05 May 2020 17:13 IST

HMSI can think of an ‘unemployment fund’ for contract workers

Such a pioneering initiative could make a big difference in case a worker is retrenched suddenly

Honda Motorcycle and Scooters India (HMSI) is the Indian subsidiary of the well-respected Japanese multinational Honda Motor Company. However, even well-known brands are not immune to labour unrest, and there is a need for companies to maintain good industrial relations (IR).

IR is concerned with the systems, rules, and procedures used by unions and employers to determine the reward for effort and other conditions of employment, to protect the interests of the employed and their employers, and to regulate the ways in which employers treat their employees.” It is primarily about the relationship between the management and the employees of a company; trade unions being the other major party in IR. The government provides the basic framework for IR through its legislation, and steps in only when the major players fail to maintain harmonious IR.

The root cause of the labour unrest at HMSI was the disparity in the treatment between regular and contract workers, and the immediate trigger was the company discontinuing the contract of 200 contract workers in November 2019. With the slump in the economy and dip in demand for vehicles and resultant cuts in production, contract workers were left the most vulnerable. They suddenly found themselves without a job in a market where a large number of people were competing for a limited number of jobs.

Job insecurity

Archaic labour laws of India, especially the Industrial Disputes Act, also contributed to the labour unrest at HMSI as it led manufacturers like HMSI to rely heavily on contract labourers, who can not only be paid less than regular employees for performing the same core activities but can also be more easily laid off during cutbacks. So the problem, at least in part, is systemic in nature. As the facts of the case suggest, the Gurugram-Manesar belt had been a hotbed of labour unrest for many years, with most of the disputes pertaining to the issue of contract labour.

However, having said that, HMSI could have handled the situation much better. At HMSI, we saw how even regular employees joined the strike. While this may have been in solidarity with the contract workers, it was also due to insecurity regarding their own jobs, what with the cutbacks in the company’s production. HMSI had earlier removed 700 contract workers in August, promising to reinstate them in November, but in November there were only more cutbacks, so the regular workers might have thought that it will probably be their turn next.

Proactive strategy

Some of the basic requirements for prevention of industrial disputes are an effective grievance redressal system, worker participation in management and collective bargaining. HMSI would have been better off engaging much earlier in a proactive IR strategy which entailed, among others:

1. Relations: HMSI could have had better relationships with its employees through joint consultations and having a dialogue regarding the ground realities (economic situation, slumping demand ) and the alternatives available to the company, on the factory floor

2. Competence: HMSI could have trained its supervisors to handle/ negotiate workers better on the shop floor. Such a programme could also have been extended to the workers.

3. Communication: The unrest at HMSI can be squarely blamed on a communication gap between management and workers. There should also have been better communication between the management and the labour contractors regarding issues pertaining to contract workers. The law allows the contract workers to communicate only through their contractors and not directly with the management. If HMSI indeed felt that the contractors were instigating the workers to create a scene at the gates of the plant, it should have exerted pressure on the contractors to desist from such activities or risk future business with HMSI.

If collective bargaining fails, the other stages in conflict settlement are conciliation, arbitration and adjudication, in that order. Following the strike, we saw that HMSI was in a position to maintain the new level of production by shifting work to its other three plants located at Tapukara in Rajasthan, Narsapura, Kolar in Karnataka and Vithalpur in Gujarat.

HMSI was also able to stick to its decision of firing the union chief and five others if due process was followed and it became evident that they were indeed instigating the contract workers. However, requiring workers to sign a good conduct undertaking can be viewed as coercive as Schedule 5 of the Industrial Disputes Act states “to insist upon individual workmen, who are on a legal strike to sign a good conduct bond, as a pre-condition to allowing them to resume work is an unfair labour practice”.

Worker participation

So, while regular workers were back inside the shop floor, their morale was likely to be down, particularly with the contract workers still demonstrating at the gates of the plant. Worker participation in management is an effective tool for prevention of industrial disputes. The basic objective of worker participation is to provide an opportunity to the workers to participate in the organisational decision-making. This also helps in boosting the employee morale and enhancing their commitment to the organisation.

Some of the common forms of worker participation in management in India are works committees, joint management councils, joint councils, plant councils, shop councils and so on. HMSI should focus on employee empowerment initiatives and better communication with the workers. This will go a long way in boosting employee morale and transform the culture of the plant from one marked by confrontation to that which centralises performance.

It will also help a great deal if HMSI makes it a practice to regularise contract employees who have worked for a certain minimum amount of time in the company. For contract workers, HMSI can also think of an “unemployment fund”. During the tenure of employment, mandatory payments could be made to an ‘’unemployment fund’’ of each worker – akin to a payroll tax withheld from wages – that would come good in the incidence of his/ her retrenchment. HMSI, by virtue of its leadership position in the industry, can pioneer such initiatives.

Collective bargaining

HMSI can also transparently and candidly engage with the union. In the first decade of the new millennium we saw how the hitherto confrontational United Auto Workers (UAW) engaged in collective bargaining with the Big Three (GM, Ford and Chrysler) to forge a social contract for the 21st Century, that paved the way for more competitive automotive companies in the US, and translating into middle-class jobs.

The UAW made substantial concessions in the context of the pressure of globalisation and the floundering of the domestic industry. It marked a transformation from a confrontational way of working to one of collaboration, which is a necessity of the new times. With the liberalisation of the Indian economy, the IR scene has changed over the last two-and-a-half decades. It is possible, and certainly desirable, to have similar transparent dialogue with workers and unions when the economy is going through a slump and the organisation is faced with an existential crisis.

(The author is Director, IBS Case Research Centre, Hyderabad.)