Tata Motors' Pune wage pact may improve industrial relations, say experts

Tata Motors isn’t first in the Indian automotive industry to sign a wage agreement with factory workers that is performance linked — it is a common practice in the two-wheeler industry — however, with the recent wage settlement at Pune, the company has definitely set a precedent for others. Experts feel this paves way for better industrial relations, and a younger workforce is likely to feel more aligned to such an approach.

On Tuesday, Tata Motors and the Pune Workers' Union, which covers around 6,400 employees, signed a wage settlement for three years effective September 1, 2015. It will be valid through August 31, 2018.

In this, the total wage package has been bifurcated-- a fixed rise of Rs 8,600 (in the ratio of 72 per cent, 15 per cent and 13 per cent for a period of three years) and Rs 8,700 non-actual, that is a total of Rs 17,300.

Sources indicated after the proposed hike following the bifurcated structure, around 10-15 per cent of the workers' salaries would be directly linked to their performance.

Industrial relations experts said this could be linked to volume of output, quality parameters, attendance or rejection rates. A senior executive in a leading four-wheeler major based in Delhi said it was easier to quantify performance objectives and achievements in case of blue-collar workers on the shop floor.

As such, Tata Motors, which is undergoing a major restructuring exercise for its human resources, has plans to replicate this in its plants across India, including Sanand, Lucknow, Jamshedpur and Pantnagar, in the months to come.

In fact, the company has already started talks with the workers' union at the Lucknow plant, which makes light commercial vehicles and medium and heavy commercial vehicles, for negotiating a new wage agreement as the existing one expires at the end of this month. Discussions on a wage settlement are already on with workers at Sanand. The Sanand union had even approached the state labour department to mediate in the matter.

Interestingly, the Dharwad plant does not have a workers' union. The site had witnessed incidents of labour unrest in 2015-16. At Dharwad, however, there is a works council, which has representation from workers and management.

Around 98 per cent of the operative employees at the Sanand, Pantnagar, Lucknow, Pune and Jamshedpur plants are members of employee unions, and together they represent around 53 per cent of the total permanent employees at these five plants.

An industrial relations expert working with a two-wheeler major said, "This has been a common practice among two-wheeler manufacturers and workmen are usually happy with such settlements. There is an 'earnability' component in such arrangements and this works as a deep motivator for workmen to go the extra mile."

He feels this also acts as a deterrent for trouble makers, as any attempts to bring down production affects pay.

Usually, in the two-wheeler space, such variable components are paid on a monthly basis, and are also linked to attendance.

Rituparna Chakraborty, co-founder and executive vice-president, TeamLease Services, said aligning employees growth directly with that of the organisation was a win-win situation for both parties. "India is young, and young workers are increasingly prioritising growth over security of job or pay. This kind of structure is a welcome move in the manufacturing industry," she added.

Globally, this has been the norm for quite some time now. For example, in countries like Japan, performance bonus is usually linked to quality parameters as companies are not comfortable with volume-related matrices, according to an expert. The automotive industry in India employs around 7.6 million people directly.