UNIT-Ⅲ

Training

The term training refers to the acquisition of knowledge, skills, and competencies as a result

of the teaching of vocational or practical skills and knowledge that relate to specific useful

competencies. It forms the core of apprenticeships and provides the backbone of content at

institutes of technology (also known as technical colleges or polytechnics). In addition to the

basic training required for a trade, occupation or profession, observers of the labor-market

recognize as of 2008[update] the need to continue training beyond initial qualifications: to

maintain, upgrade and update skills throughout working life. People within many professions

and occupations may refer to this sort of training as professional development.

Training usually refers to some kind of organized (and finite it time) event — a seminar,

workshop that has a specific beginning data and end date. It’s often a group activity, but the

word training is also used to refer to specific instruction done one on one.

Employee development, however, is a much bigger, inclusive “thing”. For example, if a

manager pairsup a relatively new employee with a more experienced employee to help the

new employee learns about the job, that’s really employee development. If a manager coaches

and employee in an ongoing way, that’s employee development. Or, employees may rotate

job responsibilities to learn about the jobs of their colleagues and gainexperience so

theymight eventuallyhave more promotionopportunities. That’s employee development.

In other words employee development is a broader term that includes training as one, and

only one of its methods for encouraging employee learning. The important point here is that

different activities are better for the achievement of different results. For example, if the

desire is provide an employee with a better understanding of how the department works, job

rotation might work very well. If the goal is to improve the employee’s ability to use a

computer based accounting package direct training would be more appropriate than, let’s say,

job rotation.
Need for Employee Training
Training of employees takes place after orientation takes place. Training is the process of

enhancing the skills, capabilities and knowledge of employees for doing a particular job.

Training process moulds the thinking of employees and leads to quality performance of

employees. It is continuous and never ending in nature.

Training is given on four basic grounds:

1) New candidates who join an organization are given training. This training familiarizes

them with the organizational mission, vision, rules and regulations and the working

conditions.

2) The existing employees are trained to refresh and enhance their knowledge.

3) If any updations and amendments take place in technology, training is given to cope up

with those changes. For instance, purchasing new equipment, changes in technique of

production, computer impartment. The employees are trained about use of new

equipments and work methods.

4) When promotion and career growth becomes important. Training is given so that

employees are prepared to share the responsibilities of the higher level job.

Training needs can be assessed by analyzing three major human resource areas: the

organization as a whole, the job characteristics and the needs of the individuals. This analysis

will provide answers to the following questions:

 Where is training needed?

 What specifically must an employee learn in order to be more productive?

 Who needs to be trained?

Begin by assessing the current status of the company how it does what it does best and the

abilities of your employees to do these tasks. This analysis will provide some benchmarks

against which the effectiveness of a training program can be evaluated. Your firm should

know where it wants to be in five years from its long-range strategic plan. What you need is a

training program
to take your firm from here to there. Second, consider whether the organization is financially

committed to supporting the training efforts. If not, any attempt to develop a solid training

program will fail.

Training Methods in Human Resource Management

On-the-job training methods

This type of training also known as job instruction training is most commonly used as a

method. Under this method, the individual is placed on a regular job & taught the skills

necessary to perform the job.

1. Job Rotation

It involves the movement of the trainee from one job to another. The trainee receives job

knowledge & gains experience from his supervisor or trainer. This type of training gives an

opportunity to the trainee to understand the problem of employees on other jobs & respect

them.

2. Coaching

The trainee is placed under a particular supervisor who functions as a coach in training the

individual. The supervisor provides feedback to the trainee on his performance & offers him

some suggestions for improvement.

3. Job Instruction

This method is also known as step-by-step training. Under this method, the trainer explains to

the trainee the way of doing the jobs, knowledge & skill and allows him to do the job. The

trainer appraises the performance, provides information & corrects the trainees.

4. Committee Assignment

Under this method, a group of trainees is given and asked to solve an actual organizational

problem. The trainees solve the problem jointly and develop teamwork.

Off-the-Job Methods

Under this method of training, the trainee is separated from the job situation and his attention
is
focused on learning the material related to his future job performance.

1. Vestibule training

In this method, actual work conditions are simulated in a classroom. Material files and

needed equipment are also used in training. This type is used for training personnel for clerical

and semi- skilled jobs.

2 Role-Playing

It is defined as a method of human interaction that involves realistic behavior in an imaginary

situation. This method of training involves action doing the practice. This method is mostly

used for developing interpersonal interaction and relations.

3. Lecture Method

The lecture is a traditional & direct method of instruction. The instructor organizes the

material & gives it to a group of trainees in the form of a talk. This is beneficial to train a

large group of trainees.

4. Conference

It is a method for clerical, professional & supervisory personnel. This involves a group of

people who put forth ideas, examine & share facts, ideas assumptions & draw a conclusion.

the success of this method depends on the leadership qualities of the person who leads the

group.

Performance management

Performance management is the process of continuous feedback and communication between

managers and their employees to ensure the achievement of the strategic objectives of the

organization.

The definition of performance management has evolved since it first appeared as a concept.

What was once an annual process is now transitioning to continuous performance

management. The goal is to ensure that employees are performing efficiently throughout the

year, and in the process, address any issues that may arise along the way that affect employee

performance.
“Most workers perceive their organization’s performance management approach as

confusing, subjective, and infrequent,” said Kathi Enderes Opens a new window (vice

president, Talent, and Workforce Research Leader) and Matthew Shannon Opens a new

window (senior research analyst) at Bersin, Deloitte Consulting LLP, in an exclusive with

HR Technologist.

This is the current state of performance management. However, it doesn’t have to be that

way. Automation now plays a significant role in performance management, and many of the

processes involved can be streamlined so that employee performance can be strategically

managed. This is the age of continuous performance management Opens a new window, and

heres everything you need to know about it.

Uses of Performance Appraisal

In many organisations, an appraisal system assists in achieving numerous goals. However, in

few firms performance appraisal is used in measuring and improving individual as well as

organisational performance. The most common issue with performance appraisal is that a lot

is expected from one form of performance appraisal system plan. For instance, a plan that is

strategically designed to improve and develop employee skills may not be used in deciding

wage increases. Although, if an appraisal plan is well designed it can be used in

accomplishing the set objectives as well as performance.

1) Human Resource Planning: It is important to record data/information of employees in a

firm so that it is easy to identify the potentials of who deserves to be promoted or have

any area to improve. Performance appraisal also helps in revealing if there is insufficient

number of workers. An appraisal system should be designed and planned after considering

the strengths and weaknesses of the HRM of the organisation.

2) Recruitment and Selection: Through the process of performance analysis, organisations

can determine the performance potential on an applicant. Studies show that successful

employees display specific behavioral traits while performing tasks. The data processed
 through performance evaluation help in setting standards for behavioral interviews. In

the process of selection, the employee rating can also be used as a variable against which

test scores are compared.

3) Training and Development: Training and development is crucial for any employee as it

acts as way to communicating what is expected and how. Performance appraisal helps in

drawing attention to these specific needs of training. For example, if an employee’s job

involves the skill of creative writing and by the process of evaluation it reveals that he or

she lacks in it or has poor knowledge about it, the employee will need appropriate training

sessions. When managers of a firm lack the capability of administering disciplinary

action, they need the necessary training to deal with this problem. Hence, identifying

deficiencies and obstacles can be overcome by training and development sessions which

develop and improve individual’s skills allowing them to perform better. An appraisal

process does not train and develop individuals but determines the training needed by

providing data.

4) Career Planning and Development: Career planning can be described as a never-ending

cycle in which an individual sets profession goals and means to achieve them throughout

his or her lifetime. However, career development is a more formal approach used by

organisations. It involves recruiting suitable qualified and experienced people when

required. Performance appraisal can determine an employee’s potential through assessing

its weaknesses and strengths. The data is also useful to counsel junior staff member and

assisting in career plans.

5) Compensation Programs: Performance appraisal evaluations help in making decisions

dealing with wage or salary regulations. It is believed that organisations should reward

employees with increase in pay when excellent performance is achieved. In order to

increase performance, an organisation should implement well planned and designed

performance appraisal systems and award the efficient workers. This not only increases

performance but
 also keeps employees motivated to achieve better in future.

6) Internal Employee Relations: Performance appraisal evaluation can provide crucial

information used in making decision about the internal employee relations i.e promotion,

demotion, transfers and dismisses etc. For example, performance appraisal data are also

used for decisions in several areas of internal employee relations, including promotion,

demotion, termination, layoff, and transfer. Also, an employee’s performance in one job

may be useful in determining his or her ability to perform another job on the same level,

as is required in the consideration of transfers. When the performance level is

unacceptable, demotion or even termination may be appropriate.

7) Assessment of Employee Potential: Some organizations attempt to assess an employee’s

potential as they appraise his or her job performance. Although past behaviors may be a

good predictor of future behaviors in some jobs, an employee’s past performance may not

accurately indicate future performance in other jobs. The best salesperson in the company

may not have what it takes to become a successful district sales manager, where the tasks

are distinctly different. Similarly, the best systems analyst may, if promoted, be a disaster

as an information technology manager. Overemphasizing technical skills and ignoring

other equally important skills is a common error in promoting employees into

management jobs. Recognition of this problem has led some firms to separate the

appraisal of performance, which focuses on past behavior, from the assessment of

potential, which is future-oriented.

Methods of Peífoímance Appíaisals

Peífoímance appíaisals come in many foíms. Manageís and human

íesouíces staff íesponsible foí these appíaisals need to choose the best
methods based on the size of theií oíganization and what soíts of
íesponsibilities the employees fulfill.

1) 720-Degree Feedback

You could say that this method doubles what you would get from the 360-degree

feedback! The 720-degree feedback method collects information not only from within the

organization but also from the outside, from customers, investors, suppliers, and other

financial-related groups.

2) The Assessment Center Method

This method consists of exercises conducted at the company's designated assessment

center, including computer simulations, discussions, role-playing, and other methods.

Employees are evaluated based on communication skills, confidence, emotional

intelligence, mental alertness, and administrative abilities. The rater observes the

proceedings and then evaluates the employee's performance at the end.

3) Behaviorally Anchored Rating Scale (BARS)

This appraisal measures the employee’s performance by comparing it with specific

established behavior examples. Each example has a rating to help collect the data.

4) Checklist Method

This simple method consists of a checklist with a series of questions that have yes/no

answers for different traits.

5) Critical Incidents Method

Critical incidents could be good or bad. In either case, the supervisor takes the

employee’s critical behavior into account.

6) Customer/Client Reviews

This method fits best for employees who offer goods and services to customers. The

manager asks clients and customers for feedback, especially how they perceive the

employee and, by extension, the business.

7) Field Review Method

An HR department or corporate office representative conducts the employee's

performance evaluation.

8) Forced Choice Method

This method is usually a series of prepared True/False questions.

9) General Performance Appraisal

This method involves continuous interaction between the manager and the employee,

including setting goals and seeing how they are met.

10) Human Resource Accounting Method

Alternately called the “accounting method” or “cost accounting method,” this method

looks at the monetary value the employee brings to the company. It also includes the

company’s cost to retain the employee.

11) Management By Objective (MBO)

This process involves the employee and manager working as a team to identify goals for

the former to work on. Once the goals are established, both parties discuss the progress

the employee is making to meet those goals. This process concludes with the manager

evaluating whether the employee achieved the goal.

12) Performance Tests and Observations

This method consists of an oral test that measures employees' skills and knowledge in

their respective fields. Sometimes, the tester poses a challenge to the employee and has

them demonstrate their skills in solving the problem.

 Factors that Distort Appraisal

1) Performance : Performance of an employee by default affects his appraisal. Every

organization would want to make better profits. If certain employees perform above their

caliber to help company achieve better results, the organization would appreciate their

efforts by giving them a raise in their compensation. It is a motivating factor as well for

employees who continue to contribute efficiently to the organization.

2) Attendance : A very essential part of employment is to be present at the workstation and

other team and company activities. Taking a day off once in a while is okay, but

frequent absenteeism will no doubt weigh down your appraisals. Employees who have

lesser absenteeism and are punctual can expect good appraisals.

3) Being motivated: A manager would love to see his employees work with excitement and

energy. Employees who get to work with motivation, take initiatives and show interest to

perform exceptionally are highly looked upon. Positive employees are retained, respected

and rewarded by the organization.

4) Team work: Organizations like team players. Employees who gel well with the team and

help the team improve will surely be recognized and the efforts will be honored. This

would be one of the reasons why employees with still performance will manage to get a

healthier raise in their appraisals. Employees who spread negativity among the team

might have to face a tough time during their appraisals.

5) Service to the customers: Employees who deal with customers of the organization

should make sure that they fulfill the required complainants. This is essential as

’employee client relations’ will be responsible for bringing revenue to the organization.

Employees who do a good job here will definitely receive a bonus.

6) Product knowledge: Employees should know in and out about the product or service that

they deal with. Product knowledge or process knowledge is an attribute by which the
 employee is measured. Limited knowledge about the product or service restricts customer

experience, and also it is difficult to convince the customers about the benefits of the

product/service. This in turn shows your inefficiency which leads to poor appraisal.

Career Anchors

Career anchors, a concept developed by Dr. Edgar Schein, represent an individual's core

values, skills, and motivations that guide their career choices and decisions. These anchors

serve as a stable foundation for career development, helping individuals make choices that

align with their deepest aspirations and preferences. There are eight primary career anchors,

including Technical/Functional Competence, Managerial Competence,

Autonomy/Independence, Security/Stability, Entrepreneurial Creativity, Service/Dedication

to a Cause, Pure Challenge, and Lifestyle. Understanding one's career anchor is essential for

both employees and organizations as it can enhance career satisfaction, improve job fit, and

contribute to long-term success by aligning personal values with professional aspirations.

The 5 stages in a Career

Let us look at the five main career stages for an employee, professional or even an
entrepreneur:

1. Exploration

A career stage that generally ends in the mid-twenties when one makes transition from formal

education to job. We start exploring about different career opportunities. Our decision for

career gets influenced by parents, peers and the financial resources.

It is a time when a number of expectations about one’s career are developed, many of which

are unrealistic.

2. Establishment

This period begins when we start the search of work and also includes accepting the first job,

acceptance by peers, learning about the job and gaining the first taste of success or failure in

the real world.

Problems in exploration period

1. Finding a niche

2. Making your mark

3. Characterized by making mistakes.

3. Mid-Career

A stage marked by:-

1. Continuous improvement in the performance

2. Levelling off in the performance

3. Beginning of deterioration

process Possible outcomes of mid-

career

1. Some employees reach their early goals and go on to even greater heights.

2. Other may suffer from plateaued mid-career

4. Late Career Stage

A career stage in which neither the person is learning about their jobs nor they are expected

to outdo their level of performance from previous years. It also has two affects on:

1. Individuals who have grown in mid career stage

2. Individuals who have stagnated or deteriorated

5. Decline (Late Stage)

This the final stage in one’s career which is usually marked by retirement. This is the difficult

stage for everyone but hardest for those who have had continued successes in the earlier

stages and then comes the time has come for retirement.

Steps of Determining Compensation

1. Define the job.

Define the job’s purpose, essential duties and responsibilities, required skills and knowledge,

experience, and educational level. This involves creating a job description or updating an

existing
one. When done right, defining a job accurately requires a comprehensive job analysis. A job

title alone will not adequately define a job. You must fully understand and document its

responsibilities.

2. Price the job.

Particularly in the case of a new job, use salary survey information (typically three sources)

to price the job. Match the job description to the jobs within your salary surveys – ideally it

should match 60-70% of the job duties. If a direct match doesn’t exist, price multiple jobs in

the survey and blend the data. In addition, match the breakouts to the demographics of your

organization to make sure you are comparing the data against your competitors – such as

number of employees and industry type.

Once matched, select a percentile based on your compensation philosophy. If you are trying

to pay competitively at market for a given position, based on your compensation philosophy,

you will want to choose the median or 50th percentile. Once data from all three sources is

collected, a market average should be calculated. This is typically the “going rate” (otherwise

known as the market rate) for the position.

3. Determine the job’s value to your organization.

Evaluating the job’s worth and value not only in the market, but also to your organization, is

an important step in setting compensation for this reason: a job with greater internal impact

and contribution to your organization’s strategy and business objectives will be more

valuable, and therefore should be paid more, than a job with less of a direct impact. Knowing

the job’s value also helps you determine whether or not compensation is worth negotiating.

When evaluating a job’s worth, several different methods can be used. Jobs can be slotted

into a class or grade that matches their class description on job skill and complexity. Also,

jobs can be assigned points based on certain factors such as mental and/or physical effort,

supervisory responsibility, and accountability/responsibility.

4. Review where a job fits within a grade/range.

Depending on the value of the job and what it is priced at, the job (if it is a new job) is then

allocated to the pay structure in a given grade. Existing jobs will already be assigned to a

grade and have a range if you have a pay structure in place. Reviewing the compensation of

other jobs within the grade, pay rates of similar jobs and peers, and the range of pay for those

jobs will help you set appropriate compensation.

You’ll also want to consider experience level in the range. Typically new-hires with no to

little experience earn closer to the minimum, and highly experienced employees earn closer

to the maximum.

5. Consider organizational factors, including budget.

Evaluate what is in your budget and what you paid the last incumbent, if it is not a new role.

You should also factor in projected cost-of living adjustments, bonuses, and other increases.

In addition, consider the mix of pay. Pay can include various forms (variable pay, base pay,

skill- based pay, etc.), depending on the position. For example, sales and executive

employees may have a much different mix of pay forms than an administrative employee.

When setting compensation, it’s important to evaluate what that mix should be based on

market data and organizational needs.

Also, recognize that pay is only part of the total rewards package. If your organization offers

many other attractive benefits like flexible schedules, engaging career opportunities, fulfilling

work, rewards and recognition programs, and generous time off and benefits, these can all

factor into your pay decisions.

What is a job evaluation?

Job evaluations are a step-by-step process to determine how much money a position should

earn. There are different methods of job evaluation, but the point of each method is

determining the value the position brings to the company. This ensures the salary is equal to

the work. The HR department performs job evaluations based on the role rather than on the

employee who holds the position. This typically occurs when a company is new or adding

additional roles.

Job evaluation methods

There are two main types of internal job evaluations methods: qualitative and quantitative.

Qualitative methods, such as job ranking and classification, are faster. But quantitative

methods, such as factor comparison and point factor, consider the skills and responsibilities

each role requires. There is also an external job evaluation method called market pricing. To

help you determine which is the best option for you, consider the following descriptions of

each job evaluation method:

1. Job ranking

This method requires you to rank each role in a hierarchy based on the value they bring to the

company or how difficult the role's duties are. Job ranking is a good job evaluation method

for smaller companies as it is simple and you can consider up to 100 jobs. It is also a good

method for reducing positions as you can pair similar roles together when ranking them and

choose to keep the one that has the biggest impact on the company.

The job ranking method has limitations as it is subjective, so combining it with a quantitative

method can help make the results more accurate.

2. Job classification

The job classification method first requires you to develop a grading system or classification

method to help you sort roles. For example, you could create the following four categories:

executives, skilled workers, semiskilled workers, and unskilled workers. Then, sort each role

into
a category, helping you determine the salary for each position in that category. This method

is also subjective and it can be hard to fit every unique role into a category.

3. Market pricing

Market pricing is an external job evaluation method. It requires you to determine a role's

salary based on the amount other companies are paying employees in the same position. To

determine the amount other companies are paying, you can look through third-party

compensation surveys. This allows you to create a competitive wage for your employees.

Market pricing overlooks internal equity. This means an employee may receive a lower salary

than their colleagues or that their work demands if the market rate for their role is low. To

counteract this, combine market pricing with one of the internal job evaluation methods.

4. Point factor

With the point factor method, you evaluate jobs by assigning each role points and then rank

them. Start by developing a detailed point system. For example, every skill a position requires

could be a point, or each job responsibility could be a point. Once you have your point

system, you can go through each role and assign it a total number of points. Then, rank the

jobs from the highest number of points to the lowest to help you determine their salaries.

5. Factor comparison

The factor comparison method is a combination of the job ranking and point factor methods.

Start by ranking each job based on certain factors, such as the number of skills each role

requires or the knowledge candidates need to have. Then, assign these factors points. The total

number of points each role has determines the job's ranking.

Component of Pay Structure

1. Basic Salary

The basic salary is the fixed income provided to the employee. It is based on several factors

such as the government-mandated minimum salary, the employee’s qualifications,

experience, and skills.

As a fixed component of the employee salary, other components are calculated as various

percentages of the basic salary.

2. House Rent Allowance

House Rent Allowance (HRA) is provided to employees to compensate them for staying in

rented property.

Such employees can also claim full or partial tax exemption under Section 10 (13A) of the

Income Tax Act, under Rule 2A of the Income Tax Rules. On the other hand, house rent

allowance is taxable if the employee is not living in a rented property.

3. Dearness Allowance

Dearness allowance is a percentage of basic salary that is provided to help them combat the

effects of inflation.

It is provided to employees of the public sector, government employees, and pensioners. It is

also fully taxable by law.

4. Conveyance Allowance

Conveyance Allowance refers to the salary paid by the company for the daily travel expenses

of the employee.

It is also referred to as ‘transport allowance’ by some companies. It was categorized as

‘Standard Deductions’ in Budget 2018, and in the next year, it was increased from ₹40,000 to

₹50,000.

5. Medical Allowance

The employer can pay their employees medical allowances as a salary component to
compensate
for their medical expenses. This amount is tax-free up to ₹15,000. Some companies also

categorize this amount as medical reimbursement and provide it only when the employee has

incurred a medical expenditure.

6. Mobile Allowance

Some companies pay the mobile charges of their employees in the form of ‘mobile

allowances’. In some organizations, it is a fixed component set as per the company’s

corporate connections. The mobile phone allowance is exempted from taxes in some

scenarios only.

7. Children Education Allowance

Some companies also provide an allowance for children’s education. It is categorized under

‘children’s education allowance’. If the employee spends more than ₹100 per month, this

allowance becomes taxable under the law.

8. Books & Periodicals Allowance

Some companies provide an additional allowance for the employee to buy books and

periodicals. This allowance is covered under the ‘books and periodicals allowance’. It is

exempt from taxes until the actual expenditure in purchasing those items is covered.

9. Leave Travel Allowance

Leave travel allowance is the payment provided by the company to compensate the employee

for their travel expenses while on leave.

It covers the standard modes of domestic travel via aeroplanes, railways and other ways of

public transport. The amount paid under ‘Leave Travel Allowance’ is exempted from taxes

under Section 10 (5) of the Income Tax Act, 1961.

10. Bonus

Bonus is how the company highlights their appreciation for employees working hard for their

company. Businesses usually share their profit with their employees with the help of bonuses

to appreciate their efforts in helping the company exceed their targets. It is also a taxable

component
of their salary structure.

11. Gratuity

Gratuity is a statutory component of the employee salary paid in a lump sum to the employee

upon their resignation from an organization. It is payable by the company only if the

employee has served in the company for a minimum period of 5 years.

It is set as 4.81% of basic salary per the provisions of the Payment of Gratuity Act of 1972. It

is paid as gratitude for the services rendered by the employee while in the organization.

12. Arrears

There are instances when human errors cause an employee to receive less salary than

expected. Similarly, due to computation delays, employees might receive their first hiked

salary in the next month from which their pay was hiked. Arrears refer to any such payments

provided to the employee later than when they were expected to receive them.

13. Incentives

Incentives refer to the additional bonuses provided to the employees for their exceptional

work. It acts as an ‘incentive’ for employees to remain more engaged with their work. It is

solely based on the performance of the employee.

14. Income Tax

Income Tax refers to the tax levied by the government on the employees working in India.

The percentage of income to be given as income tax is decided in the budget as different

slabs, which are set depending on the taxpayer’s income bracket.

15. Provident Fund

The employee provident fund is a savings fund developed solely to help the employees in

times of need. A specific percentage of the employee’s salary is deducted and deposited every

month by the employer. The employer must also deposit the same amount from their end for

the employee’s provident fund.

16. Professional Tax

Professional tax is the tax levied on the employee’s income by the state government, which is

different from the income tax imposed by the central government. Hence, professional tax

differs from one state to another. Employers can deduct the professional tax from their

employee’s salaries before disbursing them.

17. Employee State Insurance Premium

The Employee State Insurance Premium is a component of the salary deducted for providing

employees medical insurance.

The ESIC Act of 1948 stipulates that if a company has 10 or more employees with a gross

salary of less than ₹21,000 per month, then 1% of their salary should be deducted for ESIC.

The employer must also provide 4% of the employee’s salary as an ESIC contribution.

18. National Pension Scheme

The National Pension Scheme is a scheme by the Government of India to allow a person to

save additional money that can be provided as a lump sum upon retirement. It will enable the

employees to be self-reliant after their retirement.

The employee should provide a minimum of ₹6,000 if their salary is up to ₹ 50,000 per

annum. The employer must also contribute 10% of the employee’s basic wage towards NPS.

19. Labour Welfare Fund

The labour welfare fund is an additional fund provided by the state government to support

any labourer needing financial help. Since it is a statutory requirement by the state

governments, it differs from state to state. The State Labour Welfare Board decides the

contribution percentage.
20. Other Deductions

The companies are free to add other deductions apart from the statutory ones. However, these

deductions should be aimed toward employee welfare. A typical example of such deductions

is health insurance premiums, which help the employee in case of a medical need.

Factors affecting Wage and Salary

A. Demand and Supply: Demand for and supply of labor and its availability will have

great influence on the determination of wage rates. If there is a shortage of labor, the

wages demanded will be high. If, on the other hand labor is plentiful, workers will be

too willing to work at low rates of wages. However, wages cannot be regarded today

merely a price for services rendered. In recent years therefore, both management and

labor has been becoming less and less dependent on this factor as a basic factor. An

employee will not hesitate to accept lower wages if he has opportunities for growth in

the organization. Today, the money which is paid as compensation should enable a

worker to buy goods and services which will enable himand his family to live a better

and fuller life and satisfy his hierarchical needs.

B. Organization’s Ability to Pay: This is a major affecting factor in determining wage

and salary structure of an organization. Financial position and soundness of an

organization can put it in a position to offer attractive compensation package. Some of

the reputed economically sound organizations are offering good compensation package

and thereby successful in obtaining and maintaining talented workforce. Good

compensation package helps in attracting and retaining quality talent inan organization.

Generallywagesin most of the organizationdecide through collective bargaining and ,

organization’s ability and capacity to pay attractive wages depends upon over all

financial soundness and economic condition of an organization.

C. Prevailing Market Rate or “Going Wage Rate”: This is practically the major factor

that induces any organization to take it as a base while determining wage and salary

structure for it. Prevailing market rate is also known as ‘most comparable rate of wage’,

and most popular method for wage rate determination, especially for lower cadre

positions. There are many reasons for an organization to pay wages at a market rate like

competition and a practice of ‘Brain Drain’ prevails in the market. Further more certain

laws framed laid down principal of’minimum wages’, ‘equal wage for equal work’. In

addition to this trade unions are also prefer to bargain upon and in accordance with

market rate of wages.

D. Productivity: Productivity is measured in terms of output per man hour. It a result of

several factors such as technology, labor efforts, method of doing work, management

contribution and support and so on. However, productivity has always remained as base

for wage differences since it a base which is apparently justifiable and acceptable to all

in the organization. Many a time this as base is not acceptable to many trade unions as it

is very difficult to have accurate measurement and is has always remain at a discretion

of management policies.

E. Cost of Living: It is always expected that there has to be adjustment in pay rates in

accordance with prevailing cost of living. The changes in the cost of leaving affect

purchasing power of the person. Trade union also considers this as a base for collective

bargaining on wage issues.

F. Trade Union’s Bargaining Power: Generally the mechanism for fixing of wages for

majority of workers is collective bargaining or negotiation, and collective bargaining

and negotiations depends upon the trade union’s strength. If there is a strong union

operates in the organization, it may dictate its terms on wage fixation and revision over

a period of
 time and vice versa. The strength and power of the trade union depends upon its

membership, financial strength and leadership it may have, for its functioning.

G. Job Requirements: From the organizational perspective appropriate job analysis and

job evaluation exercise is a base for the wage determination and revision. It is quite

obvious also that wages to be paid to the workers should be in accordance with the

duties, responsibilities and the efforts likely to be put for job performance. Wage or

compensation package very in accordance with job description and job specification.

H. Management Attitude: Attitude of employer or management towers the working

community of the organization does influence in wage determination and revision at an

appropriate time. Some reputed and professional organization does prefer to pay wage

in accordance with their reputation or prestige of an organization in the market. They

may give participation to workers in sharing profits. On the other hand conservative

organizations do not prefer to go for such profit sharing.

I. Psychological and Social Factors: Psychologically person perceive wages and

compensation package as sole parameter for success or failure in the life. Compensation

package plays significant role in the employees pride, moral, motivation and

psychological engagement and involvement in the work. Therefore such variable should

not be overlooked by the organization while determining wage and salary structure.

Socially and ethically also people feels that “equal work should carry equal pay “ i.e.

wage should be in accordance with efforts and workers should not be felt like being

cheated. Compensation policy should not make any discrimination on the basis of caste,

color, Sex or region, and must try to satisfy condition for fairness equity and justice.

J. Legislative Considerations: Legislative provisions do provide protection to the

working community byfixing bottom line for wage payments. Many a time it was found

that the bargaining power of the workers was not strong enough to ensure fair

wages.
 Consequently, the state legislative frame work stepped in to regulate wages and provide

for certain benefits to the workers. Legislation like Minimum Wages Act, 1936,

provides for statutory minimum wages to be prevails in the industrial organization so

that workers can satisfytheir bare requirements and maintain their minimum living

standard. These aspects are also considered while deciding compensation policy for an

organization.

Profit sharing

Profit sharing refers to various incentive plans introduced by businesses that provide direct or

indirect payments to employees that depend on company’s profitability in addition to

employees’ regular salary and bonuses. In publicly traded companies these plans typically

amount to allocation of shares to employees.

What is gainsharing?

Gainsharing aims to increase company profitability by seeking higher levels of participation

and employee performance. Employees receive a financial share of the profit of the company

gained by a performance improvement they helped design.

Gainsharing aims to eliminate waste in processes and motivate employees to work hard. It’s a

group-based initiative in which employees work together to improve performance, which

results in financial gains for the organization.

ESOP

ESOP stands for employee stock ownership plan. An ESOP grants company stock to

employees, often based on the duration of their employment. Typically, it is part of a

compensation package, where shares will vest over a period of time. ESOPs are designed so

that employees’ motivations and interests are aligned with those of the company’s

shareholders. From a management perspective, ESOPs have certain tax advantages, along

with incentivizing employees to focus on company performance.

Social security

Social security means the efforts related to protect and support the sufferers against the
 impacts of different types of unwanted activities due to that the life of persons is under risk.
These are called social risks and include retirement, sickness, disability, old age, survivor,
death of earning members, maternity, unemployment, etc. .
Social security is a very wide concept to define and it is difficult also. Social security means
the efforts related to protect and support the sufferers against the impacts of different types of
unwanted activities due to that the life of persons is under risk. These are called social risks
and include retirement, sickness, disability, old age, survivor, death of earning members,
maternity, unemployment, etc.
The efforts can be put by different parties but when the efforts can be included in legislations
relating to different areas with the objective to design legal stem of social security. These are
called social security legislations. In the United States, social security considered as a set of
programmes which includes old age, survivors, and disability insurance, for the elderly and
their dependents.
Healthcare

Medical, dental, and vision insurance plans are traditional healthcare benefits. Some

companies will supplement these with other specialized services such as physiotherapy and

chiropractic sessions, fertility treatments, or psychological support.

Retirement and pension plans

Saving and investing money for the future can be difficult. Many people would rather

participate in an employer-sponsored retirement plan than try to do it on their own.

In the US, very few non-government organizations still offer a traditional pension plan. The 401(k) is
now the most common employer-sponsored plan. It allows employees to invest a tax-free portion of their
wages into the fund(s) of their choice. Employers will typically contribute to the employee’s account as well
by matching a certain amount of their contribution.