What’s it: Industrial relation is how workers and employers connect and work together to achieve desired goals while fulfilling their rights and carrying out their obligations. Employees often have conflicting interests with the company and vice versa. For example, employees demand higher salaries. Instead, it’s in the company’s interest to cut costs, which means lower salaries. For the company, the salary increase resulted in higher production costs, suppressing profitability.
Such conflicts of interest can lead to disputes. To resolve this, the company and the employee may initially negotiate for a mutually beneficial solution. But, if it doesn’t work, employees may take industrial action, such as a strike. On the other hand, companies may also take actions such as lock-outs to advance their interests.
Why is industrial relation important?
Achieving good industrial relations between workers and employers is important for several reasons. First, it benefits the company as it generates a motivated workforce. Workers get their rights and what they want, such as higher salaries, benefits, and career opportunities. They feel cared for by the company. Finally, they are motivated to carry out their duties and obligations, leading to higher productivity.
Second, disputes between employees and employers are minimal. Each has rights when carrying out obligations. Finally, a mutually beneficial relationship is created between the two parties. Minimal disputes make operations run smoothly.
Third, good relationships strengthen the company’s image. Often, the public negatively views industrial actions such as strikes – which are thought to occur due to workers’ dissatisfaction with the company.
And a good relationship between employees and the company minimizes industrial action. Finally, the company has a positive image because it treats employees well.
Fourth, a positive image raises higher standards in hiring. That attracts more professionals out there to apply. They think the company is the right place to work because it is considered friendly to employees.
Fifth, it encourages a sense of belonging among employees. As a result, they work well with people and management to achieve company goals. In contrast, poor relationships can cause workers not to cooperate.
A sense of belonging encourages employees to be more committed to the organization. Thus, the company is more likely to meet its objectives.
Sixth, a high commitment to the company makes it easier to implement changes. Employees see change as something positive for a better future. Finally, it reduced the resistance between them. They are also happy and more flexible in implementing changes.
What are the policies and procedures for building a good industrial relation?
The company implements policies and procedures to properly handle industrial relations. Good policies help companies manage employees more effectively. It clearly defines acceptable and unacceptable behavior in the workplace. And when there are deviations, the policy sets out clearly the implications and consequences. Often, policies reinforce and clarify standard operating procedures in the workplace.
Through sound policies and procedures, employees understand what the company asks them. In addition, they also understand what they get when carrying out their obligations.
Industrial policies and procedures may include:
Management establishes a complaint policy and procedure. Thus, employees know how they should report complaints when there are, for example, problems with working conditions.
On the one hand, employees are happy to have an official channel for filing complaints. On the other hand, the company can handle complaints effectively because it is more structured and clearly defined through policies and procedures. In addition, effective complaint handling allows for better employee-management relations.
Deteriorating employee relations often lead to high absenteeism. If not handled effectively, it can incur additional costs. For example, employees may not feel at home in the company, leading to high turnover. And retaining existing employees is usually cheaper than recruiting new workers. The recruitment process costs money. In addition, new employees may need some training to work as productively as those who left the company.
Then, absenteeism makes the existing workload pile up. This situation can cause the company’s productivity to decrease. And it can also interfere with operations.
To overcome these problems, companies should have an absenteeism policy to encourage employees to remain present at work. For example, the policy may relate to free time, holidays, time off, and work time allowances.
The company has clear and standardized disciplinary policies and procedures to enforce the rules. Thus, employees understand the consequences if they do not follow the rules.
Standardization is also important to prevent discrimination. Thus, any irregularities receive equal sanctions, regardless of their position. In addition, it minimizes dissatisfaction among employees.
Typical sanctions usually involve processes such as verbal warnings. If it doesn’t work, the management gives the first written warning. If ineffective, a final written warning is a step before dismissal. Some companies may impose suspensions and demotions between the last written warning and dismissal. Thus, in order, the disciplinary procedures include:
- Verbal warning
- Formal written warning
- Last written warning
Companies cannot fire employees arbitrarily. Apart from raising discontent, it can also lead to lawsuits against them, which can be very expensive.
Therefore, companies must have clear policies and procedures by government regulations. Before terminating an employee’s contract, the company must follow formal disciplinary procedures. And the procedure must be completed before the decision to dismiss is taken.
Redundancy is when a role or job is no longer needed by the company. Usually, the company will provide redundancy payments. In addition, the company notifies the period during which the employee can search for a new job.
Redundancy payments do not apply if management offers an alternative job within the company and the employee accepts it. Or, they reject it without good reason.
What are industrial relation methods used by employees?
Employees have several methods to voice their interests. Collective bargaining is the first. They, usually represented by unions, negotiate with management on issues such as:
- Salary increase or benefits package improvement
- Better working conditions or opportunities, such as training
- Job security through a permanent employment contract
- Protection against harassment and discrimination
When negotiations are ineffective, employees may use other methods such as:
Work-to-rules. Workers only want to carry out their duties and work by what is explicitly stated in the employment contract. If the company asks them to do additional tasks, they won’t do it. Instead, they aim to disrupt or slow down a company’s operations, which can be costly.
Go-slow. Employees intentionally delay or slow down production to persuade the company to meet their demands. Despite continuing to work according to the terms of their contract, employees do so with less effort than usual. As a result, the company cannot produce at full capacity.
Overtime ban. Workers refuse to work overtime. It usually marks the beginning of tougher industrial action. For example, if their demands are not met, they will take further collective action, such as a strike.
Strike action or labor strike. Workers refuse to work, causing the production process to stop. This move is usually the ultimate method used by the workforce to coerce the company. Workers do so if the previous method, which is relatively more lenient, fails to resolve the dispute. This action brought havoc to the business as operations ceased.
Walkouts. This is a type of strike action. Employees collectively leave the workplace to protest against the company or government. For example, this action took place in the United States on July 20, 2020, across the country, followed by fast food, ride-sharing, and airport workers.
What are industrial relation methods used by the employer?
Conflict does not only come from employees against the company but also vice versa. The company has interests that may conflict with the employee’s interests. For example, it is in a company’s interest to cut costs, especially during difficult periods such as a recession. Therefore, they have to cut wages to lower costs and maintain profitability. But, employees don’t want it.
In addition to salary, the company’s interest in employees also includes:
- Higher productivity, thus getting more output from the same input.
- Lower absenteeism, thus reducing costs and minimizing disruption to operations.
- Temporary employment contracts, making more flexibility in retaining productive workers through permanent contracts and terminating unproductive workers’ contracts.
- Lowering the bargaining power of unions to decreases their pressure on the company.
- Job flexibility, for example, workers can perform additional tasks outside the contract.
Like the method employed by employees, companies initiate negotiations first to encourage employees to agree to their demands. This step is a gentle way to get a mutually beneficial solution between the two parties. But, if that doesn’t work, the company may take other steps, such as:
Dismissal. The company threatens employees with dismissal. However, they cannot fire arbitrarily as it could lead to unfair dismissals and counterclaims to the company. Thus, they must accommodate applicable laws to ensure fair dismissal.
Contract changes. Companies may change contracts to force employees to accommodate their interests. For example, they do not provide opportunities for employees who refuse to extend their tenure.
Lock-out. The company closed operations during a labor dispute. This is the opposite of a strike, which is initiated by employees. During a lock-out, the company may not pay employees’ salaries. Thus, this method may effectively suppress employees, although it can also harm the company’s image.
Closure. Companies close business, usually in response to strikes. This action is extreme. Therefore, companies usually do this when other alternatives have been exhausted.
How do poor industrial relations affect companies?
Poor industrial relations are detrimental and create problems. It doesn’t just impact the employee or the company. But, it can also affect other stakeholders, such as consumers.
For example, a strike brings production to a halt. As a result, goods become scarce if the company does not have sufficient inventory to ship to the market. So, consumers find it difficult to find products in retail stores. As a result, scarcity and high demand incentivize retailers to set high prices.
Rising prices make consumers have to pay more to get goods. Some may be willing to buy. But, most consumers don’t like it and stop buying. As a result, some reduce demand.
Poor industrial relations also lead to other problems, including:
Disharmony. Employees and management cannot work together. That leads to more conflicts within the company, which are expensive to resolve.
Industrial action. Employees strike when they are dissatisfied with the company. This action causes production to stop.
Pressure on earnings. Downsizing due to strikes increases costs. For example, the company still has to pay bills and other fixed costs, which are never zero, even when operations stop. On the other hand, revenue is reduced because strikes cause production to stop.
Bad reputation. The public views negatively industrial actions such as strikes. They see the company as an unfriendly place to work for employees. The strike reflects the existing employees are dissatisfied with the company.
Machines and equipment damaged. The strike stops the machine and can negatively impact it if it lasts for a long time. In addition, during a strike, there is no routine maintenance. Finally, the machine could not operate at capacity long after production had started post-strike.
Careers are at stake. Bad relationships affect careers, making it difficult for employees to occupy higher positions.
High turnover. Employees are less likely to stay in the company for long when treated unfairly. For example, they may earn a high salary. However, discrimination and an unsupportive work environment increase stress and demotivate them.
Deceptive behavior. Employees may engage in deceptive behavior more often to demonstrate good performance, even though, in reality, this is not the case.
Wages lost. Say, workers are paid by the hour worked. So, they lost their wages during the strike.