EMPLOYEE STOCK OWNERSHIP PLAN(ESOP)
ESOP is a type of employee benefit plan as part of their total compensation, which is intended
to encourage employees to acquire stocks or ownership in the company. Under this plan, the
employer gives certain stocks of the company to the employee for negligible or low costs. This
plan is aimed to improve the performance of the company and increasing the value of the shares
by the increased involvement of the stock holders who are the employees the company.
Porter and Lawler theory of motivation (performance satisfaction theory)
The porter and Lawler theory of motivation portrays a close connection between
rewards(compensation) and employee performance and satisfaction. When the effort they
put in their work leads to a reward they are likely to be satisfied and continue to perform so as
to get rewarded. This motivation model presents the close association with effort-performance-
reward- satisfaction
Deferred compensation plan
Deferred compensation plan refers to the schemes where a portion of the employees pay
withholds up to a specific period and releases the cumulative fund at the end of the specified
period. One major advantage is it helps to reduce taxable income as the salary is not received
by the employee. These plans are beneficial for the high-income group employees.
Another example,
The portion of wage/salary of the employees that is deducting from their salary and retaining
in a separate fund and releases the amount at the time of retirement with interest. Here also the
employee gets some tax benefits at the time of retirement.
Alternative benefits
Educational assistance
Paid time off
Health club memberships
Attendance incentives
Supplemental retirement benefits
Pension schemes
Recreation facilities
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Group insurance
Transportation
Statutory employee benefits in India
1. Employee provident fund
2. Employees state insurance
3. Statutory leaves
4. Gratuity payment
5. Maternity leave
Legal aspects of Compensation
Every organization need to adhere the statutory provisions laid down by various Acts, all are
intended to avoid labour exploitation and labour welfare. The most important acts are the
following.
Workers compensation Act 1923
• The workmen’s compensation Act 1923 is applicable for those workers who are
working with an industry that is specified in the Act.
• This Act is intended to provide compensation to the workmen for injuries, and losses
caused through an accident while on duty.
• An employee eligible to get compensation from ESIC, cannot claim compensation
under the Workmen’s compensation Act.
Employees get Compensation for injury and accidents, disablement or death. Amount of
compensation depends on age, wage, nature of injury etc.
Payment of Wages Act 1936
Specifies the intervals of wage payment, conditions for wage deduction
Conditions of payment on termination
• Main provisions
• Responsibility for payment of wages: Employer or his representative
• Fixation of wage periods: shall not exceed one month
• Deductions: No deductions except those authorized by the Act
• Deductions for absence from duty: Actual absence
• Deductions for damages: After serving show cause
• Other deductions: advances, loans, payment to co-operative societies/banks/insurance
schemes
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Minimum wages Act. 1948
Ensures a minimum wage rate that vary across the states for all specified kind of jobs
Workers are classified as unskilled, semi-skilled and skilled workers
Applicable only for the list employments appended as part of the Act
❖ The appropriate Government can add any other employment that is not included in the
list.
❖ Wages means all remuneration capable of being expressed in terms of money
including house rent allowance.
❖ The appropriate Government is fixing the minimum wages by notification
❖ All employers are bound to pay the minimum wages fixed for that kind of
employment
❖ The appropriate Government revises the minimum wages not exceeding five years.
❖ Minimum wages shall be paid in cash
The Maternity Benefit Act, 1961
This Act was enacted to regulate the employment of women in certain establishments for
certain periods before and after child birth and to provide for maternity benefits and other
benefits. This Act is applicable to establishments employing 10 or more employees.
According to this Act, all women working factories and other specified establishments with
at least 10 workers are eligible to avail six months paid maternity leave( amendment 2017).
Payment of Bonus Act, 1965
• Applicable for all factories and establishments employing more than 20 or more
persons
• Employees drawing salary/wages less than 21000 (2015 amendment) are eligible to
get bonus and the wage sealing is Rs 7000.
• Salary/wages include only basic pay and dearness allowance
• Any employee who has worker not less than 30 days in an accounting year is eligible
to get bonus
• There is a statutory obligation to pay 8.33% bonus to the employees irrespective of
profit or loss
• The maximum bonus is fixed as 20%
Payment of Gratuity Act, 1972
• Applicable for all companies with ten or more employees
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• Companies should pay 15 days wages for every completed year
• If an employee worked not less than 180 days in a year, it should be counted as a
completed year.
• Maximum ceiling for gratuity amount is 20 lakhs
Employees provident fund and Miscellaneous Provisions Act, 1952
This scheme was introduced in India in 1952 as a retirement benefit scheme. Every
organization employee 20 or more employees must contribute for Provident fund scheme. The
salary limit is Rs. 15000. Employees drawing salary less than 15000 are eligible to join PF
scheme. As per the present provisions the employer deducts 12 percent of the salary from the
employee and adds another 12 percent as employer contribution (matching contribution) and
remits to the PF fund. At the time of retirement employee receives the employer and employee
contribution and its interest. In 1995, EPF introduced a pension scheme for employees and
contribute a percentage of employee contribution to the pension fund. So that much amount
will be set off from his final lump sum amount. Instead he is eligible to get an amount as
monthly pension
Employees State insurance Act 1948
• The ESI scheme is applicable to organizations with 10 or more employees
• The primary objective of ESI scheme is to provide financial support to the employees
in case of sickness, disability or death
• In addition, employees are eligible for medical benefits, including hospitalization and
outpatient treatment.
• The fund operates on employer and employee contribution
• Every employer and employee are bound to pay the specified percentage of salary
towards ESI contribution
• The present norm is to contribute 4.75% by the employer and 1.75 % of the salary by
the employee.
• Employees drawing salary below Rs 21000 are covered under the scheme.
There are so many hospitals and health centres under ESI corporation
Industrial Employment standing orders Act, 1946
This act contains the provisions associated with the formulation of a standing order that
governs the working conditions, disciplinary actions and its procedures etc.
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Industrial Disputes Act 1947
This Act deals with the provisions related to strikes, layoffs, lay outs, industrial unrest or
disputes. It provides various mechanisms to resolve industrial disputes, such as conciliation,
labour court, industrial tribunal etc.
