Industrial Relations

Part One:
Multiple choices:
1. Workers participation in management decision-making is a highly________
concept
b. Complex
2. The origin of industrial relations in India can be traced in to the:
b. First world war
3. Under the payment of wages act, 1936, no wages period shall exceed for one
c. One month
4. Collective bargaining is the process of bargaining between________
a. employees & employer
5. Layoff can also cause a ________
d. none of the above
6. As per payment of bonus act, accounting year for a company is _____
a. One year
7. WPM stands for_________
a. Workers Participation in Management
8. Causes of Industrial disputes are_________
d. All of the above
9. Trade unions of workers in an organization formed by workers to protect
their________
None of the above
10.
A grievance causes in any organization are_________
d. All of the above
Part two:
1. What are the steps of Grievances handling Process? Explain it.
GRIEVANCES AND GRIEVANCE HANDLING
Grievances Or Conflicting Thoughts Are Part Of Industrial Life.
It Is Essential To Bring This Conflict To The Surface.
All Conflicts Cannot Be Eliminated But Their Exposure Will Contribute Towards
their Reduction.
Such Exposures Lead To Adjustments And Further Improved Organizational
Effectiveness.
METHODS OF BRINGING CONFLICT TO SURFACE
Grievance Procedure
Direct Observation
Suggestion Boxes
Personal Counselor
Exit Interviews
Miscellaneous Channels

GREIVANCE
Dissatisfaction Is Any State Or Feeling Of Discontent
Dissatisfaction Orally Made Known By One Employee To Another Is A
Complaint.
A Complaint Becomes A Grievance When Brought To The Notice Of The
Management.
According To Fillipo, The Term Would Include Any Discontent And
Dissatisfaction that Affects Organizational Performance. It Can Either Stated Or
Unvoiced, Written Or Oral, Legitimate Or Ridiculous.
A Complaint Is A Discontent That Has Not Assumed Importance.
A Complaint Becomes Grievance When The Employee Feels That Injustice Has
Been Committed.

CHARACTERISTICS OF GRIEVANCES
It May Be Unvoiced Or Expressly Stated.
It May Be Written Or Oral
It May Be Valid, Legitimate Or Untrue Or False.
It May Relate To The Organizational Work.
An Employee May Feel An Injustice Has Been Done.
It May Affect The Performance Or Work.
Grievances Generally Give Rise To Unhappiness, Frustration, Indifference,
Discontent, Poor
Morale, And Poor Efficiency THAT IS CHANGE IN ATTITUDE, PERCEPTION AND
BEHAVIOR.
TYPES OF GREIVANCE
Visible Grievances
Hidden Grievances
An Employee May Feel That There Has Been An Infringement Of His Rights.
Grievances Exist In The Minds Of Individuals.
Grievances May Be Concerning Employment, Working Conditions, Change Of
Service Conditions, Biased Approach, Non-Application Of Principle Of Natural Justice,
Work Loads And Work Norms.
NEED FOR GRIEVANCE PROCEDURE
Identification And Analysis Of Grievances, Nature Nod Causes.
Helps At Formulating And Implementing The Policies And Programmes.
It Is Problem Solving, Dispute-Settling Mechanism.
Strengthen Good Industrial Relationship.
It Detects The Flaws In Working Conditions And Helps To Take Corrective
Measures.
Build Good Morale, Maintains Code Of Discipline.
Brings Uniformity In Handling Grievances.
It Develops Faith Of Employees.

 Reduces Personality Conflicts.

It Acts As A Pressure Valve.
Provides Judicial Protection To The Employees.
Provides Avenues To Present The Problems.
GRIEVANCE REDRESSAL SYSTEM
Enables The Parties To Resolve Differences In Peaceful, Orderly And
Expeditious Manner.
Enables The Parties To Investigate And Discuss The Problem
Open-Door Policy
Step Ladder Type
Grievance Handling Committee
BASIC ELEMENT OF GRIEVANCE PROCEDURE
Existence Of Sound Channel.
The Procedure Should Be Simple, Definite And Prompt.
It Should Be Clearly Defined.
Helpful Attitude Of Management.
Fact-Oriented System.
Respect For Decisions.
Adequate Publicity.
Periodic Review.
STEPS IN HANDLING GRIEVANCES
Receive And Define The Nature Of Dissatisfaction.
o Manner And Attitude When Complaint Is Received
o Assessment Must Be Made That The Complaint Is Presented Fairly.
o Statement And Issues Must Not Be Pre-Judged.
o Proper Time And Attention Is Given.
Get The Facts
o Facts Be Separated From Impressions And Opinions.
o Consult The Policies.
o Consult The Records.
Analyze And Decide.
Apply The Answer.
Follow-Up
DOS

IN HANDLING GRIEVANCES
Investigate And Handle Each Case Carefully
Talk To The Employee.
Enforce The Time Limit.
Visit The Work Area Or Place Of Grievance.
Determine Witnesses.
Examine Records.
Examine Witnesses.

Evaluate Grievance.
Permit Full Hearing.
Identify The Relief An Employee Is Expecting.
Command The Respect Of All.
All Discussions Privately.
Keep Superiors Informed.
Ensure Proper Productivity.
Stick To Labor Agreements

2. What are the 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.

3. Briefly explain the term evolution of Trade unions in India.

Trade unions are organizations of workers formed to protect the rights and
interests of workers through collective action.
In India, the first quarter of the 20th century gave the birth of the trade union
movement. A series of strikes were declared in India in the twenties. The success of
most of these strikes led to the organization of many unions.
In 1920, the All India Trade Union Congress (AITUC) was set up. In 1926, the
Trade Unions Act was passed which gave a legal status to the registered trade
unions.
Subsequently many trade unions were formed such as:
Indian National Trade Union Congress (INTUC),

Centre of Indian Trade Unions (CITU),

Hind Mazdoor Sabha (HMS),
Bharatiya Mazdoor Sangha (BMS),
United Trade Union Congress (UTUC), and
National Federation of Independent Trade Unions (NFITU).

Growth of Trade Unions in India

It was not until the close of First World War, that the modern trade Union
movement really took permanent roots in Indian Soil.
The establishment of Bombay Mill Hands Association is considered as the
first phase of the trade union movement in India. In 1905, the Printers Association of
Calcutta and Dock Union Board in Bombay were formed.
There was labor unrest in India at the end of the First World War. In several
industries, the workers went on strikes to secure wage increases. The Russian
Revolution and the Industrial Labor Organization have inspired the Indian laborers to
launch trade unions like the Spinners Union and Weavers Union which had been
established in Madras and Ahmedabad respectively.
But the important step in the history of Indian trade unionism was the
foundation of All India Trade Union Congress in 1920. There had been a steady
progress of trade union movement in India. However, the decision of the Madras
High Court that the formation of trade union is illegal stood in the way of its
development.
In 1926, the Trade Unions Act was enacted to give legal recognition to the
different trade unions. The said Act also .conferred certain privileges on the
registered trade unions in an industrial unit. The Trade Unions Act has made it
compulsory on trade unions to use their funds for workers interests and to prescribe
a fee of at least 25 paisa per works. Most of the members of the executive
committee of a trade union must be employed in the factory.
In 1930, the climate was not favorable to the growth of trade Union
movements in India. The prosecution of the communists involved in Meerut
conspiracy case and the failure of Bombay Textile strike of 1929 retarded the trade
union movement. Moreover the serious economic depression was added with it,
during the period.
In the next phase, the Second World War gave a great impetus to the trade
union movement in India. The rising cost of living forced laborers to organize
themselves into trade unions. At the same time the Second World War split the
trade union leaders on the question of participating in the war. Industrial unrest was
also increased during this period. As a result; there was a marked increase in both
the number of trade unions and of organized workers.
With independence and partition, the country was plunged into growing
unemployment. A series of strikes occurred, in the country. The All India Trade Union
Congress was split up as a result of which the Indian National Trade Union Congress
(INTUC) was formed in 1947 under the control of congress party. The Hind Mazdoor
Sabha (HMS) was formed by the socialist Party in 1948, and United Trade Union

congress (UTUC) was formed in 1949. Recently, Centre of Indian Trade Unions (CITU)
has been formed by the Communist Party (Marxists).
There are more than fourteen thousand registered trade unions in India. The
steady growth of trade unions in India is due to the political consciousness among
the laborers as well as the governmental measures to facilitate collective bargaining
through appropriate legislation.
Features
The main characteristics of the trade unionism are:
o Small size of membership,
o Lack of adequate finance,
o Non fulfillment of welfare schemes,
o Control of political parties,
o Outside interference in the activities of labor unions.
4. Explain the workers participation in management.
Like other behavioural terms, WPM means different things to different people
depending upon their objectives and expectations. Thus, WPM is an elastic concept.
For example, for management it is a joint consultation prior to decision making, for
workers it means co-determination, for trade unions It is the harbinger of a new
order of social relationship and a new set of power equation within organisations,
while for government it is an association of labour with management without the
final authority or responsibility in decision making.
Let us also go through some important definitions of WPM.
According to Keith Davis, Workers participation refers to the mental and
emotional involvement of a person in a group situation which encourages him to
contribute to group goals and share in responsibility of achieving them.
In the words of Mehtras Applied to industry, the concept of participation
means sharing the decision-making power by the rank and file of an industrial
organisation through their representatives, at all the appropriate levels of
management in the entire range of managerial action.
A clear and more comprehensive definition of WPM is given by the
International Labour Organisation (ILO).
According to the ILO:
Workers participation may, broadly be taken to cover all terms of
association of workers and their representatives with the decision-making process,
ranging from exchange of information, consultations, decisions and negotiations to
more institutionalized forms such as the presence of workers members on

management or supervisory boards or even management by workers themselves as

practised in Yugoslavia.
In Yugoslavia, WPM is governed by the Law on Workers Management of State
Economic Enterprises and Higher Economic Association. The Act consists of a threetier participation structure: collective bargaining, workers council, and hoard of
management.
In fact, the basic reason for differences in perception of WPM is mainly due to
the differential pattern of practices adopted by various countries while
implementing workers participation in management.
For example, in Great Britain and Sweden, WPM is in the form of Joint
Consultation through Joint Consultative Committees, Works Committees in France,
Co-determination Committees in West Germany, Joint Work Council in Belgium,
Workers Council and Management Board in Yugoslavia and Union Management Cooperation in USA.
In India, WPM is in the form of, what we call Labour Management Cooperation
and Workers Participation in Management. It is implemented through the agencies
like Works Committees, Joint Management Councils (JMCs) Shop Councils, Unit
Councils and Joint Councils. Notwithstanding, these different forms of WPM differ
only in degree, not in nature.
Be the perceptual differences as these may, WPM is a system of
communication and consultation, either formal or informal, by which the workers of
an organisation are kept informed, as and when required, about the affairs of the
undertaking and through which they express their opinion and contribute to
decision-making process of management.
Characteristics:
The following are the main characteristics of WPM:
1. Participation implies practices which increase the scope for employees
share of influence in decision-making process with the assumption of responsibility.
2. Participation presupposes willing acceptance of responsibility by workers.
3. Workers participate in management not as individuals but as a group
through their representatives.
4. Workers participation in management differs from collective bargaining in
the sense that while the former is based on mutual trust, information sharing and

mutual problem solving; the latter is essentially based on power play, pressure
tactics, and negotiations.
5. The basic rationale tor workers participation in management is that
workers invest their Iabour and their fates to their place of work. Thus, they
contribute to the outcomes of organization. Hence, they have a legitimate right to
share in decision-making activities of organisation.
Objectives:
The objectives of WPM are closely netted to the ration-able for WPM.
Accordingly, the objectives of WPM vary from country to country depending on their
levels of socio-economic development political philosophies, industrial relations
scenes, and attitude of the working class.
To quote, the objective of WPM is to co-determine at the various levels of
enterprises in Germany, assign the final to workers over all matters relating to an
undertaking in Yugoslavia, promote good communication and understanding
between labour and management on the issues of business administration and
production in Japan, and enable work-force to influence the working of industries in
China, for example.
In India the objective of the government in advocating for workers
participation in management, as stated in the Industrial Policy Resolution 1956, is a
part of its overall endeavour to create a socialist society, wherein the sharing of a
part of the managerial powers by workers is considered necessary.
The objective of WPM, as envisaged in the Second Five Year Plan of India is to
ensure:
1. Increase in productivity for the benefit of all concerned to an enterprise,
i.e., the employer, the employees and the community at large.
2. Satisfaction of workers urge for self-expression in the matters of enterprise
management.
3 Making employees better understood of their roles in the organisation.
In ultimate sense, the objective of WPM in India is to achieve organizational
effectiveness and the satisfaction of the employees.
Accordingly, the objectives of WPM in India are to:

1. Promote mutual understanding between management and workers, i.e.,

industrial harmony.
2. Establish and encourage good communication system at all levels.
3. Create and promote a sense of belongingness among workers.
4. Help handle resistance to change.
5. Induce a sense among workers to contribute their best for the cause of
organisation.
6. Create a sense of commitment to decisions to which they were a party.
Levels of Participation:
Having known the objectives of WPM, the question then is to what extent
workers can participate in decision-making process. In other words, it is important to
know the extents/levels of co-determination in an organisation.
Viewed from this angle, Mehtras has suggested five levels of workers
participation ranging from the minimum to the maximum. Since these levels of
workers influence the process and quality of decision making in an organisation. We
are therefore highlighting here these levels briefly ranking them from the minimum
to the maximum level of participation.
Informative Participation:
This refers to managements information sharing with workers on such items
those are concerned with workers. Balance Sheet, production, economic conditions
of the plant etc., are the examples of such items. It is important to note that here
workers have no right of close scrutiny of the information provided and
management has its prerogative to make decisions on issues concerned with
workers.
Consultative Participation:
In this type of participation, workers are consulted in those matters which
relate to them. Here, the role of workers is restricted to give their views only.
However the acceptance and non-acceptance of these views depends on
management. Nonetheless, it provides an opportunity to the workers to express
their views on matters involving their interest.

Associative Participation:
Here, the role of the workers council is not just advisory unlike consultative
participation. In a way, this is an advanced and improved form of consultative
participation. Now, the management is under a moral obligation to acknowledge,
accept and implement the unanimous decision of the council.
Administrative Participation:
In the administrative participation, decisions already taken are implemented
by the workers. Compared to the former three levels of participation, the degree of
sharing authority and responsibility by the workers is definitely more in this
participation.
Decisive Participation:
Here, the decisions are taken jointly by the management and the workers of
an organisation. In fact, this is the ultimate level of workers participation in
management.

Section B:

Caselet 1

1. Did the personnel manager handle the issue properly?

- In this case the personal manager did not handle the issue properly.
- Mr. Tiwari who has been a part in reputation of business during competitive period. He was very
good at his area of work for the past two years as far as business concern, he worked good by
contacting with the people to market and sell the product.
- In this condition, the personal manager of the company, who is satisfied with his performance,
decided to give a paid trip to him, should have known the interest of mr. Tiwari. As if this paid
trip been arranged for encouraging and appreciating the employee of the company, if he is not
satisfied should consider mr. Tiwaris needs as a family man, mr. Tiwari have some personal
needs, he doesnt have idea for trip, as the personal manager, who has not consider all these, he
has lost an efficient employee in his work.

2. What is your recommendation to avoid such situations in future?

The personal manger who is been appointed as a mediator between
the company and working persons should have known better the needs of
both the sides.
If a person who is working according to the regulations of the
company, and plays a major role in increasing the profit, should be
appreciated properly, according to the needs each and every persons need
differ by all means. So it should be noted and discussed properly, the
company norms can be liberalized according to the efficient employee needs.
As far as company needs its profit and reputation should not be
spoiled, so for that reason the regulations can be liberalized according to the
person, or the employee who is playing a major role in the company

Caselet 2

1. If you were Malik, what strategies would you adopt to solve the problem?

2. With high employee turnover in insurance industry, how can the company retain a person like
Malik?

Section C:

1. What is the Collective Bargaining? Explain the Characteristics and types of

Collective Bargaining and write down the different levels of Collective Bargaining?

Collective bargaining is a tool people use to end conflict and get things going
again in business. Occurring in either continuous or periodic forms, its aim is to
make things better for both the employer and employee overall, or to initiate social

changes. The disadvantages such as expense and creating divisions in companies

are significant, but this technique also provides some big advantages such as giving
workers a safe way to voice their concerns and opinions.
DEFINITION
The term collective bargaining refers to a good-faith business mechanism
people use to reach an agreement. Through basic negotiation and other techniques,
the people involved find solutions to work-related issues such as vacation time, pay,
work hazards, training and work hours that ultimately benefit everyone. People call
these processes collective because the opinion and well-being of the whole group,
or collective, is involved. The Universal Declaration of Human Rights formally
recognizes the ability of people to use this strategy.
PURPOSE
The primary objective of this bargaining system is to improve conditions in
some way to make things more efficient, economical, safe or enjoyable. Going
through these processes therefore keeps employers or employees from being taken
advantage of or hurt. In some cases, people use this strategy specifically to set a
precedent and send a message about an overall social change they want to happen.
In these cases, more than one company or group of workers might be involved.
Collective bargaining is specifically an industrial relations mechanism or tool,
and is an aspect of negotiation, applicable to the employment relationship. As a
process, the two are in essence the same, and the principles applicable to
negotiations are relevant to collective bargaining as well. However, some
differences need to be noted.
In collective bargaining the union always has a collective interest since the
negotiations are for the benefit of several employees. Where collective bargaining is
not for one employer but for several, collective interests become a feature for both
parties to the bargaining process. In
negotiations in non-employment situations, collective interests are less, or nonexistent, except
when states negotiate with each other. Further, in labor relations, negotiations
involve the
public interest such as where negotiations are on wages which can impact on prices.
This is implicitly recognized when a party or the parties seek the support of
the public,
especially where negotiations have failed and work disruptions follow. Governments
intervene
when necessary in collective bargaining because the negotiations are of interest to
those
beyond the parties themselves.

In collective bargaining certain essential conditions need to be satisfied, such

as the existence of the freedom of association and a labor law system. Further,
since the beneficiaries of
collective bargaining are in daily contact with each other, negotiations take place in
the background of a continuing relationship which ultimately motivates the parties
to resolve the
specific issues.
The nature of the relationship between the parties in collective bargaining
distinguishes the negotiations from normal commercial negotiations in which the
buyer may be in a stronger
position as he could take his business elsewhere. In the employment relationship
the employer
is, in a sense, a buyer of services and the employee the seller, and the latter may
have the more
potent sanction in the form of trade union action.
Unfortunately the term "bargaining" implies that the process is one of
haggling, which is more appropriate to one-time relationships such as a one-time
purchaser or a claimant to damages.
While collective bargaining may take the form of haggling, ideally it should
involve adjusting the respective positions of the parties in a way that is satisfactory
to all, for reasons explained in the Paper entitled "Principles of Negotiation".
NATURE OF COLLECTIVE BARGAINING
The ILO Right to Organize and Collective Bargaining Convention (No. 98),
1949 describes collective bargaining as:
"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."
Collective bargaining could also be defined as negotiations relating to terms
of employment and conditions of work between an employer, a group of employers
or an employers' organization on the one hand, and representative workers'
organizations on the other, with a view to reaching agreement.
There are several essential features of collective bargaining, all of which
cannot be reflected in a single definition or description of the process:
i. It is not equivalent to collective agreements because collective bargaining
refers to the
process or means, and collective agreements to the possible result, of bargaining.
Collective bargaining may not always lead to a collective agreement.
ii. It is a method used by trade unions to improve the terms and conditions of
employment of their members.
iii. It seeks to restore the unequal bargaining position between employer and
employee.

iv. Where it leads to an agreement, it modifies, rather than replaces, the

individual contract of employment, because it does not create the employeremployee relationship.
v. 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.
CONDITIONS FOR SUCCESSFUL COLLECTIVE BARGAINING
PLURALISM AND THE FREEDOM OF ASSOCIATION
A pluralistic outlook involves the acceptance within a political system of
pressure groups (e.g. religious groups, unions, business associations, political
parties ) with specific interests with
which a government has dialogue, with a view to effecting compromises by making
concessions. Pluralism implies a process of bargaining between these groups, and
between one or more of them on the one hand and the government on the other. It
therefore recognises these groups as the checks and balances which guarantee
democracy. It is natural that in labour relations in a pluralist society, collective
bargaining is recognised as a fundamental tool through which stability is
maintained, while the freedom of association is the sine qua non because without
the right of association the interest groups in a society would be unable to function
effectively. Thus pluralism's "theme is that men associate together to further their
common interests and desires; their associations exert pressure on each other and
on the government; the concessions which follow help to bind society together;
thereafter stability is maintained by further concessions and adjustments as new
associations emerge and power shifts from one group to another."
There can, therefore, be no meaningful collective bargaining without the freedom of
association accorded to both employers and workers.
TRADE UNION RECOGNITION
The existence of the freedom of association does not necessarily mean that
there would
automatically be recognition of unions for bargaining purposes. Especially in
systems where
there is a multiplicity of trade unions, there should be some pre-determined
objective criteria
operative within the industrial relations system to decide when and how a union
should be
recognised for collective bargaining purposes. The accepted principle is to recognise
the most
representative union, but what criteria is used to decide it and by whom may differ
from system

to system. In some systems the issue would be determined by requiring the union
to have not
less than a stipulated percentage of the workers in the enterprise or category in its
membership.
The representativeness may be decided by a referendum in the workplace or by an
outside
certifying authority (such as a labour department or an indepenedent statutory
body). There
could be a condition that once certified as the bargaining agent, there cannot be a
change of
agent for a prescribed period (e.g. one or two years) in order to ensure the stability
of the
process.
OBSERVANCE OF AGREEMENTS
Especially in developing countries where there is a multiplicity of unions,
unions are
sometimes unable to secure observance of agreements by their members. Where a
labour law
system provides for sanctions for breaches of agreements, the labour administration
authorities
may be reluctant to impose sanctions on workers. Where there is frequent nonobservance of
agreements or understandings reached through the collective bargaining process,
the party not
in default would lose faith in the process.
SUPPORT OF LABOUR ADMINISTRATION AUTHORITIES
Support by the labour administration authorities is necessary for successful
collective
bargaining. This implies that they will:
i. provide the necessary climate for it. For instance, they should provide
effective
conciliation services in the event of a breakdown in the process, and even provide
the
necessary legal framework for it to operate in where necessary, e.g. provision for
the
registration of agreements.
ii. will not support a party in breach of agreements concluded consequent to
collective
bargaining.
iii. as far as is practicable, secure observance of collective bargaining
agreements.

iv. provide methods for the settlement of disputes arising out of collective
bargaining if the parties themselves have not so provided.
GOOD FAITH
Collective bargaining is workable only if the parties bargain in good faith. If
not, there will be only the process of bargaining without a result viz. an agreement.
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. Strong organizations of workers and employers contribute to bargaining in
good
faith, because there would be some parity in the bargaining strength of the two
parties.
Proper Internal Communication.
Both the management and union should keep their managers and members
respectively well informed, as a lack of proper communication and information can
lead to misunderstandings
and even to strikes. Sometimes managers and supervisors who are ill-informed may
inadvertently mislead workers who work under them about the current state of
negotiations, the
management's objectives and so on. In fact, it is necessary to involve managers in
deciding on
objectives and solutions, and such participation is likely to ensure greater
acceptance - and
therefore better implementation - by them.
ADVANTAGES OF COLLECTIVE BARGAINING
First, collective bargaining has the advantage of settlement through dialogue
and consensus rather than through conflict and confrontation. It differs from
arbitration where the solution is based on a decision of a third party, while
arrangements resulting from collective bargaining usually represent the choice or
compromise of the parties themselves. Arbitration may displease one party because
it usually involves a win/lose situation, and sometimes it may even displease both
parties.
Second, collective bargaining agreements often institutionalize settlement
through dialogue. For instance, a collective agreement may provide for methods by
which disputes between the parties will be settled. In that event the parties know
beforehand that if they are in
disagreement there is an agreed method by which such disagreement may be
resolved.

Third, collective bargaining is a form of participation. Both parties participate

in deciding what proportion of the 'cake' is to be shared by the parties entitled to a
share. It is a form of
participation also because it involves a sharing of rule-making power between
employers and
unions in areas which in earlier times were regarded as management prerogatives,
e.g. transfer,
promotion, redundancy, discipline, modernisation, production norms. However, in
some
countries such as Singapore and Malaysia, transfers, promotions, retrenchments,
lay-offs and
work assignments are excluded by law from the scope of collective bargaining.
Fourth, collective bargaining agreements sometimes renounce or limit the
settlement of
disputes through trade union action. Such agreements have the effect of
guaranteeing industrial
peace for the duration of the agreements, either generally or more usually on
matters covered
by the agreement.
Fifth, collective bargaining is an essential feature in the concept of social
partnership towards which labour relations should strive. Social partnership in this
context may be described as a partnership between organised employer institutions
and organised labour institutions designed to maintain non-confrontational
processes in the settlement of disputes which may arise
between employers and employees.
Sixth, collective bargaining has valuable by-products relevant to the
relationship between the two parties. For instance, a long course of successful and
bona fide dealings leads to the
generation of trust. It contributes towards mutual understanding by establishing a
continuing
relationship. The process, once the relationship of trust and understanding has been
established,
creates an attitude of attacking problems together rather than each other.
Seventh, in societies where there is a multiplicity of unions and shifting union
loyalties,
collective bargaining and consequent agreements tend to stabilise union
membership. For
instance, where there is a collective agreement employees are less likely to change
union
affiliations frequently. This is of value also to employers who are faced with constant
changes
in union membership and consequent inter-union rivalries resulting in more disputes
in the
workplace than otherwise.

Eighth - perhaps most important of all - collective bargaining usually has the
effect of
improving industrial relations. This improvement can be at different levels. The
continuing
dialogue tends to improve relations at the workplace level between workers and the
union on
the one hand and the employer on the other. It also establishes a productive
relationship
between the union and the employers' organization where the latter is involved in
the
negotiation process.
CURRENT TRENDS IN COLLECTIVE BARGAINING
Colective bargaining may take place at the national, industry or enterprise
level. In no country does it take place exclusively at one level only. However, in
many industrialized countries, especially in Europe, the existence of strong
employers' organizations and trade unions have resulted in many important
agreements being concluded at the national or industry level,
supplemented by some enterprise level bargaining. In the USA, however, bargaining
at the
enterprise level has been the more usual practice, other than in specific sectors
such as coal,
steel, trucking and construction. In Japan national level bargaining has been the
exception, and
it has been supplemented by a substantial amount of enterprise level bargaining,
facilitated
partly by union structures which are enterprise-based. In many Asian countries
relatively low
rates of unionisation have militated against national and industry level bargaining,
and
enterprise level bargaining has been more common. This accounts for the relative
noninvolvement of some Asian employers' organizations in collective bargaining.
Japanese
employers and workers have demonstrated how a combination of enterprise level
bargaining
and shop floor mechanisms (such as joint consultation) enables the parties to take
into account
specific enterprise conditions and also to increase productivity.
The tendency during the last decade - and especially in the 1990s - even
among industrialized countries with a highly centralised bargaining system, is
towards enterprise level bargaining. This is true of even a country like Sweden with
a strong employers' organization, a strong trade union movement, and a previous
tradition of centralized bargaining. In the 1990s the avowed policy of the Swedish
Employers' Confederation has been to move negotiation to the enterprise level.

Decline in union membership and an increase in corporate power in Europe have

contributed to this trend. But most importantly, restructuring of enterprises flowing
from
intense competition has created the need to focus on enterprise level issues such as
flexible
working time, removal of narrow job classifications, new work organization,
promotion of
more worker involvement scemes and decentralised decision-making. Many
employers view
centralised bargaining as facilitating more equal distribution of incomes, but
depriving
employers of the ability to use pay as an instrument for productivity enhancement
and to
compensate for skills and performance. The push by employers for flexibility in the
context of
increasing global competition has raised many issues which are more appropriately
dealt with
at the enterprise level. Some of the many concerns of employers such as
productivity and
quality, performance, and skills development to retain or gain competitive edge and
to make
rapid changes to adapt to the global marketplace, are likely to increase the
movement towards
more enterprise level negotation.
ISSUES OF CONCERN FOR EMPLOYERS
ADDRESSING PRODUCTIVITY AND EFFICIENCY ISSUES
Historically, collective bargaining has addressed equity issues from the point
of view of
employees - issues such as a fair wage, working conditions and the equal
distribution of wage
increases to all. Until recently, considerations of efficiency important to productivity
were
either not addressed, or were accorded relatively little importance. Increasingly
employers wish
to utilize the collective bargaining process to effect workplace changes in the
interests of
competitiveness. Hence the view of employers that the process should address not
only how
the gains of improved performance should be shared, but also how to increase the
productivity
'cake' so to speak, This is the only way in which regular pay increases can be
absorbed without

eroding profitability and jeopardising competitiveness.

However, collective bargaining is relatively more conflictual than some other
forms of
negotiation and consultation. Therefore, to reduce the conflictual issues it is more
effective for
employers and their employees to establish joint consultation mechanisms to
achieve an
understanding on how to increase the productivity 'cake'. In that event, in collective
bargaining
the areas of dispute would be narrowed, and both parties would be likely to share a
common
view about the issues and even arrive at a basic agreement on them. In this
connection the joint
consultation system in the larger Japanese enterprises which fulfil this function is
worth noting.
Collective bargaining in Japan results from constitutional guarantees, the
Trade Union Act, the obligation to bargain in good faith and the right to strike. Joint
consultation, on the other hand, is a voluntary system which is an outcome of
arrangements between the parties based on the mutual acceptance of the need to
avoid conflict through strikes or other similar actions. Joint
consultation schemes have been the corner-stone of information sharing between
management
and labour and of labour-management cooperation in Japan where "unions and
employers .... have long been aware of the importance of information sharing in an
industrial relations system ... after bitter and protracted strikes in the forties and
early fifties, both management and labour
made concerted efforts to restore industrial peace and to develop a stable industrial
relations system ... these efforts led to the development of key aspects of the
modern Japanese industrial relations system, including the joint consultation, a
corner-stone of labour-management information sharing."
Japanese joint consultation systems had their origins in the 1950s when it
was promoted by the Japan Productivity Centre. It is estimated that by 1990 about
84 per cent of unionized
enterprises had set up joint consultation schemes, and 44 per cent of the nonunionized ones
had joint consultation arrangements. These mechanisms, which are an aspect of
two-way
communication, deal with a variety of issues. In both unionized and non-unionized
establishments the most common subjects which come within consultation are
working
conditions, working hours, leave, safety and health, welfare and cultural activities,
bonus,
pension and retirement payments, work scheduling, education and training,
recruitment,

transfers, lay off, job assignment. There are also a range of management issues
which fall
within joint consultation, but on these matters management merely provides
information and
explanations. These management issues include business plans and policies,
introduction of
new technology, organizational changes and production and sales plans. Many
establishments
have two levels of communication. Quality circles and shopfloor committees
represent the
mechanisms at the shopfloor level, and joint consultation committees represent the
mechanisms
at the corporate level. These committees supplement collective bargaining in the
sense that
they provide the forum for information-sharing prior to wage negotiations.
In Japan the frequency of joint consultations varies. But on an average in
unionized firms there may be 15 meetings and in non-unionized firms about 8 per
year. Research suggests that
information sharing through the joint consultation system has had a positive effect
on
profitability, labour productivity and on reducing labour costs, especially in the
manufacturing
sector (ibid.). Recent evidence suggests that the larger American corporations
"share more
business and financial information with their unions and employees than is required
by law,
and that information sharing within the non-union sector - where the statutory
requirement for
information disclosure is much less stringent - is as extensive as in the union
sector.
In Japan different views on the effectiveness of joint consultation exist in
relation to unionized and non-unionized firms. About 75 per cent of unionized firms
find joint consultation effective, while less than 50 per cent of non-unionized firms
find it so. (Shozo Inoue "Building Better Industrial Relations: The Japanese
Experience" in Report of the ILO/Japan Workshop for Asia- Pacific Employers'
Organizations on Sound Labour Relations Practices, Singapore, 2-6 March 1992: ILO,
Bangkok 33 at 40). According to Shozo Inoue (ibid.): "Effective areas of JC among
the unionized establishments are: improved communication between the
management and the union (78 per cent), followedby more smooth business
operation, and improved work environments.
Improving job satisfaction and increasing interest in management did not
score high points. In contrast, the non-union establishments report that employees
developed greater interest in management (45 per cent), followed by improved
business operation, communication and job satisfaction."

One of the significant characteristics of joint consultation in Japan is that

collective bargaining and joint consultation serve different objectives and are
therefore not in conflict with each other. Bargainable issues are dealt with under
collective bargaining and non-bargainable ones under joint consultation. If during
joint consultation some issues become bargainable (which could happen in relation
to matters on which it is not clear whether they are bargainable ones or not), they
will be transferred to the collective bargaining forum. It is also an important
characertistic of the joint consultation system that it does not handle individual
grievances,
which are dealt with under grievance handling procedures.
Joint consultation has made a significant contribution to enterprise level
labour relations by creating mutual understanding on a range of management
issues which impinge on the lives of employees. This in turn has had an effect on
collective bargaining, which tends to take place in an atmosphere in which workers
have been informed of management objectives, so that the
areas for misunderstanding and conflict are considerably reduced. In effect,
therefore, collective bargaining takes place from a point at which some degree of
common objectives have been agreed upon. Since information on wage criteria is
also shared, differences in wage negotiations (which in most countries are highly
contentious) are narrowed, facilitating acceptable compromises and negotiations
without disputes. Joint consultation has motivated employers and employees to
generate gains and to share them for their mutual benefit.
In essence, joint consultation has become the means through which
information is shared,
mutual understanding is promoted, participation in arriving at decisions is
facilitated, and
working conditions are negotiated. As such, it is an essential component of Japanese
enterprise
level labour relations. The enterprise level union system significantly contributes to
the
workability and effectiveness of the joint consultation system.
CRITERIA FOR WAGE INCREASES
Traditionally, the factors or criteria which have influenced pay increases
through collective bargaining include enterprise profit, job evaluation, seniority, cost
of living, manpower
shortage or surplus, the negotiating strength and skills of the parties. Performance
measures
such as productivity or profit related to groups or individuals have not featured
prominently in
collective bargaining. Further, though wage rates negotiated through collective
bargaining do
reflect wage differentials based on skills, such differentials have not been geared to
the

encouragement of skills acquisition and application. Therefore a major concern for

employers
is the need to negotiate pay systems which are
strategic in the sense that they achieve strategic objectives
flexible in the sense that their variable component can absorb downturns in
business
and reduce labour costs
oriented towards better pderformance in terms of productivity, quality,
profit or
whatever performance criteria are agreed upon
capable of enhancing earnings of employees through improved
performance
capable of reducing the incidence of redundancies during times of recession
or poor
enterprise performance through the flexible component of pay
able to reward good performance without increasing labour costs as a part
of total costs
through enhanced productivity
able to attract and retain competent staff
able overall to control or stabilize labour costs.
These obectives have come to the forefront, particularly due to pressures flowing
from
gloablization.
Therefore wage increases through collective bargaining need to be based on
a wider range of criteria than has traditionally been the case. Otherwise once
collective bargaining is over, the employer may be left without the financial
capacity to adjust pay based on group or individual performance, as well as on skills
acquisition and application.
LEVELS OF BARGAINING
Originally collective bargaining at the national or the industry level was
viewed by employers as a means of reducing competition based on labour costs
through standardized wage rates.
Employers no longer view collective bargaining from this perspective.
Instead, centralized and industry level negotiation is considered as depriving
enterprises of the needed flexibility to compete on the basis of adjustments at the
level of the enterprise in relation to pay, working hours and conditions, work
organization, manpower utilization and so on. The efficiency gains are considerably
greater - and more easily realizable - when negotiations take place at the enterprise
level. Therefore, the major thrust in all countries where the pattern hitherto was
national or industry level bargaining, towards increased enterprise-level bargaining,
has been by employers. Not all unions favour this trend; their power position can be
automatically

eroded by this trend, just as it is enhanced through centralized or industry level

bargaining.
RECOGNITION CRITERIA
Even where there is a single union structure, there should be recognition
criteria applicable to the union for collective bargaining purposes. The union should
be representative of a minimum percentage of employees, as the employer cannot
reasonably be expected to conclude an agreement with a union which is not
representative.
The need for recognition criteria is all the greater where there is union
multiplicity. In countries with union multiplicity and rivalry, recognition disputes
have been a cause of major disputes, and practical problems often arise. One is the
issue of the continued applicability of an
agreement to workers who subsequently leave the negotiating union and join
another union.
Another issue relates to the status of a collective agreement where, during
the duration of the agreement, the union loses its membership and is replaced by
another union in the workplace.
Employers expect the legal framework to provide for such issues, so as to
overcome
uncertainty and avoid disputes.
EXTENSION OF AGREEMENTS
The principle of extension of collective agreements to cover employers and
employees not parties to, or covered by, such agreements, is embodied in some
labour law systems. The issue can arise only where negotiations are above the level
of the enterprise, but can nevertheless be undesirable from several points of view.
First, extension of collective agreements deprives an employer of the
opportunity he would have had, had he been a party to the negotiations, to take
account of workplace conditions and needs. This is particularly important at a time
when enterprise level bargaining is the trend.
Second, it is inconsistent to speak of voluntary collective bargaining on the
one hand and
provide for involuntary coverage on the other. An extension of coverage should
occur, if at all,
only where both parties agree to it.
Third, extensions are impractical - and can be harmful - in countries with
large regional
disparities.
DISPUTES ARISING OUT OF AGREEMENTS
Employers expect disputes connected with collective agreements, whether
they relate to

interpretation or non-observance, to be settled in accordance with procedures

agreed to and
contained in the agreement, or through other machinery with conciliation as a first
step.
PRE-NEGOTIATION PREPARATIONS
OBJECTIVES
A party wishing to arrive at a satisfactory conclusion or arrangement through
collective
bargaining should first identify the objectives of the exercise. Some objectives
common to
employers are the following:
i. Ensuring that the enterprise is not rendered uncompetitive
ii. The need to keep wage increases below the level of productivity increases
and/or within the inflation rate.
iii. Guarantees of industrial peace during the period of operation of the
agreement
As far as possible managers should be consulted in determining objectives;
their priorities
should be solicited, and they should be aware of the company's views in regard to
objectives so
that they could be tested against the managers' views.
It is insufficient to merely determine objectives. A tentative plan to achieve
these objectives, which can be modified during the course of the negotiations, could
be formulated. Such a plan should include the company's requests to the union. For
instance, work reorganization to increase productivity to absorb the cost increases
consequent upon collective bargaining may form part of the company's plan.
Negotiations on the union's demands are generally an ideal setting in which
management can achieve some of its objectives through agreement. In order to
achieve this, the management must be clear about its own priorities. If there is an
existing collective agreement, it would be a useful starting point. An analysis should
be made of how it has worked, its unsatisfactory features from the company's point
of view should be identified, and the changes necessary determined.
NEGOTIATING TEAM
The negotiating team, and the respective roles of the members, should be
determined before the negotiations. Employers would find it useful to include in the
team people from different disciplines.
RESEARCH AND STUDY
The union's demands should be carefully studied. The following are some of
the matters to which attention should be paid:
a. Assess the economic impact of the demands on the company.

b. Make a comparative study, e.g. in a wage demand one should ascertain

comparative
wage rates in the industry and in allied or similar businesses, the minimum wage, if
any, and the rates applicable in other collective agreements.
c. Separate the demands which the company has no intention of fulfilling or
giving, either
on a question of principle or due to economic incapacity.
d. Prepare the company's position in regard to the other demands, e.g. the
conditions on
which the company may be prepared to grant them or compromise on them.
e. Identify the demands which may be of crucial importance to the union or to
the
employees as the case may be. This is crucial to success in negotiations because,
without a proper assessment of such demands, a negotiated settlement may not
result or, if one results, it may lack durability because it has not addressed the main
problems.
The issues which may be of crucial importance may not be the same in the
case of both
(union and employees) as they may have differing interests. Having identified the
crucial demands the company should formulate its strategy in relation to them e.g.
the possibility of trading some of the company's demands in return for the union's
demands.
RESPONDING TO THE UNION'S REQUESTS
It is a matter of assessment in each situation as to whether the management
should make an initial response in writing to the union before negotiations
commence.
Usually it is desirable that written positions stated before negotiations
commence should not contain a flat or blanket refusal. At this stage it is preferable
to couch a refusal in language
which does not give the impression of an out-of-hand rejection or a rejection without
consideration of the merits. Negative answers may sometimes be better given
during the
negotiations because it affords greater opportunities for explanations of the reasons
for the
negative answers. A rejection during negotiations would more likely give the
impression to the
union and employees that such rejection was made only after negotiations and not
before. It is
always useful from the point of view of reaching agreement on other matters to first
listen to
the reasons adduced by the union for a demand which the company does not
propose to accept.

A rejection during negotiations also enables the employer to convince a union of at

least some
of the reasons why the demand is not acceptable. It also prevents a union from
resorting to
trade union action on the issue of a refusal to negotiate, as distinct from rejection of
the
demands after negotiation.
INVENTING OPTIONS.
Since negotiations may not proceed or take place in the way a party may
plan, a party should be able to provide alternative options to what he, or the other
party, expects. For example, if it transpires that the wage increase sought is not
acceptable, the employer should be prepared
with alternatives to cushion the impact of an increase in excess of what it had
planned to agree
to.
STRATEGY
A party to collective bargaining negotiations has to formulate a strategy for
all stages of the negotiation, including the pre-negotiation stage. Before
negotiations commence, the strategy
should include matters such as;
a. options as referred to above
b. how
much to offer while leaving room for further negotiation if the
offer fails. The
offer should be sufficiently attractive so as not to lead to a breakdown in
negotiations.
c. how to link one's requirements to the concessions one makes.
THE NEGOTIATIONS
PRINCIPLED NEGOTIATION
The broad principles on which negotiations should be conducted are outlined
in the Paper
entitled "Principles of Negotiation". This section will therefore underline some other
matters to
which attention should be paid.
WHO COMMENCES
There is no inflexible rule as to who should open the negotiations. However, it
is not
unreasonable for the management to claim that if the union has initiated the
negotiations, it

should first outline its rationale and justification for doing so. Nevertheless, the
management
should make it clear at the outset that agreement on any particular issue is subject
to an overall
settlement, including its own expectations from the union.
MANAGEMENT'S REACTIONS
In outlining the employer's response, the following could be included:
i. The context in which the employer is negotiating, such as the business
environment,
and how this affects the employer's position in the negotiations.
ii. A judgement will have to be made about the stage at which the union
should be
informed about the items on which the employer will not make any concession.
However, the impression should not be created that the union will not be
allowed an
opportunity to present its case.
iii. The basis on which the employer is prepared to negotiate. This could
include the
employer's objectives and expectations from a collective agreement, and any
unsatisfactory features in the existing agreement (if there is one) which require to
be
rectified.
INTERNAL COMMUNICATION
During the negotiations there should be good internal communication
between the company and its managers about the situation at any given time. This
will help clarify misunderstandings and even eliminate disinformation especially
where employees, as happens in developing countries, seek information or
clarification from their managers.
NOTES OF DISCUSSION
Notes of the discussion should be maintained, and preferably issued and
agreed on with the other party, to avoid misunderstandings. Such notes could be
useful in the event of disputes
and a breakdown in negotiations.
STYLES OF NEGOTIATION
It is an essential principle of negotiation - indeed of human relations - that
one's style of
negotiation may need to be adapted to the style of the other party. The negotiator
who adopts
only one approach to negotiations may be puzzled when he finds that the approach
in question

bears fruit in some cases but causes an adverse reaction in other cases. The ability
to allow the
attitudes of the other party or the facts or merits of the issue to fashion one's own
particular
style in a given negotiation requires a high degree of flexibility on the part of the
negotiator, an
absence of a pre-conceived approach to negotiation, and recognition of the fact that
unltimately
what matters is one's ability to secure one's objectives through dialogue. However,
this should
not be understood to mean that there should not be a principled approach to
negotiation. What
it means is that often one has to take into account even the idiosyncracies of the
other party and
assess what form of presentation is likely to appeal best to the person whom one is
trying to
convince.
SOME BASIC RULES IN COLLECTIVE BARGAINING NEGOTIATIONS
A negotiator should view negotiations as an exercise with both sides walking
towards each other, rather than away from each other. This will enable the
negotiator to keep in mind that the final objective is a satisfactory agreement. It will
also lead to a search for, or identification of,
common ground while also addressing the differences.
A negotiator should be good at listening carefully to the other party who will,
otherwise, feel that disagreement with his position is due to a lack of
understanding. This is also necessary to encourage the other party to listen to you.
Some indication should be given to suggest that the
party has understood the other's position. Body language often communicates a
party's
reactions.
A party should build its case in a logical sequence and, as far as possible, try
to obtain
agreement at each stage of the process. This will narrow the areas of disagreement
and
facilitate focusing on those aspects.
Counter proposals and conditions attached to concessions should be
indicated as early as
possible, so that the basis on which a party is prepared to agree or compromise is
understood.
Whenever possible, invite the other party to look at the problem from the opposite
perspective,
e.g. a wage increase as an additional cost which, due to competitive pressures,
requires

management to find ways to absorb it. It is sometimes useful to ask the union for
suggestions
on how it can cooperate to facilitate absorption of the increase.
It is usually preferable to avoid taking up at the outset the position that a
particular item is not negotiable. It is more productive to request a party to justify
its claim, and then point out why
that claim is unreasonable. Taking up a non-negotiable position can lead to the
preception that
the position has nothing to do with the merits and that the party is not willing to
listen.
Skillful questioning is an effective way of compelling the other party to justify
its claim on the merits, and even shifting the other party to a different point of view.
THE AGREEMENT
When agreement is reached one of the following two courses may be
adopted:
i. Set out the agreement reached in a letter to the union and, on confirmation,
prepare a
draft agreement.
ii. Alternatively provide the union with a draft agreement. This would be the
better course
of action as the actual agreement reached will be clearer. It also leaves less room
for
further negotiations between the time agreement is reached and the draft
agreement is
approved.
Before the agreement is signed, the proper interpretation of clauses which
have the potential to result in problems of interpretation should be agreed upon
through, for example, an exchange of letters. Where there are understandings
which affect the interpretation of the agreement, they should be reduced to writing
(e.g. in a letter) before the agreement is signed. But wherever possible, the
agreement should be self-contained, inclusive of definitions or interpretations.
The contents of the agreement would depend on what is agreed upon and on
the subject matter.
The following examples are of some general application:
i. The date of commencement of the agreement
ii. Its duration - when it will terminate or may be terminated, and how it can
be terminated
iii. A definition of terms which may otherwise be ambiguous
iv. The procedure for settling disputes regarding interpretation, as well as
other disputes.
This may also include the issue of trade union action and lock-out, i.e. in what
circumstances such action may or may not be permitted.
v. The consequences in the event of breaches of the agreement

vi. As regards wages, exactly how conversion of employees' wages to the

new scales is to
be effected.
The signing of an agreement does not ensure its successful implementation.
Managers and supervisors should be acquainted with the agreement through the
most appropriate means. A
combination of written and oral communication is often useful.

TYPES OF COLLECTIVE BARGAINING:

CONJUNCTIVE/DISTRIBUTIVE BARGAINING:
Distributive bargaining is the most common type of bargaining & involves
zero sum negotiations, in other words, one side win and other side loses.
Both parties try to maximize their respective gains. They try to settle
economic isues uch as wages, benefits, bonus etc.
For example, unions negotiate for maximum wages & the management
wants to yield as little as possible, while getting things done through workers.
In distributive bargaining, unions and management have initial offers or
demands, target points (eg : desired wage level), resisyance points(unacceptable
wage levels) & settlement ranges (eg : acceptable wage level). Another type for this
type of bargaining is conjunctive bargaining.

COOPERATIVE / INTEGRATIVE BARGAINING ;

Integrative bargaining is similar to problem solving sessions in which both
sides are trying to reach a mutually beneficial alternative, i.e, a win to win situation.
Here both the employer & the union try to resolve the conflict to the benefit of both
parties. Both sides share information about their interests and concerns and they
create a list of possible solutions to best meet everyones needs. For eg ; when
companies are hit by recession, they cannot offer kind of wages and benefits
demanded by workers. At the same time they cannot survive without the latters
support. Both parties realize the importance of surviving in such difficult times and
are willing to negotiate the terms of employment in a flexible way.

PRODUCTIVITY BARGAINING :
He concept of productivity bargain involves a good understanding of the
following concepts. Based on these concept both the parties must develop a
productivity linked scheme.

COMPOSITE BARGAINING
workers believed that productivity bargaining agreements increased heir
workloads.
Rationalization, tight productivity norms have added to this burden and made
the life of a worker somewhat uneasy. As an answer to such problems, labor has
come in favor of composite bargaining. In this method, labor bargains for wages as
usual, but goes a step further demanding equity in matters relating to work norms,
employment levels, manning standards, environmental hazards, sub-contracting
clauses etc., when unions negotiate standards they ensure the workload of workers
dont exceed.

CONCESSIONARY BARGAINING ;
Quite opposite to the other forms of bargaining, where the unions demanded
from the employers, in concessionary bargaining, the objective is to giving back to
management some the what it has gained in previous bargaining.
Why should labor be willing to give back what it has worked so hard to
obtain? In some cases, despite a financial crisis, the union may not be willing to
concede. This may be because the union doesnt view managements arguments as
credible., the degree of trust and credibility between the management and the
union may influence the extent to which concessionary bargaining occurs.

2. Discuss the wage policy in India with reference to detailed evaluation of the act.
The wage and employment policies relating to the unorganised workers and
in particular the issue of minimum wages paid to them has been a subject of
considerable discussion among union leaders and labour experts in India. While

minimum wage legislation has to a large extent been effective in providing

protection to workers in the organised sector, with periodic revision, this has not
been the case with the unorganised workers, who largely remain outside the
purview of minimum wage legislation. The paper highlights the issues and concerns
relating to Minimum Wage Act, 1948 in India.
MINIMUM WAGES IN INDIA
The Indian economy is characterised by a dualism, i.e., the existence of
comparatively well organised sector along with the decentralised sector with a large
population which is self-employed. According to reports, 422.6 (94%) million
workers out of the total workforce of 457.5 million belong to the
unorganised/informal sector in India. These workers contribute to more than 60 per
cent to Indias GDP growth.
The Constitution of India envisages a just and humane society and
accordingly gives place to the concept of living wage in the chapter on Directive
Principles of State Policy. The Minimum Wages Act, 1948 is based on Article 43 of
the Constitution of India which states that, "The State shall endeavour to secure by
suitable legislation or economic organisation or in any other way to all workers,
agricultural, industrial or otherwise, work, a living wage (emphasis added)
conditions of work ensuring a decent standard of life and full enjoyment of leisure
and social and cultural opportunities".
The term 'Labour' is included in the 'concurrent list' of the Constitution which
provides for labour legislation both by the central and the state governments.
Labour laws for most workers in the informal sector are enforced by the state
governments, while that for contractors and casual workers in establishments is
regulated by the central government. All labour laws enacted by the central
government directly or indirectly influence wage level and structure of wages in the
informal sector.
Minimum wage legislation is the main labour legislation for the workers in
unorganized sector. In India, the policy on wage determination had been to fix
minimum wages in sweating employments and to promote fair wage agreements in
the more organised industries. Wages in the organised sector are determined
through negotiations and settlements between employer and employees. On the
other hand, in unorganised sector, where labour is vulnerable to exploitation due to
illiteracy and does not have effective bargaining power, the intervention of the
government becomes necessary.
The Minimum Wage Act, 1948 provides for fixation and enforcement of
minimum wages in respect of schedule employments to prevent sweating or
exploitation of labour through payment of low wages. The objective of the Act is
to ensure a minimum subsistence wage for workers. The Act requires the
appropriate government to fix minimum rates of wages in respect of
employment specified in the schedule and review and revise the minimum rates
of wages at intervals not exceeding five years. Once a minimum wage is fixed

according to the provisions of the Act, it is not open to the employer to plead his
inability to pay the said wages to his employees.
The minimum wage rate may be fixed at a) time rate, b) piece rate, c)
guaranteed time rate and d) overtime rate. The Act provides that different
minimum wage rate may be fixed for a) different scheduled employments, b)
different works in the same employment, c) adult, adolescent and children, d)
different locations or e) male and female. Also, such minimum wage may be fixed
by a) an hour, b) day, c) month, or d) any other period as may be prescribed by the
notified authority.
In order to protect the minimum wages against inflation, the concept of
linking it to the rise in the consumer price index was recommended at the labour
ministers' conference in 1988. Since then, the concept of Variable Dearness
Allowance (VDA)linked to consumer price index has been introduced. The VDA is
revised twice a year in April and October. While the Centre has already made
provision in respect of all scheduled employments in the central sphere, 22 states
and Union Territories have adopted VDA as a component of minimum wage.
NORMS FOR FIXING MINIMUM WAGES
The fixation of minimum wage in India, depends upon various factors like
socio-economic and agro-climatic conditions, prices of essential commodities,
paying capacity and the local factors influencing the wage rate. It is for this reason
that the minimum wages vary across the country.
In the absence of any criteria stipulated for fixing the minimum wage in the
Minimum Wages Act, the Indian Labour Conference in 1957 had said that the
following norms should be taken into account while fixing the minimum wage. The
norms for fixing minimum wage rate are (a) three consumption units per earner, (b)
minimum food requirement of 2700 calories per average Indian adult, (c) cloth
requirement of 72 yards per annum per family, (d) rent corresponding to the
minimum area provided under the government's Industrial Housing Scheme and (e)
fuel, lighting and other miscellaneous items of expenditure to constitute 20 per cent
of the total minimum wage (f) Fuel, lighting and other miscellaneous items of
expenditure to constitute 20% of the total Minimum Wages, (g) children education,
medical requirement, minimum recreation including festivals/ceremonies and
provision for old age, marriage etc. should further constitute 25% of the total
minimum wage. In September 2007, the national minimum floor level wage was
increased to Rs 80 per day for all scheduled employments from Rs 66 in 2004 to Rs.
45 in 1999, Rs. 40 in 1998 and Rs. 35 in 1996.
ISSUES IN WAGE POLICY
Minimum wages are expected to cover the essential current costs of
accommodation, food and clothing of a small family. The Minimum Wage Act, while
being very progressive has led to specific problems. Doubts have been raised on the
existence of a clear and coherent wage policy in India particularly in unorganized
sector. This is mainly due to its poor norms of fixation, enforcement, implementation

and coverage in various parts of the country. Some of the issues and concerns faced
in India regarding minimum wages are summarized below:
A. NORMS FOR FIXING MINIM WAGES
The Act does not set out a minimum wage in rupee terms, but just stipulates
that the wage be a living wage which is to be decided by labour department in each
state. Certain norms have been laid out including that of calorie requirements, yards
of cloth per family and so on. The Act also stipulates that minimum wage rates are
to be revised keeping in mind inflation. Additionally, the guidelines laid down for the
minimum wage by the 15th Indian Labour Conference (ILC) and the Supreme Court
suggest that a minimum wage for 8 hours of work should be high enough to cover
all the basic needs of the worker, his/her spouse and two children. However, in
many states while fixing the minimum wages, they are not linked to the payment of
dearness allowance. As a result, real wages of workers keep eroding due to inflation,
pushing them below the poverty line.
Another inadequacy is that though the MWA requires wages to be revised
every five years, this rarely happens. The MWA also has a clause which states that if
wages are not revised, the existing wages should continue. Such an arrangement
has only led to greater laziness and unaccountability on the part of state labour
departments, leaving some workers to live below poverty line. Further to overcome
these inadequacies, the National Commission on Rural Labour in 1990,
recommended that the MWA should be amended to compel timely revision of wages
and it should be linked to VDA. It should also ensure enhancement of wages every
six months on the basis of the Consumer Price Index. How far the amendment has
been implemented in states is unknown. (For example, states like Rajasthan, Orissa
etc. do not have provision for VDA).
Different wages are fixed for the same work in different sectors. For instance,
a watchman in the shop or commercial establishment may be fixed higher or lower
wages than a watchman in the plastic industry or in a construction or maintenance
of roads or building operations, though a watchmans job will be the same wherever
he may work. To overcome these deficiencies, several states like Himachal Pradesh,
West Bangal, Andhra Pradesh, etc., have rationalised all the different occupation
categories into just four categories - unskilled, semi-skilled, skilled and highlyskilled. As per this system, only one notification is applicable to all industries, rather
than the time-consuming system of notifying wages individually for various
industries. Though the system gives a clear and detailed information of minimum
wages, it has not been adopted by all states, including the Indian Labour Ministry
website, which gives the minimum rate of wage (that is wages for unskilled workers)
for each occupation.
B. COVERAGE
In order to have minimum wage fixed, the employment or industrial activity
has to be included in the schedule of Employments. Currently the number of
scheduled employments in the Central government is 45 whereas in the state

sphere the number is 1232. The criterion for inclusion in the list of scheduled
employment is that there should be at least 1000 workers engaged in that activity
in the state. Thus, many activities are excluded from the list. This criterion for
inclusion has left a very large number of workers in the unorganised sector outside
the purview of the Minimum Wage Act.
C. IMPLEMENTATION
The main problem of minimum wage legislation in India is its poor
implementation. The Act empowers the appropriate government (Central, Sate or
Local) to fix a minimum wage for workers in unorganised sectors. However, often
exemptions from the payment of minimum wages have been granted to industries.
In addition, minimum wage levels have been revised only at long intervals (where
the actual prescribed limit is within 5 years). Such a failure in implementation of
MWA is not only due to loopholes in policy design but is also an outcome of lapses in
the administration.
Poor implementation of MWA does not affect organised workers as much as it
does to workers in unorganized sectors. Unorganised workers are employed with
millions of employers (generally small trade, enterprise, sole proprietor or
household) who are scattered and hence becomes difficult to cover them under law.
This diversity in locations and nature of work has left them vulnerable to
exploitation in the absence of a broad legal standard. Also, many workers for the
fear of losing their jobs do not report about payments lower than the minimum
wage rate. At times, these workers are even forced by their employers to certify
payments below minimum wages.
D. ENFORCEMENT
Poor enforcement of the Act is another issue prevalent in most of the states
in India. The issue arises mainly due to lack of awareness amongst the workers
about minimum wage provisions and their entitlement under the labour laws.
Surveys have shown that almost 80 per cent of the workers in unorganized sector
earn less than 20 rupees a day, or less than half the government-stipulated rural
minimum wage of 49 rupees a day and urban wage of 67 rupees. This is particularly
true in remote areas and in areas where workers are not unionized or otherwise
organised. As a result their wages have long since failed to keep pace with rising
costs and continue to diminish in real value over time.
NEED FOR MEANINGFUL MINIMUM WAGE POLICY
In spite of vast number of workers in unorganized sector, and their
substantial contribution to the national economy, they are amongst the poorest
sections of Indias population. It is therefore imperative that urgent steps are taken
to improve their condition. Infrequent revisions and inadequate cost of living
adjustments have been a marked feature of minimum wages in India. The rates of
minimum wages so fixed in few states, is not enough even for two times meal in a
day, leave aside the needs of health, education and shelter. In specific terms, the

issues and problems of the wage policy in both organised and unorganised sector,
relate to the elements like need based minimum wage, protection of the real wages
through compensation for rise in the cost of living, incentives for increases in
productivity, allowances for hazards of occupation, wage differentials for skills, etc.
The main objective to be considered while fixing or revising the minimum
wage rate should be two fold - 1) Social objective: that is, by providing sufficient
purchasing power to the worker, enable him/her to have a basic standard of living.
In long run such a step would help in abolishing labour exploitation and poverty. 2)
Economic objective: The rate of minimum wage should be fixed at such a level
which would motivate workers and enable them to enjoy the benefits of economic
growth, and thereby contribute to the economy. For example, the Sixth Central Pay
Commission (CPC) has fixed the minimum wage of Central Government employees
at Rs 5740. The first four scales of pay suggested by the Fifth CPC for the Group D
Employees of the government have now been removed, under the Sixth CPC. The
existing employees in these grades are to be moved to Group C cadres through a
process of
training thereby indicating that the unskilled functions in the governmental sector
would be contracted or outsourced.
Two major and recent initiatives for providing social security to the workers in
the informal sector have been passed in the parliament; a) the National Rural
Employment Guarantee (NREG) Act 2005 and, b) the Social Security for Unorganised
(Informal) Sector Workers. The National Rural Employment Guarantee (NREG) Act
2005 is meant for the working poor in villages to take care of the problem of
underemployment and thus to enhance their income that would make them less
poor or cross the officially determined poverty line. It entitles adult citizens in rural
areas to seek work up to 100 days per household per year. With the implementation
of National Rural Employment Guarantee Scheme, hopes are raised for meeting
basic needs of workers in unorganised sector, by earning minimum wages at least.
On the other hand, Social Security scheme covers health (hospitalisation for
self and family) and maternity, life and disability and old age security in the form of
state pension for those belonging to poor households and a provident fund for
others. The scheme is based on contributions from workers, employers and
government in the ratio of 1:1:1.
Minimum Wage legislation in India requires the active support of workers,
trade unions, and labour associations. It would also require sincerity on part of the
labour departments in each state to determine minimum wage rate on the basis of
ethical and humanitarian concerns in order to ensure basic subsistence to workers
in unorganized sectors. Implementation of government policies and legislations is
the main problem in the unorganized sector. Also, low productivity in unorganised
sectors, limitation of avenues for gainful employment, lack of organisation on the
part of workers, affects their bargaining capacity, accounting for their vulnerable
situation. Hence, involvement of non government organizations and trade unions
can play an important role in better enforcement of minimum wages act. For

example, Self Employed Women Association (SEWA) in Ahmedabad.

SEWA is the 7th largest trade union organisation in India working towards
organising women workers (mainly in informal sector) for full employment, which
means employment whereby workers obtain work security, income security, food
security and social security (at least health care, child care and shelter). SEWA has
been organising workers in the dyeing, chemical and screen-printing industry,
agarbatti rollers, ragpickers, street vendors, etc for many years now. Involvement of
such organisations gives a voice to workers in unorganised sectors in collective
bargaining. Ignorance and illiteracy are the main reasons for exploitation of workers
in unorganized sectors. Trade unions and NGOs can help by making the workers
aware of the legal provisions of the minimum wage rate and the benefits to which
they are entitled.
Also, minimum wage data is not readily available. Only limited official data is
available from national labour ministry website which may or may not be updated
on regularly basis. The information available does not permit extensive comparison
on wages in formal and informal sector due to different formats of reporting or
recording of wage rate in each state. Minimum Wage Checker on Paycheck website
provides the information on minimum wages in each Indian state. The minimum
wage data collected from labour department in each state is uploaded on the
website in a detailed format enabling inter-state comparison easy.
The need of the hour is not only to increase the basic rates of minimum
wages but the basic approach towards the whole issue also needs to be changed.
The prevailing system of minimum wages, instead of abolishing the poverty, is in
fact increasing it. Initiatives like strengthening the enforcement machinery,
simplifying the procedure relating to coverage and revisions of minimum wage rate,
linking the rates with the Consumer Price Index Numbers (CPI), and increasing the
involvement of various workers' organisations in the implementation of the
Minimum Wages Act, are some of the steps advocated to improve the situation.
UNORGANISED SECTOR IN INDIA
According to reports, 422.6 (94%) million workers out of the total workforce of
457.5 million belong to the unorganised sector in India. These workers contribute to
more than 60 per cent to Indias GDP growth. The term unorganised' is often used
in the Indian context to refer to the vast numbers of women and men engaged in
different forms of employment. These workers are engaged in unorganized
economic activities in small scale industries, cottage industries, construction,
manufacturing units, textile and garment, horticulture, agriculture, rural
occupations, forest based employments, fisheries, sweeping-cleaning, loadingunloading, mining, forestry, service sector, entertainment, temporaries, home
workers, domestic servants, time rated or piece rated, casuals, part time workers,
own account workers, and contractual workers. Unorganised sector work is often
characterised by low wages that are often insufficient to meet minimum living
standards including nutrition, long working hours, hazardous working conditions,
lack of basic services such as drinking water and sanitation at the worksite, etc.

In India, workers in informal sector are distinguished from the workers in

formal sectors in the following way: a) in the organised sector activities are
regulated by legislation, while that in unorganised sector are not well regulated and
b) workers in the organised sector are covered under social security legislations,
while they do not cover the unorganised sector. As a rule of thumb the demarcation
line between organized and unorganized enterprises is at 10 employees.
Unorganised sector workers are mostly employed in rural jobs and are
increasingly migrating to the cities. Being migrant and casual in nature, they often
remain outside the purview of India's tough labour laws and the collective
bargaining strength of the unions. Workers engaged in the unorganised sector do
not have the benefit of several laws such as the Minimum Wages Act or the
Factories Act. They are also not covered by statutory welfare measures such as
maternity benefits, provident fund, gratuity, etc.