Multinationals & Industrial Relations in India

Multinational companies (MNCs), at the forefront of globalization, have grown to almost 80,000 worldwide employing 55 million people. Although the sub prime crisis of 2008 and the recent Greek’s sovereign debt problems have slowed the pace growth, it is unlikely to stall the process, facilitated by the developments in information, communication and transportation technologies. The last few years have seen a sharp surge in worker protests in multinational companies across India. In Tamil Nadu, workers at Hyundai, MRF, and Nokia went on protest strikes. It is not just blue collar workers who have been aggressively asserting their rights of protesting and striking. In the private owned sector, pilots of India’s biggest airlines like Jet Airways went on strike on separate occasions during 2009. Engineers and other employees of Air India went on a 3 day strike in May 2010. In Pune, MNCs such as Cummins Generator Technologies, Cummins India, Bosche Chassis Systems, Brembo India, lost periods of work ranging from 20 to 85 days. Gurgaon and Manesar near Delhi, the home of automobile industry, have seen large scale unrest not only in the large multinationals but in many of the subsidiaries.
Although not coordinated or for the same reasons, some are related to the downturn. For instance, many companies which paid overtime and incentives for several years of frenzied growth suddenly became cost conscious and demanded higher productivity without bonuses. Differences in pay between workers who got small annual increases in salary and managers who got much greater increases also caused the grouse. Other issues involved absorption of contract labor, trade union recognition, and inter-union rivalry.
The problems in the auto-belt in Haryana date much earlier, from 2005 in fact. About 300-700 workers of Honda Motorcycles and Scooters India (HMSI) were reported injured in a clash with the police. About 3000 workers were protesting a lockout of their factory and the dismissal of some colleagues. Interestingly, HMSI took the stance on injured innocence, saying it had nothing to do with the unfortunate incident that took place outside the factory. But the workers were almost always in fear of management for visits to the toilet or for drinking water, accept shift choice without change, receive threats of termination in case of less than expected performance, and stay back each day to complete the production target. These led the workers to get together and make a list of 50 demands for substantial higher wages, allowances and facilities. When these demand were not met the workers started to set up a union. The management tried to discourage and suppress the process by calling them individually and advised against joining the union. They even lobbied with the Haryana govt. not to allow unionization and the registrar actually turned their application down. Later, the workers reached an agreement with the management. The pact said that the striking workers would resume duty and not make any new demands for one year. The labor union would remain.
Maruti-Suzuki workers went on strike first on 12th October 2000 when nearly 4.700 employees boycotted work, protesting the company’s demand for an undertaking from them. The workers said that signing the document would have meant losing their fundamental rights. It was also a protest against the management’s decision to link bonus and incentives to productivity and efficiency. The deadlock continued for 90 days. The strike broke on the management’s terms. The union had to accept the new terms on production linked incentives and bonus. Freshly, due to several insurmountable issues, workers at Maruti’s Manesar plant have struck work thrice in five months. A regular worker at Maruti could make up to Rs. 25,000 per month in CTC (cost to company) in his first year (after three years of traineeship). About 50% of this is in the form of performance incentives, including, an attendance reward that amount to 18% of CTC and has become a contentious issue in the ongoing strike. Trainees make Rs. 13,000-14,000. And a contract worker, depending on his skills, anywhere from the minimum wage (Rs 4,664 in Haryana) to Rs. 12,000. Striking workers complain about abusive behavior by the supervisors, which the company denies. In an eight-hour shift, workers get a 30-minute lunch break and two 7.5 minute tea-breaks. One has to remove his safety equipment, run 150 metres to grab tea and snack, and then run to toilet that is 400 metres away, and be back in seven minutes. Supervisors deny permission for an additional toilet break, and steep salary cuts are affected for even a day of absence from work. Workers quote different figures- Rs. 1,200- Rs. 1,500- as cuts for a day of leave, authorized or unauthorized. Many of these policies are dictated by the demands of the assembly line, where production halts if even a single worker doesn’t do his part of in the specified time. For this reason, all manufacturing firms place a premium on attendance. But such policies tread a thin line between acceptability and outrage. It was issues such as these, and the alleged mistreatment, that led the Manesar workers to demand a union to negotiate with the management. The company says it has “persuaded” the Manesar workers to join the existing (Gurgaon based) union and not form a new one. The workers say the company first promised elections to the existing union in April, 2011 and officials began warning workers against forming a new union. They also allege that the company officials were forcing workers to sign an affidavit stating they were happy to be with the Gurgaon union and don’t want a new one. On June 6, 2011 the company summarily dismissed 11 workers for indiscipline and striking work. This included the four office bearers of the proposed union. The strike went on till June 16, when the company agreed to reinstate the dismissed workers. But the peace didn’t last long and the reasons are contested. Company officials claim the 11 reinstated workers started flouting all norms by appointing their own bay and asking workers to obey their orders instead of company supervisors and managers. Subsequently, the workers adopted a go-slow policy. Production fell from 1,200 cars a day to 700; on two days at the end of August, to 400. On those days only 95 cars passed the quality check, and the company accused workers of sabotaging cars. On August 29, the company locked the factory and demanded workers sign a ‘good conduct bond’. The company sacked 18 trainees; and 44 regular workers were either suspended or fired for “sabotaging production and deliberately causing quality problems”. The workers refused to sign. They sat outside the factory and started strike.
Recently, strike commenced at CD-maker Moser Baer’s Noida unit where, workers are demanding a revision in wages and bonuses. The management of the unit has termed the demands of workers as unreasonable while, claiming that they have enjoyed a very cordial relationship and has engagement levels with all its associates. However, the number of striking employees was as high as 1,000 which certainly make one skeptical on management’s claims.
One finds several indicators of convergence in MNC operations in India. However, although technical excellence is demonstrated in these companies, there cannot be conclusions about ‘best practices’ since many of the managerial actions have led to poor employee relations. The location of strikes and unrest have shifted to newer industrial areas like Gurgaon, Manesar, Pune, Jaipur, Chennai, Bangalore, away from the traditional hotbeds of union militancy like Bengal or Ahmedabad. Some of the unrest is related to the recession of 2007-08, but many of them are in fact related to the issue of union recognition or managerial aversion towards unions. The overall policy of the companies seems to be the strategy of creating a ‘reserve army of cheap labor’ in the area, available whenever required and vulnerable to retrenchment at will. The companies are related to global competition, and manpower utilization techniques consistent with high tech productivity and production. Labor flexibility is a dominant concern management in all the cases, and has led to increasing use of non-regular workers. A lot of problems relate to managerial styles –summary suspensions and dismissals, pay cuts, intolerance for any interference in their own production plans, insistence on written undertakings of and their political linkages. Workers are resorting to violence and are hitting back at management over perceived injustices. Management has also amply demonstrated insensitivity to worker’s sentiments and perceptions. Although collective bargaining is being used, it is often failing to solve prickly issues and workers are demanding reopening of negotiations within 6 months to one year.

Interestingly, a large group consisting of industrial leaders, economists, bureaucrats feels that the upsurge in the number of industrial disputes taking place requires an impetus to review India’s labor policies. India’s labor policies were better suited for a time when the producer had a stable market for his output, and the fledgling workforce then needed some state support to enter an equitable contract to employment. Today, the producer has to contend with an extremely uncertain business environment; but the legal framework for the conditions of employment remains the same thereby disincentivising hiring permanent workforce. The Industrial Disputes Act prevents any establishment with more than 100 employees from undertaking lay-offs even in downturns without obtaining Government permission (which is seldom granted). Firms, therefore, prefer to keep their regular workforce as low as possible and hire casual workers to adjust the labor to the peaks and the troughs of the business cycle. This leads to an obnoxious feeling among the contract workers who have no job security and get barely a third of what the regular ones earn despite doing the same work. Such a system is bound to create tensions and occasionally explode as it has been seen in recent times. It is time for India to urgently undertake labor reforms without which it cannot hope to increase the share of manufacturing in its GDP. The first thing has to end is the system of hiring through contractors and pay discriminatory wages between workers performing similar work in the same organization. Manufacturing firms should be made to keep all workers- others than those performing activities not core to the business- on their regular rolls, entitling them to uniform productivity-linked wages, provident fund and other benefits. This should be combined with the flexibility to lay-off in a humane and transparent manner with reasonable advance notice. During the period of employment, there could also be compulsory payments made to an ‘unemployment fund’ of every worker- a la payroll tax withheld from wages- that will serve as insurance in the event of losing his or her job.
The Industrial Relations machinery and the government ministers must understand that in spite of favorable climate for industry being present, their neglect towards the growing number of industrial disputes would add insult to injury among the business class. It would hamper the prospects of MNCs to wholly own and operate through subsidiaries in our economy. It can also act as a speed breaker in the pace of expansion of existing MNCs. The State should mandatorily intervene judiciously in the disputes right from the beginning and not politicize the event. The government’s solicitousness for industries’ concerns to force the workers to bite the bullet can provoke unions to enlarge company disputes into industry-wide movements while, bearing in mind the industries’ concerns. The lick and a promise attitude by the Government won’t do all and the issue should be initiated for more public debates so that a long term comprehensive solution is established.


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