Employment Relations in India

5TH EDITION

INTERNATIONAL
& COMPARATIVE
EMPLOYMENT RELATIONS Edited by Greg J Bamber,
Globalisation and change Russell D Lansbury and Nick Wailes

CHAPTER 13
Employment Relations in India
C. S. Venkata Ratnam and Anil Verma

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

International & Comparative Edited by Greg J Bamber,
Employment Relations 5th edition Russell D Lansbury & Nick Wailes

Lecture outline
• Key themes
• Context
• The actors
• Representation in Indian industrial relations
• Agreement making
• Economic context for reforms
• Current issues in employment
• Labour law reform
• Conclusions

Chapter 13:
2 India
Copyright Allen & Unwin, 2011


Key themes
• Major economic reforms in the 1990s paved the way for high
economic growth in India and involved the considerable liberalisation
of the expansive labour laws.
• There is a large rural sector and a large ‘informal’ sector in which
unions and collective bargaining are rare.
• Trade union membership overall is low but membership and collective
bargaining coverage is higher in the public sector and large
enterprises.
• There are weak laws regarding trade union recognition and
representation and poor enforcement of labour laws and collective
agreement provisions.
• Current concerns include lack of protection for workers who have
been made worse-off by the market-based labour reforms, poor
growth prospects in key parts of the labour market, high rates of
contract and casual workers, increasing downsizing and a low-value
Chapter 13: IT sector.
added
3 India


Context
• The Indian industrial relations system is rooted in British
common law.
• The IR system also reflects India’s diverse population.
• The unionisation rate is low at 5% of the total workforce due in
part to large rural and informal sectors, which are not
unionised.
• Most unions are concentrated in large enterprises and
government-related sectors.
• After slow development during most of the 20th century,
economic growth has been high since the mid-1990s.
• Indian labour laws were liberalised as part of a broader
deregulation program in the 1990s, changing what was one of
the most protective labour law regimes in the world.
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Trade unions in India 1
• Trade union movement emerged between 1850-1870 with the
emergence of early manufacturing in textiles, jute and light
engineering.
• The first national federation of trade unions, All India Trade
Union Congress (AITUC), was established in 1920 to fight colonial
rule and capitalism.
• The movement split into three major federations around the
time of independence from Britain in 1947: AITUC, the Indian
National Trade Union Congress (INTUC), and Hind Mazdoor
Sabha (HMS).
• Unions are closely affiliated with political parties. The number of
unions proliferated as more regional political parties emerged
after general election in 1967, some of which set up their own
trade union wing.
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5 India


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


The Indian Constitution and freedom of association
• The right to belong or not to belong to a union is guaranteed in the
Indian Constitution (Article 19(c)).
• It is not compulsory for a worker to join a union, but it is
unconstitutional to prevent them from joining one.
• Trade union registration and recognition are not compulsory.
• In order to stop the proliferation of unions, the Trade Union Act
1926 was amended in 2001 to require that 10% of workers or 100
workers (whichever is less) at an establishment be members for
registering a union. 7 people are required to form an unregistered
union.
• The law is silent on whether unions are formed along craft,
employment category or other lines.
• Trade unions can pursue economic, political, social and welfare
7
objectives and can raise and maintain political funds.
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India Copyright Allen & Unwin, 2011


Trade unions and politics
• The trade union movement is closely linked with political parties, as
historically unions played a major role in the struggle against colonial rule.
Some leaders of the freedom struggle were also leaders of the trade union
movement.
• Following independence, this association resulted in welfare-state and
socialist policies involving the nationalisation of critical industries combined
with investments in large-scale public enterprises.
• The close association between unions and political parties has assured
politicians of votes from the working classes and enabled unions to better
defend their members’ interests. But the association also creates problems:
divisions in political parties lead to divisions in unions; industrial relations
issues become political issues in conflicts between state and central
governments of different persuasions; and recently, unions have also
struggled with their associated political parties adopting neoliberal policies in
order to encourage investment and competition as these policies tend to be
detrimental for workers.
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8 India


National trade union centres
• Any union with a minimum of 500 000 members spread over
at least four industries and four states will be recognised as a
national trade union centre.
• There are five centres in India which fulfil this criterion:
– the All India Trade Union Congress (AITUC)
– Bharatiya Mazdoor Sangh (BMS)
– Hind Mazdoor Sabha (HMS)
– the Centre of Indian Trade Unions (CITU)
– the Indian National Trade Union Congress (INTUC)
• There are at least 7 other national unions which the
government consults with.

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Enterprise-level unions
• There are two kinds of enterprise-level unions: those
affiliated to national centres and those without any
affiliation to political parties.
• In some large organisations/enterprises, there are over a
hundred trade unions.
• Trade unions based on craft, occupational or employment
category, and caste are not uncommon in India.
• Within an enterprise there can be separate unions for
workers (on the shopfloor), staff (attendants, drivers, clerks,
typists etc), supervisory staff and executives/officers.

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


Representation 1
• Employers’ organisations in India play two representative
roles:
1. They nominate representatives of employers in voluntary or
statutory bodies set up to determine wages and conditions of
employment in a particular industry or sector and for consultation
on social and labour matters in the national and global context.
2. They seek to redress the grievances of employers against legislative
or other measures by making submissions to the authorities
concerned.
• Employers’ associations also represent interests of
employers in various committees and institutions, bipartite
and tripartite fora, and serve as a forum for information
sharing, policy formulation and consensus building on
strategic issues.
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12 India


Non-union firms
Representation 2
• In contrast to the past, it has been increasingly common since the
1990s to find establishments with no union presence, for instance, in
software companies and in several car manufacturers.
• Employers have adopted union-avoidance tactics such as the use of
greenfield sites (which have high capital investment and technology
and lower labour intensity), offering above-average wages and
conditions, and asking employees to participate in anti-union activities

Collective bargaining
• Only about 2% of the total workforce, but over 30% of the workers in
the formal (organised) sector, participates in collective bargaining.
• In the public sector and the largest public and private sector
enterprises the figure is 70% or more.
• Legislation encourages government adjudication of disputes.
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13 India


Representation 3
Historical context for industrial relations
• At the time of independence, the British gave India a legal framework
aimed primarily at dispute resolution.
• After independence, the Indian government adopted the Soviet
model of planned economic development and sought to achieve a
socialist society.
• Industrial harmony was considered a necessity for state-led
development.
• Several industries were nationalised in the early 1970s, and, during
the Emergency (1975-77), labour law changes restricted employers’
ability to sack workers and close operations that were no longer
viable. Workers’ participation in management was adopted as a
directive principle of state policy.
• Prior to the 1990s reforms, two national commissions on labour had
recommended comprehensive reforms to labour laws.
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14 India


Representation 4
Freedom of Association
• The constitution guarantees the fundamental right to freedom of association.
• The right of collective bargaining is not extended to industrial workers in
government undertakings (e.g. railways, post, telecommunications).
Compensation for these workers is based on recommendations of pay
commissions appointed periodically by the government.
• National labour laws do not mandate employers to either recognise unions or
engage in collective bargaining, but some states have provisions recognising
trade unions.
• India has not ratified some ILO conventions concerning Right of Association.
Determination of a collective bargaining agent
• Determining a collective bargaining agent has been a controversial issue
historically.
• Some states have measures for recognising unions as agents in bargaining, for
example: a Code of Discipline which is common in the public sector; secret
ballots; a check-off system; and membership verification.
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Representation 5
Collective agreements and disputes
• An agreement with one trade union is not binding on members of other
unions unless arrived at during conciliation proceedings.
• This means that even if one union has an agreement, other unions can raise
an industrial dispute with an employer.
• A collective agreement is binding only for the workers who have negotiated
and signed the agreement, but a written settlement arrived at in the course of
conciliation proceedings is binding not only on the actual parties to the
industrial dispute but also on the heirs, successors or assignees of the
employer and all the present or future workers in the establishment.
• Under the Industrial Disputes Act, disputes can be settled with or without
recourse to the government conciliation machinery. Arbitration or
adjudication follows failed conciliation.
• An ‘award’ can be an interim or final determination of an industrial dispute by
a Labour Court, Industrial Tribunal, National Industrial Tribunal or an
arbitrator. Awards are legally enforceable instruments.
• Collective bargaining is rare in the informal sector.
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16 India


Representation 6
Unfair labour practices
• The Industrial Disputes Act defines the following as
unfair labour practices:
– refusal by the employer to bargain collectively in good faith with
recognised trade unions,
– refusal by a union to bargain in good faith with the employer
– workers and trade unions engaging in coercive activities against
certification of a bargaining representative
• Breaching an industrial ‘settlement’ is punishable under
law.
• Employers use many tactics to undermine unions,
actions which are illegal but go largely unprosecuted.

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17 India


Levels of bargaining and agreements 1
National-level agreements
• Prior to the 1970s, wage boards appointed periodically by the
government set wages and conditions in some industries.
• From the 1970s, sectoral bargaining at the national level was
prevalent mainly in government-dominated industries (e.g.
banking and coal) as well as steel, ports and docks. This is
largely still the case today.
• In pay determination, civil servants’ pay provides the
benchmark for the rest of the public sector, and public sector
pay is then the benchmark for unionised private sector
workers where collective bargaining tends to be more
adversarial and contentious.
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18 India


Firm/plant-level agreements
• While employers generally prefer bargaining at the plant
level, unions press for bargaining at higher levels to increase
their bargaining power.
Duration of agreements
• Duration of collective agreements increased during the
1970s and 80s, and again in the 1990s in the public sector.
Since 1997, the duration of public sector agreements has
been ten years.
• Most private sector collective agreements typically last for
three years. Public sector agreements can have a much
longer duration.
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19 India


Collective bargaining in practice
• In practice, most unions are highly politicised and the
government wields enormous discretionary power without the
commensurate responsibility.
• This leads to poor enforcement of the law and collective
agreement provisions, and frequently unions are co-opted into
the collective bargaining crisis by the government or by
management.
• As a result, union members do not have confidence in their union
or its ideology and do not hesitate to change unions. Workers
can choose a union to represent them without belonging to it,
can enjoy the benefit of collective bargaining without joining a
union, and unions can have collective bargaining rights without
workers’ support.
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20 India


Economic context for reforms
• There has been a paradigm shift to neoliberalism since the 1990s, with
emphasis on economic growth and foreign investment over labour
protection.
• While India was a major economic force in the 17th century, and under
British rule developed textiles, steel, engineering and other industries, it
followed import substitution policies in the 1970s and did not partake in
economic development at the same time as other Asian economies.
• However, the information revolution in the 1980s afforded new
opportunities for economic development.
• In the last two decades, India has integrated significantly with the global
economy, but the majority of Indians remain poor.
• The country has achieved unprecedented GDP growth rates since the mid-
2000s and is improving its standing in global economic, competitiveness
and investment-attractiveness rankings.
• Education levels are poor and the government is investing heavily in
vocational skills and education.
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21 India


Current issues in employment 1
• A large majority of the workforce has suffered under the
neoliberal reforms, hence the need for a more interventionist
labour policy.
• There is over-dependence on agriculture and low prospects of
growth in manufacturing and in the organised sector.
• There is high incidence of contract and casual staff, who form
over half to three-quarters of the total workforce in some large
factories.
• There is much less employment in the public sector, which
historically has been an engine of economic growth.
• There is hope for increasing employment levels in the service
sector, but concerns over the low value that is added by IT
professionals compared with other countries.
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22 India


Current issues in employment 2
Search for flexibility
• One of the catchcries of the reform movement since the 1990s has
been for greater flexibility in the labour market.
• Courts and state and national governments have responded to the
need for increased flexibility with various policy measures that also
attempt (often unsuccessfully) to maintain worker protection.
• The Consumer Protection Act 1986 prohibits worker action that
impinges on liberty and normal civic activities of citizens (so city-wide
freedom protests are not allowable if they interrupt normal
activities).
• Similarly, the right to collective bargaining was taken away from
insurance workers in the early 1980s as their agreement with their
employer was found to disadvantage the interests of policy-holders.
• Although some common law cases have also established limits on
industrial action by labour, other decisions have expanded labour
Chapter 13:
rights or their enforcement.
23 India


Agenda for labour law reform
• Most commentators believe further reforms to labour
law are needed to sustain the high growth rate
necessary to pull large segments of society out of
poverty.
• Some of the most significant areas for reform include the
need for:
– fewer laws with better enforcement
– the elimination of multiple definitions across different
legislations
– clear rules for termination of employment
– removing managerial functions from the scope of bargaining
– independent industrial relations dispute-settlement machinery
– skills development funds outside of direct government control
– a tripartite national wages council
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24 India


Conclusions
• Labour policy in India has been too narrowly focused on the 7% of the
labour force employed in the formal/organised sector.
• The challenge for the government is accommodating all workers and
meeting the plurality of needs in the labour market. The government is
faced with the paradox of having to moderate the at times excessive
protection for workers in the formal sector (forming 7% of the labour
force) while enhancing protection for workers in the informal sector
(forming 93% of the labour force).
• Improvements to education and vocational skills training are needed.
• The labour administration and judiciary lack the professional skills and
accountability to match their discretionary powers, so there is a need to
build a cadre of professionals in these areas.
• Improvements to the dispute resolution system also sorely needed.
• Tripartite negotiations on devising policies which achieve flexibility and
job security have stalled, and need to be restarted.
© Allen & Unwin, 2011. These slides are support material for International and Comparative Employment Relations 5th edition. Lecturers using the
book as a set text may freely use these slides in class, and may distribute them to students in their course only. These slides may not be posted on
any university library sites, electronic learning platforms or other channels accessible to other courses, the university at large or the general public.

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