Chapter 9 – Labor relations & labor regulations in Nepal

Labor relation denotes the relationship between workers & employers, between
worker’s organization and employer’s organizations and between these respective
organizations and public authorities.

Objectives/Purposes of labor relation

a) Organizational effectiveness:
Labor relations aim to develop a common ideology among the actors
(employees, management and government) which brings together all of
these actors to work toward organizational goals. Once the ideology is shared
by all, the industry can achieve stability and consistency which leads to
organizational effectiveness.

b) Industrial peace:
Before taking any action, management and employees discuss and consult
with one another. Unilateral actions that reinforce confusion and
misunderstanding disappear forever from the scene. This contributes to the
establishment of industrial peace in the organization.

c) Change management:
Labor relations create an atmosphere of cooperation, trust and confidence.
They reduce resistance to change. They support in the management of
change. As a result, organizations can easily implement innovation and other
technological advancements.

d) Minimizes industrial disputes:

Labor relations contribute to the reduction of industrial disputes. Sound labor
relations also reduce conflicts and grievances as well as the occurrence of
strikes, lockouts and other disruptions in the organization.

e) Productivity:
Effective labor relation aim to increase employee and organizational
productivity. Employees take an interest in their jobs and work effectively
and efficiently as a result of good working relationships. This results in
increased production output, which raises existing level of productivity to a
higher level.

f) Environmental adaptation:
Labor relations are critical for environmental adaptation. Harmonious labor
relations support an organization in adapting to changing environmental
factors such as political, legal, economic, socio-cultural and technological
forces.
Actors of industrial/labor relation

a) Workers and their trade unions:

Workers are one of the key actors of labor relations. They sell their labor,
skills and efficiency to the organization in order to obtain rewards and
compensation. Basically, workers and employees are represented by a trade
union. A trade union is a continuous association of workers and employees to
maintain and improve the conditions of their working lives. They are
generally associated with political parties and fight against employers’
irrational, arbitrary and exploitive action.

b) Employers and their associations:

Employers are the buyers of labor and skills. They employe workers and try
to regulate their behavior for getting high productivity from them. Employers
are represented by employers’ associations. These associations promote and
protect the interest of employers and put pressure on the trade unions and
government.

c) Government and its bodies:

Government tries to regulate relationships of employers and employees. The
relationship is enforced and maintained through labor courts, industrial
tribunals, investing and enquiring committees. They formulate labor laws,
rules and regulations for brining uniformity in relation.

Trade union

A trade union is a formal association of employees that promotes and protects the
interest of its members through collective bargaining.

Characteristics of Trade union:

a) Formal organization:
Trade union is a formal organization. It has certain goals, structure,
procedures and people. It is a formal association of people that promotes and
protects the interests of its members through collective action.

b) Voluntary in nature:
They are basically voluntary in nature, in most of the cases. In some cases,
the membership of a union may even be compulsory. An employee joins the
trade union out of his/her free will, in majority of the cases. A person cannot
be compelled to join a union.

c) Relatively permanent in nature:

Trade unions are relatively permanent association of workers. Basically they
are not temporary or casual. The purpose of trade union is not merely
 immediate but continuous. So, to get the long-term benefit, they are
relatively permanent in nature.

d) Constantly changing:
The concept of trade union is dynamic and constantly changing in relation to
the development of new technology and system of production.

e) Common interest:
The members of a trade union have certain matters of common interest. The
examples are job security, better pay, better working condition and so on.
Those interests actually have brought them together.

f) Politically affiliated:
Generally, trade unions are affiliated to some national political parties and
has the similar ideologies adopted.

Reasons for joining trade union

a) To block management from undue action:

Employees join the union to block the management from taking any action
which is irrational, illogical and discriminatory to the interests of labor.

b) Better working condition:

With the help of trade union, employees can bargain with the employer for
better working conditions. It helps to improve quality of work life of
employees.

c) Minimize discrimination:
Trade union can force management to develop policies that ensure
employees are treated equally. They ensure there isn’t any favoritism,
prejudice and discrimination.

d) Job security:
Trade unions operate through a collective bargaining mechanism to prevent
employee lay-offs, retrenchment, dismissals and lock-outs by the employer
or management. It provides job security to its members.

e) Sense of belongingness:
Employees have the opportunity to share their opinions, visions, and ideas
through union activities. These employees also have the chance to improve
their relationships with their coworkers. These factors contribute to a sense
of belonging.
 f) Political power:
Trade union is a pressure group. Many unions are working as the sister
organizations of national political parties. This helps them gain political
power.

Functions of trade union

a) Militant or protective function:

These functions include protecting the workers’ interests i.e., hike in wages,
providing more benefits, job security etc. Unions fulfill those demands
through collective bargaining and direct action such as strike.

b) Fraternal function:
These functions include providing financial and non-financial assistance to
workers. Those assistants are given during the periods of strikes and lock
outs, extension of medical facilities during sickness and causalities, provision
of education, recreational and housing facilities, provision of social and
religious benefits etc.

c) Political function:
These functions include affiliating the union with a political party and helping
the political party in enrolling members. They also go through collective
donations, seeking the help of political parties during the periods of strikes
and lockouts.

d) Social functions:
Trade unions are not only bargaining entities. Rather they are also social
groups. They perform social works that is demanded by general public. These
functions include carrying out social service activities. They discharge social
responsibilities through various sections of the society like educating the
customers etc.

Classification of Trade Union(Types)

A) Classification based on ideology:

a) Revolutionary union:
They are mainly based on communist ideology. They believe in class
struggle to achieve the power and establish the workers right in industrial
sector. They do not believe in gradual process, rather they believe in
radical transformation. They believe in destruction of existing
social/economic order and creation of a new one.

b) Reformist or welfare union:

 These types of unions regard socialism as a long term goal of them. Their
major target is establishing socialism by peaceful means not through
revolution.

c) Uplift unions:
They advocate extensive reforms well beyond the area of working
condition i.e. change in taxation system, elimination of poverty etc. In
other words, their objective is to uplift not only industrial sector rather
also the social sector. They are more professional in terms of their
activities.

B) Classification based on Trade (Profession)

a) Craft union:
The membership in craft union is the most narrow and only people
certified in a given craft or trade can join them.

b) General union:
They draw members from all trades. In other words, they are the unions
whose membership is open to all workers irrespective of their trade, craft
or profession. These unions are very powerful and can also be found in
Nepal.

c) Blue collar vs. white collar unions:

Unions representing workers employed on the production floor, or outdoor
trades such as in construction work, are called blue-collar unions. In
contrast, those employees who work in shops and offices are called white-
collar employees. There is a separate unions for each kind of job of the
employee.

d) Industrial union:
Trade unions may be categorized on the basis of industry in which they
are employed. Examples of these are workers engaged in agriculture for
forestry hence agricultural labor unions or forest worker unions. They
open their membership only to those who work in the same industry.
Others are not allowed to take memberships in such unions.

Collective bargaining:

Collective bargaining is a process of negotiation between employers and group of

employees aimed at agreements to regulate working salaries, working conditions,
benefits and other aspects of workers’ compensation and rights for workers.
Features of collective bargaining

a) Collective:
It is collective in two ways. One is that all the workers collectively bargain for
their common interests and benefits. The other is that workers and
management jointly arrive at an amicable solution through negotiations.

b) Group activity:
In collective bargaining, one group representing the employers and the other
representing employees sit together to negotiate terms of employment. The
members from each party represent their group’s voice.

c) It is a process:
It is a process because it consists of a number of steps. The starting point is
the presentation of the list of demands and last stage is the reaching of an
agreement.

d) Bipartite:
The employers and the employees are the only parties involved in the
bargaining process. There is no third-party intervention. The conditions of
employment are regulated by those directly concerned.

e) Dynamic:
Collective bargaining is a dynamic process because of the way agreements
are arrived at, the way they are implemented, the mental makeup of parties
involved keeps changing. As a result, the concept itself changes, grows and
expands over time.

Collective bargaining process

a) Presenting demands:
The CB process usually starts with a draft of demands. Those demands are
being presented to the management by the union on behalf of employees.

b) Reduction of less important demands:

In this second stage, normally both of the parties try to reduce their
demands. Here each party trades off/reduces some of its demands to gain
others. Several rounds of discussions may be required to reduce the
demands.

c) Formation of sub-committee:
If both of the parties successfully complete the second stage then it gives
birth to the third stage. If the demands are simple/short and viable, sub-
 committees work will be easy and vice-versa. These committees go through
the depth study and its consequences or implications.

d) Informal settlement of demands:

After the parties successfully complete the third stage then they come to the
fourth stage i.e. informal settlement of demands. As the conflicting parties
reach an informal settlement, they go to its sponsor i.e. union
representatives consult informally with their superiors and the union
members and management representatives consult with top management.

e) Signing a formal agreement:

When everything is in proper order, the parties go through signing a formal
agreement. After reaching this stage, they try to forget the past differences
and look for proper implementation of the agreement.

Labor dispute:

Labor disputes are the conflicts or disagreements over the rights and interests of
employees with the management of organization.

Causes of labor dispute:

a) Compensation
b) Working condition
c) Facilities and incentives
d) Indiscipline
e) Resistivity to change
f) Non recognition of employee union.

Prevention of dispute:

a) Open communication:
Open communication can be one of the methods to prevent labor disputes in
organizations. This allows the free flow of information and understanding
between workers and management. This helps to listen employees’
complaints patiently and to handle the complaints promptly and
transparently.

b) Participation:
Employee participation is one of the effective methods for the prevention of
labor disputes. If employees get an opportunity to participate in decision
making to set performance targets and solve problems, it will reduce
unnecessary disputes in the organization.
 c) Equity:
Unfair treatment and bias in dealing with employees cause labor disputes.
So, management should establish fair and equitable compensation and work
rules for all employees.

d) Feedback:
Feedback also helps to prevent labor disputes. So, management needs to
collect feedback about organizational policies and practices from employees.

e) Counseling:
Disputes can be minimized by providing counseling sessions for employees
about the importance of dispute prevention. So, management needs to
provide counseling and training through which employees can understand the
reality and place fewer grievances to the management.

f) Regular monitoring

Settlement of dispute:

A) Unilateral method:
Grievance procedure:
It is the formal organizational mechanism for managing employee
grievances. It consists of several steps. Employees can take their grievances
to successively higher levels of management for resolution.

B) Joint method:
Collective bargaining:
Under this, the representatives from trade union and management sit
together to resolve the disputes through negotiation, settlement and
administration of a time-bound agreement between them.

C) Third party decision:

a) Conciliation:
It is a process where a third party provides assistance in settling disputes.
Here the third party person can persuade or urge to agree or give up few
things and agree on.

b) Mediation:
It is a process where a third party submits proposals for settling disputes.
The parties involved in disputes are free to accept or reject such
proposals.

c) Adjudication:
 It is a process of settlement of dispute by ordinary court, labor court or
labor tribunal. It is the final resort to settle dispute.

Collective dispute settlement process in Nepal

The labor act 2048 made the following provision for the settlement of collective
disputes.

a) Written complaint to the employer:

In the case of written complaint (signed by more than 51% of the
employees), is filed to the employer through authorized trade union. And
then bilateral discussion is held for negotiation. If dispute is not settled within
21 days, further step occurs.

b) Written complaint to labor office:

Labor union files written complaint to the labor office of the government.
Then discussion between labor and management is held for settlement of
dispute. If dispute is not solved within 15 days, employees can go on strike
(giving 30 days prior notice to management) or lock-out.

c) Appointment of mediator:
A mediator can be appointed with mutual consent of labor and management.
Such mediators settle disputes through arbitration. If not solved within 15
days, further goes for next step.

d) Appeal to government:
Any party can file an appeal to the government about the dispute.
Government adjudicates on the dispute within 60 days.

Features/provisions of labor act 2017

a) Applicability:
This labor act is applicable to all the entities regardless of number of
workers/employees. This act applies to private firm, partnership and
cooperatives and association and also applies to the entity registered in
foreign country but engaged in promotion of business, sale of its products or
other work in Nepal.

b) Hiring:
This act provided flexibility in the modes of hiring as per the requirements of
the entity. It includes regular employment, work based employment, time
bound employment, casual employment and part time employment.
c) Hiring foreign nationals:
Foreign nationals need to obtain the work permit for being engaged in the
work as per this act, except some few conditions.

d) Safety and health agreement:

Where 20 or more employees are engaged, employer shall constitute a
‘safety and health committee’ as per this act.

e) Collective bargaining committee:

Where 10 or more employees are engaged in the entity, employer shall also
constitute a ‘collective bargaining committee’.

f) Retirement:
Employees can be retired after the age of 58 years.

g) Working hours:
Working hours continue to be 8 hours a day and 48 hours a week. Overtime
has been increased to 20 hours per week from 20 hours a week.