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MU0015 Set1.Q3.)WhatisCTC?WhatarethecomponentsofCTC? CosttoCompany(CTC)istheamountthatyoucostyourcompany.Thatis,itistheamountthat thecompanydirectlyorindirectlyspendsonyoubecauseofemployingyou. ComponentsofCTC >ThefollowingarethecomponentsofCTC: >Basic. >DearnessAllowance(DA). >HouseRentAllowance(HRA). >Medicalallowance. >Conveyanceallowance. >SpecialAllowance. >VehicleAllowance. >Incentivesorbonuses. >LeaveTravelAllowanceorConcession(LTA/LTC).

Telephone/MobilePhoneAllowance.CTCincludesthesalarydirectlypaidtotheemployees,the benefitsdirectlyattributabletotheemployeessuchascompanyscontributiontotheprovident fund,pensionfunds,medicalinsurancepremium,lifeinsurancepremium,costofloansofferedto theemployees,telephoneexpensesformobilephoneconnectionsandlandlineconnections, benefitsofferedforvisitingthehomecountryorhometownandsoon.Itisimportanttonote thatevenalowerCTCmightmeanahighertakehomepaythananofferwithhigherCTC,ifthe othercomponentsarearrangeddifferently.Similarly,youmustnotinferthatwithincreasein salaryorposition,yourpayaspercentageofsalarywillincrease/decrease.Youhavetoassess eachofferseparately.MostcompaniesusuallytalkintermsofCTCasthefigureslookmore impressive.However,theyareoftenmisleading.Youshouldcarefullylookattheiroffer andcalculateyourselfhowmuchyourtakehomepaywillbe.Afterall,alldeductionsarebased onfixedpercentagesandyoucaneasilyarriveattherightfigure.Eventhecompanywillguide youonthis.Sometimes,evenalowertakehomepaymaybebeneficialiftheotherpaymentsare madeagainstvouchers/bills(forexample,telephones,cars,refreshment,andsoon).Thiswill ultimatelyloweryourtaxliability.HenceyoushouldlookatbothCTCaswellastakehomepay whilenegotiating.Youalsohavetolookatcertainothercriterialikeworktimings,numberof holidays,employeecentricschemesforfurthereducation,andsoon.Thesefactorsmustnot beignoredeventhoughyoucannotputamoneyvaluetothesefactors.Thetotalcompensation

includesthevalueofalltheperksandbenefitstheemployeeisofferedbythecompanyin additiontotheemployeessalary.CalculatingtheannualCTCisimportantfromtheemployees andtheorganisationsperspective.ThishelpstheorganisationascertaintheHRcostandthe employeesunderstandwhattheyarebeingoffered,astheycanbenchmarktheirCTCwithother comparableorganisations.EmployeescandecideonotherjoboffersdependingontheCTC.For employeestodecideonotherjoboffers,itisveryimportantthattheyunderstandhowtheCTC iscalculated.However,itisdifficulttoarriveattheCTCasmanycomponentsoftheCTC consideredbythecompanymaynotbeconsideredasapartoftotalcompensationpackage. Therefore,toarriveatacomprehensiveCTCvalue,organisationsneedtobecarefulandaddall thecomponentsofcompensationortheirequivalentcashvalue. set.1.Q.4)Whataretheelementsofcompensation? Compensationreferstomoneyandmoneyrelatedextras[2].Thus,inadditiontoapersonsbase pay,compensationcanincludebonuses,meritincreases,variablepay,andlongtermIncentives. Benefitsincludetheremainingthings,suchashealthcare,pensionplans,stockoptions,andlegal services.Anorganisationscompensationprogramsendsamessagetoemployeesabout itscommitmenttoencouraging,recognising,andrewardingemployeeperformance.While moneyshouldcertainlyneverbetheonlymotivator,itisdefinitelyimportant.Tobesuccessful,a compensationprogrammustlinkemployeeperformancewithbusinessperformance.Employees havetounderstandwhatthecompanyexpectsofthem,whythecompanyexpectsitandthe possiblerewardswhenperformanceexpectationsaremet.Takingthisapproachinpreparingthe paystructureprovidesanownershipcontextforemployees,knowingtheyareimportanttothe ongoingsuccessoftheorganisation,andthatiftheydotheirpartwell,theywillshareinthe rewardsgeneratedbythatsuccess.Letusnowlookatsomeofthemostcommonelements orcomponentsofCompensationandBenefits. Elementsofcompensation Letusfirstdiscusstheelementsofcompensationandlaterweshalldiscusswhatgoesinto benefits.Theprimaryelementsofacompensationpackageare: Basepay: Basepayisthefixedrateofcompensationthatanemployeereceivesforperformingthe standarddutiesandassignmentofajob.Employersneedtoensurethatbasepayprogramsare designedtorevealmarketpracticeswithintheiridentifiedcompetitorgroup.Toachievethis, organisationsmustfirstidentifytheircompetitivemarket.Thiscanbeachievedbyconsidering differentfactors,includingthenatureoftheindustry,geographiclocation,totalemploymentand annualrevenue.Next,theyneedtoconductanassessmentofmarketpaypracticesforsimilar jobswithintherecognisedcompetitorgroup.Thisassessmentshouldinvolvetheduties,skills, andimpactlevelsofeachjobevaluatedthatis,eachjobofsimilarsizeandscope.Thenapay

structureformanagingthecompetitivebasepaylevelsforthejobsthroughouttheorganisation shouldbedeveloped.Paystructurestypicallyconsistofaseriesofpayrangesorbandsthat revealcompetitiveratesofpayforspecificjobs,aswellasallowingroomforsalarygrowth.Jobs ofsimilarvaluefromboththemarketpointofviewandaninternalpointofviewaregrouped together.Thenacompetitivepayrangeisdevelopedaroundthemarketratesfortheparticular jobs. Variablepay: Performancebasedvariablepaycontinuestoachievemomentumasamoresuccessfulwayto identifyandrewardemployeeperformance.Alsoknownaspayperperformance,variablepayis popularintodayscorporateworld.Byincludingapercentageofvariablepayinthe compensationplan,organisationsensurethattwopeoplewithdifferentefficiencylevelsdonot getthesamebenefits.Bydoingthis,thecompanyrewardsproductivityandhardworkand motivatestheunderperformerstoworkhard.Oncelimitedtoseniormanagementlevels,these incentiveorbonusplansarebeingredesignedtorewardtheachievementofspecificcompanyor employeeperformanceobjectives.Inavariablepayplan,thesizeoftheawardvaries amongemployeesandfromoneperformanceperiodtoanother,basedonlevelsofachievement measured,aswellasagainstpreestablishedcompanyandemployeeperformancetargets. Amountsareusuallycalculatedasapercentageofbasepaydependingonjobcategoryand position.Rewardsarenormallypaidincashonanannual,semiannualorquarterlybasis dependingontheplandesign.Plandesignsrangefromsalescommissiontypestoindividual incentiveorbonusplanstoteamawards.Themainideaoftheseprogramsistoreward innovationandhardworkandtodiscouragemediocrityinperformance. Skillandcompetencybasedpay: Skillbasedpayoffersemployeesextracompensationwhentheyhavenewskillsspecially recognisedbythecompanyasessentialtoachieveacompetitiveadvantage.Skillbasedpaycan beparticularlyusefulforemployeeswholiketheircurrentjobsbutarelookingfornew challenges.Competencybasedpayismorewidespreadthanskillbasedpaybecausethe criteriacovernotonlymeasurableskillsbutalsoknowledge,performancebehaviours andpersonalattributes.Ithelpsoutemployeestogrowinthecompanyandhelpsthemtoclose theknowledgegapsneededforcreativemoves. Longtermincentivecompensation: Longtermincentivecompensationvehicles,suchasstockoptionplansandotherdeferred compensationplans,whicharenotusuallyusedtorewardperformance,areachieving desirabilityamongemployees.Theselongtermincentivecompensationplansappreciate employeesbasedoncompanyperformanceoveralongtermthatistypicallythreetofiveyears. Stockoptionplansareacommonformoflongtermcompensationatpublicorganisations.In mostprivatecompanies,incentivesthatreflectstockplansareusedforkeyemployees.Long termcompensationplanscanbevaluablepreservationtoolsforthesuccessofanorganisation.

Theyhelptofocusondrivingandimprovingthekeyemployeestoachievethefinancial performanceofthecompanyoveralongerterm. Q5.DescribeMintzberg5Psofstrategy. Theword"strategy"hasbeenusedimplicitlyindifferentwaysevenifithastraditionallybeen definedinonlyone.Explicitrecognitionofmultipledefinitionscanhelppeopletomanoeuvre throughthisdifficultfield.Mintzbergprovidesfivedefinitionsofstrategy: >Plan >Ploy >Pattern >Position >Perspective. Plan Strategyisaplansomesortofconsciouslyintendedcourseofaction,aguideline(orsetof guidelines)todealwithasituation.Bythisdefinitionstrategieshavetwoessential characteristics:theyaremadeinadvanceoftheactionstowhichtheyapply,andtheyare developedconsciouslyandpurposefully. Ploy Asplan,astrategycanbeaploytoo,reallyjustaspecificmanoeuvreintendedtooutwitan opponentorcompetitor. Pattern Ifstrategiescanbeintended(whetherasgeneralplansorspecificploys),theycanalsobe realised.Inotherwords,definingstrategyasplanisnotsufficient;wealsoneedadefinitionthat encompassestheresultingbehaviour:Strategyisapatternspecifically,apatterninastreamof actions.Strategyisconsistencyinbehaviour,whetherornotintended.Thedefinitionsof strategyasplanandpatterncanbequiteindependentofoneanother:plansmaygounrealised, whilepatternsmayappearwithoutpreconception.Plansareintendedstrategy,whereaspatterns arerealisedstrategy;fromthiswecandistinguishdeliberatestrategies,whereintentionsthat

existedpreviouslywererealised,andemergentstrategieswherepatternsdevelopedinthe absenceofintentions,ordespitethem. Position Strategyisapositionspecificallyameansoflocatinganorganisationinan"environment".By thisdefinitionstrategybecomesthemediatingforce,or"match",betweenorganisationand environment,thatis,betweentheinternalandtheexternalcontext. Perspective Strategyisaperspectiveitscontentconsistingnotjustofachosenposition,butofaningrained wayofperceivingtheworld.Strategyinthisrespectistotheorganisationwhatpersonalityisto theindividual.Whatisofkeyimportanceisthatstrategyisaperspectivesharedbymembersof anorganisation,throughtheirintentionsand/orbytheiractions.Ineffect,whenwetalkof strategyinthiscontext,weareenteringtherealmofthecollectivemindindividualsunitedby commonthinkingand/orbehaviour. Set2.Q3).Whatarethefactorstobetakenintoaccounttoensureanoptimumcompensation packageforexecutives? Manyissuesarepresentindesigningexecutivecompensation.Therearealotoffactorstobe takenintoaccounttoensureanoptimumcompensationpackageforexecutives.Inthissection, someoftheimportantcriteriaareelaborated. Strategycriterion Thisreferstothecorrelationbetweentheorganisationalstrategyandtheperformanceofits executives.Thedifficultworkistocomeoutwithamodelwhichbalancesbetween organisationalstrategiesandemployeeperformance.Oneofthebiggestexpensesforan organisationcouldbetheraisingcostofemployeecompensation.Ontheotherside,itcannotbe neglectedbecausetheemployeesperformanceisdirectlyrelatedtocompensation.Therefore, someoftheimportantstepstobetakenintoaccountare: >Creatingincentivesbasedontheproductlifecycle. >Relatingcompensationtoorganisationalstrategies. >Followingasimplecompensationstrategy. Rolecriterion Hierarchicalpositionsandorganisationalroleshaveacontributingeffecton

executivecompensationdesign.Executivesactasfigureheads,andhencetheyshould becompensatedmorethanothersinthelowerrungs.However,organisationsare nowexperimentingwithstructurestorespondtothechangingenvironment.Itmaybeessential attimestosacrificethetraditionalhierarchicalstructure.Insuchcases,executivecompensation maynotbealignedwiththefigureheadroles.Sometimesthepayisbasedonfunctionalaspects andnotontheroleorposition.Forexample,pilotsarenotpaidahighcompensationpackagefor theirposition,butfortheirfunctionalaspects.Therefore,therolesandresponsibilitiesofthejob isanimportantaspectindecidingtheexecutivecompensation. Behaviourcriterion Theactionsandtheprocessesfollowedbyexecutiveswhileperformingtheirjobsrevealtheir behaviour.Thiscriterionisassociatedwiththemonitoringmechanism,andexecutivesusuallytry anddoasubjectiveanalysisofthebusinessdecisions.Henceexecutivecompensationbasedon behaviourcriterionisquitesensible.However,executivebehaviourisdifficulttomeasureandall theaspectsoftheobservedbehaviourcannotbeexpectedtomeetaspecificoutcome.Hence, behaviourcriterionhasnotreceivedmuchattentionfromthecorporateworld. Size Thereisageneralopinionthatthesizeofanorganisationplaysthemostinfluencingrolewhile designingexecutivecompensation,whileonthecontrary,itisnot.Itistheperformanceofthe organisationwhichisthemostimportantcriterionwhichinfluencesexecutivepaypackage. Market ThemarginalproductivitytheoryofRoberts(1956)arguesthatamarketforces,thatis,supply anddemandforexecutivetalentdetermineexecutivepay.Thistheoryconsiderstheservicesof executiveslikeanyotherinputforrunningabusinessoperation.Thetheoryarguesthatthe valueoftheinput(executivecompensation)isdeterminedbytheintersectionofsupplyand demandinthelabourmarket. Peercompensation Thesocialcomparisontheory(OReillyetal.1988)assumesthatthecompensationofselected peersplaysaroleindesigningexecutivepay.Oftenboardmembersofanorganisationconsider themselvesasareferralpointintheirexecutivepayrecommendations. Set2.Q4).Howisemployeebenefitandlabourmarketlinked? Labourmarketsfunctionthroughthecontactofemployeesandemployers.Laboureconomics looksattheprovidersoflabourservices(employees),thedemandersoflabourservices

(employers),andattemptstounderstandtheresultingmodelofwages,employment,and income.Inotherwords,fromthelabourmarketpointofview,wagesnecessarilydependsonthe prevailingsupplydemandconditionsofthelabourmarket.Earlier,thecompensation managementpracticesofIndianorganisationsfocusedonattracting,retaining,developingand compensationemployees,notconsideringthelabourmarketconditions.However,withthe increaseofeconomicactivityandthesubsequentincreaseinthecompetition betweenorganisations,employeeretentionhastakentheutmostpriority. Moreover,globalisationhasalsocontributedtotheincreasedmobilityoflabourastalented andcapableemployeesnowchangejobsmorefrequently,movingacrosstheglobe.Giventhe conditions,thedemandandsupplyconditionsinthelabourmarketgainimportanceand organisationshavetoconsiderthesefactorswhilesettingupthecompensationpolicies. Designingcompensationplanswhichkeeppacewiththedemandandsupplyoflabourisnow becomingacorporatepractice Set2.Q5).Whatarethefactorsthathavetobedeterminedbeforepreparingthesalarystructure? Fromtheprevioussectionwecametoknowaboutestablishingexternalequity.Inthissectionlet usdiscusshowwecandevelopthepaystructuresoftheemployeesandwhyisitnecessaryto developaproperpaystructure.Paystructureisthegroupingofpaygradesorpaybands.There canbemorethanonepaystructureinacompensationplan.Forinstance,theremaybeonepay structureforserviceandmaintenancepositions,oneforsalespositionsandonefor managerialpositions.Or,theorganisationmayhavejustonestructureforallpositions. Theprocessofdevelopingthepaystructuredealswithinternalandexternalanalysistoassess thecompensationpackageforthespecificjobprofile.Asdiscussedinthepreviousunit,job descriptionprovidesindepthknowledgeaboutthejobprofileanditsworth.Formore informationonjobdescription,refertounit4CompensationManagementandJobDesign.Pay structurehelpsinanalysingtheemployeesrole,valueandstatusintheorganisation.Italsohelps intheassessmentofincentives.Iftheorganisationispayingverylesstoemployees,thenitmay losevaluableemployees.Iftheorganisationispayinghigh,thenitmaybeunwisely spendingcompanyresources.Themaingoalofdevelopingapaystructureistomanageand demonstrateanorganisationscompensationphilosophyandtoreflectandsupportthe advancementofthecompanysculture.Aneffectivepaystructurealsohelpstoattractand retaintheefficientemployees. Anorganisation'spaystructureisavisibledemonstrationofitscompensationphilosophyand plan.Paystructureisatool,whichisdevelopedlogicallyandcommunicatedeffectivelytomake theemployeesmoremotivatedtowardsthejob.Thefollowingthreefactorshavetobe determinedwhiledevelopingapaystructure:Theproperdataforestablishingtherelativevalue ofaparticularjobtotheorganisation.Theproperpayrangeforajobwiththedefinedvalueto

theorganisation.Thevalueofeachjobpositionwithinthespecifiedpayrange.Oncetheabove factorsaredetermined,paystructurescanbedevelopedthroughthefollowingsteps:1.Group thejobswiththosethathaveasimilarvalueintheorganisation.2.Measurethesegroupstofind outthenumberofpayrangesneededtogroupthejobsonthebasisoftheirvaluetothe organisation.3.Createasalaryrangethathasaminimumpoint,amidpointandamaximum pointforamountsallottedwithintherangeanddeterminethepayforeachjobgrouping.An organisationscompensationphilosophyandpaystrategydeterminestheapproachthatshould betakentoallocatepayacrossjobranges.Factorstobeconsideredare: >Numberofyearsofexperience. >Numberofreportingstaffmembers >Performanceevaluationresults. >Hazardousworkingconditions. >Undesirableshifts. >Educationanddegrees. >Professionalcertifications. >Managementopinions. Asuccessfullydevelopedpaystructureidentifiescareerdevelopmentinadditiontopromotion.It demonstratesandpaysforthebusinessresultsonwhichanorganisationplacesvalue.An effectivepaystructureisworththetimeandattention.Itpaystogetitright.Howanorganisation structuresitsbasesalaryprogramisbasicallyamatteroforganisationalphilosophy,although marketplacepracticesareveryessentialtoconsiderinhighlycompetitivesituations.In structuringthisbasepayprogram,severaloptionsareavailable:Organisationscanuseasingle ratestructureinwhichtheemployeesperformingsimilarjobswillreceivethesamepay rate.Organisationscanuseatenurebasedapproachwhichfocusesonfromhowlong anemployeehasbeenemployedinaparticularjob.Organisationscanalsouseacombinationof atenurebasedplanandameritbasedplan.Forexampleusuallyemployeesbegintheirjobata fixedrate,andthenprogresstohigherratesduringtheirfirstyearbasedonthenumberofyears spentinthejob,thenanyadditionalpayincreaseisawardedonlyonthebasisof performance.Organisationscanuseapaysystembasedonproductivity.Anexampleforthis wouldbeanemployeewhoispaidonlyasalescommission.Anincreasinglypopularoptionis someformofbasepaywithanincentiveopportunity,eitherbasedonindividual,team,unit,or companyperformance. Set2.Q2).Howdoescompensationeffectemployeesatisfaction?

Linkingemployeesatisfactiontocompensationisbeingpractisedsincelongtimeinmostofthe organisations.Compensationdesignsbasedonthislinkusuallymeasureperformancefroma relativelyobjectiveside,suchassalesorrevenues,stockprice,productivitygainsandsoon.The exampleofthiseffortinrecenttimesisembeddedinlabourcontractsrecentlynegotiatedat UnitedAirlines(UAL).Theunionswereabletopushforamajornewapproachinpartbecause theyown65percentofUALsstock.Underthetermsofagreementmorethanhalfofthebonus payreceivedbythetop625UALmanagerswasdeterminedbycriterialiketimeperformanceand employeesatisfaction.Whiletimeperformanceisclearlyanobjectivemeasureofperformance, employeesatisfactionislessobjectiveandmoreunusual.Infact,onlyasmallhandfulofother firmsusesatisfactiontodetermineexecutivepay.Employeesatisfactionhastobemeasuredand evaluatedbeforeanewcompensationplancanbeimplemented.Usually,anoutsidesurveyfirm ishiredtoperformtheannualsurveyforemployees.Theresultsofthissurveyissharedthrough outthecompany.Thus,thetopmanagementwillgettoknowhowemployeesfeelabout thecompensation.Employeesatisfactiontowardscompensationisthemostimportantdiscourse foranycompany,becauseitisdirectlyrelatedtotheperformancethatcanbeachievedby employees.Themoreanemployeeissatisfiedandhappywiththeircompensation,thebetter theyperform.Inturn,thiswillinfluencethecompanyperformancetoo.Thuscompaniesshould strivetobringinafaircompensationplansoastoincreaseemployeesatisfaction.Employee satisfactionwithrespecttocompensationandrewardsdependsonthelevelofintrinsicand extrinsicresultsandhowtheemployeeviewsthoseresults.Theseresultshavedifferentvalues fordifferentemployees.Formostoftheemployees,aresponsibleandchallengingjobmayhave neutralorevennegativevaluedependingontheireducationandpreviousexperiencebywork providingintrinsicresults.Theseemployeesmighthaveahighervalueformonetaryrewards, whereasforafewothers,aresponsibleandchallengingpositionorthelearninginvolvedinthe jobmayhaveveryhighpositivevalues.Appropriatetypeofcompensationplans,rewardsand benefitsareimportantforemployees.Financially,theemployeesmustbesatisfiedthattheir salariesarejustifiedandareaccordingtotheircontributiontothecompany.Inthisrespect, bothemployeesandemployerbasicallyworktowardsthesamegoalformutualbenefit.Non financialrewardsshouldalsobegiventoemployeesfortheircontributions.Forexample,paid timeoff,recognition,employeeofthemonthprograms,nominationstotrainingprograms, careergrowthopportunitiesandsoon.Toprovideincentives,thesemodelssupportthe existenceofrewardsystemsthatstructurecompensationsothattheemployeesexpectedvalue increaseswithobservedemployeeproductivity.Thuscompensationcantakemanyvarious forms,includingappreciationfrommanagersandcoworkers,implicitpromisesoffuture promotionopportunities,feelingsofselfesteemthatcomefromsuperiorachievement andrecognitionandcurrentandfuturecashrewardsrelatedtoperformance set.1.Q2.)Defineinternalequityandexplainitsimportance. Thetermequityincompensationtheoryandpracticearisesinmanydifferentcontexts.The followingarethemajorareas:Thelegalandeconomicissuerelatedtoequalpayforsimilartasks

performedbyemployees. >Thedifferenceinpaycausedduetoexternalcompetitionormarketpressures. >Thefairnessofindividualwageratesforpeopleperformingthesametask. >Theviewsofindividualemployeesoftheirvaluerelativetotheirpay.Wesaythatinternal equityexistsinanorganisationwhenanemployerpayswagesappropriatetotherelative internalvalueofeachjob.Thisisestablishedinaccordancewiththeemployer'sperceptionof theimportanceoftheworkperformed.However,beforeanorganisationcanevaluatethe importanceofeachjob,itmustfirstdeterminethejobrelatedfactorsthatwillbeusedfor settingcompensationlevels.Thisreferstothecompensablefactors.Thefollowingaresome compensablefactorsthatareusedforlowerleveljobs >Educationrequired. >Physicaldemands. >Experiencerequired. >Supervisory/managerialresponsibility. >Workingconditions. >Responsibilityforequipment/materials. >Publiccontact. >Accidentorhealthhazards. >Manualability. Determiningtherelativeinternalvalueofjobswithinalargeorcomplexorganisationcould provedifficult.Jobevaluationmethodsareusedtodevelopajobhierarchythatreflectsthe relativevalueofjobs,whichisassessedonthebasisofskills,effort,responsibility,andworking conditions.Severaljobevaluationapproacheshavebeendeveloped.Theseapproachesinclude: >Wholejobranking. >Classification. >Pointfactors. >Factorcomparison. >Slotting. >Scoredquestionnaires

Anorganisationmaychoosearigorousanddisciplinedapproachtojobevaluationorarelatively simpleone.However,itisimportanttonotethatallapproachesaresubjective,astheydependa lotonthejudgement,accuracyandcommitmentofthetopmanagementofan organisation.Internalequitycoversawiderangeofsubjectsapartfromtheamountpaid toemployeessuchasstockplans,benefits,retirementplans,healthandwelfareplans,vacation time,andsoon.Tomaximiseinternalequity,anorganisationmustassessthevalueofeach individualandthevalueofthejobtheyareperformingtotheentireorganisation. Suchinvestmentscanbedoneindifferentwaysandmostofthecompaniesbenefitgreatlyby hiringanoutsidefirmtocheckonmethodstoreducecostsandincreaseworkermotivation.The internalequitymethodundertakesthepositioningofajobintheorganisationalhierarchy.The mainaimoftheprocessistobalancethecompensationprovidedtoajobprofilewhen comparedtothecompensationprovidedtoitsseniorandjuniorlevelinthehierarchy.This fairnessisensuredusingmethodssuchas: >Jobranking. >Jobclassification. >Factorcomparison. >Pointsystem. FiguredepictsmethodsofInternalEquity.

Set2.Q.1).Whatarethemajorissuesrelatedtorepatriation?

Set1.Q1).Describeflexibleworkforceindetail.

Set1,Q6.)Ms.DeepaMehraistheVPHRofInduslinkNetwork.Sheisassignedthetaskoffinding

anewCEOforthecompanyandfixingthecompensation.Whatarethetrendsthatshewillhave tolookintobeforefinalizingthecompensationpackagefortheCEO? Ans.ThoughwehavealotofliteraturebasedonextensiveresearchavailableonCEO compensation,mostoftheseeffortsarefocusedontheUKandtheUSA.Verylittleisknown aboutthetrendsinIndia.OnethingthatisevidentfromthisresearchisthatCEOcompensation inIndiaispositivelyrelatedtotheageandorganisationalabilitiesoftheCEOs.However,itis foundthatfamilyownershipisnegativelyrelatedtoCEOpay.Further,itwasfoundthatCEO dualityandproportionofinsiderdirectorshadnosignificantbearingonCEOcompensationin familyownedfirmsbutdidplayakeyroleinnonfamilyorganizations. IncountriessuchasIndia,societalnormsaccordagreatdealofrespectforagesinceitis believedtoberelatedtowisdom(EsterbySmithet.al.1995, Lawler/Jain/Ratnam/Atmiyanandana1995).Itisthereforeconsideredanimportantqualification andlargelydeterminesanexecutive'sprogressupthecorporatehierarchy(Dutta1997, Kuppuswamy1993,Sinha/Sinha1995).Thus,intheIndiancontextitcanbehypothesizedthat: Thechronologicalageoftheexecutivewillbepositivelyrelatedtohis/hercompensation. Thelengthofanexecutive'stenureintheorganizationwillbepositivelyrelatedtohis/her compensation. IncountrieslikeIndia,wisdomisalwaysmeasuredbasedontheage.BasedonBecker postulates,thelevelofexecutivecompensationislinkedtoagefirst.Inaddition,many researchersfoundthatthereisapositiverelationshipbetweenageandcompensation.Hence, ageisconsideredasoneoftheimportantqualificationandisusedasakeycomponentto determinethecompensation.Theothermajorlinkforchiefexecutivecompensationisonthe tenureofCEOengagement.ThisisbecauseaCEOwhohasworkedforaverylongtimewould havebuiltthenecessarybasefortheorganisation.Organisationsgiveimportancetotenure becauseitisareflectionoftheCEOsknowledgewhichisaccumulatedovertimewith experience.ThetotalcompensationinCEOpayincludesthesumoftheexecutivessalary, currentbonuses,longtermincentiveplans,andstockoptions.Theyalsoreceivedefinedbenefit plans,variousperquisites,andseverancepaymentsincaseofinternationalassignments.Todays bonusesaregenerallypartofthevariablepay,whicharebasedonannualaccounting performance.Longtermincentivesareusuallybasedonmultiyearperformance.Therewards aregivenbasedonyearsofserviceandalsoaccordingtotheirperformanceeitherbycashorby stock. GhemawatandKhanna(1996)reportthatroughly60%ofallbusinessactivityinIndiais conductedbyorganisationsthatareeitherfamilyownedorfamilycontrolled.Anotherrecent studybyDutta(1997)reportsthatroughly70%ofthelargestfirmsinthecountryarefamily businesses. Reflectingitsdevelopingnature,theIndianeconomyhasgrownasaresultoftheremarkable impetusprovidedbyaninvestorclassofindividualfamilies.