EMPLOYEE COMPENSATION

Employee compensation refers to the benefits (cash, vacation,

etc.) that an employee receives in exchange for the service they
provide to their employer. Employee compensation is generally one of
the largest costs or expenses for any organization.
Compensation describes the cash rewards paid to employees in
exchange for the services they provide. It may include base
salary, wages, incentives and/or commission. Total
compensation includes cash rewards as well as any other 
company benefits.
For the employer, compensation is an instrument of procuring
(attracting), maintaining, devel­oping, promoting, and
motivating the employees and getting effective results from
them.
Objectives of compensation :-
1. To recruit and retain qualified employees.

2. To increase or maintain morale/satisfaction.

3. To motivate employees for better performance.

4. To attract and retain skilled and talented/workforce.

5. To determine basic wages and salary administration.

6. To achieve internal and external equity.

7. To ensure equal pay for equal work, that is, each individual’s pay is
fair in comparison to that of another person doing a similar job.

8. To support, communicate and reinforce an organization’s culture,

value and competitive strategy.
9. To reduce turnover and encourage company loyalty.

10. To reward for exceptional job performance with plans including

bonuses, commissions, profit sharing, stocks, gain sharing etc.

11. To control cost – A rational compensation system helps the

organization to obtain and retain workers at a reasonable cost.

. Comply with legal regulation – A sound wage and salary system

consider the legal challenges imposed by the government and ensures the
employees compliance.
Compensation strategy
Defining a compensation strategy is an important activity for all
companies, including startups. The compensation strategy must
be affordable, structured and reasonably competitive.
Your compensation strategy must be structured to best meet your unique
business circumstances. As a startup, you may not be able to compete
with large companies on salary. Therefore, you should consider a
combination of options to attract and retain key employees.

Do not underestimate the value of the advantages or perquisites that your

company has to offer that may not be readily available in larger
companies—opportunities for interesting work, lack of hierarchy,
flexible environment, and so on.

Some people are motivated by the desire to be on the leading edge of

scientific or technological advances. They may take less pay to work for
a startup if they believe in its future and the work it has to offer.
Salary and wages
A salary (or wage) is a fixed amount paid in exchange for an
employee’s services. Ontario Employment Standards legislation entitles
most employees to receive a “minimum wage” in exchange for the work
they complete for a company.

For full-time employees, salary is generally described in annual,

monthly, bi-weekly or weekly amounts. For part-time employees, it is
generally described as an hourly amount.

To determine an appropriate salary and/or salary range that your

company is willing to pay for a position, you must:

1.Establish the value of the position based on your organizational

requirements
2.Understand what the market is paying for a similar position
Incentives: Drivers in attracting the best employees
Compensation can be divided into salary, benefits and incentives. While salary
and benefits must be competitive, incentives are the most likely drivers of
attracting and retaining the best employees in startups.
There are three key types of incentives: bonuses,
profit sharing and stock options.
1.Bonuses
1.Individuals are rewarded based on attainment of performance-
based goals (individual, team and/or company).

2.Goals must be realistic and closely matched to the business and

people involved.

3.Payout potential should be large enough to be significant to the

individual.

4.Bonuses can be set up to directly drive and support the company’s

needs (for example, profitability, annual results, successful
completion of projects and/or significant project milestones).
2.Profit sharing:-
1.Payment is tied to company profits.
2.A pre-determined percentage of profit is shared among all
employees.
3.Profit-sharing bonuses are generally paid out once a year in the
form of cash or on a deferred basis.
3.Stock options:-
1.An individual receives the option to buy company shares for a set
price during a specified time frame.
2.Option can be exercised by the individual at any time during the
agreed-upon term and subject to any vesting schedule.
3.Stock options are often part of management’s executive
compensation but may be offered to key employees in lieu of a
higher salary—especially where the business is not yet profitable
and/or cash flow is constrained.
4.If the business does well and the company’s stock rises, the
holders of the options share in the financial benefits.
In general, if the company permits a long period from the date of
issue to the last date for exercising the option, it will encourage the
employee to stay with the company and be fully committed to its
success.
Commissions:-
Commissions are a common way to remunerate employees (salespeople)
for securing the sale of a product or service. The intent is to create a
strong incentive for the individual to invest the maximum effort into
their work. Commissions are usually calculated as a percentage of the
sale of the product or service (for example, 5% of a computer
component’s retail selling price).
Payment may be either straight commission (no base salary) or
a combination of base salary and commission. In general, the
commission structure is based on reaching specific targets or quotas that
have been previously agreed upon by management and the employee.
These targets or quotas are typically tied to sales revenue, unit sales or
some other volume-based metric.
 
Fringe Benefits:
Fringe benefits include such benefits which are provided to employees
either having long-term impact like provident fund, gratuity, pension; or
occurrence of certain events like medical benefits, accident relief, health
and life insurance; or facilitation in performance of job like uniforms,
canteens, recreation, etc.

Perquisites:
These are normally provided to managerial personnel either to
facilitate their job performance or to retain them in the
organization. Such perquisites include company car, club
membership, free residential accommodation, paid holiday
trips, stock options, etc.
Long term incentives:-
Long-term incentives are compensation packages offered to
higher-level employees at an organization because their
decision-making usually affects the long-term vision of a
company.
LTI’s include a base salary, benefits, and short-term and long-
term incentives. Think of it as a reward system to inspire top
performance — “
tied to individual goals and objectives instead of a compan
y’s revenue or share price.
”
It’s a deferred strategy aimed at retaining talent.
Employee benefits:-
Employee Benefits can be termed as non-cash compensation which is
given to the employee. These benefits are given to the employee apart
from salaries and wages. These are also known as fringe benefits that are
offered with the intention to attract and retain employees.

Every individual loves benefits. Employees want to get 

rewards and recognition for the work they do. Therefore, many people
apply for jobs in an organization by considering the benefits offered by
that company. Employee benefits include various health insurance, stock
options, outing plans, etc. If two organizations provide the same salary
and one offers better rewards, then the organization offering the better
rewards will get the edge in the market.
DEFINITION:-
According to the C.B. Memorial, – ‘Employee Benefits are
meant to guarantee, strengthen, and boost an employee’s overall
earnings. It is of value to the employees as it provides social security
and health-related insurance to them. It is of value not only to the
employees but also their families in major perspectives.’
 
According to Cockman, _employee Benefits can be defined as
the extra benefits provided to the employees for their overall well-being.
Also, which are not a part of their salary, wages, overtime payments.’

According to Peter Drucker, – ‘The top part of a company’s

investment ideally be focussed on employees’ well-being. And also, he
emphasizes that what we invest in men is what we get in return. It is the
only door that will give the pathway to achieving a considerable amount
of industrial growth.’
There are various types of employee benefits, and
we’ll outline some common examples of employee
benefits:-
1. Paid leave, sick leaves, and vacation days
2. Life insurance
3. Health insurance
4. Dental insurance
5. Vision insurance
6. Gym memberships or discounts
7. Wellness programs
8. Childcare benefits
9. Employee recognition programs
10 Relocation assistance
OBJECTIVES OF EMPLOYEE BENEFITS:- 

1. Helps to Attarached Talented Employees.

If you want to hire the top talent in the market who can perform all the
duties, then in this situation, a proper employee benefits plan will surely
do the work. Most of the organization has implied the same. According
to a study, 50% of businesses with less than 50 employees provide health
care benefits.
 
2. Minimize employee turnaround
We all agree hiring does matter but keeping around all your employees
also matters the most. And guess what? Employee benefits come in
handy here. An excellent benefits package can keep your workers from
switching around. Also, when you provide the benefits, it will make your
employees feel better and meaningful and thus will reduce the chance of
leaving.
3. Maintaining a healthy workforce.
We all know that the better you feel, the better you work, so if you want
an efficient employee, you should for sure include health benefits plans,
like sick leaves and regular health checkups. It’s as simple as a
healthy employee = healthy business.
 
4. Boost employee productivity
By the time we have cleared how important employee benefits are.
Hence, there’s no doubt that good employee benefits will play a part in
increasing the employees’ productivity. In addition, these benefits
provide mental happiness, which leads to being more productive.
Types of Employee Benefits in HRM
1. Life Insurance Benefit
The principal purpose of life insurance is to protect the employee’s
family if he dies. All the benefits get transferred directly to the
Life insurance policy beneficiary or beneficiaries. Generally, the
beneficiaries are children, wives, or husbands.
A private life insurance policy for an individual generally costs the
company a high amount. Such an approach is being sponsored by the life
insurance companies only for the full-time employees in the medium and
enormous form.
 
Facts & Figures:
1. Among the firms with less than ten employees, only 15.5% of them
provide life insurance benefits.
2. Providing the facility of life insurance is usually determined by the
total number of employed people.
 
2. Paid Leaves/Vacations Benefit
PTO – Part Time Off is given to the employees in the middle of working.
It can come up in the form of vacations, sick leave, and holidays.
Based on the working hours committed and the performances,
employees earn the paid vacation leaves from the company’s side. At the
same time, sick leaves and government holidays are common to all
respective of their performances.
 
Facts & Figures:
1. Almost 62% of the companies provide the paid vacations to their
employees as an employee benefit to motivate them.
2. Almost 33% of the companies provide paid sick leave to internal
employees.
3. Also, globally, after paid vacation – employee benefit, the second most
common and appreciated gift among the employees is holidays which
are paid.
3. Fringe Benefits
Fringe Benefits are a bulk of benefits given to the employees in the non-
cash payments. Also, it includes child care benefits, bonuses indirectly
related to productivity, tuition assistance, child care spending accounts.
The tuition reimbursement feature is a great way to upskill yourself with
higher studies at the current moment with these tuition fees or 50%
reimbursement by the companion.
 
Facts & Figures:
1. No production bonuses are a more fantastic means of 
appreciation among full-time employees.
2. Employees belonging to the manufacturing sector have the benefits in
common.
4. Medical Insurance Benefit
Medical Insurance covers all the medical fees, medication fees, hospital
bed fees, surgeon fees, as well as prescription fees. It also includes the
dental and optical care benefits as a whole. Employees can also be
benefited under such coverages by few organizations.
 
Facts & Figures:
1. Organizations with more employee sizes are more prone to helping
employees with such incredible benefits.
2. Overall, 53% of entire organizations offer medical insurance facilities
to full-time employees.
3. Almost 12% of companies help employees to have medical insurance
facilities.
4. Education Industry, health care industry, financial sector, as well as
manufacturing industries are likely to provide such benefits.
5. In the hospitality sector, the leisure industry is least likely to avail its
employees of such benefits.
5. Domestic Partner Benefits
To avail of the domestic partner benefit, the employee needs to perform some
formalities. He needs to start with signing a form. Then he is requires to showcase his
financial interdependence and the unmarried domestic partnership.
An example of the domestic partner benefits is the family health insurance-related
benefits. This particular benefit is considered as the income by the federal government.
 
6. Retirement Benefits
Retirement Benefits are generally provided to the employees in monthly pensions or
income after they end their careers. It typically falls into two categories
7. Defined Contribution Plans
Under this, an employee’s benefit is directly linked to the returns from the investment,
which most in various cases isn’t assured. However, the employers’ and the employees’
contributions are specified.
 
8. Defined Benefit Plans or Pension Plans
In this case, all investment-related risks are borne by the employer. Under this, the
benefit amount providing to the employees is predefine. The amount is based on the
salary drawn by the employee in his previous years as well as the total number of
experience he holds.
 
9. Disability Insurance Benefit
It enables the benefit of getting the lost income from the day you are met
with an accident, leading you to stop working as well as earning. Also, it
is of two types short-term disability works immediately and is meant for
short-term physical illnesses like minor accidents or injuries.
Long Term Disability is meant for a long-term injury or a permanent
ailment that will take years to recover.
 
Facts & Figures:
1. Long-term disability insurance is provided by almost 18.1% of the
companies to its full-time workers.
2. Short-term disability insurance is provided by nearly 19.2% of the
companies to its employees.
PERFORMANCE APPRAISAL:-
Performance Appraisal is the systematic evaluation of the performance
of employees and to understand the abilities of a person for further
growth and development. Performance appraisal is generally done in
systematic ways which are as follows:
The supervisors measure the pay of employees and compare it with
targets and plans.
The supervisor analyses the factors behind work performances of
employees.
The employers are in position to guide the employees for a better
performance.
Objectives of Performance Appraisal
Performance Appraisal can be done with following objectives in mind:
1.To maintain records in order to determine compensation packages,
wage structure, salaries raises, etc.
2.To identify the strengths and weaknesses of employees to place right
men on right job.
3.To maintain and assess the potential present in a person for further
growth and development.
4.provide a feedback to employees regarding their performance and
related status.
5.To provide a feedback to employees regarding their performance and
related status.
6.It serves as a basis for influencing working habits of the employees.
7.To review and retain the promotional and other training programme
Advantages of Performance Appraisal:-
It is said that performance appraisal is an investment for the company
which can be justified by following advantages:

1.Promotion: Performance Appraisal helps the supervisors to chalk out

the promotion programmes for efficient employees. In this regards,
inefficient workers can be dismissed or demoted in case.

2.Compensation: Performance Appraisal helps in chalking out

compensation packages for employees. Merit rating is possible through
performance appraisal. Performance Appraisal tries to give worth to a
performance. Compensation packages which includes bonus, high salary
rates, extra benefits, allowances and pre-requisites are dependent on
performance appraisal. The criteria should be merit rather than seniority.
3.Employees Development: The systematic procedure of performance
appraisal helps the supervisors to frame training policies and
programmes. It helps to analyse strengths and weaknesses of employees
so that new jobs can be designed for efficient employees. It also helps in
framing future development programmes.
4.Selection Validation: Performance Appraisal helps the supervisors to
understand the validity and importance of the selection procedure. The
supervisors come to know the validity and thereby the strengths and
weaknesses of selection procedure. Future changes in selection methods
can be made in this regard.

5.Motivation: Performance appraisal serves as a motivation tool.

Through evaluating performance of employees, a person’s efficiency can
be determined if the targets are achieved. This very well motivates a
person for better job and helps him to improve his performance in the
future.
Disadvantages of Performance Appraisal:-
1.Performance appraisal totally depends on the factors used
for the evaluation of the performance.
2.The use of incorrect or irrelevant factors can lead to the
failure of performance appraisal. 
3.Sometimes the vital factors responsible for the performance
are ignored during performance appraisal.
4.The factors like attitude, abilities, and initiative are very
vague and difficult to gauge.
5.Sometimes the managers who carry out the performance
appraisal are not qualified enough to properly assess the
abilities of the employees. Thus, it leads to irrelevant data
collection and failure of performance appraisal.
1.Rating Scales: In this scale, the factors such as attitude, initiative,
dependability, etc are quantified. A range of excellent to poor is provided
to the rater and based on the rating the performance of the employee is
calculated.
2.Checklist: A checklist form of performance appraisal consist of a
column of ‘Yes’ and ‘No’ for different employee traits. The rater has to
put a tick mark based on if the traits exist or do not exist in the
employee.
3.Forced Choice Method: In this method, different statements
about the performance of the employee are provided to the rater and
he/she is forced to answer the ready-made statements as true or false.
Further evaluation of performance is carried on by the HR department
based on the answers of the rater.
4.Forced Distribution Method: In this method, it is assumed
that the performance of an employee conforms to a bell-shaped curve.
Thus, the rater has to put employees on provided points on the scale.
5.Critical Incidents Method: Here the critical behavior of the
employee is considered by the supervisor while evaluating the
performance.
6.Behaviorally Anchored Rating Scale: Different statements
which are descriptive in nature are prepared about the behavior of the
employee. These behaviors are put on the scale points and the rater has
to indicate the points which explain the employee behavior in a more
exact way.
7.Field Review Method: In this method, the reviewer of the
performance is generally someone outside the department. The people
from the HR department or corporate office do the performance
evaluation of the employee based on the records and interviews.
8.Performance Tests and Observations: This is a kind of oral test that is
conducted to test the skills and knowledge of the employees in their respective fields.
The employees sometimes receive a situation and are asked to demonstrate their skills
and then their performance is evaluated based on that presentation.

9.Confidential Reports: Often the government departments follow this method

of performance evaluation. The employees are evaluated based on the parameters such
as leadership quality, teamwork, integrity, technical ability, attendance, etc. The
reviewer sends the confidential review to the concerned authority about the
performance of the employee.

10.Essay Method: Under this method, the detailed description of the employee

performance is written by the rater. The performance of an employee, his relations with
other Co-workers, requirements of training and development programs, strengths and
weaknesses of the employee, etc. are some of the points that are included in the essay.
The efficiency of this traditional method of performance appraisal depends on the
writing skills of the rater.
Modern Methods of Employee Performance Appraisal
Here is a list of different modern methods which can be used for
employee performance appraisal:

1.Management by Objectives: In this method, the performance

of the employee is assessed based on the targets achieved by him/her.
The management at the beginning of the financial year conveys the set
goals to the employees, at the end of the year the performance of the
employee is compared with the set goals and evaluated for the appraisal. 

2.Psychological Appraisals: Psychologists are invited to the

companies for the performance appraisal of the employees. Here the
performance is in the context of the potential future performance.
Psychological tests, in-depth interviews, reviews, and discussions with
the managers are the methods used for the evaluation of the
performance.
3.Assessment Centers: A series of exercises are conducted at the assessment
center of the company to actually evaluate the performance of the employee. The
exercises include discussions, role-playing, computer simulations, and many more. The
employees are evaluated in terms of communication skills, mental alertness, emotional
intelligence, confidence, and administrative abilities. The rater observes the event and
evaluates the performance of the employee at the end.

4.360-Degree Feedback: It is particularly a 360-degree feedback method in

which the information about the performance of the employee is collected from
supervisors, peers, group members, and self-assessment. All the remarks are considered
to evaluate the overall work performance of the employee.

5.720-Degree Feedback: In line with the 360-Degree feedback system, here the
feedback is collected from the stakeholders within the company as well as the people
linked from outside the organization. The customers, suppliers, investors, and other
financial groups provide feedback about the performance of the employee.
6.Cost Accounting Method: It is a simple method in which the performance of
the employee is linked with the monetary benefits of the organization. The rater checks
about the cost to the company to keep the employee and the contribution of the
employee in terms of monetary business.
1.Establishing performance standards
The first step in the process of performance appraisal is the setting up of the standards
which will be used to as the base to compare the actual performance of the employees.
This step requires setting the criteria to judge the performance of the employees as
successful or unsuccessful and the degrees of their contribution to the organizational
goals and objectives. The standards set should be clear, easily understandable and in
measurable terms.
In case the performance of the employee cannot be measured, great care should be
taken to describe the standards.
2.Communicating the standards
Once set, it is the responsibility of the management to communicate the standards to all
the employees of the organization. The employees should be informed and the
standards should be clearly explained to the employees. This will help them to
understand their roles and to know what exactly is expected from them. The standards
should also be communicated to the appraisers or the evaluators and if required, the
standards can also be modified at this stage itself according to the relevant feedback
from the employees or the evaluators.
3.Measuring the actual performance:-
The most difficult part of the Performance appraisal process is measuring the actual
performance of the employees that is the work done by the employees during the
specified period of time. It is a continuous process which involves monitoring the
performance throughout the year. This stage requires the careful selection of the
appropriate techniques of measurement, taking care that personal bias does not affect
the outcome of the process and providing assistance rather than interfering in an
employees work.
4.Comparing actual performance with desired performance:-
The actual performance is compared with the desired or the standard performance. The
comparison tells the deviations in the performance of the employees from the standards
set. The result can show the actual performance being more than the desired
performance or, the actual performance being less than the desired performance
depicting a negative deviation in the organizational performance. It includes recalling,
evaluating and analysis of data related to the employees’ performance.
5.Discussing results [Feedback]
The result of the appraisal is communicated and discussed with the employees on one-
to-one basis. The focus of this discussion is on communication and listening. The
results, the problems and the possible solutions are discussed with the aim of problem
solving and reaching consensus. The feedback should be given with a positive attitude
as this can have an effect on the employees’ future performance. Performance appraisal
feedback by managers should be in such way helpful to correct mistakes done by the
employees and help them to motivate for better performance but not to demotivate.
Performance feedback task should be handled very carefully as it may leads to
emotional outburst if it is not handing properly. Sometimes employees should be
prepared before giving them feedback as it may be received positively or negatively
depending upon the nature and attitude of employees.
JOB ENLARGEMENT
The definition of job enlargement is adding additional activities within the same level
to an existing role. This means that a person will do more, different activities in their
current job. For example, an employee who will now also manage her own planning
where this was formerly done by her manager.
Job enlargement is a key technique in job redesign, along with job enrichment, job
rotation, and job simplification.
Job enlargement is often confused with job enrichment. However, there is a distinct
difference. Job enlargement aims at broadening one’s job in order to make the job more
motivating. Job enrichment is the process of adding motivators to existing jobs. This
means that job enlargement is a way to do job enrichment but not all job enrichment
activities are also considered job enlargement. We will explain this in more depth later.
Benefits of Job Enlargement:-
The following are the major benefits of Job enlargement
1.Reduced Monotony: Howsoever interesting the job may appear in the
beginning, sooner or later people complain of boredom and monotony.
Job enlargement if planned carefully can help reduce boredom and make
it more satisfying and fulfilling for the employees.

2.Increased Work Flexibility: There is an addition to the number of

tasks an individual performs. There is thus an increased scope of
carrying out tasks that are versatile and yet very similar in certain
aspects.

3.No Skills Training Required: Since the individual has already been

performing the task in the past, there is no great requirement for
imparting of new skills. However people and time management
interventions may be required. The job thus gets more motivational for
the one performing it.
JOB ENRICHMENT:-
Job enrichment is a process that is characterized by adding dimensions to existing jobs
to make them more motivating. Examples of job enrichment include adding extra tasks
(also called job enlargement), increasing skill variety, adding meaning to jobs, creating
autonomy, and giving feedback.
The goal of job enrichment is to create a motivating job. This can be done, for example,
by taking a regular, ‘boring’ job and adding extra responsibilities that make the job
more meaningful for the worker. Job enrichment is, therefore, part of job design and 
job redesign.

The biggest reason to invest in job enrichment is that it leads to motivation. This makes
job enrichment especially relevant for highly skilled, white-collar service jobs.
According to Fein (1986), job enrichment is less important for blue-collar workers.
Here their primary concern is pay, job security, and the rules of the workplace. Job
enrichment is less effective in this context because it does not address these problems.

To conclude with a job enrichment definition: Job enrichment is the process of adding
motivators to existing roles in order to increase satisfaction and productivity for the
employee.
QUALITY OF WORK LIFE
“QWL is a process of work organisations which enables its members at
all levels to participate actively and efficiently in shaping the
organisation’s environment, methods and outcomes. It is a value based
process, which is aimed towards meeting the twin goals of enhanced
effectiveness of the organisation and improved quality of life at work for
the employees.”

Quality of Work-Life is the degree to which members of a work

organisation are able to satisfy their personal needs through their
experience in the organisation. Its focus is on the problem of creating a
human work environment where employees work cooperatively and
contribute to organisational objectives. The major indicators of QWL are
job involvement, job satisfaction and productivity.

According to Johnstorn, Alexander and Robin, QWL is more than simply

a concept, means or an end.
WORKERS PARTICIPATION IN MANAGEMENT :-
Workers participation in management refers to the participation of the
workers in the decision-making process of the organization. This has an
incredibly positive impact on the mental and psychological health of the
workers, and they are associated with the organization.

The concept of workers’ participation in management is based on the

Human Relations approach to Management which brought about a new
set of values to labor and management. WPM focuses on sharing power
with the workers who are engaged in work rather than being
concentrating on one hand.

Through WPM workers can share and express their views, ideas, and
contribute to the decision-making process. Sharing power with workers
and listening to their opinion will develop loyalty and trust towards the
organization and have a positive impact on the productivity of
employees.
EMPLOYEE WELFARE
Employee welfare means anything done for the comfort and (intellectual or social)
improvement of the employees, over and above the wages paid. In simple words, it
means “the efforts to make life worth living for workmen.” It includes various services,
facilities and amenities provided to employees for their betterment. These facilities may
be provided voluntarily by progressive entrepreneurs, or statutory provisions may
compel them to provide these amenities; or these may be undertaken by the
government or trade unions, if they have the required funds.
According to ILO, “Employee welfare should be understood as such
service, facilities and amenities which may be established in or in the
vicinity of undertakings to enable the persons employed in them to
perform their work in healthy and peaceful surroundings and to avail of
facilities which improve their health and bring high morale”.
The basic features of employees’ or labour welfare are as follows:

(i) Labour welfare includes various facilities, services and amenities

provided to workers for improving their health, efficiency, economic
betterment and social status.
(ii) Welfare measures are in addition to regular wages and other
economic benefits available to workers due to legal provisions and
collective bargaining.
(iii) Labour welfare measures are flexible and ever-changing. New
welfare measures are added to the existing ones from time to time.
(iv) Welfare measures may be introduced by the employers, government,
employees or by any social or charitable agency.
(v) The purpose of labour welfare is to bring about the development of
the whole personality of the worker to make him a good worker and a
good citizen.
Employee Welfare – Objectives
i) To enhance the level of morale of employees.
(ii) To create a loyal, contented workforce in organization.
(iii) To develop a better image of the company in the minds of the
employees.
(iv) To enable the workers to live comfortably and happily.
(v) To develop efficiency of the workers.
(vi) To reduce influence of trade unions over the workers.
(vii) To expose philanthropic and benevolent activities of the company.
(viii) To make the workers know that the company takes care of them.
(ix) To develop positive attitude towards jbo, company and management.
(x) To reduce tax burden.
(xi) To develop a feeling of satisfaction of employees with the company.
GRIEVANCE :-
A grievance is any dissatisfaction or feeling of injustice having
connection with one’s employment situ­ation which is brought to the
attention of management. Speaking broadly, a grievance is any
dissatisfac­tion that adversely affects organizational relations and
productivity. To understand what a grievance is, it is necessary to
distinguish between dissatisfaction, complaint, and grievance.

1. Dissatisfaction is anything that disturbs an employee, whether or not

the unrest is expressed in words.

2. Complaint is a spoken or written dissatisfaction brought to the

attention of the supervisor or the shop steward.

3. Grievance is a complaint that has been formally presented to a

management representative or to a union official.
According to Michael Jucious, ‘grievance is any discontent
or dissatisfaction whether expressed or not, whether valid or
not, arising out of anything connected with the company
which an employee thinks, believes or even feels to be unfair,
unjust or inequitable’.
In short, grievance is a state of dissatisfaction, expressed or
unexpressed, written or unwritten, justified or unjustified,
having connection with employment situation.
Features :-
1. A grievance refers to any form of discontent or dissatisfaction with
any aspect of the organization.
2. The dissatisfaction must arise out of employment and not due to
personal or family problems.
3. The discontent can arise out of real or imaginary reasons. When
employees feel that injustice has been done to them, they have a
grievance. The reason for such a feeling may be valid or invalid,
legitimate or irrational, justifiable or ridiculous.
4. The discontent may be voiced or unvoiced, but it must find expression
in some form. However, discontent per se is not a grievance. Initially, the
employee may complain orally or in writing. If this is not looked into
promptly, the employee feels a sense of lack of justice. Now, the
discontent grows and takes the shape of a grievance.
Forms of Grievances:
A grievance may take anyone of the following forms:
A) Factual: A factual grievance arises when legitimate
needs of employees remain unfulfilled, e.g., wage hike has
been agreed but not implemented citing various reasons.
b) Imaginary: When an employee’s dissatisfaction is not
because of any valid reason but because of a wrong
perception, wrong attitude or wrong information he has. Such
a situation may create an imaginary grievance. Though
management is not at fault in such instances, still it has to
clear the ‘fog’ immediately.
c) Disguised: An employee may have dissatisfaction for
reasons that are unknown to him. If he/she is under pressure
from family, friends, relatives, neighbors, he/she may reach
the work spot with a heavy heart. If a new recruit gets a new
table and almirah this may become an eyesore to other
employees who have not been treated likewise previously. The
importance of grievance handling in an organization requires
am effective approach and attitude on the part of the grievance
handling authority. It reflects healthy organizational practices
and strong organizational culture. The failure of grievance
handling will affect the harmonious environment of the
organization
Causes:
Grievances may occur for a number of reasons:
a) Economic: Wage fixation, overtime, bonus, wage
revision, etc. Employees may feel that they are paid less when
compared to others.
b) Work Environment: Poor physical conditions of
workplace, tight production norms, defective tools and
equipment, poor quality of materials, unfair rules, lack of
recognition, etc.
 
c) Supervision: Relates to the attitudes of the supervisor
towards the employee such as perceived notions of bias,
favoritism, nepotism, caste affiliations, regional feelings, etc.
d) Work group: Employee is unable to adjust with his
colleagues; suffers from feelings of neglect, victimization and
becomes an object of ridicule and humiliation, etc.
e) Miscellaneous: These include issues relating to
certain violations in respect of promotions, safety methods,
transfer, disciplinary rules, fines, granting leave, medical
facilities, etc.
GRIEVANCE HANDLING PROCEDURE
As already discussed, there are valid reasons to have the grievances
processed through Machinery or a procedure.
Objectives of a Grievance Handling Procedure
Jackson (2000) lays down the objectives of a grievance handling
procedure as follows:
1.enable the employee to air his/her grievance.
2.To clarify the nature of the grievance.
3.To investigate the reasons for dissatisfaction.
4.To obtain, where possible, a speedy resolution to the problem.
5.To take appropriate actions and ensure that promises are kept.
6.To inform the employee of his or her right to take the grievance to the
next stage Of the procedure, in the event of an unsuccessful resolution.
The Benefits of a Grievance Handling
Procedure
According to Jackson (2000), further benefits that will accrue
to both the employer and employees are as follows: It
encourages employees to raise concerns without fear of
reprisal, It provides a fair and speedy means of dealing with
complaints.
It prevents minor disagreements developing into more serious
disputes, It saves employers time and money as solutions are
found for workplace, Problems and It helps to build an
organizational climate based on openness and trust.
Effects of Grievance:-
A dissatisfied and unhappy employee will not be able to perform to the
best of his ability. His mind will be preoccupied with the things that are
bothering him which leads to a lack of focus on his current job in hand.
It leads to a drop in productivity and efficiency of the employee and the
organization as a whole.
Below are some of the effects of employee grievance:
1.Demotivated Staff
2.Low Productivity
3.Labor Unrest
4.Absenteeism
5.High Rate of Attrition
6.Strains the Superior-Subordinate Relationships
7.Reduces Employee Morale and Commitment
8.Increase in Wastage and Cost
Steps in Grievance Handling
Grievance affects not only the employee and the manager but also the
organization as a whole. The grievance procedure has to be carefully
designed and implemented as it deals with human sentiments.
Below steps should be followed to redress the grievance for the smooth
functioning of the organization.
1.Acknowledge and understand grievance
2.Gathering facts and data
3.Analysis of the grievance
4.Deriving a solution
5.Redressal
6.Execution and Follow up
1.Acknowledge and understand grievance
The first step in grievance handling is to timely acknowledge the
problems before they turn into actual grievances through several means
such as:
a) bOservation: Through observation, a manager/supervisor can
easily track the behaviour of people working under him. He can easily
find out the unusual behaviour and prepare report accordingly.
b)surveys: Periodical interviews, group meetings, collective
bargaining sessions etc with the workers are also helpful in knowing
employee discontent before it becomes a grievance.
c)Gripe boxes: It is a box in which employees can drop their
complaints. Employees do not have to disclose their identity while
expressing their feelings of injustice or discontent.
d)Exit interviews: Employees usually leave their current jobs due
to dissatisfaction regarding some areas at work. Exit interviews,
conducted properly, can provide important information about employee’s
grievances.
e)Open door policy: This policy is useful in keeping touch with
the employee’s feelings as some organizations extend a general
invitation to their employees to talk over their grievances in the
manager’s room.
2.Gathering facts and data
The next step is to collect facts and data about the grievance from all the
parties involved. Everyone’s opinion should be given equal importance
and no fact should be neglected or ignored
3.Analysis of the grievance
The problem should be analyzed on the basis of the facts and data
received after taking into consideration the economic, social,
psychological and legal issues involved in them.
4)Deriving a solution
After analyzing all the facts and data, different alternative solutions to
the problem should be discussed and the best solution should be selected.
5)Redressal
The grievance should be redressed by promptly putting into action the
best solution selected. The employee should be relieved of the stress and
discontent as soon as possible.
6)Execution and Follow up
Once the solution is executed and implemented, there should be a timely
follow up registering the employee’s reaction to the decision. Also, it
should be checked time and again whether the issue has been properly
closed and it should be made sure that it does not reoccur.
Benefits of Grievance Handling:-
The benefits of a good grievance handling system are
as follows:
1.Avoids Disputes
2.Opportunity for the Workers to Express their
3.Dissatisfaction
4.Boosts Morale and Emotional Security
5.Enhances Commitment of the Staff
6.Helps Maintain Cordial Relationship
7.Improves Staff Productivity
1.Avoids Disputes
Before a grievance takes the form of any kind of dispute, it is the duty of
the management to solve it as soon as possible. Timely redressal of
grievance saves the organization from settling a dispute that may arise
otherwise.
2.Opportunity for the Workers to Express their
Dissatisfaction
It provides the workers an opportunity to express their fears, anxieties
and dissatisfaction. It brings grievance to the open and to the knowledge
of the managers so that they can take a step to resolve it.
3.Morale and Emotional Security
It provides employees a platform where they can formally release their
emotional stress and dissatisfaction. It thus builds within him a sense of
emotional security.
4.Enhances Commitment of the Staff
When the employees feel emotionally secured that their problems and
grievances are being attended to and resolved promptly, they feel a sense
of commitment to the organization. Their drive to perform to the best of
their ability increases and they become more loyal towards the
organization.
5.Helps Maintain Cordial Relationship
Acknowledgement of employee grievance by the managers and redressal
of the same as soon as possible promotes a healthy relationship between
the subordinate and the superior. The subordinate feels cared for and in
return would follow the instructions of the superior with greater
dedication.
6.Improves Staff Productivity
When an employee grievance is attended to and a prompt action is taken
to redress it, it boosts the employee’s morale, motivates him to maximize
his potential and work with full dedication and commitment. This results
in higher standards of productivity and optimum utilization of resources.
What Is Collective Bargaining? 
The term collective bargaining refers to the negotiation of 
employment terms between an employer and a group of workers.
Employees are normally represented by a labor union during collective
bargaining. The terms negotiated during collective bargaining can
include working conditions, salaries and compensation, working hours,
and benefits. The goal is to come up with a collective bargaining
agreement through a written contract.12 According to the International
Labour Organization, collective bargaining is a fundamental right for all
employees.
Characteristics Of Collective Bargaining:-
1.It is a group process, wherein one group, representing the employers,
and the other, representing the employees, sit together to negotiate terms
of employment.
2.Negotiations form an important aspect of the process of collective
bargaining i.e., there is considerable scope for discussion, compromise or
mutual give and take in collective bargaining.
3.Collective bargaining is a formalized process by which employers and
independent trade unions negotiate terms and conditions of employment
and the ways in which certain employment-related issues are to be
regulated at national, organizational and workplace levels.
4.Collective bargaining is a process in the sense that it consists of a
number of steps. It begins with the presentation of the charter of
demands and ends with reaching an agreement, which would serve as the
basic law governing labor management relations over a period of time in
an enterprise. Moreover, it is flexible process and not fixed or static.
Mutual trust and understanding serve as the by products of harmonious
relations between the two parties.
5.It a bipartite process. This means there are always two parties
involved in the process of collective bargaining. The negotiations
generally take place between the employees and the management. It is a
form of participation.
6.Collective bargaining is a complementary process i.e. each party needs
something that the other party has; labor can increase productivity and
management can pay better for their efforts.
7.Collective bargaining tends to improve the relations between workers
and the union on the one hand and the employer on the other.
8.Collective Bargaining is continuous process. It enables industrial
democracy to be effective. It uses cooperation and consensus for settling
disputes rather than conflict and confrontation.
9.Collective bargaining takes into account day to day changes, policies,
potentialities, capacities and interests.
10.It is a political activity frequently undertaken by professional
negotiators.
Collective bargaining process comprises of five core
steps:
1. Prepare:
This phase involves composition of a negotiation team. The negotiation
team should consist of representatives of both the parties with adequate
knowledge and skills for negotiation. In this phase both the employer’s
representatives and the union examine their own situation in order to
develop the issues that they believe will be most important. The first
thing to be done is to determine whether there is actually any reason to
negotiate at all. A correct understanding of the main issues to be covered
and intimate knowledge of operations, working conditions, production
norms and other relevant conditions is required.
2. Discuss:
Here, the parties decide the ground rules that will guide the negotiations.
A process well begun is half done and this is no less true in case of
collective bargaining. An environment of mutual trust and understanding
is also created so that the collective bargaining agreement would be
reached.
.
3. Propose:
This phase involves the initial opening statements and the possible
options that exist to resolve them. In a word, this phase could be
described as ‘brainstorming’. The exchange of messages takes place and
opinion of both the parties is sought.
4. Bargain:
Negotiations are easy if a problem solving attitude is adopted. This stage
comprises the time when ‘what ifs’ and ‘supposals’ are set forth and the
drafting of agreements take place.
5.Settlement:
Once the parties are through with the bargaining process, a consensual
agreement is reached upon wherein both the parties agree to a common
decision regarding the problem or the issue. This stage is described as
consisting of effective joint implementation of the agreement through
shared visions, strategic planning and negotiated change.
Importance of Collective Bargaining:-
The importance of collective bargaining is given as under:
1.It improves wages and working conditions, as well as it promotes
equality.
2.It provides a stage to both the parties, i.e. management and workers to
stand on the same level at the negotiation table.
3.It is influential in ensuring the adaptability of the companies and
economies during the economic crisis.
4.It helps in developing trust and mutual respect between employers,
workers and their organizations.
5.It increases stability and productivity in labour relation
6.It benefits both the parties, as the workers get fair remuneration for the
work performed, without impairing the capacity of the employers to
work profitably.
7.It facilitates the adaptability of the enterprise to a short term rise or
falls in demand.
8.It facilitates instant implementation of the decisions, made during the
bargaining process.
9.results in an increased worker’s commitment and enables information
sharing.
10.It also eliminates income inequality.
11.It demonstrates the relative strength of the opposing parties.
Collective Bargaining takes place between employer and workers, to
negotiate the new contracts, as well as to renegotiate the existing ones.