Master of Business Administration-MBA Semester IVSubject Code MU0006Subject Name Compensation BenefitsAssignment Set- 1 (30 Marks)Q.

Q.1 Remuneration plays an important role in job satisfaction. What are the essential stepsinvolved in designing a remuneration plan? Ans: Designing a remuneration plan involves the followings:1. Job Analysis: The main purpose of conducting job analysis is to prepare jobdescription and job specification which in turn helps to hire the right quality of workforceinto the organization.It helps to understand the qualities needed by employees,defined through behavioraldescriptors, to provide optimum work performance.It obtains answers to such questions such as: 1. Why does job exists? 2. What physicaland mental activities does the worker undertake? 3. When is the job to be performed? 4.Where is the job to be performed? 5. How does the worker do the job? 6. Whatqualifications are needed to perform the job? 7. What are the working conditions (such aslevels of temperature, noise, offensive fumes, light) 8. What machinery or equipment isused in the job? 9. What constitutes successful performance?There are several ways to conduct a job analysis, including: interviews with incumbentsand supervisors, questionnaires (structured, open-ended, or both), observation, criticalincident investigations, and gathering background information such as duty statements or classification specifications. In job analysis conducted by HR professionals, it is commonto use more than one of these methods.2. Job Documentation: To evaluate job content, it provide objective criteria for making pay comparison, ensure that jobs are classified according to content as opposed toindividual personalities, effectively communicate the job duties to both supervisor andemployees and help the organization defend it self against charges and discrimination.3. Development of a job worth hierarchy: It is a result of job evaluation. There are six major methods which are divided in two groups according to their nature.a)Whole job evaluation and are nonquantitative in naturei-Rankingii-Classificationiii-Slotting b)Factor evaluation and are quantitative in natureiPoint factor ii-Factor comparisoniii-Scored questionnaires4. Pay survey: Wages and salary surveys ensure external equity. A wage and salarysurvey provides information as to what other organizations that compete for employeesare paying. The survey could cover all jobs within an organization or limited to benchmark jobs.The benchmark jobs have the following basic characteristicsi-Many workers in other companies have these jobs.iiThey will not be changing in the immediate future in terms of tasks,responsibilities etc.iii-They represent the full range in term of salary such that some are among thelowest paid in the group of jobs, others are in the middle range and some areat the high end of the pay scale.Formal and informal surveys could be undertaken to collect data on benefits likeinsurance, medical leave, vacation pay etc. and offer a basis on which to take decisionregarding employee benefits. Published sources also provide valuableinformation.Published sources also provide valuable information regarding industry-wisetrends in salary structures in and around the country.The published sources in India include:i.Reports published by the Ministry of Labour ii.Pay Commission Reportsiii.Reports of wage Bonds appointed by Governmentiv.Reports of employee and employers organizationv.Trade journals of specific Industry5. Pricing the Job: Establishment of pay Ranges:In order to actually establish a pay structure, an organization needs to set rates of pay for the jobs in the job hierarchy. This will depend on the number of different levels of relative job value that are recognized by the organization and the difference in pay between the highest and lowest paid jobs in the pay structure. The focal point pf the payrange is the midpoint, an organization can determine the range minimum and maximum.6. Pay rates and Pay Increases: This means deciding how to pay new employees, howand when to give employee increases, including how to move existing employees fromminimum to maximum of their assigned pay grades, how to determine the pay increasefor an employee being promoted from one job to another and what influence, if any, costof labour increases will have on the determination of pay increases for employees.7. Starting pay for new Employees: In order to avoid paying new employees the same asmore experienced employees, most employers choose to start new employees closer tothe minimum of the pay range. In general, an employee with minimum qualificationsshould be paid the minimum of the range. This general rule is not true when a new hire has skills which are in great demand or has skills or other expertise substantially abovethe minimum.8. Employee Increases: There are several different types of base pay increases: General(across the board) increases, cost of living/ labour increases, promotion increases, stepincreases (based on longevity) and merit

increases.9. Performance appraisal: A performance appraisal, employee appraisal, performancereview, or (career) development discussion [1] is a method by which the job performance of anemployeeis evaluated (generally in terms of quality,quantity,cost,andtime)typically by the correspondingmanager or supervisor [2] . A performance appraisal is a partof guiding and managingcareer development. It is the process of obtaining, analyzing,and recording information about the relative worth of an employee to the organization.Performance appraisal is an analysis of an employee's recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It isalso the judgement of an employee's performance in a job based on considerations other than productivity alone. 10. Maintaining and Auditing a Compensation plan: Changes in the external market or internally within the organization can cause one or more parts of a compensation plan to become outdated. Part of the challenge in creating a compensation plan is to build inmechanisms that facilitate change when necessary, yet maintain control on a regular basis. Some actions an organization can take to maintain an updated compensation planinclude regular review of job descriptions, monitoring of compensation levels versuscompanies with which there is competition for employees, and regular review of the paystructure including pay ranges and pay increase budgets. An audit is an excellent meansto ensure that a compensation plan is being properly administered and maintained.When planning to audit a compensation plan, an organization needs to consider thefollowing:Process measures - Are procedures and practices in place to ensure the compensation plan is being administered smoothly and efficiently?Policy compliance - Are there procedures or other mechanisms in place to ensure that thecompensation plan is being administered in accordance with policy?Documentation adequacy - Is there adequate documentation in place to ensure that theadministration of the compensation plan and compliance issues can be audited?Overall results - Are there measures that can assess how well the compensation plan isachieving its goals and objectives?After reviewing audit results, management can make recommendations on anyi mprovements that may be necessary, allocate the necessary resources and follow-up tomake sure the work is completed.

Master of Business Administration-MBA Semester IV Subject Code MU0006 Subject Name Compensation BenefitsQ.1 Fringe benefits are important components of remuneration, although mostorganizations face confusion when it comes to administering a fringe benefits program.Design the steps needed to administer Fringe Benefits, in order to avoid problems inadministering an indirect remuneration plan. Ans: A fringe benefit is a form of pay (including property, services, cash or cashequivalent) in addition to stated play for the performance of services. Some forms of additional compensation are specifically designated as fringe benefits in the InternalRevenue Code; others, such as moving expenses or awards, have statutory provisions providing for special tax treatment but are not so designated by the Code. This publication uses the term broadly to refer to all remuneration other than stated pay for which special tax treatment is available. The definition of fringe benefits applies toservices of employees and independent contractors; however, unless otherwise indicated,this guide applies to fringe benefits provided by an employer to an employee. (For adiscussion of whether a worker is an employee or independent contractor, see Publication15-A.) Fringe benefits for employees are taxable wages unless specifically excluded by asection of the Internal Revenue Code (IRC ).

Fringe benefits are one of the means to ensure, maintain and increase the materialwelfare of employees. The physical and mental strain of workers in an industry isconsiderably alleviated by tax benefits through creating an environment that insulatesthem from fatigue and monotony. Administration of Fringe Benefits:Administration of Fringe Benefits Tax identified that a number of processes relating tothe administration of FBT in Australian Government entities could be improved. ThisGuide has been produced to assist entities to administer their FBT obligations.These problem can be avoided if the following lines are taken while administeringindirect remuneration. The steps are:1.Benifit objectives:In establishing objectives, the management must consider several factors like employee preference for benefits, attendance, length of service, performance etc. The benefitsaccomplish four objectives;1.Fostering external competitiveness,2.Increasing cost effectiveness,3.Meeting Individual employees needs and preferences, 4.Complying with legal compulsions.2. Assessing Environment:A company remuneration program is influenced by both external and internal factor. External Factor: The external factors are aspects such as govt. policy and regulations, Unions, andeconomic factors. The major govt. policies, which influence employee benefits andservices, are wage regulations, tax policies, and specific benefits laws.Unions are a dominant force to improve benefits and services.Economic factors influence benefits decisions in competitive way. Struggling to achievecompetitive prices for their product and service, managers look to reduce, at least curtail,increases in labour cost.Competition in the labour market to attract and retain production employees creates pressure to match the benefits offered by others. Internal factors: Internal factors involve organisational strategies and objectives, employee preferencesand demographics.The preferences and demographics of a particular employee in an organisation also affectindirect remuneration.3. Competitiveness:Generally organisations offer benefits to match or outstrip those offered by competitors.These are assessed through market surveys conducted by professional associations andconsultants. These survey provide data on the various benefits offered, their coverage,eligibility and costs. 4.Communicating the benefits:Fringe benefits program must be communicated to employees through booklets, brochures, slide presentations, and regular employee meetings. An effective technique isto use employee calendar, which communicates the total remuneration components.5.Evaluation and control:One way to assessing the usefulness of fringes is to ascertain how far the advantagesclaimed in favour of indirect monetary schemes have really benefited the employees. Theaspect that need to be looked into are;a.Have the earning of the employee improved? b.Have the benefits been able to attract and retain competent people?c.Has the morale of employees gone up?d.Have industrial relations improved?

Question-2:Apex is an ITES service provider Company. It is startup (new) company, which is trying to woo talent from the market. Being a new company it might face difficulty in hiring highly talented candidates. As remuneration plays an important role, what will be the strategic incentives plans organization can offer to persuade talented employees besides providing good salary? Answer- 2: Question-3: Explain the steps involved in designing a Remuneration Plan. Answer-3: Designing a remuneration plan involves the followings: 1. Job Analysis: The main purpose of conducting job analysis is to prepare job description and job specification which in turn helps to hire the right quality of workforce into the organization It helps to understand the qualities needed by employees,defined through behavioral descriptors, to provide optimum work performance. It obtains answers to such questions such as: 1. Why does job exists? 2. What physical and mental activities does the worker undertake? 3. When is the job to be performed? 4. Where is the job to be performed? 5. How does the worker do the job? 6. What qualifications are needed

to perform the job? 7. What are the working conditions (such as levels of temperature, noise, offensive fumes, light) 8. What machinery or equipment is used in the job? 9. What constitutes successful performance? There are several ways to conduct a job analysis, including: interviews with incumbents and supervisors, questionnaires (structured, openended, or both), observation, critical incident investigations, and gathering background information such as duty statements or classification specifications. In job analysis conducted by HR professionals, it is common to use more than one of these methods

2. Job Documentation: To evaluate job content, it provide objective criteria for making pay comparison, ensure that jobs are classified according to content as opposed to individual personalities, effectively communicate the job duties to both supervisor and employees and help the organization defend it self against charges and discrimination. 3. Development of a job worth hierarchy: It is a result of job evaluation. There are six major methods which are divided in two groups according to their nature. a)Whole job evaluation and are non-quantitative in nature iRanking iiClassification iiiSlotting b)Factor evaluation and are quantitative in nature iPoint factor iiFactor comparison iiiScored questionnaires 4. Pay survey: Wages and salary surveys ensure external equity. A wage and salary survey provides information as to what other organizations that compete for employees are paying. The survey could cover all jobs within an organization or limited to benchmark jobs. The benchmark jobs have the following basic characteristics iMany workers in other companies have these jobs. iiThey will not be changing in the immediate future in terms of tasks, responsibilities etc. iiiThey represent the full range in term of salary such that some are among the lowest paid in the group of jobs, others are in the middle range and some are at the high end of the pay scale. Formal and informal surveys could be undertaken to collect data on benefits like insurance, medical leave, vacation pay etc. and offer a basis on which to take decision regarding employee benefits. Published sources also provide valuable information. Published sources also provide valuable information regarding industry-wise trends in salary

structures in and around the country. The published sources in India include: i. Reports published by the Ministry of Labour ii. Pay Commission Reports iii. Reports of wage Bonds appointed by Government iv. Reports of employee and employers organization v. Trade journals of specific Industry 5. Pricing the Job: Establishment of pay Ranges: In order to actually establish a pay structure, an organization needs to set rates of pay for the jobs in the job hierarchy. This will depend on the number of different levels of relative job value that are recognized by the organization and the difference in pay between the highest and lowest paid jobs in the pay structure. The focal point pf the pay range is the midpoint, an organization can determine the range minimum and maximum. 6. Pay rates and Pay Increases:This means deciding how to pay new employees, howand when to give employee increases, including how to move existing employees from minimum to maximum of their assigned pay grades, how to determine the pay increase for an employee being promoted from one job to another and what influence, if any, cost of labour increases will have on the determination of pay increases for employees. 7. Starting pay for new Employees: In order to avoid paying new employees the same as more experienced employees, most employers choose to start new employees closer to the minimum of the pay range. In general, an employee with minimum qualifications should be paid the minimum of the range. This general rule is not true when a new hire has skills which are in great demand or has skills or other expertise substantially above the minimum. 8. Employee Increases: There are several different types of base pay increases: General (across the board) increases, cost of living/ labour increases, promotion increases, step increases (based on longevity) and merit increases. 9. Performance appraisal: A performance appraisal, employee appraisal, performance review, or (career) development discussion[1] is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding manager or supervisor[2]. A performance appraisal is a part of guiding and managing career development. It is the process of obtaining, analyzing, and recording information about the relative worth of an employee to the organization. Performance appraisal is an analysis of an employee's recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It is also the judgement of an employee's performance in a job based on considerations other than productivity alone. 10. Maintaining and Auditing a Compensation plan: Changes in the external market or internally within the organization can cause one or more parts of a compensation plan to become outdated. Part of the challenge in creating a compensation plan is to build in mechanisms that facilitate change when necessary, yet maintain control on a regular basis. Some actions an organization can take to maintain an

updated compensation plan include regular review of job descriptions, monitoring of compensation levels versus companies with which there is competition for employees, and regular review of the pay structure including pay ranges and pay increase budgets. An audit is an excellent means to ensure that a compensation plan is being properly administered and maintained. When planning to audit a compensation plan, an organization needs to consider the following: Process measures - Are procedures and practices in place to ensure the compensation plan is being administered smoothly and efficiently? Policy compliance - Are there procedures or other mechanisms in place to ensure that the compensation plan is being administered in accordance with policy? Documentation adequacy - Is there adequate documentation in place to ensure that the administration of the compensation plan and compliance issues can be audited? Overall results - Are there measures that can assess how well the compensation plan is achieving its goals and objectives? After reviewing audit results, management can make recommendations on any improvements that may be necessary, allocate the necessary resources and follow-up to make sure the work is completed.