HRM End Sem Cheatsheet

Cheatsheet Content

Motivation and Productivity Employee Motivation Definition: Intrinsic drive to exert effort towards work-related activities. Combination of fulfilling employee needs/expectations and workplace factors. Challenges: Many employers don't understand motivation's significance or lack skills to foster it. Often neglect employee relations, communication, recognition, and involvement. Factors Encouraging Motivation Management actions that empower employees. Transparent and regular communication. Treating employees with respect. Involving employees in decisions. Minimizing rules; demonstrating trust. Regular employee recognition. Feedback and coaching from managers. Above industry average benefits and compensation. Employee perks (bonuses) and company activities. Positive employee management within a successful framework. Sources of Motivation Authority (easier to influence those under authority). Knowledge, money, or wealth. Application of Maslow's Theory in the Workplace Physiological Needs: Fair wages, comfortable working conditions. Safety Needs: Job security, safe work environment, health insurance. Social Needs: Teamwork, social activities, positive interpersonal relations. Esteem Needs: Recognition, promotions, challenging work, responsibility. Self-Actualization Needs: Opportunities for growth, creativity, skill development. Types of Motivational Schemes Incentive Schemes: Compensation/benefit plans rewarding performance. Social Incentives: Increase standard of living (non-financial, fringe benefits like housing, health, loans). Participative Incentives: Employee involvement in decision-making (consultation, suggestion acceptance). Psychological Incentives: Pride, recognition, appreciation (cash or non-cash). Individual Incentive Plans: Benefits for individual contribution (salary increases, allowances). Group Incentive Plans: For teams where individual contribution is hard to identify; fosters cooperation. Organization Incentive Plan: Compensates the entire staff. Nature of Motivational Schemes Incentives motivate action; central to economic activity. Can be cash (bonus, salary increase, leave grant) or kind (training, housing loan, medical allowances, free transport, scholarships). Depend on organizational resources and employee needs. Characteristics of Motivational Schemes Must induce subordinates to work and produce more. Flexible for varying individual needs (some prefer pay, others status). Comprehensive for satisfying all needs. Security is vital (job promise, wage, safety). Management must win confidence through fairness and justice. Social relationships must be recognized (job giving respected position). Employees should be well compensated. Include basic needs, group participation, guidance, self-esteem, perks (paid holiday, car allowance, parking, canteen). Importance of Personnel Management in Enhancing Worker Productivity Training and Development: Encourages best effort, makes employees feel valued. Remuneration: Meets basic needs and desire for comfort, highly motivating. Promotion: Rewards hard work, enhances motivation. Conducive Working Environment: Well-ventilated offices, safety kits, good facilities. Techniques for Increasing Motivation Creating a Positive Work Environment: Upbeat, teamwork, idea sharing, adequate tools, conflict resolution, independence. Setting Goals: Helps employees become self-motivated, links to corporate contributions, reasonable and achievable. Providing Incentives: Individual or team, financial (cash, gift cards) or non-financial (vacation, flexible work). Recognizing Achievements: Employee-of-the-month, celebrating milestones, public recognition. Sharing Profits: Employees increase earnings by increasing company profits, promotes teamwork, pride in ownership. Soliciting Employee Input: Anonymous polls, focus groups, shows care for opinions, improves morale. Professional Enrichment: Education, industry participation, tuition reimbursement, workshops, mentoring, promotion from within. Importance of Motivation Increases mental and physical reactions, leading to higher productivity, increased revenue. Low motivation leads to slower work, inefficiency, and costs the business. Can be reversed by setting goals. Fundamental for employees to bring enthusiasm to increase company's bottom line. Summary of Motivation Management must ensure employees are properly motivated and needs are met. Unmotivated employee is a threat, leading to frustration, aggression, unproductive activities. Managers should apply various motivation theories suitable for workers' needs to achieve organizational goals. Job Evaluation Methods and Training Job Evaluation Definition: Provides equity and consistency by defining the relative worth of different jobs. Process of determining job worth by analyzing responsibilities and remuneration. Objectives of Job Evaluation Determine relative contributions of jobs to organizational objectives. Purposes: Wage/salary fixation, restructuring job hierarchy, overcoming anomalies. Features of Job Evaluation Assesses jobs, not people. Standards are relative, not absolute. Based on job analysis. Carried out by groups. Some subjectivity always present. Provides basis for rational wage structure, doesn't fix pay scales. Process of Job Evaluation Gaining Acceptance: Explain aims to employees and unions. Creating Job Evaluation Committee: Experienced employees, union reps, HR experts. Finding Jobs to be Evaluated: Identify key jobs in each department. Analyzing and Preparing Job Description: Job description and analysis of job needs. Selecting Method of Evaluation: Based on job factors and organizational demands. Classifying Jobs: Arrange jobs by importance (skill, experience, responsibility); assign weights. Installing the Programme: Explain to employees and implement. Reviewing Periodically: Adjust for changes in technology, products, services. Essentials for Success of Job Evaluation Programme Compensable factors represent major aspects of job content, avoid overlap, definable, measurable, understood, cost-effective, legal. Operating managers convinced and trained. Complete information to all employees. All groups and grades covered. Programme and techniques easy to understand. Trade union acceptance and support. Guidelines for Job Evaluation Rate the job, not the person. Collect all facts accurately. Look for distinguishing features and relationships to other jobs. Study jobs independently and objectively; discuss views. Conduct systematically, based on factual information. Results must be fair, rational, and unbiased. Benefits of Job Evaluation Links pay with job requirements. Systematic procedure for determining relative job worth. Equitable wage structure, eliminates salary inequities. Employee/union participation helps solve wage grievances. Helps evaluate new jobs. Points out possibilities for more appropriate use of labor force. Job Evaluation Methods Ranking Method: Simplest; arranges jobs from highest to lowest value/difficulty. Examines job as a whole. Best for small organizations; highly subjective for large ones. Classification Method: Predetermined job groups/classes; jobs assigned to classifications. Example Classes: Executives, Skilled, Semiskilled, Unskilled. Factor Comparison Method: Ranks each job according to a series of factors (mental effort, physical effort, skill, responsibility, working conditions). Pay assigned by comparing weights of factors. Point Method: Widely used; jobs expressed in key factors with assigned points. Points summed to determine wage rate; similar point totals placed in similar pay grades. Procedure: Select key jobs, identify common factors, divide into sub-factors, define and scale sub-factors. Common Factors: Skill, Responsibility/Accountability, Effort. Convert total points to monetary values. Training Definition: Increasing knowledge and skills for a particular job. Major outcome is learning new habits, skills, knowledge. Enables efficient performance and prepares for higher-level jobs. Planned program to improve performance and change knowledge, skills, attitude, behavior. Can be on-the-job or in-classroom (on-site, off-site, simulated). Training vs. Development Training: Specific skills/behavior (e.g., firing a rifle, typing); for operatives; one-shot; management-driven; meets current job needs. Development: More general, individual/organizational needs; for executives; continuous; internal motivation; meets future job needs. Training vs. Education Training: Job-oriented, skill learning, practice-based, company-specific. Education: Person-oriented, theory-based, general knowledge, conceptual learning; imparted through schools/colleges. Both complementary and mutually supportive. Objectives of Training Impart basic knowledge/skills to new entrants. Equip employees for changing job/organization requirements. Teach new techniques. Prepare employees for higher-level tasks, build management pipeline. Need for Training Newly recruited employees for effective task performance. Prepare existing employees for promotion. Refresher training for latest developments. When changing jobs (transfer). To make employees mobile and versatile (job rotation). Importance of Training Benefits employer and employees. Makes employees more productive and useful. Methods of Training On-the-Job Training Employee learns by doing in real work situations. Experienced employee acts as guide. Examples: Job rotation, coaching, working as assistant, temporary promotions. Cost-effective, immediate feedback, good transfer of training. Drawbacks: Disrupts production, potential for damage, ineffective if trainer lacks skills. 1. Job Instruction Training (JIT): Four-step instructional process: preparation, presentation, performance try-out, follow-up. Trainer (supervisor/co-worker) acts as coach. 2. Coaching and Mentoring: Coaching: One-on-one guidance/feedback from supervisors. Mentoring: Experienced executives groom junior employees over several years. 3. Apprenticeship Training: Combined on-the-job and off-the-job; for skilled trades (electricians, carpenters). Training period 2-5 years; successful due to modeling, feedback, classroom training. Drawbacks: Long period, uniform period not suitable for all, skills may become outdated. 4. Job Rotation (Cross-training): Employees rotate through related tasks/jobs in a work unit. Advantage: Flexibility in department. Common for training managers to gain broad knowledge. Weaknesses: Difficult to coordinate, some coaches unmotivated, conflicting viewpoints. 5. Refresher Training: For rapid technological changes; short-term courses with latest developments; uses outside consultants. 6. Orientation Training (Induction): Introduces new recruits to job and organization; formal tour, key personnel, policies, benefits. Should be well-planned, conducted within first week. Off-the-Job Training Trainee separated from job situation; focuses on learning. Freedom of expression. a. Vestibule Training: Actual work conditions simulated in classroom; for electrical/semi-skilled jobs. b. Role Playing: Realistic behavior in imaginary situations; for developing interpersonal interactions. c. Lecture Method: Traditional; instructor presents material to group; must be motivating. d. Conference/Discussion Approach: Trainer lectures and involves trainees in discussion; uses audio-visual aids. e. Programmed Instruction: Subject matter in sequential units (simple to complex); trainees answer questions/fill blanks. Expensive, time-consuming. f. Behaviorally Experienced Training: Focus on emotional/behavioral learning; role playing, business games, cases, group discussions. Sensitivity training (laboratory training). Summary of Job Evaluation and Training Job evaluation: Defines relative worth of jobs. Placement: Actual posting of employee to specific job. Induction: Introduces new employee to job/organization. Training: Increases knowledge/skills for a job. Development: Executives acquire skills/competence for future managerial tasks. Methods: On-the-job (JIT, coaching, apprenticeship, rotation, refresher, orientation) and off-the-job (role playing, cases, conferences, programmed instruction). Performance and Potential Appraisal Performance Appraisal Definition: Process of deciding how employees do their jobs. Performance = degree of accomplishment of tasks (results-oriented). Systematic and objective way of judging relative worth/ability and potential. Determining and communicating performance, establishing improvement plan. Definitions of Performance Appraisal Edward Flippo: "Systematic, periodic and impartial rating of an employee's excellence in matters performing to his present job and his potential for the present job." Dale S. Beach: "Systematic evaluation of the individual with respect to his or her performance on the job and his or her potential for the development." Dale Yoder: "Includes all formal procedures used to evaluate personalities, contributions and potentials of the group members in a working organization." What is Performance Appraisal? Identification: Determine areas of work to examine performance. Measurement: Managerial judgments of performance quality. Management: Future-oriented view, helps realize potential. Features of Performance Appraisal Systematic process: Setting standards, assessing performance, offering feedback. Finds how well employee is doing, plans for improvement. Carried out periodically. Future-oriented, not past-oriented. Not job evaluation (which determines job worth). Focuses on employee development, managers as coaches. Provides opportunity for discussion, problem-solving, goal setting. Can be formal (systematic, using forms) or informal (subjective). Objectives of Performance Appraisal Evaluating performance (telling employee where they stand, personnel decisions). Developing employees (finding strengths/weaknesses, healthy relations, counseling/coaching). Appraisal serves several useful purposes: Compensation decisions: Basis for pay raises, merit-based compensation. Promotion decisions: Basis for job change/promotion. Training and development programmes: Identifies skill gaps, informs about progress. Feedback: Employee knows how well they are doing, how to improve. Personal development: Reveals causes of good/poor performance, enables improvement plans. Benefits of Performance Appraisal Employer perspective (Administrative uses): Individual differences impact company performance. Documentation for legal defense. Basis for bonus/merit systems. Clarifies performance expectations, aligns with strategic goals. Employee perspective (Developmental purposes): Feedback helps rectify mistakes, leverages strengths. Assessment and reorganization motivate improvement. The Performance Appraisal Process Establish performance standards: Benchmarks for measuring performance. Must be clear to both appraiser and appraisee. Developed from job analysis, written, measurable. Communicate the standards: Appraiser defines job, sets goals, analyzes results, coaches. Appraisee understands what and why. Standards communicated, reactions noted, revised if needed. Measure actual performance: Uses dependable performance measures (ratings). Measures should be easy to use, reliable, report critical behaviors. Sources: personal observation, statistical/oral/written reports. Measures can be objective (verifiable, quantitative) or subjective (personal opinions). Compare actual performance with standards and discuss the appraisal: Communicate and discuss outcome. Subjective appraisals can be questioned, cause dejection. Taking corrective action, if necessary: Immediate action (sets things right). Basic corrective action (addresses root cause, adjusts permanently). Methods of Performance Appraisal Individual Evaluation Methods Multiple-person Evaluation Techniques Modern Methods Individual Evaluation Methods 1. Confidential Report: Mostly government; descriptive report by immediate superior. Highlights strengths/weaknesses; not data-based; no feedback. Subjective, can be contested. 2. Essay Evaluation: Rater describes strong/weak points of employee behavior. Used with graphic rating scale for elaboration. Factors considered: job knowledge, understanding, relations, planning, attitudes. Non-quantitative; provides information about employee and evaluator. Limitations: Highly subjective, rater may be poor writer, time-consuming. 3. Critical Incident Technique: Manager lists effective/ineffective behaviors (critical incidents). Maintains logs; uses incidents for evaluation. Provides objective basis for discussion, avoids recency bias. Limitations: Negative incidents more noticeable, supervisors may complain, chore for manager, often used for superiors. 4. Checklists and Weighted Checklists: Set of objective/descriptive statements; rater checks applicable items. Weighted list: some questions weighted more heavily. Limitations: Rater bias, expensive, time-consuming, difficult to assemble/analyze. 5. Graphic Rating Scale: Printed form to evaluate performance based on traits (quantity/quality of work). Easy to understand/use, permits statistical tabulation. Limitations: Arbitrary, subjective, all characteristics may not be equally important. 6. Behaviorally Anchored Rating Scales (BARS): Combination of rating scale and critical incident techniques. Critical incidents serve as anchor statements. Construction: Collect critical incidents, identify performance dimensions, reclassify incidents, assign scale values, produce final instrument. Proponents claim it differentiates behavior, performance, results; reliable, valid. Researchers find it not superior to other methods; activity-oriented, time-consuming, expensive. 7. Forced Choice Method: Developed to eliminate bias and high ratings. Rater chooses most/least descriptive phrases from sets (two positive, two negative). Rater doesn't know scoring key, increases objectivity. Limitations: Expensive to prepare phrases, managers feel frustrated, results not useful for training. 8. Management by Objectives (MBO): Set specific, measurable goals with employees; periodically discuss progress. Emphasizes participatively set goals (tangible, verifiable, measurable). Focuses on what to accomplish. Steps: Set organization goals, set departmental goals, discuss departmental goals, define expected results, performance reviews, provide feedback. Limitations: Difficult to set measurable goals, time-consuming, qualitative aspects ignored, potential for conflicting goals, short-term focus. Multiple-person Evaluation Techniques 9. Ranking Method: Easy; ranks employees against each other in a work group (highest to lowest). Difficult to rank average employees. Limitations: Compares "whole man," doesn't quantify difference, difficult with large numbers, no systematic procedure, snap judgments. 10. Paired Comparison Method: More reliable ranking; each worker compared with all others for each trait. Number of comparisons: $n(n-2)$ for $n$ employees. Logical but not applicable for large groups (excessive comparisons). 11. Forced Distribution Method: Rater appraises employees according to predetermined distribution scale (e.g., 10% outstanding, 20% very good, 40% good, 20% fair, 10% poor). Criteria: job performance and promotability. Eliminates rater bias. Limitations: Low morale, low productivity, high absenteeism if employees feel unfairly graded. 12. Group Appraisal: Employee appraised by a group (immediate supervisor, other supervisors, department head, consultants). Eliminates personal bias, but time-consuming. 13. Human Resource Accounting (HRA): Measures effectiveness of HR activities in financial terms. Places value on human resources as assets. Evaluates employee performance in terms of costs and contributions. Performance positive if contribution > cost, negative if cost > contribution. Still in transitionary stage. 15. Assessment Centre: System for assessing several individuals by experts using various techniques (in-basket, role playing, case studies, simulations). Individuals from various departments work on assignments similar to future roles. Excellent for evaluating potential for promotion/training; objective. Strong research support; enables competition, improves morale. 16. Field Review Method: Trained HR representative assists line supervisors with ratings. HR specialist gathers information, prepares report for supervisor review. Ratings on standardized forms; more reliable due to expert involvement. Costly and impractical for many organizations. Problems with Performance Appraisal 1. Judgment errors: i. First impressions (primacy effect): Initial impression colors all subsequent evaluation. ii. Halo: One aspect of performance affects evaluation of others (e.g., few absences leads to high ratings in all areas). iii. Horn effect: One negative quality leads to harsh ratings in all areas. iv. Leniency: Raters rate very strictly or very leniently; difficult to differentiate. v. Central tendency: Raters rate all employees as average to play it safe. vi. Stereotyping: Generalizing behavior based on sex, age, religion, caste. vii. Recency effect: Greater weight to recent occurrences than earlier performance. 2. Poor appraisal forms: Vague/unclear scales, ignores important aspects, irrelevant dimensions, too long/complex. 3. Lack of rater preparedness: Inadequate training, insufficient time, poor self-image, vague objectives. 4. Ineffective organizational policies and practices: Unrewarded sincere effort, negative view of low ratings by management, lack of approval process. Top 10 Reasons for Failing Performance Appraisal Manager lacks information. Standards unclear. Manager doesn't take appraisal seriously. Manager unprepared for review. Manager not honest/sincere. Manager lacks appraisal skills. Employee doesn't receive ongoing feedback. Insufficient resources to reward performance. Ineffective discussion of employee development. Manager uses unclear/ambiguous language. Essential Characteristics of an Effective Appraisal System Reliability and validity: Consistent, reliable, valid information. Job relatedness: Measures performance in job-related activities. Standardisation: Forms, procedures, administration standardized. Practical viability: Easy to administer, implement, economical. Legal sanction: Complies with labor laws. Training to appraisers: Insights, ideas on rating, documenting, conducting interviews. Open communication: Provides ongoing feedback, explains expectations. Employee access to results: Employees know rules, receive feedback, can detect errors. Due process: Formal procedures for grievances. Conclusion on Performance Appraisal Should primarily develop employees as valuable resources. Fails if used as a whip or limitations are misunderstood. Performance Appraisal Practices in India Appraisal approaches: Absolute standards, relative standards, objective (accomplishing specific objectives). Requires consistent approach, clear standards, bias-free ratings. Hughes Escorts: Competency-based model (23 key competencies: attitude, knowledge, skill, value). National Panasonic: Key Result Areas (KRAs) driven system (business, functional, behavioral goals, time-frames, jointly decided). Larsen & Toubro: Competency matrix (73 competencies across managerial levels); identifies skill gaps. Daewoo Motors: Teamwork parameter; targets set for functional teams; team performance measured; individual members appraised by supervisor. EIH Ltd: Participatory, competency-driven system; appraised on individual/functional targets and generic competencies. Potential Appraisal Definition: Evaluation of present abilities not currently utilized or needed, but required for future higher jobs. Evaluation of abilities to discharge higher responsibilities. Objectives of Potential Appraisal Inform employees about future prospects. Help organization with succession planning. Update training efforts. Advise employees on career improvement. Assess individual for higher-level work without overstretching. Ensure continuous growth of organization. Difference between Performance Appraisal and Potential Appraisal Feature Performance Appraisal Potential Appraisal Focus Current job performance Future job capabilities Time Horizon Past and present Future Objective Evaluate current output/behavior Identify growth potential Outcome Feedback, compensation, promotion Succession planning, career development Summary of Performance and Potential Appraisal Promotion: Upward movement with increased status/responsibility/pay. Transfer: Horizontal/lateral movement with same salary/status/responsibilities. Separation: Employee/organization parts ways (resignation, dismissal, death, suspension, retrenchment, layoff). Performance appraisal: Systematic, periodic rating of current job excellence and potential. Potential appraisal: Evaluation of abilities for future higher roles. Compensation Management Concept Compensation: Payment for efforts, service, or tasks. In HRM: Direct cash payments, indirect benefits, incentives. Cascio's Definition: "Includes direct cash payments, indirect payments in the form of employee benefits, and incentives to motivate employees to strive for higher levels of productivity." Various Components of Compensation Wage and Salary: Wage: Remuneration for workers (hourly-rated). Salary: Remuneration for white-collar/managerial employees. Fixed period payment, not directly linked to productivity at a particular time. Incentives: Additional payments linked to productivity (higher production, cost saving). Individual or group basis. Fringe Benefits: Long-term impact: provident fund, gratuity, pension. Occurrence of events: medical benefits, accident relief, health/life insurance. Job facilitation: uniforms, canteens, recreation. Perquisites (Privileges): For managerial personnel to facilitate job performance or retain them. Company car, club membership, housing, paid holidays, stock options. Compensation Management Also known as wage/salary administration, remuneration management, rewards management. Designing and implementing total compensation package. Traditional view focused on wage/salary structures; modern view comprehensive. Beach's Definition: "Establishment and implementation of sound policies and practices of employee compensation." Objectives of Compensation Management Meet needs of both employees and organization (often conflicting). Agency Theory: Employers (principals) and employees (agents) try to fix compensation in their own favor. Compensation management balances these. 1. Attracting and Retaining Personnel: Attract and retain qualified individuals, especially in managerial/technical roles. 2. Motivating Personnel: For higher productivity. Alfie Kohn's arguments against traditional incentives: Punish, rupture relationships, ignore reasons, discourage risk-taking, undermine interest. 3. Optimizing Cost of Compensation: Link performance and compensation to optimize costs. 4. Consistency in Compensation: Internal: Based on job criticality and performance (higher compensation for higher-level jobs/performers). External: Similar compensation for similar jobs across organizations (reduce disparity). Compensation Management Process Organisation’s Strategy: Overall strategy drives compensation strategy. Compensation Policy: Derived from organizational strategy, specifies basis for base pay, incentives, benefits. Job Analysis and Evaluation: Job analysis defines job description/specification; job evaluation determines relative job worth. Analysis of Contingent Factors: External (market, cost of living, laws, unions) and internal (ability to pay, employee performance, skills). Design and Implementation of Compensation Plan: Incorporates base pay, incentives, benefits, perquisites; communication and practice. Evaluation and Review: Dynamic process; evaluates results (employee satisfaction, productivity); reviews and revises if needed. Essential Features of a Good Wage System Fair to employer and employee (based on scientific study). Guaranteed minimum wage. Paid according to merit (efficient workers earn more). Skilled workers paid more. Equal pay for equal work. Flexible. Minimizes labor turnover, absenteeism, late attendance. Complies with trade union agreements. Considers wage rates in same area/industry. Adjusted for price changes (dearness allowance). Correlated to organization's capacity to pay. Simple and understandable. Systems of Wage Payment (i) Time Wage System: Payment based on time spent, irrespective of work done. (ii) Piece Rate System: Payment based on work done, irrespective of time taken. (iii) Premium plans/bonus and profit sharing schemes: Used with either of the above. A. Time Wage System Worker paid hourly, daily, weekly, or monthly rate. Payment for time worked, not output. Suitable for highly skilled, unskilled workers, apprentices; where quality is important, output hard to measure, close supervision possible. Advantages: Easy, simple, assured payment. Disadvantages: No incentive for more production, no distinction between efficient/inefficient, idle time paid, uncertain labor cost per unit, requires strict supervision. (a) Flat Time Rate: Oldest; fixed rate based on employment time. (b) High Day Rate: Higher than average wage rate; attracts efficient workers, aims for pre-determined standards. Increases production, lowers labor cost. (c) Measured Day Rate: Specified work, rate fixed based on performance level. No additional remuneration for improvement beyond initially fixed level. (d) Graduated Time Rate: Rates linked to cost of living index; compensates for rising prices. (e) Differential Time Rate: Different rates for different workers based on personal abilities/skills; incentive for improvement. B. Piece (Price) Rate System (Payment by Result) Fixed rate for each unit produced, job completed. Payment according to quantity, no consideration for time. Equitable piece rate (from time/motion study, job analysis) needed. Advantages: Paid according to merit, incentive to increase production, reduces fixed expenses/unit, no idle time paid, known exact labor cost, workers use tools carefully, less supervision, motivates inefficient workers. Disadvantages: Difficulty fixing suitable rate, quality may suffer, material wastage, increased cost due to wastage/supervision, no reduction in labor cost per unit with increased production, fear of losing wages, health issues from overwork, inconsistent production, discontents slower workers. Applicable when: repetitive work, measurable output, controllable quality, equitable piece rate possible, reasonable rates, flexible system, sufficient materials/tools, time cards maintained. (a) Straight Piece Rate System: Simplest; fixed rate per unit. Can include guaranteed time rate. (b) Taylor’s Differential Piece Rate System: Penalizes slow workers, rewards efficient workers with higher piece rate. Based on standard time. Harsh, no minimum wages, almost out of use. (c) Merrick’s Multiple Piece Rate System: Improvement on Taylor’s; three piece rates based on efficiency levels (e.g., 100%). Less harsh than Taylor’s. (d) Gant’s Task and Bonus Plan: Based on time/motion study. If efficiency 100%, piece wages + 20% bonus. "Progressive Rate System." Advantages: Less harsh, simple, guaranteed time wages, distinguishes efficient/inefficient, decreases fixed cost per unit. Disadvantages: Divides workers, guaranteed time wages may not encourage efficiency. Premium and Bonus Plan Increase production by giving higher wages for less time worked. Standard time fixed; worker paid for actual time + bonus for time saved. Worker and employer share savings. Satisfactory plan: simple, reasonable, standard time from study, standards not altered, motivates workers, good working conditions, sufficient incentive, no penalty for external factors, educated workers, no limit on earnings, quality assured, indirect workers covered. Advantages: Increased production, reduced cost, attracts efficient workers, reduced labor turnover, consumer benefit. Disadvantages: Difficult to establish levels/rates, hard to withdraw schemes, non-acceptability by unions, complicated/expensive. (i) Halsey Premium Plan: Time wages + % (usually 50%) of wages for time saved. Formula: $T \times R + \% (S – T)R$ Advantages: Simple, guaranteed time wages, shared savings, distinguishes workers, reduced overhead, employer incentive. Disadvantages: Quality suffers, workers criticize sharing, difficult to determine standard time/rate. (ii) Rowan Plan: Time wages + bonus calculated as proportion of wages for time taken, where proportion is ratio of time saved to standard time. Formula: $T \times R + \frac{S-T}{S} \times T \times R$ Advantages: Guaranteed time wages, quality doesn't suffer much, reduced labor cost/unit, reduced overhead. Disadvantages: Workers criticize sharing, two workers with different efficiencies may get same bonus. Comparison Halsey vs. Rowan: Rowan is generally better as bonus increases at a decreasing rate, protecting quality, and bonus formula protects against loose premium rate setting. (iii) Emerson Efficiency Plan (Empiric System): Bonus payable only when efficiency reaches 66 2/3%. Bonus increases progressively; 20% at 100% efficiency, +1% for each 1% above 100%. Beneficial to workers (guaranteed wages, bonus at lower efficiency). (iv) Bedeaux Point Premium Plan: Job expressed in "Bedeaux points" (standard minutes). Upto 100% performance: time wages. If performance > 100%: 75% of wages for time saved to worker, 25% to foreman. Ensures time wages, distributes savings; strong incentive. Criticized by workers (foreman share), complicated. (v) Barth Plan: Incentive for beginners/trainees/unskilled. Wages = hourly rate $\times$ $\sqrt{\text{standard time } \times \text{ actual time}}$. Does not guarantee time wages. Advantages: Suitable for new entrants, hourly rate increases with efficiency. Disadvantages: Complicated, workers can't determine wages, efficient workers get less incentive. Group Bonus Schemes For team work, rewarding indirect workers, difficult to measure individual output. Bonus divided among group members in proportion to basic wages. Advantages: Creates team spirit, eliminates waste, guaranteed time wages, maintains production flow, includes support workers, reduces negotiation, administratively simpler. Disadvantages: Efficient workers' bonus same as inefficient, less direct incentive, difficult to agree on proportions. Applicable in large factories, heavy engineering, mass production. Some Group Premium Plans: Priesteman’s Production Bonus: Standard production fixed for factory; if actual exceeds standard, all workers get bonus. Scanlon Plan: Constant proportion of added value of output paid to workers. Towne Plan: Encourages cost reduction; 50% of labor cost savings distributed among workers/foreman. Co-Partnership and Profit Sharing Schemes Workers get share of yearly profits (cash or shares). Aims for worker cooperation and shared prosperity. Summary of Compensation Management Compensation includes direct cash, indirect benefits, incentives. Two principal wage systems: time wage and piece rate. Laws and Rules Governing Employee Benefits and Welfare Objectives Identify objectives/merits of labor welfare/social security. Identify laws/rules prescribing welfare/security. Distinguish statutory/voluntary welfare. Distinguish extramural/intramural welfare. Introduction Modern workers face physical/mental stress, accidents. Wages alone are not enough; need added stimulus/support. Labor welfare and social security supplement wages. Concept of Fringe Benefits and Labour Welfare No clear conceptual clarity, often lumped together. Oxford Dictionary: "Efforts to make life worth living for workman." ILO: "Services, facilities, and amenities... to work in healthy and congenial surroundings and to provide them with amenities conducive to good health and high morale." Report of Committee on Labour Welfare (1969): Includes sanitary/medical facilities, travel, accommodation, social security. Includes extramural/intramural, statutory/non-statutory, by employers, government, unions, voluntary agencies. Social security measures also included (insurance, PF, gratuity, maternity, compensation). Statutory: Implementation depends on government's coercive power (laws). Non-statutory (voluntary): Undertaken by employers voluntarily. ILO Committee (1963) divided welfare services: (i) Intramural (within establishment): Latrines, washing, creches, rest shelters, canteens, drinking water, fatigue prevention, health services, protective clothing. (ii) Extramural (outside establishment): Maternity benefits, social insurance (gratuity, pension, PF), medical facilities, family planning, education, housing, recreation, cooperative stores, vocational training, transport. Objective of Labour Welfare Humanitarian (fuller life), economic (improved efficiency), civic (responsibility/dignity). Humanitarian approach dominated by utilitarian (cost-benefit). Frees employees from worries, enhances efficiency/output. Attracts and retains better people. Statutory Welfare Provisions Amenities provided as per government legislations. Factories Act of 1948 (India): Health, welfare, safety, working hours, leave, employment of women/children. Motor Transport Workers Act of 1961: Restrooms, uniforms, medical facilities. Similar laws for mine workers, plantation workers. Canteen: ILO guidelines; State Governments ensure provision in establishments with 250+ employees. Creches: Factories Act: establishments with 50+ women workers; for children under 6; clean, sanitary, trained staff. Mothers get time to feed. Labour Officer appointment in large establishments. Voluntary Welfare Amenities Provided by employers beyond statutory requirements. i) Educational Facilities: For workers' constant change/development; fee reimbursement, books for children. ii) Transport Facilities: For employees residing far from workplace; reduces strain, anxiety, absenteeism. Conveyance allowance or loans for vehicles. iii) Recreational Facilities: Music, art, sports, games; mental/physical development; healthy climate for industrial peace. Excursions, youth clubs, holiday homes. iv) Other Facilities: Varies by organization; medical insurance, housing, subsidized meals. Social Security: Concept and Evolution Beyond welfare measures; related to human dignity and social justice. Introduces stability and protection against modern life stresses. Instrument of social/economic justice, dynamic concept. ILO Definition: "Protection which society provides for its members... against economic and social distress... from stoppage or substantial reduction of earnings... provision of medical care; and ... subsidies for families with children." Term popularized by US Social Security Act (1935). ILO (1919) promoted social justice through standards, information, technical assistance. Legislative Measures in India for Social Security The Employees’ State Insurance Act, 1948: Pioneering; medical facilities, unemployment insurance during illness. Covers factories (10+ with power, 20+ without), shops, hotels, transport, construction (20+ persons). Covers employees (manual, clerical, supervisory, contractors) with remuneration below Rs.1600/month. Administered by autonomous corporation (Minister of Labour as Chairman). Financed by employer/employee contributions, State Governments share medical cost. Benefits: Sickness/extended sickness, maternity, disablement, dependants', funeral, medical. The Employees’ Provident Funds and Miscellaneous Act, 1952: Provisions for future (retirement, early death), cultivates saving. Applies to establishments with 20+ employees. Does not apply to co-op societies (less than 50 persons) or units without power. Employees contribute 6.25% or 8%; employers make equal contribution. Refunded with interest on death, disability, super-annuation, retrenchment, migration, leaving service. Employees' Family Pension Scheme, 1971: Long-term financial benefit to family on premature death. Fund created by diverting 1 1/6% (8.33% currently) from pay, equal from employer/State Government. Central Government pays administrative cost. The Employees' Deposit-linked Insurance Scheme, 1976: Applies to establishments covered by EPF Act. Only employer (0.5% of basic salary, max Rs.75/month) and government contribute. These three schemes administered by Employees’ Provident Fund Organisation. The Maternity Benefit Act, 1961: Applicable to establishments not covered by ESI Scheme. Amended in 1976 to include women earning > Rs.1600/month in ESI-covered establishments. Maternity leave up to 12 weeks (6 before, 6 after delivery). Full wages/salary during leave; medical bonus if no free care. Requires 160 working days service. Recent amendments: 6 months or 26 weeks paid leave for first two children. The Payment of Gratuity Act, 1972: Additional retirement benefit. Applies to ports, railways, shops, establishments with 10+ workers. Employee entitled to 15 days wages for every year of service (max 20 months wages). Seasonal workers: 7 days wages/season. Requires 5 years continuous service (relaxable for death/disablement). Gratuity formula: $N \times B \times 15 / 26$ (N=years, B=last basic salary + DA). Overview of Employees’ Benefits Laws in India Industrial law (labour/employment laws) has changed employer-employee equation. Includes ESI Act, EPF Act, Maternity Benefit Act, Payment of Gratuity Act, Employees’ Compensation Act. Other Points to be Considered Company-employers must communicate workplace information in writing (Employee Handbook). Handbook should align with labor laws, social regulations (working hours, rest, leaves, social security, termination, gratuity). Summary of Employee Benefits and Welfare Underlines importance of welfare measures and social security. Familiarizes with laws/rules governing them. Enhances efficiency, morale, productivity. Emphasizes updating knowledge on law changes. Industrial Relation Management Objective Scrutiny of relations with industrial workers due to increasing education, globalization. Shift in maintenance of industrial relations. Introduction Phenomenal changes in industrial relations in India and globally. Nationalization in early fifties improved relations in public sector undertakings. Shift to privatization creates need for cordial relations. Reasons forCordial Relations: Worker cooperation, transparency, enhanced production/productivity, shared profits. P.M and H.R.M – Industrial Relations Shift from Personnel Management to Human Resources Management (HRM). HRM Approach: Workforce as part of management, proper motivation, career planning. Team spirit, "give and take," MBO approach. Flattened hierarchy, improved communication, no suspicion. Spelt out career growth, mutual benefit. More scope for union activities, better negotiations. Participative forums gaining momentum. Changes in Personal Relationships: Rules/regulations humanitarian, cooperative attitude. Procedures contracted as per need, focus on getting things done. Guidance pattern by managers, workers feel like a team. Managers facilitate with transformed leadership. Team work facilitated ("let us go and do it"). "Industrial workers are industrial assets" (Tata family motto). Higher thrust on worker development (skill improvement, career growth). Industrial Relations Changes have brought changes in: a) Management, entrepreneurs, employees. b) Trade unions. c) Workers themselves. d) Attitude of government, politicians. e) Judiciary. Management, entrepreneurs, employees because of necessity and compelling circumstances. Management adopted HRM policies. Employers formed effective associations to tackle workers and compete. Linkage with international business organizations, participation in world trade. Linkage with international labor organization for updated information. ASSO CHAM, chamber of commerce emerged as confederation of Indian Industries. Status of Trade Unions: Post-independence: Stronger trade unions, masters in private sector. Nationalization: Public sector bureaucrats couldn't pressure union leaders, needed better relations. Unions affiliated with political parties, became pawns. Change and Workers: Joined powerful unions, not principled ones. "Might is right" mentality. Ignored management interests, justifiable demands. Resulted in employer dilemma, lack of enthusiasm. Many social security Acts focused only on worker interest. Attitude of Government and Politician: Politicians jubilant with nationalization, held reins. PSU profit/loss linked to government money, comfortable IR. Backbone-less management, enhanced wages without accountability. Post-independence euphoria waned, shift to privatization, disinvestment. Created strain on IR. Amalgamation, merger, foreign companies: Workers baffled, unions submerged, global competition felt. New employment in IT: "workers" disappeared, unions out of question. Industries saw competitive world, appreciated necessity for good relations. Change in Judiciary: Judicial activism pronounced, judges decided for country's welfare. Shift where employer action was justified. Development of nation boomed. Industrial Relations and Productivity Definition (Betrel Smith): "Part of management concerned with manpower... ordinary, skilled workers or manager." Good IR provides congenial atmosphere, workers focus on job, management on welfare, company goals. Motivated workers, high morale, team spirit, profit sharing leads to satisfied workers. Satisfied worker = most productive worker. Good IR achieves better productivity (not just production). 1. Manpower productivity: Efficient development of workforce, right man, right place, right time, right job. Achieved when worker is satisfied. 2. Finance productivity: Deployment of finance for best output, low interest, high return. Just and incentive-oriented payment to workers. 3. Marketing productivity: High sales for efforts/expenditure. Low production cost (satisfied workers, avoided wastage, good quality, disciplined production). 4. Workers productivity: Increased sense of responsibility, team spirit. Less absenteeism, reduced turnover. Strained IR leads to industrial disputes, loss to both sides. Productivity Definition (V.K.R. Menon): "Development of an attitude of mind and a constant urge to find better, cheaper, quicker easier and safe ways of doing a job..." ILO: "Ratio between output and one of the factors of input (men, material, money, talent etc)." Greatest output with smallest input. Necessary for all enterprises. Effective production improvement and productivity crucial for global competition. Economic growth stable with rising productivity. Good IR leads to: industrial workers at peak efficiency, reduced wasteful expenditure/wastages, reduced total cost, improved quality, increased worker emoluments. Competitive market, technology, mechanization, computerization: all aimed at productivity through improved relations. Upgradation of employees through training/development. Capable HRM management to cope with new workers/technology. Government rules/regulations should aid productivity (e.g., productivity-linked bonus). Following actions of management may affect labour relations. I. Unbalanced management of men/material. II. Untrained, low-calibre management. III. Failure to use scientific management. IV. Incompetence at all three levels of management. Productivity can be increased along with better industrial relations and allied activities like. 1. Adoption of supply chain management for best raw materials. 2. Better environment and improved working conditions. 3. Updated machines, full-scale mechanization. 4. Correctly selected, properly trained, fully loaded workforce. 5. Proper monetary/non-monetary rewards, mutually agreeable incentive plans. 6. Grievance Procedures to avoid conflict. 7. Quality circles with workers for quality products, wastage avoidance. Summary of Industrial Relation Management Shift to HRM mode (flexible, worker-oriented). Satisfied workers are more productive, reducing conflicts. Productivity vs. production. Increased productivity benefits management, workers, and society. Regulatory Mechanism List of major regulations in India Some major regulations – economic or in the public interest – enforced in India are listed below: The Companies Act, 2013 The Competition Act, 2002 The Foreign Exchange Management Act, 1999 (FEMA) The Securities and Exchange Board of India Act, 1992 (SEBI Act) The Consumer Protection Act, 1986 The Environmental Protection Act, 1986 The Factories Act, 1948 The Industrial Disputes Act, 1947 The Minimum Wages Act, 1948 The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 The Employees' State Insurance Act, 1948 The Payment of Gratuity Act, 1972 The Maternity Benefit Act, 1961 The Payment of Wages Act, 1936 The Equal Remuneration Act, 1976 The Contract Labour (Regulation and Abolition) Act, 1970 The Child Labour (Prohibition and Regulation) Act, 1986 The Apprentices Act, 1961 The Trade Unions Act, 1926 Institutional Landscape for Business in India Business regulation cuts across sectors, can be discriminatory. Includes industrial regulation. Business regulations enforced by the Government of India Liberalization of industrial and trade policies (1980s) led to regulatory reforms. Industrial Policy Resolution of 1956 and Statement of Industrial Policy of 1991 provide framework. Reforms: investment licensing, taxation, prices/distribution, trade. Licensing: Industrial licensing eliminated except for select sectors (alcoholic drinks, tobacco, defense, explosives, hazardous chemicals, drugs/pharmaceuticals). Restrictions on investment/expansion removed, FDI facilitated. Areas reserved for public sector mostly opened to private (except atomic energy, railways). Mandatory for: compulsory licensing industries, items reserved for small-scale sector (SSI), industrial undertakings within 25 km of million-plus cities (unless industrial area before 1991 or non-polluting). SSI: Investment SSI list ratified by Central Government; licenses by Secretariat for Industrial Assistance (SIA). Exempted undertakings file Industrial Entrepreneur Memoranda (IEM) with SIA. Investor needs state government approvals for land, building plan, utilities. Tax regulation: Levied and regulated by Central and State governments. Central: income tax, customs, central excise, service tax (CBDT, CBEC). State: VAT, state excise, stamp duty, professional/land taxes. Local bodies: property, utility taxes. Reforms: rationalized rates, simplified laws, better compliance. Business entities taxed on worldwide income (residents) or Indian sources (non-residents). Transfer pricing provisions for multinational companies. Authority for Advance Rulings (AAR) for tax clarity for non-residents. Double Tax Avoidance Agreements (DTAA) with various countries. Policy on incentives: Tax incentives for corporate profits, depreciation, deductions. For new investments in infrastructure, power, SEZ, food processing, hospitals. Indian states offer tax concessions, exemptions on utilities, stamp duty, land concessions. Special Economic Zones (SEZs) general fiscal incentives: exemption from customs/excise, drawbacks, exemption from service tax, income tax concessions, sales tax holiday. Foreign exchange regulation: Liberalized controls. Rupee fully convertible on current account, almost fully on capital account for non-residents. Profits, dividends, sale proceeds repatriable for FDI. Reserve Bank of India administers Foreign Exchange Management Act 1999 (FEMA). State government business regulations: Deal with law & order, agriculture, irrigation, utilities, health, education, VAT. Entrepreneurs interact with state governments/local bodies for approvals, land, infrastructure. Regulatory constraints: opaque labor laws, inefficient land acquisition, poor policy implementation. Disconnect between laws and implementation (e.g., SEZ labor law compliance). Regulatory approvals at state level: land acquisition, building plan, Factories/Boilers Act, Electricity Inspectorate, Pollution Control Board, Labor Department, Drugs Inspectorate, power/water connections. Directorate of Industries: nodal agency for new investors, interface for approvals. Approvals/clearances required for doing business and corresponding agencies granting the same Approval/Clearance Central Government Agency State Government Agency Industrial License Secretariat for Industrial Assistance (SIA) - Environment Clearance Ministry of Environment, Forests and Climate Change State Pollution Control Board Company/Partnership Registration Registrar of Companies Registrar of Firms (for partnerships) Tax Registration (Income Tax, GST) Income Tax Department, GST Council State Commercial Tax Department (for state-specific taxes) Factory License - Inspectorate of Factories Building Plan Approval - Local Municipal Corporation / Panchayat Electricity Connection - State Electricity Board/Distribution Company Water Connection - Local Water Authority Drug Manufacturing License Central Drugs Standard Control Organization State Drugs Control Department Labour Law Registrations Chief Labour Commissioner (Central) State Labour Department Business registration process Involves multiple steps and agencies, varying by business type and location. Typically includes: choosing business structure, obtaining DIN/DSC, company name approval, MoA/AoA submission, certificate of incorporation, GST registration, other specific licenses.