Compensation and Benefits

Question: -1 Discuss the contents of Job Evaluation. Describe the process of Job
evaluation.
Answer: - Content of Job Evaluation
The contents of job evaluation are as follows:
1. Job analysis: It is a process of examining the job content by breaking it down into its
functions, elements, tasks, operations and processes.
2. Job description: It is a written and general statement that outlines the skills, education
and training required by the potential employee to perform the particular task.
3. Job classification: Here jobs are grouped with respect to their worth.
4. Job specification: It is a statement, which contains the qualifications and characteristics
of an employee, which are required for the successful task completion.

Process of Job Evaluation

The steps related to job evaluation are:
Step1: Appointment and creation of committee
A committee is set up which consists of experienced HR experts, employees and union
members so as to evaluate all the jobs in the organization.
Step2: Finding and identifying jobs that needs to be evaluated
The job in various departments of the organizations needs to be identified in order to find out
which job requires to be evaluated.
Step3: Analyzing the job description and job analysis
In the organization it is to conduct job analysis and job description which is necessary for
successful performance.
Step4: Selection of job evaluation method
It is to select the method for evaluation. This must be identified while keeping the demands of the
organization as well as factors related to job in mind.
Step5: Classification of job and compensation
The relevant worth of the jobs are arranged as per the requirement of skills, experience and
conditions under which the task is to be carried out, responsibilities to be handled, degree of
supervision that is required and so on. Thus, all these factors are assigned by weights which
determine the relative worth of the job.

Compensation and Benefits

Step6: Initiating the program
It is further carried out when the action plan is ready and the top management explains this plan to
their employees and finally put it into operation.
Step7: Concluding results
It is to review and examine the jobs periodically taking into account the environmental conditions
such as technology, services, products, etc.

Question: -2 Suppose you are a HR Manager and you are asked to develop an effective
Incentive Scheme for your organization. What are the pre-requisites you will consider while
developing an Effective Incentive Scheme? Discuss the merits and demerits of Incentives
Answer: - Pre-requisites of Effective Incentives Schemes
1. The workers co-operation is mandatory in execution of incentive schemes. The cooperation is required in respect of methods adopted for analysis of result on basis of
which payment is done, the setting wage rate methods for different work categories and
pre-requisites relating to job security, earnings and dispute settlement regarding work
standards.
2. The incentive scheme must be influenced by scientific work measurement like the
standards set must be practical and inspiring. In addition, the employees must be
provided with necessary resources to meet these standards.
3. All indirect staff like foreman, helpers, supervisors and canteen staff charge hands etc.
should also be roofed under incentive schemes.
4. A management commitment to oversee the outlay and schedule the proper administration
of plans should be formed.
5. An incentive plan should be first planned properly and then implemented carefully to
achieve desired results.

Merits and Demerits of Incentives

Merits:

Increase in volume of output Output of the firm increases as the workers are motivated
to increase their efficiency to get more wages.

Compensation and Benefits

Reduction of cost of production per unit Cost of production per unit of output declines
due to decrease in labour cost and overheads per unit.

Reduction of labour turnover Workers is rewarded properly for their efficiency which
results in reduction of labour turnover.

Reduction of idle time Since the payment of wages is linked with efficiency, the idle time
costs are reduced to the minimum.

Benefit to consumers Reduction of cost of production per unit is passed on to the

consumers by reducing the selling price.

Demerits:
In spite of the above advantages, the incentive plans are not free from disadvantages. The
following are some of the important disadvantages:

Difficulty to fix standard time Fixation of standard time for implementation of incentive
plans poses difficulty, particularly if the workers slow down deliberately while under
observation to get set a higher standard time.

More supervision required As the workers want to speed up the work to get more
wages, more supervision is necessary to avoid decline in the quality of work and wastage of
raw materials.

Union opposition Labour unions may oppose the incentive plan because it weakens
them and creates jealousies and greed among workers. This may lead to strikes and lockouts.

Question: -3. Discuss the types of managerial remuneration. Explain the elements of a
managerial remuneration.
Answer: - Types of Managerial Remuneration
Managerial remuneration comprises of two important pays which are as follows:
1. Short-term pay: It is related to the bonuses and the base pay which are usually paid to
the managers according to their performance in the organization. This type of pay is
totally cash based and over a certain period of time these bonuses become deferred.

Compensation and Benefits

2. Long-term pay: It comprises of stocks which are restricted, stock options, salary which
depend on the performance against the index and shares. These elements are used by
the shareholders in order to protect the organizations value as well as gaming control of
the top level managers on the rising value of the firm in the marketplace.

Elements of Managerial Remuneration

1. Base salaries: It is a fixed amount of money paid to an employee by
an employer in return for work performed. It does not include benefits, bonuses or any
other potential compensation from an employer. It is paid, most frequently, in a bi-weekly
paycheck to an employee.
2. Special package of perquisites and benefits: In order to maximize the availability of
time to key managers from the purpose of business perspective, various other facilities
are also offered to them such as connection of internet, connection of cell phone and so
on.
3. Profit-sharing bonus: In the programme of executive payments, it plays a very
important role. It is usually based on the profit sharing or performance.
4. Short-term bonuses: It ranges from 5% of the base salary to 10 or more times the base
salary offered when firm had very good year by recognizing the financial indicators.
5. Long-term performance bonus: The time period of receipt is 2 years or more into the
future and the award size is based on the multiyear achievement of established
performance related objectives.
6. Stock options: Many firms offer stock equivalences in the form of share appreciation
right/phantom shares. Here recipients are compensated with stock increased value i.e.
further determined by the base valuation which is prepared when share appreciation
right/phantom shares are given.

Compensation and Benefits

7. Severance packages: It is also known as Golden Handshake which is financial
remuneration and incentive packages which if given to those employees in the
organizations who are retired or laid off.

Question: -4 Define Pay based Structure. What are its objectives? Explain the major
decisions involved in designing and setting competitive pay structures.
Answer: - A pay structure refers to the collection of salary grades, bands or levels, connection of
related jobs within a series or hierarchy which helps the organisation in providing a framework for
the implementation of various policies and reward strategies within the organisation. Various
salary structures are connected with varying types of salary progression arrangements.
Objectives of pay structure

To balance strategy of reward with the strategy of the business of as to encourage and
motivate high performance level people.
To bring out clarity and order between organisation and its people in managing career
progression as well as increase in pay.
To make transparency and ensure lawfulness and fairness while designing the pay
structure.

Major decisions in designing and setting competitive pay structures

1. Specifying the competitive pay policy of the employer with the help of surveys which gives data
for converting the pay policy into pay structures, pay levels and pay mix.
2. Defining the purpose of survey which is conducted because of the following reasons:

To analyse pay related problems and establish pay structure

To estimate labour price of services and product market competitors and to select the
market competitors which are based on similar skills, same services and products as well
as employees within the similar geographical area.

3. Selection of jobs in the survey with the help of two approaches:

Low - high approach which identifies lowest and highest paid benchmark jobs for the
relevant competencies in the relevant market and to use the salaries for these jobs as
anchors basically for the skill based structures.
Benchmark job approach includes the entire structure of the job which comprises of all the
key functions and levels that can be matched with the descriptions of the benchmark jobs.
4. Designing the survey with the help of three categories of data:

Providing information about the nature of the firm.

Providing information about the total pay system

Compensation and Benefits

Specifying compensation data on each incumbent in the jobs understudy

5. Interpreting the survey results by analysing and assessing the outcomes as well as using
statistics in order to construct the market line so as to check the accuracy of the job matches, the
anomalies, age of data and the nature of the firms.
6. Balance the competitiveness with internal alignment which includes use of bands, ranges and
flat rates which offer flexibility so as to deal with pressures from external markets and differences
among firms.

Question: -5 Explain the various criteria considered for rewarding the employees for their
good service.
Answer: - The criteria for rewarding the employees for their good service in the firm are as
follows:
1. Analyzing and surveying of staff: Conducting a survey is regarded as one of the most
critical challenge for the firms when it comes to motivate their employees. For this the firm
must deeply understand their employees as well as their culture. Thus for this, they have
created Culture Critique by using the staff focus groups and also one-to-one interviews
for both current and existing employees.
2. Build up a check list of service quality: It may differ from firm to firm according to their
size and internal factors, today many firms are using Business Excellence model as
diagnostic tool. This tool helps the organization in showing how the customer satisfaction
is linked to people issues.
3. Creating a motivational environment by providing training to the managers: Many
service organizations provide training to their managers in motivation and leadership.
4. Giving positive feedback: A well done and Thank you from managers is very
influential for the employees than token or monetary reward.
5. Establishing a league table of service performance: Nowadays many organizations
use survey as well as mystery shopping so as to examine their outlets performance. The
most successful are those where appreciation is given to top performer employees and
also to those employees who make the best improvements over time in their firm.

Compensation and Benefits

6. Feedback to the compliments and comments of customers: Kwik-Fit keeps customer
correspondence folder in each Depot reception area, publicizing positive letters customer
has written. It rings up customers on daily basis and publicizes the results internally.
7. Issue Achievement Certificates: It can become highly prized when employees achieve
defined standards of customer services and skills level.
8. Link Bonuses to customer satisfaction: Not only for managers but also for service
staff, bonus payment which is a variable element becoming very vital component of
organizations.
9. Implement 360degree appraisal method: As satisfied customer is closely linked to
satisfied employees, many firms are encouraging inputs by employees as well as
customers into a managers all round 360degree feedback.
10. Develop customer service competencies as well as include customer service in
performance management: Customer service is becoming more widespread as a
valuable transferable qualification. Customer service is also regarded as key
measurements in performance appraisal.

Question: -6 write a short note on the following:

a) Wage policy plan in India
b) Voluntary retirement Scheme(VRS)
Answer: - Wage Policy
Wage policy can be defined as the principal which act as guidelines for determination of a wage
structure. It relates to all systematic efforts of the Government in relation to a national wage and
structure of wages.
The wage policy in India is built around the following fundamental principles:

Equal compensation for an equal work performed

Providing living wages for employees
Payment of wages without any deduction on the appointed dates
Use of collective bargaining to resolve wage related issues
As per legal provisions paying 8.33% as statutory bonus
Determination of fair wages above minimum wages in respect to labour and place of
industry in the financial system

Wage policy in India

Compensation and Benefits

The plans of wages in India are explained as follows:

The first plan (1951 to 1956)

The second plan (1956 to 1961)
The third plan (1961 to 1966)
The fourth plan (1969 to 1974)
The fifth plan (1974 to 1979)
The sixth plan (1980 to 1985)
The seventh plan (1985 to 1990)
The eighth plan (1992 to 1997)

Voluntary Retirement Scheme (VRS)

Voluntary Retirement Scheme is the most common method which is used by organisations to
reduce excess manpower. It helps the employer not only to compete and survive in this current
business scenario but also improve his/her performance. This scheme also becomes the
prominent means of downsizing of employees. VRS is also known by the names such as
Voluntary Separation Scheme, Golden Handshake and Early Separation Scheme.
Though the criteria of eligibility of VRS may differ from organisation to organisation it is given only
to those employees who have either served 10 years of working or attained 40 years of age.
Thus, the employees who opt for this scheme are permitted to get 45 days of benefits for each
completed year of working or monthly benefits during retirement time which is multiplied with
service months that are left before the date of working whichever is less.