Engineering Limited

Engineering Limited is a light engineering factory, which has been making reasonable
profits but has started facing serious competition and realizes that these profits wont
sustain unless there is an increase in productivity.
Of the 600 workers, 400 belong to the recognized union (Hind Masdoor Sabha), 120
belong to a left communist union (unrecognized) and the remaining workers are not
unionized. Three years ago, the recognized union had negotiated with management a
comprehensive agreement covering condition of services including basic wages and
dearness allowance. Since this agreement was due to expire in 6 months, therefore
discussions had started between the union and management regarding the wage and
incentive plan. The company initially followed straight piece rate system in which
wages are paid in accordance with the output of production and is independent of time
spent on the job. However, these schemes were not found to be effective and
management decided to explore possibilities of different wage structures and
incentive schemes to better motivate its workers.
Dearness allowance
One of major issues that arise in the case is that of the continually rising wage bill
mainly due to the dearness allowance. The management, therefore, wants to
completely do away with it and have a consolidated wage structure instead. This
proposal was rejected by the union, as there would be no direct compensation against
rising prices for the workers. Eventually, after weeks of collective bargaining, it was
decided that the revised pay structure would provide 20% increase in total
emoluments of the workers and system of dearness allowance would be abolished.
Throughout the process, the management was careful of not pursuing matters when
things were heated.
Unrecognized union
A detailed agreement containing the wage structure and revised incentive scheme was
to be signed before the Conciliation officer. However, a copy of the communication
was also sent to the unrecognized union which consisted of only 20% of the workers

but whose rights could not be ignored who would be represented by another union.
While the recognized union sent an acceptance letter to the management and
conciliation officer, the unrecognized union felt alienated and rejected the proposal
stating that at no stage was it contacted for negotiations. The unrecognized union even
threatened to go on strike but eventually, only 30 of 600 workers did not accept the
settlement.
Conclusion
Organizations recognize unions in order to establish a single point of contact and
provide an effective mechanism through which the two groups (employers and
employees) communicate with each other. These unions therefore possess bargaining
power in areas such as wage scales, working hours, health and safety, etc.
In the present case, Hind Masdoor Sabha is the recognized union and sole bargaining
agent for the company. Engineering Limited, therefore, entered into collective
bargaining with the mentioned union, which lead to feelings of neglect by the
unrecognized union. Even though the management was justified in engaging with
only the recognized union in formal negotiations, they couldve communicated the
advantages of the new wage system not only to highlight the importance of the new
plan but also to eliminate feelings of isolation by the unrecognized union.