Compensation Management

Q1.a. What is the role of compensation and rewards in modern organization? What arethe advantages of a fair compensation system? Ans1a. Role of Compensation and Reward in Organization : Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e Men, Material, Mac ine and Money, Men as been most important factor, it is impossible to imagine a business process wit out Men. !and, !abor, Capital and "rganization are four ma#or factors of production. $very factor contributes to t e process of production%business. &t e'pects return from t e business process suc as Rent is t e return e'pected by t e !andlord. similarly Capitalist e'pects &nterest and "rganizers i.e $ntrepreneur e'pects profits. ( e labour e'pects wages from t e process. &t is evident t at ot er factors are in) uman factors and as suc labour plays vital role in bringing about t e process of production%business in motion. ( e ot er factors being uman, as e'pectations, emotions, ambitions and egos. !abour t erefore e'pects to ave fair s are in t e business%production process. Advantages of Fair Compensation ystem! ( erefore a fair compensation system is a must for every business organization. ( e fair compensation system will elp in t e following: 1. &f an ideal compensation system is designed, it will ave positive impact on t e efficiency and results produced by wor*men. +. Suc system will encourage t e normal wor*er to perform better and ac ieve t e standards fi'ed. ,. t is system will encourage t e process of #ob evaluation. &t will also elp in setting up an ideal #ob evaluation, w ic will ave transparency, and t e standards fi'ing would be more realistic and ac ievable. -. Suc a system would be well defined and uniform. &t will be apply to all t e levels of t e organization as a general system. .. ( e system would be simple and fle'ible so t at every wor*er%recipient would be able to compute is own compensation receivable. /. Suc system would be easy to implement, so t at it would not penalize t e wor*ers for t e reasons beyond t eir control and would not result in e'ploitation of wor*ers. 0. &t will raise t e morale, efficiency and cooperation among t e wor*ers. &t, being #ust and fair would provide satisfaction to t e wor*ers. 1. Suc system would elp management in complying wit t e various labor acts. 2. Suc system would also bring about amicable settlement of disputes between t e wor*men union and management. 13. ( e system would embody itself t e principle of e4ual wor* e4ual wages. $ncouragement for t ose w o perform better and opportunities for t ose w o wis to e'cel.

1". #$plain the need for designing of compensation %olicy. What is the importance of compensation system in "&siness organizations? Ans1b. After going t roug t e role and essentials of a sound compensation system, it becomes imperative t at every business organization s ould be set up for itself a proper Compensation 5olicy. ( e Management of t e organization must ave w well)designed Compensation 5olicy. ( e policy calls for deciding t e criteria for promotions, up)gradations etc. &t would also be necessary to fi' up t e standard e'pectations from eac and every wor*men%employee. ( e policy s ould determine t e norms to be followed for 5erformance Appraisal or 6ob $valuation. &t s ould also c al* out t e need for training, provisions for fringe benefits, welfare sc emes etc. &t must prescribe t e manner in w ic suc benefits would be e'tended and levels wit in t e organization to w om suc benefits are e'tendable. ( e incentive sc emes and its details, 5ay pac*age structure, (a' implications etc. are matters of concern w ile designing t e compensation 5olicy. 'mportance of Compensation ( R#WRA) ystem in "&siness organizations. Money ma*es t e mare go is t e proverb. &t olds good for all t e factors participating in t e business process e'pects its fair s are of prosperity of t e business. Compensation% Reward System plays a vital role in t e business organization. And its importance can be very well ascertained as follows: 1. sound Compensation%Reward System brings amicability and peace in t e relations ip of employer and employees. +. ( e system brings out t e best out of every employee in t e organization. &t aims at creating a ealt y competition among t em. And as suc , encourages t em to wor* ard and efficiently. ,. ( e system provides ade4uate opportunities to t ose w o wis to perform better. ( e system provides growt and advancement opportunities to t e deserving employees. -. ( e system up olds t e principle of e4ual wages. &t provides transparency and parity too. .. ( e perfect Compensation system provides platform for appy and satisfied wor*force.. t is minimizes t e labour turnover. ( e organization en#oys t e stability. /. ( e organization is able to retain t e best talent by providing t em ade4uate compensation t ereby stopping t em from switc ing over to anot er #ob. 0. ( e business organization can t in* of e'pansion and growt if it as t e support of s*illful, talented and appy wor*force. 1. ( e sound Compensation system is allmar* of "rganization7s success and prosperity. ( e success and stability of organization is measured wit pay)pac*age it provides to its employees.

2. 8ot employer and employees get benefited because of t e sound Compensation System. 13. A sound Compensation System elps t e organization *eep pace wit c anging environment. &t elps t e organization to cope up wit t e wage levels in neig boring industries. 11. Sound Compensation System minimizes t e complaints from t e employees, provides t em t e congenial wor* environment to perform better and sets up for t em t e targets to be ac ieved. 9efinite targets elp employees *now t eir role in t e organization, w ic minimize wastage, and en ance overall efficiency. &t also elps organization to reduce t e cost of production and ma'imize profits.

Q*.a+ What is the concept of Cost? What are the different elements of cost? Ans+a. Cost is t e basic amount of e'penses a businessman is li*ely to incur to be able to manufacture or process one unit of proposed product. 5rior to starting of any business, a businessman as to prepare a roug s*etc of t e product e wants to produce. And e as to estimate amount of money e is li*ely to spend to be able to produce #ust one unit of suc proposed product. ( e product is made up only after spending some sums of money on raw material, labour, e'penses for electricity, transportation, pac*ing and pac*aging as well as advertisement and sales promotion. ( e most important consideration a businessman as w ile t in*ing about production of any goods and services for is business is t e operational potion of is business. :e as to t in* of two most important elements of money management viz. 1. ( e cost of is product or services +. And t e budget of is business activity ( e necessary data is to be collected to be able to estimate t e elements of e'penditure re4uired to be incurred will definitely focus on t e ob#ective of arriving at t e cost unit of is product or cost of is service t at e intends to render. Cost of is goods and service is t e starting point to e'ercise control over is finances. A businessman t erefore needs to *now t e elements of t e cost of goods and services e intends to manufacture%render. ;arious Cost Concepts%$lements of cost: ( e elements of cost are:) 1< Material +< !abour ,< $'penses ( e material t at is directly re4uired for t e actual production of goods and services, t e value for suc direct material constitutes important part of cost of production. !abor t at would be directly engaged wit t e production of goods%services will be yet anot er constituent of t e cost. And t e e'penses t at are directly related to suc production are also essential element of cost of product or services. ( e total of t e 9irect Material, 9irect !abour,nad 9irect $'penses will be %rime cost. &ndirect Material, &ndirect !abour and &ndirect $'penses added to prime cost wit ot er elements of e'penses, will provide t e businessman wit t e ,O,A- CO , OF %RO).C,'O/. ( e businessman as to decide t e percentage of profits e wis es to earn over ands above t e cost of production, additions of w ic s all ensure (:$ S$!!&=> 5R&C$ of t e product. ( e business t erefore needs to decide in advance w at s ould be t e price of is product and services.

( e business is a process t at as to be *ept continuously monitored. A compre ensive Cost control e'ercise ensures t e costs and t e resources in t e form of money would be definitely utilized in most economical and efficient manner. ( e indirect material, labour and e'penses are also re4uired to be incurred since its not #ust production, staff or not #ut raw material enables t e business enterprise to produce t e goods and services. ?or e'ample accounting staff, administrative staff, store wor*ers, elpers also elp in completing t e production process. And ence , t e material , labour and e'penses, w ic are indirect in nature still constitute t e element of e'penses and t erefore part of cost pf t e product. ( ese &ndirect Material , !abour and $'penses elp in arriving at w at one can call cost of production. Q*". What is la"o&r t&rnover? #$plain vario&s ca&ses for la"o&r t&rnover. What are the effects of la"o&r t&rnover? 0ow is it meas&red? Ans. +b. !abour (urnover : !abour (urnover is national problem of evry country and leads to ig costs and low productivity. ( e e'tend of labour turnover varies according to industry, proportion of male and female in labour force, Structure of employment in t e country, and p ysical condition wit in a particular organization. A t oroug understanding of t e causes of labour turnover and analysis and comparison of coat of suc turnover may elp in controlling t e situation. (urnover means a c ang. @e often observe t at eit er a friend or relative of us c ange is #ob. @ en e c anges t e #ob e leaves is original company say AB7 and #oins a new company say AC7. &n t is case, t is c ange as twofold effect. Company AB7 strengt of wor*ers%employees as been c anged wit reduction by one number and for company CD t ere is c ange because of additional one number. ( us, any c ange in t e composition of strengt or number of wor*ers or employees is *nown as !abour (urnoer. &t can be defined as t e Ac ange or rate of c ange in t e wor*ing force of t e organization during a particular time period. Causes of !abour (urnover. ( ere are various reasons on account of w ic for additional employee t e reasons can be: 1. +. ,. -. .. an employee leaves. :owever

$'pansion of departmental functions and activities &ncrease & production facilities and target of ig er output. Creation of new level of management in t e organization structure. C ange in tec nology, process, met ods and operations C ange in legal provisions

/. =ew activities, pro#ect ta*en up by t e organization. 0. 9iversification into new product lines or services. 1. Mergers and Ac4uisitions. 2. =ew services re4uired by t e organization. 13. &n ouse programs of training 11. Replacement in place of old employee. Causes of labour turnover can be classified into two:) a. Avoidable causes: Ensatisfactory pay pac*age, Absence of #ob satisfaction, Monotony in t e wor*, unsafe or ris*y #ob, long wor*ing ours, En ealt y relations ip, unfair treatment from management, !ac* of scope for self development, Absence of :R9 functions, feeling of insecurity. b. Enavoidable causes: 8etter prospect, 9eat , Retirement, s ift from one place to anot er, Accidents, =ational Service, (ransport problem, ?amily problem, 9ismissal, 5romotion. >enerally a good organization prepares a report on labour and every mont it is submitted to policy ma*ing aut orities. Measurement of !abour (urnover: ( ere are two parts of !abor turnover. @ en t e employee leaves t e organization e gets separated from t e wor*force. ( us an outgoing employee on account of registration, transfer, promotion results into separation from t e present wor* force. ( e second part is replacement of an employee by anot er employee. Many times t e separated employee may not get replaced. ( erefore w ile measuring labour turnover t e formula is to be selected according to t e c oice of t e interest of t e management . ( e labour turnover can be e'pressed by using any one met od. 8y using following formula we get t e rate of labour turnover and it is e'pressed as percentage. 1. Separation Met od% Rate: =umber of employees separated in a period Average number of employees in t e period $ 111

@ ere, Average =umberFG =umber of employees at t e beginning H =umber of employees at. t e end<%+ +. Replacement Met od%Rate:

=umber of employees replaced in a period $ 111 Average number of employees in t e period G:ere only t ose w o are replaced, t at number are to be considered. Suppose 133 employees are separated owever only .3 are replaced, t en only .3 to be considered.< +. ?lu' Met od% Rate: ( is sis combined measure of bot separation and replacement. =umber of employees separated H =umber of employees replaced $ 111 Average number of employees in t e period. Average number of employees in t e period.

I-a. @ at are different compensation systemsJ Ans-a. ;arious Compensation Systems ( ere are basically two compensation system viz. 8asis (ime Rate and 5iece Rate. ( eses two systems are devised to ma*e payment to wor*ers of different s*ills, efficiency levels. &ts is meant for ma*ing payment, w ic s ould ade4uate compensate t e wor*er for is efforts. ,he Compensation ystem

(ime Rate

5iece rate

8onus

5rofit s aring &ndirect Monetary &ncentive

1. (ime Rate System: ( is system is divided into t ree categories. ,ime Rates "rdinary level :ig @age !evel >raduated (ime Rates

Ordinary -evel! &t is calculated on time Gdaily, mont ly, wee*ly etc.<( e formula for calculation of salary is Rate per ho&r 2 0o&rs wor3ed 4 #arnings 5R%0 2 0W4#+. 0igh Wage -evel ! &t is calculated on ourly basis put over time is not paid. ( e formula for calculation of salary is R%0 2 0W 4 # 6rad&ate ystem! 5ayment : t e basis is lin*ed wit dearness cost of living. ( e inde' of cost of living is varying and t at is considered for calculating t e remuneration. ?ormula: 8asic Salary is Rs. +,333%) and Cost of living &nde' G9.A< is 133K t en, Rs +333H133K of Rs +333 as cost of living is added, t us total remuneration is Rs. -333%). &t after / mont s, cost of living inde' c ange 1.K. ( en basic salary H 1.3K of basic salary i.e Rs ,,333%) will ma*e it Rs, .333.

+. 5iece Rate% 5ayment Rate G 5ayment by Results< ystem of %iece Rate 5 %ayment "y Res&lts+

Straig t 5iece Rate Rate

5iece L (ime Combination

9ifferential

5iece

(aylor System

Merric* System

>antt (as* System

traight %iece Rate! 5ayment : ?lat rate is applicable per unit, w ic spent is not considered. ?ormula: 55R B " F $arnings.

is predetermined. ( e time

%iece Rate and ,ime Rate Com"inations! 5ayment: &t is a dual rate system, designed to perfect inefficient wor*ers. ( e wor*er is ensured to get t e mi2nimum payment. &f t e payment is calculated on t e basis of piece rate guarantees and number of pieces fall below t e minimum wages guaranteed, e is paid by time Rate. )ifferential %iece rate! 5ayment: &n favour of piece rate system, minimum wages were assured. :owever, under t is system, instead of combining time)rate and piece)rate, t ere are dual rates for different efficiency level. ( e purpose be ind *eeping ig piece rate for ig er efficiency is as t e level of production increases, t e cost per unit falls. -. 7on&s! 8onus is given by t e company to t eir employees as a reward. &t is been fi'ed by t e government i. e 1.,,K. 8onus encourages t e employees to wor* ard. &t is a motivating factor for t e employees to improve t eir efficiency. 8. %rofit haring!

5rofit S aring is t e most motivating factor. @ en t e company ma*es profit it gives some *ind of s are to t eir employees as a Annual increment. ( is elps to motive employees to wor* ard and get more increment.

/.

'ndirect

9onetary 'ncentive !

&ndirect Monetary &ncentives li*e traveling allowance, :RA, 9earness allowance, medical facility, etc are very motivating for t e employees.

Q:". )isting&ish "etween of ,ime rate and piece rate system. Ans.-b. =o. 1. 5articular 9efinition (ime Rate System @ en t e payment of wages is made to employees irrespective of t e production t e system is called (ime Rate System. Attendance time "vertime at rate 5iece Rate System @ en t e employee is paid on t e basis of output%units produced%completed and predetermined rate for t e same irrespective of spent for t e wor* is called piece rate system. 5roduction %"utput ig er Additional output at ig er piece rate Enits produced ' 5iece rate F $arning GE5 B 5R F $< ( e wor* s ould be measurable in 4uantitative terms. $.g. winding of transformers, pac*ing articles in plastic bags.

+. ,. -. ..

Significant factor Additional payment component ?ormula 5re)re4uisite

/.

Suitability &ndustries

:ours wor*ed ' rate per :ourF $arning G:@ B R5: F $< ( e wor* is of t e nature, w ic cannot be measured, in 4uantitative terms, e.g. 5reparing engineering drawing of a #ob. Supervision of t e wo*. to 5erformance is not possible to measure accurately. @ ere #obs involves art and s*ill, li*e ornament ma*ing, fas ion designing, furniture ma*ing etc.

@ ere precisely t e wor* can be measured. @ ere t e #ob is to stereotype nature G Assembly of parts<.

0.

@or* nature

(o be performed wit >enerally mac ines and intervals. e4uipments, wit out intervals !ow Ens*illed !ow

manually,

wit

1.

2. 13. 11. 1+.

@or*ers a. !iterary level :ig b. S*ill :ig ly S*illed c. =eed of managerial ability d. Creativity e. (enure f. 6ob Satisfaction g. Responsibility &ncentive paid by :ig er tome rate 8enefits Cost Advantages

:ig rate for additional output "f all t ese ;ery low :ig cost, fi'ed cost !ow cost, variable cost Consistency, loyalty Speedy wor* wit integration ad#ustments.

Q;a. Write a note on elements or ingredients of a good wage plan. Ans / a. $lements or &ngredients of a >ood @age 5lan:) 8efore we discuss t ese two plans, it would be fruitful to *now t e ingredients of a good wage plan. ( ese are:) 1. &t s ould be easily understandable i.e all t e employees s ould easily understand w at t ey are to get for t eir wor*. ( ey s ould be instructed in ow t e wage plan wor*s. +. &t s ould be capable of easy computation i.e. it s ould be sufficiently simple to permit 4uic* calculation. Mat ematical tables may be supplied, by reference to w ic calculations can be 4uic*ly made. ,. &t s ould be capable of effectively motivating t e employees, i.e it s ould provide an incentive for wor*. &f bot t e 4uality and 4uantity of wor* are to be stressed at t e same time, a plan s ould be selected t at will not unduly influence t e wor*er to wor* too fast or to become careless about 4uality. -. &t s ould provide for remuneration to employees as soon as possible after t e effort as been made. 9aily or wee*ly payment of wage would be preferable to induce employees to wor*. .. &t s ould be relatively stable rat er t an fre4uently varying so t at employees are assured of a stable amount of money.

Q;". What are the reasons or factors affecting wage differentials? Ans/b. @age differ in different employments or occupations, industries and localities, and also between persons in t e same employment or grade. "ne t erefore comes across suc terms as occupational wage differentials. @age differentials ave been classified into t ree categories: ?irst, t e differentials t at can be attributed to imperfections in t e employment mar*ets, suc as t e limited *nowledge of wor*ers in regard to alternative #ob opportunities available else w ere, obstacles to geograp ical, occupational or inter)firm mobility of wor*ers, or time lags in t e ad#ustments of resource distribution and c anges in t e scope and structure of economic activities. $'amples of suc wage differentials are inter)industry, inter firm and geograp ical or inter)area wage differentials. Second, t e wage differentials w ic originate in social values and pre#udices and w ic are deeper and more persistent t an economic factors. @age differentials by se', age, status or et nic origin belong to t is category. ( ird, occupational wage differentials, w ic would e'ist even if employment mar*ets were perfect and social pre#udices were absent. @age differential arises because of t e following factors:) a. 9ifference in t e efficiency of t e labour, w ic may be due to inborn 4uality, education and conditions under w ic wor* may be done. b. ( e e'istence of non)competing group due to difficulties in t e way of t e mobility of labour from low paid to ig paid employments. c. 9ifference in t e agreeableness or social esteem of employment. d. 9ifferences in t e nature of employment and occupations.

Q<a. What are the norms for fi$ation of wages in ind&stry? Ans0a. =orms ?or ?i'ation of @ages &n &ndustry. 1. @ ile computing t e minimum wages, t e standard wor*ing class family s ould be considered as consisting of four consumption units and t e earnings of women, c ildren and adolescents s ould be e'cluded. +. ( e minimum food re4uirements s ould be determined on t e grounds of a net inta*e of +033 calories as laid down by A*royd for a normal adult in &ndia ,. Clot ing needs s ould be establis ed on t e basis of a per capita consumption of 1/./+ meters per year. -. As regards ousing, t e minimum wages s ould be determined from t e standpoint of t e rent corresponding to t e minimum area specified under t e government &ndustrial :ousing Sc eme. .. Miscellaneous e'penditure on items suc fuel, lig ting etc. s ould from +3 per cent of t e total minimum wage. ( e resolution furt er prescribes t at t e aut orities involved in t e issue s ould #ustify any deviation from t ese norms.

Q<". What are the retirement "enefits related enactments in 'ndia? #$plain each of them in detail. Ans0b. Retirement benefits related enactments. $mployees7 5rovident ?und Act ( e Act was passed wit a view to ma*ing some provision for t e future of t e industrial wor*er after is retirement or for is dependents in case of is early deat and inculcating t e abit of saving among t e wor*ers. ( e ob#ect of t e Act is to provide substantial security and timely monetary assistance to industrial employees and t eir families w en t ey are in distress and or unable to meet family and social obligations and to protect t em in old age, disablement, early deat of t e bread winner and in some ot er contingencies. ( e act provides for a sc eme for t e institution of 5rovident ?und for specified classes of employees. Accordingly, t e $mployees7 5rovident ?unds Sc eme was framed under Section . of t e Act, w ic came into force on 1 st =ovember, 12.+.

9ain feat&res of the Act ( e Act is applicable to factorize and ot er establis ments engaged in specified industries classes of establis ment, w ic ave completed t ree years of t eir e'istence and employing +3 or more persons. ( e Act, owever, does not apply to co)operative societies employing less t an .3 persons and wor*ing wit out t e aid of power. An establis ment, w ic is not ot erwise coverable under t e Act, can be covered voluntarily wit t e mutual consent of t e employer and t e ma#ority of t e employees. $mployees drawing a pay not e'ceeding Rs .333 per mont G And now it is amended to Rs. /.33%) recently< are eligible for members ip of t e fund. $very employee employed in or in connection wit t e fund from t e date of #oining t e factory or establis ment. ( e normal rate of contribution to t e provident fund by t e employees and t e employers as prescribed in t e Act is 13 percent of t e pay of t e employees. ( e term MwagesN includes basic wage. 9earness allowance including cas value of food concession and retaining allowance, if any. $mployees7 State &nsurance Sc eme. ( e $mployees7 State &nsurance Sc eme. Act, 12-1 is a pioneering measure in t e field of social insurance in our country. ( is act came into force from 12 t April, 12-1. ( e Sc eme under t e Act aims at providing for certain cas benefits to employees in t e case of sic*ness, maternity, employment in#ury and medical facilities in *ind, and to ma*e provisions for certain ot er matters in relations t ereto. ( e term MemployeeN as wide connotation and would include wit in its scope functions of clerical, manual, tec nical and supervisory. 5ersons w ose remuneration Ge'cluding remuneration for overtime wor*< does not e'ceed Rs /.33 a mont are covered under t e Act. ( e Act does not ma*e any distinction between causal or temporary employees or between tec nical or non)tec nical employees. $mployees employed directly by t e principal employer and t ose employed by or t roug contractor. :owever, t e definition of MemployeeN does not include any member of t e &ndian naval, military or air force. Contribution ( e contribution will ave to be payable for every wage period. $mployees contribution as to be calculated individually for eac employee at t e rate of 1.0.K of t e wages paid%payable for every wage period. 8ut in t e case of employer7s contribution, t e same may be calculated at t e rate of -.0.. of t e total wages paid to all t e employees covered under t e $S& sc eme in eac wage period, rounded to t e ne't ig er multiple of five paise.

( e total value of t e combined employer7s s are as well as t e employee7s s are as to be deposited in State 8an* of &ndia or in any ot er aut orized ban* branc t roug a c allan in 4uadruplicate as per 5erforma on or before t e +1st of t e mont following t e calendar mont in w ic t e wages fall due. An employer w o fails to pay contribution wit in t e periods specified s all be liable to pay of t e default of delay in payment of contribution, and also may be liable for damages for late payment. &t will be in t e interest of t e employers if t e payment of contributions is made wit in t e time limits laid down under t e law so as to avail t e permissible deductions under Section -, of t e &ncome (a' Act. Contribution 5eriod Corresponding 8enefits 5eriod: 1st April to ,3t September 1st 6anuary to ,3t 6une 1st "ctober to ,1st Marc of 1st 6uly to ,1st 9ecember t e year following. &n t e case of a person w o becomes an employee wit in t e meaning of t e act for t e first time, t e first contribution period will commence from t e dare e enters into insurable employment for t e first time in t e contribution period current on t at day and is corresponding benefit period will commence on t e e'piry of nine mont s from t e date of suc employment. ?or e'ample, if a person #oined insurable employment for t e first time, say on . t 6anuary is first contribution period will be from .t 6anuary to ,1st Marc and is corresponding first benefit period will be .t "ctober to ,1st 9ecember.

Q=a. What do yo& mean "y Compensation tr&ct&re? What are the components of modern Compensation str&ct&re? Ans1a. &ntroduction "ne of t e most vital factors t e motivation, retention and t e morale amongst t e employees id t e compensation system, policies and review p ilosop ies of any organization. @ ile t e bargain able employees generally ave t eir unions to negotiate or review terms wit t e Management)w ic are governed by t e !ong (erm Settlements) t e terms of t e managerial employees are mostly seen to be at t e mercy or t e goodwill of t e organization, reviews of w ic may or may not be regular or timely, or often do not seem to meet t e e'pectations or logic of suc employees. Management Compensation t erefore, now plays a very significant part along wit t e wor*ing style and environment, empowerment etc. in t e organization7s success strategy. @ ile individual organizations may ave differences in t eir met odologies based on factors best suited t eir perceived needs, some general directions are evident, and are discussed below. 1. alary> 7asic alary or Consolidated alary continues to remain as t e ma#or component of compensation, t oug Salary Scales are often discarded t ese days, or used only as guides. &ndividual Salary is generally decided initially using t e Scale, but t ereafter performance, contribution to targets or results generated determine t e revisions periodically, w ic may vary widely from individual to individual. ASalary broad andling is t erefore, getting recognition and acceptance. 6radewise flat Allowance are being considered generally, e'cept w ere ta' e'emption benefits are still available, w en t ey continue as separate components. Allowances may be lin*ed to t e Salary as a percentage or by slabs, but preference is for flat amounts, w ic do not increase automatically, and t erefore increase could be discretionary, and t erefore controllable. Reim"&rsements of e$penses incurred on Company wor* as become limited, and in line to conform to t e ta' laws. 8eing actual in most cases, t ey are not considered as apart of t e compensation, unless it is provided towards personal benefits. Ann&al payments! 8onus or Commission, and !eave travel are common features some ta' relief7s apply for t e latter. 7enefits generally comprise of mostly unfurnis ed company owned or leased accommodation, use of company or leased ve icles, medical coverage, retrial benefits covering 5rovident ?und, 5ension or Superannuation and >ratuity, post)retrial medical assistance, easy loan sc emes at low or zero interest rates for ouse building, cars or ve icles, furniture or utility items etc. renting employees owned ousing, club entrance free reimbursement etc. Minor benefits could be provision of security, driver or gardening assistance, else of products or assets at a

*.

?.

:. 8.

concessional rate, relocation and transfer e'penses including admission etc. fees for c ildren, credit card fees, p ones etc. ;. #mployee stoc3 option schemes w ic as been popular in &( industry),is not e'tensively used yet, not being ta' advantageous to ot er industries, nor seen as being very attractive wit lesser growt trends for t eir s are values especially in t e well)establis ed older companies. <. Most companies, as against earlier visible costs, use t e M ,otal cost to the Company@ concept as basis. Cost of t e most benefits are averaged or computed on actual basis, and wit in t e system of t e overall cost, but wit greater compliance to ta' laws, t is bas*et concept is on t e wane. =. Retiral "enefits! Some in recognition of t e past contribution of pensioners, and to partly offset t e inflation post retirement practices periodic improvement in pensions, or a guaranteed grade minimum pension. A. %erformance 7on&s t at do not increase future liability is being given more as a recognition of results generated. &t re4uires transparent, balanced and fair systems and benc mar*s, and also agree targets by t e managers in advance during planning and review discussions. 11. ?rom t e earlier grade oriented compensation system wit in reasonable boundaries, compensation often as to be somew at tailor made for specialist or *ey contributors to retain t em in t e very volatile #ob mar*et. 11. Compensation review periods ave become annual generally and sometimes oftener, as compared to every t ree to five years earlier, in t e fast c anging mar*et situation. 1*. Retention strategies employed are generally t e attractive interest free or at low rates for loans, on w ic mar*et rate of interest may apply on early e'it, renting employee owned property to set off repayment of loans, 4ualifying period s or attractive service benefits added to t e retrial benefits or post retirement benefits etc. (o summarize, t e need to regularly carry out detailed compensation reviews bot wit in or wit out, and wit full support and commitment from t e top is essential. "penness and transparency are important to t e mangers in t e very sensitive and personal issue of management remuneration, and t erefore policies and practices s ould matc . ( e remuneration and t e system ave to be, and seen to be, fair and #ust, non bureaucratic and dynamic, and w ic dealt wit uman feelings and necessary speed, still remain competitively attractive.

Q=". #$plain the importance of salary s&rvey. What are the o"Bectives of s&ch a s&rvey? Ans1b. Salary Survey becomes immensely important. &t as following twin ob#ectives. 1. (o identity t e elements of dimension of managerial compensation in t e region, neig bouring industries and economy as a w ole. +. (o present t e complete pay)pac*ages)covering not #ust salary and per4uisites, but also non)monetary benefits, ranging from ousing facilities and furnis ing allowances to overseas travel facilities and e4uity participation sc emes)earned by mangers, rat er t an only t e monetary components, w ic are often misleadingly low.

QAa. What are the iss&es related to Compensation in service( 0ospitality ind&stry. Ans2a. &ssues related to Compensation in Service%:ospitality &ndustry: 1. (ypes of staff%wor*men employed, t eir s*ill sets and t eir e'pectations as against salaries%wages offered in neig bouring units. +. Size of t e organization, its organization structure and volume of transactions. ,. ( e customer base, customer7s e'pectations and t e seasonal influ' due to factors li*e vacations, monsoon, festivals, olidays, c anging abits of tourists etc. -. $mployee turnover in Service &ndustry. .. Availability of t e re4uired manpower . /. >overnment 5olicies in relation to suc industries. 0. !ocal%State ta' structure and ot er regulatory rules affecting t e industry. 1. ( e up)gradation of t e *nowledge base of employees, training and development activities as well as availability of t e ;ocational (raining &nstitute imparting re4uired *nowledge to new%budding or aspiring persons wanting to get employed in suc industries. 2. 9ifficulties in mar*eting t e service i.e, Service mar*eting: &t is difficult to convince t e customer about need for suc service.

QA".#$plain the findings of wage and salary administration in 0ospitality ind&stry? Ans2b. ( e administration of wages and salary is t e most important tas* in personnel)administration. Mere determination of t e wage structure is not enoug D it must be properly implemented and administered. @age survey, wage plans and #ob evaluation are t e t ree important met ods used for t is purpose. ( ese met ods ave to be applied wit prudence. @age and salary are also sub#ect to a variety of legislation and in t is conte't, compliance wit e'isting legislative measures is very important. ( e aim of a wage and salary policy is to recognize t e value of eac #ob, provide stability in earning, allow individuals to reac full earning potential and to ensure t at all staff s are in t e organization7s prosperity. @age levels in a organization are determined by factors li*e t e organization7s ability to pay, supply and demand of labour, #ob re4uirement, cost of living inde', prevailing wage rate trade union bargaining power, psyc ological and social factors. Suitable levels ave to be set after consideration of all t ese factors. ( erefore an attempt was made to assess t e main consideration for determining t e wage and salary structure in t e selected otel units. Competition demands ad erence to t e same relative wage level, and trade union encourage t is practice so t at t eir members can ave e4ual pay for e4ual wor* and geograp ical difference can be eliminated. 8ut during t e researc it was found t at in certain cities, prevailing wage rates are very low w ereas organizational ability to pay is more. ( is as led to frustration in employees and re4uirements, and cost of living inde' are t e ne't important factors in determining wage and salary structure. @ ereas trade union bargaining power and psyc ological and social factors are only involved in five) star and are 1/ percent only. )&ration of pay revision. 8y *eeping in view t e natural e'pectation of employees to gain ig er wage and salaries as t eir e'perience curve yearly ta*es an upward trend and to avoid frustration in employees on not getting a timely pay i*e, several organization ave decided t e duration of wage an salary revision. &t was also found t at +3 percent and ,3 percent of t e two)star and unapproved otels respectively do ot ave fi'ed duration of increments. -a"o&r t&rnCo&t. &t is seen t at most financially sound organizations ta*e into consideration t e prevailing wage rate factor w ile fi'ing t e wage and salary structure of t eir employees. ( is may engineer a sense of frustration in employees leading to eavy labour turnout. &n t is regard, an attempt was made to find out t e

percent of labour turnout due to non)satisfaction wit structure.

wage and salary

!abour turn)out due to non)satisfaction of wage and salary structure is 13)1. percent in .3 percent of five star otels. &n more t an .3 percent of t e two, t ree four star and eritage t is percentage is between 3). percent and in unapproved otels t e percentage of labour turnout is very low due to loyalty towards t e owner, social causes and illiteracy of t e employees. Concl&sion! :otels must realize t at satisfied uman resource is a valuable assets for t e organization. An organization pay must be competitive and e4uitable. ( is will not only ensure t e cooperation of t eir managerial and non)managerial personnel but also reduce t e percentage of labour turnout beside maintaining industrial peace. &f an organization fails to do so, it attracts criticism from social reformers and trade unions. ( erefore t e business organization must develop a balanced pac*age of wage and salary administration in a most appropriate and effective manner.

Q11a. What are the aspects of man&fact&ring or engineering ind&stries compensation s&rvey. Ans 13a. ?ollowing aspects were observed w ile determining pay ranges : 1. &t is important to *eep in mind t at t ere is an ade4uate differential between supervisors and subordinates)w et er t ey are paid under t e same pay plan or under different ones. +. @ en t e pay)range of one group is c anged, e4ual attention must be given to t e pay level of t e ot er. ,. 8ecause of t e continuous rise is wage and salary levels, a rise resulting from a variety of environmental pressures, considerable attention must be given to andling upward c anges in wages structure. Some firms give general percentage or Macross t e boardN pay increase based on merit or lengt of service. ( e sound t ing is to ma*e general ad#ustments in wage structure according to t e price inde' number. -. ( e e'isting pay structure s ould be regularly reviewed and revised. ( is will ma*e #ob evaluation programme more acceptable to employees. .. Regional differences in wages s ould invariably be maintained. ?orces t at favour regional differences between areas, added sources of income, or c aracteristics G rural versus urban or industrial<, seasonal occupations as in agriculture versus stable occupations. :owever , it was observed t at, several forces wor* to level t ese differences. ( e forces t at favour uniformity in wages are: ig mobility between regions and %or employees, access to timely, reliable information, wide spread unionization efforts Goften along industry%occupational lines.< Q11.". What are the factors that infl&ence wage and salary str&ct&re in man&fact&ring ind&stries. Asn13b. ?actors t at were usually ta*en into consideration for wage and salary administration are: 1. ( e organization7s ability to pay +. Supply and demand for labour ,. ( e prevailing mar*et rate -. ( e cost of living .. !iving wage /. 5roductivity 0. (rade Enion7s bargaining power 1. 6ob re4uirements 2. Managerial attitudes and 13. 5syc ological and sociological factors. 1. ( e organization7s ability to pay : @age increases were organizations, w ic could afford t em. Companies t at and t erefore, ig profits tended to pay ig er wages t running at a loss or earning low profits because of t given by t ose ave good sales an t ose w ic e ig cost of

production or low sales. All employers, irrespective of t eir profits or losses, ad opted to pay no less t an t eir competitors and needed pay no more if t ey wis ed to attract and *eep wor*ers. &n t e long run, t e ability to pay no more if t ey wis ed to attract and *eep wor*ers. &n t e long run, t e ability to pay is very important. Marginal firms and non) profit organizations Gli*e ospitals and educational institutions< paid relatively low wages because of low or no profits. +. Supply and 9emand of labour: ( e labour mar*et conditions or supply and demand forces operated at t e national, regional and local levels, and determine organizational wage structure and level. &f t e demand for certain s*ills and t e supply was low, t e results was a rise in t e price to be paid for t ese s*ills. ( e ot er alternative was to pay ig er wages if t e labour supply was scare, and lower wages w en it was e'cessive. ,. 5revailing Mar*et rate: ( is is also *nown as t e Acomparable wage7 or Agoing wage rate7 and was most widely used criterion. An organization7s compensation policies generally tended to conform to t e wage Orates payable by t e industry and t e community. &t was observed: A Some companies paid on t e ig side of t e mar*et in order to obtain goodwill or to insure and ade4uate supply of labour, w ile ot er organizations paid lower wages because economically t ey ad to, or because by lowering iring re4uirements t ey could *eep #obs ade4uately manned.N -. ( e cost of living: t e cost of living pay criterion is usually regarded as an automatic minimum e4uity pay criterion. ( is criterion called for pay ad#ustments based on increases of decreases in an acceptable cost of living inde'. &n recognition of t e influence of t e cost of living, Mescalator clausesN were written into labour contracts. .. ( is criterion means t at wages paid s ould be ade4uate to enable an employee to maintain imself and is family at a reasonable level of e'istence. :owever, employers did not generally favour using t e concept of a living wage as a guide to wage determination because t ey preferred to base t e wages of an employee on is contribution rat er on is need. /. 5roductivity: &t is anot er criterion, and was measured in terms of output per man) our. &t was not due to labour efforts alone. (ec nological improvements, better organization and management, t e development of better met ods of production by labour and management, grater ingenuity and s*ill by labour were all responsible for t e increase of productivity. Actually, productivity measured t e contribution of all t e resource factors men, mac ine, met od, materials and management. 0. (rade Enion7s bargaining power: (rade unions do affect rate of wages. >enerally, t e stronger and more powerful t e trade union, t e ig er

t e wages. A trade union7s bargaining power was often measured in terms of its members ip, its financial strengt and t e nature of its leaders ip. 1. 6ob re4uirements: >enerally, t e more difficult a #ob, t e ig er are t e wages. Measures of #ob difficulty were fre4uently used w en t e relative value of one #ob to anot er in an organization was to be ascertained. 6obs were graded according to t e relative s*ill, effort, responsibility and #ob conditions re4uired. 2. Managerial Attitudes: A (op management7s desire to maintain or en ance t e company7s prestige ad been ma#or factor in t e wage policy of a number of firms. 9esires to improve or maintain morale, to attract ig ) caliber employees, to reduce turnover, and to provide a ig living standard for employees as possible also appeared to be factors in management7s wage policy decisions. 13. 5syc ological and social factors: t eses determined in a significant measure ow ard a person will wor* for t e compensation received or w at pressures e would e'ist to get is compensation increased. 5syc ologically, persons perceived t e level of wages as a measure of success in life, people mig t feel secure, as an inferiority comple', seemed inade4uate or feel t e reverse of all t ese. Sociologically and et ically, people feel t at Me4ual wor* s ould carry e4ual wagesN7 t at Awages s ould be commensurate wit t eir effortsN7 t at M t ey are not e'ploitedN7 and Mt at no distinction is made on t e basis of caste, color, se' or religion.N (o satisfy t e conditions of e4uity, fairness and #ustice, a management s ould ta*e t ese factors into consideration. Conclusion: >enerally engineering industries ad bad patc during last 0 or 1 years. And as suc t e wage restructure programs, wor*er7s education programs and ot er welfare activities are on t e bac*)burner. ( e matters of discussions ad been t e restructure of t e organization or downsizing by resorting to sc emes li*e voluntary retirements etc. $'cept few industrial sectors li*e p armaceuticals, fertilizers or agro)based industries, food industries rest of engineering or manufacturing industries ave resorted to go steady tec ni4ue as far as compensation policies are concerned.

Q11a. What are the o"servations on compensation s&rvey of ',(,elecom ind&stries? Ans11a. t is wasn7t a good year for &( pay pac*ets. 8ut all told, it wasn7t bad year eit er. &ncrements t at big annual oopla of t e industry)lost some of t eir s een despite w ic &( #obs remain among t e best paying in t e country. Consider some numbers)by and large, entry)level salaries for people wit less t an two years7 e'perience range from + to , la* ., wit some development centers of international product companies even offering Rs . la* per year. =early alf t e wor*force wit +). years of e'perience gets between Rs- and Rs. / la* annually. &nfact, if you ignore t e fringe numbers, most &( employees wit +). years e'perience fall in t e Rs +)/ la* income brac*et. 8etween .)4o yrs t e pay pac*et largely ranges from / to 2 la* . After t at salary figures stop ma*ing sense, varying all t e way from 13 to 23 la* per annum for t ose wit over 13 years of e'perience. ( e bad newsJ ( e increment c art is suddenly loo*ing a lot flatter and is li*ely to remain t at way t roug t is year. Salary i*es ad already been affected drastically during t e recent salary survey conducted by a popular magazine of April last year w en t ey went down from an average of -3 K or so to 1. K in most companies. ( is year , t at fall got broad)based. "ver .3 K of &( employees got increments of 1.K or less, compared to ,2K last year. ( is percentage is among t ose w o even got increments in t e first place.

Q11". What is the "&siness concept of )otcom companies? Ans. 11b. ( e business concept of t e 9otcom companies. ( e business concept on w ic dotcoms were founded was to address customer re4uirements at far greatest speeds and greater economy t an traditional Mp ysicalN business. 9otcoms were to supply goods and services to consumers and ot er business wit out incurring uge capital costs. 9irect interactions wit customers and client organizations were e'pected to reduce costs by eliminating intermediaries. ( e p ysical mar*et place was to be transformed into a virtual mar*etplace. ?our 5 ases of 9otcoms: Movement of 5ay. %hase 'C 'deation) At t is stage t e idea for t e company as germi2nated and it being sold to probable financers. ( e focus of t e start up is to obtain venture capital funding and launc t e idea in t e mar*et. ( e start up company is in t e process of recruiting its wor*force C$" downwards. (ypically in t is p ase, cas compensation is *ept low and stoc* options are seen as t e primary means of attracting and retaining talents. %hase ''C )evelopmentC &n t e second p ase, w ic is t e developmental p ase t e company continues to tap its financers for capital. At t is stage t e business is seeing its first real revenue flows. ( e brand is being built up. ( e company is investing eavily to generate awareness of t e company and build t e brands. %hase '''C '%OC &n t e t ird p ase, t e company as become profitable and t e promoters are focused on t e launc of a successful &5". At t e &5" p ase t e company begins to pay at t e mar*et level to retain M*eyN employees. %hase 'DC %ost '%O) &n t e fourt stage, w ic is t e post &5" stage, t e stoc*s of t e company is sub#ect to t e vagaries of t e mar*et. ( e company may or may not continue to attract ig valuations based on its actual and e'pected performance. ( e company as to loo* at a more balanced total rewards pac*age. 9uring t e boom time employees found t e #obs in dotcoms very c allenging and rewarding. ( e upper and middle management of t e old economy companies were being offered C$" and top management positions in t ese dotcoms.

Q1*a. What is incentive? What are the determinants of incentives? Ans 1+Ga< M( e t ings about incentive plan is t at people ta*e notice.Gif you don7t ave t e rig t ob#ective<,you can meet your goal Oand run yourself rig t out of business.N)6im 8ernstein ,C$" >eneral ealt &nc. &f you rely on incentives to direct your team7s efforts, t in*ing up new and different prizes become a #ob in itself. An Aincentive7 or Areward7 can be anyt ing t at attracts a wor*ers attention and stimulates im to wor*. &n ot er words, MAn incentive sc eme is a plan or programmes to motivate individual or group performance. An incentive programme is most fre4uently built on monetary rewards Gincentive pay or monetary bonus <, but may also include a variety of non)monetary rewards or prizes.N "n t e ot er and, t e termN incentive system as a limited meaning t at e'cludes many *inds of inducements offered to people to perform wor*, or to wor* up to or beyond acceptable standards. &t does not include: i< @age salary payments and merit pay, ii< over)time payments, pay for oliday wor* or differential according to s ifts) i.e. all payments w ic could be considered incentives or perform wor* at undesirable timesD iii<premium pay for performing danger tas*s. &t is related wit wage payment plans w ic tie wages directly or indirectly to standard of productivity or to t e profitable of t e organization or to bot criteria.N 9$($RM&=A=(S "? &=C$=(&;$S : ( ese features are contingencies, w ic affect t e suitability and design of incentives to varying degrees. ( e effective use of incentives depends on t ree variables O t e individual, wor* situation, and incentive plan. ,he individ&al and the incentives : 9ifferent people value t ings differently. $nlig tened managers realize t at all people do not attac t e same value to monetary incentives, bonuses, prizes or trips. $mployees view t ese t ings differently because of age, marital status, economic need and future ob#ectives. :owever, even t oug employee7s reactions to incentives vary greatly, incentive must ave some redeeming merits. ( e wor* situations : ( is is made up of four important elements : a< (ec nology ,Mac ine or wor* system ,if speed of e4uipment operation can be varied, it can be establis range of t e incentive b< Satisfying #ob assignments ,a wor*er7s #ob may incorporate a number of activities t at e finds satisfying .c< ?eed bac* ,a wor*er needs to be able to see t e connection between is wor* and rewards. ( ese responses provide important reinforcements. d< $4uity , a wor*er considers fairness or reasonableness as part of t e e'c ange for is wor*. &ncentive plan : &n general ,are important motivators. ( eir effectiveness depends upon t ree factors : drives ,preference value ,and satisfying value of t e goal ob#ective. ?ollowing generalizations are derives from above :

i< ii< iii< iv<

&ncentives ,w et er t ey are monetary or non)monetary , tend to increase t e level of motivation in a person. ?inancial incentive relates more effectively wit basic motivation or deficiency needs. =on)financial incentives are lin*ed more closely wit ig er motivation, or becoming needs. ( e ig er t e position of a person in an organization ierarc y, t e greater is is vulnerability to non)financial incentives.

9eterminants of incentives or rewards can be classifies into: i< 9irect compensation : it includes t e basic salary or wages t at t e individual is entitled to for is #ob, over)time wor* and oliday premium ,bonuses based on performance, profit s aring and opportunities to purc ase stoc* options ets. ii< &ndirect compensation: &t includes protection programme li*e insurance plans, pensions, pay for time related wor*, services and per4uisites. 8ut t ese are maintenance factors t an reward components. Since t ey are made available to all employees, irrespective of performance, t ey will tend to retain people in t e organization but not stimulate t em to greater efforts and ig er performance. Some times, t e rewards are also termed as M&ntrinsicN rewards and M$'trinsicN rewards. ( e former are t ose t at an individual receives for imself. ( ey are largely a result of t e #ob t at t e wor*er does. ( e tec ni4ues of #ob enric ment , s orter wor* wee*s, fle'ible wor* ours ,pro#ect structure , and #ob rotation can offer intrinsic rewards t roug providing interesting and c allenging #obs, and allowing t e mar*et greater freedom.

Q1*". What are the points to "e considere?d for a s&ccessf&l wage incentive plan? Ans 1+b. A success wage incentive plan s ould consist of t e following *ey pointsD 1. ( e management s ould recognize t at t e effectiveness of an incentive depends on t e total situation, w ic includes wor*er)management confidence, relation wit t e trade union, t e 4uality of communication and of supervision and t e traditions in an industry. +. Management s ould not introduce an incentive system until it as ta*en action to ensure full understanding of w at is involved. ( is may call for procedures for t e participation of employees and negotiations wit t e trade union. ,. t e management s ould avoid any action t at may be interrupted as unfair. ( ere must be proper mac inery for andling grievances. ( e management s ould avoid actions t at resemble Mrate cuttingN because of t e need t c ange met ods and rate from time to time. -. &t is essential t at t e management pay in proportion to output, once t is output as risen above t at re4uired amount for guaranteed pay. .. ( e management s ould train supervisors all t e away down t e lines so t at foremen and department managers are able to deal wit problems wit in t eir own departments. /. >reat care s ould be ta*en in setting up standards to avoid rates t at are too loose or too tig t.

Q&e1:5a+! #$plain possi"le inp&ts and o&tp&ts to and from the payroll process. Ans1-Ga<: ( e payroll process is an important function of any business organization. ( is function is andled eit er by uman resource department or finance department .&f t e organization is large in size ,t is function is independently andled .( e ma#or of t e inputs received by t e payroll process are: 1. +. Attendance of every employee for w om payroll is to be processed for t e mont . =ew employee input viz. $mployee =o, =ame, 9ate of #oining ,9ate of birt ,8asic rate of pay, Allowance payable ,:is %:er ban* account =o. w ere is% er salary%wage to be sent, is% er ot er entitlements % eligibilities , annual %mont ly entitlement for any part of compensation administered outside t e payroll process or fle'ible pay pac*et li*e medical reimbursement .!eave travel assistance. 5romotion %&ncrement %Revisions :&nput for promotion, increment and or revision is also to be provided to payroll department basis wit arrears if any will ave to calculated and paid in t e mont under process. ( e input will include employee number ,name , effective date of suc promotion% increment, old designation ,new designation if applicable ,old basic ,new basic, old allowances and new allowances etc. 9etails of per4uisites payable to suc promotees, new entrants etc. Any recovery to be made on account of loss% damage to t e property, any recoveries to be made for any training programs t at were c argeable from eac suc participants etc. 9etails of employee% wor*man left during t e period, is % er last salary% wage payable , period for w ic e%s e is payable, is% er last date i.e. date of leaving% relieving etc. any dues payable to im % er li*e part of entitlement , leave balance , leave en ancement payable , any advice related to >ratuity payable etc. Any ot er payment li*e additional bonus ,special incentives, cas prizes payable t roug payroll is to be sent t roug t e inputs from :R 9epartment. $very input sent from :R 9epartment must ave employee no as a uni4ue code allotted to eac and every employee and inputs must necessarily ave employee no. wit out w ic inputs s all be incomplete. :R 9epartment can also send directives about t e policies designed for various promotions, transfers, per4uisites and suc compensation related matters.

,.

-. .. /.

0. 1.

2.

13. 11.

1+.

:R 9epartment also as to send important communications received wit reference to any c anges in legal provisions of any enactments to w ic payroll process is directly connected . &t must sent communication regarding c ange in cost of living inde' to enable to payroll process calculated dearness allowance correctly if applicable and implement t e same in t e salary payable for t e mont . =ow a days :R department as also to communication and coordinate closely wit payroll department wit special reference to voluntary retirement sc emes. Compensation payable ,(a' deductible and advices to be made to employees concerned as well as management are to be coordinated wit t e elp of payroll department.

Q&e 1:5"+! #$plain how the earnings are comp&ted? Ans 1-Gb<: Computation of earning: =et $arning F >ross $arning )9eduction GA< ( e components of gross earnings are : 8asic Salary 9earness allowance "t er allowance , li*e ouse rent allowance allowance ,"vertime. $'gratia 8onus &ncentives "t er occasional incomes li*e cas rewards. !eave encas ment ,leave travel allowance etc. G8<

,Medical

GC<

Components of deductions : 5rofessional ta' &ncome ta' $ S & contribution pf employee ?ine , leave wit out pay C arges for services provided by t e organization ?or e'am, transport, canteen ousing, furniture, gas, electricity etc. 5remium of !ife &nsurance Corporation. Enion members ip contribution :ousing loan installments Credit society installments "t er ban* loan installments. =et $arning , w ic popularly *nown as ta*e ome salary is wor*ed out as =et $arning F>ross $arning O >ross 9eduction.