Module 3 mhrm

Module 3

Module Outline

Compensation – Wage And Salary Administration

Executive Compensation Packages Job Evaluation Incentive Schemes And Bonuses Welfare Administration- Employee Welfare

And Benefit Schemes Quality Circles And Quality Of Work Life Employee Morale And Job Satisfaction.

Job Evaluation

The process of analyzing and assessing the various jobs systematically to ascertain their relative worth in an organization

Seeks to determine the relative worth of each job so that salary differentials can be established.

Process of Job Evaluation

Constituting job evaluation committee

Gaining acceptance

Selection of key jobs for evaluation

Job description

Selecting the method of evaluation

Classifying jobs

Installing the program

Periodic review

Methods of job evaluation

Non-quantitative methods

Ranking method Preparation of J.D. Selection of raters Selection of rates & key jobs Ranking of all jobs

Non-quantitative methods

Job grading method Preparation of grade descriptions Selection of key jobs Grading key jobs All the jobs are put in relevant grades or

classification

Quantitative Methods

Point System Types of jobs to be evaluated Number of factors to be used Determination of degrees Assigning of weights Assigning of money value to the points

Quantitative Methods

Factor Comparison MethodMental requirements,

responsibilities, physical requirements, skill & working

conditions Selecting factors to be used Selection of key jobs Ranking of key jobs Valuing the factors Comparison of jobs Establishing wage structure

Compensation – Wage And Salary

Administration

Definitions

Compensation : -Money & extra benefits – base & supplementary

Wages :– direct monetary compensation Wage levels :- the money, an average

worker makes in a geographical area or in this organization

Wage structure :- wage relationships within a particular grouping (according to occupation / organization)

Objectives of Wage & Salary Administration

Establish a fair & equitable compensation – similar pay for similar workAttract competent & qualified personnel

Retain present employees Keep labour & administrative costs in line

Improve motivation & morale Project good image of the company

Establish job sequences & lines of promotion

Minimize the chances of favoritism

Factors influencing wage & salary Administration

External

Demand & Supply Cost of living Trade union’s bargaining

power Government legislation Psychological & social factors Technological development Prevailing market rates

Internal

Ability to buy Job requirements Managerial strategy The employee

(performance, seniority, experience, potential, Luck)

Wage & Salary administration process

1. Job analysis2. Conduct the salary survey 3. Group similar jobs into pay grades (Senior, junior, intermediate & beginner)

4. Price each pay grade (usually happens based on the present pay & the job evaluation results)

Find the average pay for each pay grade

Plot the pay rates for each pay grade

Price the job

Wage & Salary administration process

5. Fine tune pay rates Developing rate ranges Correcting out of line rates To freeze the rate paid to employees in this

grade unless general salary increases bring the other jobs into line with it.

To transfer or promote some or all of the employees involved to jobs for which they can legitimately be paid their current pay rates.

To freeze the rate for some time, during which time the over paid employees should be transferred or promoted. If it cannot be done, then the rate at which these employees are paid is cut to the maximum in the pay range for their pay grade.

6. Wage administration rules

Methods of wage payment

Time wage system Time determine the wages of a person Earnings = T*R (T = Time & R = Rate)Suitability Productivity is not measurable Quality is more important than quantity Individuals does not have any control

over production Close supervision of work is possible Work delays are frequent & beyond the

control of workers

Time wage systems - Merits

Simplicity Security Better quality of goods Support of unions Beneficial for beginners Less wastage

Time wage systems - Demerits

No incentive for efficiency Wastage of time Low production Difficulty to determine labour cost More supervision required Employer – employee trouble


Piece Wage system Payment based on the output produced Rate differs based on the type of workMerits Wages linked to efforts Increase in production Better utilization of equipment Distinction between efficient &

inefficient Less supervision required Effective cost control Better planning & control

Piece Rate system - Demerits

No guarantee of minimum wages Poor quality of goods Not suitable for beginners Deterioration in health Cause of dissatisfaction Opposition from unions Difficulty in fixing piece rates

Types of Piece rate system

Straight piece rate system Increasing piece rate system Decreasing piece rate systemSuitability Where quantity is important than

quality When the work is of repetitive nature When work is standard and flow of

output is continuous Production of a worker can be

separately measured Strict supervision is not possible Production is closely related to human

efforts


Balance or Debt method- Combination of time and piece wage

system The employee will have a fixed time wage

and an alternative piece rate

Executive Compensation

Special features

Not comparable with the normal wage structures

Denied the privilege of having unions

Secrecy is maintained in respect to executive compensation

Pay is not based on individual performance but based on unit or organizational performance

Subject to statutory ceilings

Components of remuneration

1. Salary2. BonusBasic issues in fixing bonus Eligibility Fund size Deciding individual awardsMethods of fixing bonus Split Award method Multiplier method

Components of remuneration

3. Long term incentives Stock Options Phantom Shares. Stock Appreciation rights Performance Shares Performance Units4. Perquisites Normal Perks – P.F., gratuity etc Medical care Legal, tax, financial counseling Facilities for entertaining customers &

for dining out

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Wage Theories

1. Subsistence theory : David Ricardo Price of labour depends Price equals to the amount of commodities required to

feed, clothe a worker and to subsist and perpetuate his race

Labor like any commodity can be bought and sold Supply less : higher than subsistence wage, more

children, back to subsistence wage Supply high : lower than subsistence wage, fewer

children, back to subsistence wage

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Wage Theories

2. Surplus value theory : Karl Marx Labour was to be treated as an article of commerce – purchased on

payment of subsistence price Labour not paid in proportion to the time spent on the job but less Excess amount used for other payments

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Wage Theories

3. Wage fund theory : Adam smith Surplus wealth of the wealthy persons are paid as wages Size of the savings determined the demand for labour

and the wages that could be paid4. Bargaining Theory :

John Davidson Wage is determined based on the bargaining power of

the employees or trade unions

Wage Theories

5. Residual Claimant Theory- Francis A. Walker Labour is a residual claimant After making all the other payments

excess amount is paid as wages

6. Marginal Productivity Wages depend upon the demand for

and supply of labour Wages are based upon the estimate of

the value that will probably be produced by the last or marginal worker

Wage Theories

7. Compensation theory Pay affects employee satisfaction

that affects the employee behaviour As the employees become

dissatisfied with their jobs, their desire for money increases& attractiveness of the job decreases

It can result in employee turn over, absenteeism

Wage Theories

8. Expectancy theory Victor Vroom Proposes that a person will decide to

behave or act in a certain way because they are motivated to select a specific behavior over other behaviors due to what they expect as the result of that selected behavior.

- Three components of Expectancy theory: Expectancy, Instrumentality, and Valence

- 1. Expectancy: Effort → Performance (E→P)2. Instrumentality: Performance → Outcome (P→O)3. Valence- V(R)

- Motivational Force (MF) = Expectancy x Instrumentality x Valence

Wage Theories

9. Equity theory Relates employees behavior to their

perception of equity or non equity of compensation

The pay should be related to the level of work as defined by time

10. Agency theory Assume the employer as the principal

and the employees as the agency Principal has the tendency to minimize

the agency fees Principal must select a contracting

scheme (behavior oriented, outcome oriented – profit sharing, commission)

Wage policy in India

Payment of wages act 1936 Industrial disputes act 1947 Minimum Wages Act 1948 Equal Remuneration Act, 1976 Constitution of India & wage policy

Incentive Schemes

Incentives - Concepts

Monetary benefits paid to the workers in recognition of their outstanding performance

Wage incentives are extra financial motivation. They are designed to stimulate human efforts by rewarding a person, over and above time rated remuneration for improvements in the present or targeted results.

Characteristics of Incentive Schemes

Minimum wages are guaranteed to all workers

An incentive plan may consist of both monetary & non-monetary elements

For successful completion of an incentive plan, the essentials are timing, accuracy & frequency of incentives

Incentive plan should be properly communicated to the employees to encourage them

Essentials of a good incentive plan

1. Suitable climate (Employee – Employer relationship)

2. Worker’s participation3. Simplicity4. Just & equitable5. Organization & method studies6. Scientifically set standards7. Minimum guaranteed wages

Essentials of a good incentive plan

8. No upper limit9. Economical10. Stability11. Comprehensive coverage 12. Conductive to worker’s health &

welfare13. Prompt payment14. Grievance machinery15. Follow-up

Incentive Wage System

Time Based

Individual

•Halsey Plan•Rowan Plan • Emerson

Plan• Bedeaux

Plan

Production Based

Group

• Priestma’s Plan

• Scalon Plan

• Co – Partnership

• Profit Sharing

Tailor’s Differential Piece Rate

SystemGantt’s

Task & Bonus Plan

Time Based Incentive Systems

1. Halsey plan- Designed by F.A. Halsey- I = T*R+(S-T/2)*R- T = Time taken- S = Standard time- R = Hourly rate


2. Rowan Plan

Earnings = T*R (S-T/2)*T*R


Emerson Plan- A standard output is fixed for determining

the efficiency of workers- A worker reaching up to 66.5% of

efficiency is paid only minimum wages and bonus is paid only when his efficiency crosses this limit. the rate of bonus increases with the increase in efficiency)


Bedeaux Plan A supervisor also helps a worker in saving

his time so he is also given some benefit in this method.

The benefit of time saved goes both to the worker and his supervisor in the ratio of ¾ and ¼ th respectively.

PRODUCTION BASED SYSTEMS

Taylor’s Differential Piece-Rate System

The underlying principle of this system is to reward an efficient worker and penalize the inefficient person.

In Taylor’s view, inefficient person has no place in his organization.

The standard time will be fixed for completing a task

If a worker completes the task in the standard time, he is paid at higher rate and lower rate is paid if more than the standard time is taken.

Features of the system: - No minimum wages are guaranteed A standard time fixed Different rates are fixed for taking

standard time or more.

Eg:A standard output of 100 units is fixed in 8 hours time. A rate of 25 p is paid if the output is 100 or more units and 20 p, if production is less than 100 units. Workers A has produced 120 units and B produced 90 units.

The wages to be paid to workers A will be Rs. 30

(120*0.25)The wages to be paid to workers B will be Rs. 18

(90*0.20)

PRODUCTION BASED SYSTEMS

Gantt’s Task and bonus Plan The workers are guaranteed minimum

wages for taking standard time or more. A person taking less than the standard

time gets time wages plus bonus.

Features of the system: - A standard time is fixed for completing

the work. A worker taking standard or more time

gets wages on hourly rate A bonus ranging from 25% to 50 % is paid

for completing the task in less than standard time.

Eg:A standard time of 10 hours is allowed to complete a task and hourly rate is Re.1.

A person completing the task in 10 hours will get Rs 10 as wages.

If the same task is completed in 8 hours then wages will be Rs. 12

(Rs. 8 will be for time spent and Rs. 4 for bonus (taking 50% as the rate of bonus)

Group incentive systems

There may be situations when individual performance may not be measurable.

A number of persons may be associated in completing a task.

The work of one person may be influenced by the work of the other. Under such situations, incentives may be offered for raising group performance.

Scalon Plan

One percent participating bonus for every one percent of increase in productivity.

The entire amount of bonus is not paid every month – a reserve fund is maintained to meet any unexpected increase in labour cost.

In case, this reserve remains unused at the end of the year then this amount is also distributed among employees in the last month of the year and a fresh reserve is created in the New Year.

Priestman’s plan

Under this plan a standard production is fixed for the whole factory.

If productivity exceeds the standard then bonus is paid in accordance with the increase.

In case production does not reach the standard then workers get minimum wages only.

Eg: A standard production of 1,00,000 units is

fixed for the year. Actual production during the year is 1,20,000 units. Since production has gone up by 20% workers will get 20% higher wages as bonus.

Co-partnership

Under this scheme the employees are offered shares of the enterprise at reduced rates.

The payment is also collected in installments.

The employees share profits of the concern as its members

Aim is to make workers feel as a part of the organization and make them understand the viewpoint of the management.

As co-partners they will behave responsibly and will try to make the concern more and more profitable.

Profit sharing

Profit sharing is a method of remuneration under which an employer undertakes to pay his employees a share in the net profits of an enterprise, in addition to regular wages.

LABOUR WELFARE

Concept

Various services, benefits and facilities offered to the employee by the employer.

“labour welfare means anything done for the comfort and improvement of the employees over and above the wages paid which is not a necessity of the industry” –Arthur James Todd

Objectives

To provide better life and health to the labour force.

To make the workers happy, satisfied and efficient.

To improve intellectual, cultural and material conditions of living of the labour and to relieve them from industrial fatigue.

Significance

Benefits to the workers Benefits to the employers Benefits to the society

Types of labour welfare services

Within the organization services (Intra mural) – the services provided within the organization include medical aid, recreational facilities, libraries, canteens, rest rooms, washing and bathing facilities etc.

Outside the organization services (Extra mural) – outside the organization, welfare arrangements include housing accommodation, transport, children’s education, sports fields, leave travel facilities, interest free loans etc.

Statutory provisions concerning employee welfare

Employers are required to provide labour welfare facilities under the following laws

The Factories Act, 1948

Washing facilities Adequate and suitable facilities for

washing shall be provided and maintained for the use of the workers therein.

Separate and adequately screened facilities shall be provided for the use of male and female workers.

Such facilities shall be conveniently accessible and shall be kept clean.

Facilities for storing and drying clothing Suitable places for keeping clothing

not worn during working hours and for the drying of wet clothing.

Facilities for sitting Suitable arrangement for sitting shall

be provided and maintained for all workers obliged to work in a standing position.

The Factories Act, 1948

First aid appliances Canteens Shelters, rest rooms and lunch rooms

In every factory whereas more than 150 workers are ordinarily employed adequate and suitable shelters, rest rooms and a suitable lunch room with provision for drinking water, where workers can eat meals brought by tem, shall be provided and maintained for the use of the workers.

Crèches In every factory where more than 30 women

workers are ordinarily employed, there shall be provided and maintained a suitable room or rooms for the use of children under the age of six years of such women.

Such rooms shall provide adequate accommodation, shall be adequately lighted and ventilated and shall be maintained in a clean and sanitary condition and shall be under the charge of women trained in the care of children and infants.

Welfare officers

ESI ACT, 1948

It is applicable to non-seasonal power using factories employing 10 or more persons and non-power using factories employing 20 or more persons.

The Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatre, road motor transport undertakings and newspaper establishment employing 20 or more persons.

The existing wage-limit for coverage under the Act, is Rs.15000/- per month (with effect from 1.5.2010).

ESI ACT, 1948

1. Medical Benefit Members of IPs family are entitled to free, full and

comprehensive medical care under the Scheme. The package covers all aspects of health care from primary to super specialist facilities.

2. Sickness Benefit3. Enhanced Sickness BenefitFor undergoing sterilization operations for family

planning, Insured Persons are eligible to Enhanced Sickness Benefit at double the rate of sickness benefit

4. Extended Sickness Benefit payable if the IP is suffering from tuberculosis,

leprosy, mental and malignant diseases or certain other long term diseases, after exhausting sickness benefit, which is payable upto 91 days

5. Disablement Benefit Admissible for disablement caused by employment

injury. At the first instance, temporary disablement benefit is payable as long as the temporary disability lasts.

http://esicoimbatore.org/benefits/esic_tdb.htm

ESI ACT, 1948

6. Funeral Expenses Funeral expenses are in the nature of a lump

sum payment7. Dependant BenefitDependant Benefit is payable to dependants

of the Insured Person on account of death of Insured Person while in employment.

8. Maternity benefit Payment of contribution for 70 days in

immediately preceding two consecutive periods.

9. Rehabilitation allowance For each day on which insured person

remains admitted in Artificial limb centre for fixation / repair or replacement of artificial limb.

MATERNITY BENEFIT ACT, 1961

An Act to regulate the employment of women in certain establishments for certain period before and after child-birth and to provide for maternity benefit and certain other benefits.

Women covered by the provisions of ESI cannot claim benefits under this act.

Subject to the provisions of this Act, every woman shall be entitled to, and her employer shall be liable for, the payment of maternity benefit at the rate of the average daily wage for the period of her actual absence, that is to say, the period immediately preceding the day of her delivery, the actual day of her delivery and any period immediately following that day.

The Plantation Labour Act, 1951

The following plantation measures are provided to the plantation workers.

A canteen wherever 150 or more workers are employed.

A crèche, if employing 50 or more women workers.

Recreational facilities for the workers and their children

Educational arrangements in the estate if there are 25 children of workers between the age of 6 and 12

Housing facility for every worker and his family residing in the plantation.

Amenities for the protection of workers from rain or cold etc.

Appointment of welfare officers in plantation employing 300 or more workers.

The Mines Act, 1952

The mine owners are required to make provision for:

Crèches 50 or more women are employed

Shelters for taking food and rest, whenever 150 or more workers are employed.

A canteen whenever 250 or more workers are employed.

First aid boxes and first aid rooms in mines employing more than 150 workers.

Pit head baths equipped with shower baths, sanitary latrines and lockers, separately for male and female workers.

The Motor Transport Workers Act, 1961

Canteens of prescribed standards if employing 100 or more workers.

Clean, ventilated, well lighted and comfortable rest rooms at every place where motor transport workers are required to habitat night.

Uniforms, raincoats to drivers, conductors for protection against rain and cold.

The prescribed amount of washing allowance to the above mentioned staff.

Prescribed medical facilities First aid facilities in every transport vehicle

The Contract Labour Act, 1970

A canteen in every establishment employing 100 or more workers

Rest rooms or other suitable alternative accommodation

Washing facilities First Aid boxes equipped with the

prescribed contents.

The Merchant Shipping Act, 1958

Crew accommodation Supply of sufficient drinking water Supply of necessities like bedding,

towels, mess utensils To supply medicines, medical stores etc Maintenance of proper weights and

measures on board and grant of relief of distressed sea men abroad a ship

Qualified medical officer Provision of educational facilities Establishment of hostels, clubs and

canteen, libraries etc.

The Dock Workers Act, 1958

A laborer who loads and unloads vessels in a port

Amenities provided in the port premises include provision of:

Urinals and latrines Drinking water Washing facilities Bathing facilities Canteen Rest shelters Call stands First aid arrangements

The Dock Workers Act, 1958

Other welfare measures provided are:

Housing Schools Educational facilities Grant of scholarships Libraries Sports and recreation Fair price shops Cooperative societies

Non-statutory / Voluntary Benefits

Basic Pay City compensatory allowance

H.R.A.Conveyance allowance

Fringe benefitsEducational Benefits

Peek paymentsProfit sharingEmployee stock options

Reimbursements LTACoupons

Insurance benefits

Cashless hospitalization Critical illness coverage Inpatient coverage Out-patient coverage Medical insurance Life insurance Accidental death insurance Disability insurance

Retirement Benefits

P.F. Money purchase pension plan Defined benefits plans Profit sharing plans Employee’s family pension scheme, 1971 Voluntary retirement schemes Service gratuity

Flexible Benefits – Cafeteria plans

IRC (Internal Revenue Code), Section 125 (U.S. regulation)

Tax efficient benefits Childcare vouchers Modular plans (predetermined package of

benefits) Salary sacrifice pension contributions

Statutory Support Services

Medical welfare Canteens Safety Security Death Benefits Parking Space cost

Voluntary Support Services

Journal Club Membership Music at workplace Long services awards Suggestion Schemes Library Services Holiday Homes

Approaches to Labour Welfare

Policing Theory Religion theory (Investment & Atonement

Aspect) Philanthropic theory Paternalistic Theory Placating theory Public relations theory Functional Theory Social Theory

QUALITY OF WORKLIFE

Quality of Working Life (QWL)

Refers to the favorableness or un favorableness of the job environment of an organization for its employees.

QWL is a generic term, which covers a person’s feelings about every dimension of his work.

Main aim is to create a work environment where employees work in cooperation with each other and contribute to organizational objectives.

“ QWL is a process of joint decision making, collaborations and building mutual respect between management and employees”

- D.S. Cohan

Principles Principle of security Principle of equity Principle of individualism Principle of democracy

Scope of QWL

The workers expect the following needs to be fulfilled by the organizations:

Compensation- there should be a just an equitable balance between the effort and the reward

Health and safety- the working envt.should be free from all hazards detrimental to the health and safety of the employees.

Job security Job design Social integration-the workers should be

able to feel a sense of identity with the orgn and develop a feeling of self esteem- includes the elimination of discrimination and individualism,

Social relevance of work- an orgn that has greater concern for social causes can improve the QWL

Scope for better career Opportunities

Techniques for improving QWL

Flexible work schedules Job redesign Opportunity for development Autonomous work groups/self managed

work teams Employee’s participation in

management Job security Equitable justice

Quality Circles

is a small group of people who voluntarily perform quality improvement activities at the work place.

Quality circle is a small group of employees in the same work area or doing a similar type of work who voluntarily meet regularly for about an hour every week to identify, analyze and resolve work-related problems, leading to improvement in their quality performance and enrichment of their work life”

Characteristics

Quality circles consist of small groups of people who normally work at the same place and are doing similar work.

These groups meet at regular intervals and discuss problems encountered in quality improvement. Since each people take up the same type of work so their problems are similarly known to all of them.

The quality circles identify the problems first and try to find out the solutions themselves.

Quality circles are voluntary associations of persons having a common cause.

The efforts of quality circles are ultimately directed towards quality improvement on a regular basis.

Benefits

Helps in improving human relations at the work centre.

The participative culture is developed in the organization.

The workers take keen interest in solving their quality problems

It helps in reducing the defects of products/services.

It helps in improving productivity Encourages the attitude of problem

prevention There is an improved communication

between management and employees.

EMPLOYEE MORALE

Morale is an overall attitude of an individual or group towards all aspects of their work.

It is the enthusiasm to accomplish the assigned task. According to Prof. Jucius, morale consists of: What is it? ------It is an attitude of mind, a state of well being, and an

emotional force. What does it do? ------It affects output, the quality of a product,

costs, co-operation, enthusiasm, discipline, initiative and other ingredients of success.

Where dose it reside? ------It resides in the minds and emotions of individuals and in the reactions of their group or groups.

Where does it affect? ------It affects the employees and executives in their interactions. Ultimately it affects consumers and the community.

Whom does it affect? ------ it affects an employee’s group’s who co-operate with the best interests as individuals or groups and the organizations for which they work.

Factors affecting morale

The organization The nature of work The level of satisfaction The level of supervision Concept of self Workers perception of reward

system The employee’s age The employee’s educational

level The employee’s occupational

level The off the job activities of the

employee

JOB SATISFACT

ION

Job satisfaction refers to one’s attitude towards a job

“The extent of positive feelings or attitudes that individuals have towards their jobs.”

-Field man and Arnold “Job satisfaction is the set of favorable or unfavorable feelings with which employees view their work.”

- Keith Davis and Newstorm

FACTORS INFLUENCING JOB

SATISFACTION

ORGAN.FACTORS

WORKENVTAL

FACTORS

WORK ITSELF

PERSONAL FACTORS

JOB SATISFACTION

SALARIES AND SUPERVISION JOB SCOPE AGE & SENIORITYWAGES

PROMOTION WORKGROUP AUTONOMY PERSONALITYCHANGES & FREEDOM

COMPANY WORKING ROLEPOLICIES CONDITIONS CONFLICT

INTERESTING WORK