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Ms-27 june 2007

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MS-27   june-2007

MS-27 : WAGE AND SALARY ADMINISTRATION

l. Discuss the main features of reward system. How do the behavioural science theories influence reward management ?

2. What is the rationale for job evaluation ? Discuss the various methods of job evaluation

3. What are the requirements of the Payment of Wages Act, 1936 in respect of payment of wages ? Give an account of various deductions under the Act .

4. Discuss the various components of a compensation structure. What are the factors that are usually taken into consideration in determining compensation structure ?

5. Attempt any two of the following :

(a) Corporate compensation policy

(b) Compensation survey

(c) Minimum wage, fair wage and living wage

6. Discuss various allowances and fringe benefits paid to industrial employees as an integral part of their compensation package. Give examples.

7. Write short notes , on any three of the following :

(a) Tax implications of compensation to employees

(b) Equal Remuneration Act , !976

(c) Downsizing and VRS

(d) Collective bargaining as a method of wage fixation

(e) Emerging issues and trends in compensation

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

The National Manufacturing Company reached an agreement with the Union on a production incentive scheme to increase production. The company had an unprecedented demand for its goods and the Union agreed for the incentive scheme. The management was pleased. with the assurance of the Union leader to

personally undertake the task of implementing the scheme. The management promised to give him a free hand if he could assist in increasing production. The Union did increase production to alrnost double the original level. As a result, the Union gained importance. Any problem could be sorted out by the Union by its direct access to the Chief Executive.

The incentive scheme benefitted primarily the Union members. The scheme was inequitable as some workers got disproportionately large incentives, some low and

some no incentive at all. The second feature was that as the incentive was linked to the Consumer Price Index (CPI), the distortion got further accentuated. However,

when the Union tried to misuse its new found powers,

   the management struck back one day by taking disciplinary actions against all the leaders and the Union found all of a sudden that it was without a leader. Another Union arrived on the scene and the leader had established a rapport with the Chief Executive, and this new Union faithfully followed the tenets of the management but as a price extracted some benefits for its members exclusively. The Union saw to it that production became its exclusive responsibility and it had a hot-line with the Chief Executive for any problem resolution. As the years passed, the Union started agitating for improvement in the wage scales. Because of the incentive scheme, the company found that any improvement in the basic wage would pose greater problems and the primary question before the management was to delink the CPI from the incentive scheme. The Union refused to delink the CPI from the incentive scheme as some of its members were earning an amount equal to, if not more than the salary, as an incentive itself. At the same time workmen with no incentive and being grade barred began to lose. And this resulted in discontentment amongst the workmen. But the dilemma could not be resolved and this led to an explosive situation.

     A third union emerged on the scene and this led to intense inter-union rivalry resulting in indiscipline, loss of production, and violence within the factory premises, as a result of which the company declared a lockout. when the plant reopened after four months, the Union in power lost its creditility and th; new Union had the complete support of the workmen. The new Union Ieader could develop a rapport not only with the workmen bui also with the management and expected the management to solve the problem of not having revised the wage scales for a long period. But this was not an easy task as there were a lot of inequalities that the management wanted to set right.

The union, though agreeing with the management, would not agree for a cut in the wage in any manner to set right the inequalities. The Union not only wanted to cling to the beneficial aspects of the incentive scheme but also insisted that the management somehow give an increase in the basic wages. The management was being drawn into a vicious circle of the incentive scheme being inequitable but when the Union's attention was being brought to the high incentive categories, it reverted to the low basic wage theme. The management remained in a quandry as regards how to convince the workmen, to win over the constituency of workmen and make managers effective and regain supremacy in production

Questions :

(a) Identify the problems and their causes in this case.

(b) Under the given situation, how are the problems to be remedied ?

(c) Suggest various principles and strategies the management has to keep in mind while formulating a wage incentive scheme for the employees

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