IRLL Handout # 1

Introduction to Industrial Relations

Concept of Industrial Relations:

The term „Industrial Relations‟ comprises of two terms: „Industry‟ and „Relations‟.

“Industry” refers to “any productive activity in which an individual or a group of

individual(s) is (are) engaged”. By “relations” we mean “the relationships that exist

within the industry between the employer and his workmen.”

The term industrial relations explains the relationship between employees and

management which stem directly or indirectly from union-employer relationship.

Definition:-

“The concept of Industrial Relations had been extended to mean and denote the relations

of the state with employers, employees and the organizations. The subject includes

individual relations and joint consultation between employers and people at their

workplace; collective relations between employers and their organizations and trade

unions and the part played by the state in regulating these relations.” Encyclopedia

Britannica

Industrial relations are the relationships between employees and employers within the

organizational settings. The field of industrial relations looks at the relationship between

management and workers, particularly groups of workers represented by a union.

Industrial relations are basically the interactions between employers, employees and the

government, and the institutions and associations through which such interactions are

mediated.

The term industrial relations has a broad as well as a narrow outlook. Originally,

industrial relations was broadly defined to include the relationships and interactions

between employers and employees. From this perspective, industrial relations covers all

aspects of the employment relationship, including human resource management,

employee relations, and union-management (or labor) relations. Now its meaning has

become more specific and restricted. Accordingly, industrial relations pertains to the

study and practice of collective bargaining, trade unionism, and labor-management

relations, while human resource management is a separate, largely distinct field that deals

with nonunion employment relationships and the personnel practices and policies of

employers.

The relationships which arise at and out of the workplace generally include the

relationships between individual workers, the relationships between workers and their

employer, the relationships between employers, the relationships employers and workers

have with the organizations formed to promote their respective interests, and the relations

between those organizations, at all levels. Industrial relations also includes the processes

through which these relationships are expressed (such as, collective bargaining, workers‟

participation in decision-making, and grievance and dispute settlement), and the

management of conflict between employers, workers and trade unions, when it arises.

The Industrial Relations are also called as labor - management, employee-employers

relations.

A few notable features pertaining to Industrial Relations are as under:

1. Emerge out of employment relationship in an industrial setting. Without the

existence of the two parties, i.e. labor and management, this relationship cannot

exist. It is the industry, which provides the environment for industrial relations.

2. Industrial Relations are characterized by both conflict and co-operation. This is

the basis of adverse relationship. So the focus of Industrial Relations in on the

study of the attitudes, relationships, practices and procedure developed by the

contending parties to resolve or at least minimize conflicts.

3. As the labor and management do not operate in isolation but are parts of large

system, so the study of Industrial Relation also includes vital environment issues

like technology of the workplace, country‟s socio-economic and political

environment, nation‟s labor policy, attitude of trade unions workers and

employers.

4. Also involves the study of conditions conducive to the labor, management

co-operation as well as the practices and procedures required to elicit the desired

co-operation from both the parties.

5. Also studies the laws, rules, regulations, agreements, awards of courts, customs

and traditions, as well as policy framework laid down by the governments for

eliciting co-operations between labor and management. Besides this, it makes an

in-depth analysis of the interference patterns of the executive and judiciary in the

regulations of labor–managements relations.

In fact, IR encompasses all such factors that influence behavior of people at work. A few

such important factors are details below:

1. Institution : It includes government, employers, trade unions, unions federations or

associations, government bodies, labor courts, tribunals and other organizations which

have direct or indirect impact on the industrial relations systems.

2. Characters : It aims to study the role of workers‟ union and employers‟ federations,

industrial relations officers / manager, mediator / conciliators / arbitrator, judges of labor

court, tribunal etc.

3. Methods : Focus on collective bargaining, workers‟ participation, discipline

procedure, grievance redressal machinery, dispute settlements machinery, unions, rules,

regulations, policies, procedures, hearing of labor courts, tribunals etc.

4. Contents : Includes matter pertaining to employment conditions like pay, hours of

works, leave with wages, health, and safety disciplinary actions, lay-off, dismissals

retirements etc., laws relating to such activities, regulations governing labor welfare,

social security, industrial relations, issues concerning with workers‟ participation in

management, collective bargaining, etc.

Difference between industrial relations and human relations:

The term “Industrial Relations” is different from “Human Relations”.

Industrial relations refer to the relations between the employees and the employer in an

industry. Human relations refer to a personnel-management policy to be adopted in

industrial organizations to develop a sense of belongingness in the workers, improve their

efficiency and treat them as human beings and make them a partner in industry.

Industrial relations cover the matters regulated by law or by collective agreement

between employees and employers. On the other hand, problems of human relations are

personal in character and are related to the behavior of worker where morale and social

elements predominate.

Human relations approach is personnel philosophy which can be applied by the

management of an undertaking. The problem of industrial relations is usually dealt with

at three levels – the level of enterprise, the industry and at the national level.

Thus, the term “Industrial Relations” is more wide and comprehensive and the term

“Human Relations” is a part of it.

Parties to the IR system:

Three main parties are directly involved in industrial relations:

Employers and their organizations : Employers possess certain rights vis-à-vis

employees (workers). They have the right to hire and fire them. Management can also

affect workers‟ interests by exercising their right to relocate, close or merge the factory or

to introduce technological changes. The employers‟ organizations are voluntary

bureaucratic institutions.

Workers and their organizations: Workers seek to improve the terms and conditions of

their employment. They exchange views with management and voice their grievances.

They also want to share decision making powers of management. Workers generally

unite to form unions against the management and get support from these unions. These

are mainly political institutions, associations of employees formed and maintained for the

specific purpose of wresting concessions from employers.

Government: The central and state government influences and regulates industrial

relations through laws, rules, agreements, awards of court and the like. It also includes

third parties and labor and tribunal courts.

Scope: The concept of industrial relations has a very wide meaning and connotation. In the

narrow sense, it means that the employer, employee relationship confines itself to the

relationship that emerges out of the day to day association of the management and the

labor. In its wider sense, industrial relations include the relationship between an

employee and an employer in the course of the running of an industry and may project it

to spheres, which may overlap the areas of quality control, marketing, price fixation and

disposition of profits among others.

Factors affecting Industrial Relations

The factors affecting industrial relations system of an organization are :

(1) Institutional factors : Include factors like state policy, labour laws, collective

bargaining agreements, employers organizations / federations, etc.

(2) Economic factors : Include factors like type of ownership, individual, company –

whether domestic or MNC, government, etc., source of labour supply, level of

unemployment, etc.

(3) Social Factors : Include factors like social values, norms, social status (high or

low)

(4) Technological factors : Include factors like work methods, type of technology

used, rate of technological change, R&D activities, etc. These factors directly

influence employment status, wage level, collective bargaining process in an

organization.

(5) Psychological factors : Include factors such as owners‟ attitude perception of

workforce, motivation, morale, interest, dissatisfaction of workers, worker

attitude towards work. These factors affect workers‟ job and personal life that

directly or indirectly influences industrial relations systems.

(6) Political factors : Include factors such as political institutions, system of

government, attitude of government. Most of the trade unions are controlled by

political parties, so the trade relations are shaped by the gravity of involvement of

political parties in trade union activities.

(7) Enterprise-related factors : Include factors like style of management, its

philosophy and value system, organizational climate, extent of competition,

adaptability of change and the various human resource management policies

(8) Global factors : Issues included are international relations, global conflicts,

international trade agreements and relations, international labour agreements (role

of ILO) etc.

Objectives of Industrial Relations

1. To safeguard the interest of labor and management by securing the highest level of

mutual understanding and goodwill among all sections in the industry which

participate in the process of production.

2. To avoid industrial conflict or strife and develop harmonious relations, which are an

essential factor in the productivity of workers and the industrial progress of a country.

3. Reduce high turnover and absenteeism.

4. To encourage sharing of profits and of managerial decisions

5. To eliminate, as far as is possible and practicable, strikes, lockouts and gheraos by

providing reasonable wages, improved living and working conditions and fringe

benefits.

6. Improvements in the economic conditions of workers in the existing state of industrial

managements and political government.

7. Control exercised by the state over industrial undertaking with a view to regulating

production and promoting harmonious industrial relations.

8. Socialization or rationalization of industries by making the state itself a major

employer

9. Vesting of a proprietary interest of the workers in the industries in which they are

employed.

Sound Industrial Relations

A sound industrial relations system is one in which relationships between management

and employees (and their representatives) on the one hand, and between them and the

State on the other, are more harmonious and cooperative than conflictual and creates an

environment conducive to economic efficiency and the motivation, productivity and

development of the employee and generates employee loyalty and mutual trust. Industrial

relations itself may again be described as being concerned with the rules, processes and

mechanisms (and the results emanating therefrom) through which the relationship

between employers and employees and their respective representatives, as well as

between them on the one hand and the State and its agencies on the other, is regulated.

The rules, processes and mechanisms of an industrial relations system are found in

sources such as laws (legislative, judicial, quasi-judicial), practices, customs, agreements

and arrangements arrived at through a bipartite or tripartite process or through

prescription by the State.

Industrial relations operates at different levels :

(i) at the national level

(ii) at the industry level

(iii) at the enterprise level.

The elements which reflect a sound industrial relations system at all these levels are not

necessarily the same.

At the national level industrial relations operates so as to formulate labour relations

policy. In market economies this is usually done through a tripartite process involving

government, employers and workers and their representative organizations.

At the industry level industrial relations often takes the form of collective bargaining

between employers' organizations and unions. This process may result in determining

wages and other terms and conditions of employment for an industry or sector. It may

also result in arrangements on issues which are of mutual concern such as training, ways

of avoiding or settling disputes, etc.

At the enterprise level the relationship between employers and workers is more direct,

but the interests of workers may be represented by unions. Employers' organizations,

however, are not usually involved (though sometimes they are when negotiations take

place between them and unions in respect of enterprise issues) at the enterprise level in

representing the employers' interests with workers or their union, but this does not mean

that they do not have an important promotional role at this level.

Sound industrial relations at the national level build trust and confidence between

representatives of workers and employers. Sound relations at the enterprise level builds

trust and confidence between workers and management, which is the point at which the

system must ultimately be effective. Effectiveness at one level would naturally have

some impact on the other.

Objectives of sound Industrial Relations:

i. Employment and job security and increased employment opportunities.

ii. Raising living standards through improved terms and conditions of employment.

iii. Productivity improvement which enables employers to be more competitive and

to increase their financial capacity to raise the living standards of the employees.

iv. Minimizing conflict, achieving harmonious relations, resolving conflicts through

peaceful means and establishing stable social relationships.

A sound industrial relations climate is essential to a number of issues which are critical to

employers, employees and the community. The efficient production of goods and

services depends to an extent on the existence of a harmonious industrial relations

climate. Efficiency and quality depend on a motivated workforce, for which a sound

industrial relations climate is necessary. Productivity - a key consideration of

profitability, the ability of enterprises to grant better terms and conditions of employment

and for economic and social development - needs a sound labour relations base.

Productivity does not depend on individual effort alone. Many mechanisms which

contribute towards productivity gains are workable only where there is teamwork and

cooperation e.g. small group activities, joint consultation mechanisms. Therefore labour

management relations should be geared to creating the climate appropriate to securing the

cooperation necessary for productivity growth. Labour Management Relations (LMR)

and Labour Management Cooperation (LMC) are also important to the creation of a

culture which is oriented towards innovation, adaptable to and encourages change, where

authority is decentralized and two-way communication, risk-taking and maximizing

opportunities are encouraged, and where the output rather than the process is what

matters.

Importance of Industrial Relations

The healthy industrial relations are key to the progress and success. Their significance

may be discussed as under :

1. Uninterrupted production – The most important benefit of industrial relations is

that this ensures continuity of production. This means, continuous employment

for all from manager to workers. The resources are fully utilized, resulting in the

maximum possible production. There is uninterrupted flow of income for all.

Smooth running of an industry is of vital importance for several other industries

2. Reduction in Industrial Disputes – Good industrial relations reduce industrial

disputes. Strikes, lockouts, go-slow tactics, gherao and grievances are some of the

reflections of industrial unrest which do not arise in an environment of industrial

peace. It helps promoting co-operation and increasing production.

3. High morale – Good industrial relations improve morale of employees.

Employees work to increase productivity. It elevates the status of workers in the

society and their ego is satisfied. It naturally affects production because mighty

co-operative efforts can produce great results.

4. Mental Revolution – The main objective of industrial relation is a complete

mental revolution of workers and employees. The industrial peace lies ultimately

in a transformed outlook on the part of both. Workers must recognize employer‟s

authority. It will naturally have impact on production because they recognize the

interest of each other.

5. Reduced Wastage – Good industrial relations are maintained on the basis of

cooperation and recognition of each other. It will help increase production.

Wastages of men, material and machines are reduced to the minimum and thus

national interest is protected.

Thus, it is evident that good industrial relations is the basis of higher production with

minimum cost and higher profits. It also results in increased efficiency of workers.

Functional Requirements of a successful Industrial Relations Programme :

A successful industrial relations programme is based on the following basic

requirements:

1. Top management support : The IR head should have the support and should

report to the top management in the organization.

2. Sound personnel policies : The purpose of such policies is to decide, before

any emergency arises, what shall be done about the large number of problems

which crop up every day during the working of an organization. Policies,

however, can be successful only when they are followed at all the levels of the

organization

3. Adequate practices should be developed by professionals : A system of

procedures is essential if the policies have to be translated into action.

4. Detailed supervisory training : To ensure that organizational policies and

practices are properly implemented and carried into effect by the industrial

relations staff, supervisors should be trained thoroughly, so that they may

convey to the employees, the significance of those policies and practices.

5. Follow up of results : A constant review of IR programme is essential so that

existing practices may be properly evaluated and check may be exercised on

certain undesirable tendencies, should they manifest themselves. The

grievances and suggestions, wage administration, etc. should be supplemented

by continuous research to ensure that the policies that have been pursued are

best fitted to company‟s needs and employees‟ satisfaction.