PAPER 3.

6
Compensation
Management
M.B.A.
COMPENSATION MANAGEMENT
MEANING OF WAGE/ COMPENSATION PAYMENT:
Wage is a monetary payment made by te emp!oyer to is emp!oyee "or te #or$ done or
ser%i&es rendered' It is a monetary &ompensation "or te ser%i&es rendered' A #or$er may be paid
(s' )** per day or (s' +,** per mont' Tis is #age payment' Te #or$er gi%es is ser%i&es and
ta$es payment &a!!ed #age payment' Ind-stria! #or$ers are paid rem-neration "or teir ser%i&es
in terms o" money &a!!ed #age payment' Wages are -s-a!!y paid in &as at te end o" one day. one
mont or one #ee$' Money #age is te monetary &ompensation or pri&e paid by te emp!oyer to
is emp!oyee "or te ser%i&es rendered' S-& &ompensation is a!so &a!!ed #age or sa!ary or
re#ard gi%en by an organi/ation to a person in ret-rn to a #or$ done'
Genera!!y. &ompensation payab!e to an emp!oyee in&!-des te "o!!o#ing tree &omponents:
0asi& &ompensation "or te 1ob 2#age/sa!ary3
In&enti%e &ompensation "or te emp!oyee on 1ob
S-pp!ementary &ompensation paid to emp!oyees 2"ringe bene"it and emp!oyee ser%i&es3
4e"inition:
A&&ording to Mi!$o%in& and 0o-drea-. 5Compensation re"ers to a!! "orms o" "inan&ia! ret-rns.
tangib!e ser%i&es. and bene"its emp!oyee re&ei%ed as part o" teir emp!oyment re!ationsip'6
O07ECTI8E/GOA9S OF WAGE : SA9A(Y:
)' Interna! : e;terna! E<-ity: A %ery important ob1e&ti%e in administering #age and sa!ary
is to a&ie%e interna! and e;terna! e<-ity' Interna! e<-ity means simi!ar pay "or simi!ar #or$'
4i""eren&es in #ages bet#een 1obs so-!d be in proportion to te di""eren&es in te #ort o" te
1obs'
=' Fair #ages: A "air #age is someting more tat te minim-m #age pro%iding te bare
ne&essities o" !i"e' A "air #age depends on se%era! "a&tor> prod-&ti%ity o" !abor. pre%ai!ing rates o"
#ages in te same or simi!ar o&&-pations in te same or neigboring region. p!a&e o" ind-stry in
te &o-ntry?s e&onomy. emp!oyer?s &apa&ity to pay and so on'
@' Attra&t &ompetent ta!ent: Tro-g proper #age sa!ary administration. te organi/ation
see$s to attra&t ta!ented. #e!! <-a!i"ied and ard#or$ing peop!e'
+' (etain good emp!oyees: Tro-g "air and &ompetiti%e #ages and sa!aries. te
organi/ation aims at retaining &ompetent emp!oyees #o are doing a good 1ob' Te p-rpose is to
red-&e emp!oyee t-rno%er'
,' Satis"y emp!oyee needs: A $ey ob1e&ti%e o" ade<-ate #ages and sa!aries is to e!p
emp!oyees "-!"i!! teir %ario-s needs' It &reates a sense o" se&-rity and enan&es te se!">#ort o"
te emp!oyees'
A' Moti%ate emp!oyees to iger prod-&ti%ity: A #e!! p!anned #age and sa!ary system
moti%ates emp!oyees to #or$ ard. res-!ting in iger !e%e!s o" prod-&ti%ity'
IMPO(TANCE OF WAGE PAYMENT:
)' To #or$er:
Wage payment is important to a!! &ategories o" #or$ers' Wage is a matter o" !i"e and deat to
#or$ers/emp!oyees' Teir !i"e. #e!"are and e%en so&ia! stat-s depend on #age payment' It is on!y
so-r&e o" in&ome to !arge ma1ority o" #or$ers' Tey and teir -nions a!#ays demand iger
#ages and oter monetary bene"its'
Ma1ority o" !abo-r prob!ems and disp-tes are dire&t!y re!ated to #age payment' Te e""i&ien&y o"
#or$ers and teir interest and in%o!%ement in te #or$ depend on #age payment' E%en teir
attit-de to#ards emp!oyer depends on #age payment' In brie". #age payment is a matter o"
greatest importan&e to #or$ers' Wage prob!em is te most pressing and persistent prob!em be"ore
te entire !abo-r "or&e'
=' To emp!oyer:
Wage payment is e<-a!!y important to emp!oyers as teir pro"it depend on te tota! #age bi!!' An
emp!oyer in genera! is interested in paying !o# #ages and tereby &ontro!s te &ost o" prod-&tion'
Bo#e%er. !o# #ages are not ne&essari!y e&onomi&a!' In "a&t tey may pro%e to be too &ost!y to
te emp!oyer in te !ong r-n' E'g' In garment man-"a&t-ring &ompany i" tai!ors are not paid
proper!y ten it is di""i&-!t "or te &ompany to retain tem' An emp!oyer as a mora! and so&ia!
responsibi!ity to pay "air #ages to is #or$er as tey are e<-a! partners in te prod-&tion pro&ess'
Be so-!d gi%e "air #ages #i& #i!! bene"it to bot te parties' Emp!oyees #i!! o""er "-!! &o>
operation to te management #en tey are paid attra&ti%e #ages' On te oter and. stri$es and
disp-tes are !i$e!y to de%e!op #en #or$ers are paid !o# #ages or #en tey are dissatis"ied and
angry d-e to !o# #age rates' It is possib!e to earn more pro"it by paying attra&ti%e #ages to
#or$ers' E'g' (e!ian&e. Citi 0an$. Motoro!a are earned -ge pro"its be&a-se o" teir iger pay
pa&$ages'
@' To go%ernment:
Go%ernment a!so gi%e spe&ia! importan&e and attention to #ages paid to ind-stria! #or$ers as
ind-stria! de%e!opment. prod-&ti%ity. ind-stria! pea&e and &ordia! !abo-r> management re!ation
depend on te #age payment to #or$ers' Go%ernment desires to gi%e prote&tion to te #or$ing
&!ass and "or tis minim-m #ages a&t and oter A&ts are made' In India. #ages are no# !in$
#it te &ost o" !i%ing' Tis is "or te prote&tion o" #or$ers' Go%ernment is te biggest emp!oyer
in India and te #age rates o" go%ernment ser%ant and emp!oyees o" p-b!i& se&tor organisations
are de&ided by go%ernment on!y' (e%ision o" pay s&a!e o" go%ernment emp!oyees made "or
ad1-sting teir #ages as per te &ost o" !i%ing' For tis. 5Pay Commission6 is appointed and pay
s&a!e is ad1-sted as per te re&ommendations made'
In India. #age payment is %ery &riti&a!. &ontro%ersia! and de!i&ate iss-e "or a!! &ategories o" #or$
"or&e' Tis is d-e to po%erty. rising pri&es. mass -nemp!oyment and rising pop-!ation' Wage
payment indeed a %e;atio-s prob!em and needs to be ta&$!ed "rom e&onomi&. so&ia! and
-manisti& ang!es'
CONCEPT OF FAI( WAGES:
Fair #ages is te #age #i& is abo%e te minim-m #age b-t be!o# te !i%ing #age' Ob%io-s!y
te !o#er !imit o" te "air #age is te minim-m #age and te -pper !imit is set by te abi!ity o"
te ind-stry to pay' 0et#een tese t#o !imits. "air #ages so-!d depend on te "a&tors !i$e C
)' Pre%ai!ing rates o" #ages in te same o&&-pation
=' Pre%ai!ing rates o" #ages in te same region or neigbo-ring areas
@' Emp!oyers abi!ity to pay
+' 9e%e! o" nationa! in&ome and its distrib-tion
,' Prod-&ti%ity o" !abo-r
A' Stat-s en1oyed by te ind-stry in te e&onomy
Ben&e it &an be said tat "air #ages are determined on ind-stry &-m region basis' Wen "air
#ages are paid emp!oyees en1oy iger standard o" !i%ing' It is a&&epted "a&t tat #ages m-st be
"air and reasonab!e' Wages is "air #en te emp!oyee is ab!e to meet its essentia! needs and en1oy
reasonab!e standard o" !i%ing' 6E<-a! pay "or e<-a! #or$6 ser%es as base o" "air #age'
A&&ording to En&y&!opaedia o" so&ia! s&ien&e.6Fair #ages are e<-a! to tose re&ei%ed by te
#or$ers per"orming #or$ o" e<-a! s$i!!. di""i&-!ty or -np!easantness'6
Fa&tors In"!-en&ing Wage And Sa!ary Str-&t-re:
)' Te organi/ation?s abi!ity to pay:
Wage in&reases so-!d be gi%en by tose organi/ations #i& &an a""ord tem' Companies
tat a%e good sa!es and tere"ore ig pro"its tend to pay iger #ages tan tose #i& are
r-nning at a !oss or earning !o# pro"its be&a-se o" te ig &ost o" prod-&tion or !o# sa!es'

=' S-pp!y and demand o" !abo-r:
I" te demand and &ertain s$i!!s are ig and te s-pp!y is !o# te res-!t is rise in te pri&e
to be paid "or tese s$i!!s' Te oter a!ternati%e is to pay iger #ages i" te !abo-r s-pp!y is
s&ar&e and !o#er #ages #en it is e;&essi%e'
@' Te &ost o" !i%ing:
Wen te &ost o" !i%ing in&reases. #or$ers and trade -nions demand ad1-sted #ages to
o""set te erosion o" rea! #ages' Bo#e%er #en !i%ing &osts are stab!e or de&!ine te management
does not resort #it tis arg-ment as a reason "or #age red-&tion'
+' Te !i%ing #age:
Emp!oyers "ee! tat te !e%e! o" !i%ing pres&ribed in #or$ers b-dget is opened to arg-ment
sin&e it is based on s-b1e&ti%e opinion'
,' 7ob re<-irements:
7obs are graded a&&ording to te re!ati%e s$i!! responsibi!ity and 1ob &onditions re<-ired'
A' Trade -nions bargaining po#er:
Trade -nions do a""e&t te rate o" #ages' Genera!!y te stronger and more po#er"-! trade
-nion. iger te #ages'
D' Prod-&ti%ity:
Prod-&ti%ity is anoter &riterion and is meas-red in terms o" o-tp-t man>o-r' It is not d-e
to !abo-r e""orts a!one' Te&no!ogi&a! impro%ements. greater ingen-ity and s$i!! by te !abo-r are
a!! responsib!e "or te in&rease in prod-&ti%ity'
E' Pre%ai!ing mar$et rate:
Tis is a!so $no#n as F&omparab!e #ages? or ?going #age rate?' (eason beind tis is
&ompetition demand tat &ompetitors adere to te same re!ati%e #age !e%e!'
G' S$i!! !e%e!s a%ai!ab!e in te mar$et:
Wit te rapid gro#t o" ind-stries. b-siness trade tere is sortage o" s$i!!ed reso-r&es'
Te te&no!ogi&a! de%e!opment. a-tomation as been a""e&ting te s$i!!ed !e%e!s at a "aster rate'
)*' Psy&o!ogi&a! and so&ia! "a&tors:
Tis determine in a signi"i&ant meas-re o# ard a person #i!! #or$ "or te &ompensation
re&ei%ed or #at press-res e #i!! e;ert to get is &ompensation in&reased'
Components O" Emp!oyee (em-neration:
Te rem-neration pa&$et o" an emp!oyee in&!-des #age/sa!ary. in&enti%es. "ringe bene"its.
per<-isites and "ina!!y non>monetary bene"its'
Tis is made &!ear in te "o!!o#ing &art:


)' Wages and sa!ary:
Wages represent o-r!y rates o" pay. and sa!ary re"ers to te mont!y rate o" pay. irrespe&ti%e o"
te n-mber o" o-rs p-t in by te emp!oyee' Wages and sa!aries are s-b1e&t to te ann-a!
in&rements' Tey di""er "rom emp!oyee to emp!oyee. and depend -pon te nat-re o" 1ob. seniority.
and merit'
=' In&enti%es:
In&enti%es are paid in addition to #ages and sa!aries and are a!so &a!!ed Fpayments by res-!ts?'
In&enti%es depend -pon prod-&ti%ity. sa!es. pro"it. or &ost red-&tion e""orts'
Tere are: 2a3 Indi%id-a! in&enti%e s&emes. and 2b3 Gro-p in&enti%e programmes' Indi%id-a!
in&enti%es are app!i&ab!e to spe&i"i& emp!oyee per"orman&e' Were a gi%en tas$ demands gro-p
e""orts "or &omp!etion. in&enti%es are paid to te gro-p as a #o!e' Te amo-nt is !ater di%ided
among gro-p members on an e<-itab!e basis'
@' Fringe bene"its:
Tese are monetary bene"its pro%ided to emp!oyees' Tey in&!-de te bene"it o": 2a3 Pro%ident
"-nd. 2b3 Grat-ity. 2&3 Medi&a! &are. 2d3 Bospita!i/ation payment. 2e3 A&&ident re!ie". 2"3 Bea!t
and Gro-p ins-ran&e. 2g3 S-bsidi/ed &anteen "a&i!ities. 23 (e&reationa! "a&i!ities. and 2i3
Pro%ision o" -ni"orms to emp!oyees'
+' Per<-isites:
Tere are spe&ia! bene"its o""ered to managers/e;e&-ti%es' Te p-rpose is to retain &ompetent
e;e&-ti%es' Per<-isites in&!-de te "o!!o#ing: 2a3 Company &ar "or tra%e!ing. 2b3 C!-b
membersip. 2&3 Paid o!idays. 2d3 F-rnised o-se or a&&ommodation. 2e3 Sto&$ option
s&emes. et&'
,' Non>monetary bene"its:
Tese bene"its gi%e psy&o!ogi&a! satis"a&tion to emp!oyees e%en #en "inan&ia! bene"it is not
a%ai!ab!e' S-& bene"its are: 2a3 (e&ognition o" merit tro-g &erti"i&ate. et&' 2b3 O""ering
&a!!enging 1ob responsibi!ities. 2&3 Promoting gro#t prospe&ts. 2d3 Com"ortab!e #or$ing
&onditions. 2e3 Competent s-per%ision. and 2"3 7ob saring and "!e;i>time'
SYSTEMS OF WAGE PAYMENT:
A3 TIME (ATE SYSTEM
03 PIECE (ATE SYSTEM

Time rate system:
It is te o!dest and simp!est metod o" #age payment -sed e;tensi%e!y in te ind-stria! as #e!! as
go%ernment departments' Wages are paid as per te time spent by te #or$ers in te "a&tory' Te
prod-&tion gi%en by tem is not ta$en into &onsideration' Te emp!oyer b-ys te o-rs o" te
#or$ers and pays tem a&&ording!y' Time rate system is a!so &a!!ed as day #age system' In te
time rate system. e""i&ien&y. sin&erity. abi!ity is not gi%en attention and a!! te #or$ers are paid at
one and te same rate as per te period spent in te "a&tory'

A48ANTAGES OF TIME (ATE SYSTEM:

)3 Easy and simp!e: Time rate is easy to -nderstand and simp!e to "o!!o# and &a!&-!ate' Wage
&a!&-!ations are a!so easy and <-i&$' Ea& #or$er $no#s o# m-& #age payment e is entit!ed
to at te end o" te mont' Tis gi%es &on%enien&e to emp!oyer and emp!oyees'

=3 G-arantee o" minim-m #age: It gi%es te g-arantee o" &ertain minim-m #age payment to
e%ery #or$er irrespe&ti%e o" teir #or$ing &apa&ity' Wor$ers get a reg-!ar and stab!e in&ome and
tis gi%es a sense o" se&-rity to a!! #or$ers as regards #age payment'

@3 Maintains <-a!ity o" prod-&tion: H-a!ity o" prod-&tion is maintained ere as te #or$ers are
not in a -rry to &omp!ete te #or$' Tey do not r-s te 1ob and spoi! te <-a!ity be&a-se o" te
temptation to earn more' Wor$ers tend to #or$ s!o#!y and #it &are' E%en a&&idents are !ess as
#or$ers -se te ma&ines in a &are"-! manner'

+3 S-pport "rom trade -nions: Wor$ers and trade -nions a&&ept and s-pport time rate system as a!!
#or$ers are p!a&ed in one &ategory as regards #age payment' Tis ens-res -nity among #or$ers'
Trade -nions norma!!y pre"er time rate system o" #age payment'

,3 A%oids <-arre!s among #or$ers: Time rate a%oids eart b-rning and <-arre!s among te
#or$ers as -ni"orm #ages are paid to a!!' Bere e""i&ien&y. onesty and sin&erity o" #or$ers are
not gi%en any spe&ia! #eigtage' Wage rate is te same "or sin&ere and !a/y #or$ers'

A3 Con%enient in modern "a&tory system: Time rate payment is &on%enient in modern "a&tory
system #ere prod-&tion pro&ess is &ontin-o-s and integrated' It is not possib!e to meas-re te
#or$ &omp!eted by one indi%id-a! #or$er and en&e time rate system is &on%enient'

4ISA48ANTAGES OF TIME (ATE SYSTEM:
)3 Not s&ienti"i&: Time rate is not s&ienti"i& system o" #age payment as tere is no dire&t !in$ing
bet#een #ages and prod-&tion/prod-&ti%ity' Wages bi!! may in&rease #ito-t &orresponding
in&rease in te prod-&tion' Tis #i!! bring !oss to te emp!oyer / management'

=3 Absen&e o" positi%e en&o-ragement: In te time rate system. tere is no positi%e
en&o-ragement to #or$ers to impro%e teir e""i&ien&y/ per"orman&e as te #age rate is -ni"orm to
a!! #or$ersI e""i&ient and ine""i&ient'


@3No distin&tion bet#een #or$ers: In te time rate system no distin&tion is made bet#een
e""i&ient and !a/y #or$ers. bot are paid at one rate #i& is -n"air' Tis system gi%es
p-nisment to sin&ere and e""i&ient #or$ers' Tey are dis&o-raged as tey are paid !ess tan #at
tey deser%e' Tey may e%en !ea%e te 1ob'
+3 No initiati%e to #or$ers: Time rate "ai!s to en&o-rage #or$ers to ta$e more interest and
initiati%e in teir #or$' In "a&t. it en&o-rages tem to "o!!o# 5go s!o#6 po!i&y' Tis is be&a-se
#age payment is not !in$ed #it te prod-&tion gi%en'

,3 9abo-r &ost may in&rease: In te time rate system. tere is a possibi!ity o" in&rease in te
!abo-r &ost #ito-t &orresponding in&rease in te prod-&tion' Wor$ers may #or$ #it s!o#
speed. gi%e !ess prod-&tion b-t &o!!e&t te #age as per time or day "i;ed'

A3 Stri&t s-per%ision: In te time rate stri&t s-per%ision on te #or$ers is essentia! as payment is
"or period and not prod-&tion' Tis raises te e;pendit-re on s-per%ision'
D3 No e""e&t on prod-&ti%ity/ e""i&ien&y: Time rate "ai!s to raise prod-&ti%ity and e""i&ien&y o"
!abo-r "or&e' It is not an in&enti%e system o" #age payment'

Pie&e rate system:
Tis is anoter basi& system o" #age payment' It is 1-st opposite to te time rate' It is a!so treated
as an in&enti%e #age system as it en&o-rages #or$ers to prod-&e more and a!so to earn more' In
te pie&e rate system. #ages are paid as per te o-tp-t or prod-&tion gi%en by te #or$er and not
as per te time spent by te #or$er in te "a&tory' Payment is by res-!ts in terms o" o-tp-t gi%en'
Wage rate is "i;ed per pie&e o" #or$ or "or &ertain <-antity o" prod-&tion' Te prod-&tion gi%en
by a #or$er at te end o" te day is &o-nted and payment is made a&&ording!y'

ME(ITS/ A48ANTAGES OF PIECE (ATE SYSTEM:
)3 9in$ing o" #ages #it prod-&tion: Bere #ages are !in$ed #it prod-&tion or
prod-&ti%ity' It raises te prod-&ti%ity o" !abo-r' Wor$ers #or$ #it speed and -se teir &apa&ity
"-!!y as te #age payment is dire&t!y re!ated to te <-antity o" prod-&tion gi%en by a #or$er'

=3 4istin&tion is made bet#een e""i&ient and ine""i&ient #or$ers: 4istin&tion is made bet#een
e""i&ient and ine""i&ient #or$er and "-!! 1-sti&e is done to e""i&ient #or$er as e gets payment in
proportion to te prod-&tion gi%en' E""i&ient #or$ers s-pport te pie&e rate system b-t it is not
pre"erred by -ns$i!!ed and ine""i&ient #or$ers' Tey get !ess payment -nder tis metod as teir
&apa&ity to prod-&e is !ess'

@3 En&o-rages #or$ers to ta$e initiati%e in te #or$: Pie&e rate system en&o-rages #or$ers to
ta$e more interest and initiati%e in te #or$ as e%ery #or$er gets "-!! re#ard o" is e""orts' Tere
is dire&t e""orts>re#ard re!ationsip in te pie&e rate system'

+3 Fair to emp!oyer and emp!oyees: Tis system is "air to emp!oyers as #e!! as emp!oyees' Te
emp!oyees get in&ome in proportion to prod-&tion gi%en by tem and te emp!oyer gets
prod-&tion in proportion to te #age paid'

,3 In&enti%e system: Tis system ser%es as te in&enti%e system' Wor$ers #or$ e""i&ient!y
and ta$e interest in te #or$ d-e to &orresponding bene"it/ re#ard in te "orm o" iger #age
payment'
A3 9imited s-per%ision ade<-ate: In tis system stri&t s-per%ision on te #or$ers is not
ne&essary as #or$ers #or$ sin&ere!y' Tis is be&a-se teir #age payment is dire&t!y !in$ed #it
teir sin&erity and abi!ity'
D3 Freedom o" #or$ to #or$ers: Wor$ers get more "reedom o" #or$ and tere is e""e&ti%e
&ontro! on te &ost o" prod-&tion in te pie&e rate system'
E3 0rings &ordia! re!ations: Pie&e rate brings &ordia! !abo-r> management re!ations and
ind-stria! pea&e'

4EME(ITS/9IMITATION OF PIECE (ATE SYSTEM
)' No g-arantee o" minim-m #age payment: Tere is a g-arantee o" &ertain minim-m #age
payment to a #or$er' Tis may pro%e to be dangero-s parti&-!ar!y to a ne#!y re&r-ited #or$er
and #or$ers #o are be!o# a%erage'
=' Wor$ers s-""er e%en #en tey are not at "a-!t: Sometimes #or$ers s-""er in #age
payment e%en #en tey are not "a-!t' 4-e to po#er "ai!-re. et& tey may not be ab!e to gi%e
prod-&tion and nat-ra!!y tey #i!! not be e!igib!e "or #age payment e%en #en tey remain
present in te "a&tory "or te #o!e day'
@' Comp!i&ated system: Pie&e rate system is &omp!i&ated and di""i&-!t as it is di""i&-!t to
-nderstand by ordinary #or$ers' Management #i!! a%e to $eep e!aborate re&ords o" prod-&tion
gi%en by ea& #or$er' Wor$ers a!so ma$e &omp!aints as regards #age payment #en tey "ee!
tat d-e payment is not made to tem'
+' 4ist-rbs -nity o" #or$ers: Pie&e rate a""e&ts te -nity among #or$ers as #age payment
#i!! not be -ni"orm to a!! #or$ers' Tis #i!! !ead to <-arre! among #or$ers' Trade -nions oppose
pie&e rate system on te gro-nd tat it #i!! !ead to ri%a!ry among #or$ers and destroy -nity
among tem'
,' Not "air to trainees: Pie&e rate system is not "air to trainees. as teir &apa&ity to prod-&e is
!ess and nat-ra!!y tey #i!! get !ess #ages'
A' H-a!ity o" prod-&tion is ad%erse!y a""e&ted: It a""e&ts te <-a!ity o" prod-&tion as #or$ers
may #or$ #it speed and tis may bring do#n te <-a!ity o" prod-&tion' In addition te #astages
and spoi!ed #or$ are !i$e!y to in&rease d-e to aste on te part o" te #or$ers to !abo-r ard and
o%er strain temse!%es in order to earn more' Tis a""e&ts te ea!t o" #or$ers'

TIME (ATE 8/S PIECE (ATE SYSTEMS


Meaning:
Wages are paid as per te time spent by #or$ers'
Wages are paid as per te o-tp-t or prod-&tion gi%en by #or$ers'
O!d/ne# system:
O!dest and simp!est metod o" #age payment'
Modern and in&enti%e system o" #age system'
G-arantee o" #ages:
Gi%es g-arantee o" &ertain minim-m #age payment to e%ery #or$er'
Fai!s to gi%e g-arantee o" minim-m #age payment to e%ery #or$er'
S-pport:
Emp!oyees and trade -nions s-pport time rate system'
Emp!oyers and e""i&ient #or$ers pre"er pie&e rate system'
Jnderstanding o" system:
Easy to -nderstand and simp!e to administer'
Comp!i&ated system as %ario-s re&orded and registers are re<-ired to be maintained
4istin&tion bet#een #or$ers:
4istin&tion is not made bet#een e""i&ient and ine""i&ient #or$ers as a!! are paid at one and same
rate'
4istin&tion is made bet#een e""i&ient and ine""i&ient #or$ers' E""i&ient #or$er is paid more #i!e
an ine""i&ient #or$er is paid !ess'
E""e&t on prod-&tion:
En&o-rages #or$ers to "o!!o# go>s!o# po!i&y and nat-ra!!y prod-&tion s-""ers'
En&o-rages #or$ers to ta$e more interest in te #or$ and nat-ra!!y prod-&tion in&reases'
H-a!ity o" prod-&tion:
H-a!ity. #or$mansip o" prod-&tion are not a""e&ted. ra# materia!s. ma&inery are -ti!ised
proper!y' Te spoi!ed #or$ is a!so neg!igib!e'
H-a!ity. #or$mansip o" prod-&tion may s-""er' In&rease in spoi!ed #or$ and #astage o" ra#
materia!s'
S-per%ision:
Stri&t s-per%ision is ne&essary as #or$ers are paid as per te period spent'
Stri&t s-per%ision is not ne&essary as #or$ers are paid in proportion to te prod-&tion gi%en'
S-itabi!ity:
S-itab!e to man-"a&t-ring -nits. a!so s-itab!e #en indi%id-a! &ontrib-tion is not easi!y
meas-rab!e'
S-itab!e #en &ontrib-tion o" indi%id-a! #or$er is meas-rab!e and #or$ is standardised and
repiti%e in &ara&ter'
INCENTI8E SYSTEMS OF WAGE PAYMENT:
Te #age p!an so-!d be ig!y in&enti%e means it so-!d en&o-rage #or$ers to ta$e more
initiati%e and interest in te #or$. prod-&e more and a!so earn more' Te #age p!an #i& ser%es
a!! tese p-rposes is &a!!ed in&enti%e #age p!an' S-& an in&enti%e p!an is bene"i&ia! to bot >
emp!oyers and emp!oyees as #e!! as it is -se"-! "or te rapid ind-stria! gro#t'
In&enti%es in&!-de monetary as #e"t as non>monetary bene"its o""ered' Tere is moti%ation to
#or$ ard and to earn more' In e%ery in&enti%e p!an. #ages are !in$ed #it te gi%en o-tp-t'
In&enti%es are not "i;ed !i$e #ages and sa!aries' Tey %ary "rom indi%id-a! to indi%id-a! and "rom
period to period'
I9O de"ines in&enti%es as Kpayment by res-!tsK' In&enti%es &an a!so be des&ribed as Kin&enti%e
systems o" paymentK'
A&&ording to 4a!e Yoder. 5In&enti%e #ages re!ate earnings to prod-&ti%ity and may -se
premi-ms. bon-ses. or a %ariety o" rates to &ompensate "or s-perior per"orman&e6 Pie&e rate
system is te o!dest in&enti%e #age p!an #i& is a!so -se"-! "or attra&ting and retaining <-a!i"ied
personne! in te organisation and "or moti%ating personne! to iger !e%e!s o" per"orman&e' In
many in&enti%e p!ans. a &ombination o" time rate and pie&e rate systems is -sed' S-&
&ombination &reates an idea! in&enti%e p!an'
TYPES OF INCENTI8E P9ANS:
Tere are t#o types o" in&enti%e p!ans:
2a3 Indi%id-a! in&enti%e p!ans. and
2b3 Gro-p in&enti%e p!ans'
Indi%id-a! in&enti%e p!an is meant "or indi%id-a! emp!oyees' Be as to #or$ ard i'e' e""i&ient!y.
prod-&e more and sare te monetary bene"its "or imse!"' Te bene"it is dire&t!y !in$ed #it is
abi!ity. e""i&ien&y and &apa&ity'
In te gro-p in&enti%e p!an. te in&enti%e is not "or indi%id-a! emp!oyee b-t "or te gro-p o"
emp!oyees #or$ing in one department or se&tion' S-& gro-p in&enti%e p!an may &o%er te entire
!abo-r "or&e o" a prod-&tion -nit' Te gro-p #i!! #or$ &o!!e&ti%e!y. gi%e more prod-&tion and
sare te bene"it' Initia!!y te bene"it #i!! be gi%en to te gro-p and terea"ter. it #i!! be di%ided
among te members o" te gro-p'
Management is interested in gro-p in&enti%e p!an #i!e emp!oyees are interested in indi%id-a!
in&enti%e p!ans' Prod-&tion a&ti%ities are no# &ond-&ted in an integrated manner and nat-ra!!y
in&enti%es so-!d be o""ered to te emp!oyees' Gro-p in&enti%e p!ans are better as tey en&o-rage
team spirit and de%e!op &ooperation and -nderstanding among te emp!oyees' Tis a%oids
#astages and promotes prod-&ti%ity'
FEATJ(ES/(EHJISITES OF A GOO4 INCENTI8E P9AN:
Simp!i&ity:
A good in&enti%e p!an is one #i& is easy to -nderstand and simp!e to operate' An a%erage
#or$er m-st be ab!e to $no# te in&enti%e o""ered and #at e is e;pe&ted to do' Te monetary
as #e!! as non>monetary bene"its o""ered m-st be made &!ear to a!! #or$ers'
En&o-rage initiati%e:
A good in&enti%e p!an so-!d &reate initiati%e among #or$ers to #or$ more and to earn more' It
m-st o""er more in&ome to #or$ers and more pro"it/prod-&tion to te "irm or &ompany'
4e"initeness and "!e;ibi!ity:
A good in&enti%e p!an so-!d be de"inite' Tis means "re<-ent &anges so-!d not be made as
regard rates. et&' as s-& &anges &reate &on"-sion and do-bts in te minds o" #or$ers' S-& p!an
m-st gi%e &!ear bene"its to #or$ers
In addition. an idea! in&enti%e p!an so-!d be "!e;ib!e' It so-!d ta$e &are o" te&no!ogi&a! and
oter &anges ta$ing p!a&e "rom time>to>time' Tere so-!d be s-itab!e pro%ision "or s-&
ad1-stment'
Wide &o%erage and e<-itab!e:
A good in&enti%e p!an so-!d not be "or emp!oyees in &ertain departments on!y' It so-!d a%e a
#ide &o%erage and a!most a!! emp!oyees so-!d be &o%ered in s-& p!an' S-& #ide &o%erage
ma$es te p!an pop-!ar at a!! !e%e!s and among a!! &ategories o" #or$ers'
An in&enti%e p!an so-!d be e<-itab!e' Tis means it so-!d pro%ide e<-a! opport-nity to a!!
emp!oyees to so# e""i&ien&y and earn more' Tis a%oids dissatis"a&tion among emp!oyees and
ma$es te p!an 1-st and "air to a!! emp!oyees'
G-arantee o" minim-m #age payment:
An in&enti%e #age p!an so-!d in&!-de &ertain minim-m #age payment to e%ery #or$er per
mont' Tis so-!d be irrespe&ti%e o" te prod-&tion e gi%es' S-& pro%ision o" g-arantee
payments &reates a sense o" se&-rity and &on"iden&e among #or$ers'
S&ienti"i& "i;ation o" standard #or$!oad:
Jnder te in&enti%e p!an. e;tra payment is gi%en "or te e;tra #or$ i'e' #or$ #i& is o%er and
abo%e &ertain <-a!ity' S-& standard #or$>!oad m-st be &!ear. spe&i"i& and "i;ed #it s&ienti"i&
time st-dies so tat ma1ority o" emp!oyees #i!! be ab!e to gi%e e;tra prod-&tion "or e;tra
payment'
7-sti&e to emp!oyer and emp!oyees:
A good in&enti%e p!an so-!d do 1-sti&e to bot parties' Te emp!oyer m-st get additiona!
prod-&tion a!ong #it e;tra pro"it and te #or$ers m-st get e;tra payment "or e;tra prod-&tion'
P(OFIT>SBA(ING:
Pro"it>saring is regarded as a steppingstone to ind-stria! demo&ra&y' Pro"' Seager obser%es:
KPro"it>saring is an agreement by #i& emp!oyees re&ei%e a sare. "i;ed in ad%an&e o" te
pro"its'K
Pro"it>saring -s-a!!y in%o!%es te determination o" an organisationLs pro"it at te end o" te "is&a!
year and te distrib-tion o" a per&entage o" te pro"its to te #or$ers <-a!i"ied to sare in te
earnings' Te per&entage to be sared by te #or$ers is o"ten predetermined at te beginning o"
te #or$ period and IS o"ten &omm-ni&ated to te #or$ers so tat tey a%e some $no#!edge o"
teir potentia! gains' To enab!e te #or$ers to parti&ipate in pro"it>saring. tey are re<-ired to
#or$ "or &ertain n-mber o" years and de%e!op some seniority' Te teory beind pro"it>saring is
tat management "ee!s its #or$ers #i!! "-!"i!! teir responsibi!ities more di!igent!y i" tey rea!ise
tat teir e""orts may res-!t in iger pro"its. #i& #i!! be ret-rned to te #or$ers tro-g pro"it>
saring'
FEATJ(ES OF P(OFIT>SBA(ING:
Te main "eat-res o" te pro"it>saring s&emes are:
2a3 Te agreement is %o!-ntary and based on 1oint &ons-!tation made "ree!y bet#een te
emp!oyers and te emp!oyees'
2b3 Te payment may be in "orm o" &as. sto&$ o" "-t-re &redits o" some amo-nt o%er and
abo%e te norma! rem-neration tat #o-!d oter#ise be paid to emp!oyees in a gi%en sit-ation'
2&3 Te emp!oyees so-!d a%e some minim-m <-a!i"i&ations. s-& as ten-re or satis"y some
oter &onditions o" te ser%i&e #i& may be determined by te management'
2d3 Te amo-nt to be distrib-ted among te parti&ipants is &omp-ted on te basis o" some
agreed "orm-!a. #i& is to be app!ied in a!! &ir&-mstan&es'
2e3 Te amo-nt to be distrib-ted depends on te pri&e earned by te enterprise'
2"3 Te proportion o" te pro"its distrib-ted among te emp!oyees is determined in ad%an&e'
Ob1e&ti%es o" Pro"it>saring:
)3 To s-pp!ement te reg-!ar earning o" te #or$ers.
=3 To &reate a sense o" partnersip among te #or$ers and te management.
@3 To enab!e te #or$ers to parti&ipate in te prosperity o" teir &ompany.
+3 To de%e!op &ordia! !abo-r>management re!ations and to impro%e emp!oyee mora!e'
,3 To introd-&e in&enti%e #age p!an
A3 To raise prod-&ti%e e""i&ien&y by red-&ing &osts and in&reasing o-tp-t
D3 To red-&e !abo-r t-rno%er and to impro%e p-b!i& re!ations'
E3 To pro%ide "or emp!oyee se&-rity in te e%ent o" deat. retirement or disabi!ity
A48ANTAGES OF P(OFIT>SBA(ING:
)3 E;tra in&ome to #or$ers: Wor$ers get e;tra &as payment d-e to pro"it>saring arrangement'
Tis money is -se"-! "or raising teir #e!"are' Wor$ers &an p-r&ase &ost!y &ons-mer d-rab!es
o-t o" tis money a%ai!ab!e at one time' T-s. pro"it>saring pro%ides better !i"e and #e!"are to
#or$ers' It &reates &ontended !abo-r "or&e #it iger standard o" !i%ing' Pro"it>saring p!an a&ts
as a good s-pp!ement to reg-!ar #ages paid to emp!oyees' In "a&t. pro"it>saring is apt!y
des&ribed as a "orm o" added rem-neration'
=3 Wor$ers ta$e more initiati%e and interest in te #or$: 4-e to pro"it>saring arrangement.
#or$ers/ emp!oyees ta$e more interest in te #or$' Tis de%e!ops team spirit among te
emp!oyees be&a-se teir sare in te pro"it depends on teir &o!!e&ti%e initiati%e. e""orts and ard
#or$' In tis sense. pro"it>saring is -se"-! "or moti%ating emp!oyees' It en&o-rages emp!oyees to
be reg-!ar. stab!e and e""i&ient as te bene"its o" tese e!ements are o""ered to tem tro-g
pro"it>saring' Bere. e""orts and re#ard are dire&t!y and proportionate!y !in$ed' Tis en&o-rages
emp!oyees to ta$e $een interest in te #or$ and de%e!ops team spirit'
Pro"it>saring a&ts not on!y as s-pp!ement to reg-!ar #ages 2i'e' as an in&enti%e #age p!an3 b-t
a!so as a moti%ating "a&tor to a!! emp!oyees' It &reates &ommon ob1e&ti%e be"ore emp!oyer and
emp!oyees and di%erts teir energies "or a&ie%ing one &ommon ob1e&ti%e'
@3 In&rease in prod-&tion and prod-&ti%ity: Pro"it> saring a&ts as a dri%ing "or&e "or more
prod-&tion and prod-&ti%ity' It moti%ates #or$ers "or raising prod-&tion as tey get dire&t and
immediate bene"it o" additiona! e""orts on teir part' Te bene"its o" in&rease in prod-&tion are
a%ai!ab!e to emp!oyer and emp!oyees'
+3 Fair to emp!oyer and emp!oyees: Pro"it>saring gi%es mere rem-neration to #or$ers a!ong #it
more pro"it to emp!oyer' Emp!oyer pays a part o" pro"it to #or$ers b-t e is not ad%erse!y
a""e&ted as pro"it is paid on!y #en it e;&eeds a parti&-!ar !imit agreed by bot te parties' Tis
arrangement is. &ertain!y "air to bot parties' Tere is an e!ement o" so&ia! 1-sti&e in it'
,3 Ens-res &ordia! ind-stria! re!ations: Pro"it>saring &reates &ordia! !abo-r>management
re!ations' It' red-&es ind-stria! disp-tes. stri$es and !o&$>o-ts' Tis is be&a-se bot a%e &ommon
ob1e&ti%e and bot are !i$e!y to s-""er d-e to ind-stria! disp-tes. stri$es and !o&$>o-ts' T-s.
pro"it>saring red-&es ind-stria! disp-tes and !eads to "riend!y re!ations bet#een emp!oyer and
emp!oyees'
T-s. pro"it>saring agreement en&o-rages #or$ers to #or$ e""i&ient!y and a!so a%oid disp-te and
<-arre!s #it te emp!oyer' It a&ts as a nat-ra! and se!">imposed &e&$ on ind-stria! disp-tes'
Pro"it>saring &reates team spirit in te iger &adres o" management as #e!! as in te ran$ and
"i!e o" #or$ers'
A3 9ess s-per%ision re<-ired: Pro"it>saring red-&es te e;pendit-re on s-per%ision o" #or$ers as
tey ta$e interest in te #or$ on teir o#n' Moreo%er. #astage o"L materia!s. %o!-me o" spoi!ed
#or$. et&' are a!so red-&ed'
D3 Stabi!ity to !abo-r "or&e: Pro"it>saring brings stabi!ity to !abo-r "or&e as te bene"it o" pro"it>
saring is -s-a!!y gi%en on!y to tose #o #or$ in te &ompany "or te #o!e year' T-s. pro"it>
saring brings do#n te rate o" !abo-r t-rno%er and tis gi%es bene"it to te emp!oyer/
management'
E3 Promotes so&ia! 1-sti&e: Pro"it>saring is a metod o" so&ia! 1-sti&e' It is a metod by #i&
#or$ers are gi%en te re#ard o" teir ard #or$ and a!so a!!o#ed to parti&ipate in te progress
and prosperity o" teir &ompany' Pro"it>saring introd-&es ind-stria! demo&ra&y as #or$ers are
treated not on!y as #age earners b-t a!so as partners "or saring te pro"its o" te &ompany'
4ISA48ANTAGES OF P(OFIT>SBA(ING:
)3 Jn&ertainty: Tere is ig degree o" -n&ertainty in te pro"it>saring s&eme/p!an' Pro"it>
saring is -n&ertain be&a-se it #i!! be paid on!y #en te pro"it e;&eeds a parti&-!ar !imit' Te
pro"it may not &ross a parti&-!ar !imit d-e to mar$et "or&es and te #or$ers #i!! s-""er' T-s.
pro"it>saring does not gi%e "-!! g-arantee o" e;tra payment to #or$ers' It a&ts !i$e a "air #eater
p!an'
=3 Jn"air to e""i&ient #or$ers: Pro"it>saring is a gro-p in&enti%e p!an' It gi%es e<-a! bene"it to a!!
#or$ers' 4istin&tion is not made bet#een good and bad #or$ers' As a res-!t sin&ere and e""i&ient
#or$ers get !ess tan #at tey deser%e #i!e insin&ere and ine""i&ient get more tan #at tey
deser%e'
@3 Opposition "rom trade -nions: Trade -nions and #or$ers "ee! tat bon-s payment is better tan
pro"it:>saring' Tey genera!!y oppose to pro"it>saring and demand bon-s "rom te emp!oyer as
it is a &eap a!ternati%e to pro"it>saring'
+3 4isp-tes on &a!&-!ation o" net pro"it: In pro"it>saring. te net pro"it is to be &a!&-!ated at te
end o" te "inan&ia! year' Tere is a possibi!ity o" di""i&-!ties as regards te &a!&-!ation o" te net
pro"it' Te emp!oyer may !i$e to manip-!ate te a&&o-nts and so# !ess pro"it #i!e #or$ers may
&a!&-!ate it as ig' S-& <-arre! a""e&ts bot te parties as it !eads to disp-te and de!ay in
payment' In brie". as&ertaining net pro"its is one sensiti%e prob!em in pro"it>saring'
,3 Ad%erse e""e&ts on !abo-r>management re!ations: Sometimes. re!ations bet#een !abo-r and
management are ad%erse!y a""e&ted on te point o" pro"it>saring agreement' Tis de"eats te %ery
p-rpose o" pro"it>saring' 4isp-tes are possib!e as regards te pro"it>saring agreement itse!"'
A3 Not -se"-! d-ring depression: Pro"it>saring as a metod o" e;tra rem-neration to #or$ers &an
be -sed d-ring te period o" prosperity #en pro"its are ig' It &annot be -sed d-ring te years
o" depression' E%en ne#!y estab!ised &ompanies are not in a position to introd-&e pro"it>saring
s&eme "or teir emp!oyees'
D3 Opposition "rom &onser%ati%e emp!oyers: Te &on&ept o" pro"it>saring is not "-!!y a&&eptab!e
to &onser%ati%e emp!oyers' Tey "ee! tat pro"it is te re#ard "or te ris$s and -n&ertainties' Tey
a!so arg-e tat #or$ers m-st be prepared to sare pro"it as #e!! as !oss in te b-siness'
F(INGE 0ENEFITS
MEANING OF F(INGE 0ENEFITS:
Fringe bene"its may be de"ined as #ide range o" bene"its and ser%i&es tat emp!oyees re&ei%e as
an integra! part o" teir tota! &ompensation pa&$age' Tey are based on &riti&a! 1ob "a&tors and
per"orman&e' Fringe bene"its &onstit-te indire&t &ompensation as tey are -s-a!!y e;tended as a
&ondition o" emp!oyment and not dire&t!y re!ated to per"orman&e o" &on&erned emp!oyee' Fringe
bene"its are s-pp!ements to reg-!ar #ages re&ei%ed by te #or$ers at a &ost o" emp!oyers' Tey
in&!-de bene"its s-& as paid %a&ation. pension. ea!t and ins-ran&e p!ans. et&' S-& bene"its are
&omp-tab!e in terms o" money and te amo-nt o" bene"it is genera!!y not predetermined'
Te p-rpose o" "ringe bene"its is to retain e""i&ient and &apab!e peop!e in te organisation o%er a
!ong period' Tey "oster !oya!ty and a&ts as a se&-rity base "or te emp!oyees'
FEATJ(ES OF F(INGE 0ENEFITS:
M 4i""erent "rom reg-!ar #ages: Fringe bene"its are di""erent "rom reg-!ar #ages as s-&
bene"its are tose payments. #i& an emp!oyee en1oys in addition to #ages e re&ei%es' It is a
s-pp!ementary payment and pro%ides s-pport to an emp!oyee'
M Emp!oyee moti%ation: Fringe bene"its are not gi%en to emp!oyees "or per"orming &ertain
1obs' Te p-rpose is to en&o-rage tem to ta$e more interest in te assigned #or$'
M Jse"-! b-t a%oidab!e e;pendit-re: Fringe bene"its &onstit-te a !abo-r &ost "or te
emp!oyer'
M Not dire&t!y !in$ed #it e""orts: Fringe bene"its are not dire&t re#ard "or te e""orts made
or te prod-&tion gi%en by an emp!oyee'
M 0ene"i&ia! to a!! emp!oyees: Fringe bene"its are a !abo-r &ost b-t its bene"its so-!d be
made a%ai!ab!e to te entire !abo-r "or&e and not to a sma!! gro-p o" emp!oyees'
O07ECTI8ES OF F(INGE 0ENEFITS:
M To s-pp!ement dire&t rem-neration: Fringe bene"its s-pp!ement reg-!ar pay o" emp!oyed'
It raises te tota! earnings o" an emp!oyee and pro%ides better !i"e and #e!"are to im'
M Emp!oyers pre"er "ringe bene"its: emp!oyers pre"er tis indire&t rem-neration to dire&t
pay in&rease'
M To retain &ompetent emp!oyees: Fringe bene"its &reate satis"ied !abo-r "or&e' In addition.
te management &an attra&t and retain &ompetent personne! in te organisation by o""ering !ibera!
pa&$et o" "ringe bene"its'
M To de%e!op good &orporate image: Fringe bene"its e!p to de%e!op a good &orporate
image'
M To raise emp!oyee mora!e: 9ibera! pa&$age o" Fringe raises te mora!e o" emp!oyees'
9IMITATIONS OF F(INGE 0ENEFITS:
Tere are some !imitations o" Fringe 0ene"its' Tese are:
M Fringe 0ene"its may !ead to -nea!ty &ompetition among emp!oyees
M Te e;pe&ted bene"it may not be a%ai!ab!e i" te monetary bene"its are not ade<-ate!y
attra&ti%e to emp!oyees'
M Te moti%ation may not be as per e;pe&tation i" te imp!ementation o" te bene"its
s&eme is not transparent'
A48ANTAGES OF F(INGE 0ENEFITS
Tere are &ertain ad%antages o" Fringe bene"its' Tese are:
M Fringe bene"its pro%ide s-pport to rem-neration paid to emp!oyees'
M Fringe bene"its impro%e e""i&ien&y and prod-&ti%ity o" emp!oyees'
M Fringe bene"its a&t as an added attra&tion to te emp!oyees'
M Fringe bene"its red-&e monotony and "atig-e o" emp!oyees' Tey ma$e emp!oyees
e""i&ient and &o>operati%e "or #ate%er organisationa! &anges re<-ired to be introd-&ed'
M Fringe bene"its raise mora!e o" te emp!oyees' Tey de%e!op a""inity "or te organisation'
M Fringe bene"its de%e!op good &orporate image and raise mar$et standing o" te
organisation'
M Fringe bene"its a&t as a moti%ating "or&e' Tey moti%ate emp!oyees and ind-&e tem to
#or$ "or te progress and prosperity o" te organisation'
TYPES OF F(INGES/ F(INGE 0ENEFITS:
2)3 Payment "or time not #or$ed by te emp!oyee:
M Bo!idays'
M 8a&ations'
M 9ea%e #it pay and a!!o#an&es'
2=3 Contingent and de"erred bene"its:
M Pension payment'
M Gro-p !i"e ins-ran&e bene"it'
M Gro-p ea!t ins-ran&e'
M Si&$ !ea%e. maternity !ea%e. &i!d &are !ea%e. et&'
M S-ggestion/ser%i&e a#ard
M Se%eran&e pay'
2@3 9ega!!y re<-ired payments:
M O!d age. disabi!ity and ea!t ins-ran&e
M Jnemp!oyment &ompensation
M Wor$erLs &ompensation'
2+3 Mis&' bene"its:
M Tra%e! a!!o#an&es'
M Company &ar and membersip o" &!-bs. et&
M Mo%ing e;penses'
M Ci!d &are "a&i!ities'
M Too! e;penses and mea! a!!o#an&es. et&
UNIT 1: INTRODUCTION
Compensation is an a&ti%ity by #i& organi/ations e%a!-ate te &ontrib-tions o" emp!oyees in
order to distrib-te "air!y. dire&t and indire&t monetary and non monetary re#ards #itin te
organi/ation s abi!ity and !ega! reg-!ations' 5Compensation &an be de"ined as te "inan&ia! and
non "inan&ia! re#ards pro%ided by an emp!oyer "or te time. s$i!!s and te e""ort made a%ai!ab!e
by te emp!oyee in "-!"i!!ing 1ob re<-irements aimed at a&ie%ing organi/ationa! ob1e&ti%es'6
Wage: #age re"ers to o-r!y rate or dai!y rate o" pay It is te most "re<-ent!y -sed pay basis "or
prod-&tion and maintenan&e emp!oyees 2b!-e &o!!ar #or$ers3 genera!!yI #age earning emp!oyees
are paid on!y "or te a&t-a! o-rs o" #or$'
Foms o! "ompensation:
Te tree spe&i"i& "orms o" &ompensation are pay. in&enti%es. and bene"its'
)' Pay: It is te basi& &ompensation an emp!oyee re&ei%es -s-a!!y as a #age or sa!ary
=' In&enti%e: it is te &ompensation tat re#ards an emp!oyee "or e""orts beyond norma!
per"orman&e e;pe&tations' 0on-s. &ommission. and pro"it saring p!ans are in&enti%es
@' 0ene"it: It is additiona! &ompensation to an emp!oyee as part o" organi/ationa!
membersip' Bea!t ins-ran&e. pension. %a&ation pay are bene"its'
Components o! Tota# Compensation:
An in&enti%e or a Fre#ard? &an be anyting tat attra&ts te #or$er?s attention and stim-!ates im
to #or$'
Ma"oe"onomi" Compensation:
4e%e!op a &ompensation program tat re&ogni/es te !i"esty!e and standard o" !i%ing o" a!!
emp!oyees' To s-r%i%e in a &omp!e;. &ompetiti%e g!oba! e&onomy. a!! organi/ations. pri%ate and
p-b!i& m-st be ab!e to "o&-s on te e""e&ti%e and e""i&ient de!i%ery o" te prod-&ts tey are
designed to o""er' A $ey "a&tor in promoting e""e&ti%e de!i%ery o" essentia! goods and ser%i&es is
te pro%ision o" a per"orman&e based rem-neration system "or a!! #or$ers' Compensation
Management pro%ides a step by step approa& "or designing a rem-neration system tat
re&ogni/es 1ob re<-irementsI emp!oyee re!ated $no#!edge and s$i!!s and per"orman&e re!ated
in&enti%es tat !in$ indi%id-a!. team. #or$ -nit. and organi/ation per"orman&e' Tota!
rem-neration a!so in&!-des a ost o" bene"its tat prote&t and e;pand te !i"esty!e and ea!t o"
#or$ers and teir "ami!ies'
More tan e%er be"ore. te &ompensation pro"essiona! m-st be ab!e to s-pport a!! a&ti%ities tat
#i!! ma$e te organi/ation more s-&&ess"-!' From te beginning o" tese organi/ationa! redesign
e""orts. &ompensation pro"essiona!s a%e been &a!!ed -pon to identi"y:
)' 7obs in #i& #or$er e""orts &an be &ombined
=' Jnneeded 1obs and
@' Possib!y 1obs in #i& in&ompetent. obso!ete or -nneeded emp!oyees are being idden'
In addition. tese same &ompensation pro"essiona!s are being as$ed to redesign &ompensation and
re#ard programs to impro%e emp!oyee mora!e and moti%ation #i!e $eeping !abor &osts #itin
spe&i"ied !imits' To assist teir organi/ations in &ompeting #i!e "-n&tioning #itin tese o"ten
&on"!i&ting re<-irements. &ompensation pro"essiona!s a%e ad to in&rease teir $no#!edge and
s$i!!s dramati&a!!y' 0e&a-se o" tese ad%an&es in $no#!edge and s$i!!s. te importan&e o" te
&ompensation pro"ession as risen in te manageria! pro"essiona! #or!d'
Compensation An$ Ogani%ationa# &tateg'
To de%e!op a &ompetiti%e ad%antage in a g!oba! e&onomy. te &ompensation program o" te
organi/ation m-st s-pport tota!!y te strategi& p!ans and a&tions o" te organi/ation' Te
indi%id-a!s o&&-pying te e;e&-ti%e positions o" te organi/ation are responsib!e "or estab!ising
and de%e!oping te strategy o" te organi/ation' Te o%era!! strategi& p!ans in"orm a!! o" its
members o" te dire&tion te organi/ation #ises to ta$e' Management and organi/ationa!
spe&ia!ists re%ie# tese strategi& p!ans and ta$e te a&tions ne&essary #itin teir domain to
ens-re a&&omp!isment o" te p!ans'
For te -man reso-r&es &ompensation spe&ia!ist. te assignment to ens-re a&&omp!isment o"
organi/ationa! strategy begins #it determining.
)' Te #or$ tat m-st be per"ormed by some #or$ -nit or indi%id-a!'
=' Te $inds and !e%e!s o" $no#!edge and s$i!!s re<-ired'
@' Te <-a!ity o" peop!e needed to promote organi/ationa! s-&&ess'
+' Te re#ards te organi/ation &an o""er to its members tat promote a #or$ &-!t-re tat
ens-res a&&omp!isment o" organi/ationa! strategy'
&(i## Re)*iement An$ Ogani%ation Compensation
Compensation management is tat #or$ does pay o""' Bo#e%er. to be s-&&ess"-!. te #or$er m-st
be #i!!ing to a&&ept &a!!enges to so!%e prob!ems' In so!%ing prob!ems. 1ob opport-nities e;pand.
#i& !eads to te need to ta$e ris$s and a&&ept &a!!enges' In tese sit-ations o" -n&ertainty. a
"o&-s on &orre&tness is ne&essary to minimi/e te &an&e and &ost o" improper a&tion' Cange is
ine%itab!e in te $no#!edge based #or!d' 9i%ing and s-&&ess"-! adaptation to &ange re<-ire te
&ontin-o-s e;pansion o" $no#!edge and s$i!!s'
Compensation &'stem:
Te &ompensation system res-!ts "rom te a!!o&ation. &on%ersion and trans"er o" a portion o" te
in&ome o" an organi/ation to its emp!oyees "or teir monetary and in $ind &!aims on goods and
ser%i&es'
Monetary &!aims on goods and ser%i&es are #ages and sa!aries paid to an emp!oyee in te "orm o"
money or any oter "orm tat is <-i&$!y and easi!y trans"erab!e to money at te "a%oritism o" te
emp!oyee' As medi-m o" e;&ange. money enab!es an emp!oyee to p-r&ase &ertain $inds and
amo-nts o" goods and ser%i&es a%ai!ab!e in te mar$etp!a&e'
Te tota! &ompensation pa&$age may be des&ribed in many #ays. b-t te &!assi"i&ation s&eme
-sed in eigt dimensions' Ea& dimension as a n-mber o" &ompensation &omponents' Ea&
&omponent as a %ariety o" "eat-res' Te str-&t-ring o" "eat-res. &omponents. and dimensions
into a &ompensation system is a 1ob "or te &ompensation spe&ia!ist' Te eigt dimensions o"
&ompensation system areI
)' Pay "or #or$ and per"orman&e: Pay "or #or$ and per"orman&e in&!-des money tat is
pro%ide in te sort term !i$e #ee$!y. mont!y and ann-a! bon-ses/a#ards and tat
permits emp!oyees to pay "or and &ontra&t "or te payment o" desired goods and ser%i&es'
=' Pay "or time not #or$ed: Te n-mber o" o-rs #or$ed per #ee$ and te n-mber o" days
#or$ed per year a%e de&reased'
@' 9oss o" 1ob in&ome &ontin-ation: 7ob se&-rity is and a!#ays as been te primary
&onsideration "or most #or$ers' Tey #ant ass-ran&e tat teir 1obs and te in&ome
deri%ed "rom #or$ing #i!! &ontin-e -nti! tey are ready to retire'
+' 4isabi!ity in&ome &ontin-ation: Te possibi!ity a!#ays e;ists tat a #or$er #i!! in&-r
ea!t or a&&ident disabi!ity be&a-se o" tese disabi!ities emp!oyees are "re<-ent!y -nab!e
to per"orm teir assignment'
,' 4e"erred in&ome: Most emp!oyees depend on some $ind o" emp!oyer>pro%ided program
"or in&ome &ontin-ation a"ter retirement'
A' Spo-se in&ome &ontin-ation: Most emp!oyees #it "ami!y ob!igations are &on&erned #it
#at migt appen i" tey are no !onger ab!e to pro%ide money tat #i!! a!!o# teir
"ami!ies to maintain a parti&-!ar standard o" !i%ing'
D' Bea!t. A&&ident and !iabi!ity prote&tion: #en a ea!t prob!em o&&-rs. emp!oyees m-st
be &on&erned not on!y #it in&ome &ontin-ation b-t a!so #it payment "or goods and
ser%i&es re<-ired in o%er&oming te i!!ness or disabi!ity'
E' In&ome E<-i%a!ent payment: Emp!oyees -s-a!!y "ind tem ig!y desirab!e and bot
emp!oyer and emp!oyees "ind &ertain ta; bene"it in tem' Per$s are ta; "ree to emp!oyees
and ta; ded-&tib!es to emp!oyers'
Tro-g #or$. emp!oyees a%e an opport-nity to impro%e teir !i"esty!e' Te ana!ysis o" !i"esty!e
demands and te opport-nity "or maintaining a &-rrent !i"esty!e and impro%ing it in te "-t-re
-nders&ore te importan&e o" 1ob earned &ompensation'
Detemining Rates o! Pa':
Te di""eren&es in pay and &ompensation pa&$ages "or di""erent emp!oyees re!ate to te "o!!o#ing
&orre!ates or determinants' Ea& o" tese &orre!ates re!ati%e!y simp!e and straigt"or#ard. b-t !i$e
most "a&tors in"!-en&ing &ompensation de&isions' Teir intera&tion be&ome di""i&-!t to "o!!o#
and -nderstand'
)' Nind and !e%e!s o" re<-ired $no#!edge and s$i!!s'
=' Nind o" b-siness'
@' Jnion and non-nion stat-s'
+' Capita! intensi%e %ers-s !abo-r intensi%e'
,' Si/e o" b-siness'
A' Pi!osopy o" management
D' Tota! &ompensation pa&$age'
E' Geograpi& !o&ation'
G' S-pp!y and demand o" !abo-r'
)*' Pro"itabi!ity o" te "irm
))' emp!oyment stabi!ity'
)=' Gender di""eren&e'
)@' Emp!oyee ten-re and per"orman&e'
Compensation &tateg':
S-pport organi/ation mission and strategy tro-g &ompensation strategy and ta&ti&s tat
integrate ma1or organi/ationa! gro-ps o" emp!oyees. organi/ationa! !eaders. in&!-ding tose
o&&-pying te e;e&-ti%e s-ites and tose in&arge o" -man reso-r&es and &ompensation
pra&ti&es. m-st be ab!e to re&ogni/e and integrate te !ong>term strategi& ob1e&ti%es o" te
organi/ation #it its sort>term ta&ti&a! re<-irements' An -nderstanding o" o# organi/ationa!
strategy and its re!ated ta&ti&s intera&t and be&ome integrated is be&oming in&reasing!y important
to managers at a!! e!%es per"orming %ario-s organi/ationa! assignments'
To impro%e &ost and <-a!ity &ompetiti%eness is an en%ironmenta! #ere so&ia! and po!iti&a!
prob!ems are be&oming in&reasing!y more sensiti%e and in"ormation o%er!oad is a prob!em "a&ing
a!! organi/ations and teir emp!oyees in"ormation regarding #or$ re<-irements. per"orman&e
stands. and organi/ationa! re&ognition and re#ards programming m-st be readi!y a%ai!ab!e.
&omp!ete and a&&epted'
Te &ompensation system. tere"ore. m-st be ab!e to transmit a message tat is -nderstood and
a&&epted by a!! emp!oyees tat tey are %a!-ed &ontrib-tors to organi/ationa! s-&&ess and tat te
organi/ation is #i!!ing to sare te re%en-es "rom its prod-&ts in an e<-itab!e manner #it a!!
members' As organi/ations begin to modi"y teir "o&-s "rom an a!most &omp!ete!y sort>term
%ie# to one tat integrates sort>term ta&ti&a! operations #it !onger>term strategi&
&onsiderations. pay and &ompensation #i!! &ange to respond to s-pport te a&ie%ement o" sor>
term goa!s and !ong>term ob1e&ti%es'
Mi"oe"onomi" Fa"tos:
a' 7ob des&ription
b' 7ob Ana!ysis'
&' 7ob e%a!-ation
d' Pay str-&t-re
e' Sa!ary s-r%erys'
"' Po!i&ies and reg-!ations'
M 7ob 4es&riptions A &riti&a! &omponent o" bot &ompensation and se!e&tion systems. 1ob
des&riptions de"ine in #riting te responsibi!ities. re<-irements. "-n&tions. d-ties. !o&ation.
en%ironment. &onditions. and oter aspe&ts o" 1obs' 4es&riptions may be de%e!oped "or 1obs
indi%id-a!!y or "or entire 1ob "ami!ies'
M 7ob Ana!ysis Te pro&ess o" ana!y/ing 1obs "rom #i& 1ob des&riptions are de%e!oped'
7ob ana!ysis te&ni<-es in&!-de te -se o" inter%ie#s. <-estionnaires. and obser%ation'
M 7ob E%a!-ation A system "or &omparing 1obs "or te p-rpose o" determining appropriate
&ompensation !e%e!s "or indi%id-a! 1obs or 1ob e!ements' Tere are "o-r main te&ni<-es:
(an$ing. C!assi"i&ation. Fa&tor Comparison. and Point Metod'
M Pay Str-&t-res Jse"-! "or standardi/ing &ompensation pra&ti&es' Most pay str-&t-res
in&!-de se%era! grades #it ea& grade &ontaining a minim-m sa!ary/#age and eiter step
in&rements or grade range' Step in&rements are &ommon #it -nion positions #ere te pay "or
ea& 1ob is pre>determined tro-g &o!!e&ti%e bargaining'
M Sa!ary S-r%eys Co!!e&tions o" sa!ary and mar$et data' May in&!-de a%erage sa!aries.
in"!ation indi&ators. &ost o" !i%ing indi&ators. sa!ary b-dget a%erages' Companies may p-r&ase
res-!ts o" s-r%eys &ond-&ted by s-r%ey %endors or may &ond-&t teir o#n sa!ary s-r%eys' Wen
p-r&asing te res-!ts o" sa!ary s-r%eys &ond-&ted by oter %endors. note tat s-r%eys may be
&ond-&ted #itin a spe&i"i& ind-stry or a&ross ind-stries as #e!! as #itin one geograpi&a!
region or a&ross di""erent geograpi&a! regions' Nno# #i& ind-stry or geograpi& !o&ation te
sa!ary res-!ts pertain to be"ore &omparing te res-!ts to yo-r &ompany'
M Po!i&ies and (eg-!ations
T+eoies o! ,ages: A es*me:
Benry George in is boo$ Progress and Po%erty. #rites: As te emp!oyer genera!!y ma$es a
pro"it. te payment o" #ages is so "ar as e is &on&erned. b-t te ret-rn to te !abo-rer o" te
portion o" te &apita! e as re&ei%ed "rom te !abo-r' So "ar as te emp!oyee is &on&erned it is
b-t te re&eipt o" a portion o" te &apita! is !abo-r as prod-&ed' Wages &ome "rom te dire&t
prod-&t o" te !abo-r itse!" and tey &onstit-te on!y one part o" tat prod-&t' Wages is te
payment re&ei%ed by an emp!oyee in e;&ange "or !abo-r' It may be in goods or ser%i&es b-t is
&-stomari!y in money' Te term in a broad sense re"ers to #at is re&ei%ed in any #ay "or !abo-r.
b-t #ages -s-a!!y re"er to payments to #or$ers #o are paid by te o-r. in &ontrast to a sa!ary.
#i& imp!ies a more "i;ed and permanent "orm o" in&ome 2e'g'. payment by te mont rater
tan by te o-r3' In e&onomi& teory. #ages re&$oned in money are &a!!ed nomina! #ages. as
disting-ised "rom rea! #ages. i'e'. te amo-nt o" goods and ser%i&es tat te money #i!! b-y'
(ea! #ages depend on te pri&e !e%e!. as #e!! as on te nomina! or money #ages'
1. &UB&I&TANCE T-EOR. OF ,A/E& 0 IRON 1A, OF ,A/E&
It #as Tomas (' Ma!t-sLs teory o" pop-!ation tat pro%ided te ra# materia! "or te "irst
e&onomi& #age teory' Pop-!ation. a&&ording to te teory. is !imited by te means o"
s-bsisten&e: it in&reases geometri&a!!y #ereas te means o" s-bsisten&e in&reases aritmeti&a!!y'
4a%id (i&ardo trans!ated Ma!t-sLs teory into te s-bsisten&e teory o" #ages' A&&ording to tis
teory. #ages in te !ong r-n tend to e<-a! te &ost o" reprod-&ing !abor. te s-bsisten&e o" te
!aborer' Tis teory. o"ten &a!!ed te iron !a# o" #ages . indi&ated tat !itt!e &o-!d be done to
impro%e te !ot o" te #age earner be&a-se in&reasing #ages !eads on!y to in&reasing te n-mber
o" #or$ers beyond te means o" s-bsisten&e'
Te s-bsisten&e teory #as an e;p!anation o" te genera! !e%e! o" #ages in terms o" !abor s-pp!y'
Any in&rease in te #age rate abo%e te s-bsisten&e !e%e! #o-!d ind-&e an in&rease in te birt
rate and tere"ore in te s-pp!y o" !abor' Te e;panded !abor s-pp!y #o-!d "or&e te #age rate
ba&$ to te s-bsisten&e !e%e!' Any de&rease in te #age rate be!o# te s-bsisten&e !e%e! #o-!d
res-!t in star%ation and a red-&tion in te !abor s-pp!y' A!to-g te mar$et pri&e o" !abor migt
temporari!y &!imb abo%e or "a!! be!o# te nat-ra! pri&e. te t#o #o-!d &on%erge in te !ong r-n'
In te ind-stria! #or!d. te teory erred in t#o #ays: 2)3 impro%ements in te&no!ogy a%e
great!y in&reased te ease and metods by #i& s-bsisten&e &an be attained. and 2=3 &-!t-ra!
"or&es a%e !imited birt rates' A!to-g (i&ardo re&ogni/ed te potentia! e""e&ts o" te se&ond
"a&tor. e be!ie%ed tat !abor s-pp!y rater tan !abor demand #o-!d determine te genera! #age
!e%e! in te !ong r-n' A!to-g te iron !a# o" #ages seems to a%e been repea!ed in te
ind-stria! #or!d. it appears to sti!! be in e""e&t in many oter parts o" te #or!d' Pop-!ation
gro#t o!ds ba&$ e&onomi& de%e!opment in many de%e!oping &o-ntries' Famine is sti!! part o"
te #or!d s&ene' Big -nemp!oyment in most o" te ind-stria! #or!d and te e""e&ts o" te 0aby
0oom on te Ameri&an !abor "or&e s-ggest "-rter tat (i&ardo ad a point'
2. &TANDARD OF 1I3IN/ T-EOR. OF ,A/E&:
9ate in te G
t
&ent-ry tis teory o" #ages #as propo-nded #i& is a modi"ied "orm o" te
s-bsisten&e teory o" #ages' Standard o" !i%ing teory o" #ages #as "irst stated by Torres in
)E),' A&&ording to tis teory #ages tend to &on"orm to te standard o" !i%ing to #i& te
#or$ers a%e be&ome abit-ated'
Tere seems to be some tr-t in tis modi"ied "orm o" te teory. be&a-se #or$ers may not a&&ept
#ages be!o# teir estab!ised standard o" !i%ing' Bo#e%er. te e""e&t o" standard o" !i%ing on
#ages in on!y indire&t. be&a-se #or$ers &annot get iger #ages simp!y by raising teir standard
o" !i%ing -n!ess iger #ages are 1-sti"ied by iger prod-&ti%ity o" !abo-r' Moreo%er. #ages and
standard o" !i%ing are inter>dependent' It is di""i&-!t to say. #i& is te e""e&t> #eter #ages
determine standard o" !i%ing or te !atter determines te "ormer' In "a&t. #or$ers are not
a&&-stomed to any "i;ed standard o" !i%ing'
3. RE&IDUA1 C1AIMANT T-EOR.
Fran&is A' Wa!$erLs resid-a! &!aimant teory may be to-gt o" as an Ameri&an %ersion o" te
#ages>"-nd teory' Bere. te #or$ersL demand "or #ages represents te resid-a! &!aimant on
o-tp-t a"ter rent. interest. and pro"it a%e been independent!y determined and ded-&ted'
Assigning #ages rater tan pro"its as te resid-a! seems &-rio-s. b-t it does s-ggest tat
distrib-tion o" in&ome is a matter o" de&ision' It a!so permitted Wa!$er to s-ggest tat i" !abor
in&reased its prod-&ti%ity #ito-t te -se o" more &apita! or !and. its resid-a! #o-!d in&rease > te
germ o" a prod-&ti%ity teory'
4. ,A/E&0FUND T-EOR.
Te sort>term %ersion o" &!assi&a! #age teory #as te #ages>"-nd teory' As des&ribed by 7on
St-art Mi!!. tis teory e;p!ained te sort>term %ariations in te genera! #age !e%e! in terms o"
2)3 te n-mber o" a%ai!ab!e #or$ers and 2=3 te si/e o" te #ages "-nd' Te #ages "-nd #as
to-gt to &ome "rom reso-r&es a&&-m-!ated by emp!oyers "rom pre%io-s years and a!!o&ated by
tem to b-y !abor &-rrent!y' Emp!oyers #ere to-gt to a%e a "i;ed sto&$ o" K&ir&-!ating &apita!K
"or te payment o" #ages' 4i%iding te !abor "or&e 2ass-med to be te pop-!ation3 into te #ages
"-nd determined te #age' Te teory erred in ass-ming tat a "i;ed "-nd "or te payment o"
#ages e;ists and tat it a&&o-nts "or !abor demand' Most #or$ers are paid o-t o" &-rrent
prod-&tion' Emp!oyers ba!an&e !abor &osts against oter &osts in determining !abor demand' 0ot
emp!oyers and #or$ers. o#e%er. o"ten ta!$ as i" s-& "-nds e;ist and as i" tey determine te
amo-nt o" !abor ser%i&es needed' Tey may a!so a&&ept te imp!i&ation o" te teory tat any gain
to one gro-p is a !oss to oters'
5. MAR/INA10PRODUCTI3IT. T-EOR.:
Some o" te modern e&onomi&s e;p!ain te determination o" #ages by means o" margina!
prod-&ti%ity ana!ysis' A&&ording to tis teory:

KWages in per"e&t &ompetition tend to be e<-a! to te margina! net prod-&t o" a !abor' 0y
margina! net prod-&t o" a !abor is meant net addition or net s-btra&tion made to te %a!-e o" te
tota! prod-&e o" a "irm #en one -nit is added or #itdra#n "rom itK'

Wen an entreprene-r emp!oys a -nit o" !abor. o# m-& e pays to im as #ages depend -pon
te addition #i& e ma$es to te tota! re%en-e o" te "irm' I" te addition made to te tota!
re%en-e by a !abor is O,***. te rate o" #ages #i!t be e<-a! to O,***' Te entreprene-r #i!! not
pay im more tan te ret-rn #i& e &ontrib-tes to te tota! prod-&tion'
Te aim o" te "irm. as #e a!ready $no#. is to ma;imi/e pro"its' I" te net prod-&t o" a !abor is
iger tan te amo-nt paid to im' te entreprene-r #i!! go on emp!oying more -nits o" !abor'
As e engages more and more -nits o" !abor. te net prod-&e on te s-&&essi%e -nits begins to
diminis' It is not be&a-se te s-&&essi%e -nits o" !abor are in any #ay in"erior to te pre%io-s
-nits b-t be&a-se o" te operation o" !a# o" diminising ret-rns' Wen te net prod-&t o" te
!abor be&omes e<-a! to te rate o" #ages paid to im. te emp!oyer dis&ontin-es te emp!oyment
o" "-rter -nit o" !abor. Te !ast -nit #i& e tin$s 1-st #ort #i!e to engage is &a!!ed te
margina! -nit' Te net addition made to te tota! re%en-e o" a "irm by te margina! !abor is &a!!ed
te margina! net prod-&t' Te rate o" #ages paid to te !abor tends to be e<-a! to te margina! net
prod-&t o" te !abor emp!oyed LPL te margin'
As #e a%e ass-med tat a!! -nits o" !abor are o" te same grade. te rem-neration #i& is paid
to te margina! !abor #i!! be gi%en to a!! te -nits o" !abor emp!oyed ear!ier' I" any #or$er
demands more tan te margina! net prod-&t o" te !abor. e #i!! not be engaged by te emp!oyer'
Pro"essor Ta-ssing as reprod-&ed te margina! prod-&ti%ity teory o" #ages in a s!igt!y re"ined
"orm' A&&ording to im:

KWages tend to be e<-a! not to te margina! net prod-&t b-t te dis&o-nted margina! net prod-&t
o" te !abor emp!oyed at te marginK'

Wen goods are prod-&ed. e says. tey are not so!d at te same time' Tere is a time !ag
bet#een te prod-&tion and te sa!e o" te &ommodities' Te !abor re&ei%es teir rem-neration
d-ring te &o-rse o" prod-&tion' I" te pri&es o" goods "ai!. te entreprene-r #i!! a%e to -ndergo
!osses as e as paid te #age to te !abor $eeping in %ie# te pri&es o" te goods pre%ai!ing at
tat time' As te entreprene-r as borne te ris$. so e so-!d pay !itt!e !ess tat te a&t-a!
margina! net prod-&t o" te !abor $eeping in %ie# te ris$ o" "!-&t-ation o" pri&e' Se&ond!y. te
entreprene-r as to pay interest on te &apita! in%ested' So a ded-&tion at te &-rrent rate o"
interest is to be made "rom te "ina! o-tp-t o" te !abor' T-s. #e "ind tat #ages a&&ording to
Ta-ssing tend to be e<-a! not to te margina! net>prod-&t b-t dis&o-nted margina! net prod-&t o"
a !abor emp!oyed at te margina!'
CRITICI&M ON MAR/INA1 PRODUCTI3IT. T-EOR. OF ,A/E&:
Te teory o" margina! net prod-&t o" #ages as been &riti&i/ed on te "o!!o#ing gro-nds:
2i3 Te teory ass-mes tat tere is per"e&t &ompetition. among te entreprene-rs and te #age
earners #i!e in te rea! #or!d tere is no s-& per"e&t &ompetition'
2ii3 Te teory ass-mes tat a!! -nits o" !abor engaged are per"e&t!y omogeneo-s b-t te "a&t is
oter#ise'
2iii3 Te teory a!so ass-mes per"e&t mobi!ity amongst te !abor b-t te ass-mption does not e!d
good in te rea! !i"e'
2i%3 Te teory empasi/es on te demand side o" te prob!em and ma$es a #rong ass-mption
tat te s-pp!y o" !abor remains &onstant'
It is dear no# tat margina! net prod-&t teory o" #ages is tr-e on!y -nder &ertain ass-med
&onditions' In' spite o" te "!a#s #i& a%e been dis&-ssed abo%e. it o""ers a bit satis"a&tory
e;p!anation o" te #ages'
DEMAND AND &UPP1. T-EOR. OF ,A/E&:
We a%e st-died %ario-s teories #i& e;p!ain te determination o" #ages b-t tey a!! stand
dis&redited as tey do not o""er satis"a&tory e;p!anation o" #ages' Te modern e&onomist are o"
te opinion tat 1-st as te pri&e o" a &ommodity is determined by te intera&tion o" te "or&es o"
demand and s-pp!y. te rate o" #ages &an a!so be determined in te same #ay #it te e!p o"
-s-a! demand and s-pp!y ana!ysis' 9et -s no# dis&-ss in brie" as to #at #e mean by demand "or
and s-pp!y o" !abor'
2A3 4emand "or 9abor:
Tere are %ario-s "a&tors #i& in"!-en&e te demand "or !abor' Tese "a&tors in brie" are as
-nder:>
2i3 4emand "or !abor is a deri%ed demand' Te demand "or !abor is not a dire&t demand' It is
deri%ed "rom te demand "or te &ommodities and ser%i&es it e!ps !o prod-&e' I" te demand "or
a prod-&t is ig in te mar$et. te demand "or !abor prod-&ing tat parti&-!ar type o" prod-&t
#i!! a!so be ig' In &ase. te demand "or a &ommodity is sma!!. te demand "or tat !abor #i!!
a!so be !o#'
2ii3 E!asti&ity o" demand "or te prod-&t' I" te demand "or a parti&-!ar prod-&t is ine!asti&. te
demand "or te type o" !abor tat prod-&es tis prod-&t #i!! a!so be ine!asti&' Te demand "or
!abor #i!! be e!asti&. i" &eaper s-bstit-tes o" te prod-&t are a%ai!ab!e in te mar$et or te
demand "or te &ommodity it prod-&es is e!asti&'
2iii3 Proportion o" !abor &ost to tota! &ost' I" te #ages o" #or$ers a&&o-nt "or on!y a sma!!
proportion to tota! &ost o" a prod-&t. ten te demand "or !abor #i!! tend to be ine!asti&' In a
&apita! intensi%e ind-stry. "or instan&e. a s!igt in&rease in te #or$ers #ages #it a%e !itt!e
e""e&t on te -nit &ost o" prod-&tI So. te rise in #ages #i!! not red-&e te demand "or !abor'
2i%3 A%ai!abi!ity o" s-bstit-tes "or !abor' I" te s-bstit-tes o" !abor prod-&ing a parti&-!ar prod-&t
are easi!y a%ai!ab!e in te mar$et. te demand "or !abor #i!! ten be e!asti&'
A"ter &onsidering te %ario-s "a&tors #i& in"!-en&e 2e demand "or !abor. #e no# ta$e -p te
demand pri&e o" !abor'
4emand Pri&e o" 9abor:
Margina! (e%en-e Prod-&ti%ity 2M(P3' An emp!oyer ires !abor in order to ma$e pro"it' Be.
#i!e emp!oying a #or$er. &ompares te &ost o" iring a #or$er to te &ontrib-tion e is e;pe&ted
to ma$e to te tota! re%en-e o" te "irm' So !ong as te addition made by te !abor to te re%en-e
is greater tan te &ost o" emp!oying im. te entreprene-r #i!! engage tat !abor' In oter #ords.
#e &an say tat so !ong as te margina! re%en-e prod-&t o" !abor is iger tan te &ost o"
emp!oying im. te emp!oyer emp!oys tat #or$er' Te entreprene-r #i!! &ontin-e iring te
#or$er -p to te point at #i& te &ost o" emp!oying a #or$er is 1-st e<-a! to te margina!
re%en-e prod-&t o" te !abor'
Te margina! re%en-e prod-&ti%ity o" !abor d-e to te operation o" !a# o" diminising ret-rns
de&reases. as more #or$ers are p-t to #or$' Te #age rate a!so de&reases #it te "a!! in te
M(P o" !abor' T-s te demand &-r%e "or !abor is do#n#ard. s!oping 2Te demand &-r%e "or
!abor is te M(P &-r%e o" te "irm as ea& #or$er earns #at is !abor is #ort3' I" #e add -p te
demand &-r%es "or !abor o" a!! te indi%id-a! "irms 2te M(P &-r%es3 #e get te demand &-r%e o"
te ind-stry. it is te demand o" te ind-stry #i& determines #age rate "or !abor' Te indi%id-a!
"irm in a &ompetiti%e mar$et as to a&&ept #age rate set in te mar$et'
203 S-pp!y o" 9abor:
S-pp!y o" !abor is te n-mber o" o-rs o" #or$ #i& te !abor "or&e o""ers in te "a&tor mar$et'
Te s-pp!y o" !abor "or te entire e&onomy is in"!-en&ed by %ario-s "a&tors s-& as #age rate.
si/e o" pop-!ation. age &omposition. a%ai!abi!ity o" ed-&ation and training. te !engt o" training
period. pro%ision o" opport-nities "or #omen to #or$. te so&ia! se&-rity programmes et&'. et&'
Te s-pp!y o" !abor "or te ind-stry as a #o!e is !ess e!asti& in te sort>r-n' Te s-pp!y o" !abor
ere depends on te a%ai!abi!ity o" #or$ers in te !o&a!ity and "rom te nearby areas and te
#i!!ingness o" te !abor to #or$ o%ertime' In te !ong>r-n. te s-pp!y o" !abor "or te ind-stry is
more e!asti&' Te !abor &an be attra&ted by o""ering iger #ages. pro%iding training "a&i!ities.
ma$ing #or$ing &onditions p!easant et&. So te s-pp!y o" !abor "or te ind-stry is o" te norma!
sape rising -p#ard "rom !e"t to te rigt'
Wage 4etermination:
So "ar #e a%e dis&-ssed te "or&es operating beind te demand "or and s-pp!y o" !abor in te
mar$et' As regards te pri&e or te #age o" parti&-!ar grade o" !abor. it is determined by te
intera&tion o" te "or&es o"' demand "or and s-pp!y o" !abor in te &ompetiti%e mar$et'
CONCEPT& OF 1I3IN/6 MINIMUM AND FAIR ,A/E&:
)' Minim-m Wage
=' 9i%ing Wage
@' Fair Wage
MINIMJM WAGE
Te &on&ept o" 5Minim-m Wage6 stands "or di""erent standard o" di""erent &o-ntries' Te "air
#age &ommittee in India as obser%ed tat in India te !e%e! o" te nationa! in&ome is so !o# at
present tat it is genera!!y a&&epted tat te &o-ntry &annot a""ord to pres&ribe by !a# a minim-m
#age m-st pro%ide not mere!y "or te bare s-stenan&e o" !i"e b-t "or te preser%ation o" te
e""i&ien&y o" te #or$er' T-s. a minim-m #age is one. #i& may be s-""i&ient to enab!e <
#or$er to !i%e in reasonab!e &om"ort a%ing regard to a!! ob!igations to #i& an a%erage #or$er
#o-!d ordina!!y be s-b1e&t'
TBE O07ECTI8E OF MINIMJM WAGE
)' To pre%ent e;p!anation o" #or$ers and se&-re a #age e<-a! to #or$ !oad'
=' To raise te #ages in te ind-stries #ere tey are !o#. t-s pre%ent s#eating in ind-stry'
@' To promote pea&e in ind-stry by g-aranteeing a #age rate tis #i!! enab!e tem to meet
teir minim-m re<-irements'
+' (aise te standards o" !i%ing and e""i&ien&y o" #or$ers'
9I8ING WAGE
A&&ording to te &ommittee in "air #ages.
5Te !i%ing #age represented te iger !e%e! o" #age and it #o-!d in&!-de a!! amenities #i& a
&iti/en !i%ing in a modern &i%i!i/ed so&iety &o-!d a""ord' A"ter &onsidering %ario-s obser%ations
made by Indian a-torities. te &ommittee on Fair #ages obser%ed. te !i%ing #ages so-!d
enab!e to ma!e earner to pro%ide "or imse!" and is "ami!y te bare essentia! o" "ood. &!oting
and se!ter b-t a meas-re o" "r-ga! &om"ort in&!-ding d-ration "or te &i!dren. prote&tion against
i!! ea!t re<-irement o" essentia! so&ia! needs and a meas-re o" ins-ran&e against te more
important mis"ort-nes in&!-ding o!d age'6
FAI( WAGE
To bring impro%ement in te re!ations bet#een !abo-r and management te ind-stria! tr-&e
reso!-tion #as passed in )G+D. #i& pro%ided "or te payment o" "air #ages o" !abo-r. go%t' o"
India appointed a Fair #ages &ommittee in )G+E. and te &ommittee report #as p-b!ised in
)G+G' Marse!! and Pigo- a%e de"ined "air #ages' Marse!! Says. 5In any gi%en ind-stry #ages
are "air re!ati%e!y to #age in ind-stry in genera!'6 9o#er !imit o" "air #ages m-st be te minim-m
#age "or #or$ers and -pper !imit #i!! be te ind-stry &apa&ity to pay' Bo#e%er. bet#een tese
t#o !imits "o!!o#ing "a&tors a%e to be &onsidered:
a' Te prod-&ti%ity o" !abo-r
b' Te pre%ai!ing rate o" #ages in te same or neigboring !o&a!ity
&' Te p!a&e o" te ind-stry in te e&onomy
d' Te !e%e! o" nationa! di%idend and its distrib-tion
COMPONENTS OF A COMPENSATION SYSTEM
Compensation #i!! be per&ei%ed by emp!oyees as "air i" based on systemati& &omponents' 8ario-s
&ompensation systems a%e de%e!oped to determine te %a!-e o" positions' Tese systems -ti!i/e
many simi!ar &omponents in&!-ding 1ob des&riptions. sa!ary ranges/str-&t-res. and #ritten
pro&ed-res'
Te &omponents o" a &ompensation system in&!-de:
M 7ob 4es&riptions A &riti&a! &omponent o" bot &ompensation and se!e&tion systems. 1ob
des&riptions de"ine in #riting te responsibi!ities. re<-irements. "-n&tions. d-ties. !o&ation.
en%ironment. &onditions. and oter aspe&ts o" 1obs' 4es&riptions may be de%e!oped "or 1obs
indi%id-a!!y or "or entire 1ob "ami!ies'
M 7ob Ana!ysis Te pro&ess o" ana!y/ing 1obs "rom #i& 1ob des&riptions are de%e!oped' 7ob
ana!ysis te&ni<-es in&!-de te -se o" inter%ie#s. <-estionnaires. and obser%ation'
M 7ob E%a!-ation A system "or &omparing 1obs "or te p-rpose o" determining appropriate
&ompensation !e%e!s "or indi%id-a! 1obs or 1ob e!ements' Tere are "o-r main te&ni<-es:
(an$ing. C!assi"i&ation. Fa&tor Comparison. and Point Metod'
M Pay Str-&t-res Jse"-! "or standardi/ing &ompensation pra&ti&es' Most pay str-&t-res in&!-de
se%era! grades #it ea& grade &ontaining a minim-m sa!ary/#age and eiter step in&rements or
grade range' Step in&rements are &ommon #it -nion positions #ere te pay "or ea& 1ob is pre>
determined tro-g &o!!e&ti%e bargaining'
M Sa!ary S-r%eys Co!!e&tions o" sa!ary and mar$et data' May in&!-de a%erage sa!aries. in"!ation
indi&ators. &ost o" !i%ing indi&ators. sa!ary b-dget a%erages' Companies may p-r&ase res-!ts o"
s-r%eys &ond-&ted by s-r%ey %endors or may &ond-&t teir o#n sa!ary s-r%eys' Wen p-r&asing
te res-!ts o" sa!ary s-r%eys &ond-&ted by oter %endors. note tat s-r%eys may be &ond-&ted
#itin a spe&i"i& ind-stry or a&ross ind-stries as #e!! as #itin one geograpi&a! region or a&ross
di""erent geograpi&a! regions' Nno# #i& ind-stry or geograpi& !o&ation te sa!ary res-!ts
pertain to be"ore &omparing te res-!ts to yo-r &ompany'
M Po!i&ies and (eg-!ations
JNIT>=
WAGE FIQATION FACTO(S
Wage !a#s di""er &onsiderab!y #it regard to te bases or &riteria adopted "or "i;ing te #age
rates' Te basis on #i& te rates are "i;ed is o" primary importan&e #ere te ob1e&t is to
pre%ent s#eating. or to promote ind-stria! pea&e' B te p-rpose o" a !a# be to stim-!ate te
gro#t o" organi/ation. and t-s prepare te #ay "or te satis"a&tory reg-!ation o" #ages by te
ordinary pro&esses o" &o!!e&ti%e bargaining. te basis on #i& te #ages are "i;ed is o" !ees
importan&e tan te ma&inery "or "i;ing' Te basis is a!so o" se&ondary importan&e #ere te
ob1e&t is to pre%ent -n"air &ompetition bet#een emp!oyers. :E ere te essentia! &ondition i!! te
standardi/ation o" rates' T-s. (i&ardson pointed o-t tree main bases "or "i;ing #ages:
)' Te re!ation o" #ages to oter &ategories o" #or$ers'
=' Te !i%ing #age'
@' Te &apa&ity o" te ind-stry to pay'
COMPEN&ATION
7I! 'o* pi"( t+e ig+t peop#e an$ gi8e t+em t+e oppot*nit' to spea$ t+ei 9ings 0 an$ p*t
"ompensation an$ e9a$s as a "aie :e+in$ it 0 'o* a#most $on;t +a8e to manage t+em.7
0<a"( ,e#"+
Compensation =meaning>
Compensation is a s'stemati" appoa"+ to po8i$ing moneta' 8a#*e to emp#o'ees in e?"+ange !o
9o( pe!ome$. Compensation ma' a"+ie8e se8ea# p*poses assisting in e"*itment6 @o:
pe!oman"e6 an$ @o: satis!a"tion.
-o9 is "ompensation *se$A
Compensation is a too# *se$ :' management !o a 8aiet' o! p*poses to !*t+e t+e e?isten"e o! t+e
"ompan'. Compensation ma' :e a$@*ste$ a""o$ing t+e :*siness nee$s6 goa#s6 an$ a8ai#a:#e
eso*"es.
Compensation ma' :e *se$ to:
B Re"*it an$ etain )*a#i!ie$ emp#o'ees.
B In"ease o maintain moa#eCsatis!a"tion.
B Re9a$ an$ en"o*age pea( pe!oman"e.
B A"+ie8e intena# an$ e?tena# e)*it'.
B Re$*"e t*no8e an$ en"o*age "ompan' #o'a#t'.
B Mo$i!' =t+o*g+ negotiations> pa"ti"es o! *nions.
Re"*itment an$ etention o! )*a#i!ie$ emp#o'ees is a "ommon goa# s+ae$ :' man' emp#o'es. To
some e?tent6 t+e a8ai#a:i#it' an$ "ost o! )*a#i!ie$ app#i"ants !o open positions is $etemine$ :'
ma(et !a"tos :e'on$ t+e "onto# o! t+e emp#o'e. ,+i#e an emp#o'e ma' set "ompensation #e8e#s
!o ne9 +ies an$ a$8etise t+ose sa#a' anges6 it $oes so in t+e "onte?t o! ot+e emp#o'es see(ing to
+ie !om t+e same app#i"ant poo#.
Moa#e an$ @o: satis!a"tion ae a!!e"te$ :' "ompensation. O!ten t+ee is a :a#an"e =e)*it'> t+at m*st
:e ea"+e$ :et9een t+e moneta' 8a#*es6 t+e emp#o'e is 9i##ing to pa' an$ t+e sentiments o! 9ot+
!e#t :e t+e emp#o'ee. In an attempt to sa8e mone'6 emp#o'es ma' opt to !ee%e sa#aies o sa#a'
#e8e#s at t+e e?pense o! satis!a"tion an$ moa#e. Con8ese#'6 an emp#o'e 9is+ing to e$*"e emp#o'ee
t*no8e ma' see( to in"ease sa#aies an$ sa#a' #e8e#s.
Compensation ma' a#so :e *se$ as a e9a$ !o e?"eptiona# @o: pe!oman"e. E?amp#es o! s*"+
p#ans in"#*$e: :on*ses6 "ommissions6 sto"(6 po!it s+aing6 gain s+aing.
,+at ae t+e "omponents o! a "ompensation s'stemA
Compensation 9i## :e pe"ei8e$ :' emp#o'ees as !ai i! :ase$ on s'stemati" "omponents. 3aio*s
"ompensation s'stems +a8e $e8e#ope$ to $etemine t+e 8a#*e o! positions. T+ese s'stems *ti#i%e man'
simi#a "omponents in"#*$ing @o: $es"iptions6 sa#a' angesCst*"t*es6 an$ 9itten po"e$*es.
T+e "omponents o! a "ompensation s'stem in"#*$e:
B <o: Des"iptions A "iti"a# "omponent o! :ot+ "ompensation an$ se#e"tion s'stems6 @o: $es"iptions
$e!ine in 9iting t+e esponsi:i#ities6 e)*iements6 !*n"tions6 $*ties6 #o"ation6 en8ionment6
"on$itions6 an$ ot+e aspe"ts o! @o:s. Des"iptions ma' :e $e8e#ope$ !o @o:s in$i8i$*a##' o !o
entie @o: !ami#ies.
B <o: Ana#'sis T+e po"ess o! ana#'%ing @o:s !om 9+i"+ @o: $es"iptions ae $e8e#ope$. <o: ana#'sis
te"+ni)*es in"#*$e t+e *se o! inte8ie9s6 )*estionnaies6 an$ o:se8ation.
B <o: E8a#*ation A s'stem !o "ompaing @o:s !o t+e p*pose o! $etemining appopiate
"ompensation #e8e#s !o in$i8i$*a# @o:s o @o: e#ements. T+ee ae !o* main te"+ni)*es: Ran(ing6
C#assi!i"ation6 Fa"to Compaison6 an$ Point Met+o$.
B Pa' &t*"t*es Use!*# !o stan$a$i%ing "ompensation pa"ti"es. Most pa' st*"t*es in"#*$e
se8ea# ga$es 9it+ ea"+ ga$e "ontaining a minim*m sa#a'C9age an$ eit+e step in"ements o
ga$e ange. &tep in"ements ae "ommon 9it+ *nion positions 9+ee t+e pa' !o ea"+ @o: is pe0
$etemine$ t+o*g+ "o##e"ti8e :againing.
B &a#a' &*8e's Co##e"tions o! sa#a' an$ ma(et $ata. Ma' in"#*$e a8eage sa#aies6 in!#ation
in$i"atos6 "ost o! #i8ing in$i"atos6 sa#a' :*$get a8eages. Companies ma' p*"+ase es*#ts o!
s*8e's "on$*"te$ :' s*8e' 8en$os o ma' "on$*"t t+ei o9n sa#a' s*8e's. ,+en p*"+asing t+e
es*#ts o! sa#a' s*8e's "on$*"te$ :' ot+e 8en$os6 note t+at s*8e's ma' :e "on$*"te$ 9it+in a
spe"i!i" in$*st' o a"oss in$*sties as 9e## as 9it+in one geogap+i"a# egion o a"oss $i!!eent
geogap+i"a# egions. Dno9 9+i"+ in$*st' o geogap+i" #o"ation t+e sa#a' es*#ts petain to
:e!oe "ompaing t+e es*#ts to 'o* "ompan'.
B Po#i"ies an$ Reg*#ations
,+at ae $i!!eent t'pes o! "ompensationA
Di!!eent t'pes o! "ompensation in"#*$e:
B Base Pa'
B Commissions
B O8etime Pa'
B Bon*ses6 Po!it &+aing6 Meit Pa'
B &to"( Options
B Ta8e#CMea#C-o*sing A##o9an"e
B Bene!its in"#*$ing: $enta#6 ins*an"e6 me$i"a#6 8a"ation6 #ea8es6 etiement6 ta?es...
Compensation Tips: E8e't+ing is Negotia:#e
It;s a## negotia:#e. E8e' ne9 @o: 00 e8e' pe!oman"e e8ie96 in !a"t 00 is an oppot*nit' to negotiate
:ase sa#a'6 8aio*s (in$s o! :on*ses6 :ene!its6 sto"( options6 an$ ot+e in"enti8es t+at a$$ to @o:
satis!a"tion an$ po8i$e !inan"ia# se"*it'. Ta(ing "onto# o! 'o* @o: sea"+ an$ "on$*"ting a smat
sea"+ t+at ta(es into a""o*nt moe t+an @*st !inan"ia# "onsi$eations "an a#so #ea$ to t+at e#*si8e
"on$ition "a##e$ +appiness. Ae 'o* pepae$ to negotiate !o +appinessA
T+e negotiation po"ess is an oppot*nit' to $e!ine6 "omm*ni"ate6 an$ a"+ie8e 9+at 'o* 9ant. B*t to
get t+e ig+t @o: t+at pa's 9+at 'o* $ese8e6 'o*;## nee$ to $o 'o* +ome9o(. T+e !ist step in t+e
negotiation "#ini" is to *n$estan$ t+e negotiation :asi"s.
Negotiation e)*ies gat+eing in!omation6 p#anning 'o* appoa"+6 "onsi$eing $i!!eent
a#tenati8es an$ 8ie9points6 "omm*ni"ating "#ea#' an$ spe"i!i"a##'6 an$ ma(ing $e"isions to ea"+
'o* goa#. ET+e a*t+o Ma'anne 1. ,ege:a*eF In +e :oo(6 $es"i:es +o9 ea"+ pat' in a
negotiation "an !*#!i## spe"i!i" nee$s an$ 9ants o! t+e ot+e pat'6 a "on"ept "a##e$ 7e#ati8e po9e.7
A""o$ing to ,ege:a*e6 *n$estan$ing 'o* stengt+s an$ eso*"esG :eing a:#e to espon$ to t+e
nee$s o! t+e ot+e pat'G an$ (no9ing 'o* "ompetition ena:#e 'o* to assess 'o* :againing
position moe a""*ate#'.
1ean t+e po9e !a"tos
,+at is 'o* po9e o8e t+e ot+e si$e o! t+e ta:#eA Re#ati8e po9e6 ,ege:a*e sa's6 is a !*n"tion
o! t+e !o##o9ing.
B*siness "#imate !a"tos
B O8ea## state o! t+e e"onom' an$ t+e in$*st' in 9+i"+ 'o* "ompete
B O8ea## *nemp#o'ment ate an$ t+e genea# emp#o'ment pi"t*e
B Deman$ !o in$*st'0 an$ po!ession0spe"i!i" (no9#e$ge an$ s(i##s
Compan' !a"tos
B Po!ita:i#it'
B Position in t+e :*siness "'"#e =stat*p6 go9ing6 sta:#e6 t*nao*n$>
-iing manage !a"tos
B Ugen"' o! t+e "ompan';s nee$ to !i## t+e position
B De"ision0ma(ing a*t+oit'
B &ta!!ing :*$get
App#i"ant !a"tos
B Ot+e oppot*nities
B Te"+ni"a# e?petise6 *ni)*e (no9#e$geCs(i## set
B Reso*"es =!inan"ia# $ept+6 net9o(s6 et".>
B 1e8e# o! "ompetitionCa8ai#a:i#it' o! ot+e "an$i$ates
B Caee is(
P#an an$ "omm*ni"ate
A negotiation is "ompose$ o! t9o ma@o steps: p#anning =esea"+ an$ stateg'> an$ "omm*ni"ation
=in!omation e?"+ange an$ ageement. In t+e p#anning step6 get as m*"+ in!omation as 'o* "an *p
!ont an$6 *sing :ot+ t+e "ompan';s 9itten an$ *n9itten signa#s6 map 'o* s(i##s against 9+at t+e
"ompan' 8a#*es.
/i8e it time
Timing is a#so impotant. Remem:e t+at t+e :est time to negotiate is a!te a seio*s @o: o!!e +as
:een ma$e an$ :e!oe 'o* +a8e a""epte$ it. On"e 'o* ae "#ea a:o*t t+e initia# o!!e6 'o* "an
e?pess inteest an$ e8en ent+*siasm6 :*t as( !o moe time to "onsi$e t+e @o: o!!e. ,ege:a*e
s*ggests t+at t+is e)*est is ma$e 7in #ig+t o! t+e impotan"e o! t+e $e"ision.7 &ometimes 'o* "an
sp#it *p t+e negotiating session into t9o meetings: one to !im *p t+e @o: $esign an$ esponsi:i#ities
an$ t+e se"on$ to go o8e "ompensation an$ :ene!its. T+e (e' message +ee is not to ma(e an
imp*#si8e $e"ision. I! t+e' ea##' 9ant 'o*6 t+ee;s time.
Consi$e t+e a#tenati8es
.o* s+o*#$ :e pepae$ 9it+ a ationa#e !o e8e't+ing to stengt+en 'o* position. Co*nteo!!es
ae an e?pe"te$ pat o! man' negotiations6 so :e s*e to emain !#e?i:#e. Deep in min$ t+at $i!!eent
"ompanies "an gi8e negotiations moe o #ess #atit*$e. &ma##e "ompanies ma' :e moe !#e?i:#e t+an
#age6 :*ea*"ati" "ompanies. Unioni%e$ "ompanies *s*a##' +a8e 8e' #itt#e oom !o in$i8i$*a#
negotiations.
Negotiate !o a 9in09in
Remem:e t+at t+e negotiation is not a:o*t stong0am ta"ti"s o 9inC#ose. It is a t9o09a' po"ess
9+ee 'o* an$ 'o* pospe"ti8e emp#o'e ae ea"+ t'ing to get somet+ing 'o* nee$. In a
negotiation6 'o*;e :ot+ $esigning t+e tems o! a tansa"tion so t+at ea"+ o! 'o* 9i## e"ei8e t+e
ma?im*m :ene!it !om t+e !ina# ageement.
A:o8e &o*"e: B' 1in$a <en(ins6 &a#a'."om
Compensation ten$s in In$ia
In$iaHs tansition to a ma(et $i8en e"onom' :egan in 1II1 9it+ t+e into$*"tion o! #i:ea#i%ation
=po0ma(et e"onomi" e!oms>. Pio to 1II16 t+e /o8enment 9as =an$ sti## is> t+e :iggest
emp#o'e an$ @o: "eato6 a""o*nting !o o8e J5K o! post0mati"*#ation =-ig+ &"+oo#> @o:s. Pa' 9as
#age#' $etemine$ :' +ig+0#e8e# ageements :et9een emp#o'ee *nions an$ t+e /o8enment an$ 9as
#age#' g*aantee$ in nat*e. A simi#a sit*ation 9as pe8a#ent in t+e pi8ate se"to6 9+ee
/o8enment pa' s"a#es 9ee o!ten *se$ as a :en"+ma( in !i?ing an$ e8ising pa'. Compensation
pa"(ages 9ee #o9 on "as+ an$ +ig+ on !inge :ene!its s*"+ as a""ommo$ation6 "as6 an$ s*:si$i%e$
#oans. 3aia:#e pa' 9as #age#' esti"te$ to top an$ senio management in !e9 pi8ate se"to
entepises. /a$ing s'stems 9ee #age#' in$*st'09i$e an$ sa#a' pogession 9as p*e#'
$etemine$ :' #engt+ o! se8i"e.
C*ent ten$s
Po$*"ti8it' gains =4K in 2LL30L4>6 !ast go9t+ in ea# 9ages =4LK o8e t+e #ast 5 'eas>6 a :ooming
:*t e?teme#' "ompetiti8e e"onom' =/DP go9t+ o! 6K>6 simp#i!i"ation o! ta? *#es an$ emegen"e
o! (no9#e$ge0:ase$ in$*sties s*"+ as In!omation Te"+no#og' M O*tso*"ing &e8i"es6 -ea#t+"ae
et" ae (e' !a"tos t+at +a8e in!#*en"e$ "ompensation in In$ia post #i:ea#i%ation. Compensation is
no9 "+aa"tei%e$ :' a Tota# Cost o! Emp#o'ment appoa"+6 a api$ mo8ement to !#e?i:#e :ene!its6
an$ in"easing #e8e#s o! 8aia:#e pa' =8aia:#e pa' no9 !oms a:o*t NK 0 35K o! !i?e$ pa'>. /a$e
st*"t*es +a8e :e"ome ogani%ation spe"i!i" an$ sa#a' pogession is $i8en :' ma(et !o"es an$
in$i8i$*a# pe!oman"e. A8eage sa#a' in"eases o8e 2LL30L4 ange$ !om 5K 0 2LK. T+e a8eage
in"ease 9as 11K. ,+i#e most ogani%ations :en"+ma( "ompensation nationa##' 9it+in a se#e"t
go*p o! "ompetitos6 a !e9 ogani%ations ae :eginning to :en"+ma( t+emse#8es intenationa##' at
senio management #e8e#s. In$ia +as t+e !astest "ompensation in"ease ate in t+e Asian egion at
11.NK an$ it a#so +as t+e +ig+est #a:o* t*no8e in t+e egion.
Di!!eent "ompensation p#ans 0 +o9 $o t+e' a!!e"t 'o* !inan"ia# es*#ts
,it+ t+e into$*"tion o! FR& 1L2 &+ae0:ase$ Pa'ment6 "ompanies ae e)*ie$ to e"ogni%e t+e
e?penses o! emp#o'ee e)*it' "ompensation s"+emes 9it+ e!!e"t !om 1 <an*a' 2LL5. T+is ati"#e
+ig+#ig+ts t+e ma@o imp#i"ations to t+e !inan"ia# es*#ts o! t+e t+ee most "ommon e)*it'
"ompensation s"+emes6 name#' s+ae option s"+eme6 pe!oman"e s+aes s"+eme6 an$ &+ae
Appe"iation Rig+ts =&AR6 a#so (no9n as p+antom s+ae s"+eme>.
De' C+aa"teisti"s
T+e (e' "+aa"teisti"s o! ea"+ s"+eme ae as !o##o9s:
&+ae option s"+eme
B T+e "ompan' gants emp#o'ees t+e ig+t to s*:s"i:e !o ne9 s+aes in t+e "ompan' at a !i?e$
pi"e.
B Emp#o'ees ae e)*ie$ to pa' t+e "ompan' t+e e?e"ise pi"e in "onsi$eation !o t+e s+aes.
B Emp#o'ees "an genea##' on#' e?e"ise t+e ig+t a!te emaining in se8i"e 9it+ t+e "ompan' !o a
peio$ o! time an$Co a!te meeting "etain pe!oman"e tagets.
B T+e ig+t 9o*#$ genea##' e?pie a!te a peio$ o! 5 to 1L 'eas !om t+e $ate o! t+e gant.
Pe!oman"e s+ae s"+eme
B T+e "ompan' gants emp#o'ees s+aes in t+e "ompan'.
B Emp#o'ees 9i## genea##' e"ei8e t+e s+aes6 at no "ost6 a!te emaining in se8i"e 9it+ t+e "ompan'
!o a peio$ o! time an$Co a!te meeting "etain pe!oman"e tagets.
&+ae Appe"iation Rig+ts
B &imi#a to t+e s+ae option s"+eme e?"ept t+at:
Upon e?e"ise o! t+e option6 t+e emp#o'ees $o not pa' t+e e?e"ise pi"e to t+e "ompan' no e"ei8e
t+e s+aesG instea$6 t+e' ae pai$ t+e $i!!een"e :et9een t+e e?e"ise pi"e an$ t+e ma(et pi"e o!
t+e s+aes in "as+.
,+i#e a## t+ee s"+emes e)*ie t+e *se o! !ai 8a#*es o! t+e s+ae options o s+aes !o t+e
e"ognition o! t+e "ompensation e?pense o8e t+e 8esting peio$6 t+e impa"t on t+e "ompan'Hs
!inan"ia# position an$ !inan"ia# es*#ts is $i!!eent.
Impa"t on net assets
T+e t+ee s"+emes +a8e a $i!!eent e!!e"t on t+e net asset 8a#*es o! "ompanies. Un$e FR& 1L26 s+ae
option s"+eme an$ pe!oman"e s+ae s"+eme ae "onsi$ee$ Ee)*it'0sett#e$F. T+is means t+at in
e"ogni%ing an e?pense !o t+e "ompensation "osts6 a "oespon$ing in"ease in s+ae+o#$esH e)*it'
is e"ogni%e$. -en"e6 t+e net asset position o! t+e "ompan' is *n"+ange$. In "ontast6 o:#igations
*n$e &AR s"+emes ae "onsi$ee$ #ia:i#ities o! t+e "ompan'6 as t+ee 9o*#$ :e a "as+ sett#ement
9+en t+e ig+t is e?e"ise$. T+e e"ognition o! t+e "ompensation "ost *n$e &AR es*#ts in a $e"ease
in t+e net asset o! t+e "ompan'.
IMPACT ON EARNIN/& 3O1ATI1IT.
=1> Re8a#*ation o! s+ae optionsCs+aes $*ing #i!e o! gant
,it+ s+ae option an$ pe!oman"e s+ae gants6 !#*"t*ations in t+e 8a#*es o! t+e s+ae options an$
s+aes $*ing t+e #i!e o! t+e gant $o not a!!e"t t+e es*#ts o! t+e "ompan'. T+is is :e"a*se t+e
meas*ement o! t+e s+ae option o s+ae is $etemine$ at t+e $ate o! t+e gant an$ is not
s*:se)*ent#' e8a#*e$. In "ontast6 !o &AR6 t+e "ompan' is e)*ie$ to e8a#*e t+e &AR at e8e'
epoting $ate *nti# t+e ig+t is sett#e$ o e?pies. T+is is :e"a*se t+e "ompan' +as to meas*e its
#ia:i#it' ="as+ pa'ment to emp#o'ees> at t+e e?pe"te$ sett#ement amo*nt. -en"e6 &AR s"+emes "eate
moe 8o#ati#it' to t+e !inan"ia# es*#ts. In a$$ition6 moe eso*"es ae a#so e)*ie$ to pe!om t+e
e8a#*ation at e8e' epoting $ate.
&AR 9i## "ontin*e to impa"t eanings e8en a!te t+e 8esting peio$ :e"a*se t+e #ia:i#it' is e0
meas*e$ *nti# t+e e?e"ise $ate.
=2> Teatment o! *n8este$ ig+ts
T+e "ompensation "ost is a !*n"tion o! n*m:e o! options o s+aes t+at ae e?pe"te$ to 8est :' t+e
8esting $ate an$ t+e !ai 8a#*e o! t+e option o s+ae. In estimating t+e n*m:e o! options o s+aes
e?pe"te$ to 8est6 on#' non0ma(et :ase$ "on$itions6 9+i"+ ae not :ase$ on t+e ma(et pe!oman"e
o! t+e s+aes6 ae "onsi$ee$. T+ese non0ma(et :ase$ "on$itions in"#*$e t+e "ontin*an"e o! se8i"e
o8e a peio$ o! time6 an$ t+e meeting o! a "etain e8en*e taget. I! no emp#o'ees meet t+e non0
ma(et :ase$ 8esting "on$ition :' t+e 8esting $ate6 t+e "ompan' $oes not in"* an' e?pense. No
pe!oman"e s+aes 9o*#$ :e iss*e$ !o pe!oman"e s+ae s"+emes an$ no s+ae options o &AR
9o*#$ 8est. I! s+ae options o &AR ae 8este$ :' 8esting $ate6 t+e !inan"ia# impa"t o! t+e t9o
s"+emes is $i!!eent.
Fo s+ae option s"+emes6 i! t+e s+ae options ae not s*:se)*ent#' e?e"ise$ :' t+e emp#o'ees =!o
instan"e6 :e"a*se t+e options ae o*t o! t+e mone'>6 t+e "ompan' is not a##o9e$ to e8ese t+e
e?penses a#ea$' "+age$ to t+e in"ome statement. Fo &AR s"+emes6 t+e #ia:i#ities ae state$ at t+e
e?pe"te$ "as+ sett#ement. I! t+e &AR is not s*:se)*ent#' e?e"ise$6 t+e "ompan' is a##o9e$ to e8ese
t+e e?penses pe8io*s#' "+age$ to t+e in"ome statement.
Impa"t on Ta?
Rega$#ess o! t+e a:o8e "+anges6 "+ages to an entit'Hs in"ome statement e#ating to s+ae option o
pe!oman"e s+ae s"+emes6 in !om o! "apita# o notiona# "ost =s*"+ as "ost o! options gante$>6 ae
not ta?0$e$*"ti:#e. Compensation "+ages t+at epesent a"t*a# o*tgoings ="as+ o*t!#o9 o a"t*a#
#ia:i#it'> to t+e "ompan' ma' :e $e$*"ti:#e s*"+ as t+e :*'ing :a"( o! its o9n s+aes6 i.e. teas*'
s+aes6 to satis!' t+e o:#igation to t+e emp#o'ees.
In a$$ition6 s*"+ s+ae0:ase$ "ompensation "osts m*st :e $ie"t#' e#ate$ to t+e emp#o'eeHs
emp#o'ment "ompensation :ene!its in &ingapoe to :e ta?0$e$*"ti:#e. T+e "ompensation "osts to t+e
entit' s+o*#$ mat"+ t+e se8i"es en$ee$ :' t+e emp#o'ee to t+e same entit'. Cetain steps m*st :e
ta(en to s*ppot t+e "#aim !o a $e$*"tion.
Impa"t on Eanings Pe &+ae
&+ae option an$ pe!oman"e s+ae gants +a8e a $i#*ti8e e!!e"t on EP&6 as s+aes 9i## :e iss*e$.
Fo &AR s"+emes6 s+aes ae not iss*e$G +en"e t+ee is no $i#*ti8e e!!e"t on EP&.
Mo8ing !o9a$
Pio to t+e imp#ementation o! FR& 1L26 t+e $esign o! t+e s+ae "ompensation p#an is o!ten
$epen$ent on non0!inan"ia# !a"tos as t+e "ompan' is not e)*ie$ to e"ogni%e an e?pense on t+e
e)*it' inst*ment gante$. -o9e8e6 9it+ t+e imp#ementation o! FR& 1L26 it is "iti"a# !o "ompanies
to "onsi$e an$ ana#'se t+e !inan"ia# impa"t6 aising !om t+e $esign an$ st*"t*e o! t+e s"+eme6 at
an ea#' stage.
RE,ARD& AND BENEFIT& AT IBM
,+et+e 'o*;e @oining IBM as a !es+ ga$*ate o a seasone$ po!essiona#6 9e :e#ie8e t+at e8e'one
9+o 9o(s +ee s+o*#$ !ee# 8a#*e$ an$ appe"iate$. T+at is 9+' 9e o!!e a Tota# Compensation
pa"(age t+at in"#*$es :ot+ Cas+ Compensation an$ Bene!its.
Cas+ "ompensation
,e 9ant to ens*e t+at IBM "ontin*es to atta"t6 etain an$ moti8ate +ig+0pe!oming peop#e. As
s*"+6 9e o!!e a "as+ "ompensation st*"t*e t+at 9i## e"ognise 'o* spe"i!i" s(i##s an$ :*siness
e?petise. A!te a##6 t+e' a##o9 *s to $e#i8e :est0o!0"#ass so#*tions !o o* "#ients. O* "ompensation
st*"t*e ta(es $i!!eent !oms to e!#e"t in$i8i$*a# pe!oman"e #e8e#s. It in"#*$es Base Pa'6 Fi?e$
Bon*ses6 A##o9an"es6 o Ot+e Pa'ments e#e8ant to t+e #o"a# ma(et. Pe!oman"e Bon*s an$ &a#es
In"enti8es ma' a#so :e in"#*$e$ in 'o* tota# "as+ "ompensation6 an$ ae *se$ to ens*e 'o* ae pai$
"ompetiti8e#' 9it+in t+e ma(et.
Pe!oman"e :on*s
Anot+e pin"ip#e 9e !o##o9 to atta"t6 moti8ate an$ etain t+e most ta#ente$ emp#o'ees is to o!!e a
Pe!oman"e :on*s. I! 'o* ae a eg*#a emp#o'ee6 'o* 9i## +a8e some potion o! 'o* ann*a#
"ompensation tie$ $ie"t#' to :*siness es*#ts. T+is is to ens*e 'o* e"ei8e t+e appopiate
e"ognition an$ e9a$s.
/#o:a# e"ognition pogam
T+is is t+e pinna"#e o! sa#es e?"e##en"e 9it+in IBMO ,e 9ant 'o* to (no9 t+at 9e 8a#*e 'o*
"onti:*tions an$ appe"iate 'o* #ea$es+ip. O* /#o:a# Re"ognition Pogam is $esigne$ to :ing
o*t 'o* :est6 an$ en"o*age 'o* to inspie an$ moti8ate ot+es.
Emp#o'ee sto"( p*"+ase p#an
&in"e 1I5J6 IBM +as o!!ee$ sto"( p*"+ase p#ans :e"a*se 9e :e#ie8e in t+e 8a#*e o! emp#o'ee
o9nes+ip. A## eg*#a emp#o'ees6 in"#*$ing IBMes 9+o ae eg*#a pat0times6 ae e#igi:#e to
pati"ipate in t+e p#an i! t+e' "+oose. 1et;s go9 t+e "ompan' toget+eO
Note: /o8enmenta# eg*#ations ma' po+i:it o!!eing t+e p#an o ma' $i"tate $i!!eent p#an
po8isions in "etain "o*nties.
-ea#t+"ae6 9e##0:eing an$ pesona# :ene!its
,e o!!e a ange o! pesona# :ene!its s*"+ as me$i"a# s"+emes6 $enta# s"+emes6 +ea#t+ s"eening6
9e##ness pogammes6 etiements an$ ins*an"e pogammes. .o* ma' e8en :e a:#e to in"#*$e 'o*
spo*seCpatne an$ $epen$ants *n$e 'o* "o8eage !o geate pea"e o! min$. ,e t' to :e as
!#e?i:#e as possi:#e6 so 'o* "+oose 9+at is appopiate !o 'o* pesona# nee$s.
F#e?i:i#it' an$ 9o(0#i!e :a#an"e
P*ite simp#'6 'o* ae IBM;s (e' to :*siness s*""ess. ,e ae "ommitte$ to "eating a 9o(p#a"e
"*#t*e an$ en8ionment in 9+i"+ 'o* "an :a#an"e 'o* "aee 9it+ 'o* pesona# pioities. ,e
o!!e a n*m:e o! pogammes6 anging !om staggee$ 9o( +o*s to 9o(ing !om +ome to pat
time eg*#a 9o(6 9+i"+ gi8e 'o* t+e oppot*nit' to a"+ie8e a :ette 9o(C#i!e :a#an"e.
A$$itiona# pogammes
.o* 9i## !in$ t+at man' o! t+e :ene!its at IBM ae $esigne$ to ma(e #i!e a #itt#e easie an$ a #ot moe
!*nO IBM o!!es emp#o'ees 8aio*s $is"o*nts !o goo$s an$ se8i"es 0 IBM Pesona# Comp*te
P*"+ase6 -o*sing Assistan"e P*"+ase P#an6 Ca P*"+ase Assistan"e P#an6 C+i#$ Cae &e8i"es6
Mo:i#e P+one P#ans6 Fitness Centes6 an$ E$*"ationa# "o*ses. .o* ae a#so a*tomati"a##' e#igi:#e to
@oin o* man' e"eationa#6 so"ia# an$ "*#t*a# "#*:s6 an$ e8ents. Best o! a##6 t+e';e not @*st !o 'o*6
:*t !o 'o* entie !ami#' as 9e##.
&taggee$ 9o(ing +o*s
I! 'o* 9o*#$ pe!e to 9o( !om +ome o stat #ate in t+e $a'6 'o* "an at IBM. ,e gi8e 'o* t+e
!#e?i:i#it' to manage 'o* 9o( +o*s6 so 'o* "an meet t+e nee$s o! 'o* pesona# #i!e.
COMPEN&ATION M BENEFIT PRACTICE&6 PRO/RAM&6 AND PO1ICIE&.
Emp#o'ee Bene!its:
Bene!it P#an Costs
-ea#t+ Cae P#ans
=PPO6 PO&6 -MO6 -&A>
Denta# Cae P#ans
Retiement P#ans
F#e?i:#e Bene!it P#ans
Disa:i#it' Bene!it P#ans
/o*p 1i!e M ADMD Ins*an"e P#ans
Bene!its !o Pat0Time Emp#o'ees
Domesti" Patne Bene!its Emp#o'ee Po#i"ies an$ Pogams:
Pai$0Time O!! =PTO>
A#tenati8e ,o( &"+e$*#es
=in"#*$ing Te#e"omm*ting>
Re"*iting an$ -iing
-iing Bon*ses
Re!ea# Bon*ses
Retention Bon*ses
&e8ean"e Pa"ti"es
,o(p#a"e En8ionment
Caee P#anning M Po!essiona# De8e#opment
Mi#ita' 1ea8e Po#i"'
Bene!it P#an Costs
B Bene!it Costs as Pe"ent o! Pa'o##
o Me$i"a#6 Denta#6 3ision6 Disa:i#it'6 1i!e6 ADMD P#ans
o Retiement P#ans
B Bene!its Costs as a Mont+#' Amo*nt Pe Emp#o'ee
o Me$i"a#6 Denta#6 3ision6 Disa:i#it'6 1i!e6 ADMD P#ans
o Retiement P#ans
-ea#t+ Cae P#ans =PPO6 -MO6 PO&>
B Mont+#' Pemi*ms
o Pemi*m Cost
o Pe"ent o! Pemi*ms Pai$ :' Compan'
B De$*"ti:#es
o Pe"ent o! P#ans 9it+ De$*"ti:#es
o Ann*a# De$*"ti:#e Amo*nts
B Coins*an"e
o Pe"ent o! E?pense Co8ee$ :' P#an
B O*t0o!0Po"(et Ma?im*ms =OOP>
o Pe"ent o! P#ans 9it+ OOP Ma?im*ms
o Ann*a# OOP Amo*nts
B 1i!etime Reim:*sement 1imits
o Pe"ent o! P#ans 9it+ 1i!etime 1imits
B O!!i"e 3isit an$ Pes"iption Co0Pa'ments
B Domesti" Patne Me$i"a# Bene!its
-&A P*a#i!ie$ -ea#t+ P#ans
B Impa"t on Ot+e -ea#t+"ae Options
B Mont+#' Pemi*m Costs
B Pe"ent o! Pemi*ms Pai$ :' Compan'
B Ann*a# De$*"ti:#es
B O*t0o!0Po"(et Ma?im*ms =OOP>
B 1i!etime Reim:*sement 1imits
B Pes"iption E?pense Co8eage
B Compan' Conti:*tions
Denta# Cae P#ans
B T'pes o! Denta# P#ans O!!ee$
B Timing o! Emp#o'ee E#igi:i#it' to Eno##
B E?penses Co8ee$
B Costs o! Mont+#' Pemi*ms
B Pe"ent o! Mont+#' Pemi*m Pai$ :' Compan'
B De$*"ti:#es an$ Co0Ins*an"e
B O*t0o!0Po"(et =OOP> Ma?im*ms
B Ot+o$onti" E?pense Co8eage
B Ot+o$onti" Reim:*sement 1imits
Retiement P#ans
B T'pes o! Retiement P#ans A8ai#a:#e to Emp#o'ees
o De!ine$ Bene!it P#an
o 4L1=(>
o &imp#e0IRA
o Po!it &+aing P#an
o E&OP
o &EP0IRA
o &a#a' Re$*"tion &EP
B E#igi:i#it' Re)*iements
B ,+en $o Emp#o'ee Conti:*tions F*##' 3est
B Retiement P#an Costs
o as a Pe"entage o! Pa'o##
o pe Emp#o'ee
B 4L1=(> Mat"+ing Po#i"'
F#e?i:#e Bene!it P#ans
B Pemi*m Con8esionCPemi*m On#' P#an =POP>
B Uneim:*se$ Me$i"a# E?penses =UME>
B Depen$ent C+i#$ Cae E?penses =DCC>
B Depen$ent A$*#t Cae E?penses =DAC>
B A$option Assistan"e E?penses =AAE>
B Ca!eteia P#an
B Tanspotation Bene!it P#an
Disa:i#it' Bene!it P#ans =&+ot0 an$ 1ong0Tem>
B ,+o Pa's t+e Pemi*m
B E#igi:i#it' !o Disa:i#it' Bene!its
B ,aiting Peio$s
B D*ation o! P#ans
B &etting Amo*nt o! Disa:i#it' Bene!its
B Disa:i#it' Pa'o*ts
/o*p 1i!e M ADMD Ins*an"e P#ans
B /o*p 1i!e P#ans
o Bene!it Amo*nts
o Cost Co8eage
o &*pp#ementa# 1i!e Ins*an"e
B A""i$enta# Deat+ M Dismem:ement =ADMD> Ins*an"e
o Bene!it Amo*nts
Bene!its !o Pat0Time Emp#o'ees
B Bene!its A8ai#a:#e
B ,o( Re)*iements !o E#igi:i#it'
B Co8eing t+e Costs
Domesti" Patne Bene!its
B Domesti" Patne -ea#t+"ae Bene!its: Co8eage
B E#igi:i#it' Re)*iements
Emp#o'ee Po#i"ies an$ Pogams "o8ee$:
Pai$0Time O!! Po#i"ies
B N*m:e o! Da's Pai$ Time O!! Po8i$e$ :' T'pe o! Da':
o -o#i$a's
o F#oating -o#i$a's
o &i"( Da's
o 3a"ation Da's
o Pesona# Da's
o Ann*a# 1ea8e Poo#
o Ot+e Pai$ Time O!!
B N*m:e o! Da's Pai$ Time O!! Po8i$e$ :' T'pe o! Mo$e#:
o Ta$itiona# Mo$e# 9it+ &pe"i!ie$ &i"( 1ea8e
o Ta$itiona# Mo$e# 9it+o*t &pe"i!ie$ &i"( 1ea8e
o Ann*a# 1ea8e Mo$e#
B Teatment o! Un*se$ Pai$0Time O!!:
o Un*se$ 3a"ation Da's
o Un*se$ &i"( Da's
o Un*se$ Ann*a# 1ea8e Da's
o Time 1imits on t+e Use o! Caie$0O8e Pai$ Time O!!
o A""*a# o! Pai$ Time O!!
o Upon Temination
A#tenati8e ,o( &"+e$*#es
B T'pes o! A#tenati8e ,o( &"+e$*#es O!!ee$:
o Te#e"omm*ting
o F#e?i:#e ,o( -o*s
o Compesse$ ,o( ,ee(s
o <o: &+aing
o Pat0time Po!essiona# Emp#o'ment
B E#igi:i#it'
B Po$*"ti8it' o! Emp#o'ees in A#tenati8e ,o( &"+e$*#es
B Met+o$s Use$ to Monito Po$*"ti8it'
B Too#sCAssistan"e Po8i$e$ to Te#e"omm*ting Emp#o'ees
B Re)*iements !o Te#e"omm*ting Emp#o'ees
Re"*iting an$ -iing
B Re"*iting B*$gets
B Re"*iting &o*"es
B <o: Posting ,e:sites
B Re"*iting Too#s
B Inte8ie9ing App#i"ants
B Pe0Emp#o'ment Testing
B Pe0Emp#o'ment &"eening
Re!ea# Bon*ses
B Re!ea# Bon*s E#igi:i#it' :' Emp#o'ee T'pe an$ 1e8e#
B Re!ea# Bon*ses A9a$e$ :' T'pe o! Ne9 -ie
B Re!ea# Bon*s Pa'ments :' T'pe o! -ie
B Amo*nt o! Re!ea# Bon*s
B Timing o! Re!ea# Bon*s Pa'o*ts
-iing Bon*ses
B -iing Bon*s E#igi:i#it' :' Emp#o'ee T'pe an$ 1e8e#
B Ca#"*#ating -iing Bon*ses
B -iing Bon*s Amo*nts :' Emp#o'ee T'pe an$ 1e8e#
B Timing o! -iing Bon*s Pa'o*ts
B -iing Bon*s Fo!eit*e an$ Repa'ment Po#i"ies
Retention Bon*ses
B Retention Bon*s E#igi:i#it' :' Emp#o'ee T'pe an$ 1e8e#
B Ca#"*#ating Retention Bon*ses
B Retention Bon*s Amo*nts :' Emp#o'ee T'pe an$ 1e8e#
B Pa'ment o! Retention Bon*ses
&e8ean"e Pa"ti"es
B &e8ean"e Pa"ti"es :' Compan' &i%e
B Ca#"*#ation o! &e8ean"e
B &e8ean"e Pa' Amo*nts
B P#a"ement &e8i"es O!!ee$
B Re#ease Ageements
B Ten$s in &e8ean"e Amo*nts
,o(p#a"e En8ionment
B Dess Co$es
B ,o( &pa"e A##o"ation
B Compan' &ponsoe$ E8ents an$ A"ti8ities
Caee P#anning an$ Po!essiona# De8e#opment Pogams
B Caee P#anning Pogams
o Con!een"e Atten$an"e
o Po!essiona# Mem:es+ips
o T*ition Reim:*sement
o Ta$e <o*na# &*:s"iptions
o Te"+ni"a# Caee 1a$$es
o <o: Rotation C Coss Taining
o Management &*""ession P#anning
o Foma# Mentoing
B T*ition Reim:*sement
o Co*se Re)*iements to Re"ei8e T*ition Reim:*sement
o Con$itions o! T*ition Reim:*sement
B Po!essiona# De8e#opment Pogams
o Management o &*pe8iso' &(i##s
o 1ea$es+ip De8e#opment
o Po@e"t Management
o Intepesona# Comm*ni"ation
o Team B*i#$ing
o Con!#i"t Management
B Taining B*$gets
Mi#ita' 1ea8e Po#i"'
B Mi#ita' 1ea8e Po#i"'
De' Compensation Components
Compensation +as :e"ome a !a moe "omp#i"ate$ iss*e t+an @*st $e"i$ing +o9 m*"+ to pa' 'o*
emp#o'ees. In a$$ition to sa#a'6 emp#o'es m*st "onsi$e man' ot+e "omponents Q 4L1=(> p#ans6
sto"( options6 :on*ses an$ 8a"ation Q t+at +a8e :e"ome pat o! "ompensation pa"(ages to$a'.
Emp#o'ees a#so +a8e geate e?pe"tations o! 9+at s+o*#$ :e in"#*$e$ in t+ei "ompensation
pa"(ages6 an$ t+e' ma' $eman$ spe"i!i" :ene!its t+at "an :e "ost#' !o sma## :*sinesses.
Cost#' o not6 :*i#$ing a !ai an$ atta"ti8e "ompensation pa"(ages is "iti"a# !o atta"ting an$
etaining emp#o'ees. ,+en setting *p 'o* "ompensation pa"(age6 "onsi$e t+e !o##o9ing
"omponents:
&a#a' an$ 9ages. T+is is *s*a##' t+e sing#e #agest "omponent o! a "ompensation pa"(age an$6 not
s*pising#'6 t+e most "ommon point o! "ompaison *se$ :' emp#o'ees an$ potentia# emp#o'ees.
&a#a' s+o*#$ :e tie$ to a peson;s s(i##s an$ e?peien"e. &*:se)*ent in"eases nee$ to :e :ase$ on an
emp#o'ee;s pe!oman"e6 8a#*e an$ "onti:*tion to an ogani%ation.
C+e"( sa#a' s*8e's an$ 9ant a$s6 an$ s"o*t o*t "ompetitos to see i! t+e' ae *n$epa'ing o
o8epa'ing t+ei sta!!. Pa'ing too m*"+ is an *nne"essa' $ain on 'o* eso*"es6 :*t pa'ing too
#itt#e 9i## ma(e it $i!!i"*#t to !in$ an$ (eep t+e :est peop#e.
Bon*ses. Emp#o'ee :on*ses6 9+i"+ ae *s*a##' pai$ in a sing#e #*mp at t+e en$ o! t+e 'ea6 ae one
9a' o! po8i$ing pe!oman"e in"enti8es. Po!it0s+aing p#ans ae a moe !oma# 9a' o! $oing t+is6
:*t t+e';e not as e!!e"ti8e !o e9a$ing in$i8i$*a# pe!oman"e an$ "ompensating emp#o'ees !o
meeting t+ei goa#s.
1ong0tem in"enti8es. &to"( options o sto"( gants not on#' po8i$e #ong0tem in"enti8es to
emp#o'ees6 :*t t+e' "an a#so +e#p etain 8a#*a:#e team mem:es t+o*g+ 'o* ogani%ation;s "*"ia#
stat0*p p+ase.
-ea#t+ ins*an"e. Emp#o'e0sponsoe$ +ea#t+ ins*an"e is !ai#' stan$a$ among me$i*m0si%e
"ompanies. An$ it;s a :ene!it t+at +as geat 8a#*e to emp#o'ees. An emp#o'e0sponsoe$ p#an sa8es
emp#o'ees mone' an$ gi8es t+em pea"e o! min$ in (no9ing t+at t+e' 9on;t :e $enie$ "o8eage6 e8en
i! t+e' +a8e e?isting +ea#t+ po:#ems.
I! 'o* t+in( 'o* "an;t a!!o$ it6 t+in( again. Po8i$ing ins*an"e to 'o* emp#o'ees sen$s t+e
message t+at 'o* "ae a:o*t t+ei +ea#t+ an$ t+e +ea#t+ o! t+ei !ami#ies. To minimi%e "osts6 "onsi$e
+a8ing emp#o'ees pi"( *p pat o! t+e ta:. Emp#o'ees 9+o +a8e "o8eage t+o*g+ a spo*se ma' 9ant
to opt o*t o! a p#an6 pati"*#a#' i! t+ee;s a "ost asso"iate$ 9it+ it.
1i!e an$Co $isa:i#it' ins*an"e. T+is is a#so a :ene!it t+at *s*a##' "osts #ess 9+en it;s p*"+ase$ :'
an emp#o'e at+e t+an an in$i8i$*a#.
Retiement p#ans. 4L1=(> p#ans +a8e :e"ome pop*#a :e"a*se t+e' ae e#ati8e#' eas' to a$ministe
an$ ae #ess e?pensi8e t+an ta$itiona# pension p#ans. Man' emp#o'ees #i(e t+ese p#ans :e"a*se t+e'
maintain some "onto# o8e t+e amo*nt o! t+ei "onti:*tion an$ +o9 t+e mone' is in8este$. Most
sma## "ompanies t' to p*t some (in$ o! sa8ings o 4L1=(> p#an in p#a"e6 e8en i! t+e' $on;t "onti:*te
mone' to t+em.
Time o!! an$ !#e?i:#e s"+e$*#es. T+is in"#*$es +o#i$a's6 8a"ations6 si"( $a's an$ pesona# $a's. An
emp#o'e *na:#e to o!!e "ompetiti8e sa#aies ma' "#ose pat o! t+e gap :' o!!eing moe time o!! o
!#e?i:#e 9o( +o*s. &ome emp#o'es ma(e no $istin"tion :et9een si"(6 8a"ation an$ pesona# $a's
an$ a##o9 emp#o'ees a set n*m:e o! $a's o!! ea"+ 'ea to :e *se$ at t+ei $is"etion. T+is pe8ents
emp#o'ees !om a:*sing si"( $a's an$ (eeps emp#o'ees !om !ee#ing t+at t+e' nee$ to #ie 9+en a
"+i#$ is i## o a pesona# emegen"' aises.
Mis"e##aneo*s "ompensation. Ot+e !oms o! "ompensation to "onsi$e in"#*$e emp#o'ee assistan"e
pogams6 9+i"+ "an po8i$e e8e't+ing !om ps'"+o#ogi"a# "o*nse#ing to #ega# assistan"eG $is"o*nts
on "ompan' po$*"tsG *se o! a "ompan' "asG an$ an' ot+e in"enti8es t+at moti8ate emp#o'ees an$
gi8e 'o* "ompan' a "ompetiti8e a$8antage.
Compensation pa"(age o! a top e?e"*ti8e
T+e tota# "ompensation pa"(age o! a top e?e"*ti8e 9i## genea##' +a8e some Com:ination o! t+e
!o##o9ing "omponents: :ase sa#a'6 s+ot0tem :on*s :ase$ on Pe!oman"e o8e t+e past t9e#8e
mont+s6 #ong0tem :on*s :ase$ on pe!oman"e o8e t+e past 305 'eas6 sto"( options =)*a#i!ie$
an$Co non0)*a#i!ie$>6 esti"te$ sto"(6 sto"(
p*"+ase an$ po!it s+aing. E8e't+ing in a$$ition to :ase sa#a' is not t'pi"a# o! 9+at t+e a8eage
9o(e e"ei8es6 an$ ea"+ item s+o*#$ :e e?amine$ in $i8i$a:#e. On op o! t+e a:o8e t+ee 9i## a#so :e
a pension6 a## t+e *s*a# ins*an"e =+ea#t+6 $enta#6 $isa:i#it'6 #i!e> an$ spe"ia# !inge :ene!its anging
!om ta? pepaation to "o*nt' "#*: mem:es+ip. An' pa"ti"ing e"onomist 9+o +as e8e $ea#t 9it+
t+e "ompensation pa"(age o! a +ig+#' pai$ e?e"*ti8e 9i## +a8e an *n$estan$ing o! t+e "omp#e?ities
in8o#8e$ in 8a#*ation6 "ompae$ to a noma# 9age eane.
Pa'o## Management
B-man (eso-r&e is te most %ita! reso-r&e "or any organi/ation' It is responsib!e "or ea& and e%ery
de&ision ta$en. ea& and e%ery #or$ done and ea& and e%ery res-!t' Emp!oyees so-!d be managed
proper!y and moti%ated by pro%iding best rem-neration and &ompensation as per te ind-stry standards'
Te !-&rati%e &ompensation #i!! a!so ser%e te need "or attra&ting and retaining te best emp!oyees'
Compensation is te rem-neration re&ei%ed by an emp!oyee in ret-rn "or is/er &ontrib-tion to te
organi/ation' It is an organi/ed pra&ti&e tat in%o!%es ba!an&ing te #or$>emp!oyee re!ation by pro%iding
monetary and non>monetary bene"its to emp!oyees' Compensation is an integra! part o" -man reso-r&e
management #i& e!ps in moti%ating te emp!oyees and impro%ing organi/ationa! e""e&ti%eness'
Components o! Compensation &'stem
Compensation systems are designed $eeping in minds te strategi& goa!s and b-siness ob1e&ti%es'
Compensation system is designed on te basis o" &ertain "a&tors a"ter ana!y/ing te 1ob #or$ and
responsibi!ities' Components o" a &ompensation system are as "o!!o#s:
T'pes o! Compensation
Compensation pro%ided to emp!oyees &an dire&t in te "orm o" monetary bene"its and/or indire&t in te
"orm o" non>monetary bene"its $no#n as per$s. time o"". et&' Compensation does not in&!-de on!y sa!ary
b-t it is te s-m tota! o" a!! re#ards and a!!o#an&es pro%ided to te emp!oyees in ret-rn "or teir ser%i&es' I"
te &ompensation o""ered is e""e&ti%e!y managed. it &ontrib-tes to ig organi/ationa! prod-&ti%ity'
Die"t Compensation
4ire&t &ompensation re"ers to monetary bene"its o""ered and pro%ided to emp!oyees in ret-rn o" te ser%i&es
tey pro%ide to te organi/ation' Te monetary bene"its in&!-de basi& sa!ary. o-se rent a!!o#an&e.
&on%eyan&e. !ea%e tra%e! a!!o#an&e. medi&a! reimb-rsements. spe&ia! a!!o#an&es. bon-s. P"/Grat-ity. et&'
Tey are gi%en at a reg-!ar inter%a! at a de"inite time'
In$ie"t Compensation
Indire&t &ompensation re"ers to non>monetary bene"its o""ered and pro%ided to emp!oyees in !ie- o" te
ser%i&es pro%ided by tem to te organi/ation' Tey in&!-de 9ea%e Po!i&y. O%ertime Po!i&y. Car po!i&y.
Bospita!i/ation. Ins-ran&e. 9ea%e tra%e! Assistan&e 9imits. (etirement 0ene"its. Bo!iday Bomes'
Nee$ o! Compensation Management
A good &ompensation pa&$age is important to moti%ate te emp!oyees to in&rease te
organi/ationa! prod-&ti%ity'
Jn!ess &ompensation is pro%ided no one #i!! &ome and #or$ "or te organi/ation' T-s.
&ompensation e!ps in r-nning an organi/ation e""e&ti%e!y and a&&omp!ising its goa!s'
Sa!ary is 1-st a part o" te &ompensation system. te emp!oyees a%e oter psy&o!ogi&a! and se!">
a&t-a!i/ation needs to "-!"i!!' T-s. &ompensation ser%es te p-rpose'
Te most &ompetiti%e &ompensation #i!! e!p te organi/ation to attra&t and s-stain te best ta!ent'
Te &ompensation pa&$age so-!d be as per ind-stry standards'
&tategi" Compensation
Strategi& &ompensation is determining and pro%iding te &ompensation pa&$ages to te emp!oyees tat are
a!igned #it te b-siness goa!s and ob1e&ti%es' In today?s &ompetiti%e s&enario organi/ations a%e to ta$e
spe&ia! meas-res regarding &ompensation o" te emp!oyees so tat te organi/ations retain te %a!-ab!e
emp!oyees' Te &ompensation systems a%e &anged "rom traditiona! ones to strategi& &ompensation
systems'
E8o#*tion O! Compensation
Today?s &ompensation systems a%e &ome "rom a !ong #ay' Wit te &anging organi/ationa! str-&t-res
#or$ers? need and &ompensation systems a%e a!so been &anging' From te b-rea-&rati& organi/ations to
te parti&ipati%e organi/ations. emp!oyees a%e started as$ing "or teir rigts and appropriate
&ompensations' Te iger ed-&ation standards and iger s$i!!s re<-ired "or te 1obs a%e made te
organi/ations pro%ide &ompetiti%e &ompensations to teir emp!oyees'
Compensation strategy is deri%ed "rom te b-siness strategy' Te b-siness goa!s and ob1e&ti%es are a!igned
#it te B( strategies' Ten te &ompensation &ommittee or te &on&erned a-tority "orm-!ates te
&ompensation strategy' It depends on bot interna! and e;terna! "a&tors as #e!! as te !i"e &y&!e o" an
organi/ation'
E%o!-tion o" Strategi& Compensation
Ta$itiona# Compensation &'stems
In te traditiona! organi/ationa! str-&t-res. emp!oyees #ere e;pe&ted to #or$ ard and obey te bosses?
orders' In ret-rn tey #ere pro%ided #it 1ob se&-rity. sa!ary in&rements and promotions ann-a!!y' Te
sa!ary #as determined on te basis o" te 1ob #or$ and te years o" e;perien&e te emp!oyee is o!ding'
Some o" te organi/ations pro%ided "or retirement bene"its s-& as. pension p!ans. "or te emp!oyees' It #as
ass-med tat -mans #or$ "or money. tere #as no spa&e "or oter psy&o!ogi&a! and so&ia! needs o"
#or$ers'
C+ange in Compensation &'stems
Wit te bea%iora! s&ien&e teories and e%o!-tion o" !abo-r and trade -nions. emp!oyees started as$ing "or
teir rigts' Mas!o# bro-gt in te need ierar&y "or te rigts o" te emp!oyees' Be stated tat emp!oyees
do not #or$ on!y "or money b-t tere are oter needs too #i& tey #ant to satis"y "rom tere 1ob. i'e'
so&ia! needs. psy&o!ogi&a! needs. sa"ety needs. se!">a&t-a!i/ation. et&' No# te emp!oyees #ere being
treated as -man reso-r&e'
Teir per"orman&e #as being meas-red and appraised based on te organi/ationa! and indi%id-a!
per"orman&e' Competition among emp!oyees e;isted' Emp!oyees #ere e;pe&ted to #or$ ard to a%e te
1ob se&-rity' Te &ompensation system #as designed on te basis o" 1ob #or$ and re!ated pro"i&ien&y o" te
emp!oyee'
To$a'Hs Mo$en Compensation &'stems
Today te &ompensation systems are designed a!igned to te b-siness goa!s and strategies' Te emp!oyees
are e;pe&ted to #or$ and ta$e teir o#n de&isions' A-tority is being de!egated' Emp!oyees "ee! se&-red
and %a!-ed in te organi/ation' Organi/ations o""er monetary and non>monetary bene"its to attra&t and
retain te best ta!ents in te &ompetiti%e en%ironment' Some o" te bene"its are spe&ia! a!!o#an&es !i$e
mobi!e. &ompany?s %ei&!eI Bo-se rent a!!o#an&esI stat-tory !ea%es. et&'
Pa'o## Management Po"ess
Ca!&-!ation o" gross sa!aries and ded-&tib!e amo-nts is a tedio-s tas$ #i& in%o!%es ris$' Some o" te
organi/ations -se te traditiona! man-a! metod o" payro!! pro&essing and some go "or te ad%an&ed
payro!! pro&essing so"t#are' An organi/ation opts "or any o" te "o!!o#ing payro!! pro&essing metods
a%ai!ab!e
Man*a# &'stem
Man-a! payro!! system is te traditiona! payro!! system #i& in%o!%es pen and in$. adding ma&ine.
spreadseet. et& instead o" &omp-ters. so"t#are and oter &omp-teri/ed aids' Te pro&ess #as %ery pop-!ar
#en tere #ere no &omp-teri/ed means "or payro!! pro&essing'
No#>a>days it is on!y "e# sma!! s&a!e organi/ations in te remote areas tat -se te man-a! payro!!'
Sometimes te &onstr-&tion ind-stry and man-"a&t-ring ind-stry a!so -se te man-a! payro!! systems "or
te &ontra&t-a! !abo-r. as teses &ontra&ts are on dai!y/#ee$!y basis'
Tere is "-!! &ontro! in te ands o" o#ner' 0-t te pro&ess is tedio-s. time &ons-ming and ris$y as it is
more prone to errors'
A""o*ntant
A&&o-ntant is a pro"essiona! a%ing a degree/dip!oma &o-rse in "inan&e/a&&o-ntan&y' Be/se is responsib!e
"or a!! te a&ti%ities re!ated to payro!! a&&o-nting' Be/se as te so-nd $no#!edge o" a&&o-nting prin&ip!es
and g!oba!!y a&&epted standards'
Te pro&ess adds &osts to te organi/ation' It in%o!%es paying someone #o is responsib!e "or &a!&-!ating
te sa!aries o" oters' Te "inan&ia! &ontro! regarding sa!ary goes in te and o" a&&o-ntant'
Pa'o## &o!t9ae
In today?s &omp-teri/ed en%ironment. payro!! system as a!so de%e!oped itse!" into a-tomated so"t#are tat
per"orms e%ery a&tion needed by te payro!! pro&ess' It e!ps in &a!&-!ating te payab!e amo-nts and
ded-&tions %ery easi!y' It a!so e!ps in generating te pay s!ips in !esser time' A-tomated &a!&-!ations res-!t
in no errors' 4ata is %a!idated a-tomati&a!!y by te so"t#are'
It needs pro"essiona!s to ma$e -se o" te so"t#are "or its e""i&ient #or$ing'
Pa'o## O*tso*"ing
Payro!! o-tso-r&ing in%o!%es a tird party 2an o-tso-r&ing &ompany3 in te &a!&-!ations o" sa!aries and
ded-&tions' Te o-tso-r&ing organi/ation is responsib!e "or a!! te a&ti%ities o" te payro!! a&&o-nting' It
sa%es time and &ost "or te organi/ation' I" tere is more n-mber o" emp!oyees 2say more tan G**>)***3 in
te organi/ation. payro!! o-tso-r&ing #o-!d be %ery m-& bene"i&ia!'
Te data is pro%ided to te &ons-!tants/o-tso-r&ing "irms' Te %ario-s payro!! "-n&tions -nderta$en by te
o-tso-r&ing organi/ations are as "o!!o#s:
P-!RAna!ysis o" Payro!! re&ords. payro!! ta;es
Medi&a! &!aim pro&essing
Emp!oyee Ins-ran&e : Pro%ident "-nd pro&essing
9EA8E T(A8E9 CONCESSION
WBAT A(E TBE 9IMITS OF EQEMPTION IN 9'T'C' is granted to an emp!oyee in &onne&tion #it te
1o-rney on !ea%e by im or is "ami!y' It is e;empt "rom in&ome ta; #itin &ertain !imits as -nder : >
2a3 Were 1o-rney is per"ormed by rai!I rai!#ay>"are in Se&ond AC &!ass by sortest ro-te to destination'
2b3 Were p!a&es o" origin and destination are &onne&ted by rai! b-t te 1o-rney is per"ormed by any oter
mode ten Se&ond AC &!ass "are by sortest ro-te to te p!a&e o" destination'
2&3 Were p!a&e o" origin o" 1o-rney and destination. or part tereo". are not &onne&ted by rai! and 1o-rney
is per"ormed by any oter transportI ten
2i3 I" a re&ognised p-b!i& transport system e;ists bet#een s-& p!a&es te "irst &!ass or de!-;e &!ass "are o"
s-& transport by sortest ro-te. or.
2ii3 I" in oter &ase. Se&ond AC &!ass "are "or te distan&e o" te 1o-rney by te sortest ro-te. as i" te
1o-rney as been per"ormed by rai!'
E;emption #i!!. in no &ase e;&eed a&t-a! e;pendit-re in&-rred in te per"orman&e o" 1o-rney'
9ea%e Tra%e! Con&ession (-!es a%e been amended on te re&ommendation o" te Fi"t Pay Commission
to e;tend te "a&i!ity o" tra%e! by air e&onomy Y> C!ass to &ertain &ategories o" emp!oyees o" te Centra!
Go%ernment #it e""e&t "rom )st O&tober. )GGD'
Conse<-ent!y. #ere te 1o-rney is per"ormed on or a"ter )st O&tober. )GGD by air. an amo-nt not
e;&eeding te air e&onomy "are o" te Nationa! Carrier by te sortest ro-te to te p!a&e o" destination'
A!so. #ere te entit!ement #as pre%io-s!y "or air>&onditioned Se&ond C!ass (ai! "are. it as been -pgraded
to air>&onditioned First C!ass (ai! "are' S!'T' 2First Amendment3 (-!es )GGE. O'O'I' Ga/ette Noti"i&ation
No' S'O' @+2E3 dt'
)=t 7an' )GGEI C04TF'No' )+=/E,/GD>TP9 No' )*,*=)T'
WI99 TBIS CBANGE APP9Y ON9Y TO GO8E(NMENT EMP9OYEES O( 4OES IT APP9Y A9SO
TO EMP9OYEES OF OTBE( SECTO(S U
Te &ange app!ies to a!! emp!oyees'
BOW MANY TIMES CAN EQEMPTION 0E C9AIME4 U
Te assessee &an &!aim e;emption in respe&t o" t#o s-& 1o-rney2s3 in a b!o&$ o" + years' For tis p-rpose.
te "irst b!o&$ o" + years #as &a!endar year )GEA>EG' For a b!o&$ o" + years. te 1o-rney per"ormed in te
"irst year "o!!o#ing tat b!o&$ year is a!so e!igib!e "or e;emption' A!so. s-& 1o-rney #i!! not be ta$en into
a&&o-nt "or determining te ta; e;emption "or te s-&&eeding b!o&$'
TO HJA9IFY FO( EQEMPTION IS IT NECESSA(Y TO PE(FO(M ACTJA9 7OJ(NEY U
Yes. &ertainty' In &ase te 9'T'C' is en&ased #ito-t a&t-a!!y per"orming te 1o-rney te entire amo-nt
re&ei%ed by te emp!oyee #o-!d be ta;ed in is ands'
WBAT IS TBE 4EFINITION OF FAMI9Y FO( TBIS PJ(POSEU
For tis p-rpose K"ami!yK means:>
2i3 Te spo-se and &i!dren o" te indi%id-a!I and
2ii3 Te parents. broters and sisters o" te indi%id-a! or any o" tem. #o!!y or main!y dependent on te
indi%id-a!'
Con%eyan&e a!!o#an&e : It is e;empted "rom Ta; i" it doesnLt e;&eed (s E** per mont %i/ (s GA** p'a'
0asi&2V +*W o" CTC3X =****
B(A2V,*W o" 0asi&3X)****
Con%' A!!o#XE**2ta; e;empt -pto GA**pa3
Medi&a! A!!o#X)=,*2IT E;empt -pto ),*** pa3
Spe&ia! A!!o#X,***
Ci!dren Ed-&ation A!!o#X=**2Ma;im =+**pa 2= &i!dren3I ta; e;empt s-b1e&ted to S&oo!/&o!!edge going
&i!dren3
PFXDE*YDE*X),A*'
Be!per A!!o#X=***
-ni"orm a!!o#X @***
9TAXA)G*2ta; e;empt t#i&e in a b!o&$ o" + yrs 3
T+e Ne9 &tan$a$ in ;Emp#o'ee In"enti8e; &*8e's:
A Case &t*$' o! -3& :' <im -o*an
A$$ing s"a#ing mat+emati"s to ta$itiona# in"enti8e s*8e's gi8es ogani%ations a ne9 "ompetiti8e
e$ge. Emp#o'es "an no9 $is"o8e 9+at in"enti8es matte most to emp#o'ees an$ 9+i"+ ones
"oe#ate 9it+ s+ot0tem 8es*s #ong0tem emp#o'ee moti8ation.
Fo9a$0t+in(ing ogani%ations 9ant to (no9 9+at in"enti8es ae 8a#*e$ most stong#' :' t+ei
emp#o'ees. T+e se8i"e in$*st' no9 +as t+e a:i#it' to ans9e t+is )*estion moe spe"i!i"a##' an$
a""*ate#' t+an e8e :e!oe t+an(s to a ne9 app#i"ation to ta$itiona# Emp#o'ee In"enti8e &*8e's.
F*t+emoe6 t+is a$8an"ement is moe "ost e!!e"ti8e t+an t'pi"a##' statisti"a# appoa"+es #i(e a90
s"oe s*ms6 pe"entages an$ a8eages t+at ma' :e +ig+#' mis#ea$ing :*t ae sti## *se$ :' +ig+ po!i#e
s*8e' !ims.
T+e inno8ation is in t+e $ata ana#'sis 0 not t+e "ontent o pesentation o! t+e s*8e' )*estions pe se.
,it+ t+e statisti"a# go#$ stan$a$ o! Item Response T+eo' =IRT>6 "ompanies "an a"t*a##' o:tain
mat+emati"a# +iea"+ies o! in"enti8es !o t+ei emp#o'ees :ase$ on s"a#ing ana#'ses o! emp#o'ees;
atings o! t+ose in"enti8es. In ot+e 9o$s6 "ompanies gain #inea meas*es o! emp#o'ee in"enti8es
!om 9+at 9as ot+e9ise impe"ise o$ina# $ata. A#so6 IRT 9i## "#ea#' i$enti!' $emogap+i"
$i!!een"es =e.g.6 men 8s 9omen> as 9e## as 8aiations t+at mig+t e?ist :et9een $i8isions o
$epatments o! an ogani%ation. Fina##'6 IRT met+o$s po8i$e$ a po9e!*# met+o$ to +ig+#ig+t t+e
simi#aities an$ $i!!een"es :et9een s+ot0tem an$ #ong0tem emp#o'ee in"enti8es.
Case in point is t+e 9o#$9i$e "ons*#ting !im6 -3& =999.+8s."om>. -3& +as "ommissione$
Ogani%ationa# C#imate &*8e's !o se8ea# 'eas as pat o! its )*a#it' an$ e?"e##en"e pogams. T+e
"ompan';s 2LLN s*8e' meas*e$ N2 $i!!eent moneta' an$ non0moneta' in"enti8es on t+e $egee
to 9+i"+ t+e' 9o*#$ stim*#ate s+ot0tem 8es*s #ong0tem pesona# satis!a"tion in emp#o'ees. O8e
2LL emp#o'ees 0 spanning 1N o!!i"es 9o#$9i$e 0 pati"ipate$ in t+e st*$'. Emp#o'ee In"enti8e
&*8e's seem to 'ie#$ "onsistent#' impessi8e esponse ates $*e to t+e e#e8ant s*:@e"t matte. Fo
instan"e6 t+e -3& st*$' +a$ a 56K esponse ate "ompae$ to t+e R2LK ate t+at is stan$a$ !o
most )*estionnaie esea"+. It is a#so note9ot+' t+at t+e -3& espon$ents 9ee not o!!ee$ an'
e9a$ to en"o*age t+ei pati"ipation.
Unpe"e$ente$ Insig+ts
Ana#'ses e8ea#e$ t+at t+e -3& emp#o'ees; appaisa# o! a## N2 potentia# in"enti8es "o*#$ :e t+o*g+t
o! as !oming a sing#e6 mat+emati"a# +iea"+'. In ot+e 9o$s6 t+e N2 emp#o'ee in"enti8es "o*#$ :e
o$ee$ s*"+ t+at in"enti8es to9a$s t+e top pat o! t+e #ist epesente$ +ig+#' ate$ in"enti8es6
in"enti8es to9a$s t+e mi$$#e o! t+e #ist 9ee ate$ as me$io"e6 an$ t+ose nea t+e :ottom o! t+e #ist
9ee gi8en e#ati8e#' #o9 atings. Moeo8e6 t+is +iea"+' +as t+e $esia:#e popet' t+at en$osing
t+e +ig+e in"enti8es imp#ies t+at emp#o'ees a#ea$' a#so en$ose t+e #o9e ones. T+ee!oe6 in
pa"ti"e6 Managing Die"tos s+o*#$ !ist "onsi$e t+e emp#o'ee in"enti8e at t+e S1 position in t+e
+iea"+'6 ne?t at t+e S2 an$ so !ot+ =NOTE: t+e !*## +iea"+' is not pesente$ in t+is ati"#e>. T+is
same +iea"+' a#so imp#ies t+at t+e in"enti8e at t+e S6L position on t+e +iea"+' =e.g.6 ;O8enig+t
tip 9it+ o!!i"emates;> is genea##' not as e!!e"ti8e as t+e in"enti8e at t+e S2L spot =e.g.6 ;-o#i$a' pat'
9+ee signi!i"ant ot+es C !ami#' ae in8ite$;>. &o e8en t+o*g+ in"enti8e S6L mig+t "ost moe mone'6
it is not pe"ei8e$ :' emp#o'ees as meaning!*# as a #ess "ost#' a#tenati8e.
T+is aises t+e iss*e o! moneta' 8es*s non0moneta' in"enti8es. T+e -3& st*$' e8ea#e$ t+at non0
moneta' in"enti8es 9ee o!ten ate$ as +ig+ as o +ig+e t+an moneta' in"enti8es. T+is is entie#'
"onsistent 9it+ t+e i$ea t+at 0 :esi$es !ai "ompensation 0 emp#o'ees emain 9it+ ogani%ations t+at
"onsistent#' po8i$e !ee#ings o! :e#onging6 appe"iation an$ 9ot+ !o emp#o'ees. T+e !in$ing o! a
sing#e6 mat+emati"a# +iea"+' !o emp#o'ee in"enti8es a##o9s -3& Managing Die"tos to ma(e
in!ome$6 e8i$en"e0:ase$ "+oi"es 9+en it "omes to imp#ementing emp#o'ee in"enti8e pogams.
F*t+emoe6 ana#'ses e8ea#e$ t+at t+e atings o! some in"enti8es 9ee :iase$ to9a$s :eing #ong0
tem moti8atos. T+*s6 Managing Die"tos "an ma(e e8en moe tagete$ "+oi"es !o in"enti8es
:ase$ on a pati"*#a agen$a 0 ;Does t+is o!!i"e 9ant to moti8ate emp#o'ees moe !o t+e s+ot0tem
o moe !o t+e #ong0temA; &+ot0tem moti8atos mig+t app#' to asso"iate$ 9+o ae not e?pe"te$ to
emain 9it+ t+e o!!i"e moe t+an 103 'eas6 9+eeas #ong0tem moti8atos mig+t app#' to s*ppot
sta!! an$ ot+e emp#o'ees 9it+ 9+om 'o* 9ant to esta:#is+ an$ n*t*e a #asting emp#o'ment
e#ations+ip.
Be#o9 ae s+o9n epesentati8e items !om t+e mat+emati"a# +iea"+ies !o s+ot0tem moti8atos
8es*s #ong0tem moti8atos at -3&. /enea##' spea(ing6 moneta'0:ase$ in"enti8es seeme$ moe
+ig+#' 8a#*e$ as s+ot0tem moti8atos6 9+eeas emp#o'ees pe"ei8e$ in"enti8es "on"ening
e"ognition an$ appe"iation as moe #ong0tem moti8atos. Again6 in"enti8es to9a$s t+e top pat o!
t+ese #ists ae in"enti8es !o 9+i"+ emp#o'ees ga8e e#ati8e#' +ig+ atings6 in"enti8es to9a$s t+e
mi$$#e o! t+e #ist 9ee ate$ as me$io"e an$ in"enti8es to9a$s t+e :ottom pat o! t+e #ist 9ee
gi8en e#ati8e#' #o9 atings. T+ee!oe6 t+e *#e0o!0t+*m: !o -3& is to "onsi$e *sing t+ese
in"enti8es in o$e !om top to :ottom 0 ta(ing into a""o*nt t+e o!!i"e;s eso*"es an$ in"ome. T+at
is6 Managing Die"tos s+o*#$ !ist "onsi$e t+e emp#o'ee in"enti8e at t+e S1 position6 ne?t at t+e S2
an$ so !ot+.
Mat+emati"a# -iea"+' o! &+ot0Tem Moti8ation In"enti8es
1. Reim:*sement !o "ontin*ing e$*"ation "o*se9o(.
2. En"o*age team0:*i#$ing 9it+ !ee "ompan' s+its o @a"(ets.
3. ,o( +ig+0po!i#e @o:s C $esia:#e #o"ations.
4. O8enig+t tip 9it+ o!!i"e mates an$ signi!i"ant ot+es.
5. Peio$i" s*pises !o a @o: 9e## $one.
6. Time o!! to pati"ipate in "omm*nit'0se8i"e.
N. /i!t o e8ent to e"ogni%e emp#o'ment anni8esa'.
J. 3e:a# o 9itten e"ognition o! emp#o'ment anni8esa'.
I. Re"ogni%ing 'o* $epatment o $i8ision !o a @o: 9e## $one.
1L. Comment "a$ sent to "#ients a!te "omp#eting an assignment.
Mat+emati"a# -iea"+' o! 1ong0Tem Moti8ation In"enti8es
1. Pee e8a#*ations.
2. P+oto 9it+in o!!i"e to e"ogni%e emp#o'ee o! t+e mont+.
3. P*ate#' so"ia# o*tings at a #o"a# esta*ant C :a.
4. /i!t !o :eing a9a$e$ emp#o'ee o! t+e mont+.
5. 3e:a# !ee$:a"( !om s*pe8iso !o a @o: 9e## $one.
6. Cas*a# $ess "o$e on Fi$a'.
N. O!!i"e message sent to e"ogni%e emp#o'ment anni8esa'.
J. Aea to $isp#a' pesona# p+otos an$ in!omation.
I. Compan'0s*:si$i%e$ "+i#$0"ae.
1L. O*t o! o!!i"e e8ents6 e.g. atten$ing a spoting e8ent.
A Uni)*e Competiti8e A$8antage
T+e impotan"e o! some emp#o'ee in"enti8es e#ati8e to ot+e in"enti8es in t+ese Ta:#es mig+t seem
"o*nteint*iti8e o ;9ong.; -o9e8e6 (eep in min$ t+ese +iea"+ies ae $ata0$i8en 0 t+e' e!#e"t
t+e atings =an$ +en"e 8a#*e s'stems an$ min$sets> o! -3& emp#o'ees at+e t+an -3&
management. T+*s6 9+at management $eems moti8ating ma' not a#9a's :e 9+at sta!! mem:es !in$
moti8ating. An$6 sin"e t+e in"enti8e +iea"+ies $i!!e some9+at a"oss $epatments6 it s+o*#$ not :e
s*pising to !in$ 8aiations :et9een "ompanies as 9e##. T+is is 9+' Emp#o'ee In"enti8e &*8e's
o!!e 8a#*a:#e insig+ts an$ 9+' o:@e"ti8e ana#'sis o! )*antitati8e $ata is pe!ee$ o8e opinions an$
s*ppositions !om management an$ "ons*#tants.
-3&; emp#o'ee in"enti8e s*8e' "ost e#ati8e#' #itt#e to "on$*"t in tems o! time an$ mone'6 :*t it
po$*"e$ !in$ings t+at se8e$ as a e#ia:#e an$ so:eing in$i"ato o! t+e 8a#*e s'stem o! its
9o#$9i$e emp#o'ees. T+is gi8es -3& a signi!i"ant "ompetiti8e a$8antage in atta"ting an$ (eeping
its top ta#ent in an in$*st' #a$en 9it+ +ig+ emp#o'ee t*no8e. O! "o*se6 t+e spe"i!i" !in$ings a:o*t
t+e e!!e"ti8eness o! "etain in"enti8es at -3& st*$' ae not meant to genea#i%e to ot+e "ompanies.
T+e e?amp#e pesente$ +ee ae i##*stations o! t+e t'pe o! o*t"omes t+at ogani%ations "an e?pe"t
!om s*"+ s*8e's. T+e IRT met+o$o#ogies *se$ in t+e -3& Emp#o'ee In"enti8e &*8e' set a ne9
stan$a$ in t+e in$*st' an$ "an :e e!!i"ient#' $*p#i"ate$ !o ot+e :*sinesses an$ !o ot+e
in$*sties. To t+at en$6 some +e#p!*# g*i$e#ines ae s*ggeste$:
a> Cae!*##' i$enti!' in"enti8es to :e ate$ :' emp#o'ees 8ia a pane# e8ie96 i.e.6 in8ite -*man
Reso*"es po!essiona#s6 senio management an$ $epatment +ea$s to assist in "eating t+e #ist o!
in"enti8es to :e e8a#*ate$.
:> Con$*"t t+e s*8e' on#ine to ma?imi%e e!!i"ien"' an$ a""*a"' o! t+e $ata "o##e"tion.
"> Use a t+i$ pat' !o t+e st*$' to emp+asi%e t+e impatia#it' an$ anon'mit' o! t+e s*8e' to
emp#o'ees.
$> I! nee$e$6 "eate $i!!eent se"tions o! t+e s*8e' to $i!!eentiate =1> in"enti8es 'o* "ompan' no9
*ses 8es*s =2> in"enti8es t+e "ompan' is "ontemp#ating !o t+e !*t*e.
e> Ma(e it "#ea to emp#o'ees at t+e stat t+at t+e in"enti8e s*8e' mee#' aims to "o##e"t in!omation
!o "onsi$eationG it is not ne"essai#' a pomise to imp#ement ne9 in"enti8es in t+e s+ot0 o #ong0
tems.
!> ,+ee8e possi:#e6 segment $i8isions o $epatments in ana#'ses as oppose$ to aggegating es*#ts
a"oss t+e entie ogani%ation. T+ee mig+t :e an o8ea"+ing "ompan' "*#t*e6 :*t $i8isions o
$epatments "an +a8e sma## :*t signi!i"ant $e8iations !om t+e *m:e##a "*#t*e t+at "an impa"t
in"enti8e atings.
SA9A(Y AN4 WAGE MANAGEMENT
In tis arti&!e #e are dis&-ssing te #ays and means o" "i;ing te &ompensations !e%e!s
ta$ing into &onsideration %ario-s "a&tors !i$e e;perien&e. identi&a! ind-stry $no#!edge.
<-a!i"i&ations and pro%en s$i!!s' Tis in sort #e a%e &ompreended as FSa!ary and
Wage Management?'
A")*ie P*a#i!ie$ Pesonne#:
Compensation needs to be ig eno-g to attra&t app!i&ants' Pay !e%e!s m-st respond to
s-pp!y and demand o" #or$ers in te !abor mar$et sin&e emp!oyers &omp!ete "or #or$ers'
Premi-m #ages are sometimes needed to attra&t app!i&ants #o are a!ready #or$ing "or
oters'
Retain Pesent Emp#o'ees:
Emp!oyees may <-it #en &ompensation !e%e!s are not &ompetiti%e res-!ting in iger
t-rno%er o" manpo#er'
Ens-re E<-ity:
Compensation management stri%es "or interna! and e;terna! e<-ity' Interna! e<-ity
re<-ires tat pay be re!ated to te re!ati%e #ort o" 1obs. so tat simi!ar 1obs get simi!ar
pay' E;terna! e<-ity means paying #or$ers #at &omparab!e #or$ers at oter "irms in te
!abor mar$et pay'
Re9a$ Desie$ Be+a8io:
Pay so-!d rein"or&e desired bea%iors and a&t as an in&enti%e "or tose bea%iors to
o&&-r in te "-t-re' E""e&ti%e &ompensation p!ans re#ard per"orman&e. !oya!ty
e;perien&e. responsibi!ities. and oter bea%iors'
Conto# Costs:
A rationa! &ompensation system e!ps te organi/ation obtain and retain #or$ers at a
reasonab!e &ost' Wito-t e""e&ti%e &ompensation management. #or$ers &o-!d be o%er or
-nder paid'
Comp#' 9it+ 1ega# Reg*#ations:
A so-nd #age and sa!ary system &onsiders te !ega! &a!!engers imposed by go%ernment
and ens-res te emp!oyer?s &omp!ian&e'
Fa"i#itate Un$estan$ing:
System so-!d be easi!y -nderstood by -man reso-r&e spe&ia!ists. operating managers.
and emp!oyees'
Wage and sa!ary programs so-!d be designed to be managed e""i&ient!y. ma$ing optima!
-se o" te -man reso-r&es in"ormation system. a!to-g tis ob1e&ti%e so-!d be a
se&ondary &onsideration &ompared #it oter ob1e&ti%es
&'stems to A"+ie8e t+e O:@e"ti8es
Te abo%e mentioned ob1e&ti%es are a&ie%ed by te -se o" te "o!!o#ing systems'
)'7ob E%a!-ation:
A!! 1obs #i!! be ana!y/ed and graded to estab!is te pattern o" interna! re!ationsips' It is
te pro&ess o" determining re!ati%e #ort o" 1obs' It in&!-des se!e&ting s-itab!e 1ob
e%a!-ation te&ni<-es. &!assi"ying 1obs into %ario-s &ategories and determining re!ati%e
%a!-e o" 1obs in %ario-s &ategories'
='Wage and Sa!ary (anges:
O%era!! sa!ary range "or a!! te 1obs in an organi/ation is arranged' Ea& 1ob grade #i!! be
assigned a sa!ary range' Tese indi%id-a! sa!ary ranges #i!! be "itted into an o%era!!
range'
@'Wage and Sa!ary Ad1-stments:
O%era!! sa!ary grades o" te organi/ation may be ad1-sted based on te data and
in"ormation &o!!e&ted abo-t te sa!ary !e%e!s o" simi!ar organi/ations' Indi%id-a! sa!ary
!e%e! may a!so be ad1-sted based on te per"orman&e o" te indi%id-a! emp!oyees'
Pin"ip#es o! ,age an$ &a#a' A$ministation
Tere are se%era! prin&ip!es o" #age and sa!ary p!ans. po!i&ies and pra&ti&es' Te
important among tem are:
2a3Wage and sa!ary p!ans and po!i&ies so-!d be s-""i&ient!y "!e;ib!e'
2b37ob e%a!-ation m-st be done s&ienti"i&a!!y'
2&3Wage and sa!ary administration p!ans m-st a!#ays be &onsistent #it o%era!!
organi/ationa! p!ans and programs'
2d3Wage and sa!ary administration p!ans and programs so-!d be in &on"ormity #it te
so&ia! and e&onomi& ob1e&ti%es o" te &o-ntry !i$e attainment o" e<-a!ity in in&ome
distrib-tion and &ontro!!ing in"!ationary trends'
2e3Wage and sa!ary administration p!ans and programs so-!d be responsi%e to te
&anging !o&a! and nationa! &onditions'
2"3Tese p!ans so-!d simp!i"y and e;pedite oter administrati%e pro&esses'
T+e E#ements o! ,age an$ &a#a' &'stem
Wage and sa!ary system so-!d a%e re!ationsip #it te per"orman&e. satis"a&tion and
attainment o" goa!s o" an indi%id-a!' Te "o!!o#ing e!ements o" #age and sa!ary system
are identi"ied by e;perts in B(.
a3Identi"ying te a%ai!ab!e sa!ary opport-nities. teir &osts. estimating te #ort o" its
members o" tese sa!ary opport-nities and &omm-ni&ating tem to emp!oyees'
b3(e!ating sa!ary to needs and goa!s'
&34e%e!oping <-a!ity. <-antity and time standards re!ating to #or$ and goa!s'
d34etermining te e""ort ne&essary to a&ie%e standards'
e3Meas-ring te a&t-a! per"orman&e'
"3Comparing te per"orman&e #it te sa!ary re&ei%ed'
g3Meas-ring te 1ob satis"a&tion gained by te emp!oyees'
3E%a!-ating te -nsatis"ied #ants and -nrea&ed goa!s o" te emp!oyees'
i3Finding o-t te dissatis"a&tion arising "rom -n"-!"i!!ed needs and -nattained goa!s'
13Ad1-sting te sa!ary !e%e!s a&&ording!y #it a %ie# to enab!ing te emp!oyees to rea&
goa!s not attained and "-!"i!!s te -n"-!"i!!ed needs'
9EGIS9ATIONS (EGA(4ING COMPENSATION
)G))> WO(NE(S COMPENSATION:
)' to pro%ide s-re. prompt and reasonab!e in&ome and medi&a! bene"its to #or$>a&&ident %i&tims. or in&ome
bene"its to teir dependents. regard!ess o" "a-!tI
=' to pro%ide a sing!e remedy and red-&e &o-rt de!ays. &osts and #or$!oads arising o-t o" persona! in1-ry
!itigationI
@' to re!ie%e p-b!i& and pri%ate &arities o" "inan&ia! drains in&ident to -n&ompensated ind-stria! a&&identsI
+' to e!iminate payment o" "ees to !a#yers and #itnesses as #e!! as time&ons-ming tria!s and
appea!sI
,' to en&o-rage ma;im-m emp!oyer interest in sa"ety and reabi!itation tro-g appropriate
e;perien&e>rating me&anismsI
A' to promote "ran$ st-dy o" &a-ses o" a&&idents
SOCIA9 SECJ(ITY ACT )G@,
Tis a&t #as estab!ised to pro%ide Ameri&an Wor$ers #it prote&tion "rom tota! e&onomi&
destit-tion in te e%ent o" termination o" emp!oyment beyond tis &ontro!' Emp!oyers and
emp!oyees &ontrib-te e<-a!!y to te bene"its pro%ided by tis a&t. as amended. se!">emp!oyed
persons m-st pay o-t o" teir o#n po&$ets ann estab!ised amo-nt to gain so&ia! se&-rity
prote&tion' A!to-g so&ia! se&-rity is basi&a!!y a retirement program. it a!so estab!ised te
Federa! o!d>age. s-r%i%ors. disabi!ity and ea!t ins-ran&e system' 0y )GGD so&ia! se&-rity
&o%ered more tan G* mi!!ion #or$ers and teir dependents' In addition. te origina! !a#
estab!ised te "edera! and state emp!oyment &ompensation system'
WE9FA(E AN4 PENSION P9AN 4ISC9OSJ(E ACT )G,G
We!"are p!ans are tose pro%iding medi&a!. s-rgery or ospita! bene"its or &are. and bene"its in te
e%ent o" si&$ness. a&&ident. disabi!ity. deat or -nemp!oyment'
TBE BEA9TB MAINTENANCE O(GANIZATION ACT )GD@
BMOs are ea!t&are organi/ations tat pro%ide medi&a! &are at a "i;ed mont!y "ee'
)GDA T(A4E ACT:
Te trade a&t #as passed to assist emp!oyers and emp!oyees #o a%e been -rt by "oreign
&ompetition'
)GD+ EMP9OYEE (ETI(EMENT INCOME SECJ(ITY ACT:
To prote&t pension p!ans "rom "ai!-res and obso!ete ass-mptions. !eading po!iti&ian "ig-res and
go%ernment o""i&ia!s introd-&ed se%era! proposa!s "or re"orming pri%ate pension p!ans'
)GE* MJ9TIEMP9OYE( FJNCTION P9AN AMEN4MENT ACT:
Genera!!y. m-!tiemp!oyer pension p!ans are estab!ised and maintained tro-g &o!!e&ti%e
bargaining bet#een emp!oyee representati%es and more tan on emp!oyer'
)GE+ (ETI(EMENT EHJITY ACT:
Tis a&t #as designed to e!iminate dis&rimination in pensions pro%ided to #omen'
)GEE WO(NE( A47JSTMENT AN4 (ETAINING NOTIFICATION ACT:
Tis a&t re<-ires emp!oyees #it )** or more emp!oyees to pro%ide a A* day noti&e o" p!ant
&!osings and !ayo""s' Tis is te "irst pie&e o" "edera! !egis!ation to assist emp!oyees being !aid o""
or terminated'
)GAA Bea!t Ins-ran&e Portabi!ity And A&&o-ntabi!ity A&t:
)' Wor$ers #o &ange 1obs #i!! be e!igib!e "or ins-ran&e &o%erage in te ne# 1ob'
=' Wor$ers &an not be denied &o%erage by teir emp!oyer?s ins-rer "or more tan ) year
be&a-se o" a pree;isting ea!t &ondition'
@' Indi%id-a!s #o a%e been &o%ered in a gro-p p!an "or at !east )E monts #i!! a%e
a&&ess to indi%id-a! ins-ran&e &o%erage'
CI8I9 (IGBTS ACT OF )GA+
proibits pri%ate emp!oyers. state and !o&a! go%ernments. and ed-&ation instit-tions. and
&ompanies #it ), or more emp!oyees "rom dis&riminating against teir emp!oyees and 1ob
app!i&ants on te basis o" ra&e. re!igion. &o!or. se; and nationa! origin' Te Federa! go%ernment.
pri%ate and p-b!i& emp!oyment agen&ies. and !abor organi/ations. a!so m-st abide by te !a#'
Most dis&rimination !a#s-its a!!ege a %io!ation o" tis !a#' Tis !a# is en"or&ed by a "edera!
agen&y. te E<-a! Emp!oyment Opport-nity Commission 2EEOC3'
TBE CI8I9 (IGBTS ACT OF )GG)
e;pands te abi!ity o" %i&tims o" dis&rimination to &o!!e&t a#ards "or &ompensatory and p-niti%e
damages. in&!-ding emotiona! arm and "-t-re !osses' P-niti%e damages may be a#arded to
%i&tims o" intentiona! dis&rimination' P!ainti""s are a!!o#ed 1-ry tria!s'
TBE AME(ICANS WITB 4ISA0I9ITIES ACT 2A4A3 be&ame e""e&ti%e in )GG=' Te !a#
Kproibits emp!oyment dis&rimination against <-a!i"ied indi%id-a!s #it disabi!ities' A <-a!i"ied
indi%id-a! #it a disabi!ity is de"ined as an indi%id-a! #it a disabi!ity #o meets te s$i!!.
ed-&ation. e;perien&e and oter 1ob>re!ated re<-irements o" a position e!d or desired. and #o.
#it or #ito-t a reasonab!e a&&ommodation &an per"orm te essentia! "-n&tions o" te 1ob'K
TBE (EBA0I9ITATION ACT proibits &ompanies "rom dis&riminating against indi%id-a!s #it
a disabi!ity and re<-ires te estab!isment o" an a""irmati%e a&tion p!an "or indi%id-a!s #it a
disabi!ity' A""irmati%e A&tion p!an iring goa!s are not re<-ired'
TBE 8IETNAM E(A 8ETE(ANSL (EA47JSTMENT ASSISTANCE ACT o" )GD+ pro%ides
%eteran re>emp!oyment rigts and re<-ires tat an A""irmati%e A&tion p!an be #ritten "or %eterans'
A""irmati%e A&tion p!an iring goa!s are not re<-ired'
EQECJTI8E O(4E( ))=+A #as signed by President 7onson in )GA+' It &reated A""irmati%e
A&tion' E;e&-ti%e Order ))=+A app!ies to K"edera! &ontra&tors and s-b&ontra&tors a%ing a
&ontra&t or &ontra&ts #it an e;e&-ti%e bran& agen&y or department e;&eeding O)*.*** d-ring
any )=>mont period' Federa! &ontra&tors #it ,* or more emp!oyees and at !east one &o%ered
&ontra&t "or O,*.*** or more are a!so re<-ired to prepare #ritten a""irmati%e a&tion p!ans "or teir
estab!isments' A""irmati%e a&tion p!ans m-st be -pdated at !east ann-a!!y'K Companies are
re<-ired to estab!is "ema!e and minority iring goa!s and to demonstrate tat a Kgood "aitK
e""ort is being made to attra&t and retain "ema!es and minorities. espe&ia!!y into positions tat tey
a%e not traditiona!!y e!d' Cons-!ting "irms are a%ai!ab!e to #rite A""irmati%e A&tion P!ans' Te
&ost is genera!!y a "e# to-sand do!!ars per year. depending on te si/e o" te organi/ation'
So"t#are pa&$ages are a!so a%ai!ab!e to e!p #rite an A""irmati%e A&tion P!an'
TBE EHJA9 PAY ACT o" )GA@ Kproibits se; dis&rimination in te payment o" #ages to men
and #omen per"orming s-bstantia!!y e<-a! #or$ -nder simi!ar #or$ing &onditions in te same
estab!isment'K
TBE AGE 4ISC(IMINATION IN EMP9OYMENT ACT 2A4EA3 Kproibits pri%ate emp!oyers
a%ing =* or more emp!oyees "rom dis&riminating against teir emp!oyees and 1ob app!i&ants
#o are at !east +* years o!d on te basis o" age'K
BA(ASSMENT 9AW is based on &o-rt interpretation o" te Ci%i! (igts A&t o" )GA+' Te "irst
reg-!ations #ere #ritten by te EEOC in )GE*' Barassment o&&-rs i" an indi%id-a! per&ei%es to
a%e been arassed. e%en i" te a!!eged arasser did not intend to arass' Barassment in&!-des
K%erba! or pysi&a! &ond-&t #i& res-!ts in a osti!e or intimidating #or$ en%ironment tat
inter"eres #it #or$ per"orman&e or oter#ise ad%erse!y a""e&ts emp!oyment opport-nities'K
E;amp!es o" arassment may in&!-de 1o$es. name &a!!ing. derogatory &omments. and o""ensi%e
pi&t-res' Te !a# states tat i" te &ompany $ne#. &o-!d a%e $no#n. or so-!d a%e $no#n o"
te arassment. and i" te arassment -nreasonab!y inter"ered #it te indi%id-a!Ls #or$
per"orman&e or &reated an intimidating. osti!e or o""ensi%e #or$ en%ironment. ten te &ompany
is !iab!e'
STATE EHJA9 EMP9OYMENT 9AWS typi&a!!y pro%ide te same anti>dis&rimination
prote&tions as "edera! !a#s. p!-s some additiona!' For e;amp!e in te state o" Ca!i"ornia. it is
i!!ega! to dis&riminate in emp!oyment on te basis o" marita! stat-s and se;-a! orientation'
9AWS AFFECTING 0ENEFITS AN4 PAY
TBE EMP9OYEE (ETI(EMENT AN4 INCOME SECJ(ITY ACT o" )GD+ 2E(ISA3 go%erns
<-a!i"ied bene"it p!ans in&!-ding ea!t and retirement p!ans' E(ISA re<-ires tat bene"it p!ans be
made a%ai!ab!e to a!! e!igib!e emp!oyees e<-a!!y and on a non>dis&riminatory basis' E(ISA a!so
re<-ires tat te "inan&ia! per"orman&e o" te p!an be reported to emp!oyees on an ann-a! basis
2S-mmary Ann-a! (eport3. and tat spe&i"i& in"ormation on te p!an be distrib-ted to emp!oyees
2S-mmary P!an 4es&ription3' In ret-rn "or &omp!ying #it E(ISA. &ompanies &an ded-&t te &ost
o" <-a!i"ied p!ans "rom teir ta;ab!e in&ome' A rep-tab!e ins-ran&e bro$er or p!an administrator
&an assist estab!ising a p!an. ma$ing ne&essary "i!ings #it te Interna! (e%en-e Ser%i&e 2I(S3
and &omp!eting te S-mmary P!an 4es&ription and S-mmary Ann-a! (eports'
TBE CONSO9I4ATE4 OMNI0JS 0J4GET (ECONCI9IATION ACT o" )GE, 2CO0(A3
re<-ires emp!oyers #it more tan =* emp!oyees and teir ins-ran&e &ompanies to pro%ide
&o%ered emp!oyees and "ami!y members. te opport-nity "or a temporary e;tension o" ea!t
ins-ran&e bene"its #en te &o%erage is !ost d-e to &ertain K<-a!i"ying e%ents'K Te emp!oyee or
"ami!y member m-st pay te &ost o" &ontin-ing te ins-ran&e &o%erage. #i& &annot e;&eed =W
o" te emp!oyer or ins-ran&e &ompany &ost' KH-a!i"ying e%entsK in&!-de: emp!oyeeLs !oss o"
emp!oyment 2"or reasons oter tan gross mis&ond-&t3. red-&tion in o-rs o" emp!oyment.
di%or&e. or a &i!d &easing to be a KdependentK -nder te ea!t p!an' Te &ompany m-st pro%ide
te emp!oyee #it a noti&e o" teir ea!t ins-ran&e &ontin-ation rigts' A rep-tab!e ins-ran&e
&ompany or bro$er &an pro%ide e!p in &omp!ying #it te CO0(A re<-irements'
TBE FAI( 9A0O( STAN4A(4S ACT 2F9SA3 re<-ires tat &o%ered emp!oyees be paid ,*W
more tan teir base o-r!y rate "or te time #or$ed in e;&ess o" +* o-rs in a #ee$' Certain
emp!oyees are Ke;emptK "rom te F9SA' E;empt emp!oyees in&!-de managers. pro"essiona!s
2#ose position re<-ires ad%an&ed ed-&ation. dis&retion and independent 1-dgment3.
administrati%e emp!oyees 2#o independent!y estab!is &ompany po!i&y or pra&ti&es and do not
dire&t!y #or$ on te &ompany prod-&ts3. sa!es peop!e. and tea&ers' E;empt emp!oyees m-st be
paid on a sa!ary basis' Tat means tey m-st be paid te same rate regard!ess o" te n-mber o"
o-rs tey #or$ 2#it some e;&eptions3' 4etermining #i& 1obs are e;empt "rom te F9SA is
di""i&-!t. be&a-se te de"initions are s-b1e&t to interpretation' To a%oid non>&omp!ian&e #it te
F9SA. error on te side o" de"ining positions as Knon>e;emptK "rom te F9SA' Tat &an be
di""i&-!t be&a-se most emp!oyees pre"er to be in an Ke;emptK position. peraps be&a-se o"
per&ei%ed stat-s or be&a-se te re<-irement to tra&$ o-rs is remo%ed' Some states a%e teir
o#n o%ertime pay re<-irements 2e'g' Ca!i"ornia3 #i& &an e;&eed te re<-irements o" te F9SA'
STATE (EGJ9ATIONS dea! #it a!! aspe&ts o" pay in&!-ding #en pay&e&$s m-st be iss-ed
and o%ertime pay re<-irements' Te Camber o" Commer&e is a good so-r&e o" in"ormation on
state reg-!ations'
TBE IMMIG(ATION (EFO(M AN4 CONT(O9 ACT 2I(CA3 is intended to e!iminate te
emp!oyment o" Ki!!ega! a!iens'K A!! ne# emp!oyees are re<-ired to &omp!ete "orm IG 2a%ai!ab!e
"rom te !o&a! Immigration and Nat-ra!i/ation O""i&e 2INS33' Te emp!oyee m-st pro%ide
do&-mented proo" o" teir e!igibi!ity to #or$ in te Jnited States' Te emp!oyer as te
ob!igation to re%ie# te do&-ments s-pp!ied by te ne# emp!oyee and attest to teir e!igibi!ity'
Te "orms m-st be $ept on "i!e' ItLs ad%isab!e to $eep te "orms in a separate "i!e to "a&i!itate
go%ernment a-dits' Te O""i&e o" Federa! Contra&t Comp!ian&e a-dits IG "orms. typi&a!!y #en
&ond-&ting an A""irmati%e A&tion Comp!ian&e (e%ie#'
TBE FAMI9Y AN4 ME4ICA9 9EA8E ACT o" )GG@ 2FM9A3 pro%ides e!igib!e emp!oyees #it
-p to )= #ee$s o" !ea%e #itin a )= mont period "or )3 te birt. adoption. or "oster &are
p!a&ement o" te emp!oyeeLs &i!dI =3 te emp!oyeeLs serio-s ea!t &onditionI or. @3 te serio-s
ea!t &ondition o" te emp!oyeeLs spo-se. son. da-gter. or parent' Typi&a!!y a do&torLs
&erti"i&ation is re<-ired' Bea!t bene"its m-st be pro%ided to te emp!oyee ta$ing !ea%e at te
same &ost as reg-!ar emp!oyees' Emp!oyees #o e!e&t a "ami!y !ea%e are entit!ed to ret-rn to te
same or e<-i%a!ent 1ob'
POSTING (EHJI(EMENTS are estab!ised by State and Federa! !a#' Emp!oyers are ob!igated
to post on &ompany premises. in a %isib!e !o&ation. in"ormation on emp!oyeesL rigts and
ob!igations' Some pri%ate &ompanies and te Camber o" Commer&e a%e done a ni&e 1ob o"
&onso!idating te re<-ired in"ormation "or posting onto a "e# posters' ItLs a good idea to read
tese posters to be a#are o" yo-r ob!igations as te emp!oyer' Te 4epartment o" 9aborLs #eb site
!ists Federa! Posting (e<-irements and most states p-b!is posting re<-irements 2See State o"
Ca!i"ornia posting re<-irements3'
(EPO(TING O09IGATIONS' Companies #it at !east )** emp!oyees or &ompanies #it ,* or
more emp!oyees and go%ernment &ontra&ts o" O,*.*** or more. m-st s-bmit an EEO>) report
ann-a!!y to te 7oint (eporting Committee 2EEOC and OFCCP3' Te EEO>) report !ists te
n-mber o" emp!oyees by ra&e and se; "or ea& EEO 7ob Category' Companies #it Federa!
&ontra&ts or s-b&ontra&ts o" O)**.*** or more m-st s-bmit a 8ets>)**A report by September @*
o" ea& year' For "edera! &ontra&ts initiating be"ore =**@. te %eteran reporting r-!es are di""erent'
Te "orms &an be s-bmitted e!e&troni&a!!y %ia te Internet' Te 8ets>)** report !ists te n-mber
emp!oyees and re&ent!y ired emp!oyees by %eteran stat-s' Ann-a! <-a!i"ied bene"it p!an
reporting is o-t!ined abo%e'
TBE OCCJPATIONA9 SAFETY AN4 BEA9TB ACT 2OSBA3 re<-ires te 4epartment o"
9abor to &reate sa"ety and ea!t standards in te #or$p!a&e' A!! pri%ate emp!oyers #o engage
in interstate &ommer&e m-st &omp!y' OSBA inspe&tors iss-e &itations "or %io!ations' Te
4epartment o" 9abor &an see$ an in1-n&tion to stop -nsa"e pra&ti&es' Te Ba/ard
Comm-ni&ations A&t re<-ires emp!oyers to estab!is a training and in"ormation program "or
personne! #o #or$ #it a/ardo-s &emi&a!s. to !abe! &ontainers and areas #ere Krea&ti%e
materia!sK are stored or -sed. and to maintain "i!es o" OSBA Materia!s Sa"ety 4ata Seets
2MS4S3 in #or$ areas #ere rea&ti%e materia!s are -sed' Te To;i& S-bstan&es Contro! A&t #as
passed in )GDA re<-iring te En%ironmenta! Prote&tion Agen&y 2EPA3 to reg-!ate &emi&a!s tat
present an K-nreasonab!eK ris$ o" arm to -man ea!t or te en%ironment' Te EPA as
imposed %ario-s reporting. re&ord $eeping. and training re<-irements' Te state o" Ca!i"ornia
re<-ires organi/ations to &reate an In1-ry and I!!ness Pre%ention Program #i& in&!-des a
training and &omm-ni&ation system. a pro&ess "or identi"i&ation and e%a!-ation o" #or$p!a&e
a/ards. periodi& inspe&tions. pro&ed-res "or in%estigating o&&-pationa! in1-ries and i!!nesses.
pro&ed-res "or &orre&ting -nsa"e or -nea!ty &onditions. and re&ord $eeping'
NATIONA9 9A0O( (E9ATIONS ACT app!ies primari!y to -nioni/ed #or$p!a&es and dea!s
#it -nion organi/ing. &o!!e&ti%e bargaining. stri$es and !o&$o-ts' Bo#e%er. te !a# a!so app!ies
to non>-nion settings. pro%iding prote&tion to non>-nion #or$ers Kto engage in prote&ted.
&on&erted a&ti%ities "or teir m-t-a! aid and prote&tion'K Te a&tion o" emp!oyees approa&ing
teir management as a gro-p 2or one emp!oyee spea$ing on bea!" o" a gro-p o" emp!oyees3. to
dis&-ss pay. o-rs o" #or$. or #or$ing &onditions. is prote&ted' No ad%erse a&tion 2e'g' dis&arge.
demotion. or p-niti%e meas-res3 &an be ta$en against te emp!oyee2s3 "or raising s-& an iss-e'
WO(NE(S COMPENSATION pro%ides bene"its to emp!oyees in1-red on te 1ob. in&!-ding
medi&a! bene"its. disabi!ity bene"its "or !ost #ages 2typi&a!!y t#o tirds o" #ages -p to a spe&i"i&
!imit > OD=E per #ee$ in Ca!i"ornia3. deat bene"its "or dependents. and in some &ir&-mstan&es.
1ob retraining ne&essitated by te #or$ re!ated in1-ry' Wor$ers &ompensation premi-ms are paid
by te emp!oyer' Te amo-nt o" te premi-m depends on te mi; o" positions e!d by te
emp!oyees 2e'g' administrati%e. man-"a&t-ring. "ie!d ser%i&e. et&'3' 0ot te emp!oyee and
emp!oyer m-st prompt!y report in1-ries by &omp!eting and s-bmitting a Wor$ers Compensation
"orm' In"ormation on reporting #or$ re!ated in1-ries or i!!nesses m-st be posted on &ompany
b-!!etin boards'
AFFI(MATI8E ACTION:
7ob &!assi"i&ations identi"ied "or a""irmati%e a&tion are:
2)3 o""i&ia!s and administrators
2=3 pro"essiona!s
2@3 te&ni&ians
2+3 prote&ti%e ser%i&e #or$ers
2,3 para>pro"essiona!s
2A3 o""i&e and &!eri&a! #or$ers
2D3 s$i!!ed &ra"t #or$ers. and
2E3 ser%i&e and maintenan&e #or$ers'
)G+= Wage stabi!i/ation A&t:
Te go%ernment estab!ised 5going rates6 "or $ey o&&-pations and ten permitted pay in&reases
-p to te minim-m o" te 5going rate6 bra&$et' 0ene"its &o-!d be instit-ted on!y i" emp!oyers
&o-!d so# tat tey #ere &-stomary in area'
)G,* de"ense Prod-&tion A&t:
Wage in&reases #ere restri&ted d-ring te Norean &on"!i&t'
TBE PAYMENT OF WAGES ACT. )G@A
Tis is one o" te ear!ier 9abo-r 9a#s passed d-ring 0ritis (-!e and &ame into "or&e on =Et
Mar& )G@D'
Ob1e&ti%e: To reg-!ate payment o" #ages to persons emp!oyed dire&t!y or indire&t!y in Ind-stry'
Spe&i"i&a!!y. it app!ies to emp!oyees dra#ing a #age o" -pto (s' )A**/> on an a%erage per mont
and emp!oyed in 2)3 Fa&tories. 2=3 Transport Ser%i&e o" a!! $inds. 2@3 Mines. 2+3 P!antations and
2,3 Constr-&tion ind-stry' Te &entra! and state Go%ernments are empo#ered to bring any oter
ind-stry or estab!isment -nder &o%erage a"ter gi%ing @ monts noti&e o" teir intention to do so'
A-tority: Te State Go%ernment. e;&ept in te &ase o" &entra! Go%ernment' -nderta$ings spread
in more tan one State' Bo#e%er. (-!e ma$ing po#ers are %ested in te State Go%ernment' Ea&
State Go%ernment #i!! a%e its
o#n (-!es'
Wages: L #ages L &o%er a!! payments made to an emp!oyee in&!-ding a!! a!!o#an&es or tose in
$ind &apab!e o" being e;pressed in terms o" money b-t does not in&!-de. 2a3 0on-s. 2b3 Bo-se
(ent. 2&3 &ontrib-tion to Pro%ident F-nd or Pension F-nd o" te emp!oyee. 2d3 Tra%e!!ing
a!!o#an&e. 2e3 Grat-ity and 2"3 Spe&ia! e;penses' Wages &an be paid by &e<-es or &redited to te
ban$ a&&o-nts o" te emp!oyees #it te &onsent o" te emp!oyees' Emp!oyer is e"d responsib!e
"or te payment o" #ages to persons emp!oyed'
Wage Period: Any period "i;ed by te emp!oyer not e;&eeding one mont'
Time o" Payment o" Wages: Wages are to be paid to te emp!oyees a"ter te e;piry o" te #age
period'
2a3 be"ore te e;piry o" se%ent day in estab!isments emp!oying !ess tan )*** persons and
2b3 be"ore te e;piry o" tent day in estab!isments emp!oying )*** : more persons'
In te &ase o" emp!oyees #ose ser%i&es are terminated by te emp!oyer. #ages m-st be paid
be"ore te e;piry o" te se&ond #or$ing day "rom te day on #i& te emp!oyment is
terminated'
Permissib!e 4ed-&tions "rom te #ages :
2a3 "ines. 2b3 ded-&tion "or absen&e o" d-ty. 2&3 reimb-rsement o" !oss &a-sed by te emp!oyee "or
damage et&'. 2d3 o-se a&&ommodation. 2e3 &ost o" amenities pro%ided. 2"3 ad%an&es and interest
tereon. 2g3 !oans granted "rom any #e!"are "-nd. o-se b-i!ding or oter p-rposes appro%ed by
te State Go%ernment. 23 in&ome ta;. 2i3 ded-&tions as per &o-rt orders or de&rees. 213 payment to
&o>operati%e so&ieties. 2$3 9i"e Ins-ran&e Corpn' po!i&y premi-m. 2I3 p-r&ase o" Go%ernment
se&-rities. 2m3 "ide!ity g-arantee bonds ins-ran&e premi-m' 2n3 Contrib-tion to Prime MinisterLs
Nationa! (e!ie" F-nd or oter F-nds spe&i"ied. noti"ied by Centra! Go%ernment' 2*3 &ontrib-tion
to -nion "-nd'
Tota! amo-nt O" ded-&tions not to e;&eed Se%enty Fi%e per &ent o" #ages #ere ded-&tions are
made "or payments to &o>operati%e so&ieties and not to e;&eed Fi"ty per &ent in oter &ases'
4ed-&tion "or !oss: Te ded-&tion sa!! not e;&eed a&t-a! amo-nt o" !oss or damage' Bo#e%er. it
&an be made on!y a"ter te emp!oyed person as been gi%en an opport-nity o" so#ing &a-se
against ded-&tion'
4ed-&tion "or ser%i&e rendered: In te &ase o" o-se a&&ommodation or oter amenities. te
a&&ommodation or amenities m-st a%e been a&&epted by te emp!oyee'
Co>operati%e So&ieties and Ins-ran&e S&emes: 4ed-&tions #i!! be s-b1e&t to te (-!es made by
te State Go%ernment'
Pro&ed-re: C!aims arising o-t o" #rong"-! ded-&tions or de!ay in payments are to be made to te
appropriate 9abo-r Co-rt or Trib-na! a-torised by te State Go%ernment' Norma!!y. tere is a
spe&ia! &o-rt designated as te A-tority Jnder Payment o" Wages A&tL' Te &!aim m-st be made
in appropriate "orm and a&&ording to te pro&ed-re !aid do#n in te (-!es "ramed by te State
Go%ernments'
Appea!: Appea! against te order o" te A-tority &an be "i!ed be"ore te Co-rt o" Sma!! Ca-ses
or a 4istri&t Co-rt'
4isp!ay: Abstra&ts o" te A&t and te r-!es m-st be disp!ayed by te emp!oyer in Eng!is or a
!ang-age -nderstood by ma1ority o" te emp!oyees in te "a&tory or estab!isment premises'
MINIMJM WAGES ACT )G+E:
(IGBT OF WO(NE(S. ETC' Cte ob!igation o" te emp!oyers. pra&ti&a!!y spea$ing te rigt o"
emp!oyees
E%ery #or$er sa!! a%e te rigt to C
2i3 obtain "rom te o&&-pier. in"ormation re!ating to #or$ersL ea!t and sa"ety at #or$I

2ii3 get trained #itin te "a&tory #ere%er possib!e. or. to get imse!" sponsored by te o&&-pier
"or getting trained at a training &entre or instit-te. d-!y appro%ed by te Cie" Inspe&tor. #ere
training is imparted "or #or$ersL ea!t and sa"ety at #or$I
2iii3 (epresent to te Inspe&tor dire&t!y or tro-g is representati%e in te matter o" inade<-ate
pro%ision "or prote&tion o" is ea!t or sa"ety in te "a&tory'
+3 A #or$ers as te rigt to &!aim #ages "or !ea%e a!!o#ab!e to im. -nder te pro%isions o" te
payment o" #ages a&t'
,3 A #or$ers as te rigt not to pay any "ee or &arge "or te "a&i!ities "or te "a&i!ities pro%ided
by te emp!oyer'
(igt o" emp!oyers:
Te ob!igation o" te emp!oyee &an a!so be re&$oned as rigt o" te emp!oyers' 0eside some more
rigt a%e been %ested in te emp!oyer -nder te "a&tories a&t'
)3 (igt to &arry on te p!an o" setting -p a ne# "a&tory or e;tension o" an e;isting one. i" no
ad%erse order is &omm-ni&ated to im #itin @ monts o" te app!i&ation "or appro%a!'
=3 (igt to appea! to te &entra! go%ernment against te sate go%ernment?s re"-sa! to grant
appro%a! to is app!i&ation "or setting -p a "a&tory'
@3 (igt to retain a &i!d or a yo-ng person not o!ding a &erti"i&ate o" "itness. "rom #or$ing in
te "a&tory
+3 rigt o" appea! against te order o" te inspe&tor or &ie" inspe&tor. to te pres&ribed appe!!ate
a-tority. #itin @* days o" te ser%i&e o" te order'
,3 (igt to demand an app!i&ation "or !ea%e "rom te #or$ers and a medi&a! &erti"i&ate #en
!ea%e is a%ai!ed on te gro-nd o" i!!ness' Pro%ision o" o%er&ro#ding
2)3 No room in any "a&tory sa!! be o%er&ro#ded to an e;tent in1-rio-s to te ea!t o" te
#or$ers emp!oyed terein'
2=3 Wito-t pre1-di&e to te genera!ity o" s-b>se&tion 2)3. tere sa!! be in e%ery #or$room o" a
"a&tory in e;isten&e on te date o" te &ommen&ement o" tis A&t at !east G'G &-bi& metres and o"
a "a&tory b-i!t a"ter te &ommen&ement o" tis A&t at !east )+'= &-bi& metres or spa&e "or e%ery
#or$er emp!oyed terein. and "or te p-rposes o" tis s-b>se&tion no a&&o-nt sa!! be ta$en o"
any spa&e #i& is more tan +'= metres abo%e te !e%e! o" te "!oor o" te room'
2@3 I" te Cie" Inspe&tor by order in #riting so re<-ires. tere sa!! be posted in ea& #or$room
o" a "a&tory a noti&e spe&i"ying te ma;im-m n-mber o" #or$ers #o may. in &omp!ian&e #it
te pro%isions o" tis se&tion. be emp!oyed in te room'
2+3 Te Cie" Inspe&tor may by order in #riting e;empt. s-b1e&t to s-& &onditions. i" any. as e
may tin$ "it to impose. any #or$room "rom te pro%isions o" tis se&tion. i" e is satis"ied tat
&omp!ian&e tere#it in respe&t o" te room is -nne&essary in te interest o" te ea!t o" te
#or$ers emp!oyed terein' Write sort notes on any "i%e
d3 Medi&a! be"it &o-n&i! -nder emp!oyee?s state ins-ran&e a&t>)G+E
Medi&a! 0ene"it Co-n&i!'
)*' 2)3 Te Centra! Go%ernment sa!! &onstit-te a Medi&a! 0ene"it Co-n&i! &onsisting o" >
2a3 Te 4ire&tor Genera!. Bea!t Ser%i&es. e; o""i&io. as CairmanI
2b3 A 4ep-ty 4ire&tor>Genera!. Bea!t Ser%i&es. to be SappointedT by te Centra! Go%ernmentI
2&3 Te Medi&a! Commissioner o" te Corporation. e; o""i&io.
2d3 One member ea& representing ea& o" te States 2oter tan Jnion territories3 in #i& tis
A&t is in "or&e to be appointed by te State Go%ernment &on&ernedI
2e3 Tree members representing emp!oyers to be appointed by te Centra! Go%ernment in
&ons-!tation #it s-& organi/ations o" emp!oyers as may be re&ogni/ed "or te p-rpose by te
Centra! Go%ernmentI
2"3 tree members representing emp!oyees to be appointed by te Centra! Go%ernment in
&ons-!tation #it s-& organi/ations o" emp!oyees as may be re&ogni/ed "or te p-rpose by te
Centra! Go%ernmentI and
2g3 Tree members. o" #om not !ess tan one sa!! be a #oman. representing te medi&a!
pro"ession. to be appointed by te Centra! Go%ernment in &ons-!tation #it s-& organi/ations o"
medi&a! pra&titioners as may be re&ogni/ed "or te p-rpose by te Centra! Go%ernment'
2=3 Sa%e as oter#ise e;press!y pro%ided in tis A&t. te term o" o""i&e o" a member o" te
Medi&a! 0ene"it Co-n&i!. oter tan a member re"erred to in any o" te &!a-se 2a3 to 2d3 o" s-b>
se&tion 2)3. sa!! be "o-r years "rom te date on #i& is appointmentT is noti"ied: Pro%ided tat
a member o" te Medi&a! 0ene"it Co-n&i! sa!!. not#itstanding te e;piry o" te said period o"L
"o-r years &ontin-e to o!d o""i&e -nti! te appointment o" is s-&&essor is noti"ied'
2@3 A member o" te Medi&a! 0ene"it Co-n&i! re"erred to in &!a-ses 2b3 and 2d3 o" s-b>se&tion 2)3
sa!! o!d o""i&e d-ring te p!eas-re o" te Go%ernment appointing im'
e3 Important "eat-res o" te minim-m #ages a&t )G+E
An A&t to pro%ide "or "i;ing minim-m rates o" #ages in &ertain emp!oyments'
WBE(EAS it is e;pedient to pro%ide "or "i;ing minim-m rates o" #ages in &ertain emp!oymentsI
An A&t to pro%ide "or &ertain bene"its to emp!oyees in &ase o" si&$ness. maternity and
Kemp!oyment in1-ryK and to ma$e pro%ision "or &ertain oter matters in re!ation tereto
WBE(EAS it is e;pedient to pro%ide "or &ertain bene"its to emp!oyees in &ase o" si&$ness.
maternity and emp!oyment in1-ry and to ma$e pro%ision "or &ertain oter matters in re!ation
tereto
Te a&t !ays do#n "or "i;ation o".
)3 A minim-m time rate o" #ages
=3 A minim-m pie&e rate
@3 A g-aranteed time rate and
+3 An o%ertime rate
For di""erent o&&-pation. !o&a!ities or &!asses o" #or$ and "or ad-!ts. ado!es&ents. &i!dren and
apprenti&es'
=3 Te minim-m rate o" #ages may &onsist o":
)3 a basi& rate o" #ages and a &ost o" !i%ing a!!o#an&e or
=3 A basi& arte o" #ages #it or #ito-t te &ost o" !i%ing a!!o#an&e and te &as %a!-e o" te
&on&essions in respe&t o" essentia! &ommodities s-pp!ied at &on&essiona! rates'
@3 Te a&t !ays do#n tat #ages sa!! be paid in &as a!to-g it empo#ers te appropriate
go%ernment to a-tori/e te payment o" minim-m #ages eiter #o!!y or part!y in $ind in
parti&-!ar &ases'
+3 It pro%ides tat te &ost o" !i%ing a!!o#an&e and &as %a!-e o" te &on&essions in respe&t o"
s-pp!ies o" essentia! &ommodities at &on&essiona! rates sa!! be &omp-ted by &omponent
a-tority at &ertain inter%a!'
,3 Te a&t empo#ers te appropriate go%ernment to "i; te n-mber o" o-rs o" #or$ per day. to
pro%ide "or a #ee$!y o!iday and te payment o" o%ertime #ages o" #i& minim-m rates o"
#ages a%e been "i;ed -nder te a&t'
A3 Te a&t !ays do#n "or appointment o" inspe&tors and oter a-torities to ear and de&ide
&!aims arising o-t o" payment o" #ages at !ess tan te minim-m rates o" #ages or rem-neration
"or days o" rest o" #or$ done on s-& days or o" o%ertime #ages
D3 A!! estab!isments &o%ered by te a&t are re<-ired to maintain registers and o""i&e re&ords in
te pres&ribe manner
E3 Te a&t pro%ides te pro&ed-re "or dea!ing #it &omp!aints arising o-t o" te %io!ation o" te
pro%isions o" te a&t and "or imposing pena!ties "or o""en&es -nder te a&t'
2g3 E!igibi!ity and determination o" bon-s
E%ery emp!oyee sa!! be entit!ed to be paid by is emp!oyer in an a&&o-nting year. bon-s. in
a&&ordan&e #it te pro%isions o" tis A&t. pro%ided e as #or$ed in te estab!isment "or not
!ess tan tirty #or$ing days in tat year' Were an emp!oyee as not #or$ed "or a!! te #or$ing
days in an a&&o-nting year. te minim-m bon-s o" one -ndred r-pees or. as te &ase may be. o"
si;ty r-pees. i" s-& bon-s is iger tan E'@@ per &ent o" is sa!ary or #age "or te days e as
#or$ed in tat a&&o-nting year. sa!! be proportionate!y red-&ed' 0on-s -nder te payment o"
bon-s a&t &annot be &!aimed by #or$ers as a matter o" rigt' Te bon-s "orm-!a -nder te a&t rest
on &a!&-!ation o" te a%ai!ab!e s-rp!-s and it en%isages te "o!!o#ing steps Comp-tation o"
a%ai!ab!e s-rp!-s' Te a%ai!ab!e s-rp!-s in respe&t o" any a&&o-nting year sa!! be te gross
pro"its "or tat year a"ter ded-&ting tere "rom te s-ms re"erred to in se&tion A : Pro%ided tat te
a%ai!ab!e s-rp!-s in respe&t o" te a&&o-nting year &ommen&ing on any day in te year )GAE and
in respe&t o" e%ery s-bse<-ent a&&o-nting year sa!! be te aggregate o" 2a3 Te gross pro"its "or
tat a&&o-nting year a"ter ded-&ting tere "rom te s-ms re"erred to in se&tion AI and 2b3 An
amo-nt e<-a! to te di""eren&e bet#een> 2i3 te dire&t ta;. &a!&-!ated in a&&ordan&e #it te
pro%isions o" se&tion D. in respe&t o" an amo-nt e<-a! to te gross pro"its o" te emp!oyer "or te
immediate!y pre&eding a&&o-nting yearI and 2ii3 te dire&t ta;. &a!&-!ated in a&&ordan&e #it te
pro%isions o" se&tion D. in respe&t o" an amo-nt e<-a! to te gross pro"its o" te emp!oyer "or s-&
pre&eding a&&o-nting year a"ter ded-&ting tere "rom te amo-nt o" bon-s #i& te emp!oyer
as paid or is !iab!e to pay to is emp!oyees in a&&ordan&e #it te pro%isions o" tis A&t "or tat
year'T
Se&tion A:
S-ms ded-&tib!e "rom gross pro"its' Te "o!!o#ing s-ms sa!! be ded-&ted "rom te gross pro"its
as prior &arges. name!y:>
2a3 any amo-nt by #ay o" depre&iation admissib!e in a&&ordan&e #it te pro%isions o" s-b>
se&tion 2)3 o" se&tion @= o" te In&ome>ta; A&t. or in a&&ordan&e #it te pro%isions o" te
Agri&-!t-ra! In&ome>ta; 9a#. as te &ase may be: Pro%ided tat #ere an emp!oyer as been
paying bon-s to is emp!oyees -nder a sett!ement or an a#ard or agreement made be"ore te =Gt
May. )GA,. and s-bsisting on tat date a"ter ded-&ting "rom te gross pro"its notiona! norma!
depre&iation. ten. te amo-nt o" depre&iation to be ded-&ted -nder tis &!a-se sa!!. at te option
o" s-& emp!oyer 2s-& option to be e;er&ised on&e and #itin one year "rom tat date3 &ontin-e
to be s-& notiona! norma! depre&iationI
2b3 Any amo-nt by #ay o" Sde%e!opment rebate or in%estment a!!o#an&e or de%e!opment
a!!o#an&eT #i& te emp!oyer is entit!ed to ded-&t "rom is in&ome -nder te In&ome>ta; A&tI
2&3 s-b1e&t to te pro%isions o" se&tion D. any dire&t ta; #i& te emp!oyer is !iab!e to pay "or te
a&&o-nting year in respe&t o" is in&ome. pro"its and gains d-ring tat yearI
2d3 S-& "-rter s-ms as are spe&i"ied in respe&t o" te emp!oyer in te STird S&ed-!eT
b3 Witdra#a! or &an&e!!ation o" trade -nion: A &erti"i&ate o" registration o" a Trade Jnion may
be #itdra#n o &an&e!!ed by te (egistrar C
2)3 On te app!i&ation o" te Trade Jnion to be %eri"ied in s-& manner as may be pres&ribed. or
2=3 I" te (egistrar is satis"ied tat te &erti"i&ate as been obtained by "ra-d or mista$e. or tat
te Trade Jnion as &eased to e;ist or as #i!!"-!!y and a"ter noti&e "rom te (egistrar
&ontra%ened any pro%ision o" tis A&t or a!!o#ed any r-!e to &ontin-e in "or&e #i& is
in&onsistent #it any s-& pro%ision. or as res&inded any r-!e pro%iding "or any matter.
pro%ision "or #i& is re<-ired by Se&tion A: Pro%ided tat not !ess tan t#o monts pre%io-s
noti&e in #riting spe&i"ying te gro-nd on #i& it is proposed to #itdra# or &an&e! te
&erti"i&ate sa!! be gi%en by te (egistrar to te Trade Jnion be"ore te &erti"i&ate is #itdra#n
or &an&e!!ed oter#ise tan on te app!i&ation o" te Trade Jnion'
@3 Se&tion )* pro%ides tat register may dire&t "or #itdra#a! or &an&e!!ation o" registration in te
"o!!o#ing &ases Trade -nion as &eased to e;ist Trade -nion as on its o#n app!ied "or its
#itdra#a! or &an&e!!ation A!!o#ed any r-!e to &ontin-e against te pro%ision o" tis a&t
&3 Con&i!iation pro&eeding and sett!ement -nder ind-stria! disp-te a&t>)G+D
)3 Te appropriate Go%ernment may as o&&asion arises by noti"i&ation in te O""i&ia! Ga/ette
&onstit-te a 0oard o" Con&i!iation "or promoting te sett!ement o" an ind-stria! disp-te'
2=3 A &on&i!iation o""i&er may be appointed "or a spe&i"ied area or "or spe&i"ied ind-stries in a
spe&i"ied area or "or one or more spe&i"ied ind-stries and eiter permanent!y or "or a !imited
period'
2=3 A 0oard sa!! &onsist o" a Cairman and t#o or "o-r oter members. as te appropriate
Go%ernment tin$s "it'
2@3 Te Cairman sa!! be an independent person and te oter members sa!! be persons
appointed in e<-a! n-mbers to represent te parties to te disp-te and any person appointed to
represent a party sa!! be appointed on te re&ommendation o" tat party : Pro%ided tat. i" any
party "ai!s to ma$e a re&ommendation as a"oresaid #itin te pres&ribed time. te appropriate
Go%ernment sa!! appoint s-& persons as it tin$s "it to represent tat party'
2+3 A 0oard. a%ing te pres&ribed <-or-m. may a&t not#itstanding te absen&e o" te Cairman
or any o" its members or any %a&an&y in its n-mber: Pro%ided tat i" te appropriate Go%ernment
noti"ies te 0oard tat te ser%i&es o" te Cairman or o" any oter member a%e &eased to be
a%ai!ab!e. te 0oard sa!! not a&t -nti! a ne# &airman or member. as te &ase may be. as been
appointed' 4JTIES OF CONCI9IATION OFFICE(S' > 2)3 Were an ind-stria! disp-te e;ists or
is appreended. te &on&i!iation o""i&er may. or #ere te disp-te re!ates to a p-b!i& -ti!ity ser%i&e
and a noti&e -nder se&tion == as been gi%en. sa!!. o!d &on&i!iation pro&eedings in te
pres&ribed manner'
2=3 Te &on&i!iation o""i&er sa!!. "or te p-rpose o" bringing abo-t a sett!ement o" te disp-te.
#ito-t de!ay. in%estigate te disp-te and a!! matters a""e&ting te merits and te rigt sett!ement
tereo" and may do a!! s-& tings as e tin$s "it "or te p-rpose o" ind-&ing te parties to &ome
to a "air and ami&ab!e sett!ement o" te disp-te'
2@3 I" a sett!ement o" te disp-te or o" any o" te matters in disp-te is arri%ed at in te &o-rse o"
te &on&i!iation pro&eedings te &on&i!iation o""i&er sa!! send a report tereo" to te appropriate
Go%ernment or an o""i&er a-torised in tis bea!" by te appropriate Go%ernment togeter #it a
memorand-m o" te sett!ement signed by te parties to te disp-te'
2+3 I" no s-& sett!ement is arri%ed at. te &on&i!iation o""i&er sa!!. as soon as pra&ti&ab!e a"ter te
&!ose o" te in%estigation. send to te appropriate Go%ernment a "-!! report setting "ort te steps
ta$en by im "or as&ertaining te "a&ts and &ir&-mstan&es re!ating to te disp-te and "or bringing
abo-t a sett!ement tereo". togeter #it a "-!! statement o" s-& "a&ts and &ir&-mstan&es. and te
reasons on a&&o-nt o" #i&. in is opinion. a sett!ement &o-!d not be arri%ed at'
2,3 I". on a &onsideration o" te report re"erred to in s-b>se&tion 2+3. te appropriate Go%ernment
is satis"ied tat tere is a &ase "or re"eren&e to a 0oard. 9abo-r Co-rt. Trib-na! or Nationa!
Trib-na!. it may ma$e s-& re"eren&e' Were te appropriate Go%ernment does not ma$e s-& a
re"eren&e it sa!! re&ord and &omm-ni&ate to te parties &on&erned its reasons tere"ore' 4JTIES
OF 0OA(4' > 2)3 Were a disp-te as been re"erred to a 0oard -nder tis A&t. it sa!! be te
d-ty o" te 0oard to endea%or to bring abo-t a sett!ement o" te same and "or tis p-rpose te
0oard sa!!. in s-& manner as it tin$s "it and #ito-t de!ay. in%estigate te disp-te and a!!
matters a""e&ting te merits and te rigt sett!ement tereo" and may do a!! s-& tings as it tin$s
"it "or te p-rpose o" ind-&ing te parties to &ome to a "air and ami&ab!e sett!ement o" te disp-te'
2=3 I" a sett!ement o" te disp-te or o" any o" te matters in disp-te is arri%ed at in te &o-rse o"
te &on&i!iation pro&eedings. te 0oard sa!! send a report tereo" to te appropriate Go%ernment
togeter #it a memorand-m o" te sett!ement signed by te parties to te disp-te'
2@3 I" no s-& sett!ement is arri%ed at. te 0oard sa!!. as soon as pra&ti&ab!e a"ter te &!ose o" te
in%estigation. send to te appropriate Go%ernment a "-!! report setting "ort te pro&eedings and
steps ta$en by te 0oard "or as&ertaining te "a&ts and &ir&-mstan&es re!ating to te disp-te and
"or bringing abo-t a sett!ement tereo". togeter #it a "-!! statement o" s-& "a&ts and
&ir&-mstan&es. its "indings tereon. te reasons on a&&o-nt o" #i&. in its opinion. a sett!ement
&o-!d not be arri%ed at and its re&ommendations "or te determination o" te disp-te'
2+3 I". on te re&eipt o" a report -nder>s-b>se&tion 2@3 in respe&t o" a disp-te re!ating to a p-b!i&
-ti!ity ser%i&e. te appropriate Go%ernment does not ma$e a re"eren&e to a 9abo-r Co-rt. Trib-na!
or Nationa! Trib-na! -nder se&tion )*. it sa!! re&ord and &omm-ni&ate to te parties &on&erned
its reasons tere"ore'
2,3 Te 0oard sa!! s-bmit its report -nder tis se&tion #itin t#o monts o" te date on #i&
te disp-te #as re"erred to it or #itin s-& sorter period as may be "i;ed by te appropriate
Go%ernment : Pro%ided tat te appropriate Go%ernment may "rom time to time e;tend te time
"or te s-bmission o" te report by s-& "-rter periods not e;&eeding t#o monts in te
aggregate : Pro%ided "-rter tat te time "or te s-bmission o" te report may be e;tended by
s-& period as may be agreed on in #riting by a!! te parties to te disp-te'
2A3 A report -nder tis se&tion sa!! be s-bmitted #itin "o-rteen days o" te &ommen&ement o"
te &on&i!iation pro&eedings or #itin s-& sorter period as may be "i;ed by te appropriate
Go%ernment : Pro%ided tat. S-b1e&t to te appro%a! o" te &on&i!iation o""i&er. te time "or te
s-bmission o" te report may be e;tended by s-& period as may be agreed -pon in #riting by a!!
te parties to te disp-te' Sett!ements:
2)3 A sett!ement sa!! &ome into operation on s-& date as is agreed -pon by te parties to te
disp-te. and i" no date is agreed -pon. on te date on #i& te memorand-m o" te sett!ement is
signed by te parties to te disp-te'
2=3 S-& sett!ement sa!! be binding "or s-& period as is agreed -pon by te parties. and i" no
s-& period is agreed -pon. "or a period o" si; monts "rom te date on #i& te memorand-m
o" sett!ement is signed by te parties to te disp-te. and sa!! &ontin-e to be binding on te parties
a"ter te e;piry o" te period a"oresaid. -nti! te e;piry o" t#o monts "rom te date on #i& a
noti&e in #riting o" an intention to terminate te sett!ement is gi%en by one o" te parties to te
oter party or parties to te sett!ement'
2@3 An a#ard sa!!. s-b1e&t to te pro%isions o" tis se&tion. remain in operation "or a period o"
one year "rom te date on #i& te a#ard be&omes en"or&eab!e -nder se&tion )DA: Pro%ided tat
te appropriate Go%ernment may red-&e te said period and "i; s-& period as it tin$s "it :
Pro%ided "-rter tat te appropriate Go%ernment may. be"ore te e;piry o" te said period.
e;tend te period o" operation by any period not e;&eeding one year at a time as it tin$s "it. so
o#e%er. tat te tota! period o" operation o" any a#ard does not e;&eed tree years "rom te date
on #i& it &ame into operation'
2+3 Were te appropriate Go%ernment. #eter o" its o#n motion or on te app!i&ation o" any
party bo-nd by te a#ard. &onsiders tat sin&e te a#ard #as made. tere as been a materia!
&ange in te &ir&-mstan&es on #i& it #as based. te appropriate Go%ernment may re"er te
a#ard or a part o" it to a 9abo-r Co-rt. i" te a#ard #as tat o" a 9abo-r Co-rt or to a Trib-na!. i"
te a#ard #as tat o" a Trib-na! or o" a Nationa! Trib-na!. "or de&ision #eter te period o"
operation so-!d not. by reason o" s-& &ange. be sortened and te de&ision o" 9abo-r Co-rt or
te Trib-na!. as te &ase may be. on s-& re"eren&e sa!! be "ina!'
2,3 Noting &ontained in s-b>se&tion 2@3 sa!! app!y to any a#ard #i& by its nat-re. terms or
oter &ir&-mstan&es does not impose. a"ter it as been gi%en e""e&t to. any &ontin-ing ob!igation
on te parties bo-nd by te a#ard'
2A3 Not#itstanding te e;piry o" te period o" operation -nder s-b>se&tion 2@3. te a#ard sa!!
&ontin-e to be binding on te parties -nti! a period o" t#o monts as e!apsed "rom te date on
#i& noti&e is gi%en by any party bo-nd by te a#ard to te oter party or parties intimating its
intention to terminate te a#ard'
2D3 No noti&e gi%en -nder s-b>se&tion 2=3 or s-b>se&tion 2A3 sa!! a%e e""e&t. -n!ess it is gi%en by
a party representing te ma1ority o" persons bo-nd by te sett!ement or a#ard. as te &ase may be'
TBE PAYMENT OF 0ONJS ACT. )GA,
An A&t to pro%ide "or te payment o" bon-s to persons emp!oyed in &ertain estab!isments on te
basis o" pro"its or on te basis o" prod-&tion or prod-&ti%ity and "or matters &onne&ted tere#it'T
)' a&&o-nting year
=' a!!o&ab!e s-rp!-s
@' a%ai!ab!e s-rp!-s
+' sa!ary or #age6 means
5a&&o-nting year6 means >
2i3 in re!ation to a &orporation. te year ending on te day on #i& te boo$s and a&&o-nts
o" te &orporation are to be &!osed and ba!an&ed'
2ii3 in re!ation to a &ompany. te period in respe&t o" #i& any pro"it and !oss a&&o-nt o" te
&ompany !aid be"ore it in ann-a! genera! meeting is made -p. #eter tat period is a year or notI
2iii3 in any oter &ase >
2a3 te year &ommen&ing on te )st day o" Apri!I or
2b3 i" te a&&o-nts o" an estab!isment maintained by te emp!oyer tereo" are &!osed and
ba!an&ed on any day oter tan te @)st day o" Mar&. ten. at te option o" te emp!oyer. te
year ending on te day on #i& its a&&o-nts are so &!osed and ba!an&ed:
Pro%ided tat an option on&e e;er&ised by te emp!oyer -nder paragrap 2b3 o" tis s-b>&!a-se
sa!! not again be e;er&ised e;&ept #it te pre%io-s permission in #riting o" te pres&ribed
a-tority and -pon s-& &onditions as tat a-tority may tin$ "itI
a!!o&ab!e s-rp!-s6 means>
2a3 in re!ation to an emp!oyer. being a &ompany @S2oter tan a ban$ing &ompany3T #i&
as not made te arrangements pres&ribed -nder te In&ome>ta; A&t "or te de&!aration and
payment #itin India o" te di%idends payab!e o-t o" its pro"its in a&&ordan&e #it te pro%isions
o" se&tion )G+ o" tat A&t. si;ty>se%en per &ent o" te a%ai!ab!e s-rp!-s in an a&&o-ntingI yearI
2b3 in any oter &ase. si;ty per&ent o" s-& a%ai!ab!e s-rp!-sI
a%ai!ab!e s-rp!-s6 means te a%ai!ab!e s-rp!-s &omp-ted -nder se&tion ,I
sa!ary or #age6 means a!! rem-neration 2oter tan rem-neration in respe&t o" o%er>time #or$3
&apab!e o" being e;pressed in terms o" money. #i& #o-!d. i" te terms o" emp!oyment. e;press
or imp!ied. #ere "-!"i!!ed. be payab!e to an emp!oyee in respe&t o" is emp!oyment or o" #or$
done in s-& emp!oyment and in&!-des dearness a!!o#an&e 2tat is to say. a!! &as payments. by
#ate%er name &a!!ed. paid to an emp!oyee on a&&o-nt o" a rise in te &ost o" !i%ing3. b-t does not
in&!-de>
2i3 any oter a!!o#an&e #i& te emp!oyee is "or te time being entit!ed toI
2ii3 te %a!-e o" any o-se a&&ommodation or s-pp!y o" !igt. #ater. medi&a! attendan&e or
oter amenity or o" any ser%i&e or o" any &on&essiona! s-pp!y o" "ood grains or oter arti&!esI
2iii3 any tra%e!ing &on&essionI
2i%3 any bon-s 2in&!-ding in&enti%e. prod-&tion and attendan&e bon-s3I
2%3 any &ontrib-tion paid or payab!e by te emp!oyer to any pension "-nd or pro%ident "-nd
or "or te bene"it o" te emp!oyee -nder any !a# "or te time being in "or&eI
2%i3 any retren&ment &ompensation or any grat-ity or oter retirement bene"it payab!e to te
emp!oyee or any e; gratia payment made to imI
2%ii3 any &ommission payab!e to te emp!oyee'
INCENTI8E
Management is a!! abo-t managing men' Te main tas$ o" any manager in an organi/ation is to
get tings done tro-g is s-bordinates' And to get tings done. moti%ating te emp!oyees and
$eeping teir mora!e -p is %ery essentia!' Tere are a n-mber o" #ays #i& di""erent managers
in organi/ations emp!oy to impro%e emp!oyee moti%ation. s-& as by treating te emp!oyees
"air!y. setting a&ie%ab!e goa!s. gi%ing positi%e rein"or&ement. "o!!o#ing an e""e&ti%e dis&ip!ine
po!i&y. satis"ying te emp!oyee needs and !ast!y. te most important o" a!!. basing te re#ards or
in&enti%es on 1ob per"orman&e' A!to-g. a!! o" te abo%e metods o" moti%ating emp!oyees
so-!d be app!ied by a manager to in&rease #or$ prod-&ti%ity. yet spe&ia! attention so-!d be paid
#i!e de&iding -pon in&enti%es "or emp!oyees. as noting &an moti%ate an indi%id-a! !i$e tem
)' Finan&ia! in&enti%es "or emp!oyees are te amo-nt o" in&rement tey #i!! get -pon
a&ie%ing a parti&-!ar target. i'e' i" an emp!oyee does A amo-nt o" #or$. e #i!! get 0
amo-nt o" money'
=' Finan&ia! in&enti%es are not te on!y types o" in&enti%es "or emp!oyees. tere are
&ompanies #i& gi%e in&enti%es in te "orm o" gi"t items or organi/ing e%ents "or te
ig a&ie%ing emp!oyees as #e!!'
@' Many organi/ations tese days gi%e re#ards to teir ig per"orming emp!oyees in te
"orm o" boo$s. gadgets. resta-rant passes and mo%ie ti&$ets'
+' Tro#ing parties "or emp!oyees or a%ing e%ents s-& as spe&ia! dinners "or te
emp!oyees are some o" te oter emp!oyee in&enti%e ideas -sed by &ompanies tese days
0ENEFITS OF INCENTI8ES
Te in&enti%es "or emp!oyees. s-& as a rise in te sa!ary o" te ig per"orming emp!oyee.
bene"its te organi/ation in t#o #ays'
): Te emp!oyee #o re&ei%es a pay i$e gets e%en more moti%ated and t-s. maintains is ig
!e%e! o" per"orman&e'
=: Oter emp!oyees too get indire&t!y moti%ated to #or$ arder in aspiration o" re&ei%ing simi!ar
in&enti%es
MOTI8ATIONA9 INCENTI8ES FO( EMP9OYEES
0e"ore imp!ementing emp!oyee in&enti%e programs. a good idea is to ma$e a !ist o" a!! te
re#ards tat a%e been p!anned and ma$e te emp!oyees %ote te ones tat tey tin$ are te best
"or tem' An organi/ation &an a!so &onsider te "o!!o#ing in&enti%es "or emp!oyees'
)' Sta"" meetings in a good ote! instead o" o""i&e'
=' A birtday program in #i& a gi"t is de!i%ered to te emp!oyees o-se on is birtday'
@' Attendan&e in&enti%es "or emp!oyees &o-!d be someting !i$e &erti"i&ates #it Ktime o""sK
"or te emp!oyee'
+' So&&er game ti&$ets or &on&ert ti&$ets to a gro-p #i& as a&ie%ed its target'
,' Certain ea!t in&enti%es "or emp!oyees #o do so&ia! #or$'
0ONJS PAY
0on-s pay is &ompensation o%er and abo%e te amo-nt o" pay spe&i"ied as a base sa!ary or o-r!y
rate o" pay' Te base amo-nt o" &ompensation is spe&i"ied in te emp!oyee o""er !etter. in te
emp!oyee personne! "i!e. or in a &ontra&t' 0on-s pay &an be distrib-ted random!y as te &ompany
&an a""ord to pay a bon-s. or te amo-nt o" te bon-s pay &an be spe&i"ied by &ontra&t'
)' 0on-s pay is -sed by many organi/ations as a tan$ yo- to emp!oyees or a team tat
a&ie%es signi"i&ant goa!s'
=' 0on-s pay is a!so -sed to impro%e emp!oyee mora!e. moti%ation. and prod-&ti%ity'
@' As !ong as bon-s pay is dis&retionary by te emp!oyer. it is not &onsidered to be a
&ontra&t'
+' I" te emp!oyer promises a bon-s. o#e%er. te emp!oyer may be !ega!!y !iab!e to pay te
bon-s'
Pro"it saring
)' Pro"it saring re"ers to %ario-s in&enti%e p!ans introd-&ed by b-sinesses tat pro%ide
dire&t or indire&t payments to emp!oyees tat depend on &ompanyLs pro"itabi!ity in
addition to emp!oyeesL reg-!ar sa!ary and bon-ses'
=' In p-b!i&!y traded &ompanies tese p!ans typi&a!!y amo-nt to a!!o&ation o" sares to
emp!oyees'
BOW IT WO(NS:
)' Te &ompany &ontrib-tes a portion o" its pre>ta; pro"its to a poo! tat #i!! be distrib-ted
among e!igib!e emp!oyees'
=' Te amo-nt distrib-ted to ea& emp!oyee may be #eigted by te emp!oyeeLs base sa!ary
so tat emp!oyees #it iger base sa!aries re&ei%e a s!igt!y iger amo-nt o" te sared
poo! o" pro"its'
@' Genera!!y tis is done on an ann-a! basis'
4isad%antages
)' Te pay "or ea& emp!oyee mo%es -p or do#n togeter 2no indi%id-a! di""eren&es "or
merit or per"orman&e3'
=' Fo&-ses on!y on te goa! o" pro"itabi!ity 2#i& may be at te e;pense o" <-a!ity3'
@' For sma!!er &ompanies. tese p!ans may res-!t in drasti& s#ings in earnings "or
emp!oyees #i& te emp!oyees may "ind di""i&-!t to manage teir persona! "inan&es'
PE(FO(MANCE 9INNE4 COMPENSATION:
Per"orman&e !in$ed &ompensation is money paid to someone re!ating to o# #e!! one #or$s' Car
sa!esmen. prod-&tion !ine #or$ers. "or e;amp!e. may be paid in tis #ay. or tro-g &ommission'
0-siness teorist Frederi&$ Wins!o# Tay!or #as a great s-pporter o" tis metod o" payment.
#i& is o"ten re"erred to as P(P' Be be!ie%ed tat money #as te main in&enti%e "or in&reased
prod-&ti%ity and introd-&ing te #ide!y -sed &on&ept o" Lpie&e #or$L'
Tis standards>based system is -sed "or e%a!-ating emp!oyees and setting sa!aries by many
emp!oyers' Standards>based metods a%e been in de "a&to -se "or &ent-ries among &ommission>
based sa!es sta"": tey are paid more "or se!!ing more. and !o# per"ormers do not earn eno-g to
ma$e $eeping te 1ob #ort#i!e e%en i" tey manage to $eep te 1ob'
In addition to moti%ating te re#arded bea%ior. standards>based metods &an pro%ide a !e%e! o"
standardi/ation in emp!oyee e%a!-ations. #i& &an red-&e "ears o" "a%oritism and ma$e te
emp!oyerLs e;pe&tations &!ear' For e;amp!e. an emp!oyer migt set a minim-m standard o" )=.***
$eystro$es per o-r in a simp!e data>entry 1ob. and reassign or rep!a&e emp!oyees #o &annot
per"orm at tat !e%e!'
Emp!oyees #o-!d be se&-re in $no#ing tat teir per"orman&e #as e%a!-ated ob1e&ti%e!y
a&&ording to te standard o" teir #or$ instead o" te #ims o" a s-per%isor. or against an e%er>
&!imbing a%erage o" teir gro-p'
Opposition
A "-ndamenta! &riti&ism o" per"orman&e>re!ated pay is tat te per"orman&e o" a &omp!e; 1ob as a
#o!e is red-&ed to a simp!e. o"ten sing!e meas-re o" per"orman&e' For instan&e a te!epone
&a!!&entre e!p!ine may 1-dge te <-a!ity o" an emp!oyee based -pon te a%erage !engt o" a &a!!
#it a &-stomer'
As a simp!e meas-re. tis gi%es no regard to te <-a!ity o" e!p gi%en. "or instan&e #eter te
iss-e #as reso!%ed. or #eter te &-stomer emerged satis"ied' Per"orman&e re!ated pay may a!so
&a-se a osti!e #or$ attit-de as in times o" !o# &-stom. m-!tip!e emp!oyees may &ompete "or te
attentions o" a sing!e &-stomer' Were a &-stomer as been e!ped by more tan one emp!oyee.
"-rter resentment may be &a-sed i" te &ommission is ta$en by #oe%er appens to ma$e te
"ina! sa!e' Ma&ros&opi& "a&tors s-& as an e&onomi& do#nt-rn may a!so ma$e emp!oyees appear
to be per"orming to a !o#er standard independent o" a&t-a! per"orman&e'
Per"orman&e>based systems a%e met some opposition as tey are being adopted by &orporations
and go%ernments' In some &ases. opposition is moti%ated by spe&i"i& i!!>&on&ei%ed standards. s-&
as one #i& ma$es emp!oyees #or$ at -nsa"e speeds. or a system #i& does not ta$e a!! "a&tors
proper!y into a&&o-nt'
In oter &ases. opposition is moti%ated by a dis!i$e o" te &onse<-en&es' For e;amp!e. a &ompany
may a%e ad a &ompensation system #i& paid emp!oyees stri&t!y a&&ording to teir seniority'
Tey may &ange to a system tat pays sa!es sta"" a&&ording to o# m-& tey se!!' 9o#>
per"orming senior emp!oyees #o-!d ob1e&t to a%ing teir in&ome &-t to mat& teir per"orman&e
!e%e!. #i!e a ig>per"orming ne# emp!oyee migt pre"er te ne# arrangement'
(esear&
A&ademi& e%iden&e as in&reasing!y mo-nted indi&ating tat per"orman&e re!ated pay !eads to te
opposite o" te desired o-t&omes #en it is app!ied to any #or$ in%o!%ing &ogniti%e rater tan
pysi&a! s$i!!' (esear&S)T "-nded by te Federa! (eser%e 0an$ -nderta$en at te Massa&-setts
Instit-te o" Te&no!ogy #it inp-t "rom pro"essors "rom te Jni%ersity o" Ci&ago and Carnegie
Me!!on Jni%ersity repeated!y demonstrated tat as !ong as te tas$s being -nderta$en are p-re!y
me&ani&a! per"orman&e re!ated pay #or$s as e;pe&ted' Bo#e%er on&e r-dimentary &ogniti%e
s$i!!s are re<-ired it a&t-a!!y !eads to poorer per"orman&e'
Tese e;periments a%e sin&e been repeated by a range o" e&onomists.S=TS@T so&io!ogists and
psy&o!ogists #it te same res-!ts'S+T E;periments #ere a!so -nderta$en in Mad-rai. India
#ere te "inan&ia! amo-nts in%o!%ed represented "ar more signi"i&ant s-ms to parti&ipants and
te res-!ts #ere again repeated' Tese "indings a%e been spe&i"i&a!!y ig!igted by 4anie! B'
Pin$ in is #or$ e;amining o# moti%ation #or$s'S,T
COMPENSATION T(EN4S:
Compensation trends in India &anged #it !ibera!i/ation in )GG)'
M Go%ernment #as te biggest 1ob &reator
M G-aranteed pay determined by agreement bet#een emp!oyee -nions and Go%ernment
M Pri%ate se&tors made go%ernment pay s&a!es as
CJ((ENT T(EN4S
Fa&tors tat in"!-en&ed &ompensation post !ibera!i/ation
)' In&rease in prod-&ti%ity gains
=' Fast gro#t in rea! #ages
@' Faster G4P gro#t
+' IT and O-tso-r&ing ser%i&es
,' A%erage sa!ary in&reases o%er =**,>*A ranged "rom )*W to +*W