Compensation Management

QP.9 Code No. : 4012/N

FACULTY OF MANAGEMENT
MBA III Semester (New) Examination

January - 2012

COMPENSATION MANAGEMENT (HR)

Course No: 3.5.1 Elective-I (HRM) (Minor-I Area)

Time: 3 Hours Note:Answer All the Questions --SECTION-A (10 2 = 20 Marks)

1. Write short notes on the following, (a) The concept of compensation (b) Rewards (c) Incentives (d) Competitive pay (e) (f) Job design Components of cost

Max. Marks: 80

(g) Fringe compensation (h) Compensation package (i) (j) Flexi work Repatriates.

SECTION-B (5 12 = 60 Marks)
Answer All the Questions 2. (a) Discuss the concept of total reward system in an organisation. OR (b) What are the new trends in compensation management? 3. (a) Explain the traditional pay system and modern pay system practices. OR (b) Discuss how to align compensation strategy with HR strategy. 4. (a) Explain compensation surveys and the outcome of it. OR (b) Discuss how to design pay for knowledge workers in an organisation. 5. (a) Explain the components of legally required benefits of employees. OR (b) Discuss totally integrated employee benefit programmes. 6. (a) Explain executive compensation packages of large organisations. OR (b) What are the practices of compensation for expatriates and repatriates?
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QP.10

January-2012 (With Solutions)

SOLUTIONS TO JANUARY-2012 QP
SECTION-A (10 2 = 20 Marks)
Q1. Write short notes on the following : (a) The concept of compensation (f) Components of cost

Answer :
For answer refer Unit-IV, Page No. 4.24, Q.No. 17 (First Para and 4 Points Only).
(g) Fringe Compensation

Answer :
For answer refer Unit-I, Short Notes, Page No. 1.37, Bit No.1.
(b) Rewards

Answer :
For answer refer Unit-IV, Short Notes, Page No. 4.32, Bit No. 3.
(h) Compensation Package

Answer :
For answer refer Unit-I, Page No. 1.19, Q.No.18, (Only First Para Graph).
(c) Incentives

Answer :
For answer refer Unit-I, Page No. 1.10, Q.No. 9, Topic: Compensation Package.
(i) Flexi work

Answer :
For answer refer Unit-II, Short Notes, Page No. 2.49, Bit No.15.
(d) Competitive Pay

Answer :
For answer refer Unit-V, Short Notes, Page No. 5.31, Bit No. 8.
(j) Repatriates

Answer :
For answer refer Unit-III, Page No. 3.17, Q.No. 21, Topic: Market Competitive Compensation System.
(e) Job Design

Answer :
For answer refer Unit-V, Short Notes, Page No. 5.31, Bit No. 7, Topic: Repatriates.

SECTION-B (5 12 = 60 Marks)
Q2. (a) Discuss the concept of total reward system in an organisation.

Answer :
The job design refers to a better job performance, which requires deciding on sequence of job contents. Job design is a logical sequence to job analysis. According to Michael Armstrong The process of deciding on the contents of a job interms of its duties and responsibilities, on the methods to be used in carrying out the job, interms of techniques, systems and procedures and on the relationships that should exist between the job holders and his superiors, subordinates and colleagues. The significance of job design need not be overemphasized. The job design has a impact on organizations and employee objectives. Thus, the design of jobs can help both the organization and its employees achieve their objectives.

Answer :
For answer refer Unit-I, Page No. 1.19, Q.No. 18.
OR (b) What are the new trends in compensation management?

Answer :
Trends in Compensation Management The compensation practices are continuously changing according to the global trends and changing regulations in the country. The following are the new trends in compensation management,

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Compensation Management
1. Many companies are shifting from basic DA, HRA etc., to cost to company basis. The companies are providing gross salaries and leaving the decision of tax planning to the executives. The compensation package of the organisation has to match with the employees need as there is no specific standard package. Multinational companies do not permit manoeuvring through tax planning. They directly compensate by decreasing the number of heads under which payment is to be made. They make significant efforts to minimise tax and maximise profits. The executives are given freedom by the companies to design their package by considering the total cost. According to a study conducted by ABC consultants, it is found that the trend of compensation is to provide composite salaries rather than menu salaries. The companies are willing to pay for the performances of employees. These payments include bonus, generous increments and merit awards. The compensation varies from high and low performers. Perks such as good accommodation; club membership; unlimited medical benefits; furnishing and maintenance of house and holiday trips to abroad or with in the country with family, are provided if they are still taxed. Compensation varies with the age difference in managers. The young managers may opt for cash instead of perks, retirement plans and facilities. The companies which are owned by the families, include most of the personnel from family, especially the top management. Therefore, the salaries of top managers in the family owned firms are more than the salaries of the top managers of multinationals. Increments are not 20% and are from 4 to 7%, and the remaining is coming from fixed and variable increments such as bonus and incentives linked to performance. Industries such as telecom and software are considered as the hottest industries and are providing several benefits to their employees. 10.

QP.11

The other trend is to remain competitive in payment. Therefore, the companies are conducting surveys on salaries regularly for monitoring market movements. The idea is to acquire and retain the best employee. The strategy of competition is to assure employees long-term commitment. The companies are maintaining secrecy regarding the remuneration and reward structure. Age is no longer an obstacle to corporate success. The younger managers who are in the age group of 40-45 years are at the top positions. In many MNCs and software companies, the age of managers who are on senior positions are between 30-40 years. Money is the main factor in motivating the employees of middle and lower level. There is a significant increase in compensation in case of stressful jobs, leadership roles, responsibilities and expectations in traditionally managed companies. An optimized combination of fixed, variable and ESOP compensation system will be suitable to many companies and levels.
(a) Explain the traditional pay system and modern pay system practices.

11. 12.

2.

3.

13. 14.

4.

15.

Q3.

5.

Answer :
Traditional Pay System For answer refer Unit-II, Page No. 2.1, Q.No. 1, Topic: Traditional Pay System. Modern Pay System For answer refer Unit-II, Page Nos. 2.31, 2.3 and 2.35, Q.Nos. 29, Topic: Incentive Plan, Q.No. 4 and Q.No. 32.
OR (b) Discuss how to align compensation strategy with HR strategy.

6.

7.

Answer :
For answer refer Unit-II, Page No. 2.18, Q.No. 19.
Q4. (a) Explain compensation surveys and the outcome of it.

8.

Answer :
Compensation Surveys For answer refer Unit-III, Page No. 3.18, Q.No. 23, Topic: Compensation Survey.

9.

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QP.12

January-2012 (With Solutions)

(b) What are the practices of compensation for expatriates and repatriates?

Outcome of Compensation Surveys Information Compensation surveys aim to provide information about the different elements of compensation like basic pay, allowances, perquisites, incentives, revision rates and payment mode. Selection of Jobs It helps in selecting the jobs which are evaluated by job evaluation programme and are available in other firms in the given field. Units Selected It helps in selecting the units which are equivalent to the firms with respect to the size, nature of industry, location and compensation philosophy. It is significant for a firm to decide the most suitable surveys, as the surveys differ in quality and scope. These surveys are based on the participants, jobs and the suitable labour markets. The results obtained from various surveys are effective and reliable indicators of current market rate. The organization mostly relates its compensation levels to the surveys.
OR (b) Discuss how to design pay for knowledge workers in an organisation.

Answer :
Compensation Practices for Expatriates For answer refer Unit-V, Page No. 5.23, Q.No. 19. Compensation Practices for Repatriates I. (a) Strategies for Posting of Returning Expatriate The firm should position the expatriate in the place of local employee by placing the local employee in other position and by using the experience of returning expatriate. There must be economic security and incentives for remaining with the organisation. The assignment must provide job satisfaction and monetary rewards. The firm should establish new position for matching the new experience of the returning expatriate. The expatriate can be kept on hold,( if he/she agrees to it) in case of unavailability of new position. This solution is for short period. The arrival of the expatriates can be postponed till a new position is created. The firm should provide a different job which gives economic security but not professional challenge. Ways to Integrate a Returning Expatriate Manager Expatriate is not relieved from his job in home country permanently. An other employee is temporarily appointed in his position till he accomplishes his task overseas. After he returns, he gets back to his domestic job. The overseas position is assigned to two managers abroad till the completion of the project. Their jobs are assigned to others temporarily till they come back. The costs are reduced as their families do not shift and there is no replacement. A career growth plan must be developed for each expatriate manager in order to assign the jobs overseas.

(b) (c)

(d) (e) II (a)

Answer :
For answer refer Unit-III, Page No. 3.30, Q.No. 36.
Q5. (a) Explain the components of legally required benefits of employees.

Answer :
For answer refer Unit-IV, Page No. 4.23, Q.No. 16.
OR (b) Discuss totally integrated employee benefit programmes.

Answer :
For answer refer Unit-IV, Page Nos. 4.30, 4.31, Q.Nos.25, 26.
Q6. (a) Explain executive compensation packages of large organisations.

(b)

Answer :
For answer refer Unit-V, Page No. 5.7, Q.No. 7.
OR

(c)

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