Human Relations and Job Evaluation

Job evaluation is technically not simple but rather a complicated system because of the involvement of human beings. The emergence of job evaluation is directly referred to the grievances and differences about existing wage rates among the employees. High degree of reliability is necessary and can be determined but validity of the process can be determined only through employee satisfaction. Job evaluation is not only a scientific process but it is analytical and systematic approach. Consequently, we must be concerned with employee and labor union reactions.

The second problem which comes from job evaluation is that lessens the grievance more rapidly. It is argued on this point that there is always some confused conditions in the organization which become more clear and distinct, as job evaluation gives clear definition of wage structure.

And finally, the most common platform for the conflict between management and workers is in relations to skill, responsibility, efforts, working conditions and the compensation for these factors. The solution to this problem is that management has to be flexible.

To conclude, we can say that though the conflict between employer and the employee cannot be totally eliminated, it is possible to minimize it if both employer and employees agree to the usefulness of job evaluation methods in fixing the worth of a particular job.

Concept of Wage:

A very common terminology ‘wage’ does not demand an explanation. A need to define ‘wage’ hardly arises. The term wage has been defined under the Minimum Wages Act, 1948. According to it, ‘wages’ means all remuneration capable of being expressed in terms of money, which would, if the terms of the contract of employment , express or implied, were fulfilled, be payable to a person employed in respect of this employment or of work done in such employment. It includes house rent allowance but does not include:

1. the value of (1) any house accommodation, supply of light, water, medical attendance or (2) any other amenity or any service excluded by general or special order of the appropriate government.
2. any contribution paid by the employer to any pension fund or provident fund or under any scheme of social insurance.
3. any traveling allowance or the value of any traveling concession.
4. Any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment or
5. any gratuity payable on discharge.

But this definition created more confusion than simplifying meaning. Thus for our purpose, we can say that ‘wage’ is a reward to the employees for services rendered. It is necessarily that reward which is in monetary terms plus any extra benefits. The wage normally consists of basic wage, dearness allowance, bonus and other incentives. Basic wage directly depends upon the internal economic conditions, whereas the other two components namely, the dearness allowance and bonus are affected by external factors. Financial incentive which is a major constituent of any wage plan is worked out in accordance with the wage incentive system which the enterprise may decide to adopt. The type of wage incentive system that the enterprise chooses to operate depends upon the company’s wage policy. Here it is important to emphasize that basic wage is not generally amenable to change and therefore, is kept more or less constant. The increase in wage is therefore, effectuated through changes in the dearness allowance and other incentives.

Wage Policy:

The Bhootalingam Committee (India) report on Wage, Income and Prices had once again revived the question of the need and the importance of a sound wage policy. How far has the government been successful in this direction in the past? Have we ever had a rational and sound wage policy? To answer these questions, one will have to look at the attempts made in the past and the achievements accrued thereof. After independence the Government of India in its economic policy emphasized on twin goals of achieving economic growth and social justice. In practice, however, these two goals are found to be inherently conflicting. Though time and again attempts have been made to strike a balance between two inherently conflicting goals, little could be achieved.
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Short Term Incentives

Most firms have annual bonus plans aimed at motivating the short-term performance of managers and executives. Short term bonuses can easily result in plus or minus adjustments of 25% or more to total pay. There are three basic issues to consider when awarding short term incentives: eligibility, fund size, and individual awards.

Eligibility: Most firms opt for broad eligibility – they include both top and lower-level managers and mainly decide who’s eligible in one of two ways. Based on one survey about 25% of companies decide eligibility based on job level or job title. About 54% decide eligibility based on a combination of factors, including job level/title, base salary level, and discretionary considerations such as identifying key jobs that have a measurable impact on profitability. Base salary level alone is the sole determinant in less then 3% of the companies polled.

The size of the bonus is usually greater for top-level executives. Thus, executive earning $150,000 in salary may be able to earn another 80% of his or her salary as a bonus, while a manager in the same firm earning $80,000 can earn only another 30%. Similarly, a supervisor might be able to earn up to 15% of his or her base salary in bonuses. Average bonuses range from a low of 10% to a high of 80% or more. A typical company might establish a plan whereby executives could earn 45% of base salary, managers 25%, and supervisory personnel 12%.

Fund Size: the firm must also decide the total amount of bonus money to make available fund size. Some use a nondeductible formula. They use a straight percentage usually of the company’s net income to create the short term incentive fund. Others use a deductible formula, on the assumption that the fund should start to accumulate only after the firm has met a specified level of earnings. Some firms don’t use a formula at all, but make that decision on a totally discretionary basis.

There are no hard-and-fast rules about proportion of profits to pay out. One alternative is to reserve a minimal amount of the profits, say, 10% for safeguarding stockholders’ investments and then to establish a fund for bonuses equal to, say 20% of the corporate operating profit before taxes in excess of this base amount. Thus, if the operating profits were $200,000 them the management bonus fund might be 20% of $180,000 or $36,000. Other illustrative formulas used for determining the executive bonus fund are as follows:

1. Ten percent of net income after deducting 5% of average capital invested in business.
2. Twelve and half percent of the amount by which net income exceeds 6% of stockholders’ equity.
3. Twelve percent of net earnings after deducting 6% of net capital.

Individual Awards: The third task is deciding the actual individual awards. Typically, a target bonus as well as maximum amount, perhaps double the target bonus is set for each eligible position, and the actual award reflects the person’s performance. The firm computes performance ratings for each manager, computes preliminary total bonus estimates, and compares the total amount of money required with the bonus fund available. If necessary, it then adjusts the individual bonus estimates.

One question is whether managers will receive bonuses based on individual performance, corporate performance, or both. The basic rule should be: outstanding managers should receive at least their target bonuses, and marginal ones should receive at best below-average awards. Firms usually tie top-level executive bonuses to overall corporate results or divisional results if the executive heads a major division. But as one moves farther down the chain of command, corporate profit become a less accurate gauge of a manager’s contribution. Supervisors or the heads of functional departments, it often makes more sense to tie the bonus to individual performance.

Many firms tie short term bonuses to both organizational and individual performance. Perhaps the simplest way is the split-award method, which breaks the bonus into two parts. Here the manager actually gets two separate bonuses, one based on his or her individual effort and one based on the organization’s overall performance. Thus, a manager might be eligible for an individual performance bonus of up to $10,000, but receive only $2,000 at the end of the year, based on his or her individual performance evaluation. But the person might also receive a second bonus of $3,000 based on the firm’s profits for the year. Give the money you save from the poor performers to the outstanding ones.

One drawback to this approach is that it may give marginal performers too much – for instance, someone could get a company-based bonus, even if his or her open performance is mediocre. One way to get around this is to use the multiplier method. In other words, make the bonus a product of both individual and corporate performance. A manager whose own performance is poor does not even receive the company-based bonus.
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TYPES OF FRINGE BENEFITS

Organizations provide a variety of fringe benefits. The fringe benefits are classified under four heads as given here under:

1. For Employment Security :
Benefits under this head include unemployment, insurance, technological adjustment pay, leave travel pay, overtime pay, level for negotiation, leave for maternity, leave for grievances, holidays, cost of living bonus, call-back pay, lay-off, retiring rooms, jobs to the sons/daughters of the employees and the like.

2. For Health Protection:
Benefits under this head include accident insurance, disability insurance, health insurance, hospitalization, life insurance, medical care, sick benefits, sick leave, etc.

3. For Old Age and Retirement:
Benefits under this category include: deferred income plans, pension, gratuity, provident fund, old age assistance, old age counseling , medical benefits for retired employees, traveling concession to retired employees, jobs to sons/daughters of the deceased employee and the like.

4. For Personnel Identification, Participation and Stimulation:
This category covers the following benefits: anniversary awards, attendance bonus, canteen, cooperative credit societies, educational facilities, beauty parlor services, housing, income tax aid, counseling, quality bonus, recreational programs, stress counseling, safety measures etc.

The fringe benefits are categorized as follows:

a) Payment for Time Not worked: Benefits under this category include: sick leave with pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time, bargaining time, travel time etc.

b) Extra Pay for time Worked: This category covers the benefits such as: premium pay, incentive bonus, shift premium, old age insurance, profit sharing, unemployment compensation, Christmas bonus, Deewali or Pooja bonus, food cost subsidy, housing subsidy, recreation.

Employee Security

Physical and job security to the employee should also be provided with a view to promoting security to the employee and his family members. The benefit of confirmation of the employee on the job creates a sense of job security. Further a minimum and continuous wage or salary gives a sense of security to the life.

Retrenchment Compensation:

The Industrial Disputes Act, 1947 provides for the payment of compensation in case of lay-off and retrenchment. The non-seasonal industrial establishments employing 50 or more workers have to give one month’s notice or one month’s wages to all the workers who are retrenched after one year’s continuous service. The compensation is paid at the rate of 15 days wage for every completed year of service with a maximum of 45 days wage in a year. Workers are eligible for compensation as stated above even in case of closing down of undertakings.

Lay-off Compensation:

In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of the total of the basic wage and dearness allowance for the period of their lay-off except for weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year.

Safety and Health

Employee’s safety and health should be taken care of in order to protect the employee against accidents, unhealthy working conditions and to protect worker’s capacity. In India, the Factories Act, 1948, stipulated certain requirements regarding working conditions with a view to provide safe working environment. These provisions relate to cleanliness, disposal of waste and effluents, ventilation and temperature, dust and fume, artificial humidification, over-crowding, lighting, drinking water, latrine urinals, and spittoons. Provisions relating to safety measures include fencing of machinery, work on or near machinery in motion, employment of young persons on dangerous machines, striking gear and devices for cutting off power, self-acting machines, easing of new machinery, probation of employment of women and children near cotton openers, hoists and lifts, lifting machines, chains ropes and lifting tackles, revolving machinery, pressure plant, floors, excessive weights, protection of eyes, precautions against dangerous fumes, explosive or inflammable dust, gas etc. Precautions in case of fire, power to require specifications of defective parts of test of stability, safety of buildings and machinery etc.

COMPENSATION- An overview

Compensation is the process of providing adequate, equitable and fair remuneration to the employees. It includes job evaluation, wage and salary administration, incentives, bonus, fringe benefits, social security measures etc.

Job Evaluation: It is the process of determining relative worth of jobs:

1. Select suitable job evaluation techniques.
2. Classify jobs into various categories.
3. Determining relative value of jobs in various categories.

Wages and Salary Administration: This is the process of developing and operating a suitable wage and salary programs. It covers;

1. Conducting wage and salary survey.
2. Determining wage and salary rates based on various factors.
3. Administering wage and salary programs.
4. Evaluating its effectiveness.

Incentives: It is the process of formulating, administering and reviewing the schemes of financial incentives in addition to regular payment of wages and salary. It includes:

1. Formulating incentive payment schemes.
2. Helping functional managers on the operation.
3. Review them periodically to evaluate effectiveness.

Bonus: It includes payment of statutory bonus according to the Payment of Bonus Act, 1965, and its latest amendments.

In India the employees drawing above certain compensation are not covered under the Bonus act. However, the employer pays them suitable lump sum variable amount depending upon their level in the organization which is called ex-gratia. This is not compulsory on the part of the employer but acts as an incentive to the employee.

Fringe Benefits: These are the various benefits at the fringe of the wage. Management provides these benefits to motivate the employees and to meet their life’s contingencies. These benefits include:

1. Disablement benefit
2. Housing facilities
3. Educational facilities to employee and children.
4. Canteen facilities.
5. Recreational facilities.
6. Conveyance facilities.
7. Credit facilities.
8. Legal clinic.
9. Medical, maternity and welfare facilities.
10. Company stores.

Social Security Measures:

Management provides social security to their employees in addition to the fringe benefits. These measures include:

1. Workmen’s compensation to those workers (or their dependents) who involve in accidents.
2. Maternity benefits to women employees.
3. Sickness benefits and medical benefits.
4. Disablement benefits / allowance.
5. Dependent benefits.
6. Retirement benefits like provident fund, pension, gratuity etc.

Practicing various human resources policies and programs like employment, development and compensation and interaction among employees create a sense of relationship between the individual worker and management, among workers and trade unions and management.

It is the process of interaction among human beings. Human relations is an area of management in integrating people into work situation in a way that motivates them to work together productively, co-operatively and with economic, psychological and social satisfaction. It includes:

1. Understanding and applying the models of perception, personality, learning, intra and inter personal relations, intra and inter group relations.
2. Motivating the employees.
3. Boosting employee morale.
4. Developing the communication skills.
5. Developing the leadership skills.
6. Redressing employee grievances properly and in time by means of a well formulated grievance procedure.
7. Handling disciplinary cases by means of an established disciplinary procedure.
8. Counseling the employees in solving their personal, family and work problems and releasing their stress, strain and tensions.
9. Improving quality of work life of employees through participation and other means.

Lot of thinking and comparison with competitive organizations goes into fixing the compensation of employees particularly for middle management and above levels by the management. Some organization pays certain amount annually to key executives which are not a part of the regular pay and allowances. By doing this the incentive acts to deliver enhanced performance but also ensure the loyalty of the key executive to remain with the company.

FORMS / REGISTERS TO BE MAINTAINED AS PER PAYMENT OF GRATUITY ACT, 1972

FORMS / REGISTERS TO BE MAINTAINED AS PER PAYMENT OF GRATUITY ACT, 1972

Form No.	Ref. to Statute	Description	Due date to be submitted to
Form ‘A’	Rule 3(1)	Notice of opening	Within 30 days of opening of the branch
Form ‘B’	Rule 3(2)	Notice of closure	Within 30 days of closing of the branch
Form ‘F’	Rule 6(1)	Declaration of Nomination	Within 30 days from the date of joining of the employee
Form ‘I’	Rule 7(1)	Application for Gratuity by an employee	After completion of 5 and more years
Form ‘J’	Rule 7(2)	Application for Gratuity by a Nominee	After the death of the employee
Form ‘K’	Rule 7(3)	Application for Gratuity by a legal Heir

THE PAYMENT OF GRATUITY ACT, 1972

THE PAYMENT OF GRATUITY ACT, 1972 APPLICABILITY a. Every shop or establishment to which Shop & Establishment Act of a States applies in which 10 or more persons are employed at any time during the year and b. Any establishment employing 10 or more persons as may be notified by the Central Government. c. Once Act applies, it continues to apply even if employment strength falls below 10. ELIGIBILITY a. any person employed on wages / salary. b. At the time of retirement or resignation or on superannuation, an employee should have rendered continuous service of not less than five years. c. In case of death or disablement, the gratuity is payable, even if he has not completed 5 years of service. Meaning of continuous service : Even when an employee is absent due to leave, accident, sickness, lay-off, lock-out or strike, the employee will be treated on ‘continuous service’. BENEFITS a. The quantum of gratuity is to be computed at the rate of 15 days wages based on rate of wages last drawn by the employee concerned for every completed year of service or a part thereof exceeding 6 month. If the employee has completed more than 6 months, it will be treated as full year for the purpose of gratuity calculation. b. The total amount of gratuity payable shall not exceed the prescribed limit. c. To get a benefit, employee should make an application in prescribed format. However, even if an employee does not apply for gratuity, the employer is under obligation to pay the same within 30 days from the date it becomes payable. d. Gratuity can be paid to nominee, if an employee dies. Amount of gratuity cannot be attached in execution of any decree under civil, revenue or criminal court. Disputes in case of gratuity must be referred to 'Controlling Authority' appointed by Government for this purpose. CALCULATION OF GRATUITY a. Gratuity = Last drawn Basic/26 x 15 days x No. of yrs. of service b. Maximum Gratuity payable under the Act is Rs.3,50,000/- (w.e.f.24th September, 1997). FORFEITURE / DEDUCTION OF GRATUITY : An employer can deny payment of gratuity, if an employee has been removed from service for riotous or disorderly conduct or other act of violence or for moral turpitude during employment of the company. Employer can deduct from the gratuity payable any amount of loss or damage caused to employer through omission or negligence of the employee. THE INCOME TAX PROVISIONS The employers were always concerned about the gratuity amount being allowed as expenses under the Income Tax Act. Earlier actual amounts paid by way of gratuity when a workman retired or gratuity amounts kept aside based on actuarial calculations every year were admissible expenses. The flaw was though the employer showed, the figure of accumulated gratuity in his balance sheet, it was notional and not necessarily that the amount was available when the time came for actual distribution, especially as and when the company closed down. As on today there are three ways, in which gratuity is regarded as an admissible expense under Income Tax Act: i) Payment actually made on worker's retirement ii) Amounts transferred by way of premia to the insurance companies under Insurance Companies Schemes iii) Contributions transferred to the Gratuity Trust of the employer duly registered and approved by the Income Tax Department. In the same manner gratuity amount upto Rs. Three and Half Lakhs in the hands of employees is exempted from Income Tax. COMPULSORY INSURANCE The Government's grand plan under the Gratuity Act is however to compel the private employers to obtain an insurance from the life insurance companies unless the employer has already established an approved gratuity fund and desires to continue such arrangement. Having done this, the employer shall have to register his establishment with the Controlling Authority, the appropriate Government framing rules for the composition of the Board of Trustees and recovery by the Controlling Authority of the amount of gratuity payable to an employee either from the Insurance Company or the Board of Trustees. There is a further provision of calculation of interest on the delayed payments to the Controlling Authority and in violation, payment of fine, which may extend to Rs.10,000/- and a further fine, which may extend to Rs.1,000/- for each day during which the offence continues. GRATUITY ACT, SECTION 4A However the provisions under Section 4A on compulsory Insurance have remained unimplemented. since Appropriate Government have not taken any steps to issue required notifications as provided POWER OF EXEMPTION : The Managing Trustee of that Gratuity Fund, which is established and approved by the Income Tax Commissioner, shall apply, for exemption from the provisions of sub-section (2) of Section 4-A of the Payment of Gratuity Act, 1972 (39 of 1972), to the Competent Authority appointed by the State Government, who will be not below the rank of Deputy Commissioner of Labour, along with the copy of their approved Scheme and all other documents prescribed under the Income Tax Act. (Rule 22) A Competent Authority, after perusing all the relevant papers, if satisfied, may grant exemption. The Managing Trustee shall be responsible to send an audited Balance Sheet to the Competent Authority appointed by the State Government every year. In case of default on the part of the Managing Trustee to submit the audited Balance Sheet as per sub-rule (3), the Competent Authority will be free to revoke exemption order by giving show cause notice (by registered post), after a period of one month from the date of the issue of such show cause notice, if no satisfactory reply is filed. INCOME TAX EXEMPTION : Gratuity received upto Rs.3,50,000/- is exempt from Income Tax. To whom Application can be made by Employee, Nominee or Legal Heir: The employee has to apply for gratuity (Form I) within 30 days from the date the gratuity becomes payable. But he can apply 30 days prior to superannuation or retirement where the date of superannuation or retirement is known. A nominee has to apply within 30 days (Form J) and the legal heir ordinarily within one year (Form K) from the date the gratuity becomes payable to him. However, it is not necessary that application must compulsorily be made in these forms. They can be even made on a plain paper and also entertained by the employer if the applicant adduces sufficient cause for delay in preferring his claim and no claim for gratuity shall be invalid merely because the claimant failed to present his application within the specified period. Any dispute in this regard shall be referred to the Controlling Authority for his decision. An application for gratuity shall be presented by personal service or by registered A.D. PENAL PROVISION 1. Whoever, for the purpose of avoiding any payment to be made by himself under this Act or for enabling any other person to avoid such payment, knowingly makes or causes to be made any false statement or false representation shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to Rs.10,000/- or with both. 2. An employer who contravenes, or makes default in complying with, any of the provisions of this Act or any rule or order made thereunder shall be punishable with imprisonment for a term (which shall not be less than three months but which may extend to one year, or with fine which shall not be less than ten thousand rupees but which may extend to twenty thousand rupees, or with both.

LABOUR WELFARE FUND DEDUCTIONS FOR ALL STATES

LABOUR WELFARE FUND DEDUCTIONS

STATE	BASIS OF DEDUCTIONS	MONTH IN WHICH DEDUCTION TO BE MADE	SALARY SLAB	EMP'E CONTN.	EMP'ER CONTN.	FORMS TO BE FILLED	LAST DATE FOR FILING RETURNS	REMARKS
ANDHRA PRADESH	ANNUAL	DECEMBER	FLAT	2.00	5.00	FORM 3	31st January	Welfare Commissioner payable at HYD
BIHAR	N.A.	N.A.	N.A.	N.A.	N.A.		N.A.	N.A.
DELHI	HALF-YEARLY	JUNE & DECEMBER	FLAT	0.75	2.25			Welfare Commissioner
GOA	EVERY MONTH	EVERY MONTH	FLAT	5.00	10.00		15th	Welfare Commissioner
GUJARAT	HALF-YEARLY		FLAT	3.00	6.00			Gujarat Labour Welfare Fund
HARYANA	QUARTERLY	MAR/JUNE	FLAT				15 April/15 July	Welfare Commissioner payable at CHD
	QUARTERLY	SEPTEMBER/DECEMBER	FLAT	1.00	2.00		15 Oct./15 Jan
JHARKHAND	N.A.	N.A.	N.A.	N.A.	N.A.		N.A.	N.A.
KARNATAKA	ANNUAL	DECEMBER	FLAT	3.00	6.00	FORM D	15th January	Welfare Commissioner payable at BGL
KERALA	HALF-YEARLY	JUNE & DECEMBER	FLAT	4.00	8.00		15 Jul/15 Jan	Kerala Labour Welfare Fund Board
MADHYA PRADESH	HALF-YEARLY	JUNE & DECEMBER	FLAT	6.00	18.00		15 Jul/15 Jan	Welfare Commissioner Payable at Jabalpur
MAHARASHTRA	HALF-YEARLY	JUNE & DECEMBER	UPTO RS.3,500/-	6.00	18.00		31st January	Maharashtra Labour Welfare Fund
			ABOVE RS.3,500/-	12.00	36.00
PUNJAB	EVERY MONTH	EVERY MONTH	FLAT	1.00	2.00		15th	Welfare Commissioner
RAJASTHAN	N.A.	N.A.	N.A.	N.A.	N.A.		N.A.	N.A.
TAMIL NADU	ANNUAL	DECEMBER	FLAT	5.00	10.00	FORM A	31st January	DD Favouring The Secretary, Tamil Nadu welfare Fund Board, DMS Complex, Teynampet
UTTAR PRADESH	N.A.	N.A.	N.A.	N.A.	N.A.		N.A.	N.A.
WEST BENGAL	HALF-YEARLY		FLAT	3.00	6.00			Welfare Commissioner payable at Kolkatta
** Employees who are working in the managerial or supervisory capacity and drawing wages exceeding Rs.3,500/- (Rupees Three Thousand Five Hundred) only per month are excluded from LWF