BBA (Honors)

Semester-5
HRM Group: Advanced Human Resource Management

UNIT 1

Basics of Industrial Relations

 Introduction

The Industrial Relations or IR encompasses the relationship between the management and
workmen and the role of a regulatory body to resolve any industrial dispute.

As the name implies, Industry Relations comprises of two words, Industry, and Relations.
Where industry covers the production activity in which the group of workmen is engaged in,
while the relations show the relationship between the management and the workers within the
industry. IR plays a significant role in today’s working scenario where the harmonious
relationship between the employers and employees is needed to have an uninterrupted
production.

 Meaning

“Industrial relations includes securing effective and willing cooperation from employees and
reducing conflict between employers and workers and their representatives, the trade unions.”

Industrial Relations (IR) refers to the dynamic relationship between employers, employees,
and the government, especially concerning employment conditions, workplace conflict,
negotiation, and cooperation. The nature of IR is shaped by various economic, legal, and
social factors.

 Characteristics of industrial relations

1. Tripartite Relationship

Definition: IR involves three main parties — employers, employees (and their unions), and
the government.

Example: In India, the government often intervenes in wage disputes through mechanisms
like minimum wage legislation, ensuring a balance between employer profit and worker
welfare.

2. Conflict and Cooperation

IR is characterized by both conflict (disputes, strikes, lockouts) and cooperation (agreements,

negotiations) between management and workers.

Example: A trade union may call for a strike demanding higher wages (conflict), but after
negotiations with the employer, they may reach a mutual agreement (cooperation).
3. Regulated by Law

Definition: Industrial relations are governed by various labour laws and regulations, such as
the Industrial Disputes Act, 1947 in India.

Example: Before laying off workers in large companies, employers must seek permission
from the government as per legal provisions — this ensures protection for workers and
regulates employer action.

4. Collective Bargaining

Definition: Employees, through their unions, negotiate with employers over wages, working
conditions, benefits, etc., which is known as collective bargaining.

Example: The All India Bank Employees Association negotiates with the Indian Banks’
Association on behalf of bank employees for salary revisions and benefits.

5. Dynamic and Evolving Nature

Definition: Industrial relations are not static; they change with economic development,
political shifts, technological advancement, and globalization.

Example: The rise of automation and gig work (e.g., Uber drivers, Swiggy delivery partners)
has led to new IR issues, such as the classification of workers as independent contractors
rather than employees.

6. Focus on Employment Conditions

Definition: IR primarily deals with issues like wages, hours of work, job security, health and
safety, and other employment conditions.

Example: The implementation of Occupational Safety, Health and Working Conditions Code
(OSH Code) in India aims to improve safety standards in factories and construction sites.

7. Role of Trade Unions

Definition: Trade unions play a crucial role in representing workers’ interests and influencing
employer policies through negotiations and industrial actions.

Example: In the UK, the Unite the Union is known for advocating better pay and working
conditions for employees across various sectors.

8. Importance of Communication

Definition: Open and transparent communication between management and workers helps in
resolving disputes and building mutual trust.

Example: Regular meetings between HR and worker representatives in companies like Tata
Steel help maintain harmony and reduce misunderstandings.
9. Impact on Productivity and Efficiency

Definition: Healthy industrial relations contribute to higher employee morale, better

productivity, and improved organizational performance.

Example: In Japanese companies, the teamwork-oriented approach and lifetime employment

policies lead to a high level of industrial harmony and productivity.

 Importance of industrial relations

1. Increased Productivity:

With amicable industrial relations both the workers and managers continue to work on their
respective position and contribute towards the overall productivity of the firm. Thus, IR
ensures the continuity of production.

2. Reduced Industrial Disputes:

An effective IR helps in the reduction of industrial disputes as both the management and the
workers maintain harmonious relations with each other and work in unison towards the
accomplishment of production objective.

3. Increased Morale:

The peaceful industrial relations boost the morale level of the employees as they feel that
their interest coincides with that of the employer’s, and their efforts will result in the overall
profitability of the firm.

4. A good IR ensures reduced wastage of the resources

Man, Machinery, Material are fully utilized and are effectively contributing towards the
overall productivity of the firm.

Thus, an effective IR is required to ensure higher production at less cost and increased
profits. It covers the system, rules, and procedures to protect the interest of the workmen and
the employers and to regulate the behavior of the employer i.e. the way he treats his
workmen.

5. Improves Employee Morale and Job Satisfaction

Explanation: Positive IR ensures fair treatment, job security, and opportunities for employee
participation, which boosts morale and satisfaction.

Example: Infosys in India promotes a participative work culture, leading to lower attrition rates
and higher employee satisfaction.

6. Encourages Democratic Decision-Making

Explanation: Through mechanisms like collective bargaining and workers’ participation,

employees have a voice in decision-making processes.
7. Helps in Economic Development

Explanation: Peaceful industrial relations lead to uninterrupted production, attracting

investment and contributing to national income and employment generation.

8. Minimizes Legal and Industrial Disputes

Explanation: With proper IR mechanisms in place, many issues can be resolved through
negotiation rather than legal action or conflict.

9. Improves Employer-Employee Relationship

Explanation: Healthy IR fosters mutual trust, respect, and cooperation, which is essential for
long-term organizational success.

Example: Companies like Wipro encourage open-door policies, strengthening employer-

employee relations and fostering a positive workplace.

10. Supports Organizational Growth and Stability

Explanation: Stability in labor relations is essential for smooth operations, long-term planning,
and sustainable growth.

 Objectives of industrial relations

(1) Safeguard Interest of Labour and Management

To safeguard the interest of labour and management by securing the highest level of mutual
understanding and good-will among all those sections in the industry which participate in the
process of production.

(2) Enhance Economic Status of Workers

To improve the economic status of the worker by improving wages, benefits and by helping
the worker in evolving sound budget.

(3) Regulate Government Control

To regulate government control of such plants and units as are running at a loss or in which
productions has to be regulated in the public interest.

(4) Provide Workers’ Participation

To provide an opportunity to the workers to have a say in the management and decision-
making. To improve workers’ strength with a view to solve their problems through mutual
negotiations and consultation with the management.

(5) Encourage and Develop Trade Unions

To encourage and develop trade unions in order to improve the workers’ strength.
(6) Avoid Industrial Conflicts

To avoid industrial conflict, it is important to develop harmonious relations, which are an

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

(7) Eliminate Strikes and Lock-Outs

To eliminate, as far as is possible and practicable, strikes, lock-outs by providing reasonable

wages, improved living and working conditions, said fringe benefits.

(8) Maintain Industrial Democracy

To establish and nurse the growth of an industrial democracy based on labour partnership in
the sharing of profits and of managerial decisions, so that ban individuals personality may
grow its full stature for the benefit of the industry and of the country as well.

(9) Raise Productivity

To increase productivity to a higher level in an era of full employment by reducing the

tendency of high turnover and frequency absenteeism.

 Factors affecting industrial relations

1. Institutional Factors:

Under institutional factors are included items like state policy, labour laws, voluntary codes,
collective bargaining agreements, labour unions, employers’ organisations / federations etc.

2. Economic Factors:

Under economic factors are included economic organisations, (socialist, communist,

capitalist) type of ownership, individual, company — whether domestic or MNC,
Government, co-operative ownership) nature and composition of the workforce, the source of
labour supply, labour market relative status, disparity of wages between groups, level of
unemployment, economic cycle. These variables influence industrial relations in myriad
ways.

3. Social Factors:

Under social factors items like social group (like caste or joint family) creed, social values,
norms, social status (high or low) — influenced industrial relations in the early stages of
industrialisation. They gave rise to relationship as master and servant, haves and have-nots,
high caste and low caste, etc. But with the acceleration of industrialisation, these factors
gradually lost their force but one cannot overlook their importance.
4. Technological Factors:

Under technological factors fall items like work methods, type of technology used, rate of
technological change, R&D activities, ability to cope with emerging trends, etc. These factors
considerably influence the patterns of industrial relations, as they are known to have direct
influence on employment status, wage level, collective bargaining process in an organisation.

5. Psychological Factors:

Under psychological factors fall items pertaining to industrial relations like owners’ attitude,
perception of workforce, workers’ attitude towards work, their motivation, morale, interest,
alienation; dissatisfaction and boredom resulting from man-machine interface. The various
psychological problems resulting from work have a far-reaching impact on workers’ job and
personal life, that directly or indirectly influences industrial relation system of an enterprise.

6. Political Factors:

The political factors are political institutions, system of government, political philosophy,
attitude of government, ruling elite and opposition towards labour problems. For instance, the
various communist countries prior to the adoption of new political philosophy, the industrial
relations environment was very much controlled by the Government ever since change has
altered considerably like other capitalist economics.

There too, unions are now at the helm of labour activities, the industrial relations and is
marked by labour unrest. Most of the trade unions are controlled by political parties, so here
the industrial relations are largely shaped by the gravity of involvement of political parties in
trade union activities.

7. Enterprise-Related Factors:

Under enterprise-related factors, fall issues like style of management prevailing in the
enterprise, its philosophy and value system, organisational climate, organisational health,
extent of competition, adaptability to change and the various human resources management
policies.

8. Global Factors:

Under global factors, the various issues included are international relations, global conflicts,
dominant economic-political ideologies, global cultural milieu, economic and trading policies
of power blocks, international trade agreements and relations, international labour agreements
(role of ILO) etc.

 Parties in industrial relations

In Industrial Relations, the main parties involved are Workers, Employers, Government, and
Trade Unions. Each of these stakeholders plays a crucial role in shaping workplace dynamics,
employment terms, conflict resolution, and the overall labor environment.
1. Workers (Employees)
Role in Industrial Relations:
Workers are at the center of industrial relations. They provide labor in exchange for wages
and benefits. Their interests include:
• Fair wages
• Job security
• Safe working conditions
• Reasonable working hours
• Opportunities for growth

Key Objectives:
• Economic security
• Better working conditions
• Participation in decision-making
• Protection against unfair labor practices

Example:
A group of factory workers may protest against the management if safety standards are not
being met or wages are below industry standards. Their collective demands form the basis of
industrial relations issues.
Tools Used:
• Strikes
• Work-to-rule
• Collective bargaining
• Grievance redressal mechanisms

2. Employers (Management)
Role in Industrial Relations:
Employers provide jobs and seek to maximize productivity and profits while maintaining a
stable workforce. Their interests include:
• Labor efficiency
• Minimization of disputes
• Flexibility in managing labor
• Control over organizational policies
Key Objectives:
• Profit maximization
• Industrial peace
• Efficient use of human resources
• Cost-effective labor practices

Example:
A manufacturing company might want to introduce automation, which could reduce the need
for manual labor. This decision can lead to conflict with workers fearing job losses, thereby
involving industrial relations negotiation.

Employer Strategies:
• Performance incentives
• Communication and engagement
• Contractual labor arrangements
• Setting company policies and codes of conduct

3. Government
Role in Industrial Relations:
The government acts as a regulator and mediator to ensure fairness and legal compliance in
labor relations. It formulates and enforces labor laws, ensures workers’ rights are protected,
and maintains industrial harmony.

Key Objectives:
• Economic development through stable labor markets
• Protection of workers’ rights
• Ensuring law and order in labor issues
• Encouragement of collective bargaining

Government Functions:
• Legislation (e.g., Minimum Wages Act, Industrial Disputes Act)
• Arbitration and mediation in disputes
• Creating labor tribunals and courts
• Promoting social dialogue
Example:
During a prolonged strike at a public-sector company, the government may intervene through
a labor commissioner to mediate between workers and management to reach a settlement.

4. Trade Unions
Role in Industrial Relations:
Trade unions are organized groups of workers formed to protect their interests and improve
working conditions. They act as intermediaries between workers and employers.

Key Objectives:
• Collective bargaining for better wages and benefits
• Protecting workers against exploitation
• Legal representation
• Promoting job security

Functions of Trade Unions:

• Negotiating labor contracts
• Representing workers in disputes
• Mobilizing strikes or protests
• Educating and informing members

Example:
The All India Trade Union Congress (AITUC) may organize a nationwide strike demanding
better minimum wages and pension benefits for workers in the informal sector.

 Approaches to industrial relations

1. Unitary Approach:

The unitary approach is based on the notion that all the members of the organization Viz.
Managers, workers, and other staff have a common set of objectives, purposes and interests
and, therefore, work in unison towards the accomplishment of shared goals. Here, the conflict
is seen as a temporary divergence which is caused due to the poor management or the
negligence on the part of the employees to understand and mix with the organizational
culture.

The unitary approach is based on the assumption that the overall profitability of the firm
could be increased if everyone in the organization has the common interest/purpose and
works unanimously towards its completion thereby establishing the harmonious relations.
Here the strikes are considered as destructive.

2. Pluralistic Approach:

The pluralistic approach is just the opposite of unitary approach which is based on the
assumption that an organization is an alliance of powerful and divergent sub-groups
(management and trade unions), having different competing interests are mediated by the
management. The management and the trade unions (association of workers) are the powerful
sub-groups that may not agree with certain terms and conditions prevailing in the
organization and to resolve those management tries to mediate the interest of both the groups.

During mediation, if the management pays less attention to the needs of the workers then they
form unions in order to protect their interest and influence the management decision. The
unions so formed helps in balancing the power between the management and employees.

Thus, it is based on the notion that the conflict between the management and the employees is
inevitable and is viewed as instrumental in the innovation and growth.

3. Marxist Approach:

The Marxist approach is based on the basic assumption that the conflict is regarded as the
product of a capitalist society. This means that conflict arises not just because of the rift
between the employee and the employer, but also because of the division in the society
between those who owns the means of production (capitalists) and the ones who have only
labor to offer. The ultimate objective of the capitalists is to increase the productivity by
paying possible minimum wages to the workers due to which the latter feels exploited.

To overcome such situation workers form unions so as to safeguard their interests. These
trade unions are considered as a weapon to bring about a revolutionary social change that
focuses on improving the overall position of the workers in the capitalist system and not to
overthrow. Unlike the pluralist approach, the Marxist believes that the state intervention via
legislation and industrial tribunals work in the interest of the management and do not ensure a
balance between the competing groups.
4. Human Relations Approach:

The Human relations approach is propounded by Elton Mayo, who is a humanist and believes
in the positive nature of the employees. According to him, given human initiatives from
management, the employees positively listens and responds properly to them and hence there
is no room left for the conflict to arise. But however Marxists and Pluralists did not
appreciate too much stress on the positive nature of the workers.

Thus, these approaches to industrial relations must be properly understood by the HR

managers as these offer a solid foundation for much of the role of human resource
management.

 Measures to improve industrial relations

1. Sound Human Resource Policies:

Policies and procedures concerning the compensation, transfer, promotion, etc. of employees
should be fair and transparent. All policies and rules relating to employer-employee relations
should be clear to everybody in the enterprise and to the union leaders.

Top management must support them and set an example for other managers. Practices and
procedures should be developed to put human resource policies into practice. Sound policies
and rules are of little help unless they are executed objectively and equitably.

2. Constructive Attitudes:

Both management and trade unions should adopt positive attitudes towards each other.
Management must recognise union as the spokesmen of workers grievances and as custodians
of their interests. The employer should accept workers as equal partners in a joint endeavor.
Unions and workers, on their part, must recognise and accept the rights of employers.

3. Collective Bargaining:

Employers’ organisations as well as trade unions should be able and willing to deal with
mutual problems freely and responsibly. Both should accept collective bargaining as the
cornerstone of good employer-employee relations.

A genuine desire on the part of employers to bargain with employees on the basis of equality
is necessary. Government agencies should assist the two sides in public interest. Problem
centred negotiations rather than a legalistic approach is desired. Widespread union
management consultations and information sharing are helpful.
4. Participative Management:

Employers should associate workers and unions in the formulation and implementation of
human resource policies and practices. Management should convince workers of the integrity
and sincerity of the company.

Management should not interfere in the internal affairs of the unions. Instead of trying to win
workers’ loyalty away from unions, management should encourage right type of union
leadership. A strong union is an asset to the employer.

5. Responsible Unions:

Unions should adopt a responsible rather than political approach to employer-employee

relations. Unions should accept private ownership and operations of industry. They must
recognise that the welfare of workers depends on the successful operation of industry. A
strong, democratic and responsible union alone can ensure that workers honour the agreement
with their employer.

6. Employee Welfare:

Employers should recognise the need for the welfare of workers. They must ensure
reasonable wages, satisfactory working conditions, opportunities for training and
development, and other necessary facilities for labour. A genuine concern for the welfare and
betterment of working class is necessary.

7. Grievance Procedure:

A well-established and properly administered system for the timely and satisfactory redressal
of employees’ grievances can be very helpful in improving employer-employee relations. It
provides an outlet for tensions and frustrations of workers. Similarly, a suggestions scheme
will help to satisfy the creative urge of workers. A code of discipline if properly adhered to
by both the parties will help to avoid unilateral and violent actions on either side.