Master of Business Administration-MBA Semester IV

Subject Code – MU0006

Subject Name – Compensation Benefits
2 Credits
Assignment Set- 1 (30 Marks)
Note: Each question carries 10 Marks. Answer all the questions.

Q.1 Explain in detail the objectives of compensation planning

The most important objective of any pay system is fairness or equity. The team equity has
three dimensions:
a) Internal equity: This ensures that more difficult jobs are paid more.
b) External equity: This ensures that jobs are fairly compensated in comparison to similar jobs
in the labour market.
c) Individual equity: It ensures equal pay for equal work, i.e. each individual’s pay is fair in
comparison to others doing the same jobs.
In addition, there are other objectives as well. The ultimate goal of compensation
administration (the process of managing a company’s compentation program) is to reward
desired behaviours and encourage people to do well in there jobs. Some of the important
objectives that are sought to be achieved through effective compensation management are
listed below:
a) Attract Talent: compensation needs to be high enough to attract talented people. Since
many firms copete to hire the services of competent people, the salaries offered must be high
enough to
motivate them to apply.
b) Retain Talent: If compensation levels fall below the expectations of employees or are not
competitive, employees may quit in frustration.
c)Ensure Equity: Pay should equal the worth of a job. Similar jobs should get similar pay. Like
wise, more qualified people should get better wages.
d) New and Desired Behaviour: pay should reward loyalty, commitment, experience, risk-
taking, initiative and other desired behaviours. Where the company fails to reward such
behaviour, employee may go in search of greener pastures outside.
e)Control costs: The cost of hiring people should not be too high. Effective compensation
management ensures that workers are neither overpaid nor underpaid.
f) Comply with legal rules: Compensation programs must invariably satisfy governmental rules
regarding minimum wages, bonus, allowances, benefits, etc.
g) Ease of operation: The compensation management system should be easy to understand
and operate. Then only will it promote understanding regarding pay related matters between
employees, unions and managers.

2. Discuss the wage policy of India including the short Introduction of all the
components

Ans:-

Formulation of rational wage policy continues to be one of the most important

andsignificant social demands. Earlier, it formed the basic responsibility of the
employer butwith the industrial progress, wage bargain has become a matter of concern for
the employer,employee, and the state.Any rational wage policy has hence to be woven
into the socio-economic texture reflectingthe objectives and aspirations of the people of
a particular country. It cannot be dealt with, on purely economic considerations in isolation
from the social policy and political culture of that particular community.P r o b l e m s o f
wage policy are hence of great concern to employees,
m a n a g e m e n t a n d government alike. The pressures of rising prices, the
demand for higher wages and better working conditions create price, market and
production problems for the management and thef i n a l b u r d e n o f f i n d i n g a s o l u t i o n
t o t h e p r o b l e m s o f w a g e p o l i c y u l t i m a t e l y f a l l s o n t h e government.
Economic Objectives of Wage Policy

An important objective of any society is the achievement of maximum economic

welfare.

This requires the national income to be maximized. The national income should
be dividedequally among all the members of the economy and finally, there should be a fair
amount of stability in the national income. Economic welfare gets maximized if the
highest and moststable standard of living possible for each section of the
community is attained. In order tosecure this, it is necessary to achieve:a) Full
employment and optimum allocation of all resources. b) The highest degree of economic
stability consistent with an optimum rate of economic progress.c) Maximum income
security- for all sections of the community.

The Social Objectives

A given wage policy must be instrumental in achieving the following:a) Elimination of

exceptionally low wages. b) Establishment of ‘fair’ labour standards.c) Protection of wage
earners from the effects of rising prices.d) Incentive for workers to improve their productive
performance.The social and economic objectives, no doubt, are closely inter-related. Measures
inspired bysocial considerations inevitably have economic effects, and those designed to
achieve specificeconomic results have social implications. For example, the raising of wages
through fixing astatutory minimum wage will normally affect production and employment in an
organization.If the organization institutes measures to keep cost of production at a
competitive level, itmay frustrate the aspirations of the employees.Keeping the above facts
in mind, it is essential that wage policy should be necessarily inter-related with broader
economic decisions on one hand, and with the goals set for social policyon the other.
Wages, being a price of labour, have to be in harmony with other prices in
thes y s t e m . H e n c e , i t b e c o m e s n e c e s s a r y t o m a i n t a i n a b a l a n c e b e t w e e n
t h e o b j e c t i v e s o f economic development and the principles of a democratic
system in the formulation of a wage policy.

3. Apex is an ITES service provider Company. It is a startup (new) company, which

is trying to woo talent from the market. Being a new company, it might face
difficulty in hiring highly talented candidates. As remuneration plays an important
role, what will be the strategic incentives plan Apex can offer to persuade talented
employees, besides providing a good salary?
[10 Marks