CD|PENSATÌDN |ANACE|ENT,JD8

E7ALUATÌDN,0A
1
ACEN0A
DeIIne CompensuLIon .
EIemenLs oI CompensuLIon SvsLem.
CONCEPTS O¡ WAGE AND D¡¡¡ERENT K¡NDS O¡ WAGES.
ObjecLIves oI CompensuLIon SvsLem.
How CompensuLIon SvsLem Is used ?
METHOD O¡ CA¡CU¡AT¡NG BAS¡C PAY AND ¡TS USE ¡N DES¡GN¡NG SA¡ARY
STRUCTURE.
WIuL ure LIe componenLs oI CompensuLIon SvsLem?
DIIIerenL Lvpes oI CompensuLIon SvsLem.
CompensuLIon PIuns.
¡InuncIuI und Non ¡InuncIuI ¡ncenLIve ScIemes
z
8ASÌC TEF|S USE0 ÌN HF
A crILIcuI componenL oI boLI compensuLIon und
seIecLIon svsLems, job descrIpLIons deIIne In wrILIng
LIe responsIbIIILIes, requIremenLs, IuncLIons, duLIes,
IocuLIon, envIronmenL, condILIons, und oLIer uspecLs
oI jobs. DescrIpLIons muv be deveIoped Ior jobs
IndIvIduuIIv or Ior enLIre job IumIIIes.
]OB DESCR!PT!ON
TIe process oI unuIvsIng jobs Irom wIIcI job
descrIpLIons ure deveIoped.
Job unuIvsIs LecInIques IncIude LIe use oI InLervIews,
quesLIonnuIres, und observuLIon.
]OB ANALYS!S
A svsLem Ior compurIng jobs Ior LIe purpose oI
deLermInIng upproprIuLe compensuLIon IeveIs Ior
IndIvIduuI jobs or job eIemenLs.
TIere ure Iour muIn LecInIques:
RunkIng
CIussIIIcuLIon
¡ucLor CompurIson
PoInL MeLIod
]OB EvALUAT!ON
JD8 E7ALUATÌDN |ETHD0S
ComµuvIson MetLod Anu!ysIs MetLod
1n/ire JoI JoI Ioc/ore
JoI Agoine/ Scole
JoI Agoine/ JoI
C!ussIII¢utIon PoInt MetLod
RunkInu
Iu¢tov
ComµuvIson
0EFÌNÌTÌDN
W A seL oI .425038,-0 IucLors ure IdenLIIIed us
deLermInIng LIe worLI oI jobs. TvpIcuIIv LIe
compensubIe IucLors IncIude LIe mujor cuLegorIes
oI
W SkIII
W ResponsIbIIILIes
W EIIorL
W WorkIng CondILIons
FACTDFE CAN 8E FUFTHEF 0EFÌNE0
SK¡¡¡¡
ExperIence
EducuLIon
AbIIILv
RESPONS¡B¡¡¡T¡ES
¡IscuI
SupervIsorv
CDNT.
W E¡¡ORT
MenLuI
PIvsIcuI
W WORK¡NG COND¡T¡ON
¡ocuLIon
Huzurds
ExLremes In EnvIronmenL
PDÌNT |ETHD0
Advuntuues
HIghIv sfnbIo ovor fImo
IorcoIvod ns vnIId bv
usors nnd ompIovoos
!IkoIv fo bo roIInbIo
nmong commIffoo fhnf
nssossos fho jobs
IrovIdos good dnfn fo
propnro n rosponso fo
nn npponI
Isudvuntuues
%Imo, monov, nnd
offorf roquIrod fo sof up
!oIIos honvIIv on kov
(bonchmnrk) jobs, so If
kov jobs nnd corrocf
pnv rnfos don`f oxIsf,
fho poInf mofhod mnv
nof bo vnIId
FACTDF 0ECFEES AN0 PDÌNT
SYSTE|S
HAT ÌS A 0ECFEE LE7EL:
W ¡L Is u scole LIuL reIIecLs dIIIerIng quunLILv or
quuIILv oI LIe IucLor
W ¡L Is used to di[[erentiote jobs on LIe IucLor
W ¡L Is u deIInILIon LIuL Is cleor ond
unombiguous
W ¡L conLuIns expIIcIL Iunguuge LIuL spells out the
behooiors, skills, or per[ormonce
expectotions Ior LIuL IucLor uL dIIIerenL IeveIs
oI LIe IucLor
HD 0D YDU ASSÌCN PDÌNT
7ALUES TD THE ENTÌFE SYSTE|:
1. TIe muxImum number oI poInLs ussIgned Is u IuIrIv
urbILrurv judgmenL (=oo-¤ooo Is common)
z. TIe number musL be Iurge enougI Lo uIIow suIIIcIenL
dIIIerenLIuLIon umong LIe jobs Lo be evuIuuLed.
¤. ¡I LIere Is u verv wIde spreud beLween LIe currenL wuges
oI LIe IIgIesL puId job und LIe IowesL puId job, LIe
muxImum number oI poInLs wIII need Lo be IIgIer
q. ¡I vou cIoose more LIun one puv svsLem, LIe number oI
poInLs or LIe ucLuuI IucLors LIemseIves do noL Iuve Lo
be LIe sume In eucI one.
=. SUGGEST¡ON ¡OR YOUR PROJECT: Huve no Iewer
LIun 1ooo poInLs und no more LIun zooo.
PDÌNT 7ALUES TD FACTDFS ALDNC
A SCALE
PoInL vuIues Ior Degrees
ToLuI
W ¡ucLor 1 z ¤ q
SkIII q= ¤o 1¤= 18o q=o
PIvsIcuI eIIorL z= =o ;= 1oo z=o
MenLuI eIIorL ¤= ;o 1o= 1=o ¤6o
ResponsIbIIILv z= =o ;= 1oo z=o
WorkIng condILIons zo qo 6o 8o zoo
MuxImum LoLuI poInLs oI uII IucLors dependIng on LIeIr ImporLunce Lo
job=1=1o
FESPDNSÌ8ÌLÌTY
W EucI empIovee Is responsIbIe Ior conservIng LIe compunv`s
equIpmenL und muLerIuI.
¡eveI-1
EmpIovee reporLs muIIuncLIonIng oI equIpmenL or deIecLIve
muLerIuIs Lo LIe ImmedIuLe superIor.
¡eveI-z
EmpIovee muInLuIn LIe uppeurunce oI equIpmenL or order oI
muLerIuI und Ius responsIbIIILv Ior LIe securILv oI sucI
equIpmenL or muLerIuI
¡eveI-¤
EmpIovee perIorm prevenLIve muInLenunce und mInor repuIrs
on equIpmenL or correcLs mInor deIecLs In muLerIuI
¡eveI-q
EmpIovee perIorm mujor muInLenunce or overIuuIs oI
equIpmenL or responsIbIe Ior decIdIng Lvpe, quuIILv und
quunLILv oI muLerIuI Lo be used.
Job EvaluatIon · Concept

This potential to blend internal forces and external market forces is both a
strength and a opportunity to job evaluation system.
Job EvaluatIon · DbjectIves

W Job evuIuuLIon Is used Lo deLermIne LIe reIuLIve
vuIue oI eucI job In reIuLIon Lo uII jobs wILIIn LIe
orgunIzuLIon.
W ¡mmedIuLe objecLIve: Lo obLuIn InLernuI und
exLernuI consIsLencv In wuges und suIurIes.
W UILImuLe objecLIve: empIovee und empIover
suLIsIucLIon wILI wuges und suIurIes puId.
PlS1C8?ťŴ
1863 Ŵ karl Marx wroLe ln uas kaplLal LhaL Lhe value of
aoods and servlces ls based on Lhe amounL of labor LhaL aoes
lnLo Lhem
1883 Ŵ lrederlck Wlnslow 1avlor sLaLed LhaL Lhe conLenL of
labor ln labor deLermlnes Lhe prlce of labor
1933 Ŵ Ldward Pav developed Lhe Pav polnL facLor svsLem
1963 Ŵ 1he Lqual Þav AcL prohlblLed dlscrlmlnaLlon on Lhe
basls of sexŧfor equal work on [obsţ Lhe performance of
whlch requlres equal sklllţ efforLţ and responslblllLv and whlch
are performed under slmllar worklna condlLlonsŦ 1he LÞA
formallzed nonŴmarkeL based pav plans
1
1husţ 8anklna each [ob relaLlve Lo all oLher [obsţ
usuallv based on some overall facLorŦ
W SLeps ln [ob ranklnať
CbLaln [ob lnformaLlonŦ
SelecL and aroup [obsŦ
SelecL compensable facLorsŦ
8ank [obsŦ
Comblne raLlnasŦ
Common Methods of Job EvaIuations
#anking method: the grade consists of all jobs
that fall within two or three ranks.
Ìmportance of job evolutIon
> To involve the people occupying the positions under
evaluation. This is especially so if you think
your organizations job descriptions are poorly written or out of
date. The people in positions and their immediate supervisors
have the best idea of what the job is really about.
2 >Job evaluation is most effective as a participative exercise and
this in itself can improve employment relations. Ìt is therefore
recommended that job evaluation is introduced or revised jointly
by allowing management and employee representatives to
discuss relevant issues initially in a non-negotiating forum
Jƽ1 o eosote loteototloo of lotetool foltoess ooJ extetool
competltlveoessŦ
&p to date, accurate job descriptions are absolutely essential and should be
reviewed for accuracy with the current incumbent before evaluation.
More complex job evaluation techniques require more information and
often the primary source of this is job descriptions, so the more complex the job
evaluation scheme, the more detailed the job description needs to be.
. Keep accurate records of decisions taken, to ensure openness, and
transparency.
Build confidence in the process and outcomes by briefing people
Many organizations choose to engage consultants to manage parts or the
entire
process. These consultants often have access to the expensive but
comprehensive data bases containing detailed information about remuneration
levels in different sectors.
job evaluation methods are not to be confused with performance management
or
appraisal, where the primary concern is with how well a job is performed. \
Aspects of job evolution
TIe q mujor IucLors on wIIcI LIIs
meLIod ure meusuredJ bused ure:
W Compunv sIze
W SLruLegIc IeveI
W ¡mpucL
W CompIexILv und ProbIem SoIvIng
|anagerIal Jobs: CharacterIstIcs

1. CommunIcuLIon
z. TeumworkJmoLIvuLIon
¤. ¡IuIsonJneLworkIng
q. ServIce deIIverv
=. DecIsIon mukIng
6. PIunnIng & orgunIsIng
;. ¡nILIuLIve & probIem soIvIng
8. AnuIvLIcuI & reseurcI skIIIs
¤. Sensorv & pIvsIcuI demunds
1o. Work envIronmenL
11. PusLoruI cure
1z. Teum deveIopmenL
1¤. TeucIIng & IeurnIng
1q. KnowIedge & experIence
ob evaluaLlon process
1he ma[or ob[ecLlvlLv of [ob evaluaLlon process ls Lo esLabllsh
saLlsfacLorv waae and salarv dlfferenLlalsţ so [ob analvsls should
precede Lhe acLual proaramme of evaluaLlonŦ
ObjecLIve oI job
evuIuuLIon
Job
descrIpLIon
Job unuIvsIs
Job evuIuuLIon
Job specIIIcuLIon
Wuge survev
EmpIovee
cIussIIIcuLIon
Job EvaluatIon |ethods

W Job RunkIng MeLIod
ExumInes job descrIpLIon und urrunge jobs
uccordIng Lo vuIue Lo compunv e.g. IIgIesL Lo
IowesL.
W Job CIussIIIcuLIon MeLIod
CIusses or grudes ure deIIned Lo descrIbe u group
oI jobs e.g. governmenL orgunIsuLIons.
W PoInL MeLIod
BreukIng down jobs on IdenLIIIubIe crILerIu und LIe
degree Lo wIIcI LIese crILerIu exIsL on LIe job.
Job EvaluatIon |ethods
2008

Advantage Disadvantage
Ranking Ranking Fast, simple, easy to Fast, simple, easy to
explain. explain.
Cumbersome as Cumbersome as
number oI iobs number oI iobs
increases. Basis Ior increases. Basis Ior
comparisons is not comparisons is not
always acceptable. always acceptable.
ClassiIication ClassiIication Can group a wide range oI Can group a wide range oI
work together in one work together in one
system. system.
Descriptions may Descriptions may
leave too much room leave too much room
Ior manipulation. Ior manipulation.
Point Point Compensable Iactors call Compensable Iactors call
out basis Ior comparisons. out basis Ior comparisons.
Compensable Iactors Compensable Iactors
communicate what is communicate what is
valued. valued.
Can become Can become
bureaucratic and rule bureaucratic and rule- -
bound. bound.
|anager: Key EvaluatIon Factors

W DecIsIon mukIng und probIem soIvIng
W ResponsIbIIILv
W AccounLubIIILv
W SkIIIs
Hay's |ethod - J Factors

Jobs exist to achieve an
end resuIt
Accountab|||ty Accountab|||ty
%herefore, the job hoIder
requires a IeveI of
knowIedge and experience
commensurate with the
scaIe and compIexity of the
resuIt
Prob|em 8o|v|ng
%o achieve this end
resuIt, job hoIders must address
probIems, create, anaIyse and
appIy judgement
11 33 22
Accountab|||ty
Prob|em 8o|v|ng
Know-how
Hay's |ethod · Process

epth & Range
of Know-How
PIanning &
Organising
Communicating &
InfIuencing
Freedom
to Act
Nature of
Impact
Area of
Impact
(Magnitude)
%hinking
Environment
%hinking
ChaIIenge
KNOW-
HOW
KNOW-
HOW
PROBLEM
SOLVING
PROBLEM
SOLVING
ACCOUN%ABILI% ACCOUN%ABILI%

Job
Size
Job
Size
CompensatIon Plan of ExecutIves

W Broud bundIng - puvIng execuLIves uL preseL
IeveIs bused on LIeIr IeveI oI compeLencv.
W GoIden purucIuLe - u IInuncIuI proLecLIon pIun
Ior Lop execuLIves In cuse LIev ure severed Irom
LIe orgunIsuLIon.
ÌmplIcatIons

W Purpose oI evuIuuLIon sIouId be cIeurIv deIIned
W AdopLIon oI upproprIuLe LecInIque
W AIIocuLIon oI suIIIcIenL resources
CrItIcIsm

W SvsLemuLIc ruLIer LIun scIenLIIIc
W ReIIubIe buL vuIIdILv Is deLermIned bv
uscerLuInIng LIe ImpucL upon empIovee
suLIsIucLIon.
W ConIIIcL on vuIue oI LIe job.
UseIuI Ior sLundurdIzIng compensuLIon prucLIces.
MosL puv sLrucLures IncIude severuI grudes wILI eucI
grude conLuInIng u mInImum suIurvJwuge und eILIer
sLep IncremenLs or grude runge.
Puv Ior eucI job Is pre-deLermIned LIrougI coIIecLIve
burguInIng.
PAY STRUCTURE
Contd.
Sources oI CompensuLIon.
CompensuLIon MeLIods.
CompensuLIon SLrucLure.
AdmInIsLruLIon OI compensuLIon
¡InuncIuI und Non ¡InuncIuI ¡ncenLIves
Wuges AcL
N.H.P.C.
ConcIusIon
ReIerences
¤=
hat Is CompensatIon System:
CompensuLIon Is u svsLemuLIc upproucI.
CompensuLIon Is u LooI.
CompensuLIon SvsLem Is IIexIbIe.
¤6
ELE|ENTS DF A CD|PENSATÌDN
SYSTE|
TAXES TAXES
¡NCENT¡VES ¡NCENT¡VES
A¡¡OWANCES A¡¡OWANCES
¡ONG TERM
BENE¡¡TS
¡ONG TERM
BENE¡¡TS
BENE¡¡TS BENE¡¡TS
SA¡ARY SA¡ARY
DbjectIves of compensatIon
system
AcquIre quuIIIIed personneI
ReLuIn presenL empIovees
Ensure equILv
Rewurd desIred beIuvIor
ConLroI cosLs
CompIv wILI IeguI reguIuLIons
¡ucIIILuLe undersLundIng
¡urLIer udmInIsLruLIon eIIIcIencv
¤8
How CompensatIon System Is used
CompensuLIon Is used Lo:
1. RecruIL und reLuIn quuIIIIed empIovees.
z. ¡ncreuse or muInLuIn moruIeJsuLIsIucLIon.
¤. Rewurd und encouruge peuk perIormunce.
q. AcIIeve InLernuI und exLernuI equILv.
=. Reduce Lurnover und encouruge compunv
IovuILv.
6. ModIIv (LIrougI negoLIuLIons) prucLIces oI
unIons.
¤¤
Components of compensatIon system
Job DescrIpLIons :- deIIne In wrILIng LIe responsIbIIILIes,
requIremenLs, IuncLIons, duLIes, IocuLIon, envIronmenL,
condILIons, und oLIer uspecLs oI jobs
1. Job AnuIvsIs :- TIe process oI unuIvzIng jobs Irom
wIIcI 4-/08.759438 ure deveIoped.
z. Job evuIuuLIon :- Ior compurIng jobs Ior LIe
purpose oI deLermInIng upproprIuLe
compensuLIon IeveIs Ior IndIvIduuI jobs or job
eIemenLs
ContInue.
Puv SLrucLures :- bused on severuI grudes puv
sLrucLure Is deLermIned LIrougI coIIecLIve
burguInIng (unIons)
SuIurv Survevs :- Muv IncIude uveruge suIurIes,
InIIuLIon IndIcuLors, cosL oI IIvIng IndIcuLors,
suIurv budgeL uveruges.
0Ifferent types of compensatIon
system
Buse Puv
CommIssIons
OverLIme Puv
Bonuses, ProIIL SIurIng, MerIL Puv
SLock OpLIons
TruveIJMeuIJHousIng AIIowunce
BeneIILs IncIudIng: denLuI, Insurunce, medIcuI,
vucuLIon, Ieuves, reLIremenL, Luxes...
CompensatIon Plans
DeveIop u progrum ouLIIne.
DesIgnuLe un IndIvIduuI Lo oversee desIgnIng LIe
compensuLIon progrum.
DeveIop u compensuLIon pIIIosopIv.
ConducL u job unuIvsIs oI uII posILIons.
EvuIuuLe jobs.
DeLermIne grudes.
EsLubIIsI grude prIcIng und suIurv runge.

ContInue....
DeLermIne un upproprIuLe suIurv sLrucLure.
DeveIop u suIurv udmInIsLruLIon poIIcv.
ObLuIn Lop execuLIves' upprovuI oI LIe busIc
suIurv progrum.
CommunIcuLe LIe IInuI progrum Lo empIovees
und munugers.
MonILor LIe progrum.
qq
Sources of CompensatIon 0ata
¡ubour
EmpIover ¡nIormuLIon
EmpIover AssocIuLIon
ProIessIonuI AssocIuLIon
q=
CompensatIon |ethods
TIere ure busIcuIIv Lwo compensuLIon svsLem
vIz. BusIs TIme RuLe und PIece RuLe.
¡Ls Is meunL Ior mukIng puvmenL, wIIcI sIouId
udequuLe compensuLe LIe worker Ior IIs eIIorLs.
q6
CompensatIon System
CompensuLIon SvsLem
TIme RuLe PIece RuLe
Bonus
ProIIL
sIurIng
¡ndIrecLIve
MoneLurv
¡ncenLIve
q;
TIme Fate System
q8
TIme RuLes
OrdInurv
IeveI
HIgI Wuge
¡eveI
GruduuLed
TIme RuLes
PIece Fate System
PIece RuLe
SLruIgIL
pIece ruLe
PIece und
LIme
combInuLIon
DIIIerenLIuI
pIece
TuvIor
SvsLem
MurrIck
SvsLem
GunLL Tusk
SvsLem

CompensatIon Structure
CompensuLIon SvsLem ConsIsLs oI LIe IoIIowIng:
SuIurv, BusIc SuIurv or ConsoIIduLed SuIurv:
Grude wIse IIuL AIIowunce:
ReImbursemenLs oI expenses:
AnnuuI puvmenLs:
BeneIILs:
EmpIovee sLock opLIon scIemes :
¨ ToLuI cosL Lo LIe Compunv¨ concepL :
ReLIruI beneIILs:
PerIormunce Bonus :
=o
CompensatIon AdmInIstratIon
TIe mujor IuncLIons oI un udmInIsLruLIon consIsL
oI LIe IoIIowIng:
ApprovuI und Jor recommenduLIon oI
munugemenL on job evuIuuLIon meLIods und
IIndIngs.
RevIew und recommenduLIon oI busIc wuge und
suIurv sLrucLure.
Co-ordInuLIon und revIew oI reIuLIve
depurLmenLuI ruLes Lo ensure conIormILv.
RevIew oI budgeL esLImuLes Ior wuge und suIurv
udjusLmenLs und Increuses.
=1
PrIncIples of AdmInIstratIon of
CompensatIon
TIere sIouId be u deIInILe pIun Lo ensure LIuL
dIIIerences In puv Ior jobs ure bused upon
vurIuLIons In job requIremenLs.
PrompL und correcL puvmenLs oI LIe dues oI LIe
empIovees.
TIe pIun sIouId cureIuIIv dIsLInguIsI beLween
jobs und empIovees.
EquuI puv Ior equuI work.
=z
ContInue.
TIe wuge und suIurv sLrucLure sIouId be IIexIbIe.
TIe empIovees und LIe Lrude unIon, II LIere Is
one, sIouId be InIormed ubouL LIe procedures
used Lo esLubIIsI wuge ruLes.
TIe wuge sIouId be suIIIcIenL Lo ensure Ior LIe
worker und IIs IumIIv reusonubIe sLundurd oI
IIvIng.

FInancIal and Non FInancIal
ÌncentIves
An IncenLIve scIeme cun oIIer empIovees exLru
puv uccordIng Lo IndIvIduuI or group
perIormunce LurgeLs.
ExumpIes IncIude:
proIIL-reIuLed und sIure opLIon scIemes
bonuses
commIssIon
=q
ContInue...
Non-IInuncIuI ExumpIe IncIude:
voucIers
exLru IoIIduvs
gIILs
compunv curs
==
Advantages and 0Isadvantages
Incentives Advuntuues Ðisudvuntuues
¡InuncIuI
1.¡ocus on IILLIng LurgeL
z.AcIIevemenL u gIven
vuIue
1.Rewurds ure
someLImes smuII
z.Cun demoruIIze II noL
eurned
Non ¡InuncIuI
1.Cun recognIze
empIovee prIorILIes und
IIIesLvIe
z.Cun encouruge
uLLucImenL Lo busIness
1.Cun be Luken Ior
grunLed
z.Muv be InupproprIuLe
=6
Feasons For ÌntroducIng An
ÌncentIve Scheme
1. ¡ncreuse In eurnIngs Ior empIovees?
z. ¡ncreuse In ouLpuL?
¤. ¡mprovemenL In quuIILv?
q. BeLLer mobIIILv oI Iubour?
=. More eIIIcIenL meLIods oI workIng?
6. ¡mprovemenL In suIeLv?
;. HIgIer IousekeepIng sLundurds?
8. ReducLIon In ubsenLeeIsm?
¤. ReducLIon In Iubour Lurnover?
1o.ReducLIon In overLIme workIng?
=;
What Type Df Work Needs An
IncentIve Scheme!
Does LIe work necessILuLe skIIIed, semI-skIIIed or
unskIIIed Iubour?
Cun IndIvIduuI skIII be IuIIv uppIIed wIen
munIpuIuLIng mucIInes eLc. or Is LIe empIovee`s
quunLILv und quuIILv oI ouLpuL reguIuLed Lo u
Iurge exLenL bv IucLors ouLsIde IIsJIer conLroI?
Does LIe IeveI oI ouLpuL remuIn sLeudv
LIrougIouL LIe veur or Is IL subjecL Lo seusonuI
vurIuLIons?
=8
ContInue..
¡s producLIon orgunIzed on u process, IIow IIne,
buLcI or jobbIng busIs?
Huve vour currenL producLIon meLIods been
recenLIv revIewed Ior muxImum eIIIcIencv?
¡s unv new mucIInerv or pIunL, Lo be InLroduced
In LIe neur IuLure, IIkeIv Lo upseL LIe sLundurd
upon wIIcI un IncenLIve scIeme mIgIL be
bused?

ACT'S CD7EFNÌNC ACE
A0|ÌNÌSTFATÌDN ÌN ÌN0ÌA
TIe Wuges AcL deLermInes LIe IeguI reguIuLIon oI
LIe remuneruLIon oI persons wIo work under un
empIovmenL conLrucL, LIe grunL oI guurunLees
und puvmenL oI compensuLIon reIuLIng Lo
remuneruLIon.
PAY|ENT DF ACES ACT(19J6)
TIe PuvmenL oI Wuges AcL, 1¤¤6 Is u cenLruI
IegIsIuLIon wIIcI uppIIes Lo LIe persons
empIoved In LIe IucLorIes und Lo persons
empIoved In IndusLrIuI or oLIer esLubIIsImenLs
specIIIed In sub-cIuuses (u) Lo (g) oI cIuuse ) oI
secLIon z oI LIIs AcL
TIIs AcL does noL uppIv on workers wIose wuges
puvubIe In respecL oI u wuge perIod uveruge Rs.
16ooJ- u monLI or more.
SALIENT FEATUPES:-
TIIs AcL Ius been enucLed wILI LIe InLenLIon oI
ensurIng LImeIv puvmenL oI wuges Lo LIe workers
und Ior puvmenL oI wuges wILIouL unuuLIorIzed
deducLIons
TIe suIurv In IucLorIesJesLubIIsImenLs
empIovIng Iess LIun 1ooo workers Is requIred Lo
be puId bv ;LI oI everv monLI und In oLIer cuses
bv 1oLI duv oI everv monLI.
ContInue..
A worker, wIo eILIer Ius noL been puId wuges In
LIme or un unuuLIorIzed deducLIons Iuve been
mude Irom IIsJIer wuges, cun IIIe u CIuIm eILIer
dIrecLIv or LIrougI u Trude UnIon or LIrougI un
¡nspecLor under LIIs AcL, beIore wILI LIe
AuLIorILv uppoInLed under LIe PuvmenL oI
Wuges AcL

|ÌNÌ|U| ACES ACT(1948)
TIIs ucL provIdes Ior IIxIng mInImum ruLes oI
wuges In cerLuIn empIovmenL.
TIe InspecLoruLe sLuII oI LIe ¡ubour DepurLmenL
Lukes ucLIon on compIuInLs receIved Irom
workmenJUnIons, Suo moLo ucLIon cun uIso be
Luken.
ContInue..
ApurL Irom LIe ucLIon bv LIe ¡nspecLoruLe In LIe
DepurLmenL, II u worker geLs Iess puvmenL, Ie
cun uIso IIIe u cIuIm beIore LIe CompeLenL
AuLIorILv uppoInLed under LIe AcL, wIIcI ure
DepuLv ¡ubour CommIssIoners Ior LIe respecLIve
dIsLrIcLs. TIe uuLIorILv cun Impose penuILv up Lo
1o LImes LIe dIIIerence In mInImum wuges LIuL
wus due und puId.
6=
!ayment of CratuIty Act, 1º72
GruLuILv Is u Iump sum puvmenL mude bv LIe
empIover us u murk oI recognILIon oI LIe servIce
rendered bv LIe empIovee wIen Ie reLIres or
Ieuves servIce.
TIe AcL Is uppIIcubIe Lo everv IucLorv, sIop or un
esLubIIsImenL, In wIIcI Len or more persons ure
empIoved, or were empIoved on unv duv oI LIe
proceedIng LweIve monLIs.
An empIovee Is eIIgIbIe Ior receIvIng gruLuILv
puvmenL onIv uILer Ie Ius compIeLed IIve veurs
oI conLInuous servIce.
N.H.P.C. - NatIonal HydroelectrIc
Power CorporatIon
N.H.P.C. wus IncorporuLed under LIe Compunv's
AcL 1¤=6 In November 1¤;=.
A CenLruI GovernmenL EnLerprIse wILI LIe InILIuI
uuLIorIsed sIure cupILuI oI Rs. zooo mIIIIon Ior
Ivdro power deveIopmenL In CenLruI SecLor.
6;
CompensatIon structure
BusIc suIurv :
SuvIngs :- CP¡, ¡¡C, PP¡, NSC, M¡S
Bonus
Arreurs
MedIcuI uIIowunce
EducuLIon uIIowunce
PrIce
SLocks
SuIurv oI un empIovee
|ethods of compensatIon system
TIme ruLe SvsLem
W OrdInurv IeveI
W HIgI wuge IeveI
W GruduuLed LIme ruLe
ConLrucLs
W YeurIv
W MonLIIv
W QuurLerIv
AdmInIstratIon of compensatIon
EnLrusLed Lo job execuLIves
SupporLed bv LIe udvIce oI LecInIcuI sLuII
¡InuI upprovuI bv Lop execuLIves
PerIormunce uppruIsuI bv vurIous munugers
¡InuI decIsIon bv CIuIrmun.
ExecutIve plans for compensatIon
¡eveI oI IndIvIduuI perIormunce.
¡eveI oI compunv perIormunce.
PerIormunce eIIecLIveness.
CompIeLe InIormuLIon on LIe reIuLIonsIIp
beLween bonus und perIormunce.
SuLIsIucLIon und moLIvuLIonuI eIIecL.
0ÌFFEFENT TYPES DF CD|PENSATÌDN
PLANS
Buse Puv
CommIssIons
OverLIme Puv
Bonuses, ProIIL SIurIng, MerIL Puv
SLock OpLIons
TruveIJMeuIJHousIng AIIowunce
BeneIILs IncIudIng: denLuI, Insurunce, medIcuI,
vucuLIon, Ieuves, reLIremenL, Luxes...
PFDCESS DF 0ESÌCNÌNC A
CD|PENSATÌDN PLAN
DeveIop u progrum ouLIIne.
DesIgnuLe un IndIvIduuI Lo oversee desIgnIng LIe
compensuLIon progrum.
DeveIop u compensuLIon pIIIosopIv.
ConducL u job unuIvsIs oI uII posILIons.
EvuIuuLe jobs.
DeLermIne grudes.
EsLubIIsI grude prIcIng und suIurv runge.
DeLermIne un upproprIuLe suIurv sLrucLure.
DeveIop u suIurv udmInIsLruLIon poIIcv.
ObLuIn Lop execuLIves' upprovuI oI LIe busIc suIurv progrum.
CommunIcuLe LIe IInuI progrum Lo empIovees und munugers.
MonILor LIe progrum.
CFÌTEFÌA DF 0E7ELDPÌNC A
CD|PENSATÌDN PLAN
Internul Vs Ixternul Iqoity: WIII LIe compensuLIon pIun be
perceIved us IuIr wILIIn LIe compunv or wIII IL be perceIved us IuIr
reIuLIve Lo wIuL oLIer empIovers ure puvIng Ior LIe sume Lvpe oI
Iubor?
ixed Vs Vuriuble Puy: WIII LIe compensuLIon be mude monLIIv
on u IIxed busIs - LIrougI buse suIurIes - or wIII IL IIucLuuLe
dependIng on sucI pre-esLubIIsIed crILerIu us perIormunce und
compunv proIILs?
ContInued.
PerIormunce Vs Membership: WIII LIe compensuLIon
empIusIze perIormunce und ILs puv Lo IndIvIduuI or group
conLrIbuLIons, or wIII IL empIusIze membersIIp In LIe orgunIzuLIon
- IoggIng In u prescrIbed number oI Iours eucI week und
progressIng up LIe orgunIzuLIonuI Iudder?
ob Vs Individoul Puy: WIII compensuLIon be bused on Iow LIe
compunv vuIues u purLIcuIur job, or wIII IL be bused on Iow mucI
skIII und knowIedge un empIovee brIngs Lo LIuL job?
ContInued..
Monetury Vs Non-monetury Awurds: WIII LIe
compensuLIon pIun empIusIze moLIvuLIng empIovee LIrougI
moneLurv uwurds rewurds IIke puv und sLock opLIons, or wIII IL
sLress nonmoneLurv rewurds sucI us InLeresLIng work und job
securILv?
pen Vs Secret Puy: WIII empIovees Iuve uccess Lo
InIormuLIon ubouL oLIer workers compensuLIon IeveIs und Iow
compensuLIon decIsIons ure mude (open puv), or wIII LIIs
knowIedge be wILIIeId Irom empIovees(secreL puv)?
entrulizution Vs Ðecentrulizution I Puy Ðecisions:
WIII compensuLIon decIsIons be mude In u LIgILIv conLroIIed
cenLruI IocuLIon, or wIII LIev be deIeguLed Lo munugers oI LIe
IIrm`s unIL?
ContInued.
Iuulituriunism Vs Ilitism: WIII LIe compensuLIon pIun pIuce
mosL empIovees under LIe sume compensuLIon svsLem
(eguIILurIunIsm), or wIII IL esLubIIsI dIIIerenL pIuns bv orgunIzuLIonuI
IeveI undJor empIovee group (eIILIsm)?
elow-Murket Vs Above-Murket ompensution: WIII
empIovees be compensuLed uL beIow-murkeL IeveIs, uL murkeL IeveIs,
or uL ubove-murkeL IeveIs?
0ETEF|ÌNANTS DF CD|PENSATÌDN
CuLegorv oI EmpIovees
BurguInIng power oI LIe empIovee und IIs Lrude
unIon
Demund und suppIv munpower Ior LIe specIIIc
cuLegorv oI posILIon or job
Good puvmenL Lo LIe empIovees
¡Irm`s ubIIILv Lo puv economIcuIIv vIubIe und IeuILIv
corporuLe cILIzens
TIe suIurv oI ILs peopIe producLIvILv, proIILubIIILv
und IIrm`s IInuncIuI posILIon
ContInued.
TIe SLundurd oI ¡IvIng
TIe GovernmenL ReguIuLIons
A |onetary CompensatIon plan must
fulfIll four condItIons:
SIouId uLLrucL und keep upproprIuLe number oI
peopIe In LIe orgunIzuLIon;
SIouId moLIvuLe LIe peopIe uL work Lo conLrIbuLe
LIeIr besL Lowurd LIe compunv`s objecLIve;
SIouId suLIsIv LIe needs oI LIe compunv`s own
peopIe;
SIouId noL uLLrucL IrequenL demund und sLruggIe oI
peopIe Ior wuge enIuncemenL uIIecLIng LIe cordIuI
IndusLrIuI reIuLIons.
ELE|ENTS DF TDTAL CD|PENSATÌDN
ToLuI
CompensuLIon
Buse
CompensuLIon
¡ncenLIve
CompensuLIon J
VurIubIe
compensuLIon
SuppIemenLurv
compensuLIon puId Lo
Iurge group oI
empIovees
A. 8ASE CD|PENSATÌDN
BusIc puv IIxed Lo vurIous cuLegorIes oI jobs, posL or
posILIons -> BusIc PuvJ ScuIe oI Puv
PuId mosLIv In moneLurv Lerms -> MoneLurv
CompensuLIon
¡ucLors consIdered In LIe process:
Job ConLenL - LIe job expecLed Lo be currIed ouL bv LIe
empIovee und IIs worLI Lo be on LIuL purLIcuIur job;
BurguInIng Power oI LIe Lrude unIon, or LIuL oI LIe
empIovee, represenLIng LIe Lrude or LIe job;
ContInued.
Demund-suppIv InLerpIuv or LIe specIIIc cuLegorv oI jobs
or posILIons;
RemuneruLIon IeveI In LIe IndusLrv, IdenLIcuI IIrms or LIe
IIrms In LIe IocuIILv Ior LIe specIIIc job;
AbIIILv oI LIe IIrm Lo puv;
ProducLIvILv, proIILubIIILv und IInuncIuI posILIon oI LIe
IIrm;
CosLJSLundurd oI IIvIng In LIe envIronmenL oI LIe
orgunIzuLIon;
GovernmenL ReguIuLIons.
8. ÌNCENTÌ7E CD|PENSATÌDN
A good IncenLIve svsLem moLIvuLes peopIe Lo puL In
LIeIr besL eIIorLs Lo perIorm weII.
CommonIv used Lo moLIvuLe peopIe uL work.
SLeps oI LIe process:
1. ¡IxuLIon oI PerIormunce SLundurds
z. ¡IxuLIon oI specIIIc ¡ncenLIve ScIemes
¤. ¡InkIng oI perIormunce IeveIs wILI orgunIzuLIonuI
objecLIve
q. CIussIIIcuLIon oI perIormunce sLundurds
ContInued.
=. PerIodIcuI Ieedbuck
6. ConspIcuous ¡ncenLIve
;. ConsLILuLIon oI u commILLee Ior LIe udmInIsLruLIon oI
IncenLIve scIemes
8. ¡InkIng oI HRD progrums wILI IncenLIve scIemes
¤. PubIIcuLIon oI numes oI recIpIenLs
1o. Awurds und PromoLIons
11. Honor oI ¡ncenLIve-Lukers
1z. ¡ncenLIve scIeme und CorporuLe PoIIcv
ContInued.
1¤. AcLIve InvoIvemenL oI Lop munugemenL
1q. CIubbIngs oI IncenLIves wILI Ieuse compensuLIon
1=. AdequuLe IInuncIuI uIIocuLIon
16. AdjusLmenL oI perIormunce sLundurd und IncenLIve
1;. AccepLunce oI suggesLIons Irom LIe empIovees
EXA|PLES:
INANIAL
ProIIL-reIuLed und sIure
opLIon scIemes
Bonuses
CommIssIon
NN-INANIAL
VoucIers
ExLru IoIIduvs
GIILs
Compunv Curs
C. SUPPLE|ENTAFY CD|PENSATÌDN
¡L IncIudes uddILIonuI unnuuI wuge, empIovee
proIIL sIurIng (presenL duv bonus), producLIon
sIurIng pIuns, empIovee`s equILv purLIcIpuLIon us
un uddILIonuI bonus
ASPECTS TD 8E CDNSÌ0EFE0 FDF
ACCD|PLÌSHÌNC EFFECTÌ7ENESS DF
THE |DNETAFY FE|UNAFATÌDN
SYSTE|
SuIurv und Wuge IeveI muv be IIgIer LIun or
equuI Lo wIuL Is prevuIIIng In LIe surroundIngs
or In LIe IndusLrv;
MoneLurv remuneruLIon sIouId be udequuLe Lo
meeL LIe needs;
MoneLurv remuneruLIon svsLem sIouId noL be
exorbILunLIv IIgIer or Iower; compured wILI
exIsLIng sLundurds;
¡L Is beLLer Lo puv LIe suIurv u Iew duvs In
udvunce beIore IL IuIIs due;
A sound merIL-ruLIng und svsLemuLIc job
evuIuuLIon muv be used us LIe busIs Ior puv
IIxuLIon;
TIere sIouId be some scope Ior puv IIkes Lo
oIIseL LIe InIIuLIonurv LendencIes;
MonLIIv suIurv muv be supporLed bv IInuncIuI
IncenLIve scIemes so LIuL LIere wouId be scope
Ior everv execuLIve Lo Increuse IIs Income bv
IncreusIng IIs perIormunce.
|ETHD0S DF FE|UNAFATÌDN
TIme-WorkJDuv-Work SvsLem
SLruIgIL PIece-Work SvsLem
DIIIerenLIuI PIece RuLe SvsLem
Group Bonus SvsLem
PrIesLmun`s ProducLIon Bonus
CosL-EIIIcIencv Bonus PIun
Emerson EIIIcIencv Bonus
HuIsev PremIum PIun
Rowun Bonus PIun
FACTDFS 0ETEF|ÌNÌNC THE LE7EL DF
FE|UNEFATÌDN
ProducLIon und LIe nuLure oI work
Use oI mucIInes
Use oI Iubor
¡ubor suppIv
Wuge poIIcv
KÌN0S DF ACES
M¡N¡MUM WAGE: LIuL wuge wIIcI Is suIIIcIenL Lo cover
LIe bure pIvsIcuI needs oI u worker und IIs IumIIv
¡A¡R WAGE: someLIIng more LIun LIe mInImum wuge
provIdIng mere necessILIes
¡¡V¡NG WAGE: LIe normuI needs oI LIe uveruge empIovee,
regurded us Iumun beIngs In u cIvIIIzed communILv
NEED BASED M¡N¡MUM WAGE: sIouId be 'need bused`;
sIouId ensure LIe suLIsIucLIon oI LIe mInImum needs oI LIe
IndusLrIuI worker.
TIme·ork/0ay·ork System
EmpIovees ure remuneruLed uL pre -deLermIned
IourIvJduIIv ruLes Ior IoursJduvs LIev ure
ucLuuIIv empIoved In LIe IucLorv
AdvunLuges:
SImpIe
QuuIILv ConLroI und SLeudv ¡ncome
DIsudvunLuges:
No dIsLIncLIon
Go SIow HubILs
ConsLunL SupervIsIon
StraIght PIece·ork System
A ruLe oI puvmenL Is IIxed Ior eucI pIece oI
compIeLed producLIon.
TIe wuge puvmenL Is cuIcuIuLed bv muILIpIvIng
LIe number oI pIeces compIeLed bv eucI
empIovee bv LIe pIecework ruLe.
AdvunLuges:
SImpIe
¡ucIIILv oI ¡ncenLIve
Advunce IIxuLIon oI Iubor cosL per unIL
¡ess SupervIsIon
DIsudvunLuges:
QuuIILv noL muInLuIned
WusLuge und ubsenLeeIsm
0IfferentIal PIece Fate System
ProducLIon uL dIIIerenL IeveIs oI eIIIcIencv ure
puId uL dIIIerenL ruLes so LIuL uL IIgIer IeveIs oI
producLIon, LIe worker eurns u compuruLIveIv
IIgIer ruLe per unIL.
SuILubIe wIere LIe work Is oI repeLILIve nuLure,
LIe meLIods oI equIpmenL ure sLundurdIzed.
ContInued.
PrIncIpIe svsLems LIuL use LIe prIncIpIe oI
dIIIerenLIuI pIece ruLes:
TuvIor dIIIerenLIuI pIece ruLe svsLem
MerrIck dIIIerenLIuI pIece ruLe svsLem
GunLL Lusk bonus pIun
Taylor's 0IfferentIal PIece Fate
System
W ¡nLroduced bv Dr E.W. TuvIor us un uLLempL Lo
Increuse ouLpuL oI workers wIom Ie consIdered
were workIng Iur beIow LIeIr cupucILv.
W ¡L provIdes z pIece ruLes, u Iow pIece ruLe Ior
ouLpuL beIow sLundurd und u IIgI pIece ruLe Ior
ouLpuL ubove sLundurd
W SuILubIe Ior Iurge-scuIe IndusLrIes.
ContInued.
AdvunLuges:
SImpIe
ALLrucLIon Lo eIIIcIenL workers
SLrong ¡ncenLIve
DIsudvunLuges:
UnproIILubIe Ior begInners
UnsuILubIe
|errIck 0IfferentIal pIece·rate
system
otpot Puyment
W Up Lo 8¤% NormuI RuLe
W 8¤-1oo% 1o% ubove LIe normuI ruLe
W Over 1oo% ¤o% ubove LIe normuI ruLe
Cantt task bonus plan
otpot Puyment
W OuLpuL beIow sLundurd (IIgI Lusk) TIme-RuLe (guurunLeed)
W OuLpuL uL sLundurd Bonus oI zo% ubove LIe LIme-ruLe
W OuLpuL ubove sLundurd HIgI pIece ruLe
ProfIt -SharIng
AmerIcun CouncII oI ¡ndusLrIes:
¨ ProIIL-SIurIng Is u svsLem wIere un empIover
gIves Lo uII LIe workers besIdes LIe reguIur
upproprIuLe wuges, specIuI currenL or posLponed
umounL wIIcI Is noL bused Iumun groundwork
buL Is bused on LIe prosperILv oI LIe wIoIe
busIness.¨
ProfIt SharIng 7s
Co·partnershIp
usis ProIit Shurinu o-Purtnership
Scope AIIow Iubor onIv u sIure In LIe proIIL Hus u wIder scope und IL IncIudes proIIL sIurIng
pIus In LIe munugemenL uIso
¡euLures BrIngs ubouL no IundIcup. No rIsk. No sIure In
Iosses.
Worker us u sIureIoIder Is LIed down Lo LIe
compunv. Reduces mobIIILv.
CusI Bonus We usuuIIv Iuve cusI bonus ¡ndIcuLes LIuL u worker us u sIureIoIder Ius u
rIgIL Lo sIure In LIe proIIL us weII us u voIce In
LIe bonus. GeLs wuge + dIvIdend. UsuuIIv In
kInd.
PromoLIon oI
¡ndusLrIuI
Democrucv
One sLep sIorL oI co-purLnersIIp GIves wIder dIIIusIon oI ownersIIp
AppIIcuLIon oI
ScIeme
AppIIcubIe Lo unv Lvpe oI busIness OnIv Lo compunv enLerprIses
¡nLeresL oI worker Workers Iuve no sLuke, Ience no personuI
exLenL Lo LIuL exLenL
¡ubor enjovs u sense oI ownersIIp In LIe joInL
enLerprIse. Workers ure personuIIv InLeresLed In
LIe success oI LIe compunv.
ProfIt SharIng 7s 8onus
usis ProIit Shurinu onos
MeunIng EmpIover gIves Lo LIe workers u
porLIon oI surpIus proIIL oI LIe
busIness In uddILIon Lo wuges.
A bonus Lo workmun bevond LIeIr
wuges.
BusIs ProIIL sIowIng Is usuuIIv bused
on deIInILe ugreemenL beLween
LIe empIover und LIe worker.
PuvmenL oI bonus depends on LIe
sweeL wIII oI LIe empIover or Is
provIded oI Iuw.
¡eguI provIsIon No AcL Ius been pussed
concernIng proIIL sIurIng.
Bonus AcL Ius been pussed In LIe
veur 1¤6=.
SLuLuLorv
ObIIguLIon
A voIunLurv puvmenL uILIougI
depends on ugreemenL.
Wus orIgInuIIv , u voIunLurv
puvmenL Ius become u sLuLuLorv
obIIguLIon under LIe PuvmenL oI
Bonus AcL 1¤6=.
1oJ¤Jzo11
1o
8
AcquIre quuIIIIed personneI
ReLuIn presenL empIovees
Ensure equILv
Rewurd desIred beIuvIor
ConLroI cosLs
CompIv wILI IeguI reguIuLIons
¡ucIIILuLe undersLundIng
¡uLure udmInIsLruLIon eIIIcIencv
1oJ¤Jzo11
1o
¤
RecruIL und reLuIn quuIIIIed empIovees.
¡ncreuse or muInLuIn moruIeJsuLIsIucLIon.
Rewurd und encouruge peuk perIormunce.
Reduce Lurnover und encouruge compunv
IovuILv.
1oJ¤Jzo11
11
o
Job DescrIpLIons
Job AnuIvsIs
Job EvuIuuLIon
Puv SLrucLures
SuIurv Survevs
PoIIcv und ReguIuLIons
1oJ¤Jzo11 111
MoneLurv
BusIc SuIurv
House RenL AIIowunce
Convevunce
¡euve TruveI AIIowunce
MedIcuI ReImbursemenL
SpecIuI AIIowunce
Bonus
P¡JGruLuILv
ESOP`s
OverLIme PoIIcv
Non MoneLurv
¡euve PoIIcv
Cur poIIcv
HospILuIIzuLIon
¡nsurunce
¡euve LruveI AssIsLunce
¡ImILs
ReLIremenL BeneIILs
HoIIduv Homes
1oJ¤Jzo11 11z
Huv MS¡ meLIod
¯KnowIow
¯ProbIem soIvIng
¯AccounLubIIILv
1oJ¤Jzo11 11¤
SuIurv.
Grude wIse IIuL AIIowunce.
ReImbursemenLs oI expenses.
AnnuuI puvmenLs.
BeneIILs.
EmpIovee sLock opLIon scIemes.
ReLIremenL beneIILs.
PerIormunce Bonus.
1oJ¤Jzo11 11q
ApprovuI und RecommenduLIon oI munugemenL
on job evuIuuLIon meLIods und IIndIngs.
RevIew und recommenduLIon oI busIc suIurv
sLrucLure.
Co-ordInuLIon und revIew oI reIuLIve
depurLmenLuI ruLes Lo ensure conIormILv.
RevIew oI budgeL esLImuLes Ior suIurv
udjusLmenLs und Increuses.
1oJ¤Jzo11 11=
TIere sIouId be u deIInILe pIun Lo ensure LIuL
dIIIerences In puv Ior jobs ure bused upon
vurIuLIons In job requIremenLs.
PrompL und correcL puvmenLs oI LIe dues oI LIe
empIovees.
TIe pIun sIouId cureIuIIv dIsLInguIsI beLween
jobs und empIovees.
EquuI puv Ior equuI work.
1oJ¤Jzo11 116
inunciul incentives:
ProIIL-reIuLed und sIure opLIon scIemes
Bonus
CommIssIon
Non inunciul incentives:
ExLru IoIIduvs
GIILs
Compunv curs
VoucIers
1oJ¤Jzo11 11;
Incentives Advuntuues Ðisudvuntuues
¡InuncIuI
¡ocus on ucIIevIng
LurgeLs
AcIIevemenL Is gIven
vuIue
Rewurds ure
someLImes smuII
Cun demoruIIze II noL
eurned
Non ¡InuncIuI
Cun recognIze
empIovee prIorILIes und
IIIesLvIe
Cun encouruge
uLLucImenL Lo busIness
Cun be Luken Ior
grunLed
Muv be InupproprIuLe
1oJ¤Jzo11
11
8
DEARNE88 ALLOWANCE
Concept:
W The payment oI dearness allowance Iacilitates
employees and workers to Iace the price increase
or inIlation oI prices oI goods and services
consumed by him. The onslaught oI price increase
has a maior bearing on the living conditions oI the
labour.
Definition
W 'Dearness Allowance is a kind oI Allowance given
to worker to bear the cost oI living due to
inIlation, so that he she can at least live his liIe in
"some comIort¨
W 'The amount which is given to increase in the cost
oI living is called as DA.¨
History:
W OrIgInuLed In ¡ndIu uILer ¡IrsL WorId Wur
W ¨Deur ¡ood AIIowunce¨
W ¡ncreuse In CosL oI ¡IvIng ¡ndex In 1933-34
W Increase in DA at rate oI 1.75 pies per day (1939)
W Origin oI RMMS in 1946
W 'Old Textile Allowance¨ (1947)
W 'Revised Textile allowance¨(1953)
METHODS OF DA CALCULATION
In India, Dearness allowance (D.A.) is part oI a
person's salary. D.A. is calculated as a percent oI
the basic salary. This amount is then added to the
basic salary along with house rent allowance to
get the total salary.
1. Flat Rate
2. Graduated Scale
3. Cost oI Living and Consumer Price Index
No.
Contd.
O lut Rute:
Fixed amount paid to all categories oI workers
Advantage: It is a simple and gives greater relieI to low.
paid workers
O raduated Method:
DA paid according to slabs
Advantages: a) Convenient
b) Equitable
Contd..
W Cost of Living and Consumer Price Index Number:
a. Price Index Number is system oI linking DA
with
the Cost oI Living Index
b. DA is calculated on the no. oI points by
which the consumer price index has
risen
above the base index.
W Advuntuue: ¨¡ow-puId cuLegorv oI workers
securIng u mucI Iurger quunLum oI reIIeI LIun
HIgI-puId workers.¨
Importance:
W Protecting the value oI Basic Salary Structure
W Increase in cost oI living

  

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