Employment Relations in India

5TH EDITION
INTERNATION
AL
&
COMPARATIV
E
EMPLOYMENT
CHAPTER 13
Edited by Greg J Bamber,

Russell D Lansbury and Nick
Wailes
RELATIONS
Globalisation and
change
Employment Relations in India

C. S. Venkata Ratnam and Anil Verma
Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th
edition. Lecturers using the book as a set text may freely use these slides in class, and may distribute them to students
in their course only. These slides may not be posted on any university library sites, electronic learning
platforms or other channels accessible to other courses, the university at large or the general public.
International & Comparative

Employment Relations 5th edition

Russell D Lansbury & Nick Wailes
Lecture outline
Key themes
Context
The actors
Representation in Indian industrial relations
Agreement making
Economic context for reforms
Current issues in employment
Labour law reform
Conclusions
Chapter
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Copyright Allen & Unwin,

2011


Key themes
Major economic reforms in the 1990s paved the way for high
economic growth in India and involved the considerable
liberalisation of the expansive labour laws.
There is a large rural sector and a large informal sector in
which unions and collective bargaining are rare.
Trade union membership overall is low but membership and
collective bargaining coverage is higher in the public sector
and large enterprises.
There are weak laws regarding trade union recognition and
representation and poor enforcement of labour laws and
collective agreement provisions.
Current concerns include lack of protection for workers who
have been made worse-off by the market-based labour
reforms, poor growth prospects in key parts of the labour
market, high rates of contract and casual workers, increasing
downsizing and a low-value added IT sector.
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Context
The Indian industrial relations system is rooted in
British common law.
The IR system also reflects Indias diverse population.
The unionisation rate is low at 5% of the total
workforce due in part to large rural and informal
sectors, which are not unionised.
Most unions are concentrated in large enterprises and
government-related sectors.
After slow development during most of the 20 th
century, economic growth has been high since the
mid-1990s.
Indian labour laws were liberalised as part of a
broader deregulation program in the 1990s, changing
what was one of the most protective labour law
Chapter
regimes in the world.
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Trade unions in India 1
Trade union movement emerged between 1850-1870

with the emergence of early manufacturing in textiles,
jute and light engineering.
The first national federation of trade unions, All India
Trade Union Congress (AITUC), was established in 1920
to fight colonial rule and capitalism.
The movement split into three major federations
around the time of independence from Britain in 1947:
AITUC, the Indian National Trade Union Congress
(INTUC), and Hind Mazdoor Sabha (HMS).
Unions are closely affiliated with political parties. The
number of unions proliferated as more regional political
parties emerged after general election in 1967, some
of which set up their own trade union wing.
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One of the largest union to have developed from a regional

political party is the Centre of Indian Trade Unions (CITU)
which is aligned with Communist Party of IndiaMarxist
(CPI-M or CPM).
By the mid-2000s, there were over a dozen federations of
trade unions.
There may be over 100 000 unions in India, but accurate
figures are not known because the government does not
collect data on unions.
Prevalent form is the union shop, where union membership
is acquired by all employees after employment in an
establishment where a union is recognised by the employer.
The closed shop system (where only members of the union
can be employed) exists informally in wholesale markets
and on railway stations among manual workers.
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The Indian Constitution and freedom of association

The right to belong or not to belong to a union is guaranteed
in the Indian Constitution (Article 19(c)).
It is not compulsory for a worker to join a union, but it is
unconstitutional to prevent them from joining one.
Trade union registration and recognition are not compulsory.
In order to stop the proliferation of unions, the Trade Union
Act 1926 was amended in 2001 to require that 10% of
workers or 100 workers (whichever is less) at an
establishment be members for registering a union. 7 people
are required to form an unregistered union.
The law is silent on whether unions are formed along craft,
employment category or other lines.
Trade unions can pursue economic, political, social and
welfare objectives and can raise and maintain political funds.
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Trade unions and politics
The trade union movement is closely linked with political parties, as

historically unions played a major role in the struggle against colonial
rule. Some leaders of the freedom struggle were also leaders of the
trade union movement.
Following independence, this association resulted in welfare-state and
socialist policies involving the nationalisation of critical industries
combined with investments in large-scale public enterprises.
The close association between unions and political parties has
assured politicians of votes from the working classes and enabled
unions to better defend their members interests. But the association
also creates problems: divisions in political parties lead to divisions in
unions; industrial relations issues become political issues in conflicts
between state and central governments of different persuasions; and
recently, unions have also struggled with their associated political
parties adopting neoliberal policies in order to encourage investment
and competition as these policies tend to be detrimental for workers.
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National trade union centres
Any union with a minimum of 500 000 members
spread over at least four industries and four states
will be recognised as a national trade union centre.
There are five centres in India which fulfil this
criterion:
the All India Trade Union Congress (AITUC)
Bharatiya Mazdoor Sangh (BMS)
Hind Mazdoor Sabha (HMS)
the Centre of Indian Trade Unions (CITU)
the Indian National Trade Union Congress (INTUC)
There are at least 7 other national unions which the
government consults with.
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Enterprise-level unions
There are two kinds of enterprise-level unions: those
affiliated to national centres and those without any
affiliation to political parties.
In some large organisations/enterprises, there are over a
hundred trade unions.
Trade unions based on craft, occupational or
employment category, and caste are not uncommon in
India.
Within an enterprise there can be separate unions for
workers (on the shopfloor), staff (attendants, drivers,
clerks, typists etc), supervisory staff and
executives/officers.
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Management and employers

organisations
The earliest employer
associations were formed primarily in
industries such as jute, textiles and engineering in response to

labour laws enacted after independence from British rule.
The principal umbrella organisation for Indian employers is the
Council of Indian Employers (CIE).
Employer organisations proliferated after independence, and then
their structure was consolidated. CIE was formed when the
Employers Federation of India (EFI) amalgamated with the All India
Organisation of Employers (AIOE) in 1956 .
Public employers at both national and international levels originally
had a separate representative body called the Standing Conference
on Public Enterprises (SCOPE). SCOPE joined CIE in 1973.
Chambers of commerce, industry associations and representative
organisations of the public sector are all members of these
organisations.
CIE represents the interests of large-scale industry and represents
Indian employers at the International Council of Employers and at
the International Labour Organization.
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Representation 1
Employers organisations in India play two

representative roles:
1. They nominate representatives of employers in voluntary
or statutory bodies set up to determine wages and
conditions of employment in a particular industry or sector
and for consultation on social and labour matters in the
national and global context.
2. They seek to redress the grievances of employers against
legislative or other measures by making submissions to the
authorities concerned.
Employers associations also represent interests of

employers in various committees and institutions,
bipartite and tripartite fora, and serve as a forum for
information sharing, policy formulation and
consensus building on strategic issues.
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Representation
2
Non-union firms
In contrast to the past, it has been increasingly common since the
1990s to find establishments with no union presence, for instance,
in software companies and in several car manufacturers.
Employers have adopted union-avoidance tactics such as the use
of greenfield sites (which have high capital investment and
technology and lower labour intensity), offering above-average
wages and conditions, and asking employees to participate in
anti-union activities
Collective bargaining
Only about 2% of the total workforce, but over 30% of the

workers in the formal (organised) sector, participates in collective
bargaining.
In the public sector and the largest public and private sector
enterprises the figure is 70% or more.
Legislation encourages government adjudication of disputes.
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Representation 3
Historical context for industrial relations
At the time of independence, the British gave India a legal
framework aimed primarily at dispute resolution.
After independence, the Indian government adopted the Soviet
model of planned economic development and sought to
achieve a socialist society.
Industrial harmony was considered a necessity for state-led
development.
Several industries were nationalised in the early 1970s, and,
during the Emergency (1975-77), labour law changes
restricted employers ability to sack workers and close
operations that were no longer viable. Workers participation in
management was adopted as a directive principle of state
policy.
Prior to the 1990s reforms, two national commissions on
labour had recommended comprehensive reforms to labour
laws.
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Representation 4
Freedom of Association
The constitution guarantees the fundamental right to freedom of

association.
The right of collective bargaining is not extended to industrial workers in
government undertakings (e.g. railways, post, telecommunications).
Compensation for these workers is based on recommendations of pay
commissions appointed periodically by the government.
National labour laws do not mandate employers to either recognise unions
or engage in collective bargaining, but some states have provisions
recognising trade unions.
India has not ratified some ILO conventions concerning Right of Association.
Determination of a collective bargaining agent

Determining a collective bargaining agent has been a controversial issue
historically.
Some states have measures for recognising unions as agents in bargaining,
for example: a Code of Discipline which is common in the public sector;
secret ballots; a check-off system; and membership verification.
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Representation 5
Collective agreements and disputes
An agreement with one trade union is not binding on members of

other unions unless arrived at during conciliation proceedings.
This means that even if one union has an agreement, other unions
can raise an industrial dispute with an employer.
A collective agreement is binding only for the workers who have
negotiated and signed the agreement, but a written settlement
arrived at in the course of conciliation proceedings is binding not
only on the actual parties to the industrial dispute but also on the
heirs, successors or assignees of the employer and all the present or
future workers in the establishment.
Under the Industrial Disputes Act, disputes can be settled with or
without recourse to the government conciliation machinery.
Arbitration or adjudication follows failed conciliation.
An award can be an interim or final determination of an industrial
dispute by a Labour Court, Industrial Tribunal, National Industrial
Tribunal or an arbitrator. Awards are legally enforceable instruments.
Collective bargaining is rare in the informal sector.
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Representation 6
Unfair labour practices
The Industrial Disputes Act defines the following as
unfair labour practices:
refusal by the employer to bargain collectively in good
faith with recognised trade unions,
refusal by a union to bargain in good faith with the
employer
workers and trade unions engaging in coercive activities
against certification of a bargaining representative
Breaching an industrial settlement is punishable

under law.
Employers use many tactics to undermine unions,
actions which are illegal but go largely
unprosecuted.
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Levels of bargaining and

agreements
1
National-level agreements
Prior to the 1970s, wage boards appointed

periodically by the government set wages and
conditions in some industries.
From the 1970s, sectoral bargaining at the national
level was prevalent mainly in government-dominated
industries (e.g. banking and coal) as well as steel,
ports and docks. This is largely still the case today.
In pay determination, civil servants pay provides the
benchmark for the rest of the public sector, and
public sector pay is then the benchmark for unionised
private sector workers where collective bargaining
tends to be more adversarial and contentious.
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agreements
Firm/plant-level
agreements 2
While employers generally prefer bargaining at

the plant level, unions press for bargaining at
higher levels to increase their bargaining power.
Duration of agreements
Duration of collective agreements increased
during the 1970s and 80s, and again in the 1990s
in the public sector. Since 1997, the duration of
public sector agreements has been ten years.
Most private sector collective agreements
typically last for three years. Public sector
agreements can have a much longer duration.
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agreements
3
Collective bargaining
in practice
In practice, most unions are highly politicised and the

government wields enormous discretionary power
without the commensurate responsibility.
This leads to poor enforcement of the law and collective
agreement provisions, and frequently unions are coopted into the collective bargaining crisis by the
government or by management.
As a result, union members do not have confidence in
their union or its ideology and do not hesitate to change
unions. Workers can choose a union to represent them
without belonging to it, can enjoy the benefit of
collective bargaining without joining a union, and unions
can have collective bargaining rights without workers
support.
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Economic context for

reforms
There has been a paradigm
shift to neoliberalism since the
1990s, with emphasis on economic growth and foreign

investment over labour protection.
While India was a major economic force in the 17 th century, and
under British rule developed textiles, steel, engineering and other
industries, it followed import substitution policies in the 1970s
and did not partake in economic development at the same time
as other Asian economies.
However, the information revolution in the 1980s afforded new
opportunities for economic development.
In the last two decades, India has integrated significantly with the
global economy, but the majority of Indians remain poor.
The country has achieved unprecedented GDP growth rates since
the mid-2000s and is improving its standing in global economic,
competitiveness and investment-attractiveness rankings.
Education levels are poor and the government is investing
heavily in vocational skills and education.
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Current issues in
employment
1 under the
A large majority
of the workforce has suffered
neoliberal reforms, hence the need for a more

interventionist labour policy.
There is over-dependence on agriculture and low prospects
of growth in manufacturing and in the organised sector.
There is high incidence of contract and casual staff, who
form over half to three-quarters of the total workforce in
some large factories.
There is much less employment in the public sector, which
historically has been an engine of economic growth.
There is hope for increasing employment levels in the
service sector, but concerns over the low value that is
added by IT professionals compared with other countries.
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Current issues in
employment 2
Search for flexibility

One of the catchcries of the reform movement since the 1990s

has been for greater flexibility in the labour market.
Courts and state and national governments have responded to the
need for increased flexibility with various policy measures that
also attempt (often unsuccessfully) to maintain worker protection.
The Consumer Protection Act 1986 prohibits worker action that
impinges on liberty and normal civic activities of citizens (so citywide freedom protests are not allowable if they interrupt normal
activities).
Similarly, the right to collective bargaining was taken away from
insurance workers in the early 1980s as their agreement with their
employer was found to disadvantage the interests of policyholders.
Although some common law cases have also established limits on
industrial action by labour, other decisions have expanded labour
rights or their enforcement.
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Agenda for labour law

reform
Most commentators believe further reforms to labour
law are needed to sustain the high growth rate

necessary to pull large segments of society out of
poverty.
Some of the most significant areas for reform include
the need for:
fewer laws with better enforcement
the elimination of multiple definitions across different
legislations
clear rules for termination of employment
removing managerial functions from the scope of bargaining
independent industrial relations dispute-settlement machinery
skills development funds outside of direct government control
a tripartite national wages council
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Conclusions
Labour policy in India has been too narrowly focused on the 7% of the
labour force employed in the formal/organised sector.
The challenge for the government is accommodating all workers and
meeting the plurality of needs in the labour market. The government
is faced with the paradox of having to moderate the at times
excessive protection for workers in the formal sector (forming 7% of
the labour force) while enhancing protection for workers in the
informal sector (forming 93% of the labour force).
Improvements to education and vocational skills training are needed.
The labour administration and judiciary lack the professional skills
and accountability to match their discretionary powers, so there is a
need to build a cadre of professionals in these areas.
Improvements to the dispute resolution system also sorely needed.
Tripartite negotiations on devising policies which achieve flexibility
and job security have stalled, and need to be restarted.
Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th
edition. Lecturers using the book as a set text may freely use these slides in class, and may distribute them to students
in their course only. These slides may not be posted on any university library sites, electronic learning
platforms or other channels accessible to other courses, the university at large or the general public.

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5TH EDITION

Edited by Greg J Bamber,