Human Resource Practices in India

Pramila Rao, Ph.D.

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Background and Federal Laws

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Welcome to India

Namaste (pressing of the palms together) is the traditional greeting of Indians.

• The Indian flag: o Colors have symbolic

representation.

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India Quick Facts

• Population: 1.1 billion.

• Political structure: Democratic republic.

• Government: President, prime minister and two Houses of Parliament.

• The ruling party: Congress.

• Twenty-eight states and seven union territories.

• Seventeen distinct languages: Hindi and English are the official languages.

• Religion: Hinduism (83%), Muslim (11%), Christian (2%), Sikh (1.9%), Other (1.8).

• Literacy rate: 65%.

• Indian currency: Rupee ($1= 40 rupees).

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History and Societal Background

• British colony for 100 years.

• Great national leader: Mahatma Gandhi.

> Ghandi introduced the concept of non-violence protest.

• The Indian social system is dominated by a caste system.

Four specific castes; Brahmins, Khastriyas, Vaishyas, Shudras.

Created distinct labor categories.

Associated status differences.

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Business Facts

• Today, India is the fourth largest economy in the world.

• Until 1991, there was an import substitution policy that favored domestic industries.

• After 1991, there was active foreign investment with a very strong trade liberalization policy.

> Foreign direct investment in India increased dramatically ($15.8 million in 1997 compared with 0.3 million in 1991).

• In 2000, the Y2K computer crisis required worldwide computer remediation provided by software engineers.

• Indian software engineers were found to be very dedicated and hard-working (Friedman, T. 2005; “The World is Flat”).

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Mercer’s 2006 Best Companies to Work For in India

• Infosys Technologies Limited (IT industry).• MindTree Consulting (IT industry).• Satyam Computer Services Limited (IT industry).• Dr. Reddy’s Laboratories Limited (pharmaceutical

company).• Sapient Corporation (business and technology

consulting).• Agilent Technologies (IT industry).• Johnson & Johnson (consumer health care company).• Covansys India (IT industry).• HCL Comnet (IT industry).• HSBC; Hongkong and Banking Corporation (banking

services).

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Federal Employment Laws

• HR began to play a significant role with the early enactment of these employment-related laws:

• The Workers’ Compensation Act of 1923 ensured that employers compensate employees for work-related injuries.

• The Trade Union Act of 1926 gave formal recognition to trade unions.

• The Industrial Disputes Act of 1947 led to the increased role of industrial relations (employees were distinguished by the work they did such as permanent, temporary, trainee etc.).

• The Factories Act of 1948 regulated the work environment in factories to ensure the safety of employees.

• The Employees Provident Funds and Miscellaneous Provisions Act of1952 required employers to provide contributions for retirement.

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Federal Employment Laws

• The Minimum Wage Act of 1948 established minimum wages that vary from state to state.

• The Payment of Bonus Act 1965 provides for a minimum bonus of 8.33 percent of salary, even if the organization is not making any profit.

• The Persons with Disabilities Act (PWD) of 1995 was landmark legislation for disabled people in India.

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Indian HR Associations

• In the 1940s and early 1950s, two professional HR associations were established to acknowledge the importance of HR:

• Indian Institute of Personnel Management (IIPM).

• National Institute of Labor Management (NILM).

• In1980, the two associations merged to form the National Institute of Personnel Management (NIPM).

• NIPM is the only group engaged in the advancement of HR, industrial relations and labor welfare.

• NIPM has a working relationship with HR groups in the United States, Australia and the United Kingdom.

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Affirmative Action

• Affirmative Action:• Based on the caste system.

• Federal jobs and admissions to colleges are strongly influenced by quotas for caste reservations.

• State governments can set aside 50 percent of jobs based on different castes. To get increased support from the public, some states have 75 percent of job reserved.

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Indian Culture and HR Practices

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Cultural Profile (GLOBE Study)

• Power distance:o India: 5.47 (rank 16).o Morocco : 5.80 (highest score).

• Institutional collectivism:o India : 4.38 (rank 25).o Sweden: 5.22 (highest score).

• In-group collectivism: o India: 5.92 (rank 4).o Philippines: 6.36 (highest score).

• Uncertainty avoidance:o India: 4.15 (rank 29).o Switzerland: 5.37 (highest score) .

Source: Chhokar, J., Brodbeck, F., & House, R (Eds) .(2007). Culture and leadership across the world. The GLOBE book of in-depth studies of 25 societies. Lawrence Erlbaum Associates. Mahwah, New Jersey.

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Definition of Cultural Dimensions (GLOBE Study)

• Power distance: The degree to which organizations and societies accept power.

• Institutional collectivism: The degree to which organizational and institutional practices encourage collective action.

• In-group collectivism: The degree to which individuals in societies reflect collectivist behavior.

• Uncertainty avoidance: The degree to which organizations and societies avoid uncertainty by relying on practices and procedures.

• Performance orientation: The degree to which upper management in organizations and leaders in societies reward group members for performance excellence.

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Cultural Profile (GLOBE Study)

• Performance orientation:o India: 4.25 (rank 9).o Switzerland : 4.94 (highest score).

• Assertiveness:o India: 3.73 (rank 53).o Albania : 5.80 (highest score).

• Future orientation:o India : 4.19 (rank 15).o Singapore: 5.07 (highest score).

• Gender egalitarianism:o India: 2.90 (rank 55).o Hungary: 4.08 (highest score).

• Humane orientation:o India: 4.57 (Rank 9).o Zambia: 5.23 (highest score).

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Definition of Cultural Dimensions (GLOBE Study)

• Assertiveness: The degree to which individuals in organizations or societies are assertive in social relationships.

• Future orientation: The degree to which individuals in organizations or societies plan for the future.

• Gender egalitarianism: The degree to which organizations or society promote gender equality.

• Humane orientation: The degree to which individuals in organizations or societies reward individuals for positive behavior.

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National Culture and HR Practices

• Scholars have found a strong connection between cultural dimensions and HR practices.

• High power-distance cultures create: Hierarchical organizational structures. Loyal and committed subordinate workers. Autocratic relationships between managers and

subordinates.

• What kind of HR practices would low power-distance cultures adopt?

• What staffing practices would high power-distance cultures encourage?

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National Culture and HR Practices

• High institutional-collectivism cultures prefer: Group harmony and cooperation. Conformity to societal norms valued.

• High in-group collectivism cultures feel: A very close bond with their organization family, friends

and relatives.

• What kind of HR practices would low institutional collectivism cultures adopt?

• What staffing practices would high in-group collectivism cultures encourage?

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National Culture and HR Practices

• High uncertainty-avoidance cultures create:

o Formalized procedures to minimize unpredictability.o Clearly defined roles for employees.o Focus on security and trust.

• What kind of HR practices would low uncertainty-avoidance cultures create?

• What staffing practices would high uncertainty-avoidance cultures encourage?

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Indian HR Practices

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Staffing Practices

• Resumes seek strong educational background.

• Employee referrals (predominantly used for middle and senior management).

• Succession planning (predominantly used for middle and senior management).

• Elaborate employment tests related to the job, especially at entry level.

• E-recruitment: Naukri.com was the first e-portal established in 1998 (naukri means job in Hindi ).

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Staffing Practices

• Newspaper advertisements are used to brand the company to potential applicants.

• Newspaper advertisements will specify age and gender requirements.

• Personal questions will be asked in interviews/resumes about:

Age Marital status Family plans (women planning to start a family) Family background Caste background Photos to be included Verification of educational certificates

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Training Practices

• Training (future orientation):• Education is extremely valued, and training is an

extension of it.• Entry point training programs (3 to12 months of

orientation).• Ongoing training programs. • Development programs (promotions involve

training).• In-house training centers are a common feature in

Indian organizations.• Deductive learning style in training: Known as “top-

down approach” where learning principles start with general concepts and move toward specific application.

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Performance Appraisal

• Cultural dimensions of collectivism and power distance make objective appraisals a challenge.

Supervisors and subordinates develop close relationships. Organizational loyalty is as important as work

performance. Employee promotions are frequently based on seniority.

• Annual performance appraisals.• Supervisors provide performance ratings that are

frequently inflated due to personal relationships. • Employment at will does not exist in India. Employment

termination carries a social stigma.

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Compensation and Benefits

• In addition to a base salary, compensation includes:> House rent allowance (HRA*).> Medical allowance.> Dearness allowance (DA*).> Leave travel allowance (LTA*).> Commuter allowance.> * These allowances are frequently referred by their acronyms

• Several categories of leave (vacation) exist:> Sick leave: 7 days (medical certificate required).> Casual leave: 7 days (for personal and family

emergencies, requires prior permission of boss). Employees can take maximum 2 days at a time

> Annual leave: 3 weeks (after one year of employment).> Federal holidays: About 20 days.

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Compensation and Benefits

• Retirement age:

> 55-60 years (private sector);.

> 60 years (public sector).

• Retirement Benefits: Employees receive two lump-sum payments when they retire:

> Provident Fund (similar to 401(k))• Typical contributions: 10-12 percent of base salary

(employer and employee).• Payable on retirement, voluntary separation, death.

> Gratuity• Only employer contributes (15 days salary per year of

service).• Tax-exempt for employees.• Payable on retirement, voluntary separation, death.

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Compensation and Benefits

• Organizations are seen as an extension of the family.

Provide both short-term and long-term personal loans.

Personal loans for housing, car, home maintenance and family emergencies.

Loan amounts vary by position and level in organization.

All employees after their probation (confirmation) period are eligible.

• Many medium and large organizations have cafeterias with subsidized lunch facilities.

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Compensation and Benefits

• Executives receive special benefits to reflect status such as:

• Club memberships.• Overseas training.• Company housing.• Company cars.

• Provided with drivers.• International cars.• Operational and maintenance costs.

• Phone bill reimbursements.• Organizations provide business and cell phones.

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References

• Budhwar, P., Luthar, H., Bhatnagar, J. (2006). The dynamics of HRM systems in Indian BPO firms. Journal of Labor Research, 27(3), 339-360.

•  Babu, V. (2006). Infosys: Incredible Infy; What's the secret sauce that makes Infosys the best company to work for, year after year? Business Today, pp 88.

• Budhwar, P., & Khatri, N. (2001). A comparative study of HR practices in Britain and India. International Journal of Human Resource Management, 12(5), 800-826.

• Challapalli, S. (2005). Those grand jobs. The Hindu, Business line. Retrieved from http://www.thehindubusinessline.com/catalyst/2005/03/31/stories/2005033100070100.htm

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References

• Chhokar, J., Brodbeck, F., & House, R. (Eds). (2007). Culture and leadership across the world. The GLOBE book of in-depth studies of 25 societies. Lawrence Erlbaum Associates. Mahwah, New Jersey.

• Deshpande, S. (1992). Compensation Legislation in India. What US investors need to know. Compensation & Benefits Review, 24(5), 57-60.

• Grossman, R. (2006). HR's Rising Star in India. HR Magazine, 46-52.

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References

• World Flag. http://www.worldflags101.com/i/india-flag.aspx.

• http://www.disabilityindia.org/pwdacts.cfm.

• Klie, S. (2006). HR around the world. Canadian HR Reporter, 7-8.

• Merchant, K. (2006). Companies in India offer a taste of the sweet life. Financial Times (Asia edition), 23-24.

•Ratnam, V., & Chandra, V, (1996). Sources of diversity and the challenge before human resource management in India. International Journal of Manpower, 17, (4/5), 76-96.

•Tyler, K. (2006). Infosys Technologies Ltd. HR Magazine, 56–60.

• Saini, D., & Budhwar, P. (2004). HRM in India. In Managing Human Resources in Asia-Pacific. Routledge. London and New York.

• Srinivasan, N. (2002). Flawed Law. India Together.

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Thank You!

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