Employee Relations and Labour Laws

ANTIM PRAHAR

The Most Important Questions

By
Dr. Anand Vyas
1 Functions, Significance & Challenges of
Industrial Relations
The term industrial relations explain the relationship between employees and
management which stem directly or indirectly from union-employer relationship.
Industrial relations are the relationships between employees and employers within the
organizational settings.

Role:
To help establish and maintain true industrial democracy which is a prerequisite for the
establishment of a socialist society.
To help in the economic progress of a country. The problem of an increase in productivity
is essentially the problem of maintaining good industrial relations. That is why they form
an important plank of the economic development plan of every civilized nation.
To help management both in the formulation of informed labour relations policies and in
their translation into action.
Significance
• Uninterrupted production
• Reduction in Industrial Disputes:
• Mental Revolution:
• High morale

Challenges
• Lack of Privacy
• It's an "Us Against Them" Mentality
• Inflexibility of Employer
• Narrow Focus of Employees
• Faulty communications system, unfair practices,
• non-recognition of trade unions and labour laws
2 Development of Trade Unionism, Functions,
Type and Structure

Trade unions, also known as labor unions in the United States, are
organizations of workers in a common trade who have organized into
groups dedicated to improving the workers’ work life. A trade union
generally negotiates with employers on behalf of its members,
advocating for improvements such as better working conditions,
compensation and job security. These unions play an important role in
industrial relations — the relationship between employees and
employers.
Roles of Trade Union

• This mainly focuses on job security, good working conditions, regular wages, and
many other benefits. Trade unions show the unionism between labourers in an
organization. You can form a trade union under Article 19 (1) (c) of the
Constitution of India.

• History
• The origins of trade unions can be found in guilds and fraternal organizations
composed of people practicing a common trade, which date back hundreds of
years. However, the modern conception of trade unions, in which unions
represent a specific set of workers in negotiations with employers, dates back
only to the 18th century. Membership in unions only became widespread in the
United States and Europe in the 19th century.
• Types
• Craft unions
• These represent workers with particular skills e.g. plumbers and weavers. These
workers may be employed in a number of industries.
• General unions
• These unions include workers with a range of skills and from a range of industries.
• Industrial unions
• These seek to represent all the workers in a particular industry, for instance, those
in the rail industry.
• White collar unions
• These unions represent particular professions, including pilots and teachers.
Unions in a country, often belong to a national union organization. For example, in
India, a number of unions belong to the All India Trade Union Congress (AITUC).
3 Scope, Types and Reasons of Collective
Bargaining
Collective bargaining broadly covers subjects and issues entering into the conditions and terms of
employment. It is also concerned with the development of procedures for settlement of disputes arising
between the workers and management.
The collective bargaining reached has been of three types:
(1) Agreement arrived at after voluntary direct negotiations between the parties concerned. Its
implementation is purely voluntary;
(2) Agreements between the two parties, though voluntary in nature, are compulsory when registered as
settlement before a conciliator; and
(3) Agreement which have legal status negotiated after successful discussion between the parties when
the matter of dispute is under reference to industrial tribunal/courts.

Collective Bargaining Involves:

(i) Negotiations
(ii) Drafting
(iii) Administration
(iv) Interpretation of documents written by employers, employees and the union representatives
• Main Features of Collective Bargaining:
• It is a Group Action:
• It is a Continuous Process:
• It is Flexible and Mobile and not Fixed or Static:
• It is Industrial Democracy at Work:
• It is Dynamic:
4 Grievance Function in IR: Grievance
Settlement Procedure

Grievance means any type of dissatisfaction or discontentment’s arising

out of factors related to an employee’s job which he thinks are unfair. A
grievance arises when an employee feels that something has happened
or is happening to him which he thinks is unfair, unjust or inequitable.
In an organization, a grievance may arise due to several factors such as:
1.Grievance resulting from management policies include:
• Wage rates
• Leave policy
• Overtime
• Lack of career planning
• Role conflicts
• Lack of regard for collective agreement
• Disparity between skill of worker and job responsibility
3 Grievance resulting from working conditions include:
• Poor safety and bad physical conditions
• Unavailability of tools and proper machinery
• Negative approach to discipline
• Unrealistic targets
3 Grievance resulting from inter-personal factors include
• Poor relationships with team members
• Autocratic leadership style of superiors
• Poor relations with seniors
• Conflicts with peers and colleagues
Procedure
• STEP 1: In the first step the grievance is to be submitted to departmental representative, who
is a representative of management. He has to give his answer within 48 hours.
• STEP 2: If the departmental representative fails to provide a solution, the aggrieved employee
can take his grievance to head of the department, who has to give his decision within 3 days.

STEP 3: If the aggrieved employee is not satisfied with the decision of departmental head, he
can take the grievance to Grievance Committee. The Grievance Committee makes its
recommendations to the manager within 7 days in the form of a report. The final decision of
the management on the report of Grievance Committee must be communicated to the
aggrieved employee within three days of the receipt of report. An appeal for revision of final
decision can be made by the worker if he is not satisfied with it. The management must
communicate its decision to the worker within 7 days.
• STEP 4: If the grievance still remains unsettled, the case may be referred to voluntary
arbitration.
5 Industrial Disputes: Preventive & Settlement
Machinery in India
• According to Section 2(k) of the Industrial Disputes Act, 1947 “industrial
dispute” is defined as, “Any disputes or differences between employers and
employers, or between employers and workmen, or between workmen and
workmen, which is connected with the employment or non-employment or the
terms of employment or with the conditions of labour, of any person”.

• Some of the major industrial dispute settlement machinery are as follows:

• Conciliation
• Court of Inquiry
• Voluntary Arbitration
• Adjudication (Compulsory arbitration).
Types
• Conciliation:
• Conciliation, is a form of mediation. Mediation is the act of making active
effort to bring two conflicting parties to compromise. Mediation, however,
differs from conciliation in that whereas conciliator plays only a passive
and indirect role, and the scope of his functions is provided under the law,
the mediator takes active part and the scope of his activities are not
subject to any statutory provisions.

• Conciliation is the “practice by which the services of a neutral party are

used in a dispute as a means of helping the disputing parties to reduce
the extent of their differences and to arrive at an amicable settlement of
agreed solution.”
Court of Inquiry:
• In case of the failure of the conciliation proceedings to settle a dispute, the government can
appoint a Court of Inquiry to enquire into any matter connected with or relevant to industrial
dispute. The court is expected to submit its report within six months. The court of enquiry
may consist of one or more persons to be decided by the appropriate government.
• In other words, arbitration offers an opportunity for a solution of the dispute through an
arbitrator jointly appointed by the parties to the dispute. The process of arbitration saves
time and money of both the parties which is usually wasted in case of adjudication.
Voluntary Arbitration:
• On failure of conciliation proceedings, the conciliation officer many persuade the parties to refer
the dispute to a voluntary arbitrator. Voluntary arbitration refers to getting the disputes settled
through an independent person chosen by the parties involved mutually and voluntarily.
• Adjudication:
• The ultimate remedy for the settlement of an industrial dispute is its reference to adjudication
by labour court or tribunals when conciliation machinery fails to bring about a settlement.
Adjudication consists of settling disputes through intervention by the third party appointed by
the government. The law provides the adjudication to be conducted by the Labour Court,
Industrial Tribunal of National Tribunal.
6 The Workmen’s Compensation Act, 1972
The Workmen’s Compensation Act, 1923 provides for payment of compensation to workmen and their dependants
in case of injury and accident (including certain occupational disease) arising out of and in the course of
employment and resulting in disablement or death. The Act applies to railway servants and persons employed in
any such capacity as is specified in Schedule II of the Act. The schedule II includes persons employed in factories,
mines, plantations, mechanically propelled vehicles, construction works and certain other hazardous occupations.

The main provisions of the Act are

An employer is liable to pay compensation:- (i) if personal injury is caused to a workman by accident arising out of
and in the course of his employment; (ii) if a workman employed in any employment contracts any disease,
specified in the Act as an occupational disease peculiar to that employment.
However, the employer is not liable to pay compensation in the following cases:-
If the injury does not result in the total or partial disablement of the workman for a period exceeding three days.
If the injury, not resulting in death or permanent total disablement, is caused by an accident which is directly
attributable to:- (i) the workman having been at the time of the accident under the influence of drink or drugs; or
(ii) the willful disobedience of the workman to an order expressly given, or to a rule expressly framed, for the
purpose of securing the safety of workmen; or (iii) the willful removal or disregard by the workman of any safety
guard or other device which has been provided for the purpose of securing safety of workmen.
The State Government may, by notification in the Official Gazette, appoint any person to be a Commissioner for
Workmen’s Compensation for such area as may be specified in the notification. Any Commissioner may, for the
purpose of deciding any matter referred to him for decision under this Act, choose one or more persons possessing
special knowledge of any matter relevant to the matter under inquiry to assist him in holding the inquiry.
• Compensation shall be paid as soon as it falls due. In cases where the
employer does not accept the liability for compensation to the extent
claimed, he shall be bound to make provisional payment based on the
extent of liability which he accepts, and, such payment shall be
deposited with the Commissioner or made to the workman, as the case
may be.
• If any question arises in any proceedings under this Act as to the liability
of any person to pay compensation (including any question as to
whether a person injured is or is not a workman) or as to the amount or
duration of compensation (including any question as to the nature or
extent of disablement), the question shall, in default of agreement, be
settled by a Commissioner. No Civil Court shall have jurisdiction to settle,
decide or deal with any question which is by or under this Act required
to be settled, decided or dealt with by a Commissioner or to enforce any
liability incurred under this Act.
7 The Industrial Disputes Act, 1947
The Industrial Disputes Act 1947 extends to the whole of India and regulates
Indian labour law so far as that concerns trade unions as well as Individual
workman employed in any Industry within the territory of Indian mainland. It
came into force 1 April 1947.
The Act also lays down:
1. The provision for payment of compensation to the workman on account
of closure or lay off or retrenchment.
2. The procedure for prior permission of appropriate Government for laying
off or retrenching the workers or closing down industrial establishments
3. Unfair labour practices on part of an employer or a trade union or worker
Objective and Applicability of Industrial
Disputes Act, 1947
• The main objective of the industrial Disputes Act, 1947 is to investigate and thereafter come to a
settlement of any industrial disputes, primarily between employers and employees. A workman
having no supervisory or administrative capacity can raise an industrial dispute before the
competent authority. Furthermore, collective disputes can also be raised by the union.

• Principal objects of the Act are

• (1) The promotion of measures for securing amity and good relations between the employer and
workmen;
• (2) An investigation and settlement of industrial disputes between employers and employees,
employers and workmen and between workman and workmen, with a right of representation by a
registered Trade Union or Federation, of Trade Unions or association of employees or a federation
or association of employers;
• (3) The prevention of illegal strikes and lockouts; and
• (4) Relief to workers in the matters of layoff and retrenchment.
8 The Payment of Minimum wages act 1936
Purpose of the Act
The main objective of the Act is to avoid unnecessary delay in the payment of wages
and to prevent unauthorized deductions from the wages. Every person employed in any
factory, upon any railway or through sub-contractor in a railway and a person employed
in an industrial or other establishment.
Summary of the provisions of the Act
The provisions of the Act regarding the imposition of fines on the employed person are
as follows such as, The employer must exhibit on his premises a list of acts or omissions
for which fines can be imposed, Before imposing a fine on an employed person he must
be given an opportunity of showing cause against the fine, The amount of fine must not
exceed 3 percent of the wages, A fine cannot be imposed on an employed person who is
under the age of 15 years, A fine cannot be recovered by installments or after 90 days
from the day of the act or omission for which it is imposed, The moneys realized from
fines must be applied to purposes beneficial to employed persons.
• Subsection 8(3), 10(1-A) & Rule 15} deals with Any person desiring to
impose a fine on an employed person or to make a deduction for
damage or loss shall explain personally or in writing to the said person
the act or omission, or damage or loss in respect of which the fine or
deduction is proposed to be imposed, and the amount of fine or
deduction, which it is proposed to impose, and shall hear his
explanation in the presence of at least one other person, or obtain it
in writing.
9 The Trade unions act, 1926

• The trade Unions Act, 1926 provides for registration of trade unions
with a view to render lawful organisation of labour to enable
collective bargaining. It also confers on a registered trade union
certain protection and privileges.
• The application for registration should be in the prescribed form and accompanied by the
prescribed fee, a copy of the rules of the union signed by at least 7 members, and a
statement containing
• the names, addresses and occupations of the members making the application, the name
of the trade union and the addresses of its head office, and the titles, names, ages,
addresses and occupations of its office bearers.

• Objectives of Trade Union:

• The following are the objectives of trade union:
• (1) To improve the economic lot of workers by securing them better wages.
• 2) To secure for workers better working conditions.
• (3) To secure bonus for the workers from the profits of the enterprise/organization.
• (4) To ensure stable employment for workers and resist the schemes of management
which reduce employment opportunities.
• (5) To provide legal assistance to workers in connection with disputes regarding work and
payment of wages.
• (6) To protect the jobs of labour against retrenchment and layoff etc.
• (7) To ensure that workers get as per rules provident fund, pension and other benefits.
Functions of Trade Unions:
• (1) Collective bargaining with the management for securing better
work environment for the workers/ employees.
• (2) Providing security to the workers and keeping check over the
hiring and firing of workers.
• (3) Helping the management in redressal of grievances of workers at
appropriate level.
• (4) If any dispute/matter remains unsettled referring the matter for
arbitration.
10 The payment of Bonus Act, 1965 &
Amendment
The Payment of Bonus Act, 1965 provides for the payment of bonus to persons employed in certain
establishments, employing 20 or more persons, on the basis of profits or on the basis of production or productivity
and matters connected there with.
Applicability
Payment of Bonus Act, 1965 extends to whole of India.
Payment of Bonus Act, 1965 applies to every factory and to every other establishment in which 20 or more persons
are employed on any day during an accounting year;
The Government may also apply the act on any factory or establishment in which has less than 20 but not less than
10 persons are employed;

Eligibility
Payment of Bonus Act, 1965 is applicable on employees drawing wages / salary up-to 10,000/- per month.
Only those employees are entitled for bonus, who have worked for at least 30 working days in an accounting year.
Rate of Bonus
33% of the salary or wages earned by an employee in a year or Rs. 100/-, whichever is higher.
In case allocable surplus exceeds the amount of provision of minimum bonus, the employer shall be bound to pay
maximum bonus not exceeding 20% of the salary or wages earned by employees
• Amendment of payment of Bonus Act, 1965

• (a) Revision of wage threshold for eligibility: The wage threshold for determining
eligibility of employees has been revised from INR 10,000 to INR 21,000 per month,
covering a larger pool of employees.

• (b) Change in the wage ceiling used for calculation of bonus: Previously the maximum
bonus payable was 20% of INR 3500 per month. The minimum bonus payment was also
capped at 8.33% of INR 3500 per month or INR 100, whichever is higher. The calculation
ceiling of INR 3500 has now been doubled to INR 7000 per month “or the minimum
wage for the scheduled employment, as fixed by the appropriate Government”
(whichever is higher). Therefore, the cost associated with bonus payments could double
(or be greater still, depending on applicable minimum wages), based on the
organization’s performance.
• (c) Retrospective Effect: The amendment has been brought into effect from 1 April 2014.
 11The payment of Gratuity Act, 1972 & Amendment
Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the
employee in the company. Gratuity is given by the employer to his/her employee for the services rendered by him during the
period of employment. It is usually paid at the time of retirement but it can be paid before provided certain conditions are met. A
person is eligible to receive gratuity only if he has completed minimum five years of service with an organization. However, it can
be paid before the completion of five years at the death of an employee or if he has become disabled due to accident or disease.

Gratuity and Maternity Benefits

Gratuity is a part of salary that is received by an employee from his/her employer in gratitude for the services offered by the
employee in the company.
Gratuity is given by the employer to his/her employee for the services rendered by him during the period of employment. It is
usually paid at the time of retirement but it can be paid before provided certain conditions are met.
A person is eligible to receive gratuity only if he has completed minimum five years of service with an organization. However, it
can be paid before the completion of five years at the death of an employee or if he has become disabled due to accident or
disease.
There is no set percentage stipulated by law for the amount of gratuity an employee is supposed to get – an employer can use a
formula-based approach or even pay higher than that. Gratuity payable depends on two factors: Last drawn salary and years of
service. To calculate how much gratuity is payable, the Payment of Gratuity Act, 1972 has divided non-government employees
into two categories:

(a) Employees covered under the Act

• Let us understand more about the eligibility, payment option and more on Gratuity Act in India.

• 1. Eligibility
• An individual who has completed 5 years of continuous service in an organization is eligible for
gratuity benefit. However, this is not applicable in the case where the employment is terminated
due to death or any disability. The amount will be paid to the nominee or legal heir. An employee
could leave his job for various reasons, after which receiving his gratuity.

• 2. Calculation
• Calculation depends on whether an employee is covered under the payment of Gratuity Act, 1972
or it is a voluntary step on the part of a company etc. If an employee is covered under the Act, then
he is entitled to a gratuity amount of 15 days salary or wages, multiplied by the number of years he
has put in. Then in that case your calculation would be as follows:

• Gratuity = Last drawn basic salary x 15/26 x No. of years of

• 3. Taxation
• When gratuity is received by the employee within the duration of his service then gratuity is taxable
and falls under the head of “salaries”. But when gratuity is received by the employee at the time of
his retirement, death or superannuation then tax exemption rules for government employees
differs from private employees to government employees.
12 Provident Fund
• Provident fund​is an investment fund that is voluntarily established
by Employer and employees to serve as long term savings to support
an employee's retirement. Sources of fund: Employee's contribution.