In this article we will discuss about:- 1. Introduction to Public Enterprises 2. Model Employers of Public Enterprises 3. Statutory Obligations 4. Labour Management 5. Labour Management Relations 6. Settlement of Industrial Disputes 7. Recognition of Trade Unions 8. Communication and Joint Consultation 9. Bonus Distribution 10. Welfare Activities 11. Workers’ Participation in Management.


  1. Introduction to Public Enterprises
  2. Model Employers of Public Enterprises
  3. Statutory Obligations of Public Enterprises
  4. Labour Management in Public Enterprises
  5. Labour Management Relations in Public Enterprises
  6. Settlement of Industrial Disputes in Public Enterprises
  7. Recognition of Trade Unions in Public Enterprises
  8. Communication and Joint Consultation in Public Enterprises 
  9. Bonus Distribution in Public Enterprises
  10. Welfare Activities in Public Enterprises
  11. Workers’ Participation in Management of Public Enterprises

1. Introduction to Public Enterprises:

In regard to industrial relations, public enterprises differ from private enterprise in an important respect. To cite from the First Five-Year Plan, “the profit-motive and the exploitation of workers for private gain have no significance in the State-owned enterprises. The undertakings have no doubt to show the same, if not greater, efficiency of working as private-owned undertakings. They have also to show profits. But the nature of these profits is different. The profits which these undertakings make are not profits intended for any individuals or group of individual but are extra wealth for the whole country”.


The worker in a public enterprise stands on a different footing from a worker in a private enterprise. “He has a dual role of master and servant; master as a citizen of the country and servant as a worker of the undertaking. It is therefore necessary that he should be made conscious that in serving the undertaking he is serving himself and that the better he works and the greater his efficiency the better he will serve and help himself. He must be made to feel that the responsibility for the success or failure is as much his as that of the management and that the undertaking belongs to the country as a whole including himself. He should take pride in his contribution to the success of the undertaking”.

But the absence of profit-motive in public enterprises should not be used to justify exemption of public undertakings from labour laws applicable to the private sector. To cite from the Second Five Year Plan, “In view of the fact that public sector will grow in future, the manner of administration of industrial relations in public enterprises is of great importance for the success of the undertakings and for the fulfillment of the aspirations of labour. Any attempt, therefore, on the part of public employer to avoid the responsibility of an employer on the ground that he is not working for profit has to be discouraged. Managements of public undertakings should not normally seek exemptions from labour laws or ask for other concessions not available to the private sector.”

From the ordinary workers’ point of view, however, the working conditions and industrial relations in public enterprises have not been much different from those prevailing in the private enterprises.

The attitude of management towards workers, causes of disagreement and clashes of personality, working conditions and wages, stresses and strains borne by workers resulting from the working procedures and methods, effects of changes in demand, experience of competition and fear of unemployment are still more or less the same as in the private sector. In fact, the fear of unemployment has increased with the government deciding to disinvest in several undertakings.


2. Model Employers of Public Enterprises:

The labour policy and programmes of the Government of India do not distinguish between the private and public enterprises. But public enterprises can legitimately be expected to act as model employers and set an example of enlightened management and employer-employee relationships. The Guide on ‘Labour Laws and Practices’ brought out by the Ministry of Labour and Employment tries to provide an indication about the special obligations of public sector managements.

It suggests that managements should discharge their responsibilities with exceptional care and should adopt a really enlightened policy in labour matters treating workers as real partners ensuring that their just grievances are promptly redressed and taking timely remedial measures after ascertaining the causes of labour unrest. It is, however, desirable that the Government should clearly spell out the special responsibilities of the management in public sector undertakings.

It is very important for the management of public enterprises to show a lively interest in the welfare of the employees. The promotion and training policies of public enterprises should be so framed as to convince the workers of the interest that management has in developing their skills and qualifications and in improving their prospects and standard of living.


The public enterprises should set the pace and serve as a model in regard to wage rates, working conditions, and welfare activities. The Board of Directors of public enterprises should include persons having a sympathetic appreciation of labour problems. The workers should be progressively associated with the working of the enterprises so that they feel that in practice, as well as in theory, they are partners in the enterprise.

Healthy unionism should be encouraged and no restrictions should be placed on industrial and commercial employees exercising their trade union rights like the employees of private enterprises. Agreements should be concluded for increasing output and reducing costs, combating absenteeism and checking offences against discipline.

Collective bargaining between workers and management should be encouraged and the management should be given on the spot full discretion and power to enter into commitments within certain prescribed limits. Similarly, government conciliation and arbitration machinery should be made available to the workers of state undertakings.

It may, however, be made clear that the ‘model employer’ concept should not be interpreted to mean that management is bound to accept any demand that any organisation of workers may put forth. Nor should this concept be construed to mean that supervising officers would be expected to condone or be lenient to laziness, indifferent work and acts of indiscipline.


3. Statutory Obligations of Public Enterprises:

The management must be efficient in detecting causes of dissatisfaction among employees and prompt in initiating speedy measures to redress the grievances or moving the conciliation machinery to deal with disputes. One of the basic requirements for proper labour-management relations is that the employers discharge their statutory obligations promptly and effectively.

But in this regard, the record of several enterprises has been far from satisfactory. Even now there some public undertakings which have not yet framed a regular procedure for the redress of employees’ grievances. It is unfortunate that these deficiencies continue in spite of the fact that the government have circulated model standing orders and grievance procedure for the guidance of the managements. This state of affairs is partly because of lack of efficient and effective personnel departments in some enterprises.

4. Labour Management in Public Enterprises:


The personnel departments in many enterprises are manned by officers who are not professionally qualified or adequately experienced in labour matters. The public enterprises should take measures to have their personnel managers trained in industrial relations and labour management and to strengthen their personnel departments in this regard.

Further, the organisation of the personnel and labour department is not appropriate in many public enterprises. The same set of officers have been entrusted with functions relating to industrial relations and labour welfare on the one hand, and other aspects of personnel management like recruitment, promotions and conduct and discipline, on the other.

If labour officers are to be effective in dealing with workers, it is essential that they do not have to share responsibility for decisions which might become the subject matter of disputes. The officers entrusted with labour relations should not bear any direct responsibility in matters like recruitment, promotions and disciplinary action against workers.

Further, it would be very useful if the chief executive can obtain impartial and objective advice on labour matters from a senior officer who does not bear responsibility for any matters other than industrial relations and labour welfare. In smaller public undertakings, a separate section should be set up exclusively for labour relations within the personnel department.


In larger undertakings, a separate labour department should be created exclusively for labour relations. In such undertakings, it would be essential to ensure the closest co-ordination between the personnel department and the department for labour relations. The heads of these two departments must work in co-operation with each other and take important decisions after joint consultation.

5. Labour Management Relations in Public Enterprises:

In many public enterprises, the relations between management and the workers have not been cordial. In many cases, the trouble arose from inter-union or intra-union rivalries and the problem faced by the management in determining which union or group within a union actually represented the majority point of view.

It has been found that the communication between workers and management was, by and large, not satisfactory and that the machinery for joint consultation and joint councils of management had either not been organized adequately or were not functioning effectively. The agitations were launched by workers’ unions for a variety of reasons, e.g. non-acceptance of awards, disputes regarding bonus, project allowance and other allowances, disciplinary action against workers, alleged assignment of extra work, retrenchment of staff, and sometimes individual grievances.


In many cases, disputes between management and labour have resulted into unfortunate incidents involving acts of violence and disturbance of law and order at the site of the factory. The problem has become serious, especially in backward regions, with labour resorting to potentially militant measures in their attempt to secure acceptance of their demands by the managements.

These incidents, commonly known as gheraos, have introduced a new and dangerous element in the field of labour-management relations. It is highly desirable that the agreements between labour and management are arrived at through collective bargaining and voluntary agreement and not through collective coercion and exaction of concessions by the use of terror, veiled threats of force and violence.

If unchecked, these tendencies are bound to damage the normal machinery of labour-management consultations and of conciliation. The property of the public enterprises belongs to the society and the managements act as agents of the state charged with the management of this social property in the collective interest.

In such a situation, violence and gheraos in public enterprises are particularly incongruous and harmful. While public enterprises should take appropriate measures to ensure that the just grievances of labour are satisfactorily redressed and the awards of labour tribunals, wage boards, etc. are promptly implemented by the management, the Central and State Governments should take immediate and effective measures to check the spread of violence and gheraos in all enterprises, whether in the public or the private sector.

In essence, a strike or agitation reflects a breakdown of the normal processes of negotiations between labour and management and a failure of conciliation. This may be the consequence of wrong handling by the management, unjustified demands and irresponsible action on the part of the workers’ union, or the ineffectiveness of the settlement machinery of the government concerned.

In a democratic society, although strikes, except under certain circumstances, have been recognised as a legitimate weapon in the armoury of labour, they should be used only as a last resort when all other avenues of settling the dispute with the management have been exhausted. It should be appreciated that the rule of law of a very extensive and fundamental nature prevails in the country.


If judicial interpretation is final as between the government and the citizens, there is no reason why it should not be so as between the managements and workers of public enterprises. The strikes adversely affect not only the workers and the employers but also the community at large.

Since public undertakings operate mostly in the field of public utility services and basic industries, strike in them a cause a lot of inconvenience to society and result in a rise in the price which consumers have to pay for their products. It is, therefore, very essential that the strikes in public enterprises are avoided, whatever may be their cause.

The Industrial Disputes Act lays down certain conditions under which a strike becomes illegal and punitive action can be taken against the workers and other persons participating in it. But there have been cases where strikes have taken place in public undertakings in contravention of the provisions of the Industrial Disputes Act and yet no effective action has been taken subsequently.

In order to discourage such strikes, any union resorting to an illegal strike should be immediately de-recognised and the workers participating in it rendered liable to removal from service after a summary inquiry. At the same time, it may be pointed out that an illegal lock-out should be dealt with as firmly as an illegal strike.

6. Settlement of Industrial Disputes in Public Enterprises:

The Industrial Disputes Act, 1947, which is a Central Act regulating the settlement of industrial disputes, applies to various public enterprises also. The machinery prescribed by this Act consists of – (i) the Works Committee, at the unit level, (ii) the Conciliation Officers, appointed by the governments concerned for mediating in and promoting the settlement of disputes, and (iii) the adjudication authorities like Labour Courts, Tribunals and National Tribunals. Provision also exists for Boards of Conciliation and Courts of Enquiry.


Most of the public enterprises owned by the Central Government fall in the ‘State sphere’ for the purpose of this Act. In other words, when an industrial dispute arises, the State Conciliation Officers intervene and make efforts for the settlement of the dispute. In case the conciliation fails, the State Government orders adjudication, wherever necessary. However, before an adjudication is ordered, as a matter of convention, the State Government consults the Central Government in view of the repercussions that are likely to follow an award.

In the Central sphere, the Chief Labour Commissioner’s Organisation is the agency which undertakes conciliation and looks after the maintenance of cordial relations in the enterprises falling in his jurisdiction.

In addition to the statutory authorities, a Standing Committee of representatives of the Ministries of the Government of India has also been functioning since August 1957 to consider measures for the speedy settlement of disputes which take place in the public enterprises of the Central Government.

The Industrial Disputes (Amendment) Act, 2010 states that in case of a dispute between a contractor and the contract labour employed through the contractor in any industrial establishment, the appropriate government shall be the Central Government or the State Government, as the case may be, which has control over such industrial establishment.

For the resolution of disputes arising out of individual grievances, the Industrial Disputes (Amendment) Act, 2010, envisages setting up of Grievance Redressal Machinery by every industrial establishment employing twenty or more workmen. The Committee so constituted should consist of equal number of member from the employer and the workmen.

The total number of member of the Committee shall not exceed more than six, provided, as far as practicable, half of them are women. The chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on rotation basis every year.


7. Recognition of Trade Unions in Public Enterprises:

Trouble has arisen in many cases in public enterprises because of the inter-union or intra-union rivalries and the problem faced by the management in determining which union or group within a union actually represented the majority point of view. There is no Central Act providing for statutory recognition of unions.

The Indian Trade Union Act, 1926 contains provisions for registration under certain conditions but does not make it obligatory for the unions to seek registration under the Act, nor does it impose any obligations on the management. However, the Rajasthan and Madhya Pradesh Industrial Relations Acts contain provisions for statutory recognition of unions under specified conditions, and confer certain rights on the unions which are granted recognition.

In other states, managements are expected to grant recognition to unions in accordance with the procedure and criteria laid down in a voluntary code, viz. the Code of Discipline. But the Code does not lay down the rights of a recognised union as against a non-recognised union. Moreover, even an unrecognised union can raise a dispute, get conciliation proceedings started, or take the dispute to adjudication.

The present position leads to an unnecessary proliferation of unions and an unhealthy rivalry between them. This not only leads to an escalation of demands by competing unions but also weakens the trade unions on the whole and makes the process of labour-management negotiations more complicated. Sometimes the unions call for a strike or launch some kind of agitation simply to attract greater membership and raise more funds.

A simple way of overcoming the difficulties created by the proliferation of unions and inter-union rivalries would be to provide for all the workers electing their representatives who would bargain on their behalf. Each worker should be entitled to vote in electing these representatives by secret ballot once every two years.


A Labour Council elected in this way would truly represent workers and would be competent to negotiate with the management on labour matters. The elections might be held by the management organisations with the help of the Government machinery. Implementation of this scheme, however, would require necessary changes in the labour laws in their application to public undertakings. Labour-management relations in the public sector should not be treated as in the private sector.

8. Communication and Joint Consultation in Public Enterprises:

Inadequate communication between workers and management and the lack of joint consultative machinery are important reasons for the unsatisfactory state of industrial relations. Many times disputes occur in public undertakings because of misinformation and lack of understanding on the part of workers about the changes initiated by the management.

The representatives of workers and employees often make a grievance of the fact that information on several matters which they consider vital is withheld from them. They contend that in arriving at a satisfactory settlement all the relevant information should be disclosed to them just in the same way as in all judicial proceedings, all relevant information on which the decision of the dispute is likely to depend is disclosed to both the parties.

Many disputes remain unresolved and, in fact, embitter the relations with mutual suspicion and distrust between the management and its employees, simply because the information which the employees consider to be of vital importance in finding out a satisfactory settlement was inadequate or not disclosed to them. Keeping information secret creates suspicion which, according to Somervell, “will invariably set people guessing the wrong way where they feel their interests are at stake”.

Keeping in view the delicate nature of the confidence factor which governs the modern industrial world, a state enterprise should supply all the material information to its employees, of course, keeping always in view the public interest. An effective way of obtaining good communication between labour and management is by developing the joint consultative machinery in the undertakings.


Under the Industrial Disputes Act, 1947, the government concerned can require an undertaking to set up Works Committees consisting of an equal number of representatives of management and workers. The functions envisaged for the Works Committee are to promote measures for securing and maintaining amity and good relations between the employer and the workers, and towards that end to comment upon matters of common interest or concern and to try to compose differences of opinion regarding such matters.

Unfortunately, the Works Committees are not functioning effectively in public enterprises mainly because of lack of positive response from workers, absence of strong unions and inter-union rivalries.

The importance of communication has also to be viewed from the angle of the size of the enterprise. The public enterprises are generally characterised by a large size and complexity of organization. This increases the problem of securing good human relations among the employees. Inadequate communication in these enterprises is likely to lead to misunderstandings among the employees and diminish their cooperation with the management.

The attainment of higher morale, discipline and improved incentives largely depends on facilitating and promoting communication within the enterprise. The communication does not simply consist of making available more and better factual information about the enterprise but includes certain positive aspects which are more important and probably more difficult to attain.

The most important is the need to instill in the workers a sense of partnership, a sense of pride in the public enterprise and a sense of responsibility for its efficiency and well-being. It is very essential to infuse among employees a sense of purpose and an awareness of the fact that they are working in an enterprise which is engaged in serving the collective interest of the community.

The workers of the public enterprises must also be made aware of the important problems which the country and industry are facing, e.g. shortage of basic goods and materials and dependence on imports, shortage of capital resources, the overriding need for improving productivity and ensuring the maximum possible utilisation of the huge amount of capital invested in the public enterprises.

A very important reason for the failure of Works Committees is the fact that they are convened in a routine manner without adequate preparation of agenda papers. The result is that members do not find discussions very worthwhile. The managements should take Works Committee meetings as opportunities to inform the workers of their plans and difficulties and to explain the reasons for the changes being initiated.

The proceedings of the Works Committees should be given due publicity so that the workers’ representatives may feel more interested and responsible for what emerges from the discussions.

In addition to Works Committees, another joint body of the management and workers is the Joint Management Council, which exercises supervisory, advisory and administrative functions in matters regarding safety, welfare, etc. It has been possible to introduce the scheme of Joint Management Councils sponsored by the government as a purely voluntary scheme only in a few undertakings.

An important condition for the formation and success of Joint Management Councils is that there should be a well-established and strong trade union functioning in the undertaking. In most cases, this condition is not satisfied. In order to overcome this difficulty the Management Council should take a form in which the members on the workers’ side are elected by all the workers themselves and not nominated by unions. This would improve the chances of successful working of the Joint Management Councils.

9. Bonus Distribution in Public Enterprises:

A bonus, which started off originally as a distribution of part of the profit as a reward, has come to take the form, through a series of judicial decisions, of a part of the emoluments earned by employees. Some people consider profit bonus to be entirely wrong in principle. In order to provide a true incentive and reward for good work, the system of bonuses should be so devised as to provide incentives for the most productive use of installed capacity.

The volume profits as shown in the profit and loss accounts for a particular period is not necessarily the only, or even the best, test of productivity or good work. It is further contended that all earnings from public enterprises should go to the general fund because it would, to that extent, obviate the necessity of further taxation. It is also pointed out that the public enterprises provide amenities which are far better than those provided by the private sector and, therefore, payment of bonus is not justified.

The Ministry of Labour, however, did not approve of this stand because the application of labour legislation would become difficult if the public sector were to be accorded a privileged treatment. But it suggested that the public enterprises could be usefully classified into two categories for the payment of bonus.

The first category includes public utility undertakings like Posts and Telegraphs, Railways, Defence establishments, etc., where the primary objective is to provide a service rather than to make profits. The second category includes the bulk of remaining public enterprises and it is in this category that a bonus is likely to be paid on a parallel with private industry.

10. Welfare Activities in Public Enterprises:

The public enterprises have been quite liberal in their expenditure on townships and ancillary facilities like medical and educational facilities, shopping and community centres, play grounds, etc. The Committee on Public Undertakings, in its eighth Report, has commented upon the different standards followed in the scales of accommodation and the scales at which services and other facilities were being provided.

The Committee also recommended that steps should be taken to lay down “suitable guiding principles, norms and standards without any delay…to ensure that public undertakings follow a balanced approach in incurring expenditure on productive and non­productive activities”.

Glaring disparities in the scales of amenities provided to workers in different enterprises are bound to lead to a cycle of escalating demands in the public sector, which would result in avoidable additional expenditure. In this regard, it is fully recognised that laying down of rigid financial limits may not be possible.

Expenditure is bound to vary from enterprise to enterprise depending upon its location and the availability of housing, medical and educational facilities in the vicinity of the enterprise. But still broad guidelines and norms can be worked out in order to ensure a certain degree of uniformity among different public enterprises.

11. Workers’ Participation in Management of Public Enterprises:

One of the measures suggested for obtaining co-operation between the workers and the managements is the association of workers in the management of enterprises. Probably the most significant success attained in this regard has been in the erstwhile Yugoslavia where the workers’ council elects the chief executive and holds him accountable for the working of the enterprise.

But there also the chief executive and the managerial staff were responsible for the administrative control of the enterprise, and the workers are not responsible for the day-to­day administration. These limiting factors must be kept in mind while examining the extent to which workers’ association in management can be obtained in the conditions prevailing in our country.

In regard to association of labour in management, it has often been suggested that a labour representative should be included in the Board of Directors of the enterprise. This suggestion does not appear to be very appropriate because it is difficult for the labour representative to simultaneously discharge the different responsibilities of a board member and a labour representative.

Such an approach is likely to detract from the constructiveness of discussions in the Board without bringing about any significant improvement in the transaction of business relating to industrial relations. What the workers actually want is association with matters which affect them more intimately, matters which are of immediate and vital interest to them like security of service, information about the enterprise, future prospects, wages, etc. and not high policy decisions.

The best way would be that a person having experience of trade union work should be appointed to the board, not as a representative of the labour but as an expert on labour matters.