SOLUTION TO ASSIGNMENT

NAME

SANJEEV CHOWDHRY

ROLL NO

1405002539

SUBJECT

Compensation and Benefits (MU 0015)

Question 1. Discuss the contents of Job Evaluation. Describe the process of Job
evaluation
Answer.
1.
Job Evaluation. Job evaluation is the process of analysing and assessing the
various jobs systematically to ascertain their relative worth in an organization. Job is
evaluated on the basis of their content and is placed in the order of their importance.
2.

Contents of Job Evaluation. These are:(a)

Job Analysis. It is the process of identifying and determining in detail
contents of a particular job, thereby, clearly defining duties, its functions, elements,
tasks, operations and processes.
(b)
Job Description. It is a written statement containing general information
about what all a job involves ie skills, education and training required. I also includes
job title, duties, tasks and responsibilities related to job, working conditions and
hazards, reporting relationships, tools, machines and equipment to be used, and
relationships with other positions.
(c)
Job Classification. It is a systemic method of assigning value to individual
positions to develop a hierarchy of job worth. Its purpose is to determine a position's
relative size within the hierarchy. It is a formal and systematic comparison of jobs to
determine the size of one job relative to another.
(d)
Job Specification. It provides particulars about capabilities that an individual
should possess to perform the job efficiently. This includes educational qualification,
experience, training, appropriate skills, knowledge, and abilities required to perform
the job.

3.

Process of Job Evaluation.

(a)
Step 1: Appointment and Creation of Committee. In this step a committee
is constituted comprising of experienced HR professionals, employees and union
members, who evaluate all the jobs in the organisation.
(b)
Step 2: Finding and Identifying Jobs that needs to be evaluated. In the
next step, the jobs in various departments of the organisations are identified so as to
find out which job requires to be evaluated.
(c)
Step 3: Analysing the Job Description and Job Analysis. The third step in
the organisation is to conduct job analysis and job description which is necessary for
effective performance.
(d)
Step 4: Selection of Job Evaluation Method. The fourth step in the
evaluation of the job is to choose the method for evaluation. This must be identified
while keeping the demands of the organisation as well as factors related to job in
mind.
(e)
Step 5: Classification of Job and Compensation. In the next step, the
relative worth of the jobs are organized as per the requirement of skills, experience
required, conditions under which the task is to be carried out, responsibilities to be
handled, degree of supervision that is required and so on. All the factors are
assigned weights to work out the relative value of the job.

(f)
Step 6: Initiating the Program. In this step the top management explain
their plan to the employees so as to put it into operation.
(g)
Step 7: Concluding Results. The last step in the evaluation of the job is to
review and scrutinize the jobs periodically taking into account the environmental
conditions such as technology, services, products etc.

Question 2. Suppose you are a HR Manager and you are asked to develop an
effective Incentive Scheme for your organization. What are the pre-requisites you will
consider while developing an Effective Incentive Scheme? Discuss the merits and
demerits of Incentives
Answer.
(a)
Prerequisites for an Incentive Scheme. You can conclude by now that for
all firms a well-designed system of wage payment can yield a number of advantages.
But it is also true that to realise these advantages there must be some safeguards
known as prerequisites of effective incentive plans. These pre-requisites are as
under:
(a)
The co-operation of workers in the implementation of an incentive scheme is
essential because the employees could evade or sabotage the plan if they do not
like a scheme. They do so, often with the tacit connivance of the foreman or
supervisor. Workers' co-operation may be secured through proper discussion with
their representatives for methods adopted for analysis of result or output on basis of
which payment is done, the setting wage rate methods for different work categories
and prerequisites relating to job security, earnings and dispute settlement regarding
work standards
(b)
The incentive scheme must be based on scientific work measurement. The
standards set must be realistic and must motivate workers to put in better
performance. Workers must be provided with necessary tools, equipment and
materials so as to enable them reach their standards.
(c)
Indirect workers, such as supervisors, foremen, charge hands, helpers, crane
operators, canteen staff, store keepers, and clerical staff should also be covered by
incentive schemes.
(d)
There should be management commitment to the cost and time necessary to
administer incentive schemes properly, and these must be carefully assessed before
embarking on an incentive programme. There are many situations in which the
potential gains are just not worth the cost and effort involved.
(e)
There is greater need for planning. Many incentive schemes, started hurriedly,
planned carelessly, and implemented indifferently have failed and have created more
problems for the organisation than they have tried to solve. An incentive plan should
thus be first planned properly and then implemented carefully to achieve desired
results.
(b)

Merits.

(a)
Increase in Volume of Output. Output of the firm increases as the workers
are motivated to increase their efficiency to get more wages.
(b)
Enhancement of Earnings. Incentives result in enhancement of earnings
which have helped employees in improving their standard of living. Instances show
that wages have exceeded two to three times as contrasted to the time-rated wages
because of incentives.
(c)
Reduction of Cost of Production per Unit. Cost of production per unit of
output and total cost declines due to decrease in labour cost and overheads per unit.
(d)
Reduction of Labour Turnover. Workers is rewarded properly for their
efficiency which results in reduction of labour turnover.
(e)
Reduction of Idle Time. Since the payment of wages is linked with
efficiency, the idle time costs are reduced to the minimum.

(f)
Benefit to Consumers. Reduction of cost of production per unit is passed on
to the consumers by reducing the selling price.
(g)

Miscellaneous.
(i)

Reduced command.

(ii)

Greater equipment utilization.

(iii)

Reduction in scrap.

(iv)
Systems of imbursement by results would facilitate the application of
cost control techniques like standard costing and budgetary control.
(c)

Demerits.

(a)
Product Quality. The quality of products may show tendencies to get worse if
steps are not taken for timely quality maintenance through checking and inspection
involving added costs.
(b)
Opposition by Employees. A firm may face difficulties related to introduction
of new methods or machines as employees may oppose them out of their fear that
the new piece of bonus rates set may yield lower earnings or that such introduction
will slow their work rate.
(c)
Bonus Rates. Small rates will make workers disappointed and they will be
under pressure to work very hard. Soaring rates may slacken their efforts at times
and employer may not take the option of revising the rates because earnings are too
high.
(d)
Jealousy. A jealousy may arise between employees for the reason that some
may earn more than others.
(e)
Fixing Rates.
piece or bonus rates.

One the biggest complexities in incentive system is fixing of

(f)
Difficulty to Fix Standard Time. Fixation of standard time for implementation
of incentive plans poses difficulty, particularly if the workers slow down deliberately
while under observation to get set a higher standard time.
(g)
More Supervision Required. As the workers want to speed up the work to
get more wages, more supervision is necessary to avoid decline in the quality of
work and wastage of raw materials.
(h)
Union Opposition. Labour unions may oppose the incentive plan because it
weakens them and creates jealousies and greed among workers. This may lead to
strikes and lock-outs.
(i)
Standard Performance. Firms can also face difficulty in determining standard
performance. Firms usually use the average of past years performance for this
purpose.

Question 3. Discuss the types of managerial remuneration. Explain the elements of

a managerial remuneration Answer.
1.
Managerial Remuneration. It is compensation for services provided to a company
in a managerial capacity. This can include cash payments, along with benefits like stock
options, health insurance, and bonuses. Managers are typically paid more than the people
they supervise, although they tend to make less than the executives at the head of the
company. Some pay structures are transparent, making it easy to determine how much
money managers make, while others may be confidential.
2.
Types of Managerial Remuneration. Managerial remuneration comprises of two
important pays which are as follows:
(a)
Short-term Pay. It is related to the bonuses and the base pay which are
usually paid to the managers according to their performance in the organization. This
type of pay is totally cash based and over a certain period of time these bonuses
become deferred.
(b)
Long-Term Pay. It comprises of stocks which are restricted, stock options,
salary which depend on the performance against the index and shares. These
elements are used by the shareholders in order to protect the organizations value as
well as gaming control of the top level managers on the rising value of the firm in the
marketplace.
3.

Elements of Managerial Remuneration.

(a)
Base Salaries: It is the first element of the managerial remuneration which is
analysed with the help of Job Evaluation and also serves as an incentives. It is a
fixed amount of money paid to an employee by an employer in return for work
performed. It does not include benefits, bonuses or any other potential compensation
from an employer. Managerial Compensation may varies from industry type, job
type, region of the country and organisation size.
(b)
Special package of Perquisites and Benefits. Managers also enjoy all
kinds of benefits and perquisites which the organisations offer to their employees. In
order to maximize the availability of time to key managers from the purpose of
business perspective, various other facilities are also offered to them such as
connection of internet, connection of cell phone and so on.
(c)
Profit-sharing Bonus. In the programme of executive payments, it plays a
very important role. It is usually based on the profit sharing or performance.
(d)
Short-term Bonuses. It ranges from 5% of the base salary to 10 or more
times the base salary offered when firm had very good year by recognizing the
financial indicators.
(e)
Long-term Performance Bonus. It is akin to short-term bonus. The time
period of receipt is 2 years or more into the future and the award size is based on the
multiyear achievement of established performance related objectives.
(f)
Stock Options: Many firms offer stock equivalences in the form of share
appreciation right/phantom shares. Here recipients are compensated with stock
increased value i.e. further determined by the base valuation which is prepared when
share appreciation right/phantom shares are given.
(g)
Severance Package. It is also known as Golden Handshake which is
financial remuneration and incentive packages which if given to those employees in
the organizations who are retired or laid off.

Question 4. Define Pay Structure. What are its objectives? Explain the major
decisions involved in designing and setting competitive pay structures.
Answer
1.
Definition. A pay structure is the collection of salary grades, bands or levels,
connection of related jobs within a hierarchy which helps the organization in providing a
framework for the implementation of various policies and reward strategies within the
organization.
2.

Objectives of Pay Structure.

(a)
To balance reward strategy with the business strategy to encourage and
stimulate high performance level people.
(b)
To ensure clarity and order between the organization and its people in
managing career progression as well as increase in pay.
(c)
To create transparency and safeguard lawfulness and fairness in designing
the pay structure.

3.

Major Decision Involve in Designing and Setting.

(a)
Using surveys to specify the competitive pay policy of the employer for
converting the pay policy into pay structures, pay levels and pay mix.
(b)

Defining the purpose of survey as under:(i)

To analyse pay related problems and establish pay structure

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

Selection of jobs in the survey with the help of two approaches:(i)

Low high approach identifies lowest and highest paid benchmark jobs
for the relevant competencies in the applicable market and to use the salaries
for these jobs as anchors basically for the skill based structures.
(ii)
Benchmark job approach contains the entire structure of the job which
comprises all the key functions and levels that can be matched with the
descriptions of the benchmark jobs.

(d)
Designing the survey with the help of three categories of data which are
required to evaluate the total compensation package with respect to the competitors
practices. These are:(i)

Information about the nature of the firm

(ii)

Information about the total pay system

(iii)

Compensation data on each incumbent in the job understudy

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

Question 5. Explain the criteria considered for rewarding the employees for their
good service.
Answer
1.
Reward System. In forming an effective reward system, the service organisation
must:(a)

Establish how to create a committed and motivated workforce.

(b)
Decide who should be rewarded and recognized individual, team or
company as a whole.
(c)
Establish the need to recognise employees ie for providing improved
customer service or outstanding performance?
(d)
Recommend when the rewarding should be done ie as a continuous process
or on a one-off.
(e)

Formalize the form it should take, financial or non-financial.

(f)

Put in place a method to administer the reward scheme.

2.
Selection Criteria. These may be linked to a departments mission or core values or
positive behaviours. To help with this process, an employee survey can be conducted to
find out what qualities or attributes should be exhibited to be nominated to receive an
award. Also, input from management on the types of behaviours they want to be
recognized must be considered. Some examples of selection criteria are:-

3.

(a)

Teamwork.

(b)

Going the Extra Mile.

(c)

Customer Service.

(d)

Professional Development.

(e)

Award for Excellence.

(f)

Creativity and Innovation.

(g)

Performance Excellence.

(h)

Leadership.

(i)

Commitment.

(j)

Flexibility.

(k)

Innovativeness.

Criteria Considered for Rewarding the Employees for their Good Service.
(a)
Analysing and Surveying of Staff. This is a critical challenge for the firms
when it comes to motivate their employees. For this the firm must deeply understand
their employees as well as their culture. For this staff focus groups and also one-toone interviews for both current and existing employees must be conducted.

(b)
Build up a Checklist of Service Quality. This checklist helps the
organisation in showing how the customer satisfaction is linked to HR issues. It may
differ from firm to firm according to their size and internal factors. Many firms are
using Business Excellence model as such a diagnostic tool.
(c)
Creating a Motivational Environment by providing Training to the
Managers. Many organisations provide training to their managers in motivation and
leadership to:(i)

Make the workplace fun.

(ii)
Provide the specific and copious recognition for the task which
employees perform.
(iii)

Offer targeted and frequent rewards.

(iv)

Make communication influential and credible.

(v)

Reward the loyalty of employees.

(d)
Giving Positive Feedback. A well done and Thank you gesture from the
manager matters more for the employees than token or monetary reward.
(e)
Establishing a League Table of Service Performance. Nowadays many
organisations use survey for their customer satisfaction as well as use mystery
shopping to examine their performance. The most successful are those where
appreciation is given not just to the top performer employees but also to those
employees who make the best improvements over time in their firm.
(f)
Feedback to the Compliments and Comments of Customers. Firms keep
a customer correspondence folder in the reception area, publicizing positive letters
written by customers. Customers are contacted on a daily basis and publicised
internally.
(g)
Issue Achievement Certificates. An achievement certificate such as token
award is a highly prized thing for an employee when defined standards of customer
service and skills level are achieved.
(h)
Link Bonuses to Customer Satisfaction. For managers and service staff, a
variable element viz bonus payment is a very vital component. Bonuses are often
linked to the Profit Achievement.
(i)
Implement 360 degree Appraisal Method. Firms are encouraging input by
employees as well as customers into an all-round 360 degree feedback to link
satisfied customers to the satisfied employees.
(j)
Develop Customer Service Competencies as well as include Customer
Service in Performance Management. This implies setting out of well-defined
development and improvement targets to define the service competencies.
Customer Service is becoming more widespread as a valuable transferable
qualification and is regarded as a key measure in performance appraisal.
4.

The awards must be:(a)

Meaningful. To endure a motivating influence, rewards should be aligned with
the values, goals, and priorities that matter the most.
(b)
Adaptable. The diverse workplace demands alternatives. Consider creative
options to keep your program fresh. No single reward format works for everyone all
the time.

(c)
Relevant. Some personal dimension is essential to a good reward. No
matter how formal or informal, expensive or affordable, the relevance of any
recognition will be improved with a personal touch - its a little thing that makes a big
difference.
(d)
Timely. It is important that rewards respond to the behaviour they are
intending to reinforce. Dont let too much time pass or the reward may be devalued
and credibility eroded.

10

Question 6 Write a short note on the following:

A) Wage Policy Plan in India
B) Voluntary Retirement Scheme (VRS)
Answer
1.

Wage policy plan in India. The plans of wages in India are explained as follows:
(a)
First Plan (1951-1956). During this plan it was advocated that pre-war levels
of real wages should be restored as an initial march towards living wage by use of
enhanced productivity. Various measures for making wage adjustments like
reduction of disparities in income, reduction of gap between the current and living
wages, maintenance and standardization of wage differentials to provide incentives
were also suggested.
(b)
Second Plan (1956 - 1961). It was emphasised that improvement in wages
through increased productivity was due to efficiency on the part of the workers,
improved layout of plans and improvement in management practices.
(c)
Third Plan (1961 - 1966). During this period the wage policy of the preceding
two plans with respect to minimum wage fixation, reduction of disparities and wage
differentials were reinforced and the role of productivity in raising the living standard
of the workers was instituted.
(d)
Fourth Plan (1969 - 1974). There was no fresh direction or any shift of the
governments wage policy.
(e)
Fifth Plan (1974 - 1979). It was established that the reward structure of the
industrial employees in terms of wage and non-wage benefit must be related to
performance records in industrial enterprises.
(f)
Sixth Plan (1980 - 1985). It was established that there were clear variations
with respect to wages between the organized, unorganized, and urban and rural
sectors. The differences and inequalities resulted in social tensions and industrial
unrest.
(g)
Seventh Plan (1985 - 1990). During this plan the basic aim of the wage
policy was a rise in the levels of real income in union with increases in productivity,
and productive employment in skills, sectoral shifts in the desired directions and
reduction in disparities.
(h)
Eight Plan (1992 - 1997). Tis saw the formulation of wage policy involving
child labour, rural and bonded labour, women labour and interstate migrant labour,
etc.

2.
Voluntary Retirement Scheme (VRS). VRS is the most common method which is
used by organizations to reduce excessive staff and has become a prime means of
downsizing. It helps the employer not only to compete and survive in this current business
scenario but also improve his/her performance. It is also known as Voluntary Separation
Scheme, Golden Handshake and Early Separation Scheme. VRS is a scheme whereby the
employee is offered to voluntarily retirement from his services before his retirement date,
subject to certain conditions. Though the criteria of eligibility of VRS may differ from
organization who have either served 10 years of working or attained 40 years of age. Thus,
the employee who opt for this scheme are permitted to get 45 days of benefits for each
completed year of working or monthly benefits during retirement time which is multiplied
with service months that are left before the date of working whichever is less.