Nation in Labour

When the Modi government took over the reins last year, it began what was a much-needed push to labor reforms.

While some laws sought to ease apprenticeship rules for employers, or reduce the sheer number of laws that small manufacturing units have to comply with, or imposing a complete ban on child labor up to 14 years of age, there where others where companies struggled with the multiplicity of labor laws or rigid contract labor laws. Others found it difficult to align their growing strategies with decades-old laws governing workplace disputes, pay scales, social security, maternity benefits and contracting labor.

In this story, we take a look at how the employee relations and industrial relations will change in this dynamic landscape, what challenges the companies and labor force face in this regard and what initia-tives the big companies have undertaken to address the same. We talked to several industry leaders and five large companies—Mahindra & Mahindra, ICICI Bank, Raychem RPG, Hindustan Unilever and Hindalco from the Aditya Birla Group—to find out how they engaged with their work-force and found win-win solutions for both the employer and the employee.  

Mood is upbeat

Most industry leaders we spoke to sought for more flexibility in contract labour management. They want to be able to control how to manage the human resources as business needs waxes and wanes. They want the Contract Labor Act to be more of an enabler than a restriction and also want more clarity on the same. Currently, there are 44 labor laws under the purview of the Central government and more than 100 under the various state governments. There is a huge necessity to reduce the number of labor laws and standardize them as well.

“No company wants to hire and fire. They want to have a stable workforce that they can train, groom and invest in. The problem is that the worldwide scenario is so volatile that businesses have to face many uncertainties that may lead to finan-cial crunch. That is where the flexibility with the labor force would help,” said Ratish Jha of Raychem RPG.

There are growing concerns on social security for workers as well. Companies realize that if they focus on the well-being of the workers, not only does it translate immediately in terms of high pro-ductivity but also helps in keeping good employee relations. Also, the government on its part needs to have a social security umbrella in place for con-tract workers and also needs to give companies or manufacturers guidelines on how to manage people who have been laid off. Maybe the government can bring in a law, which states that the company has to pay a worker a specific amount of compensation for a specified period (say Rs 50,000/month for every six months). That would not only take care of the worker in the time that he/she is unemployed, but also give companies an idea of how much amount they need to keep handy in case they want to do layoffs.

The five companies that we talked to for the cover story laid special emphasis on the following:

Skill development and multi-skilling of employees

Regular technical and soft skills training was provided to employees to ensure the versatility of workmen and also to ensure the development of a conducive work culture. That helped the company to move the workforce around according to their needs and gaps. They have also instituted recogni-tion and benefits to motivate employees towards multi-skilling. This is a win-win for both the employers and the workmen.

Managers are given special training, especially in the areas of dealing with the workmen, handling of grievances and engagement of the workers. Workmen teams can best handle the workplace issues. At Hindalco, they have state and national level skill and quality contests.

In Hindustan Unilever, the ER team pioneered an innovative training and performance manage-ment system called ‘SPARKLE’. It was a revolution-ary approach to skilling the shop-floor employees and was undertaken to standardize the capability management process of the shop-floor employee and office staff. It standardized the performance appraisal and rating process across all the 30 loca-tions for shop-floor employees covering about 10,000 employees with the intention of identifying HiPos. SPARKLE has now become a global IT tool to man-age capability and talent for blue collar employees across Unilever. It was also executed in North Africa and the Middle East.

At Raychem RPG, they introduced the concept of SMTs (Self Managed Teams) with no supervisors. The team is responsible for planning, monitoring and reporting everything they do on the shop floor. Post their selection through a very rigorous recruitment process, the shop-floor workers undergo on-the-job training for a year. The company works towards giving them a diploma in engineering and the workers have full-day classes on Saturdays and Sundays. At the end of the program, the workers get work experience as well as an engineering diploma.

Communication

The management takes extra effort to connect with workers at the factory level. Companies have monthly and quarterly meetings with the employees, where the performance of the factory and the company are shared with the work-ers. The continuous transfer of information helps the managers and workers to be updated about the goings on in the company and hence promotes an open understanding between the two. For example, in ICICI Bank, a personal message from MD & CEO Chanda Kochhar is recorded and shared with the employees. Employee Relations manag-ers and the bank’s senior management visit all the bank’s branches and offices covering about 70,000 employees. Employees can freely raise and discuss issues with their superiors or ER managers. They developed an internet-based video conferencing application called “i-Studio Live” through which senior management can conduct virtual visits and engagement with employees. Raychem RPG engages with its workers in a very different way. They have a communication forum with the parents every six months.

Involving workmen in decision-making: Compa-nies need to consider involving their workmen in decision-making as it ensures the longevity of the company without loss of productivity. Mahindra & Mahindra has a Rise i4 ideation program where teams and workmen are encouraged to give ideas on improvement under the parameters of Productivity, Quality, Delivery, Safety and Moral. Every week two hours are allotted for ideation to all teams and they are encouraged to come up with ideas to increase productivity and reduce costs. There is a competi-tion for the best idea given.

Developing shop-floor employees into leaders

One of the major programs that was launched in HUL was SiO (Stepping into One). This pioneer program was launched to help motivate and prepare HiPo shop-floor employees and staff for the Officer Cadre. Not only did it ensure retention of talent, but also helped in building the talent pipeline. There is a program for officers too, which follows a three-pronged approach to building leadership capabilities.

The above-mentioned initiatives drive home the truth that companies are already looking at several changes like including workmen in decision-making, enhancing their skills and ensuring the top manage-ment is in constant touch with ground reality. The companies understand that good employee rela-tions will make or break the business. If the Make In India dream has to become a reality, then India will need to continuously harness the combined strength of the employers along with the labor force that will propel the nation to greater heights. The government should focus on developing a consensus on national policy framework aligning with existing changing environment on labor issues

Amendment is important

Sharad Ganjal, EVP HR, Admin, IR and Member of Exec Council at Thermax India Ltd

The government has made a good beginning and some of the states have been proactive in bringing in administrative as well as structural changes. An effective engagement between government, employers and unions will bring in pragmatism to the entire employee relations canvas. For example, the vexed subject of contract labor cannot be wished away by any player. A dynamic economy requires a reciprocal labor market policy.

Employers cannot use contract labor for cost arbitrage only; it has to be for flexibility arbitrage as well. One has to realize that today’s Gen Y blue collar employee looks more for income security rather than job security. The major issues around cur-rent labor laws are around inflexibility of engagement of labor, multiple labor laws and government intervention in schemes where it’s not required.

The Contract Labor Act has to be more of an enabler for generation of employment rather than a restriction. The government also needs to amend Chapter 5B of Industrial Disputes Act to do away with prior permission for retrenchment, closure and layoff for establishments employing less than 500 employees and design the compensation in these cases that is annuity based apart from fixed compensation. The number of labor laws should also be reduced.

Upgradation is the key

P Dwarkanath, Director - Group Human Capital at Max India Limited

In the recent past, we have predicted global financial uproar, augmented interest and inflation rates, unpredictable oil prices, vague legislative policy, limited resources and sluggish business performance.

Below are some of the key industrial relations challenges and proposed interventions to facilitate IR in the current VUCA environment: The labor laws needs to be consolidated, simplified and brought in line with con-temporary economic realities. Currently, there are about 44 labor laws under the purview of Centre and more than 100 under state governments, which deal with a host of labor issues.

There is lack of clarity on outsourcing and engagement of contract labor. For the same, speedy dispute resolution needs to be in place. Also, adequate protection of welfare practices needs to be provided, along with avoidance of unfair Labor practices especially in unorganized sector which constitutes more than 90 per cent of the workforce in India.

In terms of the Industrial Disputes Act V, Chapter B, especially in the manufacturing sector, retrenchment, closure & layoff cannot be executed even for valid reasons without the prior permission of the appropriate government, which it is essential that the IR policies should be investor friendly.

Let employees choose

Suchita Dutta, Executive Director, Indian Staffing Federation

The action bias demonstrated by the new regime provides promise for a better future. As per the OECD research, India is one of the most regulated labor markets and yet the least protected one. There are little or no incentives for our youth to move to the formal sector. It’s now time to shift the debate to how labor reform can benefit the millions. Here’s how to do it:

Let each employee decide if they want to make the 12 per cent employee PF contribution or let them decide if they want to pay their 12 per cent employer PF contribution to EPFO or NPS or if they want to pay their 6.50 per cent ESI contribution to ESI Corporation or use it to buy insurance on a health exchange plan.

The government should also consider reintroducing fixed term employment. The last NDA government has amended the Industrial Employment (Standing Orders) Central (Amendment) Rules in 2003 to introduce “fixed term contracts” as a separate class of employees but this was not made into law. While the amendment should state that all benefits and conditions for employees under fixed term contracts should be the same as for normal employees, it should be accompanied by amendments to the Contract Labor Act that remove the core and perennial restrictions and remove the 240 day artificial number that has bred litigation.

Make it simple and clutter free

Michael Dias, Secretary, The Employers’ Association, Delhi

The major issue that employers and employees are facing with the current labor laws is the fact that there are too many laws to be referred to by both employees and the employers. Consequently, implementation becomes difficult. The government is already engaged in consolidating and codifying employment laws, thereby making it easy and convenient for all concerned to understand and implement statutory requirements. The three changes that should be made in the present laws are as under:

Our laws should not be prescriptive wherein minute details with regard to compliances are set out. As our labor laws are so prescriptive, prescribing in full details the possibility of harassment by the Inspectorate is huge, thereby leading to dishonesty and corruption on their part. The approach of “one size fits all” should be discarded. Although the government has recommended special legislation for small and medium sized industries (employing up to 40 persons in the establishment), much more action needs to be taken in this regard. A separate labor law be provided for large establishments. The labor administration needs thorough revamping. The labor department is of the firm belief that all employers are dishonest and only seek to exploit. In this regard, the issue relating to prosecution of employers also needs to be revisited. The current practice of prosecuting the MD or other Directors for violations committed by staff or employees who have failed to discharge their duties prima facie creates a fear psychosis in the minds of the employers. Hence, it is imperative that a new approach to the issue of employee-employer relations in India needs to be created.

Manage the workforce better

Debi Prasad Das, Senior Vice President-HR, CEAT

In this globally competitive scenario, organizations would need the flexibility to manage human resources legally and ethically. From managing workforce and bargaining for minimum productivity, the landscape would gravitate to involve them in the expansion and growth of the organization. There are too many laws, which may not be relevant in the changed business environment. However, organizations have to comply and get inspected by many Inspectors under the Act. More than any real benefit to employees, it is perceived as harassment by government authorities.

In the current scenario, it is extremely difficult to relocate or shut down operations. Hence, organizations have to continue with old operations with high overheads. It is also difficult to retrench employees even if one has extremely valid business reasons. The process of termination of employment, even if within legal framework is extremely long and time consuming. Organizations would be required to have flexi staffing, like allowing contract labor or apprentices to work on machines with the increase and decrease in demand.

The Industrial Dispute Act needs to change to allow organizations to hire, deploy and retrench as per their business needs. Under the current circumstances, if one has to survive & grow, one has to take a different approach. CEAT has taken steps to co-exist and co-create our workplace.

In all our new plants, we have diploma holders who man our workstations.

For our old plants, we have significantly invested in employee engagement. Our happy workmen score is beyond 90 per cent. We have adopted a process of joint problem solving and workmen involvement in continuous improvement.

Laws should be re-invented

Gayathri Vasudevan, Co-founder & Chief Executive Officer, LabourNet

Labor laws should evolve with time and the rapidly changing work environment. We see a strategic push and initiatives for reforms from the policy makers recently and foresee positive outcomes from the new amendments. Instead of a plethora of laws, the Labor ministry is planning to have four or five integrated laws. The creation of five codes— wages, safety and working conditions, social security and welfare, industrial relations and employment, training and miscellaneous issues will ease the complexity of regulatory compliances.

The current labor laws are old and obsolete. There is a wide skill-gap that prevails in our country and with various immediate projects at hand; the industry needs to move fast on reforms for skill development and job creation. On the skilling front, vocational education should be compulsorily introduced at school level. We also need to create more opportunity and bring-in more sectors to ‘earn while you learn’ concept to motivate the workforce.

Skill upgradation has to be made mandatory for all industries. Focused involvement of corporate is utmost important towards delivering the reforms. They should work towards skill development of their employees and need to provide new suggestions to policy makers towards bringing in new and meaningful reforms.

Being thought leaders, the corporates can themselves take forward new initiatives for the betterment of work environment. Creating an employable workforce which can ideate, innovate and deliver in-line with objectives of ‘Make In India’ will be the key towards creating a favourable business climate

Make laws uniform for all

Jacob Jacob, Chief People Officer, Apollo Hospitals

While we see the move towards creating an impact and making India a global hub, the initiatives towards labor reforms need to be comprehensive and not limited to certain specific areas. What would be more welcome is a global approach to relook at the way work-force skilling happens. One of the major issues is that there are multiple legislations towards achieving the same objective, resulting in overlapping of clauses. Some of the clauses and indices used are archaic and need to be suitably modified for the present day labor and to the current economic scale.

Combining multiple legislations serving the same objective and bringing in uniform laws relevant to the present day would be paramount. Uniform definition of terms, reducing the need for maintaining so many similar records and registers in the era of technology could be vital for businesses. Moving from the concept of minimum wages to fair wages, and at the same time providing leeway for flexibility in workforce reduction or increase for the Business would definitely prove beneficial to the workforce as well as the industry.

Apollo has been working with the industry to push through the reforms - especially those relevant to the Services industry. Being the pioneer in healthcare services in the region, Apollo has always been in the forefront when it comes to labor welfare and pushing for relevant labor reforms in healthcare - we make sure that all our employees get the best in terms of skill upgradation, salaries and labour welfare. However, the change that is expected is not industry specific but something that can impact across industries and the labor force, creating more livelihoods

Focus on what’s beneficial

G Raj Narayan, Chief Mentor for Drona and Founder & MD of Radel Group

The labor issue being an extremely sensitive one, governments of the past were not willing to touch them. The new government, which is fully focused on development and progress on all fronts, realizes that manufacturing growth and productivity as well as foreign investment are stifled by the present labor laws. The skilling initiative is presently targeted at low levels whereas it should holistically address the skilling of manpower for design, manufacture, maintenance etc.

Firstly, the ease of doing business should be drastically improved by bringing in transparency and eliminating bureaucratic delays, cumbersome procedures, multiple returns, reports and harassment etc. especially for MSMEs.

The present labor laws are unfair to the employer wherein it makes it very difficult for an employer to take stringent action against employees indulging in indiscipline, strikes, insubordination and go-slow tactics. This results in financial losses as well as loss of motivation among entrepreneurs, leading to the industry becoming sick. It is almost impossible for industries to close down too.

The cumbersome process of issuing show-cause notices followed by enquiries followed by court proceedings extending over many months, while forcing employers to pay such insincere employees subsistence allowance further emboldens them to raise unreasonable demands from employers. It is common for an employee to switch jobs every year. In this scenario, it is the smaller employer (MSME) who bears the brunt of attrition. Therefore, all organizations employing less than 300 workmen should be exempted from any of the labor laws.

Upgrade employee skills

Divakar Kaza, President-Human Resources, Lupin Limited

There is momentum gained in terms of amendments made to the Apprentices Act, and the Uniform Labor Code. However, the rules need to be notified to the Apprentices Act so that actions can begin at the ground level, and the government is able to get through resistances at different levels.

The Industrial Disputes Act needs to be revamped not only for small and middle enterprises, but also for large industries. Similarly, the Trade Union Act needs an overhaul with respect to multiplicity of unions and memberships, external leadership etc. The Contract Labor Act needs to take into account today’s organizational requirements and needs to be flexible in deployments while ensuring fair wages.

On skill development, Lupin has taken lead in trying to bridge the gap of rural, unskilled India with modern day factory requirements. We have tied up with a university to impart knowledge while providing on-the-job skills and also providing stipend and accommodations etc. during training and employment subsequently.