Collective Bargaining as a means of Cooperation:
The Case of Nepal
- A GEFONT Paper
Presented by Mr. Govinda Bhattrai
1. Background:
The significance of collective bargaining as a means to develop sound industrial
relation and cooperation cannot be overlooked. However in practice, its role may
differ in degree because of the nature of the economy, work culture, bargaining
strength of the partners and various institutional as well as socio-economic factors.
So far Nepal is concerned, the country is primarily agricultural, dominated by the selfemployment status. Agriculture is in traditional form & technology and organized
modern farms & plantations are not yet developed to a dominant extent. Industrial
and especially the formal organized sector is too small with the viewpoint of its GDP
contribution and level of employment. But the impact of new economic policies enter
first in the industrial & organized sector and adversities do emerge first in this sector.
Therefore, cooperation and sound industrial relations have to be established first in
the organized industrial sector so that a productive system could be developed. The
coverage of collective bargaining has to be extended to include the informal sectors
also. It is because of the fact that labour welfare & social welfare approach have not
gained due emphasis in our national policies. Furthermore, with the worldwide
expansion of liberalization policies, very little social expenditure of government may
face the danger of deduction in Nepal, too. Social security system & network is
almost non-existent in Nepal. Therefore, strengthening unionism and gaining a strong
collective bargaining position is desirable not only with the view point of economic
development, but also with the viewpoint of social balance & social justice.
2. Provisions of the labour laws:
Labour Act 1992 has made a number of provisions in order to systematize the
procedure of collective bargaining. Authentic trade union can directly present the
charter of demand or it can do so by the signature of the majority of the workers
working in the enterprise. Authentic trade union i.e. collective bargaining agent in
accordance with our Trade Union Act 1992, is to be elected at an interval of every
two years by the majority of the workers in the enterprize, because there may be 4
unions, to the maximum, at a time in an enterprize 25% of the total workers can
register enterprize level union]. When CBA tables the charter of demands,
management should invite for table- talks. If the table- talk reaches any negotiation or
agreement, it will be valid for two years. But if, within 21 days, table- talks could not
be arranged or came to a failure, the case will go to the labour office. Even after
entering the labour office, if the two partners - labour and management reach to any
conclusion, government will have to recognize it unconditionally. On the other hand,
when the case enters labour office, tripartite talks will have to be held and if it does
not work, workers are free to give an ultimatum of strike through a secret ballot
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Trade Union Training on Economic and Financial Analyses of Enterprises for Collective Bargaining
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decision of 60% of the workers. Even during lockout and strike, bipartite negotiations
are possible and labour administration of the government, by law, is obliged to
recognize and accept the agreement unconditionally.
3. Practices:
Although modern industrial activities had started in Nepal just after the great
depression of 1929. Prior to the world war second, a number of industries had come
into existence. But collective bargaining practices started from early 1947, when
workers started to unionize themselves and in the effort, the historical first strike
appeared in our industrial scenario. The laws to regulate labour and trade union
aspect were non-existent at that time. Up to 1959, collective bargaining practices
were not within the legal framework and were conducted under the pressure of
practical difficulties. In 1959, The Factory & Factory Workers Act came into existence
and efforts to develop a system was initiated. However, the democratic multiparty
system was put to an end in 1960 and with the ban on political parties, even the trade
unions were banned. Therefore for a long three decades, scattered union activities
were carried on in an underground existence. In 1989, GEFONT as the national
confederation was formed in underground existence and in 1990, workers took part
in democracy movement against the autocratic & dictatorial system. The outcome of
the restoration of democracy in the field of labour were the enactment of Labour Act
1992 and Trade Union Act 1992. These labour laws have started to systematize
collective bargaining and create sound industrial relation in the country. Bu the
present collective bargaining practices are strictly limited to the enterprize level.
Industry level bargaining system is not developed within legal framework. Therefore,
in collective bargaining procedures, enterprize level unions do have the role, whereas
their national federations do not have any role.
Secondly, formal sector is very small in our country. A vast majority of workers is in
informal sectors and mainly in agricultural sector. The work- force engaged in formal
sectors is in-between 7-10 percent of the total work-force. Only 21 percent of the
workforce is in wage employment and the rest 79 percent is self-employed.
Therefore, the present coverage of the labour laws is too limited in extent and hence
the collective bargaining procedures & practices also cover a small portion of the
work- force. Thus, individual bargaining outside the legal guidelines are the common
phenomena.
Thirdly, with the increasing speed of the Globalization & liberalization policies, a
process of informalising the formal sector is gradually sharpening also in Nepal. Subcontracting of work by the big enterprises outside their boundary is gaining
momentum. Similarly the sub-contracting of labour is increasing. The number of
home-based workers is increasing. A process of throwing the masses outside the
social security network is being aggravated. This tendency is clearly visible mainly in
carpet industry in Nepal. Therefore, industry level bargaining system involving the
concerned national federation has become an urgent need today.
4. Possibilities:
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Trade Union Training on Economic and Financial Analyses of Enterprises for Collective Bargaining
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While observing the scenario objectively, both the types of factors - creating
adversities and working favorably - are on the move. On the one hand, most of the
employers are guided by their feudal mentality and have not adopted a dynamic
entrepreneurial culture, so the respect & dignity of labour is not given any
importance. On the other hand, due mainly to liberalization policies adopted under
the conditionalities of IMF\WB without adequately considering our national realities,
employers have focused their whole attention to curtail labour cost in order to gain
high competitiveness. Changes in the terms and modes of employment have
widened the use of sub-contracting and casualization, hence the uncertainty &
insecurity of employment is increasing gradually. Instead of making corrections in
external & internal economies & diseconomies and in managerial efficiency, they are
on the move to in formalize the formal sector so as to minimize their labour cost
Similarly government expenditure on social welfare & social security is negligible. As
a result, working population is subjected to more and more hardships. It will certainly
have a negative impact on cooperation between labour and management and also
hampers the effectiveness of collective bargaining.
Looking from the other angle, positive aspects are also on the move. Effective proworker unionism is being developed and radical political unionism has declined.
Unionization even in unorganized sectors, also in agriculture, is gaining a
considerable speed. Dehumanization efforts are going on, but the process of
strengthening unionism is the major trend in our national scenario. Workers'
education programs are being more and more intensive and qualitative, though the
contribution for WEP by employers and government is almost zero. The process of
revision & amendment of existing labour laws and formulation of new laws is
satisfactory. Employers' mentality is also moving towards a transition from feudal to
dynamic entrepreneurial culture. Involvement of trade unions in policy matters even
in national perspectives is increasing and we are recognized & accepted as social
partner. Finally, the amendment of law in favor of industry level bargaining system is
now our point of exercise. We hope it will have a long-term impact in creating an
environment for sound industrial relation and cooperation. With the massive
unionization of informal sectors, collective bargaining system can be extended to
informal sectors and vast agriculture.
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Trade Union Training on Economic and Financial Analyses of Enterprises for Collective Bargaining
Turin and Tokyo 8/8-2/9/05