Compensation and Benefits of Reliance Power

Date:31-08-2012

Submitted To: Prof. Francis Castelino

Submitted By:
Group Number 5 Manisha Verma UH11024 Manoranjan Mohapatra UH11025 Mayuresh Srivastava UH11026 A Vineela UH11027 Meghla Roy Chowdhury UH11028

Table of Contents
Introduction ............................................................................................................................................ 3 Organization Details Reliance Power ................................................................................................... 3 Purpose and Scope of IS Department in Reliance Power ....................................................................... 4 Vision of IS Department in Reliance Power ............................................................................................ 5 Long Term IS & SAP Objectives ............................................................................................................... 6 Components of Compensation System................................................................................................... 7 Need for Compensation Management ................................................................................................... 7 Components of compensation................................................................................................................ 8 Limitations of the system ...................................................................................................................... 11 Assess your maturity and invest for improvement. .......................................................................... 12 Focus on outcomes for improving workforce performance. ............................................................. 12 Replace outmoded technology to increase efficiency. ...................................................................... 12 Work to integrate appropriate sources and systems. ....................................................................... 13 Understand what you really need. .................................................................................................... 13 Plan your program for total compensation management. ............................................................... 14 Objective of our system design............................................................................................................. 14 Proposed System .................................................................................................................................. 15 Context Diagram: .............................................................................................................................. 15 Cost: .................................................................................................................................................. 15 Benefits: ............................................................................................................................................ 15 Level 1 DFD: ...................................................................................................................................... 16 Brief description of how the system would work ............................................................................. 17 Proposed System Description ........................................................................................................... 17 Entity Relationship Diagram ............................................................................................................. 19 System Input ..................................................................................................................................... 19 System Overview .............................................................................................................................. 19 System Input ......................................................................................................................................... 20 System Output ...................................................................................................................................... 21

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Introduction
A Human Resource Information System is a software application designed specifically for the aggregation and synthesis of employee information. These HR systems can provide functions varying from payroll and benefits breakdown to the relevant juxtaposition of available positions with qualified applications already existing within the system. With employee data neatly woven into an orderly web of HRIS databases, HR executives become free to pursue more critical- and creative-thinking projects. Meanwhile, the automation of the data significantly reduces the likelihood of entry errors and discrepancies between records. And lastly, the formation of one vast, unified reservoir of employee information allows for more complex and integrated analysis by company executives, facilitating better decision-making and greater business efficiency. Human Resources Information System is a system that lets you keep track of all your employees and information about them. It is usually done in a database or, more often, in a series of inter-related databases. Human Resource Management (HRM) has never been as significant as it is today. Companies want to attract, retain and motivate brains to meet objectives. Today Humans are regarded as one of every companys assets so they need to be efficiently and effectively managed. One of the tools companies use to attract, retain and motivate its people is Compensation Management.

Organization Details Reliance Power

Reliance Power Limited is a part of the Reliance Group, one of Indias largest business houses. The group operates across multiple sectors, including telecommunications, financial services, media and entertainment, infrastructure and energy. The energy sector companies include Reliance Infrastructure and Reliance Power.

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Reliance Power has been established to develop, construct and operate power projects both in India as well as internationally. The Company on its own and through its subsidiaries has a portfolio of over 35,000 MW of power generation capacity, both in operation as well as capacity under development. The power projects are diverse in terms of geographic location, fuel type, fuel source and off-take, and each project is planned to be strategically located near an available fuel supply or load centre. The company has 600 MW of operational power generation assets. The projects under development include seven coal-fired projects to be fuelled by reserves from captive mines and supplies from India and elsewhere: two gas-fired projects to be fuelled primarily by reserves from the Krishna Godavari Basin (the "KG Basin") off India's east coast and seven hydroelectric projects, six of them in Arunachal Pradesh and one in Uttarakhand. Reliance Power has won three of the four Ultra Mega Power Projects (UMPPs) awarded by the Indian Government so far. These include UMPPs in Sasan ( Madhya Pradesh), Krishnapatnam ( Andhra Pradesh) & Tilaiya (Jharkhand). UMPPs are a significant part of the Indian government's initiative to collaborate with power generation companies to set up 4,000 MW projects to ease the countrys power deficit situation. Besides these, Reliance Power is also developing coal bed methane (CBM) blocks to fuel gas based power generation. The company is registering projects with the Clean Development Mechanism executive board for issuance of Certified Emission Reduction (CER) certificates to augment its revenues.

Purpose and Scope of IS Department in Reliance Power

The purpose of IS Department in Reliance Power is to provide PC Support, Network Support, SAP Functional Support (incl. Configuration and Implementation), Connectivity Services, IS & SAP Helpdesk Support, and Planning of Short / Long Term objectives.

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Vision of IS Department in Reliance Power

IS support of the EPC group envisages a scenario where all functionaries are able to park their data, information and knowledge resource on a centralized server, which enables access to all the related functionaries without any geographical constraint. All systems, processes, knowledge, information and data are standardized and structured so as to save upon repetitive and non-coordinated efforts by different constituent group. Any new function and / or project has freedom to develop systems, processes and data support with full knowledge of the companys resource however with ultimate perspective of integration into standardized and structured resource of the company.

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Offer opportunity to all professionals to grow their skill sets and evolve new concepts to be in a state-of-the-art IS technology for enhancing the efficiency and effectiveness in the company.

In wake of the growing IS Centric operations, play a pivotal role in evolving and implementing the Risk Management Systems, Collaborative Tool/Knowledge Management Software Tools (E-Library, Project Communication System, Online Travel Booking System, Timesheet management System, IS Helpdesk etc.) Education & IS/ SAP training for the end users.

Long Term IS & SAP Objectives

To increase and speed-up demand for rapid IS growth in EPC Projects To meet the growing IS demands using the latest tools and by not compromising on REL standards. To formulate an IS strategy, in tune with changing business requirements. To sequence & spread IS investments over short, medium & long term. To launch a series of IS Initiatives. To design and establish a technology system spanning the corporate operations & dove-tail this system into the existing REL business structure. To redevelop a regional Security plan, email policy, information strategy, LAN, WAN, Groupware, SAP, Intranet, Web bases Applications and Lotus Notes e-mail Networks. To ensure responsibilities are carried out in line with company values IS policies, procedures and best business practices. To ensure IS Procedures are followed. To Document & continuously review & redefine processes to increase quality levels & reduce costs. To work on Re-engineering of Communication & Infrastructure models, Email / Web Servers, Application Servers, Speciality Servers, Live online Databases and SAP support. To ensure that basic requirements like data security; data warehousing; data integrity; system reliability; disaster recovery & contingency plans; redundancy and upgradeability etc are met.
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To provide leadership to the IS & SAP Teams at Noida (U.P) and to oversee Recruitment, Training, Education and Development programs of the IS Team & appropriately invest in skills development.

To evaluate specific IS & SAP training and Career development needs of the business and functional groups at EPC offices and address these needs through in-house and external programs.

Through IS, we would want to build RELs EPC Business Group image and awareness through consistency and distinctiveness.

Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analysing the job work and responsibilities. Components of a compensation system are as follows:

Need for Compensation Management

A good compensation package is important to motivate the employees to increase the organizational productivity.

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Unless compensation is provided, no one will come and work for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals.

Salary is just a part of the compensation system, employees have other psychological and self-actualization needs to fulfil. Thus, compensation serves the purpose.

The most competitive compensation will help an organization to attract and sustain the best talent. The compensation package should be as per industry standards.

Components of compensation
Basic wages/Salaries These refer to the cash component of the wage structure based on which other elements of compensation may be structured. It is normally a fixed amount which is subject to changes based on annual increments or subject to periodical pay hikes. It is structured based on the position of an individual in the organization and differs from grades to grades. Dearness allowance The payment of dearness allowance facilitates employees and workers to face the price increase or inflation of prices of goods and services consumed by him. The onslaught of price increase has a major bearing on the living conditions of the labour. The increasing prices reduce the compensation to nothing and the money's worth coming down based on the level of inflation.
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The payment of dearness allowance, which may be a fixed percentage on the basic wage, enables the employees to face the increasing prices. Bonus The bonus can be paid in different ways. It can be fixed percentage of the basic wage paid annually or in proportion to the profitability. The Government also prescribes a minimum statutory bonus for all employees and workers. There is also a bonus plan which compensates the managers and employees based on the sales revenue or Profit margin achieved. Commissions Commission to managers and employees may be based on the sales revenue or profits of the company. It is always a fixed percentage of the target achieved. For taxation purposes, commission is again a taxable component of compensation. The payment of commission as a component of compensation is practised heavily on target based sales. Depending upon the targets achieved, companies may pay a commission on a monthly or periodical basis. Mixed plans Companies may also pay employees and others a combination of pay as well as commissions. This plan is called combination or mixed plan. Apart from the salaries paid, the employees may be eligible for a fixed percentage of commission upon achievement of fixed target of sales or profits or Performance objectives. Nowadays, most of the corporate sector is following this practice. This is also termed as variable component of compensation. Piece rate wages Piece rate wages are prevalent in the manufacturing wages. The labourers are paid wages for each of the quantity produced by them. The gross earnings of the labour would be equivalent to number of goods produced by them.

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Piece rate wages improves productivity and is an absolute measurement of productivity to wage structure. The fairness of compensation is totally based on the productivity and not by other qualitative factors. The GANTT productivity planning and Taylor's plan of wages are examples of piece rate wages and the related consequences. Profit sharing payments Profit sharing is again a novel concept nowadays. This can be paid through payment of cash or through ESOPS. The structuring of wages may be done in such a way that, it attracts competitiveness and improved productivity. Profit sharing can also be in the form of deferred compensation at the time of retirement. At the time of retirement, the employees may be paid a lump sum or retiral benefits. Fringe benefits The provision of fringe benefits does not attract any explanation. These include a) Company cars b) Paid vacations c) Membership of social/cultural clubs d) Entertainment tickets/allowances e) Discounted travel tickets f) Family vacation packages. Reimbursements Employees, depending upon their gradations in the organization may get reimbursements based on the Expenses incurred and substantiated. Certain expenses are also paid based on expenses incurred during the course of business. In many cases, employers provide advances to the employees for incurring certain expenses that are incurred during the course of the business. Some examples are

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a) Travel expenses b) Entertainment expenses c) Out of pocket expenses d) Refreshments expenses during office routine outside office premises. Sickness benefits/pregnancy The increasing social consciousness of corporate citizens has resulted in the payment of sickness benefit to the Employees of companies. This also includes payments during pregnancy of women employees. The expenses incurred due to injury or illness are compensated or reimbursed to the employees. In certain companies, the death of an employee is compensated financially.Companies are also providing supporting financial benefits to the family of the bereaved employees. However, companies are covering these cost through appropriate insurance policies like, Medical and life insurance.

Limitations of the system

Employees might be driven by a myriad of motivators, but perhaps the biggest is simply getting a regular paycheck. Ensuring that compensation system is effective is not just important but imperative. But few organizations evaluate their compensation management maturity or identify shortcomings. Compensation management has become a higher profile topic in recent years among finance executives, as organizations seek to manage their processes more efficiently and align it to their strategic workforce performance goals. Six recommendations to executives and managers in HR, finance and operations who are engaged in evaluating or implementing improvements to compensation management processes and systems

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Assess your maturity and invest for improvement. A benchmarking research has found that 28 percent of the participating organizations have done sophisticated compensation management deployments and are at the most advanced innovative level of maturity. Those at the intermediate levels, strategic (one step down from innovative, 36 percent) and advanced (another step down, 20 percent), are looking to satisfy their requirements and address existing impediments but have not done so fully and are still using spreadsheets for compensation activities. Those at the tactical (lowest) level (16 percent) have no plans to improve or deploy specific compensation systems for areas that could benefit, such as sales and contact centres. Use these results and maturity index framework to assess your own organization's maturity and to determine where you can apply improvements to your people, processes, information and technology. Focus on outcomes for improving workforce performance. Before an organization can take action to realize the benefits of investment in total compensation management, HR and finance must ensure they agree on direction. The benefit companies most desire is the ability to align their workforce to their business strategy and goals (52 percent). That is assisted by efficiency of process (50 percent); visibility into employee compensation, performance and succession related information (40 percent); and establishing pay for documented performance (39 percent). Replace outmoded technology to increase efficiency. The research identified a disturbing disconnect between participants' articulated need for better processes and capabilities and the absence of effective total compensation management systems. Use of spreadsheets is so widespread in more than half of organizations that even small improvements should yield benefits. And far more than small improvements are available from today's improved compensation management systems. Organizations should assess available applications to determine what may meet their needs cost effectively. As other companies take steps to find more adequate systems, those that don't are likely to fall behind in the race to acquire and retain talent.

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Work to integrate appropriate sources and systems. Some organizations are trying to rationalize their total compensation management and reduce use of spreadsheets but many are still considering the deployment of stand-alone compensation systemssystems that are designed to support specific departmental requirements for sales, executives or field service and contact centers. This research makes clear that to drive improvement it is necessary to integrate existing information sources with compensation and workforce performance or talent management systems. This integration will require the organization focus not just on the usability and functionality of the applications but also the architecture needed to support integration to other internal systems, including the Human Management Resource System and spreadsheets, as well as external hosted or on-demand systems. Your organization should explore ways to streamline the integration process and then find a compensation system that can become the repository of the single view of compensation at every level, from individual to organization. If separate dedicated compensation systems are needed, they should be designed to support integration into the system that provides the integrated view. Understand what you really need. Make sure you fully understand what your executives and managers want and need from compensation management so you can determine the type of application to use and the sources of data to draw upon. Individual compensation management software systems have relative strengths and weaknesses. Some are better at managing variable pay components while others have better capabilities for making critical decisions about workforce planning and strategy. By clearly defining your business, user, information and technology requirements, you will be better equipped to evaluate how well providers of total compensation management applications will satisfy your particular needs. Bear in mind it is possible that no single dedicated application will meet all of your needs; perhaps bringing together specific capabilities from different systems will be required. If the latter, integration capability is essential.

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Plan your program for total compensation management. In Ventana's research, 72 percent of participants said total compensation management systems are important or very important. In addition, many organizations are adding variable pay components to compensation. This demand and a lack of confidence in existing processes among more than half of organizations are two compelling reasons to make building a plan for total compensation management a top priority. Enlist sponsors from finance and executive management who will support the required investments and provide organizational leadership for the program and its goals. With improved processes and systems that work together efficiently, you can reduce friction in the workforce and focus on driving performance improvement.

Objective of our system design

The Objective is to develop a Compensation management system for the organization. This system will make the HR department more efficient and responsive. The new system will identify the compensation policies not only that of within the organization but also the policies external to it. The automated system will help make a better use of the databases maintained within the organization and help the organization in taking strategic as well as day to day decisions. Looking at the input data to the Compensation management system we can gauge accurately what will be the exact compensation of employees.

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Proposed System
Context Diagram:

Finance System

Allocated Fund for HR Department

External agency

Market compensation Data Claim Expenses

Employee Compensation Management

Allocate Expenses New Compensation Detail

Payroll
Changes in CP,Allocated incentives,bonus

Basic,variable and incentive details

Performance Appraisal Scores

HR Department

Performance Management System

Cost:
Costs associated with the system are: Apparent costs which are computer, software, personnel and overhead costs for the design, development, implementation and maintenance of the system Implementation of the system can be an extremely costly proposition Whenever employee data is collected by an organization, there are certain security risks which arise and sometimes it becomes difficult to protect private information from internal and external threats.

Benefits:
It increases the productivity of the HR department as the data is stored systematically in a database making it easily retrievable.
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The HR executives spend lesser time on administrative issues as a result of which they can contribute more to decision making and strategic planning. The system makes it easier to communicate with employees as the database that is created is accessible to every employee in the organization. It increases transparency within the organization thereby increasing the motivation levels of employees As a result of automated systems, the HR department is able to produce required information for taking management decisions Manual data collection is not required for designing compensation packages which saves time and effort. Moreover, cost of postage and print is also saved. In case of fire, data remains protected and in case of legal suits, documents can be easily tracked which leads to cost avoidance.

Level 1 DFD:

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Brief description of how the system would work

Finance system would allocate the compensation budget which would be stored in a data store called budget allocation details. From this data store, budget for bonus, incentive, variable and basic pay would go through multiple processes for calculation and these processes would also have inputs from the employee master data which would contain details of paygrade, employee ID, name etc. The inputs from these processes will then go to the HR department which would calculate the CTC and also update changes in the data store called compensation policy, through a process. The CTC details would then go to the payroll which would generate a salary slip and give it to the employee. While calculating the CTC, an external agency will send the compensation data of competitors to a data store called paygrade details and this store would also have the paygrade data of the company so that a comparison can be done. Moreover, while calculating the CTC, appraisal results will also be taken into account, which would enter the system through an external called P.A. system.

Proposed System Description

The system consists of the following externals: Financial System HR department Performance Appraisal System External Agency Employee Payroll

The system consists of the following data stores: Employee master data Compensation Policy Employee Pay grade data Budget Allocation details

The system consists of the processes: Allocate Budget Update details Upgrade pay grade details
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Upgrade employee details Upgrade changes in policy Calculate CTC Calculate basic and variable pay Calculate bonus Calculate incentive compensation Salary slip generation Redress claims

The system consists of the following data flows: Compensation budget Allocated budget data CTC Details Appraisal data Paygrade data of the company Updated employee details Budget for basic ,variable pay Budget for bonus Budget for incentives Incentive Bonus Basic and Variable pay Employee data Payment details of competitors Changes in policy Allocated basic, bonus etc. Processed CTC details Salary Slip Allocated expense Budget for claim

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Entity Relationship Diagram

Entity Compensation Policy Attributes Requirements for bonus, incentives, basic and variable pay for each pay level as per the company policy Paygrade, roles and responsibilities Total CTC, Salary, Bonus etc. Rating, areas of improvement, recommendation Function, no. of employees Budget for bonus, incentives, variable pay etc.

Position Compensation design Appraisal Department Budget

Compensation Policy

Appraisal

Applies to Is done for is giv en to Is Governed by

Works for

System Input

Compensation design for a pay level

Belongs to

has

Position
Has

Department

System Overview

Is given

Is allocated

Is assigned

Budget

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System Input
SOURCE OF INPUT Finance system INPUT DATA Budget allocation details for various computations such as incentives, bonus, basic and variable pay.

Performance Appraisal system

Appraisal ratings in a range of 1 to 5. Based on the appraisal ratings the Employee Master Data is upgraded and employees are given incentives accordingly. This is a form of Performance Related Pay.

HR Department

Compensation policy for various middle level managers and the changes in policy.

External Agencies

Compensation benchmarking is done by having the compensation details of various companies in the Power sector. The pay grade details of middle level managers serves as the system input.

Payroll

The CTC details of various middle level managers serves as the input from payroll.

Employee

The expenses claimed by the employee regarding the fairness of the compensation provided to him/her.

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System Output
PROCESSED DATA Calculation of the individual budget for bonus, incentives, basic and variable pay, budget for claim Updation of employee data based on the individual performance rating Updation of the changes in compensation policy of the organization related to middle level managers Updation of the pay grade details of the various benchmarked companies. CTC details processing Updated pay grade details of the benchmarked companies. salary slip generation for individual employees Employee claims redressal ( middle level managers) Allocated claim expenses for the individual employee. SYSTEM OUTPUT The calculated basic pay, variable pay, incentives and bonus for the individual middle level managers. Updated details of the employee data related to performance appraisal Updated pay grade details of the company

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