Course Name: BBA Semester:-IV Paper Code: BBA 202 Academic Year:-2016-17

Institute of Innovation in Technology and Management, New Delhi
(Affiliated to GGSIP University)

Academic Session: 2015- 2016
Unit 4: Compensation and Maintenance
Unit 4 : Compensation and Maintenance
Course Name: BBA Semester:-IV Paper Code: BBA 202 Academic Year:-2016-17
Date of commencement of classes: 23rd July’ 2007
Unit IV
Compensation and Maintenance: Compensation: job evaluation – concept, process and
significance; components of employee remuneration – base and supplementary; Performance and
Potential appraisal – concept and objectives; traditional and modern methods, limitations of
performance appraisal methods, 360 degree appraisal technique; Maintenance : overview of
employee welfare, health and safety, social security.
 JOB EVALUATION
 A job evaluation is a systematic way of determining the value/worth of a job in relation to

other jobs in an organization. It tries to make a systematic comparison between jobs to assess
their relative worth for the purpose of establishing a rational pay structure.
 Job evaluation needs to be differentiated from job analysis. Job analysis is a systematic way
of gathering information about a job.
 Every job evaluation method requires at least some basic job analysis in order to provide
factual information about the jobs concerned. Thus, job evaluation begins with job analysis
and ends at that point where the worth of a job is ascertained for achieving pay equity
between jobs.
 BENEFITS/ IMPORTANCE OF JOB EVALUATION
 It tries to link pay with the requirements of the job.

 It offers a systematic procedure for determining the relative worth of jobs. Jobs are ranked on
the basis of rational criteria such as skill, education, experience, responsibilities, hazards and
are priced accordingly.
 An equitable wage structure is a natural outcome of job evaluation. An unbiased job
evaluation tends to eliminate salary inequities by placing jobs having similar requirements in
the same salary range.
 Employees as well as unions participate as members of job evaluation committees, while
determining rate grades for different jobs. This helps in solving wage related grievances
quickly.
 Job evaluation, when conducted properly and with care, helps in the evaluation of new jobs.
 It points out possibilities of more appropriate use of the plant's labour force by indicating
jobs that need more or less skilled workers than those who are manning these jobs currently.
Dr. Archana Krishnan, IITM -JP Page 1

 JOB EVALUATION PROCESS OR STEPS OF JOB EVALUATION
1. Job Analysis
It is a process through which required information about various aspects of jobs can be obtained.
Job analysis involves two dimensions:
i. Job description
Under job description, a profile of job information is prepared indicating the duties,
responsibilities and working condition of work. It explains about what the job entails.
ii. Job specification

Job specification indicates preparation of a specification statement which explains the necessary
skills, knowledge and abilities required to perform the job.
2. Job Rating
Job rating includes the process of using same methods to study job descriptions and
specifications in order to assign a relative worth for each job. Some of job rating methods are:
ranking, point rating factor comparison, and so on.
3. Money Allocation
After rating the worthiness of each job, a pay structure is determined and the money for each job
is allocated. It means, it is the arrangement of paying rewards/compensation for each job
according to its worth or value.
4. Job Classification
Job classification is the last step of job evaluation which is concerned with the categorization of
jobs according to their pay scale. For example, high paying jobs are represented at the top of the
hierarchy.
 METHODS OF JOB EVALUATION
There are three basic methods of job evaluation: (1) ranking, (2) classification, (3) factor
comparison (4) Point Comparison Method. While many variations of these methods exist in
practice, the three basic approaches are described here.
1. Ranking Method
 According to this method, jobs are arranged from highest to lowest, in order of their
value or merit to the organization.
 Jobs also can be arranged according to the relative difficulty in performing them.
 The jobs are examined as a whole rather than on the basis of important factors in the job; and
the job at the top of the list has the highest value and obviously the job at the bottom of the
list will have the lowest value.

 Jobs are usually ranked in each department and then the department rankings are combined to
develop an organizational ranking. The following table is a hypothetical illustration of
ranking of jobs.
Table: Array of Jobs according to the Ranking Method

Rank Monthly salaries
1. Accountant Rs 3,000
2. Accounts clerk Rs 1,800
3. Purchase assistant Rs 1,700
4. Machine-operator Rs 1,400
5. Typist Rs 900
6. Office boy Rs 600
 The variation in payment of salaries depends on the variation of the nature of the job
performed by the employees.
 The ranking method is simple to understand and practice and it is best suited for a small
organization. Its simplicity, however, works to its disadvantage in big organizations because
rankings are difficult to develop in a large, complex organization.
 Moreover, this kind of ranking is highly subjective in nature and may offend many
employees. Therefore, a more scientific and fruitful way of job evaluation is called for.
2. Classification Method
 According to this method, a predetermined number of job groups or job classes are
established and jobs are assigned to these classifications.
 This method places groups of jobs into job classes or job grades. Separate classes may
include office, clerical, managerial, personnel. Following is a brief description of such a
classification in an office.
(a) Class I - Executives: Further classification under this category may be Office manager,
Deputy Office manager, Office superintendent, Departmental supervisor, etc.
(b) Class II - Skilled workers: Under this category may come the Purchasing assistant Cashier,
Receipts clerk, etc.
(c) Class III - Semiskilled workers: Under this category may come Steno typists, Machine
operators, Switchboard operators, etc.
(d) Class IV - Semiskilled workers: This category comprises Daftaris, File clerks, Office boys,
etc.
 The job classification method is less subjective when compared to the earlier ranking
method. The system is very easy to understand and acceptable to almost all employees
without hesitation.

 One strong point in favor of the method is that it takes into account all the factors that a job
comprises. This system can be effectively used for a variety of jobs.
The weaknesses of the job classification method are:
 Even when the requirements of different jobs differ, they may be combined into a single
category, depending on the status a job carries.
 It is difficult to write all-inclusive descriptions of a grade.
 The method oversimplifies sharp differences between different jobs and different grades.
 When individual job descriptions and grade descriptions do not match well, the
evaluators have the tendency to classify the job using their subjective judgments.
3. Factor Comparison Method
 A more systematic and scientific method of job evaluation is the factor comparison method.
Though it is the most complex method of all, it is consistent and appreciable.
 Under this method, instead of ranking complete jobs, each job is ranked according to a series
of factors. These factors include mental effort, physical effort, skill needed, supervisory
responsibility, working conditions and other relevant factors (for instance, know-how,
problem solving abilities, accountability).
 Pay will be assigned in this method by comparing the weights of the factors required for each
job, i.e., the present wages paid for key jobs may be divided among the factors weighed by
importance (the most important factor, for instance, mental effort, receives the highest
weight). In other words, wages are assigned to the job in comparison to its ranking on each
job factor.
The steps involved in factor comparison method may be briefly stated thus:
 Select key jobs (say 15 to 20), representing wage/salary levels across the organization.
The selected jobs must represent as many departments as possible.
 Find the factors in terms of which the jobs are evaluated (such as skill, mental effort,
responsibility, physical effort, working conditions, etc.).
 Rank the selected jobs under each factor (by each and every member of the job
evaluation committee) independently.
 Assign money value to each factor and determine the wage rates for each key job.
 The wage rate for a job is apportioned along the identified factors.
 All other jobs are compared with the list of key jobs and wage rates are determined.
An example of how the factor comparison method works is given below:

Table: Merits and Demerits of Factor Comparison Method
Merits Demerits
 Analytical and objective.  Difficult to understand, explain
 Reliable and valid as each job is and operate.
compared with all other jobs in  Its use of the same criteria to
terms of key factors. assess all jobs is questionable as
 Money values are assigned in a jobs differ across and within
fair way based on an agreed rank organizations.
order fixed by the job evaluation  Time consuming and costly.
committee.
 Flexible as there is no upper
limitation on the rating of a
factor.
4. Point method
 This method is widely used currently. Here, jobs are expressed in terms of key factors. Points
are assigned to each factor after prioritizing each factor in the order of importance.
 The points are summed up to determine the wage rate for the job. Jobs with similar point
totals are placed in similar pay grades. The procedure involved may be explained thus:
(a) Select key jobs. Identify the factors common to all the identified jobs such as skill, effort,
responsibility, etc.
(b) Divide each major factor into a number of sub factors. Each sub factor is defined and
expressed clearly in the order of importance, preferably along a scale.
The most frequent factors employed in point systems are:
I. Skill (key factor): Education and training required, Breadth/depth of experience required,
Social skills required, Problem-solving skills, Degree of discretion/use of judgment, Creative
thinking;
II. Responsibility/Accountability: Breadth of responsibility, Specialized responsibility,
Complexity of the work, Degree of freedom to act, Number and nature of subordinate staff,
Extent of accountability for equipment/plant, Extent of accountability for product/materials;
III. Effort: Mental demands of a job, Physical demands of a job, Degree of potential stress.
The educational requirements (sub factor) under the skill (key factor) may be expressed thus in
the order of importance.
Degree Define
1. Able to carry out simple calculations; High School educated

2. Does all the clerical operations; computer literate; graduate
3 Handles mail, develops contacts, takes initiative and does work independently; post graduate
Assign point values to degrees after fixing a relative value for each key factor.
Table: Point Values to Factors along a Scale
Point values for Degrees Total
Factor 1 2 3 4 5
Skill 10 20 30 40 50 150
Physical effort 8 16 24 32 40 120
Mental effort 5 10 15 20 25 75
Responsibility 7 14 21 28 35 105
Working conditions 6 12 18 24 30 90
Maximum total points of all factors depending on their importance to job = 540
(Bank Officer)
4. Find the maximum number of points assigned to each job (after adding up the point values
of all sub-factors of such a job). This would help in finding the relative worth of a job. For
instance, the maximum points assigned to an officer's job in a bank come to 540. The manager's
job, after adding up key factors + sub factors' points, may be getting a point value of, say 650
from the job evaluation committee. This job is now priced at a higher level.
5. Once the worth of a job in terms of total points is expressed, the points are converted into
money values keeping in view the hourly/daily wage rates. A wage survey, usually, is
undertaken to collect wage rates of certain key jobs in the organization. Let's explain this:
Table: Conversion of Job Grade Points into Money Value

Point range Daily wage rate (Rs) Job grades of key bank officials
500-600 300-400 1 Officer
600-700 400-500 2 Accountant
700-800 500-600 3 Manager I Scale
800-900 600-700 4 Manager II Scale
900-1,000 700-800 5 Manager III Scale

 MERITS
 The point method is a superior and widely used method of evaluating jobs. It forces raters to
look into all keys factors and sub-factors of a job. Point values are assigned to all factors in a
systematic way, eliminating bias at every stage.
 It is reliable because raters using similar criteria would get more or less similar answers.
“The methodology underlying the approach contributes to a minimum of rating error”.
 It accounts for differences in wage rates for various jobs on the strength of job factors. Jobs
may change over time, but the rating scales established under the point method remain
unaffected.
 Demerits
 On the negative side, the point method is complex. Preparing a manual for various jobs,
fixing values for key and sub-factors, establishing wage rates for different grades, etc., is a
time consuming process.
 According to Decenzo and Robbins, “the key criteria must be carefully and clearly identified,
degrees of factors have to be agreed upon in terms that mean the same to all rates, the weight
of each criterion has to be established and point values must be assigned to degrees”.
 This may be too taxing, especially while evaluating managerial jobs where the nature of
work (varied, complex, novel) is such that it cannot be expressed in quantifiable numbers.
 TECHNIQUES FOR DESIGNING JOBS
1. Job simplification
 Job simplification is a design method whereby jobs are divided into smaller components and
subsequently assigned to workers as whole jobs.
 Simplification of work requires that jobs be broken down into their smallest units and then
analysed. Each resulting sub-unit typically consists of relatively few operations.
 These subunits are then assigned to the workers as their total job. Many fast food restaurants
such as McDonald's, Burger King and Nirula's use simplification because employees can
learn tasks rapidly; short work cycles allow task performance with little or no mental effort
and low-skilled and low-paid employees can be hired and trained easily.
 On the negative side, job simplification results in workers experiencing boredom, frustration,
alienation, lack of motivation and low job satisfaction. This, in turn, leads to lower
productivity and increased cost.
2. Job Enlargement
 Job enlargement expands a job horizontally. It increases job scope; that is, it increases the
number of different operations required in a job and the frequency with which the job cycle is
repeated.

 By increasing the number of tasks an individual performs, job enlargement increases the job
scope, or job diversity. Instead of only sorting the incoming mail by department, for instance,
a mail sorter's job could be enlarged to include physically delivering the mail to the various
departments or running outgoing letters through the postage meter.
3. Job Rotation
 Job rotation refers to the movement of an employee from one job to another. Jobs themselves
are not actually changed, only the employees are rotated among various jobs. An employee
who works on a routine job moves to work on another job for some hours/days/months and
returns to the first job.
 This measure relieves the employee from the boredom and monotony, improves the
employee's skills regarding various jobs and prepares worker's self-image and provides
personal growth. However, frequent job rotations are not advisable in view of their negative
impact on the organisation and the employee.
4. Job Enrichment
 Job enrichment, as currently practiced in industry, is a direct outgrowth of Herzberg's Two

Factor Theory of motivation.
 It is, therefore, based on the assumption that in order to motivate personnel, the job itself
must provide opportunities for achievement recognition, responsibility, advancement and
growth.
 The basic idea is to restore to jobs the elements of interest that were taken away under
intensive specialisation. Job enrichment tries to embellish the job with factors that Herzberg
characterised as motivators: achievement, recognition, increased responsibilities,
opportunities for growth, advancement and increased competence.
 There is an attempt to build into jobs a higher sense of challenge and achievement, through
vertical job loading.
 PERFORMANCE APPRAISAL Vs JOB EVALUATION
 It considers the individual abilities while job evaluation considers the requirement of the job
in terms of job specification and job description.
 The purpose of performance appraisal is to take the decisions regarding the pay, transfer,
promotion etc. while the purpose of job evaluation is to determine the worth of the job.
 Performance appraisal rates the man not the job but job evaluation determines the relative
worth of the job.
 Performance appraisal helps in making decision like transfer or promotion while job
evaluation helps in making decisions regarding wage policy.

 JOB EVALUATION VS JOB ANALYSIS
 Despite being a part of the broader job evaluation process, job analysis is an important
program in itself.
 While job evaluation aims at finding the net worth of different jobs in an organization with
the aim of finding salaries and wage differentials, job analysis tries to find out everything
about a specific job including the role, responsibility, working conditions, skills required,
demands and hazards associated with a job.
 Management of any organization always endeavours to make the salaries and wages
associated with jobs attractive so as to able to compete with other companies in luring better
talent.
 PERFORMANCE APPRAISAL
 “It is a systematic evaluation of an individual with respect to performance on the job and
individual’s potential for development.”
 “It is formal, structured system of measuring, evaluating job related behaviours and
outcomes to discover reasons of performance and how to perform effectively in future so that
employee, organization and society all benefits.”
 Performance Appraisal is defined as an assessment of employees by the manager, in which
he evaluates the overall contribution made by the employee to the organization.
 It is a systematic and logical review, conducted by the organization annually to judge his
potential in performing a task. It helps to analyze the skills and abilities of an employee for
their future growth that increases productivity of employees.
 OBJECTIVES OF PERFORMANCE APPRAISALS
General Goals Specific Goals

Developmental Use Individual needs
Performance feedback
Transfers and Placements
Strengths and Development needs
Administrative Decisions / Uses Salary
Promotion
Retention / Termination
Recognition
Lay offs
Poor Performers identification
Organizational Maintenance HR Planning
Training Needs

Organizational Goal achievements
Goal Identification
HR Systems Evaluation
Reinforcement of organizational
needs
Documentation Validation Research
For HR Decisions
Legal Requirements
 PERFORMANCE APPRAISAL PROCESS

1. Objectives definition of appraisal
2. Job expectations establishment
3. Design an appraisal program
4. Appraise the performance
5. Performance Interviews
6. Use data for appropriate purposes
7. Identify opportunities variables
8. Using social processes, physical processes, human and computer assistance
 PERFORMANCE APPRAISAL PROCESS:

1. The first step in the process is the establishment of performance standards against which
the output can be measured.
2. These standards are then communicated the employees as well as to the evaluators. This
step helps the employees know what is expected from them and the feedback from the
employees can be used for making any require changes in these standards.
3. The next step is to measure the actual performance against these standards a suitable
technique for measurement is selected and the internal and external factors that influence the
performance are also identified. Information on results is gathered and four sources are most
commonly used to measure the actual performance. These are personal observations, Oral
reports, written reports and statistical reports.
4. The results of the appraisal are then shared with the employee so that he become aware of
the deviation in performance and can also identify and analyze the cause behind this deviation.
This help and employee in identifying his strengths and weaknesses and improve future
performance.
5. Corrective actions is then undertaken to improve the performance of the employees the
common tools for corrective action are coaching, counselling and training.
 TRADITIONAL Vs MODERN (SYSTEMS) APPROACH TO APPRAISALS

Categories Traditional Appraisals Modern, Systems Appraisals
Guiding Values Individualistic, Control Systematic, Developmental,
oriented, Documentary Problem solving
Leadership Styles Directional, Evaluative Facilitative, Coaching
Frequency Occasional Frequent
Formalities High Low
Rewards Individualistic Grouped, Organizational
 TECHNIQUES / METHODS OF PERFORMANCE APPRAISALS

A) Traditional Methods:
1. Rating Scales:
 Rating scales consists of several numerical scales representing job related performance
criterions such as dependability, initiative, output, attendance, attitude.
 Each scales ranges from excellent to poor. The total numerical scores are computed and final
conclusions are derived.
 Traditional Appraisals – Adaptability, easy to use, low cost, every type of job can be
evaluated, large number of employees covered, no formal training required.
 Disadvantages – Rater’s biases

2. Checklist:
 Under this method, checklist of statements of traits of employee in the form of Yes or No
based questions is prepared.
 Here the rater only does the reporting or checking and HR department does the actual
evaluation.
 Advantages – economy, ease of administration, limited training required, standardization.
Disadvantages – Raters biases, use of improper weighs by HR, does not allow rater to give
relative ratings
Sample of Checklist Items for Appraising Salesclerks Yes No
 1. Are “Supervisor’s orders usually followed? ___ ___
 2. Does the individual approach customers promptly? ___ ___
 3. Does the individual suggest additional merchandise to customers? ___ ___
 4. Does the individual keep busy when not servicing a customer? ___ ___
3. Forced Choice Method:
 The series of statements arranged in the blocks of two or more are given and the rater
indicates which statement is true or false.
 The rater is forced to make a choice. HR department does actual assessment.
 Advantages – Absence of personal biases because of forced choice.
 Disadvantages – Statements may be wrongly framed.
4. Forced Distribution Method:

 Here employees are clustered around a high point on a rating scale.
 Rater is compelled to distribute the employees on all points on the scale.
 It is assumed that the performance is conformed to normal distribution.
 Advantages – Eliminates biasness
 Disadvantages – Assumption of normal distribution, unrealistic, errors of central tendency.
In this system, the appraiser is asked to distribute the employees into these categories in
such a way that about 10% of the men are in group ‘outstanding ‘, 20% ‘above average’,
40% ‘average’ ; 20% ‘below average’, and 10% ‘poor’
5. Critical Incidents Method:
 The approach is focused on certain critical behaviours of employee that makes all the
difference in the performance.
 Supervisors as and when they occur record such incidents.
 Advantages – Evaluations are based on actual job behaviours, ratings are supported by
descriptions, feedback is easy, reduces recency biases, chances of subordinate improvement
are high.
 Disadvantages – Negative incidents can be prioritized, forgetting incidents, overly close
supervision; feedback may be too much and may appear to be punishment.

6. Behaviorally Anchored Rating Scales(BARS)
 statements of effective and ineffective behaviors determine the points. They are said to be
behaviorally anchored.
 The rater is supposed to say, which behavior describes the employee performance.
Advantages – helps overcome rating errors.
 Disadvantages – Suffers from distortions inherent in most rating techniques.
For example, for appraising the performance of grocer clerk, called checker, in a large
grocery chain store eight anchors of job performance can be included namely, (I) knowledge
and (2) conscientiousness, (3) skills in human relations, (4) skill in operation of register. (5)
Skill in bagging, (6) organizational ability of check-stand work, (7) skill in monetary
transactions, and (8) observational ability.
 STEPS INVOLVED IN DEVELOPING BARS ARE AS FOLLOWS:
1. Identification of Critical Incidents or Behaviours: People with knowledge of the job to be
probed such as job holders and supervisors describe specific examples of effective and
ineffective behaviour related to job performance.
2. Identification of Performance Dimensions: People are assigned the task of developing the
instrument cluster pertaining to the incidents into a small set of key performance dimensions.
Generally, between five and ten dimensions account for most of the performance.
Examples of performance dimensions include technical competence, relationships with
customers, handling of paperwork and meeting day-today deadlines. While developing varying
levels of performance for each dimension (anchor), specific examples of behaviour should be
used which could later be scaled in terms of good, average or below average performance.
3. Reclassification of Critical Behaviours: Another group of people who are knowledgeable
about the job is instructed to retranslate or reclassify the critical incidents generated under the
previous step. They are given the definition of job dimension and total to assign each critical
incident to the dimension that best describes. At this stage, incidents for which there is less than
75 per cent agreement are discarded as being too subjective.
4. Assigning Scale Values to the Critical Behaviours: Each incident is rated on a one-to-nine
scale with respect to how well it represents performance on the appropriate dimension. A rating
of one represents ineffective performance; the top scale values indicate very effective
performance. The second group of participants usually assigns the scale values. Means and
standard deviations are then calculated for the scale values assigned to each incident. Typically,
incidents that have standard deviations of 1.50 or less (on a 7-point scale) are retained.
5. Development of Bar Instrument: About six or seven incidents for each performance
dimension – all having met both the retranslation and standard deviation criteria - are used as
behavioural anchors. The
 final BARS instrument consists of a series of vertical scales (one for each dimension)
anchored (or
 measured) by the final incidents. Each incident is positioned on the scale according to its
mean value.

7. Field Review Method: This is an appraisal done by someone outside employees’ own
department usually from corporate or HR department.
Advantages – Useful for managerial level promotions, when comparable information is needed,
Disadvantages – Outsider is generally not familiar with employees work environment,
Observation of actual behaviors not possible.
8. Performance Tests & Observations:

This is based on the test of knowledge or skills. The tests may be written or an actual
presentation of skills. Tests must be reliable and validated to be useful.
Advantage – Tests may be apt to measure potential more than actual performance.
Disadvantages – Tests may suffer if costs of test development or administration are high.
9. Confidential Records:
 Mostly used by government departments, however its application in industry is not ruled out.
Here the report is given in the form of Annual Confidentiality Report (ACR) and may record
ratings with respect to following items; attendance, self expression, team work, leadership,
initiative, technical ability, reasoning ability, originality and resourcefulness.
 The system is highly secretive and confidential.
 Feedback to the assesses is given only in case of an adverse entry.
 Disadvantage is that it is highly subjective and ratings can be manipulated because the
evaluations are linked to HR actions like promotions etc.
10. Essay Method:

 In this method the rater writes down the employee description in detail within a number of
broad categories like, overall impression of performance, promote ability of employee,
existing capabilities and qualifications of performing jobs, strengths and weaknesses and
training needs of the employee.
 Advantage – It is extremely useful in filing information gaps about the employees that often
occur in a better-structured checklist.
 Disadvantages – It its highly dependent upon the writing skills of rater and most of them are
not good writers. They may get confused success depends on the memory power of raters.
11. Cost Accounting Method:

 Here performance is evaluated from the monetary returns yields to his or her organization.
Cost to keep employee, and benefit the organization derives is ascertained.
 Hence it is more dependent upon cost and benefit analysis.
12. Comparative Evaluation Method (Ranking & Paired Comparisons): These are
collection of different methods that compare performance with that of other co-workers. The
usual techniques used may be ranking methods and paired comparison method.

 Ranking Methods: Superior ranks his worker based on merit, from best to worst.
However how best and why best are not elaborated in this method. It is easy to administer
and explanation.
 Paired Comparison Methods: In this method each employee is rated with another
employee in the form of pairs. The number of comparisons may be calculated with the
help of a formula as under. N x (N-1) / 2
B) MODERN METHODS
1. Management by Objectives: It means management by objectives and the performance is

rated against the achievement of objectives stated by the management. MBO process goes as
under.
 Establish goals and desired outcomes for each subordinate
 Setting performance standards
 Comparison of actual goals with goals attained by the employee
 Establish new goals and new strategies for goals not achieved in previous year.
Advantage – It is more useful for managerial positions.
Disadvantages – Not applicable to all jobs, allocation of merit pay may result in setting short-
term goals rather than important and long-term goals.
2. Psychological Appraisals:
 These appraisals are more directed to assess employee’s potential for future performance
rather than the past one.
 It is done in the form of in-depth interviews, psychological tests, and discussion with
supervisors and review of other evaluations.
 It is more focused on employees emotional, intellectual, and motivational and other
personal characteristics affecting his performance. This approach is slow and costly and
may be useful for bright young members who may have considerable potential. However
quality of these appraisals largely depends upon the skills of psychologists who perform the
evaluation.
3. Assessment Centres:
 This technique was first developed in USA and UK in 1943. An assessment centre is a
central location where managers may come together to have their participation in job related
exercises evaluated by trained observers.
 It is more focused on observation of behaviours across a series of select exercises or work
samples.
 Assesses are requested to participate in in-basket exercises, work groups, computer
simulations, role playing and other similar activities which require same attributes for
successful performance in actual job.

 The characteristics assessed in assessment centre can be assertiveness, persuasive ability,
communicating ability, planning and organizational ability, self confidence, resistance to
stress, energy level, decision making, sensitivity to feelings, administrative ability, creativity
and mental alertness etc.
 Disadvantages – Costs of employees travelling and lodging, psychologists, ratings strongly
influenced by assessee’s inter-personal skills. Solid performers may feel suffocated in
simulated situations. Those who are not selected for this also may get affected.
 Advantages – well-conducted assessment centre can achieve better forecasts of future
performance and progress than other methods of appraisals. Also reliability, content validity
and predictive ability are said to be high in assessment centres. The tests also make sure that
the wrong people are not hired or promoted. Finally it clearly defines the criteria for selection
and promotion.
4. 360-Degree Feedback:
 It is a technique which is systematic collection of performance data on an individual group,
derived from a number of stakeholders like immediate supervisors, team members,
customers, peers and self.
 In fact anyone who has useful information on how an employee does a job may be one of the
appraisers.
 This technique is highly useful in terms of broader perspective, greater self-development and
multi-source feedback is useful. 360-degree appraisals are useful to measure inter-personal
skills, customer satisfaction and team building skills. However on the negative side,
receiving feedback from multiple sources can be intimidating, threatening. Multiple raters
may be less adept at providing balanced and objective feedback.
 LIMITATIONS OF PERFORMANCE APPRAISAL SYSTEM

1. Halo Effect:
 In this case the superior appraises the person on certain positive qualities only. The negative
traits are not considered.
 Such an appraisal will not give a true picture about the employee. And in some cases
employees who do not deserve promotions may get it.
2. Horn Effect:-
 In this case only the negative qualities of the employee are considered and based on this
appraisal is done.
 This again will not help the organization because such appraisal may not present a true
picture about the employee.
3. Central tendency:-
 In this case the superior gives an appraisal by giving central values.

 This prevents a really talented employee from getting promotions he deserves and some
employees who do not deserve anything may get promotion.
4. Leniency and strictness:-

 Some bosses are lenient in grading their employees while some are very strict.
 Employee who really deserves promotions may lose the opportunity due to strict bosses
while those who may not deserve may get benefits due to lenient boss.
5. Spill over effect:-

 In this case the employee is judged +vely or –vely by the boss depending upon the past
performance.
 Therefore although the employee may have improved performance, he may still not get the
benefit.
6. Fear of loosing subordinates and spoiling relations:-

 Many bosses do not wish to spoil their relations with their subordinates.
 Therefore when they appraise the employee they may end up giving higher grades which are
not required. This is an injustice to really deserving employees.
7. Lack of Clarity:-
 The objective of performance appraisal is to evaluate and develop employees. An
organization should avoid using one appraisal system to achieve both objectives.
 The particular system of the appraisal system should clarify before it is designed and should
be discussed with all managers and employees to gain their commitment. Any performance
appraisal system, however good the design, is unlikely to succeed if the managers and
employees are suspicious of its objectives.
8. Cultural Factors:-
 Culture has profound impact on the appraisal system as it should be in consonance with the
organizational culture.
 ‘Readymade’ performance review system imported from other organization rarely function
satisfactorily. Their failure is partly due to culture differences. Thus culture is a vital factor to
look after.
9. Inconsistent Message
 If a manager does not keep notes and accurate records of employee behavior, they may not
be successful in sending a consistent message to the employee.
 We all struggle with memory with as busy as we all are so it is critical to document issues
(both positive and negative) when it is fresh in our minds.

10. Rater Biases
 This occurs when manager values distort the rating. Reasons for bias differ, for instance,
religion, age, gender, appearance or other arbitrary classifications. If a manager strongly
dislikes a certain ethnic group, this will be negatively reflected in appraisal if the appraisal
scheme is not properly designed.
 The review is done in retrospect and is an average of six months old so recollection of events
is poor.
The Rater related Issues:
 The opinions of staff and manager are often in opposition, causing de-motivation
 The process is usually Manager driven and the staff member is expected to be compliant in
the interview.
 The process usually involves the Manager giving their opinion and the staff member having
to defend the position, rather than a positive discussion
 There is no room for remedial action during the year
 The process is usually done in a rushed manner to meet a budget development process and
therefore loses its relevance to performance
 If not done appropriately, can be a negative experience.
 Are very time consuming, especially for a manager with many employees.
 PERFORMANCE APPRAISAL Vs PERFORMANCE MANAGEMENT
Basis for
Performance Appraisal Performance Management
Comparison
Performance Appraisal means the analysis of Performance Management is the
Meaning an employee's performance and their calibre management of human resources
for future growth and development. in an organization.
What is it? It is a system. It is a process.
Nature Rigid Supple
Type of tool Operational Tool Strategic Tool
Owned by Human Resource Department Managers
Conducted Annually Continuously
Approach Individualistic Holistic
Focused on Quantitative Aspects Qualitative Aspects
Corrections Retrospective Prospective

 PERFORMANCE MANAGEMENT
 Performance Management is a continuous process that aims at planning, monitoring and
evaluating the objectives of an employee and his total contribution to the organization.
 The basic purpose of performance management is to encourage and improve employee’s
efficiency and effectiveness.
 In this process both the employees and the managers participate in setting the objectives,
assessing the performance or progress, providing training and feedback to the employees at
regular intervals for improvement, implementing development programs for employees and
rewarding them for their achievements.
 In this way, the objectives of the parties became clear that helps to achieve the overall
objectives of the organization and the growth & development of the employee as well.
 POTENTIAL APPRAISAL
 Potential appraisal is defined as a process of determining an employee’s strengths and
weaknesses with a view to use this as a predictor of his future performance.
 This would help in determining the promotability of an individual to a higher position and
chalk out his career plan. Most organisations incorporate potential appraisal in their appraisal
processes for identifying and developing suitable employee base for succession planning.
 Potential appraisal is a powerful tool of employee development. Potential Appraisal is the
process of tracking unrevealed talent, skills and abilities in a person which even he/she is
unaware of.
 It is a future oriented appraisal, whose main objective is to identify and evaluate the potential
of the employees to rise up in the organisational structure.
 Managers use it as predictors to determine whether the employee has the potential to execute
added responsibilities in the future, therefore is a potent device for employee advancement. It
is a future – oriented appraisal.
 Potential appraisal helps to identify what can happen in future so that it can be guided and
directed towards the achievement of individual and organizational growth and goals. Many
organisations consider and use potential appraisal as a part of the performance appraisal
processes.
 Potential appraisal data is extremely useful for career panning, as the latent abilities of an
individual can be captured and linked with the future role and responsibilities.
 PURPOSES OF POTENTIAL APPRAISAL:

 To advise employees about their overall career development and future prospects
 Help the organisation to chalk out succession plans
 Motivate the employees to further develop their skills and competencies.
 To identify the training needs

 TECHNIQUES OF POTENTIAL APPRAISAL:
 Self – appraisals
 Peer appraisals
 Superior appraisals
 MBO
 Psychological and psychometric tests
 Management games like role playing
 Leadership exercises
 PERFORMANCE APPRAISAL VS POTENTIAL APPRAISAL
 Performance appraisal is an assessment of a person given a job whereas potential appraisal

is an appraisal of his capabilities to handle higher level jobs.
 Performance Appraisal is appraised by his superiors as well is asked to self appraised himself
whereas Potential Appraisal is a confidential form, not even shown to the appraise.
 Observation on the past performance is available to the performance appraiser whereas no
such data is available to potential appraiser.
 A performance appraisal system judges the performance of an employee over a given period
of time. It is an indication of how he has performed in the PAST, but may necessarily not be
an indication of his performance in the future. Depending on his past performance, a person
is rewarded suitable with an appropriate cash incentive or bonus.
 A potential appraisal system is done to judge the capability of the person for a future role,
meaning you are trying to assess a person to see whether he has the necessary skills, aptitude,
attitude and competency for an increased level of responsibility and accountability or a
leadership role. It can be enhanced with giving him specific T & D, or assigning him a
mentor. You are trying to judge his FUTURE performance based on the potential appraisal.
 It is commonly mistaken that promotion is an outcome of performance appraisal. But ideally
speaking promotion should be the outcome of a potential appraisal because only when a
potential appraisal is done will you come to know if the person is ready for a bigger
responsibility.
 COMPENSATION
includes direct cash payments, indirect payments in the form of employee benefits and incentives
to motivate employee to strive for higher level of productivity is a critical component of the
employment relationship. Compensation is affected by forces as diverse as labour market factors,
collective bargaining, government legislation and top management’s philosophy regarding pay
benefits.” Wayne F Cascio

 COMPENSATION AND BENEFITS
Compensation and Benefits is rewarding the employee for the services rendered by them for the
benefit of the organization. It is a set of programs aimed at achieving the following objectives:
 Compensation aids in attracting capable employees to the organization.
 It also helps motivate employees towards superior performance.
 Compensation also helps in retaining the employees and their services over an extended
period of time.
 TYPES OF COMPENSATION AND BENEFITS
There are three types of Compensation and Benefits namely;

1. Base Compensation
2. Variable Compensation
3. Supplementary Compensation
1. BASE COMPENSATION AND BENEFITS

 Base compensation involves monetary benefits to employees in the form of wages or salaries.
The term ‘wage’ is used to denote remuneration to workers doing manual or physical work.
Thus, wages are given to compensate the unskilled workers for their services rendered to the
organization.
 Wages may be based on hourly, daily, weekly or even monthly basis. But the term ‘salary’ is
usually defined to mean compensation to office employees, foremen, managers and
professional and technical staff. It is generally paid on weekly, monthly or yearly basis.
 Thus, the time period for which salaries are paid is generally higher than in case of wage
payments. Wages may be based on the number of units produced (i.e., piece wage system) or
the time spent on the job. But salary is always based on time spent on the job. Where it is
difficult to measure the production of the employee, the compensation is paid in the form of
salary. Both wages and salaries constitute a significant portion of the cost of operation of
business
 FACTORS INFLUENCING BASE COMPENSATION AND BENEFITS
 One factor that influences Base Compensation is demand and supply of labor in the market.
 Labor union pressure is also another factor influencing Base Compensation. This is because
unions always try their best to fight for their members’ rights.
 Nature of job as determined by the job description, each employee deserves a different
compensation package.
 Size of the organization and its ability to pay its employees.
 Product market compensation is yet another factor influencing Base Compensation.

 Psychological and social factors like employee satisfaction and security.
 Salaries paid by similar firms are also a factor affecting Base Compensation.
 Government policies on wage determination
 Cost of living of the employees. When the employees’ cost of living is very high then they
need a higher compensation benefit.
 Increase in productivity of labor
 Firms in general; whether competing firms or not.
2. VARIABLE COMPENSATION AND BENEFITS
 This type of compensation as by its name is variable.

 It means that one gets compensation as per the work done. If one does a remarkable job then
he or she deserves a higher compensation package than one whose work is of poor quality.
3. SUPPLEMENTARY COMPENSATION AND BENEFITS
 Supplementary Compensation is compensation given by an employer when he or she wishes

to.
 It is not compulsory or a routine once one is given the compensation that one will be awarded
another time.
 In this type of Compensation the employer has a right to add, deduct or even withdraw the
benefits when he or she wishes to.
 Ex: overtime earnings, commissions, bonuses.
 REMUNERATION
 Remuneration is the compensation that one receives in exchange for the work or services
performed. Typically, this consists of monetary rewards, also referred to as wage or salary.
 A number of complementary benefits, however, are increasingly popular remuneration
mechanisms. Remuneration is one component of reward management.
 An average employee in the organised sector is entitled to several benefits — both financial
as well as non-financial.
 To be specific, typical remuneration of an employee comprises—wages and salary,
incentives, fringe benefits, perquisites, and non-monetary benefits.
1. WAGES AND SALARY

Wages represent hourly rates of pay, and salary refers to the monthly rate of pay, irrespective of
the number of hours put in by an employee. Wages and salaries are subject to annual increments.
They differ from employee to employee, and depend upon the nature of job, seniority, and merit.

2. Incentives
Also called 'payments by results', incentives are paid in addition to wages and salaries. Incentives
depend upon productivity, sales, profit, or cost reduction efforts.
There are:
1) individual incentive schemes and
2) group incentive programmes.
Individual incentives are applicable to specific employee performance. Where a given task
demands group effort for completion, incentives are paid to the group as a whole. The amount is
later divided among group members on an equitable basis.
3. Fringe Benefits:
Payment to a worker in addition to salary or wages. These include employee benefits as
provident fund, gratuity, medical care, hospitalization, accident relief, health and group
insurance, canteen, uniform, recreation and me like.
4. Perquisites:
Several new benefits have been initiated by industrial giants particularly for the executives. Such
Benefits are referred to as ‘perquisites’ or ‘perks’. Perks include chauffeur driven car, corporate
aircraft, home security, company apartment, club membership, paternity leave, self-defence
training, company credit card, entertainment.
5. Non-monetary Benefits
these include challenging job responsibilities, recognition of merit, growth prospects, competent
supervision, comfortable working conditions, job sharing, and flexitime.
 FACTORS INFLUENCING EMPLOYEE REMUNERATION
A) Internal Factors
1. Ability to pay
This is one of the most significant factors influencing employee compensation. Generally, a firm,
which is prosperous and successful, has the ability to pay more than the competitive rate. This
way it can attract a superior caliber of personnel
Often the labor unions also demand an increase in compensation on the grounds that the
organisation is prosperous and is able to pay more.
2. Employee
Numerous employees related factors also influence his or her compensation. These include the
following:

 Performance—it is always rewarded with pay increase and as a result it motivates the
workers to do better in future.
 Experience: The companies presume that experience candidate posses’ leadership skills
which influence the other behavior and performance. Generally experience
candidate perform the job without need of training which is time consuming and deals with
matter of cost to company. Hence the experience candidates demand more pay than an
inexperienced candidate.
 Seniority—senior employees demand for more salary than fresher because of their hold on
related job and its functions. Many companies are demanding senior employees for key
positions by offering fat pay and even sometimes retired employees are offered
with handsome salary for key positions which deals with multitasking in organisation.
 Potential—Firms also pay their employees, especially young ones on the basis of their
potential. software companies are very good example for this, IT graduate just who
completed his education having potential in the subject can gain a good job with high
payment anywhere in the world. Good example, student of Indian Information Technology
(IIT) from Delhi had bagged job of payment 7 million (70 lakhs) Indian rupees per year in
Twitter Inc famous social networking website
3. Job requirements
Wages arc also influenced by the requirements of a job such as physical and mental requirement.
Jobs, which demand more skill, responsibility, efforts and are of hazardous in nature, will carry
high wage tag with them.
4. Job Evaluation
Job evaluation establishes a consistent and systematic relationship among base compensation
rates for all jobs. In other words, it establishes the satisfactory wage differentials.
5. Organization’s Strategy
The organization’s strategy regarding wages also influences employee compensation. For
example, an organisation, which wants rapid growth, will set higher wages than competitors. On
the other hand, organisations that want smooth going and just maintain the current earning will
pay average or below average
B) EXTERNAL FACTORS
1. The Cost of Living Adjustment is an annual adjustment in wages to account for a change in
purchasing power as measured by the Consumer Price Index
2. Laws and Regulations
Laws and regulations impact the remuneration of employees in many areas, such as:
 Work hours and compulsory time-off (paid and unpaid)

 Minimum wage

 Overtime
 Compulsory bonuses
 Employment at will
In India, some of the central laws which have a bearing on employee remuneration are the
Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act. 1965;
Equal Remuneration Act, 1976; and the Payment of Gratuity Act, 1972. The Payment of Wages
Act was passed to regulate payment of wages to certain classes of persons employed in the
industry.
3. Labor market
 Official laws on wage and salary, labor contract, payment time, wage payment delay,
working insurance, and so on.
 People’s standard of living in the areas where the offices of the company are.
 People’s living and consuming customary.
 The average wage rate in the labor market of similar work.
4. Economy
The state of economy also influences the wage and salary-fixation. Wage rates will be different
in a stable economy than in a depressed economy. In case of depressed economy there may be
increase in supply of labor and this results in the fixation of lower wage rates.
5. Inflation
Increase in the prices of commodities and decrease in value of the money is called as inflation.
The causes of inflation are many which are raising costs, fall in the currency value in
international markets, raising taxes by government and stagnation in the development of
economy, etc.
In India year 2012, due to the inflation nearly 22 listed companies had increased salary of its
employees ranging between 12% to 27% compared to last year. Example Reliance Industries Ltd
had paid nearly13% increase in salaries to its employees compared to last year salaries and
HDFC (Housing Development Finance Corporation) Bank had paid nearly 21% increase in
salaries to its employees compared to last year salaries.
6. Technological changes:
Technological changes also influence the fixation of wage levels. Due to the advancements in the
technology there may be shortage of skilled manpower in that area. So, the organisation will
provide high wages for skilled personnel. For example, information technology (IT) industry in
India and abroad is suffering from the shortage of IT experts.

7. Academic Institutions
Having good academic qualifications from Reputed and standard educational institution
influence the compensation of the potential candidate in their recruitment in companies.
Example, Indian Top Business schools like Indian Institute of Management, and IIT (Indian
Institute of Technology) graduates demands higher pay packages compared to other normal
institutions. Candidates seeking admission into theses institution requires to qualify tests
conducted on domain knowledge. Candidates those who admit in these institution are
determined, having competence and good domain knowledge which companies require
 CRITERIA OF EFFECTIVE COMPENSATION PROGRAMME

1. Adequate : Minimal governmental, union, and managerial levels should be met.
2. Equitable: Each person should be paid fairly, in line with his or her effort, abilities and
training.
3. Balanced : Pay, benefits and other rewards should provide a reasonable total reward
package.
4. Cost effective: Pay should not be excessive, considering what the organization can afford to
pay.
5. Secure: Pay should be enough to help an employee feel secure and aid him or her in
satisfying basic needs.
6. Acceptable to the employee: The employee should understand the pay system and feel it is
a reasonable system for the enterprise and himself or herself.
7. Incentive providing: Pay should motivate effective and productive work.
 PRINCIPLES OF COMPENSATION MANAGEMENT

1. Wage policies are to be carefully developed, having in mind interests of :
(a) Owners/ managers
(b) Employees
(c) Community
2. Wage policies must be clearly expressed to ensure uniformity and stability. It should not
frequently vary. It should be known to all the members of the management team so as to
avoid expediency.
3. Wage decisions should be checked against formulated policies.
4. It has to be ensured that employees know and understand the wage policies. There should be
clearly established procedures for hearing wage complaints.
5. Wage policies are to be evaluated periodically to ensure they are adequate for current needs.
6. Some companies have wage and salary committee for establishing wage polices and to
recommend changes.
7. Prompt and correct payment of the dues of the employees must be ensured. It should be
capable of easy and quick calculation. Some principles governing the fixation of wages and
salaries are also to be borne in mind. These can be made elements of wage policy.

8. There should be definite plan to ensure that differences in pay for jobs are based upon
variations in job requirements, such as skill, effort, responsibility, working, conditions,
mental and physical requirements within the organization.
9. The general level of wages should be in line with that prevailing in the labour market i.e., of
competitors in the area and industry.
10. Principle of equal pay for equal work is to be followed to avoid inequites.
11. The wage should be adequate to ensure for the worker and his family, a reasonable standard
of living.
12. The wage and salary payments should fulfil a wide variety of human needs including the
need for self-actualization.
13. Wage and salary level should be adequate to attract, retain and motivate competent
employees to perform their tasks.
 IMPORTANCE OF COMPENSATION PRACTICES
An organization has to design its compensation system in such ways that it is able to attain its
three main objectives, namely:
1. Attracting the talent: It is widely accepted that human resources of an organization give it
an edge over its competitors. By offering a well designed pay package, an organization can
get best talent available in the job market.
2. Retaining the talent: In present times, because of globalization and subsequent
privatization, the workforce has become highly mobile. The practice of lifelong employment
and commitment between the employer and the employee which was practiced in some
economies of the world
3. Motivating the employees: Employees may have talent but they will not be motivated to
use their talent unless they know that they will be rewarded duly for their contribution
towards organizational objectives or be punished for not contributing as per the demands of
the job.
4. For attracting the talent towards the organization, it is necessary that each organization
should design a compensation system that is externally competitive. With that end in mind,
wage and salary surveys are to be conducted and pay levels be determined accordingly.

 OCCUPATIONAL HEALTH AND SAFETY(OHAS) IN INDIA:
Health and Safety provisions under Indian Factories Act 1948. The Act has been promulgated
primarily to provide safety measures and to promote the health and welfare of the workers
employed in factories. To take care of the health of workers in factories, the Factories Act, 1948
has provided for certain measures which are stated below:
 PROVISIONS REGARDING HEALTH OF FACTORY WORKERS

Sections 11 to 20 of the Act contain certain provisions intended to ensure that the conditions
under .which work is carried on in factories do not affect the health of the workers injuriously:
1. Cleanliness of the factory premises: Sec. 11,
Every factory shall be kept clean and free from effluvia arising from any drain, privy or other
nuisance. It is specifically provided that in a factory—
 Accumulations of dirt and refuse shall be removed daily, by sweeping or any other method,
from the floors and benches of work rooms and from stair cases and passages, and disposed
off in a suitable manner.
 The floor of every room shall be cleaned. This shall be done at least once every week by
washing, using disinfectant or be some other effective method; where a floor is liable to
become wet in the course of any manufacturing process to such an extent as is capable of
being drained, effective means of drainage shall be provided.
— all inside wall and partitions, all ceilings or tops of rooms and
2. Disposal of Wastes and Effluents: Sec. 12,
Effective arrangement shall be made for the disposal of wastes and effluents arising out of
manufacturing process in the factories.
3. Ventilation and Temperature Sec. 13,
Provision to be made for ventilation and regulation of temperature in the factories. Effective and
suitable measures shall be adopted for securing and maintaining in every room—
— adequate ventilation by the circulation of fresh air, and
— such a temperature as will secure to workers reasonable conditions
4. Dust and Fume Sec. 14,
In every factory, where due to manufacturing process, dust or fume or other impurity arise which
is likely to be injurious to the health of workers employed, effective measures shall be taken to
prevent its inhalation, and accumulation in any workroom. If it is necessary to install exhaust
appliances, it would be installed near the point of origin of the dust, fumes, or other impurity.
5.Artificial humidification Sec. 15,
Artificial creation of humidity is employed in India in cotton textile mills and in cigarette making
factories.
6. Overcrowding Sec. 16,
No room in any factory shall be overcrowded to such an extent which becomes injurious to the
health of the workers employed therein. The Chief Inspector of factories by order in writing shall
fix the maximum member of workers to be employed in each room in the factory.

7. Lighting Sec. 17,
The Factories Act provides for sufficient and suitable lighting, natural or artificial where workers
are working or passing through. Provision of cleaning of inner and outer surface is provided for
all glazed windows and skylights used for the lighting of the workrooms.
8. Drinking Water Sec. 18,
In every factory, effective arrangement shall be made at suitable places for sufficient supply of
wholesome drinking water. Such places shall be legibly marked ‘Drinking Water’ in a language
understood by a majority.
9. Latrines and Urinals Sec. 19,
The Factories Act requires that provision should be made for —
a) sufficient latrine and urinal accommodation conveniently situated and accessible to workers
while they are in the factory;
b) separate enclosed accommodation for male and female workers;
c) such accommodation being adequately lighted and ventilated;
d) all such accommodation being maintained in a clean and sanitary
condition;
e) sweepers being employed to clean latrines, urinals and washing
places;
10. Spittoons Sec. 20
Sufficient number of spittoons must be provided in every factory and maintained in clean and
hygienic condition. No person shall spit within the premises of a factory except in the spittoons.
A notice containing this provision and the penalty for its violation shall be prominently
displayed at suitable places in the factory premises.
 PROVISIONS REGARDING SAFETY OF FACTORY WORKERS

 Safety measures which are provided in the Factories Act, 1948, are considered to be
minimum in terms of adequacy. Such measures are required to be effectively implemented.
 In addition to implementing safety measures provided in the Factories Act, there is also need
for providing training in safety to workers, and installing safety equipment in the factories.
 Employers should take the initiative in providing training in safety to employees. Workers’
unions should take interest in safety promotion. Periodic training courses in accident
prevention can be organised. Safety should become a habit with employers and the workers
alike. The Factories Act provides for the following safety measures:—
 Summary of the provisions of the Factories Act regarding the safety of the workers are stated
below: (Sections 2l to 41).
1. Fencing ot machinery. All dangerous machinery must be securely fenced e.g., moving .parts-
of prime movers and flywheels connected to every prime mover. electric generators..-Sec. 2l.
2. Work on or near machinery in motion. Work on or near machinery in motion must be
carried out only by specially trained adult male workers wearing tightly fitting c1othes.-Sec. 22.
3. Employment of young persons on dangerous machines. No young person shall work at
any dangerous machine' unless he has been specially instructed as to the dangers and the
precautions to be observed. has received sufficient training about the work. and is under the

supervision of some person having thorough knowledge and experience of the machine.-Sec.
23.
4. Striking gear and devices for cutting off power. In every factory suitable devices for
cutting off power in emergencies from running machinery shall be provided and maintained in
every workroom. Sec 24.
5. Self-acting machines. Moving parts of a self-acting machine must not be allowed to come
within 45 cms. of any fixed structure which is not part of the machine.-Sec. 25.
6. Casing of new machinery. In all machinery installed after the commencement of the Act.
certain parts must be sunk, encased or otherwise effectively guarded e.g.. set screw. bolt.
toothed gearing etc. -sec. 26.
7. Women and children near cotton Openers. Women and children must not be allowed to
work near cot/On openers, except In certain cases.-Sec. 27
8. Hoists, lifts, chains etc, Every hoist and lift must be so constructed as to be safe. There are
detailed rules as to how such safety is to be secured. There are similar provisions regarding
lifting machines. chains, ropes and lifting tackle .Sec. 28. 29.
9. Revolving machinery. The maximum safe working speed of every revolving machinery
connected therewith must be notified. Steps must be taken to see that the safe speed is not
exceeded.-Sec. 30.
10. Pressure plant. Where any operation is carried on at a pressure higher than the atmospheric
pressure, steps must be taken to ensure that the safe working pressure is not exceed~ Sec. 31.
11. Floors, stairs and means of access. All floors, steps, stairs, passage and gangways shall be
of sound construction and properly maintained. Handrails shall be provided where necessary.
Safe means of access shall be provided to the place where the worker will carry on any work.-
Sec. 32.
12. Pits, sumps. openings in floors etc. Pits. sumps. openings in floors etc. must be securely
covered or fenced.-Sec. 33.
13. Excessive weights. No worker shall be made to carry a load so heavy as to cause him injury.-
8ec. 34.
14. Protection of eyes. Effective screen or suitable goggles shall be provided to protect the eyes
of the worker from fragments thrown off in course of any manufacturing process and from
excessive light if any.-Sec. 35.
15. Precautions against dangerous fumes. No person shall be allowed to enter any chamber.
tank etc. where dangerous fumes are likely to ,be present. unless it is equipped with a manhole or
other means of going out. In such space no portable electric light of more than 24 ,volts shall be
used. Only a lamp or light of flame proof construction can be used in such space. For people
entering such space suitable breathing apparatus, reviving apparatus etc. shall be provided. Such
places shall be cooled by ventilation before any person is allowed to enter.-Sec. 36 and 36A.
16. Explosive or inflammable gas: where a manufacturing process produces inflammable gas.
dust. fume. etc. steps must be taken to enclose the machine concerned, prevent the accumulation
of substances and exclude all possible sources of ignition. Extra precautionary measures are to
be taken where such substances are worked at greater than the atmospheric. pressure.-Sec. 37.
17. Precaution in case of fire. Fire escapes shall be provided. Windows and doors shall be
constructed to open outwards. The means of exit in case of the fire shall be clearly marked in
red letters. Arrangements must be made to give warning in case or fire -sec. 38
18. Specifications of defectives etc. and safety of buildings and machinery. If any building or
machine is in a defective or dangerous condition, the inspector of factories can conduct tests to
determine how they can be made safe. He can also direct the adoption of the measure necessary
to make them safe. In case of immediate danger, the use of the building or machine can be
prohibited.- Secs. 39. 40.
19. Maintenance of Buildings. If the Inspector of Factories thinks that any building in a factory,
or any. part of it. is in such a state of disrepair that it is likely to affect the health and welfare of
the workers. he may serve on the occupier or manager or both in writing specifying the measures
to be done before the specified date. Sec. 4OA.
20. Safety Officers. The State Government may notify to the occupier to employ a number of
Safety Officers in a factory (i) wherein one thousand or more workers are ordinarily employed.
or (ii) wherein any manufacturing process or operation which involves the risk of bodily injury,
poisoning. disease or any other hazard to health of the persons employed in the factory .-Sec.
40B.
21. Rules. The State Government may make rules providing for the use of such further devices
for safety as may be necessary. Sec. 41.
 PROVISIONS REGARDING EMPLOYEE WELFARE OF FACTORY WORKERS
Organizations provide welfare facilities to their employees to keep their motivation levels high.
The employee welfare schemes can be classified into two categories viz. statutory and non-
statutory welfare schemes. The statutory schemes are those schemes that are compulsory to
provide by an organization as compliance to the laws governing employee health and safety.
These include provisions provided in industrial acts like Factories Act 1948, Dock Workers Act
(safety, health and welfare) 1986, Mines Act 1962. The non-statutory schemes differ from
organization to organization and from industry to industry.
1. Washing facilities: Sec 42 The Factories Act provides for -

 adequate and suitable facilities for washing for the use of workers in the factories. The
workers who live in crowded areas have inadequate facilities for washing at their homes and
bathing facilities add to their comfort, health and efficiency.
 Separate and adequately screened washing facilities for the use of male and female workers.
 Such facilities being conveniently accessible, and being kept clean.
2. Facilities for storing and drying clothes: Sec 43
A suitable place for keeping clothes not worn during working hours shall be provided in every
factory. Facilities shall also be provided for the drying of wet clothes.
3. Facilities for sitting: Sec 44
For workers who are to work in a standing position, suitable arrangement for sitting shall be
provided in the factories. This is to enable workers to take advantage of any opportunity for rest
which may occur in the course of their work.
4. First-aid appliances: Sec 45
 First-aid boxes or cupboards equipped with the required contents should be provided for
workers in every factory. This should be readily accessible to them during all working hours.
The number of such first aid boxes shall not be less than one for every 150 workers
employed in the factory.

 Such first-aid box shall be kept in the charge of a responsible person who is trained in first-
aid treatment and who shall be available during the working hours of the factory. In factories
employing more than 500 workers, there shall be an ambulance room. It should contain the
prescribed equipments, and be in the charge of such medical and nursing staff as maybe
prescribed.
5. Canteens: Sec 46
In factories employing more than 250 workers, there shall be a canteen for the use of workers.
The government may prescribe the rules in respect of the —
 food stuff to be served in the canteen; charges to be made;
 constitution of a managing committee for the canteen and
 representation of the workers in the management of the canteen.
6. Shelters, restrooms and lunch rooms: Sec 47

Adequate and suitable shelters, rest rooms, and lunch rooms with drinking water facility shall be
made in factories employing 150 workers or more. Workers can eat meals brought by them in
such rooms. Rest and lunch rooms shall be sufficiently lighted and ventilated. It shall be
maintained in cool and clean conditions.
7. Creches: Sec 48
In every factory, where more than 50 women workers are employed, provision shall be made for
suitable and adequate room for the use of children under the age of six years of such women.
Such a room shall be adequately lighted and ventilated. It shall be maintained in clean and
sanitary conditions under the charge of a woman trained in the care of children and infants.
8. Welfare Officer: Sec 49
The factories Act also provides for employment of welfare officers with prescribed qualification
to look into the implementation of various facilities provided for. Such a provision exist in every
factory employing more than 500 workers.
9. Rules. Sec. 50 The State Government may make rules regarding the welfare of workers.-.
 SOCIAL SECURITY MEASURES :

1. Workmen's Compensation Act 1923—
The Act provides for the compensation of those workmen who sustain personal injuries by
accidents arising out of and in the course of their employment. The Act applies to all permanent
employees employed in railways, factories, mines, plantations, mechanically propelled vehicles,
construction work and certain other hazardous occupations.
The employer is liable to pay, under this Act, the compensation in case of personnel injury
caused by accident arising out of and in the course of employment. For this purpose, injury has
been divided under three categories (i) causing death, (ii) total or partial permanent disablement,
and (iii) temporary disablement. The rates of compensation are fixed for all types of injuries
according to wage-ranges.
2. Employees State Insurance Act 1948—
In order to provide sickness benefits to workers, the Employees State Insurance Act was passed
in 1948. The Act applies to all non-seasonal factories run with power and employing 20 or more
persons. It covers all types of employees — manual, clerical, supervisory and technical. The
scheme is compulsory and contributory.
Compulsory in the sense that all workers covered under the act must be insured and contributory
in the sense that it is financed by the contributions from employees and employers.

The scheme provides five types of benefits to the insured workers and their dependents. These
benefits are:
(i) Medical Benefit—An insured person or (where medical benefit has been extended to his
family) a member of his family who requires medical treatment is entitled to receive medical
benefit free of charge. Such medical benefit may be given either in the form of outpatient
treatment or as in patient treatment in a hospital which may be either run by the ESI Corporation
or by any other agency.
(ii) Sickness Benefit—An insured person, when he is sick, is also entitled to get sickness benefit
at 62.5% of the average wage which he would have earned had he been well and at work.
(iii) Maternity Benefit-An insured woman is entitled to receive maternity benefit (which is
twice the sickness benefit rate) for all days on which she does not work for remuneration, during
a period of 12 weeks of which not more than 6 weeks shall precede the expected date of
confinement.
(iv) Disablement Benefit-An insured person is entitled to receive disablement benefit for any
injury -arising out of and in the course of his employment. Artificial limbs are also provided at
the cost of Corporation to those who lose their limbs as a result of employment injury.
Spectacles, dentures, pace-makers, etc., are also provided to insured person free of cost,
depending upon the nature of the case.
(v) Dependent’s Benefit—If an insured person meets with an accident in the course of his
employment and dies as a result thereof, his dependent, i.e., his widow, legitimate (or adopted)
sons and legitimate unmarried daughters get pension. The widow gets it throughout her life or till
remarriage. The sons get it up to the age of 18 years or until they marry, whichever is earlier.
(vi) Funeral Benefit—The eldest surviving member of the family of an insured person who has
died is entitled to receive payment for the expenditure incurred on funeral.
person.
3. Maternity Benefits Act—The expectant mothers are entitled for 12 weeks leaves i.e., 6 weeks
up to and including the day of delivery and 6 weeks immediately following that day.
4. Employees Provident Fund Act 1952—The Act was passed in 1952 covering factories
employing 50 or more workers in 6 major industries, viz., iron and steel, textiles, engineering,
cement, paper and cigarettes.. The scheme is contributory and compulsory. Thh. The
PROVIDENT FUND ACT 1952 was amended in 1971 to provide for the benefit of family
pension to the members of the deceased in case of their death while in service. A family Pension-
cum-life Insurance Scheme was introduced in 1971.
6. Family Pension Scheme 1971—This was launched for industrial workers covered by
Provident Fund Schemes. Under this scheme, a financial assistance i.e., pension is provided to
workers monthly after retirement till he survives and to his widow thereafter till she survives.
7. Payment of Gratuity Act 1972—Under this employees in factories, mines, oil fields,
plantation, ports, railways etc. are entitled to gratuity after completing 5 years of service at the
rate of 1/2 month's wages for each completed years of service subject to a maximum of 20
months wages.
8. Old-Age Pensions Scheme—Various State Governments - U.P Kerala, Andhra Pradesh,
Tamilnadu have introduced a scheme of old-age pension to persons of 60 years of age and are
poor and destitute. It is open to all.
9. Compulsory Group Insurance—The scheme was introduced by the Central Government
with the cooperation of the Life Insurance Corporation and applies to certain groups of workers.
The employees contribute certain amount monthly towards the premium.


Course Name: BBA Semester:-IV Paper Code: BBA 202 Academic Year:-2016-17

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Course Name: BBA Semester:-IV Paper Code: BBA 202 Academic Year:-2016-17

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Institute of Innovation in Technology and Management, New Delhi

(Affiliated to GGSIP University)

 A job evaluation is a systematic way of determining the value/worth of a job in relation to

 BENEFITS/ IMPORTANCE OF JOB EVALUATION

 It tries to link pay with the requirements of the job.

Dr. Archana Krishnan, IITM -JP Page 1

ii. Job specification

 METHODS OF JOB EVALUATION

Dr. Archana Krishnan, IITM -JP Page 2

Table: Array of Jobs according to the Ranking Method

Dr. Archana Krishnan, IITM -JP Page 3

The weaknesses of the job classification method are:

3. Factor Comparison Method

An example of how the factor comparison method works is given below:

Dr. Archana Krishnan, IITM -JP Page 4

The most frequent factors employed in point systems are:

Dr. Archana Krishnan, IITM -JP Page 5

Table: Conversion of Job Grade Points into Money Value

Dr. Archana Krishnan, IITM -JP Page 6

 TECHNIQUES FOR DESIGNING JOBS

Dr. Archana Krishnan, IITM -JP Page 7

 Job enrichment, as currently practiced in industry, is a direct outgrowth of Herzberg's Two

 PERFORMANCE APPRAISAL Vs JOB EVALUATION

Dr. Archana Krishnan, IITM -JP Page 8

 OBJECTIVES OF PERFORMANCE APPRAISALS

General Goals Specific Goals

Dr. Archana Krishnan, IITM -JP Page 9

 PERFORMANCE APPRAISAL PROCESS

 PERFORMANCE APPRAISAL PROCESS:

Dr. Archana Krishnan, IITM -JP Page 10

 TRADITIONAL Vs MODERN (SYSTEMS) APPROACH TO APPRAISALS

 TECHNIQUES / METHODS OF PERFORMANCE APPRAISALS

Dr. Archana Krishnan, IITM -JP Page 11

4. Forced Distribution Method:

Dr. Archana Krishnan, IITM -JP Page 12

Dr. Archana Krishnan, IITM -JP Page 13

8. Performance Tests & Observations:

10. Essay Method:

11. Cost Accounting Method:

Dr. Archana Krishnan, IITM -JP Page 14

1. Management by Objectives: It means management by objectives and the performance is

Dr. Archana Krishnan, IITM -JP Page 15

 LIMITATIONS OF PERFORMANCE APPRAISAL SYSTEM

Dr. Archana Krishnan, IITM -JP Page 16

4. Leniency and strictness:-

5. Spill over effect:-

6. Fear of loosing subordinates and spoiling relations:-

Dr. Archana Krishnan, IITM -JP Page 17

 PERFORMANCE APPRAISAL Vs PERFORMANCE MANAGEMENT

Dr. Archana Krishnan, IITM -JP Page 18

 PURPOSES OF POTENTIAL APPRAISAL:

Dr. Archana Krishnan, IITM -JP Page 19

 PERFORMANCE APPRAISAL VS POTENTIAL APPRAISAL

 Performance appraisal is an assessment of a person given a job whereas potential appraisal

Dr. Archana Krishnan, IITM -JP Page 20

 TYPES OF COMPENSATION AND BENEFITS

There are three types of Compensation and Benefits namely;

1. BASE COMPENSATION AND BENEFITS

 FACTORS INFLUENCING BASE COMPENSATION AND BENEFITS

Dr. Archana Krishnan, IITM -JP Page 21

2. VARIABLE COMPENSATION AND BENEFITS

 This type of compensation as by its name is variable.

3. SUPPLEMENTARY COMPENSATION AND BENEFITS