Industrial Relations and Legislation

Module-4 Introduction to Employee Relations-Notes

Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

Module-4- NOTES
Introduction to Employee Relations, meaning and significance of employee relations in
industry, Advantages and limitations of maintaining employee relations through unions. Legal
provisions to maintain employee relations- works committee, conciliation, board of
conciliation, voluntary arbitration, and adjudication.

Background of Employee Relations

The term 'employee relations' refers to a company's efforts to manage relationships between
employers and employees. An organization with a good employee relations program provides
fair and consistent treatment to all employees so they will be committed to their jobs and
loyal to the company. Such programs also aim to prevent and resolve problems arising from
situations at work.
Employee relations programs are typically part of a human resource strategy designed to
ensure the most effective use of people to accomplish the organization's mission. Human
resource strategies are deliberate plans companies use to help them gain and maintain a
competitive edge in the marketplace. Employee relations programs focus on issues affecting
employees, such as pay and benefits, supporting work-life balance, and safe working
conditions.
One of the most effective ways for a company to ensure good employee relations is to adopt
a human resource strategy that places a high value on employees as stakeholders in the
business. Stakeholders are people who are committed, financially or otherwise, to a company
and are affected by its success or failure. When employees are treated as more than just paid
laborers, but as actual stakeholders with the power to affect outcomes, they feel more valued
for the job they do.
Think about the last job you truly loved. Was it because you were treated like an important
part of the team? You probably had an interest in seeing the business succeed, like a
stakeholder.
Definition: The Institute of Personnel and Development (IPD) defines employee relation as
“that part of personnel; management that enable competent managers though the
development of institutions, procedures and policies to reconcile within acceptable limits to
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

the organization, the interest of employers as the buyers of labour service and those of
employees as the suppliers of labour services.”
Farnham (1993), suggests that Employee relation are: “
Concerned with the interaction between primary parties who pay for work and those who
provide it in the labour market ( employers and employees), those acting as secondary parties
on their behalf (management or management organization and trade unions) and those
providing a third party role on employment matters (state agencies and EU institutions)”

Importance of Employee Relations in Organizations:

Satisfied and happy employees hold the potential to take businesses to new heights of
success. The importance of employee relationship exists due to several such reasons however,
seven of these are discussed below which play a crucial role in the development of the healthy
relationship between employee and employer:
1. Employee engagement: It can be defined as the extent to which the employees feel
passionate about their jobs and workplaces. A research study shows that 90% of the
leaders have the idea of how important employee engagement is however, only 50% of
these employers actually know how it can be expressed. A few tips, discussed below, can
help improve employee engagement.
 Review and update the employee engagement
 Promote open and honest communication to highlight issues
 Encourage continuous feedback and recognition

 Promote sharing of thoughts and feelings

 Encourage discussions
2. Employee satisfaction: Employee engagement also leads towards employee
satisfaction. Employees that are more engaged tend to experience employee
satisfaction at a higher level and vice versa.
3. Employee productivity: Similarly, employee engagement and employee satisfaction
are both crucial for ensuring employee productivity. Increased employee productivity
ensures increased profit and revenue to the business.
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

4. Employee retention: It has been observed that more employees are switching jobs
these days. It happens when employees feel isolated and frustrated in the company.
Fortunately, employee retentions can be ignored by adopting several ways, and
developing good relations with employees is one such example. With enhanced
mutual relations, employees shall feel satisfied and would not consider other
opportunities. Therefore, realizing the importance of employee relations will also lead
towards employee retention.

5. Employee advocacy: The contact and social circle of the employee can open new
avenues of success to the organization. However, the connections of employees can
only be reached if the employee has the feeling of ownership of the company. It can
only be ensured if the management keeps their employees in the loop and share
important content and details with them.
6. The employee experience: Employee experience is very similar to employee
satisfaction in its context. Employee experience is mandatory to provide a healthy
workplace. A better employee experience can be made sure by promoting transparent
and open communication between management and employees.
7. Employee empowerment: The employees of business organizations want to own the
company they work for. Also, they want to have a certain level of say in the decision-
making process of the company. This refers to employee empowerment which
requires the employees to be able to take their own decisions to achieve their goals as
well as fulfill their responsibility in their own ways. A good communication strategy
and employee relations are all that are required to provide employee empowerment.

Benefit of Employer-Employee relationship:

1. Fewer Workplace Disputes
A friendly work environment leads to a reduction in conflicts. Employee's trust gets more
robust when they don't argue and work towards a common goal. That, in turn, results in
making them productive by avoiding confusion and increasing disharmony.
2. Added On Productivity
Just as mentioned above, a positive relationship with the employer helps the employees
generate more revenue through increased productivity. It is because when the work
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

atmosphere is pleasant, motivation is increased, and morale is improved. And

when employees feel happy, they are more likely to give their best efforts on the job.
3. Higher Engagement Rate
The organizational relationship is directly related to employee engagement. According to a
report by the Society for Human Resource Management, "The majority of employees find the
relationship with their employer to be significant to their job satisfaction.”
Thus, a close relationship can make the employees grow and stay for the long term because
they feel valued.
4. Higher Retention Rate
Companies that endorse positive relations are more likely to be successful because it helps
gain the confidence of their loyal employees who prefer to stick around.
They won't leave the team and organization, saving on recruitment, hiring, and training. To
avoid business loss, it is better to invest in creating a strong relationship rather than spending
on new searches.
5. Easier Work Assignment
As an employer, you should know your employees' strengths, weaknesses, and the current
and potential range of their expertise. It helps in assigning responsibilities and avoiding mix-
ups. It enables the employees to stay motivated and complete the given task efficiently.
Some employers also choose to create tasks to overcome weaknesses. When employees
uncover new strengths, they feel happy and be themselves at work.
6. Quick Understanding Of Problems
Maintaining a good relationship with employees results in overall free and frank
communication in the day-to-day business. Such open conversations assist in being aware of
existing business problems and drawbacks, which helps find quick resolutions.
7. Workplace Equality
Most employers fail to serve equality in the workplace. And without a fair and equal
environment, employees do not feel important.
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

As a result, they don't tend to work harder and be productive. By embracing equality for the
employees, you can create a sound and efficient workforce vital for any business's success.
8. Earning Employee Advocacy
Employee advocacy is nothing but empowering your employees to promote the brand name
of the company.

Advantages of Maintaining Employee Relations through Unions:

1. Collective Bargaining Power:
 Advantage: Unions provide employees with collective bargaining power, enabling them to
negotiate better wages, benefits, and working conditions as a unified force.
2. Improved Working Conditions:
 Advantage: Unions often advocate for better working conditions, including safety
measures, reasonable working hours, and suitable facilities, contributing to a healthier
work environment.
3. Job Security:
 Advantage: Unions may negotiate for job security provisions, protecting employees from
arbitrary dismissals and ensuring fair treatment in cases of layoffs or downsizing.
4. Dispute Resolution:
 Advantage: Unions offer a structured mechanism for resolving disputes between
employees and management, preventing and resolving conflicts through established
grievance procedures.
5. Employee Representation:
 Advantage: Unions act as representatives for employees, ensuring that their concerns are
heard and considered by management. This representation fosters a sense of fairness and
justice among workers.
6. Training and Development Opportunities:
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

 Advantage: Unions may negotiate for training and development programs, enhancing
employees' skills and contributing to their career growth.
7. Financial Benefits:
 Advantage: Through negotiations, unions often secure financial benefits for their
members, such as bonuses, profit-sharing, or other monetary incentives.
8. Legal Support:
 Advantage: Unions can provide legal support and representation to employees facing
workplace issues, ensuring that their rights are protected and that fair procedures are
followed.

Limitations of Maintaining Employee Relations through Unions:

1. Conflict and Strife:
 Limitation: Unions may lead to conflicts with management, especially when negotiating
for better terms. Strikes and other forms of industrial action can disrupt productivity and
harm the overall work environment.
2. Rigidity in Decision-Making:
 Limitation: Collective bargaining agreements may introduce rigidity into decision-making
processes, making it challenging for management to adapt quickly to changing business
conditions.
3. Costs and Dues:
 Limitation: Union membership often involves paying dues, and collective bargaining can
lead to increased labor costs, impacting the financial health of the organization.
4. Resistance to Change:
 Limitation: Unions may resist changes in work processes or organizational structure,
potentially hindering innovation and adaptation to new technologies or market demands.
5. Inequality Among Workers:
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

 Limitation: While unions strive for equality, there may be disparities among workers
within the same organization, as negotiations may prioritize certain groups or job roles
over others.
6. Loss of Individual Voice:
 Limitation: Some employees may feel that their individual voices are overshadowed by
the collective decisions made by unions, limiting their ability to negotiate personal terms.
7. Political Influence:
 Limitation: Unions may engage in political activities that align with their interests, which
can create tensions if employees have diverse political views.
8. Industry Competitiveness:
 Limitation: In certain industries, the presence of strong unions may impact the
competitiveness of companies, especially when compared to regions or sectors with lower
labor costs.
Understanding these advantages and limitations is crucial for both employers and employees
to navigate the dynamics of maintaining employee relations through unions. Balancing the
interests of both parties is essential for fostering a positive and productive work environment.

Legal provisions play a crucial role in maintaining positive

employee relations:
Legal provisions play a crucial role in maintaining positive employee relations, ensuring fair
treatment, and providing a structured framework for dispute resolution. Here are some
common legal provisions that contribute to maintaining employee relations:
1. Labor Laws:
 Labor laws, also known as employment or industrial relations laws, establish the rights
and responsibilities of employers and employees. These laws cover aspects such as
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

working hours, minimum wages, leave entitlements, and other fundamental employment
conditions.
2. Collective Bargaining:
 Many countries have laws governing collective bargaining processes. These laws outline
the rights of employees to form or join trade unions, engage in collective bargaining, and
participate in industrial action like strikes within legal parameters.
3. Works Committee:
 Legal provisions may require the establishment of works committees in certain
organizations. These committees consist of representatives from both management and
workers and aim to facilitate communication and cooperation on various workplace issues.
4. Conciliation:
 Legal provisions often include mechanisms for conciliation, where a neutral third party
assists in resolving disputes between employers and employees. Conciliation is aimed at
preventing industrial disputes and promoting amicable settlements.
5. Board of Conciliation:
 Some jurisdictions have boards of conciliation that intervene in labor disputes. These
boards typically consist of representatives from both labor and management, working to
find solutions and promote understanding between the parties.
6. Voluntary Arbitration:
 Legal provisions may allow for voluntary arbitration, where an impartial arbitrator makes
binding decisions based on the arguments and evidence presented by both parties. This is
an alternative dispute resolution method that avoids the need for litigation.
7. Adjudication:
 Adjudication involves resolving disputes through a legal process. Labor courts or industrial
tribunals may be established to adjudicate on matters related to employment,
termination, or violations of labor laws.
8. Employee Welfare Laws:
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

 Various laws address employee welfare, covering aspects such as workplace safety, health,
and social security. These laws ensure that employers take measures to create a safe and
healthy work environment.
9. Anti-Discrimination Laws:
 Legislation against discrimination based on factors such as gender, race, religion, or
disability contributes to maintaining fair and equitable employee relations. These laws aim
to prevent discriminatory practices in recruitment, promotion, and other employment
aspects.
10. Whistleblower Protection Laws:
 Laws protecting whistleblowers contribute to open communication and transparency
within organizations. Employees are safeguarded when reporting wrongdoing, promoting
a culture of accountability.
11. Employee Privacy Laws:
 Legal provisions safeguard employee privacy rights by regulating the collection, storage,
and use of personal information. These laws ensure that employers respect employees'
privacy in areas such as monitoring, surveillance, and data handling.
12. Employment Contracts and Termination Laws:
 Legal provisions often dictate the terms and conditions of employment contracts,
including provisions for termination. These laws guide fair and lawful employment
practices, ensuring that employees are treated justly in matters of termination.
Understanding and adhering to these legal provisions is essential for both employers and
employees to maintain positive and lawful employee relations. Compliance helps in
preventing conflicts, ensuring fair treatment, and fostering a healthy work environment.
Employers should stay updated on relevant labor laws and regulations to create a workplace
that respects legal standards.
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Prevention of Industrial Disputes:

Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

The consequences of an Industrial dispute will be harmful to the owners of industries,

workers, economy and the nation as a whole, which results in loss of productivity, profits,
market share and even closure of the plant. Hence, Industrial disputes need to be averted by
all means.

Prevention of Industrial disputes is a pro-active approach in which an organisation undertakes

various actions through which the occurrence of Industrial disputes is prevented. Like the old
saying goes, “prevention is better then cure”.

1. Model Standing Orders: Standing orders define and regulate terms and conditions of
employment and bring about uniformity in them. They also specify the duties and
responsibilities of both employers and employees thereby regulating standards of their
behavior. Therefore, standing orders can be a good basis for maintaining harmonious
relations between employees and employers.

Under Industrial Dispute Act, 1947, every factory employing 100 workers or more is required
to frame standing orders in consultation with the workers. These orders must be certified and
displayed properly by the employer for the information of the workers.

2. Code of Industrial discipline: The code of Industrial discipline defines duties and
responsibilities of employers and workers. The objectives of the code are:
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

 To secure settlement of disputes by negotiation, conciliation and voluntary

arbitration.
 To eliminate all forms of coercion, intimidation and violence.
 To maintain discipline in the industry.
 To avoid work stoppage.
 To promote constructive co-operation between the parties concerned at all levels.

3. Works Committee: Every industrial undertaking employing 100 or more workers is under
an obligation to set up a works committee consisting equal number of representatives of
employer and employees. The main purpose of such committees is to promote industrial
relations. According to Indian Labor Conference work committees are concerned with:-

 Administration of welfare & fine funds.

 Educational and recreational activities.
 Safety and accident prevention
 Occupational diseases and protective equipment.
 Conditions of work such as ventilation, lightening, temperature & sanitation including
latrines and urinals.
 Amenities such as drinking water canteen, dining rooms, medical & health services.

The following items are excluded from the preview of the work committees.

 Wages and allowances

 Profit sharing and bonus
 Programs of planning and development
 Retirement benefits
 PF and gratuity
 Housing and transport schemes
 Incentive schemes
 Retirement and layoff

4. Joint Management Councils: Just to make a start in labour participation in management,

the govt: suggested in its Industrial Resolution 1956 to set up joint management councils.
It consists of equal numbers of workers and employers (minimum 6 & maximum 12)
decisions of the JMC should be unanimous and should be implemented without any delay.
JMC members should be given proper training. JMC should look after 3 main areas:-

 information sharing
 consultative
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

 administrative

Representation of workers to the JMCs should be based on the nomination by the

representation.

Objectives

 Satisfy the psychological needs of workers

 Improve the welfare measures
 Increase workers efficiency
 Improve the relation and association between workers, managers and promoters.

JMC deals with matters like:-

 Employee welfare
 Apprenticeship scheme

5. Suggestion Schemes:

Joint Councils: Joint Councils are set up for the whole unit and deals with matters relating
optimum production and efficiency and the fixation of productivity norms for man and
machine for the as a whole. in every industrial unit employing 500 and more workers there
should be a Joint Council for the whole unit.

Features

 Members of the council must be actually engaged in the unit.

 The chief executive of the unit will be the chairman of the council and vice chairman
will be nominated by worker members.
 Term of the council will be two years.
 JC shall meet at once in a quarter.
 Decision of the council will be based on consensus and not on voting.

Functions

 Optimum use of raw materials and quality of finished products

 Optimum production, efficiency and function of productivity norms of man and
machine as a whole.
 Preparation of schedules of working hours and of holidays.
 Adequate facilitates for training.
 Rewards for valuable and creative suggestions received from workers.
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

7. Collective Bargaining: Collective Bargaining is a process in which the representatives of

the employer and of the employees meet and attempt to negotiate a contract governing the
employer-employee-union relationships. Collective Bargaining involves discussion and
negotiation between two groups as to the terms and conditions of employment.

8. Labour welfare officer: The factories Act, 1948 provides for the appointment of a labour
welfare officer in every factory employing 500 or more workers. The officer looks after all
facilities in the factory provided for the health, safety and welfare of workers. He maintains
liaison with both the employer and the workers, thereby serving as a communication link and
contributing towards healthy industrial relations through proper administration of standing
orders, grievance procedure etc.

9. Tripartite bodies: Several tripartite bodies have been constituted at central, national and
state levels. The India labor conference, standing labor committees, Wage Boards and
Industries Committees operate at the central level. At the state level, State Labor Advisory
Boards have been set up. All these bodies play an important role in reaching agreements on
various labor-related issues. The recommendations given by these bodies are however
advisory in nature and not statutory.

…………………………………………………………………………………………………………………………………….

Machinery for settlement of Industrial Disputes:

1. Conciliation: Conciliation refers to the process by which representatives of employees and
employers are brought together before a third party with a view to discuss, reconcile their
differences and arrive at an agreement through mutual consent. The third-party acts as a
facilitator in this process. Conciliation is a type of state intervention in settling the Industrial
Disputes. The Industrial Disputes Act empowers the Central & State governments to appoint
conciliation officers and a Board of Conciliation as and when the situation demands.

Conciliation Officer: The appropriate government may, by notification in the official gazette,
appoint such number of persons as it thinks fit to be the conciliation officer. The duties of a
conciliation officer are:

a) To hold conciliation proceedings with a view to arrive at amicable settlement between the
parties concerned.
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

b) To investigate the dispute in order to bring about the settlement between the parties
concerned.

c) To send a report and memorandum of settlement to the appropriate government.

d) To send a report to the government stating forth the steps taken by him in case no
settlement has been reached at.

The conciliation officer however has no power to force a settlement. He can only persuade
and assist the parties to reach an agreement. The Industrial Disputes Act prohibits strikes and
lockouts during that time when the conciliation proceedings are in progress.

2. Arbitration: A process in which a neutral third party listens to the disputing parties, gathers
information about the dispute, and then takes a decision which is binding on both the parties.
The conciliator simply assists the parties to come to a settlement, whereas the arbitrator
listens to both the parties and then gives his judgement.

Advantages of Arbitration:
 It is established by the parties themselves and therefore both parties have good faith
in the arbitration process.
 The process in informal and flexible in nature.
 It is based on mutual consent of the parties and therefore helps in building healthy
Industrial Relations.

Disadvantages:
 Delay often occurs in settlement of disputes.
 Arbitration is an expensive procedure and the expenses are to be shared by the labour
and the management.
 Judgement can become arbitrary when the arbitrator is incompetent or biased.

There are two types of arbitration:

 Voluntary Arbitration: In voluntary arbitration the arbitrator is appointed by both the

parties through mutual consent and the arbitrator acts only when the dispute is
referred to him.
 Compulsory Arbitration: Implies that the parties are required to refer the dispute to
the arbitrator whether they like him or not. Usually, when the parties fail to arrive at a
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

settlement voluntarily, or when there is some other strong reason, the appropriate
government can force the parties to refer the dispute to an arbitrator.

3. Adjudication: Adjudication is the ultimate legal remedy for settlement of Industrial

Dispute. Adjudication means intervention of a legal authority appointed by the government
to make a settlement which is binding on both the parties. In other words adjudication means
a mandatory settlement of an Industrial dispute by a labor court or a tribunal. For the purpose
of adjudication, the Industrial Disputes Act provides a 3-tier machinery:

 Labor court
 Industrial Tribunal
 National Tribunal

a) Labor Court: The appropriate government may, by notification in the official gazette
constitute one or more labor courts for adjudication of Industrial disputes relating to any
matters specified in the second schedule of Industrial Disputes Act. They are:

 Dismissal or discharge or grant of relief to workmen wrongfully dismissed.

 Illegality or otherwise of a strike or lockout.
 Withdrawal of any customary concession or privileges.

Where an Industrial dispute has been referred to a labor court for adjudication, it shall hold
its proceedings expeditiously and shall, within the period specified in the order referring such
a dispute, submit its report to the appropriate government.

b) Industrial Tribunal: The appropriate government may, by notification in the official

gazette, constitute one or more Industrial Tribunals for the adjudication of Industrial disputes
relating to the following matters:

 Wages
 Compensatory and other allowances
 Hours of work and rest intervals
 Leave with wages and holidays
 Bonus, profit-sharing, PF etc.
 Rules of discipline
 Retrenchment of workmen
 Working shifts other than in accordance with standing orders

It is the duty of the Industrial Tribunal to hold its proceedings expeditiously and to submit its
report to the appropriate government within the specified time.
Industrial Relations and Legislation
Module-4 Introduction to Employee Relations-Notes
Prepared by Prof. Aravinda H G
Department of Management Studies
Sai Vidya Institute of Technology and Management, Rajanukunte Blore

c) National Tribunal: The central government may, by notification in the official gazette,
constitute one or more National Tribunals for the adjudication of Industrial Disputes in

 Matters of National importance

 Matters which are of a nature such that industries in more than one state are likely to
be interested in, or are affected by the outcome of the dispute.

It is the duty of the National Tribunal to hold its proceedings expeditiously and to submit its
report to the central government within the stipulated time.