PROJECT REPORT

KHANEWAL ROAD
MULTAN

PAK ARAB FERTILIZERS LIMITED

QUALITY IS OUR STRENGTH

A COMPENSATION MANAGEMENT VIEW

SUBMIT TO: SIR FAHAD LABAR
SUBMIT BY: GROUP NO: 7
Syed Mughees Ul Hassan Roll No 55
Aiza Komal
Roll No 20
Maryam Fatima
Roll No 56
Azhar Ilyas
Roll No 51
Zulqarnain Ali
Roll No 30

ALFALAH INSTITUTE OF BANKING AND

FINANCE
ii

BAHAUDDIN ZAKARIYA UNIVERSITY MULTAN

FOREWORD
This report contains Compensation Management System of Pak Arab in detail
as far as we could find out. We personally visited Pak Arab, collected data
from internet and necessary documents provided to me by Pak Arab officials;
that heled me in completion of this report. The report starts with a slight
introduction to fertilizer industry and then Pak Arabs introduction is given,
highlighting its salient features, facilities, products and management.
Afterwards a comprehensive detail of Pak Arabs Compensation management
has given. The report concludes with my findings about Pak Arabs flaws and
some of my recommendations to eliminate these flaws. I dedicate this report
to my teacher Sir Fahad Labar who assisted me throughout the semester in
Compensation Management course, and my Group Fellows who were always
there to help me out in ups and downs.

TABLE OF CONTENTS
1. COMPANY INTRODUCTION:.........................................................................1
2. CORPORATE VALUES:.................................................................................3
3. COMPANY EMPLOYEES:...............................................................................4
4. NUMBER OF EMPLOYEES:...........................................................................4
5. TYPE OF EMPLOYEES:.................................................................................4
6. SELECTION CRITERIA:.................................................................................7
7. PAY PHILOSOPHY:........................................................................................7
8. COMPENSATION STRUCTURE:....................................................................8
9. BENEFITS OF EMPLOYEES:..........................................................................8
10.

PERFORMANCE EVALUATION:................................................................10

11.

EMPLOYEE RECOGNITION PROGRAMS:..................................................11

12.

EMPLOYEE DEVELOPMENT PROGRAMS:.................................................11

13.

OVER ALL ANALYSIS:.............................................................................12

1.

COMPANY INTRODUCTION:

Pak Arab Fertilizers Limited was established as a result of protocol concluded

and signed on November 15, 1972 by the Government of Pakistan to further
strengthen and develop friendly ties between Islamic Republic of Pakistan
and state of Abu Dhabi. A Memorandum of Understanding was concluded
between Pakistan Industrial Development Corporation (PIDC) and Abu Dhabi
National Oil Company Limited (ADNOC) on March 7, 1973. A participation
agreement emerged on November 1, 1973 to establish a joint venture for the
expansion and modernization of the old Natural Gas Fertilizer Factory (NGFF)
at Multan. The Company was incorporated on November 12, 1973.
Subsequently, PIDC assigned 52% of its shares to National Fertilizer
Corporation (NFC) of Pakistan and ADNOC assigned 48% of its share to
1

International Petroleum Investment Company, with a paid up capital of

Rs.743.061 million. Under the privatization policy of Government of Pakistan,
Pak Arab Fertilizers Limited was privatized on July 14, 2005 at a cost of
Rs.14.125 billion. It was acquired by the consortium of Fatima Group and Arif
Habib Group. Under the new management, Pak Arab Fertilizers Limited has
undergone extensive modernization and new improved processes have been
introduced to maximize the output while minimizing the negative impacts on
the environment. For this a Clean Development Mechanism (CDM) plant was
installed, which is the first project of its kind in Pakistan. Basic aim of this
project is the abatement of N2O and NOX emissions from the stack gases of
Nitric Acid plant. The reduction of greenhouse effect of these gases shows
the new managements commitment towards a cleaner environment. Pak
Arab Fertilizers Limited is located at Khanewal Road, Multan. The site area
comprises 302 acres, which includes area for the factory and the housing
colony with all amenities including medical Centre, school, management and
staff clubs for recreation of employees and their families, etc.
For the last 38 years, Pak Arab Fertilizers Limited has been the only fertilizer
company in Pakistan producing compound fertilizers, Calcium Ammonium
Nitrate (CAN) and Nitro Phosphate (NP). The Plant also produces Urea.
Area Factory: 172 Acres
Housing colony: 130 Acres
Product Line:
MOP,
UREA

SOP,

DAP,

CAN,

NP,

1.1. COMPANY FEATURES

The company was incorporated on 12 November 1973 with total authorized
capital of Rs 1000 Million Pak Arab had equity share capital participation of
Pakistan through NFC & Abu-Dhabi through ADNOC in the ratio of 52% and
48% respectively, with a paid up capital of Rs 743.061 Million. The project
was completed at a total cost of RS 2511.44 Million with a foreign exchange
of Rs 1292.25 Million. It is the largest project of its type in the country. It is
the project producing compound fertilizers such as Nitro-phosphate, Calcium
Ammonium Nitrate & Urea.
1.2. PRIVATIZATION OF PAKARAB
On July 14, 2005 Pak Arab Fertilizer was privatized at a cost of Rs 14.125
billion under privatization policy of Government of Pakistan, acquired by
Reliance Exports (Private) Limited under the umbrella of Fatima Group and
Arif Habib Group. The company has provided employment opportunities to
more than 2000 persons, which also includes indirect employment with
contractors. In addition to above, establishment of this fertilizer complex has
resulted in economic activity in terms of fertilizers and other factory related
trading / supplies.
1.3. PLANTS IN OPERATION
These plants that are working efficiently:
o
o
o
o
o
o

Urea Plant
Ammonia Plant
Nitro Phosphate Plant
Nitric Acid Pant
Calcium Ammonium Nitrate Plant
Power House

Along with the fertilizers plants, Pak Arab has its own Powerhouse, which has
the capacity to produce 27 Mega Watts (Turbo Generators of 9 MW each) of
electricity.

2.

CORPORATE VALUES:

A commitment to honesty, ethical conduct and integrity is the supreme

objective of the Company. To assist employees in achieving this objective and
implement its commitment, the Company has developed a comprehensive
Code of Conduct which guides the behavior of directors, officers and
employees of the Company and is reproduced in the form of a Policy
Statement of Ethics and Business Practices.
2.1. INTEGRITY
Our actions are driven by honesty, ethics, fairness and transparency
2.2. INNOVATION
We encourage creativity and recognize new ideas
2.3. TEAMWORK
We work collectively towards a common goal
2.4. SAFETY, HEALTH, ENVIRONMENT & CSR
We care for our people and the communities around us
2.5. CUSTOMER FOCUS
We believe in listening to our customers and delivering value in our products
and services
2.6. EXCELLENCE
We strive to excel in everything we do
2.7. VALUING PEOPLE
We value our people as our greatest resource.

3.

COMPANY EMPLOYEES:

WE believe that highly engaged employees are the key ingredient in

professional development and business success. Therefore, we invite our
employees to contribute their best and to avail the opportunities for
improvement and growth. We are an equal opportunity employer and
promote gender diversity, self-development and innovation. We provide
employees with tools, techniques, and training to master their current jobs,
broaden their skills, and advance their career goals.
WE consider our Companys assets, both physical and intellectual, very
valuable. We have, therefore an obligation to protect these assets in the
interest of the Company and its shareholders.
Protection of the Companys information is important for our business. All
employees are expected to know what information is proprietary and which
must not be disclosed to unauthorized sources. Employees are responsible
for applying all available tools to manage the Companys information
resources and records.
The Audit committee of the Board ensures the compliance of above
principles.

4.

NUMBER OF EMPLOYEES:
o Executive Employees: 151
o Office Workers: 181
o Daily Wages Workers: 4140 (According to The Plant Requirements)

5.

TYPE OF EMPLOYEES:

5.1. ORGANIZATIONAL STRUCTURE

Pak Arab Fertilizers Limited (PFL) is a private limited company having a Board
of Directors comprising of 11 members including the Chairman:
o Six Members Representing NFC
o Five Members from ADNOC (Abu Dhabi)
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The Board of Directors has appointed a full time managing director. The
Managing Director as Chief Executive of the company is responsible for the
efficient management and operation of the plants. There are four general
manager assisting MD. They are:
o
o
o
o

GM
GM
GM
GM

Finance
Manufacturing
Commercial
Audit

Under each general manager, there are two or three senior managers. Under
senior manager, there are manager then assistant managers and finally
supervisors. As our concern is with accounts department only, we will discuss
only the concerned department sketch.
The Managing Director, in accordance with the Memorandum and Articles of
Association, is the Chief Executive of the company and is answerable to the
Board of Directors. The company has two functional offices i.e. the corporate
office presently located at Lahore and manufacturing plant at Multan.
The organizational structure of corporate office is broadly designed into four
cells based on expertise and functions, namely the Personnel Group, headed
by Personnel Manager, the Finance Group, headed by General Manager
(Finance), the Planning Group, headed by General Manager (Planning), and
the Secretarial Group, headed by Secretary.
Besides evolving companys Management policies and procedures, the
function of the corporate office is also to render advisory services to the
Manufacturing plant. The Functional heads in the corporate office report to
Managing Director directly.
The board of directors has appointed a full time chairman and a managing
director, who is vested with adequate powers to manage the day to day
affairs of the company on sound commercial lines. The Managing Director as
Chief Executive is assisted by divisional heads i.e. General Manager (Mfg.),
6

General Manager (Finance), and General Manager corporate & commercial

(Company Secretary) and General Manager (Engineering). The Managing
Director administers and is responsible for the efficient management and
working of Plants. There are four major Divisions:
o
o
o
o

Manufacturing Division
Internal Audit Division
Finance Division
Corporate Affairs & Commercial Division (See organogram)

Under these divisions following departments are currently working

5.2. MANUFACTURING DIVISION
o
o
o
o
o
o
o
o
o

Safe Operation & Environment Department

Production (Plant and their relative storage areas)
Materials Department
Inspection Cell
Technical & Planning Department
Personnel & Industrial Relation Department
Security Department
General Administration Department
Procurement / commercial Department

5.3. FINANCE DIVISION

o
o
o
o
o

Management system Department

Education Department
Finance Department
Accounts Department
Internal Audit and commercial divisions are not further divided into
sections or departments.

5.4. MANAGEMENT TEAM

HEAD OFFICE
2nd Floor Trust Plaza, LMQ Road,
Multan
Chief Executive Officer (CEO)
Mr. Fawad Ahmad Mukhtar
Advisor to CEO
Muhammad Abad Khan
Chief Financial Officer

PLANT SITE
Khanewal Road, Multan
General Manager Manufacturing
Farrukh Iqbal Qureshi
Senior Production Manager
Mr. A. Majid Tariq (F.C.A)
Manager Training & Laboratory
7

Arif Hamid Dar

Director Marketing
Muhammad Zahir

Mr. Muhammad Abad Khan

General Manager (HR / Admin)
Hafiz Muhammad Hanif
Senior Electrical & Instrument
Manager
Mr. Nasir Butt
Senior Technical Services
Manager
Mr. Muhammad Saleem Zafar
Maintenance Manager
Mr. Muhammad Tariq Javed

Company Secretary
Ausaf Ali Qureshi
Director Technical
Mr. Pervaiz Iqbal
Group Head of Human Resource
Mr. Haroon Waheed

6. SELECTION CRITERIA:
For hiring new employees, no informal method is practical here, personal
influence is more considered and when new ideas are required they hire
people from outside.
Selection criteria are developed from the knowledge, skills, and abilities
identified in the job analysis and stated in the job description.
To develop selection criteria, look at each of the knowledge, skills, and
abilities on the job description and define the standard for successful
performance of the related functions.
o
o
o
o
o
o

Values
Accountabilities
Key selection criteria
Qualifications
Skills
Experience

7. PAY PHILOSOPHY:
The philosophy behind Pak Arabs compensation program is to create a
compensation program that supports the companys mission and values. We
believe our compensation program is a management tool that when aligned
with an effective communication plan is designed to support, reinforce, and
8

align our values, business strategy, operational & financial needs with a goal
of growth and profitability.
7.1. Competitive Set:
Pak Arab will benchmark the Multan metro area and target Fertilizer as our
industry and an organization size of FFCs and NFCs employees. We believe
that this definition of competitive set is most representative of our market.
7.2. Degree of Competitiveness:
Pak Arab will use the 50th percentile of base salary as the target for
employee base pay. Individual placement against that target will be based on
experience and performance.
7.3. Variable Pay Design: Pak Arab will use variable pay as a financial
incentive for rewarding individuals for individual and company goal
attainment based on the level within the organization.
Position Level
Individual Contributor
Supervisor or Manager
Director
Executive

Variable Pay attribute

0-15%/
10-25%
20-40%
50-75%

8. COMPENSATION STRUCTURE:
Company says that the body also pays to employees as much satisfactory
salary, and they are allowed to have one leave if they wish, if worker do not
take leave it is accumulated in the leave bank.
Pay Ladder of Pak Arab:
Grade
Executive
Management
Officer
Daily Wages

Finance Division
70K 200K
40K 70K
20K 40K

Production Plant
70K 200K
40K 70K
20K 40K
360/Day 480/Day

9. BENEFITS OF EMPLOYEES:
Social Facilities
Workers are also provided with best
o
o
o
o
o

Medical facilities
Educational facilities
Recreational facilities
Communicational facilities
Housing facilities

9.1. FOR MEDICAL AID

They have in their previous a medical center where free checkups and
medicines are provided. Since in the factory, dangerous fertilizers are made
so people are instructed strictly to be careful about safety and if any misshappening occurred then immediate medical aid is provided.
9.2. EDUCATIONAL FACILITY
In order to provide the better education to the children of the workers. They
have managed their own transport facilities for their workers children so that
they can get the desire education therefore many students go to schools,
colleges and university by utilizing the transport facility provided by the
company.
9.3. Quality of Life
There is separate & well established housing colony for people working
there. Employees living in this colony are provided with many facilities like
electricity, Sui gas, local telephones are free. There is a market where all the
basic necessities of life are available. Three bank branches such as MCB, NBP
& HBL are there, for recreational activities. Two clubs are there. One of them
is for the officers and one for the workers. Functions are held on different
occasions. Three schools one is English medium and the other two are of
Urdu medium. Employees whose children are studying outside the colony
schools have been provided with the proper transportation system.
Employees like engineers who are working but live outside the colony are
10

given separate transportation facility. Along with different facilities there is a

blood bank, welfare trust and check posts are there. Two rest house are
available for company.
9.4. RECREATIONAL FACILITIES
For recreational purposes, the parties and informal functions are arranging so
that workers can feel relax and can talk on each & every topic freely.
9.5. COMMUNICATION FACILITY
For interdepartmental communication both formal, and informal
communication is there. Means interdepartmental level open communication
is used. Company has its own telephone exchange.
9.6. HIRING
For hiring employees, no informal method is practical here, personal
influence is more considered and when new ideas are required they hire
people from outside.
9.7. PROFIT SHARING
Workers are also share profits by taking shares. The actually the bonus is
given to employees and in the shares.
As it is concerned with the complex chemical project therefore the time
consciousness is always taken into account.
9.8. TIMING
The factory runs for 24 hours a day which is accompanied by a day a week.
There are 365 days in a year out of which 330 days are fixed for the working
while 35 days are fixed for the shutdown. Even through it is shut down but
most of the work is done in these 35 days.
Previously shutdown was done in April and may but now it is done in
November and December. Cleanliness of pipes, turbines and machines is
done wear & tear and depreciation is to be recovered. On time delivery is
done of the high lighting feature of Pak Arab fertilizer limited. As it is
11

concerned only with the production no customer contact is there. The

responsibility of delivery and distribution goes to NFML. NFML order the DFL
for the delivery of the fertilizer which is taken by NFML wagons, trucks and
pickups. NFML is now directly responsible for the delivery of the fertilizer if it
is excess of order then it is stored in NFML warehouses.

10.

PERFORMANCE EVALUATION:

The rating scale for Performance Planning and Review is made up of five
factors: Poor, Needs Improvement, Meets Requirements, Exceeds
Requirements, and Outstanding. Any factor rated poor or needs
improvement MUST have performance comments. For any factor,
performance comments should support the rating given.
Poor:

Has destroyed equipment through misuse during this rating period.

Wastes supplies.

Deleted required software in error.

Never services equipment.

Needs Improvement:

Doesn't heed warning messages on equipment.

Sometimes forgets to turn equipment off at the end of the day.

Doesn't always get equipment serviced as recommended by the

manufacturer.

Meets Requirements:

Takes good care of equipment and uses supplies efficiently.

Turns off and secures all equipment at the end of the shift.

Exceeds Requirements:

Quickly learns new software programs.

Uses queries and reports to maximize efficiency in the office and find
errors.

12

Outstanding:

Is able to troubleshoot and solves all work related problems quickly

and efficiently.

Reports problems immediately if to the appropriate personnel.

11.

EMPLOYEE RECOGNITION PROGRAMS:

11.1. PROMOTIONS
For promotion employees have to want promotion is usually being the bases
of seniority and very good performance.

12.

EMPLOYEE DEVELOPMENT PROGRAMS:

12.1. TRAINING
Training is a very important point of the organization operations. Inside the
factory there is a technical training center for the workers to enhance their
abilities. It is modern computerized equipment to provide the best
knowledge with respect to the current requirements. Short training courses
are there. Job turnover is also there too more the personal more effective and
experienced. To broaden their views, if some specific training is required and
not possible here. Thus they send the workers on the behalf to foreign
technical Institutes. So therefore employees turnover is very low.

13.

OVER ALL ANALYSIS:

To manage the work force is a crucial task in order to make the smooth
running of the business. Company said that their better management
departmentalization is necessary so that every department in charge can
hear a good control on the employees. All the general manager of
manufacturing.
In the factory 1500 permanent & 500 casual a daily labor is there. In order to
decrease the turnover of the labor they have provided the good working
conditions so that they can be satisfied with their work, so company has
13

benefited them with many facilities. Which are enriching their physical
mental & psychological abilities.
o Pak Arab has excessive staff than required. Moreover, there is uneven
distribution at place where one man can do the job three people are
working there. And at some places a job of three persons is done by
one man. The uneven distribution results in de-motivation of the
employees and gradually his interest in his work decreases that effects
the efficiency. In order to Increase the efficiency of worker, job should
be assigned to its caliber to develop his interest in work that increase
the output and decrease the overall cost of organization.
o There are very few programs for career development of the employees.
People working in one section or department from years are still with
the same knowledge and style of doing job. There should be proper
career planning of employee that not only sharpens the skills of the
employee & improve the efficiency but also results in better and
improved output for the organization
o Too much centralization is there in the organization. Managers at low
level are not authorized to make decisions even about minor things,
they have to consult top management and give justification on small
matters. Involvement of top management and reaching at the final
decisions is time consuming and sometimes results in heavy losses.
Also man at low level with responsibility and no decision making power
gradually loses interest in his job and is de-motivated that effects his
performance. So there should be delegation of authority up to certain
extent that enables manager to take timely decisions at the spot with
confidence. When they take decisions they feel themselves more
involved and responsible for the job and in turn their efficiency
increases.
o There is no strict means to force employees to take safety measures
and show safety rules. Management should take necessary action in
implementing the safety rules in the organization.
14