Solved Assignment July Dec 2016 MS-27 (Sample Copy)

Course Code MS - 27 Course Title Wage and Salary Administration Assignment Code MS-27/TMA/SEM - II/2016 Assignment Coverage All Blocks

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1. Explain the concept and structure of compensation. Describe the functions and responsibilities of compensation programme of an organization you are familiar with.

Role and Concept of Compensation

A healthy compensation is --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- program promises great returns for a company.

Workers have a right to adequate compensation for their labor. On the other hand, benefits are provided by the employer, as a ------------------------------------------------------------------------------------------------- organization’s health.

Compensation can be in the form of wages or tips -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- determines the value of variable pay. A balanced mix of both forms of pay results in an efficient and a motivated workforce.

The current competitive conditions in the business world make it -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- personnel budget under the control and to manage the jobs in the right salary (pay) brackets.

The compensation strategy is not important just for the competitive advantage, but it supports the other HR Processes and helps them to become highly efficient HR Processes and being on the top in the industry .

The compensation strategy has a strong influence on --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------as they do not feel the need to find a new job opportunity elsewhere.

Structure of compensation-

Every company, business, or organization that pays workers has some form of compensation structure. These documents, usually produced and maintained by human resource --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and pay variations on the scale often take skill level and experience into account.

A company’s compensation structure reveals its pay --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------pay is taken into consideration with each position and pay on the structure increases with the level of experience and responsibility.

A compensation structure is influenced by a ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------company may make significantly more than an account specialist with a small start-up company or mom and pop business.

In most cases, a compensation structure is -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- employment with companies that pay more unless other attractive benefits or perks are offered.

The compensation structure may include an employee’s base pay as well as any incentive and merit pay programs. Base pay can be derived from a set salary or hourly amount. --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. Incentive compensation is often used to motivate employees to perform better at work. This type of compensation is common in sales environments. Employees who successfully sell more make more.

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2. Explain the purpose and application of the payment of wages Act, 1936. Describe the concept of deduction from wages and limits on the total amount of deduction, can the fine be deducted from wages of an employed persons? If so, subject to what conditions.

The Payment of Wages Act 1936 Section 2(vi) of The Payment of Wages Act defined "wages" to mean:

(A)l1 remuneration (whether by ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------, express or implied, were fulfilled, be payable to a person employed in respect of his employment or of work done in such employment, and includes :

Any remuneration ------------------------------------------------------------------ the parties or order of a Court;

Any remuneration to which -------------------------------------------------------------------- or holidays or any leave period;

Any additional remuneration ------------------------------------------------------------------------ or by any other name);

Any suns which by ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- provide for the time within which the payment is to be made;

Any sum to which the person employed is entitled under any scheme framed under any law for the time being in force;

The Purpose of the Act

The Payment of Wages Act, ------------------------------------------------------------------------------------------------------------------------------------------------ classes of persons employed in industry". The regulation contemperated by the Act is two-fold:

(i) To ensure -------------------------------------------------------------------------------- of wages, and

(ii) To prevent exploitation of wage-earners by prohibiting arbitrary fines and deductions from wages.

The Payment of Wages Act regulates the payment of wages to certain classes of persons employed in industry and its importance cannot be under-estimated. The ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------by him and also sealing of the fines, and also for a machinery to hear and decide complaints regarding the deduction from wages or in delay in payment of wages, penalty for malicious and vexatious claims. The Act does not apply to persons whose wage is Rs. 10,000 or more per month. The Act also provides to the effect that a worker cannot contract out of any right conferred upon him under the Act.

Application of the Act

The Payment of Wages Act, -----------------------------------------------. It applies in the first instance to the payment of wages to :

Persons ---------------------------------------------------------------------------------------------------------------- factory,

Persons employed (otherwise than in factory) upon any railway by a railway administration, either directly or, through a subcontractor, by a person fulfilling a contract with a railway administration, and

Persons employed in an ----------------------------------------------------------------------------- of clause of section.

The Act empowers the State Government to extend the application of the whole or part of the Act to any class of persons employed in the establishment or class of establishments specified by the Central/ State Government under Section 2(h)(ii).

However, before doing so the State ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to establishment owned by the Central Government, no such notification shall be issued except with the concurrence of that Government.

Deduction from Wages

a. Concept of --------------------------- The following shall be deemed to be deduction from wages :

i. Every payment made --------------------------------------------------------------------- or his agent.

ii. Any loss of wages resulting --------------------------------------------------------------------------------------------------------------------------------------------------, upon a person employed, of any of the following penalties :

The withholding of increment or promotion (including the stoppage of increment at an efficiency bar) ;

The reduction ------------------------------------------------------------------------ in a time scale ; or

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b. Deductions --------------------------------------------- from wages

Deductions authorised under the Act are enumerated in section 7(2). Any other deduction is unauthorised. Further, the authorised deductions can be made only in accordance with the provisions of the Act.

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deduction -------------------------------------------------------------------------- duty;

deductions for damage to or less of goods expressly entrusted to the employed person for custody, or for loss of money for which he is required to account, where such damage or loss is directly attributable to his neglect or default;

deduction for house-accommodation ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------which may be specified in this behalf by the State Government by notification in the Official Gazette;

deductions for such amenities ----------------------------------------------------------------------------------- officer specified by it in this behalf may, by general or special order, authorise;

deductions for recovery of -------------------------------------------------------------------------------------- or conveyance allowance), and the interest due in respect thereof, or for adjustment of over-payments of wages;

deductions for recovery of loans ----------------------------------------------------------------------------------------- with the rules approved by the State Government, and the interest due in respect thereof;

deductions for ------------------------------------------------------------------------------------------------------------------------------- Government, and the interest due in respect thereof,

deductions of ----------------------------------------------------------------------------------------- employed person ;

deductions required ------------------------------------------------------------------------------------ make such order ;

deductions for subscriptions to, and for --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------58a of the Indian Income-tax Act, or any provident fund approved in this behalf by the State Government, during the continuance of such approval;

deductions for payment to co-operative societies approved by the State Government or any officer specified by it in this behalf or to a scheme of insurance maintained by the Indian Post Office;

deductions made with the written ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Office Savings Banks in furtherance of any savings scheme of any such Government;

Deductions made, with the written authorisation of -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the State. Government or any officer specified by it in this behalf, during the continuance of such approval;

Deductions made, with the written authorisation of the employed person, for payment of the fees payable by him for the membership of any trade union registered under the Trade Unions Act, 1926.

deductions for -------------------------------------------------------------------------------- on Fidelity Guarantee Bonds;

deductions for recovery of losses ------------------------------------------------------------------------------ by the employed person of counterfeit or base coins or mutilated or forged currency notes;

deductions for recovery of losses sustained by a ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------sale of food in catering establishments or in respect of sale of commodities in grain shops or otherwise;

deductions for recovery of losses ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- loss is directly attributable to his neglect or default;

deductions made with the written ------------------------------------------------------------------------------------------------------------------------------------------------------------- may, by notification in the Official Gazette, specify;

Deductions for contributions to ------------------------------------------------------------------------ benefit of its employees.

Limits on the total amount of deductions Section 7(3) lays down that the total amount of deductions which may be made under Section 7(2) in any wage-period from the wages of any employed person shall not exceed

In cases where such deductions are wholly or partly made for payments to ------------------------------------------------------------------------------------------------------------------------------, seventy-five per cent of such wages, and

In any --------------------------------------------------------------------------------- such wages. It the total deductions authorised under ------------------------------------------------------------------------- or, as the case may be, fifty per cent of the wages, the excess may be recovered in prescribed manner.

Fines [Section 7(2)(a) and 8] (1). The fine shall be imposed on ------------------------------------------------------------------------------------------- the State Government or of the prescribed authority, and has been specified by notice under Sub-Section (2).

(2). A notice specifying such ------------------------------------------------------------------------------- which the employment is carried on or in the case of persons employed upon a railway (otherwise than in a factory), at the prescribed place or places.

(3). The fine shall not be ---------------------------------------------------------------------------------------- cause against the fine.

(4). The total amount of fine which ----------------------------------------------------------------------------------------------- an amount equal to three per cent of the wages payable to him in respect of that wage-period.

(5). No fine shall be ------------------------------------------------------------------------------------------------------ of fifteen years.

(6). No fine imposed on any employed ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- days from the day on which it was imposed.

(7) Every fine shall be deemed ----------------------------------------------------------------------- of which it was imposed.

(8). All fines and all realisation thereof shall be recorded in a register to be kept by the person responsible for the payment of wages under Section 3 in ----------------------------------------------------------------------------------------------------------------------------- such purposes beneficial the persons employed in the factory or establishment as are approved by the prescribed authority. Explanation

All the amounts realised have to --------------------------------------------------------------------------------------------------------------------------------------------------------------------- be applied to such purposes as are approved by the prescribed authority.

3. What do you understand by the concept of wages, explain the concept of basic wage through examples. Why dearness is allowance an integral part of pay packet, explain how is it administered?

Concept of wages-

Wages are the most common --------------------------------------------------------------------------------------------------------------------------- income for the majority of active people. Similarly, many pension schemes are based on wage levels and dynamics.

A wage is monetary compensation--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- as a fixed amount for each task completed (a task wage or piece rate), or at an hourly or daily rate, or based on an easily measured quantity of work done.

Wages are an example of expenses that are involved in running a business.

Payment by wage contrasts with salaried work, in ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------forms (or all monetary forms) of employee compensation.

Broadly ---------------------------------------------------------------- into six broad categories:

i) Statutory ----------------------------------------wage ii) Bare --------------------------------------------- wage iii) -------------------------------------------------wage iv) ------------------------------------------ wage v) ----------------------------------------- wage vi) -------------------------------------------- wage.

The statutory minimum wage is determined -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the Resolution of the 15th Session of the Indian Labour Conference but has been modified by the Courts. Let us now discuss each of these in some detail- The ----------------------------------- Wage- The Statutory Minimum Wage, which is prescribed under the Minimum Wages Act, 1948 is higher ---------------------------------------------------------------------------------------------------------------------------------- requirements and amenities.(See Crown Aluminium Works v. Their Workmen, AIR 1958 SC 30). The Bare Subsistence or Minimum Wage- The -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Newspapers Pvt. Ltd. v. Union of India, (1961) 1 L.L.J. 339 (SC). Living Wage- Justice Higgins of the Australian Commonwealth ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, provision for evil days, etc. as well as regard for the special skill of an artisan if he is one." Fair Wage- The Committee Fair Wages said that the fair wages lies between a minimum wage and a living wage. The Committee envisaged that while the lower limit of ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the place of the industry in the economy of the country. (Government of India, Report on National Commission on Labour p. 11). The Hindustan Times Ltd. v. Their Workmen, (1963) 1 L.L.J. 108, the Supreme Court defined fair wage as something above the minimum wage, "which may roughly be said to approximate to the need based minimum wage, in the sense of a wage which is adequate to cover the normal needs of the average employee, regarded as a human being in a civilized society". In Kamani Metals and Alloys Ltd. v. --------------------------------------------------------------------------------------------------------------------------- the minimum wage which must be paid in any event, and the living wage which is the goal. Minimum Wage- The Committee on Fair Wages stated that the minimum wage must provide not merely for the subsistence of life,' but for the preservation of the worker. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------his family, (Government. of India, Report of the Committee on Fair Wages, p. 15 cited in the Report of the National Commission on Labour).

Need-based Minimum Wage- The fifteenth Indian. -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------wage boards, adjudicators, etc.

In calculating the minimum wage, the standard working-class family should be taken to consist of three consumption -------------------------------------------------------------------------------------------------- should be disregarded.

Minimum food requirements should be calculation the basis of a ----------------------------------------------------------------------------------------------------------------------------------------------- adult of moderate activity.

Clothing requirements --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- for low-income groups; and

Fuel, lighting -------------------------------------------------------------------------------------- minimum wage.

However, the Committee recognised the existence ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the recommendations, it would be incumbent on the authorities concerned to justify the circumstances which prevented them from adherence to the norms laid down.

Concept of basic wage-

Section 2(b) defines "Basic Wages" to mean : all emoluments which are earned by an employee while on duty or on leave with wages in accordance with the terms of the contract of employment and which are paid or payable in cash to him. It, however, does not include –

the ----------------------------------------------------------------------------------------- food concession;

any dearness allowance (that is to say, all cash payment by whatever ----------------------------------------------------------------------------------------------------------------------------------------------------- bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;

Any --------------------------------------------------------------------------------------------- employer.

Section 2(g) defines "Remuneration" mean to: the basic wage or salary and any additional emoluments whatsoever payable, either in cash or in kind, to a person employed in respect of employment or work done in such employment, if the terms of the contract of employment, express r implied, were fulfilled.

The basic wage provides and stable base to the wage structure. It is the price to be paid to get a given job done. This could be on monthly, weekly or daily basis. Basic wages is ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of efficiency of workers by providing some measure of education, medical requirements and amenities.

It was after the end of the Second World War that the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------known as Need Based Minimum Wage. The underlying assumptions behind the basic wage legislation are that the industry does not have the right to exist unless the minimum needs of workers are met.

The Committee on Fair-Wages (1948) and 15th session of I.L.C. (1954) propounded certain wage concepts such as minimum wages, fair wages, living wages, and need based minimum wages.

Minimum wages - not merely for bare ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ some measure of education; medical etc.

Fair-wage - while the lower level of fair wage is the minimum wage the upper-limit is the capacity of the industry to pay. Between these two limits, ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- rate (iii) National income (iv) the place of industry in national economy.

Living-wages - It represents and inclinds decency, protection against ill health, requirements of essential social heads and -------------------------------------------------------------------------------------------------- and state will make all efforts to attain it.

Need-based ------------------------------------------------------------------------------------------------- explained above.

The concepts of Nominal/Money wage and Real Wage also require explain in brief.

Nominal----------------------------------------------------------------------------------------- or its equivalent Real wage is the money wages discounted by cost of living index to denote the pruchasing power of the wages.

Differentials in basic -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Committee suggested. They are as follow:

The --------------------------------------------------- skill The --------------------------------------------------- work The ------------------------------------------------ involved The ------------------------------------------- required The -------------------------------------- undertaken The -------------------------------------------- requirements The ------------------------------------------------ the task The ---------------------------------------- on the work The ------------------------------------ involved

Basic wage is generally practised through scales of pay. An employee draws his basic pay in a range provided in the scales. He also gets increments on periodical basis. -------------------------------------------------------------------------------------------------------------------------------------------------------------------- upward (gets promotion) or downward. (gets demotion).

Example-

The above observations about basic wage have been corroborated by industrial adjudications, particularly by the Supreme Court. In Workmen of Orient Paper Mills Ltd v. Orient Paper Mills, --------------------------------------------------------------------------------------------------------------------------------------------------------------------- industry to pay is irrelevant, the industrial adjudication has to bear in mind the minimum wage paid by the similarly situated industries in the region.

In Hindustan Times Ltd. v. Their Workmen, (1963) -------------------------------------------------------------------------------------------------------------------------------- or minimum wage and observed.

At the bottom of the ladder, there is the basic wage which the employer of any industrial labour must pay in order to be allowed to continue an industry. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------things which are needed for their health and physical well being, enough to enable him to qualify to discharge his duties as a citizen.

DEARNESS --------------------------------------------------------- OF PAY PACKET

The words dearness allowance primarily suggests and refer to allowance paid to employees in order to enable them to face the increasing dearness of essential commodities. ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the rise in prices. The assumption behind DA rise is that if the prices go back to the earlier level, the DA can be reduced or withdrawn.

In other countries, where ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Wages Act, refers to it as cost of Living Allowance.

DA forms a variable component of Pay-Packet, since rate of dearness increases more than once every year, whereas the basic pay scales are revised after longer spells of time.

The scheme of DA is having usually three parameters - ----------------------------------------------------------------------------------------------------------------------------------------------------- for Industrial Workers (Base 1960 = 100 AICPI).

The allowance may go up with the revision in the index based on average for a selected period to off-set the temporary fluctuations in the index. Also, a doze of DA is related to certain prescribed increase in the number of the Index points.

There are different patterns of calculating DA, using the above parameters –

The Central DA - Applicable to ------------------------------------------------------------------------------------------------------------------- central PSUs. In these pattern incidents of neutralisation goes upto 100% for lower slabs.

The Industrial Pattern - Applicable --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- at the the rate certain rupees (say Rs.3) for per point increase in the Price Index.

DA system in Banks and LIC is yet -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- benefits than IDA pattern.

4. Define “incentives”. Bring out their advantages and limitations. Explain the various individual and group incentive plans and their respective merits and demerits.

The term ’incentive’ is not peculiar to economics ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------what comes out clearly is the fact that incentives are truly central to the study of economics.

Incentives are monetary benefits paid to workmen in recognition of their outstanding performance. An incentive scheme is a plan or programme to motivate individual or group performance. An incentive programme is most frequently built on monetary rewards (incentive pay or monetary bonus), but may also include a variety of non-monetary rewards or prizes.

The International Labour Organisation (ILO) refers ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- are relatively fixed, incentives generally vary from individual to individual, and from period to period for the same individual.

Employee incentive system is an increasingly popular way ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------way of compensating workers. They provide employees with an actual stake in the corporation.

Advantages and Limitations of Incentives

Advantages:-

Increase in volume of output – Output of ------------------------------------------------------------------------------------------------------------------------------------------------- their efficiency to get more wages.

----------------------------------------------------- unit – Cost of production per ---------------------------------------------------------------------------------------------- to decrease in labor cost and overheads per unit.

Reduction of -------------------- turnover – Workers is --------------------------------------------------------------------------------------------------------------------------------------------- results in reduction of labor turnover.

Reduction of idle time – Since the payment of ------------------------------------------------------------------------------------------------------------------------------------------- to the minimum.

Benefit to consumers – Reduction -------------------------------------------------------------- by reducing the selling price.

Limitations:-

In spite of the above advantages, the incentive plans are not free from disadvantages. The following are some of the important disadvantages:

Difficulty --------------------------- time – Fixation of standard --------------------------------------------------------------------------------------------------------------------------------------------- to get set a higher standard time.

More -------------------------------- required – As the workers want ------------------------------------------------------------------------------------------------------------------------------------------------------ wastage of raw materials.

Union opposition – Labor unions may -------------------------------------------------------------------------------------------------------------------------------------------- and greed among workers. This may lead to strikes and lock-outs.

Individual and ------------------------------------------------------ merits and demerits-

Wage incentive plans may be discussed as --------------------------------------------------------------------------------------------------------------- and distinct needs and hence specific tailor-made incentive plans have to be devised to meet their requirements.

Therefore, correct measurement ------------------------------------------------------------------------------------------------------------------------- the incentive index. Various wage incentive schemes are formulated on the basis of these indices.

1. Incentive Plans for Blue Collar Workers: Short-term incentive plans for blue collar ------------------------------------------------------------------------------------------------------------------------ into three categories:

(a) Plans under ------------------------------------------------------------------------------------------- output;

(b) Plans under which the ------------------------------------------------------------------------------------- in output; and

(c) Plans under ------------------------------------------------------------------------------------------------- in output.

Every employer wants his workman to do the maximum work they are capable of doing. On the other hand, there is a feeling among the workers that an increasing effort ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------for outstanding performance.

All bonus or premium plans relate to two factors: one----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------dissatisfaction and dissension among the workers in a plant.

The payment of bonus to indirect workers, however poses a serious problem because the output of many of them cannot be accurately measured. For example, it is ------------------------------------------------------------------------------------------------------------------------------------------------- of inspectors, sweepers and packers. Many managements, therefore, prefer to apply a merit rating system to indirect workers, which rewards these workers for other qualities, in addition to their output.

2. Incentive Plans for White Collar Employees/Salesmen: The salesmen are usually given incentives in the form of sales commissions. One study reported that ---------------------------------------------------------------------------------------------------------------- of most sales work; (ii) tradition in the market; and (iii) the assumption that incentives are needed to motivate salesmen.

There are several incentive plans for sales staff each appropriate for different markets, products, but all plans are basically variations of three types of plans: straight salary, straight commission, and combination plans.

The straight salary method is not an ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is not related to results. This lack of relationship reduces salesmen’s performance.

Under the straight commission, the salesmen are paid on the basis of sales ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------, and the company has less control over them; (iii) salesmen’s income generally fluctuates widely.

Under the combination method of salary and commission, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------related to performance; only incentive value of money is being traded off for its security value.

3. Incentives for Management Employees: In many organisations, the managers are paid bonus. There are two types of bonus plans: one determined by formula --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------tied to overall corporate results. The size of bonus is much higher for top level executives and lower for the lower level executives.

At the top management level, incentive payments are mostly ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- incentive for good work and represent a form of saving.

In the manufacturing and retailing fields, where year-to-year ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------plan that is poorly conceived or administered can have a negative motivational impact. If a bonus plan seems appropriate, careful attention should be paid to what kind of plan would be most effective.

MERITS AND DEMERITS

The primary advantage of incentives is the inducement ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------earnings exceed two to three times that of the time rated wages or salaries. Increased earnings would enable the employees to improve their standard of living.

There will be reduction in the total as well as per unit of cost of production through incentives. Productivity would increase resulting in greater number of units produced for given inputs. This would bring down the total and unit cost of production. The production capacity is also likely to increase.

The other advantages of incentive payments are: ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------of cost control techniques like standard costing and budgetary control.

On the other hand, systems of payment by results may have disadvantages. There is a tendency for the quality of products to deteriorate unless steps are taken to ensure maintenance of quality through checking and inspection. This involves added expenses:

Difficulties may arise over the -------------------------------------------------------------------------------------------------------------------------------------------------- machines or methods are introduced, they may slacken their rate of work.

Another disadvantage is that jealousies ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------may slacken their efforts at times and employers may not take recourse to revision of rates because the earnings are too high.

Difficulty also arises in determining standard performance. Many organisations follow a safe route to fix the standards - which is usually the average of past years performance. Past performance may not be the ideal basis for fixing production norms.

Most of the problems of financial incentives ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------should be placed on non-economic factors. Many empirical researchers have shown that monetary incentives alone do not bring about the desired motivation.

5. Describe the tax planning for employee compensation in any organization you are familiar with. Explain the tax implications of employee compensation package to the employer and employees.

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Tax Planning --------------------------------- Compensation-

The basic purpose of tax ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ should meet the following objectives.

(i) All constituent parts of employee remuneration are deductible as business expense to the extent possible. If this requirement is not met, the ------------------------------------------------------------------------------------------------------------------------------------- on the employer and will thereby reduce the profitability of his business.

(ii) Remuneration received by ----------------------------------------------------------------------------------------------------------------------------------------------------- post tax income is perceived as the real income by the employee and therefore has significant implications for his morale, motivation and commitment to the organisation.

Composition ------------------------------------------ package:

The compensation package generally consists of the following components.

(a) Salary

Salary, according to its ordinary ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------is used in the context of services of non-manual type of work which the later is used in connection with manual services.

Thus in general the word salary is used for payment of services of a higher class and wages is confiend to earnings of labourers and artisans. ) Before any. payment made to a person is treated as salary, or wages, it is essential that the amount payable must be quid pro quo for services rendered by him as an employee. What appears contemplated is some sort of employment or engagements of the employee by the employer which results in his rendering services to the employer.

The test of what is or is not a salary or wage is ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------. employee or master and servant between the payer and the payee.

The ingredients of contract of service are (1) masters power over selection (ii) the payment of salary (iii) the masterfs right -to control of what and how doing the work and (iv) masterfs right of supervision or dismissal. Existence of contract of service is essential for any amount paid or received to be treated as wages/salary for the purpose of income tax.

(b) Allowances

All payments made by the employer by way ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------allowances will also be permissible deductions as business expenses for calculating the taxable income of the employer.

(c) Perquisites

The third component of employeris remuneration is ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------on the service.

When employment comes to an end, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------salary or wages. What is important is the nature of benefits given and the name given to a particular payment is not conclusive.

Tax implications --------------------------------------------- package to the employer

Tax provisions which have implications to he employer in respect of various components of compensation package should be kept in view while deciding on compensation ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------package. While considering tax planning from the angle of the employer, provisions relating to disallowances should be carefully examined to ensure that any payment made as salary or perquisite is not disallowed as permissible business expense. Income Tax makes provisions for the following deductions in respect of employee remuneration.

Payment -------------------------------------------- and perquisites Insurance ------------------------------------ health employees Bonus ------------------------------------- commission Employer's ----------------------------------- staff welfare fund Family planning expenditure Entertainment ---------------------------------------

Apart from complying with the requirement of the above provisions, employer has to ensure that tax is deducted at source.

Tax -------------------------------------------- to the employees (a) Salary The term salary for the purpose of income tax has been defined to include within its scope (I) wages (ii) any annuity or pension (iii) any gratuity (iv) any fee, commission, perquisite or profit in lieu of or in addition to any salary or wages (v) any advance of salary (vi) the annual accretion to the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------to the services rendered by the employee would fall within the meaning of salaries and would, as a consequence, be taxable.

(b) Allowances All allowances granted by the employer for the personal benefit of the employee will form part of his salary for the purpose of assessment of income tax. There are, however, ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------that such expenditure is allowed as deductible business expense. In order to avail of such tax benefit, the employer can split the total salary into basic salary and allowances in such a manner that allowances qualify and tax benefits. Some of the allowances which entitle the employer and the employees to tax benefits are given below: (i) House -------------------------------- Allowance: (ii) Conveyance -------------------------------: (iii) Travelling --------------------------------- and Expenses: (c) Perquisites As a general rule, a substantial, part of the ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------particular perquisite is taxable or not. Some of the important perquisites and their tax implications are discussed in the following paragraphs.

(i) Rent-------------------------------------- accommodation

(ii) Provisions ------------------------- owned car

(iii) ------------------------------------------------

(iv) Leave ------------------------------ Concession

(v) Medical -----------------------------------------

(vi) Other ------------------------------ perquisites

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