EMPLOYEE HEALTH

The well-being of the employee in an industrial establishment is affected by accidents & by ill health- physical & mental. We can examine employee health from following angles –
1. Physical Health:Bad health of employees results in reduced productivity, high unsafe acts, and increased absenteeism. A healthy worker on other hand, produces results opposite to these. Healthy workers are more productive, more safety conscious, & are more regular to work. ( Cheerful, Confident, Asset to the Organization ).
Health Services:-
- Pre-hiring medical check-up for all employees;
- First aid treatment following an accident. Training in First aid to all employees;
- Provision of healthy sanitary facilities;
- Control of Occupational Hazards, - Adequate Ventilation, Good Lighting, Tree Planting, Good Residential Quarters.

2. Mental Health:
Mental Health of employees has engaged the attention of employers. ( - Mental Breakdowns are common in modern days because of pressures & tensions; - Mental Disturbances of various types result in reduced productivity & lower profits for the organization )
Health Services:-
- Psychiatric Counseling;
- Co-operation & Consultation with outside psychiatrists & specialists;
- Education of company personnel in the importance of mental health;
- Development & maintenance of an effective human relations programme.

3. Noise Control:
Noise can only be minimized but cannot be totally eliminated, constant exposure to noise not only impairs hearing ability, it has adverse effects on general health of the employees. ( Changes in blood circulation, sleep disturbances, dizziness etc)
Noise control cal be achieved:-
- At the Source ( Repairing or Redesigning the machines, Substituting noise producing elements with quieter ones);
- Through enclosures
- By absorption
- By ear Protection.

4. Work Stress:
Stress refers to an individual’s response to a disturbing factor in the environment and the consequences of such reactions. Stress is mostly understood to be negative. But it has positive dimensions also. Stress is said to be positive when the situation offers an opportunity for one to gain something. Where stress brings out something better from an individual, it is called eustress. Eustress is often viewed as a motivator since in its absence the individual lacks that ‘edge’ necessary for peak performance.
Stress Experience:- How an individual experiences stress depends on –
Perception, - Past Experience, - Social Support, - Individual Differences.

Causes of Stress:- Job Stress is caused by conditions in the workplace that negatively affect an individual’s performance &/or overall well-being of his body & mind.
- Job Stress may be a result of insecurity at the workplace;
- Unrealistic expectations & a demand for high performance by the management also result in stress at the workplace;
- With the continuous advancement of technology & increased competition, there has been more pressure on the workers to perform;
- Not knowing ones duties or what one is expected to do at work, has been identified as one of the main reasons for stress;
- When an employee does not adjust himself to the workplace culture, then it results in stress as he is unable to relate with the co-workers & may enter into conflict situations with them;
- Personnel problems may also add to stress at workplace.

Handling Employee Stress:-
Effective time management techniques, physical exercises, relaxation techniques & counseling help in reducing stress. At the same time, it is also the responsibility of the organization to ensure that it does not subject the employee to excessive stressful conditions. Some of the strategies to reduce stress are encouraging employees to participate in decision making, having effective communication, setting realistic goals etc.

Avoiding Burnout:-

When an individual experiences excessive physical or mental exhaustion because of constant stress, it results in burnout. It is important to identify & eliminate the factors that cause stress before it results in burnout. Severe changes begin to appear in an individual as a result of burnout. It can be change in the health of worker, his attitude towards work & workplace. The employee no longer trusts the management & colleagues.

5) Alcoholism, Smoking & Drug Abuse:
The effects of Alcoholism on the worker & on the work are serious. Both the quality & quantity of decline sharply. A form of “On-the-job Absenteeism” occurs as efficiency declines. An alcoholic worker is more unlikely to observe safety precautions while on the job or off the job. Organizations can use 3 techniques to overcome alcoholism:-
- Disciplining Alcoholics;
- In-house counseling by the HR Department, Supervisor, Doctor;
- Company’s use Outside agencies, psychiatrists, clinics etc.
6) Violence in the Work Place:

Violent incidents at place include fist fights, stabbing, shooting, Physical attacks etc. Those who are at high risk are taxi drivers, retail workers, cashiers at petrol pumps, etc. Violence disrupts productivity, causes untold damage to those exposed & costs employers millions of rupees.

EMPLOYEE SAFETY AND HEALTH

Employee Safety:
Safety means freedom from the occurrence or risk of injury or loss. Industrial safety or employee safety refers to the protection of workers from the danger of individual accidents. An accident is an unplanned & uncontrolled event in which an action or reaction of an object, a person, a substance results in personal injury.

Types of Accidents:
Accidents may be classified as major & minor ones, depending upon the severity of the injury. An accident which ends in a death, or which results in a prolonged disability to the injured is a major one. A scratch or a cut which does not seriously disable him/her is a minor accident. An accident may be internal or external. If a worker falls, or an object falls on him or her, it is possible he or she may show no external signs of injury, but he or she may be fractured a bone or strained a muscle or nerve-which is an internal injury. If a worker recovers from such a disability, his or her disability is temporary. If the injury is such that he or she will never recover fully, his or her disability is permanent.

Need For Safety:

Cost saving: Two types of costs are incurred by the management when an accident occurs i.e.

Direct cost- It may be in the form of compensation payable to the dependents of victim if the accident is fatal, and medical expenses incurred in treating the patient if the accident is non fatal.

Indirect cost – It includes loss on account of down time of operators , slowed up production rate of other workers, materials spoiled and labor for cleaning, and damages to equipment.

Increased Productivity:

Safety plants are more effective. Safety promotes productivity because employee in safe plants can devote more time on improving the quality and quantity of their output and spend less time worrying about their safety and well being.

•Moral:

Safety is important on human grounds too. Managers must undertake accident prevention measures to minimize the pain and suffering the injured worker and his/her family is often exposed to as a result of the accident.

•Legal:

There are legal reasons too for undertaking safety measures. There are laws covering occupational health and safety, and penalties for non compliance have become quite severe. The responsibility extends to the safety and health of surrounding community, too. The supreme court held :

“ An enterprise which is engaged in a hazardous or inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and industry in the surrounding areas, owes an absolute and non-degradable duty to the community to ensure that no harm results to anyone on account of the hazardous or inherently dangerous nature.”

Working Condition Affecting Health:
Cleanliness : Hygiene essential to health . Arrangements should be made for disposal of industrial waste.Lighting : A good lighting system should provide (a) the right degree of intensity of light depending upon the nature of work ,(b) Well - diffused and uniformly spread light all over the work , (c) protection from any glare .Temperature and Ventilation : In hot and humid climate ,employees feel tired and sleepy, ventilators ,fans , coolers/ heaters, help to maintain right temperature and humidity .Freedom from Noise : Too much noise inside and outside the work place cause disturbance. Proper location of factory ,sound proof walls , double doors and glass panels may be used to avoid noise.Working space and seating arrangement : adequate space should be provided for free movement of persons , machines etc. Over – crowding should be avoided as it spoils health and efficiency.

Safety Programme:

Safety programme deals with the prevention of accidents and with minimizing the resulting loss and damages to person and property. Five basic principles must govern the safety programme of an organization these are :-

1)Industrial accidents resulting from a multiplicity of factors must be traced to their root causes. ( Poor Leadership, Training, Inadequate supervision etc.)

2)The most important function of safety program is to identify potential hazards, provide effective safety facilities and equipment and to take prompt remedial action. ( Adequate accident records & statistics, Systematic procedures for carrying out safety checks, inspections & investigations).

3)The safety policies of the organization should be determined by top level management and it must be continuously involved in monitoring safety performance and in ensuring that corrective action is taken when necessary.

4)The management and supervision must be made fully accountable for safety performance in the working areas they control.

5)All employees should be given thorough training in safety methods of work and they should receive continuing education and guidance on eliminating safety hazards and prevention of accidents.

- Strategic Choices, - Development of Safety Policy, - Organization for Safety, - Analysis of Causes for Accidents, - Implementation of the Programme, - Evaluation of Effectiveness

A safety programme generally consists of six elements :-

1)Strategic Choices – Some of the strategic choices are :-

1.1 Managers must determine the level of protection the organization will provide for employees.

1.2 Managers can decide whether a safety programme will be formal or informal.

1.3 Managers can also be proactive or reactive in developing procedures or plans with respect to employee safety.

1.4 Managers can decide to use the safety of workers as a marketing tool for the organization.

2)Safety Policy – Safety policy specifies the firm’s goals and designates the responsibilities and authority for their achievement. It may also contain caveats and sanctions for failing to fulfill them.

Specifically, a safety policy must contain a declaration of the organizations intent and the means by which the intent is to be realized.

- The Safety of employees & the public;

- Every effort will be made to involve all managers, supervisors, & employees in the development & implementation of safety programmes;

- Safety Legislation will be complied with, in the spirit as well as the letter of law.

3)Organization for Safety – Companies constitute safety committees which are, composed of employees from across the organization. Typically, safety committees serve in advisory capacities and are responsible for such tasks as reviewing safety procedures, making recommendations for eliminating specific safety and health hazards, investigating accidents, fielding safety- related complaints from employees and monitoring statutory compliances. Many companies employ safety specialists to design & handle the day-to-day activities of the safety programme. Responsibility of employee safety devolves upon the HR Department whose task is to co-ordinate the activities of all those concerned with safety. Risk Management is becoming is becoming very common these days.

4) Causes, Extent and Remedies for Accidents:The Causes can be classified into 2 groups- Human Failure, & Machine Failure. Human Failure leads to an accident when the employee ignores safety precautions & commits an unsafe act. Machine Failure refers to faulty mechanical or physical conditions leading to accidents.
- Lack of Adequate inspection adds to the problem of industrial accidents;
- One of the ironies is that those who should be screaming the loudest at the woeful lack of occupational safety at workplace.
- Most workers in our country believe that getting into an accident is the result of one’s karma;

- As companies globalize, & projects, large ones involving greater complexities increase new risks emerge.

- Lack of Education & Training: Most organizations do not educate employees about the usage & maintenance of machinery & chemicals. If the workers are not careful in operating powerful machinery, it can lead to serious injuries.
- Human Errors: Some employees are careless & tend to make mistakes. This can result in injuries & can sometimes prove to be fatal.
- Technical Errors: The machinery should be thoroughly inspected regularly so that it functions safely, without any problems or breakdowns.
- Psychological Problems: In most of the present day organizations, stress at workplace causes a number of problems. Employees working under high stress conditions commit mistakes & are more prone to accidents.

- Occupational Hazards & Risk: Some industries by their very nature are harmful for the employees working there.

Remedies:-
There are certain principles which enables the management to understand the causes and consequences of accidents and to introduce suitable safety devices. The principles are-
1. The occurrence of an injury invariably results from a complete sequence of factors, the last one of these being accident itself.
2. The unsafe act of employees are responsible for a majority of accidents.
3. The occurrence of an accident that results in an injury is largely preventable.
4. The supervisor is the key person in industrial accident prevention.
5. Safety incentive programs should focus on process rather than outcomes .
6. Safety should be driven internally, not externally.- Training in Safety: Systematic training of industrial employees is necessary if they are to do their jobs effectively & safely. This is an inescapable requirement, regardless of how carefully employees are selected or how much aptitude & experience they may have for the jobs to which they are assigned. The difference in training practice are influenced strongly by the size of the company, the types of jobs performed, & the awareness of the management regarding the importance of training.

- Role of Management & Unions: The problem of safety must begin with the management. The management should believe in, & have a commitment to safety & safety rules. The management should view safety as an integral part of the management process.- Tabulating & Analyzing the causes for accidents: Tabulating & Analyzing accidents & their causes will help organizations to prevent such accidents in the future. Analysis should be done in terms of the areas where accidents frequently occur & steps should be taken to prevent such accidents.

- Physical & Mechanical Conditions: Safety measures should be kept in mind while planning a layout & constructing a building. Workers must be provided with safe tools & equipments to work with. All machinery must be fended, & mechanically & physically unsafe conditions should be eliminated. ( Goggles, Gloves, Ear Muffs, Safety belts, shoes & Helmets)

- Conduct Regular Employee Wellness Programs: Accidents often occur due to the negligence of the workers. It is important to conduct periodic programs to make employees understand the causes & reasons for accidents at the workplace.

- Safety Posters & Film Shows: Safety posters with poignant illustrations & slogans may be put up on the walls near workplaces. The National Safety Council has published a series of such slogans as “ Provide Guards- Avoid Tragedies”, “ Overconfidence leads to accidents” etc. Films on how accidents occur, on the consequences of injuries, & the need for safety may be screened for the benefit of the workers.

- Safety Week & Awards: A safety week is observed from the 1st to 7th of every March. Safety awards are presented by the National Safety Council every year to industrial establishments which show accident free operations. BHEL has been the recipient of the highest number of such awards.

- Reducing Unsafe Acts Through Selection & Placement: Proper Employee Screening & Placement can reduce unsafe acts.
- Conduct Safety & Health Audits & Inspections:

5) Implementing the Policy – For implementing the policy the programme must cover –

•Procedures for reporting accidents, hazards, fire precautions, first aid.

•Arrangements for instructing workers about safe working methods and for training employees in safety matters.

•Good Housekeeping requirements covering storage facilities, adequate space for machinery & plant, etc.

•The maintenance of equipment and the provision of proper inspection and testing arrangements.

•General rules on safe working habits.

•Special rules for internal transport drivers.

•Arrangement for checking new machinery and materials.

•Safety inspection.

•The provision of personal protective equipment, and rules as to its use.

6) Programme Evaluation – Mainly there two methods for evaluating the effectiveness of safety programme i.e. - Organic and Systematic.
- Organic Measures: This method attempts to evaluate how well the safety programme is designed and fulfilled. ( Is the programme effective in changing unsafe behaviour, Have injury producing physical conditions been corrected, etc)
The techniques used are –
a. Safety Inspection
b. Safety Audit
c. Comparison
In Safety Inspection inspectors are given specifics to follow. These may include programme elements such as formation of safety committees, how often they meet etc. After inspection a report of the findings is made to the management concerned.
Safety Audit is an in-depth analysis of facilities, management & employee, attitude towards safety, managerial effectiveness in maintaining safety & quality of the safety planning. The level of compliance is considered as an indicator of operating effectiveness. Overall Performance in controlling the operation’s safety is the audit’s quest.
Comparison is the 3rd method of evaluating the company’s safety efforts. The purpose here is to compare the experience of a plant or industry with that of another which is comparable.

- Systematic Measures: The concern in systematic measure is with the effects of the programme, i.e. outcome of the programme i.e. the achievement of the aim the programme is designed to serve. ( E.g. Reduction in the rate of Accidents, Cost Savings etc)

Incentives

Incentives are monetary benefits paid to workmen in recognition of their outstanding performance. “Variable rewards granted according to variations in the achievement of specific results”

Financial Incentives:-
Incentives are monetary benefits paid to workmen in recognition of their outstanding performance. “Variable rewards granted according to variations in the achievement of specific results”. OR Financial rewards paid to workers whose production exceeds some predetermined standard.

Motivation & Incentives:-
Different people react to different incentives in different ways. Not everyone react to a reward in the same way & not all rewards are suited to all situations. Hence Incentive plans have to be carefully drawn.

Employee Preference for Non-Cash Incentives:-

- Frederick Herzberg:-
Frederick Herzberg said the best way to motivate someone is to organize the job so that doing it provides the feedback & challenge that helps satisfy the persons “higher-level” needs for things like accomplishment & recognition. Herzberg says the factors “hygiene” that satisfy lower-level needs are different from “motivators” that satisfy or partially satisfy higher-level needs.

- Victor Vroom:-
Victor says a persons motivation to exert some level of effort depends on 3 things:-
Expectancy ( A persons expectation that his or her effort will lead to performance)
Instrumentality ( The perceived relationships between successful performance & obtaining the reward)
Valence ( The perceived value a person attaches to the reward)
Motivation= (E*I*V)

Importance of Incentives:-
- Inducement & Motivation of workers for higher efficiency & greater output;
- Earnings of employees would be enhanced due to incentives;
- Reduction in the total as well as unit cost of production;
- Reduced Supervision, Better Utilization of equipment, Reduced Scrap, Reduced Absenteeism & Increased Output.

Disadvantages:-
- There is a tendency for the quality of products to deteriorate unless steps are taken to ensure maintenance of quality through checking & inspection;
- Jealous may arise among workers.

Types of Incentives:-

I. Individual Employee Incentives:-

1. Piecework Plans: Piecework is the oldest individual incentive plan & is still the most widely used. Here the worker will be paid a sum i.e. piece rate for each unit he or she produces.
a. Straight Piecework:- Here the rate per unit of output is fixed, & the total earnings of a worker are arrived at by multiplying the total output by the rate per unit. E.g. If the rate per unit is 10Rs & the total output of an employee is 100 units, his earnings will be 100*10=.
b. Standard Hour Plan:- Standard time in terms of hours is fixed for completion of a job. The rate per hour is then determined. The worker gets a premium equal to the % by which his or her performance exceeds the standard.

Pros & Cons of Piecework:-

- Easily understandable, equitable, and powerful incentives since rewards are proportionate to performance.
- Employee resistance to changes in standards or work processes affecting output.
- Quality problems caused by an overriding output focus.

2. Merit Pay as an Incentive: A permanent cumulative salary increase the firm awards to an individual employee based on his or her individual performance.

II. Incentives for Salespeople:-
Salespeople get straight salaries, & most receive a combination of salary & commissions. Some firms pay sales people fixed salaries perhaps with occasional incentives in the form of bonuses, sales contest prizes, & the like. Commission plans pay salespeople for results, & only for results. Commission plans tend to attract high performing salespeople who see that effort clearly produces rewards. Most companies pay salespeople a combination of salary & commissions, usually with a sizable salary component.

III. Team/Group Incentive Plans:-
Firms increasingly rely on teams to manage their work. They therefore need incentive plans that encourage teamwork & focus team members attention on performance. A Team incentive plan “ Is a plan in which a production standard is set for a specific work group, & its members are paid incentives if the group exceeds the production standard”. OR Compensation plans where all team members receive an incentive bonus payment when production or service standards are met or exceeded.
E.g. Grinding & Welding works in the electrical industry, New-product development team, Assembly teams assemble cars etc.

Pros:-
- Better Co-operation among workers;
- Less Supervision;
- Team incentives support group planning and problem solving, thereby building a team culture;
- Cross-training and the acquiring of new interpersonal competencies;
- Reduced incidence of absenteeism.

Cons:-
- An efficient worker may be penalized for the inefficiency of the other members in the group;
- Workers pay may not be proportionate to his or her personal efforts; - “Free-ride” effect may raise;

- Rivalry among the members of the group defeats the purpose of team work & co-operation.

IV. Organization wide Incentive Plans:-

Incentive plans in which all or most employees can participate. These plans include profit sharing, employee stock ownership & Scanlon/gain sharing plans. Profit sharing are plans in which all or most employees receive a share of the firms annual profits. It brings employee and company goals together. The idea is that, if the employees work hard to make the company profitable, their profit sharing bonus is bigger. ( In cash plans the firms simply distributes a % of profits usually 15%-20% as profit shares to employees at regular intervals ) Employee Stock Ownership Plan are the company wide plan in which a corporation contributes shares of its own stock to a trust established to purchase shares of the firm’s stock for employees. The trust distributes the stock to employees on retirement or separation from service, assuming the person has worked long enough to earn ownership of the stock.

Pros of ESOP’s:-

- The Company gets a tax deduction equal to the fair market value of the shares that are transferred to the trustee, & can also claim an income tax deduction for dividends paid on ESOP-owned stock;
- ESOP’s do encourage employees to develop a sense of ownership in & commitment to the firm.

Employee Stock Options is granting employees the right to purchase a specific number of shares of the company’s stock at a guaranteed price (the option price) during a designated time period.

E.g. Apple , yahoo, coca cola, Nike etc.

Gainsharing Plans is an incentive plan that engages many or all employees in a common effort to achieve a company’s productivity objectives, with any resulting cost-savings gains shared among employees & the company. This is a program under which both employees and the organization share the financial gains according to a predetermined formula that reflects improved productivity and profitability.
Scanlon plan- It is often the ratio of labour cost to total sales value, which is evaluated for calculating incentive.
Rucker plan- Here employees earnings are related to the value added by them. It considers savings not only of labour but also of material & overhead.

At-Risk Variable Pay Plans are plans that put some portion of the employee’s weekly, monthly or yearly pay at risk. Then, if employees meet or exceed their goals, they earn back not only the portion of their pay that was at risk, but also an incentive. If they fail to meet their goals, they forego some of the pay they would normally have earned.

Incentives for Managers & Executives:-

- Short-Term Incentives:
Most firms have annual bonus plans aimed at motivating managers & executives short-term performance. There are 3 basic issues to be considered when awarding short-term incentives:- Eligibility, Fund Size, & Individual Awards.
a. Eligibility: Most firms include both top & lower-level managers & mainly decide who’s eligible in several ways. Most base eligibility on a combination of factors, including job level/title, base salary, discretionary considerations etc.

b. Fund Size: The employer must also decide the total amount of bonus money to make available. Some companies use a straight % i.e. usually of the company’s net income to create short-term incentive fund. Some firms don’t use a formula at all, but make the decision on discretionary basis.

c. Individual Awards: The 3rd task is deciding the actual individual awards. One question is whether managers will receive bonuses based on individual performance, corporate performance or both. Firms usually tie top-level executive bonuses mostly to overall corporate or divisional results. But for the lower cadre, corporate profits become less accurate gauge of a manager’s contribution. E.g. Supervisors or Heads of the Departments, it often makes more sense to tie the bonus more closely to individual performance.
- Long Term Incentives:

Employers use long-term incentives to inject a long-term perspective into their executives decisions. Long-term incentives are also ‘Golden Handcuffs’ – they motivate executives to stay with the company, by letting them accumulate capital ( usually options to buy company stock) that they can only cash in after certain number of years. E.g. Stock Options, Phantom Stock etc

- Other Executive Incentives:-
Companies also provide various incentives to persuade executives to remain with the firm. This is especially important when there is reason to believe the firm is being taken by another company that wants to buy it. The target company might then install ‘Golden Parachute’ incentives. Golden Parachute are extraordinary payments companies make to executives in connection with a change in ownership or control of a Company. Golden parachutes make it easier to hire and retain executives, especially in industries more prone to mergers. They help an executive to remain objective about the company during the takeover process.

Why Incentive Plans Fail ?
• Performance pay can’t replace good management;

• You get what you pay for;

• “Pay is not a motivator”;

• Rewards punish;

• Rewards rupture relationships;

• Rewards can have unintended consequences.

Implementing Effective Incentive Plans:-

• Link the incentive with your strategy;

• Make sure the program is motivational;

• Make the plan easy for employees to understand;

• Set effective standards;

• Get employees’ support for the plan.

• Use good measurement systems.

Employee Benefits & Services:-
This includes any benefits that the employee receives in addition to direct remuneration. Benefits & services are indirect compensation because they are usually extended as a condition of employment & are not directly related to performance. Fringe benefits covers bonus, social security measures, retirement benefits like PF, Gratuity, Pension, Housing, Medical, canteen, educational facilities & so on.

Objectives of Fringe Benefits:-
- To create & improve sound Industrial Relations;
- To boost up employee morale;
- To motivate the employees by identifying & satisfying their unsatisfied needs;
- To provide security to the employees against social risks like old age benefits & maternity benefits;
- To create a sense of belongingness among employees & to retain them;

- To provide qualitative work environment & work life.

Need for Extending Benefits to Employees:-
- Rising prices & cost of living has brought about incessant demand for provision of extra benefits to the employees;
- Employers have found that fringe benefits present attractive areas of negotiation when large wage & salary increases are not feasible;
- Recognition that fringe benefits are non-taxable rewards has been a major stimulus to their expansion;
- The growing volume of labour legislation, social security legislation made it imperative for employers to share equally with their employees the cost of old age, disability benefit etc;
- The growth & strength of trade unions;

- Labour scarcity & competition for qualified personnel has led to the initiation & implementation of these benefits, not only that it increases productivity of employees.

Types of Fringe Benefits:-

1. Payment for Time Not Worked:-

- Paid Holidays: According to Factories Act, 1948, an adult worker shall have a weekly paid holiday, preferably Sunday. When a worker is deprived of weekly holidays, he is eligible for compensatory holidays.
- Shift Premium: Companies operating 2nd & 3rd Shifts, pay a premium to the workers who are required to work during the odd hours.
- Holiday Pay: Generally organizations offer double the normal rate of the salary to those workers, who work on paid holidays.
- Paid Vacation: Workers in manufacturing, mining who worked for 240 days during a calendar year are eligible for paid vacation at the rate of 1 day for every 20 days of worked in case of adult workers.

2. Employee Security:-
- Retrenchment Compensation: The ID Act provides for the payment of compensation in case of lay-off & retrenchment. The non-seasonal Industrial establishments employing 50 or more workers have to give 1 month’s notice or 1 month’s wages to all the workers who are retrenched after 1 year’s continuous service. Severance Pay- One time payment when terminating an employee.
- Lay-off Compensation: In case of Lay-off, employees are entitled to lay-off compensation at the rate of 50% of the basic wage & DA for the period of lay-off.

3. Safety & Health:-
- Safety Measures: Employee’s safety and health should be taken care of in order to protect the employee against accidents, unhealthy working conditions and to protect worker’s capacity.
- Health Benefits: Today various medical services like hospital, clinical & dispensary facilities are provided by organizations not only to employees but also to their family members. ( Sickness Benefits, Maternity Benefits, Disablement Benefits etc)

4. Welfare & Recreational Facilities:-
These Include ( Canteens, Consumer Societies, Housing, Legal Aids, Employee Counseling, Educational Facilities, Transportation, Holiday Homes etc)

5. Old Age & Retirement Benefits:-
These Include ( Provident Fund, Medical Benefit, Pension, Gratuity etc)
- Health Benefits: Today various medical services like hospital, clinical & dispensary facilities are provided by organizations not only to employees but also to their family members. ( Sickness Benefits, Maternity Benefits, Disablement Benefits etc)

4. Welfare & Recreational Facilities:-
These Include ( Canteens, Consumer Societies, Housing, Legal Aids, Employee Counseling, Educational Facilities, Transportation, Holiday Homes etc)

5. Old Age & Retirement Benefits:-
These Include ( Provident Fund, Medical Benefit, Pension, Gratuity etc)
- Health Benefits: Today various medical services like hospital, clinical & dispensary facilities are provided by organizations not only to employees but also to their family members. ( Sickness Benefits, Maternity Benefits, Disablement Benefits etc)

4. Welfare & Recreational Facilities:-

These Include ( Canteens, Consumer Societies, Housing, Legal Aids, Employee Counseling, Educational Facilities, Transportation, Holiday Homes etc)

5. Old Age & Retirement Benefits:-
These Include ( Provident Fund, Medical Benefit, Pension, Gratuity etc)

Compensation:

Compensation refers to a wide range of financial & non-financial rewards to employees for their services rendered to the organization. OR Employee Compensation refers to all forms of pay going to employees & arising from their employment. It has 2 main components, Direct Financial payments ( Wages, salaries, incentives, conveyance, HRA, LTA, commissions & bonus), & Indirect Financial payments ( Financial benefits like employer paid insurance, Car Policy, Holiday Homes, Hospitalization, Leave Policy, Retirement Policy etc).

Elements of Compensation:-
- Monthly wage & Salary or total pay including basic wage, house rent allowance, Dearness Allowance & city compensatory allowance;

- Bonus at the end of the year;
- Economic benefits such as paid holidays, LTA concession;
- Contribution towards insurance premium;
- Contribution towards retirement benefits such as employee provident fund;
- Transport & Medical Facilities.

Compensation Objectives:-
- To reward employees’ past performance fairly, in line with efforts, skills and competencies;

- To attract and retain competitive high performing employees;
- To remain competitive in the labour market;
- To align employees’ future performance with organizational goals;
- To communicate the employees their worth to the organization;
- To motivate the high performing employees;
- To provide employee social status.

Theories Of Remuneration:
- Reinforcement & Expectancy Theory:- The Reinforcement theory postulates that a behaviour which has a rewarding experience is likely to be repeated. The implication for remuneration is that high employee performance followed by a monetary reward will make future employee performance more likely. In same way, a high performance not followed by a reward will make its recurrence unlikely in future. Vroom’s Expectancy theory focuses on the link between rewards & behaviour.

- Equity Theory:- Adam’s equity theory posit that employees perceptions of how they are treated by their firm is of prime importance to them. The dictum ‘a fair day work for fair day pay’ denotes a sense of equity felt by employees. When employees perceive inequity, it can result in lower productivity, higher absenteeism or increase in turnover. The remuneration system needs to meet 3 types of equity- internal, external & individual.

1. Internal Equity: Involves the perceived fairness of pay differentials among different jobs within an organization. Employees should feel that the pay differentials among jobs are fair, given the corresponding differences in job responsibilities;
2. External Equity: Involves employees perception of the fairness of their remuneration relative to those outside the organization. What competitors pay to similar jobs will have its impact on employee motivation, commitment & Performance;
3. Individual Equity: Considers employee perception of pay differentials among individuals who hold identical jobs in the same organization. Seniority contributes to differences in remuneration received by 2 individuals in the same cadre.

- Agency Theory:- The Agency Theory focuses on the divergent interests & goals of the organization’s stakeholders & the way the employee remuneration can be used to align these interests & goals. Employers & Employees are the 2 main stakeholders in an organization. Employers assume the role of principals & employees play the role of agents. It is natural that the employees expect high agency costs while the employers seek to minimize it. The agency theory says that the principal must choose a contracting scheme that helps align the interest of the agents with the principal’s own interests. It can be behaviour oriented ( Merit Pay ) OR Outcome oriented ( E.g. Profit Sharing, ESOP, Commissions etc.)

Factors Affecting Wage/Compensation:

- External Factors:-
1. Demand & Supply of Labour: Demand & Supply of Labour influence wage & salary fixation. A low wage may be fixed when the supply of labour exceeds the demand for it. A higher wage will have to be paid when the demand exceeds supply, as in the case of skilled worker. High remuneration to skilled labour is necessary to attract & retain it.

2. Productivity of Workers: Productivity of labour also influences wage fixation. Productivity can arise due to increased effort of the worker or as a result of the factors beyond the control of the worker such as improved technology, machines, equipment & better management. Higher productivity will automatically fetch more profit to the firm, where in turn workers will be paid high wages in comparison to other firms with low productivity.

3. Cost of Living: This criteria matters during periods of rising prices, & is forgotten when prices are stable or falling. The justification for cost of living as a criterion for wage fixation is that the real wages of workers should not be allowed to be reduced down by price increases. A rise in the cost of living is sought to be compensated by payment of dearness allowance, basic pay to remain undisturbed.

4. Labour Unions: The presence & absence of labour organizations often determine the quantum of wages paid to employees. Employers in non-unionized factories enjoy the freedom to fix wages & salaries as they please. Because of large-scale unemployment, these employers hire workers at little or even less than legal minimum wages. The employees of strongly unionized companies too, have no freedom in wage & salary fixation, as they are forced by the pressure of labour representatives in determining & revising pay scales.

5. Government: To protect the working class from the exploitation of powerful employers, the Government has enacted several laws. Laws on minimum wages, hours of work, equal pay for equal work, payment of dearness allowances, payment of bonus etc have been enacted & enforced to bring about a measure of fairness in compensating the working class.

6. Society: Remuneration paid to employees is reflected in the prices fixed by an organization for its goods & services. For this reason the consuming public is interested in remuneration decision.

7. The Economy: The last external factor that has its impact on wage & salary fixation is the state of the economy. For E.g. A Depressed Economy will probably increase the labour supply, which in turn should serve to lowering the going wage rate.

Internal Factors:
1. Business Strategy: The overall strategy which a company pursues should determine the remuneration to its employees. Where the strategy of the enterprise is to achieve rapid growth, remuneration should be higher than what competitors pay. Where the strategy is to maintain & protect current earnings, because of the declining fortunes of the company, remuneration level needs to be average or even below average.

2. Job Evaluation & Performance Appraisal: Job evaluation helps establish satisfactory wage differentials among jobs. Performance Appraisal helps award pay increases to employees who show improved performance.

3. The Employee: Several employee related factors interact to determine his or her remuneration. These are Performance, Seniority, experience, potential & Luck.

Challenges of Remuneration:

- Skill based pay: In the traditional job based pay employees are paid on the basis of job they do. In the skill based system workers are paid on the basis of number of jobs they are capable of doing, or on the depth of knowledge. The purpose of the this system is to motivate employees to acquire additional skills so that they become more useful to the organization. ( Pay for performance/ Pay for seniority);

- Pay Reviews: Pay once determined should not remain constant. It must be reviewed & changed often, but how often becomes a relevant question. Pay reviews may be made on predetermined dates, anniversary dates or there could be flexible reviews.
- Pay Secrecy: Just how much & what types of information about pay should be provided to employees is a question that troubles HR managers. The tendency among most firms is to maintain pay secrecy as this would help avoid pay comparisons likely to me made by employees.

- Monetary versus Non-monetary Rewards:

The issue relating to monetary & non-monetary rewards has primarily tax implications. Many non-monetary rewards such as medical benefits & housing are fully or partially exempted from taxes. Employees & even employers prefer non-monetary benefits than monetary rewards.

- Eliticism & Egalitarianism: Firms become egalitarian when they place most of their employees under the same remuneration plan. The plan becomes elitist when the organizations establish different remuneration schemes. E.g. In some firms only the CEO is eligible for stock options. In others, even the lowest paid workers are offered stock options.
- Salary compression: A salary inequity problem, generally caused by inflation, resulting in longer-term employees in a position earning less than workers entering the firm today.
- The pay cycle, Salary increases and promotions, Overtime and shift pay, Probationary pay, Paid and unpaid leaves, Geography, Equity & its impact on Pay Rates.

Methods to Address Equity Issues/ Establishing Pay Rates:
- Salary Survey: It is difficult to set pay rates if you don’t know what others are paying, so salary surveys- surveys of what others are paying play a big role in pricing jobs. It is aimed at determining prevailing wage rates. Virtually every employer conducts at least an informal telephone, newspaper, or Internet Salary survey. Many Employers use surveys published by Consulting Firms, Governmental Agencies, etc. Employers use survey data to price benchmark jobs. Salary surveys can be formal or informal way. It is mostly to get information of employees, overtime policies, starting salaries, sick leave, insurance & paid vacations.

- Job Evaluation: Job Evaluation is a systematic process of analyzing & evaluating jobs to determine the relative worth of each job in an organization. Once the worth of jobs is determined, it becomes easier to fix the wage structure that will be fair & equitable. The basic procedure is to compare the jobs in relation to one another- For E.g. in terms of required effort, responsibility, & skills.

Objectives:-
1. Maintenance of consistent wage policy;
2. Enable management to gauge & control its payroll costs more accurately;
3. Provide a framework for periodic review of wage & salaries;
4. To manage internal & external consistency in the compensation
5. Reduce grievances & labour turnover & thereby, increase employee morale & improve management-employee relationship;

6. Serve as a basis for negotiation with the union.

Techniques of Job Evaluation:

1. Ranking Method: Ranking is one of the simplest & the oldest job evaluation methods. In this method, the jobs in an organization are assessed based on the knowledge, skills, effort & other job dimensions associated with each job. Jobs also can be arranged according to the relative difficulty in performing them.
Ranking involves preparation of brief job descriptions & assigning ranks to the jobs in accordance with their worth in the organization.

2. Job classification/ Job Grading: In this method the jobs are classified & graded based on their significance & their worth to the organization. The jobs at various levels in an organization are placed under different grades, which are clearly defined. Grades are formulated on the basis of the nature of tasks & responsibilities of the jobs, the authority associated with them & the knowledge & skill required for the jobs.

3. Point rating Method: The point method or point rating method is one of the most widely used methods of job evaluation. In this method, a point scale is developed to evaluate the jobs. However, different scales might be required to evaluate different jobs. For E.g. all the managerial jobs might be evaluated on one scale, all the operational on another & the clerical jobs on one scale etc.

4. Factor Comparison Method: Here they determine & define the specific factors like mental requirements, skills, physical requirements, responsibilities, working conditions etc. Next they will identify the key jobs or benchmark jobs, which are well known & have an established pay rate in the organization. The factors in each benchmark job are compared & ranked based on their relative importance.


Process Of Job Evaluation:

- Preparation of a Job Evaluation Plan: The need for job evaluation is determined & detailed plan of how to go about the whole exercise, including the method to be adopted, is prepared;
- Job Analysis: Job Analysis provides the basic information for job evaluation. Job Analysis helps in understanding the tasks & responsibilities associated with a job.

- Job Description & Job Specification:
- Selection of Job Dimensions: The different factors which will be the basis for evaluating each job, have to be determined. Once these dimensions are selected, monetary values have to be attached to each of these jobs, as it is a reflection of its contribution to the organization & its significance.
- Implementation of the evaluation: The employees should be educated about the program to make them understand the basis & the procedure of job evaluation.
- Maintenance: The results of job evaluation have to be updated from time to time to match the changing organizational needs.

- Group Similar Jobs into Pay Grades: Once the committee has used job evaluation to determine the relative worth of each job, it can turn to the task of assigning pay rates to each job, however, it will usually want to first group jobs into pay grades. The committee will probably group similar jobs into grades for pay purposes. So, instead of having to deal with hundreds of pay rates, it might only have to focus on e.g. 10 or 12. A pay grade is comprised of jobs of approximately equal difficulty or importance as established by job evaluation.
- Price Each Pay Grade– Wage Curves: The next step is to assign pay rates to your pay grades. Wage curve can be used to help assign pay rates to each pay grade or to each job. The wage curve shows the pay rates currently paid for jobs in each pay grade, relative to the points or rankings assigned to each job or grade by the job evaluation. The purpose of wage curve is to show the relationships between (1) the value of the job as determined by one of the job evaluation methods & (2) the current average pay rates for your grades.
- Fine tune Pay Rates:-
It Involves (1) Developing Pay rates & (2) Correcting out of line rates.
1. Developing Pay Rates: Most employers do not pay just one pay rate for all jobs in a particular grade. For E.g. GE Medical wont want to pay all its accounting clerks, from beginners to long tenure, at the same rate. Instead, employers develop vertical pay ranges for each of the pay grades. These pay ranges are a series of steps or levels within a pay grade, usually based upon years of service. These pay ranges lets the employer take a more flexible stance in the labour market. It also let companies provide for performance differences between employees within the same grade or between those with different seniorities.
2. Correcting Out-of-Line Rates: The wage rate for a particular job may now fall well off the wage line or well outside the rate range for its grade. This means that the average pay for that job is currently too high or too low, relative to other jobs in the firm. For underpaid jobs, the solution is clear, raise the wage of underpaid employees to the minimum of the rate range for their pay grade.
Pricing Managerial & Professional Jobs:

Developing compensation plans for managers or professionals is similar in many respects to developing plans for any employee. The basic aim is the same i.e. to attract & keep good employees, & in job evaluation- classifying jobs, ranking them or assigning points to them is applicable to managerial & professional jobs. Compensation for a company’s top executives usually consist of 4 main elements. Base Pay- Includes the person’s fixed salary as well as often guaranteed bonuses such as 10% of pay at the end of quarter, regardless of whether or not the company makes profit.

Short term incentives- Are usually cash or stock bonuses for achieving short-term goals, such as year-to-year increases in sales revenue. Long term incentives aim to encourage the executive to take actions that drive up the value of the company’s stock. Executive benefits & perks might include supplemental executive pension plans, supplemental life insurance & health insurance without a deductible.

What Determines Executive Pay?

- Company Size;
- Company Performance;
- Business Strategy;
- Corporate Trends;
- Complexity & Unpredictability of the decisions they make.

Elements of Executive Pay:

Salary is traditionally the cornerstone of executive compensation; it is the element on which employers layer benefits, incentives, & perquisites- all normally conferred in proportion to base pay. Executive compensation emphasizes performance incentives more than do other employees pay plans, since organizational results are likely to reflect executives contributions more directly than lower-level employees. Boards are boosting the emphasis on performance based pay.

Compensating Professional Employees:

Professional Employees are those whose work involves the application of learned knowledge to the solution of the employers problems. Compensating Professional employees like engineers & scientists presents unique problems. Analytical jobs like these emphasize creativity, problem solving, & compensable factors not easily compared or measured. Employers can also use job evaluation for professional jobs. Compensable factors here tend to focus on problem solving, creativity, technical knowledge & expertise.

Competency Based Pay:
Competency Based Pay means the company pays for the employee’s range, depth, & types of skills & knowledge, rather than for the job title he or she holds. Experts variously call this competence- knowledge or skill-based pay. With competency based pay, an employee in a class-I job who could do class II work gets paid as a class II worker, not a class I. Competencies are demonstrable characteristics of a person, including knowledge, skills, and behaviors, that enable performance. Pay for knowledge pay plans reward employees for learning organizationally relevant knowledge- for instance Microsoft pays new programmers more as they learn the intricacies of Windows Vista. Skill-based pay tends to be used more for workers with manual jobs- thus carpenters earn more as they become more proficient at finishing cabinets.

Why Use Competency Based Pay?
- Support High-Performance Work system: ( Encourage employees to work self-motivated way, organizing work around teams, pushing more responsibility for things etc)

- Support Strategic Aims: ( Paying for skills, knowledge & competencies is more strategic )

- Support Performance Management: Performance management means aligning employees goals, training, appraisals & rewards so that they support the company’s strategic goals. There is not much a manager can do to “manage” the employee’s job duties. So, paying for competencies rather than duties gives the employer more control over managing the employee’s performance.

Competency Based Pay in Practice:

In practice, skill/competency/knowledge-based pay programs generally contain 4 main elements:-
- A system that defines specific skills, and a process for tying the person’s pay to his or her skill
- A training system that lets employees seek and acquire skills
- A formal competency testing system

- A work design that lets employees move among jobs to permit work assignment flexibility.

Competency Based Pay:

Pros:-
- Higher quality;
- High productivity;
- Higher Growth;
- High Motivations;
- Higher job Satisfaction;
- Healthy Competition.
Cons:-
- Implementation problems;
- The cost implications of paying employees for knowledge, skills & behaviours even if they are not used;
- Complexity of program –systems and evaluations and assessment;
- Uncertainty that the program improves productivity.
Concepts of Wages:

Various forms of wage & salary policies have been developed, differing according to such factors as the nature of the business its location, needs of the workers, capacity of the employee to pay, & general economic conditions prevailing in a country.

- Minimum Wage:- “ A minimum wage is that wage which is sufficient to cover the bare physical needs of a worker and his family”. It was observed that the minimum wage must provide for the preservation of the efficiency of the worker. (education, medical requirements & amenities). It is the wage which has to be paid to the workers irrespective of the capacity of the industry to pay.

- Fair Wage:- Fair Wage is understood in 2 ways. In a narrow sense, wage is fair if it is equal to the rate prevailing in the same trade & in the neighbourhood for similar work. In a wider sense, it will be fair if it is equal to the predominant rate for similar work throughout the country & for the trades in general.

- Living Wage:- Living Wage is a step higher than fair wage. Living Wage may be described as one which should enable the wage earner to provide for himself/herself & his/her family not only the bare essentials of like food, clothing, & shelter, but a measure of frugal comforts including education for children, protection against ill health, requirements of essential social needs, & measure of insurance against the more important misfortunes including old age.

Principles of Wage Administration:

- Wage Policies should be carefully developed, having in mind the interests of (a) Management as the representative of the owners (b) the employees, (c) the consumers (d) the community;
- Wage Policies should be clearly expressed in writing to ensure Uniformity & Stability;
- Management should see to it that the employees know & understand the wage policies;
- Wage policies should be evaluated from time to time to make certain that they are adequate for current needs;
- Matching Employee Expectations;
- Reinforcing positive employee behaviour & contribution to the organization;

- Eliminating any discrepancies in wage administration in the organization.

Basic Wage Plans:

- Time Wage Plan: Under this system, the worker is paid for the amount of time spent on the job. This is the oldest & most common system & the wages are based on a certain period of time during the course of work. The period of time may be an hour, a day, a week etc & the wage rate will depend upon time fixed for wok is completed irrespective of output or completion of the work.

- Piece Wage Plan: Under this system, the output of work is the basis of wage payment. A worker is paid according to the amount of work completed or the number of units turned out irrespective of time taken. Though the time is not essence in this system, it is assumed that the worker will not take more than average time to complete the job. The earnings of a worker depend upon the speed of his work & his own skill & efficiency.

- Skill base pay: Under this system, employees are compensated for their job related skills. This is also called knowledge based pay. Under a typical skill based system, companies hire employees at below-market rates. Once they gain extensive knowledge & new skills, they are promoted & rewarded with an increased pay.

- Competency based pay: Competency can be defined as the knowledge, skills & behaviour of an individual that contribute to a worker’s performance. The competencies of the best performing employee are indentified & the employee is compensated for these competencies that he/she brings to the job.