Concept Notes

Labour Welfare

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Contents
1 Introduction........................................................................................................................ 4
2 Definition............................................................................................................................ 4
3 Evolution of Concept of Labour Welfare ............................................................................ 5
3.1 Phase 1 (1850-1900).................................................................................................... 5
3.2 Phase 2 (1900-1947).................................................................................................... 5
3.3 Phase 3 (1947- Present) .............................................................................................. 6
4 Labour Welfare Approaches............................................................................................... 7
4.1 Humanitarian Approach .............................................................................................. 7
4.2 Utilitarian Approach .................................................................................................... 8
4.3 Paternalistic Approach ................................................................................................ 8
5 Labour Welfare Theories .................................................................................................... 9
5.1 Police Theory............................................................................................................... 9
5.2 Philanthropic Theory ................................................................................................... 9
5.3 Paternalistic or Trusteeship Theory ............................................................................ 9
5.4 Placating Theory.......................................................................................................... 9
5.5 Public Relations Theory ............................................................................................. 10
5.6 Functional Theory ..................................................................................................... 10
5.7 Religious Theory ........................................................................................................ 10
6 Types of Labour Welfare .................................................................................................. 11
6.1 Intra-Mural ................................................................................................................ 11
6.2 Extra-Mural ............................................................................................................... 11
6.3 Statutory ................................................................................................................... 11
6.4 Voluntary ................................................................................................................... 12
6.5 Mutual ....................................................................................................................... 12
7 Statutory Welfare Measures ............................................................................................ 12
8 Social Security .................................................................................................................. 14
8.1 S ocial Security for Unorganised Workers ................................................................. 15
9 Labour Welfare Funds ...................................................................................................... 16

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10 Some Labour Welfare Practices in India ....................................................................... 17
11 Workers’ Education and Training ................................................................................. 19
12 Labour Research ........................................................................................................... 20
13 Labour Statistics............................................................................................................ 20
14 Employment Security and Management of Redundancies .......................................... 21
14.1 Redundancy and Retrenchment ............................................................................ 21
14.1.1 Managing Redundancy....................................................................................... 22
15 Recommendations of the Second National Commission on Labour ............................ 23

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1 Introduction
Labour Welfare is an important aspect
of industrial relations. Welfare
activities in an industry encompass
not only workers, but their families
also. The concept of labour welfare
finds its origin in the Directive
Principles of State Policy enshrined in
the Constitution of India:
 Article 38 directs the State to
secure a social order for the promotion of the welfare of people.
 Article 41 requires the State shall make effective provisions for securing the right to
work, to education, and to public assistance in case of unemployment, old age,
sickness and disablement, and in other cases of undeserved want.
 Article 42 mandates that the State should make provision for securing just and
humane conditions of work and for maternity relief.
 According to Article 43, the State shall try to secure to all workers, agricultural,
industrial or otherwise, work, a living wage, conditions of work ensuring a decent
standard of life and full enjoyment of leisure and social and cultural opportunities.
 According to Article 47, the State should regard the raising of the level of nutrition and
the standard of living of its people, and improvement of public health, as among its
primary duties.

2 Definition
Labour welfare refers to the whole range of benefits, amenities and facilities, including
social security provided by
employers to workers besides
their wages that helps in
maintaining and improving
their health, safety and quality
of life.
So, let us dig a bit deeper in the
definition to have a better
understanding.

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Labour welfare is all about the good things that employers do for their workers, beyond just
paying them wages. It includes a bunch of different things that help workers stay healthy,
safe, and happy in their jobs.
These things can be anything from providing medical benefits
(like health insurance), to making sure the workplace is safe
(like having fire exits and safety equipment), to offering extra
perks like paid time off or recreational facilities.
The goal of labour welfare is to make sure that workers not
only have enough money to live on, but also have the support
and resources they need to live well-rounded, healthy lives
both at work and outside of it. So, it's about more than just
the money – it's about looking out for the well-being of
employees in all aspects of their lives.

3 Evolution of Concept of Labour Welfare

The concept of labour welfare, as we understand today, has developed over a period of
time. The evolution of labour welfare in India may be broadly divided into three phases:

3.1 Phase 1 (1850-1900)

This era witnessed the initial growth of industrialization coupled with the exploitation of
labor by employers seeking higher profits. Workers endured long hours, unsafe working
conditions, job insecurity, and meager wages. However, some governmental measures
were introduced to ameliorate these conditions:
 The Apprentices Act, 1850 aimed at helping poor children to learn trades and crafts
 The Fatal Accidents Act, 1853 had the provision for giving compensation to families of
workers who lost their lives
 Enactment of the Indian Factories Act, 1881 was a significant step towards labour
welfare, though it was limited in scope and was applicable only to factories employing
not less than 100 persons.
 The Merchant Shipping Act, 1859 had provisions for the health of seamen.

3.2 Phase 2 (1900-1947)

During this phase the efforts of expanding the scope of labour welfare gained some
momentum. The discontentment caused among workers due to conditions arising out of
World War I (1914-1918), the Russian Revolution of 1917, and setting up of the

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International Labour Organisation (ILO) in 1919 gave impetus to welfare activities taken up
by the employers and the state.
 The government passed the Indian Factories (Amendment) Act, 1922 with wider
applicability. The amended Act contained provisions for limiting the working hours for
both men and women, and other welfare provisions for women and children.
 The Workmen’s (now Employees’) Compensation Act, 1923 introduced provisions for
compensation in case of injury at work, resulting in disablement or death.
 The Royal Commission on Labour (1931) had a considerable influence on welfare
activities in the country. With its recommendations, the Factories Act, 1934 came into
force. This Act reduced the working hours for children and women and provided for
crèches at workplace. It also recommended health insurance and maternity benefits.
 The Indian Dock Labourers Act was passed in 1934, providing for safety at working
places on shore and of any regular approaches over a dock, wharf, quay or similar
premises.
 In 1942, welfare officers were appointed in the Labour Department by the
government
o The Labour Investigation Committee (also known as the Rege Committee) was
appointed by the government in 1944 to investigate into labour welfare measures.
o In its report submitted in 1946, the Committee recommended extension of the
scope of labour welfare to include measures like education, healthcare, relief in
case of old age and death, etc.

3.3 Phase 3 (1947- Present)

After Independence, industrialisation begun and employment level started increasing.
Many welfare legislations were enacted towards this end, including the Factories Act, 1948,
the Plantations Labour Act, 1951. Labour Welfare Funds were created for workers under
legislations like the Coal Mines Labour Welfare Fund Act, 1947. Welfare provisions for
workers in almost every industry were made in industry-specific legislations like the Motor
Transport Workers Act, 1961.
Throughout these phases, the evolution of labor welfare in India reflects
a gradual shift from exploitative practices towards a more humane and
regulated approach, with a focus on enhancing the overall well-being of
workers. Now, let us discuss some concept check questions.

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 Concept Check
Question 1 - Which of the following act was passed that aimed to provide children with
the training of trades and crafts?
A. The Apprentices Act
B. The Fatal Accident Act
C. The Maternity Benefit Act
D. The Dock Labourer Act
Ans: Option A

Concept Check
Question 2 - requires the State shall make effective provisions for
securing the right to work, to education, and to public assistance in case of
unemployment, old age, sickness and disablement, and in other cases of undeserved
want.
A. Article 39
B. Article 40
C. Article 41
D. Article 42
Ans: Option C

4 Labour Welfare Approaches

There are three approaches that underlie the welfare activities taken up by employers:

4.1 Humanitarian Approach

This approach is based on the idea of employers feeling a sense of social responsibility
towards their workers. They believe in
providing amenities and benefits that
would help workers live with at least a
basic level of comfort. Essentially, it's
about caring for the well-being of
employees beyond just what's required.
Example: Imagine a manufacturing
company that provides its workers with
free or subsidized meals during their shifts. They do this because they understand that
many of their employees may not have the means to afford nutritious meals, especially

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during long work hours. By offering this benefit, the company aims to ensure that its
workers have access to basic necessities and can work comfortably without worrying about
going hungry.

4.2 Utilitarian Approach

From a utilitarian perspective, employers see spending on welfare amenities as an
investment. They believe that by providing these benefits, they can maintain or even
improve the efficiency and productivity of their workers. So, it's not just about being nice –
it's about getting the most out of their
workforce for the benefit of the
organization.
Example: Consider a tech company that
offers extensive wellness programs,
including gym memberships, yoga
classes, and mental health counseling
services. The company sees these
investments in employee well-being as crucial for maintaining high levels of productivity
and creativity among its workforce. By promoting physical and mental health, they believe
they can reduce absenteeism, increase employee morale, and ultimately drive better
business results.

4.3 Paternalistic Approach

This approach portrays the employer as a kind of guardian or parent figure for the workers.
Employers who take a paternalistic
approach feel a responsibility to look
after their employees and provide for
their welfare. They see themselves as
protectors of their workers' interests
and well-being, and they undertake
welfare activities out of a sense of duty
towards them.
Example: Imagine a construction firm. The company provides comprehensive health
insurance coverage not just for employees but also for their spouses and children.
Additionally, they offer educational scholarships for employees' children and organize
family-friendly events like picnics and holiday parties. Here, the owners feel a deep sense of
responsibility towards their workers and their families, treating them more like an extended
family than just employees.

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5 Labour Welfare Theories
Several theories have been proposed to explain how and why labour welfare measures are
undertaken. Some of the important theories are briefed here:

5.1 Police Theory

This theory suggests that without
external intervention, employers may
neglect workers' welfare and exploit
them for their own gain. Therefore,
the state must enforce laws and
regulations to ensure minimum
standards of welfare, such as
minimum wages and safe working conditions.

5.2 Philanthropic Theory

This theory is based on the
assumption that welfare measures
are undertaken with the objective of
providing benefits to workers for
improving their condition. Many
philanthropists believed that
investment in labour welfare will be
ultimately beneficial for industry.

5.3 Paternalistic or Trusteeship Theory

This theory is paternalistic in
approach and proposes that the
owner of an industrial undertaking is
the guardian or ‘father’ of all the
workers. The employer owns the
property and profits which he uses
for the benefit of workers and the
society as a whole. The employer must take care of the interests of workers. Mahatma
Gandhi strongly believed in the trusteeship theory.

5.4 Placating Theory

The placating theory believes that as
workers are becoming more aware of

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their rights, they are adopting a militant attitude to pressurise employers for higher wages
and improved working conditions. In such situations, undertaking welfare measures can
appease workers and peaceful industrial relations can be attained.

5.5 Public Relations Theory

When labour welfare measures of an
undertaking are publicised, they
create goodwill in the society. Sales
and profits of such an establishment
may go up. Thus, it gives two-way
benefits to employers: increased
profits and better industrial relations.
This theory may be said to be based on the utilitarian approach.

5.6 Functional Theory

This theory rests on the assumption
that welfare measures help to
preserve the efficiency and
productivity of workers. Also known
as the efficiency theory.

5.7 Religious Theory

This theory is based on the belief that
doing good deeds is an investment. In
this context, investing in labour
welfare is a good deed that would
reap fruits in future. Providing
benefits to workers in the form of
canteens, health benefits, etc. can
also help in atonement of sins.
Till now we have discussed the Introduction, Evolution, Approaches and Theories of Labour
Welfare.
Please note that direct questions can be asked from the theories and approaches. So,
before going further make sure that you have understood the concepts.
Now, let us discuss some concept check questions.

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 Concept Check
Question 3 - The theory in which welfare measures for workers are seen as an
investment is .
A. Religious theory
B. Philanthropic theory
C. Functional theory
D. Police theory
Ans: Option C

Concept Check
Question 4 - Gandhiji is a supporter of theory.
A. Trusteeship
B. Placating
C. Religious
D. Functional
Ans: Option A

6 Types of Labour Welfare

Welfare amenities provided to workers may be of several types- voluntary, statutory and
mutual. However, depending upon whether welfare amenities are provided within the
premises of an establishment or outside, welfare measures may be of two types- Intra-
Mural and Extra Mural. Now, let us discuss all these types in brief.

6.1 Intra-Mural
Intra-mural facilities are those that are provided by the employer to the workers within the
premises of an establishment, e.g., drinking water, canteen, rest room, crèche, etc.

6.2 Extra-Mural
Extra-mural facilities are provided outside the premises of an establishment, e.g., housing,
transport, etc.

6.3 Statutory
Statutory measures are mandated by law. Statutory Measures may be of two types:
 Measures which have to be provided irrespective of the size of the organisation or the
number of people employed therein like first aid, urinals etc.

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  Measures which are to be provided subject to employment of specified number of
people, such as canteens, rest shelters, crèches and ambulance rooms.
Statutory Measures may also be categorized as: welfare legislations that provide for
general well-being and some degree of comfort, and social security legislations that are
protective in nature. We will discuss statutory welfare measures in detail in the later part of
this chapter.

6.4 Voluntary
These are facilities provided voluntarily by employers out of humanitarian concern,
irrespective of statutory requirements. Examples might include additional healthcare
benefits, educational assistance programs, or recreational activities.

6.5 Mutual
Under this type, both workers and employers contribute to the welfare measures. This
could involve cooperative efforts such as joint health insurance schemes, savings plans, or
housing cooperatives where both parties share the costs and benefits.

7 Statutory Welfare Measures

The Government of India has laid down various labour enactments from time to time, many
of which contain provisions for worker welfare. Welfare provisions contained in some of the
Acts are specified below:
 The Factories Act, 1948:
o This is a legislation dedicated to labour welfare and it contains extensive
provisions for workers’ health, safety and welfare.
o It gives the number of canteens, shelters, rest rooms and welfare officers.

 The Mines Act, 1952:

o The issue of health and safety of mine workers is governed by the Mines Rules,
1955 created under the Mines Act, 1952.
o Under the Act and the Rules, an employer has to provide the following facilities for
the health and welfare of mine workers:
 adequate and suitable shelters for taking food and rest at every mine where
50 or more persons are employed
 canteens in mines employing 250 or more workers
 appointment of a welfare officer in mines employing 500 or more workers and
where the number of workers in a mine exceeds 2,500, such welfare officer to

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 be assisted by a suitably qualified additional welfare officer for every
additional 2,000 persons or part thereof employed
 sufficient supply of cool and wholesome drinking water
 sufficient number of latrines and urinals separately for males and females in
every mine and
 maintenance of first-aid boxes or cupboards in every mine and first-aid rooms
in mines employing more than 150 workers.

 The Plantations Labour Act, 1951:

o The welfare measures that are to be provided to plantation workers by employers
are:
 clean and wholesome drinking water
 separate latrines and urinals for male and female workers
 medical facilities for workers as prescribed by the State Government
 one or more canteens in every plantation ordinarily employing 150 workers
 crèches in plantations employing 50 or more women workers
 recreational facilities for workers and their children
 educational facilities for children of workers employed in any plantation
between the age of 6 and 12 exceeding 25 in number
 housing facilities for every worker and his family residing in the plantation
 workers to be provided with prescribed number and type of umbrellas,
blankets, raincoats or other like amenities for protection from rain or cold
and
 appointment of a welfare officer in plantations employing 300 or more
workers.

 The Contract Labour (Regulation and Abolition) Act, 1970:

o A contractor is liable to provide the following amenities to contract labour:
 canteen, wherein contract labour numbering 100 or more is ordinarily
employed
 rest room wherein contract labour is required to halt at night in connection
with the working of the establishment
 arrangements for sufficient supply of wholesome drinking water, latrines and
urinals, washing facilities and
 first-aid facilities
o In case of failure on the part of the contractor to provide these facilities, the
principal employer is liable to provide the same.

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  The Merchant Shipping Act, 1958:
o Welfare provisions in the Act include:
 supply of sufficient provisions and drinking water of good quality
 maintenance of proper weights and measures on board
 supply of beddings, towels, medicines, medical stores, and provision of
surgical and medical advice
 crew accommodation
 appointment of Seamen’s Welfare Officer at such ports in or outside India as
the Government may consider necessary
 setting up of an advisory board to be called the National Welfare Board for
Seafarers for advising the Central Government on the measures to be taken
for promoting the welfare of seamen generally, and in particular the
establishment of hostels or boarding and lodging houses for seamen, the
establishment of clubs, canteens, libraries and other like amenities for the
benefit of seamen, the establishment of hospitals or the provision of medical
treatment and of educational and other facilities for seamen.
Let us discuss some concept check questions.
Concept Check
Question 5 - The Welfare amenities that are provided to the workers within the
establishment premises are called amenities.
A. Extra Mural
B. Intra Mural
C. Mutual
D. Voluntary
Ans: Option B

8 Social Security
The concept of social security is based on the principles of human dignity and social justice.
According to ILO, “Social security is the protection that a society provides to individuals and
households to ensure access to health care and to guarantee income security, particularly
in cases of old age, unemployment, sickness, invalidity, work injury, maternity or loss of a
breadwinner.”
Thus, we may define social security as assurance provided by the State against various types
of adverse situations to which individuals may be exposed in events like old age, sickness,
financial distress, disablement, unemployment, maternity or death.

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Social Security may be of two types:
 Social Insurance: Social
insurance scheme is one that
provides benefit for persons
of small earnings granted as a
legal right in amounts which
is the combined contributory
effort of the insured person,
the employer and the State.
Example: Imagine you and
your employer and the government each put a small amount of money from your
paycheck into a fund. If you get sick or injured and can't work, this fund helps cover
your medical expenses and provides some money to support you while you recover.
This is like insurance for workers, where everyone contributes a little bit to help each
other out when needed.
 Social Assistance: A social assistance scheme provides financial benefits to persons
of small earnings as a right, which can sufficiently fulfil the minimum standard of
need; its source of finance is taxation.
Example: Let's say there's a family struggling to make ends meet because the
breadwinner lost their job. Social assistance programs, funded by taxes, step in to
provide financial support to help them pay for essentials like food, housing, and
healthcare until they can get back on their feet. It's like a helping hand from the
government to ensure that everyone has enough to live on, even during tough
times.
Some of the important social security legislations in India are the Employees’
Compensation Act, 1923, the Minimum Wages Act, 1948, the Employees’ State Insurance
Act, 1948, the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, the
Maternity Benefit Act, 1961 and the Payment of Gratuity Act, 1972.
Therefore, we can conclude that social security is like a safety net provided by the
government to ensure that people have support during difficult times.

8.1 Social Security for Unorganised Workers

Imagine Ramesh, who works as a daily wage laborer in a small village in India. He doesn't
have a regular job or formal employment contract, so he's considered part of the
unorganized sector. One day, Ramesh falls ill and is unable to work for several weeks.

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Without a steady income, he struggles to pay for his medical expenses and support his
family.
In this situation, Ramesh doesn't have access to any formal social security benefits like
health insurance or sick leave that organized sector workers might have. He's left to cope
with the financial burden of his illness on his own, which puts him at risk of falling deeper
into poverty.
So, here arises the need for Social Security for Unorganised Workers.
The majority of the workforce in India consists of workers in the unorganised sector. There
are no social security measures for these workers for maintaining basic living standards and
risk coverage, especially in crisis situations such as unemployment, sickness or disablement.
The only exceptions are the Governments of Gujarat, Kerala, Karnataka and Madhya
Pradesh, which have insurance schemes for the landless agricultural labour.
The Minimum Wages Act, 1948 stands out as a legislation that is widely applicable to
unorganised workers, including agricultural
labour. Some welfare schemes are being
implemented by the Central Government for
specific occupational groups of the
unorganised sector, such as beedi workers,
cine workers, handloom weavers, fishermen,
etc.
Certain initiatives of the Government like the
National Rural Employment Guarantee Act,
2005, the National Rural Health Mission and
the Sarva Shiksha Abhiyaan address the problems of employment, health and education,
respectively.
Despite these efforts, there remains a significant gap in social security coverage for
unorganized workers, highlighting the need for further measures to ensure their economic
stability and well-being.
Now, let us move on to our next topic Labour Welfare Funds.

9 Labour Welfare Funds

Labour Welfare Funds have been set up by the government to provide welfare and social
security to workers in certain industries. There are 5 welfare funds governed by different
legislations, which are administered by the Ministry of Labour & Employment. The acts are:

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  The Mica Mines Labour Welfare Fund Act, 1946.
 The Limestone and Dolomite Mines Labour Welfare Fund Act, 1972.
 The Iron Ore, Manganese Ore and Chrome Ore Mines Labour Welfare Fund Act,
1976.
 The Beedi Workers Welfare Cess Act, 1976.
 The Cine Workers’ Welfare Fund Act, 1981.
The purpose of these welfare funds is to provide
housing, medical care (prevention of diseases),
transportation, water supply, educational and
recreational facilities, social insurance and
security to workers employed in non-coal mines
and beedi industry and to cine workers. For
building and construction workers, the welfare
boards and welfare funds are required to be set
up by the concerned State Governments.
Welfare funds fall broadly in two groups:
 Tax (Cess)-Based Funds: These funds are financed through taxes or cess levied on
specific commodities or industries. For example, the welfare boards for mine workers,
beedi and cigar workers, etc., are financed by the cess levied on these commodities.
The revenue generated from these taxes is then used to fund various welfare
programs and initiatives for workers.
 Contributory Funds: In contrast, contributory funds require contributions from both
workers and employers. These contributions are pooled together to create a fund that
is used to provide welfare benefits to workers. An example of a contributory fund is
the Employees' Provident Fund, where both employees and employers contribute a
portion of their salary towards retirement savings and other benefits.

10 Some Labour Welfare Practices in India

Labour welfare practices in India involve efforts from various stakeholders including the
government, employers, trade unions, and voluntary organizations. Here are some
examples of these measures:

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 Child Care Leave
o Introduced for employees of Central Government and was introduced as a result
of recommendations of the Sixth Central Pay Commission, with effect from 1st
September 2008.
o Women employees having minor children may be granted Child Care Leave by a
competent authority for a maximum period of 2 years (i.e., 730 days) during their
entire service for taking care of up to 2 children, less than 18 years of age, whether
for rearing or taking care or any other needs like examination, sickness, etc.
o During the period of such leave, women employees shall be paid leave salary
equal to pay drawn immediately before proceeding for leave.
o It may be availed of in more than one spell. Child Care Leave shall not be debited
against leave account.

 Shops and Establishments Act:

o Enacted by every State to regulate conditions of work and provide for statutory
obligations of employers and rights of employees in the unorganised sector and
other employments in their jurisdiction.

 Non-statutory or voluntary benefits:

o Provided by employers to workers include loans for purposes like house building;
recreational facilities; education of children; purchasing of personal vehicle;
conveyance; leave travel concession; fair price shops; and many other such
facilities.

 Trade Unions' Welfare Activities:

o Though trade unions have limited financial resources, they are actively
undertaking labour welfare activities within their means like The Textile Labour
Association Ahmedabad, The Rashtriya Mill Mazdoor Sangh.

 Social Organizations' Initiatives:

o There are some social organisations like the Bombay Social Service League, the
Seva Sadan Society, the Maternity and Infant Welfare Association and the Young
Men’s Christian Association, that undertake voluntary welfare activities like night
schools, promotion of public health, organising recreational activities and lectures,
etc.

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11 Workers’ Education and Training
Education is important for workers as it helps them improve their understanding in a
holistic manner regarding their status problems and rights and responsibilities in various
roles as workers, as union members, as consumers and as citizens.
The Indian workforce is characterised by low level of education. The scheme for workers’
education is administered by the Central Board of Workers’ Education, an autonomous
body under the Ministry of Labour & Employment. The Indian Institute of Workers’
Education (IIWE) was established by the CBWE in March 1970 at Mumbai as the apex
training institute. To achieve its objectives, various training programmes are conducted by
the CBWE for the workers of formal and informal sectors at national, regional and unit
levels through a network of 50 regional and 9 sub-regional Directorates spread in various
parts of the country.
Note: The term ‘vocational training’ refers to lower-level education and training for the
population of skilled or semi-skilled workers in various trades; however, it does not enhance
their level with respect to general education.
Under the Constitution of India, vocational training is a concurrent subject. The National
Council for Vocational Training (NCVT), a tripartite body under the Ministry of Labour &
Employment, supervises training activities. It has representation from employers, workers
and Central/ State Governments. State Councils for
Vocational Training are constituted at State-level monitoring
training programmes by the respective State Governments.
Training is provided through Industrial Training Institutes
(ITIs), run by State Governments, and through various
industrial establishments that provide apprentice training.
The Directorate General of Employment and Training has
launched the Women’s Vocational Training Programme in 1977.
Let us discuss some concept check questions.
Concept Check
Question 6 - Vocational Training is a subject of list.
A. Union
B. State
C. Concurrent
D. None of the above
Ans: Option C

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 Concept Check
Question 7 - State true or false:
Social Assistance schemes are funded by the employers and employees jointly.
Ans: False
Explanation: A social assistance scheme provides financial benefits to persons of small
earnings as a right, which can sufficiently fulfill the minimum standard of need; its source
of finance is taxation.
Now, let us discuss some remaining theoretical concepts.

12 Labour Research
Labour research is an activity aimed at collecting, analysing and disseminating knowledge
about various dimensions of labour by using scientific methods. The main purposes of
most of the labour research undertaken by the Government are:
 Problem Solving: Labour research aims to identify and address issues faced by
workers. By studying various aspects of labor researchers can propose solutions to
improve workers' well-being and address challenges they encounter in the workplace.
 Policy Development: Research findings provide valuable insights that inform the
development of labor policies. By understanding the complexities of labor markets and
socio-economic conditions, policymakers can design effective policies.
 Understanding Socio-Economic Conditions: Labour research helps in comprehending
the socio-economic circumstances of workers at both national and international levels.
By examining trends, disparities, and dynamics within the labor force, researchers gain
a deeper understanding of the factors influencing workers' lives and livelihoods. This
knowledge enables policymakers to make informed decisions and implement targeted
interventions to support workers and promote social equity.

13 Labour Statistics
Labour statistics provide an insight into the socio-economic development of a country;
such statistics are necessary for planning developmental activities and improving the
industrial relations scenario of a nation. The following government agencies are engaged in
collection, compilation and dissemination of labour statistics in the country:
 Ministry of Labour & Employment and its affiliates Directorate General of Factory
Advice Service and Labour Institutes.

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  Employees’ State Insurance Corporation and Employees’ Provident Fund Organisation.
 Other agencies (Office of the Registrar General of India, National Sample Survey Office,
Planning Commission and State Governments).
 The Labour Bureau is the main agency engaged in collecting statistics on different
aspects of labour since its inception in 1946.
These agencies collect data through surveys, censuses, and administrative records, which
are then analyzed and published as official statistics. Labour statistics provide policymakers,
researchers, and other stakeholders with valuable insights into labor market dynamics,
employment trends, wage levels, and working conditions. By understanding these trends,
governments can formulate effective policies to promote decent work, improve labor
standards, and foster inclusive economic growth.

14 Employment Security and Management of Redundancies

Employment security implies that a worker enjoys permanent employment without any
fear of losing job. It implies a sense of
stability and continuity in employment,
where individuals feel confident in their
job tenure and future prospects within
an organization.
Employment security is not only
beneficial for individual workers but also
for organizations as it fosters loyalty,
commitment, and productivity among employees. It contributes to a positive work
environment and can help organizations attract and retain talented individuals.
However, it's essential to note that employment security doesn't necessarily mean absolute
protection from job loss.

14.1 Redundancy and Retrenchment

Redundancy is ‘the state of being no longer in
employment because there is no more work
available’. Budget constraints and/ or change in
work technology may be the major drivers of
redundancy.
Please note that The Industrial Disputes Act, 1947
refers to redundancy as ‘retrenchment’.

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Section 2 (oo) of the Industrial Disputes Act defines retrenchment as the termination of
workmen’s services by the employer for any reason other than termination by way of
disciplinary action; retirement (whether voluntary or superannuation); non-renewal of the
term of contract; and continued ill-health.
Please note that Employers are prohibited from terminating the employment of a female
employee at any time during maternity leave or pregnancy, where the employee would
have otherwise been entitled to maternity benefit or medical bonus under the Maternity
Benefit Act, 1961.

Additional Terms
Lay-off is the failure, refusal or inability of an employer on account of shortage
of coal, power, or raw materials, or accumulation of stock, breakdown of
machinery, natural calamity, or for any other connected reason, to give
employment to a workman whose name is borne on the muster rolls of his
industrial establishment and who has not been retrenched.
Closure is the permanent closing down of a place of employment or a part
thereof, and is taken as one which may have occurred due to industrial disputes
and other issues like financial stringency, shortage of power or raw material or
coal, inter or intra union rivalries, accumulation of stock, lack of demand,
breakdown of machinery, indiscipline, violence, etc.

14.1.1 Managing Redundancy

Managing redundancy involves several steps to ensure fairness and compliance with legal
requirements. Here are some key aspects of managing redundancy:
 Need Assessment:
o An employer must ensure that there is a genuine need for redundancy.
o For this, a works committee may be consulted on issues related to retrenchment.
 Employee Entitlements:
o An employer is required to provide 1 months’ notice to any retrenched workman
indicating the reasons for retrenchment.
o The State-specific Shops and Establishments Act specifies notice requirements for
all non-workmen employees. Most States usually require employers to provide at
least one month’s notice or the period specified in the employment contract.
o Employers are required to pay retrenchment compensation equivalent to 15
days’ average pay for every year of continuous service to all workmen who are

22 | P a g e
 made redundant. For example, if the person has worked for 10 continuous years
then he must be provided with the compensation of 150 days.
o Gratuity is also payable under the Payment of Gratuity Act, 1972 to all employees
with more than 5 years of continuous service.
Now, let us discuss the recommendations of the Second National Commission on Labour.

15 Recommendations of the Second National Commission on Labour

The Second National Commission on Labour (2002) has given several recommendations for
labour welfare and social security, some of which are as follows:
 The need for crèches not to depend on the number of women workers or the number
of children (up to 6 years of age). Every establishment employing 20 or more workers
must run a crèche properly manned and equipped either singly or in association with
other employers and/ or local bodies. Enactment of a general law relating to hours of
work, leaves and working conditions at workplace.
 Ratification of Article 4 of the ILO Convention No. 177 of 1996 on promotion of
equality of treatment and other rights of for home-workers, including right to organise,
occupational safety and health, remuneration, social security, etc. would offer
substantial safeguards to millions of workers.
 Introduction of a system of registration for domestic workers; these workers should be
entitled to benefits of all the schemes that the Commission has recommended for self-
employed workers.
 Establishing a separate wing for unorganised workers in Labour Departments, with
adequate number of women employees.
 Conversion of the Employees’ Compensation Act, 1923 from an employers’ liability
scheme to a social insurance scheme.
 Extension of the existing provisions for maternity benefit in the organised sector so
as to be applicable to all women workers
 Need for a law to place all the provident funds under a common regime; the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
 Integration of the Payment of Gratuity Act, 1972 with the Employees’ Provident
Funds and Miscellaneous Provisions Act, 1952 and its conversion into a social
insurance scheme. An Unemployment Insurance Scheme may be introduced as a part
of the Employees’ Deposit Linked Insurance Scheme.
Let us discuss a concept check question.

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 Concept Check
Question 8 - is the failure, refusal or inability of an employer on
account of shortage of coal, power, or raw materials, or accumulation of stock,
breakdown of machinery, natural calamity, or for any other connected reason, to give
employment to a workman whose name is borne on the muster rolls of his industrial
establishment and who has not been retrenched.
A. Layoff
B. Closure
C. Retrenchment
D. Redundancy
Ans: Option A

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Concept Notes
Wages

1|Page
Contents
1 Introduction ................................................................................................................... 4
2 Role of State as per Jeong............................................................................................... 4
3 Tripartite Model of Industrialisation ............................................................................... 5
3.1 Concept of Tripartism............................................................................................... 5
3.2 Evolution of Tripartite Bodies in India....................................................................... 5
3.3 Tripartite Bodies in India .......................................................................................... 6
4 Labour and Five-Year Plans ............................................................................................. 7
4.1 First Five-Year Plan (1951-1956) ............................................................................... 7
4.2 Second Five-Year Plan (1956-1961) .......................................................................... 8
4.3 Third Five Year Plan (1961-1966) .............................................................................. 8
4.4 Fourth Five Year Plan (1969-1974)............................................................................ 8
4.5 Fifth Five Year Plan (1974-1979) ............................................................................... 9
4.6 Sixth Five Year Plan (1980-1985)............................................................................... 9
4.7 Seventh Five Year Plan (1985-1990) ......................................................................... 9
4.8 Eighth Five Year Plan (1992-1997) ............................................................................ 9
4.9 Ninth Five Year Plan (1997-2002) ........................................................................... 10
4.10 Tenth Five Year Plan (2002-2007) ........................................................................... 10
4.11 Eleventh Five Year Plan (2007-2012) ...................................................................... 10
4.12 Twelfth Five Year Plan (2012-2017) ........................................................................ 10
5 Labour Law Reforms and Labour Policy......................................................................... 12
6 Amendment Proposals at various stages of Consideration ............................................ 13
7 Recommendations of The Working Group .................................................................... 13
8 Provisions for Women Workers in various legislations .................................................. 15
9 Policies and Provisions for Child Labour ........................................................................ 18
10 Theories of Wages .................................................................................................... 19
10.1 Subsistence Theory ................................................................................................ 20
10.2 Wages Fund Theory ............................................................................................... 20
10.3 Purchasing Power Parity Theory ............................................................................. 21

2|Page
 10.4 Residual Claimant Theory ....................................................................................... 21
10.5 Marginal Productivity Theory ................................................................................. 22
10.6 Bargaining Theory of Wages ................................................................................... 22
10.7 Efficiency Wage Theory/Hypothesis ....................................................................... 23
10.8 Demand and Supply Theory ................................................................................... 23
11 Wage Boards............................................................................................................. 24
11.1 Evolution................................................................................................................ 24
11.2 Constitution ........................................................................................................... 24
11.3 Functions ............................................................................................................... 24

3|Page
1 Introduction
Wages paid to labour are a source of their livelihood and a cost to the employer at the same
time. The Planning Commission was set up by a resolution of the Government of India in
March, 1950. It was charged with responsibilities
of assessing all resources of the country,
augmenting deficient resources, formulating plans
for the most effective and balanced utilisation of
resources and determining priorities. The Five-Year
Plans, formulated, executed and monitored by the
Planning Commission, form an integral component
of the planning process in India. They address Issues pertaining to employment and
employability like labour policy, industrial relations, employment, wages, welfare.

2 Role of State as per Jeong

Four distinct roles of the State that affect industrial relations are identified by Jeong as:
 A third-party regulator of labour relations- The State acts as a neutral mediator or
regulator in resolving conflicts and disputes between employers and employees.
 A regulator of markets- The State oversees and regulates economic markets to
prevent monopolistic practices, promote competition, and safeguard the interests of
workers and consumers. It enforces laws related to fair trade, pricing, and market
competition to maintain a level playing field for businesses and protect workers from
exploitation.
 An establisher of the welfare system- The State is responsible for establishing and
administering welfare programs and social safety nets to support workers. This
includes provisions for healthcare, unemployment benefits, pensions, and other social
assistance programs aimed at enhancing the well-being and security of workers and
their families.
 Its own employer and policymaker- As an employer, the State directly hires and
manages its workforce, setting employment policies, terms, and conditions for its
employees. Additionally, the State formulates and implements policies that impact
labor markets, employment practices, and industrial relations at both the national and
local levels.
Let us discuss Tripartite Model of Industrialisation in detail.

4|Page
3 Tripartite Model of Industrialisation

3.1 Concept of Tripartism

As the name suggests, tripartism involves three parties that participate in settlement of
matters of industrial dispute. The three participants are the trade unions of workers,
employer and the government, with the pivotal role played by the government. Tripartism
promotes the idea of partnership between labour and management and rests on the
following principles-:
 Management and workers should share a relation of
partnership and synergy.
 The community as a whole must be responsible for
protecting the interests of workers, so that they enjoy
their due share in the fruits of development of the
nation.
Tripartism operates at industry and national levels. As a mechanism it plays a vital role in
settlement of disputes especially when bipartism does not help in reaching a consensus.
For example, during negotiations over workplace conditions or wage disputes,
representatives from all three parties come together to find mutually beneficial solutions.
The government often acts as a mediator, ensuring that the interests of both workers and
employers are considered and that agreements reached are fair and enforceable.

3.2 Evolution of Tripartite Bodies in India

The need for consultation on labour matters was recommended by the Royal Commission
on Labour in India (also known as the Whitley Commission) in 1931. However, immediate
action was not taken by the British government at the time. The Government of India Act,
1935, which was an important milestone in itself, placed the subject of labour in the
Concurrent List. In the year 1942, India set up two tripartite bodies on
the model of the International Labour Conference:
1. The Indian Labour Conference {earlier known as the Tripartite
National Labour Conference}.
2. The Standing Labour Committee {earlier known as the Standing
Labour Advisory Committee}.
Note- India ratified the Tripartite Consultation (International Labour Standards) Convention,
1976 (No. 144) concerning tripartite consultations to promote the implementation of
International Labour Standards in 1978, the same year it was adopted by the ILO.

5|Page
3.3 Tripartite Bodies in India
The Indian Labour conference and the Standing Labour Committee are two important
national-level tripartite bodies that play a significant role in shaping the industrial relations
framework of the country. The objectives set before these two tripartite bodies at the
time of their inception in 1942 were:
i. Promotion of Uniformity in Labour Legislation: This objective aimed to standardize
and harmonize labor laws and regulations across different regions and industries
within India. By promoting uniformity in labor legislation, the tripartite bodies
sought to ensure consistency and fairness in the treatment of workers and
employers nationwide.
ii. Laying Down of a Procedure for the Settlement of Industrial Disputes: Another key
objective was to establish a structured mechanism for resolving industrial disputes in
a peaceful and efficient manner.
iii. Discussion on All Matters of All-India Importance Between Employers and
Employees: This objective emphasized the importance of fostering dialogue and
collaboration between employers and employees on issues of national significance.
Both these tripartite bodies consist of representatives of the Central Government,
Governments of States and Union Territories and representatives of Employers and
workers’ organisations nominated by the Central Government in consultation with all-India
organisations of workers and employers.
Please note the meetings of the ILC are held annually, whereas the SLC meets as and
when necessary.
The First Industrial Committee was formed in 1948 in the plantation industry.
The decision to constitute Industrial Tripartite Committees or Industrial Committees with
equal representation from employers and workers sides was mainly the outcome of
tripartite deliberations at the ILC in 1944.
State Labour Advisory Boards are tripartite advisory bodies set up in nearly all States to
provide a forum of the representatives of the Government, employers and employees for
discussing problems in order to maintain and promote harmonious industrial relations and
to increase production.
Other notable tripartite committees are:
i. the Central and State Advisory Committees to advice the Government on the
administration of welfare funds

6|Page
 ii. the Steering Committee on Wages to study trends in wages, production and prices
and assist in laying down principles to guide wage-fixing authorities
iii. the Central Implementation and Evaluation Machinery to assess the extent of non-
implementation of labour legislations, awards, etc.
iv. the Central Board of Workers’ Education, an autonomous body under the Ministry of
Labour & Employment that administers the Workers’ Education Scheme and
v. the Special Tripartite Committee constituted in 1992 to study the impact of the New
Industrial Policy on labour-related problems and for making useful recommendations.
Let us discuss some concept check questions.
Concept Check
Question 1 - The meetings of the ILC are held , whereas the SLC meets as
and when necessary.
Weekly
Monthly
Quarterly
Annually
Ans: Option D

Concept Check
Question 2 - The Planning Commission was set up in .
March 1950
March 1951
March 1952
March 1953
Ans: Option A

4 Labour and Five-Year Plans

The various policies and recommendations related to labor from the
First Five-Year Plan to the Twelfth Five-Year Plan in India are as
follows:

4.1 First Five-Year Plan (1951-1956)

In the context of labour, the primary objective of the First Five Year

7|Page
Plan was to increase employment opportunities and to raise the standard of living of
masses. The Plan concentrated on five aspects of labour policy:
i. industrial relations,
ii. wages,
iii. working conditions,
iv. employment & training
v. and productivity.
The primary objective of the First Five Year Plan was to increase employment
opportunities and to raise the standard of living of the masses.
Measures were directed towards ensuring a better distribution of the educated labour
force among different occupations, thus diverting workers from ‘crowded’ occupations to
those where there is a shortage.

4.2 Second Five-Year Plan (1956-1961)

Driven by the objective of developing a socialist pattern of the society, the Second Five Year
Plan recommended appointment of a wage commission and an authority like a tripartite
wage board, consisting of equal representatives of employers and workers, to be instituted
for individual industries in different areas.
The Employees’ Provident Fund (EPF) Scheme, which was instituted on a statutory basis
during the First Five Year Plan, was extended in the Second Plan phase to cover industries
and commercial establishments having 10,000 or more workers in the country as a whole.

4.3 Third Five Year Plan (1961-1966)

The third plan stressed on increasing the application of the principle of voluntary arbitration
for resolving differences between workers and employers. An urgent consideration was
given to the conversion of the various Provident Fund schemes into a statutory scheme
for old age, invalidity and survivorship pension-cum-gratuity.
The Plan proposed to set up a Standing Advisory Committee to promote measures for
bringing down the incidence of accidents in factories and a National Mine Safety Council
for safety education and propaganda in the mining industry.

4.4 Fourth Five Year Plan (1969-1974)

The fourth five-year plan did not have any fresh direction or any shift in the Government’s
industrial relations policy. Greater emphasis was placed on promoting safety practices and

8|Page
on the development of indigenous mine safety equipment. Stress was laid on
strengthening labour administration for better enforcement of labour laws.
It laid considerable emphasis on labour-intensive schemes such as roads, minor irrigation,
soil conservation, rural electrification, village and small-scale industries, housing and urban
development.

4.5 Fifth Five Year Plan (1974-1979)

The Fifth Five Year Plan laid emphasis on generation of employment, labour welfare and
greater mobility of labour especially from labour surplus to labour starved areas.
The Plan stressed on strengthening industrial relations and conciliation machinery, better
enforcement of labour legislations, research in labour and labour statistics, and
undertaking studies in the field of wages and productivity.

4.6 Sixth Five Year Plan (1980-1985)

One of the principal objectives of the Sixth Five Year Plan was the progressive reduction of
unemployment in the country.
Special attention was paid to women and educated manpower both for the purpose of
analysis of the existing employment market and for the formulation of suitable policies for
these categories.

4.7 Seventh Five Year Plan (1985-1990)

The emphasis of the Seventh Plan was on employment and manpower policy.
Technological upgradation, modernisation and scientific advances in production process in
organised industry, agriculture and small industry were envisaged as the essence of growth
of productivity.
The Plan also ensured suitable arrangements and adjustment policies in terms of
education, training, retraining and re-orientation of workers to avoid dislocation effects
and to ensure smoothening of the process of technology adoption.

4.8 Eighth Five Year Plan (1992-1997)

The Eighth Plan aimed mainly at reducing unemployment. The Plan echoed concerns of the
earlier Plan with particular reference to workers’ participation in management, skill,
training, productivity, equitable wage policy and the informal sector.
It also expressed concerns about rationalisation of the regulatory framework with a view
to provide reasonable flexibility for workforce adjustment for effecting upgradation of
technology and improvement in efficiency.

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 4.9 Ninth Five Year Plan (1997-2002)
The Ninth Five Year Plan attempted to create conditions for improvement in labour
productivity in general and for provision of social security. It aimed at reducing the number
of laws which determine the relations between workers and employers so that a much
smaller number of laws can reach out to the entire workforce.
The Ninth Plan directed efforts to modify the existing National Child Labour Project (NCLP)
by establishing special schools to provide non-formal education, vocational training,
supplementary nutrition, stipend, healthcare, etc. to children withdrawn from employment.
Efforts were made to extend the coverage of the National Social Assistance Programme to
the casual and self-employed workers in the informal sector both in rural and urban areas
with the objective to cover the economically active population outside the organised sector.

4.10 Tenth Five Year Plan (2002-2007)

Unemployment was a major concern in the Tenth Plan. During the Plan period efforts were
made to ensure universal access at least to primary health care facility and to promote
vocational training as a measure to generate employment opportunities.
It also undertook affirmative measures to eradicate child labour by way of the Child
Rehabilitation Scheme that included identifying child labour, providing vocational
education to children and paying them stipend, and their placement in appropriate jobs or
helping them in self-employment.

4.11 Eleventh Five Year Plan (2007-2012)

The employment strategy for the Eleventh Plan was to ensure rapid growth of employment
while ensuring an improvement in the quality of employment, especially in the unorganised
sector.
Services like Information Technology (IT) enabled services, telecom and tourism were
identified to have prospects for high growth in output and for creation of new employment
opportunities.

4.12 Twelfth Five Year Plan (2012-2017)

The focus of Twelfth Five Year Plan was to improve the outreach of skill development, both
quantitatively and qualitatively. The Plan has stressed on provision for necessary support
mechanisms to enable the financial requirements/ skill loans for poor students (i.e., the
Credit Guarantee Fund).
The Twelfth Five Year Plan has recommended activating the State Skill Missions and
making them nodal points for receiving most of the skill-related funding from Centre.

Email – [email protected], M - 8146207241 10 | P a g e http://www.edutap.co.in

The intervention of IT is clearly evident from the following thrust areas of the Twelfth Five
Year Plan:
i. Development of Information and Communication Technology (ICT)-based real time
labour market information system;
ii. Development of an online national register of skilled persons & all employment
exchanges to come online and act as pro-active counseling and placement centres;
and
iii. Setting up of a National Skill Registry having the facility to link various databases
across Ministries and States.
iv. Other focus areas of the Plan include: focus on training of trainers; promotion of
Public Private Partnership; and development of a model on the informal sector that
reaches out to people.
Therefore, we can conclude that India's Five-Year Plans have evolved over time
to address various challenges related to labor, employment, and socio-
economic development. Each plan has aimed to improve
living standards, create employment opportunities, enhance
labor welfare, and adapt to changing economic and
technological landscapes. From the early focus on basic
employment generation to the later emphasis on skill
development and technology-driven growth, the Five-Year
Plans have played a crucial role in shaping India's labor policies and industrial landscape.
Let us discuss some concept check questions.

Concept Check
Question 3 - The Five Year Plan has recommended activating the
State Skill Missions.
A. Ninth
B. Tenth
C. Eleventh
D. Twelfth
Ans: Option D

11 | P a g e
5 Labour Law Reforms and Labour Policy
Labour policy in India is mainly based on labour laws. The Planning Commission and
different committees have been recommending reform of labour laws by highlighting the
need for flexibility.
The main accusation against the labour laws in India, especially by employers, is that they
are excessively pro-worker in the organised sector. In simple words, business owners, say
that these laws favor workers too much.
Even though big businesses are making more stuff, they're not hiring more people. Instead,
they're using machines more, which means fewer jobs for people. This is a bit strange
because labor laws are supposed to protect jobs, but now they might be stopping new jobs
from being created.
Therefore, we can conclude that in India, laws meant to protect workers' rights (labor laws)
might actually be hurting them in the long run. Here's why:
The Problem:
 Strict laws: Some companies say that the current laws are too strict, making it harder
for them to grow and hire more people.
 Less hiring: As companies turn to machines instead of people (capital-intensive) to
avoid the strict laws, fewer jobs are created.
The Catch:
 Good intentions: These laws were originally made to help workers, not hurt them.
 Unintended consequence: By making it harder for companies to hire, these laws might
actually be hurting the very people they were meant to protect.
Think of it like this: Imagine a safety net meant to catch someone falling. It's good to have,
but if it's too strong, it might stop them from climbing high at all, potentially limiting their
opportunities.
What's next?
It's important to find a balance between protecting workers and helping businesses grow,
so everyone can benefit. That could mean changing some laws, finding new ways to enforce
them, or maybe even coming up with entirely new solutions.
Now, let us discuss the amendment proposals.

12 | P a g e
6 Amendment Proposals at various stages of Consideration
The government is always looking to update
these labor laws to fit better with how
things are changing. The Working Group on
Labour Laws and Other Regulations for the
Twelfth Five Year Plan (2012-17) set up by
the Planning Commission has given
recommendations on amending certain
legislations:
 The Contract Labour (Regulation and Abolition) Act, 1970 is proposed to be amended
to ensure that in case contract labour performs similar kind of work as those directly
appointed by the principal employer, such a worker shall be entitled to the same wage
rates, holidays, hours of work and social security provisions.
 The Factories Act, 1948 must be amended to introduce new terms like ‘hazardous
substance’, ‘disability’, etc.; to redefine certain other terms; and to add new provisions
on health, safety, hazardous process, welfare, working hours for adults, employment
of young persons, annual leave with wages; and penalties & procedures.
 The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 may be
amended to bring down the threshold limit of workers from the existing ‘20 and
above’ to ‘10 and above’ as regards coverage of establishments.
Let us go through the other recommendations as well.

7 Recommendations of The Working Group

On the basis of views of various stakeholders (i.e, employers, workers and State
Governments) the Working Group has given broad recommendations on labour legislations.
I. Consolidation, Simplification and Rationalisation of Labour Laws: The Working
Group has agreed with the suggestion of the Second National Commission on Labour
(2002) and National Commission for Enterprises in the Unorganised Sector (NCEUS)
(2007) that labour laws should be consolidated in the following cognate groups to
reduce their multiplicity that would ensure better enforcement and more effective
compliance. They recommend that the laws must be clubbed as:

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 Common Definitions: At present different terminologies and definitions used in various
labour laws lead to confusion and complications in the effective compliance and
enforcement of these laws. One of the pre-requisites for codification or consolidation of
labour laws is thus to have common definitions.
Protecting Interest of Workers in the Unorganised Sector: The Working Group has
recommended provisions of minimum living wage, improved regulatory activities, basic
social security and labour welfare schemes, and improved health and safety facilities to
workers in the unorganised sector.
Amendments in Certain Acts: Certain Acts like the Minimum Wages Act, 1948, the
Contract Labour (Regulation and Abolition) Act, 1970 and the Factories Act, 1948
have far reaching impact on the living standards of workers and have certain
proposed amendments at various stages of consultation. Such considerations have
been recommended to be put on fast track during the Twelfth Five Year Plan.
V. Enhancing Eligibility Criteria and Indexing of Benefits: The eligibility criteria in
terms of wage ceiling in Acts like the Payment of Wages Act, 1936, the ESI Act,
1948, the EPF and Miscellaneous Provisions Act, 1952 and the Employees’

14 | P a g e
 Compensation Act, 1923, etc. should be reviewed at a given periodicity, say 3 to 5
years.
VI. Improving Enforcement of Labour Laws: The Working Group has suggested a
complete review of the strength of the enforcement machinery of labour legislations;
creation of an All India Service for labour administration; induction of greater
professionalism, etc. Holding Lok Adalats has also been encouraged to enable faster
disposal of cases. A database should be built on all aspects relating to industrial
relations and the officers of the Labour Departments should have access to such
database through computer connectivity. In addition to codification and
simplification of labour laws, the Working Group also suggested for creating an
online ‘single window system’ for making compliance simple and user friendly and
for bringing transparency.
VII. Easing Compliance Burden of Labour Laws: For minor offences for which
punishment by way of fine is provided, a senior officer of the Labour Department
should be empowered to adjudicate these cases. This would reduce the time taken
in disposing complaints and also lessen the burden on courts. The Working Group
has recommended identification of the reasons for non-implementation of certain
Acts.
Let us discuss some concept check questions.
Concept Check
Question 4 - Equal Remuneration Act is a type of which type of labour law?
A. Law governing Industrial relations
B. Law governing wages
C. Law governing social security
D. Law governing working conditions and welfare
Ans: Option B

8 Provisions for Women Workers in various legislations

Some of the important provisions for safeguarding the interests of working women as
available in various legislations have been compiled as:
Note- Please remember the Sections as direct questions can be asked in the exam.
I. Employment:
 Section 27 of the Factories Act, 1948 prohibits employment of women in any part of a
factory for pressing cotton in which a cotton-opener is at work.

15 | P a g e
  Section 46(1)(a) of the Mines Act, 1952 prohibits employment of women in any part of
a mine which is below ground.
II. Remuneration:
 Article 39 of the Constitution of India envisages that the State shall direct its policy
towards securing equal pay for equal work for both men and women.
 The Equal Remuneration Act, 1976 gives effect to this constitutional provision. It
provides for the payment of equal remuneration to men and women workers and for
the prevention of discrimination on the ground of sex against women in the matter of
employment and for matters connected therewith or incidental thereto.
III. Health and Safety Measures:
 Sections 22(2) and 34(2) of the Factories Act, 1948 provide for health and safety of
women workers.
IV. Prohibition of Night Work:
 The Factories Act, 1948, The Beedi and Cigar Workers (Conditions of Employment)
Act, 1966 and The Mines Act, 1952 stipulate working hours for women between 6 AM
and 7 PM.
V. Provisions for Separate Latrines and Urinals:
 Provisions for separate latrines and urinals for female workers exist in:
o The Factories Act, 1948
o The Mines Act, 1952
o The Plantations Labour Act, 1951
o The Contract Labour (Regulation and Abolition) Act, 1970 and
o The Inter-State Migrant Workmen (RECS) Central Rules, 1980.
VI. Provisions for Separate Washing Facilities:
 Provisions for separate washing facilities for female workers are given in:
o The Factories Act, 1948
o The Contract Labour (Regulation and Abolition) Act, 1970 and
o The Inter-State Migrant Workmen (RECS) Act, 1979.
VII. Provisions for Crèches:
 Provision for crèches exists under the following legislations:
o The Factories Act, 1948 mandates every factory employing more than 30 women
workers to provide and maintain suitable room(s) for the use of children under
the age of 6 years of such women.
o The Plantations Labour Act, 1951, in every plantation wherein 50 or more
women workers (including those employed by any contractor) are employed, or
where the number of children of women workers (including women workers

16 | P a g e
 employed by any contractor) is 20 or more, there shall be provided and
maintained by the employer suitable rooms for the use of children of such women
workers.
o The Beedi and Cigar Workers (Conditions of Employment) Act, 1966 mandates
the provision and maintenance of suitable room(s) for the use of children under
the age of 6 years of female employees in industrial premises where more than
50 female employees are ordinarily employed.
VIII. Maternity Benefits:
 The Maternity Benefit Act, 1961 regulates the employment of women in certain
establishments for periods specified before and after childbirth and provides maternity
benefit and certain other benefits.
IX. Other Measures:
 Vocational Training of Women:
o The DGET is the apex organization for development and coordination of
vocational training programmes at national level.
o The Women’s Vocational Training Programme (WVTP) was designed and
launched under the Directorate General of Employment and Training (DGET) in
1977 to mainstream women into economic activities of the nation.
o The Programme aims to promote both self-employment and wage-employment
of women in industry as semi-skilled or skilled and highly skilled workers by way
of increasing their participation in skill-training facilities.
o Training institutes exclusively for women have been set up under Central and
State sector schemes.
o Under the Central sector, the DGET has set up 11 institutes, comprising one
National Vocational Training Institute (NVTI) for Women at Noida and 10
Regional Vocational Training Institutes.
 Sexual Harassment of Women:
o The Sexual Harassment of Women at Workplace (Prevention, Prohibition and
Redressal) Act, 2013 provides for protection against sexual harassment of
women at workplace and for the prevention and redressal of complaints of
sexual harassment.
o The Act received the assent of the President of India on 22nd April, 2013 and has
come into force on and from 9th December, 2013.
Therefore, we can conclude that various legislations in India provide crucial protections and
benefits for women workers. These include equal pay mandates, health and safety
measures, prohibition of night work, provisions for separate facilities like latrines and

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crèches, and maternity benefits. Additionally, vocational training programs and initiatives to
prevent sexual harassment further support women's participation in the workforce and
ensure their well-being. These efforts reflect a commitment to gender equality and
women's empowerment in the workplace.

9 Policies and Provisions for Child Labour

The affirmative attitude of the State towards prevention of child labour is evident from
various Articles in the Constitution of India:
 Article 21A--> Right to Education, says that the State shall provide free and
compulsory education to all children of the age of 6 to 14 years in such manner as the
State may determine by law.
 Article 24 prohibits employment of children below the age of 14 years in any factory
or mine or in any other hazardous occupation.
 Article 39(e) states that the health and strength of workers, men and women, and the
tender age of children are not abused and that citizens are not forced by economic
necessity to enter avocations unsuited to their age or strength.
 The National Policy on Child Labour, declared in August, 1987, contains a three-
pronged action plan for tackling the problem of child labour.
 As a part of the legislative action plan, the Government of India has enacted the Child
Labour (Prohibition and Regulation) Act, 1986 to prohibit the engagement of children
below the age of 14 years in 18 occupations and 65 processes and to regulate the
conditions of work of children in certain other employments.
Please note that rescue and repatriation is another crucial component of the legislative
policy.
Rehabilitative measures are set forth by way of repatriation in case of migrant child labour;
and bridge education is provided with the ultimate objective of mainstreaming such
children into the formal system of education.
The Government also provides pre-vocational training to the rescued children.
With regard to educational rehabilitation, the Government has implemented the National
Child Labour Project (NCLP) Scheme in 1988.
A survey of child labour engaged in such occupations is conducted, following which,
children are to be withdrawn and then put into special schools, to be eventually
mainstreamed into formal schooling system.

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Let us understand this with the help of an example, Imagine a young girl named Maya, who
was forced to work in a hazardous factory far away from her home. After authorities
rescued her from this situation, they arranged for her to return safely to her family. Once
back home, Maya was enrolled in a special program that helped her catch up on the
education she missed while working. She attended classes where she learned basic reading,
writing, and math skills. Additionally, Maya received training in useful skills like sewing and
computer basics to prepare her for future job opportunities.
This support was part of the government's National Child Labour Project (NCLP) Scheme,
which aims to rescue children from labor and help them reintegrate into society. Maya's
progress was monitored, and when she was ready, she transitioned into a regular school
where she could continue her education like any other child her age.
Let us discuss some concept check questions.
Concept Check
Question 5 - is the apex organization for development and
coordination of vocational training programmes at national level.
A. DGET
B. NVTI
C. ITI
D. WVTP
Ans: Option A

Concept Check
Question 6 - Article __________ prohibits employment of children below the age of 14
years in any factory or mine or in any other hazardous occupation.
A. 21
B. 24
C. 26
D. 27
Ans: Option B

10 Theories of Wages
The term "wage" refers to the payment received by workers for their services, typically
measured in time. Now, let us discuss the various theories of wages:

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10.1 Subsistence Theory
Proposed by David Ricardo, the subsistence theory states that the price of labour depends
on the subsistence of labour. Wages tend to settle at a level that is just sufficient to
maintain the bare minimum subsistence level of a worker and his/ her dependents.
 If wages fall below this level, marriages and births are discouraged and
impoverishment would increase death rate. This would again lower labour supply, until
wages rise to the subsistence level.
 If wages rise above the subsistence level, workers are encouraged to marry and have
large families, which would eventually add to the labour force, bringing wages down to
the subsistence level.
Please note that:
 The subsistence theory is completely outdated and has no practical application,
especially in developed countries.
 It also ignores the importance of demand for labour and the role of trade unions in
determining wages.
Example: In a developing country, the minimum wage is set at a level that barely covers the
basic necessities like food, shelter, and clothing for a worker and their family. If the wage
falls below this level, it may discourage workers from entering the workforce or cause
existing workers to seek additional income sources. Conversely, if the wage rises slightly
above this level, it may encourage workers to have larger families, thereby increasing the
labor supply and eventually pushing wages back down to the subsistence level.

10.2 Wages Fund Theory

According to the Wages Fund Theory proposed by J. S. Mill, wages depend upon two
quantities, namely,
 the fixed wage fund (or circulating capital) set aside for the purchase of labour and
 the number of workers seeking employment.
Since the wage fund is fixed, only a reduction in the number of workers could raise wages.
There is another dimension to the fixed wage fund: if trade unions of workers succeeded in
raising wages in one trade that could only be possible at the expense of another. Therefore,
unions cannot raise wages for the labour class as a whole.
Please note that:

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  This theory has been widely criticised on several grounds, the strongest of them being
that wages are not necessarily paid out of circulating capital alone.
 The Wages Fund Theory is applicable at best in an under-developed country that has
capital deficiency, and stands rejected now.
Example: Imagine an economy where there is a fixed fund allocated by employers for
paying wages to workers. If there are more workers seeking employment than the funds
available, wages may remain low despite high demand for labor. Even if workers in one
sector manage to negotiate higher wages, it could lead to reduced funds available for wages
in other sectors, limiting overall wage growth.

10.3 Purchasing Power Parity Theory

Keynes considered determination of wage rate from a macro viewpoint, as an income for
the wage earners.
Wage Rate is high  More Purchasing Power of workers  More demand of the workers
Similarly, If the wage rate is low, purchasing power of labour would be less, which would
lower the aggregate demand. Low aggregate demand would have an adverse impact on the
level of employment and output.
Example: Suppose a country implements policies that increase the minimum wage for
workers. As a result, workers have more disposable income to spend on goods and services,
leading to an increase in consumer demand. This increased demand may prompt businesses
to hire more workers to meet the rising production needs, ultimately driving up
employment levels.

10.4 Residual Claimant Theory

The Residual Claimant Theory has been proposed by Walker. Wages are the residue after
the other factors of production, like rent, interest and profit, have been paid.
Several authors consider this theory to be optimistic, as it suggests the possibility of
increase in wages through increased efficiency of workers, whereas the Subsistence
Theory and Wages Fund Theory were pessimistic in approach.
Example: In a company where profits are distributed among shareholders, lenders, and
workers, the wages paid to employees represent the residual income left after other
expenses like rent, interest, and profit margins for shareholders are deducted. If the
company becomes more efficient or profitable, there may be more income available for
distribution as wages to workers.

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10.5 Marginal Productivity Theory
The marginal productivity theory, is associated initially with John Bates Clark and was
developed later by Marshall, Jevons and Walras.
As per the marginal productivity theory, demand for labour is determined by the value of
output of an additional worker.
The marginal product of labour is the amount by which the output would be increased if a
unit of labour was increased, with the quantities of other factors of production remaining
constant.
Since the employer works for profit, therefore he would like to pay as low as possible, and
definitely not more than the marginal productivity of the factor (here labour).
 The marginal productivity theory rests on the assumptions of a perfectly competitive
market and profit maximisation motive of employers.
 Due to perfect competition, no factor input would be willing to accept a return lower
than its marginal productivity. Thus, in an open market marginal productivity
determines the equilibrium factor price.
Criticism: The marginal productivity theory invites criticism on account of the assumption of
perfect competition. Further, labour is assumed to be perfectly mobile, which does not hold
in the real world.
Example: A factory owner hires an additional worker to operate machinery. If the output of
the factory increases by a significant margin as a result of hiring this worker, the owner may
be willing to pay wages equal to or slightly below the value of the additional output
produced by that worker. However, if the worker's contribution does not significantly
increase production, the owner may not be willing to pay higher wages.

10.6 Bargaining Theory of Wages

This theory was proposed by John Davidson. This theory of wage determination is based on
negotiations between employers and unions, with the assumption that the two parties,
labour and employer, have conflicting objectives. Each wants the maximum share of the
firm’s profits and is aware of the costs of a strike and the risks of participating in one.
Example: During negotiations between a labor union and management, workers may
demand higher wages due to increased productivity or inflation. Management, on the other
hand, may argue for lower wage increases to maintain profitability. The final wage
settlement often reflects a compromise based on the bargaining power of each party.

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10.7 Efficiency Wage Theory/Hypothesis
The term ‘efficiency-wages’ was coined by the noted economist, Alfred Marshall. The
efficiency wage hypothesis is a complete digression from the marginal productivity theory
(which will be discussed in later part of the chapter).
It postulates that in certain situations employers may find it more beneficial to pay wages to
their workers higher than their marginal revenue product.
 The underlying idea is that the value of a worker may depend on how much he/ she is
paid, because richer workers are more productive or better motivated to avoid
unemployment.
 This theory is more modern and practical in approach as it takes a holistic view of
wages.
Example: A company decides to pay its employees above-market wages to incentivize them
to work harder, reduce turnover, and increase productivity. By paying higher wages, the
company may attract more skilled workers, reduce absenteeism, and improve overall
performance, leading to higher profits despite the increased labor costs.

10.8 Demand and Supply Theory

According to this theory, wages are determined by the interaction of demand and supply,
just like any commodity.
 Factors that determine the demand for labour include derived demand, elasticity of
demand for labour and technical progress.
 Supply of labour depends on the number of workers and the number of hours per
day they are prepared to work.
Demand for labour partly reflects productivity of labour and partly the market value of the
product at different levels of production. Workers earn to meet their needs, which may
include basic necessities of food, clothing and shelter, education and health and
entertainment of self and dependents.
Due to the trade-off between hours of work and hours of leisure, the supply curve of labour
is not normally upward sloping, but is backward bending beyond a particular wage.
Example: In a competitive job market, if the demand for a particular skill set (e.g., software
development) increases due to technological advancements, the wages for workers with
those skills may rise as companies compete to hire them. Conversely, if there is a surplus of
workers with a certain skill (e.g., manual labor), wages for those workers may decrease due
to oversupply.

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11 Wage Boards
Let us discuss the brief description of evolution of Wage Boards in India, their structure and
functions and a critical evaluation of their role in Indian Industrial Relations.

11.1 Evolution
Tracing the evolution of Wage Boards in India we can see that as early as 1931 the Whitley
Commission on Labour had recommended the setting up of a Wage Board.
The First Five Year Plan also drew a scheme for permanent wage boards to be set up in
each State with a tripartite composition and dealt with at the level of the Central
Government
Finally, the Wage Board system was introduced in March, 1957; the very first of its kind was
set up for the cotton textile industry in the name of Central Wage Board.
As on date, wages are decided by Wage Boards for journalists and non-journalists
newspaper and news-agency employees. Since 1955, the Government has constituted six
wage boards for these employees.

11.2 Constitution
A Wage Board is tripartite by structure, consisting of a chairperson, an equal number of
representatives of employers and employees (two members each) and two other
independent members (an economist and a consumers’ representative) nominated to the
Board.
 The Chairman is appointed by the appropriate Government in consultation with the
Chief Justice of the High Court concerned or the Supreme Court of India.
o Any person who is or has been eligible to be appointed as a Judge of a High Court
shall be qualified for appointment as the Chairman.
 Usually, a Member of Parliament is nominated to represent consumers.
o The appropriate Government appoints workers’ and employers’ representatives on
the recommendations of the most representative workers’ and employers’
organisations respectively in the sector concerned.

11.3 Functions
The following are the functions of the Wage Board:
 Adjudicating disputes: When there are conflicts between employers and employees
regarding wages, the Wage Board helps resolve these disputes with the help of
independent members.

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  Determining wages: The Wage Board plays a crucial role in deciding on fair wages for
workers in the industry it oversees.
 Establishing wage structure: Based on principles of fairness outlined by the Committee
on Fair Wages, the Wage Board develops a wage structure that ensures equitable pay
for workers.
 Bonus and gratuity: The Board also formulates guidelines for the payment of bonuses
and the creation of gratuity schemes, ensuring additional benefits for workers beyond
their regular wages.
Let us discuss some concept check questions.
Concept Check
Question 7 - According to Ricardo, the price of labour depends on the of
labour.
A. Demand
B. Supply
C. Subsistence
D. Bargaining Power
Ans: Option C

Concept Check
Question 8 - Wage board was first recommended by the .
A. Whitley Commission
B. First National Commission on Labour
C. First Five Year Plan
D. None of the above
Ans: Option A

Concept Check
Question 9 - So far, the Government has constituted wage boards for
working journalists and non-journalist newspaper employees.
A. 5
B. 6
C. 7
D. 8

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Ans: Option B

Concept Check
Question 10 - Rescue and is a crucial part of the legislative policy adopted
by the Government for eradication of child labour.
A. Repatriation
B. Relaxation
C. Education
D. Health
Ans: Option A

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 Concept Notes
Workers’ Participation in Management

1|Page
Contents
1 Introduction.........................................................................................................................3
2 Need for Workers’ Participation in Management ...............................................................3
3 Types of Worker’s Participation in Management................................................................4
3.1 As per ILO .....................................................................................................................4
3.2 As per Sen.....................................................................................................................5
4 Forms of Worker’s Participation in Management ...............................................................5
5 Levels of Worker’s Participation in Management ...............................................................7
6 Workers’ participation in Management in India..................................................................8
6.1 Shop Councils and Joint Councils .................................................................................8
6.2 Works Committee ........................................................................................................9
6.3 Joint Management Councils .......................................................................................10
6.4 Worker Director .........................................................................................................10
6.5 Joint Consultative Machinery .....................................................................................11
6.6 Challenges in Implementing Workers’ Participation in Management in India ...........12

2|Page
1 Introduction
The concept of workers' participation in management (WPM) has its roots in Europe.
Notably, Sydney and Beatrice Webb introduced the idea of industrial democracy. It is
essential to distinguish between "industrial democracy" and "workers' participation," as
they are distinct terms.
Workers' participation in management, therefore, encompasses the sharing of decision-
making power by workers, either directly or through their representatives, across all
aspects of organizational activities. This involvement can take various forms, ranging from
direct participation in decision-making processes to indirect involvement through
representation. Although participating employees have potential influence within an
organisation, management is free to ignore their views and opinions if it so chooses.
The idea of industrial democracy is the possibility of employee control of various aspects
of the enterprise’s operations.
It's interesting to note that different countries have different names for this idea, like "co-
determination" in Germany or "self-management" in Yugoslavia. But no matter what it's
called, the main idea is to give workers a voice and a role in making their workplaces better.

2 Need for Workers’ Participation in Management

Workers' participation in management is
crucial for several reasons:
 Sharing of Power: Involving workers in
decision-making processes allows for
power to be shared more equitably
between management and employees.
This fosters a sense of ownership and
responsibility among workers, leading to
better decision outcomes and
organizational performance.
 Stimulate Cooperation: When workers
have a voice in the management of the
organization, it encourages cooperation
and collaboration among all stakeholders.
This can lead to smoother operations,
better problem-solving, and a more

3|Page
 positive work environment.
 Increase Labour-Management Communication: Workers' participation in
management facilitates open communication channels between employees and
management. This enables better understanding of each other's perspectives,
concerns, and expectations, ultimately leading to improved relationships and more
effective decision-making.
 Empowerment of Employees: Involving workers in management processes empowers
them by recognizing their knowledge, skills, and contributions. Empowered employees
are more motivated, engaged, and committed to their work, which can enhance
overall organizational performance.
 Promotion of Industrial Peace: By giving workers a stake in decision-making processes,
conflicts and disputes between labor and management can be minimized. Workers feel
more valued and respected, leading to greater job satisfaction and reduced likelihood
of industrial unrest.
 Productivity and Quality Improvement: Engaging workers in management can lead to
innovative ideas, process improvements, and increased productivity. Workers on the
front lines often have valuable insights into ways to streamline processes, enhance
quality, and optimize resource utilization.
Therefore, we can conclude that workers' participation in management fosters shared
power, cooperation, communication, and empowerment. It promotes industrial peace,
boosts productivity, and improves quality. Embracing this approach is vital for
organizational success in today's dynamic business environment.

3 Types of Worker’s Participation in Management

3.1 As per ILO
The International Labour Organisation suggests the following types of participation:
 Direct participation: Direct participation may take place through teams and workers’
assemblies consisting of all employees. Example: A manufacturing company
implements a system where production teams are formed consisting of workers from
different departments. These teams meet regularly to discuss production processes,
identify inefficiencies, and propose solutions directly impacting their work.
 Indirect or representative participation: Workers may participate indirectly through
their trade unions, works councils, joint consultative committees and various other
committees like occupational health and safety committees, employee representation
on board, etc. Example: A retail company establishes a works council comprised of

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 elected representatives from various departments. This council meets with
management regularly to discuss issues such as work schedules, employee benefits,
and workplace safety. The council represents the interests and concerns of the entire
workforce.
 Financial participation: Such participation takes place through profit-sharing or stock
ownership, or various combinations of these forms. Example: A software
development firm introduces a profit-sharing program where a portion of the
company's profits is distributed among employees based on performance metrics or
tenure. Employees feel more invested in the company's success and are motivated to
contribute to its growth.

3.2 As per Sen

 Superficial participation: Such participation comprises information-sharing and
suggestion schemes. Example: A call center implements a suggestion box system
where employees can anonymously submit ideas for improving customer service or
workflow efficiency. While employees have the opportunity to provide input, the
extent of their involvement is limited to making suggestions.
 Intermediate participation: Intermediate participation involves collective bargaining
in both traditional and non-traditional areas and consultation on restricted issues.
Example: A manufacturing plant engages in collective bargaining with a labor union to
negotiate wages, working hours, and benefits for employees. Additionally,
management consults with employees on implementing new technology or changes to
production processes to address their concerns and ensure smooth operations.
 Real participation: Such participation covers consultation on unrestricted issues and
co-determination on both restricted and unrestricted issues. Real participation gives
workers ‘voice’ in every aspect of running of an enterprise, and hence may be equated
to democracy. Example: An automobile manufacturing company adopts a system of
co-determination where workers are involved in decision-making at all levels of the
organization. This includes consultation on strategic decisions, such as new product
development, as well as involvement in day-to-day management issues like scheduling
and resource allocation.

4 Forms of Worker’s Participation in Management

There are various forms of workers’ participation:
 Works Committee:

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 o The term ‘works committee’ describes arrangements for the representation of
workers, usually at the plant or unit-level, although they may exist at higher levels
(company, group of companies, industry, nations or group of nations).
o Extensive use of such committees, also known as works councils, workers’
committees and cooperation committees, is well established in a number of
European countries such as Belgium, Denmark, France, Germany and the
Netherlands.
 Collective Bargaining:
o In collective bargaining workers’ representatives negotiate with the
representatives of management on issues like wages, working conditions and other
labour-related issues through exchange of dialogue. It involves active participation
of workers.
o Theoretically speaking, collective bargaining is based on the principle of equality of
power, but in actual practice, each party tries to overpower the other and get the
maximum advantage for itself by using means like threats, strikes, lock-outs and
other direct actions, if necessary.
 Suggestion Schemes:
o Many organisations have implemented suggestion schemes in which workers are
encouraged to give their suggestions on various issues and problems related to
production and administration.
o Accepted suggestions may even be rewarded.
o Here workers have no power and employers are under no pressure to accept the
suggestions.
 Quality Circles:
o Quality Circle is a participative management technique in which small teams of
usually 6 to 12 employees are voluntarily formed to identify and solve quality and
performance- related problems.
o Originated in Japan, they are based on the principles of voluntary participation and
collaborative decision-making
 Stock Ownership:
o Many employers and governments have been known to propose workers’ stock
ownership as a method of participation.
o This could increase workers’ control over industry, since they become shareholders
of the company.
o In USA there have been many experiments with what is referred to as Employee
Stock Options Plan (ESOP).

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 o In India, ESOPs were pioneered by Infosys.
o National Aluminium Company Ltd. (NALCO) was the first company amongst public
sector organisations to have started ESOPs.
Therefore, we can conclude that, worker's participation in management means involving
employees in decision-making at work. This could be through committees where employees
represent themselves, negotiating with management for fair treatment, sharing ideas
through suggestion schemes, working together in quality improvement teams, or even
owning a part of the company through stocks. These practices help make workplaces fairer,
more productive, and happier for everyone involved.

5 Levels of Worker’s Participation in Management

 International Level: Workers
are represented at
international level
conferences, seminars and
bodies like ILO.
 National Level: At the
national level there is a
Tripartite labour machinery of
government.
 Regional Level: Workers
participation may occur at the
regional level through bodies like State Labour Advisory Boards.
 Industry Level: Workers discuss and decide upon issues related to the entire industry
through their representatives in Industrial committee, wage boards, etc.
 Unit or Enterprise Level: Workers participation in decisions through modes like
collective bargaining and works committees takes place at unit or enterprise level.
Let us discuss some concept check questions.

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 Concept Check
Question 1 - Works committees are examples of which levels of WPM?
A. Industry Level
B. Regional Level
C. Enterprise Level
D. National Level
Ans: Option C

Concept Check
Question 2 - Participation which takes place through profit-sharing or stock ownership
is known as .
A. Financial Participation.
B. Superficial Participation.
C. Direct Participation.
D. Indirect Participation.
Ans: Option A
Now, let us discuss the Workers’ participation in Management in India.

6 Workers’ participation in Management in India

In India, various mechanisms for worker's participation in management have been
established over the years, aimed at fostering cooperation between employers and
employees and promoting industrial harmony. Some of these mechanisms include:

6.1 Shop Councils and Joint Councils

In 1975 a scheme of shop councils and joint councils was formulated by the Government.
This was applicable to all enterprises in manufacturing and mining employing 500 or more
people in the public, private and cooperative sectors, irrespective of whether joint
consultative machineries had been set up and were functioning in such enterprises.
In the same year, in accordance with this scheme, during the Emergency period in the
country the Constitution was amended and Article 43A was introduced, that formed part
of the Directive Principles of State Policy. The purpose of this amendment was to increase
productivity, promote industrial peace.
 Shop council exists at shop floor level, consisting of an equal number of
representatives of employers and workers.

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 o Employers’ representatives are nominated by the management from among the
persons employed in the unit concerned, while all representatives of workers are
required to be from amongst those engaged in the shop or department concerned.
o Each shop council is supposed to function for 2 years and meet at least once a
month.
o The chairman of the council is nominated by the management and the vice-
chairman by the workers.
o Decision-making is by consensus and decisions have to be implemented within a
month.
o The functions of shop councils are to assist the management in achieving
production targets, improving production, productivity and efficiency, eliminating
wastage and utilising capacity and manpower to the optimum level.
 Joint council exists at plant-level, and is required to hold meetings at least once in a
quarter.
o The chief executive of the unit would be the chairman; the vice-chairman was to be
nominated by the worker members of the council.
o The joint council was required to meet at least once in 3 months. Any one of the
council members could be the secretary of the council.
o The functions of joint councils were to discuss production and productivity, achieve
efficiency, eliminate wastage, arrest absenteeism, ensure safety measures, etc.; the
physical conditions of working and welfare measures are the other areas of their
concern.

6.2 Works Committee

 Section 3(1) of the Industrial Disputes Act, 1947 provides for the setting up of a Works
Committee consisting of representatives of management and employees in every
industrial establishment employing 100 or more workmen.
 The objective of the committee, according to sub-section 2 of Section 3, is “to promote
measures for securing and preserving amity and good relations between the employer
and workmen and to that end, to comment upon matters of their common interest or
concern and endeavour to compose any material difference of opinion in respect of
such matters”
 The Act provides that the total number of representatives in the Works Committee,
including those of the employer, should not exceed 20, and that the number of
representatives of workers should not be less than that of the employer. The workers’
representatives are to be chosen from among the workmen engaged in the
establishment, in consultation with their registered trade union.

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  Works Committees were allotted discussions on lighting, ventilation, temperature,
sanitation, drinking water, canteens, dining and rest rooms, medical and health
services, safe working conditions, administration of welfare funds, educational and
recreational activities and encouragement of thrift and savings among workers.

6.3 Joint Management Councils

 The objectives of JMCs are to identify measures to build up trust and understanding
and hence promote cordial relations between management and labour; increase
productivity; secure effective welfare and other facilities; and train workers in
understanding and sharing responsibilities. Wages, bonus and personal problems were
outside the scope of JMCs.
 JMCs generally function as a consultative body.
 A JMC has equal representation from workers and management.
 The size of the Council should be restricted to 12 persons, the majority of workers’
representatives ideally with workers themselves.
 Outside members, if inducted by the local trade unions, should not exceed 25 per cent
of the workers’ representatives.
Criteria to be followed in selecting undertakings in which JMCs should be established:
 The undertaking should have well-established and strong trade unions.
 There should be willingness among employers and workers or their unions for
establishing JMCs.
 The size of the undertaking in terms of employment should be at least of 500 workers.
 The employer, if in the private sector, should be a member of one of the leading
employers’ organisations and the trade union should be affiliated to one of the central
federations.
Reason for failure of JMCs:
 Management’s reluctance to share decision-making with workers.
 Trade Unions fear that these councils will weaken their strength as workers come
under the direct influence of these councils.

6.4 Worker Director

 Another means of workers’ participation in management is having a representative of
workers, regarded as Worker Directors, in the Board of Directors of an enterprise.

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 Worker Director is the nominee of the recognised union representing workers at the
board of directors of an organisation.
 Workers, through Worker Director, directly participate in making of a policy and
monitoring its implementation at organisational level. Worker Director look into issues
put up at board level with workers’ perspective, and at the same time, communicate
management’s perspective to the workers.
 In many cases the Worker Directors felt intimidated by the presence of many Non-
Worker Directors, who all came from social and educational strata superior to that of
workers.
 Earlier most of the recognised unions in Public Sector Undertakings (PSUs) controlled
by the Centre were affiliated to Indian National Trade Union Congress (INTUC). Hence
it became easy to nominate the national INTUC president or the general secretary on
most boards.
 By the 1990s the scheme had almost come to an end and if we consider steel industry,
by that time, the lone employee director was in IISCO, West Bengal.

6.5 Joint Consultative Machinery

 The Joint Consultative Machinery (JCM) was set up in 1966 by the Government on the
basis of the recommendations of the Second Pay Commission constituted in 1959.
 The scheme of Joint Consultative Machinery, established mainly on the model of the
Whitley Councils in the UK, provides a platform for constructive dialogues between
representatives of workers and management for peaceful resolution of all disputes in
organisations where the Government is the employer.
 The scheme is non-statutory and mutually agreed upon between the management
and employees.
 The JCMs have three-tier structure, e.g., office-level, department-level and national-
level councils.
 Meetings of JCM must be held at least once in 4 months.
 There is a provision for compulsory arbitration on certain matters such as pay and
allowances, hours of work and leaves, in case there is a disagreement at the national-
level JCM.

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6.6 Challenges in Implementing Workers’ Participation in Management in
India
 Non-commitment of the management to the schemes: Some managers may not fully
support involving workers in decision-making because they worry about losing control
or don't want to change the way things are done.
 Lack of education in workers: Many workers may not have enough education or
training to effectively take part in management decisions. This lack of knowledge can
make it hard for them to contribute or understand what's going on.
 Management is often reluctant to share information or even responsibility with
workers: Managers might not want to share information or give workers more
responsibility because they're afraid of losing power or confidentiality. This lack of
openness can make it difficult for workers to trust management and work together
effectively.
Let us discuss some concept check questions.
Concept Check
Question 3 - Joint councils are required to meet once in every months.
A. 2
B. 3
C. 4
D. 5
Ans: Option B

Concept Check
Question 4 - The total number of representatives in Works committees should not
exceed .
A. 10
B. 20
C. 30
D. 40
Ans: Option B

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