CONTENT

CH. NO.
CHAPTER -1

PARTICULARS
INTRODUCTION
1.NEED &IMPORTANT OF THE STUDY
2. OBJECTIVES OF THE STUDY
3.SCOPE OF THE STUDY
3. RESEARCH METHODOLOGY
4. LIMITATIONS OF THE STUDY
COMPANY PROFILE

CHAPTER -2

INDUSTRY PROFILE

CHAPTER -3

LETERATURE REVIEW

PAGE
NO.

CHAPTER-I
INTRODUCTION

INTRODUCTION
Compensation Management is an integral part of the management of the organization.
Compensation Management contributes to the overall success of the organization in several
ways. To be effective, the managers must appreciate the value of competitive pay, their human
resources, and have an investment view of payroll costs. We want to maintain pay levels that
attract and retain quality employees while recognizing the need to manage payroll costs.
Pay is a difficult topic of conversation in most organizations. In fact, the topic is altogether taboo
in many workplaces. It simply isn't discussed unless absolutely necessary. And, when it is
necessary, such as when a pay raise (or lack of one) must be explained to an employee, many
managers find themselves at a loss for words. As the dreaded date of such a discussion
approaches, managers may begin checking their sick time banks to see if they can disappear for a
day or two.
While it may be a touchy subject, pay is a critical factor in the work lives of employees. Jobs are
accepted or rejected based in part on starting salary and the opportunity for future increases in
pay. Employees compare their pay to that of others in the same line of work. They constantly
compare their pay level to their level of contribution, trying to determine whether the ratio of
give and receive is a fair one. While it may not be a frequent topic of open discussion, employees
think about pay often.

Approaches of compensation management

There are 3P approach of developing a compensation policy centered on the fundamentals of
paying for Position, Person and Performance. Drawing from external market information and
internal policies, this program helps establish guidelines for an equitable grading structure,
determine capability requirements and creation of short and long-term incentive plans.
The 3P approach to compensation management supports a company's strategy, mission and
objectives. It is highly proactive and fully integrated into a company's management practices and
business strategy. The 3P system ensures that human resources management plays a central role
in management decision making and the achievement of business goals.
* Paying for position
* Paying for person
* Paying for performance
Because it is so important to employees, the issue of pay deserves to be clearly addressed. In
spite of their hesitance, managers are capable of dealing with this sometimes difficult issue in a
professional and effective manner. By keeping the following basic points about pay in mind, they
can address virtually any pay-related topic with their employees in a professional and productive
manner.

Specificity is Key
Pay is a topic with many different shades and a variety of implications. Whenever approaching
the subject, it is important to work out the details beforehand so that specifics can be clearly
communicated. For the manager, this means that the increase amount is nailed down before
discussing a promotion with an employee. No chance of misunderstanding or false expectations
can be permitted. Far too often, managers are apt to discuss generalities. "It will mean a good
increase." What exactly does that mean in terms of the employee's monthly budget? If care is not
taken here, good news can become the source of conflict and resentment.

Pay is Relative
What one employee considers a fantastic increase maybe an insult to another? Each individual
has a unique set of creativity and competencies. Pay should be based on the performance,
position and the competencies/skills the person is having.

Pay is Not Created Equal

Various forms of pay have different purposes. The two most common forms of direct cash
compensation in most companies are base pay and bonus. Base pay is the annual salary or hourly
wage paid to an employee given the job he holds, While bonus is typically (or at least should be)
rewarded based on the achievement of a goal of the organization.
Discussions about bonus payments should be as specific as possible. This is the opportunity to
point out particular accomplishments that contributed to overall team or company success. Even
if the bonus is paid to all employees based on a simple overall company profit target, the
manager should use the opportunity to point out specifically how individual employees helped
achieve that target.
Distributing bonus checks presents a unique motivational opportunity for a manager. Handing
money to an employee while discussing actions and behaviors he would like to see repeated,
creates a powerful link between performance and reward.
Discussions about base pay increases can be a bit different. Most companies claim to link their
annual base pay increases to performance. In reality, however, base pay decisions take into
account a variety of factors, including the relative pay of others in the same job, the company's
increase budget, market practices and where the individual falls within his pay range. Even when
performance is a factor, the manager is faced with the difficult task of evaluating an entire year's
worth of activity and then categorizing it according to the percentage increase options allowed by
the budget. It becomes very difficult to pinpoint specific employee actions or accomplishments
as the reason for the increase.

For these reasons, it's appropriate for the discussion about base pay increases to be more general
and balanced. Both strengths and weaknesses of the employee should be addressed. The actual
increase is then based on an overall assessment, as opposed to a link with one or two specific
outcomes. Any other factors that impact the increase percent, such as budget or pay range should
be openly discussed as well.

'Why?' is Critical?
All organizations pay according to some underlying philosophy about jobs and the people who
do them. This philosophy may not be in writing, but it certainly exists. Pay maybe treated in a
formal and structured manner at one company. At another, any appearance of structure is
intentionally avoided so that decisions can be made arbitrarily. Either way, the approach taken
reflects a fundamental belief about people, motivation and management.
Managers often want to view each individual as a separate case. It is important to understand,
however, that employees operate within a compensation system. A manager is wise to take the
time to learn as much as possible about his company's compensation system. This knowledge
will form the context for pay discussions and will go a long way toward helping the employee
make sense of what is said.
While the answer to "how much?" is of course important to employees, they are also concerned
about the "why?" of pay. In other words, while the actual amount of pay is very important,
employees also are interested in the rationale used to determine it. Research has shown that pay
satisfaction increases with understanding of the pay scheme.
Managers often leave this area to the HR department. Ideally, however, managers themselves
will be the primary conduit of information on this topic. If a manager does not know the
company's pay philosophy, he should seek out whomever in the organization is responsible for
pay administration and get the answers he needs.

Is pay based on an analysis of market pay practices? Is it affected by the bonus plan? Are certain
jobs considered critical and, therefore, treated differently? Do pay decisions take training and
education into account? Answers to these questions will help managers help employees
understand the organization's philosophy and the decisions resulting from it.
Job seekers who go into the negotiation process with their eyes wide open keep an important fact
in mind: A few thousand dollars one way or the other can quickly become a gain or a loss
depending on other benefits. Money is important, but it must be put in the context of other pros
and cons--some of which have a dollar value and some of which do not.
The company's health plan, bonus plan, life insurance benefit match are just a few of the rewards
with a dollar value. Beyond these, but just as important, are factors such as career development,
camaraderie among teammates, flexible schedules, etc. Ask employees in a lousy work
environment, and they will testify that these factors should never be understated.
Managers should be the company's biggest ambassadors when it comes to the value of benefits
and work environment factors. Sharp companies do a good job of showing the value of these
items. Smart managers will communicate their value, as well, especially when discussing pay.
For example, when offering a promotion to an employee, a manager should consider all the
potential benefits. What developmental opportunities are involved? Is there an increase in status?
Will the move mean additional interaction with key players? All of these, as well as any increase
in tangible pay and benefits should be discussed.

Speaking of Pay with Confidence

Discussions regarding pay do not have to be awkward--they can be clear and productive if
managers adhere to the basics outlined above. Rather than a taboo, pay can be addressed in an
up-front manner if managers do their homework, get prepared and go into the discussion with the
confidence that comes from knowledge.
Pay discussions should deal with specifics. In preparing for the discussion, the manager must
remember that pay is relative and nothing can be assumed about the employee's response. The
purpose of the particular aspect of pay being addressed is important, and the manager must be

able to discuss the issue in the context of the organization's pay philosophy. Finally, the many
faces of reward in the workplace cannot be overlooked.
If managers follow these guidelines, their pay-related communication with employees will result
in clarity and respect. In addition, they will avoid the misunderstanding and resentment that
results from avoiding this critical issue.
To conclude we can say that compensation is a hot potato for the Human Resource Department.
The motivation level of the employees to great extent lies in monetary rewards. If paid well can
generate results for the organization, failed can create problems. The major challenges what
managers face today is retention of the man power and the major cause of it is that they are paid
better in the other organizations. A satisfied employee is a productive employee and care should
be taken that they are fairly paid for their worth in the organization.

NEED FOR THE STUDY:

Compensation management of the employees is important if the
employees are satisfied then only the organization can function smoothly increases its
production, faces competition.
If employees are satisfied with their job they will carry a positive attitude. Hence the
study has been undertaken to assess the employee Compensation which is necessary for the
organization in order to make sound decisions.

OBJECTIVES OF THE STUDY

Understand the concepts of compensation management in ASHOK LEYLAND Explore
the role of c compensation management
Pay roll system in ASHOK LEYLAND
To study maintain pay equity
To study simplify the system
To study create a new mindset
To study give managers more autonomy
To study increase transparency

SCOPE OF THE STUDY

The compensation management in ASHOK LEYLAND refers to a persons feeling of
satisfaction on their job. It is different from person to person. The researcher has chosen to
measure the level compensation management in ASHOK LEYLAND .
The study considers the impact of 10 factors on compensation management in it concentrates on
the effect of factors in general, but no exclusive study is made on them.
The study considers only the perceptual elements of employees and does not focus on ground
realities. The scope of study cover: work conditions, compensation, extra benefits, conveyance
treatment of superiors, colleagues, duly timings, and grievance reprisal mechanism and
promotion policy.

RESEARCH METHODOLOGY
The methodology that is adopted for the study is such that it facilities the data
accumulation. The information is gathered through survey method. The survey method has been
adopted for collecting the data from employees.

RESEARCH DESIGN:
Research Design is defined as the specification of methods and procedures for acquiring the
information needed. Generally the research design is any of the following three typesDESCRIPTIVE, EXPLORATORY and CASUAL.

DESCRIPTIVE STUDY:
Descriptive study/research is marked by the prior formulations of specific research questions.
The investigator already knows a substantial amount about the research problem before the
project is initiated. Hence this is chosen for my research.

EXPLORATORY STUDY:
The major purpose of exploratory study is the identification of problem, the more precision
formulation of problem and the formulation of new alternative courses of action.

CASUAL STUDY:
The study involves the determination of the causes of what the researchers are predicting.
this is mainly a cause and effect study.
The research design selected by the researcher in the present study is
DESCRIPTIVE in nature.

RESEARCH INSTRUMENT:
HR research has a one main research instruments in collecting primary data. That is
questionnaires.

In order to extract first hand information from the respondents, a pre-tested questionnaire
was prepare and the same was administered to the respondents.

DATA SOURCES:
Data means a collection of facts in real life statistical data is a collection of facts in numerical
figures. The data sources are usually identified using the type of data needed. There are two
types of data.
1. Primary data
2. Secondary data

PRIMARY DATA:
The first hand information by the investigator by means of observation face to face
questioning, telephone interview and mailing questionnaire is called primary data.
Primary data consists of original information gathered for a specific purpose.

SOURCES OF PRIMARY DATA;For the purpose of present study, the primary data collected from respondents by contacting
them personally.

SECONDARY DATA:
Secondary data consists of information that already exists somewhere, having been collected for
another purpose

SOURCES OF SECONDARY DATA:

For the purpose of present study, the secondary data was collected from published data of the
companies. Population is the aggregate of objects animate and in animate, under study in any
statistical investigation. The population for the study here was employees in ASHOK
LEYLAND .

SAMPLING PROCEDURE
With a view to arrive at the sample population for the study, a Purposive-Cum convenient
sampling was followed.

SAMPLE SIZE
1)

The sample size includes 100 employees who are working in the in ASHOK
LEYLAND .

LIMITATIONS OF THE STUDY:

1. This study covers those employees who are working at ASHOK LEYLAND. The
understand and knowledge may vary from person to person. The replied gives by the
respondents are taken for granted, though they are not uniform.
2. Since names are mentioned in most of questionnaires, most of the employees
answered favorable to the company. This might have led to wring finding in the study.
3. The interpretation being based on percentage method is not definite.
4. The report is subjects to changes with fast changing scenario.

CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE

INDUSTRY PROFILE
Production
The cumulative production data for April-March 2015 shows production growth of only 1.20 percent over
the same period last year. The industry produced 1,685,355 vehicles in March 2015 as against 1,845,868
in March 2012, which declined by (-) 8.70 percent.
Domestic Sales
The overall growth in domestic sales during April-March 2015 was 2.61 percent over the same period last
year. While in March 2015 overall sales fell by (-) 7.76 percent over March 2012.
Passenger Vehicles segment grew at 2.15 percent during April-March 2015 over same period last year.
Passenger Cars declined by (-) 6.69 percent, Utility Vehicles grew by 52.20 percent and Vans grew only
by 1.08 percent during April-March 2015 as compared to the same period last year. However, in March
2015 passenger car sales further declined by (-) 22.51 percent over March 2012. Total passenger vehicles
sales also declined by (-) 13.01 percent in March 2015 over same month last year.
The overall Commercial Vehicles segment registered de-growth of (-) -2.02 percent in April-March 2015
as compared to the same period last year. While Medium & Heavy Commercial Vehicles (M&HCVs)
declined by (-) 23.18 percent, Light Commercial Vehicles grew at 14.04 percent. In March 2015,
M&HCVs sales further declined by (-) 26.16 percent over March 2012.
Three Wheelers sales grew by 4.87 percent in April-March 2015. Passenger Carriers grew by 8.58 percent
during April-March 2015 and Goods Carriers registered de-growth at (-) 9.20 percent during this period.
Two Wheelers registered growth of only 2.90 percent during April-March 2015. Scooters, mopeds and
motorcycles grew by 14.24 percent, 1.53 percent and 0.12 percent respectively over same period last year.
However, in March 2015 all sub-segments of two wheelers, scooters, motorcycles and mopeds registered
de-growth at (-) 3.18 percent, (-) 8.32 percent and (-) 4.54 percent respectively.

During April-March 2015, overall automobile exports registered de-growth of (-) 1.34 percent compared
to the same period last year. Passenger Vehicles grew by 9.02 percent, while the other segments like
Commercial Vehicles, Three Wheelers and Two Wheelers fell by (-)13.35 percent, (-) 16.22 percent and
(-) 0.72 percent respectively. In March 2015, Passenger Vehicles, Two & Three Wheelers grew by 3.07
percent, 3.51 percent and 7.50 percent respectively. While Commercial Vehicles declined by (-) 28.33

percent .WORLD-CLASSTECHNOLOGY
To offer world-class technology that is relevant and affordable to the Indian customer is the
philosophy that drives R&D at Ashok Leyland. Over the years, this philosophy has been translated time
and again into products that seamlessly integrate international technology with local needs. "The role of
R&D is central in fulfilling the company-wide commitment to total customer satisfaction" states Mr. R.
Seshasayee, Managing Director, and adds that the increased infrastructural and financial support
expresses the company's determination to become self-reliant in R&D.

VALUETOTHECUSTOMER
The immediate R&D priorities are to pro-actively address safety and environmental issues,
harness and adopt technologies that provide value to the customer in an atmosphere enabling creativity
and innovation. Powering those who "engineertomorrows" with an enabling infrastructure has been top
priority for the company.

TESTTRACKS:
:

Our R&D is not confined within walls. It extends to the test tracks as well.

Rigorous tests are carried out under stringent simulated conditions that replicate
themosttreacherouslandscapes.
Vehicle ruggedness and longevity are a prime customer concern, as they directly
impact earnings. Ever conscious of this, Ashok Leyland makes extensive use of a modern
CAD set-up, a comprehensive test track facility (where cobble-stones are calibrated and
reset periodically), accelerated fatigue testing rigs and rigorous durability testing
facilities. Together they ensure that there is a constant improvement in the life and onroad performance of every make of Ashok Leyland vehicle to hit the roads. Safety,
durability, through our R&D efforts.

INNOVATIONS:
Ashok Leyland product development successes have come from a keen sense of anticipation and
attentiveness. The company initiated research into alternative fuels well before legislative debate had even
begun in the country. The result was the implementation of CNG technology ahead of the rest promising a
breath of fresh air for polluted cities.

ASSOCIATES COMPANIES:

Automotive Coaches & Components Ltd (ACCL)

Lanka Ashok Leyland

Hinduja Foundries

IRIZAR-TVS

Ashok Leyland Project Services Limited

Albonair GmbH

JOINT VENTURE:

Nissan Motor Company

John Deere & Company
Automotive Infotronics
Ashley Alteams India Pvt Ltd
Optare

2.5 SNAPSHOT
1948 1987 THE FIRST FOUR DECADES:
Pandit Jawaharlal Nehru persuaded Raghunandan Saran, an industrialist, to enter
automotive manufacture

In 1948, Ashok Motors was set up for the assembly of Austin cars. With equity
participation by British Leyland, Ashok Leyland commenced manufacture of commercial
vehicles in 1955
Access to international technology enabled the Company to introduce a host of trendsetting product innovations in the country, supported by product development and
marketing capabilities Multi-axle vehicles, tractor trailers, double decker and vestibuled

buses, power steering

Units at Ennore, Hosur, Bhandara and Alwar became part of a pan-India growth plan of
the Indian leadership

Tie-ups with international technology majors for engine and gearbox technology
Battled formidable competition, gaining and sustaining a 25% plus market share
Withstood the unprecedented business depression of the early 80s, proved its resilience
a quality that has stood the Company in good stead in subsequent trying times too

Made a habit of earning profits and declaring dividends

1987 MID 90S THE GROWTH PHASE:
Transnational Hinduja Group took over the principal overseas shareholding of the
Company in 1987, infusing vital capital and technology. Emboldened, Ashok Leylands
long-term plan to become a global player by benchmarking global standards of
technology and quality was soon firmed up
A state-of-the-art manufacturing base set up at Hosur to roll out international class
products
Anticipated growing market demand and pioneered CNG technology
capacity up from 23,000 units in 1987 to 50,000 units in 1998.

MANAGEMENT DETAILS:
Board of Directors

Dheeraj G Hinduja, Chairman (Alternate: Y M Kale)

R Seshasayee, Executive Vice Chairman

Anil Harish

D J Balaji Rao

A K Das

Jean Brunol (from 20.10.2010)

Jorma Antero Halonen (from 19.05.2011)

S anjay K Asher (from 21.12.2010)

F Sahami

Shardul S Shroff

Dr V Sumantran

Vinod K Dasari, Managing Director

K Sridharan

Company Secretary

A R Chandrasekharan

Executive Directors

Anup Bhat

A K Jain

Jayendra Parikh

R R G Menon

P G Nilsson

Nitin Seth

Chief Financial Officer

Executive Director And

Rajive Saharia

Shekhar Arora

M S Krishnaswami & Rajan

D eloitte Haskins & Sells

Cost Auditors

Geeyes & Co.

Business Operation

Automobiles-Trucks/Lcv

Auditors

Background
The origin of Ashok Leyland, a Hinduja group company can be traced to the urge for self-reliance, felt by
independent India. Pandit Jawaharlal Nehru, India's first Prime Minister persuaded Raghunandan Saran,
an industrialist, to enter automotive manufacture. In 1948, Ashok Motors was set up in what was then
Madras, for the assembly of Austin Cars. The Company's destiny and name changed soon with equity par

Financials:

Total Income - Rs. 114065.872 Million ( year ending Mar 2011)

Net Profit - Rs. 6312.993 Million ( year ending Mar 2011)

Market Share:

Name

Last Price

Market Cap.
(Rs. Cr.)

Tata Motors

193.45

Sales

26.20

Total Assets

Turnover

61,399.84

35,912.05
47,807.42

Ashok Leyland

Net Profit

6,970.97

1,811.82
631.30

6,621.14

75.44

474.14

11,117.71
Eicher Motors
1,688.00

4,555.00

102.95

3,303.44

388.45

562.15

Tata Motors (D)

SML Isuzu

442.67

VALUES:
CUSTOMERS:

893.01

36.56

297.79

We value of customers and will constantly endeavour to fulfil their needs by proactively offering
them products and service appropriate to their diverse application.

EMPLOYEE:
We consider our employee as our most valuable asset and are committed to provide full
encouragement and support to them to enhance their potential and contribution to companys business.

VENDORS:
Our vendors are our valued partners in our business development and we will work with them in
a spirit of mutual co-operation to meet our business objectives.

DISTRIBUTORS:
Our distributors are the vital between the company and the customers and we are committed to
advice and support our distributors to continuously upgrade their infrastructure, skills and capability to
serve our customers better.

SHAREHOLDERS:
We value the trust reposed in us by our shareholders and strive unstintingly to ensure a fair and
reasonable return on their investment.

SOCIETY:
We are committed to add to the wealth and well-being of our society by enhancing the quality of
life and contributing to this economic development while maintaining the highest level of environment
and safety standards.

THE FIVE ASHOK LEYLAND CORPORATE VALUES ARE:

International
Speedy
Value creator
Innovative
Ethical

2.7 POLICIES AND OBJECTIVES OF ASHOK LEYLAND:

QUALITY POLICY:
Ashok Leyland is committed to achieve customer satisfaction, by anticipating and delivering
superior value to the customers in relation to their own business, through the product and services offered
by the company and comply with statutory requirement.
Towards this, the quality policy of Ashok Leyland is to make continual improvement in the process that
constitutes the quality management system, to make them more robust and to enhance their effectiveness
and efficiency in achieving stated objectives leading to:

Superior product manufactured as also service offered by the company.

Max use of employee potential to contribute to quality and environment by progressive
up gradation of their knowledge and skills as appropriate to their functions.
Seamless involvement from vendors and dealers in the mission of the company to address
customers changing needs and protection of the environment.

ENVIRONMENT POLICY:We at Ashok Leyland committed personal environment measures.

We follow all legal reasons.
Adopt pollution prevent technology in design and manufacturing projects.
Conserve all resources such as power, water, oil, gas, compressed air etc.. and
optimise their usage through scientific methods.
Provide clean working environment to employees.
Set and review objectives and targets for continually improving environment.

2.8 PRODUCT RANGE OF THE COMPANY INCLUDES:

 Buses
Trucks
Engines
Defence & Special Vehicles

2.9 MILESTONES:

1966 - Introduced full air brakes

1967 - Launched double-decker bus

1968 - Offered power steering in commercial vehicles

1979 - Introduced multi-axle trucks

1980 - Introduced the international concept of integral bus with air suspension

1982 - Introduced vestibule bus

1992 - Won self-certification status for defence supplies

1993 - Received ISO 9002

1997 - India's first CNG powered bus joined the BEST fleet

2001 - Received ISO 14001 certification for all manufacturing units

2002 - Launched hybrid electric vehicle

2.10 AWARDS/ACHIEVEMENTS

In the journey towards global standards of quality, Ashok Leyland reached a major
milestone in 1993 when it became the first in India's automobile history to win the ISO

9002 certification.
The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO
14001 certification for all vehicle manufacturing units in 2002.

It has also become the first Indian auto company to receive the latest ISO/TS 16949
Corporate Certification (in July 2006) which is specific to the auto industry.

Ashok Leyland buses carry 60 million passengers a day, more people than the entire Indian rail
network

Ashok Leyland has a near 85% market share in the Marine Diesel engines markets in India

In 2002, all the vehicle-manufacturing units of Ashok Leyland were ISO 14001 certified for their
Environmental Management System, making it the first Indian commercial vehicle manufacture
to do so.

In 2005, received the BS7799 Certification for its Information Security Management System
(ISMS), making it the first auto manufacturer in India to do so.

In 2006, received the ISO/TS 16949 Corporate Certification, making it the first auto manufacturer
in India to do so.

It is one of the leading suppliers of defence vehicles in the world and also the leading supplier of
logistics vehicles to the Indian Army.

It is the largest manufacturer of CNG buses in the world.

4. RESEARCH METHODOLOGY
OBJECTIVE OF RESEARCH

Estimation of working capital requirement

Evaluation of working capital management

Evaluation of Liquidity position & working capital utilization

Analysis of relationship between working capital and profitability

Analysis & sources of working capital

Analyzing the level of current assets with relation to current liabilities.

COLLECTION OF DATA:

Data has been collected from various sources like:

Annual reports of last three years

Manual of concerned departments

Internet sites like www.google.com,

METHODS OF QUANTITATIVE ANALYSIS

Calculation of net working capital requirements.

Ratio analysis

Operating cycle & cash cycle

Cash flow analysis

Determining the Financing mix

LIMITATIONS

The data is mostly secondary in nature

Data has been recalculated & regrouped wherever necessary

In the absence of sufficient data personnel judgment have been taken on reasonable assumption.

In the absence of sufficient data in-depth study of cash, Receivables and inventory management
was not possible.

ASSUMPTION:

Number of days in a year is 365 days.

All purchases have been taken as credit purchases.

All sales have been taken as credit sales.

In the absence of relevant data the data from internet site is taken as the relevant informations.

4.1 RATIO ANALYSIS

1. WORKING CAPITAL RATIOS:
Turnover Ratio:

Net Working Capital Ratio

Working Capital Turnover Ratio
Current Asset Turnover Ratio
Fixed Asset Turnover Ratio

Liquidity Ratio:

Current Ratio
Acid Test Ratio
Absolute Ratio

Profitability Ratio:

Gross Profit Ratio

Net Profit Ratio
Operating Profit Ratio

2. INVENTORY MANAGEMENT RATIO:

Inventory Turnover Ratio

Inventory Holding Period
Inventory Proportion

3. RECEIVABLE MANAGEMENT RATIO (DEBTORS):

Debtors Turnover Ratio

Debtors Collection Ratio

4. PAYABLE MANAGEMENT RATIO (CREDITORS):

Creditors Turnover Ratio

Creditors Collection Period

5. CASH MANAGEMENT RATIO:

Cash Ratio

Cash Turnover Ratio

COMPANY PROFILE
We are the 2nd largest manufacturer of commercial vehicles in India, the 4th largest
manufacturer of buses in the world and the 16th largest manufacturer of trucks globally.
With a turnover in excess of US $ 2.3 billion (2012-13) and a footprint that extends across 50
countries, we are one of the most fully-integrated manufacturing companies this side of the
globe.
Over 70 million passengers use our buses to get to their destinations every day while over
700,000 trucks keep the wheels of economies moving. With the largest fleet of logistics vehicles
deployed in the Indian Army and significant partnerships with armed forces across the globe, we
help keep borders secure.
Headquartered in Chennai, India, our manufacturing footprint spreads across the globe with 8
plants; including one at Ras Al Khaimah (UAE). Our Joint Venture partners include Nissan
Motor Company (Japan) for Light Commercial Vehicles, John Deere (USA) for Construction
Equipment, Continental AG (Germany) for Automotive Infotronics and the Alteams Group for
the manufacture of high-press die-casting extruded aluminum components for the automotive
and telecommunications sectors.
Following the independence of India, Pandit Jawaharlal Nehru, Indias first Prime
Minister, persuaded Mr. Raghunandan Saran, an industrialist, to enter automotive manufacture.
The company began in 1948 as Ashok Motors, to assemble Austin cars. The company was
renamed and started manufacturing commercial vehicles in 1955 with equity participation
by British Leyland. Today the company is the flagship of the Hinduja Group, a British-based and
Indian originated transnational conglomerate.

Early products included the Leyland Comet bus which was a passenger body built on a truck
chassis, sold in large numbers to many operators, including Hyderabad Road Transport,
Ahmadabad Municipality, Travancore State Transport, Bombay State Transport and Delhi Road
Transport Authority. By 1963, the Comet was operated by every State Transport Undertaking in
India, and over 8,000 were in service. The Comet was soon joined in production by a version of
the Leyland Tiger.
In 1968, production of the Leyland Titan ceased in Britain, but was restarted by Ashok Leyland
in India. The Titan PD3 chassis was modified and a five speed heavy duty constant-mesh
gearbox utilized, together with the Ashok Leyland version of the O.680 engine. The Ashok
Leyland Titan was very successful, and continued in production for many years.
Over the years, Ashok Leyland vehicles have built a reputation for reliability and ruggedness.
This was mainly due to the product design legacy carried over from British Leyland.
Ashok Leyland had collaboration with the Japanese company Hino Motors from whom the
technology for the H-series engines was bought. Many indigenous versions of H-series engine
were developed with 4 and 6 cylinder and also conforming to BS2 and BS3 emission norms in
India. These engines proved to be extremely popular with the customers primarily for their
excellent fuel efficiency. Most current models of Ashok Leyland come with H-series engines.
An Ashok Leyland bus run by the Chennai Metropolitan Transport Corporation

In 1987, the overseas holding by Land Rover Leyland International Holdings Limited (LRLIH)
was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian
transnational group and IVECO Fiat SpA, part of the Fiat Group and Europe's leading truck
manufacturer. Ashok Leylands long-term plan to become a global player by benchmarking
global standards of technology and quality was soon firmed up. Access to international
technology and a US$200 million investment programmed created a state-of-the-art
manufacturing base to roll out international class products. This resulted in Ashok Leyland
launching the 'Cargo' range of trucks based on European Ford Cargo trucks. These vehicles used
Iveco engines and for the first time had factory-fitted cabs. Though the Cargo trucks are no

longer in production and the use of Iveco engine was discontinued, the cab continues to be used
on the 'ecomet' range of trucks.
In the journey towards global standards of quality, Ashok Leyland reached a major milestone in
1993 when it became the first in India's automobile history to win theISO 9002 certification. The
more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO
14001 certification for all vehicle manufacturing units in 2002. In 2006, Ashok Leyland became
the first automobile company in India to receive the TS16949 Corporate Certification. Editors
note: This is part of a series of articles peeking into clean car industries and car manufacturers of
China, India, South Korea and Germany.
Among many other goals, Ashok Leyland aims to expand its operations to penetrate into
overseas markets. Included in the companys plans is to acquire smaller car manufacturers in
China and in other developing countries. In October 2006, Ashok Leyland bought a majority
stake in the Czech based- Avia. Called Avia Ashok Leyland Motors s.r.o., this will give Ashok
Leyland a channel into the competitive European market. According to the company, in 2008 the
joint venture sold 518 LCVs in Europe despite tough economic conditions. Furthermore, the
company will expand its product offers into construction equipment, following a joint venture
with John Deere. Newly formed in June 2009, the John Deere partnership is a 50/50 split
between the companies. The company says negotiation is progressing on land acquisition, and
the production plans are in place. The venture is scheduled to start rolling out wheel loaders and
backhoe loaders in October 2010. Aside from the full expansion planned for the company, Ashok
Leyland is also paying close attention to the environment. In fact, they are one of the companies
showing the strongest commitment to environmental protection, utilizing eco-friendly processes
in their various plants. Even as they thrust into different directions, Ashok Leyland maintains an
R&D group that aims to uncover ways to make their vehicles more fuel efficient and reduce
emissions.
In fact, even before laws were placed on car emissions, Ashok Leyland was already producing
low-emission vehicles. Back in 1997, they have already released buses with quiet engines and
low pollutant emission based on the CNG technology. In 2002 it developed the first hybrid
electric vehicle. Ashok Leyland has also launched a mobile emission clinic that operates on

highways and at entry points to New Delhi. The clinic checks vehicles for emission levels,
recommends remedies and offers tips on maintenance and care. This work will help generate
valuable data and garner insight that will guide further development.
When it comes to the development of environmentally friendly technologies, Ashok Leyland has
developed Hythane engines. In association with the Australian company Eden Energy, Ashok
Leyland successfully developed a 6-cylinder, 6-liter 92 kW BS-4 engine which uses Hythane (HCNG,) which is a blend of natural gas and around 20% of hydrogen. Hydrogen helps improve the
efficiency of the engine but the CNG aspect makes sure that emissions are at a controlled level. A
4-cylinder 4-litre 63 KW engine is also being developed for H-CNG blend in a joint R&D
program with MNRE (Ministry of New and Renewable Energy) and Indian Oil Corporation.
The H-CNG concept is now in full swing, with more than 5,500 of the technologys vehicles
running around Delhi. The company is also already discussing the wide-scale use of Hythane
engines with the Indian government. Hythane engines may be expected in the near future, but
these may not be brought to the United States as yet. Ashok Leylands partnership with Nissan is
also focusing on vehicle, power train, and technology development listed under three joint
ventures. With impressive investment, the joint ventures will focus on producing trucks with
diesel engines that meet Euro 3 and Euro 4 emission standards.
In the coming years, Ashok Leyland also has some hybrid trucks and buses in store for its
market. The buses and trucks are set to feature a new electronic shift-by-wire transmission
technology as well as electronic-controlled engine management for greater fuel efficiency. Ashok
Leyland focuses on improving fuel efficiency without affecting automotive power and the
vehicles will have a 5% improvement on fuel efficiency. Ashok Leyland is also developing
electric batteries and bio-fuel modes.
Ashok Leyland Ltds March quarter results were expected to be impressive, as its monthly
vehicle output reports had indicated a 138% jump in volumes. But what impressed was its net
profit growth of 317%, to Rs223 crore, over the year-ago period, even as sales rose by 139%.
Ashok Leylands operating profit margin rose to 13% compared with 10.5%. Higher volume
growth, a better product mix due to higher sales of multi-axle vehicles and tractor trailers, and

cost reduction were key reasons for margin expansion. Its estimate for volume growth in 2011 is
conservative, at 15% compared with over 30% in FY2010.
Around 1,200 buses under the Jawaharlal Nehru National Urban Renewal Mission scheme are
yet to be delivered of the 5,098 ordered. Besides, it has orders on hand from state transport
undertakings for another 2,000 buses. The firm is investing to increase its capacity, with Rs1,200
crore proposed for expansion plans over the next two years; mainly to increase output of engines
and new generation cabs. Besides, it plans to invest Rs800 crore in joint ventures. Analysts
believe that its Uttarakhand plant is expected to deliver 22,000-25,000 vehicles in fiscal 2011, in
its first full year of operation. The company has also steadily gained market share, from 21-22%
in the first quarter of 2010 to 28-29% in the fourth quarter. One concern is that it is not yet a
strong player in the eastern market. Besides, the southern market, traditionally its stronghold, has
grown by only 15% in volume terms in 2010. The rest of India (mainly north and west) grew by
40% during the year.

An Ashok Leyland-Nissan joint venture produced light commercial vehicles

(LCVs) from the former's House facility near Bangalore as well as from RenaultNissan's car plant near Chennai.

Directors

Mr. Dheeraj Gopichand Hinduja

Mr. Anil Harish

Mr. D. J. Balaji Rao

Mr. A. K. Das

Mr. Jean Brunol

Mr. Jorma Antero Halonen

Mr. Sanjay K. Asher

Mr. F. Sahami

Mr. Shardul S. Shroff

Mr. R. Seshasayee

Mr. Vinod K. Dasari

Dr. V. Sumantran
Board committee

CHAPTER-III
REVIEW OF LITERATURE

COMPENSATION MANAGEMENT
Human Resource is the most vital resource for any organization. It is responsible for each and
every decision taken, each and every work done and each and every result. Employees should be
managed properly and motivated by providing best remuneration and compensation as per the
industry standards. The lucrative compensation will also serve the need for attracting and
retaining the best employees.
Compensation is the remuneration received by an employee in return for his/her contribution to
the organization. It is an organized practice that involves balancing the work-employee relation
by providing monetary and non-monetary benefits to employees.
Compensation is an integral part of human resource management which helps in motivating the
employees and improving organizational effectiveness.
Components of Compensation System
Compensation systems are designed keeping in minds the strategic goals and business objectives.
Compensation system is designed on the basis of certain factors after analyzing the job work and
responsibilities. Components of a compensation system are as follows:

TYPES OF COMPENSATION
Compensation provided to employees can direct in the form of monetary benefits and/or indirect
in the form of non-monetary benefits known as perks, time off, etc. Compensation does not
include only salary but it is the sum total of all rewards and allowances provided to the
employees in return for their services. If the compensation offered is effectively managed, it
contributes to high organizational productivity.
Direct Compensation
Direct compensation refers to monetary benefits offered and provided to employees in return of
the services they provide to the organization. The monetary benefits include basic salary, house
rent allowance, conveyance, leave travel allowance, medical reimbursements, special
allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.
Basic Salary
Salary is the amount received by the employee in lieu of the work done by him/her for a certain
period say a day, a week, a month, etc. It is the money an employee receives from his/her
employer by rendering his/her services.
House Rent Allowance
Organizations either provide accommodations to its employees who are from different state or
country or they provide house rent allowances to its employees. This is done to provide them
social security and motivate them to work.
Conveyance
Organizations provide for cab facilities to their employees. Few organizations also provide
vehicles and petrol allowances to their employees to motivate them.

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees are
given allowances to visit any place they wish with their families. The allowances are scaled as
per the position of employee in the organization.
Medical Reimbursement
Organizations also look after the health conditions of their employees. The employees are
provided with medi-claims for them and their family members. These medi-claims include
health-insurances and treatment bills reimbursements.

Bonus
Bonus is paid to the employees during festive seasons to motivate them and provide them the
social security. The bonus amount usually amounts to one months salary of the employee.

Special Allowance
Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses,
reduced interest loans; insurance, club memberships, etc are provided to employees to provide
them social security and motivate them which improve the organizational productivity.
Indirect Compensation
Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu
of the services provided by them to the organization. They include Leave Policy, Overtime
Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement
Benefits, Holiday Homes.
Leave Policy
It is the right of employee to get adequate number of leave while working with the organization.
The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and
maternity leaves, statutory pay, etc.
Overtime Policy
Employees should be provided with the adequate allowances and facilities during their overtime,
if they happened to do so, such as transport facilities, overtime pay, etc.
Hospitalization
The employees should be provided allowances to get their regular check-ups, say at an interval
of one year. Even their dependents should be eligible for the medi-claims that provide them
emotional and social security.

Insurance
Organizations also provide for accidental insurance and life insurance for employees. This gives
them the emotional security and they feel themselves valued in the organization.
Leave Travel
The employees are provided with leaves and travel allowances to go for holiday with their
families. Some organizations arrange for a tour for the employees of the organization. This is
usually done to make the employees stress free.
Retirement Benefits
Organizations provide for pension plans and other benefits for their employees which benefits
them after they retire from the organization at the prescribed age.

Holiday Homes
Organizations provide for holiday homes and guest house for their employees at different
locations. These holiday homes are usually located in hill station and other most wanted holiday
spots. The organizations make sure that the employees do not face any kind of difficulties during
their stay in the guest house.
Flexible Timings
Organizations provide for flexible timings to the employees who cannot come to work during
normal shifts due to their personal problems and valid reasons.
Need of Compensation Management

A good compensation package is important to motivate the employees to increase the

organizational productivity.

Unless compensation is provided no one will come and work for the organization. Thus,
compensation helps in running an organization effectively and accomplishing its goals.

Salary is just a part of the compensation system, the employees have other psychological
and self-actualization needs to fulfill. Thus, compensation serves the purpose.

The most competitive compensation will help the organization to attract and sustain the
best talent. The compensation package should be as per industry standards.

Strategic Compensation
Strategic compensation is determining and providing the compensation packages to the
employees that are aligned with the business goals and objectives. In todays competitive
scenario organizations have to take special measures regarding compensation of the employees
so that the organizations retain the valuable employees. The compensation systems have changed
from traditional ones to strategic compensation systems.
Payroll is defined as a method of administrating employees salaries in the organizations. The
process consists of calculation of salaries and tax deductions of the employees, administrating
the retirement benefits and disbursements of salaries to employees. It can also be called as an
accounts activity which undertakes the salary administration of employees in the organization.
Administrating the employees salaries is not an easy task, the HR and accounts department work
together to calculate and disburse the salary to the employees. Thus, payroll management can be
further subdivided into two sub processes, i.e. Payroll accounting and payroll administration.
Payroll Accounting
Payroll accounting involves calculations of employees salaries and tax deductions. It also
undertakes the activities such as preparation of tax returns, maintaining the payroll records, etc.

Payroll Administration
Payroll Administration involves managerial activities such as maintaining employees records,
referring employment laws. Here, the HR comes into picture which maintains the daily record if
employees attendance.

Figure: Payroll Process

Database of employees is maintained. Employees details such as name, employee ID, basic
salary, daily attendance, etc are recorded. Gross Salary is calculated after adding the allowances
and incentives to the basic salary of the employee. Net salary is calculated by deducting the tax
and other calculated deductions (loan installments, etc).
Evolution of Compensation
Todays compensation systems have come from a long way. With the changing organizational
structures workers need and compensation systems have also been changing. From the
bureaucratic organizations to the participative organizations, employees have started asking for
their rights and appropriate compensations. The higher education standards and higher skills
required for the jobs have made the organizations provide competitive compensations to their
employees.
Compensation strategy is derived from the business strategy. The business goals and objectives
are aligned with the HR strategies. Then the compensation committee or the concerned authority
formulates the compensation strategy. It depends on both internal and external factors as well as
the life cycle of an organization.

Evolution of Strategic Compensation

Traditional Compensation Systems

In the traditional organizational structures, employees were expected to work hard and obey the
bosses orders. In return they were provided with job security, salary increments and promotions
annually. The salary was determined on the basis of the job work and the years of experience the
employee is holding. Some of the organizations provided for retirement benefits such as, pension
plans, for the employees. It was assumed that humans work for money, there was no space for
other psychological and social needs of workers.
Change in Compensation Systems
With the behavioral science theories and evolution of labour and trade unions, employees started
asking for their rights. Maslow brought in the need hierarchy for the rights of the employees. He
stated that employees do not work only for money but there are other needs too which they want
to satisfy from there job, i.e. social needs, psychological needs, safety needs, self-actualization,
etc. Now the employees were being treated as human resource.
Their performance was being measured and appraised based on the organizational and individual
performance. Competition among employees existed. Employees were expected to work hard to
have the job security. The compensation system was designed on the basis of job work and
related proficiency of the employee.

Maslows Need Hierarchy

Todays Modern Compensation Systems

Today the compensation systems are designed aligned to the business goals and strategies. The
employees are expected to work and take their own decisions. Authority is being delegated.
Employees feel secured and valued in the organization. Organizations offer monetary and nonmonetary benefits to attract and retain the best talents in the competitive environment. Some of
the benefits are special allowances like mobile, companys vehicle; House rent allowances;
statutory leaves, etc.
Compensation and Reward system plays vital role in a business organization. Since, among four
Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is
impossible to imagine a business process without Men. Every factor contributes to the process of
production/business. It expects return from the business process such as rent is the return
expected by the landlord, capitalist expects interest and organizer i.e. entrepreneur expects
profits.

Similarly

the

labour

expects

wages

from

the

process.

Labour plays vital role in bringing about the process of production/business in motion. The other
factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects

to have fair share in the business/production process. Therefore a fair compensation system is a
must for every business organization. The fair compensation system will help in the following:
o

An ideal compensation system will have positive impact on the efficiency and results
produced by employees. It will encourage the employees to perform better and achieve
the standards fixed.

It will enhance the process of job evaluation. It will also help in setting up an ideal job
evaluation and the set standards would be more realistic and achievable.

Such a system should be well defined and uniform. It will be apply to all the levels of the
organization as a general system.

The system should be simple and flexible so that every employee would be able to
compute his own compensation receivable.

It should be easy to implement, should not result in exploitation of workers.

It will raise the morale, efficiency and cooperation among the workers. It, being just and
fair would provide satisfaction to the workers.

Such system would help management in complying with the various labor acts.

Such system should also solve disputes between the employee union and management.

The system should follow the management principle of equal pay.

It should motivate and encouragement those who perform better and should provide
opportunities for those who wish to excel.

Sound Compensation/Reward System brings peace in the relationship of employer and

employees.

It aims at creating a healthy competition among them and encourages employees to work
hard and efficiently.

The system provides growth and advancement opportunities to the deserving employees.

The perfect compensation system provides platform for happy and satisfied workforce.
This minimizes the labour turnover. The organization enjoys the stability.

The organization is able to retain the best talent by providing them adequate
compensation thereby stopping them from switching over to another job.

The business organization can think of expansion and growth if it has the support of
skillful, talented and happy workforce.

The sound compensation system is hallmark of organizations success and prosperity. The
success and stability of organization is measured with pay-package it provides to its
employees.

Payroll refers to the administration of employees' salaries, wages, bonuses, net pay, and deductions. It
consist of the employee ID, employee name, date of joining, daily attendance record, basic salary,
allowances, overtime pay, bonus, commissions, incentives, pay for holidays, vacations and sickness, value
of meals and lodging etc. There are some deductions such as PF, taxes, loan installments or advances
taken by employee.
Payroll is administered on monthly basis and annual basis.
While administrating the monthly payroll basic salary, HRA, conveyance, and other special allowances
such mobile, etc are considered. There are some deductions which are provident fund (12%) of the

salary, taxes and other deductions.

Figure: Components of Monthly Payroll

Deductions such as tax and loan/advances taken by the employee from organizations are
deducted only where applicable. Dearness Allowance and House rent allowance is provided at a
fixed rate stated by the employment law. Provident fund is deducted from the gross salary of
employee on the monthly basis as per the employment law, which is provided later to the
employee. Organizations also contribute the same amount to the provident fund of the employee.

Annual payroll consists of leave travel allowances, incentives, annual bonuses, meal
vouchers/reimbursements, and medical reimbursements.

Figure: Components of Annual Payroll

Allowances, incentives, bonuses and reimbursements are based on organizational policies. Some
organizations provided the allowances on a fixed rate say 10% or 12% of the basic salary. Some
organizations go for performance based incentives.