SALARY AND COMPENSATION

Term Report
Report by:
Faryaz Ali Shaikh
College of Business Management, IoBM Karachi.
INTRODUCTION TO STUDY & METHODOLOY
Stateme!t o" the pro#lem$ %
The following analysis has been made eeping in !iew the human resource practices being
followed in organi"ations mainly #alary and Compensation. To achie!e this purpose, a data
analysis has been presented to help e$amine the whole compensation system in Reliance
Insurance Company %imited.
O#&e'ti(e) a!* )'ope o" the St+*y:
The scope of the analysis re!ol!es around the following main ob&ecti!es:
Compensation #ystem of the organi"ation
To Calculate corporate past performances
Metho*olo,y$ %
The -+e)tio!!aire method is adopted for data collection from the selected organi"ation
representati!e with the help of 'uestionnaire. (ther sets of information were collected
through secondary sources, i.e. the organi"ations) websites. #tructured inter!iew is also
conducted. *nnual report is being used to calculate (rgani"ation)s corporate
+erformances.
Importa!'e o" the Re)ear'h$ %
This research has a great importance. It will benefit not &ust one department but to the
organi"ation as a whole.
*s this report carries critical analysis of the compensation and salary structure, it will
help to gi!e information regarding all the areas of compensation and benefits at RIC.
It also focuses attention of the management on the area, which needs greater
attention and modification.
It also helps in identifying the weanesses of the structure, which needs to be
modified.
It also pro!ides an outline plan to remo!e weanesses of the compensation and
benefit structure and therefore increase the o!erall effecti!eness of the compensation
and benefits structure of RIC.
It pro&ects the future corporate personnel e$penditure.
I!tro*+'tio! o" the 'ompa!y
Reliance Insurance Company %imited, was incorporated in +aistan in the year ,-.,
with a share capital of Rs. /.0 Million by two leading industrial houses of +aistan,
namely *l12oor 3roup and *min Bawany 3roup. *l12oor 3roup is headed by renowned
industrialist Mr. Ismail 4. 5aaria, who is also the chairman of Reliance Insurance, while
*min Bawany 3roup is headed by Mr. Mohammad *min *hmed Bawany, who is also
the 6irector of Reliance Insurance. Both the groups ha!ing successfully implemented a
number of pro&ects, are currently leading industrial groups of +aistan.
The +resent *uthorised Capital of the Company is R)./00 Millio! while paid1up capital
is R). 123.44/ Millio!.
5Relia!'e I!)+ra!'e5 Completed 43 Year) of 7uality ser!ice in 2o!ember,8009 and is
celebrating its #il!er :ubilee and are e$tremely thanful to all those who ha!e cataly"ed
our success story.
Reliance is one of the leading 3eneral Insurance Company of +aistan ha!ing a networ
of 8. branches at all important places throughout +aistan employing a full time wor
force of 80; persons. It underwrites all classes of 3eneral Insurance and en&oys
reputation second to none. *part from the traditional co!ers such as <ire, *ccident,
Motor, Marine =Import and >$ports?, %oss of +rofits, +ersonal *ccident, 3roup
4ospitali"ation, @ormenAs Compensation, Burglary, Cash1in1#afe or in Transit etc., it
also transacts non1traditional co!ers such as Machinery Breadown and %oss of profits
following Machinery Breadown, Contractors *ll Riss, >rection *ll Riss, Bond and the
lie.
#ince its establishment, Reliance has progressed smoothly and steadily. Its 3ross
+remium income has increased from Rs. (ne Million in ,-.; to Rs. /8B... Million in
800B, while the +re1Ta$ profit has increased from Rs. 0.,C Million in ,-.; to Rs. .0.B;
Million in 800B. *t the end of 800B 3eneral Reser!e stood at Rs. B8./0 Million and
Technical Reser!es at Rs. 89;.8C Million.
Reliance has been assigned Insurer <inancial #trength =I<#? rating of 6A%6 by both the
recogni"ed rating agencies of +aistan. i1e 7CR%8IS Rati!, Compa!y Limite* &
9aki)ta! Cre*it Rati!, A,e!'y Limite*. Their +ress Release 6ated 8-th :une,800B
and ,0th :uly,800B respecti!ely is a!ailable on their website i.e. www.&cr!is.com.p and
www.pacra.com for !isitors. <ollowing sur!eillance of rating based on 800B financials,
:CR1DI# Credit Rating Company %imited =:C>1DI#? !ide its +ress Release dated ,0th
#eptember, 8009 upgraded a A+ositi!eA outloo to 5Relia!'e5 whilst maintaining rating at
A*1A = #ingle * Minus ?.
Reliance Insurance Company has the following Dision E Mission goals and is
continuously stri!ing for e$cellence.
8ISION $ To be recogni"ed as a professional and dependable business entity committed
to play a meaningful role in the de!elopment of insurance industry in +aistan and to
safeguard the legitimate interests of all staeholders, namely,policy1
holders,shareholders,reinsurers,employees and all other business associatesFpartners.
MISSION $ To pro!ide 7uality ser!ice and protection to its Clients aiming at achie!ing a
respectable !olume of business and become a prominent player through good
go!ernance and sound professionalism focussing to become a well1nown and
respected Corporate entity in the eye of #ociety and 3o!ernment.
:oar* O" Dire'tor) $
1. I)mail H. ;akaria < Chairma! =
4. Mohamme* Ami! Ahme* :a>a!y
?. A. Aziz Ayoo#
@. Ir"a! ;akaria :a>a!y
/. Mohamma* Omer A. :a>a!y
3. ;ohair ;akaria
2. Ahme* Ali A. :a>a!y
A. Noor M. ;akaria
B. A)h"aC 9atel
10. Y)i! Si**ik
11. A. Razak Ahme* < Chie" EDe'+ti(e & Ma!a,i!, Dire'tor =
Human Resources of Relia!'e I!)+ra!'e Compa!y
There is possibly no greater challenge in 4R than recruiting, moti!ating, engaging,
de!eloping and rewarding so many people in a 3roup with so many brands. The si"e of
the challenge is matched only by the success of their 4uman Resources approach: they
act as internal consultants across the 3roup, creating and deli!ering business1specific
solutions. Their remit co!ers e!ery issue in!ol!ing staff recruitment, training,
de!elopment, reward, career building, and change management. They need to
understand the specifics of each business and deli!er solutions which are consistent
across the 3roup yet sensiti!e to indi!idual re7uirements. @ith a consultancy 4R model
well established, 4R ser!ices are deli!ered to the business through Business +artners,
pro&ect1based 4R Consultants and a range of technical specialists.
@ithin RIC there are 4R professionals woring within the 3roupAs Central <unctions as
well as aligned in the business. There are also specialist technical areas such as
Remuneration and Benefits, +olicy and >mployment, 4R #hared #er!ices, 4ealth,
#afety and @ellbeing, 3roup Resourcing and 3roup (rgani"ational >ffecti!eness.
The greatest ad!antages organi"ations ha!e are their human resource. +eople ha!e uni7ue
capabilities and can accomplish great things howe!er they need a supporti!e and
encouraging en!ironment. They can be trained to perform uncountable tass but they need
the in!estment that they can de!elop the specific sills and nowledge for the re7uired tass.
There are different factors that affect the human resource of any company. >$ternal factors,
which are the %abor marets, employment system. It is necessary to enhance the sills of the
manpower and train them to meet the re7uirements of the &obs, so that the company does
not need to hire people from out side. >conomic and #ocial factors affect the lower economic
rewards for rotations. >n!ironmental factors affect in a way that the companies lie
multinationals hire people from abroad, so they need to mae those employees ad&ust to their
organi"ational culture and procedures.
COM9ONENTS OF COM9ENSATION
SYSTEMS
Compensation will be percei!ed by employees as fair if based on systematic
components. Darious compensation systems ha!e de!eloped to determine the !alue of
positions. These systems utili"e many similar components including job descriptions,
salary ranges/structures, and written procedures.
The components of a compensation system include:
7o# De)'riptio! * critical component of both compensation and selection
systems, &ob descriptions define in writing the responsibilities, re7uirements,
functions, duties, location, en!ironment, conditions, and other aspects of &obs.
6escriptions may be de!eloped for &obs indi!idually or for entire &ob families.
7o# A!aly)i) The process of analy"ing &obs from which job descriptions are
de!eloped. :ob analysis techni7ues include the use of inter!iews,
7uestionnaires, and obser!ation.
7o# E(al+atio! * system for comparing &obs for the purpose of determining
appropriate compensation le!els for indi!idual &obs or &ob elements. There
are four main techni7ues namely Raning, Classification, <actor Comparison,
and +oint Method.
9ay Str+'t+re) Gseful for standardi"ing compensation practices. Most pay
structures include se!eral grades with each grade containing a minimum
salaryFwage and either step increments or grade range. #tep increments are
common with union positions where the pay for each &ob is pre1determined
through collecti!e bargaining.
Salary S+r(ey) Collections of salary and maret data. May include a!erage
salaries, inflation indicators, cost of li!ing indicators, salary budget a!erages.
Companies may purchase results of sur!eys conducted by sur!ey !endors or
may conduct their own salary sur!eys. @hen purchasing the results of salary
sur!eys conducted by other !endors, note that sur!eys may be conducted
within a specific industry or across industries as well as within one
geographical region or across different geographical regions. Know which
industry or geographic location the salary results pertain to before comparing
the results to your company.
9oli'ie) a!* Re,+latio!) is also an important component that has their
implications and so should be taen care of while designing the system.
Compe!)atio! 9la!)
De(elop a pro,ram o+tli!e.
#et an ob&ecti!e for the program.
>stablish target dates for implementation and completion.
6etermine a budget.
De)i,!ate a! i!*i(i*+al to o(er)ee *e)i,!i!, the 'ompe!)atio! pro,ram.
6etermine whether this position will be permanent or temporary.
6etermine who will o!ersee the program once it is established.
6etermine the cost of going outside !ersus looing inside.
6etermine the cost of a consultantAs re!iew.
De(elop a 'ompe!)atio! philo)ophy.
<orm a compensation committee =presumably consisting of officers or at least
including one officer of the company?.
6ecide what, if any, differences should e$ist in pay structures for e$ecuti!es,
professional employees, sales employees, and so on =e.g., hourly !ersus
salaried rates, incenti!e1based !ersus non contingent pay?.
6etermine whether the company should set salaries at, abo!e, or below maret.
6ecide the e$tent to which employee benefits should replace or supplement cash
compensation.
Co!*+'t a &o# a!aly)i) o" all po)itio!).
Conduct a general tas analysis by ma&or departments. @hat tass must be
accomplished by whomH
3et input from senior !ice presidents of mareting, finance, sales, administration,
production, and other appropriate departments to determine the organi"ational
structure and primary functions of each.
Inter!iew department managers and ey employees, as necessary, to determine
their specific &ob functions.
6ecide which &ob classifications should be e$empt and which should be
none$empt.
6e!elop model &ob descriptions for e$empt and none$empt positions and
distribute the models to incumbents for re!iew and commentI ad&ust &ob
descriptions if necessary.
6e!elop a final draft of &ob descriptions.
Meet with department managers, as necessary, to re!iew &ob descriptions.
<inali"e and document all &ob descriptions.
E(al+ate &o#).
Ran the &obs within each senior !ice presidentAs and managerAs department, and
then ran &obs between and among departments.
Derify raning by comparing it to industry maret data concerning the raning,
and ad&ust if necessary.
+repare a matri$ organi"ational re!iew.
(n the basis of re7uired tass and forecasted business plans, de!elop a matri$
of &obs crossing lines and departments.
Compare the matri$ with data from both the company structure and the industry
wide maret.
+repare flow charts of all rans for each department for ease of interpretation
and assessment.
+resent data and charts to the compensation committee for re!iew and
ad&ustment.
Determi!e ,ra*e).
>stablish the number of le!els 1 senior, &unior, intermediate, and beginner 1 for
each &ob family and assign a grade to each le!el.
6etermine the number of pay grades, or monetary range of a position at a
particular le!el, within each department.
E)ta#li)h ,ra*e pri'i!, a!* )alary ra!,e.
>stablish benchmar =ey? &obs.
Re!iew the maret price of benchmar &obs within the industry.
>stablish a trend line in accordance with company philosophy =i.e., where the
company wants to be in relation to salary ranges in the industry?.
Determi!e a! appropriate )alary )tr+'t+re.
6etermine the difference between each salary step.
6etermine a minimum and a ma$imum percent spread.
#lot the remaining &obs.
Re!iew &ob descriptions.
Derify the purpose, necessity, or other reasons for maintaining a position.
Meet with the compensation committee for re!iew, ad&ustments, and appro!al.
De(elop a )alary a*mi!i)tratio! poli'y.
6e!elop and document the general company policy.
6e!elop and document specific policies for selected groups.
6e!elop and document a strategy for merit raises and other pay increases, such
as cost1of1li!ing ad&ustments, bonuses, annual re!iews, and promotions.
6e!elop and document procedures to &ustify the policy =e.g., performance
appraisal forms, a merit raise schedule?.
Meet with the compensation committee for re!iew, ad&ustments, and appro!al.
O#tai! top eDe'+ti(e)5 appro(al o" the #a)i' )alary pro,ram.
6e!elop and present cost impact studies that pro&ect the e$pense of bringing the
present staff up to the proposed le!els.
+resent data to the compensation committee for re!iew, ad&ustment, and
appro!al.
+resent data to the e$ecuti!e operating committee =senior managers and
officers? for re!iew and appro!al.
Comm+!i'ate the "i!al pro,ram to employee) a!* ma!a,er).
+resent the plan to the compensation committee for feedbac, ad&ustments,
re!iew, and appro!al.
Mae a presentation to e$ecuti!e staff managers for appro!al or change, and
incorporate necessary changes.
6e!elop a plan for communicating the new program to employees, using slide
shows or mo!ies, literature, handouts, etc.
Mae presentations to managers and employees. Implement the program.
6esign and de!elop detailed systems, procedures, and forms.
@or with 4R information systems staff to establish effecti!e implementation
procedures, to de!elop appropriate data input forms, and to create effecti!e
monitoring reports for senior managers.
4a!e the necessary forms printed.
6e!elop and determine format specifications for all reports.
>$ecute test runs on the human resources information system.
>$ecute the program.
Mo!itor the pro,ram.
Monitor feedbac from managers.
Mae changes where necessary.
<ind flaws or problems in the program and ad&ust or modify where necessary.
RES9ONSES OF -UESTIONNAIRE ANALYSIS
Re>ar* Ma!a,eme!t$ Dia,!o)ti' Che'kli)t
<ollowing were the responses and e$planation gi!en by the organi"ation management
on the 7uestions regarding the compensation management and reward processes in the
organi"ation
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