Compensation

Administration

After reading this chapter, you

should be able to:

To resolve the challenges of

compensation administration.
Explain the concept of wages.
Elucidate the objectives of
remuneration.

What is compensation?
Compensation is the sum of the
rewards for the job-related efforts of
the employees and also for their
commitment to and involvement in
the job.

Objectives of compensation
administration
Equity in compensation.
Enhancing individual and
organizational efficiency.
Employee motivation and retention.
Goodwill in the labour market.
Adherence to laws and regulations.
Controlling HR cost.
Improving industrial relations.

Types of compensation

Direct compensation
Direct compensation normally
includes the amount payable to
the employees as direct cash
rewards for the work extracted
from them.

Types of compensation (contd.)

Examples
Basic pay
Variable pay
Profit-sharing
Gain-sharing
Equity plans

Types of compensation (contd.)

Indirect Compensation
Indirect compensation includes the
benefits enjoyed by the employees
but paid by the organization. It is
available to all the employees
irrespective of their performance in
the job.

Types of compensation (contd.)

Examples
Mediclaim
Insurance schemes
Leave travel concessions
Retirement benefits

Theories of compensation

Equity theory
Expectancy theory
Contingency theory
Agency theory

Equity theory
According to this theory, ensuring a
fair balance between an employees
contributions to the job and his
rewards is critical for developing a
cordial relationship between the
employer and the employees.
When the rewards are greater than
the employees job efforts, they will
be satisfied.

Equity theory (contd.)

In contrast, when the employees
believe that their efforts are greater
than their rewards, they will be demotivated.

Expectancy theory
According to this theory, employees
work hard in the job whey they are
sure of a positive outcome in the
form of attractive rewards from the
job.
Positive expectations about the
eventual job outcome creates high
employee motivation in the firm and
vice-versa.

Contingency theory
According to this theory, different
compensation strategies act equally
well in different circumstances. As
such, there is no one best
compensation strategy available for all
conditions.
The effectiveness of compensation
strategy certainly depends on the
congruence among the firm, the
environment and the compensation
strategies.

Agency theory
Agency theory views the
employer as the principal and the
managers as the agents.
According to this theory, it is
necessary for the firm to use
compensation as an effective
means for creating ownership
interest among the managers.

Agency theory (contd.)

This theory insists that the firms
develop labour marketoriented and
performance-linked contractual
relationship with the managers to
motivate them.

Concept of wages
Real wages- When the income
earned by the employees as a
reward for their job efforts is
expressed in real purchasing
power, it is called real wages.
Minimum wages- This refers to
the legally permissible minimum
compensation payable to the
employees for their job efforts.

Concept of wages (contd.)

Fair wages- Fair wages are the wages
which are usually positioned above
the minimum wages but below the
living wages.

Concept of wages (contd.)

Living Wages- Highest level of wages
that should enable the earner to
provide for himself and his family not
only the bare essentials of food,
clothing and shelter but a measure of
frugal comfort, including education for
his children, protection against illhealth, requirements of essential
social needs and a measure of
insurance against the more important

Essentials of a sound pay

structure
Aligning with the business objectives
and needs.
Internal equity.
External equity.
Rewarding desired performance and
behaviour.
Legal compliance.
Reconciling individual and
organizational interest.

Factors influencing
compensation (wages and
salary) administration

Internal factors and external

factors

External factors

Labour market conditions

Labour legislations
Comparative pay scales
Cost of living
Geographical location
Collective bargaining
Technology
Globalization

Internal factors
Capacity of the organization to pay.
Corporate policies and philosophy.
Human resource policies and
strategies.
Performance evaluation report.

Steps in compensation
administration

Analysis of the job.

Evaluation of the job.
Developing the pay structure.
Survey of wages and salary.
Pricing of the job.
Compensation revision and control.

Steps in compensation
administration

Challenges facing compensation

administration
Emergence of innovative job designs.
Relevance of money as a prime
motivator.
Lack of objectivity in the fixation of
pay structure.
Political and legal challenges in
compensation administration.

Challenges facing
compensation administration
Difficulties in fixing compensation for
distinct and critical skills.
Balancing organizational and
individual needs.
Ethical issues in pay fixation.

Executive compensation
Executive compensation refers to
the compensation package offered
to the managerial personnel of an
organization.

Objectives of executive
compensation packages
Aligning managerial interest with
ownership interest.
Bringing in the best executives.
Enhancing employee motivation,
involvement and commitment.
Promoting managerial efficiency.
Ensuring complete financial security.
Encouraging progressive learning.

Elements of executive
compensation

Criticisms of executive
compensation
Complaints of over-payments.
Undue influence on compensation
determination.
Disregard for the financial health of
the organization.
Secrecy shrouding executive
compensation.
Inequality of income in the
organization.

Golden parachutes scheme

It is a unique executive
compensation plan in which a top
executive is eligible for severance
pay in the event of his present
company being taken over by some
other company as part of a merger
plan.

Wage Incentives

After reading this chapter, you

should be able to (contd.):

Enumerate the types of incentives.

Evaluate wage incentive schemes.
List the objectives of fringe benefits.
List the forms of benefits.

Meaning of wage incentives

Wage incentives are any form of
performance-based financial
and/or non-financial rewards
payable to attract and retain the
best talents without any
permanent financial commitment
to the organization.

Objectives of wage incentives

Developing an ownership interest.

Enhancing employee motivation.
Improving employee retention.
Facilitating a greater role for
employees in pay determination.
Increasing performance and
productivity.
Reducing labour cost.
Reducing the time and cost of
supervision.

Wage incentive planning process

Prerequisites for a good

incentive scheme

Transparency
Objectivity
Measurability
Attainability, flexibility
Comprehensiveness
Cost-effectiveness
Instantaneous feedback

Types of incentive schemes

Straight piece rate

Differential piece rates
Task and time bonuses
Merit rating

Straight piece rate

Under this method, the same rate
of incentive is paid to the
employees for each unit of goods
produced by them.
Incentives are computed and paid
to the employees in direct
proportion to their performance in
the job.
The formula for computing the
earnings is

Differential piece rates

In differential piece rate system,
more than one piece rate is offered
to the employees.
As part of this system, the
organization sets several standards
of performance and also different
wage rates for each standard.

 An employee reaching a particular

standard of output gets his or her
wages computed on the basis of
the wage rate applicable for that
category.
In this method, the wage rate
increases as the output increases
and the employees are strongly
motivated to reach higher levels of

Task and time bonuses

As per this incentive scheme, once
the employee reaches the standard
output, his or her wage incentive will
begin to decline afterwards.
The purpose behind this move is to
discourage haste in the production
by the employees, which was
understandably the major defect in
the differential piece rates system.

Merit rating
Merit rating aims at evaluating the
relative worth of the employees in the
organization before awarding them
appropriately.
In this method, the organization links a
part of the employees wages to their
actual performance in comparison with
the standards set in terms of factors like
competency, initiative, attitude,
regularity, health, etc.

 Depending upon the importance

of these factors to the job, the
organization may assign points to
each of these factors.
The employees overall
performance in the job is then
evaluated to determine their
aggregate score, which in turn,
decides the incentives payable to

Individual Incentive
Programmes

Taylors differential piece rate

plan
Under this piece rate plan, two wage
rates are available to the employees.
These are
Low piece rate for those employees
whose performance is less than the
standard.
High piece rate for any performance
which is equal to or more than the
standard.
The purpose of Taylor's differential

Taylors differential piece rate plan

(contd.)
The formula for computation of earnings is
Earnings = actual output x piece rate
Efficiency level = actual output/normal
output) x 100
80% of normal piece rate when actual
output is less than standard output
120% of normal piece rate when actual
output is equal to standard output

Merrick multiple piece rate plan

Merrick plan contains three piece
rates as against Taylors double
piece rates.
It provides for gradually rising
piece rates for the additional
range of output produced by the
employees.

Merrick multiple piece rate plan

(contd.)
The formula for the various
categories of output
Less than 83% = actual output x
normal piece rate
Between 83% and 100% = actual
output x normal piece rate x 110
Above 100% = actual output x
normal piece rate x 120%

Emerson efficiency plan

In Emerson efficiency plan, a standard
time is set for each job and then the
hourly rate is determined. Finally,
incentives are decided in the form of
bonus for different degrees of efficiency.
As per this incentive plan, each
employee is eligible for an hourly rate
based on the actual working hours and
also for the bonus calculated on the
basis of his or her efficiency.

 The main feature of this incentive plan

is the availability of guaranteed
minimum wages for the employees
irrespective of their output in a day.
Classification
Only hourly rate is paid: below 67%
efficiency
Hourly rate and step bonus rate(20%
of basic wage) are paid: 67 to 100%
efficiency
Hourly rate and step bonus rate(20%
of basic wage) are paid along with
additional bonus of 1 % of hourly rate

The main feature of this incentive plan is

the availability of guaranteed minimum
wages for the employees irrespective of
their output in a day.
Classification
Only hourly rate is paid: below 67%
efficiency
Hourly rate and step bonus rate(20% of
basic wage) are paid: 67 to 100%
efficiency
Hourly rate and step bonus rate(20% of
basic wage) are paid along with additional
bonus of 1 % of hourly rate for every 1%
increase in efficiency above 100%: above

Bedeaux system
The first step in the Bedeaux system
is the determination of the standard
time for various jobs.
The standard time is fixed in
Bedeaux system and is usually
expressed in terms of minutes,
popularly called Bedeaux points (B
points).
Each B point is equal to one minute
and each job has a standard number

Bedeaux system (contd.)

Earnings as per the following formula
Earnings = actual time taken x time
rate + (75/100 ) x (B points
saved/60) x hourly rate

Barth variable incentive plan

As per the Barth scheme, the rise
in employee earnings need not be
proportionate to the output.
The distinguishing feature of the
Barth plan is the absence of any
guaranteed time rate for the
employees.

Barth variable incentive plan

(contd.)
In this method, employee
earnings are calculated by
multiplying the rate per hour
with the square root of the
product of standard hour and
actual hour.
Earnings = rate per hour x
(standard hour x actual hour)

1/2

Halsey premium plan

In the Halsey premium plan, the
employee is entitled to get the
incentive for the time saved by him
or her in a certain proportion.
Thus, the employees are induced to
complete the work well ahead of the
standard time.
Minimum wages are assured for the
employees even if they fail to
complete the jobs within the

Halsey premium plan (contd.)

The formula for this method is
Earnings = actual time taken x
time rate + 50% of (time saved x
time rate).
Time saved = difference between
actual time and standard time.

Rowan incentive plan

In this method, an employee gets
the time rate for the actual hours
worked and also a bonus for the
time saved if he or she completes
the job within the standard time.
The employee who is unable to
complete the job within the
standard time gets the time rate
for the actual time worked.

Rowan incentive plan (contd.)

Earnings = actual hours worked
x time rate + (actual time
worked/standard time) x time
saved x time rate

Haynes incentive plan

In the Haynes system, the
standard time is expressed in
terms of man-minutes called
MANT.
As per this system, an employee
gets the time rate for the actual
time worked and also a bonus
for the time saved, which is
computed in man-minutes.

Haynes incentive plan

(contd.)
Depending upon the nature of
work, the employees and the
foreman divide the earnings
from the time saved in the ratio
of 5:1 in Haynes incentive plan.

Group Incentive
Schemes

Cost efficiency bonus plan

Under this plan, the organisation
first determines the standard
cost for the various elements of
cost.
Next, it measures the actual
cost incurred by the group in
accomplishing the production
goals or targets.

Cost efficiency bonus plan

(contd.)
Finally, the actual cost incurred
by the group and the standard
cost are compared to determine
the savings in the cost achieved
by the group.
As per the cost efficiency plan, a
predetermined percentage of the
savings is distributed in the form
of bonus to the employees.

Priestman bonus plan

In this plan, a group of experts set
the standard performance in terms
of the number of units for the
whole work to be carried out by a
group within a specific period.
Then, the actual performance of
the group is measured and is
compared with the standard
performance.

Priestman bonus plan (contd.)

When the actual performance
exceeds the standard performance,
the group members are entitled to
a bonus computed.
However, when the groups
performance is less than below the
standard performance, then they
are paid on the basis of time rate
without any bonus.

Rucker incentive plan

The Rucker plan aims at
achieving cost saving not only on
labour cost but also on
overheads.
The reward for the group is
determined on the basis of the
difference between the labour
cost and the sales value of
production.

Rucker incentive plan (contd.)

The total reward available to a group
depends upon the savings achieved in
terms of the value of production as a
result of efficient utilization of
machinery, materials and other
equipments.
As per this system, any savings
achieved by the group in the value of
production is used as the basis for
determining the group incentive.

Townes incentive plan

This method considers the
savings in labour cost alone for
determining the rewards
payable to the groups.
In the first step, the standard
labour cost for the entire work is
determined in advance.

Townes incentive plan (contd.)

Then the actual labour cost for
that work is measured and
compared with the standard
labour cost.
Finally, the saving in the labour
cost is computed and a
proportion of the saving in
monetary terms is distributed to
the group members.

Scanlon incentive plan

The Scanlon incentive plan
focuses on achieving savings in
the labour cost alone.
In this method, the bonus is
decided on the basis of the
difference between the total
labour cost and the sales value,
including the closing stock of
goods.

Scanlon incentive plan (contd.)

A portion of the savings in
labour cost is retained for
payment during lean seasons
when the group is unable to
achieve any cost reduction.

Improshare
In this method, an organization seeks
to achieve savings by producing
predetermined quantity of goods
within the standard time.
This method considers the
relationship between the targeted
output and the standard time (one of
the inputs) for deciding the group
bonus.
A proportion of time saved as a result

Organisation-wide
Incentive Plans

Profit-sharing plan
The crux of the profit-sharing plan
is to give out a portion of the
organizational profit to the
employees.
In this method, the organization
first determines the target profit
i.e., the standard profit for the
entire organization.
At the end of a specific period (may
be a year), it ascertains the actual

Profit-sharing plan (contd.)

Then it compares the actual profit
with the standard profit in order to
determine the excess profit.
Understandably, the employees
get a share in the excess profit of
the organization.

Employee stock option (ESOP)

scheme
This is another style of profit sharing
in which organizations distribute the
profit in an indirect form.
An ESOP scheme develops a sense of
ownership among the employees and
thus enhances their involvement in
the decision-making process.

Employee stock option (ESOP)

scheme (contd.)
Generally, the organization buys the
shares from the capital market,
keeps them in a pool called
employee stock ownership trust
(ESOT) and issues the shares to the
employees on some predetermined
basis.

Stock option plan

In stock option, the employees are given
the right to buy the stocks of their
company in specific numbers during a
specific period at predetermined rates.
The employees can treat stock option as
another investment alternative available
to them.
They normally dispose of their stocks
when the market conditions are
favourable for selling.

Evaluation of wage incentive

schemes

Direct link with performance.

No permanent financial commitment.
Self-responsibility.
Optimum utilization of production
capacity.
Low employee attrition.
Better labour-management relations.

Limitations of the incentive

schemes

Quality concerns
Employee attitude
Exploitation by management
Internal dissensions
Burnout problems
Unethical practices

Fringe Benefits

Fringe benefit- meaning

Fringe benefits are benefits
payable to the employees over
and above the direct
compensation and usually without
any reference to their
performance.

Objectives of fringe benefits

Attracting the best talents.

Improving employee morale.
Achieving the desired unity.
Improving industrial relations.
Concern for employee well-being

Forms of fringe benefits

Payment without work.

Health and safety care.
Retirement benefits.
Housing facilities.
Other facilities like educational
facilities, canteen facilities, transport
facilities, child care facilities and
relocation benefits.

Employee Well-being

After reading this chapter, you

should be able to:

List the statutory provisions

concerning employee safety
and health.
Enumerate the causes and
types of industrial accident.
Explain the role of accident
prevention and management.
Explain the measures that
reduce industrial accidents.

Meaning of employee safety

Employee safety is a process of
controlling or removing hazards
present in the occupational
environment so that the
employees are protected from
work-related accidents.

Objectives for providing

employee safety
Accident avoidance.
Cost prevention.
Improved employee satisfaction and
commitment.
Legal compliance.
Better industrial relations.
Formalizing the safety process and
programme.

Steps in an employee safety

programme

Assessment of dangers
Review of existing safety measures
Safety devices installation
Safety training
Safety compliance and verification
Periodic review of safety standards

Steps in an employee safety

programme (contd.)

Need for employee safety

To avoid loss of human lives.
To prevent financial cost of disability
and death of employees.
To fulfil Corporate Social
Responsibility (CSR).
To reduce the cost of Insurance
Premium.
To avoid fine or imprisonment for
safety lapses.

Essentials of an effective safety

programme
Clarity in safety goals.
Proper safety strategies.
Well-defined responsibilities and
accountability.
Safety awareness campaigns and
training.
Safety revisions and upgradation.

Industrial accidents
The Factories Act 1948 describes
an industrial accident as an
occurrence in an industrial
establishment causing bodily
injury to a person which makes
him unfit to resume his duties in
the next forty-eight hours.

Causes of industrial accidents

Unsafe actions
Unsafe conditions

Unsafe actions
An unsafe action refers to any act
performed by the employee during the
course of his job without observing the
necessary safety provisions which
ultimately results in an accident.
Unsafe action may be caused by
machinery failure, wrong operations,
non-compliance with safety procedure,
improper handling of safety devices
due to lack of safety training and a
wilful neglect of the superiors
instruction.

Unsafe conditions
Unsafe conditions may mean security
lapses in the environment which may be
beyond the employees control.
Unsafe conditions leading to accident may
be caused by factors like faulty machines,
inadequate workspace ventilation and
lighting, too much noise, uneven or
unstable flooring, excessive room
temperature, lack of adequate protection,
hazardous machinery, uneven and
unbalanced structures and electrical
failure.

Accident prevention and

management
Methods for determining the
accident-prone areas of the
factory are
Spot map method
Accident frequency method
Accident rate method

Spot map method

In this method, a map prepared
by the organization shows the
places which have reported the
highest number of accidents.

Accident frequency method

In this method, a ranking of the
locations is done on the basis of
the number of accidents reported
from each spot in the
organization.
The spot which has recorded the
highest number of accidents is
ranked first followed by the next
location which has recorded the
second highest number of

Accident rate method

In this method, the number of
accidents in a specific location is
compared with the employee
exposure hours in that location.
The employee exposure hours
refers to the number of hours
spent by all the employees in a
specific location as part of the
job performance process.

Severity rate method

Severity rate method calculates
accidents in terms of severity.
Severity of the injury is measured
through the productive time lost
due to the accident.

Measures to reduce industrial

accidents
Ensuring support of the top
management
Safety policy, philosophy and
plan
Safety committee
Safety education and training
Safety campaigns
Safety engineering
Legal compliance

Employee health
When the employee is free from
any form of physical or emotional
illness, it is referred to as
employee health.
Two forms of health are
Physical health
Mental health

THE FACTORIES ACT, 1948.

Definition of a Factory:Factory is defined in Section 2(m) of the Act. It means any premises
including the precincts thereofi.

Whereon ten or more workers are working, or were working on any

day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on with the aid of power, or
is ordinarily so carried on; or

ii.

Whereon twenty or more workers are working, or were working on

any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on without the aid of power,
or is ordinarily so carried on;

But does not include a mine subject to the operation of the Mines
Act,1952 or a mobile unit belonging to the Armed forces of the
Union, a railway running shed or a hotel, restaurant or eating place.

Provision regarding Health

Cleanliness
Disposal of wastes and effluents
Ventilation and temperature
Dust and fumes
Artificial humidification
Over crowding
Lighting
Arrangement for drinking water
Spittoons

Provisions regarding Safety

Fencing of machinery
Work on or near machinery in motion
Employment of young persons on dangerous
machines
Self acting machines
Casing of new machinery
Prohibition of employment of women or children
near cotton openers
Floors stairs and means of access
Protection of eyes
PRECAUTION IN CASE OF FIRE

Provisions regarding Welfare

Washing facilities
Facilities for storing and drying clothes
Facility for sitting
First aid appliance
Canteens
Rest Room
Creches
Welfare officers

Stress and stress management

Stress is an adoptive response to
an external situation which reveals
itself in physical, psychological
and/or behavioural deviations for
organizational participants.
-Fred
Luthans

Stress and stress management

Based on emotions
Time stress refers to the stress
created by time pressures like
working against deadlines.
Anticipatory stress refers to the
anticipation of some negative
developments in the future.

Based on emotions (contd.)

Situational stress refers to a
situation which remains unclear
and uncertain and the individual
fears the outcome of the
situation.
Encounter stress means the fear
created in individuals about the
likely outcome of their
interaction with other
individuals.

Based on its intensity

High stress levels- When the stress
levels are too high, the employee may
not be able to cope with such stress,
and this impairs the performance and
productivity levels of the employees.
Low stress levels will be too little to
motivate the employee and improve his
or her performance.
A moderate level of stress stirs up the
employees to improve the performance
to the required levels.

Based on causes
Short-term response- In the case of
short-term response stress, the
effect of the stress remains till the
person involved passes through the
stressful situation.
Long-term response- In this, factors
causing stress to the employees
remain for a comparatively longer
period of time.

Sources of stress
Internal stressors (individual level)
The internal sources of stress arise
from the perception of an individual
about the environment.
The internal problems of an
individual like role conflict, role
ambiguity and non-specific fears
like the fear of future and that of
inadequacy can cause stress to an

Sources of stress (contd.)

The internal sources of stress
depend primarily on the
personality characteristics of an
individual.

Sources of stress (contd.)

External stressors
It is classified into
Group-level stressors
Organizational stressors
Extra-organizational stressors

Burnout
Burnout is the exhaustion suffered
by an individual due to a
continuous exposure to a stresscausing situation.
The major symptoms of employee
burnout are declining productivity,
increased labour turnover and
absenteeism and a general
despondency in the behaviour of

Burnout (contd.)
Employees can avoid burnout by
changing their work and personal
lifestyles.

Stress management

Individual strategies

Meditation
Deep muscle relaxation
Time management
Role-playing

Organizational strategies

Time-out
Job redesigning
Counselling and mentoring
Employee empowerment
Recreation
Training and orientation
Team-building exercise
Employee assistance programme

Industrial Relations

Objectives

Characteristics and objectives of

industrial relations.
You will be able to list the major
players in industrial relations.
Enumerate the essentials of effective
industrial relations.

Industrial relations: meaning

Industrial relations is a process
through which an organization
controls the employer-employee
relations in the organization and
this process may involve
continuous communication and
consultation between them.

Objectives of industrial relations

Building cordiality in the relationship
with the employees
Connectedness
Safeguarding mutual interests
Preventing industrial conflicts
Fostering industrial democracy
Avoiding exploitation
Dynamic role for the government

Major players in industrial

relations
Employers and their associations
Employees and their unions
Government

Approaches to the study of industrial

relations

Unitary approach
In case of the unitary approach to industrial relations, the authority
rests solely with the management with no right to anyone to
challenge its decisions.
The basic assumption of this approach is that the common values
and objectives unite and bind both the management and the
workers.
The use of power in this approach is for the common good and
interest only.
In essence, this approach is not appreciative of the role of trade
unions in the organization and certainly, they are not welcome.

Pluralist approach
The pluralist approach believes in basic
ground rules, negotiated settlements and
mutual compromises for solving the
industrial conflicts.
The basic assumption of this approach is
that the disagreements between the
parties to the industrial relations on
important issues are not unbridgeable
by compromises and the collaborations
can continue at all stages.
The pluralist approach puts emphasis on
industrial democracy and collective

System approach
According to this approach, individuals are part
of an ongoing but independent social system.
The behaviour, action and role of the individuals
are shaped by the culture of the society.
The basis of this theory is that group
cohesiveness is provided by the common
ideology shaped by societal factors.
In system approach, society plays a dominant
role while the actors such as employers,
employees and their representatives keep a low
profile and play a passive role in the process.

Social action approach

Social action approach assigns an active role
to the actors of the industrial relations. The
actors are employers, employees and their
representatives.
The actors understanding of the work
situation becomes more important than the
social factors and their independent views
gain a greater weight in determining their
behaviour towards industrial relations.
Social action theory primarily considers
bargaining as an important tool for the
resolution of a conflict.

Marxist approach
According to this approach, the
industrial conflicts are the central
reality of industrial relations, but
open conflicts are uncommon.
The basic assumption of this
approach is that industrial
relations under capitalism are an
everlasting and unavoidable
source of conflict.

Marxist approach (contd.)

As far as theory is concerned, the
compensation payable to the
employees is an outcome of the
power struggle.
As per this approach, the
employers seek to maximize their
profits by paying less
compensation to the employees,
while the latter resist such
attempts and this results in

Gandhian approach
The core of the Gandhian approach
in industrial relations is the utility
of non-violence as a means of
conflict resolution in organizations.
The basic elements of this
approach are truth, non-violence,
the voluntary arbitration of
disputes and wantlessness.

Gandhian approach (contd.)

According to Gandhi, the growth of
civilization does not mean a
multiplication of wants; rather, it
means a deliberate and self-imposed
attempt to reduce such wants.
He insisted on treating workers as
human beings and advocated the
concept of trusteeship.
In essence, this approach puts
emphasis on creating equality in

Human relations approach

According to this approach, an
organization is nothing but a set of
human relations and these human
relations are central to how an
organization functions.
As per this approach, the
organizations are made up of
people and the success of the
management lies in its dealings
with these people and their

Human relations approach

(contd.)
The goals of human relations
approach are
Getting people to work.
Cooperating through mutuality
of interests.
Deriving satisfaction from the
relationship achieved.

Giri approach
The Giri approach in industrial relations focuses on
the relevance and importance of voluntary
negotiations between the employers and the
employees as a means of settling disputes.
This approach insists on the establishment of
bipartite forums at different levels of the industry
to wipe out the dispute between the employers
and the employees represented by their unions.
This approach also provides for the active
involvement and intervention of the state in
dispute prevention and settlement.

Industrial sociology approach

The aim of this approach is to
investigate the underlying trends and
patterns in the cause and effect of
industrial disputes both intended and
unintended.
This approach focuses on the
prevention of industrial conflict by
tracing the cause of the disputes and
then avoiding it.

Industrial sociology approach

(contd.)
This approach provides a conceptual
framework for investigating,
analysing and specifying the
structure and process within the
organization that often produce
conflicts.
The removal of the causes of the
disputes, according to this approach,
facilitates a more effective
maintenance of industrial relations.

Oxford school approach

According to this approach, the conflict between
the interests of employer and employee is
inherent, but this interest can be adjusted in
order that a common way, which can satisfy both
the parties, can be found out.
As per this approach, it is highly essential for the
parties (management and union) to industrial
relations to get the facts right and avoid
institutional and other biases.
The underlying assumption of this approach is
that you cant do much without income and
therefore mutually beneficial ways must be found
out for achieving a convergence of interests.

Factors influencing industrial

relations

Trade union density

Frequency of strike activity
Politico-economic institutions
Cultural diversity
Demographic structure
Pattern of behaviour

Essentials of effective industrial

relations
Industrial relations
Leadership commitment
Appropriate vision, mission and
business strategy
Creative HR policies
Open communication
Institutionalizing the relationship
Benchmarking

Essentials of effective industrial

relations
Leadership commitment

Effective
Industrial
Relations

Open communication

Appropriate
Vision, Mission

Institutionalizing the
relationship

Creative HR policies

Benchmarking industrial
relations

Discipline and
Disciplinary Action

After reading this chapter, you

should be able to:

Understand the objectives and

types of discipline.
List the symptoms and causes of
indiscipline.
Enumerate the steps needed for a
disciplinary action procedure.

Discipline: meaning
Discipline is a system designed to
ensure that the employees
performance and behaviour are
consistent with the relevant
organizational rules and regulations
in force.

Characteristics of employee
discipline

Standard behaviour
Driving force
Positive or negative in nature
Voluntary or imposed
Right of the management
Element of control process

Objectives of discipline

Goal accomplishment
Developing a responsive workforce
Changing employee behaviour
Improving morale and motivation
Exercising better control over
employees
Ensuring consistency in action
Promoting industrial relations
Substituting personal supervision

Types of discipline
Positive discipline
Negative discipline
Progressive discipline

Positive discipline
Positive discipline aims at seeking
the willing cooperation of
employees in observing the
discipline code of the
organization.
In this method, the responsibility
of the organization is to create a
positive environment that gently
prompts the employees to comply
with the organizational code of

Positive discipline (contd.)

The two inherent aspects of positive
discipline are
Personal responsibility of employees
for maintaining discipline.
Independent decision making by
them to eliminate their unsuitable
and undesirable behaviour.

Negative discipline
In this method, fear is the key to the
maintenance of discipline.
The fear of punishment for acts of
indiscipline will be the driving force
for the employees to avoid
misconduct.
It also forces them to obey the rules
and regulations of the organization.

Progressive discipline:
meaning
Progressive discipline may be
defined as any employee
discipline system that provides a
graduated range of responses to
employee performance or
conduct problems.

Progressive discipline (contd.)

Progressive discipline requires an
organization to adopt a step-by-step
approach in dealing with the indiscipline
problems of an employee.
In this method, the disciplinary action
process begins with a modest disciplinary
action, then increases the degree of severity
gradually and finally ends up with the most
severe punishment if the successive stages
of punishment do not yield the desired
change.

Progressive discipline (contd.)

A progressive disciplining of an
employee may begin with the
hiring of an employee and can
continue throughout his work life
in the organization.

Steps in a progressive discipline

process
Stage1: counselling the employee.
Stage 2: first disciplinary proceeding
(reminding).
Stage 3: second disciplinary proceeding
(warning).
Stage 4: final disciplinary proceeding
(getting an undertaking).
Stage 5: initiating disciplinary action
(dismissal, demotion, etc.).

Symptoms of indiscipline

Absenteeism
Unauthorized departure from work
Inefficiency
Immoral conduct
Insubordination
Negligence
Theft
Tardiness

Symptoms of indiscipline
(contd.)

Causing unsafe working conditions

Misuse of the organizational property
Rule violations
Abusing the supervisor or co-workers
Refusal to accept a job assignment

Causes of indiscipline

Conventional management practices

Unfair treatment
Absence of an effective code of conduct
Absence of a proper grievance-handling
mechanism
Ineffective HR policies and practices
Absence of an efficient communication system
Negative attitude of the employees and their
unions
Organizational culture

Types of disciplinary action

Types of disciplinary action

(contd.)
Oral reprimand
Written warning
Denial of increments, promotions and
pay hike
Pay reductions and disciplinary
demotions
Suspension
Discharge or dismissal

Steps in establishing a disciplinary action

procedure

Elements of a good disciplinary

system

Clarity in discipline goals

Fairness of the procedure
Transparency
Prior warning
Adequate privacy
Immediate response
Consistency
Progressive discipline
Documentation
Appeal procedure
Review and feedback

Douglas McGregors Hot Stove Rule

of discipline

Douglas McGregor (1967) identified

a few essential characteristics of
the disciplinary system of an
organization. These are
Forewarning
Immediacy
Consistency
Impartiality

Industrial Disputes
and Collective
Bargaining

Industrial dispute
A dispute is basically a
difference of opinion between
the employer and the
employees over one or more
issues.

Characteristics of industrial
dispute
Industrial dispute is a collective
dispute between employer and
employees.
The relationship existing between
the parties to the industrial dispute
must be that of employer and
employee or co-workers.
The dispute may arise out of
disagreements between employers

Causes of industrial disputes

Demand for pay and benefits hike.
Demand for hygienic and safer working
conditions.
Demand for better labour welfare and social
security measures.
Demand for recognition and appreciation.
Demand for justice to an individual or a group
of employees.
External interference.
Numerous labour legislations.

Types of industrial disputes

Interest disputes- These refer
to the disputes relating to the
economic interest of the
employees.
Rights disputes- These involve
disputes over the
understanding, interpretation,
and application of the rules and
regulations which protect the
rights of the employees.

Outcomes of disputes
The outcomes of disputes are
Strike
Picketing
Gherao
Lock-out

Strike
A cessation of work by a body of
persons employed in any industry
acting in combination or a
concerted refusal, or a refusal under
a common understanding, of any
number of persons who are or have
been so employed to continue to
work or to accept employment .
-Industrial disputes act, 1947

Types of strike

General strike
Pen-down
Tools-down and sit-in strikes
Wild-cat strike
Go-slow and work-to-rule strikes
Sick leave and mass casual leave
strikes
Hunger strike
Sympathy strike

General strike
It normally refers to a large-scale
strike organized by the employees
belonging to an industry, a region
or an entire country.
Since these strikes are organized
on a mass basis, they create a
huge impact and often put a lot of
pressure on the employers.
General strikes are normally not

Pen-down, tools-down and sit-in

strikes
In pen-down, tools-down and sit-in
strikes, employees report for duty
but do no work.
In these forms of protest, the
employees just refuse to leave their
place after entering the work
premises and remain idle.

Wild-cat strike
When employees resort to an
unauthorized strike in violation of the
labour contract or agreements, it is
called a wild-cat strike.
Wild-cat strikes are illegal and the
striking employees are not protected
legally against the consequences of
these strikes.

Go-slow (slow down) and work-torule strikes

Go-slow and work-to-rule strikes are
forms of strike in which employees
work but not up to their usual levels
or capacity.
Striking employees reduce their
output deliberately to show their
protest to the employers.
Here, the employees strictly follow
the rules and just refuse to deviate
from them.

Sick leave and mass casual

leave strikes
The purpose of mass casual or sick
leave is to bring the work to a halt in
order to achieve their demands.
The employees may opt for this
method even to forewarn the
employers of the consequences of a
strike planned in the future.
In this form of strike, the striking
employees are legally right and safe as
they exercise their right to avail leave.

Hunger strike
In a hunger strike, the employees
undertake fasting by abstaining from
both food and work as a means of
protest.
The purpose of such a strike is to
embarrass the employers and get
the attention of the government and
the general public to the cause of the
strike.

Sympathy strike
The purpose of a sympathy strike is to
express sympathy and solidarity with
another group of striking employees
belonging to a different category of
employment in the same organization.
Incidentally, the sympathy strike may
also be conducted for the striking
employees in other organizations in
the same or a different industry.

Picketing
It is a form of protest by employees
in which the primary intention is to
prevent or dissuade the non-striking
employees from attending to their
work during the strike period.
Picketing may be held at the
workplace or even at some other
prominent places to attract the
attention of the public and the
government.

Gherao
It is a form of protest in which
employees encircle their employers or
top managers at the workplace with a
view to restricting their movements.
The purpose of a gherao is to force the
employer or managers to concede the
demands of the workers.
The wrongful confinement of any
person is not legally tenable.

Lock-out
The temporary closing of a place of employment or
the suspension of work, or the refusal by an
employer to continue to employ any number of
persons employed by him.
-Industrial disputes act, 1947
A lock-out is the employers response to the
employees continued protest in the form of strike.
In a lock-out, the employer closes the workplace
with the aim of preventing the employees from
entering the factory premises and performing
their job.

Investigation and settlement of

disputes (contd.)

Negotiation
Negotiation is a first attempt to resolve an
industrial dispute.
Disputes arising out of inter-personal, intergroup problems can be solved through direct
negotiation between the employer and the
union.
As part of a negotiation-based dispute
settlement, organizations can refer disputes
involving individuals to grievance procedures
established in organizations in compliance with
the Industrial disputes act, 1947.

Collective bargaining
It is a forum for reaching an
agreement between the employer
and the union after negotiations and
bargaining.
Collective bargaining provides for
resolution of disputes through
compromises or concessions made
by both the parties.

Conciliation and mediation

Conciliation can be defined as a
procedure to achieve amicable
settlement with the assistance of
an independent third party.
Conciliation means different
forms of mediation through which
disputes can be settled without
arbitration.

Conciliation and mediation

(contd.)
The purpose of the conciliation
process is to remove the animosity
and mutual distrust in the relationship
between employer and employees.
Conciliation normally involves a third
party who acts as a mediator and
plays a key role in persuading the
employer and the employees to reach
a voluntary settlement and execution.

Arbitration
Arbitration is a mechanism for settlement of a
dispute by a third party.
Arbitration can be classified as compulsory and
voluntary.
In case of compulsory arbitration, the dispute is
referred for arbitration even without the consent
of the parties to the dispute.
In case of voluntary arbitration, the parties to
the dispute voluntarily submit their dispute for
arbitration on the basis of their common
understanding.

Adjudication
Adjudication is a court-based
decision-making process that
involves a third party and the
judgements are binding on the
parties.
Adjudication is usually a highly
formal and time-consuming
process.
It is normally an involuntary and
adversarial process.

Adjudication (contd.)
In an adversarial process,
judgment is decided in favour of
the party which is proved right
and, by the same extension, the
other party is proved wrong.
Adjudication includes courts of
enquiry, labour courts, industrial
tribunals and national tribunals.

Collective bargaining

Collective bargaining: meaning

Collective bargaining is defined as a
free and voluntary forum that
facilitates negotiation between
employers and employees unions
on issues affecting the interest and
rights of both parties so that an
amicable settlement is reached in
good faith.

Features of collective
bargaining
The features of collective bargaining
are
Joint process
Interactive mode
Continuous process
Adversarial strategy
Union-based initiative

Types of bargaining
The types of bargaining are
Distributive bargaining
Integrative bargaining
Centralized bargaining
Decentralized bargaining

Distributive bargaining
It is used when the parties to the
bargaining process have conflicting
needs, interests and goals.
In this, the employers and employees
normally adopt opposing positions.
In it, one partys gain is another partys
loss as their needs are mutually
exclusive.
Economic issues like wages revisions,
benefits, bonuses, leaves and workloads
become the major agenda of distributive

Integrative bargaining
When there is a convergence of
interests, needs and goals among the
parties to the bargaining.
In it, the employers and the employees
have the same attitude towards the
issues discussed in the bargaining and
are equally concerned about its
outcome.
Agreements regarding employee health
and safety at the end of the bargaining

Centralized bargaining
When collective bargaining is
conducted at higher levels like the
national level or industry levels in a
centralized manner, it is called
centralized bargaining.
This may be sectoral or central wage
bargaining.

Decentralized bargaining
In this case the bargaining is
conducted at the enterprise level or
even at the individual level.
In this, an organization can develop a
tailor-made wage package which best
suits the interests of both the
employer and the employees.
Decentralized bargaining provides an
opportunity to the employees to
participate in the decision-making

The Collective
Bargaining Process

Essentials of an effective collective

bargaining
An effective collective bargaining
requires
Strong unions and an effective
leadership
The organizations recognition of
unions
Top management support
Positive external environment
Openness and flexibility

Employee Grievances

Grievance: meaning
A grievance is a written
complaint lodged by an
unsatisfied employee about
unfair treatment.

Characteristics of grievance
Grievances arise out of the perceived
injustice or unfair treatment felt by the
aggrieved employee.
It is the state or feeling of discontent or
dissatisfaction.
The cause of a grievance may be real or
imaginary.
A grievance may be voiced or unvoiced.
It must arise only out of the job of the
employee in the company.

Sources of grievance
Grievances concerning management
policies and practices
Grievances concerning working
conditions
Grievances concerning supervision
Grievances concerning collective
bargaining agreements
Grievances concerning work
adjustment difficulties

Techniques of grievance
identification

Exit interview
When employees quit an organization
for any reason, an exit interview may
be conducted to obtain information
about job-related matters.
This can provide the employer with an
invaluable insight into the simmering
problems and anxieties concerning the
employees.
It will be natural for those quitting their
jobs to speak freely and frankly about
their experience and observations in
the job.

Gripe-box system
Under this system, employees can
drop their written complaints in the
boxes kept by the organization.
The purpose of this system is to
provide an outlet to the employees
to secretly express their complaints
and apprehensions without the fear
of being victimized.
This method is more effective if the
complaints are serious and sensitive

Opinion survey
Opinion survey is the means of
gathering information from the
employees about their existing
grievances.
Surveys can be conducted
through group meetings,
periodical interviews, snap
meetings and collective
bargaining sessions.

Open-door policy
In this system, the workers are
encouraged to call on the relevant
manager at any time, to freely
share their opinions, feelings and
complaints with him or her.
This method will be effective only
when there is mutual trust in the
relationship between the managers,
the supervisors and the employees.

Observation
In this method, grievances are not
heard from the aggrieved employee
directly. Rather, the manager or the
immediate supervisor constantly
tracks the behaviour of the employees
working under him or her.
When the manager or supervisor
notices unusual behaviour among the
employees, he or she should report
this to the higher authorities promptly.

Observation

Essentials of a good grievance

procedure
A good grievance procedure should be
Legally sustainable
Mutually acceptable
Easily understandable
Highly flexible
Sufficiently knowledgeable

Benefits of the grievance redressal

procedure
A sound grievance procedure
Enables the management to know the
pulse of its employees.
Provides a channel to the aggrieved
employees to express their grievances.
Provides clues about the behaviour
and attitude of the managers and
supervisors.
Keeps the morale of the employees
high.

Statutory provisions concerning the

grievance redressal procedure in India

The Industrial Employment

(Standing Order) Act, 1946
The Industrial Disputes Act,
1947
The Factories Act, 1948

Trade Unions

Trade union: meaning

Trade union is a formal association of
workers for the purpose of protecting
and promoting their rights and
interests through collective
bargaining and actions.

Features of a trade union

The features of a trade union are
Voluntary association
Common goals
Authority flows from the members
Intermediary
Collective action

Objectives of trade unions

Income security
Job security
Physical security
Social security
Emotional security
Procuring political prowess
Fostering industrial democracy and
equity

Types of trade unions

Occupational unions
Industrial unions
General unions
White-collar unions

Occupational unions
In this kind of trade union, the union members
mostly belong to a specific occupational category.
The primary purpose of such unions is to protect
the skill status of their members.
This kind of unions may exist exclusively for
technicians, pilots, marine engineers,
hairdressers, welders, journalists, freelance
photographers, and so on.
The earliest kind of occupational union was the
craft union.

Industrial unions
In an industrial union members usually
belong to a specific industry.
When the workers belonging to textile or
steel industry form a trade union, it is
commonly called an industrial union.
The primary purpose of the industrial unions
is to promote sectoral collective bargaining.
When a single industrial union represents all
the workers of a specific industry, it is a
monopolistic union.

General unions
When the unions represent workers from
different industries and organizations, they
are known as general unions.
It may be a single union for the entire working
class or an amalgamation of several unions
representing workers of different industries.
Such unions are capable of organizing general
strikes at the national level by converting the
entire working class into one body or
federation with maximum consequences.

White-collar unions (contd.)

The uniting factor for the workers of
white-collar unions is the nature of their
job and not their skills.
The employees who perform non-manual
job and belong to salaried class often
form white-collar unions.
The emergence of the services sector as
an important segment of economy and
globalization have provided impetus to
the growth of white-collar unions in India.

Strategies and actions of

unions for goal
accomplishment

Why do workers join trade

unions?
The reasons for joining unions
are
Defencelessness against
exploitation
Trade union clout
Fulfilment of social and esteem
needs
Compulsory membership
Peer group influence

Trade Union Act, 1926

The Trade Union Act, 1926 deals with the
registration and regulation of trade unions.
It also specifies the rights, privileges, duties
and liabilities of the registered trade unions.
This act is applicable to the whole of India.
Minimum number: Seven or more members of
a trade union can apply for the registration of
their trade union under this act.

The important sections of the

Trade Union Act are

Application (sections 4 & 5)

Certificate of registration (sections 8 & 9)
Powers of registered unions (section 13)
Broad objectives on which general funds
may be spent (section 15)
Fostering civil and political interests of the
members (section 16)
Legal protection to office-bearers in
certain criminal conspiracy charges
(section 17)

The important sections of

the Trade Union Act are
(contd.)

Immunity from trade disputerelated

civil suits (section 18)
Validity of agreements (section 19)
Inspection of books maintained by
the trade union (section 20)
Admission of minors as members of
trade union (section 21)

The important sections of

the Trade Union Act are
(contd.)

Disqualifications concerning holding

of office (section 21A)
Requirements regarding industrywise representation in office (section
22)
Conditions relating to dissolution
(section 27)
Filing of returns (section 28)

Challenges facing the trade union

movement
The challenges before the trade union
movement are
Declining memberships
Changing profile of Indian workers
Multi-unionism and inter-union rivalry
External leadership
International workers

Situations fostering the growth of

trade unions in organisations
The absence of an adequate two-way
communication between the employers
and the employees.
Unilateral decision and actions by the
management.
The presence among the employees of a
general distrust in the management.
A feeling of stress and anxiety in the job
environment.
The absence of recognition and respect

Strategies for developing a unionfree organization (contd.)

Effective information sharing

Ensuring employee participation
Sensitivity to employee
complaints and concerns
Fairness in HR policies and
procedures
Leadership training
Vulnerability test

Strategic Human
Resource Management

Strategic human resource

management: meaning
Strategic human resource
management is a process of aligning
HR strategies with the business
strategy to accomplish the
performance goals through the
employees competency and
commitment.

Steps in strategic management

process

Models of strategic human

resource management

Business-oriented model
This model aims at value creation by
developing a HR system that creates
and sustains the competitive
advantage through human resources.

Strategic fit model

This model focuses on
matching the HR capabilities
and resources with the external
opportunities.
It also focuses on developing
HR practices in such a way that
they complement one another.

Strategic fit model (contd.)

Two types of strategic fits are:
Vertical fit (deals with the extent
of alignment between the HR
strategies and business
strategy).
Horizontal fit (deals with the
extent of alignment among the
components of the HR strategy).

SLAP model
This method focuses on the
interdependences among HR
strategies, business strategies and
organizational changes.
This model acknowledges HRM as a
continuous process of balancing the
demand for and the supply of labour.

Levels of strategy

Corporate level strategy

Corporate level strategy -Topmost
level of strategy-making: it focuses
on the value creation for the
entire organization. Its three
components are:
Growth strategy focuses on the
development and accomplishment
of growth objectives.

Corporate level strategy

(contd.)
Portfolio strategy focuses on the
determination of the portfolio of
business units for the organization.
Parenting strategy focuses on the
allocation of resources and
development of organizational
capabilities across the business units.

Business level strategy

Business level strategy focuses
mostly on creating and sustaining
competitive advantage for products
through one or more of distinguishing
factors like price/cost leadership and
product differentiation.

Functional level strategy

At the functional level, specific
strategies are made for the functional
activities of the organization. This
strategy may encompass production,
marketing, purchase, finance, HR,
research and development, and other
similar activities of the firm.

Models of strategic
formulation
High involvement management
model
High commitment management
model
High performance management
model

High involvement management

model
This model aims at creating an
environment that facilitates the
continuous exchange of information
between the superiors and the
subordinates.

High commitment management

model
This model aims at obtaining
voluntary commitment from
employees by adopting mutually
beneficial HR practices.

High performance management

model
This model aims at constantly
improving the performance of
individuals and the organization.
A high-performance management is
achieved by continuously educating
the employees and improving their
skills.

Benefits of strategic
HRM

Achieves cost-effective engagement

of labour.
Meets the changing needs and
expectations of the customers
effectively.
Necessities the development of
clear-cut goals, direction and future
focus to the entire organization.

Benefits of strategic HRM

(contd.)
Facilitates the planning and
execution of organizational changes
in a timely and effective manner.
Ensure the optimum utilization of
organizational resources.
Helps in developing, managing and
sustaining the skills and knowledge
of its human resources.

Benefits of strategic HRM

(contd.)
Enhances the coordination among
the various functional centres and
the top management.
Facilitates the continuous scanning of
external environment.

Barriers to an effective
SHRM
Absence of long-term orientation.
Lack of strategic reasoning.
Lack of adequate support from top
management.
Resistance from labour unions.
Fear of failure.
Rigidity of HR practices.
Fear of attrition.
Absence of measurement techniques.

International Human
Resource Management

International human resource

management: meaning
International human resource
management is a process of
procuring, developing,
compensating and retaining
people in organizations
operating beyond national
boundaries at the global level.

Features of IHRM

It involves employment of the right

people at the right positions,
irrespective of geographic locations.
It requires the development of a
diversified range of skills for
employees.
It requires the development of a wellorganized evaluation system to assess
the performance of employees across
different locations and nations.

Factors distinguishing IHRM from

domestic HRM
Besides the usual domestic HRM activities,
IHRM requires
Additional HR activities like international
relocation for employees, administrative
services for expatriates, international
taxation and language translation services.
Greater attention to expatriate employees
personal needs.
Greater risk exposure.

Challenges facing IHRM

The challenges facing IHRM are
Management of cultural diversity
Management of the complexity of the
workforce
Management of communication channels
Management of divergent economic
systems
Management of legal and industrial
relations issues

International recruitment

International HR managers must identify the

global competitiveness of the potential
applicants at the time of the recruiting process.
International HR managers must keep
international knowledge and experience as
criteria in the recruitment and selection process.
International HR department must have a fairly
good idea about the skills and availability of
human resources in different labour markets in
the world.

Approaches to recruitment in
IHRM

Ethnocentric approach
Polycentric approach
Geocentric approach

Ethnocentric approach

When an international company follows the

strategy of choosing only from the nationals
of the parent country, it is called an
ethnocentric approach.
The general rationale behind the
ethnocentric approach is that the staff from
the parent country would represent the
interests of the headquarters effectively
and link well with the parent country.

Polycentric approach

When a company adopts the strategy of

limiting recruitment to the nationals of the
host country, it is called a polycentric
approach.
The purpose of adopting this approach is
to reduce the cost of foreign operations
gradually.
The companies that adopt this method
normally have a localized HR department,
which manages the human resources of
the company in that country.

Geocentric approach
When a company adopts the
strategy of recruiting the most
suitable persons for the positions
available in it, irrespective of
their nationality, it is called a
geocentric approach.

International selection

The selection criteria for international jobs

usually revolves around the five core areas
of behaviour, attitudes, skills, motivation
and personality.
The focus of selection for international
operations normally includes cultural
adaptability, strong communication skills,
technical competence, professional
expertise, global experience, interpersonal
skills, language skills and family flexibility.

International training and

development

International companies usually aim at standardizing

business and HR practices across the world through
necessary employee training and development programmes.
IHRM can provide training to expatriate employees in three
stages
Pre-move training- This refers to training the employees who
are selected for foreign assignments.
Continual training- Continuous training to the expatriates
even after they have joined duty in the foreign country.
Repatriation training- Refers to a brief training provided to
expatriates when they are ready to return to their home
country.

International
compensationdefinition
International compensation is the
provision of monetary and nonmonetary rewards including base
salary, benefits, and perquisites,
long- and short-term incentives,
valued by employees in accordance
with their relative contribution to
MNC performance
-Anne-Wil Harzing and J. van
Ruysseveldt

International compensation
approaches

Balance sheet approach

Going rate approach

Balance sheet approach

The basis of this approach is that the expatriates

pay must equalize the purchasing power across
countries and they continue to enjoy the same
standard of living they would have enjoyed in their
parent nation.
In this approach, the company compares four
groups of expenses (income taxes, housing, goods
and services and discretionary expenses) between
the home country and the host country and
compensates the expatriates if they are adversely
affected by the differences in these expenses.

Going rate approach

When the compensation

packages of the expatriates are
determined on the basis of the
salary structure prevailing in the
host nation, it is called the going
rate approach.
Typically, the salary in this
method is decided on the basis
of the survey undertaken in the
host country where the business

International employee benefits

Many international companies

usually adopt the best-of-bothworlds benefits model.
Under this model, an expatriate
employee is given homecountry benefits coverage.
However, if any benefit is not
available in the home-country
plan, he or she may join the
host-country plan.

International performance
evaluation

International performance
evaluation primarily aims at
evaluating the expatriates and
foreign employees of third countries
and the host country.

International industrial relations

The HR policies and practices of

international companies must
be well attuned to global
differences in trade union
practices and collective
bargaining system.
The unions usually find it
difficult to deal with
international companies and
hard to penetrate in terms of

International employee safety and

health

Employee safety and healthcare

facilities in plants often differ from one
country to another in their state of
condition and modernisation,
depending upon local laws and
regulations.
The multinational companies may
either follow local laws in providing
health and safety facilities or adopt
consistent health and safety policies
across all locations without violating

Strategic international human

resource management (SIHRM)
SIHRM is defined as human
resource management issues,
functions and policies and
practices that result from the
strategic activities of
multinational enterprises and
have an impact on the
international concerns and goals
of those enterprises.