The age of Collaborative IR

The dark past is over. However, there may still be some shades of grey. Industrial relations or IR has completely transformed itself with automation, reformed labour codes, and new stakeholders – the customers and the community. Here is a detailed report.


A few decades ago, it was impossible to imagine a CEO or a CHRO coming down to the shop floor to interact with the workers. Today, however, this has become regular practice.

The age of Industrial Relations (IR) 3.0 is here. Mutual acceptance, harmony, gratitude, and respect for each other have replaced volatility, exploitation, confrontations, conflicts, strikes and lockouts. Both parties — the workers and the management — are now well aware that growth and survival cannot be possible without each supporting the other.

Zubin Palia, chief group HR & IR, Tata Steel, shares an interesting observation.

“Previously, there were three stakeholders in IR — the employer, the unions and the government. It was like a triangle. Now, there are two more stakeholders — the customers and the community. The triangle has now taken the shape of a star, with the new stakeholders playing a significant role in IR.”

“Political influence in IR has reduced over time, which has weakened the power of unions in the country. ”

Rajendra Mehta, group CHRO, Suzlon Group

So what has altered the environment?

Change in Mindset

“The exploitative mindsets are on the way out, giving way to more inclusiveness,” says Raj Velarkar, CHRO, Finolex.

Citing the example of his own company, Velarkar shares that at Finolex, permanent and contractual employees are treated no differently. The latter are entitled to all the benefits at par with the former. “Blue-collared employees are treated much better than they used to be in the past,” Velarkar states.

Liberalisation of Economic Policy

“In the pre-liberalisation era, workers at the shop floor were engaged in collective bargaining, backed by political support nationally or regionally, however, the discussions largely revolved around protecting workers rights, compensation, and benefits. While the collective bargaining exists even now but discussions now are centred around a collective opportunity to build something new and strong, caring for uncertain times, health and wellness, learning and engagement,” explains Rajendra Mehta, group CHRO, Suzlon Group.

More Involvement and Worker Centricity

Today, organisations think of retraining workers and upskilling them to keep them relevant for tomorrow. In fact, the new equation has changed the role of plant HR heads.

“Previously there were three stakeholders in IR — the employer, the unions and the government. Now, there are two more stakeholders — the customers and the community. The triangle has changed shape to a star.”

Zubin Palia, chief group HR & IR, Tata Steel

They are an evolved lot now. Gone are the times when their core responsibility was to deal with conflict. Today, they are more engaged in designing upskilling programmes for workers. “They are the new advocates of workers,” asserts Velarkar. “The interaction of workers and plant HR managers will continue to change, as per future of work, worker and workplace,” concurs Zubin Palia, chief group HR & IR, Tata Steel. “Transactional conversations on leave and HR policies will reduce because they are now available digitally. This will be replaced by more meaningful discussions such as career advancements,” enunciates Palia.

Growth Opportunities

Another landmark change that has been observed is the growth opportunity provided to the workers. In the early days of industrial relations, a worker moving into a staff role was almost impossible. “Organisations, these days, support workmen to acquire digital skills and train them on new technology. Skills upgradation has become an integral approach for ensuing workmen skill remain relevant for future. Best performing workmen are also moved up in staff roles,” points out Mehta.

Many believe that plant HR managers have now become business partners, and that in the coming times, they will need to bring in more flexibility and customisation in terms of HR policies at the plant.

“Plant HR managers will also need to adjust to working with multiple employment models such as gig, permanent workers and fixed-term contracts,” observes Palia.

There is also so much to learn from the best practices in the Industry.

“The exploitative mindsets are on the way out, giving way to more inclusiveness.”

Raj Velarkar, CHRO, Finolex

“The evolving IT services companies in India introduced many new HR practices, thanks to the influence of global and American companies. This brought in significant change, as other employers were also influenced. Back home, the Tatas also brought in some noteworthy changes in IR. They were the first ones to reduce the 12-hour shift to eight hours, which later became a law in the labour codes,” shares Lalit Kar, SVP-HR, Reliance Digital.

Collaborative Unions

Globalisation, along with demographic, environmental and technological changes, has altered the labour markets. As a result, trade unions have lost some relevance and also their ability to organise and service workers.

“I do agree the significance of unions has reduced — collective bargaining remain active, when workmen interests are not protected,” says Mehta.

“In general, the Influence of unions is weakening because they themselves have not changed. Besides, the new-age workforce is more aware and capable of fighting for their rights on their own. They do not need a third party to do it for them,” states Palia.

To stay relevant, trade unions need a complete overhaul. They also need to work on their communication skills and build a connect with the workers.

There are several reasons why the importance of unions has gone downhill.

One, employers have become more empathetic towards the workers. Workers themselves have also realised that they can’t take undue advantage of the situation, and  that strikes are no answer when it comes to raising their demands. This altered relationship between the employer and the worker has reduced the need for any third-party negotiators. This has, eventually, affected the role of the trade unions.

“Workers have come to realise that unions are just like middlemen working for their own interest, and therefore, they don’t want them either,” observes Kar of Reliance Digital.

“Highly-skilled people tend to migrate to different companies and save themselves from an
exploitative employer, which has reduced the need for unions.”

Lalit Kar, SVP HR, Reliance Digital 

“When people are emotionally connected with the organisation, the sense of aggressiveness takes a back seat. Even the political influence in IR has reduced over time, which has reduced the power of unions in the country,” concurs Mehta of Welspun.

Technology Wave

Technology has played a part in changing the power equation.

Automation and technology on the shop floor have upgraded the overall skill sets. This means, more highly skilled workers are required.

“Whenever people become highly skilled, they tend to migrate to different companies. Since they are not forced to stay on with an exploitative employer, the need for unions is also reduced,’ says Kar rightly.

Good Deed

An increase in CSR activities has also played a role in easing conflicts. Workers and trade union leaders feel that businesses and organisations do not just think about themselves, but also about the larger society.

“When organisations give back to society through various initiatives including that of CSR, there is a positive effect on relations, and each of these positive acts, help build a collaborative opportunity and reduces stress of collective
bargaining,” says Mehta.

Impact on Unions

Prince Augustine, senior HR leader and former HR head of Mahindra & Mahindra, is of the opinion that though a lot has changed over the past few decades in terms of IR, the basics remain the same.

“Although the government is trying to bring in reforms, ultimately it all depends on the trade unions, as it is up to them to allow or disallow these changes,” says Augustine, adding that it is too early to write off the unions. “The negotiating power of the trade unions may have come down significantly, but that doesn’t mean unions have lost their influence. An organisation that thinks so, is trying to play with fire,” he asserts.

“If an organisation wants to shut down a plant, for instance, will the union leaders agree?” he questions.

“Larger companies can withstand strikes for longer period, but the workers can’t because they have to pay their bills. On the contrary, in the SMEs and MSMEs, neither the owners nor the workers can afford to stop production for a long period.”

Prince Augustine, senior HR leader & former HR head, Mahindra & Mahindra

It is, hence proved that unions have not lost their influence completely. The point is that they don’t have an issue at hand for which to use their influence. After all, wages have gone up in large corporations, employers are empathetic and there are structured processes to resolve issues.

“What has changed is that unions have become more collaborative. Companies have educated the unions on various matters and have collectively resolved issues,” says Augustine.

“At Tata Steel, unions are still respected. We work collaboratively with the unions, and this bond and collaborative attitude have kept the relevance of unions alive inside Tata Steel. Also, the unions have proactively brought young people forward to run them,” shares Palia.

“However, unions outside Tata Steel will have to change themselves, if they still want to be relevant in today’s time,” he advises.

What has changed in the SME and MSME story?

Industrial relations has improved in the SME and MSME sectors as well. However, the pace of growth is not at par with the corporates or larger organisations.

“On a scale of 10, I would say, the large corporations are at 10 while the MSMEs or SMEs would be at 4, in terms of IR,” says Augustine. It all depends on the establishment owners and how they treat their workers, when it comes to IR amongst MSMEs and SMEs.

“Some owners are very transactional, while others are philanthropic. Some still believe in minimum wages, while some are very down to earth and grounded. The last group touches the nerves of their workers better than some of the large organisations,” shares Augustine.

Another senior HR leader says, “In MSMEs and SMEs, owners are opportunistically empathetic towards workers. They are transactionally connected to their workers with no real emotional bonds.”

The HR leader also points out some malpractices. “Corruption still exists, although no MSME or SME will agree or admit to it. The owners pay kickbacks to union leaders – monthly or annually – and in return, they ensure that they do not create any trouble for the owners, even if the workers are being exploited,” the HR leader reveals.

“In a small setup, there is more transparency in the relationship between employers and workers. They know how much we are producing, the cost of production and how much we are selling. So they are well aware of how much we can afford to pay.”

Ajit Inamdar, Owner, New Aniket Packaging


“The malpractices of mass exploitation, which existed maybe in the 18th and 19th centuries, and which led to the formation of unions in the first place, do not exist anymore today. But this is only in case of the organised sector. In the unorganised sector and amongst the SMEs and MSMEs, exploitation persists at some level,” opines Palia.

There is a vast difference in wages between large corporates, and SME & MSME companies. That is why, large companies are able to keep labour problems at bay.

Palia reveals, “At Tata Steel, all our permanent workers and employees are paid well above the minimum wages and are governed by Long Term Settlements signed with our Union.”

For SMEs and MSMEs to keep problems at bay, the owners have to directly interact with the union leaders and keep them in good humour.

“The larger companies can withstand strikes for longer periods, but the workers can’t because they have to pay their bills. On the contrary, in the SMEs and MSMEs, neither the owners nor the workers can afford to stop production for a long period,” says Augustine pertinently.

In SMEs and MSMEs, the power dynamics are pretty much balanced. It’s not that the unions completely ignore the plight of workers or give them a cold shoulder. They do protest if conditions such as minimum wages, welfare schemes, or safe working conditions are not met. However, they also refrain from creating unnecessary demands.

The victims in the entire scenario, are the casual workers or contract labourers. “The unions play around with these poor fellows. The contract and migrant workers also prefer to keep mum as long as they get the jobs and their wages,” admits Augustine.

Ajit Inamdar, owner of an MSME company, New Aniket Packaging, has a different take. “Managing people in a small setup is not any different from that of the larger corporates. There will be no issues till the time one is paying the minimum wages, and on time.” He believes that in a small setup like his, there is more transparency in the relationship between employers and workers. “They know how much we are producing, the cost of production and how much we are selling our products in the market. So they are well aware of how much we can afford to pay,” reasons Inamdar.

“Even during COVID-19, we did not cut any wages. I have been in this business for more than 35 years, and some workers have been working with me since the very beginning. I myself have struggled my way up in the business. Having seen humble days myself, I never exploit my workers. Even if I earn a few ‘rupees’ less, I will never cut the wages of my workers,” claims Inamdar.

Even the strikes and lockouts in the SME and MSME sector have reduced considerably, according to Inamdar.

This has happened because of more transparency. Previously, most employers in the SME sector tended to extract more from the workers and pay them less. “Nowadays, talent competition is high. Even SMEs cannot afford to they deserve, because workers have the option to migrate from one company to another, for better pay,” says Inamdar.
Unlike in the past, workers today are highly aware of their rights. Smartphones have made a difference. They do not need the support of unions to raise issues for them.

What’s next?

Two things that are expected to change IR or the employer-worker relationship further are automation and the yet-to-be-implemented labour codes.

Impact of Automation

Some believe automation is just knocking on the door, while others are of the opinion that it will take a few years for automation to take over completely.

“Many jobs are at stake. I believe, the youngsters will get jobs and the older people will find it difficult to work in an upskilled environment. They may take up early retirement and they will be given separation offers,” predicts Augustine.

“Automation is not new. We began automating three years ago, transforming from industry 2.0 to 3.0, but now the pace of transformation has increased,” says Palia.

“We recognised early on that workers will need reskilling in order to stay relevant. Therefore, we created a platform to reskill and upskill our workers for the new and upcoming jobs,” says Palia.

Tata steel also identified the grey areas – the jobs that would become obsolete or be eliminated in a few years.

For instance, in a steel plant, there would be a person to climb up the large chimneys, just to measure the temperature. But now, with digital metres available, this role has become redundant.

However, redundancy doesn’t always imply a loss of jobs. Companies such as Tata Steel do everything to find an alternative. It puts redundant workers on a reskilling path and make them useful in some other areas. It has reskilling centres where it re-deploys the talent in other roles.

“We have a unique Job for Job (JFJ) Scheme wherein, we take the responsibility to skill and train young employee wards into new future roles and employ them without any interviews. This is a win-win for both the company and the ex-employee who is opting for JJF,” shares Palia

In case the employees concerned fail to reskill themselves, the Company offers a voluntary separation scheme, where the workers get paid their last-drawn dearness allowance, month on month, till the age of 60. During this period, medical benefits are provided just as any other regular employee. Besides, these employees are allowed to stay in a company-allotted house for up to six years.

The other scheme available allows such employees to swap jobs with their children in case they have already matriculated. “We take the responsibility to skill and train these youngsters into new future roles without any interviews. This is a win-win for us also,” shares Palia.

Impact of the New Labour Codes

The labour codes are also expected to bring in a series of changes in IR. Many HR practitioners and SME owners are concerned that the new labour codes will increase the labour cost.  For instance, the new labour codes state that the endurance allowance has to be 50 per cent of the monthly gross salary.

“The overall cost of the company will go up. Apart from the gratuity that has to be paid, there are a few more components which will get added to the fixed salary of the employee and eventually all of these will increase the contribution of the company towards provident fund,” shares Velarkar of Finolex

“I will have to spend more on compliance such as fire safety and other safety hazards in the factories. That will increase the cost,” points out Inamdar. However, larger organisations feel the new labour codes have simplified that compliance and reduced the paperwork required for the same. It is expected to save a lot of quality time for the compliance person in the company. Monitoring also becomes easier.

The new labour codes also prescribe keeping the minimum gratuity limit at Rs 20 lakh. However, many of the large organisations aren’t worried about the cost because they already had such worker-friendly practices in place.

“We don’t limit ourselves to Rs 20 lakh. If someone’s gratuity accumulates at Rs 50 Lakh, we pay it. That is why, we feel the new codes will not impact our labour cost,” claims Palia.

The new labour codes also promise to reduce exploitation of labour in India.

“As per the new codes, companies will have to pay gratuity to a fixed term employee even if he/she has completed one year and this will wipe out a lot of wrong practices,” opines Velarkar.

“Earlier, companies would keep workers on fixed term contract for four and a half years and then cancel the contract and make a new contract because the minimum period of employment for gratuity was five years,” he adds.

The new labour codes will also increase the flexibility of the employment model which is again a welcome move for IR.

“At Tata Steel, we were looking for a flexible model for employment where we can engage talent in some jobs which are not permanent, for a period of time. And we would like to get the best of the talent. The codes come with a social security net for these workers, which is a win-win for both of us. It will increase the employment opportunities and ensure a flexible employment generation in the system,” adds Palia.

However, that’s only one side of the story. The situation also becomes complex for mega organisations, even for the likes of Tata Steel.

“Not all states have rules for a recognition of union. For instance, the state of Jharkhand, has no such rules. There are multiple unions but no straight rules pertaining to recognition,” admits Palia of Tata Steel.

However, the new labour codes set a clear guideline on how companies can identify a recognised union in a multi-union setup. The labour codes have also increased the tenure of unions from three years to five, which again is a positive movement.

“Some amount of stability is required. In a three-year tenure, the first six months go into being in the euphoria of winning the elections and the last six months go into the preparation of electing the new union. Therefore, the management had very less time to engage with the elected union and have a discussion on meaningful employee-employer  issues. The extension of the tenure increases the stability of unions,” states Palia.

There is, also, some part of the labour codes that can make the unions a little apprehensive.

“Fixed Term Contract or FTC is a good move. However, there are some apprehensions that it can get misused. That is, resources can be churned as per cost arbitrage in the garb of putting permanent jobs into FTCs,” says Palia.

What could also turn out to be a concern for unions is the clause in the new labour codes which allows organisations of a certain size to close down factories without any prior notice.

The other aspect of the new labour codes which will force companies to improve IR is that the new labour codes have increased penalties for repeat violators of labour laws. “That is why, there will be more emphasis on complying with labour laws,” believe many HR practitioners.

With the new labour codes, the role of the plant HR head also change as less time will be devoted to transactional activities and more time to meaningful engagements.

This article first appeared in the December, 2022 Issue of HRKatha Print Magazine 

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Prajjal Saha is the editor and publisher of HRKatha, which he founded in 2015. With nearly 25 years of experience in business journalism, writing, and editing, he is a true industry veteran who possesses a deep understanding of all facets of business, from marketing and distribution to technology and human resources. Along with his work at HRKatha, he is also the author of the Marketing White Book. Thanks to his extensive experience and expertise, he has become a trusted source of insight and analysis for professionals across a wide range of industries.