Laborers were forced to leave their homes on daily basis to work for the emperor or the government. There was no workers union or organizations during the Mughal period which could handle the issues of the workers difficulties. They were even paid wages in the form of old and tattered clothes and were treated very harshly by the emperor and his followers. Since the manual workers/laborers were paid very low and were tortured by the Mughal emperors, they felt the need of union so as to fight for their cause and wage. Only the most knowledgeable and responsible persons were allowed to be the part of the union. The union followed a very democratic principle of working which played an important role during the intervention of the government with the employees. From the ancient period till now Industrial relations situation in India has been continuously undergoing through rapid changes, coinciding with both liberalization and globalization in the country. There were basically three phases till date of employment and the Industrial relation evolution in the history of India. All these 3 phases led to rapid growth of unionization and forming organizations. First Phase: The first phase started in the middle of nineteenth century and ended after 1st world war. During this phase, the British administration in India was very much effective and because of which there was not much scope of industrialization in India. British government was mostly involved in enforcing hard rules for violating of contract and in adapting the situation of labor with a view of decreasing the competitive advantages of some native employers against the British government. So many rules & regulation and governmental measures were implemented during the second half of the nineteenth century, which resulted in the beginning of Industrial relation in India.

During the British rule many mining industries and Tata iron and steel industry came into existence but their growth was very slow and the employee-management relations was also not that encouraging. By the time when First World War was about to end a new labor policy came into picture and it created definite social, economic and political situation, which brought new hopes among people for a new and improved social balance. There was great intense among the laborers because the laborers were not being paid sufficiently and reasonably with the rising prices in the economy and according to their expectations. But the establishment of International Labor Relation (ILO) in 1919 had a great influence in the labor union and Industrial relations guidelines in India. The materialization of trade unions in India and particularly the development of All India Trade Union Congress (AITUC) act and many other trade union acts in 1920 was another significant occurrence in the history of industrial relations in India. Second Phase: During the second phase of Industrial Relation after the end First World War many new policies came with the aim of improving the working conditions and stipulation of social security profits for the workers. It was a start of new era which resulted as a period of growth for employers. Due to the growth of Industrialization there was a significant rise in the economy and because of which the profits starting going up. Even though there was rise in the economy there was not much difference in the wages of the laborers as it was not matching with the growth in the economy. And because of this indifference and economic injustice, it gave rise to various revolutions by the employees in the unorganized sector of the country which resulted in many strikes or lockouts. During this phase, as a result of Industrial Labor Relation influence, various laws and acts came into action such as the Trade Disputes Act (1917), Workmens Compensation Act (1923) and the Trade Unions Act (1926). During the Second World War there was more growth due to further industrialization and the employers started gaining more profits. And because of which the employees started demanding more share in them. They were not been given any rise in their wages due to the growth and profits but were granted bonus and dearness allowance as a compensation. For many years after the end of Second World War there was lot of disturbances among the employees from the point of view of the growing Industrial relations in the country. So to put an end to all these problems, in 1946 the Industrial Employment Act (Standing orders) and the Industrial Disputes Act in 1947 was implemented. Third Phase: Soon after the Independence in 1947, there was a growing need according to the welfare of the national economy, to put a stop to strikes or lockouts that interrupted in many production and industrial sites because it resulted in huge loses. And due to this a tripartite conference was, convened in 1947, at which the Industrial Truce Resolution was adopted, giving dominant importance to the maintenance of employee rights and Industrial peace. Many more acts were then passed and practiced in 1948 such as the Factories Act, Minimum Wages Act and the Employees State Insurance Act. After the independence, Industrial scenario was subjected to lot of confusion and perplexity and Industrial conflict along with the employees management relations was widespread everywhere. Due to this the emergence of government took place which acted

as a mediator between management and workers and helped them settle their disputes in a peaceful way. And this gave rise to the most important, Industrial Disputes Act of 1947. Various other norm and schemes then came into existence during the second five year keeping in mind the employees interest to put together the much needed issues such as minimum wage, wage rules, convention on rationalization, policy of discipline, standard set of laws for conduct, and schemes for workers participation in management.

Problems faced by Industrial Relations

The aim of the liberalization was to encourage the foreign capital investment in India. But the pace of foreign investment is not as fast as it was expected. Thus the State still remains as the major employer. The State ordinarily carries on its business activities through corporations or societies. But liberalization has forced it to compete with the private sector in the economic profits but at the same time fulfill its social accountability. The number of unemployed in India is expected to grow by 20 million every year. (Sinha, 2004). Thus there is a need to create a lot of jobs to cater to this section who are mostly uneducated laborers. The study commissioned by the United Kingdoms Department for International Development for the World Development Report, 2000-01, said that liberalization could not be termed as unconditional success as only garment, footwear, gems, jewelry, telecom and software sector saw tremendous growth. Thus, the sectors which saw growth were well beyond the reach of backward classes. Thus the industry managers need to look at new paradigms and problems to take care of this section. All the laws in IR are directed towards the organized labor employed in the private and the public sector. But 93% of the workforce of India is engaged in the unorganized sector. To take care of this the government of India has declared under its Common Minimum Program that the blanket of social security and network of other schemed must be extended to cover workers from the unorganized sector such as, weavers, handloom workers, plantation labor, beedi workers etc. The obsolete labor laws of India are not able to control the basic problems like absenteeism, indiscipline. Strikes etc. faced by the industry which in turn is hampering the productivity of the nation. The management tries to exploit the workers and the workers in turn misuse the labor laws and lack of work culture.

Emerging trends in Industrial Relations

The broad trend towards decline in employment in the manufacturing sector, low union activity in sunrise sectors, decentralized collective bargaining, and direct communication with and involvement of workers can be seen as efforts at political restructuring of industrial relations Competition on the basis of cheap labor: With liberalization and globalization came intense competition. All the MNCs strive to produce maximum output from minimum input. Technology is being given preference over workers as automation will not only

reduce costs but would also increase the speed of operations. This led to a large section of labor force being laid off. The Industrial Disputes Act, 1947 deals with lay-off or retrenchment where certain basic formalities have to be complied with for termination of services, which provides some measures of social guarantee to the laborer. But these MNCs can relieve themselves of such formalities by making an application under Section 36-B of the Industrial Disputes Act, which empowers the Government concerned to exempt them from the operation of the Industrial Disputes Act, 1947. Thus, it becomes easy for them to indirectly follow an exit policy of hire and fire, thereby resulting in displacement of labor. (Sinha, 2004). Disinvestment: The privatization of the public sector companies by an instrument called divestment has resulted in either layoff or offering Voluntary Retirement Schemes (VRS) of approximately 60% of workforce. (Dutt, 2008). This has further led to decline in employment, dilution of collective bargaining, worsening of working conditions and reduction in wages. Contracting Base of the Trade Unions: With the emergence of a new class of workers the knowledge workers the clout of the trade unions seem to be shrinking. These workers do not wish to be the part of the unions and are the priority of the employers. These individuals are given more preference over the group of the low and medium skilled workers. Closures, retrenchments, increasing proportion of casual/contract workers have further led to contraction of the union-base. The unions, in order to increase their penetration are now to organize the unorganized workers in the informal sector. Deregulation: The liberalization, privatization and globalization model has generated an anti-labor economic environment in the post-reform period as against the pro-labor environment in the pre-reform period. The collective bargaining power has decreased, thus the unemployment level has increased in the organized sector. It has also tried to ensure that the public and private laborers get similar protection but this has affected many provisions and the worst affected is the pension scheme as there are no more the guarantees of the government, interest rates have fallen and has led to investment of pension funds in the risky stock market. Labor flexibility: has either replaced regular jobs with contract jobs or have at least created bad jobs. Flexible labor laws are likely to lead to less hiring and more firing. The argument that more jobs might be created in the medium and long-term has not gone down the throat of the working class. It is considered only a mirage. (Dutt, 2008) Decentralization: in terms of consideration of the IR issues from macro to micro and from industry to enterprise level. In the absence of any centralized co-ordination the whole system gets paralyzed in case of any conflict/dispute.

References
1. Unknown, 2007, Introduction to Industrial Relations http://industrialrelations.naukrihub.com/importance.html 2. R Devarajan, September 10, 2002, The Hindu, Trends in Industrial Relations http://www.hindu.com/thehindu/br/2002/09/10/stories/2002091000070300.htm 3. Justice S B Sinha, 2004, Emerging Industrial Relations http://www.ebc-india.com/lawyer/articles/2004v6a1.htm 4. Devendra Meshram, 2005, MEANING AND DEFINITION OF INDUSTRIAL RELATION http://www.citehr.com/596-industrial-relation-india.html 5. Ruddar Dutt, May 3, 2008, MAINSTREAM, VOL XLVI, NO 20, Emerging Trends in Trade Union Movement, http://www.mainstreamweekly.net/article678.html 6. A note by Alliance Business School on Labor Laws http://www.scribd.com/doc/14639175/Indian-Industrial-Relations-Laws 7. Note by National Laws on Labor , Social Security & Related Human Rights http://www.ilo.org/dyn/natlex/docs/WEBTEXT/32063/64873/E87IND01.htm 8. Article from pblabour.gov.in http://pblabour.gov.in/pdf/acts_rules/inustrial_disputes_act_1947.pdf http://pblabour.gov.in/pdf/acts_rules/trade_unions_act_1926.pdf 9. Employees Provident Fund Organization, India http://epfindia.nic.in/legel_provision.htm 10. Unknown, 5 Nov 2009, Industrial Relations http://www.docstoc.com/docs/14904866/Industrial-Relations 11. Unknown, 12 Aug 2011, Industrial Relation in India http://www.scribd.com/doc/62176710/Evolution-of-Industrial-Relations-in-India