Role Of Trade Union In Compensation Management Management Essay

Trade Unionism grew as one of the most powerful socio-economic political institutions of our time – to fill in the vacuum created by industrial revolution in industrial society. It came as a countervailing force to reconcile social and economic aberrations created by Industrial Revolution. Individual dispensability and collective indispensability was the basic principle for its formation. United we stand and divided we fall is the philosophy. The government policy of “Laissez-faire” left the working class at the mercy of mighty employers. The worker lacked bargaining power and seller of most perishable commodity (labour) he was no match for the mighty employer. The supply of labour was more and demand was less. Employers employed them at their terms, which were exploitative. The exploitation of labour was at its peak.

Combination of workers was considered as ‘criminal conspiracy’ and the terms of contract was regulated by workman Breach of Contract Act, 1860 and general law of the land. Discontent was brewing. Liberal democratic and revolutionary ideas (set in motion by American war of Independence, French Revolution and Thinkers like Rousseau & Marks etc.) of the time fanned the discontentment which was a smoldering since long and gave birth to an institution known as “trade union.”


According to Webbs, a trade union is a continuous association of wage earners for the purpose of maintaining and improving the conditions of their working lives. Under the Trade Union Act of 1926, the term is defined as “any combination, whether temporary or permanent, formed primarily for the purpose of regulating the relations between workers and employers, or for imposing restrictive conditions on the condition of any trade or business and includes any federation of two or more unions”. Let us examine the definition in parts.

Trade union is an association either of employees or employers or of independent workers.

It is a relatively permanent formation of workers. It is not a temporary or casual combination of workers.

It is formed for securing certain economic (like better wages, better working and living conditions), social (such as educational, recreational, medical, respect for individual) benefits to members. Collective strength offers a sort of insurance cover to members to fight against irrational, arbitrary and illegal actions of employers. Members can share their feelings, exchange notes and fight the employer quite effectively whenever he goes off the track.

A more recent and non-legislative definition of a union is “an organisation of workers acting collectively who seek to protect and promote their mutual interests through collective bargaining” (De Cenzo & Robbins, 1993).


Functions of trade unions are:

a) Militant or protective or intra-mutual functions: Provide protecting to the workers’ interests, i.e., increase in wages, providing more benefits, job security, etc., through collective bargaining and direct action such as strikes, gheraos, etc. included in the militant function of trade union.

b) Fraternal or extramural functions: The word fraternal means maintain brotherhood relation between employees these functions consist offering monetary and non-monetary aid to employees during the periods of strikes and lock outs, extension of medical facilities during slackness and causalities, provision of education, recreation, recreational and housing facilities, provision of social and religious benefits, etc.

c) Political functions: These functions include affiliating the union with a political party, helping the political party in enrolling members, collecting donations, seeking the help of political parties during the periods of strikes and lockouts.

d) Social functions: Social functions of trade union consist social service activities and performing social responsibilities through several sections of the society like educating the customers.


Unions concentrate their attention to achieve the following objectives:

a) Wages and Salaries: Financial demands of employees are always the vital issue for trade union, and compensation wants the major attention from trade union. It consist the issue regarding salaries, wages and bonus, they want to change the policies for equitable, and protect the workers interest.

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b) Environmental Conditions: Working or environmental conditions includes lighting and ventilation, sanitation, rest rooms, safety equipment while discharging hazardous duties, drinking, refreshment, minimum working hours, leave and rest, holidays with pay, job satisfaction, social security benefits and other welfare measures, and trade union acts as a guard to protect these benefits.

c) Personnel Policies: Personnel policies include recruitment, selection, training, career development and promotion and trade union protect or fight against these issues and it becomes vital objective of trade unions for their employees.

d) Welfare: Trade union also works as welfare guard, provide consultancy and cooperation to the employees for solve out the personal issue. Trade union receives the notice from the management through negotiation to remove the difficulties of sanitation, medicare facility, and educational facility for their children’s & cultural and social problems.

e) Employee-employer relation: Trade union also works for the maintaining harmonious and smooth relation between relations worker and management for industrial peace. Trade union acts as the communicator or representation on the behalf of employees and helps to solve the basic issue and develop healthy relation by conducting the negotiation meetings

f) Negotiating machinery: Trade union fulfill their responsibility as a negotiation machinery, which made proposals on the behalf of employees for the other party or management and the process continues until the both parties enters into an contract. Thus, negotiations are based on ‘give and take’ principle. Trade union being a party for negotiations protects the interests of workers through collective bargaining. Thus, the trade union works as the negotiating machinery.


Workers who are non-unionised are more at risk of low pay. Women who work in non-unionised workplaces earn on average two-thirds of the hourly pay of their male counterparts, whilst those women who are union members earn nearly 90 per cent”(Source: TUC Labour Market Research 2000).

Collective Bargaining

Trade union must have some control over the total labour supply available to an industry. Trade union reforms in the 1980s brought an end to the closed shop in a bid to increase the flexibility of the labour market.

Collective bargaining is a process in which employers and employees complete a mutual discussion and enters to a contract regarding the rights and responsibilities of manpower at job. Collective bargaining targets to solve out problems like as employees compensation, time period for performing the job, training, health and safety. During the bargaining process, workers are basically represented by a trade union and union may bargain with a single person or employer (who is typically representing a company’s shareholders).

A collective bargaining agreement works as a labor contract Collective bargaining includes the process of bargain between members of a union and employers for the terms and conditions of employment of employees, such as compensation, working hours, environmental conditions and conflict handling procedures, and about the rights and duties of trade unions.

Generally collective bargaining engaged with four types of activities-

Distributive bargaining, Integrative bargaining, Attitudinal restructuring and Intra-organizational bargaining.

Distributive bargaining: It consist the issues regarding distribution of surplus profit, it consists the economic or financial issues likewise bonus, salaries and wages. In this type of collective bargaining, one party’s receives something and other may lose. This type of bargaining is also called as conjunctive bargaining.

Integrative bargaining: This type of bargaining consists the discussion on these types of problems in which both the parties may gain. For example, parties may negotiate over the better training programs .Here, both the parties are endeavor to get more. As per this employees can enhance their skills and management gets more productivity and this type of bargaining is also called as cooperative bargaining.

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Attitudinal restructuring: This provides the shapes to the relations of employees and employers on the basis of attitudinal traits likewise rely or nonrely, amiableness or hostility between employee and management. When there are hard feelings between both the parties, attitudinal restructuring is required to establish harmonious industrial relations. It establishes a negotiating environment and creates trust and cooperation among the parties.

Intra-organizational bargaining: The term intra organization refers as within the organization, basically it targets at solve out internal disputes of employees. For example, employee feel ignored as they are not performed as per their skill, or women fells unsafe regarding their interests. Trade unions try to achieve results among the conflicting groups.

Characteristics of Collective Bargaining

It is a process, which are performed in the group. In other words it is the bipartite process in which one party represent the employee and other one is represented the employers, discuss mutually on the specific issues

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 flexible and voluntary process which is executed on the mutual basis or mutual discussion.

Collective bargaining is a process which is also used as the method of participation in an organization. It starts with the planning for the discussion and completes with the implementation of actions for solving the conflicts and establishes the harmonious relation.

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 it means need of one party fulfill by the other party. labur can increase productivity and their efficiency and management can pay better for their efforts.

Collective bargaining helps to ameliorate the relations between the employee and the union members and the employer.

It is a continuous process. It works for maintaining harmonious relations in industries. It uses cooperation for resolving conflict.

Collective bargaining takes into account day to day changes, policies, potentialities, capacities and interests.

It is a political activity undertaken by professional negotiators in the organization to solve out the problems

Process of Collective Bargaining

Collective bargaining basically consist the discussion or negotiations between the two parties (employees’ representatives and employer’s representatives). Or we can say trade union representative or employer for determining the terms and conditions of employment. The outcomes of collective bargaining procedure are known as the collective bargaining agreement (CBA). The process of collective bargaining is generally adopted for the purpose of resolving the conflicts.


The collective bargaining process comprises of five core steps:




Agreement or Contract

Implementation of Agreement

Prenegotiation: This is the first stage of collective bargaining process. In this stage firstly we determine whether there is actually any reason for bargaining or not. First of all we understand the issue on own behalf before discussion which covers all the issues. In other words it is the planning phase regarding the negotiation.

Negotiators: The second phase of process of collective bargaining consist the formulation of bargaining team. In this phase we are finalizing the representatives of both the parties with adequate knowledge and skills for the bargaining. In this stage both the employer’s representatives and the union representatives examine their own conditions in order to propound the issues that they believe will be most import

Negotiation: Here, the parties starts discussion on the specific issues which are predetermined and understand properly before enter in this phase. This discussion is basically known as the negotiation between the employer and employee. The result of negotiation is generally based on the negotiation strength of any of the party and finally as an outcome mutual environment of trust and understanding is also created, than the parties enter into the agreement of collective bargaining.

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Agreement or Contract: In this phase of collective process the negotiator finally execute the agreement after mutual discussion. In this agreement all the terms and conditions are fixed regarding the specific issue on which the negotiation executed.

Implementation of Agreement: In the final stage terms and conditions are implemented in the organizations, in other words strategies are taken into action which are fixed in the last stage.

Significance of Collective Bargaining

Collective bargaining is the process of discussion or negotiating in between the union representative and employers or top management and this negotiation helps to resolve the employer- employee disputes. Collective bargaining helps to determining the mutual agreed terms and conditions about rights and responsibility for both of them. It is a bipartite technique of negotiation.

Significance of

Collective Bargaining

Significance to Employee

Significance to Society

Significance to Employer

Significance to employees

Collective bargaining helps to propound a sense of self-esteem and responsibility among the employees.

It increases the strength or power of manpower, thereby, increasing their negotiation ability as a group.

Collective bargaining helps to increases the team spirit and efficiency of manpower.

Effective collective bargaining helps to increase the strength of trade union actions or movements.

The workers feel impelled for the negotiation with the management on the several matters for the benefits of employees.

It offers a flexible means for the adjustment of compensation and better working conditions, which helps to reduce the disputes between employee and employer.

Significance to employers

Collective bargaining helps the management to solve out the issues or problems of the employees.

Collective bargaining helps to increase the sense of job security among the employee and this security reduce the labour turnover rate.

Collective bargaining helps to increase the workers participation in management and provide the open channel of communication, which increases feedback level also.

Collective bargaining plays an important role in resolving and preventing industrial conflicts.

Significance to society

Collective bargaining helps to increases the industrial peace in the nation

As an its outcomes it helps to maintain the harmonious industrial climate or relation The differences and exploitation level among the workers is regularly being checked.

It offers a regulation of the terms and conditions of employment of those who are directly related about them.

Tiers of Collective Bargaining

Collective bargaining operates at three tiers

National Tier

Industrial Tier

Organizational Tier

National Tier Bargaining: It includes the two or three parties for bargaining between union representatives, central employer associations and government agencies. It targets at offering a floor for basic level bargaining on the terms of employment, often taking into account for fulfilling objectives at the economic wide.

Industrial Tier Bargaining: It targets at the fixation of standard for the terms and condition of employment in the same industry, includes a wide range for negotiation. Negotiation may be determined in narrowly or broadly terms and it covered all the industrial activities at national level.

Organization Tier Bargaining: This tier of negotiation consist the organizational activities for the negotiation. As a secondary type of negotiation, it focuses on the point that negotiation degree need not be mutually exclusive.


Q1.What is Trade Union? What are its objectives and functions?

Q2.Why do workers join Trade Union? Explain.

Q3.Discuss the role of Trade union in Determination of Compensation System.

Q4.What is the Collective Bargaining? Explain its types and characteristics?

Q5. Describe the importance of collective bargaining to the various parties?

Q6. Explain briefly the procedure of collective bargaining in an enterprise or an industry?

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