ASSIGNMENT 01 NAME: REGISTRATION NO.: LEARNING CENTRE: LEARNING CENTRE CODE: COURSE: SUBJECT: SEMESTER: MODULE NO.

. DATE OF SUBMISSION: MARKS AWARDED: MANITA SHARMA 511116758 SMIT, DEW, MAJITAR 696 MBA Compensation Benefit (MU 0015) 4TH SEMESTER B1336 18th MARCH 2013

Directorate of Distance Education Sikkim Manipal University || Floor, Syndicate House Manipal 576 104

_____________________ Signature of Coordinator

_____________________ Signature of Centre

_____________________ Signature of Evaluator

Q1. List the various elements of compensations. Compensation refers to money and money-related extras. Thus, in addition to a persons base pay, compensation can include bonuses, merit increases, variables pay, and long-term incentives. Benefits include the remaining things, such as healthcare, pensions plans, stock options, and legal services. Elements of compensations. Base Pay: Base pay is the fixed rate of compensation that an employee receives for performing the standard duties and assignment of a job. Employers need to ensure that base-pay programs are designed to reveal market practices within their identified competitor group. To achieve this, organization must first identify their competitive market. This can be achieved by considering different factors, including the nature of the industry, geographic location, total employment and annual revenue. Next, they need to conduct an assessment of market pay practices for similar jobs within the recognized competitor group. Variable Pay: Performance-based variables pay continues to achieve momentum as a more successful way to identify and reward employee performance. Also known as payper-performance, variable pay is popular in todays corporate world. By doing this, the company rewards productivity and hard work and motivates the under-performers to work hard. Once limited to senior management levels, these incentive or bonus plans are being redesigned to reward the achievement of specific company or employee performance objectives. In a variables pay plan, the size of the award varies among employees and from one performance period to another, based on levels of achievement measured, as well as against pre established company and employee performance targets. The main idea of these programs is to reward innovation and hard work and to discourage mediocrity in performance.

Skill and Competency Based Pay: Skill based pay offers employees extra compensation when they have new skills specially recognized by the company as essential to achieve a competitive advantage. Skill based pay can be particularly useful for employees who like their current jobs but are looking for new challenges. Competency based pay is more widespread than skill-based pay because the criteria cover not only measurable skills but also knowledge, performance behaviors and personal attributes. It helps out employees to grow in the company and helps them to close the knowledge gaps needed for creative moves. Long-Term Incentive Compensation: Long-Term incentive compensation vehicles, such as stock-option plans and other deferred compensation plans, which are not usually used to reward performance, are achieving desirability among employees. These long

term incentive compensation plans appreciate employees based on company performance over a long term that is typically three to five years. Stocks-option plans are a common form of long term compensation at public organization. In most private companies, incentives that reflect stock plans are used for key employees. Q2. What is CTC? What are the components of CTC? Cost of Company (CTC) is the amount that you cost your company. That is, it is the amount that the company directly or indirectly spends on you because of employing you. Components of CTC:

Basic. Dearness Allowance (DA) House Rent Allowance (HRA) Medical Allowance. Conveyance Allowance. Special Allowance. Vehicle Allowance. Incentives or bonuses. Leave Travel Allowance or Concession (LTA / LTC) Telephone / Mobile Phone Allowance.

CTC includes the salary directly paid to the employees, the benefits directly attributable to the employees such as companys contribution to the provident fund, pension funds, medical insurance premium, and life insurance premium, cost of loans offered to the employees, telephone expenses for mobile phone connections and land-line connections, benefits offered for visiting the home country or hometown and so on. It is importance to note that even a lower CTC might mean a higher take home pay than an offer with higher CTC, if the other components are arranged differently. Similarly, you might not infer that with increase in salary or position, your pay as percentage of salary will increase/decrease. Hence you should look at both CTC as well as take home pay while negotiating. You also have to look at certain other criteria like work timings, number of holidays, employee centric schemes for further education, and so on. These factors must not be ignored even though you cannot put a money value to these factors. The total compensation includes the value of all the parks and benefits the employee is offered by the company in addition to the employees salary. The annual CTC is importance from the employees and the organizations perspective. This helps the organization as certain the HR cost and the employees understand what they are being offered, as they can benchmark their CTC

with other comparable organization. Employees can decide on other job offers depending on the CTC.

Q3. Explain the link between employee satisfaction and compensation. Ans : Linking employee satisfaction to compensation is being practiced since long time in most of the organizations. Compensation designs based on this link usually measure performance from a relatively objective side, such as sales or revenues, stock price, productivity gains and so on. While time performance is clearly an objective measure of performance, employee satisfaction is less objectives and more unusual. In fact, only a small handful of other firms use satisfaction to determine executive pay. Employee satisfaction has to be measured and evaluated before a new compensation plan can be implemented. Usually, an outside survey firm is hired to perform the annual survey for employees. The result of this survey is shared throughout the company. Thus, the top management will get to know how employees feel about the compensation. Employees satisfaction towards compensation is the most importance discourse for any company, because it is directly related to the performance that can be achieved by employees. Employee satisfaction with respect to compensation and rewards depends on the level of intrinsic and extrinsic results and how the employee views those results. These results have different values for different employees. For most of the employees, a responsible and challenging job may have neutral or even negative value depending on their education and previous experience by work providing intrinsic results. These employees might have a higher value for monetary rewards, whereas for a few others, a responsible and challenging position or the learning involved in the job may have very high positive values. Appropriate type of compensation plans, rewards and benefits are important for employees. Financially, the employees must be satisfied that their salaries are justified and are according to their contribution to the company. In this respect both employees and employer basically work towards the same goal for mutual benefit. Non financial rewards should also be given to employees for their contributions. For example, paid time off, recognition, employee of the month programs, nomination to training programs, career growth opportunities and so on. To provide incentives, these models support the existence of reward systems that structure compensation so that the employees expected value increases with observed employee productivity. Thus compensation can take many various forms, including appreciation from managers and co-workers, implicit promises of future promotion opportunities, feelings of self-

esteem that come from superior achievement and recognition and current and future cash rewards to performance.

Q4. What are the major issues related to repatriation? Issues Related to Repatriation: The term repatriation refers to bringing the employees who are on an international assignment back to the home country. It is very important to manage repatriation of employees in a very careful way. A poorly managed repatriation can lead to a feeling of frustration and cynicism in the employees. These feelings can be worse than the culture shock experienced in the first weeks of the assignment. It requires transparency in repatriation policy, sharing information on the career progression path, degree and support from the organization during the international tenure and so on. Many organizations develop and share documented guidelines with respect to overseas assignment, so that the employees understand the rules and regulations and also know what to expect. Often the impact of repatriation for the employees is far greater than that of the original move to the host location. The move abroad is usually exciting, involving a promotion or at the very least, an increase in peer status. Also, the day to day impact of life in the new culture is more keenly felt by the spouse and children, who interact with it on a far more personal basis. Moreover the employees will be chosen for a particular skill set, which are generally appreciated by the new team as an asset. As the project comes to an end, the expatriate starts the closure process of the post, probably handing over to a locally based team or manager. At this point, home country HR should be back in touch with the employee, to start the career planning for the home move. However, most companies provide no post assignment guarantees, and this has a dual impact on the employee. Firstly, they will feel deeply insecure since they may have taken their family away from extended family and friends, interrupted education programmers and careers. Another issue is the change in living standards. While setting down in a foreign country, they would have been offered financial incentives for the family to relocate from generous housing allowances to the payment of school fees. On returning home, these are taken away and the lifestyle that the family has become used to is radically reduced. This is particularly a factor for

Europeans coming home from the USA, where living standards are very high in comparison with the cost of living in most Europeans cities.

Q5. Write short notes on the following economics theories of wages: A. Residual Claimant Theory B. Subsistence Theory. Residual Claimant Theory The residual-claimant theory states that, after all other factors of production have received compensation for their contribution to the process; the amount of money left over will go to the remaining factors like wages. Smith suggested this theory for wages, since he assumed that rent would be deducted first and profits next. Walker worked on a residual theory of wages and suggested that the shares of the landlord, capital owner, and industrialist were determined independently and subtracted, thus leaving the remainder for an employee in the form of wages. However, it should be noted that any of the factors of production may be selected as the residual claimant assuming that independent determinations may be made for the shares of the other factors. Subsistence Theory. Subsistence theory, also known as the Iron Law of Wages was proposed by David Ricardo. According to this theory, employees should be paid towards their labor in producing goods so as to enable them to survive, there by neither increasing nor diminishing the human race. In other words, wages cannot fall below subsistence level because without subsistence, laborers will be unable to work. On the contrary, if the compensation increases beyond the subsistence level, then the number of employees would also increase, because the employees will be in a better position to support larger families. This would then causes the compensation to fall due to the increased supply of labor than demand. When the compensation falls below the subsistence level, employees would die of hunger, malnutrition and diseases. Hence, the number of employees available for employment will come down, which, in turn, would push up the demand for labor. This increase in demand will push up the compensation beyond subsistence level.

Q6. Mr.Sarvesh is the HR Manager of First Source Pvt. Ltd. He found that many of the employees have been doing the same work for a long period of time. He decided to enrich some of their jobs. List some of the strategies which can be used by Mr.Sarvesh to enrich jobs in organizations? Ans. Job enrichment

is a way to motivate employees by giving them increased responsibility and variety in their jobs. Many employers traditionally believed that money was the only true motivating factor for employees and that if you wanted to get more work out of employees, offering them more money was the only way to do it. While that may be true for a small group of people, the majority of workers today like to work and to be appreciated for the work they do. Job enrichment allowing the employees to have more control in planning their work and deciding how the work should be accomplished is one way to tap into the natural desire most employees have to do a good job, to be appreciated for their contributions to the company, and to feel more a part of the company team. Job enrichment has two separate dimensions which contribute to an employee's behavior at work. The first dimension, known as hygiene factors, involves the presence or absence of job dissatisfactory, such as wages, working environment, rules and regulations, and supervisors. When these factors are poor, work is dissatisfying and employees are not motivated. However, having positive hygiene factors does not cause employees to be motivated; it simply keeps them from being dissatisfied. The second dimension of Herzberg's theory refers to motivators, which are factors that satisfy higher-level needs such as recognition for doing a good job, achievement, and the opportunity for growth and responsibility. These motivators are what actually increase job satisfaction and performance. Job enrichment becomes an important strategy at this point because enriching employees' jobs can help meet some of their motivational needs. There are basically five areas that are believed to affect an individual employee's motivation and job performance: skill variety, task identity, task significance, autonomy, and feedback. Job enrichment seeks to find positive ways to address each of these areas and therefore improve employee motivation and personal satisfaction Skill variety involves the number of different types of skills that are used to do a job. This area is important because using only one skill to do the same task repeatedly can be quite boring, typically causing the employee's productivity to decrease after a period of time. However, using a variety of skills in a job will tend to keep the employee more interested in the job and more motivated. One way businesses are focusing on this area is through job rotation that is, moving employees from job to job within the company, thereby allowing employees a variety of tasks in their work and helping prevent boredom. While this process can be costly to the company because employees must be trained in several different areas, the cost tends to be balanced by the increase in morale and productivity.