Maintenance of harmonious industrial relations is on vital importance for the survival and growth of the industrial enterprise. Good industrial relations result in increased efficiency and hence prosperity, reduced turnover and other tangible benefits to the organization. The significance of industrial relations can be summarized as below:
- It establishes industrial democracy: Industrial relations means settling employees problems through collective bargaining, mutual cooperation and mutual agreement amongst the parties i.e., management and employees unions. This helps in establishing industrial democracy in the organization which motivates them to contribute their best to the growth and prosperity of the organization.
- It contributes to economic growth and development: Good industrial relations lead to increased efficiency and hence higher productivity and income. This will result in economic development of the country.
- It improves morale of the work force: Good industrial relations, built-in mutual cooperation and common agreed approach motivate one to contribute one’s best, result in higher productivity and hence income, give more job satisfaction and help improve the morale of the workers.
- It ensures optimum use of scare resources: Good and harmonious industrial relations create a sense of belongingness and group-cohesiveness among workers, and also a congenial environment resulting in less industrial unrest, grievances and disputes. This will ensure optimum use of resources, both human and materials, eliminating all types of wastage.
- It discourages unfair practices on the part of both management and unions: Industrial relations involve setting up a machinery to solve problems confronted by management and employees through mutual agreement to which both these parties are bound. This results in banning of the unfair practices being used by employers or trade unions.
- It prompts enactment of sound labor legislation: Industrial relations necessitate passing of certain labor laws to protect and promote the welfare of labor and safeguard interests of all the parties against unfair means or practices.
- It facilitates change: Good industrial relations help in improvement of cooperation, team work, performance and productivity and hence in taking full advantages of modern inventions, innovations and other scientific and technological advances. It helps the work force to adjust themselves to change easily and quickly