Compliances and precautions that need to be taken care of while engaging of contract labour

Labour reforms seem to be moving from pro labour to pro capitalists. This has led to impact on labour system in India. Liberalization of Indian economy and increasing globalization and foreign companies interested in Investment in India , Global market uncertainty making corporations unsure of the workforce they would need has led to rise in contract based labour system and out sourcing.

From assembly line workers to Information technology workforce, contract labourers have become a popular staffing option in today's market.

As businesses poke their heads out of the recession of year 2008, although they are finding the courage to hire, but don't want to lay off new hires if the economy sours. The solution is to hire Contracted workers, or more specifically, temporary workers on contract.

Contracted workers solve several HR staffing issues: They provide flexible hiring for major projects and seasonal spikes in demand of the product, as they provide specific expertise; and they let HR induct new employees without actually hiring them, and in the long run, they save money because many expenses, from salary to benefits, are managed by the staffing firm.

Industrialists express concern that customers have become pretty aggressive, the competition is very tough and rapidly changing technologies constantly entail learning and upgrading skills. There is a need for continuous training because of constantly changing nature of businesses. The time to bring product or a service into market is shrinking which leads to devicing aggressive planning  stratagies and scheduling of delivery of goods and services competitive, and hence delivering the right quality in a time bound manner has become imperative and extremely challenging. Further, cost cutting and budget constraints on human resource costs, today's situation is such that in many organizations the issues of human resource management creep up frequently;further, getting the right manpower with the right skill sets is becoming a big challenge that many companies are facing today.

The commercial models are also changing. The entire industry is is moving towards a 'delivery based model'/ Just-in-time principle. This concept is based on the motto - pay for results only and not for the efforts/time/manpower that go into it in achieving outcomes. The focus is on tangible, measurable results. This means deliver quickly through reduced cycle time, innovative, light weight, accelerated practices and pimproved processes. We many a times hear that building teams and developing the right mindsets and culture of open collaboration is getting difficult hence there arrives the need to hire labour through a contractor. 

A contract Labourer is defined in the The Contract labour(R&A) Act, 1970 as the person who is hired in connection with the work of an establishment by a principal employer (who is the firm owner or a manager) through a contractor.

NEED FOR FLEXIBILITY IN LABOUR MARKET AND LABOUR LAWS

There are 3 primary reasons for which this need is being emphasized:

1) Emphasis on need for labour force to change according to the market fluctuations which happens because of increase in specialized products that requires firms to quickly change the size, composition, and at times the location of the workforce.

Employers view flexibility in the labour markets as essential because in the era of economic liberalization and growing competition between firms and countries, production should be organized to suit market conditions. Even Second national Commission on Labour and Deputy Chairman of Planning Commission Mr. Montek Singh Ahluwalia advocates the need for flexibility in the labour markets saying that it would promote competitiveness and efficiency in the current wake of globalization and rapid technological progress.

An underlying wave of change in Laws can be because of foreign investors who are keen on investing in labour intensive countries are deterred from investing in India presently due to provisions in Industrial disputes Act 1947 especially Ch V-B, and Section 9-A, and of Section 10 and complications of Contract Labour (regulation & Abolition) act 1970, can be a probable reason to favour changes pro contract labour, which is not fully proved yet.

2) Emphasis on lowering labour costs and increasing productivity because of rising competitiveness.

3) The political economy perspective which advocates free markets where there would be no government intervention and interference of trade unionism.

While Speaking in favour of Contract labour policy we can say that it permits employers to have

(i) Staffing Flexibility, that is to say, there may be certain positions whose futures are unsure. Hiring a contractor to fill the position for a particular time frame is a good alternative to hiring someone permanent if you are not certain of the position's stability. Independent contractors are also useful for companies that have fluctuating workloads and need short-term staff to help out for a specific project. Once the contract term is fulfilled, there is no obligation for either party to continue the relationship.

(ii) Trial Evaluation: Even though a company has vacancy for a permanent position available, but hiring on fixed term contract can facilitate evaluating a potential employee first before taking the employee on company's payroll. This can enable the company to assess the person's abilities and skills as to the candidate meets up to the organization's standards. If the organization is  unsatisfied with the contractor's performance, it can simply choose not to call him back for future work. If, however, organization is satisfied  with the standard of the work done by the candidate, then the organization can offer to hire that individual as a permanent employee who is already trained for the work.

(iii) Reduced Costs: The cost of hiring temporary contract workers is a lot less than hiring an employee. temporary workers may not be provided with company's benefits such as health insurance, and organization need not spend on the candidate's cost towards social Security . Also, in many cases, contract workers bring their  own equipment to do the job they're contracted for and may also at times work remotely hence save upon the cost to company towards floor space towards such employees as don't need company office space to get the company's work done.

Labour market flexibility, especially employment flexibility, is an essential requirement of structural adjustment process. It allows managements to have the necessary leverage to fine-tune organization structure, marketing of products and services, pricing, technology, human resource competencies with micro-economic changes to achieve financial viability and competitive efficiency. Opposition to flexibility , emanates more from ideological considerations than on careful study of market conditions, compulsions of technology and imperatives of good management. Global experiences have clearly suggested that though flexibility in labour market, in the initial stages, does cause employment drift and social tensions but it ultimately facilitates employment generation. However, opinions about how much flexibility is actually required for spurring economic growth differ very widely from country to country and situation to situation.

As a prime mover of economic growth and the custodian of people's interest, the government can neither allow free licence to employers nor permit the ideologues of trade unions to impede national economic development. However, this demand for humanitarian impulse, social insurance and other protective covers merits very serious consideration and support from all quarters.

Precautions be taken while engaging Contractors

While engaging contract labour through contractor, the following precautions be taken by the PRINCIPAL EMPLOYER under Contract Labour (Regulation & Abolition) Act, 1970 hereinafter referred to as Act.

• At the first instance, it must be ensured that there is no notification prohibiting contract labour system by the appropriate government for the employment of contract labour in any process, operation or any work of the establishment.
• The work for which contract labour is engaged is preferably not of perennial nature;

However, in the absence of notification by the appropriate government prohibiting or abolishing such type of contract system, then there is no bar in engaging contract labour.

• Before identifying a contractor, it is desirable to advertise in the local newspaper inviting offers from the contractors.
• The principal employer gets the registration certificate and the contractor obtains the licence from the competent authority as provided under section 7 of the Contract Labour (Regulation and Abolition) Act, 1970 before proceeding to engage the contract labour.
• The establishment must ensure that it issues certificate in Form V to the contractor for obtaining licence as provided under section 12 of the Act;
• The payment of wages to the employees employed by the contractor is disbursed to his employees by the contractor himself or his nominee and principal employer has to depute his representative to be present and sign the payment register in token of having disbursed the salary in his presence by the contractor; [Rule 72 & 73]
• There should not be any supervision and control by the principal employer in respect of employees employed through the contractor to fulfill the obligation of the contract;
• Amongst other workers as provided by the contractor, there must be at least one supervisor through whom the officials of the principal employer shall communicate, preference be given to a contractor who has such type of work at other locations also.
• Discipline of the employees of the contractor in the discharge of duties must be regulated by the contractor and not by the principal employer;
• If possible, the contract should not specify the number of persons required but must quantify the work itself;
• Leave to the employees of the contractor must be sanctioned by the contractor or by his authorised person and not by the principal employer;
• No advance should be paid by the principal employer to the contractor’s employees directly. Only contractor must regulate the same;
• Maintenance of all types of record in respect of the employees employed by the contractor should be his own responsibility and principal employer should not intervene in such matters;
• Dictum of the Supreme Court judgment in Hussainbhai’s case (contractor not to be termed as middle man) must be adhered to in drafting the agreement for the contract;
• If the establishment is covered by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees’ State Insurance Act, 1948 then preference should be given to those contractors who have their own code numbers under these Acts;
• The establishment must ensure compliance of the obligation pertaining to the various provisions regarding amenities and benefits as prescribed under the Act;
• The establishment must ensure the submission of annual return to the prescribed authority in the prescribed form under the Act.

ORGANIZATIONAL DOWNSIZING USING LEAN MANUFACTURING WITH IMPLEMENTATION ON REAL LIFE OPERATIONS.

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ORGANIZATIONAL DOWNSIZING USING LEAN MANUFACTURING WITH IMPLEMENTATION ON REAL LIFE OPERATIONS.

From: Proceedings of the National Conference on
Trends and Advances in Mechanical Engineering,
YMCA Institute of Engineering, Faridabad, Haryana.., Dec 9-10, 2006


Authored by: Anil Shastree1, S A Arundhati2
1Department of Mechanical Engineering ,Professor ,A D Patel Institute of Technology,
New V V Nagar,388121 Gujarat
2Company Secretary,Narmada Chematur Petro-Chemicals Limited,Bharuch,392015 Gujarat
1, 2Email: anilshastree@yahoo.com , arundhati_shastree@yahoo.co.uk


Abstract
Lean manufacturing can be symbolized by transparent ball- the spirit of challenge and the challenge of change. Avoiding waste is the theme. The essence of "lean" is to compress time from the receipt of an order all the way through to the receipt of payment. Shortening cycle by properly aligning all steps in the activity reduces waste and brings improvement. As enterprises have reduced costs and improved quality, the primary competitive measure is the ability to respond to the customer. This directly makes the organization cost conscious. It also helps in becoming customer focused. It is a team oriented approach. Effective communication, flexibility, standardization etc are the accrued benefits of lean manufacturing.
The paper discusses the concept of lean as applied to Indian organization and the issues there off in lean manufacturing, This paper guides through Lean Manufacturing concepts and helps to introduce methods and tools designed to put these concepts to work in a manufacturing environment ; after effect of this strategy - down sizing and its effects are explained. The rules for success of lean and its improvements as experienced by authors are explained.
The paper concludes by giving the details of the live case study in which authors have participated and their experiences about lean implementation. No doubt lean is a strategic tool for competitiveness and down sizing is the effect of strategy decision implementation. Essentially, effects of lean should be accompanied by trust and motivational leadership
Key Words: Lean, Lean Organization, Down Sizing, Experiences With Lean Implementation, Areas For Lean Working .
1.0 Introduction
Organization size reduction strategy is an accepted practice for improving the performance and for bringing change. By eliminating unnecessary steps, aligning all steps in an activity in a continuous flow, recombining labour into cross functional team dedicated to that activity and continually striving for improvement , companies can develop, produce and distribute products half or less of the human effort, space, tools, time and overall expense. They have also become vastly more flexible and responsive to customer desires. Avoiding waste is the theme. It is necessary to have the existing knowledge base if new organizational model is to be made-the model is “LEAN ENTERPRISE”. Lean production tightly integrates product design, supply and distribution, manufacturing accounting, marketing and management. An ideal lean manufacturing system consists of all the parties within the extended manufacturing enterprise sharing information and resources in team oriented ,multifunctional, environment.(European automotive initiative group –EAIG) In short, a lean enterprise is an integrated entity which efficiently creates value for its multiple stakeholders by employing lean principles and practices(Lean Initiative Aerospace, MIT) If properly implemented, lean manufacturing leads to knowledge and not just information of numbers. It is an approach road to organizational learning. It leads to the best alternative under existing situation. It is reframing the existing set up and revalidating the business assumptions. It means training an employee to be employable. Of course, there is change in mind set and attitudes. It is necessary to accrue the benefits and effectively manage the negative consequences. In lean manufacturing, the process is that of “doing it right at the first time”. It is actually changing the way one thinks about manufacturing. That can be a tough shift to make. No wonder there is thinking and rethinking process leading to the path of simplification, standardization, relearning and unlearning. Lean is doing the thing with. CHANGE. Change is not easy. It takes lots of work, dedication, desire to change and above all commitment to change. Change means gaining in depth understanding of the dynamics. It is the effective management .It is an organizational learning. It is change management. It also offers knowledge base and understanding of the turbulence in the market 1
place. It is not myopic research but a strategy for survival for gaining sustainable advantage. It is the accumulated knowledge churned out from experience Accumulated knowledge provides the basis for creating further knowledge, at the core is the corporate renewal package rather than the isolated strategy on its own. It is like providing the fresh look at the traditional ways of conducting existing business. Often companies see bucks in rejuvenating and reinventing old products and gets through LEAN. In principle, down sizing means reducing head count. This usually means managing the potential and negative consequences keeping in mind the expectations that organizations have from down sizing. Adopting the proper strategies for successful downsizing is essential.
2.0 Understanding Lean
James P Womack, Daniel T Jones and Roods D in their book” The Machine that Changed the World: The Story of Lean Production. New York: Harper Collins Publishers (1990) explained how companies can eliminate unnecessary steps and by continually striving for improvement can develop, produce and distribute products with half or less of human effort, space, tools and over all expense. Toyota implemented the system in true spirit. They have since built their reputation as quality leaders and boast one of the fastest growing market shares in the automotive industry. The theme that stands out is REDUCE CYCLE TIME. Commonly, understanding the concept of lean manufacturing leads to many more opportunities; no doubt the processing time is very small portion of the cycle time. Obviously, benefit of shorter cycle time is the reduced lead-time that gives the competitive edge and reduction in the cost.
Companies need two systems:
1) To run the business and
2) To develop new ideas.
Managers will have to concentrate on the performance of the enterprise rather than on the performance of the individual, functions and companies. Some organizational benefits expected from down sizing includes increase in productivity, improved quality, sustainable competitive advantage and above all standing firm in the future competition. Knowledge is the primary resource for individual and for organization overall. Specialized knowledge by itself produces nothing. It can become productive only when it is integrated into a task. The purpose and function of every organization business and non business alike, is the integration of specialized knowledge into a common task.
The issues involved to become a world trend setter by lean manufacturing are:
1. Lean supply network
2. Lean organization
3. Lean distribution customer service
4. Lean product development
5. Lean accounting
6. Lean information management
7. Lean manufacturing
8. Lean quality management
With Lean thinking at the core (Figure 1)
These results in
1. Converting inventory into cash faster
2. Maintaining less inventory by producing the product faster
3. Less expediting due to proper inventory levels
4. Decreased order processing costs as fever orders are being tracked simultaneously
5. Decreased processing time due to altered focus of entire team
6. Removing non-value addition (waste) - the first step for reducing the cycle time.


To view the whole paper: Click here: https://www.scribd.com/document/400747073/Organizational-Downsizing-Using-Lean-Manufacturing-With-Implementation-on-Real-Life-Operations

Value Constellation in SMEs: The New Frontier of Entrepreneurship

Value Constellation in SMEs: The New Frontier of Entrepreneurship : A Research paper by : Authors : 1) Anil Shastree and 2) ShastreeAnil Arundhati
Abstract
The dye is cast. They are small wonders. They give big push to industrial boom. The SMEs contribution to boom is fairly large. While taking pride in SMEs, one has to be conscious of numerous anxieties faced by promoters. Availability of low cost funds and competition are some of the major growth constraints. In India it takes 30-35 days to export goods to US while Chinese manufacturers are able to ensure that their goods reach within 14-15 days. Thus, Indians are at disadvantage leading to extra cost. The productivity and labor regulation is also a matter of concern. The out put per machine is 15 garments in India while it is 25 garments per machine in Bangladesh. SMEs, small size enable competitive flexibility to beat the ever changing environment; most SMEs are in the need of partners, who could provide them with platforms to augment their competitiveness. The competition is just not local but it is global and they need to take help to compete better. The financial services are improving; the help on technology up gradation, acquisition, and critical infrastructure is available. There are added functions like business and management profile, geographical reach, length of client relationship, trade references where assistance is available and above all, representations for budget provisions are also made to make this sector competitive.
This paper presents the model of 'value constellation’ to maintain the competitive entrepreneurship. Value constellation-customer oriented inter organizational strategy is one of the solutions to remain competitive through knowledge integration i.e. mix of knowledge management activities, in respective areas. The paper deals with formation of supply chain networks, business networks, research networks and satellite networks. Thus there can be purposeful cooperation with other separate judicial identities. It is virtual joint ventures. This new type of competition forces traditionally operating SMEs to team up with each other in a customer-oriented network However, these networking strategies are likely to emerge only when SMEs
get willingness to breakaway from the past traditional patterns of interaction and mental attitude. As they get unlocked from their traditional competencies and their financial and strategic resources they develop interactive strategies covering the entire value system and build atmosphere of trust. The paper identifies difficulties of formation of customer oriented network i.e. two types of value constellations-self generic truce and others based on FDI-foreign direct investment. Above all, this can give substantial capital advantage (lower cost), quick changes in manufacturing processes, higher asset utilization and skill specialization.
It takes clear vision, a steady hand and discipline to avoid quick fix solutions. Indian SMEs that nurture and expand their historically built critical manufacturing competencies have to face the challenge of 1) Mission 2) Competition3) Performance 4) Change to build a competitive and sustainable model. This is possible through knowledge management. Business associations and local institutions may play a crucial role in changing and shaping the emerging network among the SMEs.
Keywords: value constellation, small and medium-sized industry, entrepreneurship, cluster, value chain
Beginning with talent search:
Comparing to Harvard, MIT, and Princeton put together, it is experienced that gaining admission to (IIT) Indian Institute of Technology was more difficult than getting into the best of the Ivy League schools in the US. It accepted 3500 of 1,78,000 applicants in 2003. These talents have been making an impact globally. They are the part of what can broadly be classified as knowledge sector. Looking at the Patent Cooperation treaty (PCT) from developing countries, the top 50 list is created every year by the World Intellectual Property Organization (WIPO) in Geneva. CSIR was tied at thenumber one position along with Samsung in 2002. Some of the Indian Pharma and Biotech companies were also making their presence. There were around a dozen of universities from China, South Korea, Brazil and Singapore in top 50 lists; but not a single Indian University or an Indian Institute of Technology. It was a sad reality. Whither India? Do we understand the meaning of “economics of knowledge?” This does not augur well with our country. Indian talent need to recognize that the traditional factors are less important in comparison with technology. The source of technology is science-rooted in knowledge. World wide knowledge revolution is on. International trades are moving to knowledge intensive goods. The world’s major growth industries-microelectronics, biotechnology, telecommunications, designs and materials-are already knowledge industries. Is India producing the products to fit into the system? Are our educational curriculum spreading wings to fly with entrepreneurship creation in fast pace of the changing knowledge industries? Are our systems designed for creating wealth in line with creating the knowledge base
manpower? We must retrospect. Are our SMEs fostering “I” as Innovation and not as Imitation or Inhabitation? To survive fierce global competition innovative means are to be adopted, inculcated and imbibed right from the beginning through our education system. Our systems should be very objective, focused in creating wealth through the scientific research. So the systems should be based on the objectives of wealth generation through knowledge base and scientific research. Our high caliber manpower and institutes of higher learning can encourage the economic growth through entrepreneurship. This is definitely not a dream but can be a reality. Indian Institute of Science Bangalore and Institutes of technology and management are striving to produce successful entrepreneurs. There is a very interesting report about The University of California. The University has won 42 Nobel prizes so far. At the same time, based on the scientific research done in the University several biotechnology companies have been set up around the campus with their market capitalization reaching a few billion dollars. Over 80% of the employees of these companies are graduates of this university. In general, it is observed that many Nobel Prize winners have acquired a large number of patents. It is obvious that they have understood the wealth creation potential of scientific research. We can bench mark such example. We do have scientists like Dr. G N Ramchandran and our SMEs should look forward for growth through interaction. Is India short of talent? The answer is NO.
In search of success:
If SUCCESS is the game, and then the rules can be decided. There is no universal definition of “success” of business. Every one has their individual vision of what it means to be fulfilled. Success means many things. It is both, a concept and an experience, a moment and an evolution in new economic environment. It is a merging of aspirations with reality, the weaving of hopes and dreams with daily tasks. It is simultaneously tangible and ephemeral and gives the illusion of being universally quantifiable. Success is externally evaluated yet intrinsically experienced; it is both the objective and subjective. The true essence of success, beneath the visible markers and goals lies in own personal sense of satisfaction and fulfillment. The popular cultural definition of success is based primarily on three elements: power, money and fame. It is assumed that if an owner or a manager is in possession of great abundance, has status or power or is recognized as a celebrity then s/he by society’s definition is successful . If s/he has any one of those three requirements s/he qualifies. Knowledge Management has given a new dimension to this story. It makes the focus on the people, multitude of people who are successful in their own right and who define success by entirely different set of standard. These are the people whose bank balances may not be note worthy, who do not brandish significant authority and who are not necessarily recognized when they walk down the streets. But they are the “Knowledge wizards”. They should know how to apply the knowledge to practical reality. Knowledge alone is not enough unless it is put to practical use. Raw materials, in fact have, no value of their own, but acquire value in terms of the future they
represent, i.e., what will be produced at the end of the value-added chain. Exactly on the same line, specialized knowledge has no meaning by itself unless it is put to practical use. This factor is to be added with an element of time. Many small Indian entrepreneurs are competitive; they keep adding greater value than its competitors for the utility of the product keeping in mind the time pacing i.e. at reduced cycle time. Each step in the value-added chain reflects some competency or expertise, applied to the developing product or market. Those competencies are unique or special to a particular company (as distinct from competencies that are general to an industry or to doing business itself) and are central to the value that is added by that company. It sets the rhythm for the company business and they are called core competencies. Just having core competencies is not enough it should be dense. The density decides the make or brake in the dynamic market forces. Market is the intelligent place for testing competencies. They are the drivers of success in high velocity, intensely competitive industries. The specific constellation of core competencies in the value added chain of a given company defines the market identity and competitive advantage of that company over its competitors. It is reinforcement. This puts the concepts into context and shows how theory can be applied in practice to build sustainable competitive advantage and ensure future growth and development. In present Indian vibrant and increasingly competitive market SMEs are forced to innovate to remain competitive. This means constantly searching for ways in which to improve products and services, developing new offerings and introducing improved working methods. This ability to adapt to changing business environments is crucial for economic success. The solution is in the individual contribution to growth of the organization. In SMEs every employee has to share his expertise and create organizational knowledge which in turn helps to create genuine, sustainable competitive advantage. Managers or decision takers have to cope with the changing business environment while time pacing is the critical to success. The difference between those companies that flourish and those fail is often a matter of structure and its strategy. Capturing value requires new organizational model based on knowledge and relationships or organization’s competencies and customers. It is about placing company on value chain i.e. positioning company in the right place with right business, right products and right value added activities. Supply Chain Management (SCM) has emerged as one of the most powerful business improvement tools. Suppliers, manufacturers, retailers and host of service organizations have discovered that they must either transform their operations and tactics or be beaten by competitors. It is reported that SCM influences about 64% of all costs in a manufacturing company. In India such cost would be around 70-80% of turnover. This means that there is potential for savings and at the same time improving competitiveness, process efficiency and enhancing effectiveness of the system. It is the need of SMEs.
Areas of joint working:
The important area where in the SME looses the value is when the expert within leaves the organization. There is a risk and loss of knowledge when key employee
departs. There is a need to protect from this risk. It is the culture of watering the plant to grow that helps to minimize this risk. But the risk can not be avoided. The SMEs in our survey have usually adopted the path of job satisfaction for such experts but monetary incentive is found to be lacking. To enhance the monetary gain some unique solution was adopted by some small scale organizations. It was observed that more than two companies had pulled their requirements needing the synergic expertise and thus share the time of the expert. These companies are the members of their supply chain unit. To explain further, a common welding engineer is employed for the specialized job of stainless steel welding by three SMEs together and the engineer shuttles to these near by industries. Companies preferred to hire this expert compared to consultant as they have full control over the employee. They can get the services for required time particularly during the development stage of the product. The gain is found to be more than the investment. The philosophy was that of just not the technology transfer but that of knowledge transfer. The knowledge levels of the concerned employees varied in three organizations. There was need of tacit knowledge in one organization, while in other two organizations there was need of explicit knowledge (hard technology).There is a relationship between the need for tacit knowledge transfer and the explicit knowledge transfer See Fig 1. Obviously as the economic development progresses the need for tacit knowledge increases.
Figure 1
Based on the figure it is concluded that the desire to obtain more tacit knowledge increases and the desire to obtain more explicit knowledge decreases with the levels of economic development. In the small scale owner driven companies, the owner is thirstier for explicit or hard knowledge such as specific technology to manufacture a product that enables people to survive than for tacit or soft knowledge so that they have sustainable growth. The second example is that of office administration and personal function. In second example, the legal expert manages the personal department of one company and handles the company legal matters of the other
associated companies. The function of company secretary is managed by some one of the consultancy firm. The firm manages the show for many companies and thus same expertise is available for all the group of companies. Thus, quality legal services are availed as and when required by the companies and the expert is also monetarily compensated. There is a constellation of companies on one side while there is job satisfaction and economic benefit on the other to the expert. In the area of manufacturing, the new production methods implementation related to lean manufacturing was observed in Industries association. There were seven companies who were participating in this programme. A common consultant was hired jointly and exposure was given to senior officials through class room teaching. The companies were manufacturing different products but all belonged to mechanical engineering. A common programme was drawn for all companies and help was sought from educational institutions for conducting the project work through students. The students were the beneficiary, the companies were fully benefited and consultant’s time was gainfully utilized. The pulling of companies reduced the monetary burden also. These companies had realized that the emphasis must be on “finish line” i.e. demand rather than the starting point i.e. supply. These companies’ managers usually don’t give up on themselves and don’t give up easily on subordinates either. The next area was the structured access to data, information, knowledge and expertise held by individual employees. As observed in the survey, most of the SMEs have adopted computer in their routine working while the software updates and some change in the requirements is essentially handled by them through educational institutions. Companies have applied information technologies to gain an advantage over slower reacting networks. Despite many pitfalls these companies have made substantial improvements. The students are put on the projects and the problem is assigned in generalized way. A general solution is obtained and then it is applied to the specific situation. It was also observed that they use ware house concept for data storage; particularly for the old products. There is a need to have trust and sincerity of efforts among the participants. These companies had realized that it takes far more energy to improve from incompetence to mediocrity than to improve from first-rate performance to excellence. They join hands with big companies and learn from them to be competitive. Big companies like Escorts, Larsen & Toubro Limited etc. have always hired international consultants to get competitiveness in business. Only what to do knowledge is not enough; but what is needed is the change of mind set. Mahindra started with Sahyog programme as a part of constellation working with dealer but later it became the responsibility of dealers as the sales mindset continued to be traditional and kept them away from implementation. Other example is Telco. They established external relationship with suppliers and distributors. They applied e-sourcing for the procurement of raw materials and build long term relationships with vendors. M&M for a long time was looking out for a solution which enables it to enhance its business process of communicating or transacting business documents with its suppliers. The objective was that the solution would enable M&M and its suppliers to plan efficiently to achieve “Just in time” supplies which would in turn
reduce the high cost of inventory for both M&M and the suppliers. The solution was applied in e-busines. The site MahindraSuppliers.Com permits exchange of information on business documents such as purchase orders, amendments, delivery schedules and payment details. This solution integrates the supplier side with the existing SAP based system there by avoiding double entry of data. It has a single window for suppliers to get all related information across all M&M plants of both Farm Equipment Sector (FES) and the Automotive Sector (AS). A single login is given to every supplier even though he may be supplying to either or both plants. It is seen that the suppliers have to change the fundamental approach- DNA. The teaching–learning is the best process as observed with SMEs. The DNA has a couple of key components: the global mind set, relentless focus on growth and strong belief that leaders are teachers. The site is currently in the process of automating the procurement of raw materials and extending the benefits of SAP to the vendors through the internet. The site uses the same technology as MahindraKisanMitra.com. It is seen that SMEs behave according to how they are treated. They have high regards for their teachers.
Implications of joint working and practices:
It can be said that knowledge transfer is positively affected by the levels of economic development of the recipients. Usually constellations are preferred by the Small organizations as there is more of flexibility, less of financial burden, less of individual commitment and more of economic gain. They are more agile i.e. they are delivering value to customer, they are ready to change, they value human knowledge and skills and finally they are forming virtual partnership. In addition, the thinking of the constellation participants is that they are with Market, at least partially. Constellation is the preferred vehicle for technology transfer also. It was noted that Japanese car companies design and make as 30% of the items that go into their cars. American from 30% to 70% . So automobile is a one of the big sectors where technology transfer to knowledge transfer is taking place in SMEs. Japanese companies are firmly involved in the infrastructure supply chain. They make a surprisingly large fraction of their own key manufacturing equipment and write much of their software. In India the trend is not much different. There is good scope to form the constellation and be competitive in this auto field but the issue involved is systematic creation of decomposable subsystems and careful description of the requirements. The issue then becomes coordinating the different organizations and companies whose job is to deliver those requirements manufacturing is merely one of those requirements. It is reasonable to say that Industrial associations should initiate the group formation for technology transfer and change is the choice of individual. It is not possible to transfer the knowledge if there is too big gap in terms of economic development between giver and recipient. The actual knowledge needed by SMEs was that ofmanagement know how in tacit form though in certain cases explicit knowledge is also in demand for sustainable advantage. The main channel of explicit knowledge was meetings followed by demonstrations. The training of the employees is preferred with on job
working under the expert supervision. One of the main influencing factors which help the knowledge transfer was language of communication. So long as expert can convey in the language which is used by the shop, it is very clearly understood but with English as the language of communication, it was observed that the local workers had little problem in understanding and leave alone the implementation. Local language is the best tool. Common objective continues to be the main influencing factor in knowledge transfer while culture takes the next place. Mutual benefit rules as a primary motivating factor to work for and work with while primary success factor is cooperation. Mutual respect is the next factor. It is observed that there was spirit of togetherness during any high price order processing particularly when that order was in competition with any multinational. This helped in resolving the principal factor QUALITY. The frame work for effective knowledge transfer is given in Figure2.
Figure2
Frame work for effective knowledge transfer:
What makes change happen? The answer is willingness to learn to change for growth; the shift from “how” manual to “why” manual. Why person approaches work as he or she does? It opens up the assumptions, beliefs and experiences to colleagues, bosses, and subordinates. This process takes time and intensive work to happen. The survival of constellation based on authors experience includes the four basic building blocks: 1) Idea of Innovation 2) The value system and culture 3) the organizational values 4) growth orientation with uniqueness. The idea of innovation lays out person’s theory about organizational success in terms of products or services, distribution channel customer segments etc. It states the set of assumptions and beliefs the person holds about what will make a company profitable in the market place. The value section of
thinking encompasses an individual’s personal ideology such as strong belief in honesty, integrity and of course the values he or she endorses in supporting business goals. The approach usually is that of openness, transparency and functional loyalty. They look for ideas all over and map our business. The next point is motivational aspects. There is no room for demotivation. Usually people are motivated when they understand the competitive context of the work and further they are expected to deliver results. The basic belief is energy is contagious. The faster and wider we roll out an initiative the more the electricity spreads. This also involves individual thought process to take decisions. There is no room for unethical actions. The last point is learning which makes people better leaders. In competitiveness, implicit knowledge becomes explicit and can be questioned, refined and honed. This also includes the critical developing task. Typically, leaders develop other leaders. The influence of one person’s expectations on another’s behavior is by no means a business discovery. The uniqueness gives leaders an explicit body of knowledge to import It helps them to construct a framework for their own ideas which help others to build knowledge. In Indian context it is important to foster innovation or knowledge creation to SMEs; they are also involved in innovating new processes and products. The main source continues to be the parent company for which they manufacture parts. The knowledge edge is also through educational institutions. It is necessary to create the strong environment through the curriculum so that SMEs are supported for knowledge creation.
Work pattern for interaction: basis for constellation formation:
If a company does not have specific core competencies needed to establish market identity and competitive advantage that are durable and robust, that company will need to buy or create those competencies that are missing, or will need to develop alliances to provide them. Any consideration of the true worth of a company must take into account not only the usual array of assets and liabilities and its hidden assets (intangible but real factors such as R & D, labor relations, leadership, vision, etc.), but also an assessment of its core competencies, its value added. This helps in resolving the dilemma of how fast to move further and how much. Of course, more opportunities also mean more uncertainty and greater risk. In dynamic market, strategy no longer has a matter of positioning a fixed set of activities along value chain. The focus is value creating system. Every member of the chain has to create value or co produce value. This can lead to reconfiguration of roles, realignment of relationships, inviting new players if need be and improving fit between competencies and customers. The family based organizations have felt the need to join the constellation particularly for technology up date. It was found that technology moves faster than the mind set change. The change of mind set has usually taken more time than the time taken by new technology to set in. It takes years may be a generation for change in mind set while technology change is much faster. Thus up gradation is essentially required for family run business. Those small companies who had half heartedly participated in change have not done much progress and did not form team
member of constellation. There was resistance to form constellation with foreign team while Indian partner is preferred by these companies. Constellation revolves round two factors 1) economic growth and 2) technology. The technology consists of four closely linked elements viz. 1) technique, 2) knowledge, 3) organization and 4) product while knowledge contributes the major part of technology. Other elements which contribute to constellation formation are: culture, infrastructure, people relationship and mutual respect, geography, process, framework for managing knowledge. The constellation exists on all or some of these factors. The companies based on their core competencies decide their partners to get placed on the value stream while maintaining their competitive knowledge edge. This gives emphasis on market eco system. This encompasses creation incubation, dissemination, protection, renewal, monetization of knowledge in market. It includes institutions to do all this. This results in more efficient way of doing business and saving in cost. This also means moving away from rote learning. This takes the organization to new level of growth as there is knowledge sharing. Specific type of cluster formation has its own advantages and disadvantages. Thus constellation is also used as a tool for the survival in SMEs. The sense of belonging or connectedness is an important element, for there is a basic human need to feel that we belong, to feel accepted and supported by others. This sense of belonging is of great significance since feeling rejected by others is perhaps the greatest detriment to self-esteem. We all want to feel that we belong, to feel accepted and supported by others. We need to feel that we are part of a group of peers or an organization that is larger than ourselves. Being a member of a winning team or a special organization is one way of providing this feeling. The uniqueness element is related to developing the sense of personal competence. This is a critical aspect of self-esteem and motivation. Personal competence comes about as individuals make progress toward their goals. Managers as teachers can assist in this step by pointing out options and possible ways of achieving the goals that have been set and allowing members to select the means they feel would be most effective for them. As they begin to make decisions for themselves and learn how to use resources available to them to achieve their goals and successfully accomplish what they set out to do, they grow in the sense of personal competence. Throughout this process the managers’ role is to help members evaluate the choices they have made, provide encouragement, support and feedback. Mangers understand that indifference says to subordinates,” don’t think much of you.” The experience indicates that the alliance influences the competitiveness towards higher side. Each alliance has to be self sustainable. This leads to win-win situation. Relationships provide the foundations for the business activities and it should not be beyond capability to develop CUGs-currently useful generalizations. In other words, Companies can only time pace as fast as their internal capabilities will allow them to move. It takes days to produce something, weeks to develop a new marketing promotion, months to hire and train new people years to develop new products nurture management talent and build reputation for quality all these processes interact continually. The real leverage in most management situations lies in understanding dynamic complexity and not detail
complexity. Developing a profitable mix of price product or service quality, design and availability that makes a strong market position is a dynamic problem. Improving quality, lowering costs, satisfying customers in a sustainable manner is a dynamic problem. The essence of discipline of system of systems thinking lies in a shift of mind: 1) seeing interrelationships rather than linear cause effect chain and 2) seeing processes of chain rather than snapshots. This will help to build learning to recognize types of structures that recur again and again. This will help to see the deeper patterns lying behind the events and the details.
The art of living with JVs in India:
Can SMEs follow the path of their big brother? Certainly NOT. But JVs do help in making a joint to the world till it is live. SMEs have to “make hey when sun shines”. SMEs are the integral part of the main /parent industry and in JVs the business conditions are created by the parent company for SMEs. India Inc’s tryst with joint ventures hasn’t been encouraging but there is always something to learn from them till they last. There are two dilemmas that rattle the human beings: how do you hang on to some one who won’t stay? Second, how do you get rid of some one who won’t go? This is a discomfort in the clutches of partners. Three recent high profile JV’s that seem to all the trappings of a bitter marriage are Britannia Industries in which the Wadia group and Groupe Danone of France are equal partners Hutchison -Essar the partnership between Hong Kong based conglomerate and Ruias and HDFC-Chubb an insurance JV in which the partners appear to have different strategic vision. There is a clash of ideologies and culture. Partners may see the benefits of going alone. This is not all. Godrej-Proctor & Gamble joint venture came apart in 1996. More recent is Tata-- Birla partnership in Idea cellular. Finally one can conclude that JVs in India last for short time. The reason for getting into JV may be an advantage that one does not posses. Indian company gets a chance to know the working of MNC while for MNC it is a presence in India. Why JVs fail. The analysis indicates the following: 1) Change of strategy-India ceases to be a prime market for outside company. 2) Regulatory changes-This is beyond control. This could work against JV when either the limit on FDI has not being hiked in time or it has to be reduced. Insurance has been a sector where the 26 percentage FDI limit for some time now has not gone down too well with the foreign partners. 3) JV doing very well. If JV is on very good wicket, one of the partners becomes very keen on increasing its holding which is not acceptable to other partner. Suddenly a scenario like 50:50 JV becomes hard to manage. 4) The partners decide to do it alone sometimes having partner can hamper growth prospects. In case of Tata Telecom the Tatas decided to sell their holdings to other partner Avaya Inc. It worked well for both. 5) Lack of transparency. It is very important that the ground rules are laid down well in advance. If information is withheld it can cause considerable levels of mistrust among partners. There is a case of Hutchinson_Essar JV where lack of transparency was one of the key reasons for current state of affairs. JVs are back in fashion in NEW INDIA. Tata Motors-Fiat, Mahindra-Renault, Kalyani Group-Singapore technologies Kinetics,
Pantaloon-Alpha group, etc. What makes this happen? The investigation revels the following 1) Technology-The foreign partner can bring high level technology while Indian partner has good understanding of Indian market. 2) Geography, this could be a case where a foreign player has a presence in many key markets and India is necessary to complete the story. Insurance is the relevant example where large global players are there.3) Regulation- This is normally a case when highly regulated sector opens up. Insurance which for a long time was closed to foreign investment today allows up to 26% equity participation. This has seen a flow of foreign players with players like Bajaj and ICICI being the Indian partners. 4) Sharing of risk and capital, this includes sectors like heavy engineering that require large amount of capital apart from technical expertise. Here both the partners look for a scenario where risks can be equally shared. 5) Intellectual exchange, here a sector like legal business could serve as an example. Though there is no clear cut law on entry of foreign firms the intellectual advantage at both ends is hard to ignore.
SME Constellation - tomorrow’s winner in India:
Learning has to take place on organizational level while working with constellation formation. It refers to the organization as an identity, as a joint system by itself above the workgroup and therefore to something that is characteristic or important across individuals and workgroups. Just as individuals can be replaced in a work group by someone else who carries out the same function, so the workgroup can be replaced by one that is functionally isomorphic- i. e. one which functions in the same way-without affecting the way in which the organizations functions. Learning on organizational levels refers to what is “remembered” by the organization rather than by individuals, although it must be in forming that is amenable to or accessible by each person. Levels of joint systems at work are shown in the Figure 3
.
Figure3
Levels of joint systems at work:
Control takes place on different system levels.
A regulator is required to ensure the proper functioning of constellation which is based on single loop and double learning as shown in Figure4.
Figure 4
Single and double loop learning
The learning is counter checked by PRISMA model.
Prevention and Recovery Information System for Monitoring and Analysis (PRISMA)
1
Detection
Usually on the basis of voluntary reporting by employees
2
Selection
Filtering of those reports with the highest informative value
3
Description
Details of selected events, by means of qualitative fault tree techniques
4
Classification
Description of each of the many basic causes according to the system failure model
5
Computation
Statistical analysis of large data base of incidents
6
Interpretation and implementation
Translational of the statistical results to come to theoretically supported suggestions for management actions
7
Evaluation
Analyze the effectiveness of such implemented actions by means of an explicit feedback loop
The ability to respond to new customer needs and seize market opportunities as they arise is crucial. SMEs today have recognized that a high level of interaction and coordination along the value chain will be the key ingredient to their continued success.
The conceptual frame work of knowledge based SMEs constellation will consists of
 Organizational frame work, Value chain
 Organizational culture & strategy
 Technology acquisition & development
 Human resources
 Directives based on vision
 Knowledge assets and method of assessment
 Knowledge transfer performance
 Contribution to the productivity and growth of enterprise’s knowledge capital
In most successes, besides a new idea or new technology, four critical forces must confer:
 Right funding sources
 Right human capital
 Right customer insight
 Right organizational architecture
Integrating these four factors is a challenge. Engineering Indian SMEs have to grow to meet the challenge successfully. To form the constellation, every small and medium enterprise must identify the best sources and means of meeting its knowledge needs as defined by the process of knowledge needs assessment. The sources are internal or
external and the choice depends on several factors including strategic importance of knowledge, level of knowledge available at the enterprise and feasibility of outsourcing the options. The table indicates the questions the enterprise has to check for. They are
Finding answers to questions
1
Does innovation matter to the enterprise?
2
What human capital development programs are in the enterprise to meet human capital objective?
3
Does enterprise have all the knowledge it needs to meet its operational and strategic needs? What is the strategy for acquiring new knowledge?
4
Is enterprise knowledge-technology strategy effectively integrated with Information and enterprise’s strategy?
5
Is contribution to the productivity and growth of enterprise’s knowledge capital a performance criterion?
6
Is there any assessment of effectiveness of knowledge management? How?
Conclusion:
Overall, Indian business in engineering is leveraging INDIAN ness by associating with global process and technology licensors and globalizing presence in the world. As the markets are shifting, technology is proliferating, competitors are multiplying, product cycles are becoming short, successful organizations are those that consistently create new knowledge, disseminate it widely throughout the organization and quickly embody it in new technologies and products. To create new knowledge means quite literately to re-create the company and every one in it is in a non stop process of personal and organizational self renewal. In a knowledge creating company, inventing new knowledge is not a specialized activity. It is a way of behaving in which every one is a knowledge worker-entrepreneur. New knowledge always begins with Individual. Obviously, the associates-data, information, knowledge and wisdom are the pillars of constellation which are important in wealth generation. It is the Mission, Competition, Performance and CHANGE which is associated with the learning of economies of knowledge through constellation formation. There is a shift from “Knowledge” to “Knowledges”. Our education system also should move with the pace to meet the focused objective of KMS and should impart the knowledge which should lead to resource generation and wealth creation. It is then Saraswati and Lakshmi seem to co exist happily here. This is the base for constellation growth of SMEs.
References:
1) Argyris Chris (1977) Double loop learning in organization, Harvard Business review, Sept-Oct
2) Bhide Amar (2000): The origin and evolution of new Business, New York. Oxford University
3) Drucker Peter (1999): Managing oneself, Harvard Business review March –April
4) ICFAI University (2004): Supply chain management: Indian scenario, Opinion
5) Li-Hua Richard (2000): From technology transfer to knowledge transfer-a case study of international joint venture projects in china, Sixth Annual Conference, Caledonian University U K
6) Livingstone sterling J (1988): Pygmalion in Management, Harvard Business Review Sept-Oct 1988
7) Linglebash David, Dela vina Lynda, Asel Paul(2005) What is distinctive about growth oriented entrepreneurship in developing countries?
8) Ramnarayan S & Bhatnagar J (1993): How do Indian organizations meet learning challenges, Vikalpa 18(1) Jan -March
9) Shaw Nancy C, Meixell Mary J, Tuggle Francis D(2002) : A case study of integrating knowledge management into supply chain management process. IEEE proceedings of 36th International Conference of system sciences
10) Senge Peter M (1994): The fifth discipline, currency Publisher, London
11) Shastree A, Arundhati (2007):Organizational downsizing using lean manufacturing with implementation on real life operations,WWW.TAME2006
12) Shastree A, Arundhati (2007): Conceptualizing self generating organization by embedding value constellation for sustainable growth , International Conference on Management, Jan 2007, ICFAI business school, Ahmedabad, India
13) Schmitz, Hubert(1992)Growth constraints on Small–Scale Manufacturing in Developing Countries: A critical Review, “World development” 10(6)
PP 429-450
14) Wang Liming (2006): Cluster strategy: An effective way of developing SMEs, SME Entrepreneurship Global conference 2006, Monash University, Malaysia
15) Watson Craig M (2003) Dynamics of Leadership, Jaico, India Wet-Laufer Suzy (1999): Driving Change Harvard Business review March –April
16) Whitney Daniel E (1995): White paper Report on State of the art in United States of CAD methodologies for product development, Center for technology, Policy& industrial development, MIT Cambridge.
17) Www. Business-today.com Business today Dec 17,2006

Collaborative and Dynamic Entrepreneurship: Engines of Economic Growth

This research paper is authored by: authored by: Anil Shastree, Ex.Head of Department and Professor, Department of Mechanical Engineering, A D Patel institute of Technology,New Vallabh Vidya Nagar, Anand, Gujarat, India.

Abstract

This paper identifies the parameters that help in effective entrepreneurship. It identifies the competencies of entrepreneurs and their relationships with the business. In this paper, the various viewpoints of the entrepreneurs on growth, leadership and organization policy, contribution to the organisation diversifications, strategic resources etc. have been discussed. Leadership roles of an entrepreneur encompass inspiring subordinates, developing effective relationship, getting cooperation, emphasising core values and norms, mentoring, fostering team work and collaborative efforts, effective conflict resolutions etc. The data were gathered from Bharuch and Vallabh Vidyanagar small and medium industries.
The paper also touches upon difference between the role of entrepreneur and corporate executives. It also indicates the strategy for developing entrepreneurship right at the initial stages of education and comes out with the business maturity model. The paper concludes with model of matured enterprise with innovative and value added economic activity with cultural base.

To view the full paper: click here :
https://www.scribd.com/document/400652325/Collaborative-and-Dynamic-Entrepreneurship-Engines-of-Economic-Growth
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The Minimum Wages Act, 1948”- An evolutionary panorama

"The Minimum Wages Act, 1948”- An evolutionary panorama".

The evolution of Indian labour legislation is intricately interlaced with the history of British colonialism. British political economy was considered natural paramount in modelling some of the early laws. In the initial phases it was very difficult to get adequate regular Indian workers to run British organizations and hence labour laws became essential. These were obviously in order to protect the interests of British bosses. Although this was a case, attitude of Indian legislators, as it turned towards being independent from the clutches of British empire, has been very constructive and pro-welfare state. The importance of the minimum wages as an instrument of social protection was already high lightened in the ILO constitution adopted in the year 1919 as a part of treaty of Versailles after the end of World War 1. The preamble of this constitution recalls, “the High Contracting parties, moved by sentiments of justice and humanity as well as by the desire to secure permanent peace has called for the provision of an adequate living wage alongside other measures to improve the condition of labour.

The concept of minimum wages first evolved with reference to remuneration of workers in those industries where the level of wages was substantially low as compared to the wages for similar types of labour in other industries.

First of all, at the International Labour Conference in 1928, a Draft Convention was adopted on the subject of minimum wages. In India in 1929 Royal Commission on Labour was adopted which considered the subject of minimum wages.

The Minimum wages Act was enacted to fulfill the aspiration of the workers as contained in the resolution based on the Geneva Convention held in 1928, which reads:

“If the labourers are to be secured the enjoyment of minimum wages and they are to be protected against exploitation by their employers, it is absolutely necessary that restraint should be imposed upon their freedom of contract and such restrictions cannot be in any sense be said to be unreasonable. On the other hand, the employers cannot be heard to complain if they are compelled to pay minimum wages to their labourers even though the labourers on account of their poverty and helplessness are willing to work on lesser wages”.

The fact that an employer might find it difficult to carry on the business on the basis of minimum wages is an irrelevant consideration.( Held in U.Uchinoyi / vs/ State of Kerala. 1961, I.LLJ 631.)

The question of establishing statutory wage fixing machinery in India was first discussed in 1929 by the Royal Commission on Labour which was appointed and this commission considered the subject of minimum wages. The question of establishing statutory wage fixing machinery in India was again discussed at the third and fourth meetings of the Standing Labour Committee held in May 1943 and January 1944 respectively, and at successive sessions of the tripartite labour conference in September 1943, October 1944, and November 1945. The last of these, approved in principle, the enactment of the minimum wages legislation. On 11 April 1946, a minimum wages Bill, was introduced, but the passage of bill was considerably delayed by the constitutional changes in India. It reached the statute book only in March 1948.

The MINIMUM WAGE FIXING CONVENTION, 1970 (NO. 131) quoted that, “Minimum wages should be established for groups of wage earners where, in consultation with employers’ and workers’ organizations, the competent national authority finds it appropriate. Minimum wages, where they exist, should have the force of law and should not be subject to abatement; failure to pay minimum wages should be subject to penal or other sanctions.”

The purpose of seeking employment is to sell labour to earn wages so as to attain a ‘decent’ or ‘dignified’ standard of living. The wage or income that a worker obtains from his/her work is therefore, what enables him/her to achieve a fair standard of living. One seeks a fair wage both to fulfill one’s basic needs and to feel reassured that one receives a fair portion of the wealth in return for one’s work to generate for the society. Society has a duty to ensure a fair wage for every worker, to ward off starvation and poverty, to promote the growth of human resource, to ensure social justice without which likely threats to law and order may undermine economic progress.

If ‘labour’ is to be defined, which is the central issue in focus, for which an amount is fixed; labour is defined by prominent persons such as:- S.E.Thomas , who says that , “Labour consists of all human effort of the body or of mind, which is undertaken in the expectation of reward”. Mr.Jevons states that,” Labour is any exertion of mind or of body or both, undertaken partly or wholly with a view to some good than the pleasure derived directly from work”.

Thus, labour in broad sense of the term may be defined as any hand or brain work which is undertaken for a monetary consideration.

REASONS FOR THE NEED OF ENACTMENT OF THE MINIMUM WAGES ACT 1948:-

(i) In a free competitive market, the level of wages payable to workers is determined by the forces of demand and supply. In a welfare state the protection of the interests of the workers is one of the aims of legislation which is enacted in the labour field. The same is true with regard to the Minimum Wages Act enacted by the Indian parliament.

In the case of, ‘People’s Union for Democratic rights/vs/ Union of India’, it was stated that, “The Minimum Wages Act is, as is all other legislation, a welfare measure to alleviate the suffering of sections of the society labouring under economic distress. However, knowledge of one’s rights or the capacity or strength to enforce it often doesnot exist among the relevant classes. It is through public interest litigation, a strategic aim of legal aid movement, that the problems of the poor are now coming forefront and the entire theatre of law is changing.”

(ii) The Indian labour class besides being illiterate is by an large not organized to protect its interests in a competitive market where supply of labour is always excess of demand. Under such conditions the labour class is left to itself and is unable to protect its legitimate interests.

In a country which is still underdeveloped, the exploitation of labour in certain industries can become a common feature due to reasons that unemployment and few avenues for gainful employment which forces the labourers to accept the employment even on starvation wages.

Therefore, the Act was enacted to secure the welfare of workers in a competitive market by providing for a minimum limit of wages in certain employments.

(iii) The object of this Act is to “prevent exploitation of the workers” and for this purpose, it aims at fixation of minimum wages which the employer must pay. What the act purports to achieve is to prevent exploitation of labour and for that purpose, authorises appropriate government to take steps to prescribe minimum rates of wages in Scheduled industries. What is being prescribed is minimum rates of wages which a welfare state assumes every employer should pay before employment of any labourer. It is only with regard to certain specified industries that the provisions for the payment of statutory minimum wages have been laid down. The legislature undoubtedly intended to apply the Act to those industries or localities, in which, by reason of causes such as unorganized labour or absence of machinery for the regulation of wages which are paid to workers, were in the light of the general level of wages and they were subsistence inadequate. The provisions of the Act were intended to achieve the object of doing social justice of workers employed in the scheduled employment by prescribing minimum rates of wages to them.

(iv) As pronounced in judgement of the case of , ‘Hydro(Engineers) P. Ltd /vs/ Workmen. AIR 1969 SC182. “The Act contemplates that minimum wage rates must ensure not the mere physical need of the worker which would keep the worker just above starvation but ensure for the worker not only subsistence and that of his family but to preserve the worker’s efficiency as of a workman. It should, therefore, provide not merely the bare subsistence of life but the preservation of workers’ health and for some measure of education, medical requirements and amenities”.

(v) In the case of “Edward Mills co .Ltd, Beawer /Vs/ State of Ajmer(1954) II L.L.J 686, it is decided that the object of the Minimum wages Act as, “ The object of this Act is to prevent exploitation of the workers and for this purpose, it aims at fixation of minimum wages which the employer must pay”.

(vi) In the case of, “ M/S Bhikua Yamasa Kshatriaya /Vs/ Sangamner Akola taluka beedi Kamgar Union , AIR 1963, S.C. 806, it was decided that , “The legislature undoubtedly intended to apply the Act to those industries or localities in which, by reason of causes such as unorganized labour or absence of machinery for regulation of wages, the wages paid to workers were in light of general level of wages and subsistence level inadequate”.

Like other branches of labour legislation, the security of industrial peace and efficiency may be kept in view when giving effect to the provisions of this Act.

In the view of the fulfilment of the purpose of welfare state, it was upheld in the case of ‘ Patel Ishwarbhai Prahladbhai /vs/ Taluka Development Officer (1983) I Lab 7C 237 S.C. , that , “ Every person who provides labour or service to another is entitled at least to a minimum wages.”.

(vii) The judgement in the case of “ Crown Aluminium Works /vs/ Their workmen AIR 1958 SC 30” , states the motivation of the legislature for enactment of the minimum wages Act, 1948, in the following words, “ In developing country like ours which faces the problem of unemployment on a very large scale, it is not unlikely that labour may offer to work even on starvation wages. The policy of the Act, therefore, is to prevent employment of sweated labour in general interest and , so in prescribing the minimum wage rates, the capacity of the employer need not be considered as the state assumes that every employer must pay minimum wages for the employee’s labour”.

Therefore, the entire scheme of the Act is a pointer towards the direction of ensuring minimum wages to workers engaged in certain specific industries.

An insight into the imperatives for a Premise to be called 'factory'

An illustrative analysis

of

the definition of ‘Factory’

in

The Factories Act, 1948.

The definition of ‘Factory’ is given in section 2(m) of the Factories Act,1948. Section 2(m) defines the term ‘Factory’ as: - ‘Factory’ means: any premises or precincts thereof –

(i) whereon 10 or more workers are working, or were working, on any day of the preceding 12 months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on; or

(ii) whereon twenty or more workers are working, or working on any day of the preceding 12 months and in any part of which a manufacturing process is being carried on without the aid of power ,or is ordinarily so carried on, but does not include (i) a mine subject to the operation of the Mines Act 1952, or (ii) a mobile unit belonging to the armed forces of the Union of India, (iii) a railway running shed, or (iv) a hotel , (v) a restaurant, (vi) eating place., (vii) poly house or (viii) Green house engaged in the activity of floriculture or pomology or high value crops.

Explanation I: For computing the number of workers for the purposes of this clause, all the workers in different groups and relays in a day shall be taken into account.

Explanation II: For the purpose of this clause, the mere fact that an electronic Data Processing Unit or a computer Unit is installed in any premises or a part thereof, shall not be construed to make it a factory if no manufacturing process is being carried out in such premises or a part thereof.

Explanation III: For the purpose of this clause, the term, “ High Value Crops”, shall mean and include – (i) Plantation of fruits , vegetables, flowers in a green house or shed-net house;(ii) Plantation of exotic fruits, flowers and vegetables, (iii) Plantation of crops for the use of bio-technology, (iv) plantation of medicinal and aromatic plants and processing industry; (v) Production of mushroom and processing industry; (vi) Production of fruits by micro drip irrigation by use of plastic and mulching; (vii) Nurseries and processing industries where vegetables are produced in green house; (viii) Nursery of ornamental plants.

In addition to the above stated definition of Factory; the section 85 of Chapter IX of the Factories Act, 1948, extends the application of the term factory; the Section 85 titled “Power to apply the Act to certain premises”. This section is contained in Chapter IX which is titled, “special provisions”.

Section 85 states that,

(1) The State Government may, by notification in the official gazette declare that all or any of the provisions of the act shall apply to any place wherein a manufacturing process is carried with or without the aid of power or so is ordinarily carried on , notwithstanding that – (i) the number of persons employed therein is than 10, if working with the aid of power and less than 20 without the aid of power , or (ii) the persons working therein are not employed by the owner thereof but are working with the permission of, or under agreement with, such owner: provided that the manufacturing process is not being carried on only with the aid of his family,

(2) After a place is so declared, it shall be deemed to be a factory for the purpose of this Act, and the owner shall be deemed to be the occupier, and any person working therein, a worker.

Explanation: For the purpose of this section “Owner” shall include a lesser or mortgagee with possession of the premises.

According to Black’s Law dictionary, factory is a term that includes all buildings and premises wherein, or within the cartilage of which, steam, water, or any mechanical power is used to move or work any machinery employed in preparing , manufacturing, or finishing cotton, wool, hair, silk, flax, hemp, jute or tow.

This definition seems to be confined to defining expanse of term only to textile and its related industry. Further referring to the definition stated in section 2(m) of the Factories Act,1948, which is discussed earlier, it can be inferred, that the following ingredients are mandatory to constitute a premises as “ factory” which are as follows: -

(i) If the premises is using power or working without the aid of power , the number of workers required to constitute a factory differ as follows –

(a) with the aid of power – 10 or more workers,

(b) without the aid of power – 20 or more workers.

(ii) A manufacturing process should be carried on,

(iii) Work should be carried on in precincts.

The case law of K.V.V.Sharma AIR , 1953, Mad 269, stated precincts as; “a space enclosed by walls or fences. A place solely used for some purpose other than the manufacturing process carried on in a factory or a workshop does not constitute a factory.”

In the case of Ardeshir /Vs/ State of Bombay , AIR 1962, S.C.29, it was held that the word ‘premises’ is a generic term meaning open land or land with buildings or building alone. The expression, “premises including precincts” does not necessarily mean that the premises must always have precincts. Even buildings need not have any precincts. The word ’including’ is not a term restricting the meaning of the word ‘premises’ but is a term which enlarges its scope. The use of the word ‘including’, therefore doesnot indicate that the word ‘premises’ must be restricted to main building and not to be taken to cover open land as well. Though some of the provisions of the Act cannot be applicable to salt works where the process of converting sea water into salt is carried on in the open, there is nothing in the Act which makes it uniformly compulsory for every occupier of the factory to comply with every requirement of the Act. An occupier needs to comply with such provisions of the Act which applies to the factory he is working, hence, salt works should come within the meaning of the word ‘premises’ used in the definition in section 2(m). For any premises to be called a factory, the following conditions must be fulfilled:-

(1) As decided in the case of ‘Workmen, Delhi electricity Supply Undertaking /vs/ Management, AIR 1973 SC 365; “Factory” is a premise where manufacturing process is carried on.”. No manufacturing process was held to take place either in the sub-stations or in the zonal stations of the Delhi Electricity Supply Undertaking, because the workmen employed therein have no part in any manufacturing process”.

(2) As decided in the case of “New Taj Mahal Cafe ltd Mangalore /vs/ Inspector of Factories, Mangalore,(1950) I.LLJ,273. that, “In order that any premises may be held as a factory , the following conditions must be fulfilled :-

(a) a manufacturing process must be carried on in any part of the premise of the establishment and ,

(b) where a manufacturing process is carried on with the aid of power, ten or more workers must be working and where manufacturing process is carried on without the aid of power, twenty or more workers must be working in that establishment. But, the mere fact that the power is used in the premises is not sufficient, but power must be used in the aid of manufacturing process.

An important necessity for any premises to be regarded as a ‘factory’ is, that a “manufacturing process” should be conducted within the premises. In the factories Act,1948, according to section 2(k) defines manufacturing process as:- “Manufacturing process” means process for –(i) Making, altering, repairing, oiling, washing, cleaning, ornamenting, finishing, packing, breaking up, or otherwise treating or adapting any article or substance with a view to its use, sale transport, delivery or disposal, or

(ii) Pumping oil, water, sewage or any other substance or,

(iii) Generating, transforming or transmitting, power, or

(iv) Composing types for printing the letter press, lithography, photogravure, or other similar process or book binding, or

(v) Constructing, re-constructing, repairing, refitting, or breaking up of ships or vessels ; or

(vi) Preserving or storing any articles in cold storage;

In this regard it becomes necessary to discuss some special circumstances that came up in some court cases :

(1) Preparation of food with aid of various electrical appliances in kitchen of a hotel is a manufacturing process: As decided in the case of “Poona Industrial Hotel /v/s I.C. Sarin , 1980, Lab IC 100.

(2) Selling of petrol or diesel by a petrol dealer or repairing of motor vehicle will not come within the term “manufacturing process”, as noted in the case of : “ National Service Centre and Petrol Pump /vs/ E.S.I Corporation , 1983 labI.C. 412(P&H) .

(3) The work of mere packing cannot be called as a manufacturing process; {ref-AIR 1955 NUC 2710}.

(4) The business of sale of diesel oil, motor spirit, lubricant, servicing of cars and lorries, repairing vehicles and charging batteries with the aid of power, by employing more than 20 workers / labourers amount to manufacturing process, as noted in the case of “Baranagar Service Station /vs/ E.S.I Corporation (1987) 1 L.L.N 912(Cal)(Divisional Bench).& Lab I.C. 302.

(5) Decorticating groundnuts in electric mill is a manufacturing process (AIR 1959 Madras 30).

(6) Breaking up of boulders is a manufacturing process – as decided in case of “Larsen & Toubro /vs/ state of Orissa , 1992 Lab IC 1513 (Orissa- Divisional Bench).

(7) Transportation of goods on contract basis from one place to another by road with the assistance of transport carriers is not a manufacturing process- as decided in the case of regional Director E.S.I.C /vs/ Jaihind Roadways, Bangalore(2001),1 L.L.J 1187(Karnataka).

(8) Reading the definition of ‘Manufacturing process’ in the light of Supreme Court in “Workmen”, Delhi Electricity Supply Undertaking /vs/ management”, (1974) 3 SCC 108, the word ‘or’ in section 2(k) (iii) must be read as ‘and’.

In other words, to satisfy the definition of “manufacturing process”, there should be a process of generating, transmitting, and transforming of power. So a sub-station where only transforming and transmitting of power is done is not covered. A contradictory judgement was passed by Bombay High Court and it has laid down in the definition of “manufacturing process’, that , in this definition , each of the words have got independent meaning which itself constitutes the manufacturing process.

Therefore we can conclude from these cases & definition that if a manufacturing process is not carried on within the premises it cannot be regarded as a factory, and to regard an establishment or premises as a factory, it should fulfill certain conditions as mentioned above and mainly manufacturing process should be carried on.