Arun Kumar/ACTRAV-ILO

FoA & Right to CB: Pathway to Decent WorkILO C 87 & C 98: a fundamental right promotes Voice, Representation & Participation facilitates representative social dialogue, help reach mutually agreeable solutions while respecting each others needs

Role of law v/s Collective bargaining: law can force compliance but not cooperation between parties

C-87 & C-98: Development policy? money in workers pockets promotes domestic growth & employment

So, what is Collective Bargaining Agreement?Image v/s concept

CBA is like a constitution for a company /industry not a mere document for just getting some wage rise BUT a document of rights & obligations of parties to the agreement a means of joint regulation of workplace issues, including union right to information & negotiate management policy

So need for union vision for the workers, for the Company, then a strategy and actions to achieve that vision

What should you negotiate for?Issues of interest (thu CB) v/s issues of rights (as per law)- what is provided for by law ideally should not be part of CB employers are expected to abide by law (MW, rates of OT pay) CB is for getting more than the law

Negotiate compensation system & compensation package, Not just wages (some companies pay more wages, less benefits, or vice versa) total costs of the compensation package matter & should be calculated.

Employment stability v/s wages question.

Elements of compensationPay for work 8 hours of work

Pay for performance productivity linked component

Pay for time not worked (paid leave, Sundays, etc)

Lay off compensation (for temporary situation)

Deferred income (Bonus, social security)

Income equivalent payments (allowances)

Health, accident and Liability Protection

Company performance bonus

Labour rates v/s Labour costs Example: Two companies in car Industry for 8 hours work, Company N pays higher wages but has lower labour costs, while Company G pays lower wages but has higher labour costs.How can this be?Productivity plays a major role. Company N makes 1 car in 40% less time than Company GFocus on costs, not Wages - what are major costs in a company? What do Managers spend their maximum time on?

Global Financial Crisis & Companys ResponseCompany Management, taking advantage of Global Financial Crisis, demanded the Union to accept wage cut of 20% orreduce workforce by 20%. How will you respond as union?Cost structure as per the company balance sheet: Material Cost ......... 78% Energy Cost ......... 10%Admn. Cost.......... 4% Labour Cost........ 8%

Reduction by 20% head count or wages meant only 1.6% savings (20% of 8%) BUT targeting saving in material &energy costs by 10% would give 8.8% cost savings. Management had no answer but to accept unions proposal and in this way Union saved the jobs as well as wages.

Are profits a good basis for basing wage demands? Focus on value added what is it?

Value Added = Income Non Factor Expenditure. (Here non-factor expenditure means expenditure other than employee cost, depreciation and interest).

Balance Sheet Analysis - Example

PARTICULARS / YEARS20082009201020112012TOTAL CAPITAL EMPLOYED1509626425331005419054519INCOME2921426555374464751154880EXPENDITURE OTHER THAN LABOUR COST, DEPRECIATION & INTEREST2522523211303194013047439VALUE ADDITION39893344712773817441EMPLOYEES SHARE IN V.A. 15451551183622942691CAPITAL SHARE IN VALUE ADDITION 24451793529150874750EMPLOYEES SHARE IN V.A (%)3946263136CAPITAL SHARE IN V.A. (%)6154746964RETURN TO CAPITAL (%)1671699Gross Profit25761079374921961341Net Profit20291001224018111242

Where Financial Info is not available, how to negotiate?

Depend on production information & market price of the product

PARTICULARSEXISTING SCENARIOIF WAGES RISE BY 10%PRODUCTION PER MONTH315000315000NO. OF WORKERS22002200OUTPUT PER WORKER PER MONTH143143WAGES PER MONTH (Rs)80008800PER UNIT LABOUR COST5661.6PRICE PER UNIT (FOB) TO MANUFACTURER600600

LABOUR COST (MANUFACTURER) IN %9.3110.26PRICE PER UNIT TO BRAND24002400LABOUR COST (BRAND) IN %2.332.56

For effective CB, Unions need to KnowWhat kind of company it is? Labour intensive? Capital intensive? Supplying directly to market or is in supply chain?

Capacity to Pay of the company

Share of labour in the wealth (value added) produced in the company

Return on capital invested in the company (if it goes down too much, investors will withdraw & firm will close down)

Where do you get this information from? Balance Sheet and Profit & Loss Account of the Company for last 3-4 years.

Capabilities needed For effective collective bargaining, Unions need capacity for

Understanding countrys economic situation, impact of external events

Financial analysis of the company - understanding balance sheets, profit & loss statements

Management systems and philosophy (Ex. German v/s American, Japanese, Korean, Chinese, Indian employers)

Understanding productivity, work measurement techniques, changes in the company, in the economy

Survey Market Pay & Compensation Practices

What else?

Agenda for Bargaining?Issues to put on negotiating table:Traditional issues wage rates/pay, working hours & other working conditions, employment policies, productivity agreement

New areas: Company management issues such as: - demanding equity in matters relating to work norms, staffing standards & employment levels, - environmental hazards/green jobs issues, - Outsourcing, sub-contracting clauses, - Investment policies, management decisions over diversification choice of technologies, etc. - Training education leave .since all these affect workers employment and working conditions

Group DiscussionWorkers want 20% wage hike the situation facing the company is: The input prices (Cost of raw material, electricity, water etc) has gone up by 10 %Due to competition the company has to reduce the product price by 10%At the same time the share holders are also expecting 5 % more returns from the existing 15 %How to develop a strategy to respond this situation?What are the areas that you can explore to find an answer?

Increase in input cost: Reduction in wastageInventory managementChange in design of the product to save more materialEnergy savingCompetition in price: selling at lower margin but at a mass level. For this we need to improve productivity. Productivity improvement involves various factors such as: process and systems improvementupdated technologyapplication of various improvement toolsCulture and attitudinal change, etc

Once productivity and sales increases it will generate more Revenues that can go towards K & L.

Concluding RemarksFoA & CB are not just about workers rights but are also instruments of State policy to achieve objectives of social justice & for promoting sustainable economic growth

Should not be limited to industry or company level but this principle (of promoting social dialogue) should be extended to national level over issues of policies labour, social and economic for social harmony & social stability

Importance of understanding financial numbers for countering management & Union information system at work place

Need to move from mere collective bargaining over wages to participatory rights in industry as also the economy

Source of bargaining power?