Have a Great day: HRM Unit -III and Unit -IV

Unit –III

Performance Appraisal – Job evaluation and merit rating – Promotion – Transfer and demotion – Human relations - approaches to good human relations – Punishment.

Performance Appraisal

Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development. Performance appraisal is generally done in systematic ways which are as follows:

The supervisors measure the pay of employees and compare it with targets and plans.

The supervisor analyses the factors behind work performances of employees.

The employers are in position to guide the employees for a better performance.

To maintain records in order to determine compensation packages, wage structure, salaries raises, etc.

To identify the strengths and weaknesses of employees to place right men on right job.

To maintain and assess the potential present in a person for further growth and development.

To provide a feedback to employees regarding their performance and related status.

To provide a feedback to employees regarding their performance and related status.

It serves as a basis for influencing working habits of the employees.

To review and retain the promotional and other training programmes.

Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.

Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance. Compensation packages which includes bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit rather than seniority.

Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyse strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programmes.

Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and thereby the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard.

Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways:

Through performance appraisal, the employers can understand and accept skills of subordinates.

The subordinates can also understand and create a trust and confidence in superiors.

It also helps in maintaining cordial and congenial labour management relationship.

It develops the spirit of work and boosts the morale of employees.

Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance of employees, a person’s efficiency can be determined if the targets are achieved. This very well motivates a person for better job and helps him to improve his performance in the future.

Reduction in inequalities in salary structure - It is found that people and their motivation is dependent upon how well they are being paid. Therefore the main objective of job evaluation is to have external and internal consistency in salary structure so that inequalities in salaries are reduced.

Specialization - Because of division of labour and thereby specialization, a large number of enterprises have got hundred jobs and many employees to perform them. Therefore, an attempt should be made to define a job and thereby fix salaries for it. This is possible only through job evaluation.

Helps in selection of employees - The job evaluation information can be helpful at the time of selection of candidates. The factors that are determined for job evaluation can be taken into account while selecting the employees.

Harmonious relationship between employees and manager - Through job evaluation, harmonious and congenial relations can be maintained between employees and management, so that all kinds of salaries controversies can be minimized.

Standardization - The process of determining the salary differentials for different jobs become standardized through job evaluation. This helps in bringing uniformity into salary structure.

Relevance of new jobs - Through job evaluation, one can understand the relative value of new jobs in a concern.

		Yes	No
1.	He takes keen interest in his work	□	□
2.	He possesses good knowledge of his work	□	□
3.	He is good in planning	□	□

Types of Promotion:
1. Horizontal promotion:
2. Vertical Promotion:
3. Dry Promotion:
Purposes:
1. To Meet Organisational Needs:
2. To Satisfy Employee Needs:
3. To Better Utilize Employee:
4. To Make the Employee More Versatile:
5. To Adjust the Workforce:
6. To Provide Relief:
7. To Punish Employee:
Types:
1. Production Transfer:
2. Remedial Transfer:
3. Replacement Transfer:
4. Versatility Transfer:
5. Shift Transfers:
6. Penalty Transfer:
Meaning:
Causes of Demotion:
Organisational Objectives:
Individual Objectives:
Collective Objectives:
Principles of wage and salary administration:
1. External Equity:
2. Internal Equity:
3. Individual Worth:
Time Wage System:
Suitability:
Advantages:
Limitations:
Advantages:
1. Wages linked to efforts:
2. Increase in production:
3. Better utilization of equipment/machines:
4. Distinction between Efficient and Inefficient:
5. Less supervision required:
6. Effective cost control:
7. Better planning and control:

Limitations:
1. No guarantee or minimum wage:
2. Poor quality of goods/products:
3. Not suitable for beginners:
4. Deterioration in health:
5. Cause of dissatisfaction:
6. Opposition from unions:
7. Difficulty in fixing piece-rates:
Suitability:
(i) Straight piece rate:
(ii) Increasing piece rate:
(iii) Decreasing piece rate:
1. Individual Incentive (PBR) Schemes:
Taylor’s Differential Piece Rate Plan:
Halsey Premium Plan:
Rowan Premium Plan:
Emersson Efficiency Plan:
Gantt Task and Bonus Plan:
2. Group Incentive Schemes:
Profit-sharing:
Co-partnership:
Scanlon Plan:
Objective of Labour Welfare
Several objectives of Labour welfare are mentioned below:
(1) Intra-mural Facilities:
(2) Extra-mural Facilities:
(3) Statutory Facilities:
Need for Safety:
Unsafe acts:
The unsafe conditions:
Safety Programmes:
The main focus of Factories Act is towards the Health benefits to the workers. Health Chapter of the Act contains specification from Section 11 to 20. Detailed information of the sections of is provided as under:
Section 11: This section basically specifies the issues of cleanliness at the workplace. It is mentioned in the provision that every factory shall be kept clean and free from effluvia arising from any drain, privy or other nuisance. This includes that there should be no accumulation of dirt and refuse and should be removed daily and entire area should be kept clean.
Section 12: This section specifies on disposal of wastes and effluents. That every factory should make effective arrangements for the treatment of wastes and effluents due to the manufacturing process carried on therein, so as to render them innocuous and for their disposal.
Section 13: This section focuses on ventilation and temperature maintenance at workplace. Every factory should work on proper arrangements for adequate ventilation and circulation of fresh air.
Section 14: This section details on the proper exhaustion of dust and fume in the Factory. In this it is mentioned that factory which deals on manufacturing process should take care of the proper exhaustion of dust, fume and other impurities from its origin point.
Section 15: This section specifies regarding the artificial humidification in factories. In this the humidity level of air in factories are artificially increased as per the provision prescribed by the State Government.
Section 16: Overcrowding is also an important issue which is specified in this section. In this it is mentioned that no room in the factory shall be overcrowded to an extent that can be injurious to the health of workers employed herein.
Section 18: This section specifies regarding arrangements for sufficient and pure drinking water for the workers. There are also some specified provisions for suitable point for drinking water supply. As in that drinking water point should not be within 6 meters range of any washing place, urinal, latrine, spittoon, open drainage carrying effluents. In addition to this a factory where there are more than 250 workers provisions for cooling drinking water during hot temperature should be made.
Section 19: This section provides details relating to urinals and latrine construction at factories. It mentions that in every factory there should be sufficient accommodation for urinals which should be provided at conveniently situated place. It should be kept clean and maintained. There is provision to provide separate urinals for both male and female workers.
Section 20: This section specifies regarding proper arrangements of spittoons in the factory. It is mentioned that in every factory there should be sufficient number of spittoons situated at convenient places and should be properly maintained and cleaned and kept in hygienic condition.

a safety plan;

policies, procedures and processes;

training and induction;

monitoring;

supervision; and

reporting.

workers comply with procedures and instructions;

workers are appropriately trained; and

workers are subject to ongoing supervision.

the rules of your company;

the rules of the site; and

the rules of the location they are visiting.

to ensure that all risk has been covered by a new risk assessment that has been carried out due to a change in process, e.g. the installation of new workstations; and

when an investigation takes place following an incident.

The supervisors measure the pay of employees and compare it with targets and plans.

The supervisor analyses the factors behind work performances of employees.

The employers are in position to guide the employees for a better performance.

To maintain records in order to determine compensation packages, wage structure, salaries raises, etc.

To identify the strengths and weaknesses of employees to place right men on right job.

To maintain and assess the potential present in a person for further growth and development.

To provide a feedback to employees regarding their performance and related status.

To provide a feedback to employees regarding their performance and related status.

It serves as a basis for influencing working habits of the employees.

To review and retain the promotional and other training programmes.

Promotion: Performance Appraisal helps the supervisors to chalk out the promotion programmes for efficient employees. In this regards, inefficient workers can be dismissed or demoted in case.

Compensation: Performance Appraisal helps in chalking out compensation packages for employees. Merit rating is possible through performance appraisal. Performance Appraisal tries to give worth to a performance. Compensation packages which includes bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on performance appraisal. The criteria should be merit rather than seniority.

Employees Development: The systematic procedure of performance appraisal helps the supervisors to frame training policies and programmes. It helps to analyse strengths and weaknesses of employees so that new jobs can be designed for efficient employees. It also helps in framing future development programmes.

Selection Validation: Performance Appraisal helps the supervisors to understand the validity and importance of the selection procedure. The supervisors come to know the validity and thereby the strengths and weaknesses of selection procedure. Future changes in selection methods can be made in this regard.

Communication: For an organization, effective communication between employees and employers is very important. Through performance appraisal, communication can be sought for in the following ways:

Through performance appraisal, the employers can understand and accept skills of subordinates.

The subordinates can also understand and create a trust and confidence in superiors.

It also helps in maintaining cordial and congenial labour management relationship.

It develops the spirit of work and boosts the morale of employees.

Motivation: Performance appraisal serves as a motivation tool. Through evaluating performance of employees, a person’s efficiency can be determined if the targets are achieved. This very well motivates a person for better job and helps him to improve his performance in the future.

Reduction in inequalities in salary structure - It is found that people and their motivation is dependent upon how well they are being paid. Therefore the main objective of job evaluation is to have external and internal consistency in salary structure so that inequalities in salaries are reduced.

Specialization - Because of division of labour and thereby specialization, a large number of enterprises have got hundred jobs and many employees to perform them. Therefore, an attempt should be made to define a job and thereby fix salaries for it. This is possible only through job evaluation.

Helps in selection of employees - The job evaluation information can be helpful at the time of selection of candidates. The factors that are determined for job evaluation can be taken into account while selecting the employees.

Harmonious relationship between employees and manager - Through job evaluation, harmonious and congenial relations can be maintained between employees and management, so that all kinds of salaries controversies can be minimized.

Standardization - The process of determining the salary differentials for different jobs become standardized through job evaluation. This helps in bringing uniformity into salary structure.

Relevance of new jobs - Through job evaluation, one can understand the relative value of new jobs in a concern.

		Yes	No
1.	He takes keen interest in his work	□	□
2.	He possesses good knowledge of his work	□	□
3.	He is good in planning	□	□

a safety plan;

policies, procedures and processes;

training and induction;

monitoring;

supervision; and

reporting.

workers comply with procedures and instructions;

workers are appropriately trained; and

workers are subject to ongoing supervision.

the rules of your company;

the rules of the site; and

the rules of the location they are visiting.

to ensure that all risk has been covered by a new risk assessment that has been carried out due to a change in process, e.g. the installation of new workstations; and

when an investigation takes place following an incident.

Objectives of Performance Appraisal

Performance Appraisal can be done with following objectives in mind:

Advantages of Performance Appraisal

It is said that performance appraisal is an investment for the company which can be justified by following advantages:

All the above factors ensure effective communication.

Process of Performance Appraisal

1. Objectives definition of appraisal

2. Job expectations establishment

3. Design an appraisal program

4. Appraise the performance

5. Performance Interviews

6. Use data for appropriate purposes

7. Identify opportunities variables

8. Using social processes, physical processes, human and computer assistance

Methods of Performance Appraisal

Numerous methods have been devised to measure the quantity and quality of performance appraisals. Each of the methods is effective for some purposes for some organizations only. None should be dismissed or accepted as appropriate except as they relate to the particular needs of the organization or an employee.

Broadly all methods of appraisals can be divided into two different categories.

· Past Oriented Methods

· Future Oriented Methods

Past Oriented Methods

1. Rating Scales: Rating scales consists of several numerical scales representing job related performance criterions such as dependability, initiative, output, attendance, attitude etc. Each scales ranges from excellent to poor. The total numerical scores are computed and final conclusions are derived. Advantages – Adaptability, easy to use, low cost, every type of job can be evaluated, large number of employees covered, no formal training required. Disadvantages – Rater’s biases

2. Checklist: Under this method, checklist of statements of traits of employee in the form of Yes or No based questions is prepared. Here the rater only does the reporting or checking and HR department does the actual evaluation. Advantages – economy, ease of administration, limited training required, standardization. Disadvantages – Raters biases, use of improper weighs by HR, does not allow rater to give relative ratings

3. Forced Choice Method: The series of statements arranged in the blocks of two or more are given and the rater indicates which statement is true or false. The rater is forced to make a choice. HR department does actual assessment. Advantages – Absence of personal biases because of forced choice. Disadvantages – Statements may be wrongly framed.

4. Forced Distribution Method: here employees are clustered around a high point on a rating scale. Rater is compelled to distribute the employees on all points on the scale. It is assumed that the performance is conformed to normal distribution. Advantages – Eliminates Disadvantages – Assumption of normal distribution, unrealistic, errors of central tendency.

5. Critical Incidents Method: The approach is focused on certain critical behaviors of employee that makes all the difference in the performance. Supervisors as and when they occur record such incidents. Advantages – Evaluations are based on actual job behaviors, ratings are supported by descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement are high. Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close supervision; feedback may be too much and may appear to be punishment.

6. Behaviourally Anchored Rating Scales: statements of effective and ineffective behaviors determine the points. They are said to be behaviourally anchored. The rater is supposed to say, which behavior describes the employee performance. Advantages – helps overcome rating errors. Disadvantages – Suffers from distortions inherent in most rating techniques.

7. Field Review Method: This is an appraisal done by someone outside employees’ own department usually from corporate or HR department. Advantages – Useful for managerial level promotions, when comparable information is needed, Disadvantages – Outsider is generally not familiar with employees work environment, Observation of actual behaviors not possible.

8. Performance Tests & Observations: This is based on the test of knowledge or skills. The tests may be written or an actual presentation of skills. Tests must be reliable and validated to be useful. Advantage – Tests may be apt to measure potential more than actual performance. Disadvantages – Tests may suffer if costs of test development or administration are high.

9. Confidential Records: Mostly used by government departments, however its application in industry is not ruled out. Here the report is given in the form of Annual Confidentiality Report (ACR) and may record ratings with respect to following items; attendance, self expression, team work, leadership, initiative, technical ability, reasoning ability, originality and resourcefulness etc. The system is highly secretive and confidential. Feedback to the assessee is given only in case of an adverse entry. Disadvantage is that it is highly subjective and ratings can be manipulated because the evaluations are linked to HR actions like promotions etc.

10. Essay Method: In this method the rater writes down the employee description in detail within a number of broad categories like, overall impression of performance, promoteability of employee, existing capabilities and qualifications of performing jobs, strengths and weaknesses and training needs of the employee. Advantage – It is extremely useful in filing information gaps about the employees that often occur in a better-structured checklist. Disadvantages – It its highly dependent upon the writing skills of rater and most of them are not good writers. They may get confused success depends on the memory power of raters.

11. Cost Accounting Method: Here performance is evaluated from the monetary returns yields to his or her organization. Cost to keep employee, and benefit the organization derives is ascertained. Hence it is more dependent upon cost and benefit analysis.

12. Comparative Evaluation Method (Ranking & Paired Comparisons): These are collection of different methods that compare performance with that of other co-workers. The usual techniques used may be ranking methods and paired comparison method.

· Ranking Methods: Superior ranks his worker based on merit, from best to worst. However how best and why best are not elaborated in this method. It is easy to administer and explanation.

· Paired Comparison Methods: In this method each employee is rated with another employee in the form of pairs. The number of comparisons may be calculated with the help of a formula as under.

N x (N-1) / 2

Future Oriented Methods

1. Management By Objectives: It means management by objectives and the performance is rated against the achievement of objectives stated by the management. MBO process goes as under.

· Establish goals and desired outcomes for each subordinate

· Setting performance standards

· Comparison of actual goals with goals attained by the employee

· Establish new goals and new strategies for goals not achieved in previous year.

Advantage – It is more useful for managerial positions.

Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-term goals rather than important and long-term goals etc.

2. Psychological Appraisals: These appraisals are more directed to assess employees potential for future performance rather than the past one. It is done in the form of in-depth interviews, psychological tests, and discussion with supervisors and review of other evaluations. It is more focused on employees emotional, intellectual, and motivational and other personal characteristics affecting his performance. This approach is slow and costly and may be useful for bright young members who may have considerable potential. However quality of these appraisals largely depend upon the skills of psychologists who perform the evaluation.

3. Assessment Centers: This technique was first developed in USA and UK in 1943. An assessment center is a central location where managers may come together to have their participation in job related exercises evaluated by trained observers. It is more focused on observation of behaviors across a series of select exercises or work samples. Assessees are requested to participate in in-basket exercises, work groups, computer simulations, role playing and other similar activities which require same attributes for successful performance in actual job. The characteristics assessed in assessment center can be assertiveness, persuasive ability, communicating ability, planning and organizational ability, self confidence, resistance to stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity and mental alertness etc. Disadvantages – Costs of employees traveling and lodging, psychologists, ratings strongly influenced by assessee’s inter-personal skills. Solid performers may feel suffocated in simulated situations. Those who are not selected for this also may get affected.

Advantages – well-conducted assessment center can achieve better forecasts of future performance and progress than other methods of appraisals. Also reliability, content validity and predictive ability are said to be high in assessment centers. The tests also make sure that the wrong people are not hired or promoted. Finally it clearly defines the criteria for selection and promotion.

4. 360-Degree Feedback: It is a technique which is systematic collection of performance data on an individual group, derived from a number of stakeholders like immediate supervisors, team members, customers, peers and self. In fact anyone who has useful information on how an employee does a job may be one of the appraisers. This technique is highly useful in terms of broader perspective, greater self-development and multi-source feedback is useful. 360-degree appraisals are useful to measure inter-personal skills, customer satisfaction and team building skills. However on the negative side, receiving feedback from multiple sources can be intimidating, threatening etc. Multiple raters may be less adept at providing balanced and objective feedback.

Job Evaluation

According to Kimball and Kimball,“ Job evaluation represents an effort to determine the relative value of every job in a plant and to determine what the fair basic wage for such a job should be.”

Job Evaluation Process

Job evaluation is a process of determining the relative worth of a job. It is a process which is helpful even for framing compensation plans by the personnel manager. Job evaluation as a process is advantageous to a company in many ways:

Thus, job evaluation is different from performance appraisal. In job evaluation, worth of a job is calculated while in performance appraisal, the worth of employee is rated.

Merit Rating Meaning

Merit Rating is also known as performance appraisal or performance evaluation. It is a systematic process for measuring the performance of the employees in terms of job requirements.

It utilizes various rating techniques for comparing individual employees in a work group in terms of personal qualities or deficiencies and the requirements of their respective jobs. It is an established fact that people differ in their abilities and aptitudes. These differences are natural to a great extent and cannot be eliminated even by providing same training and education facilities to them.

There will be some differences in the quality and quantity of work done by different workers even on the same job. Therefore it is essential for the management to know these differentials so that employees having better abilities may be rewarded and the wrong selection and placement maybe restricted or avoided.

Definition of Merit Rating

According to Scot and Spriegel:

“Merit-rating of an employee is the process of evaluating the employee’s performance on the job in terms of the requirements of the job”. It is a technique of assessing the worth of an employee with reference to job requirements.

According to Dale Yodder:

“Refers to all formal procedures used in working organizations to evaluate personalities and contribution and potential of group members”. In the words of Yodder all types of methods used in evaluating the worth of employees for the organization are termed as performance appraisal.

Main objectives of merit rating are as follows:

1. To assess the work of employees in relation to their job requirements.

2. To consider employees/workers for promotions, transfer, layoffs etc.

3. To assess the good and bad points in working of employees and then making suggestions for improvement.

4. To help in wage and salary administrations and taking decisions about incentives and increments to be given to the workers.

5. To evaluate skill and training capabilities of employees and helping in planning suitable training and development programmes for workers.

6. To know the problems faced by workers while doing various jobs.

7. To provide a basis for comparison to segregate efficient and inefficient workers.

8. To help management in placement/transfer to workers according to their capacity, interest, aptitude and qualifications.

9. To help supervisors to know their subordinates more closely for increasing their efficiency and improving productivity.

Merit Rating: Methods, Advantages and Limitations!

Every concern whether big or small, must have a merit rating programme. The only choice of the employer is to select the method of performance appraisal. A systematic merit rating programme has a number of advantages over casual, unsystematic or haphazard appraisal.

Methods of merit-rating are similar to job-evaluation methods. These are explained below:

1. Ranking:

Under this method, a man is compared with all others without considering any specific factors. A rank is prepared by placing the best at the top and the poorest in performance at the bottom. This method is simple and is suitable in case of small scale concerns.

However, the method is subject to following limitations:

(a) It is not only difficult but rather simply impossible to compare a whole man with the whole men.

(b) When a rank is prepared, it is not possible to know the difference between the two persons listed in the rank order.

The above limitations can be overcome to some extent if paired comparison method is followed. Here an employee’s performance is compared with every other employee individually rather than whole men. Under this method the total number of comparisons will be as follows:

n (n-l)/ 2

N refers to the number of persons to be compared. The rank prepared on the basis of such comparisons will be definitely better than the simple rank. Suppose there are fifteen employees, the supervisor will have to make 105 comparisons i.e. 15(15-1)/2. The method is suitable if the number of employees is less.

2. Grading:

Under this method, the performance of the employees is evaluated against certain grades such as poor, good, very good, excellent or outstanding, satisfactory or unsatisfactory. The grade which describes his performance can be allocated to him.

3. Graphic Scales:

Under this method, performance of an employee is evaluated against certain specific factors. Five degrees or scales are established for each factor and each degree is defined. This method is most widely used in merit rating and is also the oldest.

The Factors to be Selected are of Two Types:

(1) Characteristics of employee viz., initiative, ability to learn, dependability, etc., and

(2) Contributions of employee’s viz., quality and quantity of output, safety record, etc.

For example, four factors selected for merit rating may be a) Quality of output. (b) Quantity of output (c) Dependability (d) Attitudes toward associates and superiors.

The scales or degrees may be constructed as follows:

Quality of Work Poor Fair Good Very good Excellent:

Usually the other factors considered for merit rating in addition to four discussed above arc: co-operation, personality, Health, attendance, Knowledge of job, initiative, safety, potential for development.

For each factor we can name five degrees as explained above. The crucial part of this method is, therefore, the determination of factors and their degrees. The following definitions may be given for these degrees:

Poor—Lazy, not interested in his work.

Fair—does his job without any interest in his work.

Good—does his job with interest.

V. Good—Good keen employee.

Excellent — Exceptionally hard worker.

It may be pointed out that this method is just like ‘Point System’ of Job Evaluation. The rating of an employee may be done by putting a tick or marks from 0 to 20 i.e., for poor 0 marks and for excellent 20 marks.

4. Man-To-Man Comparison:

This method resembles with the factor-comparison method of job- evaluation. Under this method certain Key personnel are selected for each factor (which may include initiative, leadership, dependability, safety etc.) Other employees will be compared with these key personnel by considering one factor at a time.

This method is not very much used in performance appraisal because of difficulty in selecting the key men.

5. Check List:

In order to reduce bias or prejudice of the rater, the merit rating under this method is actually done by the HR Department. The supervisor simply reports the. Performance of the employee by putting ‘Yes’ or ‘No’ against a series of descriptive phrases. The rate is not aware of the weightage of these questions but he can definitely distinguish between positive and negative questions.

The following is the specimen of check list statements:

There are different checklists for administrative and supervisory personnel. This method is not simple. The main disadvantage of check list method is that it is very difficult to assemble, analyse and weigh a number of phrases applicable to employee’s qualities or shortcomings.

6. Forced Choice Description:

Usually the raters try to rate the employees in the ‘average’ category because it does not require further explanation. Under this method, the rate is forced to select a statement from a pair of statements though both may be applicable or un applicable to him.

A pair of un favourable statements may be as follows:

(a) Makes promises that he knows he cannot fulfill.

(b) Shows favour to certain employees.

He must choose at least one though none may be applicable on the employee.

The Positive Statements May Be as Follows:

(a) Has a constant flow of new ideas.

(b) Shows careful judgment.

Even though both these statements may be applicable, the rater must select only one statement. Thus, bias or prejudice (halo effect) of the rater can be eliminated from merit rating under this method.

However, this system is not popular on account of the following limitations:

(a) It is very difficult to keep secret of the values attached to various statements.

(b) The rater usually objects to this method as he is forced to make a decision which he does not want to make.

7. Selection of Critical Incidents:

The act or conduct of an employee during crucial or critical circumstances is recorded by the rater. These critical incidents are carefully analysed and the behaviour or qualities of the employees are carefully rated.

The following are some of the examples of such incidents:

1. Became upset or nervous when accident took place in the factory.

2. Refused promotion or training opportunities.

3. Suggested an improvement in the methods of work.

4. Did not co-operate with his workers.

5. Gave excellent answer to union grievance.

6. Persuaded his fellow worker to withdraw his grievance.

8. Forced Distribution Method:

Where there are a large number of employees, the rater may be asked to rate all the employees as follows:

Poor 10%

Average 25%

Fair 35%

Good 20%

Excellent 10%

Generally the rater does not want to rate the employees as poor or excellent because in both the cases, he has to give reasons for justifying the rating. Hence ratings generally cluster around ‘average!. Under this method, the rate is forced to distribute all the employees in certain categories as explained above.

Advantages of merit rating are as follows:

(a) It provides a scientific basis for judging the worth of employees. They try to improve upon their performance if it is not up to the satisfaction of the employer.

(b) It provides a basis for decisions like promotion, demotion, transfer or termination of employees. Better persons are selected for promotion. The systematic evaluation of employees is also kept as a permanent record.

(c) It helps in distinguishing between efficient and inefficient workers. In this way, it reveals the defects in the selection procedure. Those employees who are misfits may be spotted and appropriate action taken against them.

(d) Workers may be given increase in pay if their performance is good. It helps the management in avoiding spot judgments and replaces it with planned decisions.

(e) Objective merit rating develops confidence among the employees if the methods of evaluation are systematic and impartial. Among the workers, a sense of competition is developed resulting into increased output or better performance.

(f) It helps in creating a congenial working environment in which employer- employee relations are improved. Subordinates get motivated and work hard for getting favorable rating.

(g) It also helps in stimulating and development of an employee as it points out the weakness of the employees. The training needs of employees can be known and training programmes can be accordingly drawn.

(h) A systematic evaluation also develops better supervisors and executives. On the basis of merit-rating report, the top management can judge the ability of executives who are writing such reports.

However, formal merit-rating may not take place in case of a small concern since the informal rating can provide all the desired information. In case of a large scale concern, both employer and employee stand benefited from a systematic performance appraisal.

Limitations of merit rating:

1. Halo Effect:

There is a tendency to rate the employee on the basis of one factor only.

It is also known as ‘blending tendency’. If the rater finds that the man is good in one factor he may rate him good in all other factors.

2. Clarity in Standards:

Each rater may apply his own standards with the result that final ratings simply cannot be compared. For example, a rater may think that ‘satisfactory’ rating is better than ‘excellent’.

3. Leniency or Strictness:

Lenient raters give high ratings whereas strict raters always give low ratings. Hence, there is a big difference of ratings between two raters. A supervisor may feel that low ratings may reflect his own weakness in dealing with workers.

4. Central Tendency:

Generally the raters evaluate employees by keeping them in the average category though some may be falling in the extreme ends of the scale viz., excellent or poor.

5. Influence of Higher-Paid Jobs:

Usually there is a tendency to give high rating to a person who is doing the highly paid job. Merit rating has nothing to do with the worth of the job (which is the subject matter of job evaluation).

6. Differing Perceptions:

Even if a person tries to be a fairest rater in performance evaluation, he cannot eliminate bias because of differing perceptions. Certain unconscious factors such as race, caste, and creed etc., effect merit rating. If a manager, who is less qualified, evaluates his subordinate who is more or better qualified, merit rating may not be fair. The limitations of merit-rating explained above can be eliminated to some extent by educating and training the raters.

Promotion Meaning

Promotion is vertical movement of an employee within the organisation. In other words, promotion refers to the upward movement of an employee from one job to another higher one, with increase in salary, status and responsibilities. Promotion may be temporary or permanent, depending upon the needs of the organisation.

There can be ‘dry promotion’ also where an employee is assigned to a higher level job without increase in pay. An example of ‘dry promotion’ is a University Professor made Head of the Department with no increase in salary.

Promotion has an in-built motivational value as it elevates the authority, power and status of an employee within an organisation. It is considered good personnel policy to fill vacancies in a higher job through promotions from within because such promotions provide an inducement and motivation to the employees and also remove feelings of stagnation-and frustration.

Definition

According to Dale Yoder, “Promotion provides incentive to initiative, enterprise and ambition; minimizes discontent and unrest; attracts capable individuals; necessitates logical training for advancement; and forms an effective reward for loyalty and cooperation, long service, etc.”

Promotion given to employees in an organisation can be classified into three types:

When an employee is shifted in the same category, it is called ‘horizontal promotion’. A junior clerk promoted to senior clerk is such an example. It is important to note that such promotion may take place when an employee shifts within the same department, from one department to other or from one plant to another plant.

This is the kind of promotion when an employee is promoted from a lower category to lower category involving increase in salary, status, authority and responsibility. Generally, promotion means ‘vertical promotion’.

When promotion is made without increase in salary, it is called ‘dry promotion’. For example, a lower level manager is promoted to senior level manager without increase in salary or pay. Such promotion is made either there is resource/fund crunch in the organisation or some employees hanker more for status or authority than money.

The following are the purposes or objectives of promotion:

1. To recognize an employee’s skill and knowledge and utilize it to improve the organisational effectiveness.

2. To reward and motivate employees to higher productivity.

3. To develop competitive spirit and inculcate the zeal in the employees to acquire skill, knowledge etc.

4. To promote employees satisfaction and boost their morale.

5. To build loyalty among the employees toward organisation.

6. To promote good human relations.

7. To increase sense of belongingness.

8. To retain skilled and talented people.

9. To attract trained, competent and hard working people.

10. To impress the other employees that opportunities are available to them too if they also perform well.

Promotion can be made on various bases. Following are the major ones:

1. Seniority i.e., length of service

2. Merit, i .e., performance

3. Educational and technical qualification

4. Potential for better performance

5. Career and succession plan

6. Vacancies based on organisational chart

7. Motivational strategies like job enlargement.

8. Training

As a matter of fact, no single basis of promotion is acceptable and applicable to all organisations. Every basis has its strengths and weaknesses. For example, while promotion on the basis of seniority gives satisfaction to the senior employees, it causes frustration to the talented ones.

Similarly, promotion based on merit motivates competent employees to work hard while trade unions oppose it on the justification of its subjectivity. In India, promotion in the government departments is made on the basis of seniority of the employees. In case of private organisations, merit is generally used as a basis for promoting employees. Here, the promotion policy is to promote the best one available.

Transfer

A transfer refers to lateral movement of employees within the same grade, from one job to another. According to Flippo “a transfer is a change in the job (accompanied by a change in the place of the job) of an employee without a change in responsibilities or remuneration”

The need for making transfer is left for various reasons as listed below:

Changes in technology, volume of production, production schedule, product line, quality of products, organisational structure, etc. necessitate an organisation to reassign jobs among employees so that right employee is placed on the right job.

Employees may request for transfer in order to satisfy their desire to work in a particular department, place and under some superior. Personal problems of employee like health, family circumstances, and interpersonal conflicts may also necessitate transfer.

When an employee is not performing satisfactorily on one job and management thinks that his/her capabilities would be utilized better elsewhere, he/she may be transferred to other job.

In some organisations like banks, employees after working on a job for a specified period are transferred to other job with a view to widen their knowledge and skill and also reduce monotony. This is also called ‘job rotation.

Work force can be transferred from the departments / plants where there is less work to the departments/plants where more work is.

Transfers may be made to give relief to the employees who are overburdened or doing hazardous work for long period.

Management may use transfer as an instrument to penalize employees who are indulged in undesirable activities. As a disciplinary action, employees are transferred to remote and far-flung areas.

Employee transfers may be classified into following types:

Such transfers are made when labour requirements in one division or branch is declining. The surplus employees from such division are transferred to those divisions or branches where there is shortage of employees. Such transfers help avoid lay off and stabilize employment.

Such transfers are affected to correct the wrong selection and placement of employees. A wrongly placed employee is transferred to more suitable job. Such transfers protect the interest of the employee.

Replacement transfers are similar to production transfers in their inherent, i.e. to avoid layoffs. Replacement transfers are affected when labour requirements are declining and are designed to replace a new employee by an employee who has been in the organisation for a sufficiently long time. The purpose of these transfers is to retain long service employees in the organisation and also give them some relief from the heavy pressure of work.

These transfers are also known as ‘job rotation? In such transfers, employees are made move from one job to another to gain varied and broader experience of work. It benefits both the employee and organisation. It reduces boredom and monotony and gives job enrichment to the employee. Also, employees’ versatility can be utilized by the organisation as and when needed.

These transfers are affected in the organisations where work progresses for 24 hours or in shifts. Employees are transferred from one shift to another usually on the basis of mutual understanding and convenience.

Management may use transfer as an instrument to penalize employees’ involved in undesirable activities in the organisation. Employee transfer from one’s place of convenience to a far-flung and remote area is considered as a penalty to the employee.

Demotion

Demotion is “reverse” of promotion. Demotion is the lowering of a rank, reduction in salary, status and responsibilities. It may be defined as the assignment of an individual to a job of lower rank and pay usually involving lower level of authority and responsibility.

Demotion is normally used as a punishment for breach of discipline. It brings bad name to the employee. The juniors supersede a person which brings humiliation. Even the reduction of pay will adversely affect the budget of an employee.

Demotion may take place due to the following reasons:

1. Breach of Discipline:

A breach of discipline may attract demotion as a punishment. An organisation can work only if proper discipline is maintained. A punitive action for such breach may be necessary so that people do not flout rules, regulation etc. of the company.

2. Inadequacy of Knowledge:

A person may not be competent to perform his job properly. He may not be able to meet job requirements. In such a situation demotion becomes necessary.

3. Unable To Cope With Change:

Now-a-days, there is a rapid change in technology and methods of work. The existing employees may not be able to adjust themselves as per the new requirements. It may be due to lack of education, technical skill, ill health, old age or other personal reasons. Under these circumstances new persons may be needed to take up such jobs.

4. Organisational Re-Organisation:

Sometimes there may be organisational changes. It may be necessitated by either combining the departments or closing of some sections or departments. In such situations the number of positions is reduced and some employees may be posted at the lower positions until normality is restored. Such demotions are not due to any fault of the employees.

Human Relations

A human relation is the process of training employees, addressing their needs, fostering a workplace culture and resolving conflicts between different employees or between employees and management.

Principles of Human Relations Approach

The basic principles of human relations approach are :-

1. Human beings are not interested only in financial gains. They also need recognition and appreciation.

2. Workers are human beings. So they must be treated like human beings and not like machines. Managers should try to understand the feelings and emotions of the workers.

3. An organisation works not only through formal relations, but also through informal relations. Therefore, managers should encourage informal relations in the organisation along with formal relations.

4. Workers need a high degree of job security and job satisfaction. Therefore, management should give job security and job satisfaction to the workers.

5. Workers want good communication from the managers. Therefore, managers should communicate effectively without feelings of ego and superiority complex.

6. In any organisation, members do not like conflicts and misunderstandings. Therefore, managers should try to stop conflicts and misunderstandings among the members of the organisation.

7. Workers want freedom. They do not want strict supervision. Therefore, managers should avoid strict supervision and control over the workers.

8. Employees would like to participate in decision making, especially, in those matters affecting their interests. Therefore, management must encourage workers' participation in management. This will increase productivity and job satisfaction.

Punishment

Punishment is the authoritative imposition of an undesirable or unpleasant outcome upon a group or individual, in response to a particular action or behaviour that is deemed unacceptable or threatening to some norm.

Unit –IV

Wages and Salary administration- Incentive system- Labour welfare and Social Security – Safety, Health and Security – retirement benefits to employees.

What do you mean by Wage?

Labour is an essential factor of production. It is a sensitive and active factor. It activates other factors of production. The remuneration paid to labourers for their services is termed as wages. Wages are contractual payments due to the contract made between the employer and the labourer. Thus, wages are predetermined.

According to Prof. Benham, “A wage may be defined as a sum of money, paid under contract by an employer to a worker for services rendered.” Thus, remuneration or reward of a labourer engaged in production for the physical or mental work is known as wage in Economics.

What do you mean by Salary?

Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. Salary is paid, most frequently, in a bi-weekly paycheck to anexempt or professional employee. In most years, an employee's salary is paid in 26 even paychecks over the course of the year.

An employee who is paid a salary is expected to complete a whole job in return for the salary.

This is different from a non-exempt employee who is paid an hourly rate or by the piece produced. This employee is generally eligible to collect overtime.

The salaried employee or employee who is paid by salary does not track hours worked and is not paid for overtime. (Some public sector, often union represented, employees expect to account for hours and collect compensatory time off.

Features of Good Wage system

A good wage system has the following features:

1. The system should be fair both to the employer and the employee. It should be based upon scientific time and motion study to ensure a standard output to the employer and a fair amount of wages to the workers.

2. The worker should be assured of a guaranteed minimum wage at satisfactory level irrespective of the work done by him.

3. Workers should be paid according to their merits. Efficient workers should be able to earn more wages as compared to the inefficient workers.

4. Skilled workers should be paid more as compared to the unskilled workers. Skilled workers are to be compensated for the efforts put in by them to acquire the skill.

5. The system should ensure equal pay for equal work.

3. The system should be flexible to allow necessary changes which may arise.

7. The system should be such as to minimise labour turnover, absenteeism and late attendance.

8. The system should not violate any local or national trade union’s agreements.

9. The system should keep in view the wage rate in the same area or industry.

10. In order to protect the real wages from erosion, the level of money wages should be adjusted to price changes. Workers should be paid dearness or dear food allowance over and above the basic pay to take account of an increase in prices. Thus, a system of wage payment should keep in view the price changes.

11. The system should be correlated to the capacity of the organisation to pay.

12. The method should be simple and capable of being understood by the workers.

13. The workers and unions of workers should be adequately informed about the procedures used to establish wage rates, so that there may be no cause of suspicion in the minds of workers.

To conclude, the system of wages should ultimately result into higher production, improved quality of the output and the contented labour force.

The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system. This is so because only a properly developed compensation system enables an employer to attract, obtain, retain and motivate people of required calibre and qualification in his/her organisation. These objectives can be seen in more orderly manner from the point of view of the organisation, its individual employees and collectively. There are outlined and discussed subsequently:

The compensation system should be duly aligned with the organisational need and should also be flexible enough to modification in response to change.

Accordingly, the objectives of system should be to:

1. Enable an organisation to have the quantity and quality of staff it requires.

2. Retain the employees in the organisation.

3. Motivate employees for good performance for further improvement in performance.

4. Maintain equity and fairness in compensation for similar jobs.

5. Achieve flexibility in the system to accommodate organisational changes as and when these take place.

6. Make the system cost-effective.

From individual employee’s point of view, the compensation system should have the following objectives:

1. Ensures a fair compensation.

2. Provides compensation according to employee’s worth.

3. Avoids the chances of favouritism from creeping in when wage rates are assigned.

4. Enhances employee morale and motivation.

These objectives include:

1. Compensation in ahead of inflation.

2. Matching with market rates.

3. Increase in compensation reflecting increase in the prosperity of the company.

4. Compensation system free from management discretion.

Beach has listed the five objectives of wage and salary administration:

1. To recruit persons for a firm

2. To control pay-rolls

3. To satisfy people, reduce the incidence of turnover, grievances, and frictions.

4. To motivate people to perform better

5. To maintain a good public image.

The main principles that govern wage and salary fixation are three:

1. External Equity

2. Internal Equity

3. Individual Worth.

This principle acknowledges that factors/variables external to organisation influence levels of compensation in an organisation. These variables are such as demand and supply of labour, the market rate, etc. If these variables are not kept into consideration while fixing wage and salary levels, these may be insufficient to attract and retain employees in the organisation. The principles of external equity ensure that jobs are fairly compensated in comparison to similar jobs in the labour market.

Organisations have various jobs which are relative in value term. In other words, the values of various jobs in an organisation are comparative. Within your own Department, pay levels of the teachers (Professor, Reader, and Lecturer) are different as per the perceived or real differences between the values of jobs they perform.

This relative worth of jobs is ascertained by job evaluation. Thus, an ideal compensation system should establish and maintain appropriate differentials based on relative values of jobs. In other words, the compensation system should ensure that more difficult jobs should be paid more.

According to this principle, an individual should be paid as per his/her performance. Thus, the compensation system, as far as possible, enables the individual to be rewarded according to his contribution to organisation.

Alternatively speaking, this principle ensures that each individual’s pay is fair in comparison to others doing the same/similar jobs, i.e., ‘equal pay for equal work’. In sum and substance, a sound compensation system should encompass factors like adequacy of wages, social balance, supply and demand, fair comparison, equal pay for equal work and work measurement.

Factors affecting wages or compensation or determinants of wages or compensation:

1) Productivity of workers: to get the best results from the employees and to increase the productivity compensation has to be productivity based.

2) Ability to pay: it depends upon the employer’s ability to pay wages to the workers. This depends upon the profitability of the firm. If the firm is marginal and can’t afford to pay higher than the competitors then the employees will go to other firms while if the company is successful then they can easily pay their employees as they wish.

3) Government: government has also fixed the rules for protecting the interest of the employees. The organizations are liable to pay as per the government instructions. Wages can not be fixed below the level prescribed by the government.

4) Labor union: labor union also helps in paying better wages to the workers. Higher wages have to be paid by the firm to its workers under the pressure of the trade unions.

5) Cost of living: wages depends upon the cost of living if it is high wages will also hike.

6) Demand and supply of labor: it is one of the important factors affecting wages. If the demand of labor is more they will be paid high wages otherwise vice versa. If the supply of the employees is more than they will be paid less and vice versa.

7) Prevailing wage rate: wages also depends upon the prevailing wage rate as the organizations have to pay accordingly to keep the employees with them.

These are the 7 factors affecting compensation.

Methods of Wage Payment

There are two different type of wage payment method

1. Time wage system

2. Piece Rate system

This is the oldest method of wage payment. “Time” is made a basis for determining wages of worker. Under this system, the wages are paid according to the time spent by workers irrespective of his output of work done. The wage rates are fixed for an hour, a day, week, a month or even a year (seldom used).

For example, a wage rate of Rs. 70 per day is fixed in an industrial unit. Two workers A and B attend work for 28 and 16 days respectively. The wages as per time wage system will be Rs. 1960 and 1120 for A and B respectively. This method of wage payment does not give weight age to the quantity of goods produced by the workers.

The supervisor may ensure that workers do not waste their time and the quality of goods is also maintained. There are no hard and fast rules for fixing rates of wages. These may be decided according to the level of the past higher positions may be paid higher rates and vice- versa.

Wages are calculated in the method as follows:

Earnings = T x R where T stands for time spent and R is rate of pay.

Time wage system is suitable under following situations:

(1) When productivity of an employee cannot be measured precisely.

(2) Where quality of products is more important than the quantity produced.

(3) Where individual employees do not have any control over production.

(4) Where close supervision of work is possible.

(5) Where work delays are frequent and beyond the control of workers.

1. Simplicity:

The method of wage payments is very simple. The workers will not find any difficulty in calculating the wages. The time spent by a person multiplied by the rate will determine his wages.

2. Security:

Workers are guaranteed minimum wages for the time spent by them. There is no link between wages and output, wages are paid irrespective of output. They are not supposed to complete particular task for getting their wages. They are sure to set certain wages at the end of a specified period of time spent in working.

3. Batter Quality of Products:

When workers are assured of wages on time basis, they will improve the quality of products. If wages are related to output, then workers may think of increasing production without bothering about quality of goods.

In this method, workers will concentrate on producing better quality of goods. In certain situations, only time wage system will be suitable. If some artistic nature products are produced, then this method will be most suitable.

4. Support of Unions:

This method is acceptable to trade unions because it does not distinguish between workers on the basis of their performance. Any method which gives different wage rates or wages based on output is generally opposed by trade unions.

5. Beneficial for Beginners:

Wage rate system is good for the beginners because they may not be able to reach particular level of production on entering employment.

6. Less, Wastages:

The workers will not be in a hurry to push through production. The materials and equipment’s will be properly handled leading to less wastage.

Time wage system suffers form the following drawbacks:

1. No Incentive for efficiency:

This method does not distinguish between efficient and inefficient workers. The payment of wages is related to time and not output. Thus, the method gives no incentive for more production.

Efficient workers may start to follow inefficient persons because rates of pay are same. Rates of wages fixed in this method are also low because these are fixed by taken into account the output of dullest workers. Thus, this method does not provide incentive for efficiency.

2. Wastage of time:

Workers may waste their time because they will not be following a target of production. Efficient workers may also follow slow workers because there is no distinction between them. This may lead to wastage of time.

3. Low production:

Since wages are not related to output, production rate shall be low. The responsibility for increasing production may mostly lie on supervisors. Because of low production, overhead expenses per unit will go up, leading to higher production cost.

4. Difficulty to determine labour cost:

Because wages are not related to output, employees find it difficult to calculate labour cost per unit. The output will go on varying from time to time while wages will remain almost same. Production planning and control will be difficult in the absence of a relationship between wages and output wages and output.

5. Difficult supervision work:

Under this system, workers are not offered incentives for production. To get more worker from them, there will be need for greater supervision. More supervision may be required to maintain proper quality of goods also. In wage system supervision cost goes up to a great extent.

6. Employer-employee trouble:

When all employees, irrespective of their merit are treated equally, there is likely to be a trouble between management and workers. Those employees, who are not satisfied with this method, may start disobeying order from their superiors.

Piece Wage System

Under piece system of payment, wages are based on output and not on time. There is no consideration for time taken in completing a task. A fixed rate is paid for each unit produced, job completed or an operation performed. Workers are not guaranteed minimum wages under this system of wage payment.

The wages to be paid to a worker can be calculated as follows:

Quantity produced = output x piece rate

The quantity produced by a worker will be multiplied by the rate per unit for calculating wages. An equitable piece rate should be fixed for giving incentive to the workers for producing more. Different piece rates will be determined for separate jobs. The factors like efforts involved, conditions under which work is to be performed, risk involved, etc. should also be taken into consideration while fixing piece rates.

The piece rate should be reviewed from time to time. These should be linked to price index so that workers are able to get a minimum level of real wages. Piece rates should also be revised when competitors do so otherwise there may be a discontentment among workers and they may opt for changing in the unit/enterprise.

The piece rate system has the following advantages:

Under piece wage system, wages are linked to the output of a worker. The higher the output, higher will be the wages. Workers will try to put in more and more effort for increasing output because their wages will go up.

Production goes up when wages are paid according to piece rate system. Workers will feel encouraged to increase output because their wages will also increase. This system is fair to both employees and employers. Efficient workers will try to exert maximum in order to raise their production and hence wages.

The machines and other equipment’s are put to maximum utilization. Workers may not like to keep the machines idle. The use of machines will also be systematic because any breakdown in these may affect the workers adversely. Thus, better machine utilization will give better output.

As in time wages system, efficient and in efficient workers are not given equal treatment in the piece wage system. Efficient workers will get more because of their better results. Inefficient workers on the other hand will get less because of low production. This method provides sufficient encouragement to efficient workers or showing better results.

Since payments are on the basis of output, workers will not waste time. They will continue to work irrespective of supervision. There may be more and more voluntary efforts on the part of workers and need for supervision is reduced to a minimum.

The increase in output will result in reduction of overhead expenses per unit. Some of the overhead expenses being fixed, increase in production will reduce expenses per unit. Reduction in cost may benefit consumers in the form of decrease in product price.

The certainty in achieving production targets will improve planning and control. When management is sure of certain quantity of production, then it can plan other things with more confidence, it will also ensure better control over production because targets may be regularly reviewed from time to time. Thus, better planning and control is possible.

There is a direct relationship between output and wages. If a worker does not ensure certain productions, then wages may also be uncertain. Any type of interruption in work may reduce earnings of workers. So workers are not sure about getting minimum wages. So this system does not provide guarantee of minimum wages.

The workers will bother more about the number of units otherwise more supervisors are appointed to keep watch on quality of products being produced.

The beginners will not be able to produce more goods because of less experience. They will earn much low wages as compared to experienced workers because their rate of production will be low. Thus, this system is not suitable for beginners.

Workers may try to work more than their capacity. This may adversely affect their health. They may try to work even when they are not keeping good health, since wages are linked with production.

There may be difference in earning of various workers. Some may earn less and others may earn more. Those who get low wages feel so jealous of others who earn more and this becomes a cause of dissatisfaction among slow workers. Thus, this system can see dissatisfaction among workers.

Piece-rate system of paying wages is opposed by trade unions. There is an unhealthy competition among workers for increasing their wages. It encourages rivalry among workers and it may become a cause of disunity.

The existence of unions is endangered when some section among them feel jealous of other. Union will never support a system where workers earn different amounts of wages and this becomes a cause of disharmony among them. So trade unions oppose this system.

The fixation of piece rates is not an easy job. If a low rate is fixed then workers may not feel encouraged to increase their production. When a high piece-rate is fixed then it will increase the cost of production of goods. The fixation of piece rate may become a cause of an industrial dispute. It may be very difficult to fix a rate acceptable to workers as well as management.

Piece rate system is suitable under following situations:

(1) Where production quantity is more important than the quality of the product.

(2) When the work is of repetitive nature.

(3) When the mass manufacturing system of production is followed and the work is standardized suitable for continuous manufacturing.

(4) When it is possible to measure the production output of worker separately.

(5) When strict supervision is not required and difficult.

(6) When the production is dependent on human efforts.

Types of Piece Rate System:

Piece rate system may be of following three types:

(i) Straight piece rate

(ii) Increasing piece rate

(iii) Decreasing piece rate

In this system, the piece rate forms the basis of payment i.e. payment for whole production is made on the basis of piece rate fixed. If the piece rate of Rs. 1.5 per .unit is fixed, then the wages will be calculated by multiplying the output by the rate fixed.

A worker producing 200 units will get Rs. 3000 (i.e. 200 x 15). If the production output is raised to 210 the wages will be Rs. 3150 (210 x 15). Thus a worker will have to increase the output in order to get higher wages. The rate of payment remains same irrespective of production level or level of output.

In this system different rates are fixed for different levels of production. A certain production level is decided and if the production goes beyond that level, higher rates are given. For example, a piece rate of Rs. 21- per unit may be fixed for production up to 100 units, Rs 2.10 per unit for output between 101 to 150 units and Rs. 2.25 per unit for a production beyond 150 units and so no. There is an incentive to get higher rate for production beyond a certain level.

In certain cases, where quality is of great consideration, this system is followed to discourage negligence of workers. In this method, the rate per unit decreases with increase in output. For example Re. 1/- per unit may be allowed up to a certain production level say 100 units. Re. 0.95 per unit for production between 100 to 150 units and Re. 0.90 per unit for an output beyond 150 units and so on.

What do you mean by Incentives?

An incentive program is a formal scheme used to promote or encourage specific actions or behavior by a specific group of people during a defined period of time. Incentive programs are particularly used in business management to motivate employees and in sales to attract and retain customers.

Features of Incentive Plan

An ideal incentive plan must possess the following features:

(i) Simplicity - The plan should be simple to understand and operate. Who should be able to calculate their wages without any difficulty?

(ii) Acceptability - It should be acceptable to workers as well as the employer.

(iii) Flexibility - The incentive plan should be flexible to introduce nice changes.

(iv) Quality - The plan should ensure the quality of the output. Workers should be discouraged to speed up the work to earn more wages at the cost of quality.

(v) Stability - The plan should give a stable earnings over a period of time, minimum but adequate wage must be ensured.

(vi) Wide coverage - It should cover the maximum number of workers. 1 direct as well as indirect worker should be covered.

(vii) No restriction on earnings - The plan should not have any restriction earnings of workers. They should be allowed to earn as much as they can.

(viii) Investigation and evaluation - The plan should be based on scientific investigation and evaluation to produce good result. Standard time should fix on the basis of time and motion study.

(ix) Increasing output and lowering cost of production - It should aim increasing output and lowering cost of production.

(x) Motivating to earn more - The plan should motivate the workers increase their efficiency and earn more.

The success of an incentive plan depends on the mutual cooperation a understanding between employer and employees.

Types of Incentive Plans

The various types of incentives are classified into two broad categories: financial and non- financial. Here, we are concerned with financial incentives only. Financial incentives may further be classified as individual incentives and group incentives. Both are discussed now one by one.

Under this plan, employees are paid on the basis of results”. The chief incentive plans included in this category are discussed in seriatim.

This plan was developed by F. W. Taylor, the father of scientific management. Under this plan, Taylor prescribed two piece work rates. One, a higher wage rate for those who reach the standard work. Second, a lower wage rate whose performance is below the standard.

The standard work is determined on the basis of time and motion studies. This wage plan encourages and rewards the employees who are efficient by giving them wages at a higher rate. At the same time, the plan penalizes those who are slow performers by paying them at a low wage rate.

This plan, originated by F. A. Halsey, an American engineer, is a combination of the time and the piece wage in a modified form. Under this plan, a guaranteed wage based on past experience is determined. If a worker saves time, he gets 50% of wages for time saved (called premium) in addition to normal wages. It is optional for the worker to work on the premium or not. Thus, this plan also provides incentive to efficient workers.

This plan was developed by D. Rowan in 1901. This plan, to a large extent IS similar to that of Halsey Premium Plan. The only difference is in regard to the determination of the premium. Unlike a fixed percentage in case of Halsey plan, it considers premium on the basis of the proportion which the time saved bears to the standard time.

Under this scheme, both standard work and day wage are fixed. Bonus is paid on the basis of worker’s efficiency. A worker becomes entitled to get bonus only when his/her efficiency reaches to 67%. The rate of bonus goes on increasing till he achieves 100% efficiency. Above 100% efficiency, bonus will be 20% of the basic rate plus 1% for each 1% increase in efficiency. In this way, at 120% efficiency, a worker receives a bonus of 40% and at 140% efficiency worker gets 60% of the day wage as bonus.

This plan is devised by H. L. Gantt. This plan combines time, piece wage and bonus. Standard time, piece wage and high rate per piece are determined. A worker who cannot complete standard work within standard time is paid only the minimum guaranteed wage. A worker performing up to the standard level of work gets time wage plus a bonus @ 20% of normal time wage. If the worker exceeds the standard, he is paid a higher piece rate but there is no bonus.

The above mentioned various incentive schemes indicate that the incentive may vary along with variation in earning with changes in performance or output.

Thus, based on linkages between performance and incentive, the various incentive schemes (PBR) may be classified into the four types as follows:

1. Incentives in the same proportion as performance.

2. Incentives varying proportionately less than performance.

3. Incentives varying proportionately more than performance

4. Incentives varying in proportions that varies with levels of performance.

The first of the above mentioned schemes is called the straight proportional scheme while the rest are nomenclature as differential or geared incentive scheme.

An employee’s performance, or say, output is not exclusively due to his own efforts but is influenced by some other factors also. For example, quality of raw material and equipments, their costs, timeliness of completion of job, etc. do also matter and count in one’s performance. Therefore, one’s performance must be measured in a holistic sense, taking all the factors into account. It has also been felt, over the years that incentives should be given on the basis of performance measured over an extended period of time (e.g. week, fortnight, month or longer) rather than by hour or day.

The underlying rationale is to sustain higher levels of productivity over a period of time and also maintain a measure of stability of employee performance and earnings. But, the duration between performance duration and incentive, i.e. reward should not be unduly lengthened; otherwise it may dampen employee motivation. Therefore, it has been suggested that incentives should be given to the employees at least on a monthly basis.

The incentive schemes can be applied on a group basis also. Group incentive schemes are appropriate where jobs are interdependent. It is difficult to meaningfully measure individual performance and group pressures affect the performance of the members of the group. The chief group incentive schemes are discussed here.

The concept of profit-sharing emerged towards the end of the nineteenth century. Profit-sharing, as the name itself suggests, is sharing of profit of organisation among employees. The International Co-operative Congress” held in Paris in 1889 considered the issue of profit-sharing and defined it as “an agreement (formal or informal) freely entered into by which an employee receives a share fixed in advance of the profits”.

The basic rationale behind profit-sharing is that the organisational profit is an outcome of the co-operative efforts of various parties, therefore, employees should also share in profits as shareholders share by getting dividend on their investment, i.e. share capital. The very purpose of introducing profit-sharing is to strengthen the loyalty of employees to the organisation. Thus, profit-sharing is regarded as a stepping stone to industrial democracy.

Both the share (percentage) of profit to be shared by employees and mechanism for its distribution are determined in advance and also made known to the employees. In order to be eligible to participate in profit-sharing. An employee needs to serve for a certain number of years and, thus, earn some seniority. As regards the forms of profit-sharing, Metzger has classified these into three categories, namely,

(i) Current,

(ii) Deferred and

(iii) Combination.

(i) Current:

Under this form, profits are paid to the employees in cash or by cheque or in the form of Stock option immediately after the determination of profits.

(ii) Deferred:

Profits are credited to employees’ accounts to be paid at the time of retirement or at a time of his dissociation from organisation due to reasons like disability, death, severance, withdrawal from employment, etc.

(iii) Combination:

In this case, a part of employee share of profit is paid in cash or cheque or stock and the remaining part is deferred and credited to his/her account.

Employees receive their share in the organisational profit in the form of bonus. In India, the employee bonus is governed by the Payment of Bonus Act, 1965.

The major apprehensions expressed against profit-sharing is mat management may dress up profit figures, as is often done for tax evasion purposes, and deprive employees of their shares in profit. It is also commented that profit-sharing, being a long-term scheme, does not work as incentive due to the absence of immediate feedback about the efforts and rewards.

In a way, co-partnership is an improvement over profit-sharing. In this scheme, employees also participate in the equity capital of a company. They can have shares either on the basis of cash payment or in lieu of other incentives payable in cash like bonus. Thus, under co-partnership scheme, employees become shareholders also by having company shares. Now, employees participate in both —profits and management of the company.

The finer points of this scheme are that it recognizes the dignity of labour and also of a partner in the business. This would, in turn, develop a sense of belongingness among the employees and encourage them to contribute their best for the development of the organisation.

The Scanlon plan was developed by Joseph N. Scanlon, a Lecturer at the Massachusetts Institute of Technology in USA in 1937. The plan is essentially a suggestion scheme designed to involve the workers in making suggestions for reducing the cost of operation and improving working methods and sharing in the gains of increased productivity.

The plan is characterised by two basic features. First, both employees and managers can participate in the plan by submitting their suggestions for cost-cutting methods. Second, increase in efficiency on account of cost-cutting is shared by the employees of the unit.

The Scanlon plan, wherever adopted, has been successful to encourage a sense of partnership among employees, improved employee-employer management relations, and increased motivation to work.

The criticism labelled against group incentive is that the incentive benefits being similar to all members of the group, the best performers may loose incentive. However, this can be overcome if group incentive scheme generates peer-level pressure for superior performance and also reduces the need for supervision. Stability in group may be a necessary condition to make the group incentive scheme successful.

As regards the ultimate impact of incentives on organisational performance, the research studies” conducted in India report that incentive schemes have a positive impact on productivity, labour cost, and industrial relations. It is concluded that “money” has a “salutary” impact on production.

About Labour Welfare

Now days, welfare has been generally accepted by employers as a social right. But the degree of importance given by them varies.

Therefore, the Government also intervenes and introduces legislation from time to time to bring about uniformity in providing such amenities. The intervention of the state, however, is only to widen the area of its applicability.

Meaning of Labour Welfare:

Labour welfare is a flexible and elastic concept. Its meaning and implications differ widely with times, regions, industries, countries, social values and customs, the general economic development of the people and the political ideologies prevailing at particular moments. As such, a precise definition is rather difficult.

Definition of Labour Welfare:

1. In the words of Prof. H.S. Kirkaldy. “The whole field of welfare is one in which much can be done to combat the sense of frustration of the industrial workers, to relieve them of the personal and family worries, to improve their health, to offer them some sphere in which they can excel others and to help them to a wider conception of life.”

2. In the second Asian Regional Conference of ILO, it was stated that workers’ welfare may be understood to mean “such services, facilities and amenities which may be established in or in the vicinity of undertakings to enable the persons employed in them to perform their work in healthy and peaceful surroundings and to avail of facilities which improve their health and high morale.”

Social Security

Government program aimed at providing basic needs to citizens who are retired, unemployed, or unemployable due to a disability or disadvantage. It is funded usually by mandatory payroll contributions (typically 5 to 8 percent of a pay check) from both the employees and the employers, and from the government's tax revenue.

1. Labour welfare provides social comfort to employees.

2. It provides intellectual improvement of employees.

3. To develop sense of responsibility and belongingness among employees.

4. To ensures that the working conditions for employees are of higher standard.

5. To build stable work force.

6. To reduce absenteeism and labour turnover.

7. To make employees lives good and worth living.

8. To boost productivity and efficiency at the workplace.

9. To provide healthy and proper working conditions.

10. To ensure well being of employees and families.

Types of Labour Welfare

Some of the major categories of labour welfare are: (1) Intra-mural Facilities (2) Extra-mural Facilities (3) Statutory Facilities (4) Mutual Facilities and (5) Voluntary.

It is very difficult to classify the welfare activities into certain broad categories.

The facilities provided inside the factory are known as intra-mural facilities. These facilities include activities relating to minimisation of industrial fatigue, provision of safety measures like fencing and covering of machines, good layout of the plant and machinery, sufficient lighting conditions, provision of first aid appliances etc.

Provisions of such facilities are also obligatory in all industrial establishments all over the world.

Facilities offered to the workers outside the factory are known as extra-mural facilities. They include better housing accommodations, indoor and outdoor recreation sports, educational facilities etc. The provision of these facilities is voluntary. Earlier, due attention was not given to the provision of extra-mural facilities to the workers but now it is realised that these facilities are very important for the general welfare and upliftment of the workers.

Under this category, welfare facilities are provided according to the labour legislations passed by the Government. The nature and coverage of these facilities vary from country to country. Again these facilities may be either intra-mural facilities or extra-mural facilities. These facilities must be provided by all the employers and cannot be ignored. Any contravention of the statutory provisions shall render the employer punishable under the Act concerned.

Industrial Safety and Health Meaning

Industrial safety in the context of occupational safety and health refers to the management of all operations and events within an industry, for protecting its employees and assets by minimizing hazards, risks, accidents and near misses. The relevant laws, compliance and best practices in the industry have most of the issues addressed for the best protection possible. Employers are to make sure that these are strictly adhered to to have maximum safety.

The following steps may be taken to effectively and efficiently eliminate an unsafe working environment:

(1) Elimination if possible of the causes of accidents.

(2) If it is not possible to eliminate the cause of accidents, make arrangements to shield the hazardous place by guards, enclosures or similar arrangements.

In view of above discussion, need and concern for safety is therefore need of the hour. There are some direct costs/ effects of an accident but there are certain indirect costs involved in it also e.g. machine down time, damage to machine, ideal time of nearby equipment and horror created among workers, loss of time etc. in aid cost compensation, legal implications and allied costs etc. So safety measures would not only eliminate/ avoid above cost but would mean performing their moral responsibility towards workmen/operators also.

An accident is by virtue of unsafe factor he results of an unsafe condition it may be the combined effect of two. An unsafeact results in the form of operator/people doing thing without proper authority, misuse of safety devices, ignoring warnings and precautions etc.

An unsafe condition may be present in various forms e.g. faulty or defective electrical fittings, inadequate maintenance of gang way. Use of defective tools etc. So to prevent the occurrence of accidents, unsafe acts have to be avoided/ eliminated or checked.

For rectification of the causes because of unsafe acts attention must be paid to following factors:

(1) Personnel adjustment:

If a foreman/supervisor identifies that a worker is unfit either physically or mentally or a job/ task, he should be quickly taken off the work in consultation with the personnel department.

(2) Method/technique used:

Some techniques requiring change should be replaced by safe methods.

(3) Operator training:

Job method may be safe or unsafe but the operator must be trained to perform the job.

(4) Publicity and education about accident prevention:

The workers/ people are led by the skill, energy and leadership of foreman/supervisor. So it is the duty of these people to educate the workmen about prevention of accidents. The aim is to teach them to become safety conscious so that they are able to recognize an unsafe act or situation and act in such a manner that accident is avoided.

To avoid accidents due to unsafe conditions, various provisions have been discussed in the “Factories Act” these may be concerned with moving parts of prime movers, electrical generators and transmission machinery: fire protection devices, control of dangerous fumes, lifting of excessive weights and safe guards over lighting machines, chains and ropes etc.

Thus safety in industry helps:

(i) Increasing the production rate.

(ii) Reducing the cost of production.

(iii) Reducing damage to machinery and equipment.

(iv) Preventing unwanted suffering and pain to employees of the organization.

(v) Preventing premature/untimely death of talented workers who may be an asset to the enterprise and society.

A safety programme intends to identify when where and why accidents occur. On the same lines a safety programme aims at reducing accidents and associated losses. A safety programme is initiated with the assumption that it is possible to prevent most work connected accidents.

A safety programme is a continuous process and tries to be decrease the influence of personal and environmental factors which cause accidents. Normally a safety programme consists of providing safety equipment’s and special training to workmen or employees.

Indian standards Institute has done commendable job in this context and lays down as follows:

(i) Safety precautions to be taken during manifesting operations.

(ii) Standards for proper lighting, ventilation and proper layout of the industrial unit.

(iii) Standards and specifications of safe industrial operations and practices etc.

(iv) Requirements for effective maintenance of tools and equipment’s.

(v) Guidance on safe cutting and welding processes.

(vi) Guidance on use of powered industrial trucks, belt conveyors and fire protection equipment’s.

(vii) Safety requirements for personal protective equipment’s.

(viii) Classification of hazardous chemicals and provision of accident provision tags.

(ix) Markings for handling and lebelling of dangerous items/ goods.

(x) Standards for safety:

(a) In industrial building

(b) Safety procedures to be followed in electrical work

(xi) Specifications for protective clothing, safety helmets face shields and safety equipment for eyes ears lags hands and feet etc.

Health and Security

Organisations are obliged to provide employees with a safe and healthful environment. Health is a general state of physical, mental and emotional well being. Safety is protection of a person’s physical health. The main purpose of health and safety policies is the safe interaction of people and the work environment. Poor working conditions affect employee performance badly. Employees may find it difficult to concentrate on work. It would be too taxing for them to work for longer hours. Their health may suffer. Accidents and injuries may multiply causing enormous financial loss to the company. Absence and turnover ration may grow. A company with a poor safety record may find it difficult to hire and retain skilled labour force. The overall quality of work may suffer.

Need for Health and Security

· Promote and maintain the highest degree of physical, social and mental well being of workers.

· Improve productivity and quality of work.

· Reduce accidents, injuries, absenteeism and labour turnover.

· Protect workers against any health hazard arising out of work or conditions in which it is carried on.

Legal provisions Regarding Health

Effective Safety Management

A safety management system combines all the different elements in your workplace that need attention to ensure you provide a safe working environment for everyone who enters it.

Safety management systems make health and safety an integral part of your business’s core operations. By designing, developing and implementing an effective safety management system, you will have methods for managing reporting, responsibilities, planning and resourcing to create a safer workplace.

Safety management systems have six elements:

Remember, it is not enough to simply adopt a satisfactory safety management system. You must also actively implement that system in your workplace. To do this, you must ensure that:

1. Safety plan

A safety plan is a strategic action plan that forms part of the business plan. It analyses the current and prospective risk for a company and charts how the risks will be eradicated and controlled over a calendar period (the safety plan must have a budget).

This plan will ensure that there is a governance structure within your company that ensures every worker clearly understands their safety obligations (and how to comply) and is accountable to carry out those obligations.

2. Policies, procedures and processes

Policies, procedures and processes include all safety paper infrastructures within your company. This paperwork will describe all safety behaviour, expectations, record-keeping, incident reporting, and incident notification documentation.

3. Training and induction

Depending on the nature of your workplace (whether it is low-risk or high-risk), everyone who enters your workplace should receive training on:

The training content will depend on the level of risk the person is exposed to.

4. Monitoring

Your obligations to monitor your workplace depend on circumstances and need. Always consider the level of risk. The higher the risk, the more frequent and detailed the monitoring needs to be.

Other times when monitoring will be necessary include:

5. Supervision

The only way to ensure your workers are carrying out their safety obligations is to have adequate supervision.

The level of supervision required in your workplace will increase if the level of safety control put in place to reduce a risk is low, i.e. the less effective the control measure used, the higher the level of supervision necessary.

6. Reporting

The governance structure of your company needs safety reporting at all levels, not just at the board level.

Your workers need to know what safety looks like – what’s going right and what’s going wrong. This can only occur when they receive safety feedback from you, e.g. how many hazards were identified, the risk levels associated with those hazards and what control measures were implemented.

Retirement Benefits

What are the first steps to learning about and setting up a retirement plan?

A good place to start is by contacting a tax professional familiar with retirement plans or a financial institution that offers retirement plans.

What are the stages of sponsoring a retirement plan?

Sponsoring a retirement plan has four stages: Choosing, Establishing, Operating, and Terminating the plan.

Choosing

You begin by:

· thinking ahead toward retirement in general; and

· learning about the specific ways that money can be put aside for your and your employees’ retirement, including types of tax-qualified retirement plans.

Establishing

You take the necessary steps to put your plan in place. Depending on the type of plan you choose, the administrative steps may include:

· adopting a written plan;

· arranging a fund for the plan’s assets;

· notifying eligible employees about the terms of the plan; and

· developing a recordkeeping system.

Operating

You want to operate your retirement plan so that the assets in the plan continue to grow and the tax-benefits of the plan are preserved. The ongoing steps you need to take to operate your plan may vary depending on the type of plan you establish. Your basic steps will include:

· covering eligible employees;

· making contributions;

· keeping the plan up-to-date with retirement plan laws;

· managing the plan assets;

· providing information to employees participating in the plan; and

· distributing benefits.

Terminating

When your plan no longer suits your business, you will close out the plan and notify the appropriate parties.

You may want to discuss these four stages with a tax professional familiar with retirement plans or a financial institution that offers retirement plans.