HRM- Long Question and Answers –

Explain the types of compensation plan

Direct compensation
 Hourly pay– Hourly pay is the salary paid for each hour of work that the employee does.
 Salary– Salary is the fixed monthly amount that the employer pays to the employee in cash.
 Commission– A monetary reward that is paid based on the performance of an individual. It is
generally provided in the case of sales jobs as a fixed percentage.
 Bonus– A bonus is a monetary incentive paid to employees for their good performance. It is paid over
and above the employee’s basic salary.
Indirect compensation
 Insurance– Employers generally provide employees with medical insurance to ensure good health of
their employees. If you are an early-stage startup facing difficulties getting employee insurance, check
out RazorpayX Payroll. It provides group insurance packages to teams as small as 2!
 Paid holidays– Paid holidays are provided to help employees maintain a work-life balance.
 ESOPs– Sometimes, companies also provide their employees with their shares at a discounted price,
offering them an additional opportunity to earn.

Discus methods of short term and long term incentives

Short term incentives planes
1. Premiums and differences
Premiums and differentials are used to reward employees who make contributions beyond ordinary
situations. These are extra compensation for the normally considered burdensome, distasteful, hazardous,
or inconvenient effort.
A prominent characteristic of work premiums is that they must comply with the Compensation Act
(minimum wage, work hours, etc.). These also depend on the nature of the organization (policy decision)
and union acceptance.
Overtime Pay
Pay for the time beyond normal weekly working hours—a useful device for cutting payroll costs. Many
jobs require specialized knowledge and skills, and certain employees may be obligated to work overtime.
An employee within the mandatory overtime program can be terminated or punished if s/he refuses to work
overtime when asked. If overtime is not excessive, most employees appreciate the opportunity to earn more.
Organizations that never pay overtime are said to be overstaffed. Overtime rates can vary according to the
time of the day or the week.
Shift, Weekend, and Holiday Work
Most companies requiring a second (4.00 pm to midnight) or a third (midnight to 8.00 am) shift pay some
shift differential.
The third shift usually receives a higher premium than the second shift.
For some employees, the shift arrangement helps meet other employees’ needs (attending college during
the day).
The premium rate varies depending on the day the employee is needed to work (double premium on
weekends and holidays- compared to normal overtime work).
2. Pay for Units Produced
It is one of the oldest incentive programs. Pay is based on some measurable output – called ‘pay for
units produced.’
 In implementing the ‘pay for units produced,’ the designers (industrial engineers) must study the
entire operation and develop the most efficient workflow, processes, and methods for performing
assignments.
Three building blocks provide the foundation for many “pay for units produced” incentive plans:
 Establishing the time required for an employee to produce a unit of output.
 Determining what should be considered an acceptable level of performance in standard work
time.
 Establishing an acceptable pay level for an employee performing an assigned job in the
specified period.
3. Individual-based Bonuses and Awards
Individual-based bonuses and awards are;
 attendance bonuses,
 length of service and seniority rewards,
 referral rewards,
 patent rewards (intellectual contributions, creative employee’s inventions resulting in
patents),
 suggestion plans (practically every incentive plan recognizes the importance of the
suggestion and provides rewards for stimulating employee creativity and innovation, and
encourages greater employee involvement).
Long term incentives planes
1. Pension Plan
A pension plan can be defined as a ‘defined benefit plan,’ ‘defined contribution plan,’ and ‘cash-
balance plan.’
A defined benefit plan includes a formula that defines the benefits an employee is to receive.
Average earnings in the highest three years of employment multiplied by 2 percent times the total years of
service is one example.
A defined contribution plan involves the payment of a specified annual amount to each participant’s
account. The amount may be;
 the flat dollar amount,
 an amount based on a special formula or,
 an amount equal to a certain percentage of the participant’s base pay.
Five basic issues of the Pension Plan
 Standard retirement age,
 size of benefits,
 discrimination in plan design,
 early retirement,
 vesting (employees’ right to the employer’s contributions and the accrued earnings of these
contributions).
2. Profit-sharing Plan
A qualified arrangement also can take the form of a profit-sharing plan. The employer’s
contributions to the plan are a percentage of corporate profits.
Write a note on 3-p concept
Pay for position
"Paying for position" refers to the compensation an employee receives based on the role or position they
hold within the organization. This component takes into account the responsibilities, skills, and
requirements associated with a specific job.
Factors Influencing Pay for Position:
1. Job Evaluation and Grading:
Organizations often conduct job evaluations to assess the relative worth of different positions. Jobs are then
graded based on factors such as complexity, responsibility, and skills required.
2. Market Rates:
External market conditions play a significant role in determining the pay for a position. Organizations
benchmark their salaries against industry standards to ensure competitiveness.
3. Internal Equity:
Ensuring fairness and equity within the organization is crucial. Positions with similar levels of
responsibility and skill requirements should comparable compensation. receive
Challenges:
Market Fluctuations:
External market conditions can impact the competitiveness of pay for positions. Economic changes may
influence salary benchmarks.
Job Complexity Assessment:
Accurately evaluating the complexity and responsibilities of each position can be challenging.
Pay for person
"Paying for person" involves compensating an individual based on their personal qualifications, skills,
experience, and the value they bring to the organization. It recognizes that two employees in the same
position may receive different compensation based on their individual attributes.
Factors Influencing Pay for Person:
1. Experience and Expertise:
Employees with more experience or specialized expertise may command higher compensation.
2. Education and Certifications:
Higher educational qualifications or industry certifications may contribute to increased compensation.
3. Performance History:
An individual's track record of performance and contributions to the organization is often considered.
Challenges:
Subjectivity:
Assessing the value of an individual's skills and contributions can be subjective. Clear criteria and
performance metrics are necessary to mitigate biases.
Retaining Talent:
Organizations must balance compensating for an individual's skills with ensuring internal equity and
avoiding disparities that may lead to dissatisfaction among employees.

Pay for performance

"Paying for performance" involves linking compensation directly to an individual's or a team's
achievements and contributions. This performance- based approach aims to reward employees for their
impact on organizational goals.
Factors Influencing Pay for Performance:
1. Performance Metrics:
Clear and measurable performance metrics are established to assess individual or team contributions.
2. Bonuses and Incentives:
Performance bonuses, profit-sharing, and other incentives are used to reward exceptional performance.
3. Goal Alignment:
Compensation is tied to the achievement of specific goals aligned with the organization's strategic
objectives.
Challenges:
• Setting Realistic Goals:
Establishing challenging yet achievable performance goals is critical. Unrealistic expectations can lead to
dissatisfaction.
• Measuring Subjective Contributions:
Some roles involve subjective contributions that are challenging to quantify. Establishing fair metrics is
essential.

Explain methods of job evaluation

1. Ranking Method: Jobs are ranked based on their overall worth to the organization in comparison to
other jobs.
2. Job Classification or Grading Method: Jobs are grouped into predefined classes or grades based on a
series of predetermined factors such as skill level, responsibilities, and qualifications.
3. Point Factor Method: Jobs are evaluated based on a set of factors such as skill, effort, responsibility,
and working conditions. Points are assigned to each factor, and the total points determine the job's value.
4. Factor Comparison Method: Jobs are evaluated based on a combination of factors, and their relative
worth is determined by comparing them to benchmark jobs.
5. Market Pricing Method: Jobs are evaluated based on their market value, typically by comparing them
to similar jobs in the external job market.

Explain the levels of performance feed back

Type of performance feedback
1. Performance feedback:
This type of feedback is information given to an employee about how well they are doing their job. It
may include suggestions for improvement, positive criticism, or praise for good work.
2. Developmental feedback:
It is meant to help employees learn new skills or gain new knowledge that will help them advance in their
careers.
3. Coaching feedback:
This type of feedback is meant to help an employee improve certain skills, like leadership or
communication.
4. Appreciative and positive feedback:
This type of feedback is given to employees to show appreciation for their efforts, achievements, and
contributions.
5. 360-degree feedback:
This type of feedback involves getting feedback from different people, such as colleagues, supervisors,
and subordinates, to get a full picture of an employee’s performance evaluation.
6. Continuous feedback:
The feedback is given all the time, not just at certain times. It lets good work and a positive attitude be
noticed quickly, and negative behavior or performance be changed as needed.
Many kinds of feedback can help employees grow and improve in their jobs, which can be good for both
the employee and the organization.
Types of employee feedback
Positive employee feedback
This kind of feedback focuses on noticing and praising good actions and behaviors. It helps to get people
excited about their jobs and boosts their confidence and sense of self-worth.
Constructive employee feedback
This kind of feedback tries to point out where the employee can improve and gives specific suggestions
for how to do so. Its main goal is to help workers learn and grow.
Performance employee feedback
This type of feedback is about how well an employee does, such as a meeting or exceeding goals,
finishing tasks on time, and showing leadership skills.
Developmental employee feedback
This type of feedback is focused on the employee’s long-term growth and development within the
organization. It could suggest ways to get more employee training or help from a mentor.

Explain the concept of ESOP

Definition -
Employee Stock option plan or Employee Stock Ownership Plan (ESOP) is an employee benefit scheme
that enables employees to own shares in the company. These shares are purchased by employees at price
below market price, or in other words, a discounted price.
Types of ESOP
ESOS - Employee Stock Option Scheme (ESOS) is a type of employee benefit plan that allows employees
to purchase a certain number of company shares at a fixed price, usually over a period of time.
ESPP - An employer-sponsored program known as an Employee Stock Purchase Plan (ESPP) enables
employees to buy company shares at a discounted price over time.
RCU - Restricted stock units (RSUs) are a type of employee stock-based compensation granted to
employees as part of their salary and vesting at a certain point in the future, usually after a vesting period
or when certain performance goals are met. RSUs are considered a form of deferred compensation since
the employee does not receive the value of the shares until they have vested.
RSA - A Restricted Stock Award (RSA) is an employee benefit program in which employees are given
company stock with certain restrictions, such as a vesting period, to promote loyalty and longer-term
employment. An RSA is generally offered to executives or key employees as an incentive.
SARs - Stock Appreciation Rights (SARs) are employee benefits where employees receive the right to
receive cash or stock based on the increase in the value of the company’s stock. This allows employees to
share the company’s success without owning the stock. Companies typically grant SARs to key employees
as an incentive for future performance.
PSOPs - Phantom Stock Option Plans (PSOPs) are a type of employee benefits program designed to reward
employees with stock-like awards without actually issuing shares of the company’s stock. The award is
usually based on the company’s performance and is typically paid out in cash or its equivalent.
Benefits of ESOP
Better employee relation Better employee performance Better productivity Attracting top talent
Advantages of ESOP
1. Ownership and Motivation: Employees become owners, which can motivate them to work harder and
care more about the company's success.
2. Tax Benefits:Companies get tax breaks for offering ESOPs, and employees may pay less tax on their
shares.
3. Succession Planning:ESOPs offer a way for owners to sell their business while keeping it in the hands
of employees.
Disadvantages of ESOP:
1. Risky Investment: Employees' wealth depends heavily on the company's performance, which can be
risky if the company struggles.
2. Complexity and Costs:Setting up and managing an ESOP can be complicated and expensive for the
company.
3. Limited Access to Cash: Employees may find it hard to sell their shares, meaning they can't easily access
the money they've invested.
Explain the external & internal factor affecting compensation
Internal Factors
1.Ability to Pay:Big companies can pay higher compensation as compared to the competing firms whereas
the smaller companies can afford to maintain their pay scale up to the level of competing firm or sometimes
even below the industry standards.
2.Business Strategy:The organization’s strategy also influences the employee compensation. In case the
company wants the skilled workers, so as to outshine the competitor, will offer more pay as compared to
the others. Whereas, if the company wants to go smooth and is managing with the available workers, will
give relatively less pay or equivalent to what others are paying
3.Job Evaluation and Performance Appraisal:The job evaluation helps to have a satisfactory differential
pays for the different jobs. The performance Appraisal helps an employee to earn extra on the basis of his
performance.
4.Employee:The employee or a worker himself influences the compensation. It can be in three ways.
i)Performance:The better performance fetches more pay to the employee, and thus with the increased
compensation, they get motivated and perform their job more efficiently.
ii)Experience:As the employee devotes his years in the organization, expects to get an increased pay for
his experience.
iii)Potential:The potential is worthless if it gets unnoticed. Therefore, companies do pay extra to the
employees having better potential as compared to others.
external Factors
1.Labor Market:The demand and supply of labor also influences the employee compensation. The low
wage is given, in case, the demand is less than the supply of labor. On the other hand, high pay is fixed, in
case, the demand is more than the supply of labor.
2.Going Rate:The compensation is decided on the basis of the rate that is prevailing in the industry. For
example, the amount the other firms are paying for the same kind of work.
3.Productivity:The compensation increases with the increase in the production. Thus, to earn more, the
workers need to work on their efficiencies that can be improved by way of factors which are beyond their
control. The introduction of new technology, new methods, better management techniques are some of the
factors that may result in the better employee performance, thereby resulting in the enhanced productivity.
4.Cost of Living: The cost of living index also influences the employee compensation, in a way, that with
the increase or fall in the general price level and the consumer price index, the wage or salary is to be varied
accordingly.

Stage of team development

Forming: This is where team members first meet. It’s important for team leaders to facilitate the
introductions and highlight each person’s skills and background. Team members are also given project
details and the opportunity to organize their responsibilities.
Storming: At this stage, team members openly share ideas and use this as an opportunity to stand out and
be accepted by their peers. Team leaders help teams in this stage by having a plan in place to manage
competition among team members, make communication easier, and make sure projects stay on track.
Norming: By now, teams have figured out how to work together. There’s no more internal competition,
and responsibilities and goals are clear. Each person works more efficiently because he or she has learned
how to share their ideas and listen to feedback while working toward a common goal.
Performing: There’s a high level of cohesion and trust between team members. Teams are functioning at
peak efficiency with less oversight from team leaders. Issues still come up, but at this point, teams have
strategies for resolving problems without compromising timelines and progress.
Adjourning: Teams complete their project and debrief on what went well and what could be improved for
future projects. Afterwards, team members move on to new projects. Now let’s look at how to use this
model to amplify the strengths within your remote marketing team so that projects are successful and
completed on time.

Explain the compensation theories

Reinforcement and Expectancy Theory: This theory is based on the assumption that, the reward-earning
behavior is likely to be repeated, i.e. an employee would do the same thing again for which he was
acknowledged once.
Similarly, in the case of Expectancy Theory, given by Vroom, the employee is motivated to do a particular
thing for which he is sure or is expected that performance will be followed by a definite reward or an
outcome.
Equity Theory: According to this theory, there should be equity or the uniformity in the pay structure of
an employee’s remuneration. If the employee feels he is not being paid fairly for the amount of work he
does in a day will result in lower productivity, increased turnover and high absenteeism. The remuneration
system should comply with three types of equity:
Internal Equity: The employee perceives the fairness in different pay for different jobs based on the nature
of work involved, i.e. he must feel that pay differentials among the jobs are fair.
External Equity: The employee should feel the fairness in what they are being paid is in line with what
other players in the same industry are paying to their employees for the same kind of job.
Individual Equity: The employee perceives the pay differentials among the individuals who are
performing the same kind of a job and within the same organization. Usually, an individual with more
experience gets high remuneration as compared to the fresher irrespective of the nature of a job.
Agency Theory: This theory states that both the employer and the employee are the stakeholders of the
company, and the remuneration paid to the employee is the agency cost. The employee will try to get an
increased agency cost whereas the employer will try to minimize it. Hence, the remuneration should be
decided in such a way that the interest of both the parties can be aligned.
Explain various component of wages
1. *Base Salary/Wage*: This is the fixed amount of money an employee receives for their work, typically
expressed as an annual salary or hourly wage. It forms the foundation of an employee's earnings.
2. *Overtime Pay*: When employees work beyond their standard hours (usually 40 hours per week in many
countries), they may be entitled to additional compensation, often at a higher rate than their regular pay.
Overtime pay encourages employers to limit excessive work hours and compensates employees fairly for
their extra time.
3. *Bonuses/Incentives*: These are additional payments given to employees for achieving specific goals,
such as meeting sales targets, completing projects ahead of schedule, or demonstrating exceptional
performance. Bonuses can be discretionary or based on predefined criteria.
4. *Commissions*: Commonly found in sales roles, commissions are a percentage of sales revenue or a
fixed amount paid to employees based on the volume or value of goods or services they sell. Commissions
serve as incentives for employees to drive sales and generate revenue for the company.
5. *Allowances*: Employers may provide allowances to cover certain expenses incurred by employees in
the course of their work, such as travel, housing, or meals. These allowances can be provided as a flat
amount or based on actual expenses incurred.
6. *Benefits*: Benefits are non-wage compensations provided to employees in addition to their salary or
wages. They include perks such as health insurance, retirement plans, paid time off (e.g., vacation days,
sick leave), life insurance, and disability coverage. Benefits help attract and retain talent and contribute to
employees' overall well-being.
7. *Tips/Gratuities*: In industries such as hospitality, food service, and personal services, employees may
receive tips or gratuities from customers in addition to their regular wages. Tips can significantly
supplement an employee's income but are typically not guaranteed.
8. *Profit Sharing*: Some companies distribute a portion of their profits among employees as a form of
profit-sharing. This can be distributed equally among all employees or allocated based on factors such as
salary level or performance.
9. *Stock Options/Equity*: In certain companies, employees may receive stock options or equity as part of
their compensation package. This grants them the right to purchase company stock at a predetermined price,
allowing them to share in the company's success and potentially benefit from stock price appreciation.
10. *Severance Pay*: When employees are laid off or terminated, they may receive severance pay as
compensation for their loss of employment. Severance pay helps ease the financial transition for employees
and may be based on factors such as length of service and salary level.
11. *Shift Differentials*: Employees who work during non-standard hours, such as evenings, weekends, or
holidays, may receive shift differentials—a higher rate of pay to compensate for the inconvenience or
potential disruption to their personal lives.
12. *Holiday Pay*: Employees who work on designated holidays may receive additional compensation,
known as holiday pay. This acknowledges the sacrifice of working during holidays and incentivizes
employees to cover essential services during these times.
Implementing performance management
Principle of performance management
Dimension of performance management
Explain the compensation structure
Explain the classification of compensation
Role of life line performance management
Explain the strategy of compensation management in multi-national organization
Explain factor evaluation system
Write a short note a DA
Briefly explain bases of wages calculation
Explain performance process
Explain the theories of wages
Explain the methods of performance management