UNIT -04

PERFORMANCE APPRAISAL & COMPENSATION

Performance Appraisal:

It is the comparative evaluation and analysis of the individual merit of the employees. It
analyses the differences in performance between employees who are working on similar jobs.
It is also known as ‘merit rating’, ‘employee rating’, ‘efficiency rating’, ‘performance
evaluation’, ‘performance review’, ‘personnel rating’ or employee evaluation. Merit rating refers to
the evaluation or appraisal of the worth of the man’s services on his job.
It is the process of assessing the performance and progress of an employee on a given
job and his potential for future development.

Primary objective –

a. To improve employee performance and productivity

b. Identify areas where employees need improvement,

c. Provide recognition and rewards for high-performing employees.

According to Edward Flippo, Performance appraisal is the systematic, periodic and an

impartial rating of an employees excellence in matters pertaining to his present job and his
potential for a better job.

According to Scott, Clotheir and Spriegel:

“Performance appraisal (or merit rating) is the process of evaluating the employees performance on
the job in terms of requirements of the job.”

NATURE OF PERFORMANCE APPRAISAL:

♣ Systematic Process: Performance appraisal is a systematic process that involves the use of
performance metrics, such as key performance indicatiors(KPIs), to evaluate employee
performance. It is based on objective criteria and is used to identify areas where employees need
improvement.

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♣ Continuous Process: Performance appraisal is a continuous process that occurs throughout the
year, rather than just once a year. It involves setting goals, providing feedback, and evaluating
employee performance on an ongoing basis.

♣ Two-way process: It’s a two way process, involves both the employee and the superior. It
provides an opportunity for employees to receive feedback on their performance and to discuss
their goals and aspirations with their superior.

♣ Objective Process : Performance appraisal is based on objective criteria, such as job

performance, attendance, punctuality. Its important that the appraisal process is based on
objective criteria to ensure that employees are evaluated fairly and that their performance is
aligned with organizational goals and objectives.

♣ Purpose Oriented : To secure information necessary for take correct decision.

OBJECTIVES OF PERFORMANCE APPRAISAL :

♣ Improve employee performance: the primary objective of performance appraisal is to improve

employee performance and productivity. By setting goals and providing feedback, employees
can work to improve their performance and achieve better results.

♣ Identify area of improvement: Performance appraisal is used to identify areas where employees
need improvement. This can includes areas such as job skills, communication, teamwork, and
time management.

♣ Provide feedback: Performance appraisal provides an opportunity for employees to receive

feedback on their performance.

♣ Align employee performance with org’nal goals: Performance appraisal is used to align
employee performance with organizational goals and objectives. By setting goals that are aligned
with the organisations mission and vision, employees can work to achieve better results that
benefits the organization as whole.

♣ Recognize and reward high-performing employees: performance appraisal is used to

recognize and reward high-performing employees. This can include promotions, bonus etc.

IMPORTANCE OF PA:

 Getting suitable candidate(s): Organisation can know merits, demerits, skills set, knowledge
level, expertise, experience, attitude of the employees towards work with the help of

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 performance appraisal. As a result of which organization can assign work/post to the employees
according to their capabilities. Thus organization gets suitable candidate for the work/ post &
mismatch between the requirement and qualification does not arises.

 Growth of employee(s): With the help of PA employees can understand their work related
capabilities & will try to improv the quality of performance. They will try to maintain their
quality of performance & will try to fix their shortcomings related with work. As a result of
which employee will see/ experience growth in their career. This will motivate employees for
better performance.

 Arrangement of Training: Suitable training is arranged for the employees if they are unable to
perform the work in order to improve their performance. Data derived from PA helps in
designing suitable training program for the employee.

 Positive impact on profit: when employees are available for the required job/post, when
employees are motivated for better performance & when less performing employees are
provided training then the efficiency of the employees will increase which in turn will increase
the overall efficiency of the organization.

 Knowing the managers: A competent manager not only manages all the activities of the
organization properly but also helps in achieving the goals of the organization. PA gives
information about the efficiency & competency of the manager.

TECHNIQUES OF PERFORMANCE APPRAISAL:

Traditional Methods Modern Methods

 Ranking Methods  Management by objectives(MBO)

 Paired comparison  Behaviorally anchored rating
scales(BARS)
 Forced distribution method
 Assessment centers
 Forced choice method
 360-degree appraisal
 Checklist method
 Human resource Accounting
 Essay method method

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1. Traditional Methods:

a. Ranking Method: It is the oldest and simplest formal systematic method of PA in which
employee is compared with all others for the purpose of placing order of worth. The
employees are ranked from the highest to the lowest or from the best to worst.
b. Paired Comparison: In this method, each employee is compared with other employees on
one on one basis, usually based on one trait only. the number of times employee is compared
as better with others determines his or her final ranking.
c. Grading Method: In this method, certain categories of worth are established in advance
and carefully defined. There can be three categories established for employees: outstanding,
satisfactory and unsatisfactory.
d. Forced distribution method: This method was evolued by Tiffen to eliminate the central
tendency of rating most of the employees at the higher end of the scale. The method assumes
that employees performance level confirms two a normal statistical distribution i. e 10,20, 40,
20 and 10 per cent. This is useful for rating a large number of employees job performance
and promo ability. It tends to eliminate or reduce bias.
e. Forced choice method: the forced choice method is developed by J.P. Guilford. It contain
a series of groups of statements, and rater rates how effectively a statement describes each
individual being evaluated. Common method of forced choice method contains two
statements, both positive and negative.
f. Check list method: the basic purpose of utilising check list method is to ease the evalution
burden upon the rater. In this method, a series of statements, i.e. questions with their answers
in Yes or No are prepared by the HR department.
g. Essay method: In this method, the rater writes a narrative description on an employees
strengths, weakness, past performance, potential and suggestions for improvement.

2. Modern Methods

a. Management by objectives(MBO): Peter F W Drucker propounded a new concept, Can

be described as a ‘process whereby the superior and subordinate managers of an organization
jointly identify its common goals, define each individual’s major areas of responsibility in
terms of results expected of him and use these measures as guides for operating the unit and
assessing the contribution of each its members.’

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 b. Behaviorally anchored rating scales(BARS):The problem of judgemental performance
evaluation inherent in the traditional methods of performance evaluation led to some
organizations to go for objective evaluation by developing a technique known as ‘BARS’
around 1960s. BARS are descriptions of various degrees of behavior with regard to a specific
dimension.

c. Assessment centers: In the assessment center method, an organization tests its employees
on both job capabilities and social interaction skills. Written tests help evaluate ability, while
situation exercises and role playing scenarios assist with determining an employees
likelihood of success in carrying out responsibility that are part of their day-to-day role.

d.360-degree appraisal: Under 360 degree appraisal, performance information such as

employee’s skills, abilities and behaviour, is collected ‘all around’ an employee. i.e. from
his/her superiors, subordinates, peers and even customers and clients.

e. Human Resource Accounting: HRA is a sophisticated way to measure in financial terms

the effectiveness of personnel manager activities and the use of people in an organization. It
is the process of accounting for people as an organizational resource. It tries to place a value
on organizational human resources as assets and not as expenses.

POTENTIAL APPRAISAL:

A well conducted performance appraisal could present the performance of an employee

about the past appraisal period. Many of the decisions in human resource department are taken on
the basis of the results of performance appraisal. But the fact is that the performance of an employee
in the past does not guarantee similar kind of performance in future. The rule equally applies to the
excellent performance as well as the poor performance. So, considering the high demands of ever
changing competitive external environment, one cannot give assurance about good performance in
future just because he has done extremely well in the past.

Potential appraisal is also termed as future oriented appraisal to evaluate the potential of
an employee to handle a new task or job.

The purpose of measuring the performance of an individual is to know today about the
things he is capable of doing in future course of time. Organizations are also adopting a practice of
potential appraisal to recognise and reward the future talents. Through the successful exercise of

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potential appraisal an employee could move higher into the hierarchy and assume more challenging
roles.

 PA is a process of determining an employees strengths and weaknesses with a view to use

this a predictor of his future performance.

 PA is a future oriented appraisal whose main objective is to identify and evaluate the
potential of the employees to assume higher positions and responsibilities in the
organizational hierarchy.

 Objectives of PA:

 Identification of employees having capabilities to perform higher level jobs.

 Identification of Training needs of employees

 Implementing succession planning activities

 Assisting employees in personal development process

 Helping organization to decide its strategy.

 Characteristics of Potential Appraisal:

 It ensures competent staff for future

 Acts as a motivator through offering future possibilities

 It is generally carried for higher positions and roles

 It is future oriented especially near future

 It is based on the predictions

EMPLOYEE COUNSELLING

Employee counselling is a vital part of performance review and potential appraisal, if

these are to achieve their basic purpose of helping employees to improve and develop. Unless
carefully and sensitively handled, employees may become more dissatisfied after the counselling
than before.

Counselling is described as the help provided by the supervisor to the subordinates in analysing their
performance and other behaviours on the job, in order to improve their performance

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Counselling is a two-way process in which a counsellor provides help to the workers by way of
advice and guidance. There are many occasions in work situations when a worker feels the need for
guidance and counselling. The term ‘counselling’ refers to the help given by a superior to his
subordinate in improving the latter’s performance.

It is a process of helping the employees to achieve better adjustment with his work environment to
behave as a psychologically mature individual, and help in achieving a better under-standing with
others so that his dealings with them can be effective and purposeful.

Thus, the basic objective of counselling is overall development of the employee.

According to Keith Davis – “Employee counselling involves a discussion of an emotional problem

with an employee with the general objective of decreasing it.”

NEED FOR EMPLOYEE COUNSELLING:

Employees undergo tremendous stress of completing the targets, work-load, meeting

deadlines, relations with subordinates or colleagues, work-life balance, lack of time and higher
responsibility. Therefore, following are some of the reasons as to why there should be counselling at
work places:

1. There is a need for the employees to come out from the problems, gives a new way to deal with
the problems.

2. The employees need to know as to how much the employer care for the employee.

3. There is also a need to identify the work related problems and the poor performance.

4. There is a need to increase the productivity of employee and the confidence about the work.

The objectives of counselling could be stated as follows:

(i) Counselling is an exchange of ideas and feelings between two persons.

(ii) It is concerned with both personal and work problems.
(iii) Counselling may be performed by both professionals and non-professionals.
(iv) Counselling is usually confidential so as to have free talk and discussion.
(v) It tries to improve organisational performance by helping the employees to cope with their
problems.
TRANSFER

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 • Transfer means shifting of an employee from one job to another, one unit to another or one
shift to another and may involve a new geographical location.
• Transfers have a number of objectives, such as moving employees to positions with a
higher priority in terms of goals, placing employees in positions more appropriate to their
interests or abilities or filing department vacancies with employees from overstaffed
department.
• According to Dale Yoder,“A transfer involves the shifting of an employee from one job to
another without special reference to changing responsibilities or compensation.
• A transfer is a lateral movement of an employee from one job to another.

PROMOTION
• A promotion is the transfer of an employee to a job that pays more money or one that
enjoys some preferred status.
• Promotion is the advancement of an employee to a better job-better in terms of greater
responsibilities, more prestige or status, greater skill and especially increased scale of pay
or salary. • The purpose of a promotion is to provide a position which in general is worth
more to the organization than the incumbent’s present position.
• Promotion means advancement of an employee to a higher post with greater
responsibilities and higher salary, better service conditions and thus higher status.
• When salary of an employee is increased without corresponding change in job status , it is
called upgrading
• The job itself may be upgraded to a higher scale of pay or if there are variable scales of
pay for same job according to skill required, upgrading may mean moving to a higher
scale without changing the job.
• Both promotion and upgrading are devices used by management to reward employees for
better performance and to increase their morale.

MERITS of PROMOTION
• The internal candidates having intimate knowledge of the organization can handle the new
jobs easily
• It will increase the morale of the employees
• It will ensure sincere effort on the part of employees because they know that they may rise to
senior positions by promotions
• The costs of training the insiders on the senior posts will be less.

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DEMERITS OF PROMOTION
• Better qualified outsiders may not be reached by the management. Moreover, the person
promoted to a senior job may not possess the required qualities.
• The mobility of manpower is restricted. Employee turnover to a certain extent is good for the
health of the organization.
• In promotion, there may be clash between factors like seniority and ability. The decisions may
lead to favouritism.
• Further growth of the business is hindered by the limited talent of the insiders. The entry of
fresh talent into the organization will be restricted.

DOWNSIZING:

♣ Downsizing in organizations is becoming a popular practice in today’s business

environment. Every organization attempts to expand or reduce their employees according to
their needs, requirements and business conditions.
♣ Reasons for Downsizing There are various reasons why organizations make strategic
decisions to downsizing the workforce.
♣ Environmental factors:

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 Economic slowdown/ recession: An economic slowdown or recession, is a period of
economic decline, partnered with a fall in retail sales and increased level of unemployment.
♣ Increased organization expenditure:
When organizations experience increased costs of production downsizing of personnel may
possibly be done to meet cost requirements. Organizations could additionally allocate a
reduced budget for salary or wages, subsequently offering current permanent staff new part-
time permanent contracts with fewer benefits.
♣ Technological advances:
Downsizing of employees in many organizations are influenced by technological advances
which may result in employee lay-offs due to redundancy of certain positions.
♣ Organizational factors:
Downsizing is sourced by means of both external factors as well as internal factors which
are found within the organization. Organizational reasons for laying-off employees could
include financial concerns of shareholders on their investments or the redesign of the
organization so as to be consistent with charters, and relevant to the organization.

Impact of Downsizing on Human Resources Management:

Downsizing has consequences for everyone in the organization, regardless if employees are
leaving or remaining in the organization.
i. Disruptions in the workplace:
According to Kravitz (2013) and Burne (2014), there are chances of arising of
disruptions in the workplace, which may result in stress, frustration, anxiety and anger in
survived employees’.
ii. Reduction of Employees’ loyalty :
According to Hofmeyr, K. & Marias, A. (2013), firms build their corporate
culture to foster innovation and increase loyalty of employees towards the firm.
However, downsizing may harm their feelings and it was observed in different firms that
employees once committed, more satisfied, productive, adaptable and effective, may feel
other way round and resign from the firms.
iii. Job Insecurity
Downsizing leads to job insecurity among the survived employees. Most of the
organizations do not follow hard and fast rules, that which employees have to be laid-off
and which to be retained.

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VRS(Voluntary Retirement Scheme):

VRS means Voluntary Retirement Scheme - it is a scheme that allows companies to offer
a voluntary retirement to employees who have not reached the age of retirement.
A Voluntary Retirement Scheme or VRS is a scheme that is offered by many companies to give
employees the freedom to take voluntary retirement before they reach the age of retirement. As
we know retirement is something that is associated with ageing, however, many individuals
seek retirement at a much younger age. Voluntary retirement Scheme or VRS allows the
employees to do just that. As far as companies are concerned, the primary goal to offer VRS to
employees is to reduce some excess staff, save costs, and improve productivity.

In India, the average age of retirement usually is 58 to 60, however, with VRS an
employee can seek voluntary retirement in their 40s. Whether it is to relax or to pursue some
other interests, VRS can benefit both the employee and the company. The employee gets to
enjoy post-retirement benefits while pursuing their interests while the company can reduce the
excess workforce and increase productivity. This is why many companies today offer Voluntary
Retirement Schemes or VRS. However, to avail VRS, the employee should be over the age of
40 years and should be working with the company for more than 10 years.

Objective of the Voluntary Retirement Scheme

The primary objective of the Voluntary Retirement Scheme (VRS) is to provide benefits to both
employees and companies. Employees that have worked with the company for a long service
tenure can benefit from this scheme by taking voluntary retirement and ending their service
tenure early so that they can enjoy the retirement benefits and pursue their other interests.

Features of Voluntary Retirement Scheme (VRS)

 In order to be eligible to avail of VRS, the employee should be more than 40 years of
age and should have completed 10 years of service tenure with the company.
 Once the employee applies for VRS and takes voluntary retirement, the company has to
clear all due payments and the provident fund to the employee.

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  It is also the responsibility of the company to provide assistance to the employees in the
form of tax consultation and counseling to ensure that they have a smooth retirement
process.
 When an employee retires through the VRS scheme, the company cannot fulfil that
employee’s vacancy.
 After opting for VRS, the employees can not join another organisation with the same
management.
 Employees can also receive compensation of up to 5 lakhs INR. this compensation is
tax-free but to avail of this benefit the employee should apply for VRS in the same year
as they get compensation.

COMPENSATION:

 When an employee works in an org. he/she gets monetary or non monetary rewards against
his/her performance called compensation.

 Monetary – wages, salary, commission, bonus etc

 Non monetary – Benefits related with health, retirement, flexible working hrs, scope of
training and development.

Compensation policy
A compensation policy is a combination of the philosophy and practices a company adopts
when determining employees’ pay, rewards, and benefits. Every company will have its own
compensation policy, though you may find that certain industries have similar or comparable
approaches to pay and benefits.
The goal of a compensation policy is not to strictly dictate what or how every employee
should be paid. Instead, it should outline specific policies and make clear the approach and protocol
behind compensation structure, total rewards, and statutory requirements.
Additionally, a compensation policy may cover compensation review frequency, overtime
guidelines, and severance policy.
‘Document which provides details related with the compensation related practices of an
organization.’
 It helps to “attract, motivate & retain talented” employees in the org.

 It provides details regarding -

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* The amount of compensation provided by org.

* The mode in which compensation is provided. (monetary/non monetary)

* When employees will get bonus, payment related to OT, equity based compensation etc.

* How compensation is calculated

* Compensation related guidelines / principles followed by the organization.

Compensation policies are the guidelines and strategies that organizations use to
determine how they will reward their employees for their work and contributions. These policies
play a crucial role in attracting, retaining, and motivating talented individuals within the workforce.
Compensation includes not only base salary but also various other forms of financial and non-
financial rewards.

Here are some key components and considerations in compensation policies:

1. Base Salary:

♣ Base salary is the fixed amount of money paid to an employee on a regular basis.

♣ It is typically determined based on factors such as job responsibilities, skills, experience, and
market rates.

2. Variable Pay:

♣ Variable pay, also known as performance-based pay, includes bonuses, incentives, and
commissions.

♣ It is linked to individual or team performance and may be tied to specific goals or targets.

3. Benefits:

♣ Compensation policies often include a range of benefits, such as health insurance, retirement
plans, stock options, and other perks.

♣ These benefits can significantly impact the overall compensation package offered to
employees.

4. Market Research:

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 ♣ Organizations need to conduct regular market research to stay informed about industry
standards and competitor practices regarding compensation.

♣ This helps in ensuring that the organization remains competitive in attracting and retaining
top talent.

5. Pay Equity:

♣ Pay equity is an essential aspect of compensation policies, ensuring that employees are paid
fairly for their work regardless of gender, race, or other demographic factors.

♣ Organizations may conduct regular pay equity analyses to identify and address any
disparities.

6. Retention Strategies:

♣ Compensation policies may include strategies to retain key talent, such as retention bonuses,
long-term incentives, or career development opportunities.

7. Legal Compliance:

♣ Organizations must ensure that their compensation policies comply with local, state, and
federal labor laws and regulations.

Effective compensation policies align with the organization's overall strategic objectives
and contribute to a positive and motivated workforce. Regular reviews and adjustments to
these policies are often necessary to adapt to changes in the business environment and remain
competitive in the talent market.

JOB EVALUATION
Wage or salary is the most important factor in maintaining and developing good
employer employee relations. Job evaluation is the process which establishes a consistent and
systematic relationship among compensation rates for all jobs within the organization.
Determining of base compensation is also important for the employee become it
determines the status of employee in the society. Employee should be compensated on the basis
of –
1) The nature of the job
2) The present relative worth of the job.
3) The defectiveness with which the individual performs the job.

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According to Flippo, “Job evaluation is systematic and orderly process of determining the worth of a
job in relation to other jobs”.
According to Kimball &Kimbal, “Job evaluation is an effort to determine the relative value of every
job in a plant to determine what the fair basic wage for such a job should be.”

Characteristics

• Job evaluation is a ranking of jobs, not people.

• It follows job analysis which provides data in respect of each job.
• It is used to determine the organization’s pay structure.
• It is a systematic, rather than a scientific, process of establishing wages and salaries.
• The heart of job evaluation is the determination of what criteria will be used to arrive at the
ranking.
• Job evaluation should not be confused with job analysis.
• Job evaluation is different from Performance Appraisal.

Objectives of Job Evaluation

1) To maintain complete and accurate description of each job or occupation.

2) To provide a standard procedure to determine the relative worth of each job.
3) To ensure that like wages are paid to all qualified employees for like work.
4) To provide an accurate and fair consideration of all employees for advancement and transfer.
5) To provide information for selection, placement and training of employees.
6) To solve wage and salary controversies.
7) To simplify union-management negotiations on wages.
8) To fix minimum and maximum wages throughout the organization for each position.

Wage Payment Methods:

 Hourly Wages:
Employees are paid a set amount for each hour worked. This is common for jobs
where the number of hours worked can vary.
 Salary:

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 Employees receive a fixed amount of pay over a set period, typically monthly or
annually. Salaried employees often receive the same pay regardless of the number of
hours worked.
 Piece Rate:
Payment is based on the quantity of units produced or tasks completed. This method
is often used in manufacturing or production environments.
 Commission-Based Pay:
Employees receive a percentage of the sales or revenue they generate. Common in
sales roles, this method ties compensation directly to performance.
 Bonuses:
Lump-sum payments provided as a one-time reward for achieving specific goals or
exceptional performance. Bonuses can be tied to individual, team, or company-wide
achievements.
 Profit Sharing:
Employees receive a share of the company's profits. This method fosters a sense of
ownership and aligns employee interests with the overall success of the organization.
INCENTIVE PLANS:

• Performance-Based Incentives:

Employees receive rewards based on their individual performance. This can include achieving
specific targets, completing projects, or meeting key performance indicators.

• Recognition and Rewards Programs:

Non-monetary incentives, such as employee recognition programs, awards, or employee of the

month recognition, can motivate employees and boost morale.

• Skill-Based Pay:

Employees receive additional pay for acquiring new skills or certifications relevant to their job. This
encourages continuous learning and development.

• Career Development Opportunities:

Offering opportunities for career advancement, promotions, and professional growth can be a
powerful incentive for employees to excel in their roles.

• Flexible Work Arrangements:

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Providing flexibility in work schedules, remote work options, or compressed workweeks can be a
valuable incentive for employees seeking better work-life balance.

• Wellness Programs:

Incentives for maintaining a healthy lifestyle, such as gym memberships, wellness workshops, or
health insurance discounts, can promote employee well-being.

Fringe benefits, also known as employee benefits

Fringe benefits play a crucial role in attracting and retaining employees, improving job satisfaction,
and promoting a positive work environment. Here are common examples of fringe benefits:

1. Health Insurance:

Medical, dental, and vision insurance coverage is a standard fringe benefit. Employers
may cover all or a portion of the premiums, providing employees and their families with
access to healthcare services.

2. Retirement Plans:

Employer-sponsored retirement plans, such as 401(k) or pension plans, help employees

save for their future. Employers may offer contributions, matching funds, or other incentives
to encourage participation.

3. Paid Time Off (PTO):

Paid leave for vacation, holidays, sick days, and personal time is a valuable fringe
benefit. It allows employees to balance work and personal responsibilities.

4. Life Insurance:

Employers may provide life insurance coverage for employees, offering financial
protection to their beneficiaries in the event of the employee's death.

5. Childcare Assistance:

Childcare benefits, such as on-site childcare facilities, subsidies, or flexible spending

accounts for childcare expenses, help employees balance work and family responsibilities.

6. Flexible Work Arrangements:

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 Offering flexibility in work schedules, remote work options, or compressed workweeks
is a fringe benefit that enhances work-life balance.

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EMERGING TRENDS IN PERFORMANCE APPRAISAL AND
COMPENSATION:

1.Continuous feedback

One of the most prominent trends in performance appraisals is the shift from annual or biannual
reviews to continuous feedback. Continuous feedback means providing timely, specific, and
constructive feedback to employees on an ongoing basis, rather than waiting for formal
occasions. Continuous feedback can help employees improve their performance, motivation,
and engagement, as well as address any issues or concerns before they escalate.

2.Multi-source feedback

Another trend in performance appraisals is the use of multi-source feedback, also known as
360-degree feedback. Multi-source feedback means collecting feedback from multiple sources,
such as peers, subordinates, customers, or external stakeholders, in addition to the manager.
Multi-source feedback can provide a more comprehensive and balanced view of an employee's
performance, strengths, and areas for improvement.

3.Development-oriented feedback

A third trend in performance appraisals is the focus on development-oriented feedback, rather

than evaluation-oriented feedback. Development-oriented feedback means emphasizing the
future potential and growth of employees, rather than judging their past performance.

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4.Pay for skills and competencies

One of the major shifts in compensation management is the move from paying for jobs and
titles to paying for skills and competencies. This means rewarding employees based on the
value they create and the capabilities they demonstrate, rather than on their seniority or
position.

5.Variable and flexible pay

Another trend in compensation management is the use of variable and flexible pay, which are
forms of pay that vary according to performance, results, or other criteria. Variable pay can
include bonuses, commissions, profit sharing, stock options, or other forms of contingent
rewards.

6. Data-driven and transparent compensation

It involves using data and analytics to inform and explain compensation decisions and
practices. Data-driven compensation can help you benchmark your pay and benefits against the
market, identify pay gaps and disparities, and optimize your compensation budget and return on
investment.

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UNIT -05

MAINTENANCE AND EMPLOYEE RELATIONS

EMPLOYEE HEALTH AND SAFETY

Employee health and safety is a cross-disciplinary area concerned with protecting the
safety, health and welfare of people engaged in work or employment. The goal of all
occupational health being and safety programs is to foster a safe work environment. As a
secondary effect, it may also dement protect co-workers, family members, employers,

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customers, suppliers, nearby communities, and other members of the public who are impacted
by the workplace environment.

It may involve interactions among many subject areas, including occupational medicine,
occupational hygiene, public health, and safety engineering, chemistry, and health physics.

Safety measures not only reduce the frequency of industrial accidents but also increase the
productivity. Safety measures work as a morale boosterfor the employees working in the plants.
Industrial life is full of risk and the employees there have to work under the shadow of
industrial hazards.

Meaning of Safety

Safety in the workplace means having an environment free from injury and hazards. Proper
processes and procedures allow employees to work without worrying about their safety.

Employee Safety

Employee safety refers to the protection of workers from the danger of industrial accidents. This
is primarily a management activity which is concerned with reducing, controlling and
eliminating hazards from the industries or industrial units.

Need For Employee Safety

The danger of life of human being is increasing with advancement of scientific

development in different fields. The need for safety was realized because every millions of
industrial accidents occur which result in either death or in temporary disablement or permanent
disablement of employees and involve large amount of losses resulting from danger to property,
wasted man hours ted wasted hours. More ever, from managerial perspective the importance of
industrial safety in toy organization may be concluded by following facilitation:

1. Treatment: Industrial safety management provides treatment for injuries and illness at the
work place.
2. Medical Examination: It carries out medical examination of staff joining the organization of
returning to work after sickness or accident
3. Hazards identification.
4. Provision of protective devices.

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5. Consultancy: It provides medical advised on other condition potentially affecting health eg
works canteen etc.
6. Education: It provides safety and health training.

OBJECTIVES OF EMPLOYEE SAFETY

1.To prevent accidents in the plant by reducing the hazard to minimum.

2.To eliminate accident caused work stoppage and lost production.

3. To achieve lower workmen's compensation, insurance rates and reduce all other direct and
indirect costs of accidents.

4 To prevent loss of life, permanent disability and the loss of income of worker by eliminating
causes of accidents.

5. To evaluate employee's morale by promoting safe work place and good working condition.

6. To educate all members of the organization in continuous state of safety mind and to make
supervision competent and intensely safety minded.

EMPLOYEE WELFARE

Welfare includes anything that is done for the comfort and improvement of Labours and
is provided over and above the wages.

Welfare helps in keeping the morale and motivation of the Labours high so as to retain
the Labours for longer duration. The welfare meatures need not be in monetary terms only but
in any kind/forms.

Employee welfare implies the setting up of minimum desirable standards of the provision of
facilities like health, food, clothing, housing, medical assistance, education, insurance, job
security recreation etc. Such facilities enable the worker and his family to lead a good working
life, family life and social life.

Meaning of Employee Welfare

Employee welfare refers to the welfare activities done for the comfort and improvement
intellectual and social of the employees over and above the wages paid which includes services
facilities and amenities to perform their work in healthy and congenial environment.

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Definitions of Employee Welfare

According to Arskur James Todd, "Employee welfare means anything done for the comfort
and improvement, intellectual and social, of the employees over and above the wages paid
which is not a necessity of the Industry"

According to Industrial Labour Organisation (ILO), "Employee welfare may be understood

and including such services facilities and amenities which may be established in vicinity of
undertaking to perform their work in healthy and congenial environment and to avail of
facilities which improve their health and bring high morale"

OBJECTIVES OF EMPLOYEE WELFARE

 To provide better life and health to the workers

 To make the workers happy and satisfied
 To build up stable labour force, to reduce labour turnover and absenteeism
 To develop efficiency and productivity among workers

BASIC FEATURES OF EMPLOYEE WELFARE

1. Employee welfare includes various facilities, services and amenities provided to workers for
improving their health, efficiency, economic betterment and social status.

2. Welfare measures are in addition to regular wages and other economic benefits available to
workers due to legal provisions and collective bargaining

3. Employee welfare schemes are flexible and ever-changing. New welfare measures are added
to the existing ones from time to time.

4. Welfare measures may be introduced by the employers, government, Labours or by any social
or charitable agency.

5. The purpose of Labour welfare is to bring about the development of the whole personality of
the workers to make a better workforce.

SOCIAL SECURITY

Social Security is the security or guarantee which is given to the Labours from the
Labours or management, regarding society's facilities. It is the security that ciety furnishes to
the Labours through appropriate organizations.

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Meaning of Social Security

Social security refer to the action programs of government intended to promote the
welfare of the population through assistance measures guaranteeing access to sufficient
resources for food and shelter and to promote health and well-being for the population at large
and potentially vulnerable segments such as children, the elderly, the sick and the unemployed.

Definitions of Social Security

According to ILO, "Social security is the protection which society provides for its members
through a series of public measure, against the economic and social distress that otherwise
would be caused by the stoppage or substantial prediction of earning resulting from sickness,
maternity, employment, injury, unemployment, invalidity, old age and death".

According to article 41 of the India constitution, "Social Security is the state shall within the
limits of its economic capacity and development make effective provision securing the right to
work, to education and to public assistance in case of unemployment, old age, sickness and
disablement and other cases of unserved wants"

FEATURES OF SOCIAL SECURITY

 It is a group effort in place of individual effort

 Protect the workers from various contingencies of life.
 It collective effort of employee, employer and govt.
 Idea to provide social justice.

SCOPE OF SOCIAL SECURITY

1. Medical Care
Medical care includes costs for medical insurance, the medical service system for the
aged, medical aid for public assistance, medical services for Workmen's Accident Compensation
Insurance, as well as costs related to government-financed special medical services.

2. Pensions
Pensions include payments by public pension schemes such as National Pensions and
Employee's Pension Insurance.

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3. Welfare and Others
Welfare and Others includes expenses for social welfare services or long-term care,
public assistances other than modical services, cash benefits for child allowance, sickness and
injury cash benefits within the health insurance schemes leave compensation benefits paid by
the Workmen's Accident Compensation Insurance and unemployment benefits from
Employment Insurance. In addition, Long-term care includes long-term care insurance benefits
and public assistance long-term care services, atomic bomb victim long-term care insurance
system co-payments, partial cost sharing and family-care leave benefits.

SOCIAL SECURITY IN INDIA

At present both types of social security schemes are in vogue in our country. Among the
social assistance schemes are the most important.

The social insurance method, which has gained much wider acceptance than the social
assistance method, consists of the following enactments.

1. The Labours' Compensation Act, 1923.

2. The Labour's State Insurance Act, 1948.
3. The Maternity Benefit Act, 1961.
4. The Payment of Gratuity Act, 1972

Employee -employer Relationship:

The term 'employee relations' refers to a company's efforts to manage relationships

between employers and employees. An organization with a good employee relations program
provides fair and consistent treatment to all employees so they will be committed to their jobs
and loyal to the company: Such programs also aim to prevent and resolve problems arising from
situations at work.

One of the most effective ways for a company to ensure good employee relations is to adopt
human resource strategy that places a high value on employees as stakeholders in the business
Sakeholders are people who are committed, financially or otherwise, to a company and are
afected by its success or failure. When employees are treated as more than just paid laborers,
but actual stakeholders with the power to affect outcomes, they feel more valued for the job they
do.

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SIGNIFICANCE OF EMPLOYEE RELATIONS

 Good Employee relations contribute to industrial peace.

 It is highly essential that there is good cooperation between labour and management to
fulfill
 individual, organizational and national goals. Social Justice and employee welfare in an
economy is possible only in an atmosphere of
 industrial peace.
 Good employee relations promote understanding between labour and management.
 It helps in redressed of grievances and fosters pursuit of industrial goals.
 It has promoted industrial productivity in establishments.
 It helps to protect worker's interests and improve their economic conditions.
 Good Employee relations reduce conflicts between management and labour.
 It helps to enhance open communication between employers and employees.
 It helps to establish a good rapport between management and unions.

GRIEVANCE

Grievance refers to the dissatisfaction of an employee with what he expects from the
company and its management. A company has to provide an employee with a safe working
environment, realistic job preview, adequate compensation, respect etc

Definitions of Grievance

According to Dule Beach, "Grievance is any dissatisfaction or feeling of injustice in connection

with one's employment situation that is brought to the attention of measurement"

According to Keith Davis, "Grievance is any real or imaginary feeling of personal misjustice
which an employee has concerning his employment relationship

According to Dale Yoder, "Grievance is a written complaint filed by an employee and claiming
unfair treatment"

CAUSES OF GRIEVANCES

 Employment Conditions
 Demand for Wage Adjustments
 Complaints concerning disciplinary measures and procedures

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  Undesirable Conditions of work
 Violation of employment Contract
 Method of Supervision
 Inadequacy of safety and health services
 Social Injustice

GRIEVANCE HANDLING

A grievance is any dissatisfaction that adversely affects organizational relations and

productivity. To understand what a grievance is, it is necessary to distinguish between
dissatisfaction, complaint and grievance.

Grievance handling is an essential part of any business, in case people have been dismissed
unlawfully so there has to be a structure and rules and regulations in place. Even in well-run
businesses, it may sometimes be necessary to take disciplinary action against employees.

OBJECTIVES OF GRIEVANCE HANDLING

1. To enable employee to air his/her grievance.

2. To clarify the nature of grievance
3 To investigate the reasons of dissatisfaction.
4 To obtain where possible a speedy resolution to the problem.
5 To take appropriate actions and ensure that the promises are kept.

ESSENTIALS OF SUCCESSFUL GRIEVANCE HANDLING

 Legal Sanctity: The Grievance Procedure should be in conformity with the prevailing
legislations.
 Unambiguity: Each and every aspect of the grievance procedure should be with clarity.
 Simplicity: The grievance handling procedure should be simple.
 Promptness: The procedure should be aimed at rapid disposal of the grievances Training:
Adequate training should be provided for employees handling grievances.
 Follow-up: Grievance procedure should be reviewed consistently to make it more
effective

IMPORTANCE OF GRIEVANCE HANDLING

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 Grievance Handling helps to bring out various issues of employee dissatisfaction. It
provides an opportunity for the employees to express their feelings and fears.
 It helps the management to understand about the superior attitude towards subordinates.
 A good grievance handling system enhances morale of employees.
 Grievance Handling Machinery improves the work culture in an organization.
 It enables management to take corrective action in relation to employee issues.
 It serves as a check on the arbitrary actions of the employer.

GRIEVANCE REDRESSAL : Grievance redressal is a management and governance related

process used commonly in India. The traditional approach to Grievance Redressal, which is
handled through letters and complaint firms, has very little appeal and its usage rarely reflects
the actual state of customer satisfaction or lack thereof. Main features of grievance redressal are:
1. Fairness. 2. Facilities for representation. 3. Procedural steps. 4. Promptness.

INDUSTRIAL DISPUTES

Industrial disputes are conflicts, disorder or unrest arising between workers and
employers on my ground. Such disputes finally result in strikes, lockouts and mass refusal of
employees to work the organization until the dispute is resolved.

So it can be concluded that Industrial Disputes harm both parties employees and
employers and are always against the interest of both employees and the employers.

CAUSES FOR DISPUTES

The causes of industrial disputes can be broadly classified into two categories:
1. Economic Causes
2. Non-economic Causes

1. Economic Causes
The economic causes will include issues relating to compensation like wages, bonus,
allowances, and conditions for work, working hours, leave and holidays without pay, unjust
layoffs and retrenchments.

2. Non-economic Causes

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The non economic factors will include victimization of workers, ill treatment by staff members,
sympathetic strikes, political factors, indiscipline etc.

Settlement or ways of resolving disputes

1. Judicial dispute resolution

The legal system provides a necessary structure for the resolution of many disputes.
However, some disputants will not reach agreement through collaborative processes. Some
disputes need the coercive power of the state to enforce a resolution.

Perhaps more importantly, many people want s professional advocate when they become
involved in a dispute, particularly if the dispute involves perceived legal rights, legal
wrongdoing, or threat of legal action against them.

The most common form of judicial dispute resolution in litigation. Litigation is initiated when
one party files suit against another. In the United States, litigation is facilitated by the
government within federal, state, and municipal courts. The proceedings are very formal and are
governed by rules, such as rules of evidence and procedure, which are established by the
legislature. Outcomes are decided by an impartial judge and/or jury, based on the factual
questions of the case and the application law. The verdict of the court is binding, not advisory,
however, both parties have the right to appeal the judgment to a higher court Judicial dispute
resolution is typically adversarial in nature, for example, involving antagonistic parties or
opposing interests seeking an outcome most favorable to their position.

Retired judges or private lawyers often become arbitrators or mediators, however,

trained and qualified non-legal dispute resolution specialists form a growing body within the
field of ADR. In the United States of America, many states now have mediation or other ADR
programs annexed to the courts, to facilitate settlement of lawsuits.

2 Extrajudicial dispute resolution

Some use the term dispute resolution to refer only to alternative dispute resolution
(ADR), that extrajudicial processes such as arbitration, collaborative law, and mediation used to
resolve conflict and potential conflict between and among individuals, business entities,
governmental agencies, and (in the public international law context) states. ADR generally
depends on agreement by the parties to use ADR processes, either before or after a dispute has
arisen. ADR has experienced steadily increasing acceptance and utilization because of a

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