NMIMS

Course: Compensation & Benefits

Internal Assignment Applicable for June 2022 Examination

1. Mr Suresh Deshpande is the M.D of “Rashmi Electricals Pvt Ltd” which

manufacturesvarious electrical components for the auto industry. It is a mid-
sized company, (set-up inthe 90’s) employing about 200 people and its products
are well known for its quality. Upto2019 this company was making good profits
and therefore it could pay its employees wellabove the market average. A major
component of this pay package were the benefits (likereimbursing school fees for
employee’s children, free lunch, free transport) whichattractedmany talented
workmen to the factory. However, after 2019, the profits starteddwindlingmainly
because of competition, increased imports from China and the
Coronapandemic.So, a few days ago Mr Deshpande called Mr Roberts, his HR
Manager to stopall thedifferent “benefits” given to the employees as these were
adding to the costs in abig way.From a Compensation point of view, explain how
should Mr Roberts prepareadequate logicto convince Mr Suresh regarding
which benefits to retain or discard (10Marks)

Answer:

Creating a truly competitive and compelling employee benefits package can be a

struggle — especially for smaller companies. As an employer, you are required to
offer certain benefits, like social security taxes, unemployment insurance, and
worker’s compensation, plus some others based upon the size of your company, not
the least of which is medical insurance per the ACA's "employer mandate".
Providing employee benefits can get expensive fast, but you can only do what you can
afford to do. The goal is to remain competitive in the marketplace, not to become a
total outlier. And remember, cost-sharing with employees is normal these days and
employees expect to pay a portion of insurance costs.
Employee Benefits are the indirect and non-cash compensation paid to an employee.
These benefits are given to employees over their salaries and wages. They are also
called fringe benefits that are offered to attract and retain employees.

There are various mandatory benefits such as compulsory health insurance, a statutory
bonuses, a provident fund and pensions, which are available to employees under
Indian employment laws. However, most of these benefits – whether at the central or
state level – are generally applicable only to employees earning up to a particular
wage threshold. Given that these wage thresholds are typically very low, most of the
above benefits are mandatorily applicable to non-executive employees only.
Mandatory benefits that are applicable to executive employees as well, regardless of
their designation or wage threshold, include:
 a gratuity, payable to personnel who have completed at least five years of
continuous service at an organisation under the Payment of Gratuity Act 1972;
 maternity benefit payable to women under the Maternity Benefit Amendment
Act 2017; and
 Mandatory leave (ranging from 24 to 36 days per year) granted under certain
state-specific shops and commercial establishments legislation.

In addition to these mandatory benefits, organisations may also extend voluntary

benefits, such as group or family health insurance and a subscription to private
provident fund schemes, as a matter of good practice. Since these benefits are
voluntary, they have no statutory restrictions.

Apart from bonus and equity compensation, executives may be entitled to:
 contractual benefits, such as allowances (eg, house rent allowances,
conveyance allowance and leave travel allowance);
 maternity benefits; and
 Retirement benefits, such as gratuity.
Employers can obtain insurance policies or formulate trusts, which may be approved
by the income tax authorities, in order to facilitate contingent gratuity payments.
Approved gratuity trusts and policies exempt employers from tax requirements with
respect to gratuity payments made to executives.
Insurance Plans - RETAIN
Insurance benefit plans are great ways to show your employees that you care about
them.
The organization pays specific amounts of money to cover an employee’s medical
care. These include insurance for losses from accidents, disability, sudden death,
dismemberment. Other types of medical care involve dental checkups, biometric
screening, etc.

Disability Insurance- RETAIN

The employer pays for the worker’s salary if the worker becomes disabled or is
unable to work. An employer can provide either short-term or long-term disability
insurance depending on the needs of the employee.
Short-term covers for the employee for up to 6 months while long-term covers a
worker’s lifetime’s salary.

Tuition Reimbursement- DISCARD

Organizations offering employees to pay back for their education expenses is an
excellent employee benefits idea. Employees have to pay on their own before taking
up a course. But once the system gets over, the employer decides to pay either a part
or the full amount for the course.

Corporate Discounts- DISCARD

Refers to the discounts offered to employees on the original price of goods or services
by the employer. These are discounts that are developed exclusively for corporate
employees. Companies also use this method to test their products internally before
launching them to the market.
Vantage Circle’s Vantage Perks program is the same. It provides the best deals and
offers handpicked for corporate employees at prices discounted exclusively for them.

Retirement Plans-RETAIN
A great employee benefits idea to add to your compensation package is providing
your full-time employees with financial security. These are done through various
methods like pension plans, 401(k)s, and more.
 Paid Sick Leaves-RETAIN
Taking care of your health is important. When employees will be weak but still have
to work, it will directly affect their productivity and efficiency. So creating a policy
where they can avail paid sick leaves is a great way to show that you care for your
employees’ well-being.

Paid Parental Leaves-RETAIN

It’s providing paid time off to employees to take care of their child or a family
member. Parental leaves can be in the form of paternity leaves, maternity leaves or
even adoption.

Childcare Facilities-RETAIN
It is a type of child care sponsored or managed by an employer. The employer usually
provides working parents the privilege to find work-life balance. Some ways are
through company provided child care spaces, covering or sharing the expenses of the
child with the parents.

Employees love benefits. They want appreciation and recognition for their hard work.
Many employees apply for organizations depending on the perks and benefits offered
by that company.
Job satisfaction is directly tied up with employee satisfaction. Ignoring employee
satisfaction will ultimately lead to a decrease in commitment. Thereby causing a lack
of motivation, efficiency, and finally productivity.

2. Ramani and Kumkum are both Ph.Ds in Chemical Engineering and both have
put inmorethan 15 years in the Pharmaceutical industry. They decided to leave
their jobs andopen asmall company of their own. Accordingly, they took a bank
loan and using theircontacts,tied-up with another big pharma company to
conduct research on their behalf.Initially theyrecruited five qualified chemists
and later as the business grew theyrecruited morelaboratory staff, accountants
and other personnel. Since it was a start-up,and the objectivewas to survive, they
tried to get good quality people and so paid thembetter than what theywere
earlier getting. Their business grew and by the end of fiveyears they were
wellestablished and by that time they had eighteen people on their rolls.The
break-up of their staff strength was as follows: - Three Senior Researchers
(allPh.Ds),five Research Associates (Post Graduates in Chemistry), five
Assistants (ScienceGraduates), three Accountants and two Clerks. However, as
there was no regular paystructure, there was wide disparity in the pay drawn by
different employees. To rectifythissituation, both Ramani and Kumkum decided
to conduct a Job Evaluation study. Inyouropinion, which Job Evaluation method
would be most suitable in this case. (10Marks)

Answer:

Job evaluation is a process of determining the relative worth of a job. It is a process

which is helpful even for framing compensation plans by the personnel manager.

Job evaluation as a process is advantageous to a company in many ways:

Reduction in inequalities in salary structure - It is found that people and their
motivation is dependent upon how well they are being paid. Therefore, the main
objective of job evaluation is to have external and internal consistency in salary
structure so that inequalities in salaries are reduced.

Specialization - Because of division of labour and thereby specialization, a large

number of enterprises have got hundred jobs and many employees to perform them.
Therefore, an attempt should be made to define a job and thereby fix salaries for it.
This is possible only through job evaluation.

Helps in selection of employees - The job evaluation information can be helpful at

the time of selection of candidates. The factors that are determined for job evaluation
can be taken into account while selecting the employees.
Harmonious relationship between employees and manager - Through job
evaluation, harmonious and congenial relations can be maintained between employees
and management, so that all kinds of salaries controversies can be minimized.

Standardization - The process of determining the salary differentials for different

jobs become standardized through job evaluation. This helps in bringing uniformity
into salary structure.

Relevance of new jobs - Through job evaluation, one can understand the relative
value of new jobs in a concern.

According to Kimball and Kimball,“ Job evaluation represents an effort to determine

the relative value of every job in a plant and to determine what the fair basic wage for
such a job should be.”
Thus, job evaluation is different from performance appraisal. In job evaluation, worth
of a job is calculated while in performance appraisal, the worth of employee is rated.

The four primary methods of job evaluations used to set compensation levels are point
factor, factor comparison, job ranking, and job classification. The first two are
quantitative and the latter two are non-quantitative. The difference between the two is:
In quantitative methods, the key factors of a job are selected and then measured. In
non-quantitative methods, a job is compared as a whole with other jobs in the
organization. 

Point factor comparison

This approach breaks down jobs into compensable factors identified during a job
analysis. Points are assigned to the factors, and a pay structure is established for the
position. The jobs with the highest points garner the highest pay. By comparing the
jobs, the rank order of importance of each can be established.

Factor comparison
The factor comparison method represents a combination of ranking and points factor
methods. Jobs with similar responsibilities within the organization are identified to set
benchmarks. Identifiable factors for the benchmark jobs are ranked during factor
analysis and then are compared to market rates in order to assign a monetary value to
each compensable factor. The advantage of this method is that it is consistent and less
subjective, however, it is also the most complex and expensive method.

Job ranking
This is the simplest method and is best used for smaller organizations with a
manageable number of specific job titles. Job ranking places jobs in a hierarchy of
their value to the company, creating a ranking of jobs within the point factor system.
The jobs are typically ranked based on a single factor, such as difficulty or education
required to effectively perform the job. The top of the hierarchy is considered the
most important level; the person who sits at the top has the most authority. As you go
down in the ranking method, duties become less specialized and jobs considered less
valuable or expendable. Salaries are typically generated in order of job importance to
the company and compensation is then based on ranking order with the highest-
ranked position earning the highest pay.

Job classification
This is a grading system. In the job classification method, descriptions of each class of
jobs are created and assigned a grade based on the job’s skill and complexity that best
matches the class description. The characteristics may include the level of
responsibility required, competencies required, and physical exertion necessary to
perform the job and, as such, positions may fall within more than one grade level.
This method relies on job titles and duties, assuming they are similar among
organizations, and job titles are often associated with numerical values, such as HR
Specialist 1 and HR Specialist 2 or appending titles with “class 1,” “class 2,” and so
on.

In the present scenario, Job ranking method of Job evaluation should be adopted. As
there are Three Senior Researchers (all Ph.Ds), five Research Associates (Post
Graduates in Chemistry), five Assistants (Science Graduates), three Accountants and
two Clerks, and all have different job responsibilities and skills that is required to
perform their particular tasks.
 Ranking Method is the simplest form of job evaluation method. The method
involves ranking each job relative to all other jobs, usually based on some overall
factor like ‘job difficulty’. Each job as a whole is  compared with other and this
comparison of jobs goes on until all the jobs have  been evaluated and ranked. All
jobs are ranked in the order of their importance from the simplest to the hardest or
from the highest the lowest. The importance of order of job is judged in terms of
duties, responsibilities sand demands on the job holder. The following steps are
involved in ranking jobs.

Merits — Ranking method of job evaluation has the following merits in terms of its

procedure, resources involvement and operational mechanisms.
 It is the simplest method.
 It is quite economical to put it into effect.
 It is less time consuming and involves little paper work.

An effective job evaluation system determines the best rate of pay for a position and
develops a broad job description that adapts to a company’s needs as they change over
time. There are a number of ways to approach job evaluation, but there are four
primary methods that all HR professionals should know.

3. Mukesh Sharma is residing in the suburbs of Mumbai and has obtained a

Diploma inMechanical Engineering from a reputable Polytechnic in 2021. Since
he was among thetop five students in the Final Year, he got two job offers in the
Campus Placementprocedure.The details of these offers are given below: -

a) “Karuna Auto-Parts private Limited” is a medium sized firm manufacturing

auto parts, employing about 400 workmen and managerial staff and its products
are well known fortheir quality as they employ the latest state-of-the-art
machines. The factory works threeshifts per day and he has been placed in
theMaintenance department as a “Trainee”. Thefactory has a good canteen and
alsohas a night rest room for people completing the B shift(2pm to 10
pm).During probation of 1 year, he will be paid a Consolidated stipend of Rs
25000/-and will berequired to work in the morning shift. After confirmation, he
 will be placed in theJuniorEngineer scale and his total earnings is expected to be
around Rs 40,000/-but he will beexpected to work in all the three shifts. This
factory is a little far from his home (about 40kms) but is accessible by rail and
the company arrangesfor pick-up from the nearest railhead.

b) “Jayant Forging Private Ltd” is comparatively smaller than the other

company andemploys about 250 people including workmen and managerial
personnel allworking in theGeneral shift. This factory is not far from his
residence but notsituated near any regular railor road routes. It is a forging unit,
established aboutthirty years ago and has not upgradedits old machinery. The
company is a sortof captive plant of one of the large commercialvehicle
manufacturer, Beta Motors and it manufactures the forged “front axle beam”
fortheir trucks for their factoryat Pune. Thus it is dependent on Beta Motors for
orders andsometimes paymentsare delayed and the company has to resort to
bank overdrafts to payemployee’s salaries. Mukesh has been offered the position
of “Jr Engineer” at a consolidatedstipend of Rs 30,000/ pm during the 1yr
probation period and will be posted at thefactoryto learn about the production
process. After confirmation, he is expectedto assistthe QualityTeam, regarding
quality issues and also travel to the BetaMotors Factory (as required), tosettle
quality and other issues. The company hasassured him of a good career in
themanagement cadre in about five years’ time.With allowances, he is expected
to draw aroundRs 45,000 after confirmation.

a. What are the different factors (give at least seven) that Mukesh can use to
compare thecompensation and other benefits included in the two offers that he
has received? (5Marks)

Answer:

When seeking a new professional opportunity, there are many considerations to keep
in mind when assessing a job offer. Understanding these considerations can help you
decide whether you want to commit to a company, and they can help you compare
two competing offers as well. The more factors you consider when deciding, the more
information you have to guide your choice.
Base pay
The first consideration when reviewing a new job offer is usually the salary or hourly
wage. An employer often provides this information to you when making the offer. It's
important to assess the income your potential employer offers and compare it to your
financial needs. You may be able to supplement an initial offer by negotiating a
higher rate.

Benefits package
Benefits can include financial incentives, such as stock options and retirement plans,
as well as indirect financial benefits, such as health insurance. Vacation pay, sick pay
and family leave are other items that may appear in a benefits package. When
comparing two job offers from different companies, if one contains a more generous
benefits package, it may be the more financially valuable offer regardless of if it has a
higher base salary.

Working hours
The hours you're required to work each week are another item to assess when
evaluating a job offer. Both longer and shorter hours can be beneficial in the right
circumstances. 

Commute
How you get to work each day can play a large part in your enjoyment of a job and
daily life. A job with a short commute may allow you to have more free time, for
example, but a longer commute to a job you greatly enjoy may be worthwhile. You
might also consider the type of commute, as you may prefer using public transit,
driving or riding a bike, and different job locations may be better suited to different
options.

Work style
Understanding how you like to work can help you find a job that aligns with your
preferred working style. Work style considerations can include your preferred work
environment and your skill set. Finding a work style that aligns with your preferences
can have a significant positive impact on your overall workplace happiness.
 Job title
Your official title at a company can be a meaningful consideration when assessing a
job offer. Your job title provides stature and can also help to clarify your position
within an organization. Attaining a position with a higher title than your previous job
shows career progression and can be beneficial for future promotions or job searches.

Career advancement
When taking a new position, you may want to consider what it means for your career
in the long term.

The job you choose can affect many areas of your life, from determining how much
money you earn to the amount of free time you enjoy. Understanding the most
important job offer considerations helps you make a more informed decision so that
you're more likely to choose a job that leads to satisfactory work-life balance.

b. After careful consideration, Mukesh chooses to work in the 1st company i.e
“Karuna Autoparts”.Give your comments whether you agree with his decision.(5
Marks)

Answer:

Mukesh must examine the opportunities for future advancement withinthe potential
new employer. A company that has a record of internal promotions may provide a
viable career path to a higher role. Finally, a company offering a job that can help him
build his skills and experience may allow him to seek a higher position at a different
company in the future.

According to me, Mukesh has chosen the right company to begin his career with.
Karuna Auto-Parts private Limited is well known for their quality as they employ the
latest state-of-the-art machines. On the other hand, Jayant Forging Private Limited
was using age old manufacturing techniques and obsolete machinery in their factory
which have may impact the quality of the goods produced.

The Karuna factory has a good canteen. During probation of 1 year, he would be
given the position of a Trainee in the maintenance Department at the pay of Rs.
25000/- whereas in the second company he has been offered the position of Junior
Engineer at the pay of Rs. 30000/- . Though the PayScale and job title is good in
second company, the growth prospects in the first company are higher. After
confirmation, he will be placed in the Junior Engineer scale and his total earnings is
expected to be around Rs 40,000/- but he will be expected to work in all the three
shifts. This factory is a little far from his home (about 40 kms) but is accessible by rail
and the company arranges for pick-up from the nearest railhead.
The second company would take around 5 years to kickstart his career. Thus,
Mukesh’s decision is correct.

Building a professional network is a valuable skill that can help you both personally
and professionally throughout your career. When assessing a job offer, understanding
how it can affect your ability to network may help you determine if the job is a good
fit for you.