SURBHIKA SHARMA: 90 DATE: 16.11.2010

we would like to thank all the people at the Reprography Room for helping us in taking printouts. We wish to express our deep sense of gratitude to our friends & family members for helping us complete this project.ACKNOWLEDGEMENTS We take immense pleasure in thanking Dr. . Finally. Nilanjan Sengupta. our course facilitator for introducing us to the basic concepts of Human Resource Management.

Naturally. the prospect of working for an unknown or nascent brand will demand significant consideration on the part of potential new hires. . The hardest part perhaps is the people aspect. retaining talent under such unique circumstances becomes all the more critical and the loss of resources with proprietary skills and knowledge. the human resources managers have to make a proper compensation plan for qualified employees. It focusses on the growing demands of employees while retaining the competetiveness and profitability of the company. can develop into a business continuity challenge. Therefore.Introduction Managing any business is challenging but getting a business off the ground and making it viable is probably the riskiest stage in the life-cycle of an organisation. As a corollary to the above problem.

This data field is a sum total of the following items: y y y y y Salaries. However. reimbursements and other expenses on employees Salaries & wages: Salaries and wages refer to the periodic payments made to the employees for the services rendered by them.20 crore under the schedule for 'Managerial Remuneration¶.31 crore under µpersonnel expenses in their 2007-08 annual report. Grasim Industries reports the amount of Salaries. For example. Havells India Ltd reports salaries. CMIE does not make a distinction between the two and thus reports a total of Rs. This is a statutory requirement essentially to save for the post-retirement life of employees. If a company reports salaries to employees separate from that paid to managers then the two is combined to derive the total employee compensation.64. ex-gratia bonus and performance-linked bonuses.51(64. In such cases. it is likely that companies may report this amount along with salaries and wages.2. The company further reports Managing and Wholetime Director's remuneration of Rs. bonus and other benefits of Rs. we combine the two. contribution to provident fund and gratuities Staff welfare and training expenses ESOP VRS Arrears paid. It is often seen that managing director's remuneration and perquisites are disclosed separately and distinct from other salaries. bonus. wages. It includes the bonus amount paid as per the µPayment of Bonus Act¶. Any amount that is . In such cases.31+2.20) crore as salaries and wages. Wages and Bonus etc. Information about bonus payments is generally available in the schedule of employee related expenses. clubbed together under the schedule of µpayments to and provisions for employees¶ in their 2007-08 annual report Contribution to Provident Fund: The µEmployees Provident Fund Act¶ mandates that employers are required to make a contribution in favour of the employees to the Provident Fund Account an amount equal to 12 per cent (earlier 10 per cent) of the basic pay and dearness allowance. Bonus & ex-gratia: Bonus payments to all employees including management employees are reported in this data field. it would be included in the data field µSalaries & Wages¶.66.Literature Review Compensation to employees Compensation to employees includes payments made in cash or kind by a company to or on behalf of all its employees.

We report this amount in this data field. It is linked to the number of years of service deployed by the employee and is available upon separation.91 crore and µContribution to Gratuity Fund¶ of Rs. However. We report this amount in this data field.31 crore.11.18 crore under µPersonnel Expenses¶ in their 2007-08 annual report. as a part of the compensation to employees and makes the entry in this data field ± µStaff training¶. etc.0. Gratuity and Other funds¶ Rs. Staff welfare: Staff welfare refers to the various amenities that are made available to the employees for their general welfare. staff food. Staff training: Staff training refers to the expenses a company incurs to train its employees.¶ However.20) crore in this data field.0.3. Consolidated Construction Consortium Ltd reports µContribution to Superannuation Fund¶ of Rs. if a company reports recruitment expenses in isolation i. canteen expenses.1. We thus report the amount of Rs. .54crore only under this field. Companies often report such an expense under the nomenclature µstaff recruitment and training¶ expenses which is reported in this data field.11(0.87 crore under µother expenses µof their annual report for the year ended 2008. Similarly.0. CMIE treats all of these uniformly.e not combined with training expense. transportation facilities.17.3.contributed by the employer during the year to this account is reported by the companies as contribution to Provident fund. Satyam Computers reports training and development expenses in the schedule of operating and administration expenses.5. the company informs that the contribution to Provident Fund is Rs. Colgate-palmolive reports in their µContribution to Provident. These are besides the regular remuneration in the form of salaries. Nestle reports training expenses under the schedule of manufacturing expenses. Lakshmi Energy And Foods reports µstaff welfare expenses¶ of Rs. staff termination or repatriation expenses are also not staff training expense but form part of the reporting under µother expenses on employees. we report it under µother employee expenses¶ and not staff welfare expenses. Usually.20 crore under µEmployee costs¶. staff and labour welfare. companies do not necessarily treat the expense incurred on training of employees as a part of personnel cost. We also include payment towards Superannuation Fund under this field. Staff welfare expenses may be in the form of free or subsidised medical treatment. recreation facilities.91+0. Further. Mafatlal Industries reports in their µcontribution to gratuity fund¶ Rs. These expenses do not form a part of the employees¶ salary but are borne by the employer for the benefit of the employees. Gratuities paid: Gratuity is a retirement benefit paid to an employee. We add both the amounts and report a total of Rs. gratuity is paid only to an employee upon separation only if he/she has completed five years of service in the company.93 crore under Employee Costs. under Personnel Expenses in the annual report for the year ended 2008. Sail reported training expenses of Rs.54 crore. Companies in the technology and pharmaceutical industry generally report expenses incurred on staff training as a separate expense head under the schedule of employee related expenses.

Thus we know that this amount is the amount amortised by the company during the year and hence reported in the VRS amortised data field. under the schedule µmiscellaneous expenses written off. Mtnl reports µcompensation paid under VRS scheme¶ of Rs. Companies thus had the option of amortising the expenditure over several years or charging the entire expenditure during a single year. the accounting policy on page 70 under note 5 reveals that the company writes off the VRS paid amount over a period of five years.09 crore under µEmployees cost¶ on of their annual report for the year ended 2008. voluntary retirement benefits are a part of a voluntary retirement scheme aimed at reducing the workforce of a company.ESOP: ESOP is Employee Stock Option Scheme wherein employees are given an option to buy a specified number of shares of the company at a specified price during a specified period. we add back the amortised ESOP amount transferred to Director's remuneration and report the gross amount of Rs. For example.52 crore in their Annual Report for the year ended 2008. VRS benefit fully charged in one year: This data field records the voluntary retirement benefit expenditure when the entire expenditure spent is charged to the profit and loss account of the accounting period in which it was spent.¶ The company deducts an amount of Rs. Voluntary retirement benefits are a part of a voluntary retirement scheme aimed at reducing the workforce of a company. During the early years of introduction of such schemes there were no guidelines on disclosures.1.62. Thus Rs. companies may choose to charge the entire amount to the year in which the expenditure was made.2. In such cases. Dabur India Ltd reports µDeferred employee compensation under ESOP¶ of Rs. The amounts involved at times during such schemes can be quite large. during an accounting period.45 crore. However. i. Companies thus had the option of amortising the expenditure over several years or charging the entire expenditure during a single year. amortized during the year. VRS benefit amortised: This data field records the amount of voluntary retirement benefit expenditure that is written off.5.8. For example. Further.8. ICAI's Accounting Standard 26 recommended that companies should amortise such expenses.2. the VRS expenditure amount is reported in this data field. Again. Later.45 crore in this data field. ICAI's Accounting Standard 26 recommended that companies should amortise such expenses. the objective is to align the interests of the employees with that of the company to motivate them and to possibly gain their long-term interest in the company. Mid-day Multimedia reports ESOP compensation of Rs. amortised. We report this amount in this data field. The amounts involved at times during such schemes can be quite large. Usually. Later.48 crore. Colgate-palmolive reports µvoluntary retirement scheme cost¶ of Rs. We do not report ESOP amount amortised under 'miscellaneous expenses written off¶ but report under Employees Compensation-ESOP.97 crore is excluded from salary and wages data field.e.97 crore ±µtransferred to Director's remuneration¶ and reports a net amount of Rs.100 . Generally. During the early years of introduction of such schemes there were no guidelines on disclosures.

value of perquisites. However. this data field does not include the sitting fees paid to the directors. We report this amount under this data field. contribution to provident fund.15 crore in this data field. Arrears paid during the year: Arrears of salary refer to the amount paid by the company to its employees with retrospective effect i.15.10 crore and µfuel and conveyance reimbursement¶ of Rs. Airports Authority Of India reports µmedical reimbursement¶ of Rs. Note 15 on page 30 states that the amount includes additional bonus payment of Rs. We exclude this amount from salaries and report it as arrears paid during the year under this data field. µLTA reimbursement¶ in their annual report.12 lakh as µLTA reimbursements¶ for the year 2008 under µPersonnel expenses¶ in their 2007-08 annual report.lakh under µemployee costs¶ of their 2007-08 Annual Report. Thus we post an amount of Rs.10. Page Industries reports an amount of Rs. Group Insurance etc.46 crore reported under µpayments to and provision to employees¶ include provision for leave encashment of Rs. Ingersoll Rand (India) reports by way of a note on page 41 of their 2007-08 annual report that Salaries wages etc. Again any remuneration and commission paid to non . We thus exclude this amount from salaries and report it under the field for "other expenses on employees" Directors' remuneration: This is an information-only data field that reports the remuneration paid to the company's executive directors and thereby charged to current year's profit and loss account.134(103. Payments/reimbursement of expenses: Reimbursement of Expenses are those expenses which are incurred by the employees and are then reimbursed to them by the company.90) crore in this data field. Further. performance linked incentive to whole time directors and also the commission paid to them. as and when it is determined. Other expenses on employees: This data field includes all the other employee related costs which are not included in any other data field under µCompensation to employees¶.2.30 crore.10+33. Maharashtra Scooters Ltd in its annual report for the year ended 2008 reports salaries and wages of Rs. We report a total of Rs.30. µfuel and conveyance reimbursement¶. which is disclosed in a separate data field . is paid to the employees as arrears.Director's fees.0.e. Deposit linked Insurance.90 crore under µOther Staff Costs¶ in their 2007-08 annual report. The remuneration paid to directors which is reported under this data field includes the amount of salary paid. of Rs. pension contribution. The data field could include information pertaining to provision for leave encashment. For example. salary of the past period paid in the current period.103. Companies pay arrears either on pay revision or in case of an order of the court of law or on settlement of a dispute with the labour union.33 crore. ESI. This information is available under µOther expenses¶.22 lakh retrospectively for the year 2006-07 consequent to amendment in Payment of Bonus Act. For example. This amount is reported under this data field. The amount.3. Companies usually report reimbursements like µmedical reimbursement/expenses¶.

To equip the employees with necessary skills and to succeed on the job they are given continuous opportunities. Infosys has kept a fund of nearly rupees 600 million to help the employees with the loan facility. Hence. . Bharat Forge Ltd reports µManaging and Whole time Director's commission¶ of Rs.75 is not included under salaries and thereby not reported in this data field. Infosys is one of the topmost IT firms. Compensation Management is a crucial part of this organisation. Its main objective is wealth creation for employees.0. We include the amount of Rs. Infosys package includes: Salary Asset Wealth creation opportunities Career loans Employee stock option plan( ESOP) Marriage loan y y y y y y The BENEFITS FOR INDIAN EMPLOYEES include:  ESOP: 83% of employees are participating in this plan in which the employee becomes a true partner in the growth of the company and shares the rewards.wholetime/non-executive directors is not included under this field but is reported under the data field µDirector's fees¶. INFOSYS TECHNOLOGIES LTD.85 crore and µCommission to Director's other than Managing and Wholetime directors¶ Rs. laptops etc. rather it focusses on a more holistic model. For example.  Training programs: When an employee joins Infosys.6.6. The company undertakes supervision of an Asset on behalf of the employee before its purchase. computers. online tutorials and company sponsored workshops.85 crore under salaries and wages and correspondingly report under this informative data field.  Assets: In case the employee requires loans for house.0. Instead it is reported under the µDirectors fees¶ data field. he is given orientation training.75 crore in their 2007-08 annual report under µOther expenses¶ Schedule. but Rs. Salary is not the only compensation factor that works in Infosys. cars.

Company has its own self-funded vision care plan . The company has an on-site ATM for the employees¶ convenience. HINDUSTAN UNILEVER: The working cycle of a typical HUL field force member is from 21st of every month to the 20th of the next month. pension and gratuity: y In Infosys.  Chartered accountants assist employees in filing their income tax returns. y Middle management is eligible for superannuation scheme. y Infosys gives its employees 20% of (Basic+DA) as bonus. the eligibility for gratuity is one year of continuous service instead of five years.Statutory benefits:  Provident fund(pf). During this period he is given various targets that helps to achieve company objectives and gives him a chance to prove his performance relative to other.dental . the company makes sure that the operating area of each field member doesn't overlap with his .All the premium is paid by the company. his health care benefits are all covered by the company.  Doctors are available for medical aid. which is much higher every year as compared to the permissible limit of 8.vision care insurance: Employees and their dependent family members are covered under a medical insurance plan from µthe guardian¶.  Medical. The maximum contribution established by internal revenue service is $10000 per year.33%. BENEFITS FOR US EMPLOYEES:  401(K) savings plan: Employees contribute 20% of their compensation to this plan annually. While deciding the area for each member of the field force.  Health Care: From the time an employee joins the company. To start with the field force member is given a particular area and his responsibility is to cater to all the retailers in that area. This plan also offers comprehensive coverage of dental care including orthodontia.  Travelling assistance: the travelling assistance to employees for making reservations for both personal and official purpose.

If he achieves 100% of the target he gets 2. 27/ . A typical µFocus¶ target is given below: Lux International ± Rs 20. Rs. the field force is evaluated using QOC (Quality of Contribution).5 points which is then added to his overall QOC score.. each member is given a specific target in Secondary Sale terms of value (e. .640 / @ Rs 6/ per unit Life Buoy Rs 70.5 points.g. It consists of 4 components 1. However if this is not met within 5th.220 / @ Rs 10/ per unit Wheel Rs 99. ECO / Width pack Target ± This is used for the penetration/reach of certain products in the existing market. Upon completion he gets additional 0.other colleagues. Secondary Sale (Max points = 2. 15 lacs) for the operating month (21st ± 20th of next month). There are various methods used by the company to incentivize the field force Monetary and Non Monetary. Based on this the Field person calculates number of packs he should sell to the retailers. Focus / Depth Pack target ± This is mainly used to increase the sales volume of certain products. In HUL. These points are used to add to the total QOC score as well as linked to monetary incentive.000 / @ Rs 10 / per unit This target needs to be achieved within 20th of next month. Eco (Max points = 0. The concerned agent receives this target around 25th of each month and has to complete this target within the 5th day of next month. Focus (Max points = 0. Upon achieving the target the field person is awarded 0.000 / @ Rs 10/ per unit Breeze Soap Rs 27. if he achieves 95% target he gets 1.5 points.5) 2.5 points added to his QOC score along with monetary incentive associated with it.5) 3. he looses the opportunity. FCS (Max Points = 0.5) 4.5) Based on the operating area. The following is a typical ECO target assigned to a field force agent: Lux International ± 105 outlets x 1 SKU Pears Soap 135 outlets x 1 SKU Rin 104 outlets x 1SKU Breeze Soap 100 outlets x 1 SKU The outlets mentioned are within the operating area of the person and 1 SKU = Rs.

For example if there are 100 outlets within the operating area of a field person then the number of visit per week is 100 and total number of visit per month = 100x4 = 400.5 which is added to his QOC score. The photograph of the award winners is displayed in the office as a source of inspiration for other sales person. Compensation Management in MSMEs . Each scheduled visit per outlet is one per week. If QOC score > 4. Each field person is given a palmtop wherein he can feed the entries on the spot where the transaction is done. Target Setting Mechanism and monitoring The regional office monitors the performance of various zones.5 ± The person is eligible for 3 star award In the event of exceptional performance.5 ± The person is eligible for 7 star award If QOC score > 4 ± The person is eligible for 5 star award If QOC score > 3. b) The sold item is immediately updated in the company information system. This solves basically the two purposes a) The field person is freed from the tedious task of maintaining cumbersome records and can then concentrate on the job (thus IT is replacing some of the field force or other channel members). Based on the QOC various awards are distributed to the field persons at the end of every month. the field force persons are required to ensure that the scheduled visit/outlet billing is such that at least 15 items are demanded per order. If this is achieved the retailer gets a discount of 1% on the billed amount and on the other hand the field person gets an additional score of 0. The sales person is required to achieve 90% success rate to get 0. Non Monetary Methods The other purpose of the QOC scores is to highlight the performance of the field person among his peers. This is the basis of setting ECO and FOCUS targets for the field persons. management representatives from the regional office come to the zonal office to distribute the awards.5 points for his QOC score and at least 65% for a satisfactory performance. A thorough analysis is done at the end of each month and based on that the weak products are identified or those for which the demand has weakened.Field Capability Score (FCS: In this component. MOC stands for Monthly operating Cycle. These awards are also known as µMOC Star¶ awards.

especially from larger and better known employer brands. targeting prospective employees. Employer Brand: Companies spend a disproportionate amount of time in building their corporate brand for customers and investors. to emotionally connect employees and prospective . Employee Value Proposition is a concept that outlines how an organisation articulates its identity. namely. View of µcompetitive landscape¶: what strategies and tactics are in use by the employeremployee contract to determine viability of the plans. Employer Branding is a part of the continuum that includes concepts like Employee Value Proposition (EVP) and Total Rewards Framework. often pales in comparison. y y y y y Employee view: What is desired by the employees from their employers Workforce view: What kind and how much of talent is available in the local market.MSME employers need to strive hard to retain their top talent. employees wait as long as it takes for them to acquire critical skills before moving to better known employers. There are many approaches to define total rewards in an organisation. does it have socio/cultural alignment with what the organisation expects. origins and values. whereas the commensurate effort in nurturing an µemployer brand¶. More often than not. This is not an evolutionary development but a recursive exchange where aspects (perhaps unarticulated) of EVP influence the design and development of the Total Rewards Framework. The Total Rewards Programme stimulates the development of the next step of the continuum. and what it promises to deliver. a comprehensive view covering six advantage points is ideal. the Employee Value Proposition or EVP. Employer view: What is possible for the employer to offer based on the business it operates Environment view: The prevailing business and regulatory environment and its impact on the employment conditions.

but rather it should compliment it. MSMEs can easily outscore their large rivals on account of organisational culture as their size affords them agility. Employees value a culture of empowerment where their organizations hear what they have to say and their decisions carry weight. MSMEs could leverage this aspect and strive to find talent who like the close-knit feel of smaller companies. small and medium-sized companies. what to expect and why the organisation is a different and a suitable place to work. being nimble. organisations can articulate it and make a brand promise to its employees. the impersonal feel of large organisations combined with the silo mentality of departments appear uninviting and intimidating to many people. At times. In most instances.employees. On the whole. The Employer Brand cannot be contrary to the corporate brand. Companies in the MSME space cannot afford the high fixed costs of salaries. Once the culture becomes ingrained into the DNA of the firm. It clearly articulates the employee experience²what is an offer. MSMEs enter a golden period where systems and processes are effective and scalable. The ability to see a tangible outcome of their effort gratifies professionals and smart companies weave this into their organisational culture and leverage it to their advantage. while too heavy a reliance on µperformance pay¶ is unattractive to employees. Small and medium firms have a better µline of sight¶ between efforts to rewards. and Economies of Scale allow more capital to accumulate with larger companies. It¶s at this time that a company becomes a good place to work. That said. In an environment where compensation is the strongest proposition to attract and hold talent. people fully engaged and margins looking healthy. Their responsiveness comes from their ability to process information between customers and management faster. MSMEs are clearly outgunned in the war of talent. Additionally. . as the effort to output process flow is generally much shorter. it would be unfair to expect all MSMEs to outscore large corporates on matters of culture or do it consistently. have much less structural development. The coming together of Total Rewards and Employee Value Proposition. results in an Employment Brand. In such an environment. Thus an employer brand is created. Those companies which are able to hold on to this period and extend it go on to become larger and successful organisations. Successful MSMEs are the ones that are able to assimilate aspects of entrepreneurial spirit and enthusiasm into their culture and practice it consistently. MSME firms have to rely on other means to stay competitive The more successful companies have managed to stay competitive by reviewing the entire employee life-cycle from hire to retire and then re-designing those points of interactions that allow them to provide a differential positioning in the employment market.


they will avoid the misunderstanding and resentment that results from avoiding this critical issue. A satisfied employee is a productive employee and care should be taken that they are fairly paid for their worth in the organization. MSME and HUL. failed can create problems. If managers follow these guidelines. Smaller projects with fast paybacks would be more attractive than a big project with a long payback. Compensation is need of the day for the Human Resource Department. The major challenges what manager¶s face today is retention of the man power and the major cause of it is that they are paid better in the other organizations. The whole idea of compensation management can be better understood through the following Pyramid structure. In addition. The motivation level of the employees to great extent lies in monetary rewards.CONCLUSION The presented report on Compensation management has shown insights through three corporates: Infosys. If paid well can generate results for the organization. Similar to changes bought about in the other departments the HR should also emphasize on restructuring the costs so as to bring the variable cost close to nil. . In the current state of affairs it is indispensable to restructure the pay models. their pay-related communication with employees will result in clarity and respect.

Prentice Hall of India Pvt. Vol.php?kall=wcohelp&cocode=219015&repnum=7&tab=40 20&type=s&cotype=nf&ordern=14&tabname=Financial+details++Presentation+of+the+financial+performance&show=indic&section=finance&macro =exp_salary_wage_diro_remn . Excel Books. New Delhi. ³The New Employment Deal´. 2006. 14 No. ³Human Resource Management-Text and Cases´. ltd New Delhi. 2000. 4. 2. http://www. ³Human Resource Management´. New Delhi. June 2010.businessbeacon.com/kommon/bin/sr. 1. Biswajeet Pattanayak. Subeer Bakshi. 3. V S P Rao. Human Capital.Bibliography 1.

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