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