As President of the Employers’ Federation of India (EFI) and also of the National HRD Network (NHRDN), I interact with many people across the country and across sectors. As I meet employees, managers, trade unions and people from the government, there is clearly an issue with respect to Industrial Relations that needs to be addressed.
Contract labor is here to stay. The problem is that we have not got the balance right between various aspects of the ecosystem in terms of costs and benefits, and the short- and long-term implications and this is creating problems in the system. In my view, while the path is unclear and there is no simple solution, we cannot any longer expect that it will get sorted on its own because it won’t.
The problem is not just about contract labor but about the wider use of non-permanent employees. While the problem might have a different shape and form in the manufacturing sector as opposed to the service sector, the basic issues and the solutions are similar. The one thing that we need to get sorted for non-permanent employees is terms and conditions. Of course, we need to look at fair wages, hygiene issues like safety, canteen, social security etc, but also look at training/skilling, engagement and motivation to make sure that this group contributes to innovation and productivity of the business. We need to create an ecosystem that is almost identical to that of permanent employees, except that they are on contract. At the core of the problem is salary differential. Contract labor is a burning issue and the fundamental matter is how much we pay our non-permanent employees and how we treat them.
To address this problem, we need to move away from a short-term cost arbitrage view to looking at labor as a strategic business process. Get it on the radar of top management. In my view, the starting point is to first accept that it is an issue. Second, we need to treat it as a strategic business process; that means like any other strategic business process we should have a strategy, a plan, metrics and a review process. Then, it is really important to start the dialogue, bring people from all sides of the table together and understand what the issues are on both sides. Only then, one can start looking at solutions. There is no cookie-cutter approach here; solutions will vary from unit to unit, from region to region, from industry to industry. Each one of us needs to find our own answers.
Changes in labor laws are necessary because we have many laws, which are very old and often contradictory and poorly administered. However, changing laws will be an incomplete solution. Management capabilities and practices must be improved to develop cooperation within enterprises towards the win-win goal of continuous improvement of the enterprises competitiveness and growth. We need to reframe the contentious debate about labor laws into collaborative deliberations about more comprehensive changes in human resources strategies. There are enough research studies that show that focus on developing human capital is far more effective in improving competitiveness than management approaches focused totally on managing the costs of labor.
If one also builds in the benefits of having a more engaged and productive contract workforce, the business will have tremendous benefits. One cannot have just a short-term and a cost minimizing approach, this is self-defeating. A strong business case will emerge by factoring the benefits of having an engaged, productive and motivated non-permanent workforce and ensuring that this group gets enough attention from the top management.
RAJEEV DUBEY is the President of Group HR, the Aftermarket sector, and Corporate Services for Mahindra & Mahindra. His key focus areas are HR/IR initiatives for the Group, the aftermarket sector, corporate communications, government relations, and infrastructure. He is also the President of EFI and NHRDN.