er india

EMPLOYMENT RELATIONS IN INDIA

Ravi Varma R

• India – Physical• India – Political• Economy• Education• Collective Bargaining• Evolution of ER in India • Key recommendations of NLC• Challenges • Conclusion• HRM in India• Questions

AGENDA

INDIA –PHYSICAL

• Republic of India• Independence – August 15th, 1947• Republic –January 26th, 1950• Capital –New Delhi• Total land area – Seventh largest by geographical area (1,269,210 sq mi)• Second most populous – 1.17 billion• Official language of the union is Hindi. English is considered as subsidiary

official language• 28 states and 7 union territories• Two linguistic families – Indo-Aryan (spoken by 74%) and Dravidian (spoken

by 24%)• Major religions – Hinduism, Islam, Christianity, Sikhism, Buddhism, Jainism,

Jews, Baha'is and others• Diverse terrain with mountains in the north, desert in the west, plateau in the

center, dense forest in the east and coasts in the south

• Bicameral Parliament - Rajya Sabha (upper house) - Lok Sabha (Lower house)• National political parties –Indian National Congress, Bharatiya Janata Party,

Nationalist Congress Party, Bahujan Samaj Party, Communist Party of India and Marxist Communist Party

INDIA –POLITICAL

President –Pratibha Devisingh Patil -12th person and first woman to hold the post

Prime Minister – Dr. Manmohan Singh- 17th Prime minister

ECONOMY

• GDP – 7.3% (2008) • GDP (official exchange rate) - $1.237 trillion (2008)

Sectors• Agriculture - Agriculture provides the principal means of livelihood for over

60% of India's population. Despite a steady decline in its share of the GDP, it remains the largest economic sector in the country

• Industry and Services - Industry accounts for 27.6% of the GDP and employ 17% of the total workforce. However, about one-third of the industrial labor force is engaged in simple household manufacturing only

-Textile manufacturing is the second largest source for employment after agriculture and accounts for 26% of manufacturing output - India is fifteenth in services output. It provides employment to 23% of workforce

ECONOMY

• Industry and Services - Business services are amongst the fastest growing sectors contributing to

one third of the total output of services in 2000 - Organized retail such supermarkets accounts for just 4% of the market as

of 2008. Regulations prevent most foreign investment in retailing• Banking and Finance -The Indian finance sector is classified into organized

and unorganized sectors. Organized sector includes public, private and foreign owned commercial and co-operative banks. The unorganized sector includes family or individual owned banks like money lenders and NBFCs.The unorganized sector and micro-credit are preferred in rural areas over the conventional banks

• Natural resources – major natural resources include coal (3rd largest reserve), iron ore, manganese, mica, bauxite, titanium ore, chromite, natural gas, limestone, oil and thorium (world’s largest)

EDUCATION

• Primary Education is up to the age of fourteen. District Primary Education Program was launched by the central government in 1994 with the aim to universalize primary education

• Secondary Education is between the age of 14 -18 and prepares students for higher education. Emphasis on vocational training is a feature of secondary education

• Tertiary Education is when a student enters the university system for higher education. As of 2009, India has 20 central universities, 215 state universities, 100 deemed universities, 5 institutions established and functioning under the state act and 13 institutes of national importance. University Grants Commission is the body that enforces standards across various universities and advice government on matters related to higher education.

• Technical Education happens at engineering colleges or universities. All India Council for Technical Education is the apex body for the development and regulation of higher technical education. Indian Institute of Technology are amongst the top 100 best technical universities. Indian School of Business and Indian Institute of Management are amongst the best business schools in the world.

• XLRI and TISS – Our peers in India!

COLLECTIVE BARGAINING

• Three levels - private sector bargaining is at enterprise level involving unions that may or may not be affiliated to political parties - centralized union federations affiliated to political parties bargain with state at industry and / or national level - employees of state and central governments have their own unions affiliated to political parties and they bargain at national and / or state level• Wage is negotiated during the bargaining process• There is no legislation that allows for a representative union• During the second phase of evolution of ER employers and employees came up with an innovative

method of making contract document by making it a legally binding document. They negotiated a contract that was agreeable for all and made it a legal document by asking for conciliation. Terms of agreement are then signed in the presence of conciliation officer thereby making the contract legally binding. This practice was started after an amendment to IDA in 1965 which made agreements arrived at through conciliation and adjudication legally valid

EVOLUTION OF ER IN INDIA

• Evolution of Employment Relations in India can be traced in 4 phases corresponding to the respective five year plans

PHASE I – “Public Sector Unionism”• Corresponds to the first three five year plans (1951-56,1956-61,1961-66)• State led industrialization with import substitution strategy• Public sector employment lead to public sector unionism• Jump in the number of registered trade unions from 4623 (1951-52) to 11,614 (1961-62)• All India Trade Union Congress (AITUC) dominated the union scene since pre

independence• Formation of Indian National Trade Union Congress (INTUC) which was an arm of the

ruling congress government. Union leaders were more loyal to congress party than to the workers belonging to the union.


PHASE – I • Relationship between state and INTUC tied neatly with the provisions of

Industrial Disputes Act (IDA) 1947 and Indian Trade Union Act of 1926• Determination of wages and working conditions by state and were not linked to labor

productivity• Objective of ER was to maintain industrial peace thus promote “responsible unionism”

resulting in lower number of strikes during phase I.• End of phase I resulted in splits in labor movement. - Socialists broke away from congress to form Hind Mazdoor Sabha (HMS) - radicals broke away from CPI to form CPI (M) and formed Center of Indian Trade Unions

(CITU)• “Giri Approach” – promote genuine collective bargaining, Code of Discipline and inter-union

Code of Conduct

ER LEGISLATIONS

• Indian Trade Union Act of 1926: This act allowed any seven workers to register their trade union. But it did not make any provision for union recognition

• Industrial Disputes Act (IDA) of 1947: “An Act to make provision for the investigation and settlement of industrial disputes, and for certain other purposes”. This act is considered to be the most important legislation between workers and employers. This act did not make provision for the representative union in a single bargaining unit. Since employers were under no obligation to bargain there were no built-in incentives for either party to engage in collective bargaining

• Amendment to IDA (1976): Gave rise to employment inflexibility. Firms employing more than 300 employees had to get government permission before they could lay off workers

• Amendment to IDA (1982): Firm employing more than 100 workers (reduced from earlier number of 300) will have to get permission from state to layoff or retrench workers


PHASE II – “Formation of new unions”• Corresponds with the annual plans for the years from 1967-69 and the fourth

and fifth five year plan (1969-74 and 1974-1979)• Industrial stagnation – increase in inflation, deceleration in public investment,

unequal terms of trade between agriculture and industry, inefficiencies of state regulation in public sector and changes in the structure of demand resulting from income inequalities in addition to oil price shocks of 1973 and 78

• This lead to unemployment and fall in labor productivity from 4.9% to 1.4% (comparison between 1959/60 – 1965/66 with 1965/66 to 1979/80)

• Increase in strikes and lockouts and flight of capital from one region to other parts of the country (eg: West Bengal)

• Formation of more radical and political unions lead by lawyers and students who were well versed about the IR system.


PHASE – II• Emergency Period (1975-77) – suspension of right to strike, freeze in wage increases• Two interventions of this period were: - attempt to form a National Apex Body comprising 11 employer representatives and 12 trade union federations to promote bipartite approach to IR - amendment to IDA: permission from state to layoff workers• There were fractures developing within the labor movement in terms of unions moving

their focus form right to interest


PHASE III – “Shift from import substitution to export promotion strategy”• Corresponds to sixth and seventh five year plans (1980-85 and 1985-90) and two annual plans (1990-92)• First part: economy suffered due from internal and external shocks resulting in balance of payments crisis

and subsequent loan from IMF Internal shocks – unrest in the northeast of the country, worst droughts since independence and rising

inflation External shock – increasing oil import bill, recession of 1980/81• Second part: economic liberalization thereby changing course from the import substitution strategy to

export promotion and domestic competition• Macroeconomic changes lead to changes in trade unionism, labor markets and structure of industrial

relations• Rise of independent unions: Mumbai textile strike of 1982

MUMBAI TEXTILE STRIKE

• Year of occurrence: 1982• It was the longest strike in post independence labor history• It started as wage and bonus issue in few mills but soon developed into industry wide strike• The real reason was the frustration of rank and file with the 1947 Bombay Industrial

Relations Act which imposed upon them an industry-wide bargaining structure with an unrepresentative union (affiliated to INTUC) as sole bargaining agent of workers

• Workers approached Datta Samant to lead the struggle • Textile strike ended in a disaster with many mills shutting down for ever, workers returning

home, employers restructuring their mills in advanced textile sector• This also lead to loss of credibility for government installed unions for ever• The major change it brought to trade unionism was the rise of “independent” union

movement


PHASE – III• Inter-city variations in ER - In Mumbai, union leaders disclaimed political allegiance. Reason could be because

Mumbai has a very high concentration of MNCs and private firms and thus very business oriented

- Kolkata was highly political conscious - Bangalore having high concentration of public sector unions due to the presence of

large number of public sector units• labor market flexibility: Subcontracting and outsourcing work to unorganized sectors• Wages were high in profitable sectors while it was not so in unorganized sectors• Number of changes proposed to remedy the limitations of IDA and Trade Union Act

which would have reduced fragmentation and multiplicity of unions, clearly define bargaining agent by providing for the secret ballot provision, promote internal leadership, set up state level industrial relations tribunals, force employers to set up all encompassing bargaining councils in order to facilitate internal grievance settlement…etc. The bill was rejected due to controversy over the definition of “industry”


PHASE IV –”Deregulation”• Corresponds to eighth and ninth five year plans (1992-97 and 1997-2002)• During this period economy had opened up and grew at 5.3% during the first five year period of

reforms, 1992-96• World Bank-IMF stabilization and structural adjustment program – devaluation of rupee twice,

reduction in import quotas, lowering of tariffs, ended state monopoly on exports and imports• Initial structural adjustment saw growth in unemployment in manufacturing sector but second

structural adjustment saw an increase in employment which grew by 2.3% (1992/93 and 1994/95)• Decline in union membership: union membership as a percentage of non-agricultural labor dropped

from 6.6% in 1985 to 5.5% in 1995. Union membership as a percentage of formal sector workers too came down from 26.5% to 22.8%


PHASE IV• Predicted growth in casual workers and self-employed due to unlikely employment

opportunities in public and private sectors• Closure of unviable public sector plants • Introduction of golden handshake and VRS• Centralized wage bargaining process was frozen, by the government, for the first few

years after 1992• It opened negotiation process. But tried to decentralize it by announcing that wage

increase will have to be absorbed by the specific enterprise as any increase in wage cannot be put into final product price under new scenario

• Setting up of National Labor Commission in the October of 1999• No labor reforms have been carried out till date due to political instability at the

central level and lack of consensus

KEY RECOMMENDATIONS OF NLC

• “Engagement of temporary labor even in core production/service activity to meet seasonal demand. Offloading perennial non-core services could be continued

• Prior permission not required in respect of lay-off and retrenchment in an establishment of any employment size. Prior permission not required in case of a unit employing less than 300, for closure of establishment

• Flexibility in overtime provisions to meet market demand. Present ceilings could be doubled”

(Labor Reforms in Southern Region States - Issues and

Concerns, CII policy primer, no 3, April 2004)

CHALLENGES

• Increased differentiation within labor markets due to high product market differentiation and application of technology that is diverse within the same industry

• Decentralization of collective bargaining as a result of wide demographic spread of firms and also due to the rise of mutually exclusive market segments within the same industry

• Formation of proposed Industrial Relations Commission (IRC) which is independent from state intervention and made responsible for conciliation and adjudication of industrial disputes. It is also envisioned to have rights to recognize trade unions as bargaining agents

CONCLUSION

“…evolution of industrial relations institutions in India has been incremental and adaptive. Change has been driven more by the endogenous force of party politics, government policy, class segmentation, demography and geography, rather than simply by the exogenous forces of globalization or by the functional requirements of a particular industrialisation strategy”

(The evolution of Indian industrial relations: A comparative perspective, Debashish Bhattacharjee ,2000)

HRM IN INDIA

• Aligned with HR practices in the developed world• Recruitment: Outsourced to firms specialized in recruitment• Training: In most of the organizations training delivery is outsourced and

internal trainers are mostly used in case the training imparted is relevant to organization’s technology

• Compensation and Benefits: Based on benchmarking exercises or from surveys conducted by firms specializing in compensation

• Payroll administration is outsourced• HR personnel are getting oriented more towards supporting businesses• There is stress on Leadership development trainings to develop second and

third tier leaders• Finishing schools for graduate engineers

er india

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