TATA Motors: Compensation

Restructuring

Group 1
Aarushi Chaturvedi
Apurba Adhikari
Biswajyoti Chaudhary
Nikita Jaiswal
Mehul Madan
Sanjana Ramavarapu
Peculiarities in Pay Mix
PCA was initially offered to all employees who
were transferred to the Pantnagar plant but was
discontinued eventually. But the PCA component
was not done away with in their salaries. This
allowance made their salary higher in the same
grade whereas the new employees joining the
Pantnagar plant were not given this allowance
which led to salary discrepancies in the new
locations.
 Employees being transferred from a higher
grade city to a lower grade often lost out on
HRA which led to significant decrease in
their salary which often led to rejection of
transfer orders and sometimes, outward
mobility. Such employees, often with
families, want their children to be offered
the best amenities which is why they
decided to keep their families in the cities
itself. This led to more costs for the
employee.
 GETs generally used the experience at TATA Motors as a
Launchpad for their future management endeavors. Thus,
having a Superannuation scheme for them did not make sense
because they did not see real benefit in the scheme and did not
work to motivate them because young employees like GET are
more attracted to a greater cash component in their salaries.
There was a significant difference in the salaries received by
the GETs at Jamshedpur and Mumbai owing to the Cost of
Living Adjustments. Since Jamshedpur was a less attractive
location than Mumbai, it was hard to keep the GETs motivated
to keep working in Jamshedpur, and that too at a lower salary.
Employees who were externally hired were paid more than the
incumbent employees which leads to the existing employees
questioning their loyalty.
Understanding Pay Mix:

Basic: Forms major part of the salary

Employee Contribution to PF: Both employer
and employee contribute a 12% equivalent of
the employee's basic salary every month
toward employee's pension and provident
fund. An interest of about 8.5% gets accrued
on it.
TAX-EXEMPT COMPONENT
HRA: This can be partially or completely exempt from taxes
Medical Reimbursement: The Rs.15,000 you can claim is for each

tax year that starts on April 1 and ends on March 31 next year. The
remaining unclaimed amount of the Rs.15,000 is added to your
taxable salary
Conveyance Allowance: Starting FY 2015-16, this limit has been

increased to Rs.19,200 per annum

Leave Travel Allowance: Exemption once every two years, for

travel anywhere in India

Child Education Allowance
Child Hostel Allowance
Taxable Component
Special Allowance: It is fully taxable
Personal Compensatory Allowance
Bonus: Bonus, performance incentive, whatever may

be its name is 100% taxable

Executive Allowance: Grade-wise entitlement to

executives
Deciding on Pay Ranges:

A pay range is attached to each grade. This allows scope for pay progression,
which is related to performance, competence or contribution.
Span: Pay ranges may be described in terms of their span (the percentage by

which the highest point exceeds the lowest point). This is usually between
20 per cent and 50 per cent (30 to 40 per cent is typical)
Reference Point: The mid-point of the pay range for a grade

Differentials: Differentials between pay ranges the percentage by which

the mid-point of a range is higher than the mid-point of the range below
are typically between 15 per cent and 20 per cent but they can be as high as
25 per cent
Overlap: Measured by the proportion of a grade which is covered by an

adjacent grade. An overlap provides more flexibility. It enables recognition

to be given to the fact that a highly experienced individual at the top of a
range may be contributing more than someone who is still in the learning
curve portion of the next higher grade.
Pay Level Solution:
Existing Pay Ranges Overlap
A,B: (204-122/204-104)*100=82%
Similarly large overlap exists between pay grades and hence broader pay
range is a better option.
Ideally taking into account competitor data the overlap should be around 25-
30%. To form the broader pay bands, we clubbed the existing grades and
reduced the overall overlap between the bands.
Overlap between new pay grades:
(233-x/233-104)*100=25
=>233-x=32 =>x=201, then first pay band is 104 to 233 then 201 to 634
Similarly we can calculate the subsequent pay bands.
Movement inside a particular pay band will be determined by seniority and
performance rating.
Pay Grade Range
A 104-204
B 122-196
C 144-235
D 136-266 New Pay Range
Grades
E 179-335
A 104-233
F 212-435
B 201-634
G 277-634
C 525-840
H 416-662
D 831-1050
I 528-748
E 1035-1360
J 781-840
K 831-1053
M 1360
N 1206
CHANGES IN THE PAY MIX
HRA: to be given to only those employees who
live in rented houses, according to grades
Instead of Executive Allowance, Company car
can be given to executives (business use of
car can be deducted in Income Tax)
All tax exempt components to be retained
Either Conveyance Allowance or Executive Car
will be given
Personal Compensatory Allowance and Special
Allowance will be clubbed as one
CHANGES (contd.)
Special Allowance will be given to
compensate for change from metro cities to
towns
For changes from towns to metro cities

dearness allowance will be increased to

reflect the cost of living
Overall salary will remain same in case of

transfer
Child Hostel Allowance will be given only if

the child lives in the hostel

NEW PAY MIX
Basic
DA

HRA

Medical Reimbursement

Conveyance Allowance/Executive Car

LTA

Child Education Allowance

Child Hostel Allowance

Bonus

Special Allowance