Chapter 14

INDUSTRIAL RELATIONS
AND
LABOUR LAWS
Chapter 14 Industrial Relations in

Changing Environment
1
Learning Objectives
After going through this session you will be able to

understand :
The cultural Issues in Industrial Relations

The changes that have taken place in the industrial
relations strategy.
The recent developments in the industrial relations
scenario.
Chapter 14 Industrial Relations in Changing Environment

2
Structure
14.1 Cultural Issues
14.2 Non-Unionism
14.3 Strategic Industrial Relations
14.4 New Perspectives of 1990s
14.5 Industrial Relations Concerns
14.6 Industrial Relations Scenario

14.7 Recent Developments
3
Structure
14.8 Changing Nature of the Labour Force

14.9 Changing Role of the State / Government
14.10 Changing Role of the Trade Unions
14.11 Unorganized Labour
14.12 Shifts in Industrial Relations
14.13 Future Perspectives
14.14 Summary
14.15 Self Assessment Questions
4
Introduction
As any social institution, industrial relations system
will evolve with the changes in social dimensions and
relationship.
In particular, industrial relations will need to respond

to the changes in the economic and cultural systems,
the make up of the labour force, technology, market
forces, political institutions and philosophy.
Of course, what the new social realities will be is

difficult to foresee.

5
Introduction
It has been an accepted fact that the

welfare of a worker depends on the
welfare of the employer; therefore,
unions are increasingly considering the
economic realities of the enterprise and
the industry, while formulating their
collective bargaining policies.

6
Culture can be broadly defined as a system of shared
beliefs, values, customs, behaviours and material
objects that members of the society use to cope with
their relationship with one another.
This definition includes not only patterns of behaviour
but also patterns of thought. On this basis, the global
culture can broadly be divided into occidental and
oriental.
The beliefs, perceptions and convictions of the people
living in eastern hemisphere are quite different from
their western counterparts.
7
These beliefs and perceptions in turn influence their
attitudes towards life, work, people and affect their
social behaviours in several ways. Within each of these
two broad classifications lie different cultures, which
may be specific to the national, social or even religious
contexts.
Since industrial relations is primarily the relationship
between employer and employees, and / or their
organizations, they are culture specific. Certain
western cultures (e.g. North American and Western
Europe) seem to value individualism and individual
achievement.
8
While eastern cultures (e.g. Japan and Korea) seem to
value consensus and teamwork.
In some countries independence is valued most while
in others interdependence is regarded the best. In
some, there is greater emphasis on equality while
others are more feudal and authoritarian in character.
In some, merit is the basis for reward while in others
seniority counts most. These and other differences
then become the determinants of a range of
personnel / human resource policies and practices.

9
At the macro or national level, the differences in the

political economy of the state could be a major
determinant of industrial relations culture. For
example, the difference between communist, socialist
and capitalist systems are too well-known and too
frequently documented. However, it appears that
today there is neither pure communism nor pure
capitalism.
There are significant diversities among nations in
regard to the nature and scope of government
initiative and interference.
10
The role of State in industrial relations within the
context of economics and social development also
differ. If a multinational corporation is having business
in different countries, it has to contend with adjusting
its human resources and industrial relations policies
such that they do not come in conflict with the official
policies of the State at the local level.
In some countries there are restrictions on
employment of expatriates, while others are more
open. Most developing countries began to insist, from
the 1970s, that multinational should progressively
replace expatriates with locals.
11
They were particularly keen on such replacement in
case of their senior management cadre. In some
countries, the higher compensation paid to expatriates
became a problem because it was perceived to not
only distort the wage and salary structure at the local
level, but also escalate demands from trade unions for
higher wages and salaries on grounds of parity and
equal pay for equal work.
The legal framework, the structure of trade unions and
employers organizations and industrial relations
practices may vary significantly across countries.
12
For example, in several countries legislation provides
for recognition of collective bargaining agent leading
to bargaining at different levels. The other way to look
at issues in collective bargaining in a cross cultural
context concerns the way a multinational enterprise
carries out negotiations in different units in different
countries.
Specific cultural and ideological factors influence
national differences in approaches towards employee
participation and employee involvement. The level at
which collective bargaining takes place also seem to
influence nature and degree of participation
13
If the industry level bargaining is the practice, many
matters of detail that become important at firm level
may remain to be adequately covered in such
agreements.
Here the participative fora like the works council seem

to fill the need as has been the case in Germany. In
Japan, where enterprise based structure of bargaining
persists, the attitude towards participation is different.
There the focus is not so much on representative
bargaining as on direct involvement of each and every
employee.
14
Some European and Scandinavian countries have
legislation mandating employers to share information
with employees. Multinational corporations operating
in such countries would be required to adhere to the
national laws on the subject irrespective of the stated
policy of the corporation elsewhere.
Cultural diversity can be discerned not necessarily
across countries alone, but also within a country. India
is a classic case. Companies find that there are
differences in language, religion, customs and
practices.
15
There are difficulties in securing optimal mobility
among the workforce. Communal tensions, social
movements, parochial sentiments and urge for
regional autonomy and political self-determination in
certain regions present fluid situations in union
management relations.
Industrial relations encompass several phenomena,
both inside and outside the workplace, concerning the
regulation employment relationship. This presupposes
that industrial relations does not occur in a socio-
technological vacuum.
16
But it occurs in a complex range and variety of social,
political, economic, technological, cultural and legal
factors which exercise a decisive impact on the
approaches of the parties, i.e. employers and
workmen towards each other. These factors are so
closely interlinked, that they, in turn, influence each
other in several ways making the situation even more
complex and, sometimes unpredictable .
Industrial relations is culture specific to the extent that
the theory and concepts, important though they are,
cannot be readily transplanted from one cultural
context to another.
17
Globalization has brought about a sea change in the
cross-cultural interactions on a scale unprecedented in
the history. The increasing congruence of worlds
culture is a direct product, in the first instance, of
industrialization and, in the second, of the
globalization of the late 20th century.
Advanced transportation and communication systems
such as e-mail, along with international migration,
have brought people and societies together. Above all,
the economic forces of international market system
have broken down the geographical barriers.
Products are made in one continent,
Chapter 14 Industrial Relations
fromin
rawChanging
materials ofEnvironment
another and
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sold in the third.
14.2 Non-Unionism
Viewed from a historical perspective, the concept of

non-unionism is not strange to Indian industry. A large
majority of small scale, proprietor managed
enterprises in the contemporary scene furnish ideal
example of non-union units.
Some of the reputed Indian companies in the medium
and large scale sector have, like their American
counterparts, attempted to thwart unionism by
employing a range of techniques including threat and
intimidation. Given the opinion, employers as a
general rule prefer non-unionism for obvious reasons.
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14.2 Non-Unionism
It was the unstinted support of government through

its regulatory framework in the context of Welfare
State that facilitated the growth of trade union
movement to its present level.
Insistence on non-unionism has only become more
pronounced and visible in the wake of liberalization
and the entry of multinational companies.
Motorola, Procter and Gamble, Perfetti, Samtel and
SRF, among others, are reported to be pursuing the
policy of non-unionism.
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14.2 Non-Unionism
From a sectorial point of view, Information Technology
Industry is patronizing non-unionism vigorously. IT
industry is, however, a class by itself with a large
proportion of white collar professionals and a high
turnover rates.
Some of the factors which have a bearing on non-
unionism in the Indian context are:-
1 The aggressive approaches of Indian employers
in the service sector to trade unionism.
2 The growth of Business Process Outsourcing
(BPO) organizations, majority of which are of American
organization and which are manifestly anti union.
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14.2 Non-Unionism
3 The decline in the number of skill workers and

their replacement by knowledge workers.
4 The declining membership of trade unions over
a period of years.
5 A perceptible change in the attitude of the
central and state governments towards trade unions.
Since industrial relations is particularly concerned with

employees, undertakings policy will spell out how, in
principle, the employer or management proposes to
structure and develop this relationship.
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14.2 Non-Unionism
Hence, the management has to make a fundamental

choice between dealing with employees on an
individual basis and dealing with at least part of the
relationship through union representatives.
Managing without unions is one approach which some

managements prefer to adopt. It is one which is easier
to adopt in the private than in the public sector .
In the context of non-unionism, the following policy

guidelines have to be laid down:-
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14.2 Non-Unionism
1 Management will take the initiative in

structuring industrial relations within its
undertaking in such a way as to serve the
interest of its employees by direct negotiations
of terms and conditions of employment and of
individual grievances.
2 Management will accept the freedom of

employees to join trade unions or other
associations of their choice.

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14.2 Non-Unionism
3 Management will take all necessary steps to

ensure that direct communication between
individual managers and employees ensures
employees are fully aware of undertakings
policies & requirements.
4 Management will establish channels of
communication with representatives of
employees through joint consultations, so that
employees are able to make their maximum
contribution to the development and well being
of the undertaking.
25
Industrial relations strategy can be defined as the
long-term goals developed by management to
preserve or change the procedures, practices, or
results of industrial relations activities over time.
The existence of such strategies is based on the
assumptions:-
1 Corporate management determines the overall

strategy to achieve the organizational goals.
2 Strategic thinking is a pre-requisite for

organizational success.
26
3 Top management have some choice in the

matter.
4 The choice of employee relations strategies and

policies rationally implies that they may be
limited to other objectives and policies.
5 There should be a direct relationship between

the industrial relations strategy and business
strategy.

27
There has been a significant change in the industrial
relations strategy during 1990s, which can be studied
with reference to three major perspectives:
a Liberal individualism and neo laissez faire.
The advent of conservative governments and product-

market imperatives resulting in an onslaught of trade
unionism heralded a new era of liberal or laissez faire
individualism more reminiscent of early 19th century
but adapted to late 20th century conditions.

28
The following are the characteristics of liberal
individualism:-
1 That economic conflicts of interest should be

freely entered into by individual employees and
employers operating in competitive markets.
2 That collective relationships between trade

union federations and employers association upset
the working of the free market mechanism and should
be avoided.
29
3 That individual workers should gain with
individual employers the contract of employment and
any conflicts arising out between them at that stage
should be resolved.
4 That once the employment contract is

consummated, the employment relationship should
be entirely free of conflict and the employee should
accept the authority of the firm in the best interests of
all.
30
5 That any combination by trade unions or

employers associations to influence the terms of
employment was to be deplored because this would
upset the competitive market forces.
6 That it is best for individuals, in a free society, to

take responsibility for their own actions and not to rely
on others such as trade unions and the state.

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7 That there should be no intervention in the
labour markets to the detriment of labour flexibility
and efficiency.
8 That there should be no intervention by the

state in private sector collective bargaining where
market forces dominate.
9 That there should be deregulation of labour

markets by dispensing with legal and other restrictions
32
10 That there should be privatization of many

public sector undertakings thereby removing
them from state control and exposing them to
market forces.
11 That there should be contracting out of local

authority services to private companies.

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b Human resource management.
The growth in the uptake of HRM has coincided with a
steady decline in importance of industrial relations as
a central feature of economic performance and policy.
It also coincided with a decline in the membership and
influence of trade unions.
The HRM has been applied to a diverse range of
management practices and strategies and the term is
often used by many employers as a more acceptable
substitute to personnel or industrial relations
management.
34
b Human resource management.
The importance of HRM for our understanding of
industrial relations and its change lies in its association
with a strategic, integrated and highly distinctive
managerial approach to the management of people.
The hard version of HRM focuses on human strategy
and employee utilization ; and the soft HRM focuses
on the human aspects of management and concern
with people in organizations.
HRM emphasizes the individual rather than the
collective regulation of employment and direct
management employee relationship.
35
c Modernism vs. post modernism
Modernism refers to the era in which factory system

of production flourished during the 19th century and
throughout the major part of 20th century. This era
was characterized by social organization of production,
the division of labour, and the assembly line of
operations coupled with narrow specialization.
During 1980s and 1990s, these traditional systems
have been gradually replaced by technology-driven
production systems with a shift in focus from skill to
knowledge.
36
Post modernism is the new concept which took birth

in 1980s and 1990s.
It embraces the notion that advanced capitalist

societies are experiencing monumental and significant
changes and movements away from the previous
modernist era.
More specifically, the post modernism represents a

change in five major assumptions detailed next.
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1. Knowledge work against skill work.

2. Customized products as against standardized
products of mass production era.
3. Multi-skills as against narrow specialization in one
particular functional area.
4. Flexible workforce as against workforce which was
rigid in terms of skills and abilities.
5. Consumerism and customer orientation.
38
Some of the current industrial relations concerns are:

There is an increasing appreciation of the direct
relevance of labour relations and human resource
management to enterprise performance and
competitiveness.
Even in countries in which major decisions in

industrial relations were taken at the macro level (e.g.
New Zealand, Australia & India) greater attention is
now being paid to industrial relations at the workplace
level.
39

This is seen as necessary to enhance flexibility
and quicker response to change when needed, and to
develop workplace procedures and mechanisms which
could contribute to more co-operative relations
between management and labour.
The higher levels of education and skills,

especially in the more industrialized countries in Asia,
are compelling re-thinking on how people should be
managed.
40

The need for greater worker involvement in
decisions in enterprises, not to speak of more
information sharing and consultation, is increasingly
appreciated.
There are substantial increases in investment in

Asia from both within and outside the region, and it is
a fact that Asia is a heterogeneous region
characterized by ethnic, cultural, linguistic and
religious diversity.
41
As a result many managements, employees and
unions have to deal with people from different
backgrounds and cultures. Therefore, cross cultural
management issues are assuming substantial
importance in the region.
Several aspects of wages and remuneration
have surfaced as major concerns. Many employers are
worried with the effects of minimum wage increases
on competitiveness if there is no compensating
increase in productivity.
42

Governments are concerned with the possible
effects of minimum wage increases on employment
generation. Nevertheless, both governments and
unions see minimum wage as a safety net measure to
uplift those living below the poverty line, and also as a
way of raising the living standards.
The countries in transition to a market

economy are finding establishing labour law
framework is not enough.
43

It is also essential to develop an industrial
relations system which would be conducive to a
smooth transition.
The question of industrial relations in the public

sector especially in the public service has assumed
importance. In many cases their bargaining rights, for
instance, are less than those of private sector
employees.

44

The changing patterns of work (e.g. more
homework, part time workers, sub-contracting) have
created alarms for unions in particular. Employment
security, social security, minimum wages, and
conditions of work are some of the areas of concerns
in relation to them.
The employers are looking to HRM as a way of
enhancing enterprise performance & competitiveness,
this will have important consequences for traditional
industrial relations / unions.
45
These developments are leading all three actors in the

industrial relations system to view labour relations
from a more strategic perspective. It is also leading to
a blurring of the distinction between industrial
relations and human resource management.
The latter is increasingly seen by employers as

requiring a shift from traditional personnel and
welfare functions to a more strategic role, though they
have a long way to go to achieve this objective.

46
The second National Commission on Labour 2002 has

recorded the following observations about the
industrial scenario in India:-
It is increasingly noticed that trade unions do
not normally give a call for strike because they are
afraid that a strike may lead to the closure of the unit.
Service sector workers feel they have become

outsiders and are becoming increasingly disinterested
in trade union activities.
47
There is a trend to resolve major disputes

through negotiations at bipartite level. The nature of
disputes or demands is changing. Instead of
demanding higher wages, allowances or facilities,
trade unions now demand job security and are even
willing to accept wage cuts or wage freezes in return
for job protection.
Disputes relating to non-payment of wages or

separation benefits are on the rise.

48
The attitude of the Government, especially of

the Central Government, towards workers and
employers seems to have undergone a change. Now,
permissions for closure, retrenchment are more easily
granted.
The conciliation machinery is more eager to

consider problems of employers and today consider
issues like increase in productivity, cost reduction,
financial difficulties of the employer, competition,
market fluctuations etc.
49
They are also not too serious in implementing
the awards of labour courts awarded long back after
protracted litigation against employers wherein
reinstatement or regularization of workers was
required.
The industrial relations machinery is not
pursuing seriously the recovery proceedings against
employers who could not pay heavy dues to workers,
if the financial position of the employer is very bad.
The labour adjudication machinery is more
willing to entertain the concerns of the industry
50
The recent developments in the field of industrial

relations are basically related to
1. Structural changes;
2. Outsourcing;
3. Mergers, acquisitions and amalgamations;
4. Globalization, privatization and liberalization,
5. Decline in trade unionism and collective
bargaining.

51
1. Structural changes
Under the impact of restructuring process, the large-

sized firms are downsizing their activities and shifting
their production to other smaller allied units.
As such, the employment in the organized sector is

shrinking.
The major share of additional employment is being

generated in the unorganized sector than in the
organized sector.
52
The restructuring process, production reorganization,
and technology changes / up gradation have made the
problems of unemployment of labour more
widespread and acute. The traditional industrial
relations system and its institutions and practices were
most suited to the tasks of protecting and promoting
the interests of workers with secure permanent
employment. The challenge for the industrial relations
system lies in whether the new system can provide for
any alternative to the traditional system.
53
The focus of industrial relations has shifted from the
region / industry level to the enterprise or even plant
level.
In the new production context, the large-sized firms

have declined and small and medium-sized firms have
increased. Most of these firms remain beyond the
purview of labour legislation. The organizations of
labour in these scattered units are weak and
ineffective.
54
New information and manufacturing technologies
have become available and the pace of structural
reforms has increased. Economic performance has
been a major problem in many countries in recent
years. These changes have lead to an urgent need for a
change in the fabric of industrial relations (Kochan and
Verma, 1989). Some scholars feel that the state of the
economy is major factor explaining the changes taking
place in industrial relations (Allen and Keany, 1983).

55
The foremost issue for the industrial

relations system in India is that it has
come under pressure to adapt to the
new environment that has emerged
after the introduction of structural
changes envisaged under economic
reforms.

56
2. Outsourcing
Production reorganization or decentralized production
has made organized sector employment more thinner.
The large-sized units shifted to flatter structures and
opted for decentralized decision making. These units
reorganized their production by trimming their size
and carrying out production in multiple units or by
externalizing their production, i.e. concentrating on
core activities with higher value addition, and
subcontracting the other work / production to allied
ancillary units.
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2. Outsourcing
These measures of economic reforms have distinctly

affected the industrial relations system in the country
as it has limited its institutions and practices to the
formal organized sector in the large sized units. As
such the system has come under pressure to adjust
and adapt to the challenges of growth of small and
medium units, and shift its focus in favour of
unorganized sector.

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2. Outsourcing
In a decentralized sector of small and medium sized

units and the enterprises in the services sector and
high tech segment there is a wide differential in wage
determination and benefits across the industries.
Along with the wide dispersion of wages and other
benefits, a new feature of this decentralized sector is
the unemployment / job insecurity.
The trend is towards increasing casualization of labour.

59
3. Mergers, acquisitions and amalgamations
The concept of mergers and acquisitions is very much
popular in the current economic scenario. More so, it is
a significantly popular concept after 1990s in India on
the birth of economic liberalization and globalization.
The basic premises for mergers and acquisitions is
consolidation process of existing undertakings; large
groups absorbing the small entities.
In absorption one or more existing companies goes unto

liquidation, i.e. Another existing company takes over
business of liquidated companies.
60
An acquisition arises when there is a purchase by one
company of the whole or a part of the shares or assets
of another company in consideration for payment in
cash or by issue of shares or other securities in the
acquiring company or partly in one form and partly in
the other.
The process of amalgamation is the result of

agreement and contract between the transferor and
transferee company.
61
In amalgamation two or more existing companies go
into liquidation and a new company is formed to take
over their business. Amalgamations are the result of
takeover either hostile or friendly. The takeover may
result into merger of two entities or two entities may
exist independently under the same management.
A series of personnel problems normally occur when
one company acquires another. People aspect is very
important in the process acquisition.
62
The communications framework is the most important
factor for smooth integration in acquisition. With
effective communication, the acquiring company can
develop a climate of confidence and, hopefully
eliminate much of the friction, which frequently
occurs.
Good communication is essential part of good human
relations. The labour relations considerations when
one company acquires another are many.
63
They include
1. union relations history,

2. representation of employees in unions,
3. history of work stoppages,
4. strikes and lockouts,
5. grievance settlement, and
6. collective bargaining and signing of agreements
and settlements.
64
4. Globalization, privatization and liberalization
Globalization and technological changes proved
disruptive for the system in terms of displacement of
labour, i.e. job losses, destabilizing the wage structure
and a shift in skill / occupation and composition of
labour.
In the process of globalization the power of trade
unions as measured by trade-union density, has
declined almost everywhere around the world, in
developing as well as developed countries.
65
Evidently, some other factors have contributed to the
evolution of trade union membership such as the
demise of state socialism in Central and Eastern
Europe, the process of economic restructuring and the
shift from manufacturing to service employment.
Nevertheless, globalization as such has an impact on
labour and labour relations, which has contributed
considerably to the significant decline of trade-union
density in general. Only some developing countries
have benefited from globalization.
66
In many countries, including the advanced economies,
income inequality and poverty have grown
considerably.
Privatization is one of the major elements of structural

adjustment process taking place in different parts of
the world. It involves complex social and labour issues,
and apprehensions about potential loss of present and
future jobs. However, there is not enough evidence to
suggest that privatization per se destroys jobs.
67
The trade unions are concerned about privatization
because of its potential adverse effects on dynamics of
trade unions and their rights.
Winds of liberalization is blowing hard over Indian

corporate sector. This sector is undergoing a process of
restructuring to gain competitive strength. But to
achieve this goal , unrestricted mergers and takeovers
may prove counter-productive.

68
5. Decline in trade unionism and collective bargaining.
The role and importance of trade unions have declined
in the most countries. The structural changes in the
economy and accompanying changes in the workforce,
the emergence of non-union enterprises, employer
aggressiveness, falling employment particularly in
the public sector, increase in part time and casual
workers, the changing gender composition of the
workforce and the management endeavors to reduce
the labour costs have generally been described as the
factors responsible.
69
In some countries, organizations have pursued union
avoidance and union busting activities. Moreover, the
nature of the workforce is becoming heterogeneous.
The slow response of the unions to the fast changing
environment has been a factor in their decline.
There are ten identifiable major reasons for the

declining power and influence of trade unions in India.
They are enumerated next.

70
decreasing relevance of unions to their own
members due to their inability or reluctance to change
and adapt to the changes in the world of work,
workplaces, workforce, and society.
inability of workers to organize themselves.
leader-centric rather than mass-based nature of

most unions.

71
relatively small size of the majority of
enterprises (union density across the world is low in
smaller companies as compared to large companies
employing 1,000 or more).
fragmentation in terms of class, category, caste,
region, ideology, and so on..
lack of internal democracy in unions and

consequent non-involvement of the rank and file in
union activity.
72
excessive dependence of unions for their
survival and functioning on either or both the state
and employer.
decreasing social relevance of union activities to
the wider public.
tilt in balance of power due to technology
(which is becoming increasingly less labour intensive)
and shift from a planned to a neoliberal market
economy (and consequent shift from labour friendly to
investor friendly policies).
Negative public image of unions.
73
The decline in the role of the trade unions has led to a
simultaneous decline in collective bargaining. The
growth of non-union enterprise, cooperation of
management outside the traditional area of collective
bargaining and the growth of management
aggressiveness in labour relations have also affected
union activity.
Management strategy now provides greater emphasis to
human resource policies. This has been another factor
contributing to the decline of collective bargaining.
74
The economic crisis of the 1980s brought about a slow

attitudinal change in unions and management. There
were instances of unions taking into account the
health of the enterprise in determining their actions.
For instance, American auto and airline unions
engaged in concession bargaining with employers.
They agreed to lower wages in order to make
companies more competitive.
This has been aided by more transparent reporting by

management to unions.
75
In some cases companies also invited union

representative to sit on the Board of Directors.
Employees were also provided with shares in the
company of their employment.
Under changed economic scenario, the role of the

trade unions needs a drastic change. Trade unions
have to realize that their objective is to not only
protect interest of workmen but also interests of the
organization. They have to develop a positive and
participative work culture.
76
Unions can play a developmental role by:-
building human resource management
philosophy, values and practices in trade unions as an
integral part of human resource development.
providing workers with right information
regarding role of trade unions in an organization by
explaining mission and plans of the organization.
redefining trade union role as one of the
developmental rather than a protest institution in the
organization.
77
Unions can play a developmental role by:-
establishing linkages between union and
different groups through human resource
development.
helping management in identifying areas of
manpower rationalization, productivity enhancement,
cutting down wasteful expenditure and improvement
of quality and service.
counseling or guidance of workers on their
social problems.
78
Unions can play a developmental role
by:-
Cooperating with management for
the survival of the organization under
competitive environment.
assisting the family members in
vocational guidance like childrens
education, career growth, and financial
investment.
79
There has been a shift in the nature of the workforce
in Industry. The labour force in many industrialized
countries is now well educated and no longer satisfied
with merely meeting first order needs. There have also
been structural changes in the work force.
Female participation rates have increased in many
countries. So too has the number casual and part time
workers.
There has been a resurgence of home work and of
other forms of self employment. Thus, an increasing
number of workers are outside the typical contract of
employment.
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There has been a reduction in the labour force in
manufacturing with a simultaneous increase in
services. The blue collar workers of 1970s and earlier
decades have been giving way to white collar workers.
There has developed a new configuration of industries
within manufacturing with the growth of micro-
electronics, consumer and capital goods and a
simultaneous fall in textiles, steel and heavy
engineering.
Ascendancy in managerial rights and the weakening of
trade unions gave greater flexibility to management of
labour and in handling industrial conflict.
81
To sum up, some of the changes / issues which are
going to affect workplace and industrial relations of
tomorrow are:-
New industries with new

technology vastly Change in production
different from the past. technology - JIT, TOM, etc.
Excess capacities
and acquisitions.
82
Privatization of public
sector undertakings.

83
The role of the state in industrial relations is
determined by its political, ideological and socio-
economic orientation. The role varies depending on
the stage and level of development and the strategy of
industrialization. In the latest phase of
industrialization, the state is adopting a neo-liberal
policy. The dominant model is that of market economy
where the state will let the market forces take charge.
Are there some core eternal values and principles

concerning the role of the state in industrial relations?

84
A good industrial relation system is one that
a) Harmonizes economic growth with social
justice.
b) Ensures observance of labour standards.
c) Is change friendly; and
d) Promotes a culture of non-interference by one
party into affairs of another.
The state should facilitate the factors and processes
that ensure the effectiveness of industrial relations
institutions and employment practices that fit into the
different cultural settings of developing nations.
85
Sound labour management relations require building
trust and cooperation through bipartite and tripartite
dialogue. The relationship between the state and
multinational co-operations is often caught between
different historical paradigms liberal, neo-liberal, and
neo- imperial traditions.
One of the more complex issues involving the interface
between government and industrial relations is
centre-state relations and the relative distribution of
power and authority regarding policy making,
legislation, and enforcement of labour laws.
86
In our federal set up, competition between states
results in pluralism and diversity, which sometimes,
can become counter productive and unhealthy in
terms of maintaining basic labour standards across the
country.
In future, the role of state will increasingly come under
scrutiny not only by social partners at the national
level, but by pressure groups at the regional and
international levels. In civil society, the role of state
will come under heavy scrutiny challenging, perhaps,
that the state does not act in public interest.
Chapter 14 Governance will
Industrial Relations in Changing remain a
Environment
challenging issue. 87
The Indian trade union movement has come of age.
What began as a fragmented protest against low
wages and oppression by employers, has gradually
evolved into a large and impressive movement with a
distinct place of its own in the national scene.
The saga of Indian trade union movement is one of

perseverance against many odds, towards stability and
strength. There was a time when trade unions were
regarded as instruments of class war; later, these were
regarded as agencies for collective bargaining.

88
In the present, trade unions have outgrown these
restrictive definitions through a gradual expansion of
their functions. A trade union is now essentially a
social organization looking after all the round interest
of workers as a social group.
In the new era, trade unions cannot be said to be
effective merely by playing a negative role of criticizing
and condemning employers and the government. They
have also to play the positive role of sharing in the
developing of industries and of preparing and training
workers to discharge their duties as citizens.
89
Trade unions have emerged from society. Hence,
though this emergence was the result of special
circumstances and their character was essentially as
pressure organizations, their interest could never be
contradictory to or, at the cost of community interest.
To the extent that the trade unions succeed in

effecting an improvement in the economic conditions
of the members, they are serving the cause of
community at large.
However, that is not enough.

90
Trade unions have a far more complex and diverse role
to play in several areas as an organized pressure
group, to bring about positive changes in the fabric of
society. In the ultimate analysis, there is a basic
commonality of interest between that of trade unions
and that of industry.
The prosperity of workers of an industry is directly
related to the prosperity of the industry; therefore, it
is as vital to the trade unions as to the employers that
the industry is nourished and developed.

91
Thus, higher productivity and adherence to work
ethics are principles that need to be taken seriously by
trade unions. Wastage in production needs to be
discouraged, technological advances will have to be
tackled skillfully in order to guard the interests of the
members, consistently with the need for
development.
Trade unions have often been accused, not without
some justification, of holding the general public to
ransom by their tactics of confrontation in basic
service industries and public utilities.
92
Strikes by teachers, doctors, hospital employees,
postal employees, water supply employees, transport
workers and so on put the community to endless
inconvenience which serves to alienate the trade
union cause in the eyes of society.
The issue at stake is not the legitimacy of the cause of
the striking workers, but whether, trade unions have
some obligations to general public, and their normal
role is consistent with community interest. Perhaps, if
the public is taken into confidence regarding the
problems of these groups, public sympathy could
provide more weightage to the unions cause.
93
The media could be used effectively to mobilize public
opinion so that it may exert pressure on behalf of
unions to get legitimate demands of workers
redressed in essential industries.
The growing consumer movement in our country poses

a new responsibility on trade unions as guardians of
social welfare and protectors of consumer interests. As
producers of consumer goods, the workers have a moral
responsibility to see that the goods and services
produced by them are of good quality. Workers are also
consumers hence their interests are congruent.
94
The issue of environment is a global issue now and
here again the trade union has a crucial role to play in
creating awareness among its members about
protecting environment. Good housekeeping in the
work environment, treatment of industrial wastes and
effluents, monitoring air pollution by the unit, all need
to be taken seriously by the trade unions from the
point of view of community welfare.
Trade unions must give their whole hearted
cooperation in every voluntary effort, besides their
own, that promotes environmental cleanliness and
safety.
95
Trade unions have traditionally viewed themselves
more as economic and industrial organizations rather
than educational, cultural and welfare institutions. It is
in the interest of trade unions to extend their scope of
activities beyond the workplace and look into
betterment of social and educational problems of the
workers.
This participation of unions in community services

would result in four major contributions to the
strengthening of unions on long term basis.

96
It would:-
a. Strengthen the membership base of unions.
b. Provide much needed benefits to members by
granting access to various welfare amenities.
c. Provide opportunities to union leaders to be
community leaders.
d. Result in favourable public opinion about the
unions.
Family welfare is one more area that offers

tremendous scope for unions in this direction.
97
Trade unions need to develop new strategies and
competencies to initiate new membership and
organizational drives. They should focus on managing
expectations of the successive new generations of
employees. There is a need for greater
democratization in the functioning of trade unions.
Trade unions in the country are faced with a dilemma

that is typical of increasing industrialization in any
developing economy. They are torn between conflicting
objectives like improvement of wages versus capital
formation or strike versus production.
98
Some more conflicting objectives are

grievances versus acceptance of discipline, and
organizational prestige versus political
subservience.
However, the basic truth remains that the

trade unions themselves have a great stake in
rapid economic development since that alone
can create a basis for their growth and
strength.

99
The role of trade unions should be as follows:-
Shared commitment to the success of business.

Employment security for workers and workforce
flexibility coupled with appropriate training.
An emphasis on quality of life.
Informing and consulting employees.
Employee representation at different levels.
Sharing of organizational success.

100
The unorganized sector accounts for over 92% of the
376 million strong workforce in India. Unorganized
labour exists mainly in agriculture, construction, small
scale manufacturing industries, trade, transport,
financial and personal services.
Unorganized workers find it difficult to form or join a
trade union of their choice due to various reasons. Job
security, income security and social security are still
elusive for the majority of them.
Most of our labour laws do not cover unorganized
labour.
101
Even the few laws that are meant to extend coverage
and protection to unorganized labour, often fail to do
so due the inherent deficiencies in those laws and the
weakness in enforcement.
Of late, there has been a growing concern about the

plight of unorganized labour in the informal sector.
The Second National Commission on Labour (2002) has

issued specific proposals for an umbrella legislation to
cover workers in the unorganized sector

102
It has suggested setting up of workers boards at
grassroots level for the unorganized sector to ensure
their minimum wages, legal protection and social
security. The commission also recommended that the
social security measures for unorganized sector should
include :-
a) Healthcare
b) Maternity and child care
c) Provident fund benefits.
d) Family benefits including pension; and
e) Safety at work place.
103
Some major shifts in industrial relations are:-
In the past, organizations have focused
on growing bigger and better. Today,
increasing international competition and
the rapid pace of technological change
are favouring organizations to become
lean, faster and flexible.
New technologies have, in several cases,
reduced the difference between blue and
white collar workers. The proportion of
white collar workers is increasing among
the full time regular employees in the
organized sector.
104
Over the past fifteen years, there has
been a steep increase in the contract
labour system and casualization of labour
which has put workers to a greater
disadvantage as compared to the regular
full time employees.
In the sphere of work organization and

workplace governance, the focus is
shifting towards managing work rather
than managing the worker

105
In the sphere of worker involvement and

participation, the major shift is in terms
of a clear preference for the employees
direct participation rather than
representative participation.
In collective bargaining some of the shifts

include; a) centralization to de-
centralization, b) collective to individual
contracts, c)parity to disparity, d)
assertion of managerial rights than the
rights of the workers.
106
Trade union membership in traditional

industries is declining; but at the same
time organizing new membership in
newer high tech industries raises special
problems.
Consumers, the community and the

judiciary have emerged as new actors in
the field of industrial relations.

107
The dynamic change process introduced under
economic reforms warrant a fresh look at the
institutional and legal framework as also the role of
the principal players in the system.
It is also true that the successful introduction and

implementation of the economic reform policies in the
country depends to a large extent upon their impact
on and moderation by three players management,
workers and government- in the industrial relations
system.

108
Currently, the industrial relations matters are kept
outside the purview of strategic management in most
organizations. There is a need for the management to
incorporate industrial relations in the overall strategic
organizational framework so as to invoke better
commitment and involvement of workers for the
successful working of the enterprises under
competitive conditions.

109
The workers and their organizations have to come to

realize the futility of protest and agitational approach
and recognize the significance of the cooperative role
to be played with other players in this regard.
One major future challenge in industrial relations

revolves around the changing nature of the labour
force. The changes present a problem to the labour
movement in its attempts to organize workers and to
formulate bargaining demands on quality of work life.

110
The labour movement is also facing the impact of

automation and changing demand patterns as the nation
moves towards a service oriented economy.
Such forces on one hand have

i) reduced the number of blue collar, semiskilled and
unskilled workers and on the other
ii) increased the number of white collar, technical

and professional employees.
111
The labour movement must devise organizing and
bargaining strategies that appeal to these new
expanding groups. So far unions have generally been
unsuccessful in this endeavour.
Additionally, the labour movement has to face growing
management opposition to the unions and collective
bargaining.
To remain competitive in domestic and international
markets, many firms are taking actions that will either
reduce union influence at the workplace or even
eliminate the need to deal with a union.
112
It is not possible to formulate a single ideal model of

industrial relations which will be conducive to economic
growth process and yet suitably safeguard the interests
of working population.
However, the functioning of industrial relations system

should be closely related to the extent to which the two
performers management and labour come to terms
with compulsions of economic realities under dynamic
changes.

113
Both the parties have to interact with full awareness
that they have equally vital stakes in the survival and
further progress of industrial enterprises.
The industrial relations system may have to transform
itself and adapt its institutions and practices to cope
up with the challenges of newly emerging institutions,
workforce and technology. The industrial relations
must address itself to the problems of workers facing
these challenges on one hand, problems of large
number of workers in growing unorganized / service
sector.
114
The effect of poor employee relations is the difficulty
in the introduction of change in the organization,
change in the methods and change of technology. It is
a well known phenomenon that in any situation there
is a tendency among people to resist the change.
The merits of the change come only later on; the initial
response to change is normally one of resistance. This
resistance can be overcome relatively easily only if
employee relations are very good.
In a situation of poor employee relations, change is
extremely difficult to introduce.
115
The systems approach to industrial relations should
contribute to the long-term well-being of the
organization, its employees, consumers and the
community. Indicators of a sound industrial relations
system should be developed through benchmarking
best practices in terms of human development and
competitiveness.
These include education, skills, safety and health,
organizational climate, employee satisfaction indices,
productivity, service quality, unit labour costs,
exceeding customer expectations and industrial
harmony.
116
14.14 Summary
1. Industrial relations in India, as elsewhere, are in a
state of transition due to a variety changes
occurring at a rapid pace.
2. The structural changes taking place in the economy
since the middle of 1991 brought to the fore the
need to adjust labour policy in line with the
changes in the industrial policies.
3. This apart, the liberalization and deregulation,
privatization, encouragement to multi-nationals,
new technologies and return to market economy
have profound implications for labour
management relations.
117
14.14 Summary
4. The emerging issues and current developments
which have a considerable impact on industrial
relations are cross-cultural issues, structural
changes in the organizations, outsourcing, mergers
and acquisitions, globalization, decline in trade
unionism and collective bargaining and emergence
of white collar and knowledge workers.
5. The future challenge in industrial relations revolves
around the changing nature of the labour force,
changing role of the trade unions and changing
role of the Government.
118
14.15 Self Assessment Questions
1. What are some of the cross-cultural issues in an

employee relations setting?
2. What are the recent developments in industrial
relations in India?
3. Employee relations in future will be both
competitive and cooperative. Discuss.

119
With this we come to an end of this session on
Industrial Relations in Changing Environment

Chapter 14
Good Luck !
120

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Chapter 14

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INDUSTRIAL RELATIONS

Chapter 14 Industrial Relations in

After going through this session you will be able to

The cultural Issues in Industrial Relations

Chapter 14 Industrial Relations in Changing Environment

14.1 Cultural Issues

14.3 Strategic Industrial Relations

14.4 New Perspectives of 1990s

14.5 Industrial Relations Concerns

14.6 Industrial Relations Scenario

14.8 Changing Nature of the Labour Force

In particular, industrial relations will need to respond

Of course, what the new social realities will be is

Chapter 14 Industrial Relations in Changing Environment

It has been an accepted fact that the

Chapter 14 Industrial Relations in Changing Environment

Chapter 14 Industrial Relations in Changing Environment

At the macro or national level, the differences in the

Here the participative fora like the works council seem

Viewed from a historical perspective, the concept of

It was the unstinted support of government through

3 The decline in the number of skill workers and

Since industrial relations is particularly concerned with

Hence, the management has to make a fundamental

Managing without unions is one approach which some

In the context of non-unionism, the following policy

1 Management will take the initiative in

2 Management will accept the freedom of

Chapter 14 Industrial Relations in Changing Environment

3 Management will take all necessary steps to

1 Corporate management determines the overall

2 Strategic thinking is a pre-requisite for

3 Top management have some choice in the

4 The choice of employee relations strategies and

5 There should be a direct relationship between

Chapter 14 Industrial Relations in Changing Environment

a Liberal individualism and neo laissez faire.

The advent of conservative governments and product-

Chapter 14 Industrial Relations in Changing Environment

1 That economic conflicts of interest should be

2 That collective relationships between trade

4 That once the employment contract is

a Liberal individualism and neo laissez faire.

5 That any combination by trade unions or

6 That it is best for individuals, in a free society, to

Chapter 14 Industrial Relations in Changing Environment

8 That there should be no intervention by the

9 That there should be deregulation of labour

a Liberal individualism and neo laissez faire.

10 That there should be privatization of many

11 That there should be contracting out of local

Chapter 14 Industrial Relations in Changing Environment

Modernism refers to the era in which factory system

Post modernism is the new concept which took birth

It embraces the notion that advanced capitalist

More specifically, the post modernism represents a

1. Knowledge work against skill work.

Some of the current industrial relations concerns are:

Even in countries in which major decisions in

Some of the current industrial relations concerns are:

The higher levels of education and skills,

Some of the current industrial relations concerns are:

There are substantial increases in investment in

Some of the current industrial relations concerns are: