UNIT – IVUNIT – IV
SUSTAINING SUSTAINING EMPLOYEE EMPLOYEE INTERESTINTEREST
I. Arul Edison Anthony Raj,I. Arul Edison Anthony Raj,MBA, M.Phil, PGDIB, ADHRM (UK).
Assistant Professor,EGS Pillay Engineering College,
Nagapattinam.
COMPENSATION: AN OVERVIEWCOMPENSATION: AN OVERVIEW
• Compensation administration is one of
management’s most difficult and challenging human
resource areas because it contains many elements
and has a far – reaching impact on an organization’s
strategic goals.
Cont.,Cont.,
• Compensation is the total of all
rewards provided to employees
in return for their services.
• The overall purposes of
providing compensation are to
attract, retain and motivate
employees.
Components of a Total Components of a Total Compensation ProgramCompensation Program
EXTERNAL ENVIRONMENTINTERNAL ENVIRONMENT
CompensationFinancial Non – Financial
Direct Indirect (Benefits) The Job Job EnvironmentWages Legally required benefits Skill Variety Sound PoliciesSalaries Social Security Task identity Competent employeesCommissions Unemployment compensation Task significance Congenial Co-workersBonus Workers Compensation Autonomy Appropriate status symbols
Family & Medical Leave Feedback Working Conditions VOLUNTARY BENEFITS WORKPLACE FLEXIBILITY Payment for Time Not Worked Flextime Health Care Compressed Workweek Life Insurance Job Sharing Retirement Plans Flexible Compensation Employee Stock Option Plans Telecommunicating Supplemental Unemployment Benefits Part – Time Work Employee Services Modified Retirement Premium Pay Unique Benefits
Definitions and ConceptsDefinitions and Concepts
• WAGE
• According to Indian Labour
Organization (ILO) defined the
term wage as “the remuneration paid
by the employer for the services of
hourly, daily, weekly and fortnightly
employees.” It also means that
remuneration paid to production and
maintenance or blue collar employees.
Cont.,Cont.,• Salary• The term salary is defined as the remuneration paid to the
clerical and managerial personnel employed on monthly or annual basis.
Components of SalaryComponents of Salary
• Earnings: Earnings are the total amount of
remuneration received by an employee during a
given period. These include • Salary (Pay),
• Dearness Allowance (DA),
• House Rent Allowance (HRA),
• City Compensatory Allowance (CA),
• Other Allowance,
• Overtime Payments, etc.
Cont.,Cont.,
• Nominal Wage: It is the wage paid or received in
monetary terms. It is also known as money wage.• Real Wage: Real wage is the amount of wage arrived after
discounting nominal wage by the living cost. It represents
the purchasing power of money wage.• Take Home Salary: It is the amount of salary left to the
employee after making authorized deductions like
contribution to the provident fund, life insurance
premium, income tax and other charges.
Objective of Wage & Salary Objective of Wage & Salary AdministrationAdministration
• To acquire qualified competent personnel;
• To retain the present employees;
• To secure internal & external equality;
• To ensure desired behaviour;
• To keep labour and administrative costs;
• To protect in public as progressive employers;
• To pay according to the content and difficulty;
• To facilitate pay roll;
• To simplify collective bargaining;
• To promote organization.
Need for Sound Salary Need for Sound Salary AdministrationAdministration
• Most of the employees satisfaction and work performance
are based on pay;
• Internal inequalities in pay are more serious to certain
employees;
• Employees compare their pay with that of others;
• Employees act only to gross external inequalities;
• Employees compare the pay of different employees with
their skill, knowledge, performance, etc.
Equity in Financial Equity in Financial CompensationCompensation
• External Equity:
• External equity exists when a firm’s
employees receive pay comparable to
workers who perform similar jobs in
other firms.
• Internal Equity:
• Internal equity exists when employees
receive pay according to the relative
value of their jobs within the same
organization.
Cont.,Cont.,
• Employee Equity:
• A condition that exists when individuals
performing similar jobs for the same firm
are paid according to factors unique to the
employee, such as performance level or
seniority.
• Team Equity:
• Equity that is achieved when teams are
rewarded based on their group’s
productivity.
COMPENSATION COMPENSATION POLICIESPOLICIES
• A Compensation policy provides general guidelines for
making compensation decisions.
• Employees may perceive their firm’s compensation
policies as being fair and unbiased and others may
have different opinions.
PAY LEADERSPAY LEADERS• Pay leaders are organizations that pay higher wages and
salary than competing firms.
• Using this strategy, they feel that they will be able to
attract high – quality, productive employees and thus
achieve lower per – unit labour costs.
• Higher – paying firms usually attract more highly
qualified applicants than lower – paying companies in
the same labour market.
WAGE BOARDSWAGE BOARDS• This is one of the important institutions set up by the
Government of India for fixation and revision of
wages.
• The wage boards fix and revise various components
of wages like basic pay, dearness allowance, incentive
earnings, overtime pay, house rent allowance and all
other allowances
PAY PAY COMMISSIONSCOMMISSIONS
• This is another institution which fixes and revises the
wages and allowances to the employees working in
government and government department.• The First Pay Commission (1946)
• The Second Pay Commission (1957)
• The Third Pay Commission (1970 – 73)
• The Fourth Pay Commission (1983)
• The Fifth Pay Commission (1996)
• The Sixth Pay Commission (2006)
WAGE INCENTIVESWAGE INCENTIVES• The term wage incentives has been used both in
restricted sense of participation and in the widest
sense of financial motivation.• According to the National Commission on Labour
defined, “wage incentives are extra financial
motivation. They are designed to stimulate human
effort by rewarding the person over an above the time
rated remuneration, for improvements in the present
or targeted results.”
Objectives of Wage Objectives of Wage Incentive SchemesIncentive Schemes
i. To improve the profit of a firm through a reduction in the unit costs of labour and material or both;
ii. To avoid or minimize additional capital investment for the expansion of production capacity;
iii. To increase a worker’s earnings without dragging the firm into a higher wage rate structure regardless of productivity and
iv. To use wage incentives as a useful tool for securing a better utilization of manpower, better production scheduling and performance control, and a more effective personnel policy.
Need for Wage Incentives Need for Wage Incentives in Indiain India
• The efficiency of the Indian worker is very low, and needs to be raised. Wage incentives can play an important part improving his efficiency.
• The average Indian worker is financially very poor. Financial incentives therefore are likely to tempt him to work better.
• A proper application of wage incentive schemes can so affect the prices that the community would be benefited.
Profit SharingProfit Sharing• A compensation plan that results in the distribution of
a predetermined percentage of the firm’s profit to
employees.
• Many firms use this type of plan to integrate the
employees interest with those of the company.
• Profit – sharing plan can aid in recruiting, motivating,
and retaining employees, which usually enhance
productivity.
Gain SharingGain Sharing
• Plans designed to bind employees to the firm’s
productivity and provide an incentive payment based
on improved company performance.
• It is one of the most popular company – wide plans.
BonusBonus• ‘Bonus’ is an extra payment to the workers beyond the normal
wage.
Payment of Bonus Act, 1965:
• Employee drawing up to ` .1,600 are eligible for bonus.
• Employees dismissed for fraud, theft etc., are disqualified for bonus.
• Minimum bonus payable is 8.33% of the salary & max 20%.
• The act was amended in the year 1985, according to this
amendment, the employees whose salary is up to `. 2,500 are
eligible for bonus. If the salary of an employee is beyond `.1,600, it
will be taken as `.1,600 for the purpose of calculation bonus.
EXECUTIVE EXECUTIVE COMPENSATIONCOMPENSATION
• Executive skill largely determines whether a firm will
prosper, survive, or fail.
• A company’s program for compensating executives is
a critical factor in attracting and retaining the best
available talent.
JOB EVALUATIONJOB EVALUATION• Job evaluation deals with money and work. It determines
he relative worth or money value of jobs.
• The International Labour Organization defined job
evaluation as “as attempt to determine and compare
demands which the normal performance of a particular job
makes on normal workers without taking into account the
individual abilities or performance of the workers
concerned”.
Objectives of Job EvaluationObjectives of Job Evaluation
• To compare the duties, responsibilities and demands of a
job with that of other jobs.
• To determine the hierarchy and place of various jobs in
an organization.
• To determine the ranks or grades of various jobs.
• To minimize wage discrimination based on sex, age, caste,
region, religion etc.
Procedure of Job EvaluationProcedure of Job Evaluation
• Analyze and Prepare Job Description: (Job
evaluation is the outcome of job analysis)
• Job analysis provides information necessary for appraising
jobs like skills, knowledge, abilities, and aptitude.
• Job description provides the information relating to duties
and responsibilities.
• Job specification provides information relating to employees
minimum acceptable qualities.
Procedure of Job EvaluationProcedure of Job Evaluation
• Select and Prepare a Job Evaluation Plan: (Job
should be divided into detailed tasks and positions)
• It also includes selection of factors, elements needed for the
performance of the jobs, determining the money value of
each factors and element and writing instructions for
evaluations.
Procedure of Job EvaluationProcedure of Job Evaluation
• Classify Jobs:
• Classify the jobs in a sequential order based on their
significance and contribution to the organization. This
includes assigning money values to each class.
• Install the Programme:
• Educate the employees, win their confidence and then put the
programme into operation.
Procedure of Job EvaluationProcedure of Job Evaluation
• Maintain the Programme:
• This step involves updating the job evaluation programme,
bring modification based on the changes in the conditions
and situations. Make sure from time to time that the
programme runs smoothly and perfectly.
Job Evaluation Job Evaluation Methods/TechniquesMethods/Techniques
• These techniques are grouped into two classes viz., quantitative and non-quantitative.
Types of Job Evaluation Methods
Quantitative Non-Quantitative
Point Rating Factors Ranking Job Classification Method Comparison Method and
Method Grading Method
SOCIAL SECURITY & SOCIAL SECURITY & WELFARE WELFARE
(EMPLOYEE BENEFITS)(EMPLOYEE BENEFITS)
• According to Lord Beveridge define social security, “is an attack on give giants viz., want, disease, ignorance, squalor and idleness.”
• Social Security Legislations in India:
• Workmen’s Compensation Act, 1923
• The Employees’ State Insurance Act, 1948
• The Employees’ Provident Fund and Miscellaneous Provision Act, 1952
• The Maternity Benefit Act, 1961
• The Payment of Gratuity Act, 1952
FRINGE BENEFITSFRINGE BENEFITSType of Fringe Benefits
Payment for Time Employee Safety and Welfare Recreational Old Age andNot worked Security Health Facilities Retirement BenefitsHours of Paid Shift Holiday Paid Work Holiday Premium Pay Vacation
Retrenchment Lay-off Compensation Compensation
Safety Workmen’s Health Measures Compensation Benefits
Canteens Credit Housing Educational Transportation Parties and Societies Picnic
Provident Deposit Gratuity Medical Benefit Pension Fund Linked Insurance
MOTIVATIONMOTIVATION
Performance = Performance = f(ability X motivation)f(ability X motivation)
Concept & Definitions Concept & Definitions • Motivation is derived from the word ‘Motive’.
• “A motive is an inner state that energizes, activates or
moves and directs or channels behaviour towards
goals.”
• According to the Encyclopedia of Management,
“motivation refers to the degree of readiness of an
organization to pursue some designated goal and implies
the determination of the nature and locus of the forces,
including the degree of readiness”.
Objective of MotivationObjective of Motivation
• To exploit the unused potential in people, they are to
be motivated.
• Needless to say that such exploitation results in
greater efficiency, higher production and better
standard of living of the people.
Types of MotivationTypes of Motivation
• Positive approach or
pull-mechanism or carat
• Negative approach or
push-mechanism or
stick
Positive ApproachPositive Approach• People are said to be motivated positively when they
are shown a reward and the way to achieve it. Such a reward may be financial or non-financial.
↣ Monetary motivation may include different incentives, wage plans, productive bonus schemes etc.
↢Non-monetary motivation may include praise for the work, participation in management, social recognition etc.
Negative ApproachNegative Approach• By installing fear in the minds of people, one can
get the desired work done.
• In this method of motivation, fear of consequences of doing something or not doing something keeps the worker in the desired direction.
THEORIES THEORIES OF OF
MOTIVATIOMOTIVATIONN
HOW TO MOTIVATE HOW TO MOTIVATE THE EMPLOYEES?THE EMPLOYEES?
WHAT ARE THE WAYS WHAT ARE THE WAYS TO MOTIVATE THEM?TO MOTIVATE THEM?
THEORIES OF THEORIES OF MOTIVATIONMOTIVATION
• Maslow’s Hierarchy of Needs.
• Herzberg’s Two – factor Theory.
• Vroom’s Expectancy Theory.
• Alderfer’s ERG Theory.
• Porter and Lawler’s Expectancy Theory.
• Equity Theory of Work Motivation.
Maslow’s Theory of Hierarchy Maslow’s Theory of Hierarchy of Needsof Needs
Herzberg’s Two – Factor Herzberg’s Two – Factor TheoryTheory
• Maslow’s theory has been modified by
Herzberg and he called it two – factor theory
of motivation.
• According to Herzberg’s,
• Dissatisfiers or Maintenance Factors
• Satisfiers or Motivational Factors
Herzberg’s Classification of Herzberg’s Classification of Maintenance & Motivational FactorsMaintenance & Motivational Factors
Maintenance Factors or Dissatisfiers
Motivational Factors or Satisfiers
Job Context Job Context
Extrinsic Factor Intrinsic Factors
Company Policy & Administration Achievement
Quality of Supervision Recognition
Relations with Supervisors Advancement
Peer Relations Work Itself
Relations with Subordinates Possibility of Growth
Pay Responsibility
Job Security
Work Conditions
Status
Vroom’s Expectancy Theory Vroom’s Expectancy Theory of Motivationof Motivation
• Victor Vroom felt that content models were
inadequate explanations of the complex process of
work motivation and he developed the relatively new
theory of motivation.
• According to this theory, motivation of any
individual depends on the desired goal and the
strength of his expectation of achieving the goal.
Vroom’s Expectancy Theory Vroom’s Expectancy Theory of Motivationof Motivation
• Vroom’s model is built mainly on three concepts –
• Valance (The Strength of an Individual’s preference for a particular
outcome)
• Instrumentality (First level outcome in obtaining the desired second
level outcome)
• Expectancy (It is a probability or strength of a belief that a particular
action or effort will leave to a particular first level outcome)
• Motivation = Valance + Instrumentality + Expectancy
Alderfer’s ERG TheoryAlderfer’s ERG Theory
• Alderfer also feels that needs should be categorized and that there
is basic distinction between lower order needs and higher order
needs.
• Alderfer identifies three groups of needs, viz.,
• Existence (Survival or Physiological well-being)
• Relatedness (importance of interpersonal & social relationships)
• Growth (Individual’s intrinsic desire for personal development)
• That is why this theory is called ERG Theory.
The Porter and Lawler Model The Porter and Lawler Model Expectancy TheoryExpectancy Theory
• All the content theories assume that satisfaction leads
to improved performance.
• However, it was later found that there is a very low
positive relationship between satisfaction and
performance.
• Lyman W. Porter and Edward E. Lawler exploded the
complex relationship between motivation, satisfaction
and performance.
The Porter and Lawler Model The Porter and Lawler Model Expectancy TheoryExpectancy Theory
• According to them, performance is a function of three
important factors, viz:
i. If an employee want to perform, he must be motivated.
ii. Motivation alone does not ensure performance and hence a
person must have the necessary abilities and skills as well.
iii. An employee must have an accurate knowledge of the
requirements of the job.
Equity Theory of Work Equity Theory of Work MotivationMotivation
JOB SATISFACTIONJOB SATISFACTION• Job satisfaction refers to a person’s feeling of
satisfaction on the job, which acts as a motivation to
work.
• It is not self – satisfaction, happiness or self –
contentment but satisfaction on the job.
Definition Definition
• Job satisfaction is defined as the “pleasurable
emotional state resulting from the appraisal of one’s
job as achieving or facilitating the achievement of
one’s job values.”
Factors of Job SatisfactionFactors of Job Satisfaction
• Job satisfaction refers to a general attitude
which an employee retain on account of many
specific attitudes in the following areas:
1) Job Satisfaction
2) Individual Characteristics, and
3) Relationships outside the job
CAREER CAREER MANAGEMENTMANAGEMENT
• Career:
• A general course that a person chooses to pursue throughout
his or her working life. Now a days, the career may change
several times due to technological changes or the individual’s
desire to do something different.
Definition Definition
• Career is progress or general course of action of a
person in some profession or in an organization.
Elaborating further, career includes the specific jobs
that a person performs, the kinds of responsibilities
and activities that comprise those jobs, movements and
transitions between jobs, and individual’s overall
assessment of and feelings of satisfaction with these
companies of his or her career.
Meaning for Career Meaning for Career ManagementManagement
• Career management is the process of enabling
employees to better understand and develop their skills
and interests and use them for the benefit of the
organization and self.
• Specifically, career management activities include
offering career development initiatives, providing
realistic career-oriented appraisals and posting open
jobs.
Components of Career Components of Career ManagementManagement
• Career management was classified by two essential
components, viz:
i. Career Planning, and
ii. Career Development.
Career Management = Career Planning + Career Development
Career PlanningCareer Planning• A career pertains to all the jobs that are held during
one’s working life.
• According to Edwin B. Flippo defined a career as, “a
sequences of separate but related work activities that
provides continuity, order and meaning in a person’s
life.”
Need for Career PlanningNeed for Career Planning
• To attract competent persons and to retain them in
the organization.
• To provide suitable promotional opportunities.
• To increase the utilization of managerial reserves
within an organization.
• To correct employee placement.
• To improve motivation and morale.
Process of Career Planning Process of Career Planning and Developmentand Development
• Analysis of individual skills, knowledge, abilities,
aptitudes etc.
• Analysis of career opportunities both within and
outside the organization.
• Relating specific jobs to different career opportunities.
• Establishing realistic goals both short-term and long-
term.
Career DevelopmentCareer Development
• Career development can be defined as an “ongoing
process by which individual progress through a series
of stages, each of which is characterized by a relatively
unique set of issues, themes or tasks.”
Steps involved in Establishing a Steps involved in Establishing a Career Development SystemCareer Development System
• There are four steps in establishing a career development system. They are;• Needs: This step involves in the conducting of a needs
assessment as a training programme.
• Vision: The needs of the career system must be linked with the interventions.
• Action Plan: An action plan should be formulated in order to achieve the vision.
• Results: Career Development programme should be integrated with the organization’s on-going employee training and management development programmes.
Career Development ActionsCareer Development Actions
i. Job Performance
ii. Exposure
iii. Resignations
iv. Change the Job
v. Career Guidance
Advantages of Career Planning Advantages of Career Planning and Developmentand Development
• For Individuals:
i. The process of career planning helps the individual to have
the knowledge of various career opportunities, his priorities
etc.
ii. It helps the organization identify internal employees who
can be promoted.
iii. It improves employee’s performance on the job by tapping
their potential abilities and further employee growth.
iv. It satisfies the employee’s esteem needs.
Advantages of Career Planning Advantages of Career Planning and Developmentand Development
• For Organisations: A long – term focus of career planning and development will increase
the effectiveness of human resource management.
More specially, the advantages of career planning and development for
an organization include:
i. Efficient career planning and development ensures the availability of
human resource will requires skill, knowledge and talent.
ii. By attracting and retaining the people from different cultures, enhances
culture diversity.
iii. Protecting employee’s interest results in promoting organizational
goodwill.
Career StagesCareer Stages
John Van Maanen and Edgar H. Schein have identified
five career stages that every individual comes across
during his/her career. The are:
1. Exploration stage,
2. Establishment stage,
3. Mid – Career (or advancement) stage,
4. Late – Career (or maintenance) stage, and
5. Decline (or disengagement) stage.
CAREER DEVELOPMENT CAREER DEVELOPMENT CYCLECYCLE
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75
Age
High
LowTransition from school
to work
Exploration Establishment
Mid-career Late-career Decline
Getting first job & being
accepted
Will Performance increase or
begin to declineThe elder
states person
Preparing for
retirement
Exploration StageExploration Stage
(Adolescence that is, from about 15 to 25 years)
This pre – work career exploration stage
involves people’s examining their needs and personal
goals and evaluating the alternatives and educational
choices available.
Establishment Establishment
(Early adulthood, that is from about 25 to 35 years)
This stage involves the individual’s entry into
the organization, socialization on the job, recognition
for effective work, possible promotions and transfer,
and achievement of full acceptance by the work group.
Mid – Career (or) AdvancementMid – Career (or) Advancement
(Later adulthood, that is from 35 to 45 years)
The advancement stage is characterized by
upward movement in the organization.
In this stage, the individual is not so concerned
with fitting into the organization as with moving up in
the organization. Those who are successful realize job
satisfaction and self-fulfillment. Many remain in this
stage for a long period.
Late – Career (or) MaintenanceLate – Career (or) Maintenance
(Middle age, from about 45 to 65 years)
The maintenance stage begins when people
detect cues that they are nearing the limit of their
advancement; their careers are beginning to level off,
and/or their need to compete is declining.
In this stage, people seek other means of
personal gratification, such as helping younger
employees or engaging in community and society –
oriented activities.
Decline (or) DisengagementDecline (or) Disengagement
(Old age, from about 65 years onwards)
The decline or late stage is the final stage in
one’s career, usually marked by retirement.
This disengagement stage may occur at
various ages, depending on the person’s degree of
success in previous stages.
DEVELOPMENT OF DEVELOPMENT OF MENTOR – PROTÉGÉ MENTOR – PROTÉGÉ
RELATIONSHIPSRELATIONSHIPS
• Mentoring is most often defined as a professional
relationship in which an experienced person
(The Mentor) assists another (The Mentoree /
Protégé) in developing specific skills and knowledge
that will enhance the less-experienced person’s
professional and personal growth.
What does a mentor do?What does a mentor do?
The following are among the mentor’s functions: • Teaches the mentoree about a specific issue
• Coaches the mentoree on a particular skill
• Facilitates the mentoree’s growth by sharing resources and
networks
• Challenges the mentoree to move beyond his or her comfort
zone
• Creates a safe learning environment for taking risks
• Focuses on the mentoree’s total development
Benefits of Mentoring Benefits of Mentoring ProgramsPrograms
Mentee / ProtégéMentee / Protégé MentorMentor OrganizationOrganization
Career advancement Personal fulfillment Development of manager
Persona support Assistance on projectIncreased commitment to
the organization
Learning and development Financial Rewards Cost Effectiveness
Increased Confidence Increased ConfidenceImproved Organizational
Communication
Drawbacks of Mentoring Drawbacks of Mentoring Programs Programs
OrganizationOrganization Mentee / Protégé Mentee / Protégé MentorMentorLack of Organization Support
Neglect of core job Lack of time
Creation of a climate of dependency
Negative experiences Lack of perceived benefits
Difficulties in coordinating programs with organizational initiatives
Unrealistic experiences
Over dependence on the mentoring relationship
Lack of skills needed for the mentoring role
Pressure to take on mentoring role
Costs and resources associated with overseeing and administering programs
Role conflict between boss and mentor
Resentment of mentees