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HRM UNIT-3 Topics Covered 1. Employee Com pensat ion: Wage and Salary Administration 2. Wo rkers Participation. 3. Strategic Challeng es of Lead ersh ip. 4. Career Management. 5. SHRM Me rge s and Acq uisitions Employee Compensation: Wage and Salary Administration Compensation is an important factor affecting how and why people choose to work at one organization over others. Employees work for rewards every employee likes to be  paid for his efforts and wants money. His aptitude to work, motivation, loyalty,  produ ct iv it y, standard of li vi ng , and st at us in the socie ty de pe nd s up on th e remuneration he receives. Components of a Compensation Program: Direct Pay Indirect Pay 1. Basic Pay Wages Salary 2. Var ia bl e Pay Bonus Incentives Shares Benefits Medical Life Insurance. Paid time off. Retirement Pensions. Others. Some Definitions: 1. Basic Pay: Basic compensation an employee receives, usually as a wage or salary. 2. Wages: Payment directly calculated on the amount of time worked.

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HRM UNIT-3Topics Covered

1. Employee Compensation: Wage and Salary Administration

2. Workers Participation.3. Strategic Challenges of Leadership.4. Career Management.5. SHRM Merges and Acquisitions

Employee Compensation: Wage and Salary Administration

Compensation is an important factor affecting how and why people choose to work atone organization over others. Employees work for rewards every employee likes to be paid for his efforts and wants money. His aptitude to work, motivation, loyalty, productivity, standard of living, and status in the society depends upon theremuneration he receives.

Components of a Compensation Program:

Direct Pay Indirect Pay1. Basic Pay

• Wages• Salary

2. Variable Pay• Bonus• Incentives• Shares

Benefits• Medical• Life Insurance.• Paid time off.• Retirement Pensions.• Others.

Some Definitions:

1. Basic Pay:Basic compensation an employee receives, usually as awage or salary.

2. Wages: Payment directly calculated on the amount of time worked.

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3. Salaries:consistent payments made each period regardless of thenumber of hours worked.

4. Variable Pay: Type of compensation linked to individual, team or organisation performance.

5. Benefits:An indirect reward given to an employee as apart of theorganization membership.

Typical Division of HR Responsibilities in Compensation

HR UNIT MANAGERSDevelops & administers the compensationsystem

Attempt to match performance & rewards.

Conducts job evaluation & Wage Surveys Follows guidelines of HR Units.Develops wage/salary strategy & policies. Evaluate employee’s performance for

compensation purposes.

# Components of Employee Compensation/ Remuneration

1. Wages and Salary.2. Incentives (depends on)

• Productivity.• Sales.• Profits/ growth.

3. Fringe Benefits (includes)• P.F. (Provident Fund)• Medical Care.•

Insurance.• Canteen, recreation etc.

4. Perquisites (includes)• Company care.• Club membership.• Paid holidays.• Furnished houses.

5. Non – Monetary Benefits (includes)• Good working conditions.• Promotion opportunities.

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• Recognition.• Appreciations, flexi time.

# Factors Affecting Compensation:Cost of living.Ability to pay.Bargaining capacity.Competition.Job requirements.Economy (Recession or Booms)Business Strategy.Employee’s performance.Performance appraisal.

# Non- Monetary Rewards:

Organization rewards are those that an employee earns as a result of his employment inthe organisation and organisation link their reward system to employee performanceand commitment to the organization.

Rewards are of two types:1. Extrinsic Reward: tangible in the nature and under the control of the organization.

E.g. Promotion. Bonus, Incentives.2. Intrinsic Rewards: Intangible in nature and internal to the individual e.g.

Challenging Assignments or Informal Recognition.

Difference between Financial/ Monetary Rewards and Non-Financial/Non- Monetary RewardsFinancial /Monetary Rewards Non-Financial /Non monetary Rewards

1. Rewards in economic terms. Eg. Bonus,incentives

1. Tangible in nature & measured in termsof giving value to their employees.

2 Eg are:-Performance incentives

ESOP(Employee Stock OptionPlan)

2. Eg. are:-Maternity leaves for females.

Child care centres

Company accommodation.

Companies transportation facilities

Employee insurance.

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Different types of Compensation Plans/ Incentives Plans:

SHORT TERM PLANS:These are based on Time rate/ Piece rate.

1) Halsey plan: - A fined standard time is set. Those who perform the work inless than standard time & thus save time are rewarded.

Formula:

Total Earning= Actual Time Worked + Bonus of Time Saved.

E.g. Prescribed time to complete a work = 8 hrs.Actual time in which work completed = 6 hrs.Hourly rate = Rs. 5Prescribed wage = Rs. 30

Plan % of wages = 50% [Worker is paid only 50% of the wages for the time saved byhim] Now, Extra wage can be calculated as: - [Sometimes it is 33% of the wages also]Extra wage = Plan % x Time saved x Hourly Rate.

Therefore, Extra Wage = ½ x 2 x 5= Rs 5/-

So Total Wage = Rs 30 + Rs 5= Rs 35 for 6 hrs.

2. Rowan Plan: - here bonus is based on the proportion of the saved time. More thetime a worker saves, more bonus will he receive.

Time Saved x Time taken x Hourly RateExtra Earning of worker = __________________________________

Standard Time

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=2 x 6 x 5 x 1/8= 60 / 8= 7.50 Rs.

There fore, Total Earnings = 30 + 7.50= 37.50 Rs /-

3. Barth Variable Sharing Plan: - here workers are not guaranteed a time rate.

FormulaWages = √ standard time x actual time taken x rate per hr. (Under root)

Hourly rate = rate / hour.

For E.g. If the standard time for completing a job is 10 hrs, actual time taken = 8 hrsHourly rate of pay = 50 Rs

Then, wages = √10 x 8 x x50Therefore wages = Rs. 447/-

4. Gantt’s Task & Bonus Plan: here the workers receives bonus when his outputcrosses minimum or standard output. This plan is similar to Emerson’s plan. Workerswho has produced above the standard level receives increased amount of bonus.

Eg. If a 10 hrs job is done in 10 ½ hrs, which shows efficiency of 95%, workers will getwages on time basis of 10 ½ hrs. , without any bonus, but at 100 % efficiency, a bonusof 20% is paid, when a 10 hrs job is done in 10 hrs.

5. Taylor’s Differential Piece Wage Plan:-Under this method standard output can be fined as per hr or per day etc. those who

reach the standards or cross the standards are entitled for higher rate of wages and thosewhose output is less than the standards are paid at lower rate of wages.

6.Emerson’s Efficiency Plan:

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Here efficiency is determined on the basis of comparison of actual performance againstthe standard and those who proves efficientAre paid the bonus. Here the standard output can be fixed as per unit of time or amountof output.

7. Merrick Differential or Multiple Piece Rate Plan:-It is modification of Taylor’s plan. This plan lays down three rates:

One for beginnersSecond for developing workers.

Third for highly skilled and efficient workers.Those who are able to produce up to 83% of standard output get the lowest piece rate of wages.Those whose output exceeds 83% are paid second higher rate which includes increaseof 10%

That who reaches the standard output is paid the maximum with a further increment of 10% in the basic rate.

8. Bedaux Point Premium Plan:The special feature of this plan is that value of time saved is divided between:

Workers and foreman

3/4th to workers.(75%)

1/4th

to foreman (25%)This is based on the fact that a worker can’t grow good results if his foreman will notco-operate with him.Here, stand time is fixed in “terms of minutes” which are called “Bedaux points” eachB represents a point equal to 1 minute. For Eg. If standard time for a job is 5 hrs, it iscalculated as Time= 60 x 5

Time= 300 minutes or 300 Bs.

Here workers get wages for the actual time worked but if standard time fixed is morethen the actual time taken to do the work, then difference is calculated by dividing the

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difference by 60 to give the hrs saved. Then 75% of this wage goes to worker and 25%to foreman.Thus Bonus Calculated = 75/100 x Bs. x RH/60 Where, Bs. = no. of points/time saved

RH = Hourly rate i.e. Rate per hr.

9. Hayne’s Plan:-Here the standard time for completing a task is set in terms of Mantis, which is the

short form of Man-Machine. The bonus of time saved is distributed between workers,supervisors and company. The bonus for the time saved is distributed on the following basis:

A). If the work isstandardised, i.e. of repetitive nature,5/6TH to worker.

1/6th to foreman.A) if the work isnon-standardised,

5/10th to worker.

1/10th to foreman

4/10 to management.

10. Group Incentive Plan:Here the wage rate is fixed for the entire job for all the workers. Bonus is divided

among the members of the group as per the individual skill and time devoted to job. Eg.If the job is done by 3 workers, A, B and C.

Paid Rate Time TakenA Rs. 25/ hr 50 hrsB Rs. 15/ hr 75 hrsC Rs. 10/ hr 115 hrsCombined wage for all the three workers= Rs 4000/-

Following will be wages of various workers on time basis:-For A = 50 x Rs. 25 = 1250

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B = 75 x Rs. 15 = 1125C = 115 x Rs. 10 = 1150

Total = 3525

As the job is being paid for at Rs. 4000, there is a group bonus of Rs. 475 and this sumis divided among 3 workers in ratio of 1250, 1125 and 1150/- respectively.

For ‘A’ will get = 475/3525 x 1250 = Rs. 168.50/-‘B’ will get = 475/3525 x 1125 = Rs. 151.50/-‘C’ will get = 475/3525 x 1150 = Rs. 155/-

Therefore, Total Wages of A = Rs. 1418.50/- ……... (168.50 + 1250)B = Rs. 1276.50/-………. (151.50+ 1125)C = Rs. 1305/-…………… (155 + 1150)

Methods or Systems of Wage Payment

There are basic three methods:-1. Time wage system.2. Piece wage system.3. Incentive wage plans.

1.Time wage system: System of payment is on the basis of time that a worker devotes to his work.Period of time may be an hr, a day, a week, a fore night or a month no account is madefor the actual amount for the work done by the workers. Also called as“Day Work System” or “Straight Time System”.

Eg. If an employee is given Rs. 50 per day, his wage for 20 days = 50 x 20= 1000/-

Quality and quantity of goods produced is not considered in this method.

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Formula, E = T x R Where, E= Earning of the employee.

T= Time Worked.R = Rate per hour

2. Piece rate system:Here the worker is paid for the amount of output, rather than the time taken to

perform that work.Here the fix rate is paid for each unit of output.Eg. 100 units of output -------- Rs 500/ month.

200 units of output --------- Rs 1000/ month.300 units of output --------- Rs. 1500/ month

NO TIME CONSTRAINTHere the workers are paid wages according to the work done rather then the time spent.

Formula, Wages = Units Produced x Rate per UnitIf a worker produces less, he is paid less.Eg. If the rate per unit for an employee working in a factory is Rs. 20 and he produces100 units in a day,His wages = 20 x 100 = 2000/- Rs.According to Dale Yoder, “piece rate represents the uniform payment for each unit processed. This system requires uniform working conditions, raw materials etc.

3. Incentive Wage Plan:It is the combination of both basic system of wage payment i.e. time and piece

wage. Here both time and amount of output forms the basis of wage payment.It avoids laziness, suspicion, distrust etc.

Remaining Topics of the Unit: - (ppts)

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Workers Participation.

Strategic Challenges of Leadership.

Career Management.

SHRM Merges and Acquisitions.