1

PROJECT REPORT

ON

“COMPENSATION MANAGEMENT”

FOR

ALFA LAVAL (INDIA) LTD.

BY

CHASMEEN R. SHIKALGAR

UNDER THE GUIDENCE OF

PROF. NITESH B. BEHARE

"UNIVERSITY OF PUNE"
IN PARTIAL FULFILLMENT OF THE REQUIREMENT
FOR THE AWARD OF THE DEGREE OF
MASTER OF PERSONAL MANAGEMENT (MPM)
2009 - 2011

THROUGH

INSTITUTE OF BUSINESS MANAGEMENT AND RESEARCH,

WAKAD, PUNE – 411057

 2

CERTIFICATE OF THE GUIDE

This is to certify that the Project work titled “COMPENSATION MANAGEMENT”

done at ALFA LAVAL is a bonafide work carried out by CHASMEEN
SHIKALGAR a student of M.P.M. of INSTITUTE OF BUSINESS MANAGEMENT
AND RESEARCH, Waked, UNIVERSITY OF PUNE, under my guidance and
supervision during the academic year 2009-2011.

Her work was found satisfactory and complete in all respect.

Place: Pune Prof. Nitesh Behare

Date: (PROJECT GUIDE)

 3

DECLARATION

I, CGASMEEN SHIKALGAR a student of M.P.M. (2009-2011), studying at Institute

Of Science, Poona‘s Institute of Business Management & Research (IBMR), Pune.
Solemnly declare that the project work titled “COMPENSATION MANAGEMENT”,
was carried by me in “Alfa Laval” in partial fulfillment of the MPM (Master of
Personnel Management ) programmed under the University of Pune.

This project was undertaken as a part of academic curriculum according to the,

University rule and norms and by no commercial interest and motives. This Work is
not copied and is the output of my personal efforts.

Place: - Pune

Signature

Date: (Chasmeen R. Shikalgar)

 4

CERTIFICATE

To Whom so ever It May Concern

This is certifying that Ms. Chasmeen R. Shikalgar D/o Mr. Razzak Shikalgar
has completed her summer internship for 28/05/2010 to 28/07/2010. The trainee
has completed her project. “COMPENSATION MANAGEMENT”under the
guidance Of Mr. Suhas (Sr. Executive HR. Manager) for partial fulfillment of
which studies in Personnel, M.P.M.2nd semester from I.B.M.R. College Waked
Pune .

Her performance and conduct during training was good.

For Alfa Laval Pvt. Ltd. Dapodi

Date-10 August-2009

Mr. Suhas

(Sr. Executive HR)

 5

ACKNOWLEDGEMENT

Planning and motivation are two key factors in making any activity a success. Goal
achievement is a result of group effort rather than individual effort. It has been the
same in the case of this project, the cooperation and support of many an individual has
made this project a success.

This project is an attempt to share my experience and learning wish “Compensation

Management”, of Alfa Laval Dapodi, for two months. I would like to thank
INSTITUTE OF BUSINESS MANAGMENT AND RESERCH (IBMR), PUNE for
providing me an opportunity for doing summer training in “Alfa Laval Pvt. Ltd
Dapodi” wish to acknowledge those many people, whose feedback has enabled me to
satisfactorily complete my summer training and report writing as well.

I would like to express my deep gratitude to Mr. S. S. Simpi Sir (Director, Institute of
Business Management And Research, and Pune) for allowing me to work with Alfa
Laval.

I would like to express my genuine appreciation for the support given by Prof. Nitesh
Behare (Internal guide), Mrs. Vidula Dharmapurikar who provided me with all the
information I needed from time to time during training.

Above all I would like to thank all our Professors for their valuable guidelines without
which my training would have been partially incomplete also have the deepest regards
to my family members for giving the

Unconditional support throughout the project done. I am also grateful to the Various
franchisee owners and the distributors I worked with , who not only Supported me
during my whole project but also give me useful and valuable Feedback from time to
time which ultimately helped me in successfully Completing my project. The entire
experience has been very encouraging and will certainly help me stand in good stead
throughout my care

CHASMEEN SHIKALGAR.

EXECUTIVE SUMMARY
 6

This project discusses the work done by Chasmeen Shikalgar student of Institute of
Business Management &Research, Pune.The main objective of the project is to
“Find out the impact of COMPENSATION MANAGEMENT On performance level
of the employee. WITH REFERENCE TO Alfa Laval Pvt Ltd. Dapodi.

For this research project I used both primary and secondary data.

I first conducted a thorough secondary research to understand the. What is the

meaning of COMPENSATION MANAGEMENT. After this I drafted a questionnaire
on the relevant issues and conducted an organization survey. I used descriptive
research design, as this suited my project’s requirement the most. The objective of the
project is to analyze the Impact of Compensation on performance level of the
employee.

This report clearly mentions objective of the study and the research methodology
utilized. both primary data and secondary data. The data collection method used is
structured non disguised questionnaire in which the types of questions used are open
ended, multiple choice and close ended.

The report contains a detailed view of the tasks, which have been undertaken to
analyze the Compensation Management. Various sets of questionnaire have been
prepared to know the PREFERENCES of employees about the compensation
provided by the company. This project reveals one of the important findings like
Compensation Management is important in maintaining the employees and reducing
turnover and absenteeism.

In my project I studied compensation Package provided by the company to Managers

and Workers from this I realized that good compensation management is very useful
in reducing the labor turn over and increasing the performance level of the employee
and in making the working environment peaceful.

The other facilities provided by the company are fringe & non fringe benefits this
includes HRA, Leave accommodation, Education allowance, canteen allowance,
payment for official journeys. The other benefits includes Fringe benefits other than
pay and allowance Includes leave and holidays, protective clothing, provident fund,
medical expenses. Alfa Laval also provides loans for the purchase of car, house etc.

We can say on the basis of this summery that Alfa Laval is very disciplined
organization . I am extremely satisfied and have gained rich experience in the field of
personnel administration. I am extremely thankful to the staff of Alfa Laval and my
project guide for their valuable guidance and help.
 7

INDEX

CHAPTER NO. PARTICULARS PAGE NO.

1 INTRODUCTION TO THE TOPIC

2 COMPANY PROFILE

3 THEORY REALATED TO THE TOPIC

4 OVERVIEW OF THE INDUSTRY 22

5 OBJECTIVES OF THE STUDY 23

6 REASERCH METHODOLOGY 31

7 SAMPLE DESIGAN 32

8 DATA ANALYSIS 47

9 FINDINGS 48

10 SUGGETIONS 49

11 BIBLIOGRAPHY 50
 8

TABLE OF TABLE

TABLE NO. PARTICULARS PAGE NO.

1.1 WAGE & SALARY ADMINISTRATION

1.2 INCENTIVES

1.3 COMPENSATION BENEFITS & SERVICES

1.4 BENEFITS OF HEALTH & SAFETY

1.5 CANTEEN FACILITIES

1.6 WELLFARE FACILITIES

1.7 IEAVES & HOLIDAYS

1.8 INHOUSE FACILITIES

1.9 LOANS & ADVANCES

1.10 RETIREMENT SCHEMES

 9

TABLE OF GRAPH

GRAPH NO. PARTICULARS PAGE NO.

1.1 WAGE & SALARY ADMINISTRATION

1.2 INCENTIVES

1.3 COMPENSATION BENEFITS & SERVICES

1.4 BENEFITS OF HEALTH & SAFETY

1.5 CANTEEN FACILITIES

1.6 WELLFARE FACILITIES

1.7 LEAVES & HOLIDAYS

1.8 INHOUSE FACILITIES

1.9 LOANS & ADVANCES

1.10 RETIREMENT SCHEMES

 10

AN INTRODUCTION

Compensation

Definition: In financial terms, the salary and wages you pay to your employees for
the work they do. Other, non-financial forms of compensation can also be offered to
attract and retain staff.

Compensation is a systematic approach to providing monetary value to employees in

exchange for work performed. Compensation may achieve several purposes assisting
in recruitment, job performance, and job satisfaction.

Compensation refers to wages and salary paid by employers to employees in

exchange for work. Compensation also includes variable pay in the form of short- and
long-term incentives such as cash bonuses and company stock awards, as well as
promotions and pay increases. The Total Rewards Program typically is comprised of
compensation
 11

PROFILE OF THE COMPANY

Alfa Laval is a Sweden-based provider of specialty products and engineering

solutions.

 The Company is engaged in the provision of products and solutions for heat
transfer, separation and fluid handling.

 Its key products include heat exchangers, separators, pumps and valves and
are primarily used in the manufacturing of food, chemicals, pharmaceuticals, starch,
sugar and ethanol.

 The Company reports three divisions: Equipment, Process Technology and

Operation. The Equipment Division and Process Technology Division market the
Company's products and solutions based on the key technologies of heat transfer,
separation and fluid handling. The Operations Division is additionally responsible for
product-related purchasing, manufacturing and distribution.

Alfa Laval AB is operational internationally, with sales activities in nearly 100

countries and 28 production units in Europe, Asia, the United States and Latin
America. Alfa Laval develops, manufactures and sells special products and world-
class technical solutions that help our customers optimize the performance of their
processes Time and time again.
Our equipment and systems create solutions for heating, cooling, separation and fluid
handling of products such as oil, chemicals, water, beverages, foodstuffs, starch and
pharmaceuticals.
Alfa Laval has approximately 11,400 employees in more than 50 countries covering
over 100 markets. We have just created a new Alfa Laval with a new spirit and a
strong focus that will reinforce our position as a global leader within the areas where
we operate.
 12

Our solid base is our shared goals and values. We are customer oriented. We dare to
do things differently. We are open, informal and flexible. We create reliable and cost-
efficient solutions.
We are a totally new company, founded in 1883.
We serve most industries. Since it started its operations in the dairy field in 1883, Alfa
Laval has continuously extended its business to cover many different industries.
Our products and solutions are used to heat, cool, separate and transport products in
industries that produce foods and beverages, chemicals and petrochemicals,
pharmaceuticals, starch, sugar and bibfuls.
Alfa Laval's products are also installed on oil platforms, in power plants, aboard
ships, in the mechanical engineering industry, in the mining industry and for
wastewater treatment, as well as for comfort climate and refrigeration applications.
Our technologies are extensively used in the fight for a better environment on land
and at sea.

Alfa Laval is continuously entering new grounds. We extend our product range and
develop our technologies for new applications all the time. Heat transfer, separation
and fluid handling. Energy-efficient heat exchangers. Separators that separates liquids
and removes particles from liquids and gases. Equipment that safely transports and
regulates fluids.

KEY INDUSTRIES

Beverages

Success in the production of beer, wine, fruit juice and other beverages depends on a
critical balance between appearance, flavor, texture and health safety on one side, and
manufacturing costs on the other. Alfa Laval’s equipment, systems and service help
customers achieve this balance.
In the complex business of brewing, Alfa Laval’s competences cover vital
applications in most parts of the brewery process such as routing, separation, heating
and cooling, yeast management, filtration, blending and pasteurization.
For the fruit juice and soft drinks industries Alfa Laval supplies equipment and
processes that are gentle enough to preserve the natural flavours and aromas. The
solutions for this industry include precise fruit preparation, dosing of ingredients,
pasteurization, clarification and yield boosting recovery of juice and peel oil.
 13

Alfa Laval also has a great deal of experience in supporting professional wine-makers
with technology for different phases of their delicate process including musting,
fermentation and maturation.
Food
Today’s consumer looks for wholesome, tasty and natural foods containing as few
additives as possible. Modern food processing is a question of creating a
commercially viable product in terms of price and shelf life, while preserving as much
of the natural flavor, texture, and nutritional value as possible.

Alfa Laval holds a strong position as a supplier of products, systems and complete
solutions for a number of food segments. It was in the food sector that we started our
business in 1883, where the company’s continuous milk separator laid the foundation
for the dairy industry. Today, Alfa Laval serves the dairy industry with a complete
product range in cooperation with its alliance partner, Tetra Pak, which provides
integrated processing, packaging and distribution solutions.

Separation, heating, cooling and transport of viscous food products and products
containing particles require specialist know-how. Alfa Laval has acquired substantial
competence in this field and supplies efficient solutions for foods such as soups,
sauces, baby food, tomato products, jams and confectionaries.

We also help producers of vegetable oils develop healthy products of high quality that
increase their margins. We supply solutions for oils extracted from every type of oil-
bearing material such as plant material, seeds and olives.

Alfa Laval has a long tradition within palm oil refining and offers solutions for every
stage of refining including deodorization, hydrogenation, de-gumming and soap stock
splitting. Our deliveries to the olive oil industry include equipment for all operations
from washing through crushing, malaxing and extraction to final clarification of the
oil.
 14

Soy

Soy is another important food material. It is not only a high-quality protein; it is also
thought to play a preventive and therapeutic role in certain diseases. Alfa Laval
equipment such as high-speed separators, decanters, membrane filtration systems,
pumps, valves and agitators is widely used for the production of numerous soy
products.

Alfa Laval provides numerous process solutions for extracting and refining fats and
proteins from surplus raw material in the fish and meat industries, which are now
increasingly utilized for the production of high-value fats and proteins for food
ingredients.

In particular, the protein part is an important potential that can be used for, for
example, functional proteins, flavor ingredients and bioactive components that serve
as food supplements. We provide specialized equipment, systems and know-how for
all steps in the processing chain including preparation and heating, clarification, solids
separation, fractionation and evaporation.

Alfa Laval also offers a comprehensive range of equipment for cleaning and
concentration of starch when it has been released from raw materials such as wheat,
maize, manioc, rice or potatoes. The range includes disc-stack centrifuges for
clarification, concentration, classification and washing, decanters for dewatering and
heat exchangers for preheating, evaporation and condensation.

The overall economy of sugar production depends on the cost of energy. Alfa Laval’s
heat exchangers, including the wide-gap plate heat exchanger and the plate
evaporator, both tailor-made for this industry, help sugar producers to maximize
product quality and minimize energy costs.

Alfa Laval supplied the first continuous centrifuge for the harvesting of bakers’ yeast
as early as the 1890s. Today, we offer the fermentation industries a wide range of
centrifuges, heat exchangers, filters and strainers meeting the high hygienic needs of
these industries for the production of bakers’ yeast, fodder yeast, yeast extract, amino
acids and starter cultures

Wastewater treatment
Virtually all kinds of industrial activities and urban development result in sludge that
is normally of little or no commercial value. Consequently, it represents a large
 15

disposal problem that is often costly to deal with. Alfa Laval’s efficient solutions for
reducing the volume of wastewater help to decrease disposal costs significantly.

We deal with all kinds of sludge, whether it comes from simple natural sedimentation,
secondary biological treatment or advanced chemical treatment.

We treat:

• Municipal waste. We are involved in the processing of sludge from the public
sector from at least 200 million people.

• Industrial waste. Our solutions are used in more than 1,000 industrial
applications.

• Water at water works. Our systems help produce 1.5 million cubic meters of
potable water every day.

Three Alfa Laval products are of vital important in the wastewater treatment
process.

• Decanter centrifuges for sludge dewatering reduce transportation and

disposal or drying costs while limiting negative effects on the environment. We also
offer a decanter autopilot optimizing plant operation around the clock

• Drum thickeners, used for thickening before dewatering, reduce sludge

volume by up to 90% and improve the overall operation economy.

• Spiral heat exchangers preheat the sludge to 60 degrees Celsius making it

easier to dewater. They are also used for sludge pasteurization to meet even the most
stringent environmental legislation as well as for digestion heating and effluent
cooling for efficient overall performance.

Membrane filtration bioreactors remove unwanted micro particles from the

wastewater.

INDUSTRY PROFILE
 16

Alfa Laval AB operates as a leader in the heat transfer, centrifugal separation, and
fluid handling industries. The company's heat exchangers are used for heating,
cooling, freezing, ventilation, evaporation, and condensation of fluids. Alfa Laval's
separation business dates back to its roots as a cream separator in 1883. Its separators
are now used in the food processing and chemical industries, on ships and oil rigs, in
wastewater treatment plants, and in businesses that purify industrial fluids. Its fluid
handling pumps and valves are used in the production of beverages, dairy products
and other foods, pharmaceutical products, and health and personal care products. Alfa
Laval's products are sold in over 100 countries to customers in the process technology
and equipment markets.

In 1877, the Swedish engineer Gustaf de Laval began to develop the first Swedish
milk separator. A year later, he secured a patent for his design. After graduating from
Uppsala University, de Laval entered the Technological Institute and passed the final
examination in 1866. Times were hard, and de Laval was forced to take a position as
clerk in the general store at the Falun mines; an engineer with a first-class diploma, he
weighed out nails, herring, and salt to miners. In 1867, however, de Laval received a
grant from the Swedish House of Lords and pursued advanced studies at Uppsala
University in 1872, receiving the degree of doctor of philosophy.

The process of mechanically separating cream and milk through the physical
application of centrifugal force was first exploited in 1876 by Wilhelm Lefeldt in
Germany and two years later in Denmark by L.C. Nielsen. The latter technology was
acquired by Burmeister & Wain of Copenhagen in 1882. Lefeldt and Nielsen's
separators could not work continuously, unlike Gustaf de Laval's superior system. On
February 26, 1878, de Laval entered into partnership with Swedish engineer Oscar
Lamm. Together they founded the trading company Oscar Lamm, Jr., of Stockholm.
The partnership was successful, with de Laval in charge of the technical side and
Lamm the financial and commercial aspects of the business. Lamm tried to interest
influential agents in Europe, among these H.C. Petersen & Company, Copenhagen;
Bergedorfer Eisenwerk near Hamburg; Th. Pilter, Paris; the trading firm D. Hald &
Company, London; and Boeke & Huidekooper of Groningen in the Netherlands. In
the company's first year of business, 1879, overseas sales accounted for 50 percent of
the company's turnover. Foreign demand for cream separators rose sharply, and in
1883 around 80 percent of sales were from overseas. Almost 97 percent of exports
were sold through foreign distributors in the more industrially advanced countries.
The product in question was the energy-intensive, power-driven cream separator.
Manual cream separators were not introduced until 1887.

The company did not set up a domestic marketing division until four years after it had
established its foreign distribution network. Its agents were already specialized in
marketing dairy equipment, and cream separators complemented their existing
product mix.
 17

Four other European companies also manufactured power-driven cream separators in

the late 1870s. They were Nielsen & Petersen--from 1882 owned by Burmeister &
Wain--in Denmark, and Lefeldt, Fesca, and Petersen in Germany. The industrial
exploitation of this process was protected by patent. The holder of the patent for the
separation method secured temporary legal protection against imitation and had the
opportunity of gaining an international monopoly. The patent on the application of
centrifugal force for separating milk and cream, which had been granted in 1884,
expired in the countries in which it had first been granted in 1892--namely, in
Sweden, Denmark, France, Germany, and the United States--and in countries where
these patents had subsequently been registered. The reason no domestic cream
separator industry had evolved in more industrially advanced countries like the United
Kingdom and France is probably that foreign patent registrations from the late 1870s
blocked the establishment of an indigenous industry until the beginning of the 1890s.
 18

COMPENSATION

Meaning of Wage Compensation Payment & Importance

Wage is a monetary payment made by the employer to his employee for the work
done or services rendered. It is a monetary COMPENSATION for the services
rendered. A worker may be paid Rs. 100 per day or Rs. 4500 per month. This is wage
payment. The worker gives his services and takes payment called wage payment.
Industrial workers are paid remuneration for their services in terms of money called
wage payment. Wages are usually paid in cash at the end of one day, one month or
one week. Money wage is the monetary compensation or price paid by the employer
to his employee for the services rendered. Such compensation is also called wage or
salary or reward given by an organisation to a person in return to a work done.
Generally, compensation payable to an Basic employee includes the following three
components: compensation for the job Incentive (wage/salary) compensation for the
Supplementaryϖ employee on job compensation paid to employees (fringe benefit
and employee services)

Importance of Wage Payment:

1. To Worker: Wage payment is important to all categories of workers. Wage is a

matter of life and death to workers/employees. Their life, welfare and even social
status depend on wage payment. It is only source of income to large majority of
workers. They and their unions always demand higher wages and other monetary
benefits. Majority of labour problems and disputes are directly related to wage
payment. The efficiency of workers and their interest and involvement in the work
depend on wage payment. Even their attitude towards employer depends on wage
payment. In brief, wage payment is a matter of greatest importance to workers. Wage
problem is the most pressing and persistent problem before the entire labour force.

2. To Employer:

Wage payment is equally important to employers as their profit depend on the total
wage bill. An employer in general is interested in paying low wages and thereby
controls the cost of production. However, low wages are not necessarily economical.
 19

In fact they may prove to be too costly to the employer in the long run. E.g. In
garment manufacturing company if tailors are not paid properly then it is difficult for
the company to retain them. An employer has a moral and social responsibility to pay
fair wages to his worker as they are equal partners in the production process. He
should give fair wages which will benefit to both the parties. Employees will offer full
co-operation to the management when they are paid attractive wages. On the other
hand, strikes and disputes are likely to develop when workers are paid low wages or
when they are dissatisfied and angry due to low wage rates. It is possible to earn more
profit by paying attractive wages to workers. E.g. Reliance, City Bank, Motorola are
earned huge profits because of their higher pay packages.

3. To Government:

Government also give special importance and attention to wages paid to industrial
workers as industrial development, productivity, industrial peace and cordial labour-
management relation depend on the wage payment to workers. Government desires to
give protection to the working class and for this minimum wages act and other Acts
are made. In India, wages are now link with the cost of living. This is for the
protection of workers. Government is the biggest employer in India and the wage
rates of government servant and employees of public sector organizations are decided
by government only. Revision of pay scale of government employees made for
adjusting their wages as per the cost of living. For this, “Pay Commission” is
appointed and pay scale is adjusted as per the recommendations made. In India, wage
payment is very critical, controversial and delicate issue for all categories of work
force. This is due to poverty, rising prices, mass unemployment and rising population.
Wage payment indeed a vexatious problem and needs to be tackled from economic,
social and humanistic angles.

Concept of fair wages

Fair wages is the wage which is above the minimum wage but below the living wage.
Obviously the lower limit of the fair wage is the minimum wage and the upper limit is
set by the ability of the industry to pay. Between these two limits, fair wages should
depend on the factors like –

1. Prevailing rates of wages in the same occupation

 20

2. Prevailing rates of wages in the same region or neighboring areas

3. Employer’s ability to pay

4. Level of national income and its distribution

5. Productivity of labor

6. Status enjoyed by the industry in the economy hence it can be said that fair wages
are determined on industry cum region basis.

Factors Influencing Wage and Salary Structure

• The organization’s ability to pay: Wage increases should be given by those

organizations which can afford them. Companies that have good sales and therefore
high profits tend to pay higher wages than those which are running at a loss or earning
low profits because of the high cost of production or low sales.

• Supply and demand of labor: If the demand and certain skills are high and the
supply is low the result is rise in the price to be paid for these skills. The other
alternative is to pay higher wages if the labor supply is scarce and lower wages when
it is excessive.

• The cost of living: When the cost of living increases, workers and trade unions
demand adjusted wages to offset the erosion of real wages. However when living
costs are stable or decline the management does not resort with this argument as a
reason for wage reduction.

• The living wage: Employers feel that the level of living prescribed in workers
budget is opened to argument since it is based on subjective opinion.

• Job requirements: Jobs are graded according to the relative skill responsibility and
job conditions required.

• Trade unions bargaining power: Trade unions do affect the rate of wages.
Generally the stronger and more powerful trade union, higher the wages.
 21

• Productivity: Productivity is another criterion and is measured in terms of output

man-hour. It is not due to labor efforts alone. Technological improvements, greater
ingenuity and skill by the labor are all responsible for the increase in productivity.

• Prevailing market rate: This is also known as ‘comparable wages’ or ’going

wage rate’. Reason behind this is competition demand that competitors adhere to the
same relative wage level.

• Skill levels available in the market: With the rapid growth of industries,
business trade there is shortage of skilled resources. The technological development,
automation has been affecting the skilled levels at a faster rate.

• Psychological and social factors: This determine in a significant measure how

hard a person will work for the compensation received or what pressures he will exert
to get his compensation increased.

Components of Employee Remuneration

The remuneration packet of an employee includes wage/salary, incentives, fringe
benefits, perquisites and finally non-monetary benefits. This is made clear in the
following chart:

1. Wages and salary: Wages represent hourly rates of pay, and salary refers to the
monthly rate of pay, irrespective of the number of hours put in by the employee.
Wages and salaries are subject to the annual increments. They differ from employee
to employee, and depend upon the nature of job, seniority, and merit. 2. Incentives:
Incentives are paid in addition to wages and salaries and are also called ‘payments by
results’. Incentives depend upon productivity, sales, profit, or cost reduction efforts.
There are: (a) Individual incentive schemes, and (b) Group incentive programmers.
Individual incentives are applicable to specific employee performance. Where a given
task demands group efforts for completion, incentives are paid to the group as a
whole. The amount is later divided among group members on an equitable basis. 3.
Fringe benefits: These are monetary benefits provided to employees. They include
the benefit of: (a) Provident fund, (b) Gratuity, (c) Medical care, (d)
 22

Hospitalization payment, (e) Accident relief, (f) Health and Group insurance, (g)
Subsidized canteen facilities, (h) Recreational facilities, and (i) Provision of uniforms
to employees.

4. Perquisites: There are special benefits offered to managers/executives. The

purpose is to retain competent executives. Perquisites include the following: (a)
Company car for traveling, (b) Club membership, (c) Paid holidays, (d) Furnished
house or accommodation, (e) Stock option schemes, etc. 5. Non-monetary benefits:
These benefits give psychological satisfaction to employees even when financial
benefit is not available. Such benefits are: (a) Recognition of merit through certificate,
etc. (b) Offering challenging job responsibilities, (c) Promoting growth prospects, (d)
Comfortable working conditions, (e) Competent supervision, and (f) Job sharing and
flexi-time.

SYSTEM OF WAGE PAYMENT

Time rate system piece rate system

Time Rate System

It is the oldest and simplest method of wage payment used extensively in the
industrial as well as government departments. Wages are paid as per the time spent by
the workers in the factory. The production given by them is not taken into
consideration. The employer buys the hours of the workers and pays them
accordingly. Time rate system is also called as day wage system. In the time rate
system, efficiency, sincerity, ability is not given attention and all the workers are paid
at one and the same rate as per the period spent in the factory.

Piece rate system:

This is another basic system of wage payment. It is just opposite to the time rate. It is
also treated as an incentive wage system as it encourages workers to produce more
and also to earn more. In the piece rate system, wages are paid as per the output or
production given by the worker and not as per the time spent by the worker in the
factory. Payment is by results in terms of output given. Wage rate is fixed per piece of
 23

work or for certain quantity of production. The production given by a worker at the
end of the day is counted and payment is made accordingly.

Incentive system of wage payment

The wage plan should be highly incentive means it should encourage workers to take
more initiative and interest in the work, produce more and also earn more. The wage
plan which serves all these purposes is called incentive wage plan. Such an incentive
plan is beneficial to both - employers and employees as well as it is useful for the
rapid industrial growth. Incentives include monetary as weft as non-monetary benefits
offered. There is motivation to work hard and to earn more. In every incentive plan,
wages are linked with the given output. Incentives are not fixed like wages and
salaries. They vary from individual to individual and from period to period. ILO
defines incentives as "payment by results". Incentives can also be described as
"incentive systems of payment". According to Dale Yoder, “Incentive wages relate
earnings to productivity and may use premiums, bonuses, or a variety of rates to
compensate for superior performance” Piece rate system is the oldest incentive wage
plan which is also useful for attracting and retaining qualified personnel in the
organisation and for motivating personnel to higher levels of performance. In many
incentive plans, a combination of time rate and piece rate systems is used. Such
combination creates an ideal incentive plan. TYPES OF INCENTIVE PLANS: There
are two types of incentive plans:

(a) Individual incentive plans, and (b) Group incentive plans.

Individual incentive plan is meant for individual employees. He has to work hard i.e.
efficiently, produce more and share the monetary benefits for himself. The benefit is
directly linked with his ability, efficiency and capacity. In the group incentive plan,
the incentive is not for individual employee but for the group of employees working
in one department or section. Such group incentive plan may cover the entire labour
force of a production unit. The group will work collectively, give more production
and share the benefit. Initially the benefit will be given to the group and thereafter, it
will be divided among the members of the group. Management is interested in group
incentive plan while employees are interested in individual incentive plans.
 24

Production activities are now conducted in an integrated manner and naturally

incentives should be offered to the employees. Group incentive plans are better as
they encourage team spirit and develop cooperation and understanding among the
employees. This avoids wastages and promotes productivity.

Profit-sharing

Profit-sharing is regarded as a steppingstone to industrial democracy. Prof. Seeger

observes: "Profit-sharing is an agreement by which employees receive a share, fixed
in advance of the profits." Profit-sharing usually involves the determination of an
organization’s profit at the end of the fiscal year and the distribution of a percentage
of the profits to the workers qualified to share in the earnings. The percentage to be
shared by the workers is often predetermined at the beginning of the work period and
IS often communicated to the workers so that they have some knowledge of their
potential gains. To enable the workers to participate in profit-sharing, they are
required to work for certain number of years and develop some seniority. The theory
behind profit-sharing is that management feels its workers will fulfill their
responsibilities more diligently if they realize that their efforts may result in higher
profits, which will be returned to the workers through profit-sharing.

Enterprise. The proportion of the profits distributed among the employees is

determined in advance.
 25

Objectives of Profit-sharing:

1) To supplement the regular earning of the workers,

2) To create a sense of partnership among the workers and the management.

3) To enable the workers to participate in the prosperity of their company,

Direct compensation
Refers to monetary benefits offered and in return of the services they provide to the
organization. The monetary benefits include basic salary, house rent allowance,
conveyance, leave travel allowance, medical reimbursements, special allowances,
bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.

House Rent Allowance

Organizations either provide accommodations to its employees who are from
different state or country or they provide house rent allowances to its employees.
This is done to provide them social security and motivate them to work.

Conveyance
Organizations provide for cab facilities to their employees. Few organizations also
provide vehicles and petrol allowances to their employees to motivate them.
 26

Reference:- http://payroll.naukrihub.com/compensation/
Fig no : 1

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The
employees are given

Allowances to visit any place they wish with their families. The allowances are scaled
as per the position of employee in the organization.

Medical Reimbursement

Organizations also look after the health conditions of their employees. The employees
are provided with medi-claims for them and their family members. These medi-claims
include health-insurances and treatment bills reimbursements.

Bonus
Bonus is paid to the employees during festive seasons to motivate them and provide
them the social Security. The bonus amount usually amounts to one month’s salary of
the employee.

Special Allowance
Special allowance such as overtime, mobile allowances, meals, commissions, travel
expenses, reduced interest loans; insurance, club memberships, etc are provided to
employees to provide them social security and motivate them which improve the
organizational productivity.

Good health insurance and a generous retirement plan benefits are becoming more
and more elusive. Employers who offer these non-cash rewards stand out among
their peers.

The Value of Non-Monetary Compensation

Non-monetary compensation can equal 20-60% of the value of the cash

compensation that an employee receives. For the current job seeker, starting salaries
 27

have barely increased, frozen or actually dropped. So, finding non-monetary benefits
in an offer can be essential when an employee evaluates it. These added perks can
sweeten (and seal) the deal.

Types of Non-Monetary Compensation

Non-monetary compensation can include many different elements – from free coffee
to a company picnic or discounted parking. Most frequently, though, it refers to the
value of more traditional benefits. These benefits can include the mandatory benefits
such as Social Security and Medicare, unemployment and worker’s compensation.
These are the items that 95% of employers in the United States must provide.
However, it also can include the voluntary benefits such as health, dental and vision
insurance. And, it usually includes some type of retirement plan, as well.

One reason employees place a high value on the non-cash compensation parts of a
total compensation package is because they can greatly reduce household expenses.
For example, getting an employer’s help with health insurance premiums can save a
family many hundreds of dollars a month, not to mention savings from the better
medical coverage likely provided by a group plan.

Beyond the employee getting material value from their benefits, there are non-
material perks, as well. Companies who offer benefits, such as a rich retirement
plan, send a message that they value their employees and want to promote long-term
relationships with their employees. These employers are becoming more and more
sought after. Workers are looking for those organizations that invest in their
employees and want to provide a fair wage, and a fair benefits package. Savvy
workers will wait to work for a company that offers a total compensation package
rather than work for a one that provides high pay with little in the way of benefits.

The Benefits of a Non-Monetary Compensation Plan for Employers : As an

employer, there are many different reasons to look at increasing the value of the
non-monetary elements of your total compensation package. First, more employees
are asking companies to provide good benefits. Second, the government offers
companies many tax incentives for certain types of benefits offered to employees.
For example, when employers offer tax-deferred benefits, such as retirement
 28

accounts or Section 125 flexible benefit plans, the employees and the employers
save taxes on the amount that the employee defers. Often times the tax savings to
the organization can offset or greatly reduce the cost of administering the plan.

Finally, offering benefits can help to increase retention among your employees.
When you give employees more cash per paycheck the reward is immediate but
short-lived. When you give employees a match in their retirement plan with a
vesting schedule which only gives employees the full value of that contribution after
a few years, you increase the likelihood that employees will stay with you. This
investment can mean savings for you, as an employer, because of lower employee
turnover and a more experienced, committed workforce.

Non-Monetary Compensation Attracts Top Talent : Taking this one step further,
many top performers are looking for an organization that goes even further than just
cash compensation and basic benefits. They’re looking for flexible work schedule,
employee training or education benefits, and well-trained managers to work for.
These elements are often even more important than the traditional “what do I get
when I work for you” benefits. The value of a well-trained manager who has an
excellent reputation for helping individuals reach their full potential and increase
their likelihood for promotion can be invaluable to employees. Often employees will
stay with an organization or take less money to work for the right people at the right
place.

If you’re looking to stay at the top of your industry by nabbing top talent, it’s
important to think about non-monetary compensation in the context of what you
offer to your employees in all areas of their career and quality of life. In these tough
economic times - where it’s hard to give more money or richer benefits – you can
win the war for talent by playing up the strengths that you have as an organization or
figuring out what you can offer that will be unique and valued in the market.

Consider All of Your Non-Monetary Compensation Options

There are a host of benefits that companies can offer to attract and retain top talent.
 29

Here is a list of a few for you to consider.

• Flex-time schedules
• On-site childcare
• Free or discounted parking
• Free or discounted food and drinks
• Gym membership discounts
• In-office massage or yoga
• Casual Fridays
• Mentoring programs for career advancement
• Free or discounted educational and training opportunities
• Work opportunities in multiple locations
• Cross-training in other areas of the business
• Annual or quarterly company parties
 30

IMPORTANCE OF THE TOPIC

Compensation is a systematic approach to providing monetary value to employees in

exchange for work performed. Compensation may achieve several purposes assisting
in recruitment, job performance, and job satisfaction. Compensation is a tool used by
management for a variety of purposes to further the existence of the company.
Compensation may be adjusted according the business needs, goals, and available
resources.

Compensation may be used to:

• Recruit and retain qualified employees.

• Increase or maintain morale/satisfaction.
• Reward and encourage peak performance.
• Achieve internal and external equity.
• Reduce turnover and encourage company loyalty.
• Modify (through negotiations) practices of unions.

Recruitment and retention of qualified employees is a common goal shared by many

employers. To some extent, the availability and cost of qualified applicants for open
positions is determined by market factors beyond the control of the employer. While
an employer may set compensation levels for new hires and advertise those salary
ranges, it does so in the context of other employers seeking to hire from the same
applicant pool.

Morale and job satisfaction are affected by compensation. Often there is a balance
(equity) that must be reached between the monetary value the employer is willing to
pay and the sentiments of worth felt be the employee. In an attempt to save money,
employers may opt to freeze salaries or salary levels at the expense of satisfaction and
morale. Conversely, an employer wishing to reduce employee turnover may seek to
increase salaries and salary levels.
 31

Compensation may also be used as a reward for exceptional job performance.

Examples of such plans include: bonuses, commissions, stock, and profit sharing, gain
sharing.

OBJECTIVES OF THE STUDY

1. To study the role of Monetary & Non-Monetary incentives in motivation &

productivity of labor.

2. To understand the compensation structure of Alfa Laval.

3. To understand the labor welfare activities undertaken by Alfa Laval.

4. To understand the impact of compensation on the performance of the employees.

 32

RESEARCH METHODOLOGY

Sources Of data collection

Both Primary & Secondary Sources were used for data collection:-

Primary Data: - Is the data which is collected by the researcher directly from his
own observations and experiences. For example, if the researcher conducts a survey
for the collected of data then it is known as primary data.

Primary data are those data which are collected for the first time, taking a sample,
representing a population. It is not a published data, it is problem specific data
collected by the researcher, first time. When primary data is published by researcher,
it becomes the secondary data for every body, other than the researcher.

Secondary Data: - are those data, which are already published. It may be useful for
many other people than the researcher who has published it. There are various sources
of secondary data collection.

Four main sources are-

Government sources, which includes development of census reports, central govt.
Records and state & local govt. Records.
Sources Of Collecting Secondary Data:-

Types Methods Techniques

Autobiographic or Life histories, diaries,

Personal Sources
letters, memories

Library
Books, Journals, Newspaper, Report of the
Research Public Sources
government department. etc.

Analysis of Historical Recording of notes, content analysis, tape &

Record film listening & analysis.

I obtained Secondary Data from following sources:-

 33

• HR Manual :- Through HR Manual I have obtained detail data of functions

Of Human Resource Department as well as various Welfare Facilities, Various

Policies, Schemes, Programs for the employees.

• Internet :- With the help of internet I have collected data such as information

About Alfa Laval ,History & Profile of the company, Achievements of the
company, Branch Locator, Working Climate, Nature of assembling etc.

• C.V. Memoria :- I have collected all the relevant information about compensation
from the book C.V. Memoria

Circulation of Questionnaire: - It is based on topics related to Personnel

management. I prepared questionnaire (Topic – Compensation) before visiting the
employees. Primary data is collected by

Asking direct question to employee & HR

Observation: - I have observed functions of Human Resource Department in Alfa

Laval, such as welfare facilities provided by the company, canteen facility, transport
facilities, health care facilities, and Re-creational facilities.Etc.

Sampling Method and Size:

Mostly I used random sampling and some of purposive sampling also in this method
very effective sample is random sample that are mostly used in market research.

Area sampling is dividing the population into various areas then sample is selected at
random from those groups.

• A sample size of 70 has been taken into consideration.

• Sampling Method:- Random Sampling
• Sampling Universe: only employees of Alfa Laval (India) Ltd.

Techniques of Data Analysis:

The next step is to extract the pertinent findings from the collected data. I have
tabulated the collected data & developed frequency distributions. Thus the whole data
 34

was grouped aspect wise and was presented in tabular form. Thus, frequencies &
percentages were prepared to render impact of the study.

The main statistical tools used for the collection and analyses of data in this project
are:

• Questionnaire
• Pie Charts
• Bar Diagrams

Presentations of findings

This was the last step of the survey. In this step the presentation on findings is
prepared and presented to the authority of the Alfa Laval (India) Ltd. and my college.
This is critical part as I’m supposed to present myself to the authority and justify the
work done by me.

Limitations of the study

 Some of the respondents refused to fill the questionnaires.

 The responses may vary as some people did not want to come up with real
answers.
 The people were busy in their own work so they might not have given actual
responses..
 Limitation of time.
 Small sample size.
 And like any other research the limitation of personal bias of respondents limits
the scope of the study.
 35

DATA ANALYSYS

Q1. Is there a good system of salary & wage administration? Is it satisfactory?

Table No. 8.1 System of salary and wage administration

Wage & Salary

Mangers Workers Percentage
Administration
Good 5 3 8

Satisfactory 55 37 92

Non satisfactory 0 0 0

Total 60 40 100%

Graph No : 8.1 System of salary and wage administration

system of salary and wage administration

60
50
percentage

40
Manager
30
Workers
20
10
0
Good Satisfactory Non satisfactory
parameters

Interpretation: From above table it can be concluded that 92% of the total
employees are satisfied with salary & wage administration, 8% of total employees
said that Wage & Salary administration in the organization is good. And maximum
employees are satisfied with the wage & salary administration in the organization.
 36

Q.2) Does the compensation provide adequate incentive to the employees to give off
their best efforts?

Table No. 8.2 Provision of adequate incentive to the employee

Incentive Managers Workers

To some extent 50 35

To full extent 10 5

No 0 0

Graph No. 8.2 Provision of adequate incentive to the employee

50
45
40
35
30 To some extent
25
TO full extent
20
15 No
10
5
0
Managers Workers

Interpretation: - From the above it is concluded that 85% of the total employee
accept that “to some extent” compensation provides adequate incentive to the
employees to give their best efforts and 15% thinks that “to the some extent”
incentives are provided to give best efforts.
 37

Q.3) Is the present system of compensation, benefits services, sufficient to retain

good people, and does it helps to keep moral & productivity high?

Table no. 8.3 Provision of compensation benefits services.

Compensation benefits, services Managers Workers Percentage

Yes 50 25 75

No 10 15 25

Total 60 40 100

Graph no: 8.3 Provision of compensation benefits services.

50

40

30

20 Yes

10
No
0
Managers Workers

Interpretation: - From the above table it is concluded that 75% employees of the
organization are satisfied with the present system of compensation & benefits
services.

4) Does the organization provide sufficient benefits to take care of employee’s health,
safety welfare?
 38

Table No.8.4 Provision of other benefits to the employees

Benefits of health, safety & welfare Managers Workers Percentage

Highly Satisfied 25 30 55

Satisfied 35 10 45

Dissatisfied 0 0 0

Graph No 8.4 Provision of other benefits to the employees

40
35
30
25 Highly Satisfied
20 Satisfied
15 Dissatisfied

10
5
0
Managers Workers

Interpretation: - From the above table we can conclude that 55% of the employees
are “Highly Satisfied” with the Health, Safety, & Welfare facilities provided by the
company and rest 45% are satisfied with these facilities.
 39

Q.5) Are you satisfied with canteen facilities provided by the organization?

Table No. 8.5 Provision of Canteen Facilities

Canteen facilities Managers Workers Percentage

Good 45 20 65

Satisfactory 15 20 35

Bad 0 0 0

Fig no.8.5 Provision of Canteen Facilities

45
40
35
30
25 Good
20 Bad
15 Satisfactory

10
5
0
Manager workers

Interpretation: - From the above table we can conclude that 65% of the employees
are highly satisfied with the Canteen facilities provided by the company.
 40

Q.6) Are you satisfied with the welfare facilities provided by the company?

Table No. 8.6 Welfare facilities provided by the company

Welfare facilities Managers Workers Percentage

Good 25 10 35

Satisfactory 35 30 65

Bad 0 0 0

Graph No. 8.6 Welfare facilities provided by the company

35
30
25
20 Good
15 Bad
Satisfactory
10
5
0
Managers Workers

Interpretation: - From the above table we can conclude that welfare facilities
provided by the company are satisfactory.
 41

Q.7) Are you satisfied with the Leaves & Holidays provided by the company?

Table. No 8.7 Provision of Leaves and Holidays

Leaves & Holidays Managers Workers Percentage

Satisfied 60 40 100

Not-Satisfied 0 0 00

Total 60 40 100

Graph No. 8.7 Provision of Leaves and Holidays

60

50

40

30

20

10 satisfied
not -satisfied
0
Managers Workers

Interpretation: - From the above table we can conclude that 100% of employees are
satisfied with leaves & holidays given by the company.
 42

Q.8) Are you satisfied with in house facilities provided by the company like Transport
facilities, Sports club facilities, Training facilities?

Table No. 8.8 Provision of in house facilities to the employees

In house Managers Workers Percentage

facilities

Good 30 35 65

Bad 0 0 00

Satisfactory 30 5 35

Total 60 40 100

Graph No. 8.8 Provision of in house facilities to the employees

35

30

25

20 Good
15 Bad
Satisfactory
10

0
Managers Workers

Interpretation: - From above table we can conclude that most employees are
satisfied with in house facilities.
 43

Q.9) Are you satisfied with the loans & advances provided by the company?

Table No. 8.9 Provision of loan and Advance facilities of the company

Loans & Advances Managers Workers Percentage

Good 10 5 15

Satisfactory 50 35 85

Non Satisfactory 0 0 00

Total 60 40 100

Graph No. 8.9, Provision of loan and Advance facilities of the company

50
45
40
35
30 Good
25 Satisfactory
20 Non Satisfactory
15
10
5
0
Manager Worker

Interpretation: - From the above table we can conclude that 85% of the employees
are satisfied with the loans and advances provided by the company.
 44

Q.10) Are you satisfied with the Retirement Benefits provided by the company?

Table No. 8.10 Provision of retirement benefits

Retirement Benefits Managers Workers Percentage

Good 10 5 15

Satisfactory 50 35 85

Non-Satisfactory 0 0 0

Total 60 40 100

Graph No. 8.10 Provision of retirement benefits

60

50

40
good
30 Satisfactory
Non-Satisfactory
20

10

0
managers workers

Interpretation: - From the above table we can conclude that 85%of the employees
are satisfied with the Retirement benefits provided by the company.
 45

FINDINGS

1. Organization provides Monetary as well as Non-monetary benefits to the

employees.

2. Organization believes that a good compensation policy helps to attract the

skilled people in the organization.

3. Organization take care of the health of the employees by keeping working

environment healthy.Organization not allow to employees to do the overtime work.

4. Organization compulsory gives Saturday & Sunday two days weekly of to the
managers & Sunday one day weekly off to the workers.

5. Working environment of the organization is good.

6. Organization provides break-fast, & lunch to the employees.

7. Organization arranges training programs to improve the knowledge & skill of

the employees which is very essential for increasing the moral of the employees.

8. In the rainy season raincoats & umbrellas are provided by the organization to
the employees also every year organization provides two pairs of uniforms to all
workmen with pair of shoes & socks.

9. Organization provides the recreational facilities to the workers like picnic &
sport club etc.

10. Annual turn over of the organization of last three years is 2007 to 2008 is 710
Crores, 2008-2009 is 800 Crores, and 2009-2010 is 885 Crores.

11. From above we conclude that a good Compensation Management is very

necessary to reduce the labor turnover & increasing the productivity.

12. Within 25 years only two employees leaves the organization due to their
personal reasons.
 46

SUGGESTIONS

1. To improve the present compensation policy organization should do survey of

the competitor organizations.

2. Salary and wage administration should be improved by the company as 92%

of the employees are just satisfied instead of highly satisfied.

3. Company should improve welfare facilities so those employees get satisfied

with the company which in turn improvement in companies performance.

4. Company should reframe the loan and Advance facilities as the employees are
only satisfied with the facility.

5. Company should improve retirement benefit facility.

 47

BIBLIOGRAPHY

TEXT BOOKS:

Page No. 459, “Compensation Management”, Chapter No—17, C.V. Memoria’S,

“Personnel Management”

Sadanand Degaonkar’S, Labour Cost & Accounting

Internet:

 http://payroll.naukrihub.com/compensation/

 http://www.authorstream.com/Presentation/drpattron68-138583-Research-

Methodology-CONTENTS-Constitutes-Topic-Select-Limitations-method-

Entertainment-ppt-powerpoint/

 http://medind.nic.in/jaq/t06/i6/jaqt06i6p479.pdf

 http://en.wikipedia.org/wiki/Methodology
 48

QUESTIONNAIRE

Name:

Department:

Q.1) Is there is a good system of salary & wage administration? It is satisfactory?

Ans: 1) Good 2) Satisfactory

3) Non satisfactory

Q.2) Does the compensation provides good incentives to the employees to give of
their best efforts?

Ans: 1) To some extent 2) To full extent

3) No

Q.3) Is the present system of compensation, benefits services sufficient to retain good
people & does it helps to keep moral & productivity high?

Ans: 1) Yes 2) No

Q.4) Does the organization provide sufficient benefits to take care of

the employee’s health, safety, welfare?

Ans: 1) Highly satisfied 2) Satisfied

3) Dissatisfied

Q.5) Are you satisfied with the canteen facilities provided by the organization?

Ans: 1) Good 2) Satisfactory

3) Bad
 49

Q.6) Are you satisfied with the welfare facilities provided by the company?

Ans: 1) Good 2) Satisfactory

3) Bad

Q.7) Are you satisfied with the leaves & holidays provided by the organization?

Ans: 1) Satisfied 2) Non satisfied

Q.8) Are you satisfied with the in house facilities provided by the company like
transport facilities, sports club facilities & training facilities?

Ans: 1) Good 2) Bad

3) Satisfactory

Q.9) Are you satisfied with the loans and advances provided by the company?

Ans: 1) Good 2) Satisfactory

3) Non satisfactory

Q.10) Are you satisfied with the Retirement benefits provided by the organization?

Ans: 1) Good 2) Satisfactory

3) Non satisfactory