05 May 2020 11:23:18 IST

Better forecasting can avoid layoffs

Anticipating and factoring in market realities will allow the company to plan its activities better

In September 2019, passenger vehicle sales declined by 24 per cent and commercial vehicles by 62 per cent. The crisis was mainly because of overproduction and stocking, according to Rajiv Bajaj, MD of Bajaj Auto. To tackle over-production, many companies like Maruti Suzuki and Tata Motors started giving forced leave without pay. Many auto companies have plants in Manesar. As almost 50 per cent of the nation’s auto components are produced in Manesar, the forced leave move led to massive unemployment. Many migrant workers also came to seek jobs in such companies. HMSI has around 1,900 permanent workers and 2,500 contract workers in Manesar. Handling such a huge number in an industry that is on a downslide was a challenge for HMSI management.

How could the labour unrest and subsequent stalemate at HMSI have been prevented?

The company could have prevented the labour unrest by laying the onus of production cuts on all HMSI plants across the country equitably to alleviate the effects of mass termination of contract employees at HMSI’s Manesar plant, especially when tensions were brewing after 700 contract workers were let go in August. Letting 200 contract workers go, was akin to HMSI trying to stretch its luck even though it was lawfully right.

A stalemate in future can be prevented by taking the following measures:

· Employee engagement : Contractualisation has eroded the relationship of the employer with the local workers. The companies which go for such hire and fire strategy and focus on short term goals end up having employees who are not loyal. Various programmes can be designed to let the worker feel that their voice is being heard. They should have their representatives who have a right to be a part of meetings on Business Development and Production Planning.

· Benefits, rewards and recognition : To involve more employees the company can provide them benefits to keep them motivated – for instance, a Scanlon Plan (a profit sharing programme in which employees share in pre-established cost savings, based upon employee effort) for permanent employees.

· Go by the contract : The company should honour the contract of the workers and wait for the contract to expire to terminate their services lawfully.

· Social security : As per The Contract Labour (Regulation & Abolition) Act 1970 Contract Workers should be given PF benefits and medical facilities.

· Proper forecasting : Laying off so many employees suddenly would naturally have come as a shock to them. The company should have better forecasting of the demand, and plan activities accordingly.

· Transparency : The Management should keep the process of hiring and firing transparent by notifying the employees a month before their contract’s termination.

What would you suggest to the Honda management to ensure smooth production? Should it reinstate some of the contract workers? Should it reinstate the union leaders whom HMSI had suspended? Or should it stick to the original decision?

Our suggestion would be:

· Reinstate : Reinstate only the permanent employees. Rehiring retrenched contract workers would only send a signal of weakness from the management and embolden the union to take the plant hostage at any point in the future to realise their demands.

· Communicate regularly and foster a positive relationship with them. They should know the reason why they are being laid off in an emphatic and empathetic manner.

· Involving external force : There exists no legal relationship between the principal employer and the worker engaged through a contractor, so the worker cannot take any disciplinary proceeding against the employer. You can direct the contractor that the worker should not be sent to the workplace. The management can involve external force if required, so that what happened in Maruti Suzuki should not repeat.

· HMSI should not reinstate the union leader . Under Section 27 of Industrial Disputes Act 1947: “Penalty for instigation, etc” The company has right to dismiss the union leader if he is instigating the permanent workers to join the strike.

· Process of termination : Rather than sending the employees back from the gate, the company should properly communicate, conduct stay meetings and give them a notice before suspending. Since the protest was illegal as it wasn’t according to Section 22 [23 and 24] of the Industrial Disputes Act, the company is within its rights to suspend the contract workers.

·HMSI should ensure that the core activities of the plant should only be carried out by permanent workers. If permanent workers fall short for kickstarting the plant’s core activities, then HMSI should consider absorbing few contract workers into the permanent muster rolls based on seniority. Under Contract Labour Act, the company cannot employ contractual worker for core activities.

If you were asked to reinstate only those contract workers who are necessary to resume production, how would you go about the job? How would you attend to the challenging task of convincing the irate contract workers who are protesting at the gates? How would you persuade the union members? What would you do to improve the morale of workers at the plant?

According to the Indian Contract Labour Act, a company cannot employ contractual workers for undertaking core activities. HMSI Manesar cannot fully realise its production activities with just its permanent workforce of 1,900 employees. To realise this shortfall, the company must make permanent a few contract employees depending on seniority and past performance.

This act of HMSI will not only give employees a sense of achievement but also be an act of good faith to gain cooperation from the labour force during such times of an economic slowdown.

The company should have followed through on its word of re-hiring retrenched workers as it goes a long way in building industrial relations with the employees and they, in turn, would have been more sensitive to the company’s needs in times of economic crisis. This could have prevented future unrest which, in our opinion, is merely a symptom. The underlying cause was the company backing out on its earlier promise.

Prajakta Dhomne

Aakash Hegde


The company can reskill retrenched employees to make them better prepared to take up jobs in other sectors.HMSI can adopt the job-sharing system to employ the same workforce by asking contract workers to work for 10-12 days in a month and take 50 per cent pay cut. This is better than laying off contract workers completely, which can lead to lockouts. The steps above, if undertaken, can go a long way to improve employee morale at HMSI Manesar.

(The First Runners-Up are PGP-1 students at TAPMI, Manipal.)