Compensation & Reward Management (AUGUST 2017)

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1 Discuss the concept of compensation. What factors affect compensation of employees in industrial organizations?
2 What is the basic purpose behind the establishment of a sound Compensation and Reward administration system in the organizations?
3 What do you understand by the term need-based minimum wage and explain the importance of it in compensation management?
4 Discuss the factors affecting wage determination.
5 What do you understand by rate range? Discuss the types of rate ranges.
6 How does an organization align compensation strategy with its HR strategy and Business strategy.
7 What are the various elements of executive compensation? Explain.
8 What are the components of discretionary core fringe compensation? Explain.
Micro-Diversification Study
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A Case of a Labour Contractor at Dharmaram
This case focuses on the migration of labourers in search of daily wage during the dry season. Mr Prabhakar is one such labour contractor who has a tie up with a sugar factory. In addition to earning for himself, he provides daily wages to nearly 100 labourers during the lean season. .
The Village Context Paidipally is a small village in the Narayankhed mandal of Medak district. It is situated five Kms away from the town of Naryankhed. The village has more of a Kannada influence as it lies very near to the state of Karnataka.
The town of Bidar in Karnataka is only 60 Kms away from Paidipally. Paidipally has nearly 300 households with around 1,000 people. Most of the people are engaged in agriculture.
Majority of the people are small and marginal farmers who practice traditional agriculture. As agriculture is dependent on rainfall, often uncertain, people migrate to other places in search
of wage labour.
The soil is black cotton type. People mostly grow jowar and pulses. Only one crop is grown due to scarcity of water. There is lack of irrigation facility and people mostly have to depend on
rainfall which is less than 600 mm per year. Few farmers have bore-well and are engaged in cultivation of vegetables.
It is well connected with buses to Narayankhed every hour. The supply of electricity is very erratic although everybody has connections.
Since Narayankhed town is very near to the village, people mostly go there for all their needs. There is a hospital and both primary and high schools in Narayankhed.
Family Details
Prabhakar is now around 40 years of age. He has been staying in this village from his childhood. His family consists of his wife, three sons and one daughter who are dependent on him.
His parents stay in the neighbouring village. His children go to school and his wife looks after affairs of the house. The main income source for the family is earnings from the labour contract.
The family has three acres of agricultural land the value of which would be Rs. 45,000. Jowar and pulses are cultivated in this land during the kharif season. The family also has one cent of residential land with a house. The value of this property would be about Rs. 75,000.
Diversification History
Prabhakar’s father used to work as a daily wage labourer. He often had to go out of his village in search of wage labour in the lean season. In this process, he came across a private sugar factory newly established near Narayankhed. The only other sugar factory existent at that time in Narayankhed was the Nizam Sugars Public Limited. He got in touch with the owner of the sugar factory and got a contract of drying the sugarcane Bagas1 which was used as fuel for the boilers for heating the sugarcane juice.
This contract gave them work for additional three to four months during the lean season often from December to February. Prabhakar assisted his father for four years in this business and learnt the required skills. From the income earned from this source, he and his father could acquire three acres of
land and a residential house.
Prabhakar was married by this time to Saraswati. The income from agriculture was meagre as small surpluses were left after own consumption. All expenditure of the house had to be met from the profits from the above contract. In order to increase the family’s income, he decided to try and get similar contract elsewhere, instead of assisting his father.
Around 18 years ago, he got his first contract from the Sri Srinivasa Sugar factory in Ramayampet for the drying of bagas.
He is still continuing with the same contract. From these earnings, he could buy another house. He also invested some amount in digging a bore well. However, this was not successful.
When he got the contract, he started engaging labourers from his village by paying some advance wages to them. He in turn got an advance from the owner of the sugar factory. This advance payment to the labourers was necessary, as they had to support their families in their absence.
He gradually started using his labourers in the manufacturing process of sugar in addition to bagas drying. At present, he employs about 100 workers, of whom nearly 30 are working in the processing of sugar.
The workers are divided into various categories at the beginning and wages are paid according to the kind of work they do. The wage varies from Rs. 18 to Rs. 100 per day. The person at the boiler will get Rs. 100, labourer using his own bullocks for drying bagas will get Rs. 90 whereas a person engaged in drying the bagas will get Rs. 18.
Prabhakar explained that the income from this activity is mostly dependent on the amount of sugarcane supply to the factory for crushing. Higher the inflow of sugarcane in the factory, greater is requirement of bagas and therefore a higher income in the season.
He would incur losses if the factory does not run for the full season completely (i.e. for nearly three months) as the advance given to the workers could not be taken back for lack of any work.
Prabhakar suffered a heavy loss last year due to inadequate supply of sugarcane to the factory. The factory has a capacity to process 100 bags per day. Last year, it ran for a month. For the rest of the two months, it was not operating.
Due to this, he suffered a loss of Rs 30,000. He had to sell off one his house to recover this loss. Out of the sale proceeds, he had partly repaid this loss to the sugar factory and the rest was given as credit by the factory owner.
Thus was possible because of his association for the last 18 years. Often he has been supported by the factory owner in the event of any unforeseen circumstances.
Future Plans
Prabhakar is not very sure about his future plans. He wants to continue to do this business as it is providing wages to more than 100 families. The factory owner had offered him a job on several occasions but he is not keen on taking it as it is against his dignity.
He could have earned Rs. 4,000 per month easily as supervisor in the factory. He has plans to invest in a bore well again. He wants his children also to get into this business.

Answer Section
Q.No 1: What is the author trying to highlight with the help of this case?
Q.No 2: What kind of contractual arrangements exist in the processing sector?
Q.No 3: Is temporary migration a common phenomena in dryland regions? If so then when?
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1. Compensation can be _____ benefits
(A): Monetary
(B): Non-monetary
(C): both ‘a’ and ‘b’
(D): None of the above
2. Wages represents _____ rates of pay.
(A): Hourly
(B): Daily
(C): weekly
(D): Monthly
3. _______ are also called ‘payments by results’.
(A): Allowances
(B): Claims
(C): Incentives
(D): Fringe benefits
4. Incentives depends upon
(A): Productivity
(B): Sales
(C): Profits
(D): All of the above
5. The following is paid only at the time of employees exit after serving more than five years
(A): Perquisites
(B): Claims
(C): Gratuity
(D): Allowances
6. The following is a perquisites.
(A): Club membership
(B): Provident fund
(C): Medical allowance
(D): Group insurance
7. A behaviour which has rewarding experience is likely to be repeated’ is postulated by
(A): Reinforcement and expectancy theory
(B): Equity theory
(C): Agency theory
(D): None of the above
8. A fair day work for fair day pay’ denotes a sense of _______ felt by employees
(A): Responsibility
(B): Equity
(C): Happines
(D): Respect
9. The remuneration system needs to meet the following type(s) of equity
(A): Internal
(B): External
(C): Individual
(D): All of the above
10. Which of the following factor influence(s) employee compensation?
(A): Labour market
(B): Cost of living
(C): labour unions
(D): All of the above
11. Any compensation plan must be
(A): Understandable, workable, acceptable
(B): Reasonable, workable, acceptable
(C): Understandable, feasible, acceptable
(D): Understandable, workable, compensable
12. The following is not a part of remuneration model
(A): Job description
(B): Job Evaluation
(C): Job Hierarchy
(D): Job Analysis
13. Enlitist remuneration systems are prevalent among
(A): Well established firms
(B): Companies with mature products
(C): Companies with limited competition
(D): All of the above
14. In organized industrial establishments pay review takes place once in ____ years.
(A): Three
(B): Seven
(C): Ten
(D): Fifteen
15. Equal remuneration Act 1976, prohibits discrimination in matters relating to remuneration on the basis of
(A): Religion
(B): Region
(C): Sex
(D): All of the above

16. The following is not a concept of wage
(A): Daily wage
(B): Minimum wage
(C): Fair Wage
(D): Living wage
17. _______ can be fixed by comparison with an accepted standard wage
(A): Minimum wages
(B): Fair Wage
(C): Living Wage
(D): All of the above
18. A ______ must be fixed considering the general economic conditions of the country.
(A): Minimum wages
(B): Fair Wage
(C): Living Wage
(D): All of the above
19. In India, _____ wage is determined mainly for sweated industries
(A): Minimum
(B): Fair Wage
(C): Living
(D): Standard
20. Providing equal pay for jobs of equal nature based on job evaluation ensures _______ in compensation administration.
(A): external equity
(B): internal equity
(C): neutrality
(D): None of the above We Also Provide SYNOPSIS AND PROJECT.
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21. Payment of cash rewards for the work extracted from the employee is normally called
(A): direct compensation
(B): indirect compensation
(C): non-monetary compensation
(D): None of the above
22. Which of the following is the fixed component in compensation packages?
(A): Profit-sharing
(B): Base salary
(C): Gain-sharing
(D): Equity stock options
23. Insurance schemes, retirement benefits and leave travel concession are examples of
(A): indirect monetary compensation
(B): direct monetary compensation
(C): non-monetary compensation
(D): None of the above
24. Ensuring a fair balance between an employee’s contributions to the job and the rewards received in return from that job is the essence of
(A): equity theory
(B): expectancy theory
(C): agency theory
(D): contingency theory
25. Which of the following theory states that the employees work hard in the job only when they are sure of positive outcomes from that job?
(A): Equity theory
(B): expectancy theory
(C): agency theory
(D): contingency theory
26. Managers never own complete responsibility for the all the decisions made by them since they are not the owners of the business is the assumption of
(A): Equity theory
(B): expectancy theory
(C): agency theory
(D): contingency theory
27. Wages which are usually positioned above the minimum wages but below the living wages are described as
(A): real wages
(B): fair wages
(C): minimum wages
(D): living wage
28. When there are several pay grades in a pay structure, it is called
(A): traditional pay structure
(B): broad-graded structure
(C): job family structure
(D): None of the above
29. Which of the following factors is not an external influencing factor in wages and salary administration?
(A): Cost of living
(B): Labour legislations
(C): Labour market conditions
(D): Ability to pay
30. Which of the following factors is not an external influencing factor in wages and salary administration?
(A): Capacity of the organization to pay
(B): Corporate policies and philosophy
(C): Performance evaluation report
(D): None of the above
31. Which of the following is not an objective of executive compensation plans?
(A): Separating ownership interest and controlling interest
(B): Enhancing employee motivation, involvement and commitment
(C): Promoting managerial efficiency
(D): Attracting and retaining the best executives
32. Provision for cars, parking lots and membership in country club are examples of
(A): base salary of executives
(B): short-term incentive plans
(C): executive perks
(D): None of the above
33. Stock option and performance shares are examples of
(A): base salary
(B): short-term incentive plan
(C): long-term incentive plan
(D): All of the above
34. Performance-based annual bonuses are an example of
(A): base salary
(B): short-term incentive plan
(C): long-term incentive plan
(D): All of the above
35. The factor/factors affecting Pay Structure is/are
(A): Corporate culture and values
(B): Management Philosophy
(C): External Economic Environment
(D): All
36. Personal car service to executive is
(A): Incentive
(B): Fringe Benefit
(C): Perquisite
(D): All
37. Executive compensation in India is built around
(A): Job complexity
(B): Employers ability to pay
(C): Executive human capital
(D): All
38. Paid Time-Off benefits are
(A): Financial Services
(B): Educational assistance
(C): Holidays & Vacations
(D): All
39. Benefit Audit is
(A): Defining objectives of organization
(B): Linking HR & Organizational objectives
(C): Assessing needs of employees
(D): None of the above
40. Employee Service is
(A): Paid sick leave
(B): Educational assistance
(C): Holidays & Vacations
(D): All We Also Provide SYNOPSIS AND PROJECT.
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