July 23, 2024

Collective Bargaining

Collective Bargaining

The term collective bargaining is made up of two words, ‘collective’ – which means a ‘group action’ through representation and ‘bargaining’, means ‘negotiating’, which involves proposals and counter-proposals, offers and counter-offers. Thus it means collective negotiations between the employer and the employee, relating to their work situations. The success of these negotiations depends upon mutual understanding and give and take principles between the employers and employees.


Collective bargaining has different meanings for different individuals or groups. Trade Unions, management and public interpret the term in their own ways. Let us now discuss some leading definitions:

According to the Encyclopedia of social sciences, “Collective bargaining is a process of discussion and negotiation between two parties, one or both of whom is a group of persons acting in concert. The resulting bargain is an understanding as to the terms and conditions which a continuing service is to be performed. More specifically, collective bargaining is a procedure, by which employer and a group of employees agree upon the conditions of work”.

Richardson says, “Collective bargaining takes place when a number of work people enter into negotiation as a bargaining unit with an employer or a group of employers with the object of reaching agreement on conditions of the employment of the work people”.

The I.L.O. workers manual defines collective bargaining as, “negotiation about working conditions and terms of employment between an employer, a group of employers or one or more employer’s organizations, on the one hand, and one or more representative workers organisation on the other with a view of reaching an agreement.

Salient Features

  • It is a collective process in which representatives of employers and employees participate mutually.
  • It is a flexible and dynamic process wherein no party adopt a rigid attitude.
  • It is a bipartite process whereas the representatives of workers and management get an opportunity for clear and face to face negotiation.
  • It is a continuous process which can establish regular and stable relationship between worker’s organisatoin and management.
  • It is a practical way to establish an industrial democracy.
  • It is a good method of promoting industrial jurisprudence.
  • It is good form of interdisciplinary system (i.e. a function embodying economic psychological, administrative, ethical and other aspects.)
  • It is a process that includes efforts from preliminary preparations to the presentation of conflicting view points, collection of necessary facts, understanding of view points, taking correct decisions etc.


Whatever labour laws may lay down, it is the approach of employers and trade unions which matters and unless both are enlightened, industrial harmony is not possible. Therefore, the solution to common problems can be found directly through negotiation between both parties and in this context the scope of collective bargaining is very great.

Collective bargaining is really beneficial forms the stand part of employees and their unions as well as management. If it works well, it develops a sense of self-responsibility and self-respect among the employees concerned and thus significantly paves the way for improved employee morale and productivity.

Collective bargaining restricts management’s freedom for arbitrary action and thereby management learns a new code of behaviour by conceiving of the union as a method of dealing with employees. The management also comes to know the grievances of workers in advance and it gives an opportunity to take precautionary measure. Moreover, collective bargaining opens u the channel of communication between top and bottom levels of an organization.

From the point of the view of the society, collective bargaining; if property conducted, result in the establishment of a harmonious industrial climate which helps for the socio-economic development of the nation. It builds up a system of industrial jurisprudence by introducing civil rights in industry and ensures that management is conduct by rules rather than by a arbitrary decisions. It extends the democratic principles from the political to industrial field.


Prof. Butler has viewed the functions as:

  • a process of social change
  • a peace treaty between two parties
  • a system of industrial jurisprudence

Collective bargaining as a process of social change

Collective bargaining enhances the status of the working class in the society. Wage earners have enhanced their social and economic position in relation to other groups.

Employers have also retained high power and dignity through collective bargaining.

Collective bargaining as a peace treaty

Collective bargaining serves as a peace treat between the employers and employees. However the settlement between the two parties is a compromise.

Collective bargaining as an industrial jurisprudence

Collective bargaining creates a system of “Industrial Jurisprudence”. It is a method of introducing civil rights into industry. It establishes rules which define and restrict the traditional authority exercised by employers over their employees placing part of the authority under joint control of union and management.

In addition to the above, its functions include:

  • Increasing the economic strength to employers and employers.
  • Improving working conditions and fair wages.
  • Maintaining peace in industry
  • Prompt and fair redressel of grievances.
  • Promoting stability and prosperity of the industry.

Principles of Collective Bargaining

The success of collective bargaining is based on certain principles. These principles are to be followed by the employers and unions. Prof. Arnold. F. Campo has laid down certain principles for union and management, for management and for union.

For both union and management

  1. Collective bargaining process should give due consideration to hear the problems on both sides. This will develop mutual understanding of a problem which is more important for arriving at the solutions.
  2. Both the management and union should analyze the alternatives to arrive at the best solution.
  3. There must be mutual respect on both the parties. The management should respect the unions and the unions should recognize the importance of management.
  4. Both the union and management must have good faith and confidence in discussion and arriving at a solution.
  5. Collective bargaining required effective leadership on both sides, on the union side and management side to moderate discussions and create confidence.
  6. In collective bargaining both the union and management should observe the laws and regulations in practice in arriving at a solution.
  7. In all negotiations, the labour should be given due consideration – in wage fixation, in working conditions, bonus etc.

For management

  1. Management should think of realistic principles and policies for labour regulations.
  2. The recognitions of a trade union to represent the problems is more essential. If there are more than one union, the management can recognize on which is having the support of majority of workers.
  3. Management should follow a policy of goodwill, and cooperation in collective bargaining rather than an indifferent attitude towards the union.
  4. Managements need not wait for trade union to represent their grievances for settlement. Management can voluntarily take measures to settle the grievances.
  5. Managements should give due consideration to social and economic conditions of workers in collective bargaining.

For unions

  1. Unions should avoid undemocratic practices.
  2. Unions have to recognize their duties to the management also before emphasizing their demands.
  3. Unions have to consider the benefits to all workers rather than a section of workers.
  4. Strike lock-outs should be resorted to, only as a last measure. As far as possible they have to be avoided by compromise and discussion.

Forms of Collective Bargaining

The forms of collective bargaining differ from country to country and time to time in India. Collective bargaining takes the following forms:

  1. Settlements under industrial disputes act: According to this, negotiations are carried out by officers according to the Industrial Disputes Act.
  2. Settlements by parties: In this case settlements are arrived at by parties themselves without the interference of a third party.
  3. Consent awards: Here the agreements are negotiated by the parties on a voluntary basis when disputes are subjudiced. Later these are submitted to the labour courts.
  4. Direct negotiation: In this agreements are arrived at by both the parties after direct negation. The enforcement of these agreements depends upon the goodwill and cooperation of the parties.

On the basis of the level (in which collective bargaining takes place) it can be classified as:

  1. Plant level bargaining
  2. Industry level bargaining
  3. National level bargaining

Plant level bargaining

It is the micro level bargaining. It takes place in the particular unit between the management and the trade unions of that unit.

Industry level bargaining

Several unions of the same industry form and association and negotiate with the employers.

National level bargaining

In this, the representatives of trade unions and employers at the national level will negotiate.

The Contents of Collective Bargaining Agreements

The scope of collective bargaining has increased during the recent years. Prof. Randle observes that the increase in the scope of collective bargaining is due to the growth of trade unions, increased response by the managements, increased response by the managements, increased prices and the legislations.

Problems relating to security of trade unions, wages, promotions, transfers, hours and conditions or work, holidays and leave with wages, safety and health etc. are included in the collective bargaining.

The Institute of Personal Management includes the following in a collective agreement.

  • Nature, scope, definition and purpose of agreement.
  • Rights and responsibilities of management and trade unions.
  • Wages, bonus, production norms, leave, retirements benefits and other benefits and terms and conditions of service.
  • Grievance redressal procedure.
  • Methods and machinery for the settlements of possible future, disputes, and
  • A termination clause

Thus collective bargaining includes not only the negotiation of wages, but also working condition, labour welfare and organizational matters.

Process of Collective Bargaining

The process of collective bargaining consists of two stages, (i) the negotiation state, and (ii) the contract administration.

Negotiation Stage

At the negotiation stage certain proposals are put forward for mutual agreement after careful consideration. The negotiation stage consists of three steps.

  • Preparation for negotiation
  • Negotiation procedure
  • Follow up action

Preparation for negotiation

First the union will submit their fresh contract to the management before the expiry of existing contract (usually 30 to 60 days before the expiry). Both the management and unions will take considerable time to the preparation and negotiation.

They collect the required data relating to large number of issues such as wage, salary, seniority, overtime allowance, the cost of living, the policies of trade unions and management, nature of agreement in other companies etc.

The company will collect such information its internal sources – such as balance sheet, contract agreements, market research reports, Govt. reports etc. The trade union also collects such data from their own central organisation, research staff from various Department etc.

The personal department prepares a personal, which includes –

  • Specific proposals of the company including the objectives of negotiation.
  • Estimating the cost of implementing the proposals.
  • Classifying the demands as demands acceptable before negotiation, demands acceptable after negotiation, demands which cannot be accepted. Such proposals are based on company’s commitment to shareholders, consumers, workers and public.

Negotiation technique or procedure

In this step, a negotiation committee is to be formed by both the parties. From the management side the representative include the chief executives. The unions is represented by the leaders and centrals leaders. The committee consists of three to six members.

The demands are classified as demands which need bargaining and demands which may be rejected. During negotiations, normally the easier demands are taken up first. Both parties should have a “bargaining cushion”, and make counter proposals. For example, a demand for wage increase by the union, may be accompanied by a counter proposal for increase in production by the management. Such negotiations go on till the “point of no return” is being reached. A rigid or irrevocable stance should always be avoided.

Follow-up action

At this stage, the agreement is printed and circulated among all the employees. The supervisors will be enlightened about the agreements for their effective implementation.

Contract Administration

Agreement will be useful if they are executed properly. As observed by Profs. Illiamson and Harries, “if anything is more important to industrial relations than the contract itself, it is the administration of the contract”.

Prof. Campo has laid down the following general principles for administering the contact effectively;

  • Cooperation between both the parties is essential. Both the parties should have a tolerant attitude towards each other and have a spirit of accommodation and goodwill.
  • Proper procedure should be adopted for the redressal of grievances by providing opportunity to exchange views.
  • When a conference over the redressal of grievance reaches an impasse, the grievance should be referred to arbitration.
  • Both the parties should honour the commitment.

Pre-requisite for Successful Collective Bargaining

Collective bargaining will be more effective under the following conditions:

Negotiating team

Negotiating team should represent all groups including production, finance and industrial relations experts. The team should be headed by an appropriate person with adequate authority to take decisions.

Recognition of unions

The management should recognize the trade union and analyze the facts in their representation of grievances. Mutual understanding encourages mutual agreement.

Open mind

Both the management and union should have open minds to listen and appreciate each others point of view with flexibility and adjustment.

‘Home Work’ on demands

The union and management have to collect relevant data relating wages, conditions of work, welfare schemes, cost of benefits.

Routine problems

The management and unions have to identify the grievances on routine basis and take appropriate action then and there.

Internal union democracy

Trade unions should encourage internal union democracy by consulting the rank and file members.

Importance to output

Trade unions should also give importance to output, quality of the products, company’s image etc., in addition to their wages, bonus, working conditions etc.

Strikes/ lockouts

Strikes and lockouts should be resorted to as last measure. Before taking any decision, both the union and management should conduct periodic discussions to avoid strikes and lockouts.

Collective bargaining has gradually been taking roots in Indian soil. Most of the collective bargaining agreements were concluded at plant level. Some industry level agreements were also concluded in textile industries in Bombay and Ahemadabad.

The scope is widening. It includes matters relating to productivity, bonus, modernization, standing orders, voluntary arbitration, incentive schemes and job evaluation etc. The number of agreement has been increasing. Most of the agreements were relating to wages. In a study conducted by E.F.I. shows that out of 109 agreements 96 were relating towages.

Thus collective bargaining is an important method of solving problems, thorough mutual understanding. If used properly it can solve the problems of both the parties- management and union through mutual confidence.

Collective bargaining is also used as a tool for bringing coordination between workers and managements. It also serves as tool of communication of views by both management and works. In the long-run it will serve as an instrument for labour participation in management and pave way for he cordial industrial relations in India.

Collective bargaining in central public sector undertakings

Collective bargaining in central public sector undertakings is done according to the guidelines issued by the Departments of Public Enterprises (earlier known as the Bureau of Public Enterprises). This department gives the content and limits of financial commitments which a public enterpriser can make with the union during the course of bargaining. However, in many instances these4 limits are circumvented by the management by making gentleman’s promises with the unions on several issues outside the written agreement and implementing these promises over a period through administrative orders.

In core industries like steel, ports and docks and banks, collective bargaining is done at the national level for the industry as a whole. Thus, in steel industry, one main collective agreement is entered into by the National Joint Consultative Forum on behalf of all private and public sector steel units with other unions. This is followed by several supplementary agreements being entered into at the plant level to cover aspects not resulted in creating uniform wage structures and fringe benefit patterns in all public sector units irrespective of the nature of industry (labour or capital intensive) and the paying capacity of a unit as determined by its financial performance. This is in sharp contrast to a private sector unit where its wages and fringe benefits are more geared to its specific requirements and circumstances

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