Dark underbelly of India Inc’s shop floors

On Linkedin, one who identified himself as an administration manager at the company wrote: “You can break the glass.. but you cannot break our spirit!! We will build.. we will be back.. we will stay strong!" The message was posted along with a picture of the Wistron plant tagged ‘work in progress’.

Another executive of the company posted the same picture, writing, “You pelted stones on us, and we are going to rebuild with the same stones… #jugaad #Wistron #wesupportwistron."

The “you" in these statements are the blue-collar or shop floor workers, many of them contract employees, who went on the rampage at the factory, destroying equipment worth ₹50 crore. The workers had alleged longer shifts and lesser-than-promised pay. Some of these allegations turned out to be true. Apple Inc., whose iPhones are assembled at the factory, found violations of working hour management processes that led to payment delays in October and November. Apple has now placed Wistron on probation.

While details around Wistron’s corrective measures are awaited, the riots, and the reaction of the company’s employees on social media, bring to fore the tension in India’s industrial landscape—between white-collar and blue-collar workers, between the management and workers on the factory floor, and between permanent and contractual workers.

India’s industrial history is littered with stories of labour strikes and occasional violence, often forgotten after peace is brokered. The automotive belt in Haryana has a history of violence. In 2012, a section of the workers in Maruti’s Manesar plant attacked the management and torched a senior employee to death. In 2018, auto makers in Chennai’s Oragadam industrial suburb faced labour strikes. And recently, Toyota Kirloskar Motors Private Ltd declared a lockout at its plant in Bidadi, near Bengaluru again, citing hostility from union members.

Not every incident makes the headlines but data from the ministry of labour and employment’s annual report is revealing. The Central Industrial Relations Machinery (CIRM), an attached office of the ministry, is entrusted with the task of maintaining harmonious industrial relations in central establishments. In 2018-19, CIRM handled 12,427 industrial disputes and averted 461 strikes. Between April and October 2019, the organisation handled 9,823 disputes and succeeded in averting 283 strikes.

Many of the disputes—contractual labour being paid less than permanent employees for the same work, for instance—are recurring problems and manufacturers of all shades have found it tough to get a handle on the situation.

The latest situation in Karnataka has dented India’s all-out effort to attract manufacturing foreign direct investment at a time of global supply-chain realignments. This comes at a time when companies that have lost business during the lockdown want to catch up on production.

“Both the management and workers need to acknowledge this fact (the urgency to get back to work). However, that doesn’t mean we don’t pay salaries to workers on time," Sandeep Singh, managing director at Tata Hitachi Construction Machinery Co. Pvt. Ltd and chairman of the Confederation of Indian Industry (CII) Karnataka State Office, said. “We are in touch with the government. It (the Wistron incident) should not leave any black mark on the state," he added.

What can companies do to avoid black marks? The answers are nuanced but the simplest would be to behave more responsibly and treat shop floor contractual workers hired in large numbers better, said Pradeep Bhargava, a former president of the Mahratta Chamber of Commerce, Industries and Agriculture in Pune.

“The industry needs to acknowledge that you cannot continue to exploit. By trying to save a little money, companies can ruin their reputation, the reputation of the state and the country," Bhargava said. “The industry has to decide to be ethical."

Contractual conundrum

Wistron’s Narasapura factory has 1,343 permanent workers and 8,490 contract workers on the rolls of six staffing firms, according to a report the All India Central Council of Trade Unions (AICCTU) prepared post the riots. This proportion of permanent to contractual workers is not an aberration in Indian manufacturing. In fact, 70% contractual workforce is quite common.

Why does the industry hire workers on contract? One, in many sectors manufacturers may not have visibility of future orders or the business could be cyclical in nature. If Wistron hired 8,000 on their payroll, for instance, the workers would become the company’s permanent liability if Apple were to stop giving out future iPhone orders. In India, it is difficult to fire people once hired so workers on the rolls of staffing companies provide flexibility to manufacturers.

Then there’s cost arbitrage. Contract workers are often paid minimum wages while a permanent worker could be paid twice or thrice the amount depending on seniority. The permanent workforce, often, is part of the company union that allows them to negotiate better pay and facilities periodically. Contractual workers have no such luck.

“The industry has created a situation where, by and large, they have an organised permanent workforce or an unionised workforce with whom they enter into a deal that suits both parties," Bhargava said. “The challenge, which is often below the radar of the politicians, the industry, even the civil society, is what’s going on with the unorganised workforce in the formal sector. Most trade unions also don’t care what happens to the contract worker," he added.

Contractual workforce also doesn’t have any stake in the organisation. “Their duration of stay in the organisation is supposed to be short and thereby, they don’t have loyalty," an industrial relations executive who didn’t want to be identified said. “For similar jobs, facilities that a permanent worker gets in an organisation are better. Discontentment among contractual workers is natural," he added.

The way out could be a fixed-term employment contract, industry experts suggested. Fixed-term employment has been notified by the central government and 14 states including Gujarat, Haryana, Uttar Pradesh and Uttarakhand. Here, a company hires a worker on a fixed term, say 18 months, directly on its rolls rather than routing it through a contractor. In these 18 months, the worker enjoys the same benefits and facilities as a permanent employee. The worker is let go after the term is over—that gives employers the flexibility they desire.

“Fixed-term employment is a very good idea and it should pave the way for settling a lot of industrial disputes," Kamal Bali, president and managing director at Volvo Group India, said. “It is a win-win."

The discipline imperative

Volvo Group runs three factories in Karnataka—two in Hosakote and one in Peenya Industrial Area, both near Bengaluru. The three factories, Bali said, are running well and so are a majority of plants in the state. “Whenever there was a problem, we have been able to sort it out within our union. Clearly, the Wistron issue is an aberration. It’s not a trend," Bali emphasised

And yet, few companies such as Toyota Kirloskar Motor Pvt. Ltd have recurring issues with labour relations in its factory, not around the contractual workforce but with discipline among its permanent workforce. In 2014, a few employees affiliated to the company’s union disrupted shop floor operations demanding salary hikes and roll back of suspension orders for employees taken to task for indiscipline. Vehicles on the shop floor were scratched with key chains and supervisors abused.

More recently, in 2020, workmen resorted to strikes complaining of higher workloads and demanding a suspended worker (for indiscipline) be reinstated. Shekar Viswanathan, who retired from Toyota Kirloskar as its vice chairman this November, pegged the indiscipline problem to workers in Karnataka who don’t need the job, similar to many workers in Haryana who have made money selling their farm land to real estate developers.

“The job is a time pass for some. They have got enough money. They have property, businesses going on the side. They come to the shop floor to have fun at the expense of the supervisor. That unfortunately is the truth as far as Toyota is concerned," he said.

Labour activists find this reasoning flawed. Rakhi Sehgal, an independent labour researcher and trade union activist, acknowledged that in some industrial belts such as Gurgaon-Manesar the workers are first-generation wage earners whose families have some land or may not require another earning member’s income for survival.

“However, this does not mean they don’t want to be in a profession. By that yardstick, many white-collar workers who are from rich families shouldn’t be working at all. This view reflects employer bias towards the blue-collar worker," she said.

Things get even more complicated when local politicians, at times opposition politicians get involved with the striking workmen. It is their chance to embarrass the government. Unions, on the other hand, need to realise that discipline is crucial for productivity. “Unless workmen see that their fortunes are tied to the fortunes made on the shop floor, you will not have a success story," Viswanathan stressed.

The way ahead

When Harbhajan Singh, a former director at automaker Honda Motorcycle & Scooter India Pvt. Ltd, left the company in March 2020, union leaders at the company invited his entire family for the farewell. However, things weren’t as sanguine when he joined the company in 2006—memories of a violent labour unrest in 2005, where hundreds of workers and a policeman were injured in Gurugram, was still fresh. The management and the workers didn’t trust one another.

Singh, earlier the VP of Tata Workers Union in Jamshedpur, went about building trust by dismantling some of the rigidity Japanese firms tried to impose.

“I brought in remunerative schemes connected to production. If incentives are production-linked, production is automatically taken care of," he said, and added that in Japanese culture, incentives or bonus schemes based on volumes were unheard of. “The Japanese firms wanted performance appraisals even for workmen. These things don’t work in India."

The automotive industry in India has witnessed many such stories of cultural frictions. A 30-minute lunch break in India can stretch to 45 minutes. And rigidity leads to discontentment. Part of the problem, Singh held, is because Indian managers haven’t learned to say no to the foreign boss.

Multinationals often have an expat who is supposed to control the local environment. Below in the hierarchy are Indian managers who are supposed to guide the expat. “The expats want to push their culture. They push Indian managers to make things happen their way. Indian managers follow what is being told. That is why there are problems," he explained.

Singh’s perspective underlines a lack of quality in industrial relations talent. An executive from Maruti Suzuki India Ltd, who didn’t want to be identified, said that executives have moved to more white-collar centric roles over the last 20 years, like corporate human resources jobs with the rise of India’s services industries. White-collar centric roles are more glamorous and better paying than managing labour. The National HRD Network, an autonomous not-profit, and CII have been working on improving the industrial relations curriculum in business schools, he added.

Meanwhile, companies serious about more harmonious relationships with the contractual workforce are offering them a pathway to up-skill and be employed as a permanent worker over time. While the wages of the contract worker would never be equal to the regular employee, a good practice is to offer a salary that is closest to the entry level pay cheque of a permanent workman.

Large manufacturers have also started taking social responsibility seriously. It is not enough to treat the workman well; the community they hire from must see them as generous and responsible.

“We have to extend a compassionate hand to the villages around our factories. It could be skilling people in these villages or developing infrastructure such as schools and toilets," Kamal Bali of Volvo Group said. “You can’t do well without doing good."