Professional Documents
Culture Documents
PROJECT REPORT
ON
“COMPENSATION MANAGEMNT”
AT
of
Khairtabad, Hyderabad
DECLARATION
MANAGEMENT” has been carried out by me for “HDFC BANK ”, this report has to be
submitted by me for the award of my MBA Degree in the department of Business Management,
Osmania University.
I, further, declare that this is my original work and I did not try to duplicate any
Place:
Date:
At the outset, I wish to thank the management of HDFC BANK For their kind
gesture of allowing me to undertake this project, and its various employees who lent their
helping hand towards the completion of this study.
“COLLEGE” under the guidance of Ms. ARSHIYA, Asst. Professor for giving
me such an opportunity to carry out this project, I am thankful to all the faculty members
of our college for co-operation and their encouragement during the course of project
work.
CONTENTS
PAGE NO
LIST OF TABLES i
LIST OF GRAPHS ii
CHAPTER-1 1-5
INTRODUCTION
CHAPTER-2 6-17
COMPANY PROFILE
CHAPTER-3 18-55
REVIEW OF LITERATURE
CHAPTER-4 56-71
INTRODUCTION
1
INTRODUCTION
Human resources are the most valuable and unique assets of an organization. The
successful management of an organization’s human Resources is an exciting, dynamic
and challenging task, especially at a time when the world has become a global village and
economies are in a state of flux. The scarcity of talented resources and the growing
expectations of the modern day worker have further increased the complexity of the
Human resources function.
Human Resources Management outline the importance of HRM and its different
functions in an organization.
2
OBJECTIVE OF THE STUDY
The company has a defined benefit gratuity plan. Every employee who has
completed five years or more of service get a gratuity on departure at 15 days
salary (last drawn salary) for each completed year of service.
3
The nature of study conducted is to understand the procedure of the compensation
management, assess the effective compensation packages and to suggest improvements
for enhancing their effectiveness.
The primary data is collected through the personal interview with the HR manager
and the other employees of the HR circle.. A questionnaire is designed to collect
responses from the employees of the organization.
4
SAMPLING TECHNIQUE
The sampling technique used for the collection of information through the
questionnaires is the simple random sampling. And the sample size is 50 respondents.
QUESTIONNAIRE DESIGN
ANALYSIS OF DATA
For the purpose of analysis, feedback is collected from the employees in the
organization by the way of questionnaire. Data collected is represented in the form of
percentages in the form of percentages and graphs and an analysis has been done on the
basis of these percentages and graphs.
5
CHAPTER - II
COMPANY PROFILE
6
COMPANY PROFILE
7
ORIGIN OF THE ORGANIZATION
track record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain
Its outstanding loan portfolio covers well over a million dwelling units. HDFC
has developed significant expertise in retail mortgage loans to different market segments
and also has a large corporate client base for its housing related credit facilities. With its
experience in the financial markets, a strong market reputation, large shareholder base
and unique consumer franchise, HDFC was ideally positioned to promote a bank in the
Indian environment.
network of over 1400 branches spread over 600 cities across India. All branches are
linked on an online real-time basis. Customers in over 120 locations are also serviced
through Telephone Banking. The Bank's expansion plans take into account the need to
have a presence in all major industrial and commercial centres where its corporate
customers are located as well as the need to build a strong retail customer base for both
The Bank also has a network of about over 2000 networked ATMs across these
cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and
Credit/Charge cardholders.
8
PRESENT STATUS OF THE ORGANIZATION
The Housing Development Finance Corporation Limited (HDFC) was amongst the first
to receive an ‘in-principle’ approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI’s liberalization of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of ‘HDFC Bank
Limited’. With its registered office in Mumbai, India. HDFC Bank commenced
PROMOTER:
track record in India as well as in international markets. Since its inception is 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain a
BUSINESS FOCUS:
HDFC Bank’s mission is to be a World-Class Indian Bank. The Bank’s aim is to build
banking services in the segments that the bank operates in and to achieve healthy growth
CAPITAL STRUCTURE:
The authorized capital of HDFC Bank is Rs.450 crore (Rs.45 billion). The paid-up capital
is Rs282 crore (Rs.28.2 billion). The HDFC Group holds 24.2% of the bank’s equity
while about 13.1% of the equity is held by the depository in respect of the bank’s issue of
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DISTRIBUTION NETWORK:
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of
over 1400 branches spread over 600 cities across the country. All branches are linked on
an online real-time basis. Customers in 90 locations are also serviced through Phone
Banking. The Bank’s expansion plans take into account the need to have a presence in all
major industrial and commercial centers where its corporate customers are located as well
as the need to build a strong retail customer base for both deposits and loan products.
MANAGEMENT
Mr. Jagdish Kapoor took over as the bank’s Chairman in July 2001, Prior to this,
The Managing Director, Mr.Aditya Puri, has been a professional banker for over
25 years. And before joining HDFC Bank in 1994 was heading Citibank’s operations in
Malaysia.
executive representing HDFC are also on the Board Senior banking professionals with
substantial experience in India and abroad head various businesses and functions and
10
FUNCTIONAL DEPARTMENTS OF THE ORGANIZATION
Here our target market is primarily large, blue-chip companies and to a lesser
extent, emerging mid-sized corporate. For these corporate, we provide a wide range of
services, including working capital finance, trade services, transactional services, cash
management, etc. We are a leading provider of structured solutions, which combine cash
management services with vendor and distributor finance, for facilitating superior supply
chain management for our corporate customers. We are also recognized as a leading
The objective of the Retail Bank is to provide our target market customers a full
range of financial products and banking services, giving the customer a one-stop window
for all his/her banking requirements. The products are backed by world-class service and
delivered to the customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile
Banking. The HDFC Bank Preferred program for high net worth individuals, the HDFC
Bank Plus and the Investment Advisory Services programs have been designed keeping in
mind needs of customers who seek distinct financial solutions, information and advice on
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3. TREASURY OPERATIONS :
Within this business, the bank has three main product areas -
With the liberalization of the financial markets in India, corporate need more
Human Resources
Information Technology
Operations
The Bank uses state-of-the-art technology for both internal and external
customers.
A) BANKING APPLICATIONS:
the Retail Banking business by Fin ware. These world-class systems have been specially
customized for HDFC Bank by i-flex Solutions Ltd. which is a Citigroup company. The
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B).LOTUS NOTES:
Lotus Notes is the system that HDFC bank uses for internal communication.
c) Facilities Management
Wipro is the company appointed to give HDFC Bank the on-site support required
13
ORGANIZATION CHART
Chairman
General Managers
14
PROUCT AND SERVICE PROFILE OF THE ORGANIZATION
DEPOSITS:
1) SAVINGS ACCOUNT:
2) Current accounts
3) Personal Loan
SERVICES
The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and
delivered to the customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile
Banking.
Here our target market is primarily large, blue-chip companies and to a lesser
extent, emerging mid-sized corporate. For these corporate, we provide a wide range of
services, including working capital finance, trade services, transactional services, cash
management, etc.
15
CHAPTER – III
REVIEW OF LITERATURE
16
REVIEW OF LITERATURE
INTRODUCTION TO TOPIC
Compensation is what employees receive in exchange for their contribution to the
organization. Generally,. Employees offer their services for three types of rewards. Pay
refers to the base wages and salaries employees normally receive. Compensation forms
such as bonuses, commissions and profit sharing plans are incentives designed to
encourage employees to produce results beyond normal expectation. Benefits such as
insurance, medical, recreational, retirement, etc., represent a more indirect type of
compensation. So, the term compensation is a comprehensive one including pay,
incentives, and benefits offered by employers for hiring the services of employees. In
addition to these, managers have to observe legal formalities that offer physical as well as
financial security to employees. All these issues play an important role in any HR
department’s efforts to obtain, maintain and retain an effective workforce.
Companies’ success in the marketplace is as much a function of the business
practitioners manage employees as it is a function of companies’ structures and financial
resources. Compensating employees represents a critical human resource management
practice: Without sound compensation systems, companies cannot attract and retain the
best qualified employees.
Compensation systems can promote companies’ competitive advantage when they
are properly aligned with strategic goals. Likewise, Compensation practices can
undermine competitive advantage when they are designed and implemented haphazardly.
The purpose of this is to provide knowledge of the art of compensation practice
and its role in promoting companies’ competitive advantage. Students will be best
prepared to assume the roles of competent compensation professionals if they possess a
grounded understanding of compensation practices and the environments in which
business professionals plan, implement, and evaluate compensation systems. Thus we
examine the context of compensation practice, the criteria used to compensate employees,
compensation system design issues, employee benefits, and the contemporary challenges
that compensation professionals will face well into this century.
17
Setting the Stage for Strategic Compensation.
Base for Pay.
Designing Compensation Systems.
Employee Benefits.
Contemporary Strategic Compensation Challenges
EVOLUTION OF COMPENSATION
Today’s compensation systems have come from a long way. With the changing
organizational structures workers’ need and compensation systems have also been
changing. From the bureaucratic organizations to the participative organizations,
employees have started asking for their rights and appropriate compensations. The higher
18
education standards and higher skills required for the jobs have made the organizations
provide competitive compensations to their employees.
Compensation strategy is derived from the business strategy. The business goals
and objectives are aligned with the HR strategies. Then the compensation committee or
the concerned authority formulates the compensation strategy. It depends on both internal
19
increments and promotions annually. The salary was determined on the basis of the job
work and the years of experience the employee is holding. Some of the organization
provided for retirement benefits such as, pension plans, for the employees. It was
assumed that humans work for money, there was no space for other psychological and
social needs of workers.
With the behavioral science theories and evolution of labour and trade unions,
employees started asking for their rights. Maslow brought in the need hierarchy for the
rights of the employees. He stated that employees do not work only for money but there
are other needs too which they want to satisfy from there job, i.e. social needs,
psychological needs, safety needs, self-actualization, etc. Now the employees were being
treated as human resource.
Their performance was being measured and appraised based on the organisational
and individual performance. Competition among employees existed. Were expected to
work hard to have the job security. The compensation system was designed on the basis
of job work and related proficiency of the employee.
Today the compensation systems are designed aligned to the business goals and
strategies. The employees are expected to work and take their own decisions. Authority is
being delegated. Employees feel secured and valued in the organisation. Organisations
offer monetary and non-monetary benefits to attract and retain the best talents in the
competitive environment. Some of the benefits are special allowances like mobile,
company’s vehicle; House rent allowances; statutory leaves, etc
INTRINSIC COMPENSATION
20
psychological states. According to this job theory, employees experience enhanced
psychological states (that is, intrinsic compensation) when their jobs rate high on five
core job dimensions: skill variety, task identity, task significance, autonomy, and feedback
(1). Job that lack these core characteristics do not provide much intrinsic compensation.
Skill variety is the degree to which the job requires the person to perform
different tasks and involves different skills, abilities, and talents.
Task from identity is the degree to which a job enables a person to complete an
entire job from start to finish.
Task significance is the degree to which the job has an impact on the lives or
work of other people.
Autonomy is the amount of freedom, independence, and discretion the
employee enjoys in determining how to perform the job.
Feedback is the degree to which the job or employer provides the employee
with clear and direct information about job outcomes and performance.
EXTRINSIC COMPENSATION:
CORE COMPENSATION:
There are six types of monetary or core, compensation. The elements of base pay
adjustments are listed in Table.
21
BASE PAY:
Employees receive base pay, or money, for performing jobs. Base pay is recurring;
that is, employees continue to receive base pay as long as they remain in their jobs.
Companies disburse base pay to employees in either one of two forms –as hourly pay or
wage or as salary. Employees earn hourly pay for each hour worked. They earn salaries
for performing their jobs, regardless of the actual number of hours worked. Companies
measure salary on an annual basis.
Companies typically set base amounts for jobs according to the level of skill,
effort, and responsibility required performing the jobs and the severity of the working
conditions. Compensation professionals refer to skill, effort, responsibility, and working
conditions factors as compensable factors because they influence pay level. Courts of law
use these four compensable factors to determine whether jobs are equal per the equal pay
Act of 1963. Compensation professionals use.
22
Work Environment
Compensation, benefits, and job analysis specialists work in nearly every industry.
They typically work in offices.
Pay
The median annual wage for compensation, benefits, and job analysis specialists
was $59,090 in May 2012.
Job Outlook
Similar Occupations
Compare the job duties, education, job growth, and pay of compensation, benefits,
and job analysis specialists with similar occupations.
JOB EVALUATION
Mississippi State University recognizes that staff positions may change in work
content or responsibilities. Therefore, a position may be evaluated for reclassification
when there has been a significant change in required job skills or responsibilities.
23
A request to establish a new staff position or to evaluate an existing staff position
shall be initiated by the division, department, or unit head and submitted to
Human Resources Management through the use of the online Request for Position
Evaluation electronic form.
A link and temporary password to the online job evaluation system will be sent to
the employee and the employee’s supervisor for existing positions or to the
supervisor requesting a new position for completion of the Job Evaluation
Questionnaire.
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ELEMENTS OF CORE COMPENSATION.
These compensable factors to help meet three pressing challenges, which we introduce
late in this chapter: internal consistency market competitiveness recognition of individual
contributions.
COLAs represent periodic base pay increases that are based on changes in prices as
indexed by the consumer price index (CPI). COLAs enable workers to maintain their
purchasing power and standard of living by adjusting base pay for inflatio. COLAs are
most common among workers represented by unions.
Seniority Pay:
Seniority Pay systems reward employees with periodic additions to base pay according
to employees’ length of service in performing their jobs. These pay plans assume that
employees become more valuable to companies with time and that valued employees.
25
Merit Pay:
Merit Pay programs assume that employees’ compensation over time should be
determined, at least in part, by differences in job performance. Employees earn
permanent increases to base pay according to their performance. Merit pay rewards
excellent effort or results, motivates future performance, and helps employers retain
valued employees.
INCENTIVE PAY
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LEGALLY REQUIRED BENEFITS:
Legally required benefits are protection programs that attempt to promote worker
safety and health, maintain the influx of family income, and assist families in crisis. The
key legally required benefits are mandated by the Social Security Act of 1935, various
state workers’ compensation laws and the Family and Medical Leave Act of 1993. All
provide protection programs to employees and their dependents.
DISCRETIONARY BENEFITS:
Discretionary benefits fall into three broad categories: protection programs, paid
time-off, and services, Protection programs provided family benefits, promote health,
and guard against income loss caused by catastrophic factors such as unemployment,
disability, or serious illness. Not surprisingly, paid time-off provides employees with pay
for time when they are not working, such as vacation. Services provide enhancements
such as tuition reimbursement and day care assistance to employees and their families
ORGANISATIONAL CULTURE:
27
TRADITIONAL HIERARCHY
NATURE OF COMPENSATION
Compensation offered by an organization can come both directly through base pay
and variable pay and indirectly through benefits.
a) Internal equity: This ensures that more difficult jobs are paid more.
b) External equity: ‘this ensures that jobs are fairly compensated in comparison
to similar jobs in the labour market.
c) Individual equity: It ensures equal pay for equal work, i.e., each individual’s
pay is fair in comparison to others doing the same/similar jobs.
In addition, there are other objectives also. The ultimate goal of compensation
administration (the process of managing a company’s compensation
programme) is to reward desired behaviours and encourage people to do well
in their jobs. Some of the important objectives that are sought to be achieved
through effective compensation management are listed below:
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a) Attract talent: Compensation needs to be high enough to attract talented
people. Since many firms compete to hire the services of competent people,
the salaries offered must be high enough to motivate them to apply.
b) Retain talent: If compensation levels fall below the expectations of
employees or are not competitive, employees may quit in frustration.
c) Ensure equity: Pay should equal the worth of a job. Similar jobs should get
similar pay. Likewise, more qualified people should get better wages.
d) New and desired behaviour: Pay should reward loyalty, commitment,
experience, risk taking, initiative and other desired behaviours. Where the
company fails to reward such behaviours, employees may go in search of
greener pastures outside.
e) Control costs: The cost of hiring people should not be too high. Effective
compensation management ensures that workers are neither overpaid nor
underpaid.
f) Comply with legal rules: Compensation programmes must invariably satisfy
governmental rules regarding minimum wages, bonus, allowances, benefits,
etc.
g) Ease of operation: The compensation management system should be easy to
understand and /” operate. Then only will it promote understanding regarding
pay-related matters between employees, unions and managers.
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EQUITY AND PAY RATES
The need for equity is the most important factor in determining pay rates. This
is achieved through the following steps:3
Find the worth of each job through job evaluation.
Conduct a salary survey to find what other employers are paying for
comparable jobs.
Group similar jobs into pay grades.
Price each pay grade by using wage curves.
Fine tune pay rates.
JOB EVALUATION
While job evaluation ensures internal equity wage and salary surveys ensure
external equity. A wage and salary survey provided information as to what other
organizations that compete for employees are paying. The survey could cover all the jobs
within an organization (obviously costly and hence avoided) or limited to benchmark
jobs, jobs that are used to anchor the company’s pay scale and around which other jobs
are slotted based on their relative worth to the firm. The benchmark jobs have
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Formal and informal surveys (through telephone, for example) could be
undertaken to collect data on benefits like insurance, medical leave, vacation pay, etc.,
and so offer a basis on which to take decisions regarding employee benefits. Published
source also provide valuable information regarding industry wise trends in salary
structures in and around the country. The published sources in India include:
One of the major problems with these sources is the comparability of jobs in
the survey to jobs in the organization. To overcome the limitations of published
surveys, conduct your own surveys of important jobs. The following survey methods
are generally used to collect relevant wage-related information:
31
COMPONENTS OF PAY STRUCTURE IN INDIA
The pay structure of a company depends on several factors such as labour market
conditions, company’s paying capacity and legal provisions:
WAGES
In India, different Acts include different items under wages, though all the Acts
include basic wage and dearness allowance under the term wages. Under the Workmen’s
Compensation Act, 1923, “wages for leave period, holiday pay, overtime pay, bonus,
attendance bonus, and good conduct bonus” from part of wages. Under the payment of
Wages Act, 1936, Section 2 (vi), “any award of settlement and production bonus, if paid,
constitutes wages.” Under the Payment of Wages Act, 1948, “retrenchment compensation,
payment in lieu of notice and gratuity payable on discharge constitute wages.”
The term ‘Allowances’ includes amounts paid in : addition to wages over a period
of time including holiday pay, overtime pay, bonus, social security benefit, etc. The wage
structure in India may be examined broadly under the following heads:
BASIC WAGE
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The basic wage in India corresponds with what has been recommended by the Fair
Wages Committee (1948) and the 15th Indian Labour Conference (1957). The various
awards by wage tribunals, wage boards, pay commission reports and job evaluations also
serve as guiding principles in determining ‘basic wage’. While deciding the basic wage,
the following criteria may be considered: (i) Skill needs of the job; (ii) Experience
needed; (iii) Difficulty of work: mental as well as physical; (iv) Training needed; (v)
Responsibilities involved; (vi) Hazardous nature of job.
DA is linked in India to three factors: the index factor, the time factor and the
point factor. All India consumer price index (AICPI): The Labour Bureau,
Shimla, computes the AICPI (Base 1960 = 100 points) from time to time.
Time Factor: in this case DA is linked to the rise in the All India Consumer Price
index (AICP!) in a related period, instead of linking it to fortnightly or monthly
fluctuations in index.
Point Factor: Here DA rises in line with a rise in the number of index points
above a specific level.
Other allowances:
The list of allowances granted by employers in India has been expanding, thanks
to the increasing competition in the job market and the growing awareness on the part of
employees.
BONUS
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Employee compensation and benefits are divided into four basic categories
:
1. Guaranteed pay – a fixed monetary (cash) reward paid by an employer to an
employee. The most common form of guaranteed pay is base salary.
Wages can be expressed in two ways. When they are expressed in terms of
money paid to the worker they are called nominal wages. But when they are
expressed in terms of their purchasing power with reference to some base
year they are called real wages. These wages are arrived at by making
adjustment in the nominal wages for the rise or fall in the cost of living.
Thus, if the nominal wage of a worker in 1984 was Rs.400p.m. and in 1994
it is Rs.900 p.m. but if the living in 1994 has become thrice as costly as in
1984 the real wage of the worker in 1994 is Rs.300 only. How do we
measure changes in the cost of living, or changes in the prices that
consumers pay? The measuring rod is the consumer price index number.
This index number is intended to show over a period of time the average
percentage change in the prices paid by the consumers belonging to the
population group proposed to be covered by the index for a fixed list of
goods and services consumed by them. The average percentage change,
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measured by the index, is calculated month after month with reference to a
fixed period.
INCENTIVE
An incentive is something that motivates an individual to perform an action.
The study of incentive structures is central to the study of all economic
activities (both in terms of individual decision-making and in terms of co-
operation and competition within a larger institutional structure). Economic
analysis, then, of the differences between societies (and between different
organizations within a society) largely amounts to characterizing the
differences in incentive structures faced by individuals involved in these
collective efforts. Ultimately, incentives aim to provide value for money and
contribute to organizational success
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FACTORS INFLUENCING COMPENSATION LEVELS:-
The amount of compensation received by an employee should reflect the effort put
in by the employee, the degree of difficulty experienced while expending his energies, the
competitive rates offered by others in the industry and the demand-supply position within
the country, etc. These are discussed below.
a) Job Needs: Jobs vary greatly in their difficulty, complexity and challenge. Some
need high levels of skills and knowledge while others can be handled by almost
anyone. Simple, routine tasks that can be done by many people with minimal
skills receive relatively low pay. On the other hand, complex, challenging tasks
that can be done by few people with high skill levels generally receive high pay.
b) Ability to pay: Project determines the paying capacity of a firm. High profit
levels enable companies to pay higher wages. This partly explains why computer
software industry pays better salaries than commodity based industries (steel,
cement, aluminum, etc), Likewise, multinational companies also pay relatively
high salaries due to their earning power.
e) Unions: Highly unionized sectors generally have higher wages because well
organized unions can exert presence on management and obtain all sorts of benefits
and concessions to workers.
f) Productivity: This is the current trend in most private sector companies when
workers’ wages are linked to their productivity levels. If your job performance is
good, you get good wages. A sick bank, for example, can’t hope to pay competitive
wages, in tune with profit making blanks.
36
g) State Regulation: The legal stipulations in respect of minimum wages, bonus,
dearness allowance, allowances, etc., determine the wage structure in an industry.
h) Demand and supply of labour: The demand for and the supply of certain skills
determine prevailing wage rates. High demand for software professionals, R&D
professionals in drug Industry, telecom and electronics engineers, financial analysis,
management consultants ensures higher wages. Oversupply kills demand for a certain
category of employees leading to a steep fall in their wages as well.
Most employers, nowadays, are Interested in paying a fair wage to all workers which
is neither very high (affecting the company’s profitability) nor very low (where
attracting and retaining people becomes difficult).
FRINGE BENEFITS
The term ‘fringe benefits’ refers to the extra benefits provide to employees in
addition to the normal compensation paid in the form of wage or salary. Many years ago,
benefits and services were labeled ‘fringe’ benefits because they were relatively
insignificant or fringe components of compensation. However, he situation now is
different, as these have, more or less, become important components of a comprehensive
compensation package offered by employers to employees.
TB main feature of fringe benefits, as they stand today may be stated thus:9
Payment for time not worked: This category include: (a) hours of work, (b) paid
holidays, (c) shift premium, (d) holiday pay and (e) paid vacation.
EMPLOYEE SECURITY:
Physical and job security to the employee should also be provided with a view to
ensure security to the employee and his family members. When the employee’s services
get confirmed, his job becomes secure. Further, a minimum and continuous wage or
38
salary gives a sense of security to the life. The Payment of Wages Act, 1936, the
Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, provide income security to
the employees.
i. Retrenchment compensation: The Industrial Disputes Act, 1947, provides
for the payment of compensation in case of lay off and retrenchment. The non-
seasonal industrial establishments employing 50 or more workers have to give
one month’s notice or one month’s wages to all the workers who are
retrenched after one year’s continuous service. The compensation is paid at the
rate of 15 days wage for every completed year of service with a maximum of
45 days wage in a year. Workers are eligible for compensation as stated above
even in case of closing down of undertakings.
ii. Layoff Compensation: in case of layoff, employees are entitled to layoff
compensation at the rate equal to 50% of the total of the basic wage and
dearness allowance for the period of their layoff except for weekly holidays.
Layoff compensation can normally be paid up to 45 days in an year.
1.22.3.5 Old age and retirement benefits: Industrial life generally breaks joint
family system. The saving capacity of the employees is very low due to lower wages,
high living cost and increasing aspirations of the employees and his family members. As
such, employers provide some benefits to the employees, after retirement and during old
age, with a view to create a feeling of security about the old age. These benefits are called
old age and retirement benefits. These benefits include provident fund, (b) pension, (c)
deposit linked insurance, (d) gratuity and (e) medical benefit.
i. Provident fund: his benefit is meant for economic welfare of the employees. The
Employee’s provident found, Family Pension Fund and Deposit Linked insurance
Act, 1952, provides for the institution of Provident Fund for employees in
factories and establishments. Provident Fund Scheme of the Act provides for
monetary assistance to the employees and/or their dependants during post
retirement life. Thus this facility provides security against social risks and this
benefit enables the industrial worker to have better retired life. Employees in all
factories under Factories Act, 1948, are covered by the Act. Both the employee
and employer contribute to the fund. The employees on attaining 15 years of
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membership are eligible for 100% of the contributions with interest. Generally
the organizations pay the Provident Fund amount with interest to the employee on
retirement or to the dependants of the employee, in case of death.
40
Pension Rates
This scheme also provides for the payment of a lumpsum amount of Rs 4,000 to
an employee on his retirement as retirement benefit and a lumpsum amount of Rs 2,000 in
the event of death of employee as life insurance benefits.
Medical benefit: Some of the large organizations provide medical benefits to their retired
employees and their family members. This benefit creates a feeling of permanent
attachment with the organization to the employees even when they are no longer in
service.
Fringe benefits are one of the means to ensure, maintain and increase the material
welfare of employees. The physical and mental strain of workers in an industry is
considerably alleviated by tax benefits through creating an environment that insulates
them from fatigue and monotony. Employees who get fringe benefits are stimulated to
give of their best so as to increase productivity and to develop a sense of belongingness to
the organization. Research studies, however, could not establish proof of any relationship
between the amount spent on fringe benefits and level of productivity.
All organizations may not provide all the benefits discussed earlier due to
financial stringencies. Moreover, the list of benefits given earlier is not exhaustive one
and some organizations provide different benefits which are not included in the list owing
to their need and the financial ability of the organizations.
Human Resource Management does not end with salary administration. It should
also deal with hum aspects of personnel management. Human aspects of personnel
management include understanding and maintaining human relation. Hence,
understanding and maintaining human relation can be treated as a function Human
Resource Management
[
42
The Act followed the British model with necessary changes to suit Indian
conditions. The main objective of the Act is to impose an obligation upon the employer to
pay compensation to the workman who suffers partial or total incapacity for more than 3
days resulting in a loss in earning capacity the main features of the Act are as under:
Coverage: The Act covers all workers employed in factories, mines, plantations,
transportation, construction works, railways, ships and certain other hazardous
occupations as mentioned in Schedule II of the Act. It does not apply to casual workers
covered under the Employees State insurance Act and members of the Armed Forces.
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The Employees’ Provident Funds and Miscellaneous Provisions Act,
1952
The Act offers retirement benefits to workers in the form of provident fund,
pension and deposit linked insurance. The main features of the Act are as under:
Coverage: The Act applies to factories in any industry mentioned in schedule I where
20 or more persons are employed. The Act does not apply to (i) cooperative societies
where less than 50 persons are employed and working without the aid of power (ii) new
establishments for 3 years from the date of commencement.
Provident fund scheme: Under the scheme, dedications are made from the
employees’ salary every month. The employer con relates an equivalent sum. The
total contributions are deposited with the Provident Fund Commission or invested
in a specified way. Premature withdrawals, loans and advances can obtained by
the employee for higher education, marriage of children’, purchase of car,
construction of house, etc. when the employee leaves the company, retires or dies
the credit, balance in his account with interest is paid to his nominees.
Family pensions scheme, 1971: When the employee dies while in service,
pension is paid to his widowr children. Under the new scheme, pension is paid to
his widower children. Under the new scheme, pension is payable to an employee
after his. Retirement in place of provident fund. An employee can opt for either
provident fund scheme or pension scheme.
Deposit linked insurance scheme, 1976: In this scheme, the legal heir or
nominee of the deceased employee gets an amount equal to the average balance in
his provident fund during the procedure ‘One year subject to a maximum Rs
3,500. The employer and the Central government make contribution to this
employee is not required to make any contribution. And the employee.
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Types of Compensation
Direct Compensation
DIRECT
COMPENSATIO
46
Indirect Compensation
Strategic Compensation
Disability Compensation
A tax-free monetary benefit paid to Veterans with disabilities that are the result of
a disease or injury incurred or aggravated during active military service. The benefit
amount is graduated according to the degree of the Veteran's disability on a scale from 10
percent to 100 percent (in increments of 10 percent). Compensation may also be paid for
disabilities that are considered related or secondary to disabilities occurring in service and
for disabilities presumed to be related to circumstances of military service, even though
they may arise after service. Generally, the degrees of disability specified are also
designed to compensate for considerable loss of working time from exacerbations or
illnesses.
Learn more about Disability Compensation
47
disabilities. Parents DIC is an income-based benefit for parents who were financially
dependent on of a Service member or Veteran who died from a service-related cause.
Learn more about DIC and Parents DIC
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Employee Benefits
Benefits and compensation provided to the employees usually depend on the
conditions of employment and other factors like security, safety, health, welfare and
recreation of employees
These benefit programs must be managed carefully to enhance recruitment and to boost
the morale of the employees
Safety benefits
Health Benefits
Insurance benefits
(a) Life insurance
(b) Vision insurance
(c) Dental insurance
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According to Richard Oyen, the current economic climate can tempt HR
professionals to curtail some standard compensation management processes in search of a
silver lining. For example, many may opt not to expend the energy involved in making
compensation adjustments. What’s the point, they reason, when they have no budget for
raises or bonuses? The reality, however, is that lean periods like this cry out for
optimized efficiency. For businesses to get the most from the budget they do have, they
must focus on those areas that directly influence the company’s bottom line—and
compensation has one of the most profound impacts of them all. So as you work to
improve on your employees’ compensation practices, here are five critical steps that will
maximize your efforts. Your organization can have the most in-depth compensation
management model, equipped with fancy processes and up-to-the second salary market
data, but it all means nothing if it does not tie your merit adjustments to your performance
metrics. A true pay-for-performance culture requires you to thoroughly assess the
organization’s performance, calibrate your results to eliminate any managerial bias, and
ultimately compensate individuals for accomplishing their goal targets. Be absolutely
certain that your compensation processes are configured along these lines, or you will be
wasting valuable budget. Human capital is your organization’s greatest cost-yet far too
many of us continue to manage employee data and calculate salary adjustments using
basic spreadsheets. Over a decade of research has consistently proven that spreadsheets
are notoriously full of errors. Why? Because people make mistakes. In fact, people are
typically only 95% to 98% accurate when they create formulas in spreadsheets1. Imagine
the number of formulas in any given spreadsheet your department produces-and then
weigh that against the results of one study in particular that found over 90% of
spreadsheets contained errors2.
When rewarding your employees for their hard work, consider offering BANK
options or one-time financial bonuses instead of simply increasing base salaries. And
remember: money is not the only motivator for engaging and retaining your workforce.
Look for other development opportunities, such as training or an increase in
responsibilities. These alternatives reflect your faith in key employees while defining
clear conduits for career growth. Market wages can fluctuate widely depending on your
industry. In addition to assessing merit increases and bonuses, take the time to see where
your organization’s salaries line up with market standards. Depending on your corporate
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salary strategy, you may need to make some adjustments that help ensure fair and
equitable compensation, especially for those roles facing high turnover risk.
The central elements of the new rules are to require disclosure of all direct and
indirect compensation that an issuer’s board paid and intended to pay to executives, and
the reasons for the amount of compensation paid to executives so as to provide investors
with an understanding of how compensation decisions were made. The rule changes,
which are significant, are similar to the SEC’s rules on executive compensation adopted
last year. The new rules apply for financial years ending on or after December 31, 2008,
so issuers will need to comply with the new rules for the 2009 proxy season”. The New
Rules in order to prepare to report under the new rules, there are certain steps that
companies should take to ensure they will be fully compliant by the deadline. The new
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rules are complex, detailed and will require the collection and development of a
significant amount of additional compensation information. The new requirement for
compensation discussion and analysis will require extensive involvement of the board of
directors, compensation committee, and management team and outside advisors. Issuers
should begin preparing
These plans will fit into the current pay system. Often, there is little connection
between the new pay systems and the overall business plan of the organization. New pay
systems are designed to achieve specific, departmental objectives or, worse, they are
because “everybody is doing it.” The traditional function of pay to attract, retain and
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motivate employees has not changed with the introduction of new pay systems; but the
emphasis has shifted from the attraction and retention functions to the motivation
function. The planning process Strategic compensation planning allows an organization to
focus on its strategic objectives and develop a comprehensive plan, considering base pay,
short- and long-term incentives, benefits and growth opportunities. This kind of planning
helps ensure that the compensation system will support the organization’s long-and short-
term objectives without overlap, which would have more than one pay plan driving the
same objectives.”
A strategy planning chart, allows to evaluate how well its current pay
system helps to attract, retain and motivate its employees. Down the side of the chart are
elements of the compensation system: direct pay, indirect pay (benefits) and several
nonpayer elements of the employee “contract” that different this company from
competitors. To identify these elements in your organization ask: “why would someone
come to work here instead of for the competition, if pay and benefits were the same? ’The
answer may be such factors as career opportunities, a participative culture, promises to
reduce staff only through attrition, or flexible work hours.
53
CHAPTER – IV
DATA ANALYSIS
AND
INTERPRETATION
54
Opinion respondent No of respondents % of respondents
Yes 43 86%
No 7 14%
Total 50 100%
Figure-1
Interpretation:
55
Opinion response No of respondents %of respondents
Yes 33 33%
No 17 17%
Total 50 100%
Figure:2
Interpretation:
From the above table it is evident that 33% of the employees in the IT
industry are aware of their compensation packages in their industry and rest
of the 17% are not aware about the compensation packages which are in
practice in the industry.
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2 Experience 34 68%
3 Length of service 5 5%
4 Other 3 3%
Total 50 100%
Figure 3
Interpretation:
Figure: 4
Interpretation:
58
1 Market level 26 52%
2 Below market level 4 3%
3 Above market level 19 19%
4 Organization’s capability 1 1%
Total 50 100%
Figure: 5
Interpretation:
59
S. No Determined by No. of respondents % of respondents
1 Manager 1 1%
2 Profit 18 18%
3 Seniority 5 5%
4 Performance 26 52%
5 Cost of living 0 0%
Total 50 100%
Figure:6
Interpretation:
In the above table shows that the incentive pay factor is determined
1% by the managers, 36% by the profit of the organization, 11% by the
seniority, 52% by the performance of the employees and cost of living is not
taken into the consideration to pay incentives.
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S. No Kinds / Plans No. of respondents % of respondents
1 Organization portfolio 0 0%
3 Individual plans 0 0%
4 All 3 above 49 98%
5 None 1 1%
Total 50 100%
Figure - 7
Interpretation:
In the above table it indicates that 98% of the employees are provided
all 3 kinds of incentives plans which are organization profit, group incentive
plan &individual plan and only 1% of the employees are not getting any kind
of incentives because, they are contract employees
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S. No Level of satisfaction No. of respondents % of respondents
1 Highly satisfied 6 6%
2 Satisfied 42 84%
3 Dissatisfied 2 2%
4 Highly dissatisfied 0 0%
Total 50 100%
Figure: 8
INTERPRETATION
After studying the above table it is concluded that 84% of the employees are
satisfied with their fringe benefits, 6% of the employees are highly satisfied with their
fringe benefits, 2% of the employees are dissatisfied with their fringe benefits and none of
the employees is highly dissatisfied regarding their fringe benefits.
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1 Protection 0 0%
programme
2 Paid time-off 0 0%
3 Above two 48 96%
4 None 2 2%
Total 50 100%
Figure:9
Interpretation:
In the above table, 96% of the respondents are provided both the
protection and paid time-off benefits and only 2% of the respondents are not
provided with either one of the benefits.
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Grade – II 51 to 75 points 43 86%
Grade – III 26 to 50 points 2 2%
Grade – III 1 to 25 points 1 1%
Grade – IV Total 50 100%
Figure: 10
Interpretation:
Note: In the questionnaire, question No. 11 deals with the checklist about fringe benefits
which contains 20 benefits and each marking allocates 5 points. According to this,
interpretation has made. In the above table 6% of the respondents got 76 to 100
points, it indicates that these respondents are getting total fringe benefits from the
organization and these employees called as Grade-I employees who are top level
executives, 86% of the respondents have scored between 51 to 75 points, it indicates that
they are getting Grade-II employees benefits, 2% of the respondents have scored between
26-50, it indicates that they are getting Group-III employees benefits and 1% of the
respondents are getting Group-IV employees benefits.
Total 50 100%
INTERPRETATION
In the above table, 68% of the respondents are provided for 9-10 hours
working duration of an employee.
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12. Do you agree that the shift system is convenient than adopting a fixed timing to
work?
INTERPRETATION
After studying the above table it is concluded that 12% of the employees strongly
Agree and Agree which is shows the highest 84 percentage and the natural which is 4%
and disagree there is null.
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13 Do you have a formal job evaluation plan in place?
INTERPRETATION
In the above table, the formal job evaluation plan which is shows the
86%. Yes and 14 % for No.
67
14 Do you have an employee policy manual?
INTERPRETATION
In the above table, employee policy manual which is shows the 86%. Yes
and 14 % for No.
68
15. Which type of Compensation payment system do you prefer?
Total 50 100%
INTERPRETATION
In the above table Compensation payment system which is shows the Fixed pay
system is 16 % and Variable pay system 68% and balance Debt method 10 %.
69
CHAPTER – V
FINDINGS, SUGGESTIONS
AND
CONCLUSION
70
FINDINGS
After doing this project work in the company, we found few of the main things in
the organization. They are as follows:
CONCLUSION
71
best-qualified employees. Practicing various human resources policies and programs like
employment, development and compensation and interaction among employees create a
sense of relationship between the individual worker and management, among workers and
trade unions and management.
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SUGGESTIONS
After doing this project work in the company, we found few of the main things
in the organization. They are as follows
organization.
Company should find out the various tax relaxation benefits to the employees.
Providing a handsome compensation package can boost up the employee
motivation.
Communicate about the benefits the employees in an effective manner.
Adjust labor cost to financial results – the basic idea is to create a bonus plan
where the company is paying more bonuses in ‘good times’ and less (or no)
73
BIBLIOGRPHY
74
BIBLIOGRPHY
Books
Web sites:
www.google.com
www.hdfc.com
www.cite.H.R.com
www.msn.com
75
QUESTIONNARIES
COMPENSATION POLICIES
PERSONAL INFORMATION:-
NAME :-----------------------
AGE :-----------------------
QUALIFICATION :-----------------------
EXPERIENCE: :------------------------
QUESTIONNARIES
A) Yes B) No [ ]
A) Yes B) No [ ]
B) Experience
C) Length of Service
D) If any other
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4. On what base you are provided the compensation in the HDFC
BANK ?
[ ]
A) To market level [ ]
D) To company capability
E) Performance
[ ]
D) Above
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8. Which type of fringe benefits you are provided in the BANK
[ ]
A) Protection programs
B) Paid time – off
C) Services
D) All are above
10. How do you satisfy with the fringe benefits provided by the
organization?
A) Highly satisfied [ ]
B) Satisfied
C) Dissatisfied
D) Highly dissatisfied
12. Do you agree that the shift system is convenient than adopting a fixed timing to work?
A. Strongly Agree [ ]
B. Agree
C. Neutral
D. Disagree
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13 Do you have a formal job evaluation plan in place? [ ]
A. Yes B. No
A. Yes B. No
79