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Human Resource Management Report

Acknowledgement

All the praise to Almighty Allah the most beneficent and merciful who gave us the
Opportunity to compile the regarding the Compensation Management of EFU
Life.

We are very thankful to our course instructor Ms.Shehla Najib Sidiki, who
enlightened us with the relevant concepts and its practical applications in the
professional world. He truly helped us and provided proper guidance for the
presentation of the report. We hope that he will continue to guide us in the similar
way so as to enlighten our future as well.

This report is the combination of lot of sincere hard work and dedication. We will
highly appreciate suggestions for improvement in this report or any other queries
regarding this report and its contents from everyone. Especially, from our
companions and well wishers as we strongly believe that nothing is perfect in this
world and there is always room for improvement.

Table of Contents

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1.0 About EFU Life……………………………………………………….……….…... 1


2.0 Pay Structure ……….……………………………………………….…………..…2
3.0 Basis of Pay Structure …………………………………………………………....4
4.0 Sources of base Pay Adjustment ………………………………………………..4
4.1 Base Pay …………………………………………………………………...4
4.2 Wage and Salary Add – ons ……………………………...…………..….5
4.3 Service and Benefits ………………………………………………………5
4.3.1 Accommodation ……………………………………….……….6
4.3.2 Basic Allowance for subsistence ………………………….….6
4.3.3 Medical Facilities ……………………………………………….6
4.3.4 Group Insurance …………………………………………..……7
4.3.5 Conveyance …………………………………………………..…7
4.4 Deferred Payment ………………………………………………………….8
4.4.1 Pension plans and Retirement pay ………...……………...…8
4.4.2 Social Security Plan ……………………………………………8
4.4.3 Provident Fund …..……………………………………………. 8
4.4.4 Savings and Thrift Plan ………………………………………..8
4.5 Pay fir Work Not Done …………………………………………………….9
4.5.1 Leave without Pay …………………………………………...…9
4.5.2 Sick Leaves ……………..………………………………………9
4.5.3 Paid Leaves ……………………………………………………10
5.0 Allocating Pay Structure ………….………………………………………………11
6.0 Merit Based Increment …………………………………………………………...13
7.0 Benefits in Addition to Salary ……………………………………………………15
8.0 Fringe Benefits ……………………………………………………………………17

1.0 About EFU LIFE

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EFU Life is the largest private sector life insurance company in Pakistan.
Established in 1992, EFU Life has a market share of more than 50% of the
private sector life premium income. The Company is also the first life insurance
company in the country that has been assigned an Insurer financial strength
rating.

In 1992, the Government of Pakistan reopened the life insurance business to the
private sector organizations and EFU Life Assurance Ltd was incorporated in
November 1992 as the first private sector life insurance company. In early 1993,
EFU Life commenced writing group life insurance business and by March 1994,
the company began writing its individual life business.

The Company has a growing branch network of 72 branches through out the
country with employee strength of over 1,600 personnel in its sales force and
around 150 personnel at its main offices in Karachi and Lahore. The company
employs 5 full time actuaries and also has an active involvement of one of the
leading actuarial firms in the country.

EFU Life is the first life insurance company in Pakistan to be awarded the ISO
9001:2000 certification. Today, EFU Life continues to be the largest private
sector life insurance company in Pakistan. In 2005, EFU Life’s premium income
was Rs. 2.5 billion.

2.0 Pay Structure


EFU LIFE has 14 Pay Scale Groups or job classifications which range from
manager, professional, technical and assistant officer employees. Each levels
has a maximum salary, midpoint salary or competitive objective and for
computational purposes as minimum salary.

Designation Grade Basic Conveyance Utilities Entertainment Drive Other Total


r
Asst. 1 50 9 18 100
Officer
Officer 1 50 15 12 100
Senior 1 50 13 5 5 4 100
Officer
Executive 2 51 12 5 6 3 100
Officer
Asst. 2 51 14 5 6 1.5 100
Manager
Deputy 2 51 14 5 6 1.5 100
Manager
Manager 2 54 0 5 9.50 5.50 1.5 100
Senior 3 50 0 5 15 7 1 100
Manager

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*All in percentages. Not true figures.

The Assistant Officer, Officer and Senior Officer have each 1 grade level which
are 1, 2 and 3 respectively. The Executive officer, Assistant Manager, Deputy
Manager and Manager each has 2 grade levels, that is, 4, 5, 6, 7, 8, 9, 10 and 11
respectively. The Senior Manager Level has 3 grade levels; 12, 13 and 14. This
makes the total of 14 pay scale groups that EFU has.

Classification Level:
1. Every management and professional position is assigned to a
classification level. In all cases, the salary range is broad enough to allow
for considerate growth in salary and over a career even if the individual is
not promoted or advanced to higher-level classification. This allows for
recognition of an employee whose superior performance may justify a
higher salary.

2. Salary ranges may be adjusted when considered necessary by


undertaking survey of comparable organizations.

3. The company’s salary system is based firmly on the evaluation of


employees’ performance, supervision assessment by multiple judgment
appraisal procedures and performance ranking.

Benefits in Addition to Salary:


Provident Fund 8.33%
Medical Reimbursement 8.33%
Pension 10.00%
Bonus 16.66% (2 Basic Pays; depending profitability)
Health Insurance Cover (Self & Dependants)
Group Insurance Cover (Designation Based)
Paid Vacations --
Car --
Petrol Allowance --

3.0 Basis of Pay Structure


EFU LIFE has based their pay structure based on Market Survey of similar
organizations in the market. They have consultants and actuaries that do a
market survey on the basis of which they then decide on their pay structure.

For Sales Force however they allocate a commission based on the Job
Description of the sales force. The commission is paid along with a basic pay.
This commission is calculated accordingly when the sales force sell a product
approximately a 50% commission is paid on average.

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4.0 Sources of Base Pay Adjustment


In today's environment, employers seeking to attract and retain high-quality
employees must appeal to a more diverse workforce, consisting of people in
various stages of life. Group cover from EFU Life offers a variety of coverage
options. Employers may select basic and supplemental coverage amount to fit
the requirements of the group.

4.1 Base Pay


There are various types of pay. Basic pay is received by all and is the main
component of an individual's salary. The other pays, often referred to as special
pays, and is for specific qualifications or events.

A member's grade (usually the same as rank) and years of service determines
the amount of basic pay received. It is divided into two main areas that includes

• Active Duty Pay


• Annual Pay Raise

Tax Advantage

Most of the allowances are not tax-exempt. Additionally, certain hardship


circumstances will change normally taxable pay into tax-exempt. However, we
were not really, provided with information that related how much of the salaries
are actually exempted from tax or not.

4.2 Wage and Salary Add-Ons


Overtime is the amount of time someone works beyond normal working hours. In
the case of Efu, there is no concept of overtime. This is because the employees
may need to achieve a certain target everyday and they may seem to spend long
hours to achieve that.

4.2.1 Payment for Working on Holidays and Weekends

They are usually remain closed on non working days and hence they may have
not really allocated any sum of money for such working hours.

4.3 Services and Benefits


The organization has a wide variety of benefits ranging from complete health
care to commissary. A review of active duty military benefits noted that when
comparing the types of benefits offered by the EFU Life with those offered in
other firm, all the core benefits offered by other firms-retirement pay, health care,
life insurance, and paid time off-are offered by the company.

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4.3.1 Accommodation

Accommodation is an allowance to offset the cost of housing. Your


accommodation depends upon employee’s location, pay grade and whether you
have dependents or not. Accommodation rates are set by surveying the cost of
rental properties in each geographic location. Therefore, Accommodation rates in
high-cost areas will be much greater than those in low-cost areas.

4.3.2 Basic Allowance for Subsistence (BAS)

BAS is meant to offset costs for a member's meals. This allowance is based in
the historic origins of the EFU’s members in which the organization provided
room and board (or rations) as part of a member's pay. This allowance is not
intended to offset the costs of meals for family members. Beginning on January
1, all enlisted members get full BAS, but pay for their meals.

4.3.3 Medical Facilities

The employees receive these allowance depending on the pay scale grade
they lye in. we were informed that these individuals may receive higher
compensation if they belong to higher pay scale grade and vice versa.
However every single employee gets coverage the benefit of medical
benefits. This benefit can be secured as an independent policy and it provides
for payment of sum assured if a member contracts any of the following ten
illnesses.

 Heart Attack
 Cancer
 Major Organ Transplant #
 Stroke
 Paralysis
 Kidney Failure
 Deafness
 Blindness
 Multiple Sclerosis
 Coronary Artery By-Pass Surgery

4.3.4 Group Insurance

Group cover from EFU Life offers a variety of coverage options. Employers may
select basic and supplemental coverage amount to fit the requirements of the
employees.

 Death
 Group Accidental Death Benefit

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 Group Accidental Disability Benefit


 Fortnightly Income Benefit
 Group Natural Disability Benefit
 Group Terminal Illness Benefit
 Group Critical Illness Cover
 Group Loan Insurance
 Group Provident Fund Insurance

The above covers are offered on a 24 hour worldwide basis, which means that
both ‘On Duty’ and ‘Off Duty’ claims are covered. The group cover from EFU Life
offers comprehensive protection and a whole range of options. It is a cost-
effective and easy-to-administer means for employers to provide protection to
their employees without requiring evidence of insurability.

4.3.5 Conveyance
We were informed that the employees are given different kind of conveyance or
conveyance allowance based on the pay scale grade the employees lie in. The
managerial level employees receive an allowance to travel for the office
purposes, the actual figures were not disclosed to us. The lower level of
employees does not enjoy this privilege.

4.4 Deferred Payment


4.4.1 Pension Plans and Retirement Pay

Service members who remain on active duty for a sufficient period of time may
retire and receive retired pay. Retirees also retain the privilege to use base
facilities, such as the Commissary and gym. Those members who entered
Service on or after a specified time, and who will qualify for an active duty
retirement, may choose between two of the current three systems. Members who
become disabled while on duty may be medically retired and receive a disability
retirement. Additionally, all retirees may choose to participate in the Benefit Plan
or the Reserve Components, which protects the retiree's family financially in the
event of his or her death.

4.4.2 Social Security Plan

Social Security will likely provide additional retirement benefits to retirees


beginning, for most persons, after turning sixty.

4.4.3 Provident Fund


This benefit can be secured as an independent policy and it provides for payment
of a multiple of Provident Fund balance on death of the member.

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4.4.4 Savings and Thrift Plan


The Thrift Savings Plan (TSP) is a sponsored retirement savings and investment
plan, which was originally only for Federal civilian employees.

The TSP offers the same type of savings and tax benefits that many other
insurance corporations offer their employees under specified plans. The
retirement income that the employees receive from your TSP account will
depend on how much they have contributed to the company’s account during
their working years and the earnings on those contributions. But, it's important to
remember the TSP is for long-term retirement savings. There are penalties for
early withdrawals. So if the employees look for short-term savings, consider they
must consider the Government Savings Bonds. They are a convenient way to
help save for homes, education, automobiles, or vacations.

4.5 Pay for Work Not Done

4.5.1 Leave without Pay

Leave without pay is a temporary non-pay status and absence from duty that, in
most cases, is granted at the employee's request. In EFU Life these instances
for granting leave without is a matter of supervisory discretion and may be limited
by organization’s internal policy. Employees, however, have as many as they
want however at the time of appraisal this is been considered and in case it
exceed the acceptable amount of leaves it work as negative point for the
employee.

4.5.2 Sick Leave


Sick leave (or paid sick days or sick pay) is an employee benefit in the form of
paid leave, which workers can use during periods of temporary sickness or to
stay home and address their health and safety needs without losing pay or their
jobs. In some places of employment it is a workplace policy, and in many
jurisdictions it is codified into law. Some policies allow workers paid time off to
attend doctor visits or to care for family members. In the case of Efu the
employees may have limited number of sick leaves. However if the employees is
said to be under a treatment of disease that pay require a prolong time to cure
then his/her case is considered and is usually granted this leave. In the case of
female employees they are allowed to have an extra or prolonged period for
maternity leaves.

4.5.3 Paid Leaves


All the employees are entitled to receive a paid leave of one month. However,
this period may not exceed from the allotted number of days in case it does than

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employee needs to give an application. In the case of females, these may be


another month of maternity leave.
5.0 Allocating Pay Structure:
While determining a compensation plan, the employer should take notice of how
many direct competitors exist within the local market and how much do they pay
to new recruits or management trainees and what account for their benefits. All of
this information is acquired through market surveys. It is also argued that pay
should be kept independent of local wage scale and should be adjusted in
accordance to the value generated through service done for the company. Since
businesses operate to maximize profits, they set compensation at the least
possible level so that most profit could be generated for the company. Therefore,
wages are set at the pricing point where wage is set that would attract the most
employees and leave less room for turnover or attrition rate.
When relating EFU to referent others, here we precisely mean the competitors in
accordance to which salaries are determined through the help of market surveys.
Some of the main competitors of EFU life include NGI, Alico, Adamjee Insurance
and State Life Insurance. Thus, as told by the HR manager, Ms. Abrogena, EFU
Life pays wages that are 50% to 60% higher as compared to competitors
operating in insurance industry. This is why they have been able to retain their
core employee since many years. Similarly, fringe benefits are enjoyed by all
employees except for a few such as traveling and car not available for lower or
initial level staff.
Furthermore, all companies and individuals have been affected by the credit
crunch and it paves way to a trickledown effect but consequently, they didn’t cut
salaries last year or down size productive people, in fact, salaries were increased
this year. Moreover, for the sales department, jobs are based on a do or die
situation, in simple words, sales are the target for employees and performance is
reviewed quarterly, if they do not deliver then that have to let go. Therefore, as
told by Ms. Abrogena, not everybody can make sales.
Sales people have a fixed salary and get commission for the sales they make. It
is usually calculated when a product is sold and is based on 40% of premium.
Sales representatives belong to the sales department and the bank assurance
department where employees from the former make sales to individuals or
companies, whereas, those from the bank assurance department aim at banks
where products are placed, sales from these get them a commission of 10%.
Thus, units are allocated in this regard of policy product sales.
Moreover, increase in salary could be up to 25% to 30% depending on the
performance throughout the year and hence profitability is computed product
wise where commission is based on piece rate.
Likewise, training is further broken down into internal training such as in house
weekly training, telephone training if required with the span of time depending on
whether new recruits are hired such as those for the designation at reception.
There is only one part time position which has a time slot of 6 pm to 11 pm and
this is the time when this particular job can easily take place since its all about
scanning papers. Though the company is striving for a paperless environment, it
would at least take them three more years to free themselves from the huge piles

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of papers they had surrounding departments. Therefore, there arises a need for a
scanner’s job which might get redundant in years to come.
The management trainee of EFU starts by getting a minimum salary which
happens to be Rs. 6000 based on price floor set by the government and also
according to market surveys under taken by the company. However, it increases
within the minimum and maximum range when the employee witnesses vertical
growth within the hierarchy and still the salary paid in terms of the percentile
generated is up to 60% higher.
EFU Life does not operate in a bureaucratic environment as they feel it would
hinder the performance of employees throughout, rather it is a decentralized
environment in which everybody’s is invested with the power to take decisions
and feel respected, therefore, the company treats each and everyone as an
asset whether it is a management trainee or the board of directors.
In the wake of all these capabilities, EFU is the fastest growing life insurance
company locally even though it has been sixteen years since their
commencement. This has made them capable of getting various awards
including, The 25th Corporate Excellence Award 2008 and is one of the 25
companies listed in the stock exchange.
Lastly, the HR department has nothing to do with salaries as it is for talent
management and HR management only, thus, salaries negotiation and approval
is dependent on the department heads only.

6.0 Merit Based Increment


EFU life assurance Limited has always been the front runner in providing better
working conditions and environment to their employees to grow themselves in
this changing competitive world. EFU is big and fastest growing Insurance
Company in Pakistan. This organization consists of different departments such
as Personal Insurance sales, Bancassurance, Takaful and many others. The Pay
structure of all these departments differ as per the requirement of the jobs and
their merit based increment system differ.
The direct sales department, which involves in direct sales of life insurance
policies to the customers, is divided in two departments one is direct sales force
and other is Managerial Staff. The direct sales team work on direct commission
base they are not awarded with any fixed salary that is why there is no concept of
increment of remuneration in their salary. Their commissions are fixed with
certain percentages and do not change over the years.
The managerial staff of sales force is compensated both on the basis of
commission as well as fixed salaries. These managers are evaluated according
to fixed criterion and their performances are continuously checked through
proper procedures. The increments of these managerial staff depend upon the
productivity shown in the year. These managers are supposed maintain certain
level of production over the years, if that level is not maintained then the person
will be demoted to lesser rank post.
The production linked system is the main criterion for the merit based increment
of managers in the sales departments. In EFU Life assurance certain levels of
increment is predefined according to the level of productivity. For Instance a

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manager shows a phenomenal productivity growth of 35 percent then he will get


increment of salary according to that level and if another person shows growth of
10 percents in its productivity then he will get increment of that level. In the
beginning of the year certain targets of Productivity growth are set and if any
manager fail to achieve those targets than decrease in salary or demotion are
most likely to be done by the company.
EFU Life Assurance Ltd is an organization which is operating in the Pakistan for
last 16 years and they are preparing themselves for competing in the 21 century
and they have applied every practice in order to ensure the performance level of
their employees. They have applied different ranking method in order to project
the performance of the employees over the year and this will help in setting the
future targets for the employees
EFU does have other departments other than sales department and these
departments include bancassurance, Marketing, Client services, Customer
relationship and many other departments. The employees of these departments
are working on the fixed pay scale and their increment is based on performance
appraisal conducted at the end of the year. In order to determine the
performance of each employee in the organization a performance evaluation
form is given to the department head and he is supposed to fill that form on
behalf of the employees working under him. If the performance appraisal shows
a satisfying performance patterns than a proper increment in salary is done if not
than increment is not done and the person is shifted to the probation list of the
organization.

7.0 Benefits in Addition to Salary


In addition to the basic salary EFU Life also provides side benefits such as,
provident Fund and Gratuity Fund to its employees. These are actually the post
retirement benefits which are being vested when the employee is working and
then on their retirement these benefits are rewarded to them.
Provident Funds are managed by EFU Life in a manner that, a percentage
amount is contributed by the employee from its basic salary and organization
itself also contributes the same percentage of the amount into the employees
account. The established percentage is 8.33% which is also taken as 1/12; it
means that every month an assigned percentage of contributions will be made by
the organization and as well as by the related employee for the provident fund.
This contribution keeps on pooling in by the organization and is then invested.
Later, the returns on the investments are also contributed by the organization into
the employees’ accounts for Provident fund. This could be explained clearly from
the structure below:

Provident Funds = Employees Investment + Employer’s Investment+


Earning on Investments

It says that provident fund is made up of three major factors of contribution which
holds, employees, employers’ and earning on investments. If an employee

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doesn’t get retired but he/she resigns the job then how much ever the amount all
the accumulated amount of provident fund is rewarded to the employee.

As far as, Gratuity Fund is considered it is the additional benefit to salary which is
not made by the contribution of the employee’s salary but only by the contribution
of organization. Every month an assigned percentage of its salary, which is
8.33% in case of EFU Life is contributed.

Gratuity Fund = Employers’ Contribution (8.33% of the organization’s


Salary)

An employee will be eligible of receiving of gratuity fund if he/she has been


employed for five years at least, but it is not applicable in case of sudden death.

8.0 Fringe Benefits


EFU has provided fringe benefits to almost all of its employees. This is the
reason why there is a sense of economic security in the employees of the
organization. From the unit manager to the senior most level, all of the
employees enjoy these fringe benefits. Some of the benefits that employees can
get are:
 Car
 Petrol allowance
 Pension
 Utilities
 Insurance
 Health Insurance
 Mobile Phone cards

The benefits and their value increases with every higher designation in the
hierarchy and this is based on the performance of each employee; higher the
productivity, greater the benefits employees can reap.

EFU assures all of its employees by making different life and health insurance
plans available to the employees. An employee at a higher level can be covered
with an insurance plan of higher value. This gives a sense of security to the
families of these employees as well through these insurance plans.

Cars
Following are the vehicles provided by the company at different levels:
Sales Person No vehicle, own transport

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Business Performance based


Development
Manager(BDM),
Executive
Development
Manager(EDM)

Unit Manager No vehicle provided, performance based


Assistant Branch Suzuki Mehran
manager(ABM)

Branch Suzuki Cultus (simple)


Manager(BM)

Senior Branch Suzuki Cultus (Loaded)


Manager(SBM)

Group -Toyota Corolla Xli


Manager(GM) -Honda City

Senior Group -Toyota Corolla GLi


Manger -Honda City Auto

Regional -Toyota Corolla SE Saloon


Manager(RM) -Honda Civic VTi

The vehicles are totally maintained by the company. All the vehicles are
surveyed and checked for any faults on a regular basis, thus providing its
employees a safe drive. Moreover, all of the vehicles are insured by EFU itself.

Petrol allowance
Sales Person No petrol allowance
Business Health- Low
Development Petrol- Rs1000-3000 per month
Manager(BDM),
Executive
Development
Manager(EDM)

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Unit Manager Petrol- Rs.1700-3500


Assistant Branch Petrol- Rs.3500-5000
manager(ABM)

Branch Petrol-Rs.5000-8000
Manager(BM)

Senior Branch Petrol- 150-200 liters


Manager(SBM)

General Petrol-200-300 liters


Manager(GM)

Senior General Petrol-300-400 liters


Manger

Regional Petrol-400-500 liters


Manager(RM)

The fuel expenses are given to all the employees at the different levels. The
amount of fuel provided to each one depends on which level the employee
stands on. An employee at a higher level receives greater compensation for fuel
as compared to an employee at a lower level.
At the lowest sales level, there is no wage set. Instead they work on a
commission basis which accounts for 40% of the sales they make. On reaching
the target levels set by the organization, a sales person can receive greater
benefits by reaching to higher levels in the hierarchy.

The benefits provided by the company to UM, ABM, BM are quite low. This helps
in giving the employee an advantage to perform and increase its productivity
since it is the main factor that helps in reaping more of the benefits provided by
the company. Moreover, there is a yearly raise in the salary and some of the
benefits. This is done by reviewing the performance levels of the employees
quarterly and evaluating them and hence, increasing the benefits accordingly.
The employees at the senior levels enjoy greater benefits. These benefits are
greater in value. Apart from this, experience of an individual is a crucial factor.
This is because the benefit of different departments also depends on the
experience of the employee, how long the employee has been in the company or
a related field.

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