2 – Industrial Relations in India – Employee Relations Management

Chapter Two

Industrial Relations in India

The system of industrial relations in India has evolved since the early part of the twentieth century. The State has played an important part in this evolution, both directly and indirectly. The colonial history, International Labour Organization, economic policies, political movement, etc. have helped shape the industrial relations system in India.


After reading this chapter, you should be able to:

  • Trace the evolution of the system of industrial relations in India
  • Appreciate the context of the ongoing paradigm shift from industrial relations to employee relations
  • Identify the concerns that need to be addressed by employers, unions and the government in the current competitive global environment
  • Have a better understanding of the problems related to labour reforms

From Industrial Relations to Employee Relations

Raman Shenoy has recently taken over as Assistant Vice President (People Engagement) of a large ITES organization in Delhi. The company is the global hub for the management of business processes for clients from across the world. Raman's company employs more than 20,000 people and has won several major awards for employee and customer satisfaction. When queried on how he managed industrial relations or industrial action or trade-union activism in the company, this is what Raman had to say:

“Because of our proactive policies towards employees, we almost do not face any industrial relations issues. Trade unions are non-existent. Most of our employees, because of their excellent compensation, “job content” and working conditions, do not fall within the purview of any labour legislation. Gone are the days of the old-economy companies where you had to deal with unionized employees, industrial action, compliance with labour legislations. In the new economy, we cannot afford to function with the legacies of the old economy.”

A few of the proactive measures towards employee relations that Raman listed out for his organization are:

  • Employee relations SPOCs (single points of contact) are aligned to each process and provide touch points for employees.

  • All issues, grievances and concerns of employees are accorded top priority by respective managers and the ER team.

  • Regular and scheduled one-on-one, skip meetings, both by operations and ER, help to address the issues as soon as possible.

  • Open houses are held for each process once every quarter wherein the top management presents highlights of performance, policies, and answers questions.

  • Reward and recognition is a part of the work life of all employees. Almost every month, R&R schemes are rolled out, offering attractive prizes and gifts for better performance and productivity.

  • There are annual budgets assigned to facilitate critical employee-related activities—ER, R&R, team fund, parties, celebrations, etc.

  • The retention of employees is the key challenge for management. Even employees are aware of this and try to exploit this.

Raman says the above covers the entire range of issues pertaining to employee relations. He says it is a sea change from his previous company, an aluminium-manufacturing company with the legacy “IR system” of management. There is no union to deal with and hardly any regulatory compliance. The state government, in order to ensure that the new industry thrives in a globally competitive environment, is very flexible with granting exemptions if the provision exists in the law. The market forces have ensured that very good care is taken of the employees.

While Raman's experience may not be true across different sectors of the industry, it does indicate the coexistence of totally different frameworks of relationships amongst the players of IR across different industries/regions across the country. On the other extreme, there have been instances where the relationship deteriorated to the extent of widespread and brutal violence. Since the diversification of the economy post 1991, it is but to be expected that the future trends would reflect heterogeneity of workplace contexts. Some parts of the Indian economy are still rural/agricultural, some dominated by traditional manufacturing, while the others comprise high-tech manufacturing and modern service sector1. Is this how relationships will be managed across the organized industries? How is it different from the other periods in our development history? What are the forces and initiatives that have helped shape relationships at the workplace, and have these forces changed over a period of time? Will there be some kind of homogenization in the quality of employer-employee-State relationship shaped by the prevailing economic and social forces? Will the State leave the industries in the organized sector to regulate their own relationships and focus its attention on the unorganized sector? From a colonial past to the Freedom struggle, to the building of a nation and an economy, the industrial relations system has crossed many bends in the road. In this chapter, we trace the journey of the industrial relations system in India to understand the nuances of the current set up, and go on to answer these questions.

“The Indian government considers its responsibility to maintain industrial peace and harmony in order to safeguard the interests of workers and employers. The State has, therefore, assumed powers to regulate labour relations. It has, since Independence, encouraged mutual settlement, collective bargaining, conciliation, voluntary arbitration and adjudication as the principal means of resolving industrial conflicts. It has also recognized trade-union rights of workers and their promotion through democratic means and has intervened through legislative action for enhancing living and working conditions of workers and promoting social security”.2 This statement captures the approach of the State, so far, towards industrial relations in the country since Independence. In going through the chapter, we will familiarize ourselves with the evolution and meaning of the various terms that have been used in the statement. The statement provides a useful reference for examining the mosaic of industrial relations in the country through history, and for creating a platform from which one can attempt to comprehend how the future may unfold.

2.1 The System of Industrial Relations in India

The institutional framework of the industrial relations system in India has been largely influenced by its colonial history. The government's role has been primarily to control industrial conflict; and, hence, has been regulatory and predominated by labour legislations. The legislations provide the preventive machinery that attempts to avoid sources of conflict by prescribing safety, hygiene, occupational-health-related provisions to be ensured by employers in addition to compliance with the specified procedures regarding leave, dismissal and layoffs. The Industrial Disputes Act (1947) puts checks in place relating to layoffs, retrenchments and closures—potential sources of major conflicts. The trade unions have strong political affiliations and have the right to strike, provided due notice (where required) is given. The industrial disputes settlement machinery includes conciliation, arbitration and adjudication. Strikes could be called off if a request for third-party intervention through conciliation officers is sought by either party. The failure to resolve conflicts through either conciliation or mediation may lead to the parties either seeking voluntary arbitration or referring to the government for resolution through compulsory arbitration or adjudication by courts or tribunals. The labour legislations, thus, follow a protectionist philosophy to reduce potential sources of conflict, while the dispute settlement mechanism attempts to resolve conflicts.

Industrial Dispute

Industrial dispute has been defined under the Industrial Disputes Act, 1947. Stated simply, it is a dispute between an employer and (a group of) employees on matters relating to employment or conditions of employment.

The industrial relations policy of India has, by and large, been worker centric, driven by the socialist principles of the economic policy that predominated the post-Independence period till the 1980s. Social security provisions were made mandatory for all employers through provident fund schemes, thereby making them bear some part of the social-policy costs.

Settlement Machinery

Once an industrial dispute arises, the ID Act (1947) has provisions for a three-tier machinery (conciliation, arbitration and adjudication) for the settlement of the dispute.

The industrial policy and import substitution controls provided by the government protected both public- and private-sector firms from international competition. However, this protectionism led to inefficiencies and workforce rigidities, reflected in the preference for employment in public sectors and the government, and reluctance towards labour-displacing technologies, rationalization of labour, labour-cost-control strategies and productivity-based incentive schemes.


Forces Shaping the IR System in India

  • The colonial history

  • The government's role in IR—preventive and regulatory

  • India being a founder member of ILO

  • The political movement for Freedom and labour participation

  • “Worker-centric” State policies

  • The protection of domestic industries—import substitution

  • Multiplicity of TUs and political affiliation of TUs

  • Labour in Concurrent List

The Trade Unions Act of 1926 provided a means to organize labour, and recognized that need of labour organizations by the State. This provided a fillip to the growth of trade unions in the country, more so after Independence. The unionization of the work force, however, has been largely restricted to the organized sector.3 A large number of unions are affiliated to regional or national federations, the major ones being the Indian National Trade Union Congress, the All-India Trade Union Congress, the Centre of Indian Trade Unions, the Indian Workers' Association, and the United Trade Union Congress. These federations, in turn, have affiliations to various political parties. Political affiliations, many times, have led to industrial action in furtherance of larger political goals rather than immediate enterprise or industry-level issues agitating the minds of the workforce. The political affiliation of trade unions led to the multiplicity of unions and leaders, often emerging from outside the labour force.

Sole Bargaining Agent

A provision making it binding for a recognized union alone to bargain on behalf of all employees

With no legal provision requiring a sole bargaining agent, the participatory system of industrial relations that should have emerged, given the above-mentioned practices and a democratic political system, have not yet been strongly established. Labour is in the Concurrent List, which allows different states to enact their own industrial relations laws, required also because of the differing institutional histories of different states. For example, trade unions in Mumbai (Bombay) have historically been quite different in their orientation towards collective bargaining relative to trade unions in comparison to states such as West Bengal, which have a strong CITU influence. The MPIR Act requires a sole bargaining agent and, hence, Madhya Pradesh has had a more successful collective-bargaining practice than other states. In addition, there are also institutional differences across industries.

Some of the basic characteristics of the industrial relations system in India are as follows:

  1. The industrial relations climate is controlled through the regulatory provisions in labour laws and the settlement machinery comprising conciliation officers and boards, voluntary arbitration and labour courts and industrial/national tribunals for adjudication.
  2. The regulation of labour relations by the State has been primarily through legislations that have been greatly influenced by the British labour laws. Though the laws promulgated are extensive, they are confounded with serious ambiguities and gaps such as procedures for the recognition of unions and collective bargaining with the sole bargaining agent or the recognized union.
  3. Indian unions are restricted to the organized sector of industry. Most unions have political affiliations. This has generated multiplicity of unions operating in an industry, which has fostered external leadership rather than encouraging the emergence of leaders from the rank and file of workers.
  4. State intervention has continued to prevail since the time of Independence, although in the last decade, it has shown a declining trend.
  5. There is a marked difference in the labour management relations in different states and also between organized and unorganized sectors, public and private enterprises, multinationals and domestic companies.
  6. There is no national industrial relations policy. The Industrial Relations Bill and the report of the National Commission on Labour were just steps in this direction. Similarly, there is no national wage policy, and also no clear evidence of a pattern in terms of the operation of the industrial relations institutions.
  7. Collective bargaining is more a matter of optional practice with no statutory backing.
  8. The changes brought in by the new economic policy have resulted in changes in the industrial relations structure. The heterogeneity of the emerging workforce has made it difficult to establish standards or uniform IR practices in the Indian industry.

2.1.1 The Role of the State

In a developing country like India, State intervention has been deemed necessary because:

  1. The labour organizations, however numerous, were relatively weak. The relationship has been one of profound distrust and, hence, the government has to play a major role in taking an interventionist role in maintaining industrial relations.
  2. Labour situations, at times, lead to lawlessness, making it necessary for the State to intervene through industrial relations policies, which are likely to ensure social justice and industrial peace.
  3. The federal nature of the constitution has made it imperative for the State to intervene in labour matters to ensure smooth and continuing production. The fact that labour and industrial relations is on the Concurrent List means that the centre has to enact certain laws that are applicable to certain sections of labour throughout the country.
  4. The Directive Principles of the State policy enjoins upon the State to establish a welfare State and to look after the interests of the weakest sections of the society, including the handicapped.

The policy on various aspects of industrial relations has traditionally evolved through a consensual approach involving all the three players—the State, the employers and the employees. Several institutions for tripartite consultations have been created.

2.1.2 The Labour Policy

The labour policy in India has evolved from the needs expressed in the policy objectives in relation to industrial development. Policies and practices have been created, modified and developed on the basis of joint consultations, at different levels, amongst the three players—the employers, the employees and the government. A measure of consensual outcome of these consultations found expression in legislation and other measures of the government. The common denominator of the views of the three parties, in a way, came to represent the national policy on labour and industrial relations, operating on a voluntary basis.

2.1.3 Tripartism in India's Industrial Relations System

Consultations amongst the three actors of industrial relations, namely, the employer, the employee and the State, since the initial years, have been the cornerstone of IR policy in India. To give shape to this element of policy, a number of bodies and fora were created. Every major piece of policy initiative has emerged out of consultations amongst the three parties. The consultative machinery has been operationalized through a large number of tripartite bodies set up by the government to provide a forum to discuss and deliberate upon labour issues, policies and legislations. Notable among these are:

  1. Indian Labour Conference (ILC)
  2. Standing Labour Committee (SLC)
  3. Committee on Conventions
  4. The Industrial Committees

Consultations amongst the three actors of industrial relations namely employer, employee and the State, has since the beginning years, has been a cornerstone of the IR Policy in India. To give shape to this element of policy, a number of bodies and fora were created. ‘Tri-Partism’, therefore, is an important feature of the IR System and Policy in India.

The need and evolution of these tripartite bodies are based on the recommendations of ILO (itself tripartite in nature) and the Royal Commission on Labour (Whitley Commission) in 1931. The rules and procedures of the Indian tripartite consultative machinery are largely in tune with the recommendations of the ILO Committee on Consultation and Cooperation. The Indian Labour Conference (ILC) and Standing Labour Committee (SLC) are the most important constituents of tripartite bodies that play a vital role in shaping the IR system of the country. The representatives of the workers and employers are nominated to these bodies by the central government in consultation with the all-India organization of workers and employers.

The highest tripartite mechanism in the country, the Indian Labour Conference and the Standing Labour Committee, were set up in 1942 “to advise the Government of India on matters brought to its notice”. The objectives set before these two tripartite bodies at the time of their inception were:

  1. to promote uniformity in labour legislation;
  2. to lay down a procedure for the settlement of industrial disputes; and
  3. to discuss all matters of all-India importance as between employers and employees.

The important tri-partite bodies are:

  1. Indian Labour Conference
  2. Standing Labour Committee
  3. Committee on Conventions
  4. Industrial Committees

The union labour minister is the ex-officio chairperson of the ILC and the SLC. The agenda for the ILC and the SLC meeting is finalized by the labour ministry after taking into account all the issues raised before it by the member bodies. The demand that the conference should frame its agenda and have an independent secretariat was not accepted by the government.


India, being a founder member of the ILO, has been influenced in a large measure by the deliberations at the ILO. The Committee on Conventions, a tri-partite body, examines the ILO conventions and recommendations for ratification by India.

According to the National Commission on Labour, these two bodies have immensely contributed to the attainment of the objectives set before them. The tripartite deliberations helped to reach a consensus on the statutory minimum wage fixation (1944), the introduction of health insurance (1945), the enactment of the Employment Standing Order Act, 1946, the Industrial Disputes Act, 1947, Minimum Wages Act, 1948, the Employees' State Insurance Act, 1948, the Employees' Provident Fund Scheme, 1950, and the Employees' Provident Fund Act, 1947, to name a few. The range of subjects discussed at the forums of ILC/SLC has been large ranging from social, economic and administrative matters concerning labour policy. Apart from these, other subjects under their purview include workers' education, workers' participation in management, training within the industry, wage policy, wage boards, the code of discipline, criteria and procedures for the recognition of unions. Though the recommendations of the tripartite bodies are of an advisory nature, the government, the workers and the employers attach considerable weight to their recommendations. Though the government is one of the three parties with the union labour minister being the ex-officio chairperson of ILC, the government has made it clear that the recommendations of the ILC are nothing more than just that—recommendations—and, therefore, not binding on the government.

When initially constituted, it was expected that the ILC would meet at least once a year and the SLC whenever necessary. The ILC met regularly till the early 1970s. Thereafter, the meetings have become few and far between, almost one meeting in three to four years. A major reason for infrequent meetings can be attributed to the question of representativeness of the three participants, namely, the government, the employers and the employees.

The Committee on Conventions is a three-member tripartite committee set up in 1954 with the objective:

  1. to examine the ILO conventions and recommendations for ratification, which will be discussed in the last section of this chapter, and
  2. to make suggestions for implementation of ILO standards

The industrial committee was set up to discuss specific problems of industries and also deliberate on the legislative proposals that are put forth by different parties.

2.1.4 The Impact of the ILO on Indian Labour Relations

The impact of the activities of the ILO on the Indian labour scene is two-fold. First, the ILO was the principal source for the labour legislation in India through the ratification of the ILO standards. The principles of these standards are incorporated into the existing labour laws. Second is the effect of Article 3 of the Constitution of the ILO, which provides for the nomination of non-government delegates and advisors to the International Labour Conference. The nomination of these non-government delegates from amongst employers and employees meant an effort at organizing the employers and employees' bodies so that they may represent in the annual events at the ILO.

RATIFICATION PROCEDURES OF THE ILO STANDARDS.   The ILO standards are analogous to treaties requiring competent national authority within a period of one year or eighteen months. In India, the treaty-making power is within the competence of the government of India. The power to enact and implement legislation lies in the hands of the parliament. The Director General of the ILO sends a certified copy of the convention to all member States. Since labour is in the Concurrent List of the constitution, the government of India dispatches the convention to the state governments, to the ministers of labour of the union, as well as to the all-India organizations of workers and employers, inviting their views regarding the desirability and practicability of giving effect to these standards. A statement of action is drawn up; taking into account the comments received, it is considered by the union cabinet and is placed before the parliament, where the proposals are discussed from all aspects. Copies of the statements are forwarded to the International Labour Office, the state government, and the workers' and the employers' organizations. Follow-up action, by way of ratification of conventions, is taken up subsequently.

The Tripartite Committee of India was set up to draw up a programme of implementation of the ILO conventions. This committee makes a detailed scrutiny of these ILO conventions. It is on the recommendation of this committee that India ratifies conventions and recommendations. In case where the committee has not ratified a particular instrument, it focuses on the reasons for non-ratification.


The ILO has made a total of eight conventions as Core Conventions or Human Rights Conventions. India has ratified four of these conventions, namely:

  • Forced Labour Convention (No. 29)
  • Equal Remuneration Convention (No. 100)
  • Abolition of Forced Labour Convention (No. 105)
  • Discrimination (Employment Occupation) Convention (No. 111)

THE RATIFICATION OF CONVENTIONS BY INDIA.   There was no important labour legislation in India up to 1919. But the establishment of the ILO and the continuous association of our country with its organization have greatly influenced labour legislation. India has so far ratified 30 conventions. According to these conventions, the labour legislations have been adopted or amended in our country. Of the 30 conventions ratified by India, 11 were ratified prior to 1930, 4 between 1930 and Independence, and 15 after Independence.

The eight Core Conventions of the ILO (also called “fundamental/human rights conventions”) are:

  1. Forced Labour Convention (No. 29)
  2. Abolition of Forced Labour Convention (No.105)
  3. Equal Remuneration Convention (No.100)
  4. Discrimination (Employment Occupation) Convention (No.111)

    The above four have been ratified by India.

  5. Freedom of Association and Protection of Right to Organized Convention (No.87)
  6. Right to Organize and Collective Bargaining Convention (No.98)
  7. Minimum Age Convention (No.138)
  8. Worst Forms of Child Labour Convention (No.182)

These four are yet to be ratified by India4

Consequent to the World Summit for Social Development in 1995, the above-mentioned conventions (Sl. No. 1 to 7) were categorized as the Fundamental Human Rights Conventions or Core Conventions by the ILO. Later on, Convention No. 182 (Sl. No. 8) was added to the list.

The government of India has its own compulsions in not having ratified all the ILO conventions. For one, ratifying would mean taking action to give effect to the conventions through bringing out suitable legislations.

2.2 The Historical Perspective

Prior to Independence, during the early part of the twentieth century, the industrial relations philosophy was mainly laissez-faire and selective intervention (National Commission on Labour, 1969). The main driver was to allow the industry to produce, and any interventions by the government were largely in furtherance of this objective. Growing unrest of labour, the Bolshevik Revolution in Russia and the formation of the ILO were stimuli to usher in a few changes through legislation. The Trade Disputes Act (1929) was, therefore, enacted and it provided for government intervention in industrial disputes. The Royal Commission on Labour (1931) recommended a few changes in the Act. In the mean time, the Bombay Trade Disputes (Conciliation) Act was enacted in the year 1934. This Act provided for:

  • A compulsory recognition of the union by the employer
  • The right of the workers to get represented by a union or a government official
  • The setting up of industrial courts
  • The certifying of standing orders
  • The prohibition of strike/lock outs in certain circumstances

On recommendations of the Royal Commission and lessons drawn from the Bombay Trade Disputes Act, the Trade Disputes Act was amended in 1938.

The Government of India Act of 1935 put labour in the Concurrent List, which meant both the centre and the state were competent to legislate. With a view that a modicum of uniformity in legislations of the centre and different states was desirable, a need was felt for a tripartite consultation at an apex level. Indian Labour Conference and Standing Labour Committee were a response to this felt need of the employer, the employees and the government.

The period during the World War II witnessed turbulence in the industrial relations situation. The exploitation of labour for furthering the war effort, a fall in earnings due to price rise, political influence of the Freedom struggle, all combined to make a volatile labour situation. The Defence of India Rules, at this time, introduced a structure for resolution of industrial disputes through the process of adjudication. Many of the provisions of the Defence of India Rules were later incorporated in the Industrial Disputes Act of 1947.

The policy objectives of the elected government after Independence were to protect the labour of exploitation and to ensure industrial peace and harmony. The initial phase was a paternalistic protective phase.

2.2.1 The Protective Phase (1947–1956)

This phase of industrial relations was characterized by providing “rights” to citizens by the adoption of the constitution and the Industrial Truce Resolution to restrain from work stoppages. The constitutional provisions provided for certain rights that ensured every citizen be treated equally on principles of economic and social justice. The articles in the constitution that are relevant for initiation of the protective phase of industrial relations are outlined in Box 2.1:


The protective phase witnessed the enactment of the Industrial Disputes Act (1947), the Constitutional Provisions, the Industrial Truce Resolution, the First Five Year Plan, etc.

The reader would do well to go through the constitutional provisions relating to labour. This would help in understanding the genesis of various legislations and government-led initiatives.

The Industrial Truce Resolution, which was the outcome of the ILC of 1947, required labour and management to agree to maintain industrial peace and prevent any work stoppage during the next three years to facilitate industrial development. The implementation of this truce resolution was facilitated by a central advisory council covering the entire field of industry with committees under each for each industry, supported by provincial advisory boards and committees for each major industry at the state level. The Industrial Policy Resolution of 1948 reserved the government right to undertake new development in six basic industries, viz, coal, iron and steel, aircraft and shipbuilding, telephone and telegraph, mineral and oil production, which were taken up in the public sector. In addition, arms and ammunition, atomic energy and rail transport were made state monopolies.

On the legislative front, the legal provisions for regulating industrial relations were embodied in the Industrial Disputes Act, 1947, which sought the prevention and the settlement of industrial disputes in all industries through conciliation, arbitration and adjudication. The act also provided for the establishment of permanent machinery for settlement of disputes by the appointment of conciliation officers, industrial tribunals, labour courts and making settlement/awards given by them binding on both parties. In addition, the Labour Relations Bill of 1950 introduced the principle of compulsory collective bargaining, but lapsed with the dissolution of the parliament. However, the concept introduced a movement towards a non-legal industrial relations of voluntary bipartite negotiations and collective bargaining, which later came to be known as the Giri Approach as it was advocated by V. V. Giri, the then labour minister.

The principle of protectionism was followed through in the First Five Year Plan, which, aimed at bringing about an all-round development of the country, set certain targets to be achieved in the field of production. It was, therefore, considered essential that industrial/ economic development should progress smoothly during the planning era. The implementation of the targets necessitated industrial peace, that is, no strikes, no lockouts, no stoppages of work so that production can go on unhampered. Even though the focus of the First Five Year Plan was agriculture, as far as industry was concerned, it spelled out the following:

  1. Workers' right of association, organization and collective bargaining to be recognized as the basic premise on which mutual relationship could be built.
  2. Employer–employee relationship to be based on satisfaction of mutual economic needs
  3. Closer association between trade unions and employers' representatives at various levels—unit, industry, regional and national level
  4. Strengthening the legal machinery for settlement of disputes by arbitration or adjudication in the form of tribunals and courts manned by experts
  5. Setting up norms and standards to govern the relations and dealings between employers and employees and for the settlement of industrial disputes through tripartite bodies like the Indian Labour Conference, the Standing Labour Committee and the Industrial Committees for particular industries
  6. In case of differences between management and labour, the Plan recommended that the board of directors must have a few people who understand labour problems and understand their point of view.

Fundamental Rights

Article 14: The State shall not deny to any person equality before the law or the equal protection of the laws.

Article 19: All citizens shall have the right:

  1. to freedom of speech and expression;
  2. to assemble peaceably and without arms;
  3. to form associations or unions;

subject to some reasonable restrictions laid down by the law.

Article 21: No person shall be deprived of his life or personal liberty except according to procedure established by law.

Directive Principles of State Policy

Article 38: (1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life.

(2) The State shall, in particular, strive to minimize the inequalities in income, and endeavor to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations.

Article 39: The State shall, in particular, direct its policy towards securing:

  1. that the citizens, men and women equally, have the right to an adequate means of livelihood
  2. that the ownership and control of the material resources of the community are so distributed as best to subserve the common good
  3. that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment
  4. that there is equal pay for equal work for both men and women
  5. that the health and strength of workers, men and women, and the tender age of children are not abused and that citizens are not forced by economic necessity to enter avocations unsuited to their age or strength

Article 41: The State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want.

Article 42: The State shall make provision for securing just and humane conditions of work and for maternity relief.

Article 43: The State shall endeavour to secure, by suitable legislation or economic organization or in any other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full enjoyment of leisure and social and cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an individual or cooperative basis in rural areas.

Article 43A: The State shall take steps, by suitable legislation or in any other way, to secure the participation of workers in the management of undertakings, establishments or other organizations engaged in any industry.

In terms of systems, the First Five Year Plan prescribed:

  1. A need for a systematic “grievance procedure” to be helped by having elected shop stewards
  2. The importance of work committees as the “key to the system of industrial relations”.
  3. A need for a single bargaining agent over as large an area of industry as possible.
  4. The public sector to set itself as a model employer, in terms of wages, working conditions and welfare facilities

The First Five Year Plan Prescribed:

  • A systematic grievance procedure
  • Work committees as the key
  • A single bargaining agent
  • The public sector to be a model employer

The protectionism phase was marked with the provision of minimum wages and conditions of labour, uniformity in labour laws, initiation of facilitative machineries like grievance procedures and work committees to deal with man-management issues.

2.2.2 The Consolidation Phase (1956–1965)

While the first phase saw a number of legislative interventions by the State, the second phase saw a host of initiatives based on “moral” exhortations. This was also the period of the Second Five Year plan with the focus shifting to rapid industrialization. Under the stewardship of Gulzari Lal Nanda, a slew of Codes was introduced in industrial relations as a non-statutory moral regulation for a better relationship between labour and management. This was based on the Gandhian trusteeship approach discussed in Chapter 1, with three important contributions made in the forms of the Code of Conduct, the Code of Discipline, and the Draft Code of Efficiency and Welfare.

THE CODE OF DISCIPLINE IN INDUSTRY.   When the government shifted its emphasis from legislation to voluntary agreements, it tried to bring home to the parties (the government, the workers and the employers) an awareness of their obligations under the labour legislations, and also create in them an attitude of willing acceptance of their responsibilities. It was in this context that the question of discipline in the industry was discussed at length by the Indian Labour Conference held in July 1957. The following general principles were laid down:

  • There should be no lockout or strike without notice.
  • No unilateral action should be taken in connection with any industrial matter.
  • There should be no recourse to go-slow tactics.
  • No deliberate damage should be caused to plant or property.
  • Acts of violence, intimidation, coercion, or instigation should not be resorted to.
  • The existing machinery for settlement of disputes should be utilized.
  • Awards and agreements should be speedily implemented.
  • Any action that disturbs cordial industrial relations should be avoided.

In order to consider these aspects and the relevant matters, a tripartite sub-committee was appointed, on whose report, recommending a code of discipline was accepted with certain modifications. The Code of Discipline in Industry, thus evolved, was accepted in March 1958 after due discussion, and came into force on 1 June 1958 (The full Code of Discipline in Industry is given in Appendix III).

The Code of Discipline is a set of self-imposed and mutually agreed voluntary principles of discipline and relations between the management and the workers in the industry. It is a code of conduct both for the workers and the management, and provides for the voluntary and mutual settlement of disputes, through mutual negotiations, voluntary arbitrations and conciliations without the interference of an outside agency. While it refrains both the parties from unilateral action, it induces them to make the best use of the existing machinery for the settlement of disputes. Thus, the code compels both the parties not to indulge in any strike or lockout without exploring the avenues for voluntary, mutual settlement of any possible misunderstanding or disputes. In a nutshell, it lays emphasis on the atmosphere of mutual regard and respect.

The fairly successful results of the planning process initiated after Independence created a need for the consolidation of the process of economic growth and development through implementation, for better results. The consolidation process was done by laying greater emphasis on bipartism and tripartism for increased association between labour and management. The Second Five Year plan recommended the following:

  1. The avoidance of disputes at all levels, including the last stage of mutual negotiations and conciliation
  2. The importance of preventive measures for achieving industrial peace
  3. An increased association between management and trade unions through formation of joint councils and a proper demarcation of the functions of workers' committees and trade unions
  4. A need for the avoidance of indiscipline in industry for which a Code of Discipline was agreed upon in 1958
  5. Suggested restrictions on the number of outsiders who serve as office bearers of unions
  6. A need for union recognition to make collective bargaining effective, and the representative union to have the sole right to take up matters with the management
  7. The use of voluntary arbitration in case of unresolved disputes rather than compulsory adjudication

The central government amended the Industrial Disputes Act accordingly to include a new provision, Section 10 A, providing for such a reference of disputes to voluntary arbitration. On the social security front, the EPF Act was extended to cover industries and commercial establishments having 10,000 workers or more and the contribution enhanced from 6.25 to 8.33 per cent. The ESI Act proposed to extend coverage to the workers' families.

This phase can, therefore, be characterized by a consolidation process wherein worker interests were retained and the government's control initiated through the philosophy of bipartism and tripartism.

During the Second Plan period, two more initiatives were started, that of Joint Management Councils and Worker's Training. Joint Management Councils were introduced in 23 units, with a purpose to jointly discuss issues related to production and productivity.

At the time of the Chinese aggression, the second Industrial Truce Resolution was passed on 3 November 1962, which emphasized:

  • The need to maximize production and the need to exercise restraint by employers and workers
  • That no interruption of work be allowed
  • That all disputes should be settled by voluntary arbitration, especially those related to dismissal, discharge and retrenchment of workers
  • That unions should discourage absenteeism, and negligence on the part of the workers
  • Joint emergency production committees to be set up

The policy initiatives during the second and the third plant periods can, thus, be summarized as follows:

  • The introduction and improvement of the three codes introduced in 1958, to give a more positive orientation to industrial relations
  • Active implementation of workers' education programmes
  • Enlarging the coverage of the ESI scheme to 3 million workers' families by extending the coverage of the Act to establishments employing 20, from the earlier 150
  • A national safety council set up in 1966
  • Model Grievance Procedure based on the principle of bipartite forums
  • Scheme for workers' participation through joint councils
  • The resolution of conflicts by voluntary arbitration
  • Central Wage Boards
  • The establishment of norms for wage determination

The second phase had two Five Year Plans. The policy initiatives taken up in this period reflected a new labour policy that aimed towards the prevention and settlement of disputes. Prevention was facilitated by modifications in labour legislation and the creation of mutually beneficial relations through workers' participation and joint councils. This established the bipartism spirit in the industrial relations climate.

Thus, the approach for the consolidation used was through bipartite and tripartite machinery promoted by the State.

2.2.3 The Conflict-ridden Interventionist Phase (1966–1976)

The fragmentation of the Indian polity made it difficult for tripartite agreements to be arrived at by consensus. Political affiliations of trade unions brought interference of political parties to a state level. This resulted in labour turbulence, and with non-Congress governments in most states, the practice of tripartism declined. The much greater polarization in national politics resulted in clearer conflict lines being drawn not only among the unions, but also between labour and management. The spirit of cooperation that was sought to be introduced through the various voluntary arrangements (Code of Discipline et al.) all disappeared from the IR scenario; they were but a faint memory. “When these arrangements were discussed in the tripartite fora, the actors could not disagree openly with such lofty ideals. The moral appeal, though outstanding, soon waned. In retrospect, it appears the actors agreed to these because they were merely voluntary and non-adherence did not entail any sanctions.”5 In the 1970s, the government was forced to increasingly step in for securing industrial peace since the machinery in existence was proving to be inadequate.

The political uncertainty created economic insecurities and the declaration of emergency created a more volatile industrial relations climate. Despite the decline in industrial activity and social militancy, this period was crucial in labour history as it created a platform to evaluate and initiate labour reforms that would facilitate economic revival and growth. An important development during this phase was the appointment of National Commission on Labour in 1967, with Justice P. B. Gajendragadkar as its chairman. Although the recommendations could not be implemented, but till date, there has not been a more comprehensive assessment of the industrial relations, and the recommendations are valid even today.

The Fourth Five Year Plan (1969–1974) came after three years of a plan holiday and coincided with the emergency period. This was a period when labour rights and privileges were withdrawn and the right to strike suspended from June 1975. The employers' rights to closure were restricted but not that of lockouts. A national apex body was set up as a bipartite consultative forum to resolve industrial relations problems supported by similar bodies at the state level. This forum issued guidelines to resolve industrial relations problems that affected production and productivity, but in practice, were not very successful. In addition, national industrial committees were set up for some major industries to deal with their specific problems. The Fourth Plan continued with the industrial policy of the previous years and made only a brief reference to industrial relations, according importance to the growth of a healthy trade-union movement for better labour-management relations. Renewed emphasis was placed on collective bargaining and settlement of disputes through voluntary arbitration. It recommended summary powers to labour courts and that workers' participation through joint councils be extended to the plant level.


The third phase or the conflict-ridden phase was precipitated by the fragmentation of political parties, different parties in power in the centre and in the states and the onset of the emergency. This period also saw the report of the first National Commission on Labour in 1960. With increasing strife, the government's role became increasingly interventionist.

2.2.4 The Directionless Phase (1977–1980)

Despite the change in the political supremacy of non-Congress parties and the government being composed of those non-aligned to the Congress, there were no fresh initiatives taken in the field of labour relations, although they were brought to power by pro-labour campaigns. The bottled-up grievances of the emergency period opened up floodgates of industrial disputes; strikes and indiscipline were rampant. As a result of this, the government was constrained to introduce a legislation to restrict strikes and lockouts in essential services. The national-level apex body discussed above was discontinued. Tripartism was given a fillip with a labour conference inviting 10 major central trade-union organizations (CTUO), some of whom were never invited earlier for consultations on creating a comprehensive law on industrial relations. The conference led to the introduction of an industrial relations bill in the parliament, which was never passed. Thus, the net result was nothing concrete for either labour or the industrial relations climate. The Janata government, however, introduced the Industrial Policy Statement that envisaged decentralization of the industrial structure.

The Fifth Five Year Plan (1975–1980) made only a brief reference to industrial relations focusing once again on conciliation machinery, enforcement of labour legislations, research in labour relations, imparting training to labour officers, undertaking studies on wages and productivity. Special attention was given to improving productivity in all spheres of the economy.

This directionless phase was, however, too short-lived to make any impact either ways.

2.2.5 The Productivity-, Efficiency-, Quality-orientation Phase (1981–1990)

The post-1980s period, around the world, emphasized quality and productivity. The Industrial Policy Resolution of 1980 was a reassertion of the 1956 resolution recalling the socialist principles, employment generation and correction of regional imbalances, but with a leaning towards productivity and efficiency. The IMF credit added to the prioritization for higher productivity and cost efficiency.

Certain changes were made in the ID Act in 1982, under which “go slow” and “gherao”, the typical work stoppage tactics of the Indian workforce, were declared as unfair labour practices. The rationalization of manpower was attempted by a few private-sector industries. By and large, a lot of structural changes were witnessed. Employment in public sector reduced, thereby reducing the trade-union strength.

The Sixth Five Year Plan (1980–1985) emphasized industrial harmony and advocated an internal mechanism within units to promote this. The measures suggested included suggestion schemes, grievance redress machinery, participative joint councils at the unit level. Workers Participation in Management Scheme was formulated in 1983, which was made applicable to all public-sector undertakings.

The Seventh Five Year Plan (1985–1990) emphasized efficiency, capacity utilization and productivity, and envisaged greater competition within the industry. Interestingly, this plan, while highlighting that there was considerable scope to improve industrial relations, admitted that the existence of inter- and intra-union rivalry created industrial relations problems. It stated that “if adequate consultative machinery and grievance procedures are evolved and made effective, strikes and lockouts would become redundant. Effective arrangements should be made for the settlement of inter-union disputes and to discourage unfair practices and irresponsible conduct”.

2.2.6 The Competitive Phase

The adoption of the liberalization programme with the New Economic Policy (NEP) in 1991 brought with it a paradigm shift in the concept of industrial relations. The shift to employee relations has been the focus of this book to prepare students for the same. There have been, interestingly, no explicit changes in the labour policy but the worker-centric State approach has shown a greater leaning towards pro-management positions. The NEP introduced a competitive phase through the process of liberalization and globalization. The focus shifted to gain competitive advantage, which more often than not was not in favour of labour, with the rationalization of manpower, automation, restructuring, reengineering, etc. To get around retrenchment, employers have experimented with novel ways such as the VRS or a “golden handshake” to shed surplus labour. Employer practices clearly show more aggression while promoting one-to-one Employer–employee relationship. To circumvent the provisions of labour laws, more and more organizations are re-designating the workmen as “supervisors” or “executives”. This also helps with low unionization of the workplace and thereby reduces chances of workplace conflicts and disputes. The worker-centric State role has seen a shift towards being more neutral. The government–labour coalition has weakened considerably, given the State's enthusiastic support for economic liberalization.


The period of 1980s saw a shifting emphasis on productivity and quality enhancement. The Industrial Policy Resolution of 1980, while maintaining the earlier sociopolitical-economic orientation, leaned towards the enhancement of productivity in the industry. The plan document also emphasized industrial harmony for greater productivity.

With a view to inducting an element of dynamism in the Indian economy, a new industrial policy was announced by the government in 1991. The said policy has brought about a drastic change in the organization and working of the industrial system of the country that, in turn, considerably influenced its labour policy. With a view to safeguarding the interest of labour, the industrial policy has stated that the “government will fully protect the interests of labour, enhance their welfare and equip them in all respects to deal with the inevitability of technological change. [The] government believes that no small section of society can corner the gains of growth, leaving workers to bear its pains. Labour will be made an equal partner in progress and prosperity. Workers' participation in management will be promoted. Workers cooperatives will be encouraged to participate in packages designed to turn around sick companies. Intensive training skill development and ungradation programmes will be launched”.

The decade 1995–2005 has seen a clearer shift to pro-management position of the government, reflected in lesser control of the labour ministry in policy making, lesser labour inspectors employed in the states and a kind of disengagement with industrial relations climate. With employment in the public sector reducing, the role of the State and its control has also declined. The Eighth, Ninth and Tenth Five Year Plans have focused on competitive advantage, manpower planning and reduction in losses due to industrial unrest. There has been a decline in the number of strikes and lockouts and also the number of man-days lost due to work stoppages.


“A review of industrial relations in the pre-reform decade (1981–1990) reveals that as against 402.1 million man-days lost during the decade (1981–1990), that is, in the pre-reform period, the number of man-days lost declined to 210 million during 1991 to 2000, that is, the post-reform period. But more man-days have been lost in lockouts than in strikes …”

Extract from a Report on Second National Commission on Labour

2.3 Trends in Industrial Relations Management

Fundamentally, liberalization requires a laissez-faire policy, reducing the government interference to the minimum. Competition is the key to market regulations in a capitalist economy. This leads to the important question of how the principles of socialism, inbuilt in our constitution, can be integrated in this scenario. Globalization has imposed a need to make our labour laws adaptable to the new reality. Without a change in the constitution and, with an increasingly globalized economy, as far as the labour policy is concerned, a stalemate of sorts has arrived with the three actors unable to come to a consensus on the way ahead. A fractured polity does not help the matter much.

2.3.1 The Inclusion of the Needs of Unorganized Labour

Today, the unorganized sector contributes 93 per cent of our workforce. An IR and labour policy directed at only 7 per cent of the working population will be farcical. Any policy on labour must take into account the vast unorganized sector, many of which comprise what is called the SME sector. The second NCL suggests a separate set of labour legislation just for the SMEs. The UPA government, in its Common Minimum Programme, is committed to the extension of the social-security net to cover workers from the unorganized sector. Maybe, it is time to let the organized sector regulate itself through the progressive human resources management approach, while the government focuses its attention on the upliftment of employees in the unorganized sector.

2.3.2 Labour Laws

The second NCL has discussed in detail the competitiveness of the Chinese industry when compared to that of India. An oft-repeated point cited in favour of China's competitiveness is their labour laws (read labour market and employment flexibility, to put it crudely, the right of employer to hire and fire). This restriction in India is said to be the major impediment to a level of FDI, which is much less when compared to that of China. This may be taking an overtly simplistic view of a complex issue and putting the blame where it may not be due. Nevertheless, even without comparisons, inherent in the prevailing labour legislative schemes are distortions that manifest themselves in the form of dissatisfaction expressed by both the employers and the employees. The employees face the problem of employment security, while the industry is faced with the problems of absenteeism, indiscipline and labour mobility. While all parties feel that changes may be required, such changes should take into consideration problems faced by both workmen and industries.

The existing labour laws are tilted in favour of labour due to historical reasons, and rightly so. However, the forces in the environment are not the same as obtained 50 years back. At least in the organized sector, despite laments from the labour, the situation has changed. In acknowledgement of these changes, the government has become neutral (where the inclination was pro-labour earlier), though it has not been able to push forth with reforms due to lack of consensus. In the existing labour laws, the emphasis is more on rights. A result of this is the tendency of trade unions to raise demands without due regard to financial implication in a competitive environment. To strike a balance, the Second National Commission on Labour has made certain suggestions6:

  • The existing set of labour laws should be broadly grouped into four or five groups of laws pertaining to (i) industrial relations, (ii) wages, (iii) social security, (iv) safety and (v) welfare and working conditions, and so on.
  • The coverage as well as the definition of the term “worker” should be the same in all groups of laws, subject to the stipulation that social-security benefits must be available to all employees including administrative, managerial, supervisory and others.
  • Simple, common definitions of terms that are in constant use; such terms include “worker”, “wages” and “establishment”
  • The Commission has given considerable thought to the number of employees that should be fixed as the threshold point for the organized sector. The Commission feels that a limit of 19 workers should be accepted.
  • Instead of having separate laws, it may be advantageous to incorporate all the provisions relating to employment relations, wages, social security, safety and working conditions, etc., into a single law, with separate parts in respect of establishments employing less than 20 persons.
  • The government may lay down a list of such highly paid jobs, which are presently deemed as workmen category as being outside the purview of the laws relating to workmen and included in the proposed law for the protection of non-workmen. Another alternative is that the government may fix a cut-off limit of remuneration, which is substantially high enough, in the present context, such as INR 25,000 per month, beyond which employees will not be treated as ordinary “workmen”.
  • Keep all the supervisory personnel, irrespective of their wage/salary, outside the rank of the worker, and keep them out of the purview of the labour laws meant for the workers.
  • It is necessary to provide a minimum level of protection to managerial and other (excluded) employees too, against unfair dismissals or removals. This has to be through adjudication by labour court or Labour Relations Commission or arbitration.
  • There should be an enactment of a special law for small-scale units. The reasonable threshold limit will be 19 workers. Any establishment with workers above that number cannot be regarded as small.
  • Provisions must be made in the law for determining negotiating agents, particularly on behalf of the workers.
  • Changes in the labour laws should be accompanied by a well-defined, social-security package that will benefit all workers, regardless of whether they are in the “organized” or the “unorganized” sector, and should also cover those in the administrative, managerial and other categories, which have been excluded from the purview of the term “worker”.
  • There is no need for different definitions of the phrase “appropriate government”, and there must be a single definition of the phrase, applicable to all labour laws.
  • The provisions of all these laws (related to labour management relations, e.g. ID Act, Trade Unions Act and Industrial Employment Standing Orders Act) should be judiciously consolidated into a single law called the Labour Management Relations Law or the Law on Labour Management Relations.
  • New and effective legislation involving workers in the grievance-settlement machinery is necessary.
  • A system of legal aid to the workers must be designed so that they are not handicapped due to their inability to afford a lawyer's fee.
  • A clause naming an arbitrator or a panel of arbitrators may be added in every settlement so that any dispute arising out of interpretation of a settlement, or any other dispute can be referred to arbitration immediately without delay.
  • ESMA should be withdrawn.

Recommendations of the Second National Commission on Labour

  • Defining the organized sector
  • Uniformity in definitions
  • Fewer streamlined labour laws
  • A separate law for small-scale sector
  • Social-security package for all
  • Withdrawal of ESMA
  • Supervisors and highly paid categories to be kept out of “worker” category

2.4 Conclusion

There have been substantial changes in the economic environment. Fifty years of development have brought about changes in both the employers and the employees. There have been no systemic shifts in the management of industrial relations. The country is poised to make its presence felt amongst the comity of nations. However, multiplicity of trade unions, employers' organizations, political parties and different parties in power at the centre and the states, a coalition government during times of change have all contributed to a state where a consensus on facing the challenges ahead is proving to be elusive. The time has come, perhaps, to forge a consensus amongst the three actors of IR for heralding a completely new paradigm of industrial relations.


  • The industrial relations system of India has its origins in the colonial past.
  • The movement for Independence, too, influenced the evolution of the industrial relations system in India.
  • The constitution embodies certain rights to prevent any form of discrimination or exploitation.
  • The State role has been interventionist and labour policies have been pro-labour, being enacted through a consultative
  • process of involving major trade unions, government representatives and employer representatives.
  • Industrial relations in India has been shaped largely by principles and policies evolved through tripartite consultative machinery at the industry and the national levels.
  • The ILO guidelines have a great influence in promoting uniform standards in the field of labour policy and industrial relations.
  • The historical evolution of the industrial relations system can be categorized under six phases (i) The Protective Phase (1947–1956) (ii) The Consolidation Phase (1957–1965) (iii) The Conflict-ridden Interventionist Phase (1966–1976) (iv) The Directionless Phase (1977–1980) (v) The Productivity-, Efficiency-, Quality-orientation Phase (1981–1990) (vi) The Economic Growth Competitive Phase (1991 onwards).
  • The current scenario points to a shift in the relative bargaining power in industrial relations, away from the workers to the employers.
  • It is argued that the labour laws are restrictive to the extent that they impose restrictions on closure of units, firing of employees and rationalization of manpower.
  • A dichotomy exists, where the economic objective is global competitiveness and the social objective is employment security. Resolving this would require substantial underwriting of a large part of social-security costs by the State, which is possible only with an interventionist government providing for higher rates of public-resource mobilization and public expenditure.


  • industrial dispute
  • settlement machinery
  • tripartism
  • preventive machinery
  • sole bargaining agent


  1. The first phase of unionism represented a period of State-driven industrialization that possibly required government support and control of the labour movement. Elaborate.
  2. The growth and transitions in the industrial relations scenario in India have been closely connected with the economy and the Five Year Plans or with the political changes. Bring out the features of the Five Year Plans that had a significant impact on the industrial relations in India.
  3. Which phase in the Indian industrial history contributed most to the development of a congenial industrial climate? Give reasons for your answer.
  4. The mid-1990s were characterized by a union-movement shift from those of “rights” to those of “interest”. Elucidate.


  1. Why should one study industrial relations? What should be the focus and the expected outcomes of this study?
  2. The structural changes of the economy had an effect on union activity, collective bargaining practices and labour relations in general. Elaborate.


  1. With globalization, the labour law provisions should be as liberal in India as they are in the advanced economies.
  2. The industrial relations system in India caters to the elite 7 per cent of labour in the organized sector. The remaining 93 per cent in the unorganized sector has largely been ignored by the State, trade unions and employers alike. There should be no protective labour legislation in the organized sector and it should be left to the market to regulate human resources.
  3. Since labour is one of the factors of production, free movement of labour should encourage the efficient use of global resources.


  1. There were a few incidents of labour unrest during the year 2005. Brief reports from a few newspapers are reproduced here. Gather the relevant details regarding these incidents. On the basis of this, discuss the direction that the system of industrial relations in India should be allowed to take to address such issues on a long-term basis. Do you think incidents like these would impact India's global competitiveness? Why?

    S Kumar's, nationwide: The company's worsted fabrics plant at Thandavapura, near Mysore, closed on 31 May 2005 as the workers resorted to an illegal strike. It was announced on 27 June that the issue was resolved and production back on track. The financial-loss estimate is unavailable.

    Omax Auto, Gurgaon: Along with group company Speedomax (both with units in Haryana), it was faced with labour problems that lasted for a month between June and July, but were resolved a day before the police–protesters clash broke out in Gurgaon over the HMSI issue. It cost the company close to INR 5 crore (INR 50 million) in production losses.

    Hitachi Electric, Gurgaon: It lost two-and-a-half days' production in May 2005, but differences were kept within company walls. The financial-loss estimate is unavailable.

    Toyota Kirloskar Motor, Bangalore: There was minor spat between the workers and the management over wage hike in April-May 2005. The issue was settled for the time being with a management truce in the form of a 15 per cent wage hike. The shaken company is considering setting up its second plant in a location that is relatively peaceful.

    Apollo Tyres, Limbda, Gujarat: Operations at its plant were temporarily suspended on 31 May on account of an “illegal strike” by one section of trade unions in the factory. A week later, the issue was resolved. The financial-loss estimate is unavailable.

    Tata Motors, Jamshedpur: A minor flash strike took place on 7 June. Three hundred workers attached to the transport section struck work for four hours against the suspension of a union member. Management revoked its plans to outsource general transportation from a contracting firm. No financial loss has been reported.

  2. Read the news report7 given below. Why do you think the employees did not seek government intervention? There have been employee-related issues such as shift-working for women, employee safety, occupational diseases and payment for over time in the “new economy” industries including IT, BPO and financial services. Discuss what the State should do to handle such issues. Should the State intervene at all?

    There's trouble brewing in India's BPO paradise. For the first time, the shadow of labour strife appears to be looming over the outsourcing industry.

    WNS Global Services, one of India's biggest BPOs, experienced this first-hand at its Nashik unit when a section of workers agitated over pay earlier this week and then turned to local politicians for help. Till date, attempts to unionise employees in the BPO industry have not been successful.

    While the upheaval in Nashik has been quelled for now, independent local sources in Nashik said the employees stayed away from work for two days and returned after only repeated assurances from the management. The signs are ominous for the sunrise industry, which is estimated to clock revenues of $11 billion for 2007–08.

    A WNS spokesperson denied there was a strike at the Nashik centre, but admitted some workers were asking for payment of additional bonus and that it was in talks with them.

    “In October 2007, the government passed a notification which required the industry to retrospectively change its bonus payouts for employees from April 1, 2006. We have complied with this notification and paid bonuses accordingly. On account of additional payment of statutory bonus for 2006–07, the difference in bonus payouts, for that period, among certain high-performing and average performing employees of WNS has reduced. As a result, some of our employees were asking for payment of additional bonus over and above statutory/performance incentive bonus for 2006–07. We are in discussions with these employees and hope to resolve the issue soon,” the spokesperson told ET in an email.

    The Nashik unit of Maharashtra Navnirman Sena appears to have played a minor role in the matter.

    NYSE-listed WNS has other problems to contend with. It saw net profit fall 23.1% to $5.5 million in the third quarter to December 2007 due to the rise in rupee. US economic woes and high employee turnover are eroding the profitability of the sector.

    WNS employs about 1,800 people in two centres in Nashik, where it mainly gets data processing work done. The spokesperson said there has been no disruption in client service. The town, about 130 km northeast of Mumbai, has developed into tier-II BPO destination, where wages and property prices are much lower than in frontline cities such as Mumbai and Pune.

    In fact, in recent months, a lot of public debate over wage levels has taken place in Nashik, where a BPO employee typically gets Rs 4,000 ($100) or less per month. About low wages, the WNS spokesperson said the compensation was also a matter of location.

    “The compensation for a Mumbai or Delhi-based employee would definitely be more than cities like Pune or Nashik,” he told ET over the phone.


Johri, C. K. (ed.), Issues in Indian Labour Policy (New Delhi: Shriram Center for Industrial Relations,).

Mathur, K. and N. R. Seth Tripartism in Labour Policy: The Indian Experience (New Delhi:

Report of the Second National Commission on Labour (2002).

Sarkar, Santanu “Trade Unionism in Indian BPO-ITES Industry—Insights from Literature”, Indian Journal of Industrial Relations, Vol. 44, No 1, July 2008.

Sheth, N. R. “Labour Relations in New Economic Environment”, Vikalpa, Vol. 18 (3), 1993.

Shriram Center for Industrial Relations, 1969).

Sodhi, J. S. and S. P. S. Ahluwalia (eds.), Industrial Relations in India: The Coming Decade (New Delhi: Shri Ram Center for Industrial Relations, 1992).

Venkatratnam, C. S. (ed.), Paradigm in Labour Management Relations (New Delhi: Response Books, 2001).

Venkatratnam, C. S., Industrial Relations (New Delhi: Oxford University Press, 2006).


Observations of the Second National Commission on Labour (2002) on Changes in the Industrial Relations

“A review of industrial relations in the pre-reform decade (1981–1990) reveals that as against 402.1million man-days lost during the decade (1981–1990), that is, in the pre-reform period, the number of man-days lost declined to 210 million during 1991 to 2000, that is, the post-reform period. But more man-days have been lost in lockouts than in strikes … A large number of workers have lost their jobs as a result of VRS, retrenchment and closures both in the organized and the unorganized sector. The exact number is not available. According to our information, no data on this subject has been compiled by any State government … We have received a large number of complaints on VR schemes. We have also been told of elements of indirect compulsion, pressure tactics, innovative forms of mental harassment, compelling employees to resign by seeking to terminate them, and in some cases, physical torture and threats of violence against themselves or dependents.

“We shall make a few other general observations on matters that have come before us about the industrial relations scenario: i) 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; ii) service-sector workers feel they have become outsiders and are becoming increasingly disinterested in trade-union activities; iii) there is a trend to resolve major disputes through negotiations at a bipartite level. The nature of disputes or demands is changing; iv) the attitude of the government, especially of the central government, towards workers and employers seems to have undergone a change. Now, permissions for closure or retrenchment are more easily granted; v) 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, and so on; vi)recovery proceedings against employers who could not pay heavy dues of workers are not being seriously pursued by the industrial relations machinery, if the financial position of the employer is very bad; vii) the labour adjudication machinery is more willing to entertain the concerns of industry.”


Main Recommendations of National Commission on Labour on Industrial Relations Policy

Collective Bargaining: While realizing the fact that the collective bargaining agreements have not made much headway in India, the NCL has recommended compulsory recognition of a union as a sole representative for the purpose of bargaining.

The commission has suggested various measures to encourage the growth of collective bargaining which, according to it, enjoys an important place in maintaining peaceful industrial relations. It has observed that:

  1. In the absence of arrangements for statutory recognition of unions, except in some states and provisions, which require employers and workers to bargain in “good faith”, it is no surprise that reaching of collective bargaining agreements has not made much headway in India. Nonetheless, the record of reaching collective agreements has not been as unsatisfactory, as is popularly believed. Its extension to a wider area is certainly desirable.
  2. There is a case for a shift in emphasis and increasingly greater scope for and reliance on collective bargaining. Any sudden change replacing adjudication by a system of collective bargaining has to be gradual. A move should be made towards collective bargaining in such a way that it may acquire primacy in the procedure for settling industrial disputes.

The Commission also observed that:

  1. An essential step to facilitate collective bargaining process is the compulsory recognition of a union as sole representative for the purpose of bargaining with the management.
  2. In order to enable employees to effectively participate in the process of collective bargaining, they should be well-organized and trade unions must become strong and stable.
  3. The place which strike/lockout should have in the overall scheme of industrial relations needs to be defined. Collective bargaining cannot exist without the right of strike or lockout.

The Recognition of Unions: A trade union seeking recognition as a bargaining agent from an individual employer should have a membership of at least 30 per cent of workers in the establishment. The minimum membership should be 25 per cent if the recognition is sought for an industry in a local area. The Commission is of the view that statutory recognition should be granted to the union as a sole bargaining agent. In this connection it recommends:

  1. Recognition should be made compulsory under a Central Law in all undertakings employing 100 or more workers or where the capital invested is above a stipulated size. A trade union seeking recognition as a bargaining agent from an individual employer should have a membership of at least 30 per cent of the workers in the establishment. The minimum membership should be 25 per cent if the recognition is sought for an industry in a local area.
  2. The Industrial Relations Commission is to certify the union as a representative union on the basis of either verification of membership of the contending unions or by a secret ballot open to all workers in the establishment. The Commission will deal with various aspects of union recognition such as: (i) determining the level of recognition—whether plant, industry, centre-cum-industry to determine which the majority union is; (ii) certifying the majority union as a recognized union for collective bargaining; and (iii) generally dealing with other related matters.
  3. The recognized union should be statutorily given certain exclusive rights and facilities, such as the right of sole representation; the right to enter into collective agreements on terms of employment and conditions of service; the right to collect membership subscriptions within the premises of the undertaking; the right of check off, holding discussions with departmental representatives within factory premises; inspecting, by prior agreement, the place of work of any of its members; and nomination of its representatives on works/grievance committees and other bipartite committees to represent cases of dismissal and discharge of their members before the Labour Court.
  4. The unions should be made strong organizationally and financially. Multiplicity of unions and intra-union rivalries should be discouraged by:
    1. Providing compulsory registration of unions
    2. Raising the minimum number required for forming a union
    3. Raising the minimum membership fee
    4. Reduction in the number of outsiders
    5. Taking steps to build internal leadership
  5. The minority unions should be allowed only the right to represent cases of dismissal and discharge of their members before the Labour Court.
  6. To represent cases of dismissal and discharge of their members before the Labour Court.
  7. The compulsory registration of employers' association has also been recommended.

Strikes/Lockouts and Gheraos: The NCL has categorized industries as “essential” and “non-essential” for the purpose of strikes and lockouts, and observed that every strike/lockout should be preceded by a notice.

It has made the following recommendations:

  1. In essential industries/services, where a cessation of work may cause harm to the community, the economy or the security of the nation itself, the right to strike may be banned, but with the simultaneous provision of an effective alternative like arbitration or adjudication to settle disputes.
  2. In non-essential industries, a maximum period of one month has to be fixed for the continuance of a strike or lockout. After the lapse of this period, the dispute has automatically to go before the IRC for arbitration. In essential industries, the right to strike/lockout should be made redundant by requiring the IRC to adjudicate when mutual negotiations fail and parties do not agree to arbitration.
  3. Every strike/lockout should be preceded by a notice. A strike notice to be given by a recognized union should be preceded by a strike ballot open to all the members of the union, and the strike decision must be supported by two-thirds of the members present and voting. Gherao cannot be treated as a form of labour unrest since it involves physical coercion rather than economic pressure. It is harmful to the working class, and in the long, run may affect national interest.
  4. The penalties, which have been provided for unjustified strikes/lockouts, would ultimately discharge these and would, in due course, persuade the parties to sit round the table earnestly and settle their disputes by negotiation.
  5. To restrain the outbreak of unnecessary strikes/lockouts, compensation and forfeiture of wages for a strike/lockout should be provided for.

Conciliation: The Second National Commission on Labour observes that “the functioning of conciliation machinery has not been found satisfactory due to the delays involved, the casual attitude of one or the other party to the proceedings, lack of adequate background in the officer himself for understanding the major issues involved, the ad hoc nature of the machinery and the discretion vested in the government in the matters of reference to disputes. It has, therefore, pointed out:

  1. Conciliation can be more effective if it is freed from outside influence and the conciliation machinery is adequately staffed. The independent character of the machinery will alone inspire greater confidence and will evoke greater cooperation of the parties. The conciliation machinery should, therefore, be a part of the proposed Industrial Relations Commission. This transfer will introduce important structural, functional and procedural changes in the working of the machinery as it exists today.
  2. Officers using the machinery would function effectively if there is proper selection adequate pre-job training and period in-service training.

Arbitration: The Commission has observed that with the growth of collective bargaining and the general acceptance of recognition of representative unions and improved management attitudes, settlement of disputes through voluntary arbitration will be accepted.

Unfair Labour Practices: The Commission recommends that “unfair labour practices” on the part of both employers' and workers' unions should be detailed and suitable penalties prescribed in the industrial relations law for those found guilty of committing such practices. Labour Court will be the appropriate authority to deal with complaints relating to unfair labour practices.”

Works Committees and Joint Management Councils: As per NCL, works committees should be set up in units which have a recognized union. The union should be given the right to nominate the worker-members of the Works Committee.

“A clear demarcation of the functions of the Works Committee and the recognized union, on the basis of mutual agreement between the employer and the recognized union, will make for a better working of the Committee”.

About joint management councils, the Commission says:

“When managements and unions are willing to extend cooperation in matters they consider to be of mutual advantage, they may set up a joint management council. In the mean time, wherever the management and the recognized trade union in a unit so desire, they can by agreement enhance the powers and scope of the Works Committees to ensure a greater degree of consultation/ cooperation. The functions of the two in this latter situation can as well be amalgamated.”

The Settlement of Industrial Disputes: According to the Commission, the best way to settle industrial disputes for the parties is to talk over their differences across the table and settle them by negotiation and bargaining. A settlement so reached leaves no rancour behind and helps to create an atmosphere of harmony and cooperation. There should be a shift to collective bargaining. Disputes between employers and workers, the Commission observes, have been taking a legalistic turn, mainly because of the emphasis on adjudication through industrial tribunals and courts.

The Commission has laid down the procedure for the settlement of disputes. It observes:

After negotiations have failed and before the notice of a strike/lockout is served, the parties may agree to voluntary arbitration. The IRC will help the parties in choosing a mutually acceptable arbitrator or may provide an arbitrator from among its members/officer if the parties agree to avail of such services.

In essential services/industries, when collective bargaining fails and parties do not agree to arbitration, either party may notify the IRC of the failure of negotiations, whereupon the IRC shall adjudicate on the dispute.

The Grievance Procedure: The Commission has observed that “statutory backing should be provided for the formulation of an effective grievance procedure, which should be simple, flexible, less cumbersome and more or less on the lines of the present Model Grievance Procedure. It should be time-bound and have a limited number of steps, say, approach to the supervisor, then to the departmental head, and thereafter a reference to the Grievance Committee consisting of management and union representatives. The Commission has, therefore, recommended that:

  1. Grievance procedure should be simple and have a provision for at least one appeal. The procedure should ensure that it gives a sense of (a) satisfaction to the individual workers (b) reasonable exercise of authority to the manager, and (c) participation to unions. A formal grievance procedure should be introduced in units employing 100 or more workers.
  2. A grievance procedure should normally provide three steps: (a) submission of a grievance by the aggrieved worker to his immediate superior, (b) appeal to the departmental head/ manager, (c) appeal to a bipartite Grievance Committee representing the management and the recognized union. In rare cases, where unanimity eludes the Committee, the matter may be referred to an arbitrator.

The Discipline Procedure: After the views of both the employers and the workers have been heard, the Commission has suggested the following changes in the discipline procedure:

  1. Standardization of punishment for different types of misconduct
  2. Inclusion of workers' representatives in the domestic enquiry committee; an adequate show-cause opportunity to a workman
  3. Presence of a union official to represent the case of a workman during the enquiry proceedings
  4. Supply of the record of proceedings to the aggrieved workman
  5. Payment of a subsistence allowance during the suspension period
  6. Right of appeal to administrative tribunals set up for the purpose
  7. Fixing a time limit for tribunal proceedings and giving unfettered powers to it to examine the case de novo, modify or cancel a punishment ordered by the employer.

To make the procedure more effective, the Commission has made the following recommendations:

  1. In the domestic enquiry, the aggrieved workers should have the right to be represented by an executive of the recognized union or a workman of his choice
  2. A record of the domestic enquiry should be made in a language understood by the aggrieved employee or his union
  3. The domestic enquiry should be completed within a prescribed time, which should be necessarily short
  4. Appeal against the employer's order of dismissal should be filed within a prescribed period
  5. The worker should be entitled to subsistence allowance during the period of suspension as per agreement
  6. Supply of the record of proceedings to the aggrieved workman
  7. Payment of a subsistence allowance during the suspension period
  8. Right of appeal to administrative tribunals set up for the purpose
  9. Fixing a time limit for tribunal proceedings and giving unfettered powers to it to examine the case de novo, modify or cancel a punishment ordered by the employer
  10. Having an arbitrator to give his decision in a domestic enquiry

Industrial Harmony: While industrial peace calls for both a negative and positive approach, the attainments of industrial harmony necessarily calls for a positive and constructive approach to the solution of industrial disputes. Therefore, the Commission laid emphasis on the freedom of industrial relations machinery from “political partisan” influence. This was necessary in view of the multi-party governments that were emerging in the country.

The Commission has referred to certain weaknesses in the working of the existing industrial relations machinery, namely, the delays involved, the expenditure, the largely ad hoc nature of the machinery and the discretion vested in the government in matters of reference for disputes. Therefore, to make the industrial machinery more effective and more acceptable, suitable modification in the existing machinery should be made.

Industrial Relations Commission: The Commission has recommended—

“The constitution of an Industrial Relations Commission, on a permanent basis, both at the state level and the centre. The state IRC will deal with disputes in respect of industries for which the state government is the appropriate authority, while national IRC will deal with disputes involving questions of national importance or those likely to affect or interest establishments situated in more than one state. One of the principal reasons for suggesting these Commissions is the desire to eliminate the possibility of political influence disturbing or distorting industrial peace in the country.

“The Commission will have both judicial and non-judicial members. The judicial member as well as the President of the National/State IRE are to be appointed from among persons eligible for appointment as judges of High Courts. Non-judicial members need not have qualifications to hold judicial posts, but should be otherwise eminent in the field of industry, labour or management.

The IRC will be high-powered bodies independent of the executive. The main functions of these IRCs will be (a) adjudication in industrial disputes, (b) conciliation, and (c) certification of unions as representative unions.

“The conciliation wing will consist of a conciliation officer with the prescribed qualifications and status.

“The functions relating to certification of unions will rest with a separate wing of the National/State IRC.

“The Commission may provide arbitrators from among its members/officers, in case parties agree to avail of such services.

“All collective agreements should be registered with the IRC.

“An award made, by the IRC in respect of a dispute raised by recognized union should be binding on all workers in the establishment(s) and the employer(s).”

Labour Courts: The Commission recommended for—

  1. The setting up of Labour Courts in each state. The strength and location of such courts is to be decided by the appropriate government.
  2. Members of the Labour Court will be appointed by the government on the recommendation of the High Court.
  3. Labour Courts will deal with the disputes relating to rights, obligations, interpretation and implementation of awards and claims arising under the relevant provisions of laws or agreements, as well as with disputes relating to unfair labour practices.
  4. Labour Courts will thus be courts where all the disputes specified above will be tried and their decisions implemented. Proceedings instituted by parties asking for the enforcement of rights falling under the aforesaid categories will be entertained in that behalf.
  5. Appeals over the decisions of the Labour Court in certain clearly defined matters may be with the High Court within whose jurisdiction/area the court is located.


Code of Discipline

Managements and Unions agree:

  1. That no unilateral action should be taken in connection with any industrial matter and that disputes should be settled at an appropriate level
  2. That the existing machinery for settlement of disputes should be utilized with the utmost expedition
  3. That there should be no strike or lockout without notice
  4. That affirming their faith in democratic principles, they bind themselves to settle all future differences, disputes, grievances by mutual negotiation, conciliation and voluntary arbitration
  5. That neither party will have recourse to (a) coercion (b) intimidation (c) victimization or (d) go-slow
  6. that they will promote constructive cooperation between their representatives at all levels and as between workers themselves that they will establish upon mutually agreed basis, a grievance procedure, which will ensure a speedy and full investigation leading to settlement
  7. That they will promote constructive cooperation between their representatives at all levels and as between workers themselves and abide by the spirit of agreements mutually entered into
  8. That they will establish upon mutually agreed basis, a grievance procedure, which will ensure a speedy and full investigation leading to settlement
  9. That they will abide by various stages in the grievance procedure and take no arbitrary action, which would bypass this procedure
  10. That they will educate the management personnel and workers regarding their obligations to each other

Managements agree:

  1. Not to increase workloads unless agreed upon or settled otherwise
  2. Not to support or encourage any unfair labour practice such as (a) interference with the right of employees to enrol or continue as union members (b) discrimination, restraint, or coercion against any employees because of recognized activity of trade unions and (c) victimization of any employee and abuse of authority in any form
  3. To take prompt action for (a) settlement of grievances and (b) implementation of settlements, awards, decisions and orders
  4. To display in conspicuous places in the undertaking the provisions of this code in the local language(s)
  5. To distinguish between actions justifying immediate discharge and those where discharge must be preceded by a warning, reprimand, suspension or some other form of disciplinary action, and to arrange that all such disciplinary action should be subject of an appeal through normal grievance procedure
  6. To take appropriate disciplinary action against its officers and members in cases where enquiries reveal that they were responsible for precipitate action by workers leading to indiscipline
  7. To recognize the union in accordance with the criteria (Annexure I) evolved at the 16th Session of the Indian Labour Conference in May 1958.

Unions agree:

  1. Not to engage in any form of physical duress
  2. Not to permit demonstrations, which are not peaceful and not to permit rowdyism in demonstrations
  3. That their members will not engage or cause other employees to engage in any union activity during working hours, unless as provided for by law, agreement or practice
  4. To discourage unfair labour practices such as (a) negligence of duty (b) careless operation (c) damage to property (d) interference with or disturbance to normal work and (e) insubordination
  5. To take prompt action to implement awards, agreements, settlements and decisions
  6. to display in conspicuous places in the union offices, the provisions of this code in the local languages, and
  7. to express disapproval and to take appropriate action against office bearers and members for indulging in action against the spirit of this code