Insights into IR in Next Decade
Insights into IR in Next Decade

Insights into IR in Next Decade

- Dr Rajen Mehrotra

In the next 10 years (next decade), enterprises will tend to have an employment model where the permanent workers which presently is nearly 30 per cent will fall further and become 10 to 15 per cent of the workforce.

The employment model of enterprises both in manufacturing and service sector has gone through a major change from 2013 wherein the enterprises have substituted the erstwhile permanent workers by engaging people under various categories given below, depending upon the decision of the top management of the enterprise:-

i)Designated officers / executives, who are doing the same work which was done by the workers earlier.
ii)National Employment Enhancement Mission (NEEM) trainees through a NEEM agent under The All India Council of Technical Education scheme on skill development which commenced in April 2013.
iii)Company Apprentices under the provision for "Optional Trade" wherein an enterprise can come up with a trade relevant to its business based on the introduction of Section 2(iii) (LL) under "The Apprentices (Amendment) Act, 2014.
iv)Fixed Term Employment (FTE) employees based on the Government of India Gazette Notification of 16 March 2018 bringing FTE as a valid form of employment under The Industrial Employment [Standing Orders] Act, 1946 under the Central Rules.
v)Workers through contractors/temping companies which would be covered under The Contract Labour (Regulation & Abolition) Act 1970.
vi)Engaging persons on a daily basis with a fixed salary per day and paying them for the days worked every month.
The present approach of enterprises in most cases is not only to achieve a cost arbitrage but also to find innovative approaches to reduce direct employment of persons in the worker category wherein there is a lower probability of these persons becoming members of a trade union and / or being covered under the ambit of the Industrial Disputes Act, 1947. It is likely that this trend will continue in the future and will have its own impact on Industrial Relations of the next decade.

Study on Employment Trend in India
Dr. K. P. Kannan, Honorary Fellow, Centre for Development Studies, Thiruvanathapuram, while delivering the First Sharit Bhowmik Lecture on 22 Sept. 2017 at Tata Institute of Social Sciences (TISS) Mumbai analysed the shift in employment of the informal workforce in the formal sector from 2000 to 2012 in India. As per Dr. K. P. Kannan the informal employment in the formal sector which was 5.8 % in 2000 went up to 10.1% in 2012 while the formal employment in the formal sector which was 8.2 % in 2000 went down to 7.8 % in 2012. This study indicates the structural shift in the type of employment in terms of the macro economic data on employment. The analysis by Dr KP Kannan clearly indicates that there is a substantial increase in employment of flexible work force in the formal sector, thus leading to a structural change in the employment pattern in India.

Study on Employment Trend of workers in Pune "Option Positive" carried out a survey of 143 enterprises in and around Pune covering enterprises located in Chakan, Ranjangaon, Sanaswadi, Talegaon and also at Baramati & Pirangul. This survey was presented by Arvind Shrouti of Option Positive at a Conference on "The Employment Conundrum" organized by Industrial Relations Institute of India on Fri 25 January 2019 in Mumbai. The details of the findings based on the survey as presented by Arvind Shrouti are as follows: -

The survey findings clearly indicate presently the permanent workers in enterprises surveyed are 27%, contract workers are 28%, NEEM Trainees are 22% and the balance are 23%. It is clearly evident that the category of workers in the employment model of the workers has gone through a major shift from what it was prior to 1991 (i.e. the year, when the Indian economy opened up). NEEM Trainees is the new pattern of engaging productive work force in large number of manufacturing enterprises after 2013. Presently the permanent workers as a percentage of the workers in an enterprise has fallen drastically to nearly 30 percent and this trend of reduction is likely to continue as the approach of enterprises in hiring the incremental workforce in worker category will be of the non-permanent category. This approach is bound to have an impact on membership of trade unions plus Industrial Relations. The survey findings also indicate the existing monthly average wage in each category of workers. The permanent workers in most cases would be of the skilled category, and would also be members of a trade union and receiving the benefit of increase in monthly emoluments, because of the long-term wage settlements signed by the enterprise with the trade union. The average monthly wage of the permanent workers is Indian Rupees 38,720/- which is three to four times the monthly wage of the other category of workers (i.e. non-permanent workers which can also be referred as flexi workforce).

The survey findings of Option Positive also indicates the skill, as well as years of service of the non-permanent workers and the details of the findings based on their survey are as follows:-

From the survey findings, it is evident that only 20 % of the non-permanent workers (i.e. flexi workforce) are unskilled, hence an inference could be drawn that a substantial number of contract workers, temporary workers and NEEM trainees are undertaking work which is of semiskilled or skilled nature, but still their monthly remuneration is less than one third of that compared to the permanent worker. This disparity at a later date is bound to lead to an Industrial Relations issue. Also because of non-ease on availability of job mobility over 50 % of the non-permanent workers (i.e. flexi workforce) continue to work in the same organization for over five years, even though there is no practice of any annual increment in wages.

Likely Changes in Next 10 Years
The present business environment is highly competitive and in a dynamic economy it is essential to have a flexible employment model wherein an enterprise can easily restructure the workforce, as and when required based on the business conditions. At the same time enterprises need to ensure that the remuneration and retrenchment benefits of the flexible workforce must not be exploitive.

It is highly unlikely that any major changes in labour laws {i.e. Trade Union Act 1926, Industrial Employment (Standing Orders) Act 1946, Industrial Disputes Act 1947, Contract Labour (Regulation and Abolition) Act 1970} which govern Industrial Relations in enterprises is likely to occur in the next decade. The National Democratic Alliance under Ministry of Labour & Employment had brought in Labour Code on Industrial Relations Bill 2015 covering Trade Union Act 1926, Industrial Employment (Standing Orders) Act 1946, Industrial Disputes Act 1947. In the said Bill there were certain changes proposed in the existing laws such as amendment to Chapter VB of the Industrial Disputes Act 1947, where prior permission for Layoff, Retrenchment and Closure of an industrial undertaking raised from present 100 to 300 (NB the figure was earlier 300 and was brought down to 100 as strikes and lockouts in industrial establishments were banned during the emergency period in India). Also, the amount of compensation payable to the departing worker in the case of Retrenchment & Closure revised upwards in the said Bill. The Labour Code on Industrial Relations Bill 2015 has not been passed by Parliament and the sessions of the present Parliament are over, hence the Labour Code on Industrial Relations Bill 2015 will lapse. It is possible that a similar Bill may be brought, once the next Government comes to power in 2019. In all probability the Contract Labour (Regulation and Abolition) Act 1970 will continue and more flexibility is likely to be brought in on engaging contract labour, as Government of India and Public Sector Units (PSU's) are the biggest employers of Contract Labour. Also, there is immense flexibility in the type of work that can be assigned to this category of workers (i.e. contract labour) and also their work performance in most cases is better compared to the permanent workers.

New, successful business models like aggregators Uber and Ola, where the vehicle owner is an " employer" and also the "employee / driver " is presently fuzzy with reference to the labour legislation in India. In recent times we witnessed unionization of these vehicle owners coupled with strikes in Mumbai and Bengaluru when their monthly income fell, as they have to pay the equal monthly instalments to the bank for the loan taken to buy the vehicles and become vehicle owners. It is likely that the next decade will see both unionizations as well as litigation and probably a direction towards clarity on this fuzzy employer - employee relationship, as the aggregators Uber and Ola claim that they are not employers, but agencies, that facilitate business between the vehicle owner and the customer. This aggregator model presently is not limited to vehicle owners, but also other activities of business and is likely to expand by identifying new areas of applications for various business where it is feasible.

As for Information Technology (IT) & Information Technology Enabled services (ITEs), highly educated and skilled manpower is by and large recruited and it has been observed that these employees are reluctant to become members of a Trade Union. It is likely that this trend will continue till the next decade, though there have been efforts by certain trade unions at making these employees members.

Also, the trends in automation and digitisation: Industry 4.0, in the next decade can lead to less employment of ôbargainable employeesö, and higher number of highly skilled and highly paid employees recruited at the executive levels. This category of executive employees is not likely to become members of a trade union.

In the next decade, enterprises will tend to have an employment model where the permanent workers which presently is nearly 30 % will fall further and become 10 to 15 % of the workforce. This employment model is bound to have Industrial Relations implications, if the ratio of monthly wages of the permanent workers to non-permanent workers (i.e. flexible work force) is five to six times.

In the next decade the new workforce will come from Gen Millennials and Gen Z. Managements will need to look at issues & problems faced by the Gen Millennials and Gen Z & draw strategies proactively to prevent their grievances turning into Industrial Relations issues. This younger workforce especially in greenfield sites will need a different handling, as they seek higher rate of growth, both in money and promotions and also their preference will be for white collar type or service sector jobs.

It is true that most trade unions find it tough unionizing the flexible work force (i.e. Contract Workers, Temporary Workers, Trainees and NEEM Trainees) as this category of workers have a fear of loss of employment in the event of unionization. As job security is likely to be impacted adversely in the coming years, due to various reasons (with poor job security i.e. contract or temporary) this workforce is likely to ôlook for some ray of hope, as to who can protect their jobs at the same time facilitate in improving monthly earnings which are higher than the minimum wageö.

This could facilitate in increase in trade union membership and demands for improved job security and higher wages, though the workforce is engaged through a contractor / service provider or an agency.

Also, by the next decade when the permanent workers in the employment model falls to 10 to 15 %, the probability of the trade unions in making flexible workforce a member of their trade union is likely to be higher, if the ratio of monthly wages of the permanent workers to non-permanent workers (i.e. flexible work force) becomes five to six times. This wide variation in the wage pattern is likely to lead to a situation of turbulence, industrial unrest and if timely corrective interventions are not taken by enterprises in certain cases it could also lead to violence.

I have tried to predict the likely employment model, likely wage disparity and the consequential Industrial Relations climate of the next decade.

It is for individual enterprises to work out their strategies to handle the industrial relations issues that will emerge in their enterprises in the next decade. Some of the suggested actions enterprises can undertake, if they find them feasible and affordable for their enterprise to avoid getting into aturbulent Industrial Relations situation in the next decade, are listed below, but this is not a check list.

i)Limit the intake of flexible work force based on the principle of minimum adequate manning.
ii)Be open for a dialogue with the representatives / trade union of the flexible work force to find out what their grievances / demands are and have an approach towards finding a solution
iii)Be prepared to work out a methodology to pay the flexible work force higher than statutory minimum wages.
iv)Wherever the flexible work force is engaged on jobs that are of skilled, semi-skilled jobs, be prepared to work out a mechanism to pay them higher wages compared to the wages paid to the unskilled category.
Enterprises will also need competent Personnel in the management team who can effectively handle the Industrial Relations situations that will emerge with the diversified workforce. Presently, there is limited availability of managerial personnel who can effectively handle these situations with amicable solutions acceptable to the trade unions, their members and the management and take proactive steps to ensure avoidance of turbulence / disturbance.
The Industrial Relations in the next decade in each enterprise will not be identical, but since the likely employment model as predicted may have a flexible work force varying from 85 to 90 %, there are chances of a turbulent Industrial Relations Climate and hence the need for each enterprise to take preventives measures to prevent occurrence of turbulence.

Dr. Rajen Mehrotra is the Immediate Past President of Industrial Relations Institute of India (IRII), Former Senior Employers' Specialist for South Asian Region with International Labour Organization (ILO) and Former Corporate Head of HR with ACC Ltd. and Former Corporate Head of Manufacturing and HR with Novartis India Ltd. E-Mail: Based on the talk delivered on Fri. 15 March 2019 in Mumbai at the Western Regional Conference on "HR Challenges Decade '- 3*"organized by National Institute of Personnel Management (NIPM), Mumbai Chapter. Published in April 2019 issue of Current Labour Reports & Arbiter

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