Wage and Salary Administration

Mrs. Nora Bhatia

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Compensation : concept and context

Compensation
Why :
Rewards that motivate employees to perform Help foster the values, culture, behavior required Achievement of business objectives Attract and retain talent Sense of commitment to the orgn Acquire a competitive advantage

Compensation Direct compensation : financial remuneration, usually cash. Basic, DA, Shift allowance, bonus, incentives etc Indirect compensation : benefits like PF, Pension, medical, health insurance, sick leave

Compensation Internal equity : wage differentials reflect the degree of difficultly. Corresponds to the difference in the evaluated contents of the job External equity : wage rate in an orgn is commensurate with wage rate for similar jobs in the industry, region

Functions & responsibilities of a compensation program Formulate compensation plans Job evaluation system Ascertain going rates for jobs across the industry Make policy recommendations Supervise and maintain records pertaining to all matters of compensation Framing a compensation policy aligned to business goals and objectives Promote team and unit performance
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Corporate compensation policy Strategy of wage increase : productivity linked / cost reduction factor Rationality and hygiene factors : linked to job outcome Internal equity External equity Review : evolutionary process Managerial compensation
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Issues and current trends Broad banding : greater flexibility Pay for knowledge, skills and competency (Ph.D, MBAs) Team pay plans Coping with change : increasing expectations, multi-skilled

Wage Theories Subsistence theory :

David Ricardo Price of labour depends on the subsistence of labour Price equals to the amount of commodities required to feed, clothe a worker and to subsist and perpetuate his race Labor like any commodity can be bought and sold Supply less : higher than subsistence wage, more children, back to subsistence wage Supply high : lower than subsistence wage, fewer children, back to subsistence wage
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Wage Theories
Surplus value theory : Karl Marx Tendency of the capitalist, chronic unemployment and existence of industrial reserve army that kept wages at subsistence level Supply of labor always tended to be kept in excess Worker did not get full compensation for work done Rate of surplus labor which is the ratio of surplus labor to necessary labor is called rate of exploitation

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Wage Theories
Wage fund theory : Adam smith Wage fund assumed to be fixed Any change in wages was due to the number of workers seeking employment Bargaining Theory : John Davidson Upper limit (beyond which employer will incur losses)

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Wage Theories
Purchasing power theory : High wage rate : more purchasing power, increase in demand and thus higher output Low wage rate : less purchasing power, fall in demand will affect employment and output

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Behavioral theories

What motivate people to work ? A satisfied need is not a motivator

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Behavioral Theories
Hierarchy of needs : Abraham Maslow

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Behavioral Theories
Two factor theory Friedrich Herzberg Hygiene factors company policy and administration supervision technical salary working conditions If absent will lead to employee dissatisfaction

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Behavioral Theories
Two factor theory Friedrich Herzberg Motivating factors recognition work itself responsibility advancement If present can lead to employee satisfaction and motivation
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Wage Theories
ERG theory
Clayton Alderfer Existence (survival or physical being Relatedness (interpersonal) Growth (personal development)

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Process theories
Motivation and effort : the relation Expectancy theory : Victor Vroom An individuals preference for a particular outcome Youngsters : single, unmarried, lesser need for childrens education, health benefits, travel concessions Senior employees : retiral benefits, health insurance,

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Equity theory Inequity occurs when a person perceives that the ratio of his/her outcomes to inputs and the ratio of a relevant others outcomes to inputs are unequal. Persons outcomes Persons inputs Others outcomes <=> Others inputs

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Key considerations : public policy Fix statutory minimum wages Equal pay for equal work Compensate for rise in cost of living Capacity to pay : Supreme court an employer who cannot pay minimum wages has no right to exist

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Key considerations : public policy

Practical problems : Minimum wage : organized and unorganized sector Possible to pay for ones need, not his greed Labour cost and productivity : ITC cost per cigarette at the same level for a 5-year period Merit and seniority progression : time bound promotions ? Motivation : money may not be everything but everything else is way behind Integrity : compensate them adequately enough to keep them out of temptation
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Legal framework of wage and salary administration

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 Minimum wage : not only for bare subsistence but also for preservation of efficiency and providing some measure of medical, education, etc Living wage : protection against ill-health, requirements of essential social heads, insurance against some future misfortune, etc Fair wage : Lower limit is minimum wage and upper limit is the capacity of the industry to pay. Between these two the actual wage depends on : prevailing wage rate, productivity of labour, place of the industry in the national economy
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Payment of wages Act : 1936 Payment of bonus Act 1965 Minimum Wages Act 1948 Equal remuneration Act, 1976 Payment of Gratuity Act 1972

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PAYMENT OF WAGES ACT, 1936

Purpose : To ensure regular and prompt payment of wages To prevent exploitation of wage earners by prohibiting arbitrary fines and deductions from wages

Application Applies to : persons employed in any factory, persons employed (otherwise than in a factory) upon any railway by a railway administration or, either directly or through a sub-contractor, by a person fulfilling a contract with a railway administration, and to persons employed in an industrial or other establishment specified in sub-clauses (a) to (g) of clause (ii) of section 2.
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PAYMENT OF WAGES ACT, 1936

Responsibility for payment of wages Every employer shall be responsible for the payment to persons employed by him of all wages required to be paid under this Act: in factories, if a person has been named as the manager of the factory under the Factories Act, 1948 in industrial or other establishments, a person responsible to the employer for the supervision and control of the industrial or other establishments upon railways (otherwise than in factories), if the employer is the railway administration and the railway administration has nominated a person in this behalf for the local area concerned. Fixation of wage-periods (1) Every person responsible for the payment of wages under section 3 shall fix periods (in this Act referred to as wage-periods) in respect of which such wages shall be payable. (2) No wage-period shall exceed one month.
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PAYMENT OF WAGES ACT, 1936

Wages to be paid in current coin or currency notes All wages shall be paid in current coin or currency notes or in both: PROVIDED that the employer may, after obtaining the written authorisation of the employed person, pay him the wages either by cheque or by crediting the wages in his bank account.

5. Time of payment of wages (1) The wages of every person employed upon or in(a) any railway, factory or industrial or other establishment upon or in which less than one thousand persons are employed, shall be paid before the expiry of the seventh day, (b) any other railway, factory or industrial or other establishment, shall be paid before the expiry of the tenth day, after the last day of the wage-period in respect of which the wages are payable: [PROVIDED that in the case of persons employed on a dock, wharf or jetty or in a mine, the balance of wages found due on completion of the final tonnage account of the ship or wagons loaded or unloaded, as the case may be, shall be paid before the expiry of the seventh day from the day of such completion.]
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PAYMENT OF WAGES ACT, 1936

Deductions which may be made from wages Deductions from the wages of an employed person shall be made only in accordance with the provisions of this Act, and may be of the following kinds only, namely: (a) fines; (b) deductions for absence from duty; (c) deductions for damage to or loss of goods expressly entrusted to the employed person for custody, or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default; [(d) deductions for house-accommodation supplied by the employer or by government or any housing board set up under any law for the time being in force (whether the government or the board is the employer or not) or any other authority engaged in the business of subsidising house- accommodation which may be specified in this behalf by the State Government by notification in the Official Gazette;] (e) deductions for such amenities and services supplied by the employer as the State Government 15[or any officer specified by it in this behalf] may, by general or special order, authorise.
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PAYMENT OF WAGES ACT, 1936

Limits on the total amount of deductions : Notwithstanding anything contained in this Act, the total amount of deductions which may be made under sub-section (2) in any wage-period from the wages of any employed person shall not exceed(i) in cases where such deductions are wholly or partly made for payments to co-operative societies under clause (j) of sub-section (2), seventy-five per cent of such wages, and (ii) in any other case, fifty per cent of such wages PROVIDED that where the total deductions authorised under sub-section (2) exceed seventy five per cent or, as the case may be, fifty per cent of the wages, the excess may be recovered in such manner as may be prescribed.

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PAYMENT OF WAGES ACT, 1936

Fines (1) No fine shall be imposed on any employed person save in respect of such acts and omissions on his part as the employer, with the previous approval of the State Government or of the prescribed authority, may have specified by notice under subsection (2). (2) A notice specifying such acts and omissions shall be exhibited in the prescribed manner on the premises in which the employment is carried on or in the case of persons employed upon a railway (otherwise than in a factory), at the prescribed place or places. (3) No fine shall be imposed on any employed person until he has been given an opportunity of showing cause against the fine, or otherwise than in accordance with such procedure as may be prescribed for the imposition of fines. (4) The total amount of fine which may be imposed in any one wage-period on any employed person shall not exceed an amount equal to three per cent of the wages payable to him in respect of that wage-period. (5) No fine shall be imposed on any employed person who is under the age of fifteen years. (6) All fines and all realisations thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under section 3 in such form as may be prescribed; and all such realisations shall be applied only to such purposes beneficial to the persons employed in the factory or establishment as are approved by the prescribed authority. 30 .

PAYMENT OF WAGES ACT, 1936

Deductions for payments to co-operative societies and insurance schemes Deductions under clause (j) 27[and clause (k)] of sub-section (2) of section 7 shall be subject to such conditions as the State Government may impose. Deductions for payment of Life Insurance Premium Subject to the following conditions : a written authorization of the employed person is obtained such conditions as may be specified by the State Govt. Deductions for payment to Post Office Savings Bank Subject to the following conditions : a written authorization of the employed person is obtained such conditions as may be specified by the State Govt. Deductions for payment to Prime Ministers National Relief Fund or any other Fund Subject to a written authorization of the employed person is obtained
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Minimum Wages Act 1948

The need Purpose Procedure for fixing and revising minimum wages Committee method Notification method (2 months Advisory Board Maintenance of records and display of notices : Name, nature of work, wages paid, receipts by employees Claims and procedure : Time for making the claim (within 6 months) Procedure for deciding the claims
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THE PAYMENT OF BONUS ACT, 1965

The Scheme : To impose statutory obligation upon the employer of every establishment covered by the Act to pay bonus to employees in that establishment To define the principle of payment of bonus as per prescribed formula To provide for payment of minimum and maximum bonus and link the payment of bonus with the scheme of set-off and set-on To provide for enforcement of the liability for payment of bonus. Application. shall apply to every factory; and every other establishment in which twenty or more persons are employed on any day during an accounting year. Scope : The act covers all persons who are employed for hire or reward to do any work, skilled, manual, supervisory, managerial, administrative, technical or clerical work drawing a salary or wage not exceeding Rs 10,000/- per month in any factory or establishment employing 20 or more persons. The act covers a probationer but not an apprentice.

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THE PAYMENT OF BONUS ACT, 1965

Computation of available surplus. The available surplus in respect of any accounting year shall be the gross profits for that year after deducting therefrom the sums referred to in section 6; an amount equal to the difference between - (i) the direct tax, calculated in accordance with the provisions of section 7, in respect of an amount equal to the gross profits of the employer for the immediately preceding accounting year; and (ii) the direct tax, calculated in accordance with the provisions of section 7, in respect of an amount equal to the gross profits of the employer for such preceding accounting year after deducting therefrom the amount of bonus which the employer has paid or is liable to pay to his employees in accordance with the provisions of this Act for that year.

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THE PAYMENT OF BONUS ACT, 1965

Sums deductible from gross profits.The following sums shall be deducted from the gross profits as prior charges, namely:Depreciation : any amount by way of depreciation admissible in accordance with the provisions of subsection (1) of section 32 of the Income-tax Act, or in accordance with the provisions of the agricultural income-tax law, as the case may be Development rebate : any amount by way of 1[development rebate or investment allowance or development allowance] which the employer is entitled to deduct from his income under the income-tax Act; direct taxes subject to the provisions of section 7, any direct tax which the employer is liable to pay for the accounting year in respect of his income, profits and gains during that year; such further sums as are specified in respect of the employer in the 2[Third Schedule].

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THE PAYMENT OF BONUS ACT, 1965

Eligibility for bonus.Every employee shall be entitled to be paid by his employer in an accounting year, bonus, in accordance with the provisions of this Act, provided he has worked in the establishment for not less than thirty working days in that year. Disqualification for bonus.Notwithstanding anything contained in this Act, an employee shall be disqualified from receiving bonus under this Act, if he is dismissed from service for - (a) fraud; or (b) riotous or violent behaviour while on the premises of the establishment; or (c) theft, misappropriation or sabotage of any property of the establishment.

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THE PAYMENT OF BONUS ACT, 1965

Payment of minimum bonus.Subject to the other provisions of this Act, every employer shall be bound to pay to every employee in respect of the accounting year commencing on any day in the year 1979 and in respect of every subsequent accounting year, a minimum bonus which shall be 8.33 per cent of the salary or wage earned by the employee during the accounting year or one hundred rupees, whichever is higher, whether or not the employer has any allocable surplus in the accounting year: Payment of maximum bonus.(1) Where in respect of any accounting year referred to in section 10, the allocable surplus exceeds the amount of minimum bonus payable to the employees under that section, the employer shall, in lieu of such minimum bonus, be bound to pay to every employee in respect of that accounting; year bonus which shall be an amount in proportion to the salary or wage earned by the employee during the accounting year subject to a maximum of twenty per cent, of such salary or wage.

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THE PAYMENT OF BONUS ACT, 1965

Set on and set off of allocable surplus (1) Where for any accounting year, the allocable surplus exceeds the amount of maximum bonus payable to the employees in the establishment under section 11, then, the excess shall, subject to a limit of twenty per cent. of the total salary or wage of the employees employed in the establishment in that accounting year, be carried forward for being set on in the succeeding accounting year and so on up to and inclusive of the fourth accounting year to be utilized for the purpose of payment of bonus in the manner illustrated in the Fourth Schedule. (2) Where for any accounting year, there is no available surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in the establishment under section 10, and there is no amount of sufficient amount carried forward and set on under sub-section (1) which could be utilized for the purpose of payment of the minimum bonus, then, such minimum amount or the deficiency, as the case may be, shall be carried forward for being set off in the succeeding accounting year and so on up to and inclusive of the fourth accounting year in the manner illustrated in the Fourth Schedule. 38

THE PAYMENT OF BONUS ACT, 1965

Time-limit for payment of bonus. [All amounts] payable to an employee by way of bonus under this Act shall be paid in cash by his employer -(a) where there is a dispute regarding payment of bonus pending before any authority under section 22, within a month from the date on which the award becomes enforceable or the settlement comes into operation, in respect of such dispute; (b) in any other case, within a period of eight months from the close of the accounting year: Provided that the appropriate Government or such authority as the appropriate Government may specify in this behalf may, upon an application made 2 subs. by Act 23 of 1976, sec. 13, for (1) subject to the provisions of this section, all amounts to it by the employer and for sufficient reasons, by order, extended the said period of eight months to such further period or periods as it thinks fit; so, however, that the total period so extended shall not in any case exceed two years.
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Equal Remuneration Act, 1976

Object / Purpose Details : No discrimination while recruiting

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Payment of Gratuity Act, 1972

Purpose : Rate of gratuity : Piece rate employee : average of total wages received for a period of 3 months immediately preceding the termination of employment. Seasonable employee : Ceiling of gratuity : Forfeiture of gratuity : Recovery of Gratuity :

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Compensation structure and differentials

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 Incentive payments :
Individual payment by result Group payment by result scheme Enterprise level schemes

Managerial Incentive Plans

Percentage of profit Shares on concessional rates Bonuses in cash or kind (discount coupons, paid holidays, etc)
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Fringe benefits Humanistic consideration : education, health, housing Statutory : canteens, rest sheds, crche, maternity, paternity, Security : Gratuity, PF, Pension, Medical Hazard of industrial life : ESIC, Hospitals Tax considerations : transport, interest free loans, loans at concessional rates Utilization of leisure time : holiday homes, foreign trips, guest houses Inculcating a sense of involvement : concessional lunch, subsidized picnics
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Collective bargaining
Levels of bargaining : Sectoral bargaining at national level : govt is a long term player. Long term settlements Banks, coal, ports Industry cum region wide agreements : Cotton, jute, textile, tea Decentralized firm/plant level agreements Duration : 3-4 years Trends : something for nothing, something for anything, something for something, nothing for nothing
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Job evaluation Right man for the right job Right pay for the right job Method to determine the relative worth of a job

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Job evaluation
Job analysis : breaking down to tasks, functions, processes, operation and elements Job Description : description of a job based on job analysis Person / job specification : statement of content of job based on JD Job grading : ranking of a job based on JA Job classification : grouping jobs according to their worth Job assessment : monetary value on the basis on job grading
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Job evaluation
Objectives : Primary : Establish wage level of a plant Bring new jobs in parity with existing jobs Facilitate wage negotiations Secondary : Criteria for merit rating and promotion Scope for automation and improvement Analyse wage rates

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Job evaluation
Procedure :
Select the group of jobs Study the job job analysis Prepare the job description Device an evaluation plan (education, experience, responsibilities) Committee of raters / evaluate Group / classify the jobs Convert job grades to money value Obtain approval from union and management Establish a grievance procedure
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Job evaluation methods

Ranking method : All jobs are ranked in order of complexity, responsibility and demands on respective employees Made easier by identifying those at the two extreme ends and then the middle region Ranking more than once arrive at final ranking Simplest method and less time consuming

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Job evaluation methods

Classification method : Grades are established JDs description and nature of the job Jobs are classified into one of the other grades Less time consuming, comparatively easier. Irrational in the absence of logic and sometimes similar (nearby) jobs are put in different classes

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Job evaluation methods

Point rating method :
Job is analysed through 5-8 factors and 20-30 sub factors (eg. skill, effort, responsibility and working conditions) Given points which total out as the overall position of the job Not scientific but systematic. Outcome in hard numbers Time consuming Plan for clerical employees is not suitable for factory operators (physical effort is not essential as against a sedentary job) In a sophisticated process plant, the factor of mental/visual effect will have a higher weightage as against physical effort
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Job evaluation methods

Factor comparision method : Factors or elements of a job are evaluated in terms of monetary value, eg. Mental requirement, skill, physical requirement, responsibility and working conditions Internal / external comparision of job are considered Conflict may arise on the valuation of each factor

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Job evaluation other methods

Time span of discretion methods
Effect of decisions is felt after a period of time A decision by :
Unskilled worker - few hours Marketing manager 1-2 years Board of director 4-5 yrs

Decision band method : type of decision

Band E policy making decisions top mgmt Band D programing decisions sr managers Band C interpretive decisions middle managers Band B routine decisions skilled operators Band A automatic decisions (when, how, where) semi skilled workmen Band O Defined decisions by unskilled workmen
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Compensation Survey
Informal surveys External surveys Commissioned surveys External survey method :
Job title method Job Description method

Process :
Selection of jobs for wage survey Organizations to be included Information to be collected
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Compensation Survey
Benefits : Compare pay structure Entry level pay scales Pay differentials in select jobs Info on employee benefits Trends in compensation

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Reward systems, incentives and pay restructuring

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 Incentive schemes
Select the objective Determine the parameters of performance Determine the performance-reward relationship Determine the maximum payable incentive amount Formulating a communication and review scheme

Group incentive and productivity sharing Long term incentive (ESOP) Competency based pay

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Incentives
Merits : Motivation Enhanced earnings Productivity improves Reduced supervision Better utilization on equipment Reduced scrap Reduced absenteeism and turnover

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Incentives
Demerits : Maintenance of quality checking and inspection Jealousies some earn more than others May oppose introduction of new machinery / processes

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Steps in designing incentive schemes

Custom tailored Objectives (short long term) Selection of performance measures behaviors considered important for organizational performance (increasing output, reducing labor, other costs, improving quality) External influences (changes in production methods, product mix, prices of inputs, outputs) Distribution avoid absenteeism varied with number of days/hours worked Equity equal opportunity for all to earn Involvement and communication Union participation Review
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Incentive schemes Issues and Trends

Levels of education which scheme will be easily understood and motivate them Trade union Organizational culture team spirit and involvement Monetary and non monetary incentives Rewarding good performance enriched role, publicity in newsletter

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Group incentives
Advantages : Better co-operation Less supervision Reduced incidence of absenteeism Shorter training time Disadvantages : Efficient worker may be penalized for the inefficiency of other members Incentive may not be strong enough Rivalry amongst group members, defeats the purpose

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Incentives pre-requisites
Co-operation of workers in the implementation Scientific work measurement Indirect workers, like crane operators, helpers, store keepers should also be covered Need for greater planning

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Incentives systems
The Halsey system standard time to complete a task Minimum wage is guaranteed Time saved in completion of a task Usually @50% Taylor differential piece rate system Expected to do certain units within a certain period of time Encourages the efficient worker with a higher wage rage Penalizes the inefficient with a lower rate of payment Seldom used now
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Incentives systems
Premium and task bonuses : Workers who complete the task in std time or less receive wages for the std time plus a bonus When a worker fails to turn out the required quantity he simply gets the wage rate and no bonus

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Incentives systems
Scanlon Plan : Developed by Joseph Scanlon of United steel workers of USA Adopting a measure for increased productivity Sharing the gain from that increased productivity Promotes teamwork High flexibility in generation of decisions and execution of the plan

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Stock Options
Merits Attraction Retention Motivation Financial participation of employees in wealth created through joint efforts Commitment Develop a common purpose / ideology between employees and employers

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Dearness allowance
Not linked to CPI Flat rate : payment is a method under which a fixed amount is paid to employees irrespective of their categories and wage scales Graduated scale : DA increase which each scale of salary increase but after a limit there is no increase in the amount of DA. A minimum amount of DA is also set for workers in each scale below which DA is not allowed to fall

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Dearness allowance
Linked to CPI Flat rate : rate per point with variations in points of CPI As a percentage of pay : DA is expressed as a fixed percentage of pay and equated to a scale of points of the CPI

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Other allowances
HRA LTA/LTC Washing allowance Conveyance Shift allowance Cash handling allowance Lunch / dinner allowance City compensatory allowance OT allowance

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Downsizing
External reasons : Structural and other changes in the economy Changes in technology Changes in ownership and control Business process re-engineering Internal reasons : Improper / inadequate HR planning Wrong selection / recruitment Inadequate training Substitution of labour with capital

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Approaches to deal with worker redundancy

Worker flexibility with employment security multi-skilled Review job specifications at regular intervals skill requirements Employment practices perpetuate obsolescence heirs

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Measures to avoid downsizing or minimize job losses

Restrictions on hiring for a limited period Spreading reductions over time Training and retraining VRS Counselling and outplacement

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VRS
Cost and benefits to company : Relative health of the enterprise something is better than nothing Real cost to the company less skilled, less motivated under-performers may not leave as they may not get better opportunities elsewhere Cost and benefits to employees Golden parachute : secure investment Family obligations substantial amount spent in repaying debt

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How to go about a VRS ?

Should be the last option rather than first traumatic experience Identify who will be covered, who not, who will opt, who will not Awareness. Share the info with employees, union, communication channels Communication and counselling Phased manner to avoid massive reduction in manpower. Cash flow effect

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VRS should cover the following aspects

Applicability Eligibility Effective date of the scheme Duration of the scheme Compensation and benefits Procedure for application, acceptance and withdrawal Mode of payment Due date for payments Procedure for redressal of grievances/settlement of disputes
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Emerging issues and trends

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Tax planning
A conscious well thought out process of arranging ones financial affairs Taking advantage of deductions, exemptions, rebates Minimizing tax liability Without infringing on any provision tax avoidance

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Composition of compensation package

Salary payment for services rendered Relationship employer / employee (power on selection, payment, kind of work, supervision, dismissal Salary v/s wage Allowances : payments by employer by way of allowances for personal benefit of the latter chargeable to IT.

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Composition of compensation package

Perquisites : gain / profit incidental from employment in addition to regular salary / wages. Attached to an office or employment Payable only on continuance of employment / service Ceases when employment comes to an end

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Tax implications of compensation

Salary Allowances :
HRA Conveyance, etc

Perquisites :
Rent free accomodation Company owned car Furniture LTC / LTA Medical
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Tax implications of compensation

Non taxable perquisites : Refreshments provided during office hours, in office premises Subsidized lunch in canteen Goods manufactured sold to employees at a discount Subsidized transport office : residence Premium : Group insurance / Personal Accident Insurance

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Emerging Trends
Comparative international compensation Job content related compensation : link annual increment to performance Performance related compensation : performance based annual increment and periodic incentive linked to individual / group performance. Allows risk of business to be shared with employees

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Emerging Trends
Competency based compensation Job holders competencies not the worth of the job Predictor of superior performance Acquisition of competencies : improvement in results significantly Stock options Profit linked bonus

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Paradox of performance related compensation

Motivates those with high performance ratings May help retain high performances, though no evidence that poor performers have left the organization Fairness Clear linkage between effort and performance and performance and reward

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 360 degree feedback Select the feedback tool Select the raters Use the feedback Review the feedback Integrate the process into a larger PMS

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Competency
It is derived from the Latin word Competere, which means to be suitable. The concept was orginally developed in Psychology denoting Individuals ability to respond to demand placed on them by the environment.

Competencies defined
A collection of characteristics (i.e. skills, knowledge and selfconcept, traits, behaviour, motivation, etc.), that enables us to successfully complete a given task.

Skills

Knowledge

SelfSelf-concept (Attitude)

Iceberg Model of Competencies

Competency based compensation

Knowledge, skills, attitudes, personal traits that drive superior performance Describes what makes people effective in a given role Behaviors associated with superior performance

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Concept of career stages

Stage 1 (Dependency)
Willingly accepts supervision Competent at detailed and routine tasks Able to perform well under time / budget pressures Learns how of doing things Assumes responsibility for definable projects Relies less on supervision, works independently Develops credibility and a reputation Develops as an innovator
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Stage 2 (Independence)

Concept of career stages

Stage 3 (Contribution through others) Stimulates others through ideas and knowledge Mentor in developing others Leader in team performance Stage 4 (Leadership through vision) Provides direction to the orgn Represents the orgn on critical strategic issues Champions significant technology and product

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Communication : levels of achievement

Level 1

Level 2

Level 3

Level 4

Under some supervision and / or guidance effectively uses written and verbal communication

Independently maintains excellent communication with all appropriate parties. Has strong technical credibility within the group

Communicates effectively across functional boundaries to add value to the business and gain support for recommendations

Uses communication skills and personal credibility to shape long term technical direction and other significant business decisions

Linking pay to achievement

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Traditional v/s competency based model

Reward component Traditional system competency based system

Basic Pay

Based on internal job evaluation and Based on competency level demonstrated by market survey employee greater width and depth employee adds to core business

Progression - basic pay

one more year of service

Variable pay

share of the employee as a partner in the privilege of membership of the group success of the business company decides as a matter of policy Does what is told. Labour is important, not ideas Job for loyalty Employees share for undertaking risk and accountability

Benefits

Quality of work life Career opportunity

Empowered Mutually responsible, employability

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Compensation issues :
Employers : productivity Employees : cost of living Youngsters : now Senior employees : retiral benefits Take-home pay Net pay Pay comparison with co-workers / other industries

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Thank you ! All the best for the exams !

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