LECTURE 3 Collective Bargaining in India BM

Collective Bargaining in India
K.R. Shyam Sundar

Professor
XLRI
Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 1

Concept of CB
 ILO – “negotiations about working conditions
and terms of employment between an
employer, a group of employers or one or
more employers’ organisation on the one hand
and one or more rep workers’ organisations on
the other , with a view to reaching agreement
• "Voluntary negotiation between employers or
employers' organizations and workers'
organizations, with a view to the regulation of
terms and conditions of employment by
collective agreements.“ (C.98)
Features of CB
• It is a method used by trade unions to improve the
terms and conditions of employment of their
members.
• It seeks to remedy the unequal bargaining position
between employer and employee.
• Where it leads to an agreement, it modifies, rather
than replaces, the individual contract of
employment
• The process is bipartite, but in some developing
countries the State plays a role in the form of a
conciliator where disagreements occur, or where
collective bargaining impinges on government policy
Subject Matter of CB
Substantive Matters Procedural Matters

• Those which set out • Those which regulate the
relations between the
standards of parties to the agreement
employment which are themselves and have no
directly applicable to bearing on individual
relations between an relations between employers
individual employer & and workers
• E.g. enforcement of CB
worker
agreement, methods of
• E.g. wages, working settling industrial disputes,
hours, leave, holidays, grievance procedure,
etc. procedure for negotiating
new agreement
Bargainable Issues
 At a theoretical level any issue  Wages and allowances
concerning employer-employee
 Working conditions
could be covered
 But in reality there could be  Incentive payments
bargainable and non-bargainable  Job security
distinction  Changes in technology
 The non-bargainable category  Work tools, techniques and
would involve in principle where practices
neither the management nor trade  Transfers & promotion
union is willing to yield ground –
prerogatives versus rights  Disciplinary matters
 e.g. work methods, product choice,  OSH
market issues, corporate decisions,  Insurance & benefits
etc. – for employer  Union recognition
 Union generally does not want  Union activities in the company
negotiations on production norms,
 Social security
discipline issues
Bargainable Issues – a comparison
 In India the parties are allowed to bargain over any issue
– no delimitation by law
 In Singapore & Malaysia – promotions, transfers, work
assignments, redundancies, lay offs & retrenchment –
non-bargainable
 Taiwan – does not allow bargaining over introduction of
new technology
 In South Korea, till 1987, wages not bargainable
 Some countries require certification of collective
agreement and the judiciary could refuse it if some
provisions are seen as against the national interest
• PROS AND CONS OF COLLECTIVE BARGAINING

Pre-requisites of C.B.
1) Freedom of Association
2) Strong & stable trade unions
3) Recognition of trade unions
4) Bargaining in Good Faith
5) Give and take – Mutual gain/survival
6) Absence of ULP or victimization
7) Proper Internal Communication
8) Support of Labour Administration Authorities
9) Enforcement of Agreements
Meaning of Good Faith
• Good faith is more likely where certain
attitudes are shared among employers,
workers and their organizations e.g. a belief
and faith in the value of compromise through
dialogue, in the process of collective
bargaining, and in the productive nature of
the relationship collective bargaining requires
and develops.

Support by the labour administration authorities
• Provide the necessary climate for it. For instance,
they should provide effective conciliation services
in the event of a breakdown in the process
• Provide the necessary legal framework for it to
operate in where necessary, e.g. provision for the
registration of agreements.
• Will not support a party in breach of agreements
concluded consequent to collective bargaining.
• Provide methods for the settlement of disputes
arising out of collective bargaining if the parties
themselves have not so provided.
CB PROCESS
Management TU
Ability to pay (Balance Sheet) Ability to live and work (family

budget)
Cost calculations (wage is a Purchasing power of wages

cost)
Wage cost > wage levels Wage levels & not bothered
with costs
Labour cost as a % of total cost Effort-wage bargain
Cut costs – source of Source of livelihood – maximize

competitiveness - so CUT wages
LABOUR COST

Bargaining process variation
Process
Conventional Modern
POKER GAME
Strategy (bluff, Hard, rigid
Flexible & Weak Mature & rational
deceive, stick bargaining
hard)
Stages in Negotiations
Preparation
Negotiations
Negotiation
Signing
Enforcement
Preparation
• Who to commence negotiation?
• Hold discussions at lower level to get shop floor realities
• Collect information (networks/study/others)
• Use of Consult agencies
• Set objectives – classify (can be, may be, reject?)
• Or NEGOTIATION RANGE
• Establish priorities
• Prepare a CHARTER OR A COUNTER
• Selection of negotiating team – role identification amongst
the members/chief negotiator, etc. (seriousness or good
faith)
• Negotiation strategy
• Consequences of failure
Attributes of NEGOTIATOR
Negotiation – First Phase
• Physical aspects of negotiations – place,
ambience, seating, facilities, etc.
• Ensure representative and empowered people sit
at the negotiating table
• Social greetings, icebreakers, etc.
• Presentation technique – TU or Management
• No interruptions even if mis-representation, etc.
• Body language of listening
• Ignore emotional, long language
• After completion – clarifications, gentle
questioning, say for source of information, etc.
Negotiation (contd.)
• Counter arguments without aggression – but
signalling will take place
• Strategy – should big points be taken up or
easy and winnable points to be taken up
• Identify the areas of agreement – don’t get
bogged down with one or two issues
• Allow elbow room for flexibility later – if close
the door keep a window open
• Keep cross talking as low as possible –
multiple signals problematic
Negotiation – Stage 2
• More speakers, noise, etc.
• May be a break – tea/lunch etc.
• Adjournments
• Allow internal meetings
• Prevent negotiating fatigue
• May be new information, new ideas, new
suggestions – be floated
• Information use is a TACTIC
Negotiation – Third Phase
• Conclusion (either way)
• Decide on the point of concluding – settlement of
all or major or minor (contextual)
• Signal – not bargaining in good faith – STOP
• Or not reciprocative – concession not recognized
• ANXIETY about the terms of settlement or failure
• Outcomes to be clearly defined so that no
misunderstanding and miscommunication (which
is more dangerous)
Negotiation – another phase
• Endorsement of the skeleton of the offers and
the counteroffers
Settlement
• Define the scope of agreement – to whom it
applies
• Tenure of the agreement
• Clear mention of the terms of agreement with
minute details
• Conditions for operationalizing agreement and
obligations and liabilities
• Procedure for problems of
interpretation/implementation (procedural)
• Valid signatures and registration of necessary by
law
Structure of C. B. Agreement
 Introductory paragraphs
 Case recital
 Terms of employment
 Wages & allowances
 Other allowances
 Working hours/holidays
 Welfare (canteen, creches, housing, transport, co-operatives,
employment to workers’ children)
 Social security
 Management proposals regarding flexibility
 Industrial peace clause
 Mechanisms for interpretation, implementation, dispute resolution
 Tenure of collective agreement (1-3 years short term agreement
and 3 or 4+ long term agreement, LTA)
TYPES OF COLLECTIVE BARGAINING
• Conjunctive or Distributional Bargaining
• Integrative Bargaining
• Attitudinal structuring
• Intra-Organisational Bargaining
• Concession Bargaining
• Productivity Bargaining

Conjunctive or Distributional Bargaining
The parties try to maximize their respective

gains.
Mostly deal with economic issues like wages,
bonus, allowances, benefits, etc.
It is a zero-sum game – one party’s gain is
another’s loss
Maximization of wages – TU
Maximization of profits - Employers

Integrative Bargaining
Also known as Interest-Based Bargaining
It is a negotiation strategy in which both the
parties collaborate to find a win-win solution to
their problems.
This strategy focuses on developing mutually
beneficial agreements based on the interests of
the disputants (avoid damaging issues)
Typical issues include - job evaluation
procedures, performance appraisal methods or
training programmes etc.
Attitudinal structuring:
It refers to the efforts by the negotiators to influence their
opponents' perceptions about the nature of the issues to be
negotiated.
By cultivating an atmosphere of friendliness, mutual
respect, trust, and cooperation, negotiators can encourage
their opponents to view issues largely in integrative terms
and participate in joint problem solving.
This activity involves shaping and reshaping some
perceptions like trust/distrust, friendliness/hostility, co-
operative/non-cooperative between the labour and
management.
When there is a backlog of bitterness between both the
parties, attitudinal structuring is required to maintain
smooth and harmonious K.R.
Sunday, November 19, 2023
industrial relations.
Shyam Sundar, XLRI 27
Intra-Organisational Bargaining
It seeks to achieve consensus among the
workers and management.
Even within the union there may be differences
between different groups as may be the case
with the management.
Intra-organisational consensus is required for
the smooth acceptance of the outcome of
Collective Bargaining.

Concession Bargaining
• Based on "give and-take" or "win-win" agreements in which
reciprocal exchange is strongly emphasized:
• E.g. In return for an undertaking to limit the number of
redundancies or reduce general working hours, for example,
the employees' side accepts the reopening of discussions on
pay structure or the pace of work.
• The term “concession” has been defined as reductions,
cutbacks or givebacks in wages and benefits.
• Wage and benefit reductions plus the lessening of restrictive
work rules resulting from the early opening of existing
contracts.
• Acceptance of a wage increase that is smaller than originally
demanded has been termed a concession.
• Conditions necessary for success of
1) Genuine economic distress (not caused by
management’s incompetency)
2) Concessions on both sides
3) A temporary phase or arrangement
4) No loss of existing jobs

Productivity Bargaining
• It refers to negotiations and agreements which
incorporate increases in productivity
• through re-organisation of work-force,
changes in work-practices and working
conditions in return for improvements in pay
and conditions of service.
• Mostly it originates from the managements
side

• Productivity refers to the ratio of output and
input
• it is the efficiency with which inputs are utilized
and spent in achieving the output
• Different productivity ratios for different factors
of production.
• Production relates to the volume of output
whereas productivity refers to the ratio of
efficiency of utilization of different factors of
production.
• Higher productivity implies higher and higher
standard of living for the workers and the
community
Productivity Bargaining - Guidelines
1) It should be shown that the workers are contributing
towards the achievement of constantly rising levels of
efficiency.
2) Where appropriate, major changes in working practice or
working methods should be specified in the agreement.
3) Measurements of efficiency should be based on the
application of relevant indices of performance or work
standards
4) A realistic calculation of all the relevant costs of the
agreement and of the gain attributable in the workers’
contribution should normally show that the effect is to
reduce the total cost of output or the cost of providing a
given service.
5) There should be effective controls to ensure that projected
increases in efficiency are achieved and that higher pay or
other improvements are made only when such increases
are19,assured.
Sunday, November 2023 K.R. Shyam Sundar, XLRI 33
Issues In Prod Barg:
• Productivity determination – outside agency or joint

determination?
• How to isolate workers’ efforts/capital effects?
• Physical productivity (in terms of numbers, e.g. tonnes,
metres, kilograms, pieces, etc.) versus Value productivity
(physical * price of the product – higher the price greater
the value of productivity and vice versa)
• Competition between & segmentation of workers –
differentials versus standardization?
• Need for transparency – between Management & TU and
workers – conflicts
• Control of extraneous factors like raw
material/energy/machine
breakdown, etc.
K.R. Shyam Sundar, XLRI 34
Productivity Mechanisms & Riders
Productivity mechanisms The routes comments
Raise utilization of resources Assess low utilization Both managerial & workers
Increase worker engagement Exclude non-work time & Rewards & penalties
time increase work time – MOST
technique
Work organization Multiskilling & multi machining Training & skill allowance (TPM)
& associated tasks (cleaning,
inspection)
Reduce wastes Waste in time, raw materials,
scrap reduction, zero defect
Quality improvement (TQM) Quality charts, self inspection & Weightage for quality in variable
certification, workers’ pay
involvement (thru. small groups)
Reward + penalties Penalties for underperformance, Scope for abuse

indiscipline, absences, restrictive
practices, etc.
Assertion of mgt. prerogatives Tech, machine, work orgn, Justified by productivity, no loss
worker deployment, etc. of employment
Bonus linked to performance & Performance of Bonus may >20%; non-
productivity workers/company compliance = conventional
bonus
Nov 19, 2023 K.R. Shyam Sundar, Mumbai 35

TU– cautious & conditional nod to productivity
 TU & CB legitimacy in ADVERSE times hinge on changes in
outlook and negotiational strategies
 Cooperation to productivity subject to:
 cant be basis of wage determination – conventional criteria
still relevant
 Not lead to work intensification & no OSH
 No unemployment of existing stock
 Low weightage of variable pay
 Productivity gains to be shared equally
 Productivity is STILL CANNOT be the SOLE DETERMINANT OF
WAGES – it is COST OF LIVING, LABOUR WELFARE AND
DISTRIBUTIONAL CONCERNS ARE IMPORTANT
Wage – Productivity-Cost
• Low wages + low prod = untenable
• Low wages + high prod = exploitation
• High wages + low prod = leniency
• High wages + high prod = sustainable

Unit Labour Cost
Unit Labour Cost:
Definition:
Unit labour costs (ULC) measure the average cost of labour
per unit of output
It is the ratio of total labour costs to real output
Economics of ULC:
A rise in labour cost need not mean weakening of
competitiveness provided productivity also rises to the
same extent
For e.g. if labour cost rises by 5% and labour productivity
rises by 5% then the unit labour cost will remain the same
and hence competitiveness is not hurt
ULC Economics
• Firms do care about unit labor costs because they track the
relationship between their total labor costs and how
productive workers are.
• If a firm’s unit labor cost increases, and even more so vis-à-
vis those of its competitors, most likely it will lose market
share and its growth expectations will be negatively
affected.
• The solution to this problem is a combination of wage
restraint and labor productivity increase, the latter usually
achieved by introducing labor-saving techniques that are
profitable.
• But the above solutions are difficult to achieve because of
the resistance by trade unions
LEVELS OF BARGAINING:
CENTRALISED:
 ECONOMY WIDE SECTORAL INTERMEDIARY

(INDUSTRY/REGION)
 DECENTRALIZED
(FIRM/COMPANY/PLANT/PROFIT CENTRE)
CENTRALIZATION VERSUS DECENTRALIZATION:
MERITS OF DECENTRALIZATION:
 NEED AS COMEPTITION INTENSIFIES

 TAKES INTO A/C LOCAL FACTORS
 LOCAL PARTNERS MORE KNOWLEDGEABLE
 SCOPE FOR INTRODUCING FIRM SPECIFIC
IMPROVEMENTS, GREATER COMMITMENT BY
LOCAL PARTNERS = INCREASE IN
PRODUCTIVITY, INDUSTRIAL PEACE
 CENTRALISATION RIASES TU’S BARG. POWER
FOR CENTRALISATION:
 BARGAINING POWER EQUALITY

 LARGER CONCERNS & WAGE MODERATION
 ABSENCE OF RANK & FILE PRESSURE ON
NEGOTIATORS
 REDUCTION OF TRANSACTION COSTS
 ROLE OF STATE FACILITATED
COLLECTIVE BARGAINING IN INDIA

TWO TYPES OF BARGAINING EXERCISES:
 PERIODIC (WAGES, DA, WORKLOAD, BENEFITS ETC.)

 ANNUAL (BONUS)
Levels of CB in India
Levels
Industry-
Profit Centre Plant Level Firm National
cum-region
Hindustan
Banking
Lever/Blue Textile /Insurance/
Star/Siemens (all
India)
industry/Tea Steel/Ports/
Coal

Limitations on CB in India
1) Some constituents of the labour market, for
instance, government employees in public sector,
have limited rights and opportunities to organize
and bargain collectively – (Venkata Ratnam, 2001,
2006, p.193)
2) Similarly, police personnel do not right to CB
3) Contract & Casual workers, non-statutory trainees
4) Workers in the informal sector (incl. agricultural
labourers)
5) Employees in emerging sectors IT industry, Modern
Retail Outlets, etc.
6) Employees
Sunday, November 19, 2023 in SEZs,K.R.EPZs
Shyam Sundar, XLRI 46
1) The central labour laws do not provide for the
determination of collective bargaining agent
2) Informal guidelines (such as Code of Discipline, Code
of Conduct) exist which are voluntary for those states
which do not statutory basis
3) Some states have laws on determination of bargaining
agent.
4) The laws governing the legality of strikes are so tough
so as to render legal strikes well nigh impossible
5) Under the ID Act, collective agreements are placed on
a pedestal lower than the settlement reached via
conciliation

COLLECTIVE BARGAINING COVERAGE IN INDIA
About 2% of the total workforce or 30% of the

organized sector workforce is covered by CB

Labour
Market
Trends
Managerial
Labour
Reforms Strategies -
Flexibility
TUs &
Collective
Absence Bargainin
g Union Resistance
of Aiding & Opposition
Laws
New
Informality Sectors &
Industries
Three Trends in the Wake of Globalization
• Movement away from Collective Bargaining to

Individual Bargaining
• Decentralisation of collective bargaining, i.e. a
movement from centralised collective
bargaining to plant or local level collective
bargaining;
• Increased STRESS ON PRODUCTIVITY AND
COMPETITIVENESS & COST MINIMIZATION

Employers have changed their strategies –
 away from adversarial,
 better sharing of information with trade
unions,
 pro-active rather than responsive
 Adopting Gradualist Approach where
necessary – Educative Strategy and mind-set
change

 Workers and trade union leaders (esp. insiders) have
witnessed the dynamics of competitive economy
 the real adversary is not the employer but the
competitors – realization
 In the post-glob period where employer offensive aided
by market economy is peaking, non-distributional
bargaining such as productivity bargaining & concession
bargaining could give space for collective institutions
 CB could pre-empt or prevent unilateral determination
and there could be negotianally guided work
reorganization and other aspects
 the competitive market economy’s dynamics offer
incentives on both the sides to resort to C.B.

NEW TRENDS in CB
 Instead of unions submitting the demands, the management

does
 Dominant level of bargaining is enterprise level bargaining
 Industry wide settlements - in sugar, cotton & silk, textile
(earlier) in Maharashtra; Plantations and cotton textile
industries in TN; Jute mill industry in West Bengal
 Decentralization and informalization of bargaining
 Average duration of collective agreements in private sector 2-
3 years
 New trend of longer settlements say 5-10 years (e.g. Sulzer
India limited (8), Pune, Lubricant India Private Limited, Gharda
Chemicals, Kalyan, Maharashtra)
 In Central Public Sector Enterprises – 5 years tenure settlement
(option for a 10 years settlement
also)
K.R. Shyam Sundar, XLRI 53
• PRODUCTIVITY BARGAINING IN INDIA

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Collective Bargaining in India

K.R. Shyam Sundar

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 1

Substantive Matters Procedural Matters

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 7

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 9

Ability to pay (Balance Sheet) Ability to live and work (family

Cost calculations (wage is a Purchasing power of wages

Labour cost as a % of total cost Effort-wage bargain

Cut costs – source of Source of livelihood – maximize

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 12

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 24

The parties try to maximize their respective

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 25

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 28

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 30

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 31

• Productivity determination – outside agency or joint

Reward + penalties Penalties for underperformance, Scope for abuse

Nov 19, 2023 K.R. Shyam Sundar, Mumbai 35

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 37

 ECONOMY WIDE SECTORAL INTERMEDIARY

 NEED AS COMEPTITION INTENSIFIES

 BARGAINING POWER EQUALITY

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 43

 PERIODIC (WAGES, DA, WORKLOAD, BENEFITS ETC.)

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 45

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 47

About 2% of the total workforce or 30% of the

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 48

• Movement away from Collective Bargaining to

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 50

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 51

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 52

 Instead of unions submitting the demands, the management

Sunday, November 19, 2023 K.R. Shyam Sundar, XLRI 54

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