Why Labour Law is heart of Human Resources by Uddalak Banerjee (XLRI HRM 2012-14)

This article is not for faint hearted , but then realities of life and the answers to some very important questions have been attempted to be answered in this particular article. A few days back one of the aspirants asked why does a HR manager can earn 150000 USD and what and how can an HR manager add value to business to merit the pay equivalent to a CMO (Chief Marketing Officer) ?. Both these questions are not limited to one aspirant and i am sure there might be thousands of aspirants across student fraternity of not just India but abroad who might think over such an issue at one point of their life or the other.Since this article might be read in future by many aspirants , to them i would say that this article is not to deter any person from taking up human resources but then to unravel the part of human resources which can be considered its soul.

To understand this article first you need to understand why a labour works for an employer and why an employer needs labour to work beyond the fact that labour needs money to meet basic needs by working for employer and employer needs a man to do his job. To analyse this deeply , you need to understand that a employer needs a worker to undertake all the activities which can expand his business and generate tangible value more than the expenditure he incurs for keeping that person on roll.How this is different from the first line of this paragraph is more evident in another question .. Why should a man manufacture a set of goods worth Rs 1000 through his own day long labour and readily give the same willingly and knowingly at a cost of Rs 100 ??Now tell me the answers of few more questions: What recognition does the worker get for the good he creates? Suppose he creates an excellent good , will he ever get a percent of the profit? Will the user ever know that he made it ? Who will the user associate with the product? It will always be the employer!

Now lets look at why HR as a field emerged:

Event 1:Increasing oppression of labourers in the hands of ever greedy employers.

Event 2: Trade unions being formed and gradual associations of these unions with regional political parties .

Event 3: Political parties for their political mileage started to spread the message of labour violence. This event was further fuelled by gradual spread of education and awareness of rights.

Event 4: The realisation among employers that to enhance productivity there can be multiple factors at work. One of which is labour. The others being capital , machinery etc .

Event 5: Black labour movements , A series of strikes , lockouts and labour reforms and their forceful implementation by government of india owing to pressure from political parties who by now had already grown a strong root in labour classes. CITU , INTUC etc achieved prominence through strikes .

If one looks at the time frame when the labour laws were passed and implemented , a major chunk was passed during 1940 to 1960 period . This may be due to high nationalist fervour during the indian independence phase or may be the political climate and overall optimism towards a brighter future of a dream of equality for all. I say so because in 1921,Buckingham and Carnatic Mills strike happened,in 1926 binny mills strike happened , In 1928 south indian railway strike happened and so on.Sometimes demand for bonus, sometimes purely exploitation , sometimes wage rate , the demands were growing louder and hence understanding of labour problems , compliance of labour laws, enhancing manpower productivity necessitated creation of HR. If you look at acts like ID act 1947 , Factory act 1948 , Minimum Wage Act 1948 , Employers liability Act 1938 , Trade Union Act 1926 and their timelines you would find first came trade union then came how acts on liability of employer followed by rule sto be maintained in factory and during industrial disputes .Each of these Acts falls under the umbrella of Labour Laws . If you had read this far into this article , by now you must have understood that the essence of creation of HR and all the expectations from the field are actually directly regulated and related by Labour laws. Starting from under what conditions a factory should run ( Factory Act 1948) to under what conditions Trade union can be formed ( TU Act 1926) to how regulation of the labour reforms would be done in industries ( ID ACT 1947) to what minimum wages ,gratuity , bonus to provide ( Minimum wages act 1948 , Payment of Gratuity Act , 1972 )etc. From basic salary calculation to number of leaves to benefits to be given to a worker to how to try a worker for an offence and what maximum punishment to give are all to be implemented word by word and letter by letter by Labour Law acts. Even incase of hiring of workers from another state (Inter State Migration Workers Act ) , to classification of industries as under Industries Act each and every activity and its scope is pre decided by these acts. From recruitment to Training and development to consulting to employee engagement each and every activity is regulated by Labour laws. Straight from working hours, breaks , canteen , toilet to conspiracy at work to leaves and retrenchment each and every thing is related to precided norms set by labour laws. Sextual harassment and who all should sit in the hearings , how the cases are to be filed , how workers are to be tried for offences , who to set new rules ,dealing with accidents ,death, retrenchment , PF , Gratuity including exceptions each and every thing has to have compliance to existing labour law reforms. For each and every violation , the penalties run into crores of rupees , cancellation of factory licence ,imprisonment ,lockout and at times intangibly irreparable loss of business through adverse publicity. But then the penalties dont end in monetary losses, the penalty is reflected in death of Awanish ji (HR , Maruti Plant) and countless such HR professionals who had to be sacrificed in the alter of tug and war between management and workers. Management on one end looks at its own productivity ,profitability and incremental benefit . worker on the other hand constantly tries to protect his or her own job security , income and social standing. In between comes HR , who has to at the same time peform all labour law compliances and at the same time has to look after productivity figures and even at times take decisions to suit the business goals more than the workers.

Indian Penal Code clearly states Section 499 to 502 for defamation , Section 503 to 510 for criminal intimidation , Section 490 to 492 for breach of contract of service , Section 441 to 462 for criminal trespass , 120A to 120 B for Criminal Conspiracy, 299 to 311 relating to murder. But in spite of these codes HR workers fall pray to politics and victimization which again cant be avoided given that for a worker his employer is HR manager who sets workplace rules of work .To obey rules and at the same time take decisions in cases which are not defined based on Prior Supreme Court Judgements and International Labour law recommendations and treaties signed by the country takes massive amount of reading and constant upgradation of skill sets to keep abreast of industries changing requirements and business rules. For example , contract act gets ammended , then all old existing contracts needs to be changed as per new rules and all parties re convinced to sign the new contract. From wage fixation to firing a worker , understanding implications of Labour laws and using them as a competitive advantage without violating labour standards is a work of art and is extremely hard to do . To know how to go out of a purview of one labour law act by say raising minimum salaries of workers ,imparting supervisory role to workers , regulating vacancies and training individuals in line category under the garb of skill development to get critical tax benefit from government is not something most hr managers can do . IT takes massive intellect and decision making power and self belief to accomplish the above and for hr consulting agencies thorough knowledge of each of these points decides whether it earns 1000 crore from a client (in return of profits generated above 1500 crore) or ends up bankrupt !

From interpretation of human psychology to facing Labour Courts for actions and decisions made with respect to accidents , payouts , percentage loss of earning power , bonus , leaves granted , retrenchment of workers , decisions on sextual harassment , delay in wage payment etc etc each and every decision decides a fate of a hr manager . The penalty for non compliance can be death by workers killing the hr manager within the work premises , outside work premises at some place else . Death can also come in the form of court judgement if found guilty of a command that lead to death of many. Death as a penalty in so many forms is perhaps only there in HR field and never so in other forms where at max a failure or loss in job or monetary loss incurred through lack of proper decision making or negligence. Hence only individuals who have hunger to learn and proactively influence labour markets , business and unions should be part of this fraternity because it is this knowledge that will decide he will live, be imprisoned , put to death or earn enough to lead business as MD or CEO . All the best!