TATA MOTORS COMPENSATION

RESTRUCTURING

SUBMITTED BY GROUP 2 –
1. AVISHEK BHATTACHARYA – XHA23006
2. DEBASIS ROUT – XHA23010
3.MAMTA KUMARI - XHA23014
4. SACHIN KUMAR SHARMA – XHA23021
5.SHAYANTI MONDAL – XHA23025
 TATA MOTORS HISTORY
• India’s largest automobile company with consolidated revenues of more
than USD33 billion

• Six plants in Jamshedpur, Pune, Lucknow, Pantnagar, Sanand and

Dharwad

• 60% market share in commercial vehicles, 14% in passenger vehicles in

India

• Conservative compensation strategy- salaries between 40th and 50th

percentile for fixed pay, slight aggression in variable pay for senior
executives.
 PECULARITIES IN THE COMPENSATION
STRUCTURE
NO.OF COMPONENTS (PAY MIX)
PAY LEVELS (STRUCTURE)
BENCHMARKING(PAY POSITIONING)
PERSONAL COMPENSATORY ALLOWANCE
HOUSE RENT ALLOWANCE
SCHEMES
LOCATION DISPARITY-
Elaborate Pay Mix with about 16 components
Some allowances linked to basic salary
Below market average fixed pay component, aggressive
variable pay but only for senior executives
Below market average fixed pay component, aggressive
variable pay but only for senior executives
Individualised personal compensatory allowance used to
make-up for difference in HRAs during transfer to protect
total salary
Compulsory PF and Superannuation deductions
PCA retained from previous transfers too, Compensation
of those in Jamshedpur plant was lesser than those in
Mumbai
CHALLENGES FACED DUE TO THIS
PECULIARITIES
• There were 17 pay grades in the compensation structure, this led to a lot off confusion
and extensive disparities in the salaries of employees.
• Due to 16 components in the pay mix, even a little tweak in basic salary amounted to
drastic changes in the overall compensation.
• Except for managers in the executive levels(levels G-O) company followed a
conservative policy of paying in the 40 - 50 % ile range.
• Internal inequity cropped up as salaries of the transferred employees and the new
hires differed significantly due to PCA provided to transferred employees, proving to
be demotivating for new employees.
• PCA retained from previous transfers also added to the loss to the organization as it’s
unnecessary and created further disparity amongst employees at the same level.
• HRA policies created barriers to internal transfers across different locations; reduced
the attractiveness of 2ND TIER cities & resulted in different in-hand salaries for
employees.
• Compulsory PF and Superannuation deductions meant low-in-hand salary for GETs
who looked for short-term incentives. It posed difficulty in the retention and
attraction of talent.
 Swot Analysis
Strength Weakness
• Strong brand reputation

S W
• Complex and opaque
• Financially stable compensation system
company • Difficulty attracting and
• Experienced management retaining talent
team • Lack of transparency in
• Dedicated workforce compensation decisions
• Strong focus on • Lack of alignment between
innovation pay and performance

• Opportunity Threat
• Restructuring the compensation

O T
• Economic downturn
system to attract and retain talent • Competition from
• Improving transparency in foreign automakers
compensation decisions • Changes in government
• Linking pay more closely to regulations
performance • Technological
• Implementing a performance- advancements
based bonus system
A View of the Financial Performance of the Company
Heads F Y - 2010-11 F.Y. – 2009-2010 Y – on – Y (Increase/ Decrease in %)
(Million USD) (Million USD)

COGS 6860 4991 37.44740533

Revenue 8245 6067 35.89912642

Employee Cost 363 290 25.17241379

Profit After Tax 347 447 -19.20903955

Net worth 3165 2367 33.71356147

Head F Y - 2010-11 F.Y. – 2009-2010 Y – on – Y (Increase/

sti ng Decrease in %)
te re
In act –
F
Employee Cost as % 4.98 5.30 -5.85
of Total Expenditure
 RECOMMENDED CHANGES IN THE
STRUCTURE
We propose to combine the grades that have similarity of roles reducing the number of pay
grades from 17 previously to 5 now

To ensure roles requiring special skills/years of expertise are paid differently than those lying in
the same grade we propose to introduce Pay Bands (wherein the basic would differ), also, this
would ensure the presence overlaps across grades

A fixed percentage of the basic pay is to be standardized as the HRA component.

RECOMMENDED CHANGES IN THE STRUCTURE

Employees shifting from upper-class city to lower-class city will not find a reduction in their pay, in
fact, they would be better off with more in-hand salary as the cost of living in lower-class cities is
much lower, leading to increased attractiveness of lower-class cities amongst young talent. Another
advantage is that PCA can be eliminated as a component.

A standard basic pay (40% of the TFP) is to be paid to employees in the same grade. Distinctions
should be made in the variable pay of salary.

To acquire better talent in the initial stages, we recommend a better salary for grades A-G. This would
ensure that the right kind of young talent from top colleges is in the leadership pipeline of the
company as they prefer more in-hand cash and are market price sensitive.
RECOMMENDED CHANGES IN THE
STRUCTURE

There are some components that might not make

sense to entry-level employees – Gratuity,
Superannuation, Child hostel allowance, etc. To
avoid the problem of forceful deductions, the
company can introduce a cafeteria scheme of
bonuses/incentives where employees instead of
being eligible for a component, can choose which
component they really want.
Emoluments that are of a similar nature
can be combined, e.g. Child Education
Allowance and Child hostel allowance;
Officers and Executive allowance, and
Transport and conveyance allowance.
 CALCULATION OF THE CONSOLIDATION
OF PAY GRADES AND SALARIES -
PROPOSED

• AN EXCEL SHEET - TATA CASE STUDY CALCULATIONS - HYPERLINKED WITH

THE CONSOLIDATION OF PAY GRADES AND THREE PROPOSED
COMBINATIONS OF PAY STRUCTURE
PROPOSED PAY MIX STRUCTURE
Earlier New
Basic Basic
Child Education Allowance
Child Allowance
Child Hostel Allowance
Executive Allowance
Officer’s Allowance
Officer’s Allowance
Housing Allowance
Housing Allowance
Performance Compensatory Allowance
Gratuity Gratuity
Superannuation Superannuation
Leave Travel Assistance Leave Travel Assistance
Special Payment
Merit Allowance
Merit Allowance
Transport Allowance
Mobility Allowance
Conveyance Allowance
THANK YOU