Month: October 2020

Sections 22 to 27 of the Act deal with the subject of taxation of “Income from house property”.

Section 22: Annual value of property is taxable under the head “Income from House property”.

Section 23: Determination of ‘Annual value’

Section 24: Allowable deductions from “Income from House property”

Section 25: Amounts not deductable from “Income from House property”

Section 25A: Special Provision for arrears of rent and unrealised rent received subsequently.

Section 26: Property owned by co-owners

Section 27: Situations where the ownership shall be deemed, for taxing income from house property

Section 22 provides for taxation of ‘annual value’ of a property consisting of any buildings or lands appurtenant thereto. The term ‘buildings’ includes any building- office building, godown, storehouse, warehouse, factory, halls, shops, stalls, platforms, cinema halls, auditorium etc. as long as they are not used for business or profession by owner. Land appurtenant includes land adjoining to or forming a part of the building. It would depend on the nature of the land, whether it is appurtenant to the residential building, factory building, hotel building, club house, theatre etc. and will include courtyards, compound, garages, car parking spaces, cattle shed, stable, drying grounds, playgrounds and gymkhana.

Determination of ‘annual value’ of the property [Sec. 23]

‘Annual Value’ is inherent capacity of property to yield income. The inherent capacity has been defined as the sum for which the property might reasonably be expected to be let from year to-year. It is not necessary, that the property should be actually let. It is also not necessary that the reasonable return from property should be equal to the actual rent realized when the property is, in fact, let out. Under Section 23 (1) of the Income tax Act, annual value of property shall be deemed to be the following:

1. The sum for which the property might reasonably be expected to be let out from year to year;
2. Where the property or any part of the property is let and the actual rent received or receivable by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable

iii. Where the property or part of the property is let and was vacant during the whole or any part of the previous year and, owing to such vacancy, the actual rent received or receivable by the owner in respect thereof is less than the sum referred to clause (a) the amount so received or receivable.

4.1 Annual value to be calculated as under:

1. Where RC Act applicable

(i) Standard rent under the Rent Control Act; or

(ii) Actual rent received Whichever is higher

2. Where RC Act is not applicable:

(i) Municipal Value or

(ii) Fair Rent or

(iii) Rent Received whichever is higher

Sub-section 2: The annual value of a house or part of a house shall be taken as nil if the property

• is occupied by the owner himself for the purpose of his own residence or,
• if such house or part thereof cannot be occupied by him because his employment, business or profession is carried on at any other place and, he has to reside at that other place in a building that does not belong to him.

Deductions permitted from Income from house property [Sec. 24]

Amount left after deduction of municipal taxes is net annual value. Following permissible deductions are allowed from Annual Value in cases of let out properties (Section 24).

(1) Deduction equal to 30% of the annual value, irrespective of any expenditure incurred by the taxpayer (s.24(a)). No other allowance for depreciation, repairs, maintenance etc. would be allowable.

(2) Interest on borrowed capital (s.24(b)). Interest on borrowed capital is allowable as deduction on accrual basis (even if account books are kept on cash basis) if capital is borrowed for the purpose of purchase, construction, repair, renewal or reconstruction of the house property.

As per section 25, interest chargeable under the Income tax Act, which is payable outside India on which tax has not been paid or deducted (and in respect of which there is no person in India, who may be treated as an agent under section 163) shall not be deducted in computing the income chargeable under the head “Income from house property”.

Income from house property is wholly exempt from tax in following situations

1. Income from any farmhouse forming part of agricultural income;
2. Annual value of any one palace in the occupation of an ex-ruler; Section 10(19A)
3. Property Income of a local authority; Section 10(20)
4. Property income of any registered trade union; Section 10(24)
5. Property income of a member of a Scheduled Tribe;
6. Property income of a statutory corporation or an institution or association financed by the Government for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both;
7. Property income of a corporation, established by the Central Govt. or any State Govt. for promoting the interests of members of a minority group;
8. Property income of a cooperative society, formed for promoting the interests of the members either of the Scheduled Castes or Scheduled tribes or both;
9. Property Income, derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities by an authority constituted under any law for the marketing of commodities;

• Property income of an institution for the development of Khadi and village Industries;’
• Self-occupied house property of an assessee, which has not been rented throughout the previous year;
• Income from house property held for any charitable purposes;
• Property Income of any political party. Section 13A

Section 26

Co-ownership: In case where property is owned jointly by two or more persons, and where shares of such joint owners are definite and ascertainable, the income of such house property will be assessed in the hands of each co-owner separately. For the purpose of computing income from house property the rent/ annual value will be taken in proportion to his share in the property. In such an eventuality, the relief admissible under section 23(2) shall also be separately allowable to each such person [Explanation to Section 26]. However, where the share is not definite, the income of the property shall be assessed as that of an Association of persons.

Deemed ownership (Section 27)

In the following situations the ownership shall be deemed for taxing income from house property in view of Section 27 of the Act:

1. When house property is transferred to spouse (otherwise than in connection with an agreement to live apart) or minor child (not being a married daughter) without adequate consideration (Section 2 7(i))
2. In the case of holder of an impartible estate (Section 27(ii))

iii. A member of a cooperative society, company etc. to whom a building or part thereof has been allotted or leased under a house building scheme (Section 27(iii)). Thus, when a flat is allotted by a cooperative society or a company to its members/shareholders who enjoy the flat, technically the co-operative society/company may be the owner. However, in such situations the allottees are deemed to be owners and it is the allottees who will be taxed under this head.

iii a. A person who is allowed to take or retain possession of any building (or part thereof) in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, is deemed as the owner of that building (or part thereof) [Sec. 27 (iiia)].

1. A person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building (or part thereof) by virtue of any such transaction as is referred to in section 269UA(f) [i.e. if a person takes a house on lease for a period of 12 months or more, is deemed as the owner of that building or part thereof] [Sec. 27 (iiib)].

(v) taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property.[Sec. 27 (vi)].

Profit & Gain from Business and Profession (S. 28, 30,31,32, 35, 35D,36,37, 40, 40A and 43B)

In this Article we have discussed briefly Different Provisions Applicable to Income from Business and Profession at one place.

Profits and Gains from Business and Profession

1. Chargeability:

The following incomes are chargeable to tax under the head Profit and Gains from Business or Profession:

2. Deductions under Sections 30 to 37

Amount deductible, while computing, Profits and Gains of Business or Profession are:

3. Amount expressly disallowed under the Act

4. Expenses deductible on actual payment basis

The following expenses shall be allowed as deduction if such expenditure are actually paid on or before the due date of filing of return of income:-

5. Other provisions

Taxable income refers to any individual’s or business’ compensation that is used to determine tax liability. The total income amount or gross income is used as the basis to calculate how much the individual or organization owes the government for the specific tax period.

Types of Taxable Income

Every taxpayer knows that failure to file a report for one’s income tax can lead to serious consequences. So, to be sure about paying taxes, here’s a list of the types of income:

1. Employee compensation and benefits

These are the most common types of taxable income and include wages and salaries, as well as fringe benefits.

2. Investment and business income

For people who are self-employed, they are also subject to tax liability, specifically through their business’ income. For example, net rental income and partnership income qualify as taxable income.

3. Miscellaneous taxable income

This includes income that doesn’t fit into the other types. It includes things such as death benefits, life insurance, and canceled debts. Alimony, items involved in barter trading, and income from one’s hobby are also miscellaneous taxable income.

Taxable vs. Non-Taxable Income

Taxable income includes all types of compensation, whether they are in the form of cash or services, as well as property. Unless a particular income is expressly exempted by law from tax liability, every income is taxable and should be reported in the income tax return. Examples include:

• Salary
• Wages
• Interest received from banks
• Stock options
• Dividends
• Unemployment compensation
• Notes received
• Rents from personal property

Non-taxable income, on the other hand, refers to income that is received but that is not subject to taxation. However, even if such forms of compensation cannot be taxed, they still need to be reflected in the tax return. Examples of non-taxable income are:

• Gifts
• Inheritance
• Cash rebates from items bought
• Child support payments
• Welfare benefits
• Meals and lodging

Income from salary is the sum of Basic salary + HRA + Special Allowance + Transport Allowance + any other allowance. Some components of your salary are exempt from tax, such as telephone bills reimbursement, leave travel allowance. If you receive HRA and live on rent, you can claim exemption on HRA. Calculate exempt portion of HRA, by using this HRA Calculator.

On top of these exemptions, a standard deduction of Rs 40,000 was introduced in budget 2018. This has been increased to Rs 50,000 in budget 2019.

To calculate Income tax, include income from all sources. Include:

• Income from Salary (salary paid by your employer)
• Income from house property (add any rental income, or include interest paid on home loan)
• Income from capital gains (income from sale purchase of shares or house)
• Income from business/profession (income from freelancing or a business or profession)
• Income from other sources (saving account interest income, fixed deposit interest income, interest income from bonds)

Workers’ participation is aimed at the following objectives:

1. Economic:

Workers’ participation in industry improves relationship between workers and management and establishes better human relations. This leads to increased workers’ efficiency thereby increasing productivity and output of the manufacturing unit. Workers’ participation in management enthuse high morale which can be utilized for increasing production. High industrial productivity helps in attaining the economic objectives of the country.

2. Social:

Workers’ participation in management increases the worker’s status in society. He is considered as a respectable member of the society. He is the co-partner in the gains from production. It is reflected through industrial harmony and peace reducing industrial disputes.

3. Psychological:

Workers’ participation in management has a positive impact on the behaviour of the workers. It installs sense of belonging to the organisation in the minds of the workers. It gives them self-respect. They feel dignified and they behave in a responsible manner because they are the partners in decision making process. There are all psychological objectives to be attained by the organisation. The positive behaviour such as high morale, self-motivation, increased efficiency is all exploited in increasing the productivity of the organisations.

Methods of Workers’ Participation in Management:

There are many methods used for workers’ participation in management.

Some of them are the following:

1. Suggestion Method:

Under this method the suggestions from the workers are invited as regards improvement in working, how to avoid accidents, cleanliness etc. The best suggestion from the worker is rewarded and a certificate to that effect is given to the worker so that others can make better suggestions in future. Management receives novel suggestions from the workers. This increases the importance of the workers with the management. This is a method of encouraging workers’ interest in the industrial establishment. This method is adopted in many organizations in India.

2. Co-partnership:

It is a means of workers’ participation in management and is viewed as leading to industrial democracy. Co-partnership allows workers to participate in decision making. Under this method the employees get shares of the company and establish their ownership. This is made possible because the share of profit is not paid in cash but company shares are allotted to the workers.

Being shareholders of the company, they are entailed to participate in management. This increases the status of workers and leads to improvement in their attitude as they realize their responsibility and relations between workers and management become smooth. They also receive dividend on their shares.

Co-partnership suffers from limitations. Employees are not interested in co-partnership and want their share of profit in cash and refuse to accept shares of the company. They prefer to remain wage earners rather than to become partners in the business.

3. Representation on Board of Directors:

Under this method one or two representatives of the workers are nominated on the Board of Directors of a company. They enjoy same privileges and have the same authority as other directors have. They participate in the decision making process as regards policies and procedures. This is one of the most effective methods of ensuring workers’ participation in management. Here the representatives of the employees to be nominated are elected or suggested by the unions of the employees.

4. Works Committees:

The Industrial Disputes Act 1947 provides for establishing works committees in every establishment employing hundred or more workers. This is made compulsory to ensure workers’ participation through legislation. The work committee consists of equal number of members of workers and employer. The object of establishing works committees is to promote healthy industrial relations. However these committees so far failed to achieve the objects as both workers and employers could not change their outlook.

5. Joint Management Councils:

Industrial Policy 1956 of government of India has stressed on joint consultation between management and workers to maintain industrial peace and to promote better industrial relations in the prime sector of industries. The joint management councils received recognition during second five year plan. Under this system consultative committees are set up consisting of representatives of employees and employers both. They are advisory in nature.

These committees discuss the matters relating to workers and the working conditions. The representatives of workers and employers discuss these problems. The managements consider their decisions sympathetically and implement them though not mandatory.

The committees discuss matters relating to canteen facilities, prevention of accidents, general precautions and safety measures, drinking water facilities, rules and regulations, absenteeism, training, discipline etc. After taking decisions regarding the above matter, recommendations are made to the management.

It is not mandatory on the part of the industries to establish joint management councils. These committees are set up with the consultation of recognized union of the establishment. These committees are usually formed at plant level. The members of management are nominated by the top management and the representatives of workers are elected or nominated by the recognized trade union of the undertaking.

Though a good venture of setting up of joint management councils, they could not come up to the expectations. Earlier it received a positive response and one hundred joint management councils were set up. The joint management councils failed to promote mutual understanding between employees and employers. Only union leaders get the opportunity to participate in the council meetings a common employee is far away from the deliberations.

Many a times union leaders use this opportunity to bargain by pushing up their various demands defeating the sole purpose of the joint management councils. In 1975 the government looking at the ineffectiveness of joint management council, introduced shop councils.

Shop Councils:

Under this system the industrial units having employees 500 or more have to set up shop councils in all shops and departments. The members of management and of workers have equal representation. The total number of members should not be more than twelve.

The decision of the shop council is to be implemented within a month’s time. The tenure of the council is for two years. The council should meet at least once in a month. The shop council must make efforts to increase the productivity, to avoid wastages and to make maximum use of machines and manpower and recommend the steps to remove absenteeism.

Joint Councils:

In order to ensure effective workers’ participation, joint councils were introduced. Every undertaking employing 500 or more employees should set up a joint council at the unit level. Organisation of the joint council was the same as of shop council. The joint council should meet at least once in three months. It has a chairman, Vice Chairman and secretaries who receive all the facilities required to perform their functions.

It deals with optimum production, fixation of productivity norms, matters unresolved by the shop councils. Some of the state governments extended this scheme to the undertaking having less than 200 employees. The scheme was implemented in about 1500 undertakings of public and private sectors. Shop councils and joint councils were the schemes implemented during emergency in 1975 but after the lifting of emergency the schemes have lost their effect.

Merits of Worker’s Participation:

Workers’ participation in management is a tool which promotes better industrial relations and establishes industrial peace. It is important concept for both management and workers. The need is to implement it honestly to reap its merits in the form of mutual understanding, increased efficiency of workers, increased production etc. Workers’ participation in management has several advantages.

1. Mutual Understanding:

The employees and employers nurture two different conflicting interests. Surprisingly both lack the knowledge of the problems faced by them. Workers’ participation in management brings both the parties together. This togetherness enables them to understand each other’s problem. This minimizes conflicts and promotes mutual understanding.

2. Efficiency of Workers Increase:

The workers become the partner in decision making process. Whatever decisions are taken, they are their own and hence they have to abide by them. They become enthusiastic and put lot of hard work while working. This helps in increasing the overall efficiency of workers.

3. Increase in Production:

Increase in efficiency of workers, better understanding between workers and employers lead to mutual cooperation which results in increased productivity and increase in total production of the enterprise.

4. Establishes Industrial Peace:

Workers participate in decision making process. Whatever decisions good are bad taken workers are the party to it and hence they cannot evade the responsibility. Employers and workers understand each other better and conflicts are minimized. Each dispute is solved with mutual understanding. In this way disputes are eliminated and industrial peace is restored.

5. Promotion of Industrial democracy:

Participation of all the parties’ employees and employers in the management of the industries which works to safeguard the interests and betterment of all is industrial democracy. Workers’ participation in management helps in promoting industrial democracy.

6. Welcomes Changes:

Some if not all the changes are resisted by the workers. But workers’ participation in management helps in arriving at a unanimous decision whether to accept or reject any change. The changes which bring more benefits than the costs incurred on them, are accepted. Hence the changes are welcomed by the employees.

7. Personal Development:

Participation helps workers to express their creative instinct and they respond favourably to the challenges at the workplace as regards performance of the job. They feel free in doing so. It is possible as participation brings industrial democracy.

8. Reduces Misunderstanding:

Participation reduces misunderstanding regarding the managements’ outlook. This increases the organisational balance.

9. No Outside Help to Sort-out Disputes:

Employees themselves are participating in the decision making with the employers. They therefore realize workers as well as managements’ problem better hence disputes are resolved by understanding the difficulties of each other. So, in case of industrial dispute no outside help is taken they are sorted out within the plant itself by the employees and employers themselves.

Demerits of Workers’ Participation:

In spite of above advantages of workers’ participation there are certain disadvantages.

Following are the demerits of workers’ participation:

1. Workers are not Enthusiastic:

The workers are not enthusiastic about the scheme and employers believe that they being incompetent cause delay in decisions. Some of the good decisions cannot be implemented for lack of support from the workers.

2. Weak Trade Unions:

In India trade unions are not strong enough. There are multiplicities of trade unions and they are dominated and led by political leaders. This makes trade unions weak. They cannot show solidarity of workers. There should be one strong union so that they can elect competent representatives for participation. Moreover, there are certain problems require specialized knowledge which workers do not possess hence such problems cannot be solved through participation. They cannot even understand the gravity of situation.

Reasons for Grievances Handling

(i) Economic: Wages, overtime, bonus, etc.

(ii) Work environment: Poor working conditions, substandard equipments and machinery, defective tools, materials, etc.

(iii) Poor quality of supervision: Perceived notion of favouritism, nepotism, bias, etc.

(iv) Work organization: Rigid and unfair rules, lack of recognition, etc.

Normally grievances originate from managerial policies and practices, when the latter lack consistency, uniformity, equity, fair play, and the desired level of flexibility. Grievances also arise because of inter­personal problems of individual employees, and labour union practices aiming at reinforcing and con­solidating their bargaining strength. The lack of proper communication between the employees and the management can also be a significant reason giving rise to grievances.

Grievances lead to:

(i) Low morale and commitment

(ii) Loss of interest in work

(iii) Low productivity

(iv) Increase in wastages and costs

(v) Increase in absenteeism

(vi) High employee turnover

(vii) Indiscipline among employees

(viii) Employees unrest.

Elements of a Sound Grievance Handling Procedure

The grievance handling procedure is very important for grievance handling in an organisation. It provides the clear-cult guidelines and shows the path to the managers how to solve the grievances. For smooth working it should have certain basic elements so that it can claim that is a good procedure for effective working.

The following elements for a sound grievance handling procedure are suggested:

(a) Well defined communication channels.

(b) The procedure should be simple, to understand.

(c) Properly defined steps for redressing of grievances.

(d) Should have logical sequence of steps.

(e) Favourable attitude of concerned authorities responsible for redressing.

(f) Fact base approach for redressal of grievances.

(g) Proper communication of procedure to all employees and authorities.

(h) Respect for decisions of redressing authority.

(i) Periodical review of grievance handling procedure.

Important Principles of Employee Grievance Handling

Principles or Guidelines for Grievance Handling:

For effective handling of grievances certain principles or guidelines can be followed with good results.

(i) Adequate time must be given for talking to employees, collecting data from and giving them various types of information needed.

(ii) In grievance-handling the representative of management should develop an attitude towards employees that should be instrumental in winning their confidence, loyalty and genuine cooperation. Management’s sincere interest and constructive willingness to help the employees should be displayed throughout.

(iii) A positive approach of management representatives indicating their full awareness of the specific issues as well as their desire and capabilities to carry out the entrusted responsibilities proves highly useful in gaining respect and cooperation.

(iv) In handling grievances, the management representatives must keep in focus not only the current impact of the grievances but also its effects in the long run along with its far distant implications. Thus, grievances should be handled in terms of their total effect on the organization and not solely their immediate or individual effect.

In this connection, the following list of Do’s and Don’ts grievances is useful.

Do:

1. Investigate and handle each and every case as though it may eventually result in an arbitration hearing.
2. Talk with the employee about his grievance; give him a good and full hearing.
3. Get the union to identify specific contractual provisions allegedly violated.
4. Enforce the contractual time limits.
5. Comply with the contractual time limits for the company to handle a grievance.
6. Determine whether all the procedural requirements, as dictated by the agreements, have been complied with.
7. Visit the work area where the grievances arose.
8. Determine if there were any witnesses.
9. Examine the relevant contract provisions, and understand the contract thoroughly.
10. Determine if there has been equal treatment of employees.
11. Examine the grievant’s personal record.
12. Fully examine prior grievance records.
13. Evaluate any political connotations of the grievance.
14. Permit a full hearing on the issues.
15. Identify the relief the union is seeking.
16. Treat the union representative as your equal.
17. Command the respect of the union representative.
18. Hold your grievance discussions privately.
19. Provide the grievance process to non-union members as well.
20. Satisfy the union’s right to relevant information.
21. Demand that proper productivity levels be maintained during the processing of incentive grievances.
22. Fully inform your own superior of grievance matters.

Don’t:

1. Discuss the case with the union steward alone; the grievant should definitely be there.
2. Make agreements with individuals that are inconsistent with the labour agreement.
3. Apply the grievance remedy to an improper grievance.
4. Hold back the remedy if the company is wrong.
5. Admit the binding effect of a past practice.
6. Relinquish your authority to the union
7. Settle grievances on the basis of what is fair. Instead, stick to the labour agreement which, after all, should be your standard.
8. Make mutual consent agreements regarding future action.
9. Bargain over items not covered by the contract.
10. Concede implied limitations on your management’s rights.
11. Argue grievance issues off the work premises.
12. Treat as “arbitrable” claims demanding the disciplining or discharge of management members.
13. Commit the company in areas beyond your limits of responsibility of familiarity.
14. Give away your copy of the written grievance.
15. Discuss grievances of striking employees during an illegal work stoppage.
16. Settle grievance when you are in doubt.
17. Support another supervisor in a hopeless case.
18. Refer a grievant to a different form of adjudication.
19. Overlook the precedent value of prior grievance settlement.
20. Give long written grievance answers.
21. Trade a grievance settlement for a grievance withdrawal (or try to “make-up” for a bad decision in one grievance by “bending over backwards” in another)
22. Negate the management’s right to promulgate plant rules
23. Deny grievances on the premise that “your hands have been tied by the management”.
24. Agree to informal amendments in the contract.

Grievances, if not identified and redressed, may adversely affect workers, managers, and the organiza­tion.

The effects are the following:

1. On the production:
2. Low quality of production
3. Low productivity
4. Increase in the wastage of material, spoilage/leakage of machinery
5. Increase in the cost of production per unit
6. On the employees:
7. Increase in the rate of absenteeism and turnover
8. Reduction in the level of commitment, sincerity and punctuality
9. Increase in the incidence of accidents
10. Reduction in the level of employee morale.
11. On the managers:
12. Strained superior-subordinate relations.
13. Increase in the degree of supervision and control.
14. Increase in indiscipline cases
15. Increase in unrest and thereby machinery to maintain industrial peace

Need for a Formal Procedure to Handle Grievances:

A grievance handling system serves as an outlet for employee frustrations, discontents, and gripes like a pressure release value on a steam boiler. Employees do not have to keep their frustrations bottled up until eventually discontent causes explosion.

The existence of an effective grievance procedure reduces the need of arbitrary action by supervisors because supervisors know that the employees are able to protect such behavior and make protests to be heard by higher management. The very fact that employees have a right to be heard and are actually heard helps to improve morale. In view of all these, every organization should have a clear-cut proce­dure for grievance handling.

Employee Grievance Handling: Effects

Grievance which indicates discontent and dissatisfaction among employees adversely affects their productivity. In other words, by not initiating timely action to deal with grievance, the organisation tends to lose the productive efforts of the discontented employee. It is indeed unrealistic to assume that an aggrieved or dissatisfied employee will put his or her best efforts on the job. The redressal of the employees’ grievances, therefore, assumes importance.

Following are some effects of grievance handling:

1. It encourages employees to raise concerns without fear of reprisal.
2. It provides a fair and speedy means of dealing with complaints.
3. It prevents minor disagreements developing into more serious disputes.
4. It saves employers time and money as solutions are found for workplace problems. It helps to build an organizational climate based on openness and trust.
5. It is a channel for an aggrieved employee to express and present his grievance.
6. It is an assurance for dispassionate handling of one’s grievance.
7. It provides assurance about the availability of some machinery for prompt handling of grievance.
8. It is a means by which an aggrieved employee can release his feelings of discontent or dissatisfaction with his/her job.

Employee Grievance Handling Importance

Any feeling of discontent or dissatisfaction usually results in definite and considerable losses to employee morale, efficiency and productivity. Grievances generally give rise to unhappiness, frustration, indifference to work and thus affect the interests of the organization very adversely.

Quite often when minor grievances are accumulated, major problems creap in like work-stoppages: strikes, lockouts and other forms of unpredictable eruption causing long-term damage to productivity. Therefore, it becomes extremely essential to handle the grievances at the earliest possible moment.

Human Resource Manager’s role in grievance redressal is significant and to be successful he must know and understand the causes which lie behind grievances and how to set them right. His skill in observation of behaviourism, attitudes and habits of people may be highly useful in exploring early symptoms of changes in individuals due to unexpressed grievances. Attitude surveys also provide clues to actual or probable grievances and their impact on productivity.

With the help of thorough analysis of the nature and pattern of grievances, the causes of employee dissatisfaction can be removed. The HR manager has to probe deeper into the details of grievances and explore the best possible method of settling them.

He has to help the top management and line managers, particularly supervisors, in the formulation and implementation of the policies, programmes and procedures for effective grievance handling. These policies, programmes and procedures are generally known as the grievance redressal procedure.

The importance of grievance handling lies in the fact that grievances can have several effects which are essentially adverse and counterproductive to organizational objectives. As we have seen, these adverse effects include – indiscipline, unrest, low productivity, poor quality of production, increase in wastage and costs, increase in employee turnover, increase in absenteeism, increase in accident-proneness, loss of interest in work and consequent lack of morale and commitment.

Therefore, management must be alert to signs and symptoms of employee dissatisfaction and attempt to uncover root-causes of the ill-feelings so that harmony and productive results can be achieved in the organization.

If managed or handled properly the importance of effective grievance handling would be following:

(a) Relieve employees from mental pains or suffering.

(b) Employees feel satisfied at workplace.

(c) Develop employees’ interest in their jobs.

(d) Sense of belongingness or attachment develops.

(e) Employees become cooperative at work.

(f) Avoid many labour problems in industry.

(g) Industrial disputes and accidents are avoided.

(h) Develop good industrial relations in industry.

(i) Industrial peace and harmony are maintained and developed further.

(j) Performance of employees improves to a good extent

(k) Production volume and quality improve.

(l) Profitability of the company improves.

(m) Overall effectiveness and reputation of the company in business improves.

(n) Reputation of the company in markets improved.

(o) Contributes in development of employees, society and national economy.

Employee Grievance Handling: Merits and Demerits

Merits:

1. Investigate and handle each and every case as though it may eventually result in an arbitration hearing.
2. Talk with the employee about his grievance; give him a good and full hearing.
3. Get the union to identify specific contractual provisions allegedly violated.
4. Enforce the contractual time limits.
5. Comply with the contractual time limits for the company to handle a grievance.
6. Determine whether all the procedural requirements, as dictated by the agreement, have been complied with.
7. Visit the work area where the grievance arose.
8. Determine if there were any witnesses.
9. Examine the relevant contract provisions, and understand the contract thoroughly.
10. Determine if there has been equal treatment of employees.
11. Examine the grievance personal record.
12. Fully examine prior grievance records.
13. Evaluate any political connotations of the grievance.
14. Permit a full hearing on the issues.
15. Identify the relief the union is seeking.
16. Treat the union representative as your equal.
17. Command the respect of the union representatives.
18. Hold your grievance discussions privately.
19. Provide the grievance process to non-union members as well.
20. Satisfy the union’s right to relevant information.
21. Demand that proper productivity levels be maintained during the processing of incentive grievances.
22. Fully inform your own superior of grievance matters.

Demerits:

1. Discuss the case with the union steward alone; the grievant should definitely be there.
2. Make agreements with individuals that are inconsistent with the labour agreement.
3. Apply the grievance remedy to an improper grievance.
4. Hold back the remedy if the company is wrong.
5. Admit the binding effect of a past practice.
6. Relinquish your authority to the union.
7. Settle grievances on the basis of what is fair. Instead, stick to the labour agreement which, after all, should be your standard.
8. Make mutual consent agreements regarding future action.
9. Bargain over items not covered by the contract.
10. Concede implied limitations on your management’s rights.
11. Argue grievance issues of the work premises.
12. Treat as “arbitral” claims demanding the disciplining or discharge of management members.
13. Commit the company in areas beyond your limits of responsibility or familiarity.
14. Give away your copy of the written grievance.
15. Discuss grievances of striking employees during an illegal work stoppage.
16. Settle a grievance when you are in doubt.
17. Support another supervisor in a hopeless case.
18. Refer a grievant to a different form of adjudication.
19. Overlook the precedent value of prior grievance settlement.
20. Give long written grievance answers.
21. Trade a grievance settlement for a grievance withdrawal (or try to “make up” for a bad decision in one grievance by “bending over backwards” in another).
22. Negate the management’s right to promulgate plant rules.
23. Deny grievances on the premise that “your hands have been tied by the management.”
24. Agree to informal amendments in the contract.