Industrial Relations Management Exam Notes

BHARATHIAR UNIVERSITY
MBA (HR)
COURSE 2.4
INDUSTRIAL RELATIONS
MANGEMENT
(Notes For Examination)
Prepared By
Dr Abbas T. P
drtpabbas@gmail.com
1|Page 2.4 – Industrial Relations Management

2.4. INDUSTRIAL RELATIONS MANGEMENT
UNIT I
Q1. INDSUTRIAL RELATION
Essentially, Industrial Relation (IR) is concerned with the relationship
between management and workers and the role of regulatory mechanism in
resolving any industrial dispute.
Specifically, IR covers the following areas:
1. Collective bargaining.
2. Role of management, unions, and government.
3. Machinery for resolution of industrial disputes.
4. Individual grievance and disciplinary policy.
5. Labour legislation.
6. Industrial relations training.
Objectives of Industrial Relations
The main objectives of industrial relations system are:
1. To safeguard the interests of labour and management by securing the
highest level of mutual understanding and good-will.
2. To avoid industrial conflict and develop harmonious relations for
ensuring the productivity of workers.
3. To raise productivity by lessening the tendency to high turnover and
frequency absenteeism.
4. To promote the growth of an industrial democracy based on labour
partnership in the sharing of profits and of managerial decisions.
5. To eliminate or minimize the number of strikes, lockouts and gheraos
by providing reasonable monetary and non-monetary benefits.
6. To improve the economic conditions of workers.
Importance of Industrial Relations
1. Uninterrupted Production: Uninterrupted production means
continuous employment for all from manager to workers. There is
uninterrupted flow of income for all.
2. Reduction in Industrial Disputes: Good industrial relations reduce
the industrial disputes like strikes, lockouts, gherao, etc.
3. High Morale: Good industrial relations improve the morale of the
employees. Employees work with great enthusiasm with the feeling in
mind that the interest of employer and employees is one and the same.
2.4 – Industrial Relations Management 2|Page

4. Reduced Wastage: Good industrial relations reduces wastages of
man, material and machines to the minimum.
Approaches to IR: The three popular approaches to IR are:
1. Unitary Approach: The unitary perspective is based on the assumptions
that the organization is an integrated group of people with a single authority
structure and a set of common values, interests and objectives shared by all
members of the organization. Management's right to manage and make
decisions is regarded as legitimate, rational and accepted and any
opposition to it is seen as irrational. The underlying assumption of the
unitary approach is that the organizational system is in basic harmony and
conflict is unnecessary and exceptional.
2.Pluralistic Approach: The pluralistic approach perceives:
1. Organizations as coalition of competing interest and the
management’s role is to mediate amongst the different interest
groups.
2. Trade unions as legitimate representatives of employee interests.
3. Stability in IR as the product of concessions and compromises
between management and unions.
Legitimacy of the management’s authority is not automatically accepted.
Conflict between the management and workers is understood as inevitable.
Employees join unions to protect their interest and influence decision
making by the management. Unions thus balance the power between the
management and employees.
3.Marxist (Radical) Approach: Marxist, like the pluralistic, regard
conflict between employers and employees as inevitable. However, Marxists
see conflict as a product of the capitalist society.
As per the Marxist approach, conflict arises not just because of competing
interest within the organization, but because of the division within society
between those who own or manage the means of production and those who
have only their labour to offer.
Trade unions are seen both as labour reaction to exploitation by capital, as
well as a weapon to bring about a revolutionary social change. Concern with
wage related disputes are secondary.
Development of IR System in India
The origin of the industrial relations in India can be traced to the origin of
the industry itself. Industrial relations in an organized form started
emerging in India only by the latter half of the 19th century.

Prior to the Independence, the industrial relations philosophy was mainly a
selective intervention.
The period 1947-1956 is termed a Protective Phase. This phase of industrial
relations was characterized by providing rights to the citizens by the
adoption of the constitution and the industrial truce resolution to restrain
from work stoppages.
The period 1956-1965 is known as the Consolidation Phase. This phase
witnessed the following:
 There should be no lockout or strike without notice.
 Unilateral actions should not be taken in connection with any industrial
matter.
 There should be no resort to go slow tactics.
 No deliberate damage should be caused to plant or property.
 Awards and agreements should be speedily implemented.
 Actions that disturbs the cordial industrial relations should be avoided.
The period 1967-80 is known as the Conflict Ridden Interventionist phase.
This phase was precipitated by the fragmentation of political parties,
different parties in power in the centre and in the states and the onset of
the emergency. The important features of this phase are
 Economic stagnation.
 Economy grows at @ 2%/year; two oil price shocks
 Considerable slowdown in employment growth.
 Crisis in IR system: massive strikes & industrial conflict, multiple
unionism & decline in strength.
The period 1981-91 is known as the Productivity-Efficiency-Quality-
Orientation phase. The important features of this phase are:
 Initial domestic economic liberalization; economy grows @ 5.7%/year.
 Regional variation in economic development increases.
 Variation in wage growth: skilled versus unskilled, labour productivity
increases, period of ‘jobless' growth.
 Rise of ‘independent' enterprise unionism
The period 1992-2009 is known as the Post-Reform Decade. The important
features of this phase are:
 Stabilization & structural adjustment reforms: Economy grows @ 6.2%-
6.5%
 In the five years (2004-09) growing @ 7%-8%/year.
 Regional variation increases massively.
 Max growth in services: IT and IT-enabled services, hotels &
restaurants, autos & ancillaries.

UNIT 2
Q.2. TRADE UNION
Trade union is an association either of employees or employers or of
independent workers. It is a relatively permanent formation of workers and
not a temporary or casual combination of workers.
It is formed for securing certain economic (like better wages, better working
and living conditions), and social (such as educational, recreational,
medical, respect for individual) benefits to members.
Types and structure of the trade union
Unions can be categorised under two heads
A. The purpose for which unions are formed
B. The variation in the composition of their membership
(A) Union classification according to the purpose
Under this head normally two type of union have been kept.
1. Reformist Unions: Such unions don’t believe in the destruction of
economic, social and management structure of the state or concern but want
only to modify them and to have favourable response for their members
through negotiation and other peaceful manners.
The reformist union is subdivided in two parts:
(a) Business unionism: Business unions are those unions that are
maintained primarily to represent the workers in collective
bargaining with the employers.
(b) Friendly unionism: Idealistic in nature and aims to elevate the moral,
intellectual and social life of the workers. They emphasize such other
consideration as education, health, insurance etc.
2. Revolutionary Unions: Such unions aim at destroying the present
structure and replacing it with the new and different institution according
to the ideals that are regarded as preferable.
These unions are further classified in two classes:
a) Anarchist unions: The unions which try to destroy the existing
economic system by revolutionary means called anarchist Unions.
Such unions no longer exists today.
b) Political unions: The unions which gain power through political action
called political unions. The main function of such unions is to
eliminate the power of capital and capitalists, redistributing wealth

and giving effective power to workers.
(B) Union classification on the basis of membership structure
According to variations in the composition of the members, unions can be
classified into four categories:
a) Craft union: It is an organization of workers employed in a particular
craft and trade or in a single or few occupations aiming to safeguard
their interest.
b) Industrial union: It is an organization of workers which links all
craftsmen and skilled workers in any industry. It is organized upon
the industry wise basis rather than the craft wise basis.
c) Staff union: The term staff union is popularly used to both craft and
industrial union. It is organized the workers on the basis of craft
working in same industry.
d) General union: It is an organization which covers various industries
and labourers having different skills. They have numerical
superiority, for they are open to all classes of workers.
Functions of Trade Union
Trade unions perform a number of functions which can be broadly classified
into four categories:
(a) Intra-mural functions: These functions include protecting the
workers' interests through collective bargaining and direct action such
as strikes, gheraos, etc.
(b) Extramural functions: These functions include providing financial
and non-financial assistance to workers during the periods of strikes
and lockouts, extension of medical facilities during casualties,
provision of education, recreational and housing facilities, etc.
(c) Political Functions: These functions include affiliating the union to
a political party, helping the political party in enrolling members,
collecting donations, seeking the help of political parties during the
periods of strikes and lock-outs.
(d) Social Functions: These functions include carrying out social service
activities, discharging social responsibilities through various sections
of the society like educating the customers etc.
Problems of Trade Union
a) Small size of the unions
The small size of the unions is due to various factors, namely,

i) The fact that any seven workers may form a union under the Trade
Unions Act of 1926, and get it registered, a large number of small
unions have grown.
ii) The structure of the trade union organization in the country is in
most cases the factory or the unit of employment. So whenever
employees in a particular factory or mine are organized, a new union
is formed.
iii) Though the number of unions and union membership are
increasing, average membership is declining.
iv) Rivalry among the leaders has resulted in multiplicity of unions,
thereby reducing the average membership.
b) Inadequate funds: Because of the small size of the unions, they suffer
from lack of adequate funds and they find it difficult to engage the services
of experts to aid and to advise members in times of need. The poor financial
position adversely affects their entire working. They can neither undertake
any welfare activities for their members nor can undertake successful
conduct of strikes, or publication of periodicals.
c) Multiplicity of the Unions & Intra-Union Rivalry: Multiple rival
unionisms are an important feature and one of the great weaknesses of the
Indian trade union movement. Multiplicity of unions lead to inter-union
rivalries, which ultimately cuts at the very root of unionism, weakens the
power of collective bargaining and reduces the effectiveness of workers in
securing their legitimate rights.
d) Intra-Union rivalry: Another frustrating problem is that of intra-union
rivalry. Trade union rivalry is acute and pervades the entire industrial
scene in India.
e) Leadership Issue: Another disturbing feature of the trade unions is the
‘outside’ leadership, i.e., leadership of trade unions by persons who are
professional politicians and lawyers and who have no history of work in the
industry. There are several reasons for this phenomenon namely, for
avoiding victimization of worker-office-bearers of the trade unions, and at
times for lack of financial resources to appoint whole time office-bearers.
f) Politicisation of the Unions: One of the biggest problems the country’s
trade union movement faces is the influence of the political parties.

UNIT III
Q.3. INDUSTRIAL DISPUTES
As per Section 2(k) of Industrial Disputes Act, 1947, an industrial dispute
is defined as any dispute or difference between employees and employers, or
between employers and workmen, or between workmen and which is
connected with the employment or non-employment or the terms of
employment or with the conditions of labour, of any person.
When an industrial dispute occurs, the management and the workmen, try
to pressurize each other. The management may resort to lockouts while the
workers may resort to strikes, picketing or gheraos.
Causes of Dispute
The major causes of industrial dispute are:
 Economic causes ― wages, salaries, profit, etc.
 Social causes ― low morale, corruption, pollution, etc.
 Political causes ― political rivalry, unstable government, etc.
 Technical causes ― loss of jobs due to automation, unsuitable
technology, etc.
 Psychological causes ― loss of job, propaganda, instigation, etc.
 Market causes ― competition, loss, recession, etc.
 Legal causes ― court order of closing down factories, shifting, etc.
Disputes can also be caused by unions, which include:
 Non-cooperation
 Arguments and quarrelsome behaviour ― indiscipline
 Hostility and irritations
 Stress, strain and anxiety
 Unwillingness to negotiate or participate in discussions
 Resentment or withdrawal
 Absenteeism, alcoholism or high incidence of accidents
 'Work to rule' or 'go slow' tactics
 Demonstrations
 Strikes
Disputes can also be caused by management, which include:
 Refusal to discuss or negotiate a demand by the union
 Arrogant employee of the Personnel department
 Use of derogatory language on an employee
 Disciplinary issues that result in suspension, demotion, dismissal, etc.
 Layoffs
 Lock-out

 Termination
Types of Industrial Disputes
ID can be classified into various types depending on their nature. The
following are some of the types of disputes:
a. Perceived Conflict: Perceived conflict is one which people perceive
that conflicting conditions exist in the work-organization.
b. Latent Conflict: Latent conflict is one which does not emerge in open.
c. Manifest Conflict: Manifest conflict is one which is not only
recognition of conflict, but also expressing it explicitly or openly.
Prevention of Industrial Disputes
Industrial Disputes Act, 1947, has suggested some important preventive
measures, including:
 Setting up of Works committees in establishments employing 100 or
more persons with equal number of representatives of workers and
management for settling any differences of opinion in matters of
common interest
 Prohibition of changes in the conditions of service (a) without giving
notice to the workmen affected by such changes; and (b) within 21 days
of giving such notice.
 Prohibition of strikes and lock-outs in a public utility service (a) without
giving notice to other party within six weeks before striking, (b) within
14 days of giving such notice, (c) before the expiry of the date of strike
or lock-out specified in the notice
 Prohibition of Unfair Labour Practices: The Act prohibit employers,
employees and unions from committing unfair labour practices
mentioned in the Schedule V of the Act. Commission of such an offence
is punishable with imprisonment up to six months and fine up to
Rs.1,000, or both
 Regulation of lay-off and retrenchment and closure of establishment:
The Act require employers to (a) pay lay-off compensation to employees
for the period that they are laid-off, at the rate of 50% of the salary (b)
give one month notice, and also pay compensation at the rate of 15 days
wages for every completed year of service for retrenchment and closing
establishments, (c) retrench employees on the basis of first come last go,
and (d) obtain permission from the Government for retrenchment laying
off employees and closing of establishments employing 100 or more
persons

Settlement of Industrial Disputes
For Industrial disputes which are not prevented or settled by, the following
authorities are provided under the Industrial Disputes Act for resolving the
same:
1.Conciliation: Conciliation in industrial disputes is a process by which
representatives of management and employees and their unions are brought
together before a third person or a body of persons with a view to persuade
them to arrive at some agreement to their satisfaction and in the larger
interest of industry and community as a whole.
This may be regarded as an extension of process of mutual negotiation under
the guidance of a Conciliation Officer, or a Board of Conciliation appointed
by the Government. The main duty of a Conciliation Officer is to investigate
and promote settlement of disputes. He has wide discretion and may do all
such things, as he may deem fit to bring about settlement of disputes. His
role is only advisory and mediatory. He has no authority to make a final
decision or to pass formal order directing the parties to act in particular
manner.
2. Voluntary Arbitration: When Conciliation Officer or Board of
Conciliation fails to resolve dispute, parties can be advised to agree to
voluntary arbitration for settling their dispute. If the parties to the dispute
agree to do so by submitting a written agreement to that effect, mentioning
the person acceptable to them as arbitrator and also the issues to be decided
in arbitration proceedings, to the Government and the Conciliation Officer
concerned before it is referred for adjudication to Labour Court or Tribunal.
The Agreement must be signed by both the parties.
Arbitrator is a quasi-judicial body. He is an independent person and has all
the attributes of a statutory arbitrator. He has wide freedom, but he must
function within the limit of his powers. He must follow due procedure of
giving notice to parties, giving fair hearings, relying upon all available
evidence and documents.
3. Adjudication: Adjudication is compulsory method of resolving conflict.
The Industrial Disputes Act provides the machinery for adjudication,
namely, Labour Courts, Industrial Tribunals and National Tribunals. The
procedures and powers of these three bodies are similar.
Under the provisions of the Act, Labour Courts and Industrial Tribunals can
be constituted by both Central and State Governments, but the National
Tribunals can be constituted by the Central Government only, for
adjudicating disputes which involve a question of national importance or of
such a nature that industrial establishments situated in more than one
State are likely to be affected by such disputes.
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Q.4. INDUSTRIAL DISPUTES ACT 1947
The Industrial Disputes Act, 1947 is a piece of social legislation enacted for
settlement of industrial disputes. It is an Act to ensure specific justice to
both employers and employees and advance the progress of industry by
bringing about harmony and cordial relationship between the parties.
The Industrial Dispute Bill was passed in March, 1947 and implemented
w.e.f. 1st April, 1947. Since then, it has as many as 35 major amendments.
It has 9 Chapters and 40 sections.
Objectives of the Act
The principal objectives of the Act are:
(a) To ensure social justice to both employers and employees.
(b) To settle disputes arising between the capital and labour by peaceful
methods.
(c) To promote measures for securing and preserving harmony and good
relations between the employer and employees.
(d) To prevent illegal strikes and lockouts.
(e) To provide compensation to employees in cases of lay-off,
retrenchment and closure
(f) To protect employees against victimization by the employer.
(g) To promote collective bargaining.
Conditions to Strike and Lock-Outs
The Act prohibits strikes and lockouts subject to certain terms.
No person employed in a public utility service shall go on strike in breach of
contract
(a) Without giving to the employer notice of strike within six weeks before
striking; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of strike specified in any such notice as
aforesaid; or
(d) During the pendency of any conciliation proceedings before a
conciliation officer and seven days after the conclusion of such
proceedings.
No employer carrying on any public utility service shall lock-out any of his
workman
11 | P a g e 2.4 – Industrial Relations Management

(a) without giving them notice of lock-out within six weeks before locking-
out; or
(b) within fourteen days of giving such notice; or
(c) before the expiry of the date of lock-out specified in any such notice as
aforesaid; or
(d) during the pendency of any conciliation proceedings before a
conciliation.
Lay-Off, Retrenchment and Closure
Lay-Off: Lay-Off means "the failure, refusal or inability of an employer on
account of shortage of coal, and power or raw material or the accumulation
of stocks or the breakdown of machinery or for any other reason to give
employment to a workman whose name is on the rolls of his industrial
establishment and who has not been retrenched."
In industrial undertakings where lay-off provisions apply, only those
workmen will be entitled to lay-off compensation whose names are on the
rolls of the establishment and who are not casual workers and who have
completed one year of continuous service with employer concerned.
Retrenchment: Retrenchment is "the termination by the employer of the
service of a workman for any reason whatsoever otherwise than a
punishment inflicted by way of disciplinary action".
No workman who has been employed for one year can be retrenched until
(a) he has been given one month's notice in writing indicating the reasons
for retrenchment and the period of notice has expired,
(b) the workman has been paid compensation equivalent to fifteen days'
average pay for every completed year of service or any part thereof in
excess of six months; and
(c) notice in the prescribed manner is served on the appropriate
Government
Closure: The Act defined the word closure as permanent closing down of a
place of employment or part thereof.
Under the Act, an employer intending to close down an undertaking shall
be required to give sixty days' prior notice to the appropriate Government,
stating clearly, the reasons for the closure
Dispute Settlement Authorities under the Act
The Act provides elaborate and effective machinery for the amicable
settlement of industrial disputes by setting up the various authorities.

These are:
1. Works Committee: In the case of an industrial establishment in which
100 or more employees are employed, the employer requires to constitute a
'Work Committee' consisting of equal number of representatives of
employers and employees. Works committee deals with the employees
problem arising day to day in the industrial establishment.
2. Conciliation Officer or Conciliation Board: The appropriate
Government is empowered to appoint conciliation officers or to constitute a
Board of conciliation to act as the mediators in between the parties to resolve
the dispute. In the case of public utility services matters like strikes and
lockouts, the conciliation officer or board can initiate the conciliation
proceeding and tries to settle the dispute in between the parties.
3. Court of Enquiry: As occasion arises, Government can initiate a Court
of Inquiry to find out matters connected with an industrial dispute. A Court
of Inquiry looks into only matters which are referred to it by Government
and submits its report to the Government ordinarily within certain period
from the date of reference.
4. Adjudication: The Act provides the machinery for adjudication, namely,
Labour Courts, Industrial Tribunals and National Tribunals. The
procedures and powers of these three bodies are similar. Under the
provisions of the Act, Labour Courts and Industrial Tribunals can be
constituted by both Central and State Governments, but the National
Tribunals can be constituted by the Central Government only, for
adjudicating disputes which involve a question of national importance or if
industrial establishments situated in more than one State.
5. Arbitration: When Conciliation Officer or Board of Conciliation fails to
resolve dispute, parties can be advised to agree to voluntary arbitration for
settling their dispute. If the parties to the dispute agree to do so by
submitting a written agreement to that effect, mentioning the person
acceptable to them as arbitrator and also the issues to be decided in
arbitration proceedings, to the Government and the Conciliation Officer
concerned before it is referred for adjudication to Labour Court or Tribunal.
The Agreement must be signed by both the parties.
6. Grievance Settlement Authority: Every industrial establishment
employing 20 or more workmen shall have one or more Grievance Redressal
Committee for the resolution of disputes arising out of individual
grievances.

Q.5. PAYMENT OF WAGES ACT, 1936
This is one of the earlier Labour Laws passed during British Rule and came
into force on 28th March 1937.
Object of the Act: The Payment of Wages Act regulates the payment of
wages to certain classes of persons employed in industry. The Act
guarantees payment of wages on time and without any deductions except
those authorised under the Act. The Act provides for the responsibility for
payment of wages, fixation of wage period, time and mode of payment of
wages, permissible deduction.
Responsibility for Payment of Wages
Every employer shall be responsible for the payment to persons employed
by him of all wages required to be paid.
Fixation of wage-periods. [Section 4]: Every person responsible for the
payment of wages shall fix wage periods. No wage-period shall exceed one
month. That means wage can be paid on daily, weekly, fortnightly and
monthly only.
Time of Payment of Wages. [Section 5]: If there are less than 1000
employees, wages of employees should be paid before the expiry of the 7th
day after the last day of the wage period. If there are more than 1000
employees, wages of employees should be paid before the expiry of the 10th
day after the last day of the wage period.
Deductions Which May be made from Wages: At the time of payment
of the wage to employees, employer should make deductions according to
this act only.
The following are said to be the deductions and which are acceptable
according to this act.
 Fines,
 Deductions for absence from duty,
 Deductions for damage to or loss of goods made by the employee due to
his negligence,
 Deductions for house-accommodation supplied,
 Deductions for amenities and services supplied by the employer,
 Deductions for recovery of excess or advance payments of wages,
 Deductions for recovery of loans,
 Deductions of income-tax payable,

 Deductions by order of a court,
 Deduction for payment of provident fund,
 Deductions made if any payment of any premium on his life insurance
policy with the acceptance of employee,
 Deduction made if any contribution made as fund to trade union with
the acceptance of employee,
 Deductions for recovery of damage or loss happened,
 Deduction made if any contribution to the Prime Minister’s National
Relief Fund with the acceptance of employee,
Fines. [Sec 8]: Fine should be imposed by the employer on employee with
the approval of the state government or prescribed authority. Employer
should follow the rules mentioned below for and before imposing of fine on
the employee.
 Notice board of fines on employee should be displayed in the work
premises.
 Fine should not be imposed on the employee until he gives the
explanation for the act or omission he made.
 Total amount of fine should not exceed 3% of his wage.
 Fine should be imposed for one time only on the wage of the employee
for the act or omission he made.
 Fines should not be recovered in the way of instalments from the
employee.
 Fine should be recovered within 60 days from the date on which fine
were imposed.
 Fine should be imposed on day act or omission made by the employee.
 All fines collected from the employee should be credited to common
fund and utilize for the benefit of the employees.
Deductions for Absence from Duty. [Sec 9]
Deductions can be made by the employer for the absence of duty by the
employee for one day or for any period.
The amount deducted for absence from the duty should not exceed the wage
payable for the period of absence.
Employee present for the work place and refuses to work without proper
reason shall be deemed to be absent from duty.

Deductions for Damage or Loss. [Sec 10]
Employer should give an opportunity to the employee to explain the reason
and cause for the damage or loss happened and deductions made by
employer from the employee wage should not exceed the value or amount of
damage or loss made by the employee.
Deductions for Services Rendered. [Sec 11]
House-accommodation or service provided by the employer should be
accepted by the employee to make deduction from the wage of the employee.
Deduction should not exceed an amount equivalent to the value of the house-
accommodation or service supplied.
Deductions for Recovery of Advances. [Sec 12]
In case of advance paid to the employees by the employer, such advance
should be recovered by the employer from the payment of the wages /salary
to the employee. But employer should not recover the advance given for the
travelling expense for the employee.
Maintenance of Registers and Records. [Sec 13a]
Every employer should maintain such registers and records giving such
particulars of persons employed by him, the work performed by them, the
wages paid to them, the deductions made from their wages, the receipts
given by them and such other particulars and in such form as may be
prescribed.
Inspectors
The state government may appoint an inspector for purpose of this act.
Every Inspector shall be deemed to be a public servant within the meaning
of the Indian Penal Code, 1860 [Sec 14(5)]. The inspector of this act is having
powers mentioned below
 Inspector can make enquiry and examination whether the employers
are properly obeying the rules mentioned under this act.
 Inspector with such assistance, if any, as he thinks fit, enter, inspect
and search any premises of any railway, factory or industrial or other
establishment at any reasonable time for the purpose of carrying out
the objects of this Act.
 Inspector can supervise the payment of wages to persons employed.
 Seize or take copies of such registers or documents or portions thereof
as he may consider relevant in respect of an offence under this Act
which he has reason to believe has been committed by an employer.

Q.6. PAYMENT OF BONUS ACT, 1965
The payment of Bonus Act provides for payment of bonus to persons
employed in certain establishments of the basis of profits or on the basis of
production or productivity and for matters connected therewith.
Eligibility for Bonus
Every employee receiving salary or wages up to Rs. 3,500 p.m. and engaged
in any kind of work whether skilled, unskilled, managerial, supervisory etc.
is entitled to bonus for every accounting year if he has worked for at least
30 working days in that year.
However employees of L.I.C., Universities and Educational institutions,
Hospitals, Chamber of Commerce, R.B.I., IFCI, U.T.I. Social Welfare
institutions are not entitled to bonus under this Act.
Disqualification for Bonus
Notwithstanding anything contained in the act, an employee shall be
disqualified from receiving bonus, if he is dismissed from service for fraud
or violent behaviour while in the premises of the establishment or theft,
misappropriation or sabotage of any property of the establishment.
Minimum/Maximum Bonus Payable
The minimum bonus which an employer is required to pay even if he suffers
losses during the accounting year or there is no allocable surplus is 8.33 %
of the salary or wages during the accounting year, or Rs. 100 in case of
employees above 15 years and Rs 60 in case of employees below 15 years, at
the beginning of the accounting year, whichever is higher
If in an accounting year, the allocable surplus exceeds the minimum bonus,
the employer should pay bonus in proportion to the salary or wages earned
by the employee in that accounting year subject to a maximum of 20% of
such salary or wages.
Time Limit for Payment
The bonus should be paid in cash within 8 months from the close of the
accounting year or within one month from the date of enforcement of the
award or coming into operation of a settlement following an industrial
dispute regarding payment of bonus. However if there is sufficient cause,
extension may be applied for.
Calculation of Bonus
The method for calculation of annual bonus is as follow:
1. Calculate the gross profit in the manner specified in

 First Schedule, in case of a banking company, or
 Second Schedule, in any other case.
2. Calculate the Available Surplus.
Available Surplus = A+B
where A = Gross Profit – Depreciation admissible u/s 32 of the Income
tax Act - Development allowance - Direct taxes payable for the
accounting year – Sums specified in the Third Schedule.
B = Direct Taxes in respect of gross profits for the immediately
preceding accounting year – Direct Taxes in respect of such gross profits
as reduced by the amount of bonus, for the immediately preceding
accounting year.
3. Calculate Allocable Surplus
Allocable Surplus = 60% of Available Surplus, 67% in case of foreign
companies.
Make adjustment for ‘Set-on’ and ‘Set-off’. For calculating the amount of
bonus in respect of an accounting year, allocable surplus is computed
after considering the amount of set on and set off from the previous
years.
The allocable surplus so computed is distributed amongst the employees in
proportion to salary or wages received by them during the relevant
accounting year.
Duties/Rights of Employer
Duties: An employer has the following duties:
 To calculate and pay the annual bonus as required under the Act
 To submit an annual return of bonus paid to employees during the
year, in Form D, to the Inspector, within 30 days of the expiry of the
time limit specified for payment of bonus.
 To co-operate with the Inspector, produce before him the
registers/records maintained, and such other information as may be
required by them.
 To get his account audited as per the directions of a Labour
Court/Tribunal or of any such other authority.
Rights: An employer has the following rights:
 Right to forfeit bonus of an employee, who has been dismissed from
service for fraud, riotous or violent behaviour, or theft,

misappropriation or sabotage of any property of the establishment.
 Right to make permissible deductions from the bonus payable to an
employee, such as, festival/interim bonus paid and financial loss
caused by misconduct of the employee.
 Right to refer any disputes relating to application or interpretation of
any provision of the Act, to the Labour Court or Labour Tribunal.
Rights of Employees
 Right to claim bonus payable under the Act and to make an application
to the Government, for the recovery of bonus due and unpaid, within
one year of its becoming due.
 Right to refer any dispute to the Labour Court/Tribunal Employees, to
whom the Payment of Bonus Act does not apply, cannot raise a dispute
regarding bonus under the Industrial Disputes Act.
 Right to seek clarification and obtain information, on any item in the
accounts of the establishment.
Recovery of Bonus Due
Where any bonus is due to an employee by way of bonus, employee or any
other person authorised by him can make an application to the appropriate
government for recovery of the money due.
If the government is satisfied that money is due to an employee by way of
bonus, it shall issue a certificate for that amount to the collector who then
recovers the money.
Such application shall be made within one year from the date on which the
money became due to the employee.
Offences and Penalties
For contravention of the provisions of the Act or rules the penalty is
imprisonment up to 6 months, or fine up to Rs.1000, or both.
For failure to comply with the directions or requisitions made the penalty is
imprisonment up to 6 months, or fine up to Rs.1000, or both.
In case of offences by companies, firms, body corporate or association of
individuals, its director, partner or a principal officer responsible for the
conduct of its business, as the case may be, shall be deemed to be guilty of
that offence and punished accordingly, unless the person concerned proves
that the offence was committed without his knowledge or that he exercised
all due diligence

Q.7. THE EMPLOYEES PROVIDENT FUND & MISCELLANEOUS ACT, 1952
The Employees Provident Funds & Miscellaneous Act, 1952 is an important piece of
Labour Welfare legislation enacted by the Parliament to provide social security benefits
to the workers.
The provisions of the act extend to whole of India except the State of Jammu & Kashmir
and also the State of Sikkim.
Applicability
All the establishments employing 20 or more persons are brought under the purview of
the Act from the very date of set up subject to fulfilment of other conditions.
Definition of Wages
In this act, Wages means and includes Basic + Dearness Allowances, Cash value of
food concession and retaining allowances, if any.
Eligibility
 An employee at the time of joining the employment and getting wages up to Rs.
6,500/- is required to become a member.
 He / she is eligible for membership of fund from the very first date of joining a
covered establishment.
Provident Fund Contribution
a. Employee Contribution: Provident fund contribution is recovered @ 12% of wages
from employees who earn up to a maximum wage of Rs.6,500/- p.m. However,
employees can contribute more than this statutory minimum which will be considered
as Voluntary Contribution.
b. Employer Contributions
 Employer is also required to contribute towards provident fund; the deduction
rate is same as employee’s contribution i.e. 12% of the wages.
 Of this 12%, 3.67% goes to Provident Fund and the balance of 8.33% goes to
Pension Fund.
c. Voluntary Contribution
 An employee can contribute voluntarily over and above the stipulated rate of PF
contribution by opting for Voluntary PF scheme at any rate as he / she desires
i.e. up to 100% of Wages.
Employees Deposit-linked Insurance Scheme (EDLI)
 Apart from contributing to provident fund and pension fund, employer is also
required to contribute towards Employee Deposit Linked Insurance Scheme.
 The rate of contribution is 0.5% of the wages.

 The employees need not contribute anything towards this scheme.
 In case of death of a member, his / her nominee will get a maximum of Rs.60,000
from this scheme.
Administrative Charges
 The employer is also required to pay administrative charges at 1.10% of
emoluments towards provident fund charges.
 Employees need not contribute anything towards these charges.
Remittance of Contribution
The employer is required to pay the contribution recovered from employees into the
provident fund account on or before 15th of the following month, for example, if the
contribution is deducted for the month of October 2008, it should be remitted on or
before 15th of November 2008.
Annual Account Statement
After the close of each period of contribution, annual statements of accounts will be sent
by PF Department to each member through the factory or other establishment where the
member was last employed.
Withdrawal of Provident Fund and Pension Fund
A member is eligible to apply for withdrawing his provident fund and pension fund only
after 2 months from the date of resignation, provided that he / she is not employed during
the said 2 months.
The member should submit Form 19 to withdraw his provident fund dues on leaving
service/retirement/termination.
To claim pension, the member is required to submit Form 10 C.
Transfer of Provident Fund from previous employer to current employer
A resigned employee who joins another company is left with an option of transferring
the PF from his previous PF account to the current PF account, by filling the Form 13.
Advances from PF Account
The members are eligible to withdraw cash as tax-free and interest-free advances from
their PF Account for purposes like marriage, education, medical treatment etc., subject
to the prescribed conditions.
Marriage
 only for self, son, daughter, brother & sister
 The member should have completed at least 7 years of service
 Maximum of 3 times in the entire service

 Maximum amount is 50% of employee’s share.
 The member should apply in Form 31 through employer
 Marriage Invitation card should be submitted along with form as proof for
marriage through employer.
Education
 Only for self, son & daughter
 The member should have completed at least 7 years of service
 Maximum of 3 times in the entire service
 Maximum amount is 50% of employee share at the time of tendering application
 The member should apply in Form 31 through employer
 Bonafide certificate duly indicating the fees payable from the educational
institution.
For Medical Treatment
 Only for self, spouse, son, daughter, dependent father & mother
 Applicable for major surgical operation in a hospital and 1 month or more
hospitalization.
 For this purpose, no minimum service is required.
 A doctor of the hospital certifies that a surgical operation or hospitalization for 1
month or more is/was necessary.
 Maximum amount given is 6 times of wages or full employee share, whichever
is less.
 A certified proof for the said decease has to be submitted along with the
application in Form 31 through employer.
Purchase of Flat/House (from agency/promoter)
 Should have completed 5 years of services
 Members contribution with interest should not be less than 1,000
 House/Flat should be free from encumbrances
 Flat/house should be in the name of the member or spouse of the member or in
the joint names of member & spouse.
 The Agreement with the Flat promoter should be registered under the Indian
Registration Act.
 The maximum amount given is least of Basic+DA for 36 months or total
contribution & Interest or total cost of site.

Q.8. FACTORIES ACT, 1948
Object and Scope of the Act
The main object of the Factories Act, 1948 is to ensure adequate safety
measures and to promote the health and welfare of the workers employed
in factories.
The Act contains detailed provisions regarding the health, safety and
welfare of workers inside factories, the hours of work, the minimum age of
workers, leave with pay etc. The Act has been amended several times. In
1976 the Act was amended extensively.
Application of the Act
The Factories Act applies to factories all over India, including the State of
Jammu and Kashmir.
Approval, Licencing and Registration
It is necessary to obtain a licence before a factory is started. The State
Government may make rules requiring the submission of plans or
description of factories to the State Government.
The Inspection Staff
The Factories Act empowers the State Government to appoint Inspectors.
Every District Magistrate is an Inspector for his district.
Certifying Surgeons
The State Government may appoint qualified medical practitioners to be
certifying surgeons for the purposes of the Act.
Provisions Regarding the Health of Workers
The Act contain certain provisions intended to ensure that the conditions
under which work is carried on in factories do not affect the health of the
workers injuriously. The summary of the provisions is given below:
 Cleanliness. Every factory shall be kept clean and free from dirt, and
the outflow of drains etc. The floors must be cleaned. Drainage shall
be provided. Inside walls, partitions and ceilings must be repainted at
least once in five years.
 Disposal of wastes and effluents. The waste materials produced
from the manufacturing process must be effectively disposed off.
 Ventilation and Temperature. There must be provision for
adequate ventilation by the circulation of fresh air.
 Dust and Fume. If the manufacturing process used gives off injurious

or offensive dust and fume, steps must be taken so that they are not
inhaled or accumulated.
 Over Crowding. There must be no overcrowding in a factory.
 Lighting. Factories must be well lighted.
 Drinking water. Arrangements must be made to provide a sufficient
supply of drinking water.
 Latrines and Urinals. Every factory must provide sufficient number
of latrines and urinals for male and female workers.
Provisions Regarding the Safety of Workers
Summary of the provisions of the Factories Act regarding the safety of the
workers are stated below:
 Fencing of machinery. All dangerous machinery must be securely
fenced.
 Work on or near machinery in motion. Work on or near machinery
in motion must be carried out only by specially trained adult male
workers.
 Employment of young persons on dangerous machines. No young
person shall work at any dangerous machine unless he has received
sufficient training.
 Striking gear and devices for cutting off power. In every factory
suitable devices for cutting off power in emergencies shall be provided
and maintained in every workroom.
 Women and children near cotton Openers. Women and children
must not be allowed to work near cotton openers.
 Cranes, lifts, chains etc. Every crane and lift must be so constructed
as to be safe.
 Revolving machinery. Where grinding is carried on, the maximum
safe working speed of every revolving machinery must be notified.
 Pressure plant. Where any operation is carried on at a pressure
higher than the atmospheric pressure, steps must be taken to ensure
that the safe working pressure is not exceed.
 Floors, stairs and means of access. All floors, steps, stairs, passage
and gangways shall be of sound construction and properly
maintained.
 Pits, openings in floors etc. Pits, openings in floors etc. must be

securely covered or fenced.
 Excessive weights. No worker shall be made to carry a load so heavy
as to cause him injury.
 Protection of eyes. Effective screen or suitable spectacles shall be
provided to protect the eyes of the worker.
The Working Hours
Weekly Hours. No adult worker shall be required or allowed to work in a
factory for more than forty-eight hours in any week.
Daily Hours. No adult worker shall be required or allowed to work in a
factory for more than nine hours in any working day.
Restrictions on the Employment of Women
The following restrictions have been imposed to women workers:
 Maximum daily work is 9 hours
 Prohibition of night work
 Change of shift only after holiday
 No woman person shall be allowed work on or near machinery in
motion
 Crèches must be provided wherein more than 30 women are
employed.
Holidays and Leave
The Factories Act provides for holidays like weekly holidays, compensatory
holidays and annual leave with wages according to certain rules.
Wages and Salary
The remuneration that is to be paid daily or weekly is called Wages and the
one that is paid monthly and is fairly high, is to be called Salary.
Obligations of Workers
The act also lays down that no worker in a factory
 Shall wilfully interfere with or misuse any appliance, convenience or
other things provided in a factory,
 Shall wilfully and without reasonable cause do anything likely to
endanger himself or others; and
 Shall wilfully neglect to make use of any appliance or other thing
provided in the factory for the purposes of securing the health or safety

Q.9. THE ESSENTIAL SERVICES MAINTENANCE ACT, 1981
An Act to provide for the maintenance of certain essential services and the
normal life of the community.
Short title and Extent
This Act may be called the Essential Services Maintenance Act, 1981. It
extends to the whole of India, except to the State of Jammu and Kashmir.
Power to prohibit strikes in certain employments
If the central government is satisfied that in the public interest it is
necessary to do so, it may, by general or special order, prohibit strikes in
any essential service specified in the order.
Upon the issue of an order under
 No person employed in any essential service to which the order shall
go or remain on strike;
 Any strike declared or commenced whether before or after the issue of
the order, by persons employed in any such service shall be illegal.
Dismissal of employees participating in illegal strikes
Any person,
 who commences a strike which is illegal under this Act or goes or
remains on, or otherwise takes part in, any such strike; or
 who instigate or incites other persons to commence, or go or remain
on, or otherwise take part in, any such strike,
shall be liable to disciplinary action (including dismissal) in accordance with
the same provisions as are applicable for the purpose of taking such
disciplinary action (including dismissal) on any other ground under the
terms and conditions of service applicable to him in relation to his
employment.
Penalty for illegal strikes
Any person who commences a strike which is illegal under this Act or goes
or remains on, or otherwise takes part in, any such strike shall be
punishable with imprisonment for a term which may extend to six months,
or with fine which may extend to one thousand rupees, or with both.
Penalty for instigation, etc
Any person who instigates or incites other persons to take part in, or
otherwise acts in furtherance of, a strike which is illegal under this act shall
be punishable with imprisonment for a term which may extend to one year,

or with fine which may extend to two thousand rupees, or with both.
Penalty for giving financial aid to illegal strikes
Any person who knowingly expends or supplies any money in furtherance
or support of strike which is illegal under this act shall be punishable with
imprisonment for a term which may extend to one year, or with fine which
may extend to two thousand rupees, or with both.
Power to prohibit lock-outs in certain establishments
necessary to do so, it may by general or special order, prohibit lock-outs in
any establishment pertaining to any essential service specified in the order.
Upon the issue of an order under,
 No employer in relation to an establishment to which the order applies
shall commences any lock-out;
 Any lock-out declared or commenced whether before or after the issue
of the order by any employer in relation to an establishment to which
the order applies shall be illegal.
Any employer in relation to an establishment who commences continues or
otherwise acts in furtherance of a lock-out which is illegal under this section,
shall be punishable with imprisonment for a term which may extend to six
months, or with fine which may extend to one thousand rupees or with both.
Power to prohibit lay-off in certain establishments
necessary or expedient to do so, it may, by general or special order, prohibit
lay-off, on any ground other than shortage of power or natural calamity.
Upon the issue of an order
 No employer in relation to an establishment to which the order applies
shall lay-off or continue the lay-off any workman unless such lay-off is
due to shortage of power or to natural calamity and any laying off or
continuation of laying-off shall unless such laying-off or continuation
of laying-off is due to shortage of power or to natural calamity, be
illegal;
 A workman whose laying-off is illegal shall be entitled to all the
benefits under any law for the time being in forces as if he had not
been laid-off.
Any employer in relation to an establishment who lays off or continues the
laying off of any workman shall, if such laying-off or continuation of laying-

off is illegal under this section, be punishable with imprisonment for a term
which may extend to six months, or with fine which may extend to one
thousand rupees, or with both.
Power to arrest without warrant: Notwithstanding anything contained
in the code of criminal procedure, 1973, any police officer may arrest without
warrant any person who is reasonably suspected of having committed any
offence under this Act
Offences to be tried summarily
Notwithstanding anything contained in the code of criminal procedure,
1973, all Offences under this Act shall be tried in a summary way by any
metropolitan magistrate, or any judicial magistrate of the first class
specially empowered in this behalf by the state government.
Act to override other laws
The provisions of this Act and of any order issued thereunder shall effect
notwithstanding anything inconsistent therewith contained in the
industrial disputes Act, 1947 or any other law for the time being in force.
Repeal and saving
The Essential Services Maintenance Ordinance, 1981, is here by repealed.
Notwithstanding such repeal, anything done or any action taken under the
said ordinance shall be deemed to have been done or taken under the
corresponding provisions of this Act.

Q.10. MATERNITY BENEFITS ACT 1961
The Maternity Benefit Act, aims to regulate of employment of women
employees in certain establishments for certain periods before and after
child birth and provides for maternity and certain other benefits.
The Act extends to the whole of India and is applicable to:
 Every factory, mine or plantation (including those belonging to
Government) and
 An establishment engaged in the exhibition of equestrian, acrobatic
and other performances, irrespective of the number of employees, and
 To every shop or establishment wherein 10 or more persons are
employed or were employed on any day of the preceding 12 months.
The State Government may extend the Act to any other establishment or
class or establishments; industrial, commercial, agricultural or otherwise.
What is Maternity Benefit?
Every woman shall be entitled to, and her employer shall be liable for, the
payment of maternity benefit, which is the amount payable to her at the
rate of the average daily wage for the period of her actual absence.
Period for Which Benefit Allowed
The maximum period for which any woman shall be entitled to maternity
benefit shall be 12 weeks in all whether taken before or after childbirth.
However she cannot take more than six weeks before her expected delivery.
Who is Entitled to Maternity Benefit
Every woman employee, whether employed directly or through a contractor,
who has actually worked in the establishment for a period of at least 80 days
during the 12 months immediately preceding the date of her expected
delivery, is entitled to receive maternity benefit.
For calculating the number of days on which a woman has actually worked
during the preceding 12 months, the days on which she has been laid off or
was on holidays with wages shall also be counted.
There is neither a wage ceiling for coverage under the Act nor there is any
restriction as regards the type of work a woman is engaged in.
Notice for Maternity Benefit
A woman employee entitled to maternity benefit may give a notice in writing
to her employer, stating as follows:
 that her maternity benefit may be paid to her or to her nominee (to be

specified in the notice);
 that she will not work in any establishment during the period for
which she receives maternity benefit; and
 that she will be absent from work from such date (to be specified by
her), which shall not be earlier than 6 weeks before the date of her
expected delivery.
The notice may be given during the pregnancy or as soon as possible, after
the delivery.
On receipt of the notice, the employer shall permit such woman to absent
herself from work after the day of her delivery. The failure to give notice,
however, does not disentitle the woman to the benefit of the Act.
Restriction on Employment of Pregnant Women
No employer should knowingly employ a woman during the period of 6
weeks immediately following the day of her delivery or miscarriage or
medical termination of pregnancy. Besides, no woman should work in any
establishment during the said period of 6 weeks.
Further, the employer should not require a pregnant woman employee to do
an laborious work involving long hours of standing or any work which is
likely to interfere with her pregnancy or cause miscarriage or adversely
affect her health, during the period of 1 month preceding the period of 6
weeks before the date of her expected delivery, and any period during the
said period of 6 weeks for which she does not avail of the leave.
Discharge or Dismissal to be Void
When a pregnant woman absents herself from work in accordance with the
provisions of this Act, it shall be unlawful for her employer to discharge or
dismiss her during, or on account of, such absence, or give notice of discharge
or dismissal in such a day that the notice will expire during such absence or
to vary to her disadvantage any of the conditions of her services.
Dismissal or discharge of a pregnant woman shall not disentitle her to the
maternity benefit or medical bonus allowable under the Act except if it was
on some other ground.
Leave for Miscarriage and Illness
In case of miscarriage or medical termination of pregnancy, a woman shall,
on production of the prescribed proof, be entitled to leave with wages at the
rate of maternity benefit, for a period of 6 weeks immediately following the
day of her miscarriage or medical termination of pregnancy.
Leave for Tubectomy Operation

In case of tubectomy operation, a woman shall, on production of prescribed
proof, be entitled to leave with wages at the rate of maternity benefit for a
period of two weeks immediately following the day of operation.
Leave for Illness
Leave for a maximum period of one month with wages at the rate of
maternity benefit are allowable in case of illness arising out of pregnancy,
delivery, premature birth of child, miscarriage or medical termination of
pregnancy or tubectomy operation.
Medical Bonus
Every woman entitled to maternity benefit shall also be allowed a medical
bonus of Rs. 250, if no pre-natal confinement and post-natal care is provided
for by the employer free of charge.
Duties of Employers
Important obligations of employers under the Act are:
 To pay maternity benefit and/or medical bonus and allow maternity
leave and nursing breaks to the woman employees, in accordance with
the provisions of the Act.
 Not to engage pregnant women in contravention of section 4 and not
to dismiss or discharge a pregnant woman employee during the period
of maternity leave.
Right of Employees
Important rights of an employee are:
 To make a complaint to the Inspector and claim the amount of
maternity benefit improperly withheld by the employer.
 To appeal against an order of the employer depriving her of the
maternity benefit or medical bonus or dismissing or discharging her
from service, to the competent authority, within 60 days of the service
of such order.
Penalties for Contravention of Act by Employer
For failure to pay maternity benefit as provided for under the Act, the
penalty is imprisonment up to one year and fine up to Rs. 5000. The
minimum being 3 months and Rs. 2000 respectively.
For dismissal or discharge of a woman as provided for under the Act, the
penalty is imprisonment up to one year and fine up to Rs. 5000. The
minimum being 3 months and Rs.2000 respectively.

UNIT IV
Q.11. COLLECTIVE BARGAINING
Collective Bargaining is a process in which representatives employers and
employees meet and try to negotiate an agreement which specifies the
nature of future relationship between the two.
Objectives of the Collective Bargaining: The objectives of the collective
bargaining are:
a) To settle disputes/conflicts relating wages and working conditions
b) To protect the interests of workers through collective action
c) To resolve the differences between workers and management through
voluntary negotiation and arrive at consensus
d) To avoid third party interventions in matters relating to employees
Prerequisites of Collective Bargaining: Pre-requisites of Collective
Bargaining are:
a) Strong, independent and well-organized unions.
b) Recognition of the union as bargaining agents.
c) Willingness to adopt a “Give-and-Take” approach
d) Favourable political climate
e) Mutual trust and good faith
f) Absence of unfair labour practices
g) A problem-solving approach rather than a fire-fighting approach
Importance of Collective Bargaining
a. Importance to Employees: Collective Bargaining helps the employees
 Collective bargaining develops a sense of self-respect and
responsibility among the employees.
 It increases the strength of the workforce, thereby, increasing their
bargaining capacity as a group
 Collective bargaining increases the morale and productivity of
employees.
 It restricts management’s freedom for arbitrary action against the
employees. Moreover, unilateral actions by the employer are also
discouraged.

 Effective collective bargaining machinery strengthens the trade
unions movement.
 The workers feel motivated as they can approach the management on
various matters and bargain for higher benefits.
 It helps in securing a prompt and fair settlement of grievances.
b. Importance to Employers: Collective Bargaining helps the employers
 It becomes easier for the management to resolve issues at the
bargaining level rather than taking up complaints of individual
workers.
 Collective bargaining tends to promote a sense of job security among
employees and thereby tends to reduce the cost of labour turnover to
management.
 Collective bargaining opens up the channel of communication between
the workers and the management and increases worker participation
in decision-making.
 Collective bargaining plays a vital role in settling and preventing
industrial disputes.
c. Importance to Society: Collective Bargaining helps the society
 Collective bargaining leads to industrial peace in the country.
 It results in establishment of a harmonious industrial climate
 The discrimination and exploitation of workers is constantly being
checked.
 Helps to extend the democratic principle from the political to the
industrial field.
Collective Bargaining Process
The collective bargaining process comprises of five core steps:
1. Prepare: Choosing a negotiation team and representatives of both the
union and employer. Both parties should be skilled in negotiation and
labour laws, and both examine available information to determine
whether they have a strong standing for negotiation.
2. Discuss: Here, the parties decide the ground rules that will guide the
negotiations.
3. Propose: Both representatives make opening statements, outlining
options and possible solutions to the issue at hand.

4. Bargain: Following proposals, the parties discuss potential
compromises, bargaining to create an agreement that is acceptable to
both parties.
5. Settlement: Once an agreement is made between the parties, it must
be put in writing, signed by the parties, and put into effect.
Types of Bargaining
1. Conjunctive or Distributive Bargaining: In this form of collective
bargaining, both the parties viz. the employee and the employer try to
maximize their respective gains. It is based on the principle, “my gain
is your loss, and your gain is my loss” i.e. one party wins over the
other.
The economic issues such as wages, bonus, other benefits are
discussed, where the employee wishes to have an increased wage or
bonus for his work done, whereas the employer wishes to increase the
workload and reduce the wages.
2. Co-operative or Integrative Bargaining: Both the employee and
the employer sit together and try to resolve the problems of their
common interest and reach to an amicable solution. In the case of
economic crisis, such as recession, which is beyond the control of either
party, may enter into a mutual agreement with respect to the working
terms.
For example, the workers may agree for the low wages or the
management may agree to adopt the modernized methods, so as to
have an increased production.
3. Productivity Bargaining: This type of bargaining is done by the
management, where the workers are given the incentives or the bonus
for the increased productivity. The workers get encouraged and work
very hard to reach beyond the standard level of productivity to gain
the additional benefits.
Through this form of collective bargaining, both the employer and the
employee enjoy the benefits in the form of increased production and
the increased pay respectively.
4. Composite Bargaining: In this type of collective bargaining, along
with the demand for increased wages the workers also express their
concern over the working conditions, recruitment and training
policies, environmental issues, mergers and amalgamations with
other firms, pricing policies, etc. with the intention to safeguard their
interest and protect the dilution of their powers.

Q.12. WORKERS PARTICIPATION IN MANAGEMENT
Workers' participation in management means sharing the decision-making
power with the lower ranks of the organization in an appropriate manner.
The philosophy underlying workers' participation stresses:
(a) Democratic participation in decision-making;
(b) Involvement in organizational goals by creative suggestions and
initiative
(c) Encourages people to accept responsibility
(d) Maximum employer-employee collaboration;
(e) Minimum state intervention;
(f) Realization of a greater measure of social justice;
(g) Greater industrial efficiency through mental and emotional
involvement of workers, rather than mere muscular activity
(h) Higher level of organizational health and effectiveness.
Objectives
1. To raise level of motivation of workers by closer involvement
2. It is an opportunity for expression and to provide a sense of
importance to workers.
3. It forges ties of understanding, leading to better effort and harmony.
4. It is a device to counter-balance powers of managers.
5. It is panacea for solving industrial relation problems.
Forms of Participation
1.Collective Bargaining: Collective bargaining is based on the principle
of balance of power. Joint consultation is a particular technique which is
intended to achieve a greater degree of harmony and cooperation by
emphasizing matters of common interest. Collective bargaining results in
collective agreements which lay down certain rules and conditions of service
in an establishment.
2.Works Councils: These are exclusive bodies of employees, assigned with
different functions in the management of an enterprise.
3.Joint Management Councils and Committees: Mainly these bodies
are consultative and advisory, with decision-making being left to the top
management. As they are consultative and advisory, neither the

managements nor the workers take them seriously.
4.Board Representation: The role of a worker representative in the board
of directors is negotiating the worker's interest with the other members of
the board. The effectiveness of workers' representative at the board depends
upon his ability to participate in decision-making, his knowledge of the
company affairs, his educational background, his level of understanding and
also on the number of worker representatives in the Board.
5.Workers’ Ownership of Enterprise: In this form of management,
workers have complete control of management through an elected board and
workers council. Even in such a system, there exist two distinct managerial
and operative functions with different sets of persons to perform them.
Though workers have the option to influence all the decisions taken at the
top-level, in actual practice, the board and the top management team
assume a fairly independent role in taking major policy decisions for the
enterprises, especially in financial matters.
Types of Workers Ownership
1.ESOP: In ESOP (Employees Stock Option Plan) is a type of tax-qualified
employee benefit plan in which most or all of the assets are invested in the
employer’s stock. A stock option plan grants employees the right to buy
company stock at a specified price during a specified period. In an ESOP,
the shares are held in a separate trust until employees retire or leave the
company.
Today, many private business owners also use ESOPs as their exit strategy.
The tax advantages associated with ESOPs can be significant for the
company. For all companies, payments made to the ESOP are tax
deductible.
2.Profit Sharing Plan: Profit sharing is an arrangement in which an
employer shares some of its profits with its employees. The compensation
can be stocks, bonds, or cash, and can be immediate or deferred until
retirement. Profit-sharing allows for changing contributions each year.
Contributions are determined by a formula to allocate the overall
contribution and distribution of accumulated funds after the retirement age.
Unless the plans are defined as an elective deferral plan, the contributions
are not tax deductible. Contributions and earnings can grow tax-deferred
until withdrawal.
The essential features of profit-sharing are:
(a) the arrangement is voluntary but based on an agreement between
employer and employee;

(b) the amount to be distributed amongst the participants depend upon
the profits earned by the enterprise; and
(c) the proportion of the profits to be distributed is determined well in
advance.
The aims of profit-sharing plans are:
(a) to promote increased effort and output,
(b) to share some gains in the productivity of the firm,
(c) to secure employee co-operation and to achieve industrial harmony;
and
(d) to strengthen unity of interest and employee loyalty to organizational
objectives.
The profit-sharing scheme is comparatively easy and less expensive to
adopt. In some cases, these schemes have become successful resulting in
increased production at a lower cost. There are cases where they have not
made any significant contribution towards improving the overall efficiency
of the company.
To be effective, profit-sharing schemes should be based on the
considerations of profitability of industrial units, computation of surplus
profit for distribution on an average basis, and fair return on capital
invested in an enterprise.
It should not be treated as a substitute for adequate wages but provide
something extra to the participants. Full support and co-operation of the
union is to be obtained in implementing such a scheme.
3.Turnaround management: Turnaround management is a process
dedicated to corporate renewal. It involves the formulation and
implementation of a strategic plan and a set of actions for corporate renewal
and restructuring, typically during times of severe corporate financial
distress.
Turnaround management involves management review, root failure causes
analysis, and SWOT analysis to determine why the company is failing.
Once the analysis is completed, a long term strategic plan and restructuring
plan are created. These plans may or may not involve a bankruptcy filing.
Once approved, turnaround professionals begin to implement the plan,
continually reviewing its progress and make changes to the plan as needed
to ensure the company returns to solvency.

Q.13. QUALITY OF WORK LIFE
Quality of Work Life (QWL) is a concept which talks about the overall focus
on employee as a person rather than just the work done by him/her. Quality
of Work Life basically talks about the methods in which an organisation can
ensure the holistic well-being of an employee instead of just focusing on
work-related aspects.
The distinctive elements of QWL are
(a) A concern about the impact of work on people as well as on
organisational effectiveness, and
(b) The idea of participation in organisational problem-solving and decision
making.
QWL leads to:
(a) Positive employee attitudes toward their work and the company.
(b) Increased productivity and intrinsic motivation.
(c) Enhanced organizational effectiveness and competitive advantage
Ways to achieve quality of work life
Each organisation has its own way of achieving this. But the most common
elements adopted are:
1. Providing Job Security: If an employee is confident that his job is
secure, they are much more relaxed and can perform better.
2. Rewards and recognition: If an employee is awarded for a good
performance, its helps them to perform even better.
3. Flexible work timings: Flexibility during working hours significantly
contributes to improving the quality of work life for an employee.
4. Increased employee participation: Involving employees in
discussions, strategies & feedback helps increase the employees QWL
5. Open communication: Transparency between management and
employees gives them confidence as they are updated with the business and
also feel at ease being approachable
6. Career growth plans: Discussing the future of the employee in the
company, interesting aspects of the job, career development, etc., are all
appreciated by employees
7. Job enrichment: Companies which are able to enrich the job with new
tasks, better learning & training, more opportunities, etc., are more likely
to keep employees happy at work.

Q.14. QUALITY CIRCLES (QC)
'Quality circles' is widely used form of participative management. Basically,
the Quality Circle consists of a group-organization with eight to ten
employees who meet once a week, fortnight or month depending upon the
problems and their frequency of generation. These members discuss various
problems related to quality and recommend alternative solutions to solve
the problems by investigating the causes. Depending upon the
recommendations, corrections are made.
Composition of Quality Circle
1. Members: A group of people, six to eight members, from the same work
area, coming together naturally to identify work area problems, analyse
them and find solutions.
2.Circle Leader: A leader should be elected democratically among the
members. The leader once elected need not be permanent.
3. Facilitator: The management will select a facilitator to coordinate and
to help circle activities.
4. Steering Committee: A steering committee comprising of various
departmental and divisional heads will review the QC operations in the
organizations and provide the necessary support and help to the circles.
5. Executive Committee: An executive committee will comprise of two to
three persons from Senior Management Cadre to formulate policies and to
incorporate various changes from time to time to make the QC successful.
Quality Circle Operation
During the quality Circle process each problem will pass through the
following stages of the operation cycle:
1. Problem collection: The QC members first identify and prioritize
problems depending on the potential benefits and urgency.
2. Problem selection: Members may pick up one problem, at a time, in
order of priority.
3. Problem analysis: In this step, the group tries to establish the cause-
effect relationship first.
4. Problem solution: Various alternative solutions to a problem should
be explored and the optimum solution to be chosen.
5. Management presentation: Solution should be presented to the
management stating the main observation and the benefit anticipated
6. Implementation and review and follow up: The circle members
should prepare an implementation schedule and review plan after
receiving the approval from the management.

Q.16. WORKER EMPOWERMENT
Employee empowerment is giving employees a certain degree of autonomy
and responsibility for decision-making regarding their specific
organizational tasks. It allows decisions to be made at the lower levels of an
organization where employees have a unique view of the issues and
problems facing the organization at a certain level.
Empowerment has become necessary due to the following reasons:
1. Time to respond has become much shorter.
2. First-line employees must make many decisions.
3. An employee feels much more control in their life since authority is
given to individual decision-making.
4. There is great untapped potential among employees, which can be
revealed through empowerment.
Employee empowerment can be done by:
1. Seeking opinions from the employees.
2. Facilitating the employees to try their ideas.
3. Encouraging for sharing of resources and information.
4. Improving the communication skills of the employees.
Importance of Employee Empowerment:
1. The investment in employees can improve productivity, which can
reduce the costs.
2. Individual employees experience a feeling of self-esteem, self-efficacy
and self-confidence.
3. It also helps in making employees more self-reliant.
4. It allows independent decision-making by the employees.
5. It helps a firm to assign different projects to enhance the competence of
employees.
6. More freedom given to employees can be utilized for taking judicious
decisions.
7. Assigning proper authority can improve the organizational
effectiveness.
8. Independent decision-making can improve self-confidence among the
employees.
9. It can boost up the morale of the employees.
10. The overall efficiency of an organization can be multiplied due to
empowerment of the employees.

Q17. ESOP
An Employee Stock Option Plan (ESOP) is a stock option granted to
specified employees of a company. Many companies use employee stock
options plans to compensate, retain, and attract employees. These plans are
contracts between a company and its employees that give employees the
right to buy a specific number of the company’s shares at a fixed price within
a certain period of time. The fixed price is often called the grant or exercise
price. Employees who are granted stock options hope to profit by exercising
their options to buy shares at the exercise price when the shares are trading
at a price that is higher than the exercise price.
Basic Features of ESOPs
The conventional stock option plans give the employees a choice or option to
a fixed proportion of shares in the company, if they wish to. These offers vest
over a period to an employee subject to fulfilment of certain conditions such
as continued employment for a specified period or there can be performance
based plans wherein the employee has to meet certain level of performance
as laid down by the Company.
Various Stock Options Schemes Available
1. Employee Stock Option Scheme (ESOS): An ESOS is a right to buy
shares at a pre-determined price. The option provided under this scheme
confers a right but not an obligation on the employee. Stock options are
subject to vesting that requires continued service over a specified period
of time. Upon vesting of options, employees can exercise the options to
get shares by paying the pre-determined exercise price.
2. Employee Stock Purchase Plan (ESPP): An ESPP provides the
employees an option to purchase company shares often at a discount on
FMV (fair market value) at grant or on exercise. The plan term
determines the date and price at which the employee is entitled to
purchase company stock.
3. Stock Appreciation Right (SAR)/Phantom Equity Plan (PEP):
Under SAR/PEP, the employees are allotted notional shares/units at a
pre-determined price. When the employee fulfils the vesting conditions,
he is paid cash equivalent to the net gain.
4. Restricted Stock Award (RSA): Under RSA, an employee receives an
award of stock, subject to certain underlying conditions. If the
underlying conditions are not met, the shares are forfeited.
5. Restricted Stock Unit (RSU): Under RSU, an employee is awarded
an entitlement to receive stock at some specified date in the future,
subject to certain conditions.

Q.18. PROFIT SHARING PLAN
Profit sharing is an arrangement in which an employer shares some of its
profits with its employees. The compensation can be stocks, bonds, or cash,
and can be immediate or deferred until retirement. Profit-sharing allows for
changing contributions each year. Contributions are determined by a
formula to allocate the overall contribution and distribution of accumulated
funds after the retirement age. Unless the plans are defined as an elective
deferral plan, the contributions are not tax deductible. Contributions and
earnings can grow tax-deferred until withdrawal.
The essential features of profit-sharing are:
(a) the arrangement is voluntary but based on an agreement between
employer and employee;
(b) the amount to be distributed amongst the participants depend upon
the profits earned by the enterprise; and
(c) the proportion of the profits to be distributed is determined well in
advance.
The aims of profit-sharing plans are:
(a) to promote increased effort and output,
(b) to share some gains in the productivity of the firm,
(c) to secure employee co-operation and to achieve industrial harmony;
and
(d) to strengthen unity of interest and employee loyalty to organizational
objectives.
The profit-sharing scheme is comparatively easy and less expensive to
adopt. In some cases, these schemes have become successful resulting in
increased production at a lower cost. There are cases where they have not
made any significant contribution towards improving the overall efficiency
of the company.
To be effective, profit-sharing schemes should be based on the
considerations of profitability of industrial units, computation of surplus
profit for distribution on an average basis, and fair return on capital
invested in an enterprise.
It should not be treated as a substitute for adequate wages but provide
something extra to the participants. Full support and co-operation of the
union is to be obtained in implementing such a scheme.

Q.19. TURNAROUND MANAGEMENT
Turnaround: A turnaround can refer either to a business firm that faces
financial disaster or action taken to prevent the occurrence of a financial
disaster. The true nature of turnaround is a firm whose recent past or
projected future financial performance unacceptable to the owners or
creditors.
Turnaround Management: Turnaround management is a process
dedicated to corporate renewal. It involves the formulation and
implementation of a strategic plan and a set of actions for corporate renewal
and restructuring. Before a viable turnaround strategy can be formulated,
one must identify the root causes of the crisis.
The turnaround process frequently involves the following stages:
1. Management change - Consultants may be called in to manage the
turnaround of the firm.
2. Situation analysis - A situation analysis is performed to evaluate the
prospects of survival. Assuming the firm is worth turning around,
depending on the root causes of the distress one or more of the following
turnaround strategies: Change of top management, Divestment of
certain assets, Reformulation of strategy, Revenue increase, Cost
reduction, Strategic acquisitions, etc.
3. Emergency action plan - achieve positive cash flow as soon as possible
by eliminating departments, reducing staff, etc.
4. Business restructuring - once positive cash flow is achieved, the strategic
plan is implemented, improving continuing operations, adjusting the
product mix and repositioning products if necessary. The management
team begins to focus on achieving sustained profitability.
5. Return to normalcy - the company becomes profitable and the changes
are internalized. Employees regain confidence in the firm and emphasis
is placed on growing the restructured business.
Abandonment Strategy
In some cases the prospects of the firm may be too bleak to continue as an
ongoing operation and an exit strategy may be appropriate. Different
strategies may be pursued that vary in their immediacy. An immediate
abandonment strategy exits the market by immediately liquidating or
selling to another firm. In other situations, a harvest strategy is appropriate
by which the firm plays the end-game, maximizing near-term cash flows at
the expense of market position.

UNIT V
Q.20. STRATEGIC MANAGEMENT OF INDUSTRIAL RELATIONS
Concept of Industrial Relations
The term ‘Industrial Relations’ comprises of two terms: ‘Industry’ and
‘Relations’.
“Industry” refers to “any productive activity in which an individual (or a
group of individuals) is (are) engaged”.
By “relations” we mean “the relationships that exist within the industry
between the employer and his workmen.”
Industrial relations are the relationships between employees and employers
within the organizational settings. It is basically the interactions between
employers, employees and the government, and the institutions and
associations through which such interactions are mediated.
The relationships which arise at and out of the workplace generally include
the relationships between individual workers, the relationships between
workers and their employer and the relationships between employees.
The relationships employers and workers have with the organizations are
formed to promote their respective interests, and the relations between
those organizations, at all levels. Industrial relations also includes the
processes through which these relationships are expressed (such as,
collective bargaining, workers’ participation in decision-making, and
grievance and dispute settlement), and the management of conflict between
employers, workers and trade unions, when it arises.
Strategic Industrial Relations
Strategic industrial relations is an approach for analysing the strategic
choices made by the actors – employers, workers and their organizations,
and policy makers – in industrial relations systems and the implications of
those choices for industrial relations outcomes.
Strategic industrial relations is based on the premise that these actors
deliberately choose the strategies and institutional structures that they
believe will best facilitate attainment of their objectives. Like its sister
approach, strategic human resource management, strategic industrial
relations builds on concepts drawn from two bodies of research:
 Strategic management and
 Industrial organization economics.
Strategic industrial relations, however, differs from strategic management
and strategic human resource management in a key respect. Whereas

strategic management and strategic human resource management focus on
the identification and implementation of choices that advance the employing
organization’s objectives, strategic industrial relations has a broader focus.
Specifically, strategic industrial relations focuses on identifying and
implementing choices that advance the individual or joint objectives of
workers, worker organizations, and industrial relations policy makers as
well as the objectives of employing organizations.
Strategic Industrial Relations Models
The most general model of strategic industrial relations is articulated by
Kochan et al (1994). Their model integrates concepts from the literature on
business strategy with the more traditional industrial relations systems
models (e.g., Dunlop, 1958).
Whereas traditional industrial relations systems models emphasize the role
of environmental factors in determining industrial relations processes and
outcomes, their model portrays industrial relations processes and outcomes
as determined by the interaction of environmental pressures and
organizational responses.
This model is useful for specifying broad categories of factors (e.g., external
environment, values, business strategy, history) likely to influence the
strategic choices made by industrial relations actors.
Labour-Management Relations
Labour-Management relations is a field that deal with the relationship that
exist between the management and labour and the other various external
and internal forces that affects employer and employees.
Labour-Management relations are the most complicated set of relations that
any HR Manager has to deal with. Efficient maintenance of labour relations
helps the HR Managers in developing a harmonious environment within the
organization which, in turn, helps the organization in effectively achieving
its goals and objectives.
At the heart of labour relations is the desire of both management and labour
to create an efficient and effective organization. When this happens,
management is planning, organizing and directing work such that
employees understand their roles and responsibilities in a way that they can
produce the desired outcomes. There is a healthy work environment and
strong working relationships amongst everyone.
The development of healthy labour relations requires the existence of strong
and well-organised trade unions and associations of employers in the
enterprise. It also requires that the attitude of the management towards
labour must be cordial, sympathetic, positive, humanistic and democratic in

order to eliminate frustrations, animosity and poor labour relations. Such
attitude of the employers will raise the job security of workers and will
provide an opportunity for labour participation in management.
Participation of labour in management will enable the labour to take part
in those management decisions, which affect the terms and conditions of
employment. The mutual association of labour and management will create
a congenial atmosphere free of animosity for consultations, discussions and
negotiations, which would ultimately lead to harmonious labour
management relations. The Government too plays a significant role in
labour relations because legislate and enforce the labour laws.
The two-fold objectives of good labour relations is to preserve industrial
peace and secure industrial co-operation.
The industrial peace and harmony is necessary for all round progress of an
enterprise. Harmonious labour relations lead to higher productivity,
peaceful running of an enterprise and overall progress of the organisation.
The poor labour relations generate industrial disharmony, and friction
which results in industrial disputes and causes hazardous industrial
situations.

Q.21. TURNAROUND MANAGEMENT
A turnaround can refer either to a business firm that faces financial disaster
or action taken to prevent the occurrence of that financial disaster.
Turnaround management is the systematic and rapid implementation of a
range of measures to correct a seriously unprofitable situation. It might
include dealing with a financial disaster or measures to avoid the highly
likely occurrence of such a disaster.
Turnaround management uses analysis and planning to save troubled
companies and returns them to solvency, and to identify the reasons for
failing performance in the market, and rectify them. Turnaround
management involves management review, root failure causes analysis, and
SWOT analysis to determine why the company is failing. Once the analysis
is completed, a long term strategic plan and restructuring plan are created.
Once approved, turnaround professionals begin to implement the plan,
continually reviewing its progress and make changes to the plan as needed
to ensure the company returns to solvency.
The Process of Turnaround: Organisations have to make a series of
action choices during the turnaround process. The series of turnaround
actions taken by organizations can be grouped under the following
categories.
1) Change in the leadership: The turnaround process generally starts
with personnel change at the leadership position. Though leadership
change is an effective turnaround choice, it may not be an effective
strategy in all situations especially when the causes of decline are
external.
2) Forming the team at the top: The CEO must build a team of
managers proficient at addressing the complexity of turnaround
process. For evaluation of all possible options of turnaround, the newly
constituted team at the top formulates a strategic planning for
implementation of turnaround plan.
3) Change in strategy: Diagnosing the problem with the support of top
management, identifying the root causes, formulation of strategy
based on contingency, choice of strategy for implementation are of key
elements in turn around process. However, these strategies usually
take years to yield results. Therefore, less cost-effective diversification
based recovery strategies are also employed in turnaround process.
4) Retrenchment of assets and people: Retrenchment is a crucial
stage in recovery phase of the turnaround process. During downsizing,
practices such as allowing employees to leave with dignity, helping

them find jobs, etc., can motivate remaining employees to stay and
work productively.
5) Upgrading of technology: When obsolete technologies and
processes have caused the organizations decline, upgrade technology
in the turnaround process.
6) Financial restructuring: In many of the cases, the interest burden
was one of the important causes of decline. It would not have been
possible for any of these declining firms to turn around without
adequate financial restructuring with the help of banks, financial
institutions and the parent company. Simultaneously, strengthening
finance function in the organisation is important. Cash flows need to
be closely monitored and financial implications of all important
decisions carefully evaluated.
7) Organizational change: Reallocation of people and structural
changes to implement strategic changes are essential ingredients of
turnaround. Creation of new teams for a series of change initiatives,
relocation of staff and stopping some of the non-value added activities,
restructured departments to meet the requirements of the market and
availability of skilled people are some of the structural strategic
changes to adopt. Changes are also required in the organisation to
smoothen the information flow.
8) Support of the parent company: Long periods of sickness lead to
low morale, indiscipline, and obsolescence of technology, internal
management systems and practices. Turnaround actions are geared
towards reversing these trends and enabling the company to operate
effectively. Explicit support of the parent company dilutes these
problems. It is essential for organisations to get credible support from
the parent companies.

Q.22. INTERNATIONAL LABOUR ORGANISATION
The International Labour Organization (ILO) is a United Nations agency
dealing with labour problems, particularly international labour standards,
social protection, and work opportunities for all. The ILO has 187 member
states
In 1969, the organisation received the Nobel Peace Prize for improving
peace among classes, pursuing decent work and justice for workers, and
providing technical assistance to other developing nations.
Aims and Purposes of ILO
The aims and purposes of the ILO were redefined in the form of a declaration
⎯ the Declaration of Philadelphia.
The Declaration is based on the following fundamental principles:
6. Labour is not a commodity.
7. Freedom of expression and of association is essential for sustained
progress.
8. Poverty anywhere constitutes a danger to prosperity everywhere.
9. The war against want requires to be carried on with unrelenting
vigour by each nation, and by a continued and concerted international
effort
The main aims of the organisation are:
1. To remove the hardships and deprivations of the working masses all
over the world and to ensure economic justice for them;
2. To improve their living and working conditions as a vital step towards
the establishment of a universal and lasting peace based on social
justice.
Structure of ILO
The International Labour Organisation has a three-party governing
structure – representing governments, employers, and workers (usually
with a ratio of 2:1:1).
The principal organs of the ILO are:
1. The International Labour Conference;
2. The Governing Body; and
3. The International Labour Office
The governing body decides the agenda of the International Labour
Conference, adopts the draft programme and budget of the organization for

submission to the conference, elects the director-general, requests
information from member states concerning labour matters, appoints
commissions of inquiry and supervises the work of the International Labour
Office.
The ILO organises the International Labour Conference in Geneva every
year in June, where conventions and recommendations are crafted and
adopted. The conference also makes decisions about the ILO's general
policy, work programme and budget.
Each member state has four representatives at the conference: two
government delegates, an employer delegate and a worker delegate. All of
them have individual voting rights, and all votes are equal, regardless of the
population of the delegate's member state.

Q.23. AFL-CIO
The American Federation of Labour and Congress of Industrial
Organizations (AFL-CIO) is the largest federation of unions in the United
States. It is made up of fifty-six national and international unions, together
representing more than 12 million active and retired workers. The AFL-CIO
engages in substantial political spending and activism, typically in support
of Democrats and liberal or progressive policies.
The AFL-CIO was formed in 1955 when the AFL and the CIO merged after
a long separation. Membership in the union peaked in 1979, when the AFL-
CIO had nearly twenty million members. From 1955 until 2005, the AFL-
CIO's member unions represented nearly all unionized workers in the
United States. Several large unions split away from AFL-CIO and formed
the rival Change to Win Federation in 2005, although a number of those
unions have since re-affiliated. The largest union currently in the AFL-CIO
is the American Federation of State, County and Municipal Employees
(AFSCME), with approximately 1.4 million members.
Membership
The AFL-CIO is a federation of international labour unions. As a voluntary
federation, the AFL-CIO has little authority over the affairs of its member
unions except in extremely limited cases, such as the ability to expel a
member union for corruption. As of June 2014, the AFL-CIO had 56 member
unions representing 12.5 million members.
Governance
The AFL-CIO is governed by its members, who meet in a quadrennial
convention. Each member union elects delegates, based on proportional
representation. The AFL-CIO's state federations, central and local labour
councils, constitutional departments, and constituent groups are also
entitled to delegates. The delegates elect officers and vice presidents, debate
and approve policy, and set dues.

Q.24. GLOBALIZATION
The term globalization can be used in different contexts. The general usages
of the term Globalization can be as follows:
i. Interactions and interdependence among countries.
ii. Integration of world economy.
iii. Deterritorisation.
By synthesising all the above views, Globalization can be broadly defined as
follows:
It refers to a process whereby there are social, cultural, technological
exchanges across the border.
The term Globalization was first coined in 1980s. But even before this there
were interactions among nations. But in the modern days Globalization has
touched all spheres of life such as economy, education. Technology, cultural
phenomenon, social aspects etc.
Effect of Globalization on India
Globalization has its impact on India which is a developing country. The
impact of globalization can be analysed as follows:
1. Access to Technology: Globalization has drastically, improved the
access to technology. Internet facility has enabled India to gain access to
knowledge and services from around the world.
2. Growth of international trade: Tariff barriers have been removed
which has resulted in the growth of trade among nations. Global trade has
been facilitated by GATT, WTO etc.
3. Increase in production: Globalization has resulted in increase in the
production of a variety of goods. MNCs have established manufacturing
plants all over the world.
4. Employment opportunities: Establishment of MNCs have resulted in
the increase of employment opportunities.
5. Free flow of foreign capital: Globalization has encouraged free flow of
capital which has improved the economy of developing countries to some
extent.
Negative effect of globalization
Globalization is not free from negative effects. They can be summed up as
follows:
1. Inequalities within countries: Globalisation has increased inequalities
among the countries. Some of the policies of Globalization (liberalisation,

WTO policies etc.) are more beneficial to developed countries.
2. Financial Instability: As a consequence of globalization there is free
flow of foreign capital poured into developing countries. But the economy is
subject to constant fluctuations on account of variations in the flow of
foreign capital.
3. Impact on workers: Globalization has opened up employment
opportunities. But there is no job security for employees. Workers are not
permitted to organise trade unions.
4. Impact on farmers: Indian farmers are facing a lot of threat from global
markets. They are facing a serious competition from powerful agricultural
industries.
5. Impact on Environment: Globalization has led to 50% rise in the
volume of world trade. Some of the projects financed by World Bank are
potentially devastating to ecological balance.
6. Domination by MNCs: MNCs are in a position to dictate powers. They
are exploiting the cheap labour and natural resources of the host countries.
7. Threat to national sovereignty: Globalizations results in shift of
economic power from independent countries to international organisations,
like WTO United Nations etc. The sovereignty of the elected governments
are naturally undermined.

Q.25. LIBERALISATION
Progressive elimination of government control over economic activities is
known as “liberalisation”.
Liberalisation refers to freedom to business enterprises from excessive
government control and they are given freedom to make their own decisions
regarding production, consumption, pricing, marketing, borrowing, lending
& investments.
The major elements of Liberalisation in India includes the following:
1. De-licencing of industries: The Industrial Policy 1991 abolished
licencing for most industries which helped Indian companies to concentrate
on productive activities.
2. Liberalisation of foreign investment: At present FDI is 100 % in
certain sectors such as infrastructure, exports, hotels, tourism, etc. The
Liberalisation of FDI has resulted in certain benefits such as increased in
inflow of foreign capital.
3. Liberalisation of foreign technology imports: The liberalized import
of foreign technology led to technological improvement in Indian industries.
4. Liberalisation of industrial location: As per the Industrial Policy
1991, there is no need to obtain approval from central government for
industrial location. This enabled the Indian firms to set up industries at a
right location of their choice without much interference from government
authority.
5. Liberal taxation: The government of India has introduced liberal
reduction in taxation rates on direct tax & indirect tax, customs, excise,
service which has greatly benefited the firms operating in India.
Advantages of Liberalisation
1. Increase in foreign investment.
2. Increase in efficiency of domestic firms.
3. Rise in the rate of economic growth.
4. Control of price.
Disadvantages of Liberalisation
1. Increase in unemployment.
2. Loss to domestic unit.
3. Increased dependence on foreign nation.
4. Unbalanced development of sectors.

Q.26. MERGERS & ACQUISITIONS
Mergers and acquisitions (M&A) are defined as consolidation of companies.
Differentiating the two terms, Mergers is the combination of two companies
to form one, while Acquisitions is one company taken over by the other.
The reasoning behind M&A generally given is that two separate companies
together create more value compared to being on an individual stand. With
the objective of wealth maximization, companies keep evaluating different
opportunities through the route of merger or acquisition.
Mergers & Acquisitions can take place:
 by purchasing assets
 by purchasing common shares
 by exchange of shares for assets
 by exchanging shares for shares
Types of Mergers and Acquisitions:
Merger may take two forms:
 Merger through absorption or
 Merger through consolidation.
Mergers can also be classified into three types from an economic perspective
depending on whether in the same industry or not, into
 Horizontal (two firms are in the same industry),
 Vertical (at different production stages or value chain) and
 Conglomerate (unrelated industries).
From a legal perspective, there are different types of mergers like
 Short form merger,
 Statutory merger,
 Subsidiary merger and
 Merger of equals.
Reasons for Mergers and Acquisitions:
 Financial synergy for lower cost of capital
 Improving company’s performance and accelerate growth
 Economies of scale
 Diversification for higher growth
 To increase market share and positioning
 Strategic realignment and technological change
 Tax considerations
 Diversification of risk

Stages involved in any M&A:
Phase 1: Pre-acquisition review: This would include self-assessment of
the acquiring company with regards to the need for M&A, ascertain the
valuation and chalk out the growth plan through the target.
Phase 2: Search and screen targets: This would include searching for the
possible apt takeover candidates. This process is mainly to scan for a good
strategic fit for the acquiring company.
Phase 3: Investigate and valuation of the target: Once the appropriate
company is shortlisted through primary screening, detailed analysis of the
target company has to be done.
Phase 4: Acquire the target through negotiations: Once the target
company is selected, the next step is to start negotiations to come to
consensus for a negotiated merger. This brings both the companies to agree
mutually to the deal for the long term working of the M&A.
Phase 5: Post merger integration: If all the above steps fall in place, there
is a formal announcement of the agreement of merger by both the
participating companies.
Reasons for the failure of M&A
(a) Poor strategic fit: Wide difference in objectives and strategies of the
company
(b) Poorly managed Integration: Integration is often poorly managed
without planning and design.
(c) Incomplete due diligence: Inadequate due diligence can lead to failure
of M&A
(d) Overly optimistic: Too optimistic projections about the target company
leads to bad decisions and failure of the M&A

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