Performance Management

Compensation Management
Saket Jeswani
MBA Sem - 3 RCET, Bhilai
[SAKET JESWANI]
Unit - III
Performance Management System

[2013]
Saket Jeswani, Jeswani, Associate Professor, Professor, MBA, RCET, Bhilai Page 1 Saket Associate MBA, RCET, Bhilai
PERFORMANCE MANAGEMENT
Saket Jeswani Associate Professor, MBA,RCET, Bhilai
Learning Objectives
Performance Introduction, Definition, Concept
Performance Appraisal Introduction, Definition, Concept
Performance Management
Performance Management Components Performance Management Process Performance Management & Strategic Linkages
Performance Management Techniques
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Saket Jeswani, Associate Professor, RCET, Bhilai
Saket Jeswani, Associate Professor, MBA, RCET, Bhilai
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Introduction to Performance
1. Organizations need highly performing individuals in order to meet their goals, to deliver the products and services they specialized in, and finally to achieve competitive advantage. 2. Performance is also important for the individual. Accomplishing tasks and performing at a high level can be a source of satisfaction, with feelings of mastery and pride. Low performance and not achieving the goals might be experienced as dissatisfying or even as a personal failure.
3. Moreover, performanceif it is recognized by others within the organizationis often rewarded by financial and other benefits.
4. Performance is a majoralthough not the onlyprerequisite for future career development and success in the labor market. Although there might be exceptions, high performers get promoted more easily within an organization and generally have better career opportunities than low performers.
Definition of Performance
1. Job performance is formally defined as the value of the set of employee behaviors that contribute, either positively or negatively, to organizational goal accomplishment. Job performance is the way employees perform their work. An employee's performance is determined during job performance reviews, with an employer taking into account factors such as leadership skills, time management, organizational skills and productivity to analyze each employee on an individual basis. Job performance reviews are often done yearly and can determine raise eligibility, whether an employee is right for promotion or even if an employee should be fired. The performance is not defined by the action itself but by judgmental and evaluative processes. Thus the actions, which can be scaled, or measured, are considered to constitute performance. Job performance, which refers to the degree to which an individual executes his roles with reference to certain specified standards set by the organization, is central to any Saket Jeswani, Associate Professor, RCET, Bhilai organization.
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Concept of Performance
1. Job performance is behavior the observable things people do that is relevant to accomplishing the goals of an organization. Performance can be differentiated between an action (i.e., behavioral) aspect and an outcome aspect.
2.
Behavior Aspect
Job Performance
Set of behaviors that a person does (or does not) perform
Outcome Aspect
End result of those behaviors
Learning Objectives
Performance Introduction, Definition, Concept Performance Appraisal Introduction, Definition, Concept Performance Management Performance Management Components Performance Management Process
Performance Management & Strategic Linkages

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Introduction to Performance Appraisal

1. Performance is the set of behavior shown by the employee in the organization while performing work/job. 2. This set of behavior helps to achieve the individual as well as organizational goals. 3. Therefore, this set of behavior needs to be managed timely. 4. Management of behavior includes measurement of performance i.e. Performance Appraisal process and then management of undesired behavior. 5. Employees needs to be motivated timely while performing work to get the desired behavior. 6. Performance appraisal process gives the result of desired or undesired behavior. The desired behavior is appraised through increments/promotions and undesired behavior is treated further to improve through training & development.
Introduction to Performance Appraisal

1. Performance appraisal is a systematic and objective way of evaluating performance in both work related behavior and potential of employees. 2. It is the systematic evaluation of the individual with regard to performance on the job and potential for development. 3. The identification and measurement of human performance in organizations is performance appraisal. 4. It is an opportunity for worker and supervisor to discuss the individuals work, review past performance, and identify goals for future improvement.
5. It should be scheduled regularly (formal) and take place casually at times.

6. It should result in mutually acceptable plan for improving performance in coming time period.
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Definition of Performance Appraisal
1.
According to Edwin Flippo, "Performance Appraisal is the systematic, periodic and impartial rating of an employee's excellence, in matters pertaining to his present job and his potential for a better job. According to Dale Beach, "Performance Appraisal is the systematic evaluation of the individual with regards to his or her performance on the job and his potential for development. According to Wendell French, The formal, systematic assessment of how well employees are performing their jobs in relation to established standards, and the communication of that assessment to employees
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Concept of Performance Appraisal

The process by which an employees contribution to the organization during a specified period of time is assessed. Performance Appraisal process involves 1. Setting Work Standards 2. Assessing Actual Performance 3. Providing Feedback to the Employees
Performance Appraisal
Setting Work Standards
Assessing Actual Performance
Providing Feedback
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Learning Objectives
Performance Introduction, Definition, Concept Performance Appraisal Introduction, Definition, Concept Performance Management Performance Management Components Performance Management Process Performance Management & Strategic Linkages
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Introduction
1. Performance appraisal is evaluating an employees current performance relative to his or her performance standards. or past
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The idea of appraisal should improve employee performance. Many managers take the integrated goals, training employees and then appraising and rewarding & managing them. This total integrated process is known as Performance Management. PM is defined as a process that consolidates goal setting, performance appraisal and development into a single common system, the aim of which is to ensure that the employee performance is supporting the companys strategic aims. It includes the practice through which the manager defines the employees goals and work, develops the employees capabilities and evaluates and rewards the persons efforts all within the framework of how the employees performance should be contributing to achieving the companys goals.
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Introduction
5. Employers always want employees to perform in ways that lead to better organizational performance. Employee performance depends on 3 general factors: Employee performance = f (SKM)
S = skill & ability to perform task K = knowledge of facts, rules, principles & procedures M = Motivation to perform
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Where,
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We need to hire people with skill and ability (S). We need to make sure that knowledgable employees (high K) stay with the company. If we succeed in these two things, we can then concentrate on building further knowledge & skills (K & S). And finally, we need to find ways to motivate (M) employees to perform well on their jobs. The above equation can be justified with the help of performance management & measurement.
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Introduction
9. We need to accurately measure performance to tell if our HR efforts are working. We cant tell, if we select good employees and if we dont know how to measure what constitutes good. We cant tell if employees are building the kinds of knowledge base they need, if we cant measure knowledge accumulation. We cant reward performance, if we cant measure it.
10. Performance Appraisal is only one part of broader process of Performance Management.
11. We define PM as the process through which managers ensure that employees activities & outputs are congruent with the organizational goals.
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Definition
1. According to Armstrong and Baron, Performance Management is both a strategic and an integrated approach to delivering successful results in organizations by improving the performance and developing the capabilities of teams and individuals. According to Lockett, Performance management is the development of individuals with competence and commitment, working towards the achievement of shared meaningful objectives within an organisation which supports and encourages their achievement. According to Aguinis, Performance management is a continuous process of identifying, measuring and developing the performance of individuals and teams and aligning performance with the strategic goals of the organization. The holistic process of identifying, evaluating and developing the work performance of employees in the organization so that the organizational goals and objectives are more effectively achieved, while at the same time benefiting employees in terms of recognition, receiving feed back, catering or work needs and offering career guidance to face stiff domestic and international competition.
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Concept
1. Performance management is the systematic process by which an organization involves its employees, as individuals and members of a group, in improving organizational effectiveness in the accomplishment of organizations mission and goals.
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In other words performance management should be: 1) Strategic - it is about broader issues and longer-term goals 2) Integrated - it should link various aspects of the business, people management and individuals and teams.
Performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year, in support of accomplishing the strategic objectives of the organization. The communication process includes: 1) Setting Objectives 2) Discussing Expectations and Performance Standards 3) Identifying Goals 4) Providing Feedback 5) Evaluating Results
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Nature of Performance Management

Make clear what the organization expects Provide performance information to employees
Effective Performance Management System
Identify areas of success and needed development
Document performance for personnel records
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Objective of Performance Management System

1. To confirm the services of probationary employees upon their completing the probationary period satisfactorily 2. To check the effectiveness & efficiency of individuals, teams & organization as a whole. 3. To effect promotions based on competence and performance 4. To access the training and development needs of the employees 5. To decide upon the pay rise 6. To determine whether HR programmes such as selection, training, and transfer have been effective or not.
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Importance of Performance Management System

1. A Performance Management System enables a business to sustain profitability and performance by linking the employees' pay to competency and contribution.
2. It provides opportunities for personal development and career growth. 3. It brings all the employees under a single strategic umbrella.
4. Most importantly, it gives supervisors and subordinates an equal opportunity to express themselves under structured conditions. 5. It calls for a high level of co-ordination, channeled information flow, and timely review.
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Purposes of Performance Management

1. STRATEGIC PURPOSE First and foremost, a performance management system should link employee activities with the organization's goals. One of the primary ways strategies are implemented is through defining the results, behaviors, and, to some extent, employee characteristics that are necessary for carrying out that strategy, and then developing measurement and feedback systems that will maximize the extent to which employees exhibit the characteristics, engage in the behaviors, and produce the results. 2. ADMINISTRATIVE PURPOSE Organizations use performance management information (performance appraisals, in particular) in many administrative decisions: salary administration (pay raises), promotions, retention-termination, layoffs, and recognition of individual performance 3. DEVELOPMENTAL PURPOSE A third purpose of performance management is to develop employees who are effective at their jobs. When employees are not performing as well as they should, performance management seeks to improve their performance. The feedback given during a performance evaluation process often pinpoints the employee's weaknesses.
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Performance Management Vs Performance Appriasal

Strategic
Performance Appraisal
Operational
Focus on Long Term Goals

It is process Integrated Process Management by Agreement Holistic Managers Owned Adaptable & Flexible Focus on Individuals Growth
Focus on Short Term Goals

It is a system Isolated from organizational needs Management by Command Individualistic HR Owned Rigid & Inflexible Focus on Individuals Past Performance
Practical & Effective

Focus on Qualitative aspect of performance Can be linked to total reward
Bureaucratic & Superficial

Focus on Quantative aspects of performance Can be linked to financial reward
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Criteria For Performance Management

Various criteria's for performance management are: strategic congruence, validity, reliability, acceptability, and specificity. 1. Strategic congruence is the extent to which the performance management system elicits job performance that is congruent with the organization's strategy, goals, and culture. Validity is the extent to which the performance measure assesses all the relevantand only the relevantaspects of performance. Reliability refers to the consistency of the performance measure. One important type of reliability is interrater reliability: the consistency among the individuals who evaluate the employee's performance. Acceptability refers to whether the people who use the performance measure accept it. Specificity is the extent to which the performance measure gives specific guidance to employees about what is expected of them and how they can meet these expectations.
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4. 5.
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Learning Objectives
Performance Introduction, Definition, Concept Performance Appraisal Introduction, Definition, Concept
Performance Management Performance Management Components

Performance Management Process Performance Management & Strategic Linkages
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Components of PMS
A process that consolidates goal setting, performance appraisal, and development into a single common system, the aim of which is to ensure that employees performance is supporting the companys strategic aim.
Measurement (Performance Appraisal)
Management
Performance Management System
Any effective performance management system includes the following components: 1. Performance Planning 2. Performance Appraisal and Reviewing 3. Feedback on the Performance followed by personal counseling and performance facilitation 4. Rewarding good performance 5. Performance Improvement Plans 6. Potential Appraisal
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Components of PMS
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Components of Performance Management
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Learning Objectives
Performance Introduction, Definition, Concept Performance Appraisal
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Performance Management Process

Performance Management process includes: 1. 2. 3. 4. 5. Planning work and setting expectations, continually monitoring performance, Developing the capacity to perform, periodically rating performance, and Rewarding good performance.
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Performance Planning
1. In an effective organization, work is planned out in advance. Planning means setting performance expectations and goals for groups and individuals to channel their efforts toward achieving organizational objectives. Getting employees involved in the planning process will help them understand the goals of the organization, what needs to be done, why it needs to be done, and how well it should be done. 2. Employee formulates his job objectives in consultation with his superior. 3. Each objective and its contribution to organizational objective is discussed and ho to measure the accomplishment of each objective. 4. Developmental activities as required by the employee is worked-out.
5. Once performance plan is worked-out employee to carry-out the work as specified under the guidance and coaching of the supervisor.
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Performance Standards
1. While the list of Major Job Duties tells the employee what is to be done, performance standards provide the employee with specific performance expectations for each major duty. They are the observable behaviors and actions which explain how the job is to be done, plus the results that are expected for satisfactory job performance. The purpose of performance standards is to communicate expectations. Good performance typically involves technical expertise, it also involves certain behaviors (e.g. friendliness, helpfulness, courteousness, punctuality, etc.). It is often these behaviors that determine whether performance is acceptable. Performance standards are:
1) 2) 3) 4) 5) Based on the position, not the individual Observable, specific indicators of success Meaningful, reasonable and attainable Describe "fully satisfactory" performance once trained Expressed in terms of Quantity, Quality, Timeliness, Cost, Safety, or Outcomes
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Performance Measurement
1. In an effective organization, assignments and projects are monitored continually. Monitoring well means consistently measuring performance and providing ongoing feedback to employees and work groups on their progress toward reaching their goals. Why measure performance? 1) When you can measure what you are speaking about and express it in numbers, you know something about it. - Kelvin 2) You cannot manage what you cannot measure. Anon Performance measurement plays an important role in: 1) Identifying and tracking progress against organizational goals 2) Identifying opportunities for improvement 3) Comparing performance against both internal and external standards
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Why Measure Performance ?

Because 1. What you cannot measure you cannot improve. 2. If you cannot improve you cannot grow. 3. Measurement helps in objectively differentiating between
performers and non performers. 4. Pay for performance is possible only through metrics.
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Approaches to Measure Performance

COMPARATIVE APPROACH Ranking Forced Distribution Paired Comparison ATTRIBUTE APPROACH Graphic Rating Scale Mixed standard scales BEHAVIORAL APPROACH Critical Incident Behaviorally Anchored Rating Scale Behavioral Observation Scale Organizational Behavior Modifaction (OBM) Assessment Centers THE RESULTS APPROACH Management By Objectives Productivity Measurement And Evaluation System (ProMES) THE QUALITY APPROACH
Developing
1. In an effective organization, employee developmental needs are evaluated and addressed.
Developing in this instance means increasing the capacity to perform through training, giving assignments that introduce new skills or higher levels of responsibility, improving work processes, or other methods. Providing employees with training and developmental opportunities encourages good performance, strengthens job-related skills and competencies, and helps employees keep up with changes in the workplace, such as the introduction of new technology.
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Rating
1. From time to time, organizations find it useful to summarize employee performance. This can be helpful for looking at and comparing performance over time or among various employees. Organizations need to know who their best performers are. Within the context of formal performance appraisal requirements, rating means evaluating employee or group performance against the elements and standards in an employee's performance plan and assigning a summary rating of record. The rating of record is assigned according to procedures included in the organization's appraisal program. It is based on work performed during an entire appraisal period. The rating of record has a bearing on various other personnel actions, such as granting within-grade pay increases and determining additional retention service credit in a reduction in force. Note: Although group performance may have an impact on an employee's summary rating, a rating of record is assigned only to an individual, not to a group.
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Rewarding
1. In an effective organization, rewards are used well. Rewarding means recognizing employees, individually and as members of groups, for their performance and acknowledging their contributions to the organizations mission. A basic principle of effective management is that all behavior is controlled by its consequences. Those consequences can and should be both formal and informal and both positive and negative. Good performance is recognized without waiting for nominations for formal awards to be solicited. Recognition is an ongoing, natural part of day-to-day experience. A lot of the actions that reward good performance like saying "Thank you" don't require a specific regulatory authority. Nonetheless, awards regulations provide a broad range of forms that more formal rewards can take, such as cash, time off, and many nonmonetary items. The regulations also cover a variety of contributions that can be rewarded, from suggestions to group accomplishments.
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Establishing PMS
1. Processes of performance management is practised by line managers. 2. Purpose is no more than that of recording views and decisions; they are not ends in themselves. 3. It is important to establish the principles of performance management and get everyone to involve in it, but administration and control procedures should be carried out with a light touch. 4. There should be scope for managers to decide on their own detailed approaches in conjunction with their staff as long as they abide by the guiding principles. 5. Performance management practice should indeed be monitored through the evaluation approaches.
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Establishing PMS
1. Performance management is not a form-filling exercise, as many traditional merit rating or performance appraisal schemes appeared to be. HR managers who spent their time chasing up reluctant line managers to complete their appraisal forms and return them to the personnel department often unwittingly defeated the whole purpose of the exercise. Managers tended to be cynical about their rating and box-ticking activities and often produced bland and unrevealing reports that could be prepared without too much effort. They became even more cynical if they had any reason to believe that the completed forms were gathering dust in personal dossiers, unused and unheeded. And, sadly, this is often what happened. A case could be made for having no forms at all for managers to complete. They could be encouraged to record their agreement and the conclusions of their reviews on blank sheets of paper to be used as working documents during the continuing process of managing performance throughout the year.
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Implementing PMS for Performance Improvement 1. The improvement of performance is a fundamental part of the continuous process of performance management. 2. The aim should be the positive one of maximizing high performance, although this involves taking steps to deal with underperformance.
1) 2) IMPROVING PERFORMANCE AT THE ORGANIZATIONAL LEVEL IMPROVING PERFORMANCE AT The MANAGERIAL LEVEL
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Implementing PMS for Performance Improvement

Dealing With The Problem OVERALL STRATEGY
Alignment of individual objective with organizational objective
HUMAN RESOURCE IMPROVEMENT

IMPROVING TEAM PERFORMANCE IMPROVING INDIVIDUAL PERFORMANCE
TOP MANAGEMENT LEVERS FOR IMPROVING PERFORMANCE

To improve organizational performance top management needs to focus on developing a high-performance culture.
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Performance Management Model
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Managing Problem Employees

1. Everyones performance is improvable and the steps outlined above apply as much to high performers as to anyone else.
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But special action may be required to deal with people who do not meet expectations. When managing underperformers, the advice given by Charles Handy that this should be about applauding success and forgiving failure needs to be remembered.
Managing underperformers is therefore a positive process, which is based on feedback throughout the year and looks forward to what can be done by individuals to overcome performance problems and, importantly, how managers can provide support and help.
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Managing Problem Employees

Managers can provide support and help in following areas: 1. 2. 3. 4. 5. Identify and agree the problem. Establish the reason(s) for the shortfall. Decide and agree on the action required. Resource the action. Monitor and provide feedback.
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Why is the Performance Poor?

1. The employee has no idea of what is expected of them. 2. They are lacking training or knowledge, so are unable to perform the required tasks. 3. There is a non-work related problem that is distracting them from their job. 4. The employee is not suited to the job. 5. They are simply a poor performer in anything they do.
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Learning Objectives
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1. Strategic alignment means executing strategic planning by bringing together key leaders and implementers to determine where an organization must focus (mission), where it must be (vision), how it intends to get there (goals and objectives), and how to measure success (performance metrics). 2. It aligns people, processes and technology to plan, measure, monitor, and drive organizational performance. 3. It includes:
1) Strategy Development: formulates strategic elements (i.e., vision, mission, goals, & objectives) through facilitated session with key stakeholders 2) Measures and Targets Development: links the organizations strategic mission and direction to specific desired outcomes 3) Execution/Strategy Management: develops key elements needed for successful implementation to include action plans, metrics, and governance structure. Supports the execution of the strategic plan by providing change and program management assistance
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PMS & Strategic Linkage with other HRM Functions

PMS has a central role in an organization's plans. There is a close link between PMS and other HRM activities. PMS can serve two things to evaluate the previous functions of HRM and also act as a guideline to practice an effective future function of HRM.
1. 2. 3. 4. 5. 6. 7. 8.
Human resource planning Job analysis Recruitment & Selection. Remuneration and benefits Training & Induction Career planning and development Individual & Organizational goal setting Employee performance
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Learning Objectives
Performance Management Components Performance Management Process Performance Management & Strategic Linkages Performance Management Techniques
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Performance management techniques include: 1. Guiding: the process of directing an individual or a group along the path leading from present state to a desired state 2. Coaching: helping another person to improve awareness, to set and achieve goals in order to improve a particular behavioural performance 3. Teaching: helping an individual or group develop cognitive skills and capabilities
4. Mentoring: helping to shape an individuals beliefs and values in a positive way; often a longer term career relationship from someone who has done it before 5. Counselling: helping an individual to improve performance by resolving situations from the past.
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6. Balanced Scorecard: Developing specific performance areas where employees are expected to succeed 7. Scheduled reviews: Periodic review sessions with management to evaluate employee performance
8. Documented performance plan: Each review session between the employee and management results in charted progress--enabling employees to understand how well they are improving 9. Pay for performance: Compensation increases for high levels of employee output
10.Training & Development
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Conclusion
1. A performance management system is the key factor determining whether an organisation can manage its human resources and talent effectively. 2. Performance management provides information on who should be trained and in what areas, which employees should be rewarded, and what types of skill are lacking at the organisation or unit level. 3. Therefore performance management also provides information on the types of employee who should be hired. When implemented well, performance management systems provide critical information that allows organisations to make sound decisions regarding their people resources.
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Components of Compensation
Saket Jeswani Associate Professor, MBA,RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai Page 28
Index
1. 2. 3. 4. 5. 6. 7. 8. Components of Compensation Wage/Salary Benefits Incentive - Pay for Performance Bonus Perks Fringe Benefits Retirement Benefits
Components of Compensation
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Types of Wage Plans

1. Time Wage Plan: Remuneration does not vary with output or the quality of output but depends on the time unit consumed in performing work. It is not incentive ie earnings during a given time period do not vary with the productivity of an employee during that period.
2. Piece/ Output Wage Plan: It is concerned with the output or some other measure of productivity during a given period of time. To earn more an employee is required to put in more labour and produce more.
Time Wage Plan

Merits
It is simple for the amount earned by a worker can be easily calculated As there is no time constraint worker will pay attention to the quality of their work As equal pay to equal work policy is followed no ill-will is generated among workers No rough handling / misuse of machinery As it provides a regular and stable income to an employee he can plan his budget It is the only system that can be employed where output on employee can not be measured It requires less administrative work
No incentives for working harder and better The labour charge for a particular do not remain constant There are chances for systematic evasion of work Provides no job satisfaction Cost of performing a work can not be determined Difficult to measure efficiency of each worker for promotion
Demerits
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Piece/ Output Wage Plan

Merits
It pays to the worker according to his efficiency Gives him direct stimulus to increase his production Requires less supervision Workers will take greater care of machines Estimate of cost of work is easier Method of production is improved The total unit cost of production comes down with larger output
Demerits
Fixation of piece rate by employer is not done on scientific basis results in machine over working, more wastage, leading to high cost of production and lower profits Deterioration of quality Frequent replacement of machinery Encourages rivalry among the workers
Time Wage System vs Piece Wage System

Criteria
1. Meaning
Time Wage System
Piece Wage System
Time rate system is a method of wage Piece rate system is a method of wage payment to workers based on time spent payment to workers based on the quantity of by them for the production of output. output they have produced. Time rate system pays the workers Piece rate system pays the workers according to the time spent in the factory according to the units of output produced. Time rate system emphasis on better Piece rate system gives emphasis on larger quality of output. quantity of output. Piece rate system discriminates the Time rate system does not discriminate the workers and pays more wages to workers and pays the same wages to efficient and skilled workers. efficient and inefficient workers. Piece rate system requires strict supervision to get the required quality output. Piece rate system helps to fix per unit labor cost in advance.
2. Nature Of Payment 3. Emphasis 4. Discrimination
5. Supervision
Time rate system requires strict supervision to get required quantity of output. 6. Determination Of Time rate system does not help to fix Labor Cost labor cost per unit in advance. 7. Flow Of Production
Time rate system helps maintain a Piece rate system does not bring uniformity uniform flow of production and ensures in the flow of production and causes an an efficient use of materials, tools and excessive wastage of inputs. equipments.
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Employee Benefits
1. Employee benefits can be explained as different nonwage compensations offered to employees other than their normal salaries or wages. 2. Some good examples of these benefits are disability income protection, group insurance (health, life, dental etc.), housing, retirement benefits, tuition, daycare, sick leave, reimbursement, vacation, profit sharing, social security, education funding, and similar specialized benefits.
Objectives of Benefit Programs
1. 2. 3. 4. 5. 6. 7.
To Improve Morale To Meet Health and Safety Needs To Attract Good Employees To Reduce Turnover To Reduce Unionism To Maintain a Competitive Position To Enhance the Organization's Image
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Types of Employee Benefits

Besides, there are various different types of employee benefits which are provided by the company, the most common ones being life insurance, medical, disability, fringe benefits, paid time off, and retirement benefits.
1. Medical Insurance: Medical insurance, as an employee benefit, covers the costs of physician as well as the surgeon fees, prescription drugs, and hospital rooms. Besides, dental and optical care might also be offered as a part of an overall benefits package. It might also be offered as individual pieces. Also, coverage can, many a times, include the employees family.
2. Disability Insurance: Disability insurance replaces whole or a part of income which is lost in case a worker is not capable of doing the job due to illness or injury. The disability insurance can be divided into two main categories namely, short-term disability and long-term disability.
Types of Employee Benefits

3. Retirement benefits: Retirement benefits are funds which are set aside to avail people with a pension or income after the ending term of their career. The common categories fitting in retirement plans include defined benefit plans and defined contribution plans. Life Insurance: Life insurance protects the family of the employee in case of his death. These benefits are paid in one single installment to the policy beneficiaries. Paid time off: The paid time off is earned by the employees while working. The most common types of this employee benefit include holidays, vacation leave, sick leave. Fringe benefits: Different types of non-cash payments are used to attract and hold talented employees. These benefits are referred as fringe benefits and include tuition assistance, child-care benefits, non-production benefits, and flexible medical or child-care spending accounts.
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Incentives
1. It is a form of pay linked to an employees performance as an individual, group member or organization member. 2. Incentive pay is influential because the amount paid is linked to certain predefined behaviors or outcomes. 3. For incentive pay to motivate employees to contribute to the organizations success, the pay plans must be well designed. 4. Incentive pay links pay (as a reward) to performance 1. The idea of incentive pay is to create incentives for employees to improve their job performance by linking employee pay to employee job performance 2. Incentive pay is also called Pay for performance
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Incentive Wage Plans
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Individual Incentive Plans

1. Halsey plan: Here the worker gets a guaranteed wages based on the time, irrespective of whether the assigned work is completed or not. If the worker is able to finish the task in less than the standard time, he or she is entitled to get fifty per cent of time saved at time rate in addition to normal time wages.
2. Rowan plan: It assures minimum time wages. Bonus is paid on the basis of time saved. But unlike a fixed percentage, it is calculated: Bonus = Time saved/Standard time X Time taken X hourly rate
3. Gantt task and bonus plan: Here time wages are guaranteed. Standard time for each task is fixed. Workers, who fail to finish the job within the time limits, get time wages. A worker who reaches the standard is paid time wage plus bonus at a fixed percentage (20 percent) of normal time wages. If a worker exceeds the standards, he is paid a high piece rate.
Individual Incentive Plans

4. Bedeaux plan: In this plan every operation is expressed in terms of standard minutes called as B's representing one minute. A worker gets time wages for 100 % performance; ie, finishing the job exactly as per standards set. If actual performance exceeds the standard performance in terms of B's then 75% of the wages of time saved is paid to worker as bonus and 25% is given to the foreman.
5. Haynes manit plan: It is more or less like the bedeaux plan. Here the bonus is only 50 per cent as against 75 per cent, being paid to the efficient worker. Of the remaining 50 per cent, 10% goes to the foreman and the rest to management.
6. Emerson's efficiency plan: If the worker achieves 67% efficiency, he gets bonus at a given rate. The rate of bonus increases gradually from 67% to 100%. Above 100% bonus will be at 20% of the basic rate plus 1% for each increase in efficiency.
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Pay for Individual Performance

Types of pay for individual performance include:
1. Piecework rates Straight piecework plan Differential piece rates 2. Standard hour plans 3. Merit pay 4. Individual bonuses Retention bonuses 5. Sales commissions Straight commission plan
Pay for Group Performance

Types of pay for individual performance include: 1. Gainsharing 2. Group bonuses 3. Team awards
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Pay for Organizational Performance

1. Two ways organizations measure their performance are in terms of their: 1) Profits 2) Stock price
2. Organization-level incentives can motivate employees to align their activities with the organizations goals.
3. Linking incentives to the organizations profits or stock prices exposes the employees to a high degree of risk. 4. Types of pay for organizational performance include: 1) Profit sharing 2) Stock ownership a) Stock options b) ESOPs
Wage Incentive Plan
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Types of Pay-for-performance Plans
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Incentives and Rewards

1. A distinction may be drawn between incentives and rewards. Incentives are forward looking while rewards are retrospective. 2. Financial incentives are designed to provide direct motivation do this and you will get that 3. Financial rewards provide a tangible form of recognition and can therefore serve as indirect motivators 4. Competence-Related Pay: a method of rewarding people wholly or partly by reference to the level of competence they demonstrate in carrying out their roles. 5. Skill-Based Pay: Skill-based pay links pay to the level of skills used in the job and, sometimes, the acquisition and application of additional skills by the person carrying out the job.
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Incentives and Rewards

5. Team-Based Rewards: Team-based rewards are payments or other forms of non-financial rewards provided to members of a formally established team which are linked to the performance of that team.
Profit Sharing: Profit sharing is a group-based organisation plan. The fundamental objectives of profit sharing are: 1) to encourage employees to identify themselves more closely with the company 2) to stimulate a greater interest among employees in the affairs of the company as a whole 3) to encourage better cooperation between management and employees. Gain Sharing: Gain sharing is a formula based company or factory-wide bonus plan which provides for employers to share in the financial gain made as a result of its improved performance. Gain sharing is based on ownership, involvement, and commitment. Stock Options: is the right to purchase a specific number of shares of company stock at a specific price during a period of time. The price at which the employee can buy the stock is equal to the market price at the time the stock option was granted. Employee Ownership: A number of plans exist that help get some or all of the ownership of a company into the hands of employees. These include stock option plans, stock purchase plans, and Employee Stock Ownership Plans (ESOPs).
6.
7.
8.
9.
Bonuses
1. Bonus refers to the extra lump-sum income, awarded by an organisation to its employees usually on an annual basis.
2. It may be provided to the employees on special occasions like festivals, new year and other important celebrations. 3. Some firms even distribute bonus to its employees as a token for their contribution in the high performance of the firm. 4. All such gestures by an enterprise help in boosting the confidence of the employees in their efforts as well as in the organisation.
5. In India, the payment of bonus by an establishment is governed by the Payment of Bonus Act,1965. The Act imposes statutory liability upon the employers of every establishment covered under the Act to pay bonus to their employees.
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Bonuses
6. The Act applies to every factory where 10 or more workers are working and every other establishment in which 20 or more persons are employed, on any day during an accounting year, excluding employees covered under Life Insurance Corporation of India (LIC), port and dock workers, universities, etc. Under the Act, every employee is entitled to be paid by his employer a bonus in an accounting year subjected to the condition that he/she has worked for not less than 30 working days of that year.
7.
8.
However, this bonus shall be payable by employer only when the employer derives profit from running organization as bonus is payable out of these profits.
Also, wherever the salary or wage of an employee exceeds a particular mentioned amount(per annum), then the bonus payable to such employee shall be calculated as if his/her salary or wage was equal to that particular amount only.
9.
Bonuses
10. The Act further provides for payment of minimum and maximum bonus and linking the payment of bonus with the production and productivity. Every employer shall pay minimum bonus at the rate of 8.33% of the salary or wages earned by an employee in a year or one hundred rupees, whichever is higher.
11. Here it is not required that the employer has any allocable surplus in the accounting year. Whereas, when the allocable surplus exceeds the amount of minimum bonus payable to the employees, the employer shall in lieu of such minimum bonus, be bound to pay bonus equivalent to the amount in certain proportion of salary or wages earned by employees.
12. Such a benefit in the form of bonus serves as an incentive to the employee to work harder and contribute his best for the growth of the organisation.
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Fringe Benefits
1. Fringe benefits refer to supplements to wages obtained by the employees at the cost of the employers. Fringe benefits are also called wage extras, hidden payments, non wage labour costs and supplementary wage practices. Fringe benefits are non-cash compensation benefits 2. Thus fringe benefits embrace both voluntary and involuntary programmes. These programmes are intended: 1) to improve employer employee relations, 2) minimise excessive labour turnover costs and 3) provide a sense of individual security. 3. Fringe benefits can be most effective if they are geared to the preferences of the employee.
Fringe Benefits
1. A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are met. 2. Any employee who receives taxable fringe benefits will have to include the fair market value of the benefit in their taxable income for the year, which will be subject to tax withholdings, and social security benefits payments. 3. Fringe benefits commonly include health insurance, group term life coverage, education reimbursement, childcare and assistance reimbursement, cafeteria plans, employee discounts, personal use of a company owned vehicle and other similar benefits.
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Fringe Benefits
1. The characteristics of fringe benefits are: 1) These benefits are distinctly additional to the regular wages paid to the workers. 2) These benefits are meant primarily to be of advantage to the employees. 3) Only those benefits fall within the purview of fringe benefits which are or can be expressed in cash terms. 4) The scope of fringe benefits is different from that of welfare services. Fringe benefits are provided by the employers alone whereas welfare services may be provided by other agencies as well. 5) Benefits that have no relation to employment should not be regarded as fringe benefits.
Types of Fringe Benefits

Types of Fringe Benefits Payment for Time not worked Employee security Safety and health Welfare recreational facilities Old age and retirement benefits
Hours of work
Paid holidays
Shift Holiday premium pay
Paid vacation
Retrenchment compensation
Lay off compensation Workmens compensation Legal aid Health benefits Educational Trans- Parties & Miscefacilities portation picnic llaneous
Safety measures Canteens Consumer Credit Housing societies societies
Employee Welfare Holiday counselling organisations homes
Provident fund Deposit linked insurance Gratuity Medical benefits

Pension
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Perks (perquisites)
1. The term perks is often used colloquially to refer to those benefits of a more discretionary nature. 2. Often, perks are given to employees who are doing notably well and/or have seniority. 3. Common perks are take-home vehicles, hotel stays, free refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch, andwhen multiple choices existfirst choice of such things as job assignments and vacation scheduling.
4. They may also be given first chance at job promotions when vacancies exist.
Retirement Benefits
1. 2. 3. 4. 5. 6. Pension Scheme Gratuity Retirement, Death and Service General Provident Fund Deposit Linked Insurance Revised Scheme Leave encashment, contributed provident fund
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Retirement Benefits
1. Retirement and pension benefits are provided to retired government officials to ensure a regular income and a secure future. The provision of such financial benefits results in a feeling of independence and a decent standard of life. 2. It usually consist of leave encashment, retirement gratuity and contributed provident fund. 3. Along with these retirement benefits, senior citizens are also entitled to pension benefits that allow them to live a hassle free life after completion of their job tenure. Different types of pension available to senior citizens are superannuation, retiring pension, voluntary retirement pension, compensation pension, compassionate allowance, extraordinary pension or family pension. 4. Superannuation pension is meant for those government officials who retire at the age of 60 years. Voluntary pension is awarded to those who wish to retire three months in advance after completing 20 years of service. Extraordinary pension is another pension scheme that is awarded to those government employees who are disabled or the families of those employees who lose their lives during the tenure of 32 their job. Saket Jeswani, Associate Professor, RCET, Bhilai
Retirement Benefits
1) Pension: 2) The minimum eligibility period for receipt of pension is 10 years. A Central Government servant retiring in accordance with the Pension Rules is entitled to receive superannuation pension on completion of at least 10 years of qualifying service. In the case of Family Pension the widow is eligible to receive pension on death of her spouse after completion of one year of continuous service or before even completion of one year if the Government servant had been examined by the appropriate Medical Authority and declared fit for Government service 3) W.e.f 1.1.2006, Pension is calculated with reference to average emoluments namely, the average of the basic pay drawn during the last 10 months of the service or last basic pay drawn whichever is beneficial. Full pension with 10/20 years of qualifying service is 50% of the average emoluments or last basic pay drawn whichever is beneficial. Before 1.1.2006, for qualifying service of less than 33 years, amount of pension was proportionate to the actual qualifying service broken into completed half-year periods. Minimum pension presently is Rs. 3500 per month. Maximum limit on pension is 50% of the highest pay in the Government of India (presently Rs. 45,000) per month. Pension is payable up to and including the date of death. Saket Jeswani, Associate Professor, RCET, Bhilai 33
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Retirement Benefits
2. Gratuity: 1) Retirement Gratuity: This is payable to the retiring Government servant. A minimum of 5 years qualifying service and eligibility to receive service gratuity/pension is essential to get this one time lump sum benefit. Retirement gratuity is calculated @ 1/4th of a months Basic Pay plus Dearness Allowance drawn before retirement for each completed six monthly period of qualifying service. There is no minimum limit for the amount of gratuity. The retirement gratuity payable is 16 times the Basic Pay, subject to a maximum of Rs. 10 lakhs.
34 Saket Jeswani, Associate Professor, RCET, Bhilai
Retirement Benefits
2. Gratuity: 1) Death Gratuity: This is a one-time lump sum benefit payable to the widow/widower or the nominee of a permanent or a quasipermanent or a temporary Government servant, including CPF beneficiaries, dying in harness. There is no stipulation in regard to any minimum length of service rendered by the deceased employee. 2) Service Gratuity: A retiring Government servant will be entitled to receive service gratuity (and not pension) if total qualifying service is less than 10 years. Admissible amount is half months basic pay last drawn for each completed 6 monthly period of qualifying service. There is no minimum or maximum monetary limit on the quantum. This one time lump sum payment is distinct from and is paid over and above the retirement gratuity.
35 Saket Jeswani, Associate Professor, RCET, Bhilai
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Retirement Benefits
3. General Provident Fund: As per General Provident Fund (Central Services) Rules, 1960, all temporary Government servants after a continuous service of one year, all re-employed pensioners (Other than those eligible for admission to the Contributory Provident Fund) and all permanent Government servants are eligible to subscribe to the Fund. A subscriber, at the time of joining the fund is required to make a nomination, in the prescribed form, conferring on one or more persons the right to receive the amount that may stand to his credit in the fund in the event of his death, before that amount has become payable or having become payable has not been paid. A subscriber shall subscribe monthly to the Fund except during the period when he is under suspension. Subscriptions to the Provident Fund are stopped 3 months prior to the date of superannuation. Rates of subscription shall not be less than 6% of subscribers emoluments and not more than his total emoluments. Rate of interest on GPF accumulations with effect from 1.4.2009 is 8% compounded annually and the rate of interest will vary according to notifications of the Government. The Rules provide for drawal of advances/ withdrawals from the Fund for specific purposes.
Retirement Benefits
4. Deposit Linked Insurance Revised Scheme: Under the GPF Rules, on the death of subscriber, the person entitled to receive the amount standing to the credit of the subscriber shall be paid an additional amount equal to the average balance in the account during the 3 years immediately preceding the death of the subscriber subject to certain conditions provided in the relevant Rule. The additional amount payable under that Rule shall not exceed Rs. 60,000/-. To get this benefit, the subscriber should have put in at least 5 years service at the time of his/her death.
5.
Leave Encashment: Encashment of leave is a benefit granted under the CCS (Leave) Rules and not a pensionary benefit. Encashment of Earned Leave/Half Pay Leave standing at the credit of the retiring Government servant is admissible on the date of retirement subject to a maximum of 300 days. There is no provision under the Rule for payment of interest on delayed payment of Leave Encashment.
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Retirement Benefits
6. Contributory Provident Fund: The Contributory Provident Fund Rules (India), ,1962 are applicable to every non-pensionable servant of the Government belonging to any of the services under the control of the President. A subscriber, at the time of joining the Fund is required to make a nomination in the prescribed Form conferring on one or more persons the right to receive the amount that may stand to his credit in the Fund in the event of his death, before that amount has become payable or having become payable has not been paid. A subscriber shall subscribe monthly to the Fund when on duty or Foreign Service but not during the period of suspension. Rates of subscription shall not be less than 10% of the emoluments and not more than his emoluments. The employers contribution at that percentage prescribed by the Government will be credited to the subscribers account and this is 10%. Rate of interest with effect from 1.4.2009 is 8% compounded annually. The Rules provide for drawal of advances/ withdrawals from the CPF for specific purposes. As in GPF Rules, the CPF Rules also provide for Deposit Linked Insurance Revised Scheme.
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Performance Management

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Performance Management

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Compensation Management

Performance Management System

Saket Jeswani Associate Professor, MBA,RCET, Bhilai

Performance Management Techniques

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Set of behaviors that a person does (or does not) perform

Saket Jeswani, Associate Professor, RCET, Bhilai

Performance Management & Strategic Linkages

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Introduction to Performance Appraisal

Introduction to Performance Appraisal

5. It should be scheduled regularly (formal) and take place casually at times.

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Definition of Performance Appraisal

Saket Jeswani, Associate Professor, RCET, Bhilai

Concept of Performance Appraisal

Setting Work Standards

Assessing Actual Performance

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Performance Management Techniques

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Nature of Performance Management

Effective Performance Management System

Identify areas of success and needed development

Document performance for personnel records

Saket Jeswani, Associate Professor, RCET, Bhilai

Objective of Performance Management System

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Importance of Performance Management System

Purposes of Performance Management

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Performance Management Vs Performance Appriasal

Focus on Long Term Goals

Focus on Short Term Goals

Practical & Effective

Bureaucratic & Superficial

Saket Jeswani, Associate Professor, RCET, Bhilai

Criteria For Performance Management

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Performance Management Performance Management Components

Performance Management Techniques

Saket Jeswani, Associate Professor, RCET, Bhilai

Measurement (Performance Appraisal)

Performance Management System

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Saket Jeswani, Associate Professor, RCET, Bhilai

Components of Performance Management

Saket Jeswani, Associate Professor, RCET, Bhilai

Saket Jeswani, Associate Professor, MBA, RCET, Bhilai

Performance Management Techniques

Saket Jeswani, Associate Professor, RCET, Bhilai