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Continental Biscuits Limited: Compensation and Benefits

Report submitted by:


Mansoor Ali Seelro
Adeel Ahmed Larik
Waqar Hussain Memon
Class: BBA VII (HRM)
Report submitted to:
Madam Raheela Haq
Words of importance on information collected:

How the information was collected: We first looked for reference of any authentic person
who can refer us to any company with easy access. We met Sir Ali Akbar Rizvi, Director
Entrepreneurship at Sukkur IBA, who arranged our appointment with Manager Finance at
Continental Biscuits Limited, Sukkur Plant. The day of appointment was Saturday, December
08, 2012, and the time was at our discretion, so we reached Sukkur Manufacturing Unit around
11:30 a.m. We had an extended, full of discussion interview of about 2 hours with the manager.
We then returned with our note takings.

Relatedness of the information: The information collected and summarized here relates to
only Sukkur Plant of CBL i.e. Sukkur Manufacturing Unit.

Rationale for missing information (if any): We identify and present four rationales for any
information that is not included in this report, however, which was part of questionnaire with
the intention to collect.
i. First and foremost, Head office and the HR department were located in Karachi, so the
information available at Sukkur facility was not all-inclusive.
ii. Second, because the source of information (i.e. manager) was a bit irrelevant since he
was a finance manager, whereas we needed information related to HR (i.e.
Compensation and Benefits).
iii. In addition, the manager finance was new to that facility, that is, he joined the facility
just 6 months before.
iv. Finally, we did not report any of the stock plans simply because the company does not
own any publicly traded stocks/shares.

Address of the facility: B-62, S.IT.E, Shikarpur Road, Sukkur.

Contacts:
• +92-71-5630279,
• +92-71-5630885,
• +92-71-5630886

E-mail of Manager Finance: saleem@cbl.com.pk


TABLE OF CONTENTS

Brief Introduction to CBL …………………………………...………. 01


Compensation and Benefits …………………………………...……... 01
Number of employees as per pay structure groups……………...……… 01
Performance appraisal, MBO and merit pay ………………………… 02
Profit sharing and incentive pay …………………………………… 02
Competency-based pay ………………………………………….… 03
COLA increments …………………………………………………. 03
Job Descriptions and Compensable factors ………………………… 03
Compensation surveys ……………………………………………... 03
Health Insurance Program ………………………………………… 04
Life insurance program ……………………………………………. 04
Retirement Plans – gratuity fund and provident fund ………………… 04
Termination, outplacement assistance and rehiring …………………… 04
Transportation Services ………………………………………….… 04
Flexible Work schedules …………………………………………… 04
Paid time off policy at CBL …………………………………………. 05
Compensation for executives ………………………………………... 05
Comments on entire Compensation System …………………………... 05
Appendix - Measurement and Scaling: The Questionnaire ……………. 07
Brief Introduction to CBL

For more than two decades CBL is engaged in the manufacturing and marketing of the
brand LU. CBL has an array of products which are pre-eminent in the branded biscuit
business both in Pakistan as well as abroad. Its unrivalled portfolio of brands has been
meeting consumer needs for well over two decades and includes such favorites as TUC,
Candi, Prince and Tiger. CBL produces some of the best known crackers, cream
variants, plain and ingredient-based biscuits. CBL’s manufacturing location based in
Sukkur is a centre of excellence which provides employment to 3000 people in the
region. Its marketing, sales, finance, commercial, IT and the human resources functions
are located in the head office in Karachi employing a total of 200 employees. As a part
of the leading FMCG, CBL’s head office has close links both with the Regional Offices
of Kraft in UAE and our manufacturing plant in Sukkur.

Compensation and Benefits

CBL Management is focused on Talent Management. The philosophy is that by


focusing on performance an organization can increase and develop its talent pool. A
culture of learning and performance improvement means that internally developed
candidates will be eligible to fill senior positions available in the company.

One way to enforce a performance based culture is to tie rewards to individual


performance. By doing so employees are motivated towards self development strive to
deliver breakthrough performance.

CBL believes that this is only possible through an effective Performance Management
System that links individual growth to business objectives and helps define an
individual and team based, growth oriented culture. While working at CBL, employees
feel empowered to contribute to overall company objectives and achieve their own
personal and professional goals.

CBL offers a highly competitive compensation structure to its employees, which


enables the organization to attract and retain talent easily. CBL’s benefits equally
match those given in the FMCG industry.

Number of employees as per pay structure groups: Sukkur facility of CBL


employs 83 full time, exempt employees whereas 1700 employees (approx.) employed
are full time, nonexempt who work on hourly or daily wages and are subject to
overtime pay. This figure also includes some leased employees which come under
umbrella of contingent workforce. The facility does not employ any on-call or
freelancer employees. Full time employees (e.g. food technologists) are hired through
formal application process (i.e. tests, interviews, screening, etc.) by relying on head-
hunters. Contingent workers (e.g. leased ones) are hired through civil contractors.

Performance appraisal, MBO and merit pay: At each level, department-wise,


region-wise or team-based goals are assigned. Region may communicate the goals to
cities, cities to facilities, facilities to departments, departments to members or teams.
Finally, performance of region, department or team is reviewed (usually annually)
against the goals assigned and merit rewards are distributed. For example, each
supervisor at the facility has a team to lead and direct. Supervisors oversee in different
shifts for a week. Appraisal takes into consideration that in which shift and under
whose supervision, wastage (i.e. breakage of biscuits while packaging) was low,
because the key indicator of performance of any worker or supervisor is reduced
wastage. Accordingly then workers and supervisors are rewarded for reduced wastage
individually as well as on the basis of overall team or shift performance. This comes
under umbrella of gain-sharing when gains are shared in team on achieving reduced
wastage and better safety record.

Usually performance of managerial level jobs is reviewed periodically against overall


goals assigned to them by top level management at the start of the year. For example,
finance department’s performance criteria could be having no complaint or issue raised
by workers for their payroll or wages. In other words, did finance department disburse
salaries and wages on time? Did workers raise any issues with regards to their payroll
disbursement? In this way, performance of whole finance department including support
staff, finance manager, and director finance would be reviewed and rewards would be
distributed accordingly.

The performance criteria for non-exempt workers, on the other hand, are a little bit
different. They are evaluated against their workplace behavior (violent vs. friendly),
absenteeism, wastage and safety records, hard-work, etc.

Profit sharing and incentive pay: Annually 5% of the profits are accrued for
workers’ welfare fund. This gives company a tax advantage in that the amount donated
for workers’ welfare fund is used to compute average relief which is subtracted from
gross tax payable and the company leaves with only net tax liability. CBL believes
different types of incentives have significant impact on employees’ performance as
well as performance of the company as a whole.

Salespeople at the facility receive fixed salary plus quarterly bonus (usually equivalent
to 2 months gross salary). These bonuses are tied to amount of tons produced. The
amount of bonuses may vary depending upon company’s annual profits. Also
distributors attach commissions as incentives with number of units sold to retailers and
consumers.

Competency-based pay: CBL reimburses its employees for acquiring


groundbreaking job related skills. Since quality, innovation and hygiene are core values
at CBL, thus, it requires employees to have state-of-the-art knowledge and skills.
Employees go for employer-sponsored training programs abroad (e.g. Dubai). Also in-
house training sessions are arranged. This is the reason CBL assigns its employees
duties beyond their job descriptions as well, which helps CBL recover lost performance
during decelerated periods usually April to August.

Competency-based pay also helps employees have empowerment on the job and take
part in the decision making process. Since teamwork is an essential part of CBL’s life,
CBL believes pay-for-knowledge system will help achieve this. Every individual is
responsible for contributing to the team’s efforts. By making work employees closely
together, CBL fosters a culture of collaborative thinking and leadership development.

COLA increments: Keeping in view the prevailing inflation rate, salaries of


managerial level jobs are given permanent cost-of-living adjustment raises. The annual
rate of COLA adjustment is usually 8-14%. However, for nonexempt workers CBL
already has maintained salaries above minimum wage rate set by government i.e. Rs.
8000.

Job Descriptions and Compensable factors: Each job at CBL has job duties and
responsibilities clearly delineated in job descriptions. CBL pays more for jobs that
require higher qualifications, more responsibilities and more complex job duties than
jobs that require lower qualifications, fewer responsibilities and less complex job
duties. However, one noteworthy point is that working conditions are not considered
partly as compensable factor because CBL has already made colossal pre-cautionary
investment to ensure safety when working at the facility. Due to this step taken by CBL
management, workers have never been put to any work-related hazards. Thus, pay
differentials for any job are not determined by differences in working conditions. This
was the upside for which management and employees of CBL – Sukkur Plant were
honored with a ‘zero accident award’ in recognition of outstanding safety achievements
in 2010 by Kraft Foods.

Compensation surveys: As mentioned earlier, the company recruits through


headhunters, who in turn recommend the prevailing market rates to the company for
exempt employees. The company pays above market rates since CBL has no
competitor in Sukkur in branded biscuits category. This is consistent with what already
mentioned regarding workers pay being set above minimum wage rate.
Notwithstanding, CBL enjoys over 30% market share after EBM (English Biscuits
Manufacturers) in branded biscuits category.

Health Insurance Program: Indemnity plans are in action for employee health care.
These plans cover employee, spouse and dependent children. CBL has contract with
New Jubilee Insurance Company which reimburses any predefined medical expenses
(e.g. hospitalization) under policy agreement. Hospitalization includes both inpatient as
well as outpatient coverage. There are no years of service defined to be eligible for
health insurance program. In other words, employees are eligible for health care
programs from the day one when they join the organization.

Life insurance program: Life insurance program is open for all types of jobs. The
lump sum payments defined under this insurance are fixed i.e. Rs. 200,000 for any
nonexempt workers, Rs. 300,000 or more for exempt employees. If the death is
accidental while performing the job the payments account for double to the above
figures.

Retirement Plans – gratuity fund and provident fund: For managerial


positions, CBL maintains both gratuity fund and provident fund. However for non-
managerial positions, only gratuity fund is maintained. Under provident fund, employer
contributes 8.33% annually until retirement, whereas under gratuity fund, one month
gross salary paid for one year of time period. The mode of distribution of these funds is
usually lump sum, which is categorized as defined contribution plan.

Termination, outplacement assistance and rehiring: During slowdowns (e.g.


April to August), company has to layoff the workers. When retrenchment period wraps
up, temporarily laid off people are rehired. If not rehired, they are given outplacement
assistance. However, if someone has been permanently terminated, he is given an
experience certificate. It is also important to note that if termination is involuntary
because of, for example, insubordination, poor performance, etc. employee does not
benefit from outplacement assistance.

Transportation Services: CBL has a pick and drop facility for its nonexempt
employees while exempt employees (e.g. managers) have their own company-
maintained cars.

Flexible Work schedules: The Company has no any flexible work schedule policy
at Sukkur facility.
Paid time off policy at CBL: The Company has following paid time off policies for
employees:

Leave type Days allowed annually


Casual leave 10
Sick leave 10
Holidays 15
Sabbatical leave Depends
Maternity leave Depends
Hajj leave Depends

From above leave policies, no any is accumulated for next year i.e. if not used, they are
forfeited. However, holidays leave is exception, which is accumulated for next year left
unused.

Compensation for executives: Executives at CBL live a splendid life. They avail
themselves of a company-maintained car. Moreover, they are compensated for
outings, entertainments, foreign trips, etc. for free. They also enjoy company-paid free
lunches and teas. Apart from that, executive employees as well as nonexecutive ones
are paid mobile allowance. If executives are terminated because of change in
ownership or company takeover, they are compensated with golden parachutes.
However, if executives are terminated because of poor performance and the company
incurred losses as a result of their negligence, they are not compensated. In other
words, they are not compensated with platinum parachutes.

Comments on entire Compensation System

To recap, the compensation system being practiced is overall good. The company has
clear job descriptions and pay differentials are determined on the basis of level of effort
required, complexity of job duties and work responsibilities and level of qualifications.
This is one sign of internally consistent compensation system. However, working
conditions factor was exception in this regard. Performance criteria and incentive basis
is set to be the reduced wastage and better safety records. This helps in performance
appraisal process be it for managers or factory workers, which in turn helps in
designing merit pay.

Also some percentage of profits is set aside for workers’ welfare fund annually as profit
sharing scheme. The company encourages teamwork which leads to innovative ideas.
This is why the company practices pay-for-knowledge pay system and reimburses
expenses incurred on employee training. Inflation is not a disregarded factor at CBL.
Employees receive 8-14% annual raises as cost-of-living adjustment depending upon
prevailing inflation rates. Not only employees benefit from medical coverage facility,
but also their spouses and dependent children are eligible for the facility. Life
insurance is an integral part of every employee’s discretionary benefits at CBL.

Handsome gratuity and provident funds are also maintained by the company which are
distributed as lump sum payments at the time of retirement. Executives are
compensated with a variety of lucrative benefits including employer-sponsored car,
fully-funded trips, outings, golden parachutes, etc. Moreover, company’s paid leaves
motivate employees to continue working with the company and come back even after
the termination.
Appendix

Measurement and Scaling: The Questionnaire

Compensation and Benefits Information Questionnaire


(The information collected herein will be used for report writing purpose only.
Also it will remain confidential and will not be redistributed to any third parties)

General Company Information:


Interview with: _______________________________ Designation: _______________________

Name of Organization: ___________________________________________________________

Form of Organization: ____________________________________________________________

Branch Network (if any): ________________________ Number of Employees: ______________

Division, subsidiary or region (you’re reporting data for herein): __________________________

Contact Information:
Phone: __________________________________ E-mail: ________________________________

City: ____________________ Address: ______________________________________________

Business, Company Size, Pay Grades and Pay Structure Groups

1. Please indicate ( ) the one that best describes type of your business.
Merchandising
Manufacturing
Service

2. If you have indicated form of organization as “company” in above sheet, which type of
company?

Private Limited Company


Public Limited Company
Public Company
Other, please specify the type: _________________________________________
3. Please specify the number of employees working as full-time, part-time, and so on and also
indicate whether they can be categorized as in exempt or non-exempt pay structure.

Pay Structure Full- Part- Temporary & On- Leased Freelancers Total
time time call
Exempt (annual)
Non-exempt
(hourly)
Total

4. Which one do you practice? [check both if apply]


Pay compression
Two-tier pay structure
5. How pay is structured for different job grades?
Please specify: _____________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

6. How often and in what situations do you restructure pay level for different job grades?
Please specify: _____________________________________________________________
_________________________________________________________________________
_________________________________________________________________________

Seniority and Merit Pay

7. Please complete the table that follows to indicate periodic seniority and merit increases to
base pay of employees. [If increase amounts are non-recurring, please fill “one-time” instead of
number of months, & specify amount if fixed payments are made instead of percentage increase. If
any of the pay programs (merit or seniority) is not applicable in your organization, please leave the
field blank].

General
Seniority Merit
increase/COLA
Increase Number of Increase Number of Increase Number of
Employee Group
(%) months (%) months (%) months
between between between
increases increases increases
Exempt (annual)
Non-exempt
(hourly)
8. What level of performance is required for employees to be eligible for merit increase?

Performance level For exempt employees For non-exempt employees


Outstanding
Above average
Average
Below average
Poor

Competency-based pay

9. Do you assign duties and goals to employees beyond what have been delineated in their job
descriptions?
Yes
No

10. Do you give a pay raise on the basis of acquiring job related skills and knowledge that are
directly or indirectly expected to impact company performance?

Yes
No

Incentive Pay

11. What types of incentive plans does your organization currently employ? [check all that
apply]

Individual incentive plans


Piecework plans

Management incentive plans

Behavioral encouragement plans

Referral plans

Group incentive plans


Team-based plans

Gain-sharing plans

Companywide incentive plans


Profit sharing plans

Employee stock option plans


12. What percentage of base pay do incentive plans account for?

Percentage represented
Type of variable pay
Hourly wage Annual/monthly salary
Individual incentive plans _______% _______%
Group incentive plans _______% _______%
Companywide incentive plans _______% _______%

13. Check ( ) the one (or all) of the following alternative sales incentive plans that are used in
your organization.
Salary-only plans
Salary-plus-bonus plans
Salary-plus-commission plans
Commission-plus-draw plans
Commission-only plans

14. What impact do incentive plans have on overall performance of the organization?
Significant impact
Some impact
No impact at all

Internally Consistent Compensation Systems

15. Is every position/job in your organization delineated by a clear and well-crafted job
description?
Yes
No

16. Do you pay more for jobs that require higher qualifications, more responsibilities and more
complex job duties than jobs that require lower qualifications, fewer responsibilities and
less complex job duties?
Yes
No

17. Are pay differentials for any job determined by differences in working conditions and the
level of effort that a particular job requires?
Yes
No
Market-competitive Compensation Systems

18. How do you set base pay level for each job in your organization?

By choosing benchmark jobs from relevant labor market (i.e. compensation survey)

On the basis of compensable factors for each job

Both, using integration policy

On the basis of management’s discretion

19. For each employee group (as determined by pay structure above), what’s your
organization’s current base pay level philosophy?

Employee Group To pay below To pay at To pay above No formal compensation


the market the market the market philosophy
Exempt (annual)
Non-exempt
(hourly)

Retirement Plans and Health Insurance Programs (employer-sponsored)

20. Which one (or all) of the following retirement (pension) plans does your organization
provide its employees?
Defined Benefit Plans
Defined Contribution Plans
Section 401 (k) plans

Profit sharing plans

Stock Bonus Plans

ESOPs

Cash Balance Plans (Hybrid)

21. Check ( ) the Health Insurance Program that is most applicable in your organization?
[check all that apply]

Fee-for-service Plan
Indemnity plans

Self-funded plans

Managed care plans


HMOs
PPOs

POS

22. If above plans are applicable, how maximum benefit limits are applied?
Once a year
Lifetime

23. When employees become eligible for all these retirement plans and health insurance
programs?
After 1-3 consecutive service years
After 3-6 consecutive service years
After 6+ consecutive service years
No length of service required (plans are inherent)

Discretionary Employee Benefits

24. Please use the following table to check ( ) the types of time off (leaves) your organization
grants to its employees. [Use “P” if leave is Paid, “U” if it’s Unpaid].

Type of time off Days allowed per year Paid/Unpaid


Holidays
Vacations
Sick leave
Personal leave
Sabbatical leave
Maternity leave
Mandatory leave
Special leave
bereavement leave
Jury duty
Time off banks/integrated time
off
Volunteerism
Other1 :
Other2 :
Other3 :
Other4 :
Other5 :
25. What’s your policy regarding unused leaves by employees?
Adjusted next year
Forfeited
Other: ________________________________________________________________

26. Do you provide any of the following protection programs to your employees? [check all that
apply]

Income protection Programs


Disability insurance

Life insurance

Retirement plan

Health protection programs

27. Indicate if any or all of the following services you provide to your employees.
Employee assistance Programs (EAPs)
Family assistance programs
Financial education
Outplacement assistance
Tuition reimbursement
Wellness Programs
Transportation service

Compensation for Flexible Workforce

28. Which of the following types of contingent workforce does your organization employ?
Part-time employees
Temporary and on-call employees
Leased employee arrangements
Independent contractors, freelancers and consultants

29. How do you establish pay and benefits for contingent workforce?

Please specify: ___________________________________________________________

________________________________________________________________________
30. Does your organization allow employees to have flexible work schedules?
Yes
No

31. If you have answered yes to above question, check ( ) the one (or more) that is applicable
in your organization.
Flextime
Compressed workweek
Job sharing
Telecommuting
Other, (please specify): __________________________________________________

32. How do you decide on pay and benefits for employees availing flexible work schedules?

Please specify: ___________________________________________________________

________________________________________________________________________

Compensation for Executives


33. Which of the following monetary benefits do you provide your executives as part of their
current core compensation?

Discretionary bonuses
Performance-contingent bonuses
Target plan bonuses
Predetermined allocation bonuses
Short-term incentives
Profit sharing plans
Current profit sharing
Deferred profit sharing

Gain-sharing plans
34. Please check ( ) the form of deferred stock compensation that is most applicable in your
organization. [check all that apply]

Incentive stock options


Non-statutory stock options
Discount stock options
Stock appreciation rights
Restricted stock
Phantom stock

35. What types of perks your company executives and key employees avail?

Company cars
Financial services
Recreational facilities
Free lunches
Free use of corporate jets
Travel perks
Residential security
Tickets to sporting events
Others, please specify: ___________________________________________________
______________________________________________________________________

36. Is there any policy to award ‘golden parachutes’ to executives (e.g. CEOs) if they are
terminated as a result of change in company ownership or company takeover?
Yes
No

37. What about ‘platinum parachutes’ if executives are terminated because of their negligence
in terms of performance?
Yes
No

Recruitment and Retention

38. Which of the following ways your organization employs in order to attract and retain
employees? [check all that apply]
Overtime pay (in case of non-exempt employees)
Employee referral bonus (individual incentive)
Flextime
Compressed workweek
Telework (telecommuting)
Job sharing
Paid sabbaticals
Volunteerism
Paying above market
Employee stock option programs
Profit sharing
Team-based incentive
Pay compression (in order to attract new hire)
Two-tier pay structure (in order not to lose the existing employee)
Behavioral encouragement incentive

Promotions

39. What are the promotion criteria being practiced in your organization? [more than one or all
boxes can be checked that apply]

Criteria For exempt employees For non-exempt employees


Length of service
Performance
Achievement of exceptional goals
Acquiring groundbreaking job-related competencies
Other (please specify):

Miscellaneous

40. To what extent your employees are satisfied with overall compensation (including core
compensation and benefits)?
Extremely satisfied
Very satisfied
Somewhat satisfied
Not satisfied