Facing a Tough Union Settlement: How Do I Draft a Fair Memorandum of Damages?

Dear All,

Our settlement with the Union is due effective from 01.04.2009. Please provide me with some guidelines for the settlement. The Union has submitted their cost of damages (COD), which is very exorbitant. I have been given the task of drafting the memorandum of damages (MOD). The previous HR personnel have left, so I have nobody to refer to. Please assist me once again.

Regards,
Kumar Manoj

Dear Manoj,

The first and foremost thing that you have to do is calculate the cost of the demands and compare the percentage rise with the current cost to the company. If possible, go back to the previous two settlements and do some research work on them to find out the percentage rise in the previous cases. Take each item one by one and calculate its cost to the company.

For the union, the sky is the limit, so don't get worried about the exorbitant nature of demands given by them. There is always a scope for negotiation, and the union also knows that they won't be getting what they are asking for. That's why they always aim for higher.

After preparing the cost, sit with the higher management and get their approval on how much they are ready to part with for each demand. Remember, unless the higher management knows the cost of COD, they won't be interested in talking to anybody.

Your next step would be to prepare a management proposal for each demand along with a covering letter, get it signed by the competent authority, and pass it to the union. Remember, while preparing the cost of COD, always try to keep your BASIC and DA cost as low as possible. Whatever increase the management is considering should be in items such as HRA, TA, MA, and other salary components that do not have any indirect cost to the company.

Once the negotiation starts, then your real skill and knowledge of labor laws will be tested. Be very careful when you negotiate with the union. Do not underestimate them. In fact, they are really very good with these things. Don't make unnecessary comments that you are not sure of. Your persuasion skills will be tested to the limit. Always support your answers with strong logical and theoretical backup.

At this point, I really envy you. I really love Union management settlements. I have done two settlements and waiting for my third, which is due on 1.4.2010. Please don't hesitate to ask in case you need some suggestions during the process of negotiation. I would be more than happy to help you.

All the best.

Bye.

Regards.

Dear Manoj,

Mr. Awvik has provided you with valid information. I want to add some more points which will be useful for your negotiation.

You should also gather details about similar companies and the business aspect of your company, such as the business conducted in the last agreement period and currently. When considering the cost to the company, ensure everything is converted into financial terms. For instance, if the union requests an extra leave or holiday, it should be quantified in rupees (equivalent to one day's pay).

Develop a thorough network to understand the clear expectations of the employees. Note that staff, executives, and managers will be interested in the benefits extended to the workers and unionized individuals. It's essential to not retreat from the negotiation table; any withdrawal should come from the other party.

Identify the weaknesses of the opposing side and leverage them during negotiations. Address any disruptive behaviors, such as slow-downs, firmly as they can be strong negotiation points.

Document meeting minutes and obtain signatures from the President and general secretary of the union. Form negotiation teams with a maximum of five representatives from both the union and management.

Involve line supervisors in managing situations and gathering input. Maintain influence with top leaders regularly. Secure all necessary legal coverage, like injunction orders, in advance.

Revive any pending actions related to disciplinary issues, as they can serve as leverage. Maintain communication with labor departments and have alternative manpower prepared.

Thank you and regards,
Kameswarao

Dear Manoj,

One more thing, always have the total negotiable amount ready beforehand. I mean the total package that the management is willing to forego, e.g., ₹500, ₹1000, ₹1500, and then distribute it among the various salary components as earlier suggested. Once you get the figure from the management, then you can negotiate according to your favorability.

Regards

Hello Kumar, Awvik, and Kamesrao,

Thanks for the wonderful post on Union settlement. I am a novice in the Union issues. I just have one doubt, what's 'COD' and 'MOD'.

Dear Mr. John,

Very good morning. Thanks for your kind words. The COD is the Charter of Demands submitted by the union and the MOD - actually, it is the expectations of the management. It should be counter demands/expectations submitted to the union by the management on receipt of the document from the union. Normally, these will be related to productivity, timelines, discipline, reduction of equipment downtime, cycle time, less loitering, wasting of time, availability at the work spot, ownership, reduction in absenteeism, safety-related matters, etc., which, in turn, increase productivity, zero accidents, and statutory compliance matters.

Thanks and regards,
Kameswarao