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Q: What do you mean by living wage?

Explain

Ans. Living wages has been defined differently by different people in different countries. The best
definition is given by Justice Higgins which reads "Living wage is a wage sufficient to ensure the
workman food, shelter, clothing, frugal comfort, provision for evil days etc. as regard for the skill of an
artisan, if he is one". According to

Fair Wages Committee Report: "The living wage should enable the male earner to provide himself and
his family not merely the basic essentials of food, clothing and shelter but a measure of frugal comfort
including education for the children, protection against ill-health, requirement of essential social needs
and measures of insurance against old age." Thus living wages means the provision for the bare
necessities plus certain amenities considered necessary for the wellbeing of the workers in terms of his
social status.

Article 43 of the Constitution of India states that the state shall endeavour to secure by suitable
legislation or economic organisation or in any other way to all workers a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of pleasure and social and cultural opportunities.
Thus, Government of India has adopted as one of the directives of the principle of slate policy to ensure
living wages.

Q:Distinguish between ‘minimum wage’ and ‘fair wage’?

Ans. Fair Wages— Fair wage, according to the committee on Fair Wage, is the wage which is above the
minimum wage but below the living wage. The lower limit of the fair wage is obviously the minimum
wage; the upper limit is set by the capacity of the industry to pay. The concept of fair wage is essentially
linked with the capacity of the industry to pay.

The fair wage depends on considerations of such factors as:

(i) The productivity of labour,

(ii) The prevailing rates of wages in the same or neighbouring localities,

(iii) The level of the national income and its distribution, and

(iv) The place of the industry in the economy of the country.

Minimum Wage: It is that wage that must be paid whether the company earns any profit or not. This
wage provides not merely for bare sustenance of life but also for the preservation of the efficiency of the
worker. Minimum wage may be fixed by an agreement between the management and the workers but is
usually determined through legislation. This is more so in the unorganised sector where labour is
ununionised. In the fixation of minimum wages, besides the needs of workers, other factors like ability of
the concern to pay nature of the jobs etc. are also considered. The 15th Labour Conference formally
quantified the term minimum wage thus.

i. In calculating the minimum wage, the standard working class family should be taken to comprise three
consumptions units for one earner, the earnings of women, children, adolescents being disregarded.

ii. Minimum food requirements should be calculated on the basis of a set intake of calories as
recommended by Dr. Aykoyd for an average Indian adult of moderate activity.
iii. Clothing requirements should be estimated on the basis of per capita consumption of 18 yards per
annum which would give for the average workers family of four a total of 72 yards.

iv. In respect of housing the rents corresponding to the minimum area provided for under Government
Industrial Housing Scheme should be taken into consideration in fixing the minimum wage.

v. Fuel, lighting, and other miscellaneous items of expenditure should constitute 20% of the minimum
wage.

Q: State the objectives of executive remuneration.

Ans. The following are the main objectives of executive compensation policy:

 The manager should be incentivized so that they adopt those strategies, investments, and
actions that result in the increase in the shareholder value. Thus, an executive aligns his interest
with the interest of the shareholder.
 The remuneration package should be designed such a way that it motivates the executives to
work harder, take risks and take unpleasant decisions such as termination or retrenchment,
aimed at increasing the shareholder’s wealth.
 The executive compensation is often designed with the intent to retain the executives during
the bad times caused due to the adverse market and industry factors.
 The cost of the executive pay must be limited to the extent where the shareholder’s wealth
does not get affected and, in fact, maximizes.

Generally, the executive compensation packages are designed by the board of directors, particularly the
compensation committee, which is comprised of the independent directors. The purpose for which the
committee is created is to pay incentives to the executive team who play a significant role in decision
making and is responsible for the corporate strategy and the overall value creation of the company.

Q: Distinguish between fringe benefits and perquisites.

Ans Difference between perquisites and fringe benefits:

Fringe benefits Perquisites

Expense done by employer on the entertainment free education facility provided to employee's
facilities of employee counts under fringe benefit children came under perquisite

Fringe benefits are not clubbed with the salary & The perquisites are clubbed under the head
the tax on the same is paid by the employer income from salary and tax accordingly to
employee

Fringe benefits are taxed in the hands of The perquisites are in the hands of employee
employer himself

Calculation by IT dept for the purpose of income Perquisites are known as subsidized facilities like
tax for deference amount as INCOME is called housing, schooling, conveyance etc, which is
fringe benefits. offered by an organization to their employees.
Q: Mention any five tax free perquisites.

Ans. Tax Free Perquisites

Perquisites provided by an employer to an employee are taxable under the head of Salaries. However,
some types of perquisites are tax free in the hands of the employee. For effective tax planning and
reduction of tax liability, the employer and employee must be aware of such tax free perquisites. In this
article, we look at a list of all tax free perquisites under the Income Tax Act.

Medical Facilities & Reimbursements

The value of medical treatment provided to an employee or any member of his/her family in a hospital,
dispensary or a nursing home maintained by the employer will be a tax free perquisite. Also, any money
paid by the employer for expenditure incurred by the employee on his/her medical treatment or
treatment of any member of his family subject to a maximum of Rs.15,000 in the previous year will be
treated as a tax free perquisite.

Training

Any cost incurred by the employer for providing training to the employees or by way of payment of fees
or refresher courses attended by the employees can be treated as tax free perquisite.

Telephone & Laptops

Expenses incurred by an employer on a telephone, mobile phone or use by the employee or any
member of his household, a laptop or computer belonging to the employer can be treated as a tax free
perquisite.

Loan to Employees

ANy loan of an amount of less than Rs.20,000 provided as a loan to an employee can be treated as a tax
free perquisite. Also, the loan provided by an employer for medical treatment in respect of diseases
specified in Rule 3A of the Income Tax Rules is tax free.

Insurance Premium & Pension Contributions

Insurance premium paid by an employer on an accident policy taken out for the employee is a tax free
perquisite. Also, employers contribution to superannuation fund of the employee, provided such
contribution does not exceed Rs.1,50,000 per employee per year can be treated as a tax free perquisite.
Q: Distinguish between wage and salary.

Ans.

BASIS FOR
SALARY WAGE
COMPARISON

Meaning A fixed pay that an individual draws A variable pay that an individual draws on
for the work done by him on an the basis of hours spent in completing the
annual basis. certain amount of work.

Skills Skilled personnel Semi-skilled or unskilled

Type of cost Fixed Variable

Rate of payment Fixed rate Wage rate

Payment cycle Monthly Daily

Basis of payment Performance basis Hourly basis

Paid to whom Employees Labor

Nature of work Administrative-office work Manufacturing-process work

KRA Yes No
(Key resultant
area)

Extra pay for No Yes


extra hours

Q: State the role of Pay Commission in India.

Ans. Pay Commission Role to Save Employee Rights

The Indian government recently showed a green flag to the seventh pay commission report, and now
the central, state and local body government employees are getting a hiked salary. Indian government
reviews the salary structure of government employees in every ten years and make the necessary
changes in the form of allowances, pay hike, and other benefits. It is noticeable that the function of the
pay commission is not only to give hike in salary but also provide maximum employee benefits and
protect the rights of an employee.

Government jobs in India are the high paying jobs as compared to private sector jobs. The pay
commission keeps all the monetary needs of an employee in mind. Apart from the basic salary, pay
commission secures a dearness allowance, travelling allowance, and house rent allowance to all the
employees. Further, there are benefits for the employees working in harsh conditions. For instance, a
soldier working in the snow cladded mountains gets the extra monetary benefit for working in harsh
terrains, or a government doctor who is not practicing gets a non-practicing allowance. There are
several benefits for working women as well. A pregnant woman government employee gets a maternity
leave of 26 weeks, which she can avail during or post childbirth. In the case of miscarriage, a woman
government employee gets six weeks paid leave. A male government employee gets 15 days of
paternity leave post childbirth.

Sometimes a woman needs to focus on her children’s care to ensure their healthy and bright future, but
she has to sacrifice her personal life in the way of performing her duties. For such situations, pay
commission has made a provision called child care leave, which can extend up to two years in severe
conditions. If a male employee is a single parent, then he can also avail this child care leave facility that
is a fully paid leave.

Till now we have discussed the in-service benefits, but the pay commission also takes care of the retired
employees of government services. There are hikes in pension along with the regular salaries for the
retired people. According to pay commission guidelines, it is mandatory to save a minimum amount of
salary as the provident fund, which will provide post-retirement financial assistance to the employees.
The pay commission protects the right of the employees to make a better work culture in the
government offices.

Q: Write a note on ’Scanlon’ plan in incentive.

Ans. Scanlon Plan is cost-saving, gain-sharing, productivity-incentive plan in which any saving (agreed
upon standard labour cost per unit of output subtracted from actual labour cost per unit of output) is
shared equally between the workers and the organization. This plan requires a formal employee
participation along with frequent performance reviews and employee reporting.

This type of a gain-sharing program seeks to involve employees more directly in an organization’s
decision-making process. Since the employees and the employers are set to benefit from the plan, both
should acknowledge the importance of each other’s suggestions and contributions. For such plans to
work, the relations between employers and employees need to be relatively stable and the employees
should feel a sense of belonging to the organization.

Procedure

a) Employees provide suggestions to the department level committee

b) The suggestions seek to identify ways to improve productivity

c) The department level committees then transfer the suggestions to a screening committee

d) The screening committee includes members of the workforce and the management
e) The screening committee reviews the suggestions and designs measures to improve
performance

f) The screening committee periodically reviews performance and computes the amount of bonus
to be paid to workmen as their share of performance improvements.

Q: Provide a basic idea about wage structure.

Q:What are the objectives of labour welfare?

Ans. Objectives of Labour Welfare.

Ø To increase the standard of living of the. Working class The labourer is more prone to exploitation
from the capitalists if there is no standardized way of looking after their welfare.

Ø To make the management feel the employees are satisfied about the work and working conditions.

Ø To reduce the labour problems in the orgnisaton: There are various problems affecting the workers,
problems like absenteeism, turnover ratio, indebtedness, alcoholism, etc., which make the labourer
further weak both physically and psychologically. Labour Welfare looks forward to helping the labourer
to overcome these problems.

Ø To recognize human values Every person has his own personality and needs to be recognized and
developed. It is in the hands of the management to shape them and help them grow. The management
employs various methods to recognize each one's worth as an individual and as an asset to the
organization.

Ø To retain the employees There should be fixed policies: This calls in to prepare the policies, to
conduct different training programmes, to have various motivational schemes, to create interest in the
job. The employees who feel secure in an organisation, backed by fixed welfare policies have less chance
of looking for a job elsewhere.

Ø To show up their positive mind in the work: Positive mind refers to the development of one's
attitudes. This is to change the negative attitude into positive.

Ø To influence over other employees: This means Labour Welfare helps to change one's personality -
presentation skills, communication skills, inter-personal relationships, etc. This is best achieved when
their morale is kept high by the different welfare schemes.

Ø To increase the bargaining power of the employees: Bargaining means to systematically extract
something from the opponent. The better bargaining power, the better influence on the opponent.
Labour welfare measures like formation of works committee, worker's participation, Trade Union, etc.,
will surely help them to have better bargaining power.
Q: How does ‘job evaluation’ differ from performance appraisal?

Ans. 1) Performance appraisal is concerned with comparative merit of individuals. While job evaluation
analysis the job not take into account the individual abilities of the job holder.

2) It considers the individual abilities while job evaluation considers the requirement of the job in terms
of job specification and job description.

3) The purpose of performance appraisal is to take the decisions regarding the pay, transfer, promotion
etc. while the purpose of job evaluation is to determine the worth of the job.

4) Performance appraisal rates the man not the job but job evaluation determines the relative worth of
the job.

5) Performance appraisal helps in making decision like transfer or promotion while job evaluation helps
in making decisions regarding wage policy.

Q: Discuss the important objectives of compensation planning?

Ans. Attract Talent: compensation needs to be high enough to attract talented people. Since many firms
compete to hire the services of competent people, the salaries offered must be high enough to motivate
them to apply.

Retain Talent: If compensation levels fall below the expectations of employees or are not competitive,
employees may quit in frustration.

Ensure Equity: Pay should equal the worth of a job. Similar jobs should get similar pay. Like wise, more
qualified people should get better wages.

New and Desired Behaviour: Pay should reward loyalty, commitment, experience, risk-taking, initiative
and other desired behaviors. Where the company fails to reward such behaviour, employee may go in
search of greener pastures outside.

Control costs: The cost of hiring people should not be too high. Effective compensation management
ensures that workers are neither overpaid nor underpaid.

Comply with legal rules: Compensation programs must invariably satisfy governmental rules regarding
minimum wages, bonus, allowances, benefits, etc.

Ease of operation: The compensation management system should be easy to understand and operate.
Then only will it promote understanding regarding pay related matters between employees, unions and
managers.

Q:Compute the minimum wage per day from the following information:

For 3000 calorie, required amount is Rs.100. The price of cloth is Rs. 200 per yard. Subsidized rent for
housing is Rs.2000/month.

Q:An employee engaged in producing certain components receives an ordinary day rate of Rs 16 per day
of 8 hours. The standard output for producing the component has been fixed at 80pieces per hour. On a
certain day,output of the worker is 800 pieces. Find the labour cost per 100 pieces and the wages should
have been actually earned by the workman under the following conditions: i) if bonus Rs.2.50 is paid per
100 pieces of extra output. (ii)If paid for straight piece rate basis at the standard rate

Q: Standard time of a job is 5 hours. Actual time taken is 4 hours Hourly rate is Rs.6per hour. Compute
the incentive of the worker as well as foreman and also total wages of the worker.

Q: Calculate the total earning of a worker and the effective hourly rate where payment of bonus is i)
halsey scheme, (ii) Rawan Scheme from the following: Basic wage note per hour Rs.10.Time allowed for
the job 48 hours Actual time taken 36 hours

Q: Job analysis programme has various purposes – What are these purposes? Explain them.

Q: What is job classification method? Point out the main ability of such method. What are its advantages
and disadvantages?

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