Monday, February 4, 2008

Attrition Cost

Attrition Costs One of the best methods for calculating the cost of turnover takes into account expenses involved to replace an employee leaving an organization. These expenses are:
A. Recruitment cost The cost to the business when hiring new employees includes the following six factors plus 10 percent for incidentals such as background screening:

*Time spent on sourcing replacement
*Time spent on recruitment and selection
*Travel expenses, if any
*Re-location costs, if any n Training/ramp-up time
*Background/reference screening
B. Training and development cost To estimate the cost of training and developing new employees, cost of new hires must be taken into consideration. This will mean direct and indirect costs, and can be largely classified under the following heads:

*Training materials
*Employee benefits
*Trainers’ Time
C. Administration cost
They include:

*Set up communication systems
*Add employees to the HR system
*Set up the new hire’s workspace
*Set up ID-cards, access cards, etc.

Attrition rate

Attrition rate: There is no standard formula to calculate the attrition rate of a company. This is because of certain factors as:

The employee base changes each month. So if a company has 1,000 employees in April 2004 and 2,000 in March 2005, then they may take their base as 2,000 or as 1,500 (average for the year). If the number of employees who left is 300, then the attrition figure could be 15 percent or 20 percent depending on what base you take.

Many firms may not include attrition of freshers who leave because of higher studies or within three months of joining.

In some cases, attrition of poor performers may also not be treated as attrition. Calculating attrition rate: Attrition rates can be calculated using a simple formula:
Attrition =(No. of employees who left in the year / average employees in the year) x 100
Thus, if the company had 1,000 employees in April 2004, 2,000 in March 2005, and 300 quit in the year, then the average employee strength is 1,500 and attrition is 100 x (300/1500) = 20 percent. Besides this, there are various other types of attrition that should be taken into account. These are:

Fresher attrition that tells the number of freshers who left the organization within one year. It tells how many are using the company as a springboard or a launch pad.

Infant mortality that is the percentage of people who left the organization within one year. This indicates the ease with which people adapt to the company.

Critical resource attrition which tell the attrition in terms of key personnel like senior executives leaving the organization.

Low performance attrition: It tells the attrition of those who left due to poor performance.

Attrition and Turnover

Attrition is reduction in force by means of resignations, retirements and death.
Turnover is defined as a change in the workforce due to accessions, quits, discharges, and layoffs. The difference being that attrition is a function of a declining workforce, whereas turnover is the function of a stable or expanding workforce.
Attrition - The no. / rate at which people leave an organisation (decline in workforce)
Turnover - Defined as a change in the workforce due to accessions, quits, discharges, and layoffs.
The difference being that attrition is a function of a declining workforce, whereas turnover is the function of a stable or expanding workforce.
The general measure of turnover is a percentage, derived from the number of separations divided by the total number of workers on the payroll.
Ex.: 10,000 employees left a workforce of 5,000 10,000/5000 = 10/5 = 2/1 = 200%

Turnover: The Real Bottom Line.

Turnover is the rotation of workers around the labor market; between firms, jobs, and occupations; and between the states of employment and unemployment.

[1] "In-house engineering," "revolving door policy," and "management by turnover," are a few of the many colorful and euphemistic terms used to describe this organizational phenomenon. By whatever name or form, labor turnover is one of the most significant causes of declining productivity and sagging morale in both the public and private sectors. Management theorists say it lies behind the failure of U. S. employee productivity to keep pace with foreign competition.

[2] Pervasive organizational downsizing and restructuring has dampened recent interest in turnover as the subject of academic inquiry. However, attrition among key personnel or groups of strategic employees at a time when many U.S. organizations face employee shortages continues to be a bedrock business issue.

[3] Specifically, two decades of relentless downsizing have removed the negative societal connotations once associated with hop scotching from job to job, and workers are increasingly willing to abandon their job when it is economically convenient. As a result, the concept of employee loyalty has been changed forever.
[4] Furthermore, technology has created a virtual mobility that allows people to work in their homes or other locations, perhaps even in other states or out of the country. This has enormously broadened the range and ensured the privacy of a potential job hunt. There will likely be many additional scholarly explorations on the subject of turnover.

Consequences of Turnover

Excessive turnover often engenders far reaching consequences and, at the extreme, may lead to jeopardy of the organization's objectives. There may be a brain drain that negatively affects innovation and causes major delays in the delivery of services and the introduction of new programs. The smartest and most talented employees are the most mobile and the ones who are disproportionately more likely to leave.

[5] For some departments and agencies of government entities, the loss of key employees may negatively impact the quality and innovation of services delivered. As a result, it may adversely affect the satisfaction of citizens/customers.

[6] In governmental agencies or departments the customer includes not only citizens who consume services, but the employees who work there. The human relations department in an agency must provide personnel services and incentive programs that will induce the best workers to stay. It is the job of the human relations department to keep agencies staffed with the skills, inclination, temperament, and willingness to provide high quality service to citizens/customers. Hence governmental units are becoming increasingly concerned about keeping loyal and dedicated workers, reducing turnover, and increasing the duration of employment. Employee loyalty is the underpinning of customer satisfaction with the organization. An enthusiastic and loyal employee will nurture productive working relationships with customers. Consequently, it is better for an organization to keep experienced and productive employees to hire new ones. However, to get and keep loyal workers, the organization must have a long run time horizon. It must invest in its employees through training programs and value them through strong organizational vision. In the face of eroding loyalty, attracting and keeping good people is the key to strategic staffing in all industries and sectors.
[7] Employee turnover is both pervasive and costly. It cuts across every type and size of organization from low tech to high tech and from finance to sales.

[8] While the rate of turnover may vary between companies, sectors, and industries, and by division, function, tenure, gender, race, and performance level within the same organization, there are enormous adjustment costs any time an employee walks out the door.
[9] For example, a Louis Harris and Associates survey pegs the cost of losing a typical worker at $50,000.

[10] Another nationwide survey suggests that the average internal cost-per-hire for an engineer is $4,901, computer programmer $2,500, secretary $1,000, retail sales associate $350, and assembly line worker $300.

[11] The out-of-pocket or visible costs can be categorized as costs of termination, advertising, recruitment, candidate travel, selection, hiring, assignment, orientation, signing bonuses, and relocation.

[12] The cost of replacing a worker is often underestimated, because in addition to visible costs like those noted above, there are many "hidden" costs and consequences of turnover. They include disruption of customer relations, the vacancy cost until the job is filled, costs resulting from disruption of the work flow, and the erosion of morale and stability of those who remain. Further, there is the temporary loss of production and valuable time taken from customer relations while the new hire acquires job skills and achieves maximum efficiency.

[13] One estimate reveals that the cost of voluntary and involuntary employee turnover to American industry--the "find them, lose them, replace them" syndrome--is about $11 billion a year.

[14] What Causes Turnover
For years management theorists have suggested that the basic functions of management are to plan, organize, direct, and control the operations of their organization. Unfortunately, these functions tell the manager what should be done, not how to do it. Specifically, current labor force demographics suggest that the new diverse workforce will not respond to old traditional management practices.
[15] Consequently, today's managers are faced with a different workplace and workforce configuration than that of 20, 10, or even 5 years ago. They must rethink their staffing strategies for the year 2000--and beyond.

[16] Despite the metamorphic workforce and workplace, effective managers can use a variety of strategies to hire good people, influence and motivate them to perform at a consistently high level, and inhibit the departure of the more highly qualified performers. The key to curbing exits is for managers to gain insight into employees' attitudes by understanding their personality traits and core beliefs and fostering long-term and well-conceived employee development plans. The result of such turnover-reduction intervention may help organizations to improve their retention of valuable people, especially the most enthusiastic, skilled, and proficient ones.

[17] Given the high cost of turnover, investment in a well-executed retention program can yield a high rate of return. Although there is no single answer that explains all the causes of employee turnover, more is being understood about the turnover phenomenon each year. An organization can keep good workers with a holistic long-term retention strategy and the necessary programs and policies to support it.

[18] However, they must first understand the causes of employee departures. Some of the forces that underlie excessive employee separations and rehires are discussed below.
1. Hiring Practices
Putting the right people in the right position at the right time and then training them properly is one of the most critical tasks any organization faces. Good hiring and screening practices and effective job matches can expedite the speed with which new hires are moved to their profitable use.

[19] The U.S. Department of Labor estimates the expenses associated with a bad hiring decision may be as much as 30 percent of the first year's potential earnings.

[20] If the mistake is not discovered and corrected within six months, the cost goes even higher. Because of the high cost of employee exits, managers must recruit, hire, and maintain an expert work force with a coherent and comprehensive strategic vision.
[21] They must not only be sure that the hiring criteria are job related, with the new hires having the skills the organization needs, but they must be equally sure the criteria are consistent with the strategies and culture of the organization. The deployment of a built-in reward system for managers and supervisors who keep good people can help achieve that goal.

[22] Excessive turnover is driven by and is the natural and inevitable result of poor management. Overall, organizations fail because of managerial incompetency. Poor judgment, poor communication skills, lack of foresight, and a narrowly focused view of the management job are some of the reasons why managers fail in the human relations area as well as others.
Excessive turnover is driven by and is the natural and inevitable result of poor management. Overall, organizations fail because of managerial incompetency. Poor judgment, poor communication skills, lack of foresight, and a narrowly focused view of the management job are some of the reasons why managers fail in the human relations area as well as others.
[23] Furthermore, a manager with a background in finance is more likely to view the organization as a basket of assets that responds only to government's stakeholders, rather than a social institution with a concern for employees. (Stakeholders are any individual, group, or other organization that can place a claim on the organization's attention, resources, or output. Examples of a government's stakeholders are citizens, taxpayers, service recipients, the governing body, unions, interest groups, political parties, and others.) Of course, a manager with a background in production is more likely to emphasize efficiencies in processing and distribution. Such executives tend to have a "myopic" vision by concentrating their efforts on the functional areas that they know best, which often are not personnel activities. They are likely to turn quickly to labor force reductions as a way to solve competitive problems. Such an idiosyncratic view will often weaken the cohesion of the group; cause workers to lose their commitment to the organization and to disagree with company work rules and systems; create tension and conflicts between management and the workforce; and cause general frustration and dissatisfaction among subordinates over the lack of top management guidance.

[24] Managers with myopic vision often experience excessive turnover (churning), and they may end up with an insufficient number of qualified people.

[25] Further, they may not be able to get the most out of those who stay because they do not feel valued. Subordinates may be disloyal; show signs of diminished job satisfaction and poor performance; provide lackadaisical and less personalized service to clients; or when conditions become intolerable, seek to change their employment status.

Today's boss must provide strong leadership in an environment where technology is growing at a runaway pace, change is constant, and uncertainty is never ending. They must achieve organizational profit and other goals with an increasingly diverse workforce whose attitudes and values have changed greatly from the previous generation. Managing today requires ingenuity and strategic wisdom to a greater degree than at any time in our history.
Managers must keep in mind that employees are the major contributors to the efficient achievement of the organization's success. They must hire and train the right people, adapt their managerial style to today's worker, provide recognition and pay for superior performance, and create a nontoxic and productive work environment. Those managers who cannot or refuse to change face the prospect of excessive departures that can imperil the business strategy and be ruinous to the performance of their organization.

Strategies for Reducing Turnover Costs

At The Rainmaker Group we are committed to helping your organization Maximize Possibility by identifying and retaining top performers to achieve a high retention and high performance workforce.

We understand that time is money to your organization. Every minute of every day that your employee retention problems persist your organization is losing valuable time, energy, and resources.

With the use of the powerful tools at our disposal, our employee retention experts will get to know your team and organizational culture better than you ever could have imagined. By doing so we can get down to the real causes of employee turnover in your organization and develop an employee retention program that is right for your team.

Our employee retention programs deliver results - we guarantee it!

Our clients always see a sizable return on investment in the form of improved profitability, reduced employee turnover, and enhanced employee morale.

Stop unwanted employee turnover dead in its tracks and get back to doing what you do best: growing and leading your organization.

Three Rs of Employee Retention

Respect is esteem, special regard, or particular consideration given to people. As
the pyramid shows, respect is the foundation of keeping your employees.
Recognition and rewards will have little effect if you don’t respect employees.

Recognition is defined as “special notice or attention” and “the act of perceiving
clearly.” Many problems with retention and morale occur because management is
not paying attention to people’s needs and reactions.

Rewards are the extra perks you offer beyond the basics of respect and
recognition that make it worth people’s while to work hard, to care, to go beyond
the call of duty. While rewards represent the smallest portion of the retention
equation, they are still an important one.
You determine the precise methods you choose to implement the three Rs, but in
general, respect should be the largest component of your efforts. Without it,
recognition and rewards seem hollow and have little effect—or they have negative
effects. The magic truly is in the mix of the three.

When you implement the “three Rs” approach, you will reduce turnover and
enjoy the following:

Increased productivity

Reduced absenteeism

A more pleasant work environment (for both employees and you!)

Improved profits
Furthermore, an employer who implements the three Rs will create a hard-toleave
workplace, one known as having more to offer employees than other
employers. You become a hard-to-leave workplace—one with a waiting list of
applicants for any position that becomes available—purposefully, one day at a

Reducing Employee Turnover

Tips for Reducing Employee Turnover

Hire the Right Demographic: Is your small business properly recruiting the right age group? Match your company profile with your target hiring group. If you can't offer career advancement to your workforce, then avoid hiring young career oriented staff. Consider hiring older employees who are less concerned with advancement.

Understand Employee Motivation: Retaining staff requires learning what's important to your employees. Look to the external motivators like recognition and rewards. Remember the internal motivators of purpose and passion.

Read Between the Lines: The real cause of employee turnover usually won't be found in your typical exit interview. Departing employees will provide the usual response of leaving for more pay or a better job. Inquire for deeper meaning. Was it a lack of support? Was the commission structure unreasonable? Take the time to get to the bottom of the turnover.

These 3 tips to reduce turnover are a good start to understanding your employee loss issue. Be critical and always look inward. You may be the source of the turnover. Make certain your management style is the way you would want to be managed. High turnover can be a signal your business is in trouble. Low turnover can also be a negative

Costs of Hiring New Employees

Costs of Hiring New Employees

The cost to your business when hiring new employees includes the following 6 factors plus 10% for incidentals such as background screening:

Bonus signing
Relocation pay
Time for interviewing
Travel expenses
Pre-employee assessments

Employee Turnover

Employee turnover is a ratio comparison of the number of employees a company must replace in a given time period to the average number of total employees. A huge concern to most companies, employee turnover is a costly expense especially in lower paying job roles, for which the employee turnover rate is highest. Many factors play a role in the employee turnover rate of any company, and these can stem from both the employer and the employees. Wages, company benefits, employee attendance, and job performance are all factors that play a significant role in employee turnover.

Companies take a deep interest in their employee turnover rate because it is a costly part of doing business. When a company must replace a worker, the company incurs direct and indirect expenses. These expenses include the cost of advertising, headhunting fees, human resource costs, loss of productivity, new hire training, and customer retention -- all of which can add up to anywhere from 30 to 200 percent of a single employee's annual wages or salary, depending on the industry and the job role being filled.
While lower paying job roles experience an overall higher average of employee turnover, they tend to cost companies less per replacement employee than do higher paying job roles. However, they incur the cost more often. For these reasons, most companies focus on employee retention strategies regardless of pay levels.

Most companies find that employee turnover is reduced when they address issues that affect overall company morale. By offering employees benefits such as reasonable flexibility with work and family balance, performance reviews, and performance based incentives, along with traditional benefits such as paid holidays or sick days, companies are better able to manage their employee turnover rates. The extent a company will go to in order to retain employees depends not only on employee replacement costs, but also on overall company performance. If a company is not getting the performance it is paying for, replacement cost is a small price to pay in the long run.
Nothing can be more frustrating to a small business owner or manager than the constant aggravation of employee turnover. High or low employee turnover can be detrimental to your company. Learn what you need to know to calculate and curtail the revolving employee exit door in your business.

Employee turnover can vary as a result of the industry and location of your business. For instance, the food service industry typically experiences turnover of 100-300%. The stress of employee turnover is much greater on smaller businesses than larger corporations. Before you can take effective measures to reduce turnover, you first need to find the price your business pays in lost employees.

Retention Success Reasons

A transparent work environment can serve as one of the primary triggers to facilitate accountability, trust, communication, responsibility, pride and so on. It is believed that in a transparent work culture employees rigorously communicate with their peers and exchange ideas and thoughts before they are finally matured in to full-blown concepts. It induces responsibility among employees and accountability towards other peers, which gradually builds up trust and pride. More importantly, transparency in work environment discourages work-politics which often hinders company goals as employees start to advance their personal objectives at the expense of development of the company as a single entity.
Employees comprise the most vital assets of the company. In a work place where employees are not able to use their full potential and not heard and valued, they are likely to leave because of stress and frustration. In a transparent environment while employees get a sense of achievement and belongingness from a healthy work environment, the company is benefited with a stronger, reliable work-force harboring bright new ideas for its growth.
Quality Of Work

Providing quality work life involves taking care of the following aspects:

Occupational health care: The safe work environment provides the basis for the person to enjoy working. The work should not pose a health hazard for the person. The employer and employee, aware of their risks and rights, could achieve a lot in their mutually beneficial dialogue.

Suitable working time: Organizations are offering flexible work options to their employees wherein employees enjoy flexi-timings for dedicating their efforts at work.

Appropriate salary: The appropriate as well as attractive salary has always been an important factor in retaining employees. Providing employees salary at par with the other counterparts of above that what competitors are paying motivates them to stick with the company for long.

Providing quality at work not only reduces attrition but also helps in reduced absenteeism and improved job satisfaction. Not only does QWL contribute to a company's ability to recruit quality people, but also it enhances a company's competitiveness. Common beliefs support the contention that QWL will positively nurture amore flexible, loyal, and motivated workforce, which are essential in determining the company's competitiveness.

Providing quality at work not only reduces attrition but also helps in reduced absenteeism and improved job satisfaction. Not only does QWL contribute to a company's ability to recruit quality people, but also it enhances a company's competitiveness. Common beliefs support the contention that QWL will positively nurture amore flexible, loyal, and motivated workforce, which are essential in determining the company's competitiveness.

Employee Support

Management can support employees, indirectly, in a number of ways as Follows:

Manage employee turnover: Employee turnover affects the whole organization in terms of productivity. Managing the turnover, hence, becomes an important task. A proactive approach can be adopted to reduce attrition. Strategies should be framed in advance and implemented when the times arrives. Turnover costs should also be taken into consideration while framing these strategies.

Become employer of choice: What makes a company an employer of choice? Is the benefit it offers or the compensation packages it gives away to its employees? Or is it measured in terms of how they value their employees or in terms of customer satisfaction? Becoming an employer of choice involves following a road map which tells where to go as a brand.

Engage the new recruits: The newly hired employees are said to be least engaged in the organization. Keeping them engaged is an important task. The fresh talent should be utilized to maximum before they start feeling bored in the organization.

Optimize employee engagement: An organization’s productivity is measured not in terms of employee satisfaction but by employee engagement. Employees are said to be engaged when they show a positive attitude toward the organization and express a commitment to remain with the organization. Employee satisfaction also comes with high engagement levels. So, organizations should aim to maximize the engagement among employees.

Communication Between Employee and Employer

Communication is a process in which a message is conveyed to the receiver by the sender. The message may be or may not be in a common format or language that both the sender and receiver understand. So there is a need to encode and decode the message in the process. Encoding and decoding also helps in the security of the message. The process of communication is incomplete without the feedback. Communication is the solution to almost everything in this world. Same applies to employee retention also.

Straight-from-the-shoulder communication is what the employees need from their employers. Employees look for organizations where communication and process are transparent. Nothing is hidden and shared with the employees.

Reason for Leaving

Job is not what the employee expected to be: Sometimes the job responsibilities don’t come out to be same as expected by the candidates. Unexpected job responsibilities lead to job dissatisfaction.

Job and person mismatch: A candidate may be fit to do a certain type of job which matches his personality. If he is given a job

which mismatches his personality, then he won’t be able to perform it well and will try to find out reasons to leave the job.

No growth opportunities: No or less learning and growth opportunities in the current job will make candidate’s job and career stagnant.

Lack of appreciation: If the work is not appreciated by the supervisor, the employee feels de-motivated and loses interest in job.

Lack of trust and support in coworkers, seniors and management: Trust is the most important factor that is required for an individual to stay in the job. Non-supportive coworkers, seniors and management can make office environment unfriendly and difficult to work in.

Stress from overwork and work life imbalance: Job stress can lead to work life imbalance which ultimately many times lead to employee leaving the organization.

Compensation: Better compensation packages being offered by other companies may attract employees towards themselves.

New job offer: An attractive job offer which an employee thinks is good for him with respect to job responsibility, compensation, growth and learning etc. can lead an employee to leave the organization.

Advantage Of Employee Retention

Importance Of Employee Retention

1. The Cost of Turnover: The cost of employee turnover adds hundreds of thousands of
money to a company's expenses. While it is difficult to fully calculate the cost of turnover (including hiring costs, training costs and productivity loss), industry experts often quote 25% of the average employee salary as a conservative estimate.

Loss of Company Knowledge: When an employee leaves, he takes with him valuable knowledge about the company, customers, current projects and past history (sometimes to competitors). Often much time and money has been spent on the employee in expectation of a future return. When the employee leaves, the investment is not realized.

Interruption of Customer Service: Customers and clients do business with a company in part because of the people. Relationships are developed that encourage continued sponsorship of the business. When an employee leaves, the relationships that employee built for the company are severed, which could lead to potential customer loss.

Turnover leads to more turnovers: When an employee terminates, the effect is felt throughout the organization. Co-workers are often required to pick up the slack. The unspoken negativity often intensifies for the remaining staff.

Goodwill of the company: The goodwill of a company is maintained when the attrition rates are low. Higher retention rates motivate potential employees to join the organization.
Regaining efficiency: If an employee resigns, then good amount of time is lost in hiring a new employee and then training him/her and this goes to the loss of the company directly which many a times goes unnoticed. And even after this you cannot assure us of the same efficiency from the new employee

Employee Retention

Employee Retention involves taking measures to encourage employees to remain in the organization for the maximum period of time. Corporate is facing a lot of problems in employee retention these days. Hiring knowledgeable people for the job is essential for an employer. But retention is even more important than hiring. There is no dearth of opportunities for a talented person. There are many organizations which are looking for such employees. If a person is not satisfied by the job he’s doing, he may switch over to some other more suitable job. In today’s environment it becomes very important for organizations to retain their employees. The top organizations are on the top because they value their employees and they know how to keep them glued to the organization.
Employees stay and leave organizations for some reasons. The reason may be personal or professional. These reasons should be understood by the employer and should be taken care of. The organizations are becoming aware of these reasons and adopting many strategies for employee retention. In this section we are going to study about various topics related to employee retention, why is it needed, basic practices, myths, etc. in detail.

Employee Retention Strategies

Employs an easy-to-understand systems approach to ensure the root causes of turnover are addressed and the potential for lasting change unleashed.

Customizes all activities to your organization’s unique history, current practices and strategic objectives. Also considered are challenges unique to your industry sector, competitive marketplace issues and talent shortages.

Involves those responsible for implementing change in actually creating the change, ensuring input and improved shared understanding and support of all initiatives.

Integrates hands-on, action-oriented approaches that enable organizations to move forward quickly and effectively

Recognizes the research-proven role of no-cost strategies in developing the “glue” that builds employee loyalty and commitment.

Brings to your organization leading-edge organization-development best practices to effectively and quickly build a retention-rich culture.
The quality of the supervision an employee receives is critical to employee retention. People leave managers and supervisors more often than they leave companies or jobs. It is not enough that the supervisor is well-liked or a nice person, starting with clear expectations of the employee, the supervisor has a critical role to play in retention. Anything the supervisor does to make an employee feel unvalued will contribute to turnover. Frequent employee complaints center on these areas.
--lack of clarity about expectations,
--lack of clarity about earning potential,
--lack of feedback about performance,
--failure to hold scheduled meetings, and--failure to provide a framework within which the employee perceives he can succeed.
The ability of the employee to speak his or her mind freely within the organization is another key factor in employee retention. Does your organization solicit ideas and provide an environment in which people are comfortable providing feedback? If so, employees offer ideas, feel free to criticize and commit to continuous improvement. If not, they bite their tongues or find themselves constantly "in trouble" - until they leave.

Retention Factors

Employee Retention factors include:

*Recognition and appreciation
*Effectiveness of managers
*Responsibility and challenge
*Promises kept and broken
*Expectations and expectation gaps
*Corporate Culture
*Rewards and Compensation
*Training and development
*Autonomy, empowerment
*Advancement potential
*Intent to leave or stay, and in what time period
*Themes and trends: getting worse or better
*Work environment
*Organizational fairness
*Fun at work
*Organizational pride and brand
*Resources to do job
*Trust and respect
*Reasonable deadlines, hours of work, health and working conditions
*Leadership of company
*Loyalty, commitment and intent to stay
*External pull to other jobs and competitors

The Negotiations

The Negotiations

Principled Negotiation

The broad principles on which negotiations should be conducted are outlined in the Paper entitled "Principles of Negotiation". This section will therefore underline some other matters to which attention should be paid.

Who Commences

There is no inflexible rule as to who should open the negotiations. However, it is not unreasonable for the management to claim that if the union has initiated the negotiations, it should first outline its rationale and justification for doing so. Nevertheless, the management should make it clear at the outset that agreement on any particular issue is subject to an overall settlement, including its own expectations from the union.
Management's Reactions

In outlining the employer's response, the following could be included:

The context in which the employer is negotiating, such as the business environment, and how this affects the employer's position in the negotiations.

A judgement will have to be made about the stage at which the union should be informed about the items on which the employer will not make any concession. However, the impression should not be created that the union will not be allowed an opportunity to present its case.

The basis on which the employer is prepared to negotiate. This could include the employer's objectives and expectations from a collective agreement, and any unsatisfactory features in the existing agreement (if there is one) which require to be rectified.
Internal Communication

During the negotiations there should be good internal communication between the company and its managers about the situation at any given time. This will help clarify misunderstandings and even eliminate disinformation especially where employees, as happens in developing countries, seek information or clarification from their managers.

Notes of Discussion

Notes of the discussion should be maintained, and preferably issued and agreed on with the other party, to avoid misunderstandings. Such notes could be useful in the event of disputes and a breakdown in negotiations.
Styles of Negotiation

It is an essential principle of negotiation - indeed of human relations - that one's style of negotiation may need to be adapted to the style of the other party. The negotiator who adopts only one approach to negotiations may be puzzled when he finds that the approach in question bears fruit in some cases but causes an adverse reaction in other cases. The ability to allow the attitudes of the other party or the facts or merits of the issue to fashion one's own particular style in a given negotiation requires a high degree of flexibility on the part of the negotiator, an absence of a pre-conceived approach to negotiation, and recognition of the fact that unltimately what matters is one's ability to secure one's objectives through dialogue. However, this should not be understood to mean that there should not be a principled approach to negotiation. What it means is that often one has to take into account even the idiosyncracies of the other party and assess what form of presentation is likely to appeal best to the person whom one is trying to convince.
Some Basic Rules in Collective Bargaining Negotiations

A negotiator should view negotiations as an exercise with both sides walking towards each other, rather than away from each other. This will enable the negotiator to keep in mind that the final objective is a satisfactory agreement. It will also lead to a search for, or identification of, common ground while also addressing the differences.

A negotiator should be good at listening carefully to the other party who will, otherwise, feel that disagreement with his position is due to a lack of understanding. This is also necessary to encourage the other party to listen to you. Some indication should be given to suggest that the party has understood the other's position. Body language often communicates a party's reactions.

A party should build its case in a logical sequence and, as far as possible, try to obtain agreement at each stage of the process. This will narrow the areas of disagreement and facilitate focusing on those aspects.

Counter proposals and conditions attached to concessions should be indicated as early as possible, so that the basis on which a party is prepared to agree or compromise is understood.
Whenever possible, invite the other party to look at the problem from the opposite perspective, e.g. a wage increase as an additional cost which, due to competitive pressures, requires management to find ways to absorb it. It is sometimes useful to ask the union for suggestions on how it can cooperate to facilitate absorption of the increase.

It is usually preferable to avoid taking up at the outset the position that a particular item is not negotiable. It is more productive to request a party to justify its claim, and then point out why that claim is unreasonable. Taking up a non-negotiable position can lead to the preception that the position has nothing to do with the merits and that the party is not willing to listen.

Pre-Negotiation Preparations

Pre-Negotiation Preparations

A party wishing to arrive at a satisfactory conclusion or arrangement through collective bargaining should first identify the objectives of the exercise. Some objectives common to employers are the following:

i) Ensuring that the enterprise is not rendered uncompetitive
ii)The need to keep wage increases below the level of productivity increases and/or within the inflation rate.
ii)Guarantees of industrial peace during the period of operation of the agreement

As far as possible managers should be consulted in determining objectives; their priorities should be solicited, and they should be aware of the company's views in regard to objectives so that they could be tested against the managers' views.
It is insufficient to merely determine objectives. A tentative plan to achieve these objectives, which can be modified during the course of the negotiations, could be formulated. Such a plan should include the company's requests to the union. For instance, work reorganization to increase productivity to absorb the cost increases consequent upon collective bargaining may form part of the company's plan. Negotiations on the union's demands are generally an ideal setting in which management can achieve some of its objectives through agreement. In order to achieve this, the management must be clear about its own priorities. If there is an existing collective agreement, it would be a useful starting point. An analysis should be made of how it has worked, its unsatisfactory features from the company's point of view should be identified, and the changes necessary determined.
Negotiating Team

The negotiating team, and the respective roles of the members, should be determined before the negotiations. Employers would find it useful to include in the team people from different disciplines.

Research and Study

The union's demands should be carefully studied. The following are some of the matters to which attention should be paid:
Assess the economic impact of the demands on the company.

Make a comparative study, e.g. in a wage demand one should ascertain comparative wage rates in the industry and in allied or similar businesses, the minimum wage, if any, and the rates applicable in other collective agreements.

Separate the demands which the company has no intention of fulfilling or giving, either on a question of principle or due to economic incapacity.

Prepare the company's position in regard to the other demands, e.g. the conditions on which the company may be prepared to grant them or compromise on them.

A party to collective bargaining negotiations has to formulate a strategy for all stages of the negotiation, including the pre-negotiation stage. Before negotiations commence, the strategy should include matters such as;

i)options as referred to above

ii)how much to offer while leaving room for further negotiation if the offer fails. The offer should be sufficiently attractive so as not to lead to a breakdown in negotiations.

iii)how to link one's requirements to the concessions one makes.

Advantages of Collective Bargaining

Advantages of Collective Bargaining

First, collective bargaining has the advantage of settlement through dialogue and consensus rather than through conflict and confrontation. It differs from arbitration where the solution is based on a decision of a third party, while arrangements resulting from collective bargaining usually represent the choice or compromise of the parties themselves. Arbitration may displease one party because it usually involves a win/lose situation, and sometimes it may even displease both parties.

Second, collective bargaining agreements often institutionalize settlement through dialogue. For instance, a collective agreement may provide for methods by which disputes between the parties will be settled. In that event the parties know beforehand that if they are in disagreement there is an agreed method by which such disagreement may be resolved.
Third, collective bargaining is a form of participation. Both parties participate in deciding what proportion of the 'cake' is to be shared by the parties entitled to a share. It is a form of participation also because it involves a sharing of rule-making power between employers and unions in areas which in earlier times were regarded as management prerogatives, e.g. transfer, promotion, redundancy, discipline, modernisation, production norms. However, in some countries such as Singapore and Malaysia, transfers, promotions, retrenchments, lay-offs and work assignments are excluded by law from the scope of collective bargaining.
Fourth, collective bargaining agreements sometimes renounce or limit the settlement of disputes through trade union action. Such agreements have the effect of guaranteeing industrial peace for the duration of the agreements, either generally or more usually on matters covered by the agreement.
Fifth, collective bargaining is an essential feature in the concept of social partnership towards which labour relations should strive. Social partnership in this context may be described as a partnership between organised employer institutions and organised labour institutions designed to maintain non-confrontational processes in the settlement of disputes which may arise between employers and employees.

Sixth, collective bargaining has valuable by-products relevant to the relationship between the two parties. For instance, a long course of successful and bona fide dealings leads to the generation of trust. It contributes towards mutual understanding by establishing a continuing relationship. The process, once the relationship of trust and understanding has been established, creates an attitude of attacking problems together rather than each other.
Seventh, in societies where there is a multiplicity of unions and shifting union loyalties, collective bargaining and consequent agreements tend to stabilise union membership. For instance, where there is a collective agreement employees are less likely to change union affiliations frequently. This is of value also to employers who are faced with constant changes in union membership and consequent inter-union rivalries resulting in more disputes in the workplace than otherwise.
Eighth - perhaps most important of all - collective bargaining usually has the effect of improving industrial relations. This improvement can be at different levels. The continuing dialogue tends to improve relations at the workplace level between workers and the union on the one hand and the employer on the other. It also establishes a productive relationship between the union and the employers' organization where the latter is involved in the negotiation process.

Nature of Collective Bargaining

Nature of Collective Bargaining

"Voluntary negotiation between employers or employers' organizations and workers' organizations, with a view to the regulation of terms and conditions of employment by collective agreements."

Collective bargaining could also be defined as negotiations relating to terms of employment and conditions of work between an employer, a group of employers or an employers' organization on the one hand, and representative workers' organizations on the other, with a view to reaching agreement.

There are several essential features of collective bargaining, all of which cannot be reflected in a single definition or description of the process:
1) It is not equivalent to collective agreements because collective bargaining refers to the process or means, and collective agreements to the possible result, of bargaining. Collective bargaining may not always lead to a collective agreement.

2) It is a method used by trade unions to improve the terms and conditions of employment of their members.

3) It seeks to restore the unequal bargaining position between employer and employee.

4) Where it leads to an agreement, it modifies, rather than replaces, the individual contract of employment, because it does not create the employer-employee relationship.

5)The process is bipartite, but in some developing countries the State plays a role in the form of a conciliator where disagreements occur, or where collective bargaining impinges on government policy.

Characterstics Of Collective Bargaining

Characterstics Of Collective Bargaining
It is a group process, wherein one group, representing the employers, and the other, representing the employees, sit together to negotiate terms of employment.

Negotiations form an important aspect of the process of collective bargaining i.e., there is considerable scope for discussion, compromise or mutual give and take in collective bargaining.
Collective bargaining is a formalized process by which employers and independent trade unions negotiate terms and conditions of employment and the ways in which certain employment-related issues are to be regulated at national, organizational and workplace levels.

Collective bargaining is a process in the sense that it consists of a number of steps. It begins with the presentation of the charter of demands and ends with reaching an agreement, which would serve as the basic law governing labor management relations over a period of time in an enterprise. Moreover, it is flexible process and not fixed or static. Mutual trust and understanding serve as the by products of harmonious relations between the two parties.

It a bipartite process. This means there are always two parties involved in the process of collective bargaining. The negotiations generally take place between the employees and the management. It is a form of participation.

Collective bargaining is a complementary process i.e. each party needs something that the other party has; labor can increase productivity and management can pay better for their efforts.
Collective bargaining tends to improve the relations between workers and the union on the one hand and the employer on the other.

Collective Bargaining is continuous process. It enables industrial democracy to be effective. It uses cooperation and consensus for settling disputes rather than conflict and confrontation.
Collective bargaining takes into account day to day changes, policies, potentialities, capacities and interests.

It is a political activity frequently undertaken by professional negotiators.

Negotiation and Collective Bargaining

Negotiation and Collective Bargaining

Collective bargaining is specifically an industrial relations mechanism or tool, and is an aspect of negotiation, applicapble to the employment relationship. As a process, the two are in essence the same, and the principles applicable to negotiations are relevant to collective bargaining as well. However, some differences need to be noted.

In collective bargaining the union always has a collective interest since the negotiations are for the benefit of several employees. Where collective bargaining is not for one employer but for several, collective interests become a feature for both parties to the bargaining process. In negotiations in non-employment situations, collective interests are less, or non-existent, except when states negotiate with each other. Further, in labour relations, negotiations involve the public interest such as where where negotiations are on wages which can impact on prices. This is implicitly recognized when a party or the parties seek the support of the public, especially where negotiations have failed and work disruptions follow. Governments intervene when necessary in collective bargaining because the negotiations are of interest to those beyond the parties themselves.

In collective bargaining certain essential conditions need to be satisfied, such as the existence of the freedom of association and a labour law system. Further, since the beneficiaries of collective bargaining are in daily contact with each other, negotiations take place in the background of a continuing relationship which ultimately motivates the parties to resolve the specific issues.
The nature of the relationship between the parties in collective bargaining distinguishes the negotiations from normal commercial negotiations in which the buyer may be in a stronger position as he could take his business elsewhere. In the employment relationship the employer is, in a sense, a buyer of services and the employee the seller, and the latter may have the more potent sanction in the form of trade union action.

Unfortunately the term "bargaining" implies that the process is one of haggling, which is more appropriate to one-time relationships such as a one-time purchaser or a claimant to damages. While collective bargaining may take the form of haggling, ideally it should involve adjusting the respective positions of the parties in a way that is satisfactory to all, for reasons explained in the Paper entitled "Principles of Negotiation".

collective bargaining-Introduction

collective bargaining, the conditions necessary for successful collective bargaining, some of the advantages of collective bargaining, issues of concern for employers and guidelines for employers on the process of bargaining itself from the pre-negotiation stage to the agreement itself. Some of the fundamental principles, the observance of which could achieve the broader objectives of negotiations in the employment relationship, are discussed in another Paper entitled "Principles of Negotiation".
A collective bargaining process generally consists of four types of activities- distributive bargaining, integrative bargaining, attitudinal restructuring and intra-organizational bargaining. Distributive bargaining: It involves haggling over the distribution of surplus. Under it, the economic issues like wages, salaries and bonus are discussed. In distributive bargaining, one party’s gain is another party’s loss. This is most commonly explained in terms of a pie. Disputants can work together to make the pie bigger, so there is enough for both of them to have as much as they want, or they can focus on cutting the pie up, trying to get as much as they can for themselves. In general, distributive bargaining tends to be more competitive. This type of bargaining is also known as conjunctive bargaining.
Integrative bargaining: This involves negotiation of an issue on which both the parties may gain, or at least neither party loses. For example, representatives of employer and employee sides may bargain over the better training programme or a better job evaluation method. Here, both the parties are trying to make more of something. In general, it tends to be more cooperative than distributive bargaining. This type of bargaining is also known as cooperative bargaining.
Attitudinal restructuring:This involves shaping and reshaping some attitudes like trust or distrust, friendliness or hostility between labor and management. When there is a backlog of bitterness between both the parties, attitudinal restructuring is required to maintain smooth and harmonious industrial relations. It develops a bargaining environment and creates trust and cooperation among the parties.
Intra-organizational bargaining: It generally aims at resolving internal conflicts. This is a type of maneuvering to achieve consensus with the workers and management. Even within the union, there may be differences between groups. For example, skilled workers may feel that they are neglected or women workers may feel that their interests are not looked after properly. Within the management also, there may be differences. Trade unions maneuver to achieve consensus among the conflicting groups.

Trade Unionism In India

The trade unionism in India developed quite slowly as compared to the western nations. Indian trade union movement can be divided into three phases.
The first phase (1850 to1900) During this phase the inception of trade unions took place. During this period, the working and living conditions of the labor were poor and their working hours were long. Capitalists were only interested in their productivity and profitability. In addition, the wages were also low and general economic conditions were poor in industries. In order to regulate the working hours and other service conditions of the Indian textile laborers, the Indian Factories Act was enacted in 1881. As a result, employment of child labor was prohibited.

The growth of trade union movement was slow in this phase and later on the Indian Factory Act of 1881 was amended in 1891. Many strikes took place in the two decades following 1880 in all industrial cities. These strikes taught workers to understand the power of united action even though there was no union in real terms. Small associations like Bombay Mill-Hands Association came up by this time.
The second phase (1900 to 1946) This phase was characterized by the development of organized trade unions and political movements of the working class. Between 1918 and 1923, many unions came into existence in the country. At Ahmedabad, under the guidance of Mahatma Gandhi, occupational unions like spinners’ unions and weavers’ unions were formed. A strike was launched by these unions under the leadership of Mahatma Gandhi who turned it into a satyagrah. These unions federated into industrial union known as Textile Labor Association in 1920.In 1920, the First National Trade union organization (The All India Trade Union Congress (AITUC)) was established. Many of the leaders of this organization were leaders of the national Movement. In 1926, Trade union law came up with the efforts of Mr. N N Joshi that became operative from 1927. During 1928, All India Trade Union Federation (AITUF) was formed.
The third phase began with the emergence of independent India (in 1947). The partition of country affected the trade union movement particularly Bengal and Punjab. By 1949, four central trade union organizations were functioning in the country:

The All India Trade Union Congress,
The Indian National Trade Union Congress,
The Hindu Mazdoor Sangh, and
The United Trade Union Congress
The working class movement was also politicized along the lines of political parties. For instance Indian national trade Union Congress (INTUC) is the trade union arm of the Congress Party. The AITUC is the trade union arm of the Communist Party of India. Besides workers, white-collar employees, supervisors and managers are also organized by the trade unions, as for example in the Banking, Insurance and Petroleum industries.
Trade unions in India
1) The Indian workforce consists of 430 million workers, growing 2% annually. The Indian labor markets consist of three sectors:

2)The rural workers, who constitute about 60 per cent of the workforce.
Organized sector, which employs 8 per cent of workforce, and

3)The urban informal sector (which includes the growing software industry and other services, not included in the formal sector) which constitutes the rest 32 per cent of the workforce.
At present there are twelve Central Trade Union Organizations in India:

All India Trade Union Congress (AITUC)
Bharatiya Mazdoor Sangh (BMS)
Centre of Indian Trade Unions (CITU)
Hind Mazdoor Kisan Panchayat (HMKP)
Hind Mazdoor Sabha (HMS)
Indian Federation of Free Trade Unions (IFFTU)
Indian National Trade Union Congress (INTUC)
National Front of Indian Trade Unions (NFITU)
National Labor Organization (NLO)
Trade Unions Co-ordination Centre (TUCC)
United Trade Union Congress (UTUC) and
United Trade Union Congress - Lenin Sarani (UTUC - LS)

Joining Trade Unions

Joining Trade Unions
The important forces that make the employees join a union are as follows:
1. Greater Bargaining PowerThe individual employee possesses very little bargaining power as compared to that of his employer. If he is not satisfied with the wage and other conditions of employment, he can leave the job. It is not practicable to continually resign from one job after another when he is dissatisfied. This imposes a great financial and emotional burden upon the worker. The better course for him is to join a union that can take concerted action against the employer. The threat or actuality of a strike by a union is a powerful tool that often causes the employer to accept the demands of the workers for better conditions of employment.

2. Minimize DiscriminationThe decisions regarding pay, work, transfer, promotion, etc. are highly subjective in nature. The personal relationships existing between the supervisor and each of his subordinates may influence the management. Thus, there are chances of favoritisms and discriminations. A trade union can compel the management to formulate personnel policies that press for equality of treatment to the workers. All the labor decisions of the management are under close scrutiny of the labor union. This has the effect of minimizing favoritism and discrimination.
3. Sense of SecurityThe employees may join the unions because of their belief that it is an effective way to secure adequate protection from various types of hazards and income insecurity such as accident, injury, illness, unemployment, etc. The trade union secure retirement benefits of the workers and compel the management to invest in welfare services for the benefit of the workers.
4. Sense of ParticipationThe employees can participate in management of matters affecting their interests only if they join trade unions. They can influence the decisions that are taken as a result of collective bargaining between the union and the management.
5. Sense of BelongingnessMany employees join a union because their co-workers are the members of the union. At times, an employee joins a union under group pressure; if he does not, he often has a very difficult time at work. On the other hand, those who are members of a union feel that they gain respect in the eyes of their fellow workers. They can also discuss their problem with’ the trade union leaders.
6. Platform for self expressionThe desire for self-expression is a fundamental human drive for most people. All of us wish to share our feelings, ideas and opinions with others. Similarly the workers also want the management to listen to them. A trade union provides such a forum where the feelings, ideas and opinions of the workers could be discussed. It can also transmit the feelings, ideas, opinions and complaints of the workers to the management. The collective voice of the workers is heard by the management and give due consideration while taking policy decisions by the management.
7. Betterment of relationshipsAnother reason for employees joining unions is that employees feel that unions can fulfill the important need for adequate machinery for proper maintenance of employer-employee relations. Unions help in betterment of relations among management and workers by solving the problems peacefully.

Revival of Trade Union

In the changing scenario the role to be played by the trade unions must also change if they want to survive.

To organize professional workers successfully and appropriately, unions need to understand their needs and concerns. The sense of collective solidarity is likely to be weaker than for other groups of workers, and there may be less of a tradition of union organization on which unions can build. Professionals expect unions themselves to be professional, and to deliver the services members need in an efficient way.

The point to understand is that there is competition for the services unions can offer. The table below seeks to identify the likely work-related needs which a professional worker – perhaps working on a contract basis rather than in a traditional employment relationship, perhaps working away from a central workplace, perhaps working for a number of different clients – could be expected to have. Whilst in many ways these needs resemble those which are currently met through the familiar industrial relations structures, other agencies could (and do) step in to service them: a problem at work could be guarded against in the same way, say, as a motorist arranges vehicle breakdown protection or a householder organizes a service contract for domestic appliances.
Negotiation on pay or contract fee

• Agents
• Commercial training courses in negotiating skills/assertiveness for individuals negotiating for
Health and safety advice

• Commercial telephone help lines
• Web based advice services
• Specialist consultants
• Doctors
Employment rights

• Attorneys/lawyers
• Specialist consultants
• Commercial telephone help lines
Disciplinary representation

• Attorneys/lawyers
• Specialist consultants
Taxation advice

• Accountants
• Commercial help lines
• Specialist tax advisory services
Social activities

• Web-based associations
• Informal networks
• More focus on neighborhood rather than
workplace socializing
Psychological and physical health

• Doctors/health services
• Private practice therapists

Pensions/social protection

• Private insurance companies
• Private financial advisers/brokers
Finding work

• Informal networks
• Web based services ( etc)
• Professional associations/member cooperatives

Providing access to training

• Educational institutions
• Commercial training providers
These service providers may operate as commercial ventures, or as non-profit professional mutual associations or societies. In each case, however, they are effectively competing with trade unions’ own services, and as a consequence threaten membership income and organizing muscle.

Decline in Trade Union Membership

Apart from the fact that trade unions have undergone a process of erosion, it is evident that they have also become less appealing to workers. There are a number of reasons that have contributed to this. Some of them have been underlined below:

Changes in composition of work force
Its basic cause has to do with the changes in the economy that have led to fewer male industrial unskilled workers, and more female service sector workers.

Changes in labor market structure
The labor market has changed dramatically in the last twenty years. Part-time work has increased, more women are in work, and more people work for themselves
Changes in the structure of economy
The economy has been shifting from manufacturing to the service sector. Jobs have continued to decline in industry, construction, and energy-related firms, even when the economy is growing. In contrast, jobs in the service sector - areas like hotel and catering, business services, and health and education - have continued to grow.

Growing emphasis on individual relations
A major reason for decline in trade union density has been the more emphasis that is being paid today to the individual relations. Management now directly deals with individual workers and at the time employment the terms of employment are decided well in advance leaving little work to be done for trade unions and lesser issues for collective bargaining.

Future of Trade Union

Early emphasis

At its inception the labor market was dominated by the classical economics view which espoused free and unregulated labor markets. This laissez-faire capitalism led to social injustices and inequities since labor did not have the power to bargain with employers. Additionally, the dominant position of the employer in what was formerly termed the "master and servant" relationship prevented labour from enjoying rights. IR therefore came to espouse a degree of labour market regulation to correct the unequal bargaining power.

The causes of labor problems - even those within the enterprise - were thought to need addressing through a range of initiatives external to the enterprise, by
The State through protective labor laws and dispute settlement mechanisms.

Voluntary action on the apart of employees to protect themselves and increase their bargaining strength through freedom of association and collective bargaining, but backed by State interventions to guarantee these rights.
Collective IR operates in three ways. One way is through national or industry level agreements between unions and employers' organizations. A second way is through agreements between a single employer and a union. A third way is through legislative enactments applicable to employers and employees generally, or to particular sectors, or to particular categories of employees.

Asia is a heterogeneous region, characterized by ethnic, cultural, linguistic and religious diversity. Due to substantial increases in investment in Asia by both Asian and Western investors, many employers and unions are dealing with workers and employers from backgrounds and cultures different to their own. Some of the resulting problems and issues fall within cross-cultural management. The problems arise due to differences in IR systems, attitudes to and of unions, work ethics, motivational systems and leadership styles, negotiating techniques, inappropriate communication, consultation and participation procedures and mechanisms, values expectations of workers and interpersonal relationships.
These cross-cultural management issues in turn pose the following problems:

What particular IR and human resource management considerations at the regional, sub-regional and country level affect the development of sound relations at the enterprise level in a cross-cultural environment?

What would be the most effective programs for this purpose?

How can investors in Asia familiarize themselves with the environmental and cultural considerations in the recipient country relevant to their managing people at work?

How could information be collected, analyzed and disseminated?
Industrial Relations/Human Resource Management Training

Since IR has assumed a particularly important role in the context of globalization, structural adjustment and in the transition to a market economy, employers in each country would need to identify what aspects of IR and HRM should be accorded priority, how training in them could be delivered, and what concrete role is expected from an employers' organization.
Balancing Efficiency with Equity and Labour Market Flexibility

Traditional IR view labour problems arising due to employers wish to use resources productively and to generate profit, while employees wish to maximize their return on labour. The State intervenes for a variety of reasons. The setting in which IR developed was conditioned by the national environment - political, economic, social and legal. But today the conditioning environment increasingly includes the international and regional context. Globalization has created pressures on IR for efficiency in the employment relationship, reflected for instance on the emphasis on flexibility (types of contracts, working time, pay, etc.) and productivity. These developments and the pressures for labour market deregulation and flexibility raise the issue of efficiency versus equity. However, the main issue for IR in this regard is not efficiency and equity as antithetic concepts, but how to achieve a balance between the two. This is because while an IR system should facilitate competitiveness, it should also promote equity by ensuring a fair return on labour and a fair sharing of the gains from economic activity, reasonable and safe working conditions, and an environment in which employees can communicate and discuss their concerns and be represented in order to protect and further their interests.

In Asian economies in transition (China, Mongolia, Viet Nam, Laos and Cambodia) the governments are seeking to establish a labour law system relevant to a market economy. Viet Nam already has a Labour Code, and China is in the process of enacting several laws including one covering collective bargaining contracts. There were hitherto no IR in these countries as known in a market economy, as there were no private employers (or employers' organizations), and employees were not expected to have interests different from those of the employer (the State) as they were considered to be the owners of the enterprises. Decisions were made not so much by managers as by the State.

These countries are now seeking appropriate IR 'models'. Employers in these economies will need to develop the expertise necessary to persuade the other two constituents that the labour law framework should not be too regulated so as to deprive enterprises of the flexibility which will be needed to adapt to changes when these economies have to move to the next stage of economic development.

Misconceptions About Trade Union


There are many misconceptions about trade unions. Firstly, their members are not just in manual trades; there are trade unions for everyone from airline pilots to zoologists. Secondly, there are no 'dinosaurs' - unions have a responsible and progressive approach to industrial relations. Nor are they dominated by old, white males - forty percent of members are women, and many unions now have sections dedicated to meeting the needs of young workers.

Most employers do try to follow the law and be fair and responsible, but problems are inherent in the very nature of the relationship between employer and employee. Even when there is a forward-looking, understanding management and a loyal and co-operative work force, there will be differences of opinion in the relationship between management and staff. From time to time, organizations need to respond to new situations. Staff will be asked to change their patterns of work. You may be faced with doing something that you do not want to do. You may be asked to learn difficult new skills. You may be asked to work over a weekend when you had planned something else. Redundancy now touches every level of an organization. Knowing your statutory rights or best practice in these situations is not always easy on your own. Alone, raising issues can be pretty daunting - if not impossible.
This is where trade unions can help. They can provide you with the advice and support to ensure that these differences of opinion do not turn into major conflicts. The more members a trade union has in a particular company, the more likely it is that there will be formal 'recognition'. This means that management has agreed to allow the union to represent its members. It might also mean that management and the union meet every year to discuss pay and conditions - such as hours of work. At present, forty-four out of the top fifty companies recognize unions, and the results are impressive. The average union member earns more than the average non-member. In private companies the union "mark-up" is 6p in the pound for manual workers and 4p in the pound for white collar staff. The average union member also gets more paid holiday than the average non-member. Two out of three union members get twenty-five days or more paid leave a year. Only one in three non-members enjoys this much holiday. Recognized unions, therefore, produce real results for their members and are responsible for tangible differences in the living and working conditions of many working people.
Even if a union is not recognized, members can receive free advice and support on anything connected with their employment. Membership of a union is an insurance policy. Unions win more than £300 million a year in compensation for members who suffer injuries or discrimination at work. Non-union members are twice as likely to be seriously injured at work. Not only do unions do a great deal to prevent problems in the first instance (by, for example, lobbying for proper health and safety regulations, or for a rigorous equal opportunities policy), they are also on hand to help when things go wrong (by, for example, giving legal advice and counseling, and advising members on their rights in relation to contracts, conditions, discrimination and dismissal).

Importance of Trade Union


Trade unions have always had two faces, sword of justice and vested interest". The balance between these two features can change over time; however it seems clear that in many countries, unions have lately come to be widely perceived as conservative institutions, primarily concerned to defend the relative advantages of a minority of the working population. However if we examine closely we shall find that trade unions have not just benefited the employees but also the employers in a number of ways:

Helps management in bringing about any kind of changes

Provides for a mechanism to deal with employees at large, dealing with large number of workers on one to one basis is not possible, this is where a trade union comes into picture

Securing maximum cooperation from workers.

Meeting its social obligations
by helping in the recruitment and selection of workers.

by inculcating discipline among the workforce

by enabling settlement of industrial disputes in a rational manner

by helping social adjustments. Workers have to adjust themselves to the new working conditions, the new rules and policies. Workers coming from different backgrounds may become disorganized, unsatisfied and frustrated. Unions help them in such adjustment.
promoting and maintaining national integration by reducing the number of industrial disputes

incorporating a sense of corporate social responsibility in workers

achieving industrial peace

Tasks Taken by Trade Union

Career development

A number of trade unions have introduced innovative services for members. Guidance on Career development is one of the major tasks that has been undertaken by a lot of trade unions. to name a few:

The British telecom managers’ union Connect, for example, launched its Opus² Careers Advice counseling service in January 2002. Opus² makes use of qualified and experienced counselors, and two programmes are currently offered, one on career assessment and the other on getting interviews. Each programme takes about four to six weeks to work through, and is based on a set of five 40 minute counseling sessions which take place either by phone or face-to-face. The cost of the programme for Connect members (about €290) is lower than equivalent commercial services, and it is preceded by a free half-hour session, to allow the individual to assess its suitability for their needs. Hourly career counseling is also available (€100 ph). Connect originally introduced Opus² for its own members, but now makes it available (at a slightly higher price) to members of other trade unions and (at a higher price) to non-union members.
Another British union, Prospect, has its own Career Plus career development programmed, delivered to members as a series of web-based worksheets. Career Plus includes modules on continuing professional development, skills, training and mentoring, and applying for jobs. Members work through the material in their own time.
SIF (Sweden) has had many years’ experience in helping members in career development. For example, it made use early on of the internet to deliver the Career coach (Karriärcoach) service to members. This is a web-based tool designed to help individuals analyze their working life prospects. SIF members receive a password from the union and can then work their way in their own time through the programme. This is one of a number of innovative developmental tools which SIF has developed for delivery to members over the internet or on CD-ROM.
Finansforbundet in Denmark is another union to offer help in career development and in personal and professional development for managers. This ranges from individual advice and guidance (for example, on appropriate lifelong learning options) to whole day or after-work sessions on particular subjects relevant to professional staff. Finansforbundet says that this has proved a popular initiative, with in recent years approximately 15% of the union’s members in professional and managerial posts participating each year.
Also in Scandinavia, the Finnish union Insinöörliitto IL offers both web-based advice to members on how to apply for better jobs and more traditional courses, on topics such as career development and job applications. Insinöörliitto IL offers legal advice to members who are negotiating their contracts and salaries with new employers

The Belgian union for professionals LBC-NVK has for several years offered its members career management workshops. Currently, two sessions are held each year, each open to 25 participants. The union hopes to extend this initiative from January 2005, to enable about 200 members each year to have access to this service.
Employment agencies

In many countries, trade unions in the past played an important role in directly finding work for members. This tradition was associated particularly with craft-based unions, as part of the mechanisms used to control access to particular professions and to prevent dilution of professional skills. It is perhaps not surprising; therefore, if some unions are now looking to recreate a similar service for their own professional and technical staff members.

TEK (Finland) operates a Recruitment Service for its members, using the union’s website. Employers can advertise current job vacancies for engineers and technical professionals on the site, without charge. Members can access this database, but can also submit on-line their own CVs (in Finnish and in English). These CVs are searchable by employers looking for new members of staff.

Connect (UK) decided to set up its own employment agency in the early 1990s, at a time when large numbers of Connect’s members were being offered voluntary redundancy by British Telecom. The vast majority had only ever worked for BT, and found the prospect of looking for work elsewhere daunting.

In France, the five major union federations have come together, along with the employers’ organisation MEDEF, to create a non-profit organisation APEC, l’Association pour l’emploi des cadres (Association for the employment of professional and managerial workers). APEC offers a major web-based employment service for cadres.It claims to have been used to date by 25,000 companies and 400,000 individuals. At any one time, around 10,000 jobs are likely to be posted on the website; individuals can also post their own CVs. APEC is available to all cadres, including those who are not affiliated to the participating unions.
Provision of training courses and lifelong learning

Unions can contribute in several different ways to the extension of training provision for members. Firstly, for many unions this is an important issue to be raised during the collective bargaining process. The Belgian managerial and professional union LBC-NVK speaks for many when it says, “Training and retraining are such fundamental rights that we try at all costs to establish these rights in collective agreements, both at company and sector level”.Naturally, unions in many countries are also actively engaged in bipartite (union/employer) and tripartite (government/union/employer) organisations and initiatives to promote vocational Training.

In France, for example, CFDT Cadres plays a key role in CESI, Centre Enseignement Scientifique et Industriel, the body which coordinates the training of engineers, technicians and cadres.

The Portuguese bank union SBSI participates in the Portuguese vocational training institute for the banking sector, whilst in Spain the UGT is a partner in the 2004 Plan for continuing vocational training.

Unions are also developing partnerships with educational institutions. SIF (Sweden) reports that it “co-operates with local universities and university colleges in Sweden in order to offer members possibilities to participate in specific curricula and courses. An example, where there have been places reserved for SIF members, is a course in project management. SIF pays for the training, and the employer lets the member participate in the course during working hours.”
Unions also themselves put on a wide range of training courses for their own members. Whilst these include more traditional courses designed for union activists on such topics as representing members and occupational health and safety, unions are increasingly focusing on servicing their members’ needs for professional qualifications. SIF, for example, arranges about fifteen educational seminars a year designed specifically for professionals and managerial staff, each focusing on a key work-related issue. In Finland, TEK currently arranges about 35 training workshops and lectures each year, tailored to the needs of its members. Another Scandinavian union, HTF (Sweden), also runs seminars and courses for managers. As the HTF puts it, “We help such members to create networks and develop their skills in subjects that are important to them”.
Preventing and combating sexual harassment:

Trade unions are uniquely able to take steps to "raise awareness of the problem of sexual harassment in the workplace" by conducting training of company officers and representatives on sexual harassment and by including information on sexual harassment in all union-sponsored or approved training courses.

Trade unions also have an opportunity to encourage employers to adopt "adequate policies and procedures to protect the dignity of women and men at work in the organization."

Trade unions may play a role as advisor to union members who have sexual harassment complaints, providing guidance on among other things, "any relevant legal rights. … Trade unions could consider designating specially trained officials to advise and counsel members with complaints of sexual harassment and act on their behalf if required. This will provide a focal point for support. It is also a good idea to ensure that there are sufficient female representatives to support women subjected to sexual harassment."

Activities Taken by Trade Unions


The central function of a trade union is to represent people at work. But they also have a wider role in defense of their members' interests. Individual unions and the Trades Union Congress play a very important role in lobbying the government and other decision makers to ensure the best possible deal for working people.

They also play an important educational role, organizing courses for their members on a wide range of matters. Seeking a healthy and safe working environment is also a prominent feature of union activity.

Unions also provide a variety of other benefits. For example, many union members can now have half an hour's free professional legal advice on anything - it does not need to be connected to their work. Many other unions provide benefits of membership such as cheap travel and insurance plans.
Most importantly, almost every improvement in workplace conditions - for example, equal pay laws, stronger health and safety legislation and statutory redundancy pay came about following pressure from trade unions.

The main service a union provides for its members is negotiation and representation. There are other benefits people get from being members of trade unions.
Information and advice
Member services

Negotiation is where union representatives discuss with management issues which affect people working in an organization. The union finds out the members' views and relays these views to management. There may be a difference of opinion between management and union members. 'Negotiation' is about finding a solution to these differences. This process is also known as 'collective bargaining'.

In many workplaces there is a formal agreement between the union and the company which states that the union has the right to negotiate with the employer. In these organizations, unions are said to be 'recognized' for 'collective bargaining' purposes.

Pay, working hours, holidays and changes to working practices are the sorts of issues that are negotiated. People who work in organizations where unions are recognized are better paid and are less likely to be made redundant than people who work in organizations where unions are not recognized.

Trade unions also represent individual members when they have a problem at work. If an employee feels they are being unfairly treated, he or she can ask the union representative to help sort out the difficulty with the manager or employer.

If the problem cannot be resolved amicably, the matter may go to an industrial tribunal. Industrial tribunals make sure that employment laws are properly adhered to by employees and employers. They are made up of people outside the workplace who listen to the employer's and the employee's point of view and then make a judgment about the case. People can ask their union to represent them at industrial tribunals. Most cases that go to industrial tribunals are about pay, unfair dismissal, redundancy or discrimination at work.

Unions also offer their members legal representation. Normally this is to help people get financial compensation for work-related injuries or to assist people who have to take their employer to court.
Information and advice

Unions have a wealth of information which is useful to people at work. They can advise on a range of issues like how much holiday you are entitled to each year, how much pay you will get if you go on maternity leave, and how you can obtain training at work.
Member services

During the last ten years, trade unions have increased the range of services they offer their members. These include:

Education and training - Most unions run training courses for their members on employment rights, health and safety and other issues. Some unions also help members who have left school with little education by offering courses on basic skills and courses leading to professional qualifications.

Legal assistance - As well as offering legal advice on employment issues, some unions give help with personal matters, like housing, wills and debt.

Financial discounts - People can get discounts on mortgages, insurance and loans from unions.
Welfare benefits - One of the earliest functions of trade unions was to look after members who hit hard times. Some of the older unions offer financial help to their members when they are sick or unemployed.