Collective bargaing


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Collective bargaing

  1. 1. COLLECTIVE BARGAININGCollective Bargaining is a process involving discussions and negotiationsbetween two groups representing Labour and Management regarding terms ofemployment. Collective Bargaining, a collective and continuous process,involves formation of bargaining agreements and the implementations of suchan agreement. It is a flexible approach that attempts in achieving peace anddiscipline in the Industry. The principle of ‘give and take’ has been infused inthe principle of Collective Bargaining. As workers mainly in the formal sector areorganized, collective bargaining is more commonly in vogue in the formalsector.Collective bargaining is a technique that has been adopted by the unions andthe managements to reconcile their conflicting interests. It is called ‘collective’because the employees as a group, select representatives to meet and discussdifferences with the employer. It is called collective also because both theemployer and the employee act as a group rather than as individuals. It isknown as bargaining because the method of reaching an agreement involvesproposals and counter proposals, offers and counter offers and othernegotiations.Through discussions each party learns more about each other andmisunderstandings are often removed. Although all major differences might notalways be sorted out collective bargaining helps in resolving many minordifferences and there are many cases in which even major disputes have beensettled without work stoppage or outside intervention. Accordingly role ofcollective bargaining in conflict resolution is very significant.Thus collective bargaining: • is a collective process in which representatives of both the management and employees participate. • is a continuous process which aims at establishing stable relationships between the parties involved.Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 1
  2. 2. • not only involves the bargaining agreement, but also involves the implementation of such an agreement. • attempts in achieving discipline in the industry • is a flexible approach, as the parties involved have to adopt a flexible attitude towards negotiations.DEFINITION OF COLLECTIVE BARGAININGDonovan Commission “ A right which is and should be the prerogative ofevery worker in democratic society”.Byar & Rue (1991) “ CB is a process that involves the negotiation, drafting,administration and interpretation of a written agreement between an employerand a union for a specific period of time”. J.T. Dunlop & J.T. Healey “ CB as a mixture of a poker game combiningdeception, bluff, luck and ability”.EVOLUTION OF COLLECTIVE BARGAININGThe phrase collective bargaining is said to have been coined by Sydney andBeatrice Webb of Great Britain which is said to be the "home of collectivebargaining"CB rose and grew with the trade union movement. Thus Roots of CB lie in GreatBritain where it developed in response to the conditions created by theIndustrial Revolution.Along with trade unions, the idea of bargaining collectively gained strength inthe early part of the 18th Century.Initially, the negotiations were carried out at plant level.By early 1900, industry and national level agreements became quite common.The idea spread across to France, Germany, and USA. And today, through theprocess of CB, organizations have learnt to cope with industrial conflict.Characteristics OF COLLECTIVE BARGAINING1. Not equivalent to collective agreement because collective bargaining refersPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 2
  3. 3. to the process while collective agreement to the possible result.2. It’s a method use by trade unions to improve the terms and conditions ofemployment of their members.3. It seeks to restore the unequal bargaining position between employer andemployee.4. Where it leads to an agreement, it modifies rather than replaces theindividual contract of employment.It is a group process, wherein one group, representing the employers, and theother, representing the employees, sit together to negotiate terms ofemployment. Negotiations form an important aspect of the process of collectivebargaining i.e., there is considerable scope for discussion, compromise ormutual give and take in collective bargaining. Collective bargaining is a formalized process by which employers andindependent trade unions negotiate terms and conditions of employment andthe ways in which certain employment-related issues are to be regulated atnational, organizational and workplace levels.Collective bargaining is a process in the sense that it consists of a number ofsteps. It begins with the presentation of the charter of demands and ends withreaching an agreement, which would serve as the basic law governing labormanagement relations over a period of time in an enterprise. Moreover, it isflexible process and not fixed or static. Mutual trust and understanding serve asthe by products of harmonious relations between the two parties.It a bipartite process. This means there are always two parties involved in theprocess of collective bargaining. The negotiations generally take place betweenthe employees and the management. It is a form of participation.Collective bargaining is a complementary process i.e. each party needssomething that the other party has; labor can increase productivity andmanagement can pay better for their efforts.Collective bargaining tends to improve the relations between workers and theunion on the one hand and the employer on the other.Collective Bargaining is continuous process. It enables industrial democracy tobe effective. It uses cooperation and consensus for settling disputes rather thanconflict and confrontation.Collective bargaining takes into account day to day changes, policies,Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 3
  4. 4. potentialities, capacities and interests.It is a political activity frequently undertaken by professional negotiators.TYPES OF BARGAINING1. Conjunctive/Distributive BargainingHere, the parties try to maximize their respective gains. In this method, theparties try to settle economic issues through a zero-sum game. Zero-sum gameis where ‘my gain is your loss and your gain is my loss’. Neither party is willingto yield an inch.2. Co-operative BargainingBoth parties are more open to coming down from their high horses and co-operating. They are willing to negotiate the terms of employment in a flexibleway. This willingness is because of recession and the need to be able tosurvive in such difficult times. This would not be possible without each other’ssupport and hence co-operative bargaining.TELCO and Ashok Leyland resorted to co-operative bargaining when theautomobile sector was going through a period of recession. Employees maynow be willing to accept a cut in wages in return for job security. Managementmay also agree to modernize and bring in new technology and invest inmarketing efforts in a phased manner.3. Composite BargainingWorkers tend to argue that productivity bargaining increases theirworkload. Rationalization, introduction of high technology, tight productivitynorms hit the unions and workers below the belt. As a result, workers tend tofavour composite bargaining. In this method, labour bargains for wages asusual.In addition, they also bargain for such issues that, if permitted, may result inlower employment in some other plant, diluting the bargaining powers ofunions.E.g. Workers demand further equity in matters relating to work norms,employment levels, manning standards, environmental hazards, sub-contractingPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 4
  5. 5. clauses, etc.We see that workers are no longer solely interested in the monetary aspects tothe exclusion of work related matters.Through composite bargaining, unions are able to prevent the dilution of theirpowers and ensure justice to workers by putting certain limits on the freedom ofemployers.For the employer, this is the lesser evil when compared to strikes and lockouts.FUNCTIONS OF COLLECTIVE BARGAINING1. A market or economic function It determines the terms labor will continue tobe supplied to a company by its present employees or will be supplied in thefuture by newly hired workers.2. A governmental function Bargaining relationship is seen as a mutualdependency of the parties concerned and the power of each to veto the acts ofthe other.3. A decision making function CB allows the workers through their unionrepresentatives to participate in the determination of the policies which guideand rule their working lives.IMPORTANCE OF COLLECTIVE BARGAININGCollective bargaining includes not only negotiations between the employers andunions but also includes the process of resolving labor-management conflicts.Thus, collective bargaining is, essentially, a recognized way of creating asystem of industrial jurisprudence. It acts as a method of introducing civil rightsin the industry, that is, the management should be conducted by rules ratherthan arbitrary decision making. It establishes rules which define and restrict thetraditional authority exercised by the management.Importance to employeesPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 5
  6. 6. Collective bargaining develops a sense of self respect and responsibility amongthe employees.It increases the strength of the workforce, thereby, increasing their bargainingcapacity as a group.Collective bargaining increases the morale and productivity of employees.It restricts management’s freedom for arbitrary action against the employees.Moreover, unilateral actions by the employer are also discouraged.Effective collective bargaining machinery strengthens the trade unionsmovement.The workers feel motivated as they can approach the management on variousmatters and bargain for higher benefits.It helps in securing a prompt and fair settlement of grievances. It provides aflexible means for the adjustment of wages and employment conditions toeconomic and technological changes in the industry, as a result of which thechances for conflicts are reduced.Importance to employersIt becomes easier for the management to resolve issues at the bargaining levelrather than taking up complaints of individual workers.Collective bargaining tends to promote a sense of job security amongemployees and thereby tends to reduce the cost of labor turnover tomanagement.Collective bargaining opens up the channel of communication between theworkers and the management and increases worker participation in decisionmaking.Collective bargaining plays a vital role in settling and preventing industrialdisputes.Importance to societyCollective bargaining leads to industrial peace in the country.Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 6
  7. 7. It results in establishment of a harmonious industrial climate which supportswhich helps the pace of a nation’s efforts towards economic and socialdevelopment since the obstacles to such a development can be reducedconsiderably.The discrimination and exploitation of workers is constantly being checked.It provides a method or the regulation of the conditions of employment of thosewho are directly concerned about them.COLLECTIVE BARGAINING PROCESSThe collective bargaining process comprises of five core steps:Prepare: This phase involves composition of a negotiation team. Thenegotiation team should consist of representatives of both the parties withadequate knowledge and skills for negotiation. In this phase both theemployer’s representatives and the union examine their own situation in orderto develop the issues that they believe will be most important. The first thing tobe done is to determine whether there is actually any reason to negotiate at all.A correct understanding of the main issues to be covered and intimateknowledge of operations, working conditions, production norms and otherrelevant conditions is required.Discuss: Here, the parties decide the ground rules that will guide thenegotiations. A process well begun is half done and this is no less true in caseof collective bargaining. An environment of mutual trust and understanding isalso created so that the collective bargaining agreement would be reached.Propose: This phase involves the initial opening statements and the possibleoptions that exist to resolve them. In a word, this phase could be described as‘brainstorming’. The exchange of messages takes place and opinion of both theparties is sought.Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 7
  8. 8. Bargain: Negotiations are easy if a problem solving attitude is adopted. Thisstage comprises the time when ‘what ifs’ and ‘supposals’ are set forth and thedrafting of agreements take place.Settlement: Once the parties are through with the bargaining process, aconsensual agreement is reached upon wherein both the parties agree to acommon decision regarding the problem or the issue. This stage is described asconsisting of effective joint implementation of the agreement through sharedvisions, strategic planning and negotiated change.COLLECTIVE BARGAINING AGREEMENTCollective bargaining generally includes negotiations between the two parties(employees’ representatives and employer’s representatives). Collectivebargaining consists of negotiations between an employer and a group ofemployees that determine the conditions of employment. Often employees arerepresented in the bargaining by a union or other labor organization.The result of collective bargaining procedure is called the collective bargainingagreement (CBA).Collective agreements are written documents regarding working conditions andPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 8
  9. 9. terms of employment concluded between an employer and the union.The CBA maybe described in a number of ways. It is a compromise between theself-interest of the two parties that they have agreed upon as a guide to theirrelationships on certain matters for a specified period of time.The contents of the agreement would depend on what is agreed upon and onthe subject matter. The following examples are of some general application: • The date of commencement of the agreement • Its duration - when it will terminate or may be terminated, and how it can be terminated • A definition of terms which may otherwise be ambiguous • The procedure for settling disputes regarding interpretation, as well as other disputes. This may also include the issue of trade union action and lock-out, i.e. in what circumstances such action may or may not be permitted. • The consequences in the event of breaches of the agreement • As regards wages, exactly how conversion of employees wages to the new scales is to be effected.The contents of CBA vary considerably from plant to plant and from industry toindustry. Usually, they cover items relating to wages, working conditions,working hours, fringe benefits and job security.Legally, a CBA binds only the parties to it and the persons on behalf of whomthey were acting. It often happens that all workers in a given undertaking maynot belong to the union which signed the agreement or they are non –unionized. Therefore, in a number of countries the law provides for compulsorycoverage of agreements or settlements on employers and all the employees inan establishment. The implementation and supervision of collectiveagreements, in some countries, depends on the good faith of the parties. TheyPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 9
  10. 10. are “gentlemen’s agreements” without any legal sanction, for instance, in theUnited Kingdom.In India, there are three types of agreements, namely 1. voluntary agreements, 2. settlements, and 3. Consent awards.Collective agreements are voluntary when they are a result of directnegotiations between the parties on themselves for their implementation.Settlements are collective agreements that are backed by the interventions ofgovernment agencies. Consent awards are agreements reached between theparties when the matters in dispute are under reference to industrial tribunals/courts.CBA may be in the form of procedural agreements or substantiveagreements.Procedural agreements deal with the relationship between workers andmanagement and the procedures to be adopted for resolving individual or groupdisputes. This will normally include procedures in respect of individualgrievances, disputes and discipline. Frequently, procedural agreements are putinto the company rule book which provides information on the overall terms andconditions of employment and codes of behavior.Substantive agreement deals with specific issues, such as basic pay, overtimepremiums, bonus arrangements, holiday entitlements, hours of work, etc. Inmany companies, agreements have a fixed time scale and a collectivebargaining process will review the procedural agreement when negotiationstake place on pay and conditions of employment.When agreement is reached one of the following two courses may be adopted:Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 10
  11. 11. - Set out the agreement reached in a letter to the union and, on confirmation,prepare a draft agreement. - Alternatively provide the union with a draft agreement. This would be thebetter course of action as the actual agreement reached will be clearer. It alsoleaves less room for further negotiations between the time agreement isreached and the draft agreement is approved.The signing of an agreement does not ensure its successful implementation.Managers and supervisors should be acquainted with the agreement throughthe most appropriate means. A combination of written and oral communicationis often useful.CONDITIONS FOR SUCCESSFUL COLLECTIVE BARGAININGTrade Union RecognitionThe existence of the freedom of association does not necessarily mean thatthere would automatically be recognition of unions for bargaining purposes.Especially in systems where there is a multiplicity of trade unions, there shouldbe some pre-determined objective criteria operative within the industrialrelations system to decide when and how a union should be recognised forcollective bargaining purposes. The accepted principle is to recognise the mostrepresentative union, but what criteria is used to decide it and by whom maydiffer from system to system. In some systems the issue would be determinedby requiring the union to have not less than a stipulated percentage of theworkers in the enterprise or category in its membership. The representativenessmay be decided by a referendum in the workplace or by an outside certifyingauthority (such as a labour department or an indepenedent statutory body).There could be a condition that once certified as the bargaining agent, therecannot be a change of agent for a prescribed period (e.g. one or two years) inorder to ensure the stability of the process.Observance of AgreementsPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 11
  12. 12. Especially in developing countries where there is a multiplicity of unions, unionsare sometimes unable to secure observance of agreements by their members.Where a labour law system provides for sanctions for breaches of agreements,the labour administration authorities may be reluctant to impose sanctions onworkers. Where there is frequent non-observance of agreements orunderstandings reached through the collective bargaining process, the party notin default would lose faith in the process.Support of Labour Administration AuthoritiesSupport by the labour administration authorities is necessary for successfulcollective bargaining. This implies that they will:Provide the necessary climate for it. For instance, they should provide effectiveconciliation services in the event of a breakdown in the process, and evenprovide the necessary legal framework for it to operate in where necessary, e.g.provision for the registration of agreements, will not support a party in breach ofagreements concluded consequent to collective bargaining.As far as is practicable, secure observance of collective bargaining agreements.Provide methods for the settlement of disputes arising out of collectivebargaining if the parties themselves have not so provided.Good FaithCollective bargaining is workable only if the parties bargain in good faith. If not,there will be only the process of bargaining without a result viz. an agreement.Good faith is more likely where certain attitudes are shared among employers,workers and their organizations e.g. a belief and faith in the value ofcompromise through dialogue, in the process of collective bargaining, and in theproductive nature of the relationship collective bargaining requires anddevelops. Strong organizations of workers and employers contribute toPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 12
  13. 13. bargaining in good faith, because there would be some parity in the bargainingstrength of the two parties.Proper Internal CommunicationBoth the management and union should keep their managers and membersrespectively well informed, as a lack of proper communication and informationcan lead to misunderstandings and even to strikes. Sometimes managers andsupervisors who are ill-informed may inadvertently mislead workers who workunder them about the current state of negotiations, the managementsobjectives and so on. In fact, it is necessary to involve managers in deciding onobjectives and solutions, and such participation is likely to ensure greateracceptance - and therefore better implementation - by them.TRENDS IN COLLECTIVE BARGAINING In recent years, in India as in almost elsewhere, collective bargaining hasfaced the challenges stemming from falling trade union membership, increasingindividualization of labour relations and the difficult quest for greatercompetitiveness and flexibility in a situation of economic globalization. In thiscontext, certain trends in India could be enumerated as follows: • Coverage of collective bargaining is high in the formal sector and very low portion of workers in the informal sector are covered by collective agreements. • Bargaining at the enterprise level is increasing • Other forms of bargaining and new issues • Bargaining in the public sector largely staying at the same level.Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 13
  14. 14. • Other forms of bargaining like individual employer-employee bargaining, work councils, bargaining on individual work contracts, bargaining directly with workers’ representatives, work place consultations based on performance targets etc. are on the increase. • The new issues in the bargaining are bankruptcy, equality, career- developments, leisure time, evaluation systems etc. and overall the issues covered in collective bargaining are broadening.PERCEPTIONS ON COLLECTIVE BARGAINING • CB essentially means negotiations between the labour and management • CB should just not stop at the negotiations but also go on to be implemented; otherwise the entire process of CB will be rendered futile. • It is mostly the formal sector that benefits out of the CB process. • Once both the parties know what they want, negotiations become easier and better. • Obviously all the above mentioned conditions are required successful for CB but the most essential among them is the “good faith” • CB agreement is a written format and it is essential because that acts as a legal framework and as a guide to their relationships on certain matters for a specified period of time. • Today because of the weakening unions, collective bargaining is not highly practiced, yet at the other end there are organisations which take care of the workers well enough so that collective bargaining is not highly required.Collective bargaining in IndiaPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 14
  15. 15. In India, the workers working in the formal sector, who constitute only sevenpercent of the total workforce are generally, in a position to gain from thecollective bargaining mechanism and the vast majority of the workers engagedin the informal sector are largely untouched by this instrument in its standardform for improvement of their terms of employment. Generally, all enterpriseswhich are either registered under the purview of any one of the acts like theIndian Factories Act, 1948, Mines and Minerals (Regulations and Development)Act, 1957, Plantation Labour Act, 1951 the Companies Act, 1956 the Central/State Sales Tax Act, Shops and Establishments Acts of the State Governmentsare defined as part of the organized sector. Also included are all governmentcompanies, Departmental Enterprises and Public Sector Corporations. Also, allworkers in the agricultural sectors except those working in the plantations areregarded as informal sector workers.In India, Collective Bargaining and rise in Trade Unionism came into existencemainly in the early 20 th century. The movement got impetus from Constitutional,statutory and voluntary provisions. Article 19(c) of the Indian Constitutionguarantees freedom of association as a fundamental right. The Trade UnionsAct passed in 1926 provides for registration of Trade Unions of employers andworkers and in certain respects, it defines the law relating to registered TradeUnions. It confers legal and corporate status on registered Trade Unions. TheAmendment to the Trade Unions (Amendments) Act, 1926 in 2001, enforcedwith effect from 9th January 2002 provides for reducing multiplicity of TradeUnions, orderly growth of Trade Unions and promoting internal democracy.In India, trade unions gained prominence much later – only after 1900. In 1918,Gandhiji - as the leader of the Ahmedabad textile workers – advocated theresolution of conflict through CB agreements.But the idea gathered interest only after the Second World War. TheGovernment of that time took steps like setting up of machinery for negotiations,conciliation and arbitration. The trade union movement and also CBagreements became popular after Indian independence.Prepared by Mrs. Neha Rathi Faculty of KKPIMS Page 15
  16. 16. Moving from agreements at the plant level, such agreements spread toindustries such as chemicals, petroleum, tea, coal, oil and aluminum. In portsand docks, banking and insurance, collective agreements were arrived at, rightat the national level.FACTORS AFFECTING CB1. Use of contingency worker and employee leasing.2. Technological changes3. International forces- less expensive foreign worker.4. Economic conditions5.Heavily governed by its political forces and legal regulationsPrepared by Mrs. Neha Rathi Faculty of KKPIMS Page 16