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Payroll Administrator Responsibilities Many employers have a payroll department, which disburses paychecks to its employees.

Under the direction of a payroll administrator, the payroll department also keeps records of hours worked, wage garnishments and tax payments. In the event of an error in any one of these areas, it is the duty of payroll administrators to make correction or provide explanations. Additional duties of a payroll administrator range from updating payroll systems to working with human resources department. Payroll Systems

Many payroll administrators are expected to maintain a system to manage employee work hours. These systems may be automated. Automated payroll systems are web-based and provide interfaces that calculate hours worked, deductions and taxes. These systems also generate direct deposits. Payroll administrators must become proficient with the automated system their employer uses and may be required to attend training. It is then the responsibility of payroll administrators to train payroll staff to use the systems. Manual payroll systems may also be designed by payroll administrators. Since this system involves paperwork, payroll administrators often create a filing system in addition to the forms used.

IRS Regulations

Because of the diversity in the family statuses, marital statuses and income statuses of employees, payroll administrators must be apprised of new and existing Internal Revenue Service tax laws. As such, payroll administrators may have frequent correspondence with the IRS or state tax agency. When levies have been imposed against an employee's wages, it is the duty of a payroll administrator to inform the employee and execute the payroll garnishment. Payroll administrators must oversee the processing of federal W-2 forms, which includes the yearly wages of employees and must be given out to employees by January 31 of each year. W-2 forms are necessary to file income taxes for the year.

Human Resources

Payroll administrators often work with human resources departments to determine the amount of time off employees have available to them (sick leave and vacation leave). Additionally, human resources departments may have to verify and document employees' rate of pay. Thus, payroll administrators would provide this information. Principally, payroll administrators work with human resources departments to "process" employees, which includes getting employer identification, time cards, job descriptions and pay rates. Payroll administrators also work with human resources departments to determine disability and worker's compensation pay.

Payroll Administrator Duties

One of the most important jobs in any organization is that of the payroll administrator. The person in position is responsible for each step in the payroll process that enables employees to be paid at the end of each pay period. This is the department where raises are given, taxes are taken and other monies are calculated. The payroll administrator has a number of responsibilities to ensure that wages are correct and timely. Recording Hours

Payroll administrator duties include collecting time cards and time sheets and viewing online punches to calculate the number of hours each employee worked during each pay period.

Salary Recording

The payroll administrator is responsible for making sure the correct hourly wage or salary is entered into the formula to calculate wages.

Tax Deductions

The payroll administrator must ensure that state, federal and local taxes, as well as Social Security are calculated and withheld from each employee's wages. There may also be other withholdings required, such as insurance, 401k and garnishments.

Bonuses and Commissions


According to, the payroll administrator will have the responsibility of calculating, including and withholding taxes from any employee commissions and bonuses.

Pay Disbursement

Many companies use direct deposit for employee wages, requiring the employees to forms complete and return forms to the financial institutions of the employee's choosing. If direct deposit is not used, payroll administrators must print employee checks and have them ready to hand out on payday.

New Hires

New employees are required to fill out a number of forms when reporting for a job. According to, it is the responsibility of the payroll administrator to collect these forms and file them with the necessary offices in a timely manner.

Executive remuneration
6.1 Introduction Executive remuneration has been a hot topic for debate in the corporate circles for long. The remuneration is one tool used extensively by corporates to poach talent from a competitor and also in an effort to retain talent. Salaries and perks paid to highest decisionmakers in organisations are only spiraling upwards as a result of economic deregulation and the consequent entry of MNCs into the country. Brain drain is now an issue of the past. One no longer has to travel shores to have exciting salaries. It is happening here in our own country and in fact a reverse brain drain has started. The fact that the USA is increasing the number of H1B visas for Indians is a good proof for this. This unit deals with the components and features of executive remuneration and the issues raised in connection with executive remuneration. Objectives: After studying this unit, you will be able to: Identify the components of executive remuneration and describe them. Point the unique features of executive remuneration. Argue for and against payment of higher remuneration to executives. Answer effectively the issues raised in paying more to managerial personnel. 6.2 Components of Executive Remuneration From the point of remuneration, an executive is an individual who is in a management position at the highest levels. This category includes Presidents, Vice-Presidents, Managing Directors and General Managers. Their remuneration generally comprises four elements. They are: a) Salary b) Bonus c) Long-term incentives d) Perquisites (perks)

6.2.1 Executive Salary Salary is the basic component of executive remuneration. Salary, though supposed to be determined through job evaluation and serves as the basis for other types of benefits, it may be only a partial solution. This is because executives must be paid for their capabilities and competence rather than for job demands. For this precise reason, norms of wage and salary fixation are generally not observed while fixing salaries for executives. Salary as a component of total remuneration is insignificant as it is subject to deductions at source and is also capped by government regulations. In order to make good the cuts and ceilings, executives are offered hefty incentives and attractive perks. 6.2.2 Executive Bonus This is an important component of modern day remuneration for executives. This type of incentive is usually annual in nature and is performance-based. For this reason, the definition of performance is crucial. There are almost as many bonus systems as there are companies using this form of executive remuneration. In some systems, the annual bonus is tied by the formulae to the share price or the return on investment. Other bonus plans are based on the subjective judgement of the Board of Directors and the Chief Executive Officer. More complex systems establish certain targets, for example, a 10 per cent increase in corporate earnings from the previous year, and then a bonus pool after the target is attained. The bonus is then distributed, either in accordance with a preset formula or on the basis of subjective judgements. Executives deserve bonus because they have much more opportunity to influence organisational success than non-managerial staff. 6.2.3 Long-term Incentives for Executives Generally, stock options are offered as long-term incentives. Companies allow executives to purchase their shares at fixed prices. Stock options are valuable as long as the price of share keeps increasing. The share price crashes when the company starts incurring loss, and executives stand to lose in the process. The following aspects are relevant as regards stock options: a) An option is not a bonus. Executives have to use their own resources to exercise their right to purchase the stock. b) The executives are assuming the same risk as all other shareholders, namely, that the price could move in either direction. c) Options are a form of profit-sharing that links the executives financial success to that of the shareholders. d) Stock options are one of the few ways to offer large rewards to executives without the embarrassment of "millions of dollars of obvious money changing hands." Nevertheless, the risk factor in this type of incentive may be too great for it to be attractive to executives.

ESOP: A NOTE Companies are increasingly using employee Stock Option Plans (ESOP) as an effective reward and retention strategy. It is also being used as an effective recruitment strategy to attract talent. However, the attractiveness is currently marred by the fact that the Securities and Exchange Board of India (SEBI) guidelines require the shares offered under ESOP to be treated as preferential issues. SEBIs formula of taking the average of the last six months market rates of the particular stock is a dampener. There are several variations to ESOP. The most common variation is the Stock Appreciation Rights. Under this, employees are given Rights to a particular number of shares at the market rate on the date of allotment of Rights. No shares are transferred to employees, nor are they given money to buy the scrips. The Rights are redeemable in installments at regular intervals at the market price prevailing on the date of redemption. Employees are given the appreciation benefit. But if the price is same or lower than the "Right price", the employee does not gain or lose anything. The second variation is to give options to employees to buy shares at the average of the last six months market rates and offer soft loans from the company to buy these shares, whenever required. These options are given in installments at intervals of one or two years. There is no lock-in period. In case of foreign companies functioning in India, the shares are held abroad, on behalf of the employees as Reserve Bank of India forbids Indian Employees from owning foreign stock. Calculations are made to find out the appreciation in the value of shares held by an employee by the time he wants to sell. The rupee equivalent of the appreciation is paid to the holder. The third variation is to offer the option of warrants which are converted into shares at a fixed price at the option of the employee. In this, the warrants are covered into shares at prices far less than the market and hence the scheme is quite attractive. Criteria for ESOP Eligibility (a) Positions held by employees (b) Consistent performance (c) Length of service in the company 6.2.4 Perquisites

Perks constitute a major source of income for executives. In addition to the normally allowed perks like provident fund, gratuity and the like, executives enjoy special parking, plush office, vacation travel, auto expenses, membership in clubs and well-furnished houses. Perks take care of all possible needs. Executives are rarely required to spend money from their pockets. Their holidays, servants, telephone bills and even electricity and gas bills are taken care of by their companies. Self Assessment Questions I 1. Executive remuneration generally comprises salary, bonus, long-term incentives and 2. Executives must be paid for their .rather than for job demands. 3. Executive bonus is an important component of modern day remuneration for executives. This type of incentive is usually .in nature and is. 4. Companies allow executives to purchase their shares at fixed prices. This is called . 6.3 Special Features of Executive Remuneration a) Managerial remuneration cannot be compared to the wage and salary schemes meant for other employees in organisations. Factors and variables are more numerous in management jobs, and simple comparisons and ratings may not be possible. b) Executives are denied the privilege of having unionised strength. They cannot demand for higher salaries and perks, hoist red flags on factory gates, shout slogans, pelt stones, and burn buses. It is the workers who resort to all these and if they succeed in their efforts, executives too benefit. Put in another way, executives often prompt workers to go on a strike. c) Secrecy is maintained in respect of executive remuneration. What A receives is not made known to B and what B gets, C cannot know. Secrecy is maintained because no two executives in the private sector, in the same grade, receive the same pay. Remuneration depends upon such factors as competence, length of service and loyalty to the founders. d) Executive pay is not supposed to be based on individual performance measure but rather on unit or organisational performance. This is because an executives own performance is assumed to be directly reflected in the measure of unit or corporate performance. However, in practice, an executive pay may not be linked to the organisations performance. e) Executive remuneration is subject to statutory ceilings. As per the latest guidelines, the monthly salary varies from Rs.40,000 to 87,500 subject to an overall limit of Rs.10, 50,000 per annum including perquisites.

Remuneration is restricted to five per cent of its net profit if the company has one executive, but the total remuneration is not to exceed 10 per cent of its net profit if the number of managerial personnel is more than one. These ceilings, however, do not apply to private limited companies. 6.4 Extent of Pay Theoretically, remuneration of managerial personnel is supposed to be guided by job descriptions, job evaluations, salary grades with ranges of pay in each grade, and salary surveys. But in practice, the norms seem to have been thrown to winds and exorbitant amounts are paid to decision-makers in organisations. The annual salaries of Indian CEOs range from Rs. 50 lakh to Rs.1 cr. But this is mostly confined to financial sectors, informatics and consumer goods industries. Entry-level annual salaries too have shot up ranging from Rs.2 lakh to 4 lakh. 6.5 Executive Remuneration in Indian Industry Certain broad generalisations can be made with respect to executive remuneration in Indian industries. These are: a) Norms of wage and salary fixation such as job description, job evaluation, grades of pay and wage parities are generally ignored. What an executive receives depends on employers ability and employees bargaining strength. b) Salaries and perks of executives are subject to annual reviews and hikes, unlike the remuneration of employees, which is reviewed once in three years. c) A study reveals that, executives are offered composite salaries instead of menu salaries. The latter refers to a package of items, numbering nearly hundred, from which the CEO is asked to choose. d) There is a tendency to link salaries (at least 20 per cent) to performance. e) Holidaying abroad is gaining increasing acceptance. In a year, a typical executive works 10 months on his job, holidays one month abroad with his family, and attends training classes in the remaining one month. f) For executives posted abroad, relatively higher salaries are paid during their foreign assignments. Once they are back in India, the same executives are paid less to maintain parity with those working in the home office. g) Competition among companies to attract competent personnel is resulting in a virtual hijacking of managerial personnel. Executives in the public sector stand nowhere in comparison to their counterparts in the private sector in respect of salaries and perks. There has, therefore, been an exodus of executives from government-owned organisations to private sector enterprises.

6.6 Justification for Paying More The various justifications put forth for the huge salaries of executives are: a) The executives have intrinsic worth and hence command hefty premiums. Managerial personnel matter much in organisations. Organisations are often positioned after great personalities. Positioning organisations after individuals is more visible in service organizations. Organisations have grown into veritable empires under stewardship of certain such personalities. Such growth has benefited all stakeholders, particularly the shareholders. b) Competent executives are always in short supply. Added to this is the demand for Indian managers abroad. It is a problem of demand outstripping supply. Economics tells us, that other things being equal, price shall be high when demand exceeds supply. One must pay heavily if one has to attract talented and competent individuals. Obviously, one should pay more to talented executives. c) Retaining high-caliber personnel is more difficult than attracting them. The management must throw norms of wage and salary administration to winds, and pay the executives well. Their remuneration must be reviewed annually and frequent salary hikes should be made. Otherwise, there will be a flight of people and there are always opponents to hijack them. d) After successfully retaining executives, they must be motivated for better performance. There might be several theories on motivation but coming to their essence, it is money and more money, which motivates employees, and executives are no exception. Motivated executives are in an advantageous position to inspire others in organisations. A leader who is crest-fallen can hardly motivate followers to action. e) Salaries and benefits enjoyed by executives across the globe are beyond anybodys comprehension. MNCs pay attractive remuneration to their executives, be they homecountry or host-country nationals. f) The Third Wave that is sweeping across the world compels disproportionately high remuneration to be paid to knowledgeable personnel. According to Alvin Toffler, the First Wave started with the rise and dominance of agriculture in several parts of the world, a period that lasted from 8000 BC to AD 1650-1750. The rise of industrial societies signalled the beginning of the Second Wave, which reached a peak in the mid-1950s, according to Toffler. The Third Wave, presently being witnessed, is exemplified by the dominance of high-tech, knowledge-based, information-tied and service-oriented businesses. These organisations need the services of individuals who have good brainpower. Not for nothing, business strategists, accountants, computer programmers, news editors, and doctors are paid high salaries and benefits. g) Expectations of people, in general, have gone up. An average middle income family needs many more things than what their forefathers could even dream of. A range of white

goods, once considered a luxury, has now become a necessity. If this is the life style of a middle-income family, surely, an executive has to lead a life, which fits his status and job. h) An executives salary and perks are not the same as the wage of the worker. To the worker, the wage is a means of living. For the executive, financial reward may be a symbol of social prestige and social/ class position. The executive who drives himself to success in his role is creating the means by which certain community goals can be achieved. The financial reward is also a symbol of the executive role itself, its power, its dignity and its freedom. In this connection, it is not the absolute amount of financial reward that is important as a generalised goal, but the superiority of executive remuneration relative to all other roles in the plant. i) Another reason why executives must be paid more is to eliminate or, at least, minimise corruption. The best way of satisfying human greed in the present context is to pay well. Although corruption is a universal weakness, workers have lesser access to vital documents, have no contacts with outside parties and are unable to connive with security personnel. Assuming that the workers too resort to shortcuts, the damage caused to the organisation is less severe. 6.7 Challenges in Executive Remuneration There are several issues that need to be addressed in relation to the remuneration provided to the highest decision-makers in organisations. These are: a) The Worth of an Executive Is the Chief Executive of a leading tobacco company for example, worth Rs. 40.5 lakh per annum/ Rs. 11,096 per day or Rs. 1387 per working hour? Surely, there are many numbers of employees in an organisation whose competency is no less significant but their remuneration is in no way near to that of a Managing Director or a General Manager. Assuming that an executive is worth that much, the success of an organisation does not depend only on one individual (though failure does). The healthy bottom line of an organisation is the result of combined efforts of technicians, scientists, financial wizards, marketing experts, HR specialists, canteen staff, sweepers, drivers and a host of others. The CEOs alone should not be given all the credit for healthy bottom lines. b) If there is one individual who really deserves applause and handsome rewards, it is the founder of the organisation. In the initial stages, this gentleman sheds his blood for the organisation. When banks refuse to sanction additional loans, he pledges family assets to raise money for buying raw materials and paying salaries to employees. He spends sleepless nights devising strategies to market his products, to tackle labour militancy and to satisfy government agencies. It is a struggle and a challenge all the way till the unit starts doing well. He then needs a deputy to assist in managing the business. The executive demands 100 times more than what the founder had been drawing all along. Such demands naturally defy logic.

c) Another issue relates to the gap between the pay drawn by an executive and the wages paid to a worker. The difference in certain cases is 50 to 60 times! Huge disparities in income are often dysfunctional. Disparities in pay increase the probability of top executives getting alienated from front-line employees. It creates a psychological distance and also a lifestyle disparity. That is why executives at various levels sometimes tend to feel out of touch and uncomfortable while dealing with front-line employees. d) A general argument in favour of hefty pay scales to executives is their motivation. They should be paid more to put in better performance. Looking at the flip side, money ceases to be the motivator beyond a certain point. Beyond this, money makes people extravagant and wasteful. Children are the worst affected by this kind of affluence. Then there is the constant fear of raids by Tax Authorities. Surplus money therefore results in needless tension. Assuming that money motivates, these high-flying executives hardly stick to one organisation. A few hundreds more offered by a rival organisation will induce them to put in their papers. Majority of managerial personnel are known for job-hopping. Gratitude and loyalty are words of the past. e) Finally, there is the question of equity. When hundreds of people are languishing in the unorganised sector, it may be unethical to pay huge salaries and perks to select elites in the society. The hapless employees work hard for eight to ten hours a day but get paid a paltry sum of Rs. 500 to Rs. 600 per month each. Added to this is the endless uncertainty of tenure. 6.8 Remedial Measures The following remedial measures if implemented are likely to address the challenges with regard to high managerial remuneration: a) Income beyond a certain limit must be subject to higher taxation. Statutory guidelines governing executive remuneration are now liberal. Payment beyond specified limits needs the prior approval of the Government. And the Government does not generally deny approval. b) Executives, on their own, must take up more and more socially responsive actions such as adopting and uplifting villages, sustaining ecology, caring for the hungry and the homeless, supporting a cause, sponsoring cultural programs, contributing to education, and the like. Such actions will make the business and its executives more acceptable to the society. c) Conscious efforts must be made to increase the supply of managers and technicians. There is therefore, greater need for starting more colleges and institutes to train young MBAs, BEs and other technicians. d) Participative management needs to be encouraged. Employees must be offered stock option schemes and be encouraged to become owners of the undertakings for which they serve as workers, clerks, and supervisors.

e) The concept of corporate governance is highly helpful in resolving the issues. The Kumaramangalam Birla Committee on Corporate Governance recommends the formation of a Remuneration Committee, which will determine, on behalf of shareholders, the remuneration to be provided to executives. With this, a sense of equity will prevail in executive remuneration. Self Assessment Questions II State whether the following statements are True or False: 1. Executives enjoy the privilege of having unionised strength. 2. Executives in the same grade, in the private sector, receive the same pay. 3. Executive pay is supposed to be based on individual performance measure. 4. Executive remuneration is subject to an overall limit of Rs. 10, 50,000 per annum including perquisites. 5. Motivated executives are in an advantageous position to inspire others in organisations. 6.8 Summary Executive remuneration comprises salaries, bonus, stock options and perks. Perks generally outstrip other elements in the package of remuneration. Executive remuneration differs from wages and salaries paid to other employees. Executives are denied the privilege of enjoying unionised strength, though they stand to gain when workers go on strike and succeed. Secrecy is maintained in respect of salaries and perks paid to executives. There are several reasons why executives are paid more. They are worth lakhs of rupees in terms of talent and brainpower. They need to be attracted, retained and motivated, and their greed must be satisfied so that they can adopt honest business practices. Certain social and ethical issues are relevant in this context. First, high remuneration seems to be merely a hype disregarding individual intrinsic worth. Second, executives alone are not responsible for an organisations healthy bottom line. Third, there must be some parity between salaries of an executive and wages of a worker. Finally, higher salaries and perks do not guarantee motivation. More and more socially responsive actions, stiffer income taxation, increasing supply of managers and technicians and encouraging employees to become owners of enterprises are the answers to the issues raised.

6.9 Terminal Questions 1. What is the category of employees defined as executives? Explain executive salary and executive bonus. 2. What are the long term incentives given to executives? Explain perquisites. 3. List out the features of executive remuneration. 4. Write a note on executive remuneration in Indian industry. 5. Executive salaries are phenomenally high. What reasons can be given to support such high salaries? 6. What are the finer aspects that should be borne in mind while administering executive remuneration?