Performance Appraisal and compensation

Concept of Performance Appraisal

Performance appraisal may be understood as the assessment of an individual’s performance in a systematic way.
The performance being measured against such factors as job knowledge, quality and quantity of output,
initiative, leadership abilities, supervision, dependability, cooperation, Judgment, versatility, health etc.t is the
systematic evaluation of the individual with respect to his/her performance on the job and his/her potential for
development. A system that involves employee evaluations once a year with an ongoing effort to provide
feedback and coaching so that performance can be improved is performance management system.(PMS).PA-
Performance appraisal is the systematic description of an employee’s strengths and weaknesses. Thus
performance appraisal is a part of Performance management system. Assessment is generally not confined to
past performance alone .Potentials of the employee for future performance must also be assessed. Therefore a
more comprehensive definition is Performance Appraisal is a formal, structured system of measuring and
evaluating job related behaviour and outcomes to discover how and why the employee is presently performing
on the job and how the employee can perform more affectively in the future so that the employee, organization
and society all benefits” This definition states behaviour is also a part of the assessment .Behaviour can be
active or passive – do something or do nothing. Either way behaviour affects job results, employee assessment
is as old as the concept of management.

The process of performance appraisal helps the employee and management to know the level of
employee’s performance compared to the standard pre-determined level useful to decide upon
employee promotion/ transfer salary etc. Performance appraisal indicates the level of desired
performance level, level of actual performance and the Gap between these two. This Gap should
be bridged through Human Resource techniques like, Training, executive development etc.
Method of evaluating Behaviour of Employees in the work spot including both the quantitative
and qualitative aspect of Job performance. Performance is measured in terms of results and not
efforts. Important features are.
 It is the systematic description of an employee’s job relevant strength and weakness.
 To find how well the employee is performing the job and establish a plan of improvement.
 Appraisals are arranged periodically according to a definite plan

 Performance evaluations not job Evaluation. It refers to how well someone is doing the assigned
job. Job evaluation determines how much a job is worth to the organization and therefore what
range of pay should be assigned to the job.

 Performance appraisal is a continuous process in every large scale organization.

 Is a way to find out interpersonal relationship
 Provides job satisfaction of the employees on the job assigned

 A system by which favoritism and Discrimination by superiors can overcome- a fair judgment.
The following are the objectives :
 To effect promotions based on competence & performance

 To confirm the services of probationary employees after the completion of probationary

period.
 To assess the training & development needs of employees.
 To decide on pay rise(unorganized sector)
 To let the employees know where they stand & to guide them for their development.
 To improve communication between a superior & subordinate & to set goals.
 To ask HR programmes such as selection training & transfer are effective or not
 To create and maintain a satisfactory level of performance

 Assist managers to take decision: On promotion, transfer, extension of tenure, Termination

etc. In such cases objective assessment of performance is needed.

 Training and development: Needs of employees vary depending on their skill level.
Knowledge Level, Experience. Hence as accurate, up to date information in regard to their
competence level is needed. Appraisal provide this.
 Validation of selection criteria: for certain position or skill.

 Feedback to employees: Adequate & Relevant on time feedback is made available for
corrective action, motivation etc.

 Reward Management; Upto date, accurate, objective, performance evaluation is needed for
selecting employees to receive such awards.
 Manpower planning: for these purposes appraisal is useful
- Towards long term successive – planning career paths.
- Determination of future vacancies & consequent promotional avenues.
To sum up performance appraisal primary purpose / objective are
 Compensation
 Performance feedback

 Training
 Promotion
 Manpower Planning
  Plan Lay off, Retrenchment etc

The Performance Appraisal Process

The following are the steps
Performance goal setting/Standard performance

Communicating the standards performance to employees

Measuring the actual performance

Comparing the actual and standard performance

Identifying the gap

Framing training and development actions to meet the gap

Methods of Performance Appraisal

1. Traditional method
2. Modern methods

Traditional methods

1. Graphic Rating Scale

Ranking Method
 2. Paired comparison method
3. Forced Distribution method.
4. Checklist Methods
 Simple check list
 Weighted check list
 Forced choice method 5.
Essay free from appraisal 6.
Group appraisal

7. Confidential Reports.
Modern methods
1. Behaviorally anchored rating scales bars
2. Assessment center
3. Human Resource Accounting
4. Management by Objective.
5. Psychological Appraisal
There are numerous methods which have been devised to measure the quantity and quality of
employees’ job performance. Each of the methods could be effective for some purposes, for
some organizations. These methods are appropriate as per the company’s requirements. Broadly
are the approaches to appraisal can be classified into a) past oriented methods b) future oriented
method.
Past oriented method:
Rating scale methods:

This is the simplest and most popular technique for appraising employee performance. The
typical rating scale system consists of several numerical scales, each representing a job related
performance criterion such as dependability, imitative, output, attendance, attitude,

cooperation and etc... Each scale ranges from excellent to poor. The rater checks the appropriate
performance level on each criterion; then computes the employees total numerical score. The
number of points may be linked to salary increases, whereby total points = corresponding
percentage of increase in salary.
Rating Scale:
Instructions: - for the following performance factors, please indicate on rating scale, your
evaluation of the employee.
Employee name: ____________ Dept: _________
Raters name: _______________ Date: _________
Excellent Good Acceptance Fair Poor
Dependability

Initiative

Overall output

Attendance

Attitude

Cooperation

Quality of work

Total

Grand total

Advantages: adaptability, easy to use, low cost, nearly every type of job can be evaluated with
this rating scale, if the job performance is changed. A large number of employees can be
evaluated in short time; the rater do not require training to use this scale.
Disadvantage: Biases influence valuation.

Check lists:
Here a check list of statements on the traits of the employee and his/her job is prepared in two
columns i.e.
‘yes’ and ‘no’ column. The rates (immediate superior) ticks the ‘yes’ column if the answer to the
statement is positive and in column ‘no’. if the answer is negative. Assessment is done in the HR
department. Certain points are given to ‘yes’ & ‘no’ column to become a weighed check list
depending on the points. Increases in salary are determined thereafter.
PARAMETERS YES NO
Is the employee really interested in the job
Does he/she possess adequate knowledge about the job?
Is his/her attendance satisfactory?
Does he/she maintain his/her equipment in good
Condition?
Does she/he cooperate with coworkers?
Does he/she keep his/her temper?
Does he/she obey orders?
Does he/she observe safety preparations?
Does he/she complete the work?
Does he/she evade responsibility?

(ii) Ranking Method:

Rank as best to worst on Some characteristics. Bajaj, Tempo, BASF use this. Rank the
best and worst in the first stage and go on the same way with remaining, to complete rating of all
employees.

(iii) Paired comparison Method:

Followed where number of employee are less. Assign each employee a capital letter A,B,C etc
Pair the objectives, put them in a chart & each plotted pair against write in the letter of employee
who is found superior and given a positive comparison total and a percentage of total positive
evaluation. This positive comparison given in the paired comparison method has an advantage
over other comparative methods. (Ranking and forced Distribution)

(iv) Forced Distribution:

after assigning marks to the performance of each employee, Distributor in a pattern to
confirm to normal frequency Distribution. The limitation is that, in a group if all are
outstanding, it is difficult to place people at lower category. Usha, JCT, SPL follow this
method.

No
Of
Employee
40% 20%
 Average Below 10%
10%20% Average
Excel Good On
Ent satisfactory
 Scores

Checklist Method.

(i) Simple Checklist (ii) Weighted checklist (iii) Forced choice Method
Rater checks on a statement of Performance Ratings on Large number of statements in
behavior of an employee as various Behaviour of Groups are prepared. Each group
positive / negative. Employee employee is given a weight consists of four descriptive
performance is rated on age. Weighted performance statements concerning employee
number of positive choice score is compared with the behavior. Two Statements
Statement meaning may vary overall assessment standards to favourable Two Statements,
Rater to Rater find out the overall Unvavourable. Appraiser to select
performance of an employee. one statement that mostly
Demerit: The consuming rater deserves employee’s behavior.
may not fully know items Demerit: Objective evaluation not
contributing to the successful possible – Rater may not fully
performance. understand equally desirable/ un
desirable

Critical incident method: A continuous rating method, instead of once in 6 months or 1 year
Annual Rating.

Supervisor records employee performance on critical incidents both positive and negative
characters on specially designed note book. Rating done based on notebook data. Reduces Bias in
evaluation short coming. Critical incidents not defined for comparison – All capital (ITC,
VOLTAS, VST follow this) incident may not be knowing to supervisor.
Essay or Free form of appraisal: Manager is required to write a short essay describing each
employee’s performance during the rating period. This format emphasizes Evaluation of overall
performance. Based on strength and weakness of employee rather than specific job dimension.

Supervisory BIAS and HOLO effect required by asking supervisor to enumerate specific
examples of employee behavior.

To Enumerate Specific examples of employee behavior.

Demerit.
- Difficult to take decisions based on essays- No standard
- to compare- Evaluators may vary in their skills of essay
- Writing & the employee actual performance will depend
- On the writing skills of the appraiser.
-
BPL, BIRLA, 3M, Wheels India & BATA follow this method.

Group Appraisal; An employee is appraised by a Group of appraisers. Group consist of

Immediate superiors, Managers, HODs of other Department, who have close contacts,
Consultants. HOD of the concerned employee will be chairman and immediate supervisor,
coordinator for group activities and he explains other members about job character, Demands,
standard of performance etc.
The Group rating against standard performance discussed with the concerned widely used by Kinetic
Honda, Birla, VXL, Bluestar used essentially for promotion, Demotion and Retrenchment.

Confidential Reports: A traditional method of Assessment based on observations, Judgments and

in turn, superior appraises. Superior does not allow the employee knows the Report and his
performance superior rates on his subordinates.

- Strengths - Attitude to work - punctuality - Character

- weakness - Sincerity - Attendance - Friendliness
- Intelligence - Commitment - Conduct - Cooperation etc
Followed by Most of PSU & Organizations, though suffer Limitations.

Modern methods
Behaviourly Anchored Rating Scales: BARS
Combines Elements of Traditional Rating Scales and Critical Incident Methods
Using BARS: Job Behaviour from Critical Incidents – Effective Ineffective Behaviours are
described more objectively.

Method: Individuals who are familiar with a particular job to identify its major components and
then rank and validate specific behavior for each of the components, then they rank and validate
specific behaviours for each of the components emphasis on pooling the thought process of
people who will use the scales both as Evaluators and Evaluees.

Step: I. Collect Critical Incidents: Supervisors job Holders Describe Effective In effective,
Indifference Behaviour Related to Job performance.
Step II. Identify performance Dimension: Convert Critical incidents into Key performance
dimension, Generally About 5 to 10 Dim for a job.
Step III. Reclassification of Incidents: Another Group to reclassify the Critical Incidents
Generated > 75% agreed ones selected.
Step IV. Assigning Scale value to the Incidents: 1 to 9 scale
1- Ineffective performance- Higher value- Effective performance

Step V. Producing the Final Instrument; About Six/Seven incidents for each performance
dimension. Scale to its mean value.

Assessment centre: First applied in the German Army in 1930s

Technique: It is a system or organization, where assessment of several individuals done by
various experts using different techniques some of the method used are : Role Playing, Case
Studies, Stimulation Exercise, In Basket, structured insight, Transactional analysis. This is not a
technique of performance appraisal by itself.

Human Resource Accounting: Deals with Cost and Contribution of human resources to the
organization. Employee contribution can be taken as positive when contribution is more than the
cost and cost of employee includes Cost of manpower, planning, recruitment, selection, Induction,
Placement, Training, Development, etc. Bank of Baroda, SAIL, ITC Ltd, Made attempts to follow
this method.

Management by Objectives: ‘MBO’ focuses attention on particularly set goals that are tangible,
verifiable and measurable.

‘MBO’ is done along the following lines

Emphasis is on what must be accomplished rather than how it is to be accomplished.
- Subordinate and Superior jointly Determine Goals to be accomplished dring the
Appraisal period and level of performance to meet specific goals.
- During the appraisal period the superior and subordinates update and alter the
Goals as necessary to suit business environment both superior and subordinate
jointly discuss whether the subordinate achieved the Goals. If not identify reasons
for deviations viz. Market change, strike / lockout etc.

Essential Characteristic of an Effective Appraisal System.

1. Strategic congruence: an ideal PA should be congruent with the unit and organizations strategy.
Individual goals must be aligned with unit and organizational goals.
2. Thoroughness: system should be thorough regarding 4 dimensions. First all employees should
be evaluated (including managers). Second, all major job responsibilities (including behaviors,
results). Third, evaluation should include performance spanning the entire review period (not just
few months or weeks). Finally, feedback should be given on positive performance aspects as well
as those that are in need of improvement.
3. Practicality: It should be easy-to-use system for taking decisions and benefits should overweigh
costs.
4. Meaningfulness: the standards and evaluations must be relevant and important, assessment
must be for those functions which are under employees control, evaluation should be regular, and
result should be useful for administrative decisions
5. Specificity: it should be specific and provide detailed and concrete guidance to employees about what is
expected from them and how they have to meet these expectations. Identification of effective and ineffective
performance: system should distinguish between effective and ineffective behaviors and results
7. Reliability: A good system should be free of error.
8. Validity: The system should include relevant (include all performance facets), not deficient (do
not leave any important aspects out), and are not contaminated (do not include factors outside of
the control of the employee)
9. Acceptability and fairness: A good system is acceptable and is perceived as fair by all
participants. Perceptions of fairness are subjective, eg: perceptions are individualistic (United
States) and collectivistic (Korea) cultures.
10. Inclusiveness: Good systems include input from multiple sources and concerns of all the
people who will be affected by the outcome.
11. Openness: Good systems have no secrets, feedback should be given frequently, and it is two
way communication process where information is exchanged and hence it should be clear, open
and honest.
12.Correct ability: It is difficult to have a system to be completely objective, but it should have a
mechanism to correct the errors.
13. Standardization: Performance is evaluated consistently across people & time, to achieve this,
ongoing training of individuals of appraisers is a must and hence appraisal is standardized.
14. Ethicality: Managers suppresses his personal interest in providing evaluations, and evaluates
for performance dimensions with sufficient information, and the privacy of employee is
respected.

Compensation
Objectives of Compensation Planning
Compensation is what employees receive in exchange for their contribution to the organisation.
Compensation is a comprehensive payment including pay, incentives and benefits offered by
employers for hiring the services of employees. Remuneration is the compensation an employee
receives in return for his/her contribution to the organisation. Remuneration occupies an
important place in the life of an employee.

 His/her standard of living, status in the society, motivation, loyalty & productivity depend
upon the remuneration he/she receives.
  For employer too, employee remuneration is significant because of its contribution to the
cost of production.
 Many battles (in the form of strikes & lockouts) are fought between the employer and the
employees, on issues relating to wages or bonus.
 For HRM too, employee remuneration is a major function since HR specialists has a
difficult task of fixing wages & wages differentials acceptable to employees and their
leaders.

Compensation has been an extremely important issue for both, the employer and employee. This
is because money is a crucial incentive and directly or indirectly related with fulfillment of all
human needs.
• Employees sell their hands and brain in order to fulfill their primary needs and employers hire them to achieve
their organizational objectives. Therefore the employer’s and employee’s perspectives vary on matters
concerning compensation. Another perspective from employer’s point of view is to assess its impact on wide
range of employee’s attitude, behaviors and ultimately its effectiveness on organization’s success.

• Compensation directly influences key outcomes like job satisfaction, attraction, retention,
performance, skill acquisition, cooperation and flexibility etc. While employer’s objective is
concerned with primarily productivity, the employee’s emphasis may be on higher compensation
to offset their increased cost of living and perhaps the price his skill will fetch in the competitive
job market.
• Compensation therefore remains one of the most strategic and important functions of human
resource management. Over the years, compensation has become a complicated issue. Not only
are the problems of internal equity and external parity important, but also the larger issues of the
wider economy and society impinge on the problem of compensation.
Components of compensation
Compensation consists of mainly 2 types’ monetary benefits & non-monetary benefits
Monetary benefits:

. Wages & salary:

Wages represent hourly rates of pay & salary refers to the monthly rate of pay. Wages & salaries
are subject to annual increments. They differ from employee to employee and depend upon the
nature of job, seniority & merit.
b. Increments:
Also called as ‘payments by results’. Incentives are paid in addition to wages & salaries.
Incentives depend upon productivity, sales, profit or cost reduction efforts.
There are 2 types of incentives
1. Individual incentive is given to specific employee based on his performance.
2. Group incentive is given to a group to a based on the team effort in achieving the goals.
The amount is divided equally to its members.
c. Fringe benefits
Includes employee benefits such as provident fund, medical care, hospitalization, accident relief,
health & group insurance, canteen, uniform, recreation and etc…
d. Perks:
These are given to executives & include company car, club membership, paid holidays, furnished
house, stock & shares. Perks are essential to retain competent executives.
Non-monetary benefits:
Challenging job opportunities, recognition of merit, growth prospects, competent
supervision, comfortable working conditions, job sharing & flextime.
Objectives of compensation planning
The most important objective of any pay system is fairness or equity. The term equity
has three dimensions:
Internal Equity: This ensures that more difficult jobs are paid more
External Equity: This ensures that jobs are fairly compensated in comparison to similar jobs in the
labour market.
Individual Equity: It ensures equal pay for equal work: each individual pay’s fair in comparison to
others doing the same/similar jobs.
New & Desired Behavior: loyalty, commitment, initiative
Control costs: effective compensation management ensures that employees are neither overpaid
nor underpaid
Comply with legal rules: Compensation should satisfy with government rules, bonus, allowances,
benefits etc.

Ease of operation: Compensation management should be transparent and easy to

understand Employee compensation is designed to have 3 objectives
1. To attract capable employees to the organisation
2. To motivate than towards superior performance
3. To retain their services over an extended period of time.
Job Evaluation
Job evaluation is the process of analyzing and assessing the various jobs systematically to
ascertain their relative worth in an organisation”. Jobs are evaluated on the basis of their content
& are placed in the order of their importance, in this way; a job hierarchy is established in the
organisation. The purpose of job evaluation is to fix the salary among various jobs. Here jobs are
ranked & then wages are fixed and not the job holders. For job holders, separate evaluation
performance evaluation is carried out.
Job evaluation process starts with defining objectives of evaluation & ends with
establishing age & salary differentials.
A job evaluation programme involves answering several questions.
 Which jobs are to be evaluated?
 Who should evaluate the jobs?
 What training do the evaluators need?
 How much time is involved?
 What should be the criteria for evalution?
 What methods of evaluation are to be
employed? Objectives of job evaluation
 To fix the salary among various jobs
 To review salary & wages from time to time
 To classify jobs & responsibility to maintain the organisation structure
 To motivate employees for better productivity and human relations
 To reduce complaints & labour turnover
 To help in performance appraisal programme i.e. promotions
Techniques/methods of job evaluation
Ranking/grading method (non analytical method):
This is the simplest & inexpensive method of job evaluation. The assessment is done by looking
at the worth of each job on the basis of little .But the job is not broken down into factors or
elements. Each job is compared with others and its place is determined.
Analytical methods of job evaluation

Factors are checked for job analysis

Factors comparison method:
Factors of jobs are compared, the factors are
a. Mental requirements
b. Skill requirements
c. Physical exertion
d. Responsibility
e. Job conditions.
Accordingly ranks are assigned to each factor. The total value of ranks is converted into
salary. Merits: all jobs can be evaluated.
Demerits: Complicated & expensive, Time
consuming Point ranking method
The factors start with selection of job factors, construction of degrees for each
factors and assignment of points to each degree.
Advantages:
 A job is split into a number of factors. The worth of each job is determined based on
factors.
 Systematic & explainable to the employees
 Simple & easy to administer
Disadvantage:
 Points allotment & degree identification
 Range of points and grades allotted is difficult to
calculate. E.g. 231 to 249 – grade 7
250 to 259 – grade 6
A point 1 difference changes the grade
Limitations of job evaluation
a. Difficult to measure factors accurately
b. Difficult in deciding salary calculations. E.g. secretary job & receptionist job
c. It depends on the standards & formulae for salary calculations & hence salary
may be less than the cost of living.
d. Complicated procedures & difficult to understood.

Compensation Pay Structure in India

Demand & supply of Labour influence wage and salary fixation. A low wage may be fixed when the supply of
Labour exceeds the demand for it. A higher wage will have to be paid when the demand exceeds supply

e.g. skilled Labour. But in our country there are plenty of workers e.g. unskilled Labour and they
are underpaid, to avoid this exploitation, minimum wages act of 1948 is established. In contrast,
there is a shortage of technicians, computer specialists and professional managers. High
remuneration packages are necessary to retain these skilled employees. Current trends in salary,
Productivity also influences wage fixation. A number of factors influence the wage fixation. They
are categorized into external and internal factors.
Wage and Salary Administration
The term “Wage & salary administration” or “compensation administration” denotes the process
of managing a company’s compensation programme. The goals of compensation administration
are to design a cost effective pay structure that will attract, motivate and retain competent
employees. Employee compensation may be classified into two types-base compensation and
supplementary compensation. Base compensation refers to monetary payments to employees in
the form of wages and salaries. The term wages implies remuneration to workers doing manual
work. The term salary is usually defined to mean compensation to office, managerial, technical
and professional staff.

Factors Influencing Compensation levels

Job needs
b) Ability to pay
c) Cost of living
d) Prevailing wage rates
e) Unions
f) Productivity
g) State regulation
h) Demand & supply of labour
Types of compensation
Time rate system: Employees are simply paid a predetermined rate per week, or hour for the
actual time they have worked. The basic rate for the job can be fixed by negotiation by reference
to local rates, or by job evaluation. This system is prevalent in the engineering and processing
industries among clerical, supervisory and managerial personnel.
Advantages: Earnings are predictable and steady. Need not argue with supervision and rate-
fixers about piece rate or time allowances.
Disadvantages: do not provide motivation of a direct incentive relating the reward to the effort.
• This problem can be overcome by adopting a system of measured day work and
merit award.
Piece rate system
• Straight Piece work: is payment of a uniform price per unit of production. This is most
appropriate where production is repetitive in character and can easily be divided into similar
units. In this system, you can pay a worker a flat money price for each piece or operation
completed (money piece work), or you can pay him for the time allowed to complete a task (time
piece work). In this latter case, if the worker completes the job in less than the allowed time he
gains the advantage of time saved.
• Differential Piece work: Systems allow you to adjust wage cost per unit in relation to output. In
this system, the wages cost per unit of production falls as output increases. At the same time the
hourly rate of workers earnings still increases, although not in proportion to the increased output.
This system is possible where it is early to relate effort to production and the work is
standardized, repetitive and measurable. Quality should be kept in mind while adopting the piece
rate system.
Executive Compensation.
Executive compensation in India is built around three important
factors: a) Job complexity:
It depends on the size of the company as measured its sales volume, earnings and assets
growth, the geographical dispersal of the unit etc.
b) Employers ability to pay:
It is also a major factor to be considered while deciding executive compensation.
Eg: a sick bank cannot afford to pay the same kind of salary as paid by a
flourishing bank. c) Executive human capital:
The economic theory of Human capital sys that the compensation of a worker should be equal to
his marginal productivity. The productivity of an executive likewise depends on his qualifications,
job knowledge, experience and contribution.
In recent years, companies are paying allowances like stock options. Educational, recreational,
academic allowances and several other developmental initiatives aimed at improving the overall
personality of an executive.The following are the perks given to executives
Physical exam
• Company car
• Financial counseling
• Company plane
• Income tax preparation
Human Resource Management 14MBA21
• First-class air travel
• Country club membership
• Luncheon club membership

• Estate planning
• Employee stock options(ESOP)
• Personal liability insurance
• Spouse travel
• Chauffeur service
• Reserved parking
• Executive dining room
• Home security system
• Car /phone
• Financial seminars/Coupons
• Loans at low or no interest
• Legal counseling

Employee Welfare
Introduction
Employee or labour welfare is a comprehensive term including various services, benefits and facilities
offered to employees by the employer. Through such generous fringe benefits the employer makes life
worth living for employees. The welfare amenities are extended in addition to normal wages and other
economic rewards available to employees as per the legal provisions.

According to Dr.Parandikar” labour welfare work is work for improving the health, safety and general
wellbeing and the industrial efficiency of the workers beyond the minimum standard laid down by
labourlegislation”

Welfare measures may also be provided by the government, trade unions and non-government agencies in
addition to the employer. The basic purpose of labour welfare is to enrich the life of employees and keep
them happy and contented. Welfare measures may be both statutory and voluntary. Labour laws require the
employer to extend certain benefits to employees in addition to wages. Voluntary benefits are the result of
employer’s generosity, enlightenment and philanthropic feelings.

Types of Welfare Facilities and Statutory Provisions.

Welfare services may broadly be classified into two categories
1. Intramural activities which are provided within establishment such as latrines and urinals, crèches’, rest
centers, canteens, uniforms, library. Medical aid, subsidized food, shift allowance etc.

2. Extramural activities which are undertaken outside the establishment such as family planning, child
welfare, cooperative stores, credit societies, vocational guidance, holiday homes, leave travel facilities,
transport to and from the place or work .etc.

Statutory Provisions.
Employers are required to offer welfare facilities to workers under different labour laws.
The Factories Act, 1948
The Act provides the following services to workers:
· Washing facilities to male and female workers separately
· Facilities for storing and drying clothes
· Facilities for occasional rest for workers who work in a standing position for long hours.
· First aid boxes or cupboards- one for every 150 workers and the ambulance facility if there are
more than 500 workers

· Canteens, where there are more than 250 workers

· Shelters rest rooms and lunch rooms where over 150 workers are employed

· Crèche, if 30 or more workers are employed

· Welfare officer, if 500 or more workers are employed.
The Plantation Act, 1951
The Act provides for the following:
· A canteen if 150 or more workers are employed
· Crèche, if 50 or more women workers are employed
· Recreational facilities for workers and their children
· Educational arrangements in the estate if there are 25 or more children of workers,between the age
of 6 and 12

· Housing facilities for every worker and his family residing in the estate.
· Medical aid to workers and their families’ sickness and maternity allowance.
· Providing umbrellas, blankets, raincoats to workers as a protection against rain or cold as prescribed
by the state government.

· Welfare officer, if 300 or more workers are employed.

The Mines Act, 1951
The Act provides for the following:
· Shelters for taking food and rest if 50 or more workers are employed
 ~ First aid boxes and first-aid rooms if 150 or more workers are employed.
· A canteen if employing 250 or more workers
· A crèche if employing 50 or more females
· Pit-head baths equipped with showers, sanitary latrines
· Welfare officer if 500 or more workers are employed
The Motor Transport Act, 1961
The Act provides for the following:
· First aid equipment in each transport vehicle
· Medical facilities at the operating and halting centers
· Canteen if employing 100 or more workers
· Comfortable, clean, ventilated and well-lighted rest rooms at every place where motor transport
workers are required to halt at night.

· Uniforms, rain coats to conductors, drivers and line checking staff for protection against cold and
rain

· Prescribed amount of washing allowance to the above staff members.

The Contract Labour (Regulation and Abolition) Act, 1970

The act requires the contractor to extend the following benefits to workers:
· Canteen, if employing 100 or more workers
· Rest rooms or other suitable alternative accommodation where contract labour is required
· to halt at night in connection with the work of an establishment Washing facilities
~ First aid boxes equipped with prescribed contents.
Labour Welfare Officer
The Factories act, 1948,The Plantation act 1951 and the Mines act 1951 provide for the
appointment of a labour Welfare Officer if the number of workers employed within a unit
exceeds 500(300 as per the plantation act).The post has been created specifically to:
1. Eliminate the malpractices of the recruitment system
2. Improve labour administration in the factories
3. Serve as a liaison with the state labour commissioner
The Labour Welfare Officer should possess a university degree/diploma in social service form a
recognized institution and adequate knowledge of local language where the factory is situated.
The duties and Responsibilities of a Labour Welfare Officer many be summarized (Central
Welfare Officers Rules 1951)
 · Advisory: advising & suggesting in the formulation of labour laws
· Service oriented: Offers help to workers to solve their problems
· Supervisory: He can supervise, inspect and regulate welfare activities
· Functional: Check the implementation of labour laws
· Policing: He can forward workers grievances to management, can influence Industrial relations
and can restrain workers from resorting to illegal strikes and lockouts

~ Mediation: can mediate and build harmony between labour and management
Employee Grievances
A grievance is a sign of employees’ discontent with job and its nature. Grievance is caused due to the
difference between the employee expectation and management practice

Causes of Grievance
· Wages, Incentives
· Job Classifications

· Foreman/Supervisor
Disciplinary Measures
· Promotions
· Transfer/Night Shift
· Safety And Health Measures
· Non Availability Of Materials
· Violation Of Contracts
· Improper Job Assignment
· Work Conditions
Employee Grievance procedure

3 important principles of grievance settlement are

1. Settlement at the lowest level
2. Settlement as expeditiously (speedily and efficiently)as possible
3. Settlement to the satisfaction of the aggrieved
Settlement of grievances at 3 levels
· Immediate supervisor(reply within 2 days)
· Departmental/factory head(reply within 3 days)
· Grievance committee(within 7 days)
· Else, appeal for further voluntary arbitration
Grievances Management in Indian Industry.-Grievance Machinery
· A grievance machinery is required to administer the grievance procedure
· Departmental representatives are selected to take forward the grievance procedure to
solve the problems as a committee
At present, there are three legislations dealing with grievances of employees working in industries. The
Industrial Employment (Standing Orders) Act, 1946, requires that every establishment employing 100 or
more workers should frame standing orders. These should contain, among other things, a provision for
redressal of grievances of workers against unfair treatment and wrongful actions by the employer or his
agents. The Factories Act, 1948, provides for the appointment of a Welfare officer in every factory
ordinarily employing 500 or more workers. These Welfare officers also look after complaints and
grievances of workers. They will look after proper implementation of the existing labor legislation. Besides,
individual disputes relating to discharge, dismissal or retrenchment can be taken up for relief under the
Industrial Disputes Act, 1947, amended in 1965. However, the existing labor legislation is not being
implemented properly by employers. There is lack of fairness on their part. Welfare officers have also not

been keen on protecting the interests of workers in the organized sector. In certain cases, they are playing
a dual role. It is unfortunate that the public sector, which should set up an example for the private sector,
has not been implementing labor laws properly.

Grievances Management in Indian Industry.

Guidelines for Handling Grievances
The following guidelines may help a supervisor while dealing with grievances. He need not follow all
these steps in every case. It is sufficient to keep these views in mind while handling grievances.
Treat each case as important and get the grievance in writing.
· Talk to the employee directly. Encourage him to speak the truth. Give him a patient hearing.
· Discuss in a private place. Ensure confidentiality, if necessary.
· Handle each case within a time frame.
Examine company provisions in each case. Identify violations, if any. Do not hold back the remedy
if the company is wrong. Inform your superior about all grievances.

· Get all relevant facts about the grievance. Examine the personal record of the aggrieved worker.
See whether any witnesses are available. Visit the work area. The idea is to find where things have
gone wrong and who is at fault.

· Gather information from the union representative, what he has to say, what he wants, etc. Give
short replies, uncovering the truth as well as provisions. Treat him properly.

· Control your emotions, your remarks and behavior.

· Maintain proper records and follow up the action taken in each case.
Discipline
Meaning
· Discipline refers to a condition or attitude among employees with respect to rules and
regulations of an organisation
· Discipline refers to the orderliness in working and behavior
Objectives of Discipline
· To obtain a willing acceptance of the rules, regulations
· To impart an element of certainty
· To develop the spirit of tolerance and adjustments
· To give and seek direction and responsibility
· To create an atmosphere of respect
· To increase the working efficiency and morale of the employees
Approaches to discipline

1. Positive Approach
2. Progressive discipline
3. Red Hot stove Rule
4. Judicial Approach to Discipline in
India.
A Positive Approach to Employee Discipline
Traditionally, methods for maintaining discipline have been punitive in nature. The relatively new concept
of a non-punitive positive discipline system is winning increasing acceptance among many employers. The
purpose of this method is to enable employees to truly confront their performance or attendance problems
and take responsibility for their actions.

To be effective, disciplinary action should emphasize correcting the problem rather than punishing the
offender. It should maintain the employee's dignity and self-respect. It should provide for increasingly
serious steps if the problem is not resolved, and it should ultimately result in a change in the employee's
behavior and performance.
Like traditional approaches, the positive discipline approach involves a number of formal steps that increase
in seriousness. But unlike punitive disciplinary systems, the positive approach emphasizes reminders of
expected performance not warnings or reprimands for misconduct.
—

Step 1: Oral Reminder The first step in the positive discipline approach is a meeting between a supervisor
—

and the employee to discuss the problem. The supervisor tells the employee the reason for the rule that has
been violated, tells the employee the specific changes that are required, and expresses confidence that the
employee will correct the problem and the expectation that no further action will be needed. No record of
the meeting is placed in the employee's file. This is communicated to the employee, hopefully providing a
strong incentive for improvement.
Step 2: Written Reminder If the problem continues, the supervisor again talks to the employee
— —

seriously, but without threats. The supervisor tells the employee what is expected and asks the employee to
confirm that he or she understands what changes must be made. At the end of the discussion, the supervisor
tells the employee that a written summary of their conversation will be placed in the employee's file. It's
recommended that the employee be asked to sign the report of the documented discussion.

Step 3: Decision-Making Leave In traditional discipline systems, the next step involves suspending the
—

offending employee for several days. In the positive discipline approach, the supervisor tells the employee
to remain at home the following day and to use that time to make a final decision as to whether she or he
can meet the organization's standards. The employee is told that the organization wants to keep him or her
as a productive member of the work force, but that the decision is up to the employee and future —

violations will result in termination. The employee is told to report back to the supervisor after the decision-
making leave day to let the supervisor know his or her decision. The employee may be asked to develop a
plan for improving his or her performance. Upon returning to work, the results of the meeting with the
supervisor should be documented, signed by the employee, and placed in the employee's personnel file.

Progressive Approach to discipline

It is an employee disciplinary system that provides a graduated range of responses to employee performance
or conduct problems. Disciplinary measures range from mild to severe, depending on the nature and
frequency of the problem. For example, an informal coaching session might be appropriate for an employee
who is tardy or violates a minor work rule, while a more serious intervention -- or even termination -- might
be called for if an employee commits serious misconduct or doesn't improve a performance problem after
receiving several opportunities to do so.

Most large companies use some form of progressive discipline, although they don't necessarily call it by
that name. Whether they are referred to as positive discipline programs, performance improvement plans,
corrective action procedures, or some other title, these systems are all similar at their core, although they
might vary in the details. All are based on the principle that the company's disciplinary response should be
appropriate and proportionate to the employee's conduct.

Red Hot stove Rule

The "Hot-Stove Rule" of Douglas McGregor gives a good illustration of how to impose disciplinary action
without generating resentment. This rule draws an analogy between touching a hot stove, and undergoing
discipline. When you touch a hot stove, your discipline is immediate, with warning, consistent, and
impersonal.

These four characteristics, according to McGregor, as applied to discipline are self-serving and may be
explained as follows:
1. When you touch the Hot stove, you burn your hand. The burn was immediate. Will you blame the hot
stove for burning your hand? Immediately, you understand the cause and effect of the offense. The
discipline was directed against the act not against anybody else. You get angry with yourself, but you know
it was your fault. You get angry with the hot stove too, but not for long as you know it was not its fault.
You learn your lesson quickly.

2. You had warning as you knew the stove was red hot and you knew what would happen to you if you
touched it. You knew the rules and regulations previously issued to you by the company prescribing the
penalty for violation of any particular rule so you cannot claim you were not given a previous warning.

3. The discipline was consistent. Every time you touch the hot stove you get burned. Consistency in the
administration of disciplinary action is essential. Excessive leniency as well as too much harshness creates
not only dissatisfaction but also resentment.

4. The discipline was impersonal. Whoever touches the hot stove gets burned, no matter who he is.
Furthermore, he gets burned not because of who he is, but because he touched the hot stove. The discipline
is directed against the act, not against the person. After disciplinary action has been applied, the supervisor
should take the normal attitude toward the employee.

Judicial Approach to Discipline in India

The Industrial Employment (Standing Orders) act was passed in 1946 with a view to improve the industrial
relations climate. The Act requires that all establishments must define the service rules and prepare standing
orders. The term standing orders refers to the rules and regulations which govern the conditions of
employment or workers. They indicate the duties and responsibilities on the part of both the employer and
the employees. The standing order contain rules relating to:

Classification of employees ,working hours, holidays, shift working, attendance ,leave, suspension,
termination, stoppage of work etc..
Thus standing order specify the terms and conditions which regulate the employee-employer relationship
within a unit. Any violation of these terms and conditions may lead to misconduct or indiscipline.
Essential of a good disciplinary system
To avoid conflict and lawsuits, managers must administer discipline properly.
1. Rules and Performance criteria
2. Documentation of the facts
3. Consistent response to rule violations
4. Training of supervisors
5. Prompt action
6. Impersonal discipline
7. Reasonable penalty
Follow-up
Principles of a Natural Justice
· The employee must be indicated about the charge against him
· The employee must be given a chance for defense
· The enquiry must be fair and impartial
· The evidence should be put forward in front of the employee
· Punishment should be appropriate with the misconduct

Managing difficult employees.

Problem employees are those employees who create problems within the organization. Substance
abusers, angry or withdrawn workers, personnel with excessive absenteeism, and the terminating
employees provide challenges to nurse managers. In each case the nurse manager must be alert to
the symptoms of problems, help the employee solve the problem, and evaluate the results.
Types of problem employee:-
· Substance abusers
· Angry or withdrawn employees
· Decreased productivity
· Absenteeism
· Terminating employees
When the delinquent employee is going to be punished, the type of punishment should be a
commensurate with the severity of the omission or misconduct.

Different types of punishment resulting from various types of omission or misconduct are as
follows:
· Oral warnings
· Written warnings
· Loss of privileges and fines
· Punitive suspension
· Withholding of increments
· Demotion
· Termination
 Industrial Relations
Overview of industrial relations and industrial conflict.
It is the relationship between employees and management in the day-to-day working of an Industry
.Industrial relations is a set of functional interdependence involving historical, economic, social,
psychological, demographic, technological, occupational, political and legal variables.

Industrial Relations means the relationship between employees and the Management in the
day to day working of the Industry.
Whole field of relationship that exists because of the necessary collaborations of men
and women in the employment process of an Industry” Dale Yoder.
Whole field = Set of functions inter dependence involving, historical, economic, social, physical,
demographic, Technological, occupational political and Legal Variables
Industrial Relations deal with either the Relationship between the State and the Employers
and worker organizations or the relation between occupational organization themselves”
I. L.O (International labourOrganisation)

Characteristics of Industrial Relations (IR)

· Industrial relations are outcome of employment relationship in an industry
· IR develops the skills of co-operation with each other
· IR creates rules to maintain harmonious relation
· Government is involved in forming the rules , laws, awards etc
· Employers ,employees and government are responsible for IR

Features of Industrial Work

· Industry is the association of large number of workers, supervisors, managerial, personnel,
consultants and other stake holders.

· This association brings group relationship which affects social, economic, political and
cultural life of the community
· Large scale industrialization requires diversified skilled human resource, blue collar, white
collar, and gold collar workers
~ Industrial workers are interdependent
· Centralization of power and authority, workers feel loss of freedom because of rules and
regulation
· Jobs are highly insecure because of technology change, downsizing

• Wage/salary is the main attraction factor

OBJECTIVES OF IR
1. To promote and develop congenial labor management relations
 2. To enhance wages and other benefits
3. To regulate production by minimizing conflicts
4. To socialize industries
Factors for Industrial Relations
Governmental Factors
Factors include governmental Policies like Industrial policy, Economic policy, labor policy,
export policy etc
Eg: reservation policy, VAT

Economic Factors
Economic organisation like capitalist, communist, mixed, democratic etc, the structure of
labor force, demand and supply of labor force
Eg: open policies to setup industries

Technological Factors
Mechanization, automation, rationalization, computerization, i nternet
Social And Cultural Factors
Population, religion customs and traditions of people, various cultures and religions, joint
family, women in labor etc

Political Factors
Political parties and their ideologies, their growth, mode of policies, involvement in trade unions etc
Eg: economic reforms, MNC’s

Institutional Factors
Governmental policies, labor legislations, collective agreement employees’ court, employers’
federations, attitude of workers, system of power status etc

Three Actors of Industrial Relations

Workers and their organizations (trade union)

Employers and their organisation

Government

Industrial disputes
Industrial disputes mean any dispute or difference between employers and employees and workmen or
between workmen and workmen which is connected with the terms of employment or with the
working conditions
Causes of industrial conflicts
Industry related factors
· Employment, work, wages, hours of work,privileges, rights and obligations of employees
and employers
· Dismissal or non-employment of any person
· Registered agreement, settlement or award
· Demarcation of the functions of an employee
Management related factors
· Management’s non -cooperation wrt disputes
· Unwillingness to recognise a trade union
· Less delegation of authority to officials for negotiation
· Management’s rigidity wrt employment, promotion, transfer
· Change in working methods, closure of the department, termination of employees etc.
Government related factors
· Change in the economic policies
· Old labor laws
· Improper and inadequate implementation of labor laws
· Lack of monitoring of the labor laws
· Political unrest and little faith in government
· Inefficient officers dealing with the disputes
Other factors
· Influence of politics in the trade union, strikes ,gherao and bandhs
· Political instability, strained centre-state relation
· Corruption, decreased social values, morale and industrial unrest
· Rivalry between unions
Industrial Disputes

Industrial Dispute in the form of a strike or a lock out is a double edged sword. It means stoppage of
work, causing production loss to the employer. The worker at the same time, is pushed to the wall as he
loses his earnings.

Preventive and settlement machinery

Adoption of well defined, progressive policies for IR
· Adoption of fair recruitment, promotion and wage policies
· Adoption of effective two way communication
· Provision of just and humane working conditions
· Adoption of suitable and speedy grievance procedure
· Recognition of a representative union
· Encouragement of joint consultation, collective bargaining
Settlement of Industrial Conflicts
Investigation
Mediation
Conciliation
Voluntary Arbitration/adjudicationCollective bargaining
Collective bargaining is a process of negotiations between the employers and group of employees aimed
at reaching agreements that regulate working conditions. The interests of the employees are
commonly presented by representatives of a Trade union to which the employees belong to.

Characteristics of Collective bargaining

· It’s a group action as opposed to individual action.
· It is flexible & mobile and not fixed.
· It is a two-party process.
· It is a continuous process.
~ It is dynamic and not static
Importance of collective bargaining
· It helps to increase economic strength of both parties.
· It helps to establish uniform conditions of employment.
· Secure a prompt and fair redresses of grievances.
· Avoid strikes, & coercive activities.
· Lay down fair rates of wages& norms.
· Achieve an efficient operation of the plant.

~ It ensure old age pension benefits and other fringe benefits.

Collective Bargaining Process

Industrial relations scenario: current issues and future challenges.
The analysis of the role of the IR partners is certainly alarming when viewed in the context of the new
economic environment of India.
· However, it would be too rash to draw any decisive conclusion of the future of IR in
India because the partners can ill-afford to escape the vicious circle of Hobson's choice

· The inevitability of the great paradigm shift is obvious. There is absolutely no choice
for the economic environment other than to change and adapt itself to global standards.

· This change makes it inevitable for the market forces to rule the roost.
· Every economic decision must revolve around the dictates of market forces.
 · The survival of every situation in such an environment must, therefore, depend on the
competitive edge of the former.

· Competitiveness in terms of quality and price will determine the survival and
growth of the business.

~ To make the business survive and grow, changes in structure and style, attitude and approach,
and system and standards are inevitable.
· Such changes will make it inevitable for the economic environment to change.
Therefore, the question is do the IR partners reall
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