UNIT IV

COMPENSATION MANAGEMENT AND EMPLOYEE RELATION

INTRODUCTION TO COMPENSATION MANAGEMENT

Compensation management is the act of providing monetary value to an employee for the work
they do by means of a company process or policy. Some types of compensation include salary,
bonuses, and benefit packages. Companies use compensation management in order to find,
keep, and motivate employees to do quality work.

Compensation management is the act of distributing some type of monetary value to an

employee for their work by means of the company's policy or procedures. In basic terms, it is
paying an employee based upon the decided pay and benefit package for the position. The goal
of compensation management is to find quality people who perform quality work and then
compensate them in order to retain them and reduce turnover rates. Some different types of
compensation include salary, overtime pay, commission, bonuses, and benefits packages that
might include health and dental insurance, vacation time, and retirement savings.

DEFINATION OF COMPENSATION MANAGEMENT

The term compensation is used to mean employees’ gross earnings in the form of financial
rewards and benefits as part of employment relationship. In terms of human resource
management, compensation is referred to as money and other benefits received by an employee
for providing services to his employer. Compensation management, also known as wage and
salary administration, remuneration management, or reward management, is concerned with
designing and implementing total compensation package or salary structure.

Compensation may be viewed as a system of reward that motivates an employee to perform

better.

“Compensation means something, such as money, given or received as payment or reparation, as

for a service or loss. Compensation may be defined as money received in the performance of
work, plus the many kinds of benefits and services that organizations provide their employees.”

“Compensation includes direct cash payments, indirect payments in the form of employee
benefits and incentives to motivate employees to strive for higher levels of productivity”

“Compensation is the remuneration received by an employee in return of higher contribution to

the organization. It involves balancing the work employee relation by providing financial and
non- financial benefits or incentives to employees.”
TYPES OF COMPENSATION:

Compensation can be classified into:

(1) Financial compensation and

(2) Non- Financial compensation.

Financial compensation includes Direct compensation and Indirect compensation.

The direct compensation is used to describe financial remuneration usually cash and includes
such elements as basic pay, dearness allowance, overtime pay, shift allowance, incentive, bonus,
profit sharing bonus and commissions, etc.

Indirect compensation or wage supplements or fringe benefits refer to such benefits as provident
fund, pension scheme, medical and health insurance and sick leave and various other benefits
and perks.

Non- financial compensation includes praise and recognition and satisfaction of employees.

NEED OF COMPENSATION MANAGEMENT

The basic need of compensation management is to meet the needs of both employees and the
employer. The employers want to pay as little as possible to keep their costs low. Employees
want to get as high as possible. The compensation management tries to balance between these
two with following specific needs:

1. Attracting and Retaining Personnel: From organization’s point of view, every organization

wants new talent and skill from outside ,for this purpose the compensation management aims at
attracting and retaining right personnel at right place in the organization time to time.

2. Motivating Personnel: Compensation management aims at motivating personnel for higher

productivity. Compensation management can be designed to motivate people through monetary
compensation.

3. Optimizing Cost of Compensation: Compensation management aims at Optimizing cost of

compensation by establishing link performance with compensation.

4. Consistency in Compensation: Compensation management tries to achieve consistency-both

internal and external-in compensating employees. Internal consistency involves payment on the
basis of criticality of jobs and employees’ performance on jobs. External consistency involves
similar compensation for a job in all organizations.

OBJECTIVES OF COMPENSATION MANAGEMENT

The basic objective of establishment of a sound compensation administration is to establish and
maintain an equitable compensation structure.

Its secondary objective is the establishment and maintenance of an equitable labour-cost

structure, an optimal balancing of conflicting personnel interests so that the satisfaction of
employees and employers is maximized and conflicts minimized.

A sound compensation system tries to achieve these objectives:

(a) For employees:

1. Employees are paid according to requirements of their jobs, i.e., highly skilled jobs are
paid more compensation than low skilled jobs. This eliminates inequalities.
2. The chances of favoritism (which creep in when wage rates are assigned) are greatly
minimized.
3. Job sequences and lines of promotion are established wherever they are applicable.
4. Employees’ morale and motivation are increased because a wage programme can be
explained and is based upon facts.

(b) To employers:

1. They can systematically plan for and control their labor costs.
2. In dealing with a trade union, they can explain the basis of their wage programme
because it is based upon a systematic analysis of job and wage facts.
3. A wage and salary administration reduces the likelihood of friction and grievances over
wage inequities.
4. It enhances an employee’s morale and motivation because adequate and fairly
administered wages are basic to his wants and needs.
5. It attracts qualified employees by ensuring and adequate payment for all the jobs.

COMPENSATION MANAGEMENT PROCESS

In order to achieve the objectives of compensation management, it should proceed as a process.

This process has various sequential steps as shown:

 Establish a compensation policy

 Setting of organizational criteria about compensation
 Analysis of government policy
 Joint consultation with trade union
 Deciding fringe benefits
 Design and implementation of compensation policy
 Evaluation and Review

THE COMPENSATION PROGRAMME: FUNCTIONS AND RESPONSIBILITIES

The functions and responsibility in a compensation programme involves essentially three
aspects:

(1) The determination of wage rates and wage structure,

(2) Maintaining the rationality of wage structure, and

(3) Determining methods of wage payment.

A wage structure is a body of wage rates differentiated by difficulty or degree of responsibility of

work in an organization. The wage rate is for a job rather than compensation to an individual.

Equitable’ wage structure or `internal equity’ implies that wage differentials reflect the degree of
difficulty. In other words, the differences in wage rates for jobs correspond to differences in the
evaluated contents of jobs.

The wage payment is determined by `Job evaluation’. It is a systematic method of evaluating

each job in relation to other jobs in an organization. It is a major method of ensuring equity in the
internal rates for jobs.

In view of the complexity of factors, there is a need to define and develop the compensation
function in an organization and determine its location and working. The functions and
responsibilities of a compensation programme will be as follows:

 To formulate the compensation plan.

 To establish job evaluation program.
 To determine or establish the criteria for wages and salary.
 To analyze the government rules and regulation regarding the
 Compensation.
 To make polices for the compensation and update that policy time to time.
 To make policies for promotions.
 To make the policies for increasing the salary.
 To maintain the records of all employees of the organization.
 To promote the team work.
 To make the performance appraisal system.
 To promote the value and culture system in the organization policy.
 To help the management for training and development programs.

The function should be operated by someone who has specialized knowledge and skill in
compensation programmes. To ensure the effectiveness of the functionary, a coordinating
committee should be constituted so that ultimately the objectives of a compensation programme
can be achieved.
COMPONENETS OF EMPLOYEE AND EXECUTIVE COMPENSATION
According to the Center on Executive Compensation, "Executive pay arrangements typically
consist of six distinct compensation components: salary, annual incentives, long-term
incentives, benefits, perquisites and severance/change-in-control agreements."1 See High-
Performing Companies Pay Executives Differently.

The components of an executive compensation plan vary widely across companies. How
incentive vehicles are structured and implemented vary even more widely. Below are the most
common components of an executive compensation plan:

1. Base Salary
The standard wage paid to an executive that typically is the largest share of an annual
compensation package.
2. Bonuses (Short-term incentives)
Distributions for annual milestones or reaching incentivized goals that are typically cash-
based.
3. Long-term incentives
Vehicles used to share long-term value creation with employees. These are often tied to
equity or enterprise value.
4. Benefits
Non-cash compensation provided to an employee on an annual basis. These typically
include elements like health and life insurance, defined benefit or contribution plans, and
paid vacations.
5. Perquisites
Privileged grants to employees in addition to their other compensation. These can include
everything from a company car to a business-paid cell phone.

FACTOR AFFECTING EMPLOYEE COMPENSATION

The factors affecting employee compensation can be categorized into:-

1. Internal Factors and
2. External Factors.
Some of the internal factors affecting employee compensation are:
 A. Compensation Policy of the Organization
B. Employer’s Affordability
C. Worth of a Job
D. Employee’s Worth
E. The Organizational Ability to Pay
F. Job Analysis and Job Description and
G. Employee Related Factors.

Some of the external factors affecting employee compensation are:

A. Demand and Supply of Labour

B. Cost of Living
C. Economic Conditions
D. Prevailing Wage Level
E. Society
F. Government Control
G. Labour Unions
H. Legislation

There are number of factors influencing the compensation package payable to employees.
They can be categorized into:
1. External factor
2. Internal factor
1. External Factors:
These are demand and supply of labour, cost of living, society, labour unions, legislation,
economy and compensation survey.
(i) Demand and Supply of Labour:
Even in times of high employment, individuals with certain skills or abilities are in
demand. This demand and supply of labour influences wage and salary fixation. Jobs in
high demand frequently will receive premium wages, as in case of skilled labour.
However, if supply of labour exceeds the demand, then employers are willing to pay less.
High remuneration to skilled labour is necessary to attract and retain it. But exploitation
of unskilled labour, like, for instance, paying less wages because it is available in plenty,
is unjustifiable. The Minimum Wages Act, 1948, is precisely meant to prevent this kind
of exploitation.
The basic point of this approach is that firm pays its employees the “going rate” for the
type of work they do. Going rate analysis is done by reviewing all job description and
then collecting relevant salary market data through participating in national, regional, and
local salary surveys and by third party survey administrators (generally human resources
consulting firms).
Going rates are those that are paid by different units of an industry in a locality and by
comparable units of the same industry located elsewhere. If the firm offers pay much
below the going rate, it may be unable to attract and retain qualified workers. If it pays
much more than the going rate, it may be unable to charge comparative prices for its
product because its labour costs are too high.
Productivity of labour also influences wage fixation in labour market. Productivity can
arise due to increased effort of the worker, or as a result of the factors beyond the control
of the worker such as improved technology, better management etc. Greater effort of the
worker is rewarded through piece – rate or other forms of incentive payments.
Productivity is the relationship between the input of labour measured in man-hours and
its output in the form of money or physical terms. Productivity linked wages may help
utilize human resources better and help determine fair wages.
(ii) Cost of Living:
The logic for using cost of living as a pay determinant is both simple and important. A
pay increase must be roughly equivalent to the increased cost of living, if a person is to
maintain a precious level of real wages. A rise in the cost of living is sought to be
compensated by payment of dearness allowance, basic pay to remain undisturbed. Some
firms even index pay increases to the inflation rate and sacrifice merit pay to provide
across the board increases designed to offset the results of inflation.
(iii) Society:
Compensation paid to employees often affects pricing of the firms goods or services. For
this reason, consumers may also become interested in compensation decisions.
Businesses in a local labour market are also concerned with the pay practices of new
firms locating in their area. The Supreme Court has been keeping social and ethical
considerations in adjusting wage and salary disputes. It was also considered to keep the
company wages in line with other wages in the community.
(iv) Labour Unions:
The presence or absence of labour organizations often determines the quantum of wages
paid to employees. When union uses comparable pay as a standard in making
compensation demands, the employer needs accurate labour market data. When a union
emphasizes cost of living, it may pressure management into including a cost of living
allowance. The employees of strongly unionized companies too, have no freedom in
wage and salary fixation. They are forced to yield to the pressure of labour representation
in determining and revising pay scales.
(v) Legislation:
There are numerous Legislation Acts which affect the compensation system. Equal
employment legislation, including The Civil Rights Act, Family and Medical Leave Act,
Payment of Wages Act, 1948; The Payment of Bonus Act, 1965; Equal Remuneration
Act, 1976; Payment of Gratuity Act, 1972 etc. The Payment of Wages Act seeks to
protect workers against irregularities in payment of wages and unauthorized deductions
by the employer.
The Minimum Wages Act enables the Central and State Governments to fix minimum
rates of wages payable to employees in sweated industries. The Equal Remuneration Act
provides for payment of equal remuneration to men and women workers for same or
similar work. The Equal Pay Act, 1963 prohibits an employer from paying an employee
of one gender less money than an employee of the opposite gender, if both employees are
performing same nature of job. (same skill, effort and responsibility).
In addition to legal enactments, there are wage boards, tribunals and fair wages
committees which aim at providing a minimal standard of living to workers. Also there is
the Companies Act, 1956, which checks the managerial remuneration.
(vi) The Economy:
The economy definitely affects financial compensation decisions. For example, a
depressed economy generally increases the labour supply and lowers the market rate. On
the other hand, a booming economy results in greater competition for workers and price
of labour is driven upward.
Since the cost of living is commonly used as pay standard, the economy’s health exerts a
major impact upon pay decisions. Cost of living typically rises as the economy expands.
(vii) Compensation Survey:
A compensation survey strives to obtain data regarding what other firms are paying for
specific jobs within a given labour market. The surveys may be either outsource to a
consulting firm or conducted by the organization itself. In this, market rates remain the
most important standard for determining pay.
Most big organizations provide low, high and average salary for a given position with the
help of compensation survey. It provides information for establishing both direct and
indirect compensation. A firm should take the determinants such as the geographical area
of the survey and the specific firms to contact before conducting a compensation survey.
2. Internal Factors:
Among the internal factors that affect pay structure are the compensation policies,
organizational ability to pay, job analysis, and job descriptions, employee, trade union’s
bargaining power.
(i) Compensation Policies:
It provides general guidelines for making compensation decisions. The first thing
employers should consider when developing compensation package is fairness. It should
be vital and maintain internal and external equity. The policy should include the
company’s philosophy related to the major components of incentive compensation,
including the strengths and weaknesses of each and how the overall plan provides
optional alignment of interest with shareowners.
The policy should provide broad guidelines by which the company will use alternative
forms of compensation, and the relative weight in relation to overall compensation if
“others” form of compensation will be utilized. An organization often, formally or
informally, establishes compensation policies that determine whether it will be a pay
leader, a pay follower, or strive for an average position in the labour market.
(a) Pay leaders – They are organizations that pay higher wages and salaries than
competing firms. This helps to retain and attract high quality and productive employees.
(b) The market rate – These are the average pay that most employers provide for a similar
job in a particular area or industry, it is also known as going rate.
(c) Pay followers – These are companies that choose to pay below the market rate
because of poor financial condition or a belief that they simply do not require highly
capable employees.
(ii) The Organizational Ability to Pay:
An organization’s ability to pay is also an important factor in determining compensation
package. Companies that have good sales and, therefore, high profits tend to pay higher
wages than those which running at a loss or earning low profits because of the high cost
of production or low sales. However all employers, irrespective of their profits or losses,
must pay no less than their competitors to attract and retain potential employees.
(iii) Job Analysis and Job Description:
It is found that the more difficult and challenging a job, the higher are the wages. For this,
the particular job is analyzed and then the relative value of a job is determined. Job
analysis is the systematic process of determining the skills and knowledge required for
performing job.
(a) Determine what tasks must be accomplished by whom.
(b) Decide which job classifications should be exempt and which should be non-exempt.
 (c) Develop model job descriptions for exempt and non-exempt positions and distribute
the models to incumbents for reviews and comment; adjust job descriptions if necessary.
(d) Finalize and document all job descriptions.
(e) Evaluate jobs.
(f) Also a general task analysis is conducted by major departments to the jobs within each
seniors, vice president’s and manager’s department and then rank jobs between and
among departments.
(g) Verify ranking by comparing it to industry market data concerning the ranking and
adjust if necessary.
(h) Prepare a matrix organizational review.
(i) Determine grades.
(j) Establish the number of levels – senior, junior, intermediate and beginner for each job
family and assign a grade to each level.
(k) Determine the number of pay grades or monetary range of position at particular level
and establish the salary range.
(iv) Employee Related:
In addition to all the above factors, employee related factors are also important in
determining wage structure. These factors include performing on the job, seniority
experience, and membership in the organization and their potential.
Trade Union’s Bargaining Power:
The stronger and more powerful the trade union in any organization, the higher the
wages. Trade union’s bargaining powers are often measured in terms of its membership,
its financial strength and the nature of its leadership.

EMPLOYEE INCENTIVE SCHEMES

Employee incentive schemes focus on recognizing and rewarding staff for their hard
work. Incentive schemes can vary in terms of the rewards given, but they are usually put in
place to encourage employees to work towards specific targets.

Types of Incentive Schemes:

1. Individual and
2. Group Incentive Scheme
 1. INDIVIDUAL SCHEMES

Under this plan, employees are paid on the basis of results”. The chief incentive plans included

in this category are discussed in seriatim.

Taylor’s Differential Piece Rate Plan:

This plan was developed by F. W. Taylor, the father of scientific management. Under this plan,

Taylor prescribed two piece work rates. One, a higher wage rate for those who reach the standard

work. Second, a lower wage rate whose performance is below the standard.

The standard work is determined on the basis of time and motion studies. This wage plan

encourages and rewards the employees who are efficient by giving them wages at a higher rate.

At the same time, the plan penalizes those who are slow performers by paying them at a low

wage rate.

Halsey Premium Plan:

This plan, originated by F. A. Halsey, an American engineer, is a combination of the time and

the piece wage in a modified form. Under this plan, a guaranteed wage based on past experience

is determined. If a worker saves time, he gets 50% of wages for time saved (called premium) in

addition to normal wages. It is optional for the worker to work on the premium or not. Thus, this

plan also provides incentive to efficient workers.

Rowan Premium Plan:

This plan was developed by D. Rowan in 1901. This plan, to a large extent IS similar to that of

Halsey Premium Plan. The only difference is in regard to the determination of the premium.

Unlike a fixed percentage in case of Halsey plan, it considers premium on the basis of the

proportion which the time saved bears to the standard time.

Emersson Efficiency Plan:

Under this scheme, both standard work and day wage are fixed. Bonus is paid on the basis of

worker’s efficiency. A worker becomes entitled to get bonus only when his/her efficiency

reaches to 67%. The rate of bonus goes on increasing till he achieves 100% efficiency. Above

100% efficiency, bonus will be 20% of the basic rate plus 1% for each 1% increase in efficiency.

In this way, at 120% efficiency, a worker receives a bonus of 40% and at 140% efficiency

worker gets 60% of the day wage as bonus.

Gantt Task and Bonus Plan:

This plan is devised by H. L. Gantt. This plan combines time, piece wage and bonus. Standard

time, piece wage and high rate per piece are determined. A worker who cannot complete

standard work within standard time is paid only the minimum guaranteed wage. A worker

performing up to the standard level of work gets time wage plus a bonus @ 20% of normal time

wage. If the worker exceeds the standard, he is paid a higher piece rate but there is no bonus.

The above mentioned various incentive schemes indicate that the incentive may vary along with

variation in earning with changes in performance or output.

2. Group Incentive Schemes:

The incentive schemes can be applied on a group basis also. Group incentive schemes are

appropriate where jobs are interdependent. It is difficult to meaningfully measure individual

performance and group pressures affect the performance of the members of the group. The chief

group incentive schemes are discussed here.

A. Profit-sharing:

The concept of profit-sharing emerged towards the end of the nineteenth century. Profit-sharing,

as the name itself suggests, is sharing of profit of organisation among employees. The

International Co-operative Congress” held in Paris in 1889 considered the issue of profit-sharing

and defined it as “an agreement (formal or informal) freely entered into by which an employee

receives a share fixed in advance of the profits”.

The basic rationale behind profit-sharing is that the organisational profit is an outcome of the co-

operative efforts of various parties, therefore, employees should also share in profits as

shareholders share by getting dividend on their investment, i.e. share capital. The very purpose of

introducing profit-sharing is to strengthen the loyalty of employees to the organisation. Thus,

profit-sharing is regarded as a stepping stone to industrial democracy.

Both the share (percentage) of profit to be shared by employees and mechanism for its distribu-

tion are determined in advance and also made known to the employees. In order to be eligible to

participate in profit-sharing. An employee needs to serve for a certain number of years and, thus,

earn some seniority. As regards the forms of profit-sharing, Metzger has classified these into

three categories, namely,

(i) Current,

(ii) Deferred and

(iii) Combination.

(i) Current:

Under this form, profits are paid to the employees in cash or by cheque or in the form of Stock

option immediately after the determination of profits.

(ii) Deferred:

Profits are credited to employees’ accounts to be paid at the time of retirement or at a time of his

dissociation from organization due to reasons like disability, death, severance, withdrawal from

employment, etc.

(iii) Combination:
In this case, a part of employee share of profit is paid in cash or cheque or stock and the

remaining part is deferred and credited to his/her account.

Employees receive their share in the organisational profit in the form of bonus. In India, the

employee bonus is governed by the Payment of Bonus Act, 1965.

The major apprehensions expressed against profit-sharing is mat management may dress up

profit figures, as is often done for tax evasion purposes, and deprive employees of their shares in

profit. It is also commented that profit-sharing, being a long-term scheme, does not work as
incentive due to the absence of immediate feedback about the efforts and rewards.

Co-partnership:

In a way, co-partnership is an improvement over profit-sharing. In this scheme, employees also

participate in the equity capital of a company. They can have shares either on the basis of cash

payment or in lieu of other incentives payable in cash like bonus. Thus, under co-partnership

scheme, employees become shareholders also by having company shares. Now, employees

participate in both —profits and management of the company.

The finer points of this scheme are that it recognizes the dignity of labour and also of a partner in

the business. This would, in turn, develop a sense of belongingness among the employees and

encourage them to contribute their best for the development of the organization.

Scanlon Plan:

The Scanlon plan was developed by Joseph N. Scanlon, a Lecturer at the Massachusetts Institute

of Technology in USA in 1937. The plan is essentially a suggestion scheme designed to involve

the workers in making suggestions for reducing the cost of operation and improving working

methods and sharing in the gains of increased productivity.

The plan is characterised by two basic features. First, both employees and managers can partici-

pate in the plan by submitting their suggestions for cost-cutting methods. Second, increase in

efficiency on account of cost-cutting is shared by the employees of the unit.

The Scanlon plan, wherever adopted, has been successful to encourage a sense of partnership

among employees, improved employee-employer management relations, and increased

motivation to work.

The criticism labeled against group incentive is that the incentive benefits being similar to all
members of the group, the best performers may loose incentive. However, this can be overcome

if group incentive scheme generates peer-level pressure for superior performance and also

reduces the need for supervision. Stability in group may be a necessary condition to make the

group incentive scheme successful.

As regards the ultimate impact of incentives on organizational performance, the research studies”

conducted in India report that incentive schemes have a positive impact on productivity, labour

cost, and industrial relations. It is concluded that “money” has a “salutary” impact on production.

RECENT TREND IN COMPENSATION MANAGEMENT

The following are recent trend of compensation management adopted in an

organization:-
1. Group Mediclaim/Insurance Schemes
2. Personal accident Insurance Schemes
3. Company leased Accomodation
4. ATM Facilities
5. Corporate Credit Card
6. Club Membership
7. Cellular phone/Laptop
8. Personal Health Care
9. Loans
 10. Educational Benefits
11. Maternity Leave
12. Paternity Leave
13. Employee Stock Ownership Plan etc.

MEANING OF EMPLOYEE RELATION AND INDUSTRIAL RELATION

 Employee relations is a two person relationship between employee and employer. The focus
is on how to effectively manage and strengthen this relationship. Industrial Relations on the
other hand, is a three person relationship between the organization, the union and the workforce
that the union represents.

Employee Relations is the study of the relationship between employees and also between
employers and employees. A business which focuses on the importance of strong Employee
Relations often results in higher engagement, higher motivation and ultimately improved
productivity and profitability. Employee Relations is about providing information to employees
on the goals of the organisation. Employees should understand the ultimate goals of the business
and what their role is in achieving these goals.

People considering a career in Employee Relations should be able to bring the following skills,
knowledge and attributes to the table:

 A thorough understanding of HR policy and processes

 In depth understanding of Irish employment law
 Ability to provide expert judgement and advice to line managers, employees and HR
colleagues
 Strong credibility, and ability to influence at a senior level with strong stakeholder
management skills 
 Excellent interpersonal and communication skills
 Coaching skills
 A strong customer service focus and employee experience mind-set

Industrial relations are the relationships between employees and employers within the
organizational settings. ... From this perspective, industrial relations covers all aspects of the
employment relationship, including human resource management, employee relations, and
union-management (or labor) relations.

Some of the objectives of industrial relations are:-

1. Uninterrupted Production and Increased Productivity

2. Less/Zero Conflict

3. Industrial Peace and Harmony

4. Contented and Committed Workforce

5. Dynamic Workforce

6. Management of Organizational Complexity

7. Developing Trade Unions

8. Cordial Human Relations

9. Educating Workers

10. Promoting Trust, Creativity and Cooperativeness and a Few Others.

Scope of IR:

1. Individual relations – concerning discipline and grievance of individuals.

2. Collective relations – concerning trade unions, collective bargaining, functioning of joint

committees such as house allotment committee and prevention and settlement of industrial
disputes.

3. Role of state, that is, role played by the government in terms of labour legislation, labour
reforms, rules, regulations and so on.

4. industrial aspects, that is, role played by the international organisation of employers and
workers or bodies like the ILO.

Specifically, Industrial Relations cover the following areas:

i. Collective Bargaining.

ii. Role of Management, Unions and Government.

iii. Mechanism for regulation of Industrial Disputes.

iv. Industrial grievance, discipline policy and practices.

v. Labour legislation.

Objectives:

1. To protect the interest of labour and management.

2. To deter industrial unrest.

3. To raise industrial productivity.

4. To reduce high labour turnover.

5. To increase workers’ participation in management.

6. To provide reasonable wages, better living conditions and other fringe benefits.

7. To bring industrial units under Government control.

BASIC FUNADAMENTAL OF INDUSTRIAL RELATION

The fundamental objective of industrial relations is to maintain sound relations between

employees and employers. The other objectives can be drawn from this objective.

They are:

I. Improve the economic status of workers

II. Minimize industrial conflicts

III. Give opportunity to workers to have a say in decision making

IV. Settle issues through negotiations and joint consultation

V. Encourage and develop trade unions to enhance the collective strength of workers

VI. Maintain peaceful and harmonious relations that pave the way for industrial democracy
VII. Accept and get along with the laws of the land aimed at protecting the rights of both
employer and employee.

12 BASIC OBJECTIVES OF INDUSTRIAL RELATION ARE AS

FOLLOWS WHICH IS EASILY DEFINE THE SCOPE AS WELL AS
IMPORTANCE OF IR

(i) To promote mutual understanding and goodwill among employees and management.

(ii) To raise the productivity of labour and organization as a whole.

(iii) To establish and maintain industrial democracy through workers’ participation in

management, collective bargaining, etc.

(iv) To minimize all forms of industrial conflict for example, strikes, lockouts etc.

(v) To promote smooth and healthy labour management relations.

(vi) To promote mutual cooperation between the employers and the employees.

(vii) To integrate the interests of labour and management.

(viii) To minimize absenteeism and labour turnover.

(ix) To promote the welfare of the workers.

(x) To encourage and develop strong trade unions.

(xi) To bring about government control over plants and units running into losses.

(xii) To ensure that the government endeavour to bridge the gap between the unbalanced,
disordered and maladjusted social order.