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ASSIGNMENT No.

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(Units: 1–5)
Note: Attempt all questions.
Q. 1 Organizational effectiveness can be enhanced by auditing and reviewing Wage and Salary Program, discuss.
(20)
Ans Internal Audit
The role of internal audit is to provide independent assurance that an organisation's risk
management, governance and internal control processes are operating effectively.

Importance to Organization
By reporting to executive management that important risks have been evaluated and highlighting where
improvements are necessary, the internal auditor helps executive management and boards to
demonstrate that they are managing the organisation effectively on behalf of their stakeholders. This is
summarised in the mission statement of internal audit which says that internal audit’s role is 'to enhance
and protect organisational value by providing risk-based and objective assurance, advice and insight'.
Hence, internal auditors, along with executive management, non-executive management and the
external auditors are a critical part of the top-level governance of any organisation.
Key Steps to Implementing Continuous Auditing
Once the issues above are understood by managers and auditors alike, the organization will be in a
better position to begin using continuous auditing. Generally, the implementation of continuous auditing
consists of six procedural steps, which are usually administered by a continuous audit manager. Knowing
about these steps will enable auditors to better monitor the continuous audit process and provide
recommendations for its improvement, if needed. These steps include:
1. Establishing priority areas.
2. Identifying monitoring and continuous audit rules.
3. Determining the process' frequency.
4. Configuring continuous audit parameters.
5. Following up.
6. Communicating results.

1. Establishing Priority Areas


The activity of choosing which organizational areas to audit should be integrated as part of the internal
audit annual plan and the company's risk management program. Many internal audit departments also
integrate and coordinate with other compliance plans and activities, if applicable. (Steps 2-6 below are
applicable to all of the priority areas and processes being monitoring as part of the continuous audit
program.)
Typically, when deciding priority areas to continuously audit, internal auditors and managers should:
 Identify the critical business processes that need to be audited by breaking down and rating risk
areas.
 Understand the availability of continuous audit data for those risk areas.
 Evaluate the costs and benefits of implementing a continuous audit process for a particular risk
area.
 Consider the corporate ramifications of continuously auditing the particular area or function.
 Choose early applications to audit where rapid demonstration of results might be of great value to
the organization. Long extended efforts tend to decrease support for continuous auditing.
 Once a demonstration project is successfully completed, negotiate with different auditees and
internal audit areas, if needed, so that a longer-term implementation plan is implemented.
2. Monitoring and Continuous Audit Rules
The second step consists of determining the rules or analytics that will guide the continuous audit activity,
which need to be programmed, repeated frequently, and reconfigured when needed. For example, banks
can monitor all checking accounts nightly by extracting files that meet the criterion of having a debt
balance that is 20 percent larger than the loan threshold and in which the balance is more than US
$1,000.
In addition, monitoring and audit rules must take into consideration legal and environmental issues, as
well as the objectives of the particular process. For instance, how quickly a management response is
provided once an activity is flagged may depend on the speed of the clearance process (i.e., the
environment) while the activity's overall monitoring approach may depend on the enforceability of legal
actions and existing compliance requirements.
3. Determining the Process' Frequency
Although the process is called continuous auditing, the word continuous is in the eye of the beholder.
Auditors need to consider the natural rhythm of the process being audited, including the timing of
computer and business processes as well as the timing and availability of auditors trained or with
experience in continuous auditing. For instance, although increased testing frequency has substantial
benefits, extracting, processing, and following up on testing results might increase the costs of the
continuous audit activity. Therefore, the cost-benefit ratio of continuously auditing a particular area must
be considered prior to its monitoring.
4. Configuring Continuous Audit Parameters
Rules used in each audit area need to be configured before the continuous audit procedure (CAP) is
implemented. In addition, the frequency of each parameter might need to be changed after its initial
setup based on changes stemming from the activity being audited. Hence, rules, initial parameters, and
the activity's frequency ― also a special type of parameter ― should be defined before the continuous
audit process begins and reconfigured based on the activity's monitoring results.
5. Following Up
Another type of parameter relates to the treatment of alarms and detected errors. Questions such as who
will receive the alarm (e.g., line managers, internal auditors, or both ― usually the alarm is sent to the
process manager, the manager's immediate supervisor, or the auditor in charge of that CAP) and when
the follow-up activity must be completed, need to be addressed when establishing the continuous audit
process.
Additional follow-up procedures that should be performed as part of the continuous audit activity include
reconciling the alarm prior to following up by looking at alternate sources of data and waiting for similar
alarms to occur before following up or performing established escalation guidelines. For instance, the
person receiving the alarm might wait to follow up on the issue if the alarm is purely educational (i.e., the
alarm verifies compliance but has no adverse economic implications), there are no resources available
for evaluation, or the area identified is a low benefit area that is mainly targeted for deterrence.
6. Communicating Results
A final item to be considered is how to communicate with auditees. When informing auditees of
continuous audit activity results, it is important for the exchange to be independent and consistent. For
instance, if multiple system alarms are issued and distributed to several auditees, it is crucial that steps
1-5 take place prior to the communication exchange and that detailed guidelines for individual factor
considerations exist. In addition, the development and implementation of communication guidelines and
follow-up procedures must consider the risk of collusion. Much of the work on fraud indicates that the
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majority of fraud is collusive and can be performed by an internal or external party. For example, in the
case of dormant accounts, both the clerk that moves money and the manager that receives the follow-up
money may be in collusion since the manager's key may have to be used for certain transactions.
WAGES AND SALARIES
When determining what your organization will pay for wages and salaries, it is important to understand
the economic conditions of the region in which you function, the volume of potential employees and the
legislative requirements in place. When determining what to pay, first consideration is placement of the
role organizationally which can be determined through job evaluation/classification. The second
consideration is the job relevant skills and experience the applicant possesses which may impact their
placement in the salary range upon hire.
APPROACHES AND TECHNIQUES TO DETERMINING BASE PAY
Determining base pay is directly linked to your compensation philosophy. Having a clear understanding
of what role, the position plays in the organization, including the complexity of the required
responsibilities and tasks, is factored into the equation along with data on market and sector
comparatives. Organizations that take the time to ensure they have factored in all of the following
components will be more effective in managing their competitiveness externally as well as their
consistency and credibility internally.
Create job descriptions
Job descriptions define the requirements and responsibilities of a job that has been created to meet an
organizational need. Job descriptions are an important element of your organization’s overall
compensation philosophy when they are used to develop a consistent salary structure based on the
relative level of duties, responsibility and qualifications of each position in the organization.
Conduct a job analysis
Conducting an analysis of each job by group/department to determine which tasks are being done and
by who will help both in determining if you have the most effective alignment of tasks to roles and in
developing your job descriptions. This is important as compensation structures are built based on the
level of skill and experience required for a certain role to perform core functions.
Should you find inconsistencies or inefficiencies, you should conduct a review to evaluate the
appropriateness of the tasks assigned to that role. From there you determine if the job description and
associated compensation warrants changing or not.
Perform job evaluation
Job evaluation is the process for assessing the relative worth of jobs within an organization. Paying fairly
based on internal relative worth is called Internal Equity. A comprehensive analysis of each position’s
tasks, responsibilities, knowledge, and skill requirements is used to assess the value to the employer of
the work performed and provide an internal ranking of the jobs. Job evaluation is a measurement of the
internal relativity of the position and not the incumbent in the position. Job evaluation can be used
independently, although it is usually part of a compensation system designed to provide appropriate
salary ranges for all positions. This process will ensure an equitable and defensible compensation
structure which compensates employees fairly for job value.
Review pay structures
Pay structures are helpful when standardizing your organization’s compensation practices as they reflect
the grouping of jobs based on relative worth. Typical pay structures can have several grades or levels,
career bands, or job families with each having a minimum or maximum salary associated. These could
be identified by hourly wages or annual salaries.
A number of levels may exist for a role or types of roles linked together, and for each, a dollar value
would be associated. Creation of pay structures are based on internal and/or external data.
 The most basic salary structure is one in which each job class is a level with a single salary for all
incumbents within the level.
 This is seen as somewhat limited as employees (or potential employees) come with a
variety of experience and skills and therefore should not all be compensated at the same
rate.
 An alternative to the basic salary structure is to incorporate salary ranges for each of the different
job levels.
 Placement in the range is based on established criteria outlining experience, skill,
potential and fit
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 The scale is usually created by evaluating the market comparative data however, the
placement of the person in the salary range is usually based on their skill and ability
against other employees in the same role
 Criteria for moving through a salary grade must align with the compensation philosophy and
should be described in the Compensation Policy.

Building a matrix that identifies the hierarchy of the job family through levels as well as skills and
competencies can assist in determining the appropriate placement of a position.
Participate in salary surveys
Salary surveys are conducted with employers in the same labour market to determine pay levels for
specific job categories. Generally, wage and salary surveys are conducted either by region, sector or job
classification for the purposes of comparability. By participating in salary surveys, you’ll be have access
to information that will allow you to benchmark your organization’s compensation practices including
wages, salaries, bonuses and benefit provisions against other organizations in your region or sector
PAY INCREASES, BONUS AND INCENTIVE PLANS
Pay increases
Base pay is a fixed regular payment made to an employee in exchange for performance of the duties
and responsibilities of their role. When an employee receives an increase to their base pay, it is
considered a pay increase. There are various reasons and methods for determining an increase, but the
common factor is that the increase changes the level of ongoing base pay.
A cost of living increase
 This is an increase offered to employees, regardless of performance, with the intention of
increasing base pay for each role on the salary scale by a set percentage in order to account for
increases in the cost of living. When this is offered regularly, employees can begin to see it as an
entitlement.
 If Cost of living increases are provided, they are generally done on an annual basis, and are
given to all employees at a rate recommended by the Executive Director and approved by the
Board of Directors and is contingent on the overall financial stability of the agency.
 Many small organizations are moving away from the standard cost of living increase and
performing market adjustments instead.
A market adjustment following a compensation review against pre-established criteria
 Market adjustments are typically made following the receipt of market survey data. This data is
usually received and evaluated towards the end of either your fiscal or calendar year.
Organizations will evaluate their salaries against market data and, if required, adjust base
salaries for roles that are below the market. Many organizations have predetermined the percent
of market they want to be paying at – i.e. a decision to pay at the median, or 50th percentile.
 If a position in the organization is significantly overpaid compared to market or, some companies
will notify employees and not provide an increase to the employee. In this situation, the employee
is considered to be “red circled” (unable to qualify for any salary increases until their salary comes
in line with market)
A promotional increase
 A promotion is the advancement of an employee to a position that is evaluated at a higher grade
level than the position to which the employee is currently assigned.
 An employee who is being promoted can receive a promotional increase at the time of the
promotion aligned to the appropriate point in the new salary range, taking into consideration
performance, qualifications, and market information.
 Promotion is usually based on availability of opportunities and preparedness of employees to
advance.
A merit increase
 Merit increases are awarded to recognize an employee’s contribution and to compensate them
for their high level of performance.
 Performance is the key factor in awarding a merit increase and can be the factor that moves a
person through the salary scale towards the midpoint or higher. Merit increases can be awarded
on an employee’s anniversary date following a formal performance review or at the beginning of a
calendar year, depending on your compensation structure and philosophy.
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Incentive plans
Incentive plans have not typically been popular in the nonprofit sector. However, leaders are starting to
see a change in perspective regarding the use of incentive plans. Providing incentive plans, especially to
senior level staff, can enable organizations to compete for talent they would otherwise have not been
able to pursue.
 Incentive plans are established to reward employees for improved commitment and performance
and as a means of motivation
 An incentive plan is designed to supplement base pay and fringe benefits
 A financial incentive plan may offer a percentage of base salary or a cash bonus whereas a non-
financial incentive plans offer benefits such as additional paid vacations or increased professional
development
Communicating wage and salary information
Effective communications about compensation makes employees more aware of the value they receive
from their compensation plan. When employees have a good understanding of their compensation plan
they are more confident that they are being paid fairly - which results in greater motivation and retention.
A compensation communication strategy should be created in alignment with the organization’s HR
strategy as well as be supported by management.
The level of transparency is highly dependent on the organization’s culture and varies for each
organization. Ideally; employees should be advised of their own salary, their job grade / level, the position
of their salary in the salary range for their job grade / level, the basis for progress through the range over
time (seniority and / or performance), and the procedures for annual salary adjustments (if any).
Communicating total compensation information through formats such as statements, booklets,
newsletters and memos provides a consistent message and allows employees to refer to the material
later. Presenting compensation information through meetings, workshops and ongoing support allows
interaction so individual questions and concerns can be addressed immediately. Overall, it is important to
ensure employees have access to information regarding the compensation plan and that it is provided in
clear and concise language. A compensation plan can also be used to attract prospective employees and
therefore effective external communication is also important.

Q. 2 Job analysis is an essential step for development of Wage and Salary Programs, discuss. (20)
Ans Job Analysis
Job Analysis is a systematic exploration, study and recording the responsibilities, duties, skills,
accountabilities, work environment and ability requirements of a specific job. It also involves
determining the relative importance of the duties, responsibilities and physical and emotional skills
for a given job. All these factors identify what a job demands and what an employee must possess
to perform a job productively.
Importance of Job Analysis
The details collected by conducting job analysis play an important role in controlling the output of
the particular job. Determining the success of job depends on the unbiased, proper and thorough
job analysis. It also helps in recruiting the right people for a particular job. The main purpose of
conducting this whole process is to create and establish a perfect fit between the job and the
employee.
Job analysis also helps HR managers in deciding the compensation package and additional perks
and incentives for a particular job position. It effectively contributes in assessing the training needs
and performance of the existing employees. The process forms the basis to design and establish
the strategies and policies to fulfill organizational goals and objectives.
However, analysis of a particular job does not guarantee that the managers or organization would
get the desired output. Actually collecting and recording information for a specific job involves
several complications. If the job information is not accurate and checked from time to time, an
employee will not be able to perform his duty well. Until and unless he is not aware of what he is
supposed to do or what is expected of him, chances are that the time and energy spent on a
particular job analysis is a sheer wastage of human resources. Therefore, proper care should be
taken while conducting job analysis.
A thorough and unbiased investigation or study of a specific job is good for both the managers and
the employees. The managers get to know whom to hire and why. They can fill a place with the

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right person. On the other hand, existing or potential employee gets to know what and how he is
supposed to perform the job and what is the desired output. Job analysis creates a right fit between
the job and the employee.

Job Analysis Process

 Identification of Job Analysis Purpose: Well any process is futile until its purpose is not identified
and defined. Therefore, the first step in the process is to determine its need and desired output.
Spending human efforts, energy as well as money is useless until HR managers don’t know why data
is to be collected and what is to be done with it.
 Who Will Conduct Job Analysis: The second most important step in the process of job analysis is to
decide who will conduct it. Some companies prefer getting it done by their own HR department while
some hire job analysis consultants. Job analysis consultants may prove to be extremely helpful as
they offer unbiased advice, guidelines and methods. They don’t have any personal likes and dislikes
when it comes to analyze a job.
 How to Conduct the Process: Deciding the way in which job analysis process needs to be
conducted is surely the next step. A planned approach about how to carry the whole process is
required in order to investigate a specific job.
 Strategic Decision Making: Now is the time to make strategic decision. It’s about deciding the extent
of employee involvement in the process, the level of details to be collected and recorded, sources
from where data is to be collected, data collection methods, the processing of information and
segregation of collected data.
 Training of Job Analyst: Next is to train the job analyst about how to conduct the process and use
the selected methods for collection and recoding of job data.
 Preparation of Job Analysis Process: Communicating it within the organization is the next step. HR
managers need to communicate the whole thing properly so that employees offer their full support to
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the job analyst. The stage also involves preparation of documents, questionnaires, interviews and
feedback forms.
 Data Collection: Next is to collect job-related data including educational qualifications of employees,
skills and abilities required to perform the job, working conditions, job activities, reporting hierarchy,
required human traits, job activities, duties and responsibilities involved and employee behaviour.
 Documentation, Verification and Review: Proper documentation is done to verify the authenticity of
collected data and then review it. This is the final information that is used to describe a specific job.
 Developing Job Description and Job Specification: Now is the time to segregate the collected data
in to useful information. Job Description describes the roles, activities, duties and responsibilities of
the job while job specification is a statement of educational qualification, experience, personal traits
and skills required to perform the job.
Thus, the process of job analysis helps in identifying the worth of specific job, utilizing the human talent in the
best possible manner, eliminating unneeded jobs and setting realistic performance measurement standards.

What to Collect?
 Job Content
 Job Context
 Job Requirements
1. Job Content: It contains information about various job activities included in a specific job. It is a
detailed account of actions which an employee needs to perform during his tenure. The following
information needs to be collected by a job analyst:
 Duties of an employee
 What actually an employee does
 Machines, tools and equipments to be used while performing a specific job
 Additional tasks involved in a job
 Desired output level (What is expected of an employee?)
 Type of training required

1. The content depends upon the type of job in a particular division or department. For example, job
content of a factory-line worker would be entirely different from that of some marketing executive or
HR personnel.
2. Job Context: Job context refers to the situation or condition under which an employee performs a
particular job. The information collection will include:
 Working Conditions
 Risks involved
 Whom to report
 Who all will report to him or her
 Hazards
 Physical and mental demands
 Judgment

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Well like job content, data collected under this category are also subject to change according to the
type of job in a specific division or department.
3. Job Requirements: These include basic but specific requirements which make a candidate eligible
for a particular job. The collected data includes:
 Knowledge or basic information required to perform a job successfully
 Specific skills such as communication skills, IT skills, operational skills, motor skills,
processing skills and so on
 Personal ability including aptitude, reasoning, manipulative abilities, handling sudden and
unexpected situations, problem-solving ability, mathematical abilities and so on
 Educational Qualifications including degree, diploma, certification or license
 Personal Characteristics such as ability to adapt to different environment, endurance,
willingness, work ethic, eagerness to learn and understand things, behaviour towards
colleagues, subordinates and seniors, sense of belongingness to the organization, etc
For different jobs, the parameters would be different. They depend upon the type of job, designation,
compensation grade and responsibilities and risks involved in a job.

Purpose of Job Analysis


Job Analysis plays an important role in recruitment and selection, job evaluation, job designing, deciding
compensation and benefits packages, performance appraisal, analyzing training and development needs,
assessing the worth of a job and increasing personnel as well as organizational productivity.

 Recruitment and Selection: Job Analysis helps in determining what kind of person is required to perform
a particular job. It points out the educational qualifications, level of experience and technical, physical,
emotional and personal skills required to carry out a job in desired fashion. The objective is to fit a right
person at a right place.
 Performance Analysis: Job analysis is done to check if goals and objectives of a particular job are met or
not. It helps in deciding the performance standards, evaluation criteria and individual’s output. On this
basis, the overall performance of an employee is measured and he or she is appraised accordingly.
 Training and Development: Job Analysis can be used to assess the training and development needs of
employees. The difference between the expected and actual output determines the level of training that
need to be imparted to employees. It also helps in deciding the training content, tools and equipments to be
used to conduct training and methods of training.
 Compensation Management: Of course, job analysis plays a vital role in deciding the pay packages and
extra perks and benefits and fixed and variable incentives of employees. After all, the pay package
depends on the position, job title and duties and responsibilities involved in a job. The process guides HR
managers in deciding the worth of an employee for a particular job opening.
 Job Designing and Redesigning: The main purpose of job analysis is to streamline the human efforts and
get the best possible output. It helps in designing, redesigning, enriching, evaluating and also cutting back
and adding the extra responsibilities in a particular job. This is done to enhance the employee satisfaction
while increasing the human output.

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Q. 3 Explain the reasons for a wage and salary budget and steps in the budget
process. (20)

Ans Introduction
One of the most important factor to be taken care of in human resources management is the
amount of remuneration to be paid to an employee for a fairway’s work. Work is the expenditure of
human energy for direct remuneration or pay. Pay in one form or another is certainly one of the
main spring of motivate in our society. Wage and salary administration is concerned with
establishing and implementing sound policies and practices of employee compensation. It satisfies
physical needs of employees and determines social status.

Objectives of Wage and Salary Administrative


A Wage is the remuneration paid for the service of labour in production periodically to an
employee / worker. So payment made to labour is generally referred to as wages. Wages also refer
to the hourly rate paid to such groups as production and maintenance. Salary normally refers to the
periodically rates paid to clerical. administrative and professional employees. So money paid
periodically to person whose output cannot be measured is generally referred as salary. Wage and
salary are paid as per contract of employment. Wages include basic wage / salary and allowances.
Allowances are paid in addition to basic wage to maintain the value of basic wage over a period of
time. In India, different Acts include different item under wages. Though all the lets include basic
wages and Dearness allowance under the item wages. E.g. under the Workmen’s Compensation
Act, 1923, section 2(m) wages for leave period, holiday, overtime pay, bonus, attendance bonus
and good conduct bonus form part of wages and under the payment of wages Act, 1936 section
2(vi) any reward of settlement and production bonus, if paid constitutes wages.
Wage and salary administration is establishment and implementation of sound policies and
practices of employee compensations. Wage policies of different organisations very somewhat.
Some organisations pay minimum necessary to attract the required number and kind of labour,
while some organisations pay well above the going rates in the labour market. Various factors
influence wage and salary structure and administration like govt. legislation and public policy,
organisations ability to pay, labour supply and demand, going wages and salaries, cost of living,
productivity, trade union’s bargaining power, job requirement, management attitude about wage to
be paid etc.
The basic objective of wage and salary administration is to establish and maintain an equitable
wage and salary structure and secondary objective is to establish and maintain an equitable labour
cost structure. Generally sound wage and salary administration tries to achieve following
objectives.
(1) To attract and retain the service of employee.
(2) To pay employees according to the content and difficulty of the job.
(3) To reward employees according to the effort and merit.
(4) To improve employee morale and productivity.
(5) To satisfy employee as to how and why they are paid.
(6) To facilitate pay roll administration, budgeting and wage and salary control.
(7) To simplify collective bargaining.
(8) To promote employee organizational flexibility promotion and transfer.

Remuneration provides more than a means of satisfying the physical needs-it provides recognition, a sense of
accomplishment and determines social status. Hence formulation and administration of wage and salary to attract
and retain right personnel in right position is the prime responsibility of the management in any organisation.

Developing and Managing a Budget


Having a formal and structured budgeting process is the foundation for good business management,
growth and development.
Very similar to our personal finances, discipline and planning should be the cornerstone of a business
budgeting process.

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So where do we begin? As with most things that come with managing an organization, budgeting needs
to be driven by the vision (what we are trying to accomplish) and the strategic plan (the steps to get
there).
Organizations that stay focused on their strategy and plan know exactly where they want to spend their
resources and have a plan to help keep them from spending money in areas that do not line up with the
vision (what we are trying to do) and mission (why we are doing it).

10 Steps to Developing and Managing a Budget


1. Strategic Plan
Every organization, no matter the size should know why it exists and what it hopes to accomplish.
This is articulated through a written Vision and Mission Statement. A Strategic Plan is the HOW the
organization plans to achieve its mission.
The first step in the budgeting process is having a written strategic plan. This ensures that organizational
resources are used to support the strategy and development of the organization. It means budgeting
toward the vision.
2. Business Goals
Annual business goals are the steps an organization takes to implement its strategic plan and it is these
goals that need to be funded by the budget.
Goals need to be developed and there needs to be accountability for achieving goals, which is the
responsibility of the management team, board or business owner.
The budget provides the financial resources to achieve goals.
For example, if your organization has outgrown its facility and there is an objective to increase space,
there needs to be dollars budgeted to expand or move the business operations.
3. Revenue Projections
Revenue projections should be based on historical financial performance, as well as projected growth
income. The projected growth may be tied to organizational goals and planned initiatives that will initiate
business growth.
For example, if there is a goal to increase sales by 10%, those sales projections should be part of the
revenue projections for the year.
4. Fixed Cost Projections
Projecting fixed costs is simply a matter of looking at the monthly predictable costs that do not
change. Employee compensation costs, facility expenses, utility costs, mortgage or rent payments,
insurance costs, etc.
Fixed costs do not change and are a minimum expense that need to be funded in the budget. For
example, if there are open staff positions, the cost to fill those positions should be part of fixed cost
projections.
5. Variable Cost Projections
Variable costs are costs that fluctuate from month to month, supply costs, overtime costs, etc. These are
expenses that can and should be budgeted and controlled.
For example, if higher Christmas sales drive overtime costs temporarily, those costs should be budgeted.
6. Annual Goal Expenses
Goal related projects should also be given budgets. Each initiative should have projected costs
associated with the goals.
This is where the cost of implementing goals are incorporated into the annual budget. Projections of
costs should be identified, laid out and incorporated into the departmental budget that is responsible for
completing the goal.
For example, if the sales department has a goal of increasing sales by 10%, costs associated with the
increased sales (additional marketing materials, travel, entertainment) should be incorporated into that
budget.
7. Target Profit Margin
Every organization, whether they are for-profit or not-for-profit, should have a targeted profit margin.
Profit margins allow for returns for the business owner or investors.
Not-for-profit organizations use their profit margins to reinvest into the facilities and development of the
organization. Profits are important for all organizations and healthy profit margins are a strong indicator
of the strength of an organization.
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8. Board Approval
The governing board, president, owner or head of the organization should approve the budget and keep
current with budget performance. Again, similar to your personal finances, the owner should be
reviewing monthly financial statements for the following reasons.
 To monitor budget performance.
 To be familiar with all expenditures.
 To safeguard the organization against misappropriation of funds or employee fraud.
9. Budget Review
A budget review committee should meet on a monthly basis to monitor performance against goals. This
committee should review budget variances and assess issues associated with budget overages.
It is important to do this on a monthly basis so there can be a correction to overspending or modification
to the budget if needed. Waiting until the end of the year to make corrections could have a negative
affect on the final budget outcome.
10. Dealing With Budget Variances
Budget variances should be reviewed with the responsible department manager and questions should be
raised as to what caused the variance. Sometimes unforeseen situations arise that cannot be avoided
so it is also important (just like your personal budget) to have an emergency fund to help with those
unplanned expenditures.

Q. 4 Discuss the role of intrinsic rewards in developing incentive plan for


organizations. (20)

The intrinsic rewards in today’s work


To identify these intrinsic rewards, we began by analyzing the nature of today’s work. Basically, most of
today’s workers are asked to self-manage to a significant degree—to use their intelligence and
experience to direct their work activities to accomplish important organizational purposes. This is how
today’s employees add value—innovating, problem solving and improvising to meet the conditions they
encounter to meet customers’ needs.
In turn, we found that the self-management process involves four key steps:3
1. Committing to a meaningful purpose
2. Choosing the best way of fulfilling that purpose
3. Making sure that one is performing work activities competently, and
4. Making sure that one is making progress to achieving the purpose.
Each of these steps requires workers to make a judgment—about the meaningfulness of their purpose,
the degree of choice they have for doing things the right way, the competence of their performance, and
the actual progress being made toward fulfilling the purpose. These four judgments are the key factors in
workers’ assessments of the value and effectiveness of their efforts—and the contribution they are
making.
When positive, each of these judgments is accompanied by a positive emotional charge. These positive
charges are the intrinsic rewards that employees get from work, ranging in size from quiet satisfaction to
an exuberant “Yes!” They are the reinforcements that keep employees actively self-managing and
engaged in their work.
The following are descriptions of the four intrinsic rewards and how workers view them:4
 Sense of meaningfulness. This reward involves the meaningfulness or importance of the
purpose you are trying to fulfill. You feel that you have an opportunity to accomplish something of
real value—something that matters in the larger scheme of things. You feel that you are on a path
that is worth your time and energy, giving you a strong sense of purpose or direction.
 Sense of choice. You feel free to choose how to accomplish your work—to use your best
judgment to select those work activities that make the most sense to you and to perform them in
ways that seem appropriate. You feel ownership of your work, believe in the approach you are
taking, and feel responsible for making it work.
 Sense of competence. You feel that you are handling your work activities well—that your
performance of these activities meets or exceeds your personal standards, and that you are

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doing good, high-quality work. You feel a sense of satisfaction, pride, or even artistry in how well
you handle these activities.
 Sense of progress. You are encouraged that your efforts are really accomplishing something.
You feel that your work is on track and moving in the right direction. You see convincing signs that
things are working out, giving you confidence in the choices you have made and confidence in
the future.
Levels of intrinsic rewards
Professor Walter Tymon (Villanova University) and I developed and refined a measure of the four intrinsic
rewards, now available as the Work Engagement Profile.5 Together with our colleagues, we have used it
for research, training, and interventions in a number of organizations in the U.S., Canada, and India.
We found it useful to break down each reward into three levels—high (the top 25% of our norm sample),
middle-range (middle 50%), and low (bottom 25%).
High-range scorers experience the four intrinsic rewards most intensely. These rewards are highly
energizing and engaging.
Middle-range scorers experience these same rewards to a more moderate degree—as somewhat
positive but limited. For example, their work may seem reasonably meaningful when they stop to think of
it; they may have a fair amount of choice but have to live with some decisions that don’t make sense to
them; they may feel they do most things pretty well but not a few others; and they may feel they are
making some progress but less than they would like. They experience these reward levels as moderately
energizing and engaging—enough to put in a “fair day’s work,” but end up feeling less satisfied than they
would like.
Low-range scorers are dissatisfied with many aspects of their work. They may feel their work is relatively
meaningless or pointless, that they are unable to make or influence decisions about how to do their work,
are unable to perform work activities very well, and are making little or no headway. Experiencing these
feelings drains the workers of energy and they are likely to become cynical and resentful about their job
over time.
Important benefits of the intrinsic rewards
Our research findings to date reveal the widespread benefits of the above intrinsic rewards for both
organizations and employees.6
From the organization’s viewpoint, our data confirm the impact of the intrinsic rewards on employee self-
management. For example, people with high reward levels show greater concentration and are rated as
more effective by their bosses. But the benefits extend beyond self-management. The intrinsic rewards
are strong predictors of retention. Note that this is the “right” kind of retention—keeping the people who
are energized and self-managing rather than those who can’t afford to leave. We find that employees
with high levels of intrinsic rewards also become informal recruiters and marketers for their organization.
They recommend the organization to friends as a place to work and recommend its products and
services to potential customers.
The intrinsic rewards are also a relatively healthy and sustainable source of motivation for employees.
There is little chance of burnout with this form of motivation. Workers with high reward levels experience
more positive feelings and fewer negative ones on the job. Their job satisfaction is higher, they report
fewer stress symptoms, and are more likely to feel that they are developing professionally. 7
Overall, the intrinsic rewards seem to create a strong, win/win form of motivation for both an organization
and its employees—and one which suits the times. This type of motivation is focused on the shared
desire that employees’ work makes an effective contribution to meaningful purposes, so that it is
performance-driven. It embodies the kind of self-management and professional development demanded
by younger workers. It does not depend on large outlays of money to generate extra effort, so that it is
feasible when funds are tight. Furthermore, intrinsic rewards do not require that a boss be present, as
exemplified by the growth of the virtual work and telecommute environments…
Despite these benefits, however, a number of managers underestimate the importance of intrinsic
rewards, and continue to treat financial rewards as the key factor in motivating others. While some of this
bias may simply come from their use and familiarity with older models, there is another explanation.
Research shows that, although people are quick to recognize the role of intrinsic rewards in their own
behavior, there is a general tendency to assume that other people are motivated mostly by money and
self-interest.8 In our workshops, for example, managers are commonly surprised to learn that intrinsic

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rewards are valued as much by their employees as by themselves. So, it is important to educate the
managers in your organization on this issue.
Building a high-engagement culture
In our work with managers, change agents and training specialists, we have developed seven guidelines
for building a culture that supports high levels of engagement and intrinsic rewards:9
1. Begin with a meaningful purpose.
Unlike financial rewards, you simply can’t task the Human Resources Department with developing an
“intrinsic reward system.” Building intrinsic motivation is largely a line management responsibility,
although HR can offer considerable help. That responsibility begins with spelling out a meaningful
purpose for the organization. To be meaningful, this purpose usually needs to involve more than profit,
tapping directly into the contribution that the organization’s work makes to its customers—the
contribution that allows it to earn a profit. Again, it is largely that sense of contribution to something of
value that drives the entire self-management process.
2. Build intrinsic motivation and engagement into management training and executive coaching.
As mentioned earlier, managers tend to recognize the role of intrinsic rewards in their own motivation, but
often underestimate their importance for other people. To build a culture of engagement it is important to
incorporate training on intrinsic motivation and employee engagement into management development
programs. We also find that managers are more credible and effective in promoting the value of
engagement when they first learn how to better understand and manage their own intrinsic rewards.
Training typically begins by getting managers in touch with their own intrinsic rewards and then shifts to
learning how to support the intrinsic rewards of their direct reports. At executive levels, the four intrinsic
rewards also provide a useful framework for executive coaching. For example, the New West Institute
builds its coaching on executive transitions around the four rewards, identifying what would be most
meaningful for the executives in their new position, what choices they have, the new competencies they
need to build, and the ways they will identify progress.10 Training and coaching, then, are an important
part of embedding intrinsic motivation and engagement into the organization’s culture.
3. Focus conversations on meaningfulness, choice, competence and progress.
Leaders from the top down need to convey the same message—that the organization stands for doing
work that matters and doing it well. When approaching any work project, leaders can underline the
importance of contribution by focusing discussions on the basic questions in the self-management
process:
 What can we do here that is meaningful?
 What creative choices can we think of to accomplish this?
 How can we make sure we’re doing this work competently?
 How can we make sure we’re actually accomplishing the purpose?
These questions bring employee contributions to the foreground and highlight the intrinsic rewards.
4. Engage the “middle.”
Pay special attention to building intrinsic motivation for people in the middle ranges—the large group that
is only somewhat engaged. If you are able to move their intrinsic rewards to the high range, they will
combine with the people who already highly engaged to form a large majority of highly engaged,
energized people—the critical mass needed to support a culture of high engagement.
5. Measure intrinsic reward levels.
Without some way of assessing the state of intrinsic rewards in your organization, you will be flying blind.
We use the Work Engagement Profile for systematic measurement, though with experience it is possible
to get a rough sense of reward levels from everyday conversations with employees. 11 Measuring the
reward levels will show you the overall level of engagement in your organization and allow you to
recognize improvement. It will also allow you to determine if any rewards are at lower levels than others.
Because self-management requires all four reward levels, the lowest rewards will tend to act as a drag
on overall engagement over time—so that they deserve special attention.
6. Provide missing building blocks for intrinsic rewards that you need to bolster.
Each reward has its own unique building blocks. Building a sense of competence involves actions that
are different than those used in building a sense of choice, for example. The following is a list of key
building blocks.12

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Q. 5 What are the basic things that need to be kept in mind while managing Wage and Salary Administration
Units? (20)

Ans
Wage and Salary Administration
Wage and salary administration affect levels of employee commitment to the organisation. However,
fascinating the individual’s job assignment is, the employee must be paid. Pay affects the way people
work-how much and how well. A large part of the compensation that people receive from work is
monetary. Although managers are expected to conserve money and distribute it wisely, many employees
feel that they should get more of it for what they do. Wages, salaries and many employee benefits and
services are form of compensation.
Administration of employee compensation is called wage and salary administration. According to D.S.
Beach “Wage and Salary Administration refers to the establishment and implementation of sound
policies and practices of employee compensation. It includes such areas as job evaluation, surveys of
wage and salaries, analysis of relevant organizational problems, development and maintenance of wage
structure, establishing rules for administrating wages, wage payment incentives, profit sharing, wage
changes and adjustments, supplementary payments, control of compensation costs and other related
items.”
The wage and salary administration aims to establish and maintain an equitable wage and salary
structure and an equitable labor cost structure.
Objectives of Wage and Salary Administration:
A sound plan of wage and salary administration seeks to achieve the following objectives :
 To establish a fair and equitable compensation offering similar pay for similar work.
 To attract competent and qualified personnel.
 To retain the present employees by keeping wage levels in tune with competitive units.
 To keep labor and administrative costs in line with the ability of the organization to pay.
 To improve motivation and morale of employees and to improve union management relations.
 To project a good image of the company and to comply with legal needs relating to wages and
salaries.
 To establish job sequences and lines of promotion wherever applicable.
 To minimize the chances of favoritism while assigning the wage rates.
Principles of Wage and Salary Administration :
The following principles should be followed for an effective wage and salary administration ;
 Wage policy should be developed keeping in view the interests of all concerned parties viz.,
employer, employees, the consumers and the society.
 Wage and salary plans should be sufficiently flexible or responsive to changes in internal and
external conditions of the organization.
 Efforts should be made to ensure that differences in pay for jobs are based on variations in job
requirements such as skill, responsibility, efforts and mental and physical requirements.
 Wage and salary administration plans must always be consistent with overall organizational plans
and programmes.
 Wage and Salary administration plans must always be in conformity with the social and economic
objectives of the country like attainment of equality in income distribution and controlling inflation,
etc.
 These plans and programmes should be responsive to the changing local and national
conditions.
 Wage and salary plans should expedite and simplify administrative process.
 Workers should be associated, as far as possible, in formulation and implementation of wage
policy.
 An adequate data base and a proper organizational set up should be developed for
compensation determination and administration.
 The general level of wages and salaries should be reasonably in line with that prevailing in the
labor market.
 There should be a clearly established procedure for hearing and adjusting wage complaints. This
may be integrated with the regular grievance procedure, if it exists.
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 The workers should receive a guaranteed minimum wage to protect them against conditions
beyond their control.
 Prompt and correct payments to the employees should be ensured and arrears of payment
should not accumulate.
 The wage and salary payments must fulfill a wide variety of human needs including the need for
self-actualization.
 Wage policy and programme should be reviewed and revised periodically in conformity with
changing needs. For revision of wages, a wage committee should also be preferred to the
individual judgement however unbiased of a manager.
FACTORS AFFECTING WAGE/SALARY LEVELS
Generally, a large number of factors influence the salary levels in an organisation. Significant amount
them are: (i) Remuneration in Comparable Industries; (ii) Firm’s Ability to Pay; (iii) Cost of living: (iv)
Productivity; (v) Union Pressure and Strategies; and (vi) Government Legislations.
 Remuneration in Comparable Industries: Prevailing rates of remuneration in comparable
industries constitution an important in factor in determining salary levels. The organisation,
in the long-run must pay at least equal to the going rate for similar jobs in similar
organisations. Further, the salary rates for the similar jobs in the firms located in the same
geographical region also influence the wage rate in the organisation. The organisation has
to pay the wages equal to that paid for similar jobs in comparable industries in order to
secure and retain the competent employees, to follow the directive of Courts of Low, to
meet the trade union’s demands, to satisfy the employee’s need for same social status as
that of same categories of employees in comparable organizations. Comparable
industries constitute the organisation engaged in the same or similar activities, of the
same size, in the similar type of management, i.e., public sector or under the management
of same owners, organisations located in the same geographical region.

Compensation Policy in Levi Strauss


Levi Strauss takes pride in being called an Employer of choice. The company has put place several
unique HR initiatives and processes. In fact, Levi’s even has official annual Employee Application Day
that’s organized by HR. Complete with a barbecue, music band and fun activities, it is an event that
celebrates the value of employees.
Levi’s compensation program is different in that it is designed to evaluate and reward employees, not for
performance, but also aspirational behavior.
1. A new time-off-with-pay program (TOP), to replace separate vacation, sick leave and floating
holiday plans.
 Firm’s Ability to Pay: One of the principal considerations that weight with the management
in fixing the salary is its ability to pay. But in the short-run, the influence of ability to pay
may be practically nil. However, in the long-run, it is quite an influential factor. In
examining the paying capacity of an organisation, apart from profitability, various
expenses that the industry has to bear, certain trends in prices products/ services that are
to be charged by the industry should also be taken into account. In addition, total cost of
employees 9salaries, allowances, cost of franker benefits etc.) Should be taken into
consideration in determining the ability to pay. Trade unions demand higher wages when
the company’s financial position is sound. But they may not accept wage reduction, when
the company’s financial position is in doldrums. Hence, the management has to take
decisions judiciously; further, certain incentives are linked to the profitability. Thus,
whatever the influence of other factors may be, the organization cannot pay more than its
ability to pay in the long-run.
 Relating to Price Index: The cost of living is another important factor that influences the
quantum of salary. The employees expect that their purchasing power be maintained at
least same level, if not increased by adjusting wages to changes in cost of living. In recent
years, in advanced countries, “a number of labour agreements have ‘escalator’ clauses,
providing for automatic wage and salary increase as cost of living index raises.” Dearness
allowance is an allowance grated to the employees with a view to combating onslaughts
of soaring prices.
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 Productivity: An interesting increasing development in wage determine has been
productivity standard. This is based on the fact that productivity increase is also the result
of employee satisfaction and contribution to the organisation. But wage productivity
linkage does not appear to be so easy since many problems crop up in respect of the
concept and measurement of productivity. But although the wages are not linked direct to
the productivity in an organisation, changes in productivity have their impact on
remuneration. This criterion received consideration of wage boards, “not only because it
constituted a factor in the fixation of ‘fair wage’ but also because it was directly related to
such questions of desirability of extending the system of payment by result.”
 Union pressure and strategies: The wages are also often influenced by the strength of
Union, their bargaining capacity and strategies. Arthur M. Ross consult concluded that
“real hourly earnings have advanced more sharply in highly organized industry then in
less unionized industries.” Unions pressurize management through their collective
bargaining strategies, political tacts and by organising strikes etc. Trade unions influence
may be on the grounds of wages in comparable industries, firm’s financial position, rising
living cost, those industries where the wages level is below that of other comparable
industries.”
 Government Legislations: Government legislations influence wage determination. The two
important legislation which affect wage fixation are: the Payment of Wages Act, 1936 and
the Minimum Wages Act, 1948. The important provisions of Payment of Wages Act,
1936are: ensuring proper payment of wages and avoiding all malpractices like non-
payment, under payment, delayed and irregular payment, payment in kind and under-
measurement of work. The Act covers all employees drawing the wage up to Rs. 1000 per
month. The Act stipulation that the organizations with less than hundred workers should
pay wage by the seventh and the organizations with more than 100 employees should pay
the tenth of month.

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