Jib Evaluation &CompensationManagement

Chapter 5

Job Evaluation

Job evaluaton is a systematic way of determining the value/worth of a job in an organisation.

Definition – Job Evalution• “A systematic process of analyzing &

evaluating jobs to determine theirworth in the organization.”-

Edwin B.Flippo

• Indicator of managements attitude

• Enable to attract, retain & motivateemployees

Compensation• Traditional approach – importance to

work in an org

• Contemporary approach – worth of anindividual in an org

Features of Job Evaluation• It tries to assess jobs, not people.

• The standards of job evaluation are relative, not absolute.

• The basic information on which job evaluations are made is obtained from job analysis.

Features of Job Evaluation• Job evaluations are carried out by groups,

not by individuals.

• Some degree of subjectivity is alwayspresent in job evaluation.

• Job evaluation does not fix pay scales,but merely provides a basis for evaluatinga rational wage structure.

Objectives

• Determine organizational hierarchy• Evolving rational wage and salary

structure• Maintaining harmonious relationship• Identify responsibility & authority• Updated data on JD &JS• Eliminating inequalities• Ensure employee satisfaction

Principles

• Proper selection of job dimensions –rating

• Define the dimensions

• Define the evaluation program to e/es

Principles contd…

• Active participation of e/es

• Consider market factors – demand forjobs

Process

1. Preparation of job evaluation plan– need + method adopted

2. Job Analysis – collection ofinformation related to jobs

3. Job Description – tasks &responsibilities associated to thejob

Process contd…4. Job Specification – knowledge +

skill + attitude required

5. Selecting job dimensions &assigning monetary values

6. Classification of jobs – based onmonetary values

Process contd…7. Implementation & Evaluation

8. Maintenance

Benefits of job evaluation• It tries to link pay with the requirements of

the job.

• It offers a systematic procedure fordetermining the relative worth of jobs.

• An equitable wage structure is a naturaloutcome of job evaluation

• An unbiased job evaluation tends toeliminate salary inequalities by placing

Benefits of job evaluation• Employees as well as unions participate

as members of job evaluation committee.

• Job evaluation, when conducted properlyand with care, helps in the evaluation ofnew jobs.

• It points out possibilities of moreappropriate use of the plant’s labour forceby indicating jobs that need more or lessskilled workers than those who are

Techniques of job evaluation

Quantitative NonQuantitative

Point Rating Ranking methodFactor comparison Job classification

Process contd…7. Implementation & Evaluation

8. Maintenance

Job Evaluation

FactorComparison

Ranking Classification

PointMethod

JobEvaluationMethods

Non Quantitative Techniques

1. Ranking Method

• Jobs are assessed on the basis of,

Knowledge, Skill, Effort, JobDimension

⚫ The following table is a hypothetical illustration ofranking of jobs.

⚫ Table: Array of Jobs according to the RankingMethod

Rank Monthly salaries1. Accountant $ 3,0002. Accounts clerk $ 1,8003. Purchase assistant $ 1,7004. Machine-operator $ 1,4005. Typist $ 9006. Office boy $ 600

⚫ The variation in payment of salaries depends on thevariation of the nature of the job performed by theemployees.

TYPES OF RANKING METHOD• Simple Ranking• Alternation Ranking• Paired Comparison.

Ranking Method contd…Steps• Job description

• Job evaluation

• Assign ranks on the basis of worth tothe organization

Ranking Method contd…Advantages• Simple

• Appropriate to small organization

• Quick & inexpensive

Disadvantages• Job specification not considered

• Does not differentiate the jobs

Job Classification/GradingJobs are graded on the basis of their

significance & worth to theorganization

Steps• Defining the organization structure

• Identify dimensions – managerial,supervisory, data entry

CLASSIFICATIONMETHOD

⚫ Following is a brief description of such a classification inan office.1. Class I - Executives: Further classification under this

category may be Office manager, Deputy Officemanager, Office superintendent, Departmentalsupervisor, etc.

2. Class II - Skilled workers: Under this category mayhave the Purchasing assistant, Cashier, Receiptsclerk, etc.

3. Class III - Semiskilled workers: Under this categorymay come Steno typists, Machine-operators,Switchboard operators, etc.

4. Class IV - Semiskilled workers: This categorycomprises Daftaris, File clerks, Office boys, etc.

Job Classification/Grading contd…

Advantages• Technique incorporated JD & Grade

definition• Better understanding of the

organizational structure• Comprehensive in nature

Disadvantages• Time consuming

DESIGNATION LEVELPay Scale

• Executive Director E-9 Rs.62000-80000• Group General Manager E-8 Rs.51300-73000• General Manager E-7 Rs.51300-73000• Deputy General Manager E-6 Rs.51300-73000• Chief Manager/Chief

Geophysicist/ChiefGeologist/ChiefChemist/Chief Engineer E-5Rs.43200-66000

• Manager/SuperintendingGeophysicist/SuperintendingGeologist/Superintending/ChemistSuperintending Enginee rE-4Rs.36600-62000

• Deputy Manager/DeputySuperintending Geophysicist/Deputy Superintending Geologist/DeputySuperintending Chemist/ DeputySuperintending Engineer E-3Rs.32900-58000

Quantitative Methods1. Point Rating Method• Jobs are evaluated using scales• Similar jobs are evaluated using

common scale

Steps• Prepare JD + JS on a sample job –

identify common job factors• Job factors are broken down to

concrete sub factors

Point Rating Method contd…• Assign degree statements (specific

requirement of each sub factor) –five degrees, in the form of phrases

• Assign points to factors, subfactors & degrees

• Degree 1= 20 points = experienceless than 6 months

2= 40 points = experience 6 monthsto 1 year

Point Rating Method contd…

• Preparation of chart

• Jobs are ranked on the basis of points

POINT-FACTORMETHOD

⚫ Table: Point Values to Factors along a ScalePoint values for Degrees Total

⚫ Factor 1 2 3 4 5⚫ Skill 10 20 30 40 50 150⚫ Physical effort 8 16 24 32 40 120⚫ Mental effort 5 10 15 20 25 75⚫ Responsibility 7 14 21 28 35 105⚫ Working conditions6 12 18 24 30 90⚫ Maximum total points of all factors depending on their

importance to job =540 (Bank Officer)

POINT-FACTORMETHOD

• Table: Conversion of Job Grade Points intoMoney Value

• Point range Daily wage rate (Rs) Job grades of key bank officials

• 500-600 300-400 1 Officer• 600-700 400-500 2 Accountant• 700-800 500-600 3 Manager I Scale• 800-900 600-700 4 Manager II Scale• 900-1,000 700-800 5 Manager III Scale

Point Rating Method contd…

Advantages• Accurate• Long lasting• Job description is considered –

higher validity

Disadvantages• Time consuming• Costly

Factor Comparison MethodBased on the principles of Point Rating &

Ranking Method

Steps• Select common factors across all jobs

• Identify bench mark jobs

• Bench mark jobs are compared & ranked ontheir relative importance

Factor Comparison Method contd…• Each factor is assigned a monetary value & in

total = pay of bench mark job

• All jobs are then compared as against benchmark jobs

Advantages• Analytical & Reliable

• Easy to communicate to supervisors

Factor Comparison Methodcontd…

• Logical approach – monetary valuesassigned on factor importance

Disadvantages• Procedure is complex

• High dependence on the bench markjobs

Advantages of Job Evaluation• Helps to remove discrepancies in the

wage structure

• Gives logical explanation – wagerelated issues

• Facilitates the entry of new jobs to theorganizational wage structure

• Helps to compare the wage structure

Limitations of job Evaluation• Dynamic environment bring about change in job factors

– outdated evaluation techniques.

• Poor formulation leads to grievances

• Rigid pay systems.

• Imbalance b/w designed pay structure & financialstrength of the org.

• Cannot stick to the demands as union demands have tobe met.

Valuing Jobs Using MarketPricing

• Market Pricing– Use of pay survey data to identify the relative value

of jobs based on what other employers pay forsimilar jobs.

• Advantages of Market Pricing– Ties organizational pay levels to what is actually

occurring in the market, without being distorted by“internal” job evaluation.

– Communicates to employees that the compensationsystem is “market linked,” rather than distorted byinternal issues.

Pay Surveys

• Pay Survey– Collection of data on compensation rates for

workers performing similar jobs in otherorganizations.

• Benchmark Jobs– Jobs found in many organizations.

• Internet-Based Pay Surveys– Pay survey questionnaires are distributed

electronically rather than as printed copies.

Wage & Salary Administration

• Compensating employees in a fairmanner

• Maintaining principle of equity

• Matching employees expectations

Compensation• What an e/e receives in return for his or her

contribution to the organization

Compensation System

An organization exists to accomplish the specificgoals and objectives. The employees hired by theorganization helps in the fulfillment of these goals.

These employees have their own needs. Needs canbe satisfied by providing money, goods and / orservices in return of their services.

The organizations have to use reward system whichhelps in building a competitive / strategicadvantage.

Components of a CompensationSystem

Components of compensation

• Wage & salary- basic + allowances• Incentives• Fringe benefits• Perquisite• Non – monetary benefits

CompensationAdministration

Process

Compensation Systems Should Include:

1) Signal to employees the major objectives of theorganizations, such as quality, customer focus etc;

2) Attract and retain the talent, an organization needs;3) Encourage employees to develop the skills and

abilities they need;4) Motivate employees to perform effectively;5) Create the type of culture the company seeks to

engender.

Equity Theory

Employees want to be treated fairly. Equity is thebalance between the inputs an individual brings to ajob and the outcomes he / she receives from it.

Employee inputs include:-Experience, education, special skills, effort and time

worked.

Outcomes include:-Pay, benefits, achievement, recognition and any other

rewards.

Designing Equitable Compensation Systems:-

THERE ARE THREE ELEMENTS OF EQUITY:-

Internal Equity:- Refers to the relation ship among jobswithin a single organization.

External Equity:- Refers to comparisons among individualsin the same job within the same organization.

Establishing Internal Equity:- Job evaluation methods.

Principles Governing CompensationAdministration

• Principle of equity

• Matching competitiveness in wage market

• Matching e/e expectations

• Eliminating discrepancies

• Devise system to suit the org

• Maintaining good IR

Purpose of Wage & SalaryAdmn.

• Attract Talent

• Retain & Motivate Talent

• Financial Mgt

• Legal Requirement

Factors to Consider for DeterminingWage and Salary Structure

• Ability to pay• Supply and demand• Productivity• Government legislation• Cost of living• Personal perception of wage• Labour Unions

Important factors which affect theindividual differences in wage rates

(a) Worker’s capacity and age;(b) Educational qualifications;(c) Worker experience;(d) Hazards involved in work;(e) Promotion possibilities;(f) The prevailing wage in the community;(g) Stability of employment;(h) Demand for the product; and(i) Profits or surplus earned by the organisation

Concepts of Different Wages1. Minimum Wages• Minimum wages act 1948

• Enable an average worker to fulfill all hisobligation

• Minimum piece rate/ minimum time rate

• Fixed by law

• Revised every 2-3 years

• Based of cost of living index./consumer price index

OBJECTIVES• To prevent the exploitation of Workers by

the Employers• (By fixing the statutory obligationon the employer to pay the minimum

wages).• To bring the social justice.• To enable the working class to have aminimum standard of life.

Minimum Wages contd…Minimum wages are fixed on 6 components,• Standard working class family considered –

earnings of women, children, adolescents -disregarded

• Minimum food intake / member

• Rent

• Per capita clothing

Concepts of Different Wagescontd…

2. Fair Wage• Also consider the financial capacity of the e/r

• Higher then minimum wage & less then living wage– fair wage committee’s recommendation

• Related to productivity of the e/e

• Prevailing wage rates considered

Concepts of Different Wagescontd…

3. Living Wage

• Highest in value• Not for basic necessities but other comforts• Living Wage Individual in India remained

unchanged at 11000 INR/Month in 2017 from11000 INR/Month in 2016. Living WageIndividual in India averaged 10775 INR/Monthfrom 2014 until 2017, reaching an all time highof 11000 INR/Month in 2016 and a record low of10300 INR/Month in 2014.

Basic Wage Plans1. Time Wage Plan• Basis – time period of employment

• Implemented where o/p cannot bestandardized

• Fixed amount irrespective of o/p

• Extra benefit only through extra time

The essential point is that the production of a worker is nottaken into consideration in fixing the wages.

Advantages:-- Employees maintains the quality of the production.- All the workers doing same work gets same

wages, so no jealousy.- Provides stable earnings to the employees.

Disadvantages:-- No difference between effective and non-effective

employees

Basic Wage Plans contd…2. Piece Wage Plan• Basis – output of the employee

• output is measurable

• Implemented where o/p can be standardized

• Direct incentives – compromise on qualitye.g. call centers

• Payment by results

3. Balance or Debt MethodThis is a combination of time and piece rates.The worker is guaranteed an hourly or a day-ratewith an alternative piece rate.

• If the earnings of a worker at piece rate>Amountthrough time basis =he gets credit for the balance

• If the earnings through piece rate = time basis =question of excess payment do not arises.

• If the earnings of a worker at piece rate<Amountthrough time basis = he is paid on the basis oftime rate.

What is Allowance?

• A sum of money paid regularlyto a person, typically to meetspecified needs or expenses

• Allowance are generally Calculated on Basic salary

Types of Allowances

1.Fully exempted allowances.

2. Partly exempted allowances.

3. Fully taxable allowances

Dearness Allowance

DA is a cost of living adjustmentallowance paid to Governmentemployees and pensioners in India.As of June 2012, the DearnessAllowance is calculated as a percentageof an Indian citizen's basic salary tomitigate the impact of inflation on peoplebelonging to the low income group.The guidelines that govern the DA varyaccording to where one lives (forexample, whether rural or urban)..

House Rent Allowance

HRA is generally paid as component of salarypackage. This allowance is given by an employerto an employee to meet the cost of renting anaccommodation.

Least of following exempt from Tax U/S 10(13A)1. Residential house in Metro city - 50 % of SalaryResidential house at other place - 40% of Salary2. Actual House rent allowance received.3. Rent paid in excess of 10 % of salary.

Conveyance Allowance(Transport Allowance)

The conveyance allowance is a type of allowancewhich is paid to the employees of the state As well ascentral govt. employees in order to meet the expensesto come to office from the residence of the employees

It varies on the basis of the city of posting, distance ofthe employees from the residence to office & type ofconveyance used to travel.CA is exempted U/S 10(14) read with Rule 2BB uptoRs. 800/- p.m.If person blind or OD then upto Rs. 1600/- P.m.

City CompensatoryAllowance

It is an allowance paid by employer to compensate highcost incurred by employee work in big cities like Delhi,Mumbai, Bangalore, and other metropolitan cities.However, it is a fully taxable allowance. i.e. the amountof this allowance will be taxed with the salary received.

Foreign Allowance

This allowance is paid by the Government of India to itscitizen employees for being posted outside the countryand it is not included in total income. It is completelytax-free U/S 10 (7).

Variable CompensationBasis – performance – not on organizational hierarchy

• Differentiates b/w performers & non performers

• American Management Association Survey –grievances, absenteeism comes down

• Components – production incentives, profit sharing,bonus

Variable Compensationcontd…

• Motivational tool at individual level &group level

• Worker level – piece rate/time rate• Manager level – monetary & non

monetary incentives, challengingassignments, increased responsibility

• Group level – entire gp rewarded –motivate towards a common goal

Components of ExecutiveCompensation Packages

Executive Compensation• “Reasonableness” of Executive Compensation

– Would another company hire this person as anexecutive?

– How does the executive’s compensation comparewith that for executives in similar companies in theindustry

– Is the executive’s pay consistent with pay for otheremployees within the company?

– What would an investor pay for the level ofperformance of the executive?

Executive Compensation• Compensation paid to top mgt.Steps to design an EC package• Review of existing package – identify the flaws

• Analyze organizational objectives - SR – bonus linked – increase in profit

- LR – stock options – growth rate

• LR objective – retention (restrictive stock option)

Executive Compensationcontd…

• Analyze the financial status of thecompany

• Detailed EC plan designed

• Maintain transparency

Common Executive CompensationIssues

Other Issues in CompensationAdministration

1. Pay secrecy or openness

2. Pay security – guaranteed annualwage, cost of living adjustments

3. Pay compression – Narrow differenceb/w own pay & colleagues pay

Wage Differentials• Differences in wage paid for same or similar

job – work schedule, hazards, cost of living

• Individual level – competence, experience,knowledge, gender

• Organizational level – size, stage ofbusiness cycle, image

• Industry level – business trend (high pay inIT) – changing

Rewards• e/e earns as a result of his

employment with the organization• Stimulates e/es to perform

• Extrinsic – tangible (promotion, bonus)

• Intrinsic – intangible (informalrecognition, challenging tasks)

• Financial – bonus, incentives

Incentives• Variable rewards granted to employees

according to variations in theirperformance

• Also called – payment by results

• Vary from individual to individual

Pay for Performance

An incentive or reward can be anything that attracts anemployee’s attention and stimulates him to work.

According to BURACK and SMITH –” An incentivescheme is a plan or programme to motivate individualsor group performance. An incentive programme ismost frequently built on monetary rewards but mayalso include a variety of non-monetary rewards.”

Types of Incentive Plans(i) Plans for blue collar workers(ii) Plans for white collar workers(iii) Plans for managerial personnel

Incentive for Blue collar workers (A) Short-Term

- Systems under which the rate of extra incentiveis in proportion to the extra output.

- Systems under which the extra incentive isproportionately at a lower rate than the increasein output.

- Systems under which the rate of incentives isproportionately higher than the rate of increasein output.

Long term incentive plans for bluecollar workers.

Under such plans, each member of group receivea bonus based on the output of the group as awhole.

The most important reason for adopting groupplan – as the jobs are interrelated.

1. One worker’s performance reflects not onlyhis effort, but also of co-workers.

2. It encourages co-operation among groupmembers.

3. Group production levels tend to be morestable than individual ones.

4. Group plans also facilitate on-the job training.

Incentive plans for White collar workers

75% organization pay this incentive to their salesteam.

Due to:-- The unsupervised nature of most sales work.- Tradition in the market- The assumptions that incentives are needed to

motivate salesmen.(a) Straight salary method(b) Straight commission(c) Combination plans

Types of Incentives - Shortterm IncentivesShort term Incentives (Blue collar workers)1. Halsey Plan• Standard time + o/p is fixed

• Guaranteed minimum wage on time basis

• Incentives paid – if work completed before time

• Incentives = plan% * time saved * hourly rate

Types of Incentives contd….e.g. St. time = 8 hrs Actual time = 6 hrs Plan % = 50% Hourly rate = Rs. 5/hr Pay = 30 + 5

2. Rowan Plan• Guaranteed minimum wage on time basis• Incentives = (Time saved * time taken *hourly rate)/

std. timePay = 30 + 7.50

Types of Incentives contd….3. Barth System• No guaranteed min. wageWage = √ (std. time * time taken) * hourly ratePay = √ (8 * 6) * 5 = 6.9 * 5 = 34.50

4. Task Bonus System• Std. pay & task is predetermined• Applied to groups for team work• Incentives issued only if individual tasks are

performed

Types of Incentives contd….5. Point Rating System• Job is rated in terms of std. time• At the end of a specified period – o/p is assessed –

paid accordingly

e.g. std time value 10 units /hr no. of working hrs/ day 8/ Rs. 5 end of the day e/e produces 100 units (equivalent

to 10 hrs of production) pay = Rs. 50

Types of Incentives contd….6. Progressive Bonus• Based on efficiency of the e/e

• Incentives start = o/p cross % of std o/p

• If performance does not reach specific% then daily hourly wages are paid

Long Term Incentives1. Annual Bonus – one time cash bonus paid

at the end of the year• Basis – profit + individual performance• Payment of Bonus Act 1965 – 8.33% of

wage/salary earned or Rs. 100 which everis higher

2. Profit Sharing – 1st implemented by WaltDisney Corporation

• Distribution Plan – annual or quarterly cashbonus is paid according to pre determinedformula

Long Term Incentives contd…• Deferred Plan – credit system, paid on

retirement/ e/e leaves the organization

• Combination Plan – combination of 1+2 plans - e/e receive a portion of profit – cash

bonus, rest will be put in deferred plan

3. Gain Sharing• External factors are not considered• Rewarding groups for their successful

performance

Long Term Incentives contd…• Independent of profits accrued

• Rewarded for predetermined characteristic(team work)

4. E/e stock plans• Stake issued at lower price than the market

price

• Enhances accountability & loyalty

Types of e/e Stock Plans1. E/e stock purchase plan (ESPP)2. Restricted stock plan3. E/e Stock Option Scheme (ESOS)4. Stock Appreciation Rights (SAR)5. Phantom Stock6. Premium priced options/ performance

vesting options

Non Monetary Incentives• Recognize e/e’s contribution

• Delegate challenging assignments

• Additional responsibility + Authority

• Free gifts & free tours

Non-monetary incentivesWhile monetary incentives often appear as importantmotivators, many factors unrelated to money can alsoserve as “attention-getters” and “encouragers ofaction”.Examples:--A person with strong need for affiliation may respondreadily to job assignments.-The opportunity to communicate with and relate to othersis a factor many workers emphasize.-An employee with high-level desires for power mayrespond easily to opportunity, where he can gainleadership.-Persons interested in enhancing their reputations andreceiving recognition in the eyes of others, respond toverbal praise.

Guidelines for Effective IncentivePlans

• IP linked to the e/e performance – shouldincrease morale

• IP should be transparent – should becommunicated

• Employee suggestion should beconsidered

• Least importance to external factors

Guidelines for Effective IncentivePlans contd….

• Should be flexible

• Should include both monetary & nonmonetary incentives

Employee Benefits & Services

Meaning• Which include any benefits that the e/

e receives in addition to directremuneration

• Also known – fringes, serviceProgrammes, hidden pay roll

Services & Benefits

Besides base compensation and incentives,employees are provided various types of benefits andservices by the organizations.

These are called by various names such as fringebenefits, employee welfare, wage supplements, subwages, supplementary compensation, social securityetc.

• Employee benefits and services –

Any benefits that the employee receives in addition to directremuneration

‘Fringes embrace a broad range of benefits and services thatemployees receive as part of their total package. It is based oncritical job factors and performance. Benefits and serviceshowever are indirect compensation because they are usuallyextended as a condition of employment and are not directlyrelated to performance’

*fringe benefits are also called welfare expenses, wagesupplements sub wages or social charges, etc

• Benefits and compensation provided tothe employees usually depend on theconditions of employment and otherfactors like security, safety, health,welfare and recreation of employees

• These benefit programs must bemanaged carefully to enhancerecruitment and to boost the morale ofthe employees

Features of Fringe Benefits

• Fringe Benefits are provided to employees in addition totheir wages and other performance related incentives.

• These are provided to employees not for the performanceof any specific jobs but are offered to them as means forfacilitating the performance of their jobs.

• These are provided to all employees irrespective of theirwork efficiency.

Why Benefits & Services?• Mitigate fatigue

• Discourage labour unrest

• Satisfy e/e objectives

• Aid recruitment

• Reduce turn over

• Minimize overtime cost

Why Organizations Provide Benefits

– Employee demand: To meet rising prices andincreased cost of living employees demandvarious types of benefits

Example: Variable dearness allowance,Enhanced HRA

o Trade union demands: The growth and strengthof trade unions has substantial influence on thebenefits and services a company offers

– Employer’s preferences: Employers prefer to givebenefits to employees as it enhances employee’smorale and works as an effective motivationaltool provided it is within the accepted norms andlimits

Do Benefits motivate e/e’s?• No satisfactory answer

• Satisfaction at wk place – plays improle

• Fringe benefits fail in theirmotivational effect – not withperformance, but with orgmembership

• Fringe benefits result in – unhealthycompetition

Principles of Fringes• Provided to the e/e – protect &

promote their well being

• Must satisfy a real need

• Cost-effective

• Sound planning

• e/e should educate – to use thesebenefits

Factors influencing the decision to set up aparticular employee benefit and service

program• Cost

• Ability to pay

• Needs of the employees

• Bargaining strength of the trade union

• Tax consideration

• Social responsibility

• The reaction of employees

Types of benefitsThere are numerous types of benefits which may beprovided to employees, and there are different waysto classify them.One such classification may be STATUTORY andVOLUNTARY benefits.Various benefits provided by an organization may beclassified under two groups:------

• Employee welfare• Social Security

Coverage of Benefits1. Payment for time not worked

(a) Vacation

(b) Holidays

(c) Sick leave

(d) Miscellaneous types of non-workingplans

(e) Shifts premium

2. Employee Security1. Severance pay

2. Lay-off

3. Guaranteed annual wage

4. Supplementary unemployment

benefits

5. Retrenchment compensation

3. Safety benefits

4. Health Benefits(a) Medical benefit or insurance

(b) Managed care

• Health maintenance organization

• Preferred-provider organization

8. Welfare and recreational facilities(a) Educational assistance

(b) Legal assistance

(c)Housing facilities

(d) Financial services

(e) Employee assistance programs

5. Maternity benefit

6. Dependent benefit

7. Insurance benefits(a) Life insurance

(b) Vision insurance

(c) Dental insurance

9. Old age and retirement benefits(a) Provident fund

(b) Pension

(c)Deposit linked insurance

(d) Medical benefit

(e) Gratuity

(f) Retirement counseling

Employee services

• In addition to fringe benefits,organizations also provide servicesthat employees find desirable.

• These services are provided at low orno cost to the employee.

• These are provided at the discretion ofthe management with consultationwith the trade unions.

These services include

• Services related to type of work performed- includes subsidiesfor the purchase and upkeep of work clothing and uniform.

• Eating facilities• Transportation facilities• Child care facilities• Housing services• Financial and legal services• Recreational, cultural and social programs• Educational services• Medical services• Outplacement services• Flexible time• Cafeteria service

Fringe benefits in India❖ When a study was conducted , it was revealed

that 19,60,981 companies pay little over2148.3 million in wages and fringe benefitsper year in India.

❖ The fringe benefits were high in mining andplantation industries low and very low inmanufacturing sector.

The quantum of the bonus varied sector tosector

A. Payments for time not workedB. Statutory fringe benefitsC. Voluntary benefits

Major benefits offered in INDIA• Payments for time not worked

- Weekly off-day- Gazzetted holidays- Personal leave

• Hazard protection• Employee services• Retirement Benefits

- Provident Fund Scheme- Pension Scheme- Gratuity

• Insurance Benefits• Recreation Benefits

Types of Non monetary Rewards

Significant Benefit & ServiceProgrammes

• Payment for time not worked – on thejob & off the job

• Insurance Benefits

• Compensation benefits

• Pension plans

Problems raised by benefit programs

• Charge of Paternalism = When too many benefits & servicesare offered to employees , a feeling develops that employersare playing the role of parents and workers are looked upon aschildren.

• Excessive Expenditure = It’s a very costly affair and involvesa great deal of paper work

• Maintenance of least productive worker = With increase inbenefits and services employees ,particularly when they arenot very productive ,tend to stick to their jobs and are notinterested in changing them.

• Neglect of other personnel functions = Due to excessiveconcern from management they stop emphasizing on otheraspects of personnel programs which can develop a concernamong the employees .

Problem in Administration• Lack of e/e participation

• Usually depends on the age –preferences changes

Administration of benefits and services

• Organizations have seldom established objectives, systematicplans and standards to determine the variability of theprogram

• Lack of employee participation• Managers take little interest in benefits program and trade

unions are almost hostile to schemes• Employees have little awareness about such programs• These problems can be avoided if following steps are taken:- To establish benefit objectives- To assess environmental factors- To assess competitiveness- To communicate benefit information- To control benefit costs and evaluation

How to avoid these Problems?• Establishing the benefits objectives

• Assessing the environmental factors

• Assessing the competitiveness -compare with competitor

• Communicating benefit info

• Controlling benefit costs & evaluation

Modern E/e Benefit Schemes

1. Golden Parachute• For top mgt executives

• Provision of compensation forthe loss of a job – acquisition byanother firm

• To reduce conflict

Modern E/e Benefit Schemescontd….

2. Cafeteria Benefit Plan• Flexible benefit plans

• e/e can select the most suitable plan

• Customized benefit plans