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TABLE OF CONTENTS
CBP
Objectives
Upon completion of this module you would be able to understand the following:
1.
2.
3.
4.
5.
Opening Case
Tata Consulting services (TCS) is a truly global company. It has 28,000 software
engineers drawn from 32 countries. TCS adopts unique system of hiring people.
Its starts its human resource sourcing right at the college level. The software
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Organizations are not mere bricks, machines and inventories. They are people.
It is people who staff and manage the organization.
2.
are
applied
in
acquisitioning,
developing,
maintaining,
and
4.
HRM functions are not just limited to business establishments only. They are
applicable to NGOs, Education, Recreation etc.
Definition:
HRM is the planning, organizing, directing and controlling of the procurement,
development, compensation, integration, maintenance and separation of human
resources to the end that individual, organizational and social objectives are
accomplished.
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Ignorant about existing labor laws which land your company into
trouble
Strategic challenges of HR
The central challenge facing HRM is always provide a set of services that make
sense in terms of the companys strategic plan.
A strategic plan is the companys plan for how it will match its internal
strengths and weaknesses with external opportunities and threats in order to
maintain a competitive advantage.
The basic strategic planning process involves asking, Where are we now as a
business and where do we want to be? The manager then formulates specific
strategies to take the company from where it is now to where he or she wants it
to be. A strategy is thus a course of action. The companys various strategies
HRs, Sales, production etc need to support the companys strategic plan.
Suppose the strategic plan calls for improving quality of the companys products.
Then one of HR strategy might be to boost employee quality consciousness
through improved screening and training.
Example:
The essence of Dell computers strategic plan has always been to be what
strategic planner call a low-cost leader, by using the internet and phone to sell
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PCs directly to end users at prices competitors cannot match. The firms HR
managers have devised various HR strategies to support the firms low-cost
strategy. For example, Dell now delivers most of its HR services via the web. A
managers
tool
section
on
intranet
contains
about
30
automated
web
1.
The
need
to
support
corporate
productivity
and
performance
improvement efforts.
With the globalization of the world economy, competition has increased, and
with it need to continually improve the organizations performance.
2. The employees play an expanded role in the employers performance
improvement efforts.
This requires high level of employee competence and commitment.
3. The HR Department must be more involved in designing not just
executing the companys strategic plan.
In formulating the strategy the top management needs the input of the
managers charged with hiring, training and compensating the firms employees.
HR professionals therefore need to understand the basic strategic planning.
The strategic management process
Figure 1.1 below gives the idea of what strategic management process. Strategic
planning is the part of the firms strategic management process.
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our
companys
opportunities
and
threats,
and
its
strengths
and
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Management experts use the terms vision and mission to help define the
companys current and future business.
The companys Vision is a general statement of its intended direction that
evokes emotional feelings in organization members.
The firms mission is more specific and shorter term. It serves to communicate
who we are, what we do, and where we are headed.
Step 2: Perform external and internal audits:
Managers base their strategic plans on methodical analyses of their external
and internal situation. The basic point of strategic plan should be to choose a
direction for the firm that makes sense, in terms of the external opportunities
and threats it faces and the internal strengths and weaknesses it possesses.
Ideally managers begin their strategic planning by methodically analyzing their
external and internal situations. The strategic plan should provide a direction for
the firm that makes sense, in terms of the external opportunities and threats the
firm faces and the internal strengths and weaknesses it possess. To facilitate this
strategic external/internal audit many managers use SWOT analysis. This
involves using a SWOT chart to compile and organize the process of identifying
company Strengths, Weaknesses, Opportunities, and Threats.
Step 3: Translate missions into strategic goals:
The firms managers need long-term strategic goals. For example, what exactly
does that mission mean, for the next five years, in terms of how many and what
specific types of partnership to form, with whom and when?
Saying the mission is to make quality job one is one thing operating that mission
for your managers is another. What exactly does that mission mean, or each
department, in terms of how well boost quality?
As an example, WebMDs sales director needs goals regarding the number of
new medical related content providers vitamin forms, hospitals, HMOs it must
sign up per year, as well as sales revenue targets. The business development
managers needs goals regarding the number of new businesses such as using
WebMD to help manage doctors office online he or she is to develop and sign.
Similarly, Citicorp cant function solely with a mission, provide integrated,
comprehensive financial services worldwide. To guide managerial action, it needs
goals in terms of things like building shareholder value, maintaining superior
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rates of return, building a string balance sheet and balancing the business by
customer, product and geography.
Step 4 : Formulate a strategy to achieve the strategic goals:
The firms strategy is a bridge connecting where the company is today with
where it wants to be tomorrow. The question is how do we get from here to
there? A strategy is a course of action. It shows how the enterprise will from
the business it is in now to the business it wants to be, given its opportunities
and threats and its internal strengths and weaknesses. A knowledge of and
commitment to the strategy helps ensure that employees make decisions
consistent with the companys needs.
Again a strategy is a course of action. It shows how the enterprise will move
from the business it is in now to the business it wants to be in (as laid out by its
vision, mission, and strategic goals) given the firms opportunities, threats,
strengths, and weaknesses. The strategies bridge where the company is now,
with where it wants to be tomorrow. The best strategies are concise enough for
the manager to express in an easily communicated phrase that resonates with
employees.
For example,
Company
Strategic Principle
Dell
Be direct
eBay
General Electric
Southwest Airlines
Meet
customers
short-haul
travel
needs
Wal-Mart
Keeping the strategy clear and concise helps ensure that employees all share
that strategy and so make decisions that are consistent with it. For example the
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management
functions:
Planning,
organizing,
staffing,
leading
and
controlling.
Step 6: Evaluate performance:
Strategies dont always succeed. Managing strategy is an ongoing process.
Strategic control keeps the companys strategy up to date. It is the process of
assessing progress toward strategic goals and taking corrective action as
needed.
For example, Procter & Gamble announced it was selling its remaining food
businesses Jif, Crisco, and Folgers coffee because management wants to
concentrate on household and cosmetics products.
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Management formulates a strategic plan. That strategic plan implies certain work
force requirements, in terms of employee skills, attributes and behaviors that HR
must deliver to enable the business to achieve the strategic goals.
For Example, Must our employees dramatically improve the level of customer
service? Do we need more computer-literate employees to run our new
machines?
Given these work force requirements, HR management formulates HR strategies,
policies and practices aimed at achieving the desired workforce skills, attributes
and behaviors. (These may take the form of new selection, training, and
compensation policies and practices, for instance.
Ideally HR management then identifies the scorecard metrics it can use to
measure the extent to which its new HR initiatives are supporting management
strategic goals.
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There are seven steps in using the HR scorecard approach to create a strategic
results oriented HR system. Fig 1.2 illustrates this.
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For this value chain analysis is useful. The companys value chain identifies the
primary activities that create value for customers and the related support
activities.
Lets refer to Fig 1.3 which demonstrates a sample value chain for a Hotel:
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Step 3: Identify the strategically required organizational outcomesEvery company must produce critical, strategically relevant outcomes if it is to
achieve its strategic goals. At Dell we have seen earlier, receiving quick,
competent, and courteous technical advice by phone is one such outcome.
Based on his or her understanding of how the company operates, and perhaps
an analysis of firms value chain, the manager, in this step, now identifies and
specifies the strategically relevant organizational outcomes.
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Step 4: Identify the required workforce competencies and behaviors The question here is, What employee competencies and behavior must our
employees exhibit if our company is to produce the strategically relevant
organizational outcomes, and thereby achieve its strategic goals?
Step 5: Identify the strategically relevant HR system policies and
activities
Once the HR manager knows what is to be expected out of the employees he or
she can turn to the task of identifying the HR activities and policies that will help
to produce these employee competencies and behaviors.
In this step, the important thing is to be specific. It is not enough to say we
need training programs, or disciplinary processes. Instead the manage must
now ask, Exactly what sort of the new training programs do we need, to
produce the sorts of employee competencies and behaviors that we seek? How
and to what end should we change the disciplinary processes? In this step, the
HR manager must therefore become precise about the actual form and design of
the firms HR system.
Step 6: Design the HR scorecard Measurement system After choosing
required organizational outcomes, and employee competencies and behaviors,
and specific HR system policies and activities, the question is how shall we
measure them all?
For example, if we decide to improve the disciplinary system, how precisely will
the company measure such improvement?
quantify
each
of
these
organizational
outcomes,
and
employee
competencies, and the HR policies and activities, the measures can help the
company and HR manager assess HRs performance, unambiguously and
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quantitatively. They make it clear whether and to what extent employee morale
is up or down.
Second, they can help HR manager to build a measurable and persuasive
business case for how HR contributes to achieving the companys strategic
financial goals. The manager will be able to show, quantitatively, how the firms
HR activities affect employee behaviour, customer satisfaction and therefore
fiancial performance.
The HR scorecard is crucial in this measurement process. It helps the HR
manager demonstrate how HR contributes to the companys strategic and
financial success.
Step 7: Periodically evaluate the measurement system The HR manager
cannot assume that the HR scorecards various measures and links will always
stay the same. He or she should periodically evaluate measures and links to
make sure they are still valid.
Exercise:
The Hotel Paris International: An example
Let us see how this seven step process works by considering a fictitious
company, The Hotel Paris international. Let us say this Paris based hotel has a
global expansion plan to stay competitive in the market. In doing so they believe
that it will let them capitalize on their reputation for good service, by providing
multi-city alternatives for their satisfied guests. The problem is, their reputation
for good services has been deteriorating. If they cannot improve the service, it
would be unwise for them to expand, since their guests might actually prefer
other hotels after trying the Hotel Paris.
Implement the above seven step process in the above example.
Refer to fig 1.4 for solution
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those
companies
who
look
after
their
organizational
2.
3.
are
very
important
for
all
types
of
businesses
and
managers
can
efficiently
asses
the
returns
of
their
companies.
4.
5.
6.
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Job description and 2.Job specification. Figure below gives the difference
between the two.
Job Analysis
A process of obtaining all pertinent job facts
Job description
A statement containing items such
as:
Job title
Location
Job summary
Duties
Working conditions
Hazards
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Job Specification
A statement of human qualifications necessary to
Do the Job. Usually contains such items as
Education
Experience
Training
Judgment
Initiative
Physical effort
Physical skills
Responsibilities
Communication skills
Emotional characteristics
2.
3.
4.
using the information to determine skills, abilities and knowledge that are required on
the Job.
5.
2.
Employee hiring
3.
4.
Performance appraisal
5.
6.
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b.
c.
d.
e.
a.
Employee involvement:
Job analysis involves collecting job related information-duties, responsibilities, skills and
knowledge required to perform the jobs.
The focus here is not on the job not on the individual holding the job. However
individuals are consulted.
Employees are often asked to supply the vital information about the contents of the job,
given their familiarity with it.
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Care should be taken as we gather information from the employee as he or she may
inflate their duties and responsibilities of his/her job making it more important than it
actually is.
On the other hand lack of involvement from employees may lead to inaccurate and
incomplete information.
While involving employees in Job analysis they should be communicated why the
analysis is being conducted. (Further training, recruiting more employees, additional
responsibilities )
b.
Level of details
The nature of the job being analyzed determines the level of detail in Job analysis.
For Eg. Analyzing the number of movements and employee makes and the frequency of
job related movements will be more relevant for a crane operators job than a personal
managers position.
The level of details required in job analysis also depends upon the purpose for which job
related details are being collected. For Ex: if the primary purpose of Job analysis is for
mass input for intensive training programs or an input assessing how much the job is
worth, the level of details required may be great.
c.
Another strategic choice relates to the timing and frequency of conducting Job analysis .
Job analysis is generally conducted when
(i) an organization is newly established and the Job analysis is initiated for the first
time.
(ii) A new job is created in an established company.
(iii) A Job is changed significantly due to change in technology, methods, procedures or
systems.
(iv) The organization is contemplating a new remuneration plan or
(v) The employees or the managers feel that there exists certain inequities between job
demands and remuneration it carries.
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d.
Human sources
Job analysis
Job incumbents
Supervisors
Job experts
In deciding sources to be used in a given job analysis, the analyst should follow at least
two guidelines:
1.
For non-human sources, use such sources which are most recent, and
2.
2.
Information Gathering
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2.
3.
Following table brings out the elements to be gathered for a given Job. The type of data,
however, depends upon the end use of the information, as also on the time and budget
constraints.
Work Activities
a.
2.
3.
4.
(ii)
(iii)
b.
c.
Procedures used
d.
e.
b.
c.
d.
Job context
a.
1.
2.
b.
Organisational context
c.
Work schedule
d.
Personal requirements
a.
Specific skills
b.
c.
Work experience
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d.
e.
3. Information processing
After information is gathered it needs to be processed so that it would be useful in
various personal functions.(Performance appraisal, hiring, promotions, transfers). The
processed information is useful to prepare job description and job specification.
4. Job Description
A job description is a written statement of what the worker actually does, how he or she
does it and what the jobs working conditions are. This information is further used to
write a job specification; this lists the knowledge, abilities and skills required to perform
the job satisfactorily.
There is no standard format for writing a job description. However they usually contain
the following:
a.
Job identification
b.
Job summary
c.
d.
Authority of incumbent
e.
Standards of performance
f.
Working conditions
g.
Job specifications
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Job Title:
Recommended Salary Grade
Job Family:
Reports to :
Location :
Job Code:
Exempt/Non Exempt status:
Division :
Department :
Date:
Other :
Date:
Date:
Date:
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Corporate compensation:
Date :
The Corporate Human Resources Recruiter is responsible for delivering all facets of recruiting
success throughout the organization. This will be achieved through the development of local and
national recruiting plans, employing traditional sourcing strategies and resources as well as
developing new, creative recruiting ideas. The Corporate Human Resources Recruiter will play a
critical role in ensuring we are hiring the best possible talent.
Primary Objectives of the Human Resources Recruiter:
Network through industry contacts, association memberships, trade groups and employees.
Lead the creation of a recruiting and interviewing plan for each open position.
Conduct regular follow-up with managers to determine the effectiveness of recruiting plans
and implementation.
Research and recommend new sources for active and passive candidate recruiting.
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--Post
positions
--Improve
--Research
the
to
company
new
ways
website
of
appropriate
recruiting
using
page
the
Internet
to
assist
Internet
sources.
in
for
recruiting.
recruitment.
--Use social and professional networking sites to identify and source candidates.
Network Through Industry Contacts, Association Memberships, Trade Groups and Employees
Aid public relations in establishing a recognizable employer of choice reputation for the
company, both internally and externally.
Communicate with managers and employees regularly to establish rapport, gauge morale,
and source new candidate leads.
Give presentations at colleges, attend student group meetings, and increase college
awareness of the company before and after career fairs.
Maintain all pertinent applicant and interview data in the Human Resources Information
System (HRIS)
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To perform this job successfully, an individual must be able to perform each essential duty
satisfactorily, as assigned. The requirements listed below are representative of the knowledge, skill,
and ability required. Reasonable accommodations may be made to enable individuals with disabilities
to perform the essential functions.
Ability to travel for recruitment meetings, college visits, and career fairs and maintain a
flexible work schedule.
One to two years of human resources experience required; one to two years of human
resources corporate recruiting experience preferred.
Physical Demands:
The physical demands described here are representative of those that must be met by an employee
to successfully perform the essential functions of the job. Reasonable accommodations may be made
to enable individuals with disabilities to perform the essential functions. While performing the duties of
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this job, the employee is regularly required to see, talk and hear. The employee frequently is required
to sit and use hands along with fingers, to handle or feel. The employee is occasionally required to
stand, walk, reach with hands and arms, climb or balance, and stoop, kneel, crouch or crawl. The
employee must frequently lift and/or move up to 50 pounds. Specific vision abilities required by this
job include close vision.
Work Environment:
The work environment characteristics described here are representative of those encountered while
performing the essential functions of this job. Reasonable accommodations may be made to enable
individuals with disabilities to perform the essential functions. While performing the duties of this job,
the employee is occasionally exposed to moving mechanical parts and vehicles. The noise level in
the work environment is usually moderate.
This job description is intended to convey information essential to understanding the scope of the
position and is not an exhaustive list of skills, efforts, duties, responsibilities or working conditions
associated with it.
1.
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Personnel
Planning
and
recruiting
Personnel planning is the first step in recruiting and selection process. Following steps
are involved in this process to select the best candidate for the job:
1.
Decide what positions youll have to fill through personnel planning and
forecasting.
2.
Build a pool of candidates for these jobs by recruiting internal and external
candidates
3.
4.
5.
Decide who to make an offer to, by having the supervisor and perhaps others on
the team interview the candidates.
The need or importance of manpower planning may be assessed through the
following facts:
(i) Increase in the size of the business:- Wit the expansion of the plant, a
large number of workers are required to be recruited. At the time of taking the
decision for expansion of he plant, a stock of the existing manpower should be
taken and future need of the personnel should be assessed. Ti sis very essential
to know whether new responsibilities should be assigned from among the
existing personnel or personnel should be recruited afresh outside to met the
challenges
of
the
new
responsibilities.
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planning.
(iii) Reduction in labour cost:- In order to maintain the supremacy over other
competitive firms, it is in the interest of eh organization to control the cost of
labour by effective use of manpower and thus reducing the wastage. This can be
well
done
by
manpower
planning.
organisation
in
this
regard.
Effective recruiting:
Assuming the company authorizes you to fill a position, the next step is to develop an
applicant pool. The more applicants you have, the more selective you can be in your
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hiring. If only two candidates apply for two openings, you may have little choice but to
hire them. But if 10 or 20 applicants appear, you can use techniques like interviews and
tests to screen out all but the best.
The recruiting yield pyramid:
It is a historical arithmetic relationships between recruitment leads and invitees, invitees
and interviews, interviews and offers made, and offers made and offers accepted.
It is used to calculate the number of applicants they must generate to hire the required
number of new employees.
Eg:
Lets say a company needs 50 new entry level accountants. From experience, the
company knows the ration of offers made to actual hires is 2:1; About half the people to
whom it makes offers accepts them.
Similarly the firm knows that the ratio of candidates interviewed to the offer made is
3:2 while the ratio of candidates invited to interviews to candidates actually interviewed
is about 4:3. Finally the firm knows that out of six leads that come in from all its
recruiting efforts, only one applicant typically gets an interview i.e say 6:1.
Given all these ratio, the firm knows it must generate 1200 (6:1)applications to be able
to invite 200 candidates (4:3) to its office for interviews. The firm will then get to
interview about 150 of those invited, and from these it will make 100 offers. Of those
100 offers, around 50 will accept.
Recruiting is done both internally and externally.
In case of internal recruiting the organization recruits for the posts from within.
Candidates fill in the vacancies in the form of promotions or through Job postings.
Job posting means publicizing the open job to the employees and listing the jobs
attributes, like qualifications, supervisor, work schedule and pay rate.
Hiring externally:
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Firms cant always get all the employees they need from their current staff, and some
times they just dont want to. Following are the sources that firms use to hire
candidates:
1.
Advertising
2.
Employment agencies.
3.
Internet.
4.
Campus placements
employer, including the names of the supervisor and their telephone number all
essential for following up on the reference. Also in signing the application, the applicant
should certify his or her understanding of several things: that falsified statements may
be cause for dismissal; that medical examination may be requiredetc.
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Personal History
a.
Name in full
b.
Marital status
c.
Date of birth
d.
e.
Current address
f.
g.
Current address
h.
i.
Special qualification
II.
Employment History
a.
b.
III.
Personal declarations
Individual and group activities:
1.
Bring to class several classified and display ads from the Wednesday Times ascent.
Analyze the effectiveness of these ads.
2. Develop your own application form for the post of Professor, Clerk and Asst. Engineer.
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Carefully scrutinizing all information supplied by the applicant on his or her employment
application. Ex. Look for unexplained gaps in employment.
b.
Getting the applicants written authorization for reference checks, and carefully checking
the references.
c.
Saving all records and information you obtain about the applicant.
d.
Rejecting applicants who make false statements of material facts or who have conviction
records for offences directly related and important to job in question.
e.
Keeping in mind the need to balance the applicants privacy rights with others need to
know, especially when you discover damaging information.
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f.
A. Selection process:
Selection is a long process, commencing from preliminary interview of the applicants
and ending with the contract of employment. Selection process differs from organization
to organization and between two different jobs within the same organization. Selection
procedure for senior managers will be long-drawn and rigorous, but it is simple and
short while hiring shop floor workers.
B. Environmental factors affecting selection:
Selection is influenced by several factors. More prominent among them are supply and
demand of specific skills in the labour market, unemployment rate, labour market
conditions, legal and political considerations, companys image, companys policy and
cost of hiring.
C. Preliminary interview:
The purpose of this interview to reject misfits for reasons, which did not appear in the
application forms. Its a good public relations exercise.
D. Selection tests:
Job seekers who pass the screening and preliminary interview are called for tests.
Different types of tests may be administered, depending on the job of the company.
Generally,
tests
are
used
to
determine
the
applicants
ability,
aptitude
and
personality. Ability tests assist in determining how well an individual can perform tasks
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related to the job. An excellent illustration of this is the typing test given to a
prospective employee for a secretarial job. An aptitude test help determine a persons
potential to learn in a given area. Personality tests are given to measure a prospective
employees motivation to function in a particular work environment. Interest tests are
used to measure an individuals activity preference. Graphology test is designed to
analyze the handwriting of an individual. It has been said that an individuals
handwriting can suggest the degree of energy, inhibitions and spontaneity, balance and
control. For example, big letters and emphasis on capital letters indicate the tendency
towards dominations and competitiveness. A slant to the right, moderate pressure and
good legibility show leadership potential. Polygraph tests are designed to ensure
accuracy of the information given in the applications. Medical tests reveal physical
fitness of candidate. Whatever tests one may conduct it should be reliable and valid.
E. Employment interview:
The next step in selection process is employment interview. The interview is conducted
at the beginning and at the end of the selection process.
Interview is a formal, in-depth conversation conducted to evaluate the applicants
acceptability. It is considered to be a excellent selection device. It can be adapted to
unskilled, skilled, managerial and professional employees. It allows a two-way exchange
of information, the interviewers learn about applicant, and the applicant about the
employer.
While conducting interview one must be careful of Absence of reliability, lack of validity
and Bias.
Interview has at least three objectives (i) helps obtain additional information from the
applicant; (ii) facilitates giving general information to the applicant such as company
policies, job, products manufactured and the like; (iii) help build the companys image
among the applicants.
b.
c.
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d.
e.
f.
Analyze career and interests to reveal strengths, weaknesses, patterns and behaviour.
g.
Maintain control over the direction and time taken for the interview.
Donts:
a.
b.
c.
d.
e.
f.
g.
2.
3.
4.
5.
What pay do you have in mind. (Try tactfully to avoid answering this one early in the
interview)
Reading motivation
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What would like to be doing five years from now when you retire?
Regarding education:
Have you had any special training for this kind of job?
Regarding experience
What are your greatest strengths and limitations for this job?
Regarding pay
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Many employers requests names, addresses and telephone numbers or references for
the purpose of verifying information and perhaps, gaining additional background
information on an applicant.
These references are to be checked for two important purposes. One purpose is to gain
insight about the potential employee from the people who have had previous experience
with him or her. The second purpose for reference checks is to access the potential
success of a prospect.
G. Selection decision
After obtaining information through the preceding steps, selection decision the most
critical of all steps must be made. The other stages of the selection process have been
used to narrow the number of candidates. The final decision has to be made from the
pool of individuals who pass the tests, interviews and reference checks. Other senior
managers and officers are pooled in before making decision on selection of candidate.
H. Physical examination
After the selection decision and before the job after offer is made, the candidate is
required to undergo a physical fitness test. A job offer, is often contingent upon the
candidate being declared fit after physical examination. The results of medical fitness
test are recorded in a statement and are preserved in the personnel records.
I. Job offer
The next step in the selection process is the job offer to those applicants who have
crossed all the previous hurdles. It is made through a letter of appointment. Such letter
generally contains a date by which the appointee must reply on duty. The appointee
must be given reasonable time for reporting. This is necessary for those who are already
in employment in which case he or she is required to obtain a relieving certificate from
the previous employer.
J. Contracts of employment
After the job offer has been made and the candidates accept the offer, certain
documents need to be executed by the employer and the candidate. One such form is an
attestation form. This form contains certain vital details about the candidate which are
then authenticated and attested by him/her. There is also need of preparing a contract
of employment. The basic information that should be included in a written contract of
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employment will vary according to the level of the job, but the following checklist sets
out the typical headings:
1.
Job title
2.
Duties, including phrase such as the employee will perform such duties and
will be responsible to such a person, as the company may from time to time
direct.
3.
Date when continuous employment starts and the basis for calculating
service.
4.
5.
Hours of work including lunch break and overtime and shift arrangements.
6.
Holiday arrangements:
a.
b.
c.
Qualifying period.
d.
e.
f.
g.
h.
i.
Public holidays.
7.
Sickness
a.
b.
c.
d.
e.
Medical certificate.
8.
9.
15.
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The selection process does not end with executing the employment contract. There is an
another step a more sensitive one reassuring those candidates who have not been
selected. Such candidates must be told that they were not selected, not because of any
serious deficiencies in their personalities, but because their profiles did not match the
requirements of the organization. They must be told that those who were selected were
done purely on relative merit.
Discussion questions:
1.
If you were a chairman of your company, what considerations would guide your
judgment on the following employment issues:
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safety
measures,
routine
etc.
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personnel department to answer the personnel department to answer the problems that
a new employee may have on the job and to respect some of information given earlier.
Induction is a follow-up action of hiring and concerned with the problem of introducing
or
orienting
new
employee
to
the
organisation.
When a new employee reports for duty, he should be welcomed as a new members of
the organization and must be helped to get acquainted and adjusted with his fellow
employees and work-environment. The first day of employment is long remembered by
most of the people. Initial impression counts much, later in the attitude of the employee
towards
the
job
and
the
company.
The new employee must be got introduced with the fellow employees and to the working
conditions, rules and regulations if he has not already been introduced at the time of
occupational test. It is a first step in the proper communication of the personnel policy
and seeks to build a two-way channel of information between management and
employees.
Purpose of Orientation
Orientation Helps
New Employees
Feel
Welcome and
At Ease
Understand
the
Organization
Know What
Is Expected
in Work and
Behavior
Begin the
Socialization
Process
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(ii)
(iii)
The primary reason the orientation is to make new employee feel at home in the new
environment. This helps them to overcome anxieties in the new working culture.
Topics that are covered in EOP
1. Organizational issues
History of Employer
Organisation of Employer
Probationary period
Disciplinary regulations
Employee handbook
2. Employee benefits
Rest breaks
Counseling
Insurance benefits
Retirement programme
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Rehabilitation programmes
3. Introduction
To supervisor
To trainers
To co-workers
To employee counselor
4. Job duties
Job location
Job tasks
Overview of Job
Job objectives
Company
Organization and
Operations
Employee Benefit
Information
Personnel
Policies
Daily
Routine
Employee
Orientation
Safety Measures
and Regulations
Facilities
Tour
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Placement:
After an employee has been hired and oriented, he or she must be placed in his/her
right job. Placement is understood as the allocation of people to jobs. It is the
assignment or re-assignment of an employee to a new or different job.
A few basic principles should be followed at the time of placement of a worker on the
job. These maybe enumerated below:
(i) Man should be placed on the job according to the requirements of the job. The jobs
should not be adjusted according to the qualifications or requirements of the man. Job
first,
Man
Next'
should
be
the
principle
of
placement
(ii) The job should be offered to the man according to his qualifications. Neither higher,
nor
lower,
except
in
case
of
interview
placement.
(iii) the employee should be made conversant with the working conditions prevailing in
the industry and all things relating to the job. He should also be made aware of the
penalties
if
he
commits
wrong.
(iv) While introducing the job to the new employee, an effort should be made to
develop a source of loyalty and co-operation in him so that he may realize his
responsibilities better towards the job and the organisation.
Notes:
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2.
3.
4.
List and discuss the pros and cons of six appraisal methods.
5.
6.
Discuss the pros and cons of using different raters to appraise a persons performance.
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Objective 6: Understanding
Performance Appraisal & Performance
Management
Appraisal Methods
Appraisal Tools
Problems in Appraisal
The process employers use to make sure employees are working toward
organizational goals.
Why Performance Management?
Increasing use by employers of performance management reflects:
The belief that traditional performance appraisals are often not just useless but
counterproductive.
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Appraisals help in planning for correcting deficiencies and reinforce things done
correctly.
Realistic Appraisals
Motivations for soft (less-than-candid) appraisals
Employee loses the chance to improve before being forced to change jobs.
Continuous improvement
A management philosophy that requires employers to continuously set and
relentlessly meet ever-higher quality, cost, delivery, and availability goals by:
Eradicating the seven wastes:
overproduction,
defective products,
unnecessary downtime,
transportation,
processing costs,
motion, and
inventory.
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Direction sharing
Role clarification
Goal alignment
Developmental goal setting
Ongoing performance monitoring
Ongoing feedback
Coaching and support
Performance assessment (appraisal)
Rewards, recognition, and compensation
Workflow and process control and return
Defining Goals and Work Efforts
Guidelines for effective goals
Encourage participation
Supervisors
HR department
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Prepares forms and procedures and insists that all departments use them.
Responsible for monitoring the system to ensure that appraisal formats and
criteria comply with EEO laws and are up to date.
Making sure that you and your subordinate agree on his or her duties and job
standards.
Appraising performance
Discussing the subordinates performance and progress, and making plans for
any development required.
Personal competencies
MBO
A scale that lists a number of traits and a range of performance for each that is
used to identify the score that best describes an employees level of performance
for each trait.
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Ranking employees by making a chart of all possible pairs of the employees for
each trait and indicating which is the better employee of the pair.
Forced distribution method
Narrative Forms
Reallocate incidents
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Involves setting specific measurable goals with each employee and then periodically
reviewing the progress made.
1.
2.
3.
4.
5.
Performance reviews.
6.
Provide feedback.
Halo effect
Occurs when a supervisors rating of a subordinate on one trait biases the rating
of that person on other traits.
Central tendency
A tendency to rate all employees the same way, such as rating them all average.
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Strictness/leniency
The problem that occurs when a supervisor has a tendency to rate all
subordinates either high or low.
Bias
The tendency to allow individual differences such as age, race, and sex to affect
the appraisal ratings employees receive.
Learn and understand the potential problems, and the solutions for each.
Use the right appraisal tool. Each tool has its own pros and cons.
Train supervisors to reduce rating errors such as halo, leniency, and central
tendency.
Have raters compile positive and negative critical incidents as they occur.
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Peers
Rating committees
Self-ratings
Subordinates
360-Degree feedback
SatisfactoryPromotable
SatisfactoryNot promotable
UnsatisfactoryCorrectable
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UnsatisfactoryUncorrectable
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Source: David Antonion, Improving the Performance Management Process Before Discontinuing Performance
Appraisals, Compensation and Benefits Review MayJune 1994, p. 33, 34.
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Postpone action.
Do it in a manner that lets the person maintain his or her dignity and sense of
worth.
Criticism should be objective and free of any personal biases on your part.
Give the subordinate the opportunity to present his or her ideas and feelings and
to influence the course of the interview.
Offer the subordinate the necessary support for development and change.
Help you defend your rating, both to your own boss and (if needed) to
the courts.
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What does this mean for the goals we set for our employees, and for
how we train, appraise, promote, and reward them?
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suitability; and (iii) for training and development purposes. Other objectives of appraisal
were:
informing
employee
where
he
stands,
follow-up
interviews,
discovering
forms
or
changing
from
design.
The surveys show that companies have different criteria to evaluate their employees.
There are basically three groups of criteria being used for appraisal purpose: (i)
evaluation of qualitative characteristics, such as, intelligence, integrity, honesty,
leadership an attitudes, abilities, etc., evaluation of actual performance- qualitatively
and quantitatively; and evaluation of development and future potential and development
by an employee during the period under consideration. However, companies face certain
problems in developing evaluative criteria. Such problems are in the area of developing
uniform and generally agreed-upon norms on any overall company basis; developing
quantitative an qualitative indices of work performance; developing criteria for
evaluating employee's potential; and fitting employee evaluation with organisational
objectives. Some other problems are in the area of implementation of the results of
appraisal. In many cases, where companies are using formal appraisal system,
independent decisions are taken by management in terms of rewards, promotion,
transfer, and development. Such decisions jeopardies the objectives of formal appraisal
system.
There is a wide variation in periodicity of appraisal of employees. Some companies
appraise annually, some appraise half-yearly, and a few quarterly; however, annual
appraisal is most common. Further, in terms of timing of appraisal, two situations exist;
(i) Every employee is appraised at the same time or staggered throughout the year in
certain predetermined groups: (ii) appraisal is made on the anniversary date of
employment.
Appraisal feedback in a formal way is provided buy very few companies, only. Many
companies provide feedback in the form of annual increments-normal, special, or
withholding promotion; placement, transfer, etc.; demotion, termination of service, etc.;
warning,
etc.
The above discussion brings out the facts that there is a wide variation in appraisal
practices, not only in terms of taking appraisal as formal or systematic or in terms of
objectives of appraisal but such variation is also in terms of the methods followed,
periodicity, and decisions based on appraisal. This further suggests that there is
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subjective approach in appraisal. Such fact is more relevant in the case of those
companies which do not follow formal and systematic appraisal systems.
Notes
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Objective 6: Understanding
Performance Appraisal & Performance
Management
Appraisal Methods
Appraisal Tools
Problems in Appraisal
What is Remuneration?
Remuneration is the compensation which an employee receives in return for the
contribution to the organization. It occupies an important place in the life of an employee.
Remuneration helps one lead a standard of living that is desired.
For the employer, employee remuneration is significant because
it
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1.
2.
3.
The prevailing market rate. (Wage survey is generated from time to time by
government which helps in understanding the minimum wage) For executives
Companies Act 1956 puts cap on salary and perquisites of managers. Sec 198 and
309 of the act contains provisions relating to the managerial remuneration.
4.
5.
6.
Productivity.
7.
8.
Job requirements.
9.
Managerial attitudes.
10.
11.
There is no particular formula for fixing the wage or salary. Once an individual is aware
of how much the organization is willing to invest on man-power, he must study the
prevailing market rates, wage surveys and also Companies Acts fixation of salaries for
managers as a tool to come out with employees wage and salary structure.
Wage and Incentive Plans:
There are different methods of wage payment under incentive plans. They are as
follows:
For Blue collared workers:
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8.00
= x 2 x 1 = +1.00
9.00
Under this method, hours is a fixed percentages of wages of time saved and worker
is given a guaranteed wage rate for the time taken to finish the job
Eg:
Standard time = 10 hrs
Rate per hour = Rs.1
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Case 1:
Time taken = 10 hrs Earnings = 10 x 1 = Rs.10
Case 2:
Time taken = 12 Hrs Earnings = 12 x 1 =Rs.12
Case 3:
Time taken = 8 hrs
Earnings: Time wages = 8 x 1 =
Bonus
8.00
= 2/10 x 8 = + 1.60
9.60
Taylor's differential piece rate system: This system was introduced by Taylor, the
father of scientific management. This system introduced to penalize a slow worker by
paying him a low piece rate for low production and to reward an efficient worker by
giving him a higher piece rate for a higher production.
Thus if a worker completes the work within or less than the standard time, he is paid a
higher piece rate and if he does not complete the work within the standard time, he is
given a lower piece rate.
Merricks multiple piece rate: Under this method, three piece rates are applied for
workers with different levels of performance. Wages are paid at ordinary piece rate to
those workers whose performance is less than 83% of the standard out put. 110% piece
rate is given to workers whose performance is between 83% and 100% of standard.
120% of ordinary piece rate is given to those workers who produce more than 100% of
the standard output.
Gants's task and bonus plan: This plan is based on careful time and motion study. A
standard time is fixed for doing a particular job, worker's actual performance is
compared with the standard time and his efficiency is determined. If a worker takes
more time then the standard time to complete the job (Below 100%) he is given wages
for the time taken by him and if a worker takes the standard time to perform job (100%
efficiency), he is given wages for the standard time and bonus of 20% of wages earned.
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If the worker take less time than the standard time his efficiency is more than 100%
and he is given wages for the actual time and bonus at the rate of 20%.
The above are the couple of plans that companies adopt to arrive at the bonus for the
blue collared workers.
The following are some methods used to motivate employees:
Motivation and morale are helped through a suggestion scheme. For example, the
suggestion scheme is described as partnership for progress scheme at Telco.
According to the Company, it has helped boost employee morale. Under this scheme,
handsome cash awards are offered to employees who come up with practice ideas to
save money, materials or man hours and increase productivity. Under this scheme, many
suggestions have been received and implemented dealing with diverse subjects such as
reuse of scrap, import substitution, saving in operation time, improvements in
procedures, safety and beautifying the town. This testifies to the popularity of scheme;.
The Company gives away, on an average, Rs. 40,0000 a year in Suggestions Box awards
which is probably the highest amount disbursed by an organisation in India.
ACC generates a sense of security and a family atmosphere by giving preference to
the employees' relatives in certain cases. In ACC Ltd., weightage is given to an applicant
who is related to an employee who has retired or died or is about to retire. The relative
must be a son, daughter, nephew or son-in-law who is likely to help such employee's
family. Such weightage preference is given only once. Some organizations in India do
create a strong family atmosphere. For example, in ACC Ltd., apart form this aspect
contributing to the family concept there is no formal induction of new employee in a
department. The induction automatically takes place in the department with all the
members of the department pitching in like a family to make the new entrant feel a part
of the family.
At the Indian Oil corporation, the promotion policy caters to the self-actualization
need of the employees by prescribing that vacancies for higher positions must be filled
up from within, wherever possible, i.e., whenever suitable departmental candidates
exist. Mid-level out-side recruitment is indulged in only when departmental candidates
do not possess the requisite qualifications, experience and expertise Promotions are
based on both merit and seniority. They are authorized by a duly constituted
departmental promotion committee.
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objectives
of
the
organisation.
The processes of development and training are often confused. Training means learning t
basic skill and knowledge for a particular job or a group of jobs and there is no choice
with the employer whether to train or not, the only choice is tat of method to be
employed. It occurs as a result of controlled external stimulation but development takes
place when the individual is internally motivated. Development means self development
and organizations only to provide for the necessary condition for the development. The
initiative for development should be taken by the individual himself. Moreover, it
develops the overall personality of the individual while on the other hand the training
programme seeks to develop the skill and knowledge for a particular job.
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After having decided the training needs, it is advisable to lay down the objectives of
training on the basis of needs an the circumstances of the case in consultation with the
true mangers.
It should also be decided which method it is to be adopted for the training on the basis
of the needs and the objectives of the training programme. The programme should be
chalked out with the aim to contribute towards the organisation objectives.
(i) Jobs and the worth of the men should be analysed through job analysis and
performance appraisal techniques and if there is an imbalance between the man an the
job,
it
should
be
corrected
through
organising
training
programmes.
(ii) Production problems like low productivity, poor quality, high cost, high rate of
absenteeism and labour turnover indiscipline etc., should be identified to indicate the
need
for
training.
(iii) Opinions may be obtained from the management and the workers trough interviews
or through questionnaire regarding necessary and desirable training programme.
(iv) Line managers may forecast the manpower requirements in the future on the basis
of long term plans regarding business expansion, new plants; new designs and new
developed technology. Training may be given to existing employees to enable them to
meet the future requirements.
A training programme should be set up only after having decided the clear-cut objectives
in mind, otherwise it will be a sheer wastage of money in organising the training
programme.
Training is usually needed where there is a special problem interfering with production
such as excessive turnover among new employees, high rat of absenteeism, i rat of
accidents, spoilage of work etc., and management feels that such problems would be
solved if proper training programme is organised.
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below:-
deducting
the
cost
of
production.
3. Reduced Supervisions and Direction: A well trained people of self reliant because
he knows what to do and how to do and understands is responsibilities well. Educes, not
eliminates, the need for detailed and constant supervision. Direction is generally not
required
by
trained
personnel.
4. Heightened morale: The moral of a well trained employee is increased because the
main objective of the training programme will mould employees attitudes to achieve
support for organisation actives and to obtain better co-operation and greater loyalty.
Dissatisfactions, complaints, absenteeism, and labour turnover can be greatly reduced
with
the
help
of
training.
5. Fill Manpower needs: Training helps in spotting out proposing mean and in
removing defects in the selection process. The promising trainee will naturally be
discovered on evidence of quick understanding or instruction. Training may also qualify
them
for
more
responsible
jobs.
mistakes
because
they
possess
the
required
know-how
and
have
an
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of learning trough trial and error. Skilled work-force can be developed by the
organisation
within
short
span
of
time.
8. Better Industrial Relations: training creates a feeling among the workers that
they are being properly cared for, and that the employer is sincere to them. This will
improve
the
relations
between
the
employees.
authority
and
stimulating
employees
which
will,
in
turn,
help
the
1.
On-the-job
Method
2. Off-The-Job-Methods
On-the-job Method
It is most popular method of developing the executive talent. The main techniques are
(a) Coaching. Under this technique, the superior coaches the job knowledge and skill,
to his subordinates. He briefs the trainees what is expected of them and guides how to
get it. He also watches their performance and directs them to correct the mistakes. The
main objective of this training is to provide them diversified knowledge. Coaching is
recognised as one of t managerial responsibilities, and the manger as an obligation to
train an develop the subordinates working under him. He delegates his authority to the
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CBP
subordinates
to
prepare
them
to
handle
the
complex
situations.
(b) Understudy. This system is quite different from the system discussed above. Under
this system, a person is specifically designated as the their apparent who is called the
understudy. The understudy's future depends on what happens to his superior leaves his
post due to promotion, retirement or transfer. Te department manger picks up one
individual from the department to become his understudy. He guides him to learn his job
and
tackle
the
problems
tat
confront
the
manger.
(c) Job Rotation. Under this system, an individual is transferred one job to another or
from open department all to another in the coordinated and planned manager with a
view to broaden the general background of the trainee in the business. The trainees is
rotated from one job to another and thus the acquires a considerable degree of
specialized knowledge and skill but a man can never acquire t diversified skill needed for
promotion
unless
is
deliberately
put
in
different
types
of
situations.
(d) Special Project. A special assignment is a highly useful training device, under
which a trainee is assigned a project that is closely related to his job. He well study the
problem and submit the written recommendations upon it. It will not only provide the
trainee a valuable experience in tackling the problem but would also have the other
values of educating the trainees about t importance of t problem but would also have
the other values of educating the trainees about the importance of the problem and to
understand the organizational relationship of the problem with different angles. Thus the
trainee acquires knowledge of the assigned task and learns to work with other s having
different
view
points.
(e) Committee Assignments: This system is similar to special project. Under this
system an ad-hoc committee is constituted and is assigned a subject related to the
business to discuss and make recommendations. The committee will study the problem,
discuss
it
and
submit
to
be
report
containing
the
various
suggestions
and
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CBP
(a) Special Courses. The method of special courses requires the trainee to leave the
work place and to devote is entire time to developmental objectives. The prime object of
such special courses is to provide an opportunity to te trainee to acquire knowledge with
full devotion. Development is primary and work is secondary. These courses may be
conducted in a number of ways-Firstly, the organisation establishes such courses to be
taught to the trains by the members of the firm or by the regular instructor appointed
by the firm or by the regular instructor appointed by the firm or by the specialists
(professors and lecturers_ from other outside institutions. The second approach to this
technique is to send the personnel to programmes established by the colleges or
universities. The organisation sponsors some of its members to the courses and bears
the expenses. The third approach to the technique is to work with a college or other
institutions in establishing a course or a series of courses to be taught by faculty
members.
big
organisation
may
starts
its
own
training
school.
(b) Role Playing. Under this method, two or more trainees are assigned different roles
to play by creating an artificial conflict situation. No dialogue is given before hand. The
role players are provided with he written or oral description of the situation and the role
to play. Sufficient time is given to the role players to plan tier actions and they must act
their parts before the class. For instance role playing situation may be a supervisor
discussing
grievances
with
is
subordinate.
(c) Case Study. Case study technique is extensively used in teaching law, business
management, human relation, etc., to let the trainee understand that there mat be
different solutions to a particular problem. Under this method, the trainees are given a
realistic problem to discuss, which is more or less related to the principles already
taught. This method provides an opportunity to the trainee to apply his skill to the
solution of realistic problems. Cases may be used in either of the two ways:- (i) They
can be used after exposing the formal theory under which the trainee applies their skill
to specific situation, or (ii) They may be assigned to the trainees for written analysis or
oral
discussion
without
any
prior
discussion
of
the
theory.
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training
purposes.
or
in
other
way,
it
is
an
advisory
body.
view
in
case
of
criticism
or
questions.
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communication. The members, under this method, sit around a table and discuss. The
trainer, usually a psychologist, neither leads the discussion nor suggests what should be
discussed but only guides the discussion. The members freely discuss and criticize the
behaviour
of
each
other
thereby
giving
feed
back
positive
or
negative.
Orientation
about
organizations;
safety
training
or
refresher
training
can
be
accomplished most effectively in the class room. There may be different methods of
instructions
such
are:
(a) Formal Lecture: When depth of theoretical knowledge (such as safety, health etc.)
is required, formal lectures are arranged by the orgnaisation and delivered by the
lecturer presumed to be a master of the the subject at hand. The lecture method may
be used for a large group and therefore, cost per trainee is know. Trainees should be
permitted
to
ask
questions.
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(b) Conference and Seminar: There are two types of seminars. There first is that in
which a student gives a lecture on some predetermined topic and is followed by
discussion and exchange of views under a chairman who sums u the discussion by is
fruitful advice an comments. The second method is that where all students participate in
the
seminar.
(c) Case-Study: Case study is a practical problem faced by an industrial unit which is
discussed at large in the group, possibly to find an optimum solution. The Trainee
studies the problem and finds the solution. Te supervisor reviews the solutions an
discusses
it
with
the
trainees.
(d) Role- Playing: Under this system, the trainees play assigned role (such as the role
of supervisor, instructor, etc.) under an instructor who prepares them and assign
different roles for the play.
Vestibule Training
Under this method, the training is not given on the job but workers are trained on
specific jobs in a special part of the plant by models.
Training is given in a class room where working conditions are created which are similar
to the actual workshop conditions. After training, the worker is put on similar jobs in the
workshop. It should be noted that a well qualified and trained instructor should be the
in-charge
of
the
programme.
training or vestibule schools in which knowledge and skill in doing a craft or a series of
related jobs are involved.
Notes:
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Chapter 9
Labor Laws
Objective:
To Understand the Labor Laws
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Gratuity
Bonus Calculation
ESI Act
Managerial remuneration
Membership:
All the employees (including casual, part time, Daily wage contract etc.) other then an
excluded employee are required to be enrolled as members of the fund the day, the Act
comes into force in such establishment.
Basic Wages:
"Basic Wages" means all emoluments which are earned by employee while on duty or on
leave or holiday with wages in either case in accordance with the terms of the contract
of employment and witch are paid or payable in cash, but dose not include
The cash value of any food concession;
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Any dearness allowance (that is to say, all cash payment by whatever name called paid
to an employee on account of a rise in the cost of living), house rent allowance,
overtime allowance, bonus, commission or any other allowance payable to the employee
in respect of employment or of work done in such employment.
Any present made by the employer.
Excluded Employee:
"Exclude Employee" as defined under pare 2(f) of the Employees' Provident Fund
Scheme means an employee who having been a member of the fund has withdraw the
full amount of accumulation in the fund on retirement from service after attaining the
age of 55 years; Or An employee, whose pay exceeds Rs. Five Thousand per month at
the time, otherwise entitled to become a member of the fund.
Explanation:
'Pay' includes basic wages with dearness allowance, retaining allowance, (if any) and
cash value of food concessions admissible thereon.
Employee
Provident
Fund
Scheme:
Employees' Provident Fund Scheme takes care of following needs of the members:
(i)
Retirement
Housing
Education
of
Children
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Any establishment which has at the end of any financial year accumulated losses equal
to or exceeding its entire net worth and
Any establishment engaged in manufacturing of (a) jute (b) Breed (d) coir and (e)
Guar gum Industries/ Factories. The contribution under the Employees' Provident Fund
Scheme by the employee and employer will be as under with effect from 22.9.1997.
Benefits:
A) A member of the provident fund can withdraw full amount at the credit in the fund on
retirement from service after attaining the age of 55 year. Full amount in provident fund
can also be withdraw by the member under the following circumstance:
A member who has not attained the age of 55 year at the time of termination of service.
A member is retired on account of permanent and total disablement due to bodily or
mental infirmity.
On migration from India for permanent settlement abroad or for taking employment
abroad.
In the case of mass or individual retrenchment.
B) In the case of the following contingencies, the payment of provident fund be made
after complementing a continuous period of not less than two months immediately
preceding the date on which the application for withdrawal is made by the member:
Where employees of close establishment are transferred to other establishment, which is
not covered under the Act:
Where a member is discharged and is given retrenchment compensation under the
Industrial Dispute Act, 1947.
Withdrawal
before
retirement:
A member can withdraw up to 90% of the amount of provident fund at credit after
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attaining the age of 54 years or within one year before actual retirement on
superannuation whichever is later. Claim application in form 19 may be submitted to the
concerned Provident Fund Office.
Accumulations
of
deceased
member:
Amount of Provident Fund at the credit of the deceased member is payable to nominees/
legal heirs. Claim application in form 20 may be submitted to the concerned Provident
Fund Office.
Transfer
of
Provident
Fund
account:
Transfer of Provident Fund account from one region to other, from Exempted Provident
Fund Trust to Unexampled Fund in a region and vice-versa can be done as per Scheme.
Transfer Application in form 13 may be submitted to the concerned Provident Fund
Office.
Nomination:
The member of Provident Fund shall make a declaration in Form 2, a nomination
conferring the right to receive the amount that may stand to the credit in the fund in the
event of death. The member may furnish the particulars concerning himself and his
family. These particulars furnished by the member of Provident Fund in Form 2 will help
the Organization in the building up the data bank for use in event of death of the
member.
Annual
Statement
of
account:
As soon as possible and after the close of each period of currency of contribution, annual
statements of accounts will de sent to each member through of the factory or other
establishment where the member was last employed. The statement of accounts in the
fund will show the opening balance at the beginning of the period, amount contribution
during the year, the total amount of interest credited at the end of the period or any
withdrawal during the period and the closing balance at the end of the period. Member
should satisfy themselves as to the correctness f the annual statement of accounts and
any error should be brought through employer to the notice of the correctness Provident
Fund Office within 6 months of the receipt of the statement.
86
CBP
What is Gratuity?
Gratuity is a retrial benefit. This act envisages in providing a retirement benefit to the
workman who have rendered long and unblemished service to the employer. Gratuity is
a reward for long and meritorious service.
Applicability
of
the
Act:
Every factory, mine, oilfield, plantation, port, railways, company, shop, establishment or
educational institutions employing ten or more employees.
When
is
Gratuity
Payable?
On
b.
On
his
his
superannuation.
retirement
or
resignation.
To
whom
is
Gratuity
Payable?
Gratuity is normally payable to the employee himself, however in the case of death of
the employee it shall be paid to his nominee & nomination has been made to his heirs.
Incase the nominee is a minor; share of the minor shall be deposited with the controlling
authority who shall invest the same for benefit of the minor, until he/she attains
majority.
Amount
of
In
Gratuity
case
Payable
In
Gratuity
Gratuity
of
=
15
Maximum
wages
days
wages
Limit
of
seasonal
x
No
of
7
Method
non
days
case
Payable=
Payable
of
establishment:
completed
seasonal
x
No
of
seasons
of
Calculation:
years
of
service,
establishment:
for
which
employed.
Gratuity
The government through an ordinance has enhanced the maximum limit of the amount
87
CBP
of gratuity payable under the Act is Rs. 100,000 to Rs. 2,50,000 with effect from 02-0497.Now
at
present
the
maximum
Forfeiture
limit
is
3.5
of
lacs.
gratuity:
The gratuity of an employee whose service have been terminated for any Act of willful
omission or negligence causing any damage or loss to or destruction of property
belonging to the employer, gratuity shall be forfeited to the extent of the damage or loss
caused.
The
The
gratuity
right
of
forfeiture
payable
to
an
is
limited
employee
to
shall
the
extent
be
of
wholly
damage.
forfeited:
1. If the services of such employee have been terminated for his riotous or disorderly
conduct
or
any
other
act
of
violence
on
his
part,
or
2. If the service of such employee have been terminated for any act which constitutes
an offence involving moral turpitude, provided that such offence is committed by him in
the course of his employment.
The
President.
All those employees drawing Basic + DA up to Rs. 10,000/- per month are eligible to get
Bonus.
For the calculation of Bonus the maximum Basic + DA to be taken is Rs. 3500/- per
month.
If you calculate minimum bonus @ 8.33% of (Basic + DA) for the complete year, it will
come out to be one month's (Basic + DA).
In short the minimum bonus to be paid for the year is one month (basic + DA) subject
to
maximum
of
Rs.
3500/-
As for the period, it is taken as a Financial year in most cases. However some companies
also take the period until the month of Diwali while calculating bonus.
88
CBP
COVERED
The ESI Scheme is being implemented area-wise by stages. The Scheme has already
been implemented in different areas in the following States/Union Territories.
89
CBP
Managerial remuneration:
671. SCHEDULE XIII
[SCHEDULE
XIII
without
the
approval
of
the
Central
Government
[PART I Appointments
the
the
the
(viii)
(ix)
Central
Industries
the
the
the
Food
and
Contracts
1899
Salt
Act,
Act,
Act,
Act,
Act,
Act,
of
(1
1951
1954
1955
1956
(Regulation)
(2
1944
Regulation)
Adulteration
Commodities
Companies
Securities
the
of
Act,
and
(Development
Essential
the
Stamp
Excise
Prevention
the
(vi)
(vii)
Indian
of
(65
(37
(10
(1
1956
1899),
1944),
of
of
of
of
(42
1951),
1954),
1955),
1956),
of
1956),
Wealth-tax
Act,
1957
(27
of
1957),
Income-tax
Act,
1961
(43
of
1961),
90
CBP
(x)
the
Customs
Act,
1962
(52
of
1962),
(xi) the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969), (xii) the
Foreign
Exchange
Regulation
Act,
1973
(46
of
1973),
(xiii) the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986),
(xiv) the Securities and Exchange Board of India Act, 1992 (15 of 1992),
(xv) the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);
(b) he had not been detained for any period under the Conservation of Foreign Exchange
and Prevention of Smuggling Activities Act, 1974 (52 of 1974): Provided that where the
Central Government has given its approval to the appointment of a person convicted or
detained under sub-paragraph (a) or sub-paragraph (b), as the case may be, no further
approval of the Central Government shall be necessary for the subsequent appointment
of that person if he had not been so convicted or detained subsequent to such approval;
[(c) he has completed the age of 25 years and has not attained the age of 70 years:
Provided that where(i) he has not completed the age of 25 years, but has attained the age of majority; or
(ii) he has attained the age of 70 years; and where his appointment is approved by a
special resolution passed by the company in general meeting, no further approval of the
Central Government shall be necessary for such appointment;
(d) where he is a managerial person in more than one company he draws remuneration
from one or more companies subject to the ceiling provided in section III of Part II;]
(e) he is resident in India.
Explanation.-For the purpose of this Schedule, resident in India includes a person who
has been staying in India for a continuous period of not less than twelve months
immediately preceding the date of his appointment as a managerial person and who has
come to stay in India,(i)
for
taking
up
employment
in
India,
or
91
CBP
1. Earlier clauses (c) & (d) substituted by Notification No. GSR 418(E), dated 12th.
Where the effective capital of Company is -
Monthly
remuneration
payable
shall
not
exceed
(i)
Rs. 75,000
(ii)
Rs. 1,00,000
(iii)
Rs. 1,25,000
(iv)
Rs. 1,50,000
(v)
Rs. 2,00,000
September, 1996.
PART II
Remuneration
Section I.- Remuneration payable by companies having profits
Subject to the provisions of section 198 and section 309, a company having profits in a
financial year may pay any remuneration, by way of salary, dearness allowance,
perquisites, commission and other allowances, which shall not exceed five per cent of its
net profits for one such managerial person, and if there is more than one such
managerial person, ten per cent for all of them together.
Section II.- Remuneration payable by companies having no profits or inadequate
profits
[1. Notwithstanding anything contained in this part, where in any financial year during
the currency of tenure of the managerial person a company has no profits or its profits
are inadequate, it may pay remuneration to a managerial person by way of salary,
dearness allowance, perquisites and any other allowances, not exceeding ceiling limit of
Rs.24,00,000 per annum or Rs.2,00,000 per month calculated on the following scale: 1. Substituted by Notification No. GSR 215(E) dated 2nd. March, 2000.
2. A managerial person shall also be eligible to the following perquisites which shall not
be included in the computation of the ceiling on remuneration specified in paragraph 1 of
this section:
(a) contribution to provident fund, superannuation fund or annuity fund to the extent
these either singly or put together are not taxable under the Income-tax Act, 1961,
92
CBP
(b) gratuity payable at a rate not exceeding half a month's salary for each completed
year
of
service,
and
off.
Explanation II.(a) Where the appointment of the managerial person is made in the year in which
company has been incorporated, the effective capital shall be calculated as on the date
of
such
appointment;
93
CBP
(b) In any other case, the effective capital shall be calculated as on the last date of the
financial year preceding the financial year in which the appointment of the managerial
person
is
made.
Explanation III.
-For the purposes of section II of this Part, family means the spouse, dependent children
and dependent parents of the managerial person.
[Section III - Remuneration payable to a managerial person in two companies
Subject to the provisions of section I and II, a managerial person shall draw
remuneration from one or both companies, provided that the total remuneration drawn
from the companies does not exceed the higher maximum limit admissible from any one
of
the
companies
of
which
he
is
managerial
person.]
94