India (according to the constitution: Sovereign Socialist Secular Democratic Republic of India) is historically known for work stoppages and strikes. For around two decades, however, labor market policies in India have tended to be liberal and business-friendly. Foreign investors should find an investment-friendly business climate - partly at the expense of Indian workers.
The role of trade unions in India
In order to avoid mass layoffs, special legal regulations were issued for companies with more than 100 permanent employees, whereby plants and companies can only be closed with the consent of the local authority Commissioner of Labor can be done. As a result of this development, registered industrial disputes in the formal sector have declined significantly over the last decade.
In India, there is generally no obligation for companies of a certain size to have employee representatives, works councils or unions.
Find out – through your network and partners – about the risks and the local characteristics and history of labor conflicts and strikes in the region BEFORE setting up a production facility.
Potential for conflict with temporary workers
Conflicts very often arise in connection with the employment of temporary workers - especially in industrial companies. The employment of temporary workers in itself is not the problem. Rather, it is the failure to comply with regulations and poor internal communication that lead to problems.
It is therefore important that you have a reputable partner who adheres to legal regulations (length of employment, follow-up contracts, occupational safety, work ethics). Therefore, obtain reliable information and references.
Risk minimization & conflict management
To reduce the risk of work conflicts, you can take concrete precautions and measures. The following three areas of action should primarily be mentioned here:
- Professional personnel selection
Selection of managers with appropriate experience in dealing with employee representatives and unions, crisis situations (strikes, unrest, layoffs) and dealing with authorities on labor law issues. The local managers should also have the appropriate will and willingness to tackle and get through even delicate and unpleasant tasks proactively. - Open and proactive communication policy
India is a country where rumors and speculation spread incredibly quickly. Therefore it is essential, permanent to keep an ear to the workforce and about formal as well informal communication channels to communicate. This is not just limited to sending information, but also requires being open to feedback. - Fair conditions & wage structure
A market-oriented and performance-related one reward The employee is also an important basis for company peace in India. Since the granting of social benefits is not regulated by the state to the same extent as in Europe, the company has a special role to play in this case.
Long-term practice in India has shown that European companies rarely - or not at all - concern themselves with the competitiveness of their wages and salaries in the Indian market.
As a result, two extremes often occur: the salary level has developed over the years to levels that are well above the market - or the opposite. While in the former case there can often be considerable resistance to corrections (including work conflict), in the opposite case, major improvements fail due to the economic possibilities of the respective company.
If you have any further questions about labor law and human resources management, please contact our department WB Human Resources®.
