MS27 Wage and Salary Administration June 2006

MANAGEMENT PROGRAMME

Term-End Examination

MS-27 : WAGE AND SALARY ADMINISTRATION

Time : 3 hours
Maximum Marks : 100
(Weightage 70%)

Note : (i) There are two Sections A and B.
(ii) Attempt any four questions from Section A. Each question carries 15 marks
(iii) Section B is compulsory and carries 40 marks.

June 2006

SECTION A

1. Discuss the key economic and behavioural issues in compensation. Do wage theories prove relevant and useful for policy formulation at macro and micro levels?

2. Give an account of various types of compensation differentials. Compensation differentials have considerable economic and social significance for an organisation. Discuss.

3. Explain the various components of a compensation structure. Flexible compensation system is the future trend in compensation management. Discuss.

4. Write briefly on any two ol the following : (a) The procedure for fixing and revising minimum wages under the Minimum Wages Act, 1948. (b) The role of individual and group reward systems in an organisation. (c) The main types of pay surveys.

5. (a) What are the salient features of the Payment of Gratuity Act, 1977?

(b) What are the salient features of the Payment of Bonus Act, 1965 ?

6. Discuss the types of performance-linkerde ward schemes. Critically analyse the steps in designing a performance linked reward scheme.

7. Write short notes on any three of the following:
(a) Voluntary Retirement Schemes (VRS)
(b) Tax planning
(c) Collective bargaining as a method of wage fixation
(d) Equal pay for equal work
(e) Compensationpolicy

SECTION B

Read the following case and answer the questions given at the end.

The Indian Electric Company is a city based manufacturer of welding machines and motors. When Mr. Nirad Shah established the company in 1970, he was keenly aware of the importance of a highly motivated workforce, and how the company's success, in fact, depended on it. Therefore, Mr. Shah had to ensure that each employee would work as deligently as possible for the good of the organisation.

Mr. Shah relaised that the best way to motivate employees would be to link the company's reward and recognition system to its goals. To establish this connection, Shah developed and implemented an incentive system. Its aim was to improve the company's overall performance by allowing contributing workers to share in the proceeds. The plan rewards employees for turning out quality products efficiently while controllong costs. The system includes the following components:

Paying by the piece rate: Production workers are paid according to the number of "pieces" or product units they produce that are not defective. If a customer sends a defective part back to the company, the employee who produced it must repair it on his or her own time.

Providing year-end Bonus: To reward workers further for their efforts, Shah introduced a year-end bonus system that gives all workers opportunity to nearly double their base wages. Workers get the bonus if the company's annual profit increases. Providing Stock Options : Shah also provided his employees with the option of buying company's stock at a low cost. Employees are also given shares of the company's stock based on annual profits.

All the above financial incentive payments enabled the employees to earn more and helped to improve their morale and motivation.

Questions:

(a) Identify the salient issues of this case in general.

(b) What are the additional financial incentive schemes you suggest for sustaining the morale and motivation of the employees.

(c) Also suggest suitable non-financial incentives for further improving the morale and motivation of the employees of lndian Electric Company.