Industrial Relations: Everything You Need to Know
Industrial Relations" refers to the relationships between employers and workers, whether at the national, regional, or company level. It encompasses all interactions related to social and economic issues, including wage determination, working hours, and working conditions. These relations are crucial for maintaining workplace harmony and ensuring fair practices in the labour market.
According to the International Labour Organisation (ILO), industrial relations deals with relationships between either state and employers and workers organisations or the relationship between the occupation organisation themselves.
What Is Industrial Relations?
The term industrial relations comprises two words, i.e. ‘industry’ and ‘relations’. The term ‘industry’ refers to any productive activity in the organisation in which the employees are engaged. On the other hand, the term ‘relations’ refers to the relationship, which exists within the industry between the management and the employees. The relationship between management and employees within the organisation within the organisational settings is defined by industrial relations. Industrial relations emerge directly or indirectly from management-trade union relationships.
Types of Industrial Relations
Industrial relations can be categorised based on various factors such as the relationship dynamics, the type of interaction, and the level at which the interactions take place. Here are the primary types of industrial relations:
Individual Industrial Relations: This type focuses on the relationship between individual employees and employers. It deals with hiring, job responsibilities, compensation, and grievance redressal at an individual level.
Collective Industrial Relations: In collective industrial relations, the relationship is between employer organisations and trade unions or groups of employees. It includes collective bargaining, where the union negotiates terms on behalf of its members regarding wages, working conditions, and other employment terms.
Directive Industrial Relations: These relations are governed by rules and regulations set by the government, such as labour laws and labour policies. The government plays a significant role in ensuring that industrial disputes are resolved fairly and that workers' rights are protected.
Why are Industrial Relations Relevant to Business?
Industrial relations play a vital role in businesses as they directly affect the work environment, productivity, and the delivery of goods and services.
Before establishing a business in a new country, companies must carefully study and understand the local industrial relations system.
For example, they should assess whether collective bargaining occurs across multiple employers, whether collective agreements apply to all workers and employers (regardless of union membership), or if multiple unions can exist within a company and have the right to sign agreements.
Some unions may have a history of conflict, leading to collective disputes. In the context of globalisation, businesses are adopting strategies to extend industrial relations internationally, such as International Framework Agreements (IFAs) between global unions and multinational companies. This helps ensure consistent labour practices across borders and aligns with the company’s global operations.
Characteristics of Industrial Relation
Following are the significant features of industrial relations:
Industrial relations are the result of employment relationships in industrial enterprises.
Industrial relations introduced the concept and method of balancing and cooperating.
Industrial relations formulate rules and regulations to maintain harmonious relations.
The intervention of the Government to shape the industrial relation is made through laws, agreements, rules, charters, etc.
Industrial relations incorporate both individual relations and collective relations.
Several parties play a role in industrial relations. The main parties are employees and their organisation, employers and their association, and government.
Objectives of Industrial Relation
Following are the different objectives of industrial relation.”
To establish industrial peace.
To safeguard the interests of both workers and management.
To avoid industrial disputes.
To raise the production capacity.
To establish industrial democracy.
To minimise the labour turnover rate and absenteeism.
To safeguard the workers economic and social interests.
To contribute to the economic development of the country through productivity.
To establish a full employment situation.
To minimise strikes, lockout, Heroes, etc., by providing good working conditions and fair wages to the workers.
Nature of Industrial Relation
Industrial relations are concerned with the relationship between management and workers.
Industrial relations safeguards the interest of employees.
Industrial relations are concerned with the system, rules, and procedures used by unions and employees to determine the reward for effort and other conditions of employment, safeguard the interests of the employees and their employer and regulate how employers treat their employees.
Industrial relations maintain a balance with employee expectations, employer associations, trade unions, and other social and economic institutions of societies.
Industrial relations help in resolving disputes, conflicts, and controversies between labour and management.
Scope of Industrial Relation
Industrial Relations is a wide-reaching term. Different scholars have expressed their different views on the scope of industrial relations. According to Dale Yoder, “Industrial relations incorporate policies related to recruitment, selection, training of workers, personnel management, and collective bargaining.” According to the International Labour Organisation (ILO), industrial relations incorporate the relations between state and employers and relations between trade unions and employers associations.
According to Richard A Lester, the scope of industrial relations is no longer limited only to trade unions and industrial management, rather it includes all aspects of labour such as wages, productivity, social security, management, and employee policies. Trade Union policies also form part of it.
In a modern organisation, the industrial relations functions are performed by the Industrial Relations Department. This function is performed under the supervision of the Director of the Industrial Relations department. In the performance of this function, support is rendered by different managers and subordinates. Different important functions performed by workers of the industrial relation department includes:
Management of policies and programs of industrial relations.
Public Relation
Labour Relation
Recruitment, Selection, and Placement of labourers.
To provide medical and health-related services.
To maintain employment records of the employees.
Provision of recruitment test, ability test, skill test, and intelligence test.
Provision of training and education program
What is the Importance of Industrial Relations?
Promotes Democracy: Industrial relations means employing collective bargaining to resolve issues faced by workers. This collective bargaining is generally employed through cooperation and mutual agreement amongst all the affected parties, i.e., democracy, management, and employees unions. This enables an organisation to establish industrial democracy, which eventually motivates the workers to perform their best to the growth and prosperity of the organisation.
High Morale: Good industrial relations enhance the morale of the employees and motivate the workers to work more efficiently.
Avoid Conflicts Between Management And Union: Industrial relations minimise issues between unions and management. This is because industrial relations incorporate setting up machinery to resolve issues faced by management and employees through mutual agreement to which both these parties are bound. This results in ignoring any unfair practices that could lead to major conflicts between employers and trade unions.
Minimises Wastage: Satisfactory Industrial relations are maintained on the basis of co-operation and recognition of each other in the department. It helps to minimise wastage of material, manpower, and costs.
Economic Growth And Development: Good and harmonious industrial relations result in increased efficiency and hence prosperity, which in turn minimise turnover and other tangible benefits to the organisation. This promotes economic growth and development.
Functions of Industrial Relations
The important functions of industrial relations are:
To establish communication between workers and management to maintain the sound relationship between the two.
To establish support between managers and employees.
To ensure the creative contribution of trade unions to avoid industrial conflicts.
To safeguard the interests of workers and the management,
To avoid an unhealthy and unethical atmosphere in an industry.
To formulate such considerations that may promote understanding, creativity, and cooperativeness to enhance industrial productivity.
To ensure better workers’ participation.
Factors Affecting Industrial Relations
Industrial relations are influenced by a variety of factors that impact the relationship between employers, employees, and trade unions. Key factors include:
Economic Conditions: Economic stability or instability can influence wage negotiations, job security, and employment conditions.
Government Policies: Laws and regulations, including labour laws, social security, and minimum wage policies, shape industrial relations.
Technology and Automation: The introduction of new technologies can lead to job displacement or changes in work roles, affecting employee satisfaction and relations.
Union Strength and Influence: The presence and power of labour unions impact negotiations and conflict resolution between workers and employers.
Management Style: A company’s approach to management, whether authoritarian or participative, influences employee morale and industrial relations.
Social and Cultural Factors: Societal values, traditions, and cultural attitudes towards labour can influence industrial relations in different regions.
Conclusion
To conclude, industrial relation, also known as an employment relationship, is the versatile academic field that studies the employment relation, i.e. the complex interaction between employer and employees, labour/trade union, and employer organisation and state. Also, it is observed that a good industrial relation increases the efficiency of workers and eventually increases the productivity of an organisation.
FAQs on Industrial Relations
1. What is meant by Industrial Relations (IR) in the context of Commerce?
Industrial Relations (IR) refers to the complex relationship and interactions between employers, employees, and their representative bodies (like trade unions), often with the government acting as a mediator. It covers all aspects of the employment relationship, including wage negotiation, working conditions, dispute resolution, and collective bargaining to ensure workplace harmony and productivity.
2. What are the primary objectives of establishing good industrial relations?
The main objectives of establishing good industrial relations are:
- To establish and maintain industrial peace and harmony between labour and management.
- To safeguard the interests of both workers and employers.
- To minimise industrial disputes like strikes and lockouts.
- To raise overall productivity and production capacity.
- To establish a framework for industrial democracy through worker participation.
- To contribute to the economic development of the country.
3. What is the overall scope of Industrial Relations?
The scope of Industrial Relations is very broad and includes all aspects of the relationship between employers and employees. This encompasses personnel management policies like recruitment and training, the dynamics of trade unions, the process of collective bargaining, and the role of the government in setting labour laws, social security policies, and dispute resolution mechanisms.
4. Why is maintaining harmonious industrial relations crucial for a business's success?
Maintaining harmonious industrial relations is crucial because it directly impacts organisational performance. Good relations lead to higher employee morale and motivation, which boosts productivity. It helps in avoiding conflicts, strikes, and lockouts, thus minimising wastage of manpower, materials, and costs. A stable work environment enhances the company's reputation and supports sustainable economic growth.
5. What are the key factors that influence the state of industrial relations in an organisation?
Several key factors can influence industrial relations, including:
- Economic Conditions: Economic stability or recession affects wage negotiations and job security.
- Government Policies: Labour laws, minimum wage acts, and social security regulations set the legal framework.
- Technology: The introduction of automation can change work roles and affect job satisfaction.
- Union Strength: The power and influence of trade unions play a significant role in negotiations.
- Management Style: A participative and democratic management approach generally fosters better relations than an authoritarian one.
6. What are the different types of industrial relations?
Industrial relations can be categorised based on the parties and dynamics involved:
- Individual Industrial Relations: Focuses on the direct relationship between an individual employee and the employer, covering hiring, compensation, and grievances.
- Collective Industrial Relations: Involves the relationship between employer organisations and groups of employees represented by trade unions, primarily through collective bargaining.
- Directive Industrial Relations: Governed by rules, regulations, and laws set by the government to ensure fair practices and protect workers' rights.
7. How do Industrial Relations (IR) and Human Resource Management (HRM) differ?
While both deal with managing employees, their focus differs. Industrial Relations (IR) traditionally concentrates on the relationship between management and employee groups, particularly unions, focusing on collective bargaining and dispute resolution. Human Resource Management (HRM) has a broader scope, covering the entire employee lifecycle from an individual perspective, including recruitment, performance appraisal, training, and employee welfare. IR is often considered a specialised part of HRM.
8. What is the Industrial Relations Code in India, and why was it introduced?
The Industrial Relations Code is a comprehensive Indian law that consolidates and simplifies several pre-existing labour laws related to trade unions, industrial disputes, and working conditions. It was introduced to streamline regulations, promote ease of doing business, and create a more efficient mechanism for resolving industrial disputes, thereby balancing the interests of both workers and employers.
9. What are the potential consequences for a company with poor industrial relations?
Poor industrial relations can lead to severe negative consequences for a company. These include frequent strikes, lockouts, and employee protests, which disrupt production. It can also cause high labour turnover and absenteeism, low employee morale, and a decline in productivity and product quality. Ultimately, it damages the company's public image and financial stability.
10. How does collective bargaining contribute to positive industrial relations?
Collective bargaining is a cornerstone of positive industrial relations because it establishes a democratic and structured process for negotiation. It allows employees, through their unions, to have a collective voice in determining their wages, working hours, and other terms of employment. This process replaces unilateral management decisions with mutual agreement, which builds trust, reduces conflict, and ensures that the outcomes are fair and binding for both parties.
11. Who are the main parties involved in the industrial relations system?
The industrial relations system primarily involves three main parties:
- Employees and their Trade Unions: Workers who perform the tasks and the organisations that represent their collective interests.
- Employers and their Associations: The management that provides employment and the associations that represent their interests.
- The Government: The state, which acts as a regulator and mediator by setting laws and policies to protect the interests of both parties and the economy at large.
12. How do government policies and labour laws shape industrial relations?
Government policies and labour laws form the legal framework within which industrial relations operate. They set the 'rules of the game' by legislating on issues like minimum wages, working hours, workplace safety, and conditions for strikes or lockouts. By enforcing these rules, the government protects workers' rights, prevents exploitation, and provides formal channels for dispute resolution, thereby shaping the power dynamics between employers and employees.
13. Why is the government's involvement (tripartite approach) often necessary for maintaining industrial peace?
The government's involvement, creating a tripartite system, is necessary because it acts as a neutral and powerful third party. It balances the often-conflicting interests of employers (profit maximization) and employees (fair wages and conditions). The government ensures that neither party becomes overly dominant and provides a legal structure for mediation and adjudication, preventing disputes from escalating and disrupting national economic stability and social order.
14. How does globalisation impact the industrial relations strategies of multinational companies?
Globalisation compels multinational companies to manage industrial relations across different countries with varying labour laws, cultures, and union structures. This has led to the development of international IR strategies, such as signing International Framework Agreements (IFAs) with global union federations. These agreements help ensure consistent labour standards and ethical practices across all a company's global operations, aligning local practices with its worldwide corporate values.
15. What are the key functions of an Industrial Relations department within a large company?
An Industrial Relations department is responsible for managing the relationship between the company and its workforce. Key functions include managing collective bargaining negotiations, handling employee grievances, ensuring compliance with all labour laws, liaising with trade unions, and developing policies that promote a positive and productive work environment. They also play a role in training managers on effective employee relations.
