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TECHNOLOGICAL CHANGE AND

INDUSTRIAL RELATIONS

INTRODUCTION

Change has three dimensions:


Market change
Technological change
Organizational change

Technological Change

Advanced technologies
Better opportunities
Inherent Threat

Concerns of technological
changes among people

Employment Issues
Changes in Occupational Profiles
Education and Training
New Working Arrangements and
Managerial Attitudes

Industrial Relations

Implications for trade unions and


labor-management relations
Inter- union rivalry
Dismantling of groups

Pre-requisites for
introducing technological
1. Management Strategy/Approach
changes
-Options available
Market situation
Societal changes

Contd
Management seeks to attain the
following objectives through TC
Reduction in production cost
Reduction in labor input in work
processes
Greater efficiency of operations
through better management control

Higher quality of products/service


Adapting production to the
changing demands of customers
Getting a comparative advantage

Activities undertaken
before initiating change

Information sharing
Consultation
Management commitment
Workers skills training and up-gradation
Measures to ensure workers health
and safety
Sharing the gains with employees
Trade union participation

Trade Union Response


Reasons why trade unions resist TC
1. Fear of Unemployment
2. Redundancy and Problems of
retaining
3. Major Benefits of improved
technology
4. Workers hardest hit by
modernization

Negotiate change
1. Appropriate training
2. Accent on teamwork
3. Supportive management practices

Observations of 15th ILO


1.

2.

3.

Protection of employment and


wages of employees.
Equitable share of gains among
members of the community,
employers and employees.
Proper assessment of workload
and working conditions.

Handling redundancies

Reasons for workforce adjustments:


External reasons can be :
Structural and other changes in the
economy/economy
Changes in environment
Changes in technology
Changes in ownership and control

Business process re-engineering


Outsourcing, contracting out
Introduction of information technology
Product/process obsolescence
Material substitution
Chronic sickness/corporate failure
Decline in employment elasticity due to
automation

Internal reasons:
Improper/inadequate human resource
planning
Wrong selection
Inadequate training
Inadequate/improper
motivation/reward system
Substitution of labor with capital

Approaches to deal with


workforce Redundancy

Combine worker flexibility with


employment security
Review job specification at regular
intervals
Progressive employment practices
Infrequent use of down sizing and job
reduction
Promotion of Intraprenership
VRS

Adjustment Strategies

Undertaken to cope with the


changed economic environment.
Specialization
Downsizing
Reorganization and technological
changes
Amalgamation, Merger, Takeover

VRS/Early Retirement
Scheme

VRS is voluntary on both sides- employer and


employee
Early retirement scheme is one that an employer
introduces to employees when he feels they are
redundant
The guidelines require that the scheme should
result in overall reduction in the existing
strength
of
the
employees
of
the
company.Therefore, the Scheme can be drawn
evenbythe profitmaking companies, but the
company should be older than 10 years.

Cost-benefit analysis of
VRS
Costs and benefits to the company
Relative health of the enterprise
Real cost to the company
Costs and benefits to the employees
Golden parachute
Costs and benefits to the community

Legal Aspects

Law mandates not only compliance


with certain procedures and
compensation as per laws but also
prior approval from the
government .
Options of employers-negotiate
with workers/unions and arrive at
an agreed plan of action.

Tax Aspects of VRS

VRS applies to an employee of the


company who has completed 10
years of service or 40 years
It applies to all employees and
executives (excluding directors).
It has been drawn to result in overall
reduction in the existing strength of
the employees of the company.

Vacancy caused by the VRS is not to be


filled up.
The retiring employee is not to be
employed in other business belonging to
the same management.
The amount should not exceed Rs. 5 lacs.
The employee has not Availed in the past
the benefit of any other voluntary scheme.

The above guidelines are to be strictly


followed, and in case, the payments on
account of voluntary retirements are
not strictly made as per the prescribed
guidelines, the payment will not be
exempt.
Only the amount representing the
excessandabove the limit of Rs. 5 lacs
is to be subjected to Income-tax.