Article: Labour law reform - A reality check

Employee Relations

Labour law reform - A reality check

It's now time to redraw a broader HR roadmap, introspect and learn from the past on the industrial relations front
Labour law reform - A reality check

The subject of labour law reform in India, especially vesting the “hire and fire” authority on the management without any interference, has been discussed time and again for ensuring the growth of the manufacturing sector. While there is a need to make certain amendments to the existing labour law and attract more investments, one must not assume that the prefix of “hire and fire” would accelerate our management capabilities and would help the sector to shrug off a decade-long sluggishness.

Then two questions arise: Do the existing laws prohibit the management to take appropriate disciplinary action on delinquent and non-performing employee/labour? Or in a situation when the company goes through business/financial severity, cannot justifiably down-size/layoff/retrench workers as per the existing law?

Would it really make an impactful difference if the management has the blanket authority to impose “Hire & Fire” without requiring any legal compliances under the principle of natural justice?

The answers to the above two are “NO”.

In fact, we must know that the trigger for investment and the industrial growth in any sector largely depends on

  • The government’s political stability and a consistent industrial development policy
  • Incentives, concessions, efficient and consistent tax mechanism of the government
  • Efficient regulatory and licencing mechanism, industry-friendly approach of the regulatory bodies and its seamless processes
  • Availability of skilled manpower and other resources like power, water, raw material etc.
  • Market potential of the geographic region
  • Reasonably good social security legislations


If all of the above are in-sync with our national objectives and its industrial growth policies, then the success or failure of running the business/industry would only depend on the management capability of the organization. Most of the labour legislations were not in place before the Industrial Revolution and until 1940s. In fact, companies like TATA had proactively deployed such measures in their internal policies much before they became the law.

So, what prompted the government to table such laws? The answer is simple: To ensure that the management does not indulge in excesses or unfair labour practices and also help maintain a balanced relationship between labour-force and the management. But the intention was never meant to prevent organizations from operating their businesses successfully and smoothly in India.

Such a scenario requires the management to focus on fostering confidence, trust, mutual respect, bonding and healthy relationship with its own workforce proactively, rather than depending on any regulation to play a role in building relationship. Again, things can be forged by developing good and innovative workplace practices and also emphasizing on strategic and solution approach to all such IR and labour management complexes and challenges faced by the organization.

More often than not, the attitude or behaviour of any workforce, be it knowledge/techie or be it skilled/unskilled workforce, is largely influenced by our management or supervisory styles and the working environment of the organization.

Let us now discuss a practical behavioural scenario here; for example, if an individual joins a company and his/her attitude/behaviour is observed to be at “X” level and few years down the line, the same becomes “X” negative, what has then contributed for such an adverse behaviour? If we continue adopt a management style which produces such more accumulated numbers of “X” negative behaviours triggering them to voice their concerns jointly/cohesively before the management, this itself is the first instance which gives birth to a work-culture product called “Union”. And then in order to manage such product (union), we developed a “Product Management” expert called IR (Industrial Relations). Is it not a knee-jerk management approach? Traditionally, the IR function has been seen to be very conventional and reactive style, mostly emphasizing on follow-ups on industrial unrests, disputes and negotiations, labour court cases and disciplinary proceeding, conciliations etc. The typical IR folks are seen to be either 100 per cent union friendly or 100 per cent management-centric but no balanced approach.

For a moment, let us assume that there are NO labour laws in place and hence management is at its full liberty to “Hire & Fire” the labourers at any moment it wishes to. Here, leave alone the ethical and social justice aspects of it, can there be any organization, which can remain profitable by continuously producing and dispensing the services of trained resources? Will it not have adverse impact on company’s productivity, the bottom-line and the business results? And when organizations all over keep throwing such massive numbers of workforce, will it not have an adverse impact on our socio-economic system? What about the applicability of the legal course called “Fundamental Right” leading to law and order scenarios?

Well, we must revisit these aspects as well and thus extrapolate if the straight-jacketed “Hire & Fire” empowerment alone can really enhance our management capability/skill which, in turn, certainly will result in the organizational/business success.

No doubt, like HR, IR too pose multiple challenges on the organization and there is no single-design-fits-all formula in IR management. Hence, organization must analyse each issue/case in a different perspective as each issue will have its own unique sets of complexes which will have to be addressed or resolved through effective planning and strategic intervention. The best solution oriented approach to it, would be to pre-empt future critical and strategize resolution in advance. Again, the real solution lies on your proactive management approaches and practices.

On the other hand, if one understands the labour laws thoroughly, there are visible gaps on which every organizations can capitalize in terms of effective labour/union management. As such, there are a number of ways that the organization can separate a delinquent employee/labour. Now, in light of new concept, we need to replace the term “IR” with “IRM” (Industrial Relations Management) and also to replace intangibles with the tangibles in labour management practices.

To me, everything will definitely fall in line, if we have a management approach which emphasizes on labour practices that promotes values, trusts, confidence, mutual respects and bonding between labour workforce, union and the management. Developing a heathy and productive work environment must add strengths to the organization’s business operational success. Finally the management approach should be proactive, strategic and solution-oriented.

Well, it’s now the time to redraw a broader HR roadmap, introspect and learn from the past and practically acknowledge that a good and able HR leader with the knowledge and experience of labour laws and practices, should possibly be able to fill the gap in managing the labour/IR management effectively. No matter what it is, the challenges would continue to be there but it has to be morphed into a platform of opportunities for HR leaders to demonstrate their capability by moving away from transactional activities to a value-added transformational role.

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Topics: Employee Relations, #IndustrialRelations

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