Module 6:

Key issues, Critical Challenges & Recent Trends in IR, Future of IR. Ethical issues in IR

1. LEARNING OBJECTIVEs

2. INTRODUCTION

3. ISSUES AND CHALLENGES FOR INDUSTRIAL RELATIONS IN COMPETITIVE

BUSINESS ENVIRONMENT

4. EMERGING TRENDS IN INDUSTRIAL RELTIONS

5. INDICATIONS FOR THE FUTURE

6. SUMMARY
1. LEARNING OBJECTIVES
Upon completion of the lesson the students should be able to understand
 The key issues and challenges the IR is confronting in the competitive business
environment.
 The recent trends and developments in the field of IR
 Some of the ethical consideration in IR

2. INTRODUCTION:
The traditional industries are facing acute competition and have also started thinking to become
smart by shedding their extra baggage by resorting to re-structuring and re-engineering. This has
been necessitated also by day-to-day technological innovations and their application in industry.
The exercise amounts to generating surpluses and its management. This has created real HR crisis
for the emerging industries.
The profiles and requirements of emerging industries are entirely different from the
requirements of the traditional industries, in following terms;
 The required Organisational Structure is not a monolithic and pyramidal one. It is flat,
lean and smart, almost leading to virtual organisation.
 The offices are intelligent, paperless and fitted with all modern electronic gadgets which
require very few manpower.
 Employers are global with multi-locational working dispensations. They like to approach
their employees directly without intervention of any outside agency like trade unions.
They negotiate with their employees on all matters including compensation package and
productivity. Encouraged by the success of new management principles, they introduce
HR interventions like QCs, workers empowerment, team-working, etc., to reach the
workers directly.
 The employees are knowledge-employees, younger, educated, full of expectations and
aspirations and career-oriented. The manpower is diverse with multi- cultural/lingual
employees and a sizeable number of female employees. Their problems and perspectives
are different from those of old blue-collar employees.
 New players like Consumer Forums, NGOs, Environmental Campaigners and Electronic
Media are replacing trade unions in many grey areas.
 Flexibility has become of vital importance, which may be enterprise flexibility like
outsourcing, franchising, etc., or labour flexibility like Numerical flexibility (size of
workforce), Skill flexibility (Composition of workforce), Functional flexibility (Job
employment, Job enrichment), Locational flexibility (flexi-timings), Pay flexibility (flexi
pay) and Place flexibility (flexi-working places - Home working), etc.
 Contracting out of non-core activities like Catering and Housekeeping Services, Security,
Parking, Courier Services, Medical and Health Services, Education and Training, etc.,
have become common.
 Changing Pattern of Managerial Practices - Diverse forms of employment - Life-long
employment vs Short-term, Part-time employment, House worker, Contract
worker/Contingent worker, International workers are regular features.
 Changing Nature of Work-Robotised working, Unmanned Work Station (Power-Plants),
Field work (Journalists, Sales executives), Open 24 hours, 365 days (Banks, Restaurants,
Call centers)-is yet another new phenomenon.
  Use of Electronic Gadgets in the offices-like Telephones, Mobile phone, Computers and
its numerous utilities such as M.S office, e-mail, S.M.S., Internet, etc., have made them
self-reliant.
 Pressure from International Bodies - ILO/WTO/WB/IMF, International Labour
Standards- are exerting pressure on Industrial Relations. These business scenarios require
a different brand of Employees Relations.
3. ISSUES AND CHALLENGES FOR INDUSTRIAL RELATIONS IN COMPETITIVE
BUSINESS ENVIRONMENT

In the following section, we shall discuss the changes and

challenges for the discipline of industrial relations.

 Changing Organisations
In the past, organizations have focused on growing
bigger and better. Today, increasingly international
competition and the rapid pace of technological
change are favouring organizations to become lean,
faster, and flexible. In fact, most organizations are
downsizing, decoupling and disaggregating.
 Changing Profiles and Characteristics of the Employees
The Colour of the collar of the worker in the organized sector is changing. New
technologies have, in several cases, reduced the difference between blue and white collar
workers. The proportion of white-collar employees is increasing among the full-time
regular employees in the organized sector. Thus, today, in the organized sector, there are
less of working class and more of middle class workers. Alongside the change in the
profile of the workforce, there is also a change and escalation in the aspirations of the
employees. They are less eager to join a trade union and much less keen to join a protest
meeting or participate in a strike.
Further, in the organized sector, there is a gradual reversal in the ratio of
executives to non-executives. Over the years, in most companies, executives
outnumbered non-executives. This is a consequence of the variety of managerial
responses to face the competitive challenges: (a) overcome problems in dealing with the
protected worker under the Industrial Disputes Act, 1947; (b) technological changes
eliminating the 3D jobs – dirty, dangerous and drudgerous – and lower and middle level
information gathering and processing tasks warranting different kinds of age, skill mix
among the employees, and (c) contracting out and outsourcing whereby the permanent
employee strength shrinks to accommodate those with core and critical skills, while
banishing the rest to the periphery of the organization in casual, contract, and contingent
employment.
 Casualisation
Over the past 15 years there has been a steep increase in the contact labour system and
casualization of labour, which has put workers to a greater disadvantage compared to the
regular full-time employees. While the full-time employees have relatively better skills
and training, they work less and under safer conditions with better income, job and social
security. Their counterparts in the unorganized and casual, contract and contingent
employment are less skilled, less trained, work more under less safe conditions, earn less
and enjoy little or no job, income and social security.
 Increased complexity and diversity
Labour is in the concurrent list of the distribution of powers between the union and states
of India, with both the Central and State Government having power to legislate on certain
similar matters concerning industrial relations. With the political and ideological
affiliations of the parties in power at the central and the state level being varied, it may be
 difficult to have a single or unified model of industrial relations. With the general
weakening of the tripartite system it has become difficult to achieve any consensus on
uniform patterns of industrial relations policy. Attempts at reforms in labour relations
systems and practices at the central level have, therefore, remained inconclusive.
According to one view, the conventional system of industrial relations, based on rules
and regulations and their enforcement, has become obsolete. The original objective of the
government during the successive plans to maintain industrial peace is no longer
sufficient. Peace without harmony may well be considered as peace of the graveyard.
Also, peace alone is not the objective of industrial or economic activity.
In the current economic scenario, stress needs to be laid on human resource
management, which considers that conflicts is not natural to industry and that it arises
only on account of bad management. It is necessary that management give up then-
reactive policies and adopt a proactive approach to get the best out of workers in their
respective organizations.
The future of industrial relations should be oriented towards human resource
management that believes in investment in human capital and involvement of people in
all matters that affect them both at the workplace and beyond, seeking to secure a work-
life balance. This means development of competence, multi-skilling, career planning, and
work that meets the expectations of the workers and secures a balance between the
requirements of the organization and the family needs of the workers. Continuous
improvement of work through workers’ initiative, emphasis on equity and fairplay, trust
and transparency, judicious exercise of power and authority, better understanding and
cooperation between management and workers, and greater devolution of authority at all
levels and decentralization of decision-making are all aspects which go a long way in
promoting commonality of interests, securing the twin objectives of equity and
efficiency.
Conciliation of industrial disputes has, over the years, become a ritual and is
generally considered as an inevitable stage for securing adjudication. However, in most
cases, adjudication itself is dilatory and fails to satisfy either party.
 Disinvestment, Deregulation, and Decentralization

Disinvestment (often viewed as synonymous

with privatization) affects industrial relations in
the following ways:
i. It changes ownership, which may bring
out changes not only in work
organization and employment but also
in trade union organization and trade
union dynamics.
ii. It changes the work organization by
necessitating retraining and
redeployment.
iii. It affects the rights of workers and trade
unions, including job/union security, income security, and social security.
Trade unions, managements, and often governments have together been responding to
these challenges through various types of new, innovative, or model arrangements to deal
with different aspects of disinvestments. These include
i. making workers the owners through issue of shares or controlling interest (The
latter has not happened in India as yet in the context of disinvestments though it
happened in the context of sick companies identified by the Board of Financial
and Industrial Restructuring.),
ii. negotiating higher compensation for voluntary separations,
 iii. safeguarding existing benefits,
iv. setting up further employment generating programmes, and
v. proposals for setting up new safety nets that include not only unemployment
insurance but also skills provision for redundant workers.
Deregulation, especially in the sphere of labour laws, usually results in erosion of the
accrued interests of workers and trade
unions.

The issue here often concerns enacting

minimal protective measures to ensure
that transferred public sector/
government employees receive similar
protection as is provided in
public/government employment. The
worst affected are the pension
provisions. While, in the past, pension
schemes usually provided defined
benefits, in the post globalization era, it
is often restricted to defined contributions.
This means, usually, a reduction in pension benefits and an uncertainty concerning future
provision of pension benefits due to
i. the absence of government guarantees,
ii. falling interest rates, and
iii. investment of pension funds in stock markets.
Decentralization of industrial relations is seen in terms of the shift in consideration of
industrial relations issues from macro to micro and from industry to enterprise level.
When the coordination is at the national or sectoral level, in the event of industrial
conflict, work in the entire industry can be paralysed. But when the dispute is at the bank
level, in the absence of centralized coordination by trade unions, only work in that bank
is paralysed and other banks function normally. This weakens the bargaining power of
unions.

 Some more challenges have been identified:

 technology and job creation
 skills development
 labour mobility
 labour commitment
 work culture
 productivity and competitiveness

4. EMERGING TRENDS IN INDUSTRIAL RELATIONS

The emerging industrial relations scenario is complex. The existing regional and social
imbalances are being exacerbated in the wake of the far reaching economic changes ushered into
the economy without much consultation with the concerned social partners. Some states are
waking up to the need for wooing investment, foreign and domestic, and creating jobs. In the
process they are resorting to competitive labour policies that are ‘investor friendly’. The
components of the industrial relations policy of Kerala, the relaxations and exemptions to labour
inspections in Rajasthan and Uttar Pradesh, the liberal response of the Tamil Nadu Government
to requests from employers for notice of change, lay-off, etc. and the cancellation of the
registration of an unusually large number of unions in West Bengal, have had far reaching
implications for industrial relations.
The legislative
initiatives for introducing
the secret ballot as the
methods of union
recognitions in several
states, including Andhra
Pradesh, West Bengal,
Orissa and similar efforts
in other states are
manifestations of an
approach whereby the
relative inertia of the
Central Government is
sought to be offset by the
aggressive measures by
certain State Governments.
These and the polarization
of several industrial relations policies and legislative measures due to Centre-State Government
differences, point to an increasing diversity in industrial relations contexts with varying impacts
on trade unions, collective bargaining etc. in different states. Union membership is declining in
some states, while it is increasing in others. Strikes by trade unions is on the decline, but is offset
by the increasing incidence of lockouts and strike measures by organizations such as the People’s
War Group in Andhra Pradesh in Singareni Collieries from time to time.
Central laws being the same, their interpretation by the judiciary and the perception of the
labour administration are changing over time, giving rise to new thinking on the subject. In 2005
alone, in five different cases, the Supreme Court held that sleeping on duty, using abusive
language against superiors, and physical assault on superiors are all incidents which justify
dismissal. Strikes have to be not only legal (refer to the strike by government employees in Tamil
Nadu, discussed in an earlier chapter), but also justified, though the criterion for justification, as
measured by public interest, is often rather abstract. Where trade union action is lacking, non-
governmental organizations are rushing to fill the vacuum, particularly, in matters concerning
minimum wages and living conditions in the unorganized sector, and occupational safety,
environment, etc. in both the organized and the unorganized sectors.
A. Paradigm Shift in Managing Work and Worker
In the sphere of work organization
and workplace governance, the
focus is shifting towards managing
work rather than managing the
worker. Changes in labour policy
and labour law in many countries
around the world are increasingly
focusing on flexibility and
competitiveness. As a result, new
initiatives in labour market policies
include new arrangements for
funding skills development.
Workplace adjustment is being
encouraged in several parts of the world through making administrative clearances for
separations redundant so long as the requirements of prior notice, information,
consultation, and compensation to the affected workers are met.
  Worker involvement and participation
In the sphere of worker involvement and participation, the major shift is in terms
of a clear preference for the ‘new’ human resources policies for employees rather
than union participation, direct rather than representative participation, and
encouragement for small group activities that emphasize problem solving rather
than preoccupation with individual or collective grievances in participative form.
The attitudinal disposition of the parties needs to be more conducive than it has
been all along.
 Collective Bargaining
In collective bargaining, some of the shifts include: (a) centralization to
decentralization; (b) collective to individual contracts; (c) parity to disparity; (d)
increased wages/incomes and benefits accompanied by erosion of job control; (e)
concession bargaining; (f) assertion of managerial rights than the rights of
workers; and, (g) attendance, skill or performance-linked than age-weighted and
seniority-based wages and benefits. Some of these trends were considered
disturbing, especially from the employees’ point of view.
 Social security
The shift in employees’ benefits and social security arrangements are mainly in
terms of greater concern for post-retirement portable benefits, be it provident
fund, pension, or health insurance. The shift from welfare to ‘money fare’
through the conversion of several of the welfare benefits into cash is, however, a
worrisome development. The other trend is a shift in retirement benefits from
defined benefits to defined contributions. This puts the real value of retirement
benefits at serious risk.
B. New Actors and the Emerging Dynamics
Traditionally, industrial relations was the concern of three principal actors:
workers and their unions, managers/employers, and the government. In the post-
liberalization, globalization era, consumers and the community have begun to assert
themselves and play a significant role. When the rights of consumers and the community
are affected, the rights of workers/unions and managers/employers take a back seat. The
court rulings are borne by the realization that wider public good matters most in
preference to the narrow self-interest of a minority. Workers and unions, in particular, are
asked to assert their rights without impinging on the rights of others, particularly the
consumers and the community. Hence the ban on bandh and restrictions even on protests
and dharnas. Increasingly, trade unions are getting isolated and see a future for
themselves only by aligning themselves with the interests of the wider society.
C. Pro-labour-Pro-investor Policies
World over, when the states assumed a welfare role and adopted pro-labour policies, the
trade unions grew in strength and power. When the states became neutral, the trade union
movement stagnated. Now, when mostly the states have adopted pro- investor policies,
trade unions are declining in power and influence, if not in numbers. In such
circumstances, unless trade unions forge broader alliances with the society— consumers
and community and various civil society institutions, including non-governmental
organizations—they will find their powers dwindling.
D. Changed Mindsets of the Judiciary, Legislature, and Executive
A remarkable feature of industrial relations in the wake of globalization is the gradual
withdrawal of the state from its traditional role of actively supporting organized labour.
Labour law reforms remain taboo, but both the judiciary and the labour administration
and adjudication machinery have been more willing than before to entertain the concerns
of the industry Typically, conciliation machinery is showing concern for issues relating to
competitiveness and flexibility and considering issues like increase in productivity, cost
 reduction, modernization, retraining and redeployment, etc. There is less emphasis on
reinstatement and regularization of dismissed employees. Some state governments—
notably Rajastan, Andhra Pradesh, and Uttar Pradesh—have taken the initiative to make
small changes in labour laws and have made major efforts to drastically simplify the
returns to be submitted by employers and ease the pressure of labour inspections. Even
the central government is considering the closure of certain industrial units for the long-
term viability and competitiveness of enterprises.
E. Declining Trade Union Density
In the traditional strongholds of trade union membership—government and public
sector—the workforce is declining due to non-filling of vacancies and introduction of
voluntary/early separation schemes. New employment opportunities are shrinking in
these sectors. In the private sector, particularly the service and the software sectors, the
new, young, and female workers are generally less eager to join unions. Trade unions are
still to conceive and implement meaningful strategies to make unionism relevant and
appealing to these new and diverse workgroups. It is mainly in the unorganized sector,
thanks to the initiatives that the government is willing to consider in the realm of social
security benefits, there is a prospect of rise in trade union membership. Here too, trade
unions are finding an adversary in a group that is otherwise considered an ally: the non-
governmental organizations operating under the guise of, or as, virtual trade unions.
F. Worker Militancy Replaced by Employer Militancy
Economic reforms introduced in India in 1991 signify India's quest for global economic
integration. During the decade 1981-90, India had lost 402.1 million man-days due to
industrial conflict, whereas in the subsequent decade, 1991-2000, the number came down
to half: 210 million. This does not mean that the industrial relations situation has
improved dramatically. Workers are increasingly more circumspect and hence reluctant to
go on strikes because of the fear of job insecurity, concern about the futility of strikes,
and realization about the imperative need to consider the survival of enterprise as a
prerequisite for employment and income security. Trade unions are hesitant to give a call
for a strike because it may lead to loss of jobs or closure of the unit. What is even more
striking is that over 60% of the man-days lost in the post-reform period were due to
lockouts and less than 40% were due to strikes. It must be added that quite a few lockouts
may have been preceded by strikes.
One measure of trade unions becoming more defensive than offensive with
employers can be seen from the shift in their actions from strikes to law suits. Also,
instead of pressing for higher wages and improved benefits, trade unions are pressing for
maintenance of existing benefits and protection and claims over non-payment of agreed
wages and benefits.
G. Collective Bargaining
As discussed earlier, and also in the chapter on collective bargaining, with the
shift in level of coordination and bargaining from national/sectoral to enterprise/plant
level, the bargaining power of trade unions is shrinking. Also, there is a gradual
movement away from parity to disparity. Since 1992 to date, over 100 of the 240 central
public sector corporations did not have wage revisions because the government
announced that companies have to mobilize resources to pay for the workers' wages and
that the government would no longer subsidize wage increases

5. INDICATIONS FOR THE FUTURE

In a general way, conventional notions about industrial relations as relations between management and
unions will undergo substantial changes. Increasingly, customer focus, both internal and external, will
tend to be a decisive factor. Non-union firms are likely to proliferate in the future. Therefore, the already
pluralistic industrial relations will have further dimensions added to it. The plurality of industrial relations
 will be seen not merely in terms of the organized and the
unorganized, but also union and non-union firms, and firms and
industries in different stage of business cycles. Industrial
relations will increasingly be driven by contextual factors at the
micro level even as macro aspects continue to influence the
inputs, labour institutions, structures, processes and outputs. The
field of industrial relations will, thus, have a wider scope so that
it comes to be referred to as employment relations covering the
entire gamut of employment.

The changing nature of work, changing profiles of

employees, and the ascendancy of managerial power through
technology and market oriented policies of the State means that
trade unions have to search for a new form and structure for
maintain voice and representation. In some other cases, the
managements will resist unionization. In yet others, the State is
seeking, in its bid to desperately woo investors, to exempt
enterprises from the operation of trade unions and the exercise of
core labour standards. At yet another level (as) discussed in
Chapter 24, international pressure is mounting to link labour standards with international trade either
through sanctions through bi-, tri- or multi-lateral institutions (governments and international agencies,
such as IMF and World Bank), and when they seem slow and inadequate in yielding the required
response, pressure is built at the market place through consumer boycott and other forms of action such as
SA 8000 audits, etc. increasingly the young, new and diverse workforce will resist joining unions. Still
both they and the management need to have or develop alternative forms to give voice and representation
to employees.

In the past, industrial relations were shaped by the legislative effort of the state, rule
making through interactions between workers and their organizations or employers and their
organizations, and arbitration/adjudication by courts. Typically the large companies provided job security,
income security (compensating for rise in cost of living), and social security through legislative and
negotiated entitlements. Employment guarantee is provided or gained increasingly through employability
that is possible only with continuous learning and skill upgradation. The employee benefits and social
security benefits will become portable and driven by contributions. Career shifts through self-reliance and
resilience seem to be the order. With working conditions being legislated and wages being market driven,
the trade unions’ role will be mostly in terms of protecting the employee against arbitrary dismissals.
The basic philosophy of industrial relations may not change with changes in industrial
strategies, but the underlying strategies and tactics of the social partners will. Central to the philosophy of
future industrial relations will be the core values such as equity and fairness, exercise of power and
authority, notions about individuality and collectivism, trust and transparency, and efficienty and equity.
Competition and globalization need high-performance organizations. Moreover,
employees who man such organizations will have new demographic and social characteristics and new
and higher expectations. The major changes in employment relations/industrial relations will be with
regard to the following four dimensions: flexible and adaptive work organization, continued emphasis on
the development of skills and competencies, contingent compensations systems, and workplace
governance that recognizes the need for increased say and stake for the employees at all levels as well as
job satisfaction.

6. SUMMARY

The traditional industries are facing acute competition and have also started thinking to become smart by
shedding their extra baggage by resorting to re-structuring and re-engineering. This has been necessitated
also by day-to-day technological innovations and their application in industry. The exercise amounts to
generating surpluses and its management. This has created real HR crisis for the emerging industries.

The future of industrial relations should be oriented towards human resource management that believes in
investment in human capital and involvement of people in all matters that affect them both at the
workplace and beyond, seeking to secure a work-life balance. This means development of competence,
multi-skilling, career planning, and work that meets the expectations of the workers and secures a balance
between the requirements of the organization and the family needs of the workers. Continuous
improvement of work through workers’ initiative, emphasis on equity and fair play, trust and
transparency, judicious exercise of power and authority, better understanding and cooperation between
management and workers, and greater devolution of authority at all levels and decentralization of
decision-making are all aspects which go a long way in promoting commonality of interests, securing the
twin objectives of equity and efficiency. Some more challenges have been identified: technology and job
creation, skills development, labour mobility, labour commitment, work culture, productivity and
competitiveness.