Masters of Business Administration (MBA)

July Intake 2021

Second Semester

Assignment 1
Human Resource Management
Condition of Compensation management

in

Prime Commercial Bank Limited

Submitted By: Submitted To:

Rajesh Shrestha Keshav Khadka
Submitted for the partial fulfillment of the assignment of Human Resource Management
(MBA)

Date: 26th September 2022

 Acknowledgement

I am delighted to bring out this summary of an assignment entitled "Human Resource

Management" as part of the MBA 2nd Semester.

This assignment is designed to meet the requirements for the second semester degree of
Master of Business Administration (MBA) under the Faculty of Management,
Infrastructure University, Kuala Lumpur, Malaysia.

I would like to thank the Himalayan College of Management for giving me the opportunity
to exchange practical experiences in various activities in a practical environment that will
be fruitful and beneficial for the future.

In this assignment, I have discussed the Condition of Compensation management of Prime

Commercial Bank Limited.

I would like to thank Mr. Keshav Khadka Sir, Course Instructor of Human Resource
Management for providing me this opportunity to develop my knowledge and
understanding of HRM.

I would also like to thank the team of Himalayan College of Management for their
assistance for preparing this assignment.

Finally, I would like to thank all those who have contributed directly and indirectly to this
Assignment.

With Sincere thanks,

Rajesh Shrestha

MBA 2nd Semester, 2022

Himalayan College of Management

 Table of Contents
1. Introduction and compensation management history ......................................................1

2. Compensation Management in Nepal's Situation ............................................................2

3. Company Intro: Prime Commercial Bank Limited ..........................................................2

4. Compensation Structures at Prime Commercial Bank Limited........................................3

5. Management of Compensation: Influencing Factors .......................................................4

6. Process for Managing Compensation .............................................................................8

7. The goal of compensation management ..........................................................................9

8. Issues encountered in Compensation Management ....................................................... 10

9. Advice and ideas for improving the compensation management at Prime Commercial
Bank Limited. .................................................................................................................. 11

10. Conclusion ................................................................................................................. 13

 Introduction

1. Introduction and compensation management history

An organized method of giving employees money in exchange for their labor is called
compensation. Incentives may help with hiring, work happiness, and performance, among
other things. The performance of your staff will be considerably improved, and a more
engaged workforce that is eager to go above and beyond for your company will be produced.
As a broad system, such a system should be well defined, consistent, and applicable to all
levels of the organization. When it comes time to make important decisions about pay
planning, the more clarity there is on individual employee performance. When it comes time
to make crucial choices on pay planning, good compensation management allows for greater
visibility into individual employee performance. When it comes time to make important pay
planning choices, proper compensation management will provide us a clearer view of
individual employee performance. These performance evaluations play a crucial role in
deciding pay and benefits, but they also help people advance in their existing jobs and be
ready for new chances. For each organization, the most important resource is its human
capital. It is accountable for each and every choice made, every action taken, and every
outcome. By offering the greatest salary and remuneration in accordance with industry
norms, employers may effectively manage and inspire their workforce. Additionally helping
to recruit and keep the top personnel is the generous salary.
Compensation management is the process of monitoring, evaluating, and deciding on each
employee's salary, benefits, and incentives. Compensation management is an essential
component of any plan for performance reviews and employee retention. In order to improve
employee happiness and productivity, lower turnover rates, and attract top performers,
businesses might include both monetary and non-monetary benefits as part of creative
remuneration. Effective pay management is advantageous to both the business and the
employee. Professionals are far more likely to stick with their positions, maintain high
performance levels, and maintain their morale if they receive a fair base salary, significant
perks, and incentives in return for their work. Effective pay management fuels employee
engagement, which fosters corporate success. Compensation administrators seek to engage,
motivate, and retain staff by providing competitive award schemes that are both innovative
and cost-effective for the company.

1
2. Compensation Management in Nepal's Situation

The development of compensation plans that are completely competitive in the talents
market and interaction with market competitors are two of the key HRM duties related to
pay and benefits. At the moment, creating compensation systems takes into account
corporate goals and overall business strategy. The company's goals and objectives are thus
supported by compensation methods. The direction and aim of the human resources function
are established by human resources strategies, which are derivable from overarching
corporate goals and must be followed by compensation and benefits plans. It is necessary
for a conflict-free environment that they always be perfectly aligned with one another and
never diverge from one another. When developing general compensation guidelines, the pay
and benefits plan is a guideline.
In Nepal nowadays, the following compensation management techniques are in demand:
Performance-based pay
 Quantity rate, variable, and fixed pay systems
 Skill-based pay

Based on specialized abilities

 Equal pay for equal work

Based on the payment system used by competitors

 Medical facilities
 Insurance facilities
 Loan facilities
 Bonus facilities

3. Company Intro: Prime Commercial Bank Limited

Among Nepal's commercial banks is Prime Commercial Bank Limited. The bank, which has
offices all throughout the country and is a commercial bank of the "A" class with a license
from Nepal Rastra Bank, offers all commercial banking services. Its head office is in
Kathmandu.
In September 2007, the 21st commercial bank in Nepal, Prime Commercial Bank Ltd., was
established. The "Banks and Financial Institutions Act" of Nepal classifies it as a "A" class
financial institution. With the primary goal of delivering "Banking Services to Everyone" in
a nation where a sizable portion of the population is still without access to banking services,
it was founded by notable business people and experts from a variety of fields.
With an emphasis on maintaining outstanding relationships with valued clients and an
increasing role in the financial industry, the bank has successfully established itself.
Independent raters and publications in the nation rank it among the top 10 commercial banks
in Nepal. The shares of the Bank are listed and often traded on the Nepal Stock Exchange
(NEPSE). It has a capital structure that is in accordance with regulations.
The bank is set up to offer its employees services in every major currency used worldwide.
The bank's main headquarters are in Kathmandu, Nepal, near Kamal Pokhari. The bank has
made it simpler for its clients to obtain its products and services by placing 24 branches
inside the valley and 75 outside.
In 2017, the bank also acquired Birtalaxmi Bikash Bank Limited, Country Development
Bank Limited, and Kankai Bikas Bank Limited. According to publications and independent
raters, the bank is among the top 10 commercial banks in Nepal. The shares of the bank are
for sale and buy on the Nepal Stock Exchange (NEPSE).

4. Compensation Structures at Prime Commercial Bank Limited

Employee remuneration covers the cost of the financial incentives they get. It is the result of
labor. The workers' quality of life is significantly impacted by it. The remuneration is given
by the employer. The purpose of compensation management is to develop a stable pay
system that will reward, retain, and encourage qualified individuals. It should be reimbursed
in a way that the workers think is appropriate. Employee satisfaction and an organization's
financial capacity should coexist in compensation schemes in a balanced way. There are
many different ways that employees are compensated, including the following:
a) Salary and Benefits
The Prime Commercial Bank pays its employees a minimum wage of NRS. Rs.
20,000.00. The monthly wage is guaranteed in accordance with the Bankers Rule and
Labor Law 2074. On the 25th of each month, according to the Nepali calendar, the
appropriate staff members' salaries are put into their accounts.
 b) Annual Leave
The employees of Prime have access to a variety of leave options. If the workforce
does not use their vacation time, leave encashment is available.
c) Additional Leave
Employees of Prime may be expected to work weekends, especially at busy times and
close to the conclusion of a quarter. In certain situations, they may accept replacement
leaves. Employees may be granted up to seven days of leave annually.
d) Facilities for Transportation
For business-related travel, employees may rent a car. This amenity is available to all
employees. In addition, there is a monthly stipend of Rs. 2000 available. Staff
automobiles and gasoline for their vehicles are also made available to manager's level
personnel.
e) Benefits and bonuses
The Commercial Bank Act states that bonuses are given depending on the bank's
success. The welfare committee of the bank also decides whether to provide support
to employees who get bonuses.
f) Insurance protection
There are benefits including medical assistance, insurance, life insurance, and accident
insurance for the personnel, with varying insurance limits depending on their position
in the bank.
g) Allowance
Depending on their responsibilities and the nature of their work, different allowances
are given, such as travel and daily allowances, uniform allowances for staff members
below the managerial level, remote and outstation allowances according to their branch
location, key, teller, and ATM custodian allowances, hardship and overtime.

5. Management of Compensation: Influencing Factors

One of the main points of dispute between companies and their employees is pay. Employees
offer their services to the company; they invest their time, effort, skills, and expertise in the
firm. As a reward for their dedication, employers compensate their employees. There are
two sorts of employee compensation concerns. As follows:
a) Internal variables
Here are a few internal variables that have an impact on employee pay, simply
explained:
(i) Compensation Policy of the Organization: It offers a list of general
recommendations for choosing compensation. When putting together a remuneration
plan, fairness should be the main priority for employers. For it to be required, both
internal and external equity must be maintained. The main elements of incentive pay,
their benefits and drawbacks, and how the entire structure offers an optional alignment
of interests with shareholders should all be covered in the policy.
(ii) The Organization's Ability to Pay Financially: When deciding on a
compensation plan, a company's financial stability is a crucial consideration.
Companies that are profitable and have high sales often pay higher wages than those
that are in the red or have low profitability as a result of high production costs or low
sales. Regardless of profits or losses, however, all businesses must provide salaries
that are comparable to those of their rivals in order to attract and retain talented
workers.
(iii) Analysis of Jobs and Job Descriptions: When evaluating a compensation plan,
a company's financial stability is crucial. Companies that are generating a lot of money
and have strong sales often pay higher wages than those that are losing money or have
weak sales and low profitability. However, whether a business makes money or loses
money, in order to attract and retain talented workers, all businesses must give salaries
that are comparable to those of their rivals.
(a) Establish who is responsible for what duties.
(b) Choose which job classifications should be exempt from regulations and which
ones shouldn't.
(c) Write model job descriptions for positions that are exempt and roles that are not
exempt. Give the samples to the current employees for inspection and comment.
Change the job descriptions as necessary.
(d) Complete, document, and assess each job description.
(e) Key departments also prioritize duties inside and between departments after doing
a thorough task analysis on the roles played by each senior, vice president, and
manager.
(f) Check the ranking's accuracy by comparing it to information from the industrial
market, and make any required adjustments.
(g) Create an organizational matrix assess and assign grades.
(h) Designate the senior, junior, and intermediate levels and assign a grade to each.
(i) After defining the number of pay grades or the wage range for each position at a
specific level, establish the compensation range.

(iv) Factors relating to employees: Along with the other factors described above,
employee-related factors are equally important in determining the remuneration
structure. Work performance, seniority-related experience, organizational connection,
and potential are some of these factors.
(v) The Negotiating Power of Unions: Earnings increase in direct proportion to how
powerful and successful the union is in any given organization. Trade unions
commonly utilize their membership, financial resources, and leadership style as
measures of their negotiating power.

b) External variables
Listed below are a handful of the outside factors that influence employee pay:
(i) Labor supply and demand: Even during times of great employment, certain
talents or qualities are in demand. The setting of wages and compensation is influenced
by the supply and demand of labor. As is the case with skilled workers, professions
that are in great demand typically pay more. Even Nevertheless, if there is a labor
shortage, employers are prepared to offer lower wages. High pay is necessary to both
recruit and retain skilled personnel. However, given the abundance of unskilled labor,
it is undesirable to take advantage of it by, for example, paying it less.
(ii) Living expenses: It makes sense and is important to base pay on the cost of
living. A wage increase must generally correspond to the growth in the cost of living
if someone wishes to maintain their actual income at a given level. It is planned to
counteract an increase in living expenditures by offering a dearness allowance and
maintaining basic pay the same. In order to combat the consequences of inflation, some
businesses even go so far as to abandon merit pay in favor of general pay increases.
Even more, the indexing of these rises to the rate of inflation.
(iii) Community: The cost of the company's goods or services is usually
impacted by employee remuneration. Customers may become more interested in pay
decisions as a result. Businesses in a local labor market are also concerned about the
pay practices of new companies that are moving in close by. The Supreme Court has
taken social and ethical considerations into account while deciding compensation and
salary disputes. It was also taken into account to ensure wage parity with other rates in
the area.
(iv) Unions of workers: The existence or nonexistence of labor unions usually
affects the amount of pay provided to employees. When union bases compensation
proposals on comparable wages, employer needs exact labor market data. A union that
prioritizes cost of living issues could exert pressure on management to incorporate a
cost of living stipend. For workers in strongly unionized companies, the fixation of
wages and salaries is not free. When choosing or altering pay rates, they must accede
to the requests of labor representatives.
(v) Laws passed by the government: Several legislative actions have an
influence on the compensation system. Laws pertaining to equal work opportunities
include, among others, the Equal Pay Act of 1976, the Equal Remuneration Act of
1976, the Family and Medical Leave Act, the Civil Rights Act, the Payment of Wages
Act of 1948, the Payment of Bonus Act of 1965, and the Payment of Gratuity Act of
1972. The Payment of Wages Act attempts to protect workers against erroneous wage
payments and illegal employer deductions.
(vi) Economy of the nation: Certainly, the economy has an impact on decisions
about financial remuneration. A sluggish economy, for instance, often leads to more
workers being available and a lower market pay. On the other hand, a strong economy
raises the pressure on labor costs and the level of competition for workers. Since the
cost of living is usually used as a pay benchmark, the state of the economy has a big
impact on pay choices. The cost of living frequently rises in tandem with economic
expansion.
(vii) Evaluation of Compensation: An investigation into compensation tries to
learn what other companies in a given labor market are paying for specific occupations.
The corporation itself or a consultancy firm may conduct the surveys. Market rates
continue to be the most important factor in determining compensation in this situation.
 The majority of big businesses employ compensation surveys to provide the lowest,
highest, and median pay for a certain position. It provides information required to
calculate both direct and indirect compensation.
Other factors that affect compensation management include the demand and supply of labor,
an organization's financial capacity, the prevailing wage rate, the cost of living, the living
wage, bargaining power, job requirements, productivity, legal requirements, managers'
attitudes, labor unions, organizational policies, employee-related issues, etc.

6. Process for Managing Compensation

(a) Research evaluation of the Position:

The method of managing remuneration begins with a research examination of the job.
This is necessary to discover each position's specifics, including its duties,
requirements, and environment. The job description, which is a textual type of job
analysis, serves as the foundation for identifying and investigating a job's features as
a component of a compensation development measure.
(b) the job's evaluation:
After doing a study of the positions based on assertions from the job descriptions, the
second stage of pay management comprises determining the worth of the employment
from a perspective. To maintain internal equality, a suitable job evaluation approach
is employed while creating the compensation structures for distinct roles.
(c) Establishing the Pay Structure:
The compensation plan determines remuneration. The company decides the internal
relationship between the roles based on their relative worth before establishing the pay
structure and pay grades for professions of equivalent importance and complexity.
(d) Wage & Salary Survey:
Here, a company researches earnings and wages in the labor market to find out more
about the compensation other companies in the industry provide for jobs requiring a
comparable skill set. A compensation survey's primary goal is to determine the
employees' pay scale while guaranteeing external parity. The business may get the
crucial information on the market-prevailing pay rates for different professions,
together with information on inflation and living costs.
 (e) The job's price:
The process of determining pay scales for roles within a company based on job
assessments and compensation surveys is known as job pricing. In this process, the
job's internal and external values are compared to determine the job's price. The
principle that should govern decision-making on employment compensation is to pay
the job and reward the employee. Paying the labor means offering the right wages in
line with the worth of the position, whereas rewarding the person means praising a
person for their efficacy as indicated by performance reviews.
(f) managing and changing compensation
In many businesses, employee compensation makes up a substantial amount of all
operating expenses. Organizations can evaluate the effectiveness of compensation
plans using methods like budgeting, performance evaluation, and other suitable ratios.
An organization's financial spending may be efficiently managed with the use of a
budget. makes it so that the firm's labor expenses related to employee compensation
are managed, analyzed, and controlled in accordance with the budgets that are really
what determine how to do so.

7. The goal of compensation management

Pay management aims to recruit, engage, and retain employees through competitive
compensation plans that are in compliance with the corporate budget, the appropriate job
market, and legal requirements. Effective pay management should Recruit and nurture talent,
inspire employees, and boost morale
Following the law and paying attention to business remuneration can help your philosophy
of life match the current job market.
 Offering allows compensation management to accomplish its goals.
 Exciting pay and beneficial advantages
 Rewards, incentives, and wellness indicators for motivating programs
 Saving money for retirement
Executives in human resources may promote competitive pay packages, though, by
collaborating with managers to design a comprehensive compensation plan that takes into
consideration the needs of both employees and the changing job market.
 Develop and implement a compensation philosophy: The business case for salary,
benefits, and other forms of employee remuneration are officially stated in the
compensation philosophy. Respecting the compensation philosophy consistently
demonstrates the company's honesty and integrity to employees and potential new
hires.
Take feedback from the workforce: Employees can provide the most accurate advice
on pay packages. To enable employees to voice their true opinions, HR managers
might conduct surveys that are fully anonymous. HR management may explain the
purpose of the survey before it begins by noting the importance of the workers' job
satisfaction and the significance placed on their experiences and opinions.
Respond to employee feedback: HR executives and pay management may make
changes in response to employee input. Despite the fact that there are numerous
considerations when creating compensation plans, adjusting pay packages to take
employees' financial and lifestyle demands into account can boost employee
engagement and retention.
Informing employees about the pay structure: Although employees could get
alluring pay packages, they might not know how to take use of these benefits. After
HR representatives have gone over the compensation plans with them, managers may
go through the plans with their team members. As a consequence, employees are better
equipped to comprehend and benefit from every part of their compensation package.
Pay compensation to increase living standards: In addition to basic salary, benefits
such as a pleasant workplace, a fitness program at work, increased vacation time, or
daily fresh catering may be included in compensation.

8. Issues encountered in Compensation Management

Managers and supervisors are under a lot of pressure to come up with a competitive pay plan
because of the tight labor market today and other economic issues like high inflation. Most
individuals seek employment for reasons other than monetary gain; they want to further their
careers, better their communities, and advance their fields. They also desire justice and
equity in their treatment and compensation.
Having trouble finding reliable references: Members of our community routinely
 complained about how difficult it was to get trustworthy and useful wage benchmark
data. To be competitive, people managers want to know what similar companies in
their industry pay employees or give opportunities for different jobs. Unfortunately,
obtaining such information may be challenging, especially for highly specialized
occupations.
Equity and fairness in compensation: Fair decision-making in compensation matters
more than ever right now. However, implementing equal pay has its own set of
challenges, particularly when equity hasn't traditionally been a key focus for the
business. Fortunately, there are excellent HR executives out there today who are
furthering the conversation and supporting more equal pay practices.
Paying attention to performance: Another common challenge is determining the best
method for connecting compensation to performance. For remuneration to be
performance-based, organizations must have the proper policies and performance
management technologies to give assessments. Evaluations must be carried out in a
fair and consistent manner.
Securing leadership acceptance and backing: Many HR professionals have trouble
getting corporate leaders to agree on a compensation plan. Compensation packages
need to be competitive to attract and retain top personnel, but many HR teams find
pushback from their leaders, typically because of financial reasons.
While being competitive, keeping up with market changes: There is no disputing
that the recent years have been difficult for all of us, and concerns about the economy
have caused both businesses and individuals to feel uneasy. When it comes to creating
an equitable and competitive pay policy, changing market conditions might seem like
they are always moving the goalposts.

9. Advice and ideas for improving the compensation management at Prime

Commercial Bank Limited.

For a developing business, expanding the compensation strategy makes sense. Why is it
important for business to have its best employees on board because they can grow and guide
a company in the proper direction? In order to retain high-performing employees, the
company should offer perks above and above a fair basic salary. It is becoming more
common to demand bonuses, various forms of variable pay, indirect compensation, and non-
monetary compensation incentives. Building a motivated and loyal team can benefit greatly
from making incentives apparent.
Here are a few tried-and-true strategies to improve your compensation plan:
 Performance-based promotions: When workers understand that increasing
performance standards is the only way to earn higher money, they tend to be more
motivated. In contrast to regular quarterly performance meetings and high pay for
performance, which are both essential elements of an enhanced compensation plan,
an annual review is preferred.
 Business recognition awards: Employees thrive at work when they frequently get
both constructive criticism and praise from superiors. Particularly when it comes to
candidates from different generations, this is true. Simple certificates of success with
a distinctive incentives program work nicely.
 Help with professional education: In progressive businesses, staff members who
are encouraged to pursue lifelong learning usually achieve success. The quality of
the work produced by staff members may be raised, serving as a valuable career
incentive for everybody, provided employers provide them with the resources and
encouragement they need to get degrees and certifications in their industries.
 Strategies for corporate health: Healthy surroundings are ones that encourage
productivity. When given the resources to properly take care of their own health at
work, employees are more inclined to try. Numerous studies have shown that
corporate wellness programs may be used to enhance pay structures and eventually
reduce a variety of health-related costs.
 Possibilities for collaborative and original work: Since workers are seeking for
ways to improve their work-life balance, giving them the opportunity to work from
home or on a flexible schedule can be perceived as a huge benefit. When included
into a remuneration plan, this may significantly raise your hiring and retention rates.
Long-term organizational growth can be facilitated by an effective employee compensation
plan. A generous remuneration structure contributes to this endeavor because it fosters
employee loyalty, which raises productivity and profitability.
10. Conclusion

The study of remuneration, incentives, benefits, and safety/health concerns is a great topic
in human resources. Remuneration is important in the modern workplace since it aims to
boost employee morale and job satisfaction. Employees often feel better about themselves
and more pleased to work for a firm that offers incentives. Offering incentives regularly
enables the firm to hire more competent staff, which in turn increases the company's ability
to compete in the market.
Benefits that are routinely provided to employees are also essential for boosting staff morale.
When benefits like health insurance and paid time off for family obligations are provided,
employees feel more energized and productive when they return to work. Because they let
workers feel that their company cares about them, safety and health concerns are crucial
because they enable them to carry out their duties without worry or with less dread. All
managers worldwide are required to consider factors including remuneration, incentives,
benefits, and safety and health considerations in every modern workplace. By taking good
care of its employees, a business may both keep its present staff and attract new, qualified
prospects.
Companies that provide competitive remuneration that also improves quality of life can
increase employee engagement at work and boost productivity, both of which eventually
boost business success. Building a strong corporate culture depends on attracting, keeping,
and engaging people through a comprehensive pay scheme. The value a firm places on its
employees is shown by compensation packages that offer market-range pay and take care of
employee wellbeing. When an employee receives such all-encompassing remuneration, the
business culture is sure to benefit from their positive energy and upbeat attitudes.

References:
Class Slides: Keshav Khadka (Lecturer- Human Resource Management Lecturer)
Learning resources and slides of Human Resources
Official websites of Prime Bank
Prime Banks Employees