Employment Relations in India

2 India

Lecture outline

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

3 India

Key themes• Major economic reforms in the 1990s paved the way for high

economic growth in India and involved the considerable liberalisation of the expansive labour laws.

• There is a large rural sector and a large ‘informal’ sector in which unions and collective bargaining are rare.

• Trade union membership overall is low but membership and collective bargaining coverage is higher in the public sector and large enterprises.

• There are weak laws regarding trade union recognition and representation and poor enforcement of labour laws and collective agreement provisions.

• Current concerns include lack of protection for workers who have been made worse-off by the market-based labour reforms, poor growth prospects in key parts of the labour market, high rates of contract and casual workers, increasing downsizing and a low-value added IT sector.

4 India

Context• The Indian industrial relations system is rooted in British

common law.• The IR system also reflects India’s diverse population. • The unionisation rate is low at 5% of the total workforce due in

part to large rural and informal sectors, which are not unionised.

• Most unions are concentrated in large enterprises and government-related sectors.

• After slow development during most of the 20th century, economic growth has been high since the mid-1990s.

• Indian labour laws were liberalised as part of a broader deregulation program in the 1990s, changing what was one of the most protective labour law regimes in the world.

5 India

Trade unions in India 1• Trade union movement emerged between 1850-1870 with the

emergence of early manufacturing in textiles, jute and light engineering.

• The first national federation of trade unions, All India Trade Union Congress (AITUC), was established in 1920 to fight colonial rule and capitalism.

• The movement split into three major federations around the time of independence from Britain in 1947: AITUC, the Indian National Trade Union Congress (INTUC), and Hind Mazdoor Sabha (HMS).

• Unions are closely affiliated with political parties. The number of unions proliferated as more regional political parties emerged after general election in 1967, some of which set up their own trade union wing.

6 India

Trade unions in India 2• One of the largest union to have developed from a regional

political party is the Centre of Indian Trade Unions (CITU) which is aligned with Communist Party of India—Marxist (CPI-M or CPM).

• By the mid-2000s, there were over a dozen federations of trade unions.

• There may be over 100 000 unions in India, but accurate figures are not known because the government does not collect data on unions.

• Prevalent form is the ‘union shop’, where union membership is acquired by all employees after employment in an establishment where a union is recognised by the employer.

• The ‘closed shop’ system (where only members of the union can be employed) exists informally in wholesale markets and on railway stations among manual workers.

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Trade unions in India 3The Indian Constitution and freedom of association• The right to belong or not to belong to a union is guaranteed in the

Indian Constitution (Article 19(c)). • It is not compulsory for a worker to join a union, but it is

unconstitutional to prevent them from joining one.• Trade union registration and recognition are not compulsory. • In order to stop the proliferation of unions, the Trade Union Act

1926 was amended in 2001 to require that 10% of workers or 100 workers (whichever is less) at an establishment be members for registering a union. 7 people are required to form an unregistered union.

• The law is silent on whether unions are formed along craft, employment category or other lines.

• Trade unions can pursue economic, political, social and welfare objectives and can raise and maintain political funds.

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Trade unions in India 4Trade unions and politics• The trade union movement is closely linked with political parties, as

historically unions played a major role in the struggle against colonial rule. Some leaders of the freedom struggle were also leaders of the trade union movement.

• Following independence, this association resulted in welfare-state and socialist policies involving the nationalisation of critical industries combined with investments in large-scale public enterprises.

• The close association between unions and political parties has assured politicians of votes from the working classes and enabled unions to better defend their members’ interests. But the association also creates problems: divisions in political parties lead to divisions in unions; industrial relations issues become political issues in conflicts between state and central governments of different persuasions; and recently, unions have also struggled with their associated political parties adopting neoliberal policies in order to encourage investment and competition as these policies tend to be detrimental for workers.

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Trade unions in India 5National trade union centres• Any union with a minimum of 500 000 members spread over

at least four industries and four states will be recognised as a national trade union centre.

• There are five centres in India which fulfil this criterion:– the All India Trade Union Congress (AITUC)– Bharatiya Mazdoor Sangh (BMS)– Hind Mazdoor Sabha (HMS)– the Centre of Indian Trade Unions (CITU)– the Indian National Trade Union Congress (INTUC)

• There are at least 7 other national unions which the government consults with.

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Trade unions in India 6Enterprise-level unions • There are two kinds of enterprise-level unions: those

affiliated to national centres and those without any affiliation to political parties.

• In some large organisations/enterprises, there are over a hundred trade unions.

• Trade unions based on craft, occupational or employment category, and caste are not uncommon in India.

• Within an enterprise there can be separate unions for workers (on the shopfloor), staff (attendants, drivers, clerks, typists etc), supervisory staff and executives/officers.

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Management and employers’ organisations• The earliest employer associations were formed primarily in industries such as

jute, textiles and engineering in response to labour laws enacted after independence from British rule.

• The principal umbrella organisation for Indian employers is the Council of Indian Employers (CIE).

• Employer organisations proliferated after independence, and then their structure was consolidated. CIE was formed when the Employers’ Federation of India (EFI) amalgamated with the All India Organisation of Employers (AIOE) in 1956 .

• Public employers at both national and international levels originally had a separate representative body called the Standing Conference on Public Enterprises (SCOPE). SCOPE joined CIE in 1973.

• Chambers of commerce, industry associations and representative organisations of the public sector are all members of these organisations.

• CIE represents the interests of large-scale industry and represents Indian employers at the International Council of Employers and at the International Labour Organization.

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Representation 1• Employers’ organisations in India play two representative

roles: 1. They nominate representatives of employers in voluntary or

statutory bodies set up to determine wages and conditions of employment in a particular industry or sector and for consultation on social and labour matters in the national and global context.

2. They seek to redress the grievances of employers against legislative or other measures by making submissions to the authorities concerned.

• Employers’ associations also represent interests of employers in various committees and institutions, bipartite and tripartite fora, and serve as a forum for information sharing, policy formulation and consensus building on strategic issues.

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Representation 2Non-union firms• In contrast to the past, it has been increasingly common since the

1990s to find establishments with no union presence, for instance, in software companies and in several car manufacturers.

• Employers have adopted union-avoidance tactics such as the use of greenfield sites (which have high capital investment and technology and lower labour intensity), offering above-average wages and conditions, and asking employees to participate in anti-union activities

Collective bargaining• Only about 2% of the total workforce, but over 30% of the workers in

the formal (organised) sector, participates in collective bargaining. • In the public sector and the largest public and private sector

enterprises the figure is 70% or more. • Legislation encourages government adjudication of disputes.

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Representation 3Historical context for industrial relations• At the time of independence, the British gave India a legal framework

aimed primarily at dispute resolution. • After independence, the Indian government adopted the Soviet

model of planned economic development and sought to achieve a socialist society.

• Industrial harmony was considered a necessity for state-led development.

• Several industries were nationalised in the early 1970s, and, during the Emergency (1975-77), labour law changes restricted employers’ ability to sack workers and close operations that were no longer viable. Workers’ participation in management was adopted as a directive principle of state policy.

• Prior to the 1990s reforms, two national commissions on labour had recommended comprehensive reforms to labour laws.

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Representation 4Freedom of Association • The constitution guarantees the fundamental right to freedom of association. • The right of collective bargaining is not extended to industrial workers in

government undertakings (e.g. railways, post, telecommunications). Compensation for these workers is based on recommendations of pay commissions appointed periodically by the government.

• National labour laws do not mandate employers to either recognise unions or engage in collective bargaining, but some states have provisions recognising trade unions.

• India has not ratified some ILO conventions concerning Right of Association.

Determination of a collective bargaining agent• Determining a collective bargaining agent has been a controversial issue

historically. • Some states have measures for recognising unions as agents in bargaining, for

example: a Code of Discipline which is common in the public sector; secret ballots; a check-off system; and membership verification.

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Representation 5Collective agreements and disputes • An agreement with one trade union is not binding on members of other

unions unless arrived at during conciliation proceedings.• This means that even if one union has an agreement, other unions can raise

an industrial dispute with an employer.• A collective agreement is binding only for the workers who have negotiated

and signed the agreement, but a written settlement arrived at in the course of conciliation proceedings is binding not only on the actual parties to the industrial dispute but also on the heirs, successors or assignees of the employer and all the present or future workers in the establishment.

• Under the Industrial Disputes Act, disputes can be settled with or without recourse to the government conciliation machinery. Arbitration or adjudication follows failed conciliation.

• An ‘award’ can be an interim or final determination of an industrial dispute by a Labour Court, Industrial Tribunal, National Industrial Tribunal or an arbitrator. Awards are legally enforceable instruments.

• Collective bargaining is rare in the informal sector.

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Representation 6Unfair labour practices • The Industrial Disputes Act defines the following as

unfair labour practices: – refusal by the employer to bargain collectively in good faith with

recognised trade unions, – refusal by a union to bargain in good faith with the employer – workers and trade unions engaging in coercive activities against

certification of a bargaining representative• Breaching an industrial ‘settlement’ is punishable under

law. • Employers use many tactics to undermine unions,

actions which are illegal but go largely unprosecuted.

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Levels of bargaining and agreements 1National-level agreements• Prior to the 1970s, wage boards appointed periodically by the

government set wages and conditions in some industries. • From the 1970s, sectoral bargaining at the national level was

prevalent mainly in government-dominated industries (e.g. banking and coal) as well as steel, ports and docks. This is largely still the case today.

• In pay determination, civil servants’ pay provides the benchmark for the rest of the public sector, and public sector pay is then the benchmark for unionised private sector workers where collective bargaining tends to be more adversarial and contentious.

19 India

Levels of bargaining and agreements 2Firm/plant-level agreements• While employers generally prefer bargaining at the plant

level, unions press for bargaining at higher levels to increase their bargaining power.

Duration of agreements• Duration of collective agreements increased during the

1970s and 80s, and again in the 1990s in the public sector. Since 1997, the duration of public sector agreements has been ten years.

• Most private sector collective agreements typically last for three years. Public sector agreements can have a much longer duration.

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Levels of bargaining and agreements 3Collective bargaining in practice• In practice, most unions are highly politicised and the

government wields enormous discretionary power without the commensurate responsibility.

• This leads to poor enforcement of the law and collective agreement provisions, and frequently unions are co-opted into the collective bargaining crisis by the government or by management.

• As a result, union members do not have confidence in their union or its ideology and do not hesitate to change unions. Workers can choose a union to represent them without belonging to it, can enjoy the benefit of collective bargaining without joining a union, and unions can have collective bargaining rights without workers’ support.

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Economic context for reforms• There has been a paradigm shift to neoliberalism since the 1990s, with

emphasis on economic growth and foreign investment over labour protection.

• While India was a major economic force in the 17th century, and under British rule developed textiles, steel, engineering and other industries, it followed import substitution policies in the 1970s and did not partake in economic development at the same time as other Asian economies.

• However, the information revolution in the 1980s afforded new opportunities for economic development.

• In the last two decades, India has integrated significantly with the global economy, but the majority of Indians remain poor.

• The country has achieved unprecedented GDP growth rates since the mid-2000s and is improving its standing in global economic, competitiveness and investment-attractiveness rankings.

• Education levels are poor and the government is investing heavily in vocational skills and education.

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Current issues in employment 1• A large majority of the workforce has suffered under the

neoliberal reforms, hence the need for a more interventionist labour policy.

• There is over-dependence on agriculture and low prospects of growth in manufacturing and in the organised sector.

• There is high incidence of contract and casual staff, who form over half to three-quarters of the total workforce in some large factories.

• There is much less employment in the public sector, which historically has been an engine of economic growth.

• There is hope for increasing employment levels in the service sector, but concerns over the low value that is added by IT professionals compared with other countries.

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Current issues in employment 2Search for flexibility • One of the catchcries of the reform movement since the 1990s has

been for greater flexibility in the labour market. • Courts and state and national governments have responded to the

need for increased flexibility with various policy measures that also attempt (often unsuccessfully) to maintain worker protection.

• The Consumer Protection Act 1986 prohibits worker action that impinges on liberty and normal civic activities of citizens (so city-wide freedom protests are not allowable if they interrupt normal activities).

• Similarly, the right to collective bargaining was taken away from insurance workers in the early 1980s as their agreement with their employer was found to disadvantage the interests of policy-holders.

• Although some common law cases have also established limits on industrial action by labour, other decisions have expanded labour rights or their enforcement.

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Agenda for labour law reform• Most commentators believe further reforms to labour

law are needed to sustain the high growth rate necessary to pull large segments of society out of poverty.

• Some of the most significant areas for reform include the need for: – fewer laws with better enforcement– the elimination of multiple definitions across different

legislations– clear rules for termination of employment– removing managerial functions from the scope of bargaining – independent industrial relations dispute-settlement machinery– skills development funds outside of direct government control – a tripartite national wages council