Unit-1

Industrial Relations

Industrial relations is used to denote the collective relationships between

management and the workers. Traditionally, the term industrial relations is used
to cover such aspects of industrial life as trade unionism, collective bargaining,
workers’ participation in management, discipline and grievance handling,
industrial disputes and interpretation of labor laws and rules and code of conduct.

In the words of Lester, "Industrial relations involve attempts at arriving at

solutions between the conflicting objectives and values; between the profit motive
and social gain; between discipline and freedom, between authority and industrial
democracy; between bargaining and co-operation; and between conflicting
interests of the individual, the group and the community”.
The National Commission on Labor (NCL) also emphasize on the same
concept. According to NCL, industrial relations affect not merely the interests of
the two participants- labor and management, but also the economic and social
goals to which the State addresses itself. To regulate these relations in socially
desirable channels is a function, which the State is in the best position to
perform.In fact, industrial relation encompasses all such factors that influence
behavior of people at work. A few such important factors are below:

Institution: It includes government, employers, trade unions, union federations

or associations, government bodies, labor courts, tribunals and other
organizations which have direct or indirect impact on the industrial relations
systems.

Characters: It aims to study the role of workers unions and employers’

federations officials, shop stewards, industrial relations officers/ manager,
mediator/conciliators / arbitrator, judges of labor court, tribunal etc.
Methods: Methods focus on collective bargaining, workers’ participation in the
industrial relations schemes, discipline procedure, grievance redressal
machinery, dispute settlements machinery working of closed shops, union
reorganization, organizations of protests through methods like revisions of
existing rules, regulations, policies, procedures, hearing of labor courts, tribunals
etc.

Contents: It includes matter pertaining to employment conditions like pay, hours

of works, leave with wages, health, and safety disciplinary actions, lay-off,
dismissals retirements etc., laws relating to such activities, regulations governing
labor welfare, social security, industrial relations, issues concerning with workers’
participation in management, collective bargaining, etc.

Introduction to Industrial Relations: Industrial relations has become one

of the most delicate and complex problems of modern industrial society.
Industrial progress is impossible without cooperation of labors and
harmonious relationships. Therefore, it is in the interest of all to create and
maintain good relations between employees (labor) and employers
(management).

Concept of Industrial Relations: The term ‘Industrial Relations’

comprises of two terms: ‘Industry’ and ‘Relations’. “Industry” refers to “any
productive activity in which an individual (or a group of individuals) is (are)
engaged”. By “relations” we mean “the relationships that exist within the
industry between the employer and his workmen.”
The term industrial relations explains 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. The field of industrial relations looks
at the relationship between management and workers, particularly groups of
workers represented by a union. Industrial relations are basically the interactions
between employers, employees and the government, and the institutions and
associations through which such interactions are mediated.
The term industrial relations has a broad as well as a narrow outlook. Originally,
industrial relations was broadly defined to include the relationships and
interactions between employers and employees. From this perspective, industrial
relations covers all aspects of the employment relationship, including human
resource management, employee relations, and union-management (or labor)
relations. Now its meaning has become more specific and restricted. Accordingly,
industrial relations pertains to the study and practice of collective bargaining,
trade unionism, and labor-management relations, while human resource
management is a separate, largely distinct field that deals with nonunion
employment relationships and the personnel practices and policies of employers.

The relationships which arise at and out of the workplace generally include the
relationships between individual workers, the relationships between workers and
their employer, the relationships between employers, the relationships employers
and workers have with the organizations formed to promote their respective
interests, and the relations between those organizations, at all levels. industrial
relations also includes the processes through which these relationships are
expressed (such as, collective bargaining, workers’ participation in decision-
making, and grievance and dispute settlement), and the management of conflict
between employers, workers and trade unions, when it arises.

Glossary Of Industrial Relations: Related Terms

For better understanding of industrial relations, various terms need to be defined

here:
Industry:
Industrial Disputes Act 1947 defines an industry as any systematic activity
carried on by co-operation between an employer and his workmen for the
production, supply or distribution of goods or services with a view to satisfy
human wants or wishes whether or not any capital has been invested for the
purpose of carrying on such activity; or such activity is carried on with a motive to
make any gain or profit. Thus, an industry is a whole gamut of activities that are
carried on by an employer with the help of his employees and labors for
production and distribution of goods to earn profits.

Employer
An employer can be defined from different perspectives as:-

A person or business that pays a wage or fixed payment to other person(s) in

exchange for the services of such persons.

A person who directly engages a worker/employee in employment.

Any person who employs, whether directly or through another person or

agency, one or more employees in any scheduled employment in respect
of which minimum rates of wages have been fixed.

As per Industrial Disputes Act 1947 an employer means:-

In relation to an industry carried on by or under the authority of any

department of [the Central Government or a State Government], the
authority prescribed in this behalf, or where no authority is prescribed, the
head of the department;

In relation to an industry carried on by or on behalf of a local authority, the

chief executive officer of that authority;

Employee: -
 • Employee is a person who is hired by another person or business for a
wage or fixed payment in exchange for personal services and who does
not provide the services as part of an independent business.
• An employee is any individual employed by an employer.
• A person who works for a public or private employer and receives
remuneration in wages or salary by his employer while working on a
commission basis, piece-rates or time rate.
• Employee, as per Employee State Insurance Act 1948, is any person
employed for wages in or in connection with work of a factory or
establishment to which the act applies.

In order to qualify to be an employee, under ESI Act, a person should belong

to any of the categories:

o Those who are directly employed for wages by the principal employer
within the premises or outside in connection with work of the factory or
establishment.
o Those employed for wages by or through an immediate employer in the
premises of the factory or establishment in connection with the work
thereof
o Those employed for wages by or through an immediate employer in
connection with the factory or establishment outside the premises of such
factory or establishment under the supervision and control of the principal
employer or his agent.
o Employees whose services are temporarily lent or let on hire to the
principal employer by an immediate employer under a contract of service
(employees of security contractors, labor contractors, house keeping
contractors etc. come under this category).

Employment: The state of being employed or having a job.

Industrial Relation System

An industrial relations system consists of the whole gamut of relationships

between employees and employees and employers which are managed by the
means of conflict and cooperation.A sound industrial relations system is one in
which relationships between management and employees (and their
representatives) on the one hand, and between them and the State on the other,
are more harmonious and cooperative than conflictual and creates an
environment conducive to economic efficiency and the motivation, productivity
and development of the employee and generates employee loyalty and mutual
trust.

Actors in the IR system:

Three main parties are directly involved in industrial relations:

Employers: Employers possess certain rights vis-à-vis labors. They have the
right to hire and fire them. Management can also affect workers’ interests by
exercising their right to relocate, close or merge the factory or to introduce
technological changes.

Employees: Workers seek to improve the terms and conditions of their

employment. They exchange views with management and voice their grievances.
They also want to share decision making powers of management. Workers
generally unite to form unions against the management and get support from
these unions.

Government: The central and state government influences and regulates

industrial relations through laws, rules, agreements, awards of court ad the like. It
also includes third parties and labor and tribunal courts.
Importance of Industrial Relations

The healthy industrial relations are key to the progress and success. Their
significance may be discussed as under –

Uninterrupted production – The most important benefit of industrial relations is

that this ensures continuity of production. This means, continuous
employment for all from manager to workers. The resources are fully utilized,
resulting in the maximum possible production. There is uninterrupted flow of
income for all. Smooth running of an industry is of vital importance for several
other industries; to other industries if the products are intermediaries or
inputs; to exporters if these are export goods; to consumers and workers, if
these are goods of mass consumption.

Reduction in Industrial Disputes – Good industrial relations reduce the

industrial disputes. Disputes are reflections of the failure of basic human
urges or motivations to secure adequate satisfaction or expression which are
fully cured by good industrial relations. Strikes, lockouts, go-slow tactics,
gherao and grievances are some of the reflections of industrial unrest which
do not spring up in an atmosphere of industrial peace. It helps promoting co-
operation and increasing production.

High morale – Good industrial relations improve the morale of the employees.
Employees work with great zeal with the feeling in mind that the interest of
employer and employees is one and the same, i.e. to increase production.
Every worker feels that he is a co-owner of the gains of industry. The
employer in his turn must realize that the gains of industry are not for him
along but they should be shared equally and generously with his workers. In
other words, complete unity of thought and action is the main achievement of
industrial peace. It increases the place of workers in the society and their ego
 is satisfied. It naturally affects production because mighty co-operative efforts
alone can produce great results.

Mental Revolution – The main object of industrial relation is a complete mental

revolution of workers and employees. The industrial peace lies ultimately in a
transformed outlook on the part of both. It is the business of leadership in the
ranks of workers, employees and Government to work out a new relationship
in consonance with a spirit of true democracy. Both should think themselves
as partners of the industry and the role of workers in such a partnership
should be recognized. On the other hand, workers must recognize employer’s
authority. It will naturally have impact on production because they recognize
the interest of each other.

Reduced Wastage – Good industrial relations are maintained on the basis of

cooperation and recognition of each other. It will help increase production.
Wastages of man, material and machines are reduced to the minimum and
thus national interest is protected.

Thus, it is evident that good industrial relations is the basis of higher

production with minimum cost and higher profits. It also results in increased
efficiency of workers. New and new projects may be introduced for the welfare of
the workers and to promote the morale of the people at work. An economy
organized for planned production and distribution, aiming at the realization of
social justice and welfare of the massage can function effectively only in an
atmosphere of industrial peace. If the twin objectives of rapid national
development and increased social justice are to be achieved, there must be
harmonious relationship between management and labor.
Objectives of industrial relations

The main objectives of industrial relations system are:-

To safeguard the interest of labor and management by securing the highest

level of mutual understanding and good-will among all those sections in
the industry which participate in the process of production.
To avoid industrial conflict or strife and develop harmonious relations, which
are an essential factor in the productivity of workers and the industrial
progress of a country.
To raise productivity to a higher level in an era of full employment by
lessening the tendency to high turnover and frequency absenteeism.

To establish and promote the growth of an industrial democracy based on

labor partnership in the sharing of profits and of managerial decisions, so
that ban individuals personality may grow its full stature for the benefit of
the industry and of the country as well.

To eliminate or minimize the number of strikes, lockouts and gheraos by

providing reasonable wages, improved living and working conditions, said
fringe benefits.

To improve the economic conditions of workers in the existing state of

industrial managements and political government.

Socialization of industries by making the state itself a major employer.

Vesting of a proprietary interest of the workers in the industries in which

They are employed.

Role of State in Indian Industrial Relations

India is socialist democratic republic state. Every elected government of the
country has as its bounden duty to secure upliftment of all citizen and to that
extent the constitution provides for rules and regulations through a system of
laws that would facilitate progress, redress of grievances and thereby would
maintain peace and harmony in the society!
As regards "labour" while the State is committed to promote industrial growth
through bilateral relations between employers and employees for mutually
healthy existence, cooperation and progress, the state is NOT oblivious to the
fact that despite best intentions and efforts, sometimes the issues between the
parties may not get resolved at bilateral level and unless a way ro resolve is
sanctified through the constitution of the country and the system of law, there
would be impediments to progress and the expected peace and harmony may
get vitiated. Against this backdrop, it is simple to accept and apreciate that the
State has reserved a a role of an "Umpire or a Referee" in the game of industrial
relations in the country. Its provides all kinds of mechanisms to parties through
law to resolve their own problems bilaterally and has further taken care to provide
a quasi judicial/judicial system for determination of disputes.
Personally and professionally, one feels that this is an ideal system.
Unfortunately, the experience shows that corrupt administration, adventurous
unionism, sluggish judiciary and tight fisted managements have made a virtual
mockery of the concept. But the idea essentially is excellent in the State
becoming an Umpire and to help parties become mature in resolving problems
amongst themselves! The role of the State in Indian Industrial Relations is that of
an Umpire, Elder brother andwell-wisher! That the concerned parties have
vitiated the golden thought is the country's misfortune!!!

Employers' organization
An employers' organization, employers' association or employers' federation is
an association of employers. A trade union, which organizes employees is the
opposite of an employers' organization. The role and position of an employers'
organization differs from country to country, dependent on the economic system
of a country. In countries with a pluralist or anglo-saxon economic system (such
as the United Kingdom and the United States), where there is no institutionalized
cooperation between employers' organizations, trade unions and government, an
employers' organization is an interest group or advocacy group that through
lobbying tries to influence government policy. In these countries, employers'
organizations tend to be weak, with many of their functions taken over by
industry trade groups, which are basically public relations organization.

In countries with a social market economy, such as Austria, Sweden and the
Netherlands, the employers' organizations are part of a system of institutionalized
deliberation, together with government and the trade unions. In tri-partite
bargaining the so-called social partners strike agreements on issues like price
levels, wage increases, tax rates and pension entitlements. In these countries
collective bargaining is often done on a national level not between one
corporation and one union, but national employers' organizations and national
trade unions.

INDUSTRIAL RELATIONS MACHINERY

Today we are going to study the means and ways to resolve industrial disputes.
We should understand that whenever there is some problem in our professional
or personal life, we should not get disturbed by the problem .We should look for
solutions. Please remember that Go d helps those who help themselves! At this
encouraging note let us get into the technicalities of resolving conflicts in
organisations.
INDUSTRIAL RELATIONS MACHINERY
Cordial industrial relations and lasting industrial peace require that the causes of
industrial disputes should be eliminated. In other words, preventive steps should
be taken so that industrial disputes do not occur. But if preventive machinery fails
then the Government should activate the industrial Settlement machinery
because non-settlement of disputes proves to be harmful not only for the
workers, but also the management and the society as a whole. The machinery
for handling the industrial disputes has been shown in the following figure:
MACHINERY FOR HANDLING INDUSTRIAL DISPUTES
Preventive Machinery
(Voluntary or Non-statutory)
Settlement Machinery (Statutory)
This is sure that all of us would have heard the saying that prevention is better
than cure. Keeping that in mind let us discuss the prevention machinery before
the settlement machinery. I hope all of you have understood the difference
between the two. If you have not, let me explain it to you. The preventive
machinery ensures that there are no disputes. It aims at creating an environment
in which the employees are allowed to participate and there are very less
chances of conflicts. It is thus proactive in nature. Now don’t tell me that you
don’t understand the meaning of pro activity…Anyhow, pro activity means that
actions are taken before there is a problem. The settlement machinery on the
other hand is reactive in nature. After there is a problem or a dispute, the
settlement machinery comes into the picture.
Prevention of industrial disputes:
The preventive machinery has been set up with a view to creating harmonious
relations between labour and management so that disputes do not arise. It
comprises the following measures:
a) Schemes of workers’ participation in management such as works committees,
joint management councils and shop councils and joint councils.
b) Collective bargaining.
c) Tripartite bodies
d) Code of discipline.
The schemes of workers’ participation and collective bargaining will be discussed
in greater detail as a separate topic. As of now, please read something on these
schemes and we will discuss it in the due course.
Rests of the preventive measures are discussed below:
• Tripartite Bodies
Industrial relations in India have been shaped largely by principles and policies
evolved through tripartite consultative machinery at industry and national levels.
The aim of the consultative machinery is “to bring the parties together for mutual
settlement of differences in a spirit of cooperation an goodwill” Thus these bodies
play the role of consultants!!
Indian Labour Conference (ILC) and Standing Labour Committee (SLC) have
been constituted to suggest ways and means to prevent disputes. The
representatives of the workers and employers are nominated to these bodies by
the Central Government in consultation with the All-India organisations of
workers and employers.
The Labour Ministry settles the agenda for ILC/SLC meetings after taking into
consideration the suggestions sent to it by member organisations. These two
bodies work with minimum procedural rules to facilitate free and fuller
discussions among the members. Please note that the ILC meets once a year,
whereas the SLC meets as and when necessary. I am sure you would have read
in the newspapers that the ILC meet is being organized.
The functions of ILC are:
(a) To promote uniformity in labour legislation
(b) To lay down a procedure for the settlement of industrial disputes
(c) To discuss matters of All-India importance as between employers and
employees. The ILC advises the Government on any matter referred to it for
advice, taking into account suggestions made by the States and representatives
of the organisations of workers and employers.
The Standing Labour Committee’s main function is to consider and determine
such questions as may be referred to it by the Plenary Conference or the Central
Government and to render advice, taking into account the suggestions made by
various governments, workers and employers.
• Code of Discipline
The Code of Discipline is a set of self-imposed mutually agreed voluntary
principles of discipline and relations between the management and workers in
the industry.In view of growing industrial conflict, the Fifteenth Indian Labour
Conference agreed that there should be a set of general principles of discipline,
which should be adopted by labour and management voluntarily. To evolve such
a set of principles, a tripartite sub-committee was set up. The resulting draft was
discussed at Standing Labour Committee meeting in October 1957. At the
Sixteenth Indian Labour Conference held in 1958, the final form of the Code of
Discipline was approved. The details of the code are discussed later.As of now
please understand that there are three sets of principles in the Code Of
Discipline. The first set of principles is for the management and the union. The
second set is for the Management and the third one is for the union

Central Industrial Relations Machinery (CIRM)

The Chief Labour Commissioner’s (Central) [CLC(C)] Organisation, also known

as Central Industrial Relations Machinery, is an attached office of the Ministry.
The CIRM is headed by the Chief Labour Commissioner (Central). It has been
entrusted with the task of maintaining Industrial Relations, enforcement of Labour
Laws and verification of Trade Union Membership in central sphere. CIRM has
complement of 25 officers at the Head Quarters and 253 Officers in the field.
The offices of these Officers are spread over different parts of the country with
zonal, regional and unit level formations.
Functions of the organisation:

The functions of CIRM broadly are given as under:

• Prevention and settlement of Industrial Disputes, in central sphere;

• Enforcement of Labour Laws and Rules made thereunder in central
sphere;
• Implementation of awards.
• Quasi-Judicial functions.
• Verification of the membership of the Trade Unions.
• Welfare.
Dunlop's Contribution to Industrial Relations

Dunlop's Model One of the significant theories of industrial labor relations was
put forth by John Dunlop in the 1950s. According to Dunlop industrial relations
system consists of three agents – management organizations, workers and
formal/informal ways they are organized and government agencies. These actors
and their organizations are located within an environment – defined in terms of
technology, labor and product markets, and the distribution of power in wider
society as it impacts upon individuals and workplace. Within this environment,
actors interact with each other, negotiate and use economic/political power in
process of determining rules that constitute the output of the industrial relations
system. He proposed that three parties - employers, labor unions, and
government-- are the key actors in a modern industrial relations system. He also
argued that none of these institutions could act in an autonomous or independent
fashion. Instead they were shaped, at least to some extent, by their market,
technological and political contexts.
Thus it can be said that industrial relations is a social sub system subject to
three environmental constraints- the markets, distribution of power in society and
technology.

Dunlop's model identifies three key factors to be considered in conducting an

analysis of the management-labor relationship:

1. Environmental or external economic, technological, political, legal and

social forces that impact employment relationships.
2. Characteristics and interaction of the key actors in the employment
relationship: labor, management, and government.
3. Rules that are derived from these interactions that govern the employment
relationship.

Dunlop emphasizes the core idea of systems by saying that the arrangements in
the field of industrial relations may be regarded as a system in the sense that
each of them more or less intimately affects each of the others so that they
constitute a group of arrangements for dealing with certain matters and are
collectively responsible for certain results”. In effect - Industrial relations is the
system which produces the rules of the workplace. Such rules are the product of
interaction between three key “actors” – workers/unions, employers and
associated organizations and government The Dunlop’s model gives great
significance to external or environmental forces. In other words, management,
labor, and the government possess a shared ideology that defines their roles
within the relationship and provides stability to the system.

Industrial Relation Policy

Prior to 1991, the industrial relations system in India sought to control conflicts
and disputes through excessive labor legislations. These labor laws were
protective in nature and covered a wide range of aspects of workplace industrial
relations like laws on health and safety of labors, layoffs and retrenchment
policies, industrial disputes and the like. The basic purpose of these laws was to
protect labors. However, these protectionist policies created an atmosphere that
led to increased inefficiency in firms, over employment and inability to introduce
efficacy. With the coming of globalization, the 40 year old policy of protectionism
proved inadequate for Indian industry to remain competitive as the lack of
flexibility posed a serious threat to manufacturers because they had to compete
in the international market.

With the advent of liberalization in1992, the industrial relations policy began to
change. Now, the policy was tilted towards employers. Employers opted for
workforce reduction, introduced policies of voluntary retirement schemes and
flexibility in workplace also increased. Thus, globalization brought major changes
in industrial relations policy in India. The changes can be summarized as follows:
 • Collective bargaining in India has mostly been decentralized, but now in
sectors where it was not so, are also facing pressures to follow
decentralization.

• Some industries are cutting employment to a significant extent to cope

with the domestic and foreign competition e.g. pharmaceuticals. On the
other hand, in other industries where the demand for employment is
increasing are experiencing employment growths.

• In the expansionary economy there is a clear shortage of managers and

skilled labor.

• The number of local and enterprise level unions has increased and there
is a significant reduction in the influence of the unions.

• Under pressure some unions and federations are putting up a united front
e.g. banking.

• Another trend is that the employers have started to push for internal
unions i.e. no outside affiliation.

• HR policies and forms of work are emerging that include, especially in

multi-national companies, multi-skills, variable compensation, job rotation
etc. These new policies are difficult to implement in place of old practices
as the institutional set up still needs to be changed.

• HRM is seen as a key component of business strategy.

• Training and skill development is also receiving attention in a number of

industries, especially banking and information technology.

Perspective of IR
Unitary Perspective: In unitarism, the organization is perceived as an integrated
and harmonious system, viewed as one happy family. A core assumption of
unitary approach is that management and staff, and all members of the
organization share the same objectives, interests and purposes; thus
working together, hand-in-hand, towards the shared mutual goals.
Furthermore, unitarism has a paternalistic approach where it demands
loyalty of all employees. Trade unions are deemed as unnecessary and
conflict is perceived as disruptive.

From employee point of view, unitary approach means that:

• Working practices should be flexible. Individuals should be business

process improvement oriented, multi-skilled and ready to tackle with
efficiency whatever tasks are required.

• If a union is recognized, its role is that of a further means of

communication between groups of staff and the company.
• The emphasis is on good relationships and sound terms and conditions of
employment.

• Employee participation in workplace decisions is enabled. This helps in

empowering individuals in their roles and emphasizes team work,
innovation, creativity, discretion in problem-solving, quality and
improvement groups etc.
• Employees should feel that the skills and expertise of managers supports
their endeavors.

From employer point of view, unitary approach means that:

• Staffing policies should try to unify effort, inspire and motivate employees.
• The organization's wider objectives should be properly communicated and
discussed with staff.
 • Reward systems should be so designed as to foster to secure loyalty and
commitment.
• Line managers should take ownership of their team/staffing
responsibilities.
• Staff-management conflicts - from the perspective of the unitary
framework - are seen as arising from lack of information, inadequate
presentation of management's policies.
• The personal objectives of every individual employed in the business
should be discussed with them and integrated with the organization’s
needs

Pluralistic-Perspective : In pluralism the organization is perceived as being

made up of powerful and divergent sub-groups - management and
trade unions. This approach sees conflicts of interest and
disagreements between managers and workers over the distribution of
profits as normal and inescapable. Consequently, the role of
management would lean less towards enforcing and controlling and
more toward persuasion and co-ordination. Trade unions are deemed
as legitimate representatives of employees. Conflict is dealt by
collective bargaining and is viewed not necessarily as a bad thing and
if managed could in fact be channeled towards evolution and positive
change. Realistic managers should accept conflict to occur. There is a
greater propensity for conflict rather than harmony. They should
anticipate and resolve this by securing agreed procedures for settling
disputes.
The implications of this approach include:

• The firm should have industrial relations and personnel specialists who
advise managers and provide specialist services in respect of staffing and
matters relating to union consultation and negotiation.
 • Independent external arbitrators should be used to assist in the resolution
of disputes.

• Union recognition should be encouraged and union representatives given

scope to carry out their representative duties

• Comprehensive collective agreements should be negotiated with unions

Marxist Perspective: This view of industrial relations is a by product of a

theory of capitalist society and social change. Marx argued that:
Weakness and contradiction inherent in the capitalist system would result in
revolution and the ascendancy of socialism over capitalism.

Capitalism would foster monopolies.

Wages (costs to the capitalist) would be minimized to a subsistence level.

Capitalists and workers would compete/be in contention to win ground and

establish their constant win-lose struggles would be evident.

This perspective focuses on the fundamental division of interest between capital

and labor, and sees workplace relations against this background. It is concerned
with the structure and nature of society and assumes that the conflict in
employment relationship is reflective of the structure of the society. Conflict is
therefore seen as inevitable and trade unions are a natural response of workers
to their exploitation by capital.