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MU0015 COMPENSATION AND BENEFITS Question: - 1 what do you mean by Compensation Management?

Explain the non- compensation dimensions. Answer: - Compensation Management Compensation in its simplest form is the payment that one gets for the work done by him either on full time or on part time basis. The issue of compensation has always been a critical issue for both the employer and the employee. Money is a crucial incentive and can be directly or indirectly stated as a medium of fulfilling human needs. In words of I. Kessler, a renowned compensation manager, “compensation management refers to payment refers to payment system which determines employee wage or salary, direct or indirect rewards”. Compensation dimensions Pay for work and performance: This includes short-term monetary payments made on weekly, monthly and annual periods in form of awards or bonuses to allow employees to make payment for their desired product and services. Pay for time not worked: It has been observed from past experience that the number of days worked per year and the number of hours worked per week have decreased. Disability income continuation: An employee becomes unable to perform his normal dulties when he incurs some health or accident disabilities. Medical, surgical and hospital bills creates an additional burden for him in addition to his ongoing self and family expenditure. Deferred income: Different types of programmes, like savings plans, social security, employer-provided pension plans, annuities, and supplemental income plans provide after retirement income to the employee. Spouse (family) income continuation: In compensation, there are some plans, which are designed to provide the dependents of the employee with income source in case of his death or permanent disability to work.

Health, accident, and liability protection: At the time of health problems, employee’s main focus is not only concerned with income continuation but also associated with payments for medicinal treatments to overcome disability or illness. Income equivalent payments: In addition to basic pay and allowances, the employees are provided with some additional benefits. These benefits are attached to their designation either in form of monetary or non-monetary incentives. Organizations develop compensation policy: The compensation system centre’s on sound principles of compensation administration. Question: - 2 discuss the classification of Employee Benefits. What are the factors that influence the choice of a benefit program? Answer: Classification of Employee Benefits Disability income continuation: The major components, which are included in the disability income continuation plans, are as follows: Compensation of workers Social security Long term and short term disability Sick leave Death due to accident and dismemberment Travel accident insurance Spouse and family income protection: The event of such misfortune the major components which are available in order to protect the family of the employees are as follows: Health care coverage Life insurance Worker’s compensation Travel accident insurance Retirement plans Medicare Tax sheltered annuity

Health and accident protection: In order to maintain a normal standard of living when some unusual health-related calamity occurs, the organization give their employees a wide range of insurance related services in order to help to their families. Property and liability protection: Various components of property and liability protection are as follows: Group legal Employee liability Group auto Group umbrella liability Factors Influencing Choice of Benefit Program Influence of organized labour: Sometimes the pressure of the union resulted in the broadening or establishment of the benefit plans of the employee. Labour unions have also influenced the benefits of the employees of non-union. In order to discourage and demotivate their employees, some employers may offer generous benefit plans. Wage controls: Employee benefit program turned out to be a very essential factor for attracting and retaining the employees in labour market which is characterized by less unemployment. Therefore, when wage controls were established in 1970s, there were no growth of employee benefit program due to higher employment rate and short wage control duration. Cost advantages: Due to the economics that is associated with the group of administration, benefits are usually gained at a lower cost through group arrangements rather than with the help of separate contracts which are purchased by the individual employees. Inflation: Inflation is also another important factor that affects the benefit program of the employees. Tax advantages: The favourable tax treatment is provided by the Internal Revenue Code to the employer of the company for the types of benefits he/she offer to its employees.

Question: - 3 Suppose you are a HR Manager and you are asked to develop an effective Incentive Scheme for your organization. What are the Answer:Pre-requisites of Effective Incentive Schemes 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 realize these advantages there must be some safeguards known as pre-requistions of effective incentive plans. These pre-requisites are as under: The workers’ co-operation is mandatory in execution of incentive schemes. The co-operation is required in respect of 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 pre-requisites relating to job security, earnings and dispute settlement regarding work standars. The incentive scheme must be influenced by scientific work measurement like the standards set must be practical and inspiring. In addition, the employees must be provided with necessary resources to meet these standards. All indirect staff like foremen, helpers, supervisors, and canteen staff charge hands etc. should also be roofed under incentive schemes. A management commitment to oversee the outlay and schedule the proper administration of plans should be formed. An incentive plan should be first planned properly and then implemented carefully to achieve desired results.

Question: - 4 Define Pay Structure. What are its objectives? Explain the major decisions involved in designing and setting competitive pay structures. Answer: - A pay structure refers to the collection of salary grades, bands or levels, connection of related jobs within a series or hierarchy which helps the organisation in providing a framework for the implimentation of various policies and reward strategies within the organisation. Various salary structure are connected with varying types of salary progression arrangements. Objectives of pay structure To balance strategy of reward with the strategy of the business fo as to encourage and motivate high performance livel people. To bring out clarity and order between organisation and its people in managing career progression as well as increase in pay. To make transparency and ensure lawfulness and fairness while designing the pay structure. Major decisions in designing and setting competitive pay structures 1. Specifying the competitive pay policy of the employer with the help of surveys which gives data for converting the pay policy into pay structures, pay levels and pay mix. 2. Defining the purpose of survey which is conducted because of the following reasons: To analyse pay related problems and establish pay structure To estimate labour price of services and product market competitors and to select the market competitors which are based on similar skills, same services and products as well as employees within the similar geographical area. 3. Selection of jobs in the survey with the help of two approaches: Low - high approach which identifies lowest and highest paid benchmark jobs for the relevant competencies in the relevant market and to use the salaries for these jobs as anchors basically

for the skill based structures. Benchmark job approach includes the entire structure of the job which comprises of all the key functions and levels that can be matched with the descriptions of the benchmark jobs. 4. Designing the survey with the help of three categories of data : Providing information about the nature of the firm. Providing information about the total pay system Specifying compensation data on each incumbent in the jobs understudy 5. Interpreting the survey results by analysing and assessing the outcomes as well as using statistics in order to construct the market line so as to check the accuracy of the job matches, the anomalies, age of data and the nature of the firms. 6. Balance the competitiveness with internal alignment which includes use of bands, ranges and flat rates which offer flexibility so as to deal with pressures from external markets and differences among firms. Question:- 5 Explain the process of designing a successful Reward Strategy . Answer:- Process of Designing a Successful Reward Strategy The steps that are essential in designing the effective reward strategy in the service sector organisations which are as follows: Step 1: Review changes to the size and structure of job roles As the firms finances are re – built and re – organized, the boundaries of many job roles are likely to be extended. Thus both the breadth and depth of the roles may modify and hence, evaluation techniques and effective job design will help the organization to revalue these roles more clearly and fairly. Step 2: Check the validity of pay and grading structure The second step helps the organization to find out and check whether

the old compensation structure is suited to the new compensation structure and its impact on grades and levels and also its influence on the career and pay progression. Step 3: Obtain accurate and current market data The third step is to obtain accurate and current market data as the organisations must keep their eyes on the market trends when the economy begins to recover so as to reduce the risk of losing competent people when the job market ease. Step 4: Review the cost effectiveness of the provisions made on benefit and incentive scheme The next step focuses on the reviewing the cost effectiveness on the scheme of incentive and benefits so as to get the best rate. Step 5: Re-communicate the value of total reward package Most of the employees in the organization are unaware of the worth of their benefits. So for this organization have to work hard in order to communicate the total worth of the reward package in a more clear way to their staff. Step 6: Ensure reward strategy is equal to pay compliant In the last step, the organization must ensure that their reward strategy must equal to the pay compliant. Question:-6 Write a short note on the following: a) Wage policy plan in India b) Voluntary retirement Scheme(VRS) Answer:- Wage Policy Wage policy can be defined as the principal which act as guidelines for determination of a wage structure. It relates to all systematic efforts of the Government in relation to a national wage and structure of wages.

The wage policy in India is built around the following fundamental principles: Equal compensation for an equal work performed Providing living wages for employees Payment of wages without any deduction on the appointed dates Use of collective bargaining to resolve wage related issues As per legal provisions paying 8.33% as statutory bonus Determination of fair wages above minimum wages in respect to labour and place of industry in the financial system Wage policy in India The plans of wages in India are explained as follows:

The first plan (1951 to 1956) The second plan (1956 to 1961) The third plan (1961 to 1966) The fourth plan (1969 to 1974) The fifth plan (1974 to 1979) The sixth plan (1980 to 1985) The seventh plan (1985 to 1990) The eighth plan (1992 to 1997)

Voluntary Retirement Scheme (VRS) Voluntary Retirement Scheme is the most common method which is used by organisations to reduce excess manpower. It helps the employer not only to compete and survive in this current business scenario but also improve his/her performance. This scheme also becomes the prominent means of downsizing of employees. VRS is also known by the names such as Voluntary Separation Scheme, Golden Handshake and Early Separation Scheme. Though the criteria of eligibility of VRS may differ from organisation

to organisation it is given only to those employees who have either served 10 years of working or attained 40 years of age. Thus, the employees who opt for this scheme are permitted to get 45 days of benefits for each completed year of working or monthly benefits during retirement time which is multiplied with service months that are left before the date of working whichever is less.