IGCSE BUSINESS STUDIES

INDUSTRIAL RELATIONS
IN THE
WORKPLACE

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INDUSTRIAL RELATIONS

Business organisations often find that, for whatever reason, they have to
reduce the number of staff they employ, or, they have to replace a
member of staff (again, for one of several reasons). The most common
are set out below.

Dismissal

This is where a worker is told to leave their job because their work or
behaviour is unsatisfactory. For example, if an employee was constantly
late for work and despite being given warnings continued to be late, they
will probably be dismissed. If an employee was caught stealing or if they
were unable to do the job to a satisfactory standard, they would be
dismissed.

Redundancy

Redundancy (sometimes called retrenchment) is when an employee is no

longer needed through no fault of their own. For example, if the company
introduced new machinery that did the job of several workers, those
workers may no longer be needed. If the company went through a period
of falling sales and profits, they would probably look for cost savings which
would involve losing staff and/or closing down some of their production
capacity.

When an employee is made redundant, they are usually given some

money to compensate them for losing their job. In some countries this is
laid down in law, for example one week's wages for every year that the
employee has worked for the business. However, there is nothing to stop a
business paying more than the legal minimum and redundancy pay is
often agreed with the trade union(s) involved. If only some of the
employees are to be made redundant, the trade unions will normally
agree the fairest way to decide who goes. Sometimes this will be by
voluntary redundancy where some employees may be willing to be made
redundant. They are sometimes older workers (who will get a pension and
a redundancy payment) or those who have other ideas for employment
(maybe using their redundancy pay as start up capital to become
entrepreneurs). The terms of the redundancy are usually agreed between
the Personnel department and the trade unions that represent the
employees.

Retirement

When a person reaches a set age they can finish work and receive a
pension (in the UK it’s 65 for men and 60 for some women). In most cases
pensions are paid by the state (i.e. the Government) but employees have
paid money into the Government all their working lives (like a savings
account) through taxes and National Insurance. People can also pay into
private pensions held with investment companies. If a person has
invested their money wisely, they may be able to retire earlier than the
legal age (say, 50 years old), in which case they can benefit from their
savings while they are still young enough to enjoy them!

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If you are REALLY keen, there is a shortage of qualified people in your field
of expertise, or don’t think that the state pension gives you enough money
you can keep on working for as long as you want. However, 50 years of
work is enough for most people!

Other reasons for staff turnover

Sometimes people decide to leave their job for other reasons. This could
be because they have found a better job in another company, they want
to undertake some full time training (maybe go back to university) or
because of family commitments (looking after children or elderly
relatives).

TRADE UNIONS

As mentioned above, when staff are dismissed or made redundant,

very often a trade union will be involved. But what are they and
what are their aims?

Employees generally share many of the same interests, such as

improving their pay, having a pleasant environment in which to
work, being treated fairly by their employer, being given proper
training, working in a safe environment. Forming a trade union is a
way of helping employees achieve improvements in these different
aspects of their employment - a trade union is a type of pressure
group. Union members pay a subscription to become a member
and to benefit from the advantages of union membership.

Trade Unions came into being as we know them today in the

nineteenth century in Britain, around the time of the Industrial
Revolution. Conditions for workers were very harsh in Britain at this
time and so workers got together in groups and tried to negotiate
with their employers to get the pay and working conditions of the
workers improved. One worker who complained may have been
dismissed but there was strength in numbers. If all the workers got
together and complained, it was much less likely that they would all
be sacked,

The first trade unions were for skilled craftsmen. Today CRAFT
UNIONS still exist for workers who have undergone lengthy training
and are skilled workers, such as electricians and plumbers.

Workers who are unskilled or semi-skilled also wanted to be

represented by a union and so these workers formed GENERAL
UNIONS. These unions represent many different types of workers
who work in many different industries regardless of skill, type or
place of work. A famous example is the T.G.W.U (Transport and

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General Workers Union). They tend to have been formed by

different unions merging together and the are usually large unions.
Their members tend to be spread over a large number of industries
and located in different parts of the country.

In addition, there are also INDUSTRIAL UNIONS who represent all the
workers (skilled, semi-skilled and unskilled) who work in a particular
industry. For example, if all the workers who worked for the
railways we represented by one trade union, this would be an
industrial union. Management likes this type of union because they
only have to deal with one trade union instead of several. From the
workers' point of view, the union tends to be large and therefore has
more power to improve conditions of employment.

However, many employees are non-manual workers. These include

office workers, management and professional occupations. Their
unions are called WHITE-COLLAR UNIONS. An example would be civil
servants work for the government.

The aims of a trade union

 To secure adequate pay for its members
 To secure an improvement in working conditions
 To provide educational, recreational and social amenities for
their members
 To ensure their members interests are represented and
considered in ‘all’ aspects of national life.

The structure of Trade Unions

This varies widely but generally a President or General Secretary will be elected and they will
work full-time for, and be paid by, the trade union. They will work at the headquarters of the
union.

If the union is large, it may have full-time officials working in each district or region. These
people will support and help members in the branches.

The branches of a union are often at each work site, i.e. factory or offices, or based in the
local region if the members do not all work for the same employer. The branches will have a
shop steward or a union representative, as they are sometimes called. Unions are usually
democratic and all the officials (people working for the union) will have been elected to their
position by the union members. Shop stewards are often given paid time off work to carry
out their union duties. Managers can find it helpful to have shop stewards because they have
someone through whom to work when dealing with the employees. In large factories, the
shop stewards may elect someone to represent them - this person is called a convenor.

Find the diagram of the organisational structure of a trade union in your textbook and draw it
in the space below – labeling it properly

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Employers associations

Many industries in different countries have EMPLOYER

ASSOCIATIONS, EMPLOYER FEDERATIONS or TRADE ASSOCIATIONS.
Businesses join together to form their own association or
federation. Their members pay an annual subscription and in return
they will receive benefits.

Use your textbook to note down the advantages of joining an

employers association.

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Employer associations act as pressure groups on the government to

try to influence their policies. They represent business interests and
therefore want the government to create an economic environment,
which will allow their businesses to prosper.

They will want the government to keep control of the economy in

such matters as inflation, to provide services such as law and order,
health and education for the workforce. Taxation should not be too
much of a burden on business. Rules and regulations on business
should not be too great. Economic policies should ensure fair
competition between firms. There should be a good transport
infrastructure (roads, ports, rail, bridges), access to overseas
markets and reliable sources of power.

Collective bargaining

As mentioned earlier, it is not feasible or economic to negotiate with

each worker separately, when discussing issues such as
improvements in pay and conditions. Therefore agreements are made
between representatives of the different interested groups and a
'collective' agreement is made. This is called COLLECTIVE BARGAINING.

The bargaining can take place on a local or national level. The relevant
parties get together, usually the trade union(s) and employers or
employer's association, and discuss the particular issue. They discuss
the problem and negotiate an agreement, for example about a pay
increase or to improve particular working conditions.

Make notes from your textbook below about why trade unions usually
argue for a pay rise:

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If the discussions are about a pay increase then both sides often start
off at a position higher (trade union) or lower (employer) than they are
willing to settle at. This is like haggling in the street over the price of a
product for sale. So the employees will start at a high rate and are
usually willing to come down a little, whereas the employers will start
off at a low pay increase, but if necessary will be willing to increase
their offer a little.

If the two sides are not too far apart in the beginning, they will meet in
the middle and there will be a negotiated settlement or agreement.
Both sides are happy and they both feel they have gained something.
However, this does not always happen. If the two sides are far apart
over an issue then the negotiations may break down. If this happens,
the workers may take INDUSTRIAL ACTION to try to force the
employers to agree to their demands.
Industrial action

Industrial action can take various forms and differs from industry to
industry, firm to firm and country to country. It may take at least
one of the following forms.

Strike action

STRIKE action may take the form of.

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 A token strike - a short stoppage of half a day, one day or

even an hour to indicate the strength of feeling about the
claim
 A selective strike - only a few selected workers walk out, these
mill be chosen by the trade union in order to cause a lot of
disruption to the workplace
 An all out strike - all members of the union stop working and
leave the workplace until the dispute or claim is settled.

Workers may be paid out of the trade union's strike fund if the strike
is official, i.e. it has the backing and agreement of the trade union.
If it is an unofficial strike, sometimes called a 'wild-cat strike', strike
pay will not be paid. If strike action is called by the trade union,
then the members are sent a ballot paper on which they can vote
whether they want to strike. If the majority of workers are in favour
of the strike, all the trade union members should go out on strike.
However, some may carry on working because they disagree with
the strike or they may not be able to afford to go without wages.

Picketing

This is carried out to support strike action. Workers, who are on

strike, stand outside the factory gates and try to persuade the other
workers not to go in to work. If they are successful then production
at the factory may be halted altogether. The strikers gain publicity
for their grievances and can give the firm a bad image. This puts

pressure on the firm to settle the dispute.

On a separate piece of lined paper, make notes from page 204 from
your textbook on other types of industrial action – work to rule, go
slow and an overtime ban. Also, note the costs of industrial action
for employers, employees, customers and the economy.

Other terms you need to know

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Complete the table below to make sure you have a full set of notes
on industrial relations.

Term Definition/meaning

Closed shop

Single union
agreement

Labour
turnover

Absenteeism

TUC

CBI

ACAS

Congratulations, you now have a full set of notes to help you prepare for any
industrial relations questions that may appear on the examination. However, can you
apply this knowledge to a case study? There’s only one way to find out!

TREAT THE CAUSE OR THE SYMPTOM?

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Cheshire Engineering and Chemical Ltd (CHEC) were proud of its

reputation as a no-nonsense employer. The T.G.W.U. had once
organised a six-week strike over union recognition but the strikers
had eventually given up. 'We want to make money, unions want to
take money,' CHEC’s Chairman had once said.

The factory was organised with very high division of labour, in order
to ensure that relatively unskilled workers could be used; yet output
would be high. For the same reasons the factory was highly
automated.

Now the Directors had to admit that things were not working
properly. Absenteeism (at 15%) and labour turnover (at 40% a
year) were nearly three times the national averages, and were
making it impossible for production to keep up with the demand for
their products. Even more alarming was that the local Job Centre
had told them that job seekers were refusing to go for interviews at
CHEC because of its poor reputation.

The Board of Directors met to discuss the situation. The Production

Director said:
'It's simple; we need much greater financial incentives.
An extra £5 for every full week of attendance, a £500
bonus for each year of completed employment, and a
£50 signing on fee.'

The Marketing Director disagreed:

'I think we need a new approach. Our products are
pretty poor quality, and my customers complain that
if they phone the factory to check on deliveries, our
people are very off-hand with them. It's not just a
matter of money, we need to give our workers the
job satisfaction that will lead to a more responsible
attitude by them'.

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The Managing Director had a different solution:

'If we moved to the Northeast, the level of
unemployment would mean people really want to get
jobs and keep them. We could sell this factory, and
with the proceeds could buy a factory in Newcastle
plus management offices here in Bristol, so only
Production need move.’

Questions (marks out of 34 )

1) Define the following terms found in the case study:

a) Division of labour
b) Automation
c) Absenteeism

Knowledge = 2 x 3

2) Explain the meaning of labour turnover. Outline two costs

that would be caused by high labour turnover.

Knowledge = 2 Analysis = 4

3) If CHEC employ 200 staff and each completes a full year with
no absenteeism, calculate how much the Production
Directors plan would cost the company (assume no new
employees are hired and a 50 week year).

Application = 4

4) Draw up a table that states 2 advantages and 2

disadvantages of each of the three proposals.

Analysis = 2 x 3 (advantages) + 2 x 3 (disadvantages)

5) Which proposal do you think should be carried out? Explain

your answer.

Analysis = 3 Evaluation = 3

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