Negotiating wage settlements
Designation : - Director
Organization : - Industrial Relations Institute of India & Head Consultant, S.R. Mohan Das & Associates, Mumbai
Wage settlements are defining moments in an organisation's history, particularly for the workmen and the unions. For the Unions it is an occasion to show their leadership skills and extract their worth or their pound of flesh for the work they do in the organisation. It is also an occasion to try and address some of the major concerns and aspirations of the workmen and the only way in which they can improve their quality of life is through the income they secure from the organisation. In the Indian environment, unions go into hibernation once a wage settlement is signed for the tenure of the agreement. They again spring to life when the settlement is to be signed.
For the organisations, it is on occasion for trepidation, for taking stock and for planning how to strategise and chart a path through a period of reckoning. Additional costs will be incurred for the organisation. Some conflict may also come through and the business opportunity and growth potential will determine the future affordability. However, the workmen will already be aware of the company's financial position during the tenure of the settlement. They will also be well aware of the increases that have been given to the managerial and supervisory cadre of the company. They will also be well informed of the wage settlements that have been taking place in the region and industry and would have done their homework on what demands the company must give and what are the benefits they would like to have revised, substantially. Given the substantial hikes being given in the region and the Industry, these settlements become the talking point and how to better the wage increases gets impetus from such settlements.
Though wages settlements have been taking place and there has been always interest evinced from HR professionals as well as employees and trade unions on the amount of wage increase at the time of settlements, some changes have taken place that needs to be taken note of.
For the company, the occasion heralds a major opportunity for bringing about significant changes in the working habits (not work culture as a culture refers to positive capabilities and competencies), improving productivity, reducing waste/costs, enhancing efficiencies and if this opportunity is lost, the legal provisions in the Indian environment, particularly Section 9A of the Industrial Disputes Act, which mandates a Notice of Change is both time consuming and costly, if the Unions become litigation minded. In the manufacturing, quite a lot of changes have taken place technologically. Robotics, Artificial Intelligence, 3-D Printing, Nano - technology, Internet of Things have given the fourth revolution in transforming the workplace a heady advantage. Manning norms are now a miniscule of what they were earlier and the machines now know what export quality production is and what is likely to get rejected and alerts the worker well before he has commenced his work. Not only do these changes mean substantial benefits for the organisation, but the gains of the share also percolate to the workers. The changes do warrant investment in technology, but companies look at it as a onetime cost and far greater efficiency and shorter pay - back periods.
These changes are now more radical than what was earlier spoken of and achieved through techniques like the Maynard's Operational Sequence Technique (MOST). Many unions have embraced these techniques and many companies in the Pune and Nashik Industrial belt have settlements agreeing to MOST.
The other development that is noteworthy to take cognisance of is the spectacular settlements taking place. When companies like Buckhardt gives workers a Rs. 27,000 p.m. hike or a company like Sulzer gives Rs. 25,000 p.m. per worker increase, it not only raises the bar, it becomes difficult to strive for a reasonable and meaningful settlement. In the Pune Industrial Belt, the settlements signed in Thermax and Bajaj Auto Ltd are as defining for the managements like the Maruti violence and settlement became a defining feature in the employer dynamics as much as Sulzer and Maruti have become inspirations for Unions. The Settlement in Bosch, where workers had to agree to international norms for working on machines and the management deducting 8 days wages for their illegal strike is also something unions now have to hear when they negotiate wage settlements.
Line managers have also become more active in the wage settlement process, which was not there earlier. Negotiations used to involve somebody from finance, the plant head and the HR head. Now negotiations are preceded by meetings with the line managers and supervisors to work out their own wish list and check lists that are a must in the wage settlement process. Such an involvement also ensures that what is contracted for and agreed to by the unions also get implemented.
Companies which focused on Kaizan, ISO2000 and ISO14000 compliance, are Total Quality Management, Small Group Activity, Operators Environmental Guidelines to make manufacturing also green. Environmentally friendly production was also a key requirement to make products acceptable internationally. Further, employment of Child Labour particularly in the carpet making and other industries traditionally employing child labour had to be made transparent and compliant with global standards, if the products were to be made acceptable in the International Markets. The compliance with fair labour standards also led to the conditions of labour, particularly in the sweatshops of China, and countries in the Far East less acceptable.
Many companies also embraced new concepts and tools to improve business. Enterprise Resource Planning and Business Process Reengineering have fine - tuned manufacturing processes along with outsourcing of non-core activities. In many of the manufacturing enterprises, sea changes have taken place to bring about radical transformation in the routine manufacturing activities. Two major industries that have been a witness to such a transformation and transition have been a major source of inspiration for many of the Indian companies. Mahindra & Mahindra and Crompton are two Indian companies that have settlements that have radically altered the outputs and ensuring that the wage hikes have led to improved competitive ability by reducing the per unit cost with substantial improvements in labour productivity.
Managements are also seeking enhanced tenure of settlements and seeking four year of five year settlements with the sop of a higher wage increase so that the three year negotiations get stretched. The Government Public Sector undertakings have five year settlements as the norm and in the government, even 10 year settlements have been there.
Unlike countries abroad, where wage negotiations take place annually and on an industry wide basis, here the bargaining is company based. The settlements are for tenures that average about three years. However, there is a major difference here in that some companies have provisions for generous Dearness Allowance payments linked to the Consumer Price Index. This gives workmen benefits that are quite substantial and are an outgo and additional cost for the employer, who finds that he cannot recover it from the market place because of the competition. Thus at the time of negotiating the Charter, apart from what was given at the time of settlement, the additional outgo by way of dearness allowance is also required to be considered. Traditionally, workmen and unions have not been willing to look at this issue. But in the changed environment, we see that the trade unions and workmen have also become sensitive to this concern of the employer. The wage settlements thus also address the concern of the Indian employer on Dearness Allowance.
In the present environment, if any adverse or radical changes are required to be made, the company cannot expect the union leaders to canvass for the changes directly with the constituency unless the benefits offered by the company justify such an initiative. Thus, if the organisation is not doing well, it is the management that must take the initiative to convey this to the constituency and this must commence well before the agreement expires. Keeping quiet during the entire tenure of the settlement and talking about it only before the settlement leads to a lot of suspicion in the minds of the constituency. Many of the workers state that the usual sob story is repeated ad nauseum every time at the time of negotiating the charter of demands. The company is not doing well; it is making losses, etc. Why not close down if it is doing so badly, is the refrain of the workers. This is also quite legitimate and this has something to do with the credibility of the communication of the management.
Submission of the management charter of demands: In the changed environment, companies find that the practice of giving a management charter of demands whenever the unions submits its own charter is not just a cosmetic exercise, but a real means of bringing about substantive changes in the working environment. Today, issues of the management focus on introduction of massive upgradation of technology and processes to make the business truly competitive. If changes in manufacturing are to take place that bring about a radically different way of doing business, then the outlook to wage negotiations has also to be completely different. Just as major investments are looked as capital investments, the concept of wage as an investment also has to be considered. If major changes are to be brought about, then like a capital costs, increase in wages has to be considered as an investment too to bring about major changes in process and performance requirements in the business.Such an investment can bring about major manufacturing changes in operations and process oriented operations, quality, reduction in cycle times, waiting times, improvement in productivity, efficiency, outputs and also reduction in waste or rejection. Once these changes are ratified and introduced, substantial benefits for the company flow and the increased labour costs are recovered through the changes that have been introduced. Thus where major changes in processes or product manufacturing techniques are involved or where there is intensive capital and technology invested companies are not averse to considering an increase in wage costs to bring about improvements in productivity and efficiency of operations. In such circumstances, the increased wage costs.