DIPLOMA IN ENGINEERING

NOWGONG POLYTECHNIC
6TH SEMESTER

INDUSTRIAL MANAGEMENT & ENTREPRENEURSHIP – Hu – 601

UNIT 4 -HUMAN RESOURCE MANAGEMENT

HUMAN RESOURCE MANAGEMENT - INTRODUCTION
People are the real assets of an organization. If treated well, they can take organizations to
commanding heights. Organisations have their own predetermined goals. These goals have no
meaning unless people understand the underlying philosophy, translate them into concrete
action plans and put their heart while realizing the targe Organizations, thus, depend on people
for their survival and growth. In a similar way, people need organizations.
HRM is a process of bringing people & organization together so that the goals of each are met.
It is the part of the management process which is concerned with the management of human
resources in an organization and tries to secure best from the people by winning their
wholehearted co-operation. In short, HRM may be defined as the art of procurement,
developing and maintaining competent workforce to achieve the goals of an organization in an
effective and efficient manner.
DEFINITIONS:
According to Edwin Flippo: HRM is planning, organizing, directing, controlling of
procurement, development, compensation, integration, maintenance & separation of human
resources to the end so that individual, organizational & social objectives are achieved.
HRM is the organizational function that deals with issues related to people such as
compensation, hiring, performance management, organization development, safety, wellness
benefits, employer motivation, communication, administration &training.
HRM is the process of attracting developing & maintaining a talented & energetic workforce
to support organizational mission, objectives & strategies.
IMPORTANCE OF HRM
I. At the Enterprise Level
(a) Good human resource practices can help in attracting and retaining the best people in
the organization. Proper planning alerts the company to the types of people it will need
in the short, medium and long run.
(b) It helps in training people for challenging roles, developing right attitudes towards the
job and the company, promoting team spirit among employees and developing loyalty
and commitment through appropriate reward schemes.
II. At the Individual Level
Effective management of human resources helps employees, as:
(a) It promotes team work and team spirit among employees.
(b) It offers excellent growth opportunities to people who have the potential to rise.
(c) It allows people to work with diligence and commitment.
III. At the Society Level
Society, as a whole, is the major beneficiary of good human resource practices, as:
(a) Employment opportunities multiply.
(b) Scarce talents are put to best use. Companies that pay and treat people well always race
ahead of others and deliver excellent results.
IV. At the National Level
Effective use of human resources helps in exploitation of natural, physical and financial
resources in a better way. People with right skills, proper attitudes and appropriate values help
the nation to get ahead and compete with the best in the world leading to better standard of
living and better employment.
OBJECTIVES OF HRM:
The primary objective of HRM is to ensure the availability of right people for right jobs at
right time so as the organizational goals are achieved effectively.
This primary objective can further be divided into the following sub-objectives:
1. To help the organization to attain its goals effectively and efficiently by providing competent
and motivated employees.
2. To utilize the available human resources effectively.
3. To increase to the fullest the employee's job satisfaction and self-actualization.
4. To develop and maintain the quality of work life (QWL) which makes employment in the
organization.
5. A desirable personal and social situation.
6. To help maintain ethical policies and behaviour inside and outside the organization.
FEATURES OF HRM
1. It is an inherent part of management: Human resource management is inherent in
the process of management. This function is performed by all the managers throughout
the organization rather that by the personnel department only. If a Manager is to get the
best of his people, he must undertake the basic responsibility of selecting people who
will work under him.
2. It is a pervasive function: meaning thereby, it is present or noticeable function
throughout the organization. Human Resource Management is a pervasive function of
management. It is to establish and maintain cordial relations between employees and
management.
3. To reconcile individual/group goals with organizational goals. performed by all
managers at various levels in the organization. It is not a responsibility that a manager
 can leave completely to someone else. However, he may secure advice and help in
managing people from experts who have special competence in personnel management
and industrial relations.
4. It is basic to all functional areas: Human Resource Management spreads across all
the functional area of management such as production management, financial
management, and marketing management. That is every manager from top to bottom,
working in any department has to perform the personnel functions.
5. It is people centered: Human Resource Management is people centered and is relevant
in all types of organizations. It is concerned with all categories of personnel from top
to the bottom of the organization.
The broad classification of personnel in an industrial enterprise may be as follows:
 Blue-collar workers (ie. those working on machines and engaged in loading, unloading
etc.) and white-collar workers (ie. clerical employees),
 Managerial and non- managerial personnel,
 Professionals (such as Chartered Accountant, Company Secretary, Lawyer, etc.) and
non-professional personnel
6. It involves Personnel Activities or Functions: Human Resource Management
involves several functions concerned with the management of people at work. It
includes manpower planning, employment, placement, training, appraisal and
compensation of employees. For the performance of these activities efficiently, a
separate department known as Personnel Department is created in most of the
organizations.
7. It is a continuous process: Human Resource Management is not a "one shot" function.
It must be performed continuously if the organizational objectives are to be achieved
smoothly.
8. It is based on Human Relations: Human Resource Management is concerned with the
motivation of human resources in the organization. The human beings can't be dealt
with like physical factors of production. Every person has different needs, perceptions
and expectations. The Managers should give due attention to these factors. They require
human relations skills to deal with the people at work. Human relations skills are also
required in training performance appraisal, transfer and promotion of subordinates
PRIMARY FUNCTIONS OF HRM
Every organization is comprised of people. Acquiring their services, developing their skills,
motivating them to high levels of performance, and ensuring that they maintain their
commitment to the organization are essential to achieving organizational objectives. This
is true regardless of type or size of organization; it may be government, business, enterprise,
education, health or any social organization. Hiring and retaining good people is critical to
the success of every organization.
HRM basically consists of four basic functions:
1. Staffing
(a) Strategic Human resource planning
(b) Recruiting
(c) Selection
2. Training and Development
(a) Orientation
(b) Employee training
(c) Employee Development
(d) Career development
3. Motivation
(a) Motivation Theories and Job design
(b) Performance appraisals
(c) Rewards and compensations
(d) Employee benefits
4. Maintenance
MANAGEMENT SCOPE in DIFFERENT AREAS
(a) Safety and health
(b) Communications
(c) Employee relations
5. Training and Development
(a) Orientation
(b) Employee training
(c) Employee Development
(d) Career development
Fig: Primary Functions of HRM (to redraw as per sample)
1. Human Resource Planning:
Human Resource Planning (HRP) is the continuous process of systematic planning ahead
to achieve optimum use of an organization's most valuable asset-quality employees. Human
resources planning ensure the best fit between employees and jobs while avoiding
manpower shortages or surpluses.
 Human resource planning (HRP) is a strategy used by a company to maintain a
steady stream of skilled employees while avoiding employee shortages or surpluses.
 Having a good HRP strategy in place can mean productivity and profitability for a
company.
There are four general steps in the HRP process:
i. identifying the current supply of employees,
 ii. determining the future of the workforce,
iii. balancing between labor supply and demand, and
iv. developing plans that support the company's goals.
Whenever an organization is in the process of determining the need of human resources,
we call it Human Resource Planning. Human Resource Manager ensures that the company
has the right type of people in the right number at the right time and place, which are trained
and motivated to do the right kind of work at the right time and who are capable of
effectively and efficiently performing those jobs in line with the overall objectives and
goals of the organization Without sound planning and linking it with overall organization
strategy, any estimation of human resources will not be aligned to actual needs.
Human Resource Planning needs to be flexible enough to meet short-term staffing
challenges while adapting to changing conditions in the business environment over the
longer term. HRP starts by assessing and auditing the current capacity of human resources.
DEFINITIONS OF HUMAN RESOURCE PLANNING:
According to Wikstrom, Human Resource Planning consists of a series of activities, viz.
(a) Forecasting future manpower requirements, either in terms of mathematical projections
of trends in the economic environment and developments in industry, or in terms of
judgmental estimates based upon the specific future plans of a company;
(b) Making an inventory of present manpower resources and assessing the extent to which
these resources are employed optimally;
(c) Anticipating manpower problems by projecting present resources into the future and
comparing them with the forecast of requirements to determine their adequacy, both
quantitatively and qualitatively; and
(d) Planning the necessary programmes of requirements, selection, training, development.
utilisation, transfer, promotion, motivation and compensation to ensure that future
manpower requirements are properly met.
Human resource planning, if used properly, it leads to the maximum utilization of human
resources, reduces excessive labour turnover and high absenteeism; improves productivity
and aids in achieving the objectives of an organization but if not used properly, it leads to
disruption in the flow of work, lower production, less job satisfaction, high cost of
production and constant headaches for the management personnel. Therefore, for the
success of an enterprise, human resource planning is a very important function, which can
be neglected only at its own peril.
2. Recruitment and Selection
Once the requirement of human resources has been identified through proper planning, the
next step is to meet this requirement. The organization takes steps to acquire these people
to ensure its uninterrupted operations.
Recruitment is a positive process of discovering the potential candidates for current and
future requirement of the company and stimulating them to apply for the jobs in the
organization. When more persons apply for jobs then there will be a scope for recruiting
better persons.
In the words of Dale Yoder, Recruitment is the process to "discover the sources of
manpower to meet the requirements of the staffing schedule and to employ effective
measures for attracting that manpower in adequate numbers to facilitate effective selection
of an efficient working force."
Kempner writes, "Recruitment forms the first stage in the process which continues with
selection and ceases twith the placement of the candidates."
PROCESS OF RECRUITMENT:
Recruitment Process Passes through the following Stages:
(1) Searching out the sources from where required persons will be available for recruitment.
If young managers are to be recruited then institutions imparting instructions in business
administration will be the best source.
(ii) Developing the techniques to attract the suitable candidates. The goodwill and
reputation of an organisation in the market may be one method. The publicity about the
company being a professional employer may also assist in stimulating candidates to apply.
(iii) Using of good techniques to attract prospective candidates. There may be offers of
attractive salaries, proper facilities for development, etc.
(iv) The next stage in this process is to stimulate as many candidates as possible to apply
for jobs. In order to select a best person, there is a need to attract more candidates.
FACTORS RECRUITMENT PROCESS
1. Size of the Enterprise:
The number of persons to be recruited will depend upon the size of an enterprise. A big
enterprise requires more persons at regular intervals while a small undertaking employs
only a few employees. A big business house will always be in touch with more sources
of supply and try to attract more ad more persons for making a proper selection. It can
afford to spend more amounts in locating prospective candidates. So the size of an
enterprise will affect the process of recruitment.
2. Employment Conditions:
The employment conditions in an economy greatly affect recruitment process. In under
developed economies, employment opportunities are limited and there is no dearth of
prospective candidates. At the same time suitable candidates may not be available because
of lack of educational and technical facilities. If the availability of persons is more, then
selection from large numbers becomes easy. On the other hand, if there is a shortage of
qualified technical persons, then it will be difficult to locate suitable persons.
3. Salary Structure and Working Conditions:
The wages offered and working conditions prevailing in an enterprise greatly influence the
availability of personnel. If higher wages are paid as compared to similar concerns, the
enterprise will not face any difficulty in making recruitments. An organization offering low
wages can face the problem of labour turnover.
The working conditions in an enterprise will determine job satisfaction of employees. An
enterprise offering good working conditions like proper sanitation, lighting, ventilation, etc
would give more job satisfaction to employees and they may not leave their present job.
On the other hand, if employees leave the jobs due to unsatisfactory working conditions, it
will lead to fresh recruitment of new persons.
4. Rate of Growth:
The growth rate of an enterprise also affects recruitment process. An expanding concern
will require regular employment of new employees. There will also be promotions of
existing employees necessitating the filling up of those vacancies. A stagnant enterprise
can recruit persons only when present incumbent vacates his position on retirement, etc.
CONSTRAINTS ON RECRUITING EFFORTS
1. Image of the Organization
The image of a company in the market plays a great role in attracting many qualified
candidates as many of them may not be interested to work for the particular company if the
Image of the company is not good. On the other hand if the image of the company is good,
many qualified candidates will even want to shift to this company even if there is no great
difference in the compensation.
2. Job content and attractiveness
If the content of the job advertised is not attractive or challenging for the qualified persons
there may not be much response. In segment of job market where unemployment is low, or
where wide range of job opportunities leads to competition, a shortage results. Many jobs
considered boring, hazardous or low paying or even lacking in promotional prospects fail
to attract candidates of required caliber and right qualifications.
3. Organization's internal policies
Many a time the internal policies of organization say, giving preference to internal
candidates in promotion or the companies where nepotism is rampant, play a major role in
not been able to attract real talent for various positions except for lower most position.
4. Government Policies
Government policies like reservations for local people in jobs or jobs guaranteed to project
affected persons or any other regulations concerning the type of enterprise also restrict the
choice of right type of candidates for a particular job requirement.
5. Cost of recruitment process
Though this may not be a major factor, but budget constraint may also lead to restrict choice
of recruitment sources or reach to wider constituencies of candidates. Expenses involved
in advertisement, travel of recruiting team or reimbursement of travel expenses to the
prospective candidates may sometime limit the area of search for right candidates.
SOURCES OF RECRUITMENT
1. INTERNAL SOURCES
Many large organizations groom their staff at all positions to take up higher positions as
and when necessitated. Through the tools such as transfers( horizontal shifting of
employees) and promotions (vertical-upward movement of employees towards a
position with more responsibilities and benefits), the internal search is either carried out
by the HRM department or recommended by various functional heads in the company. The
elevation of employees from within the company has the following positive effects:
(a) It builds morale of employees and motivates them to perform better.
(b) It confirms a good selection as the first had information about the candidate is already
available.
(c) The chosen candidate is also aware of the company and settles down fast in the new
position.
(d) It's good public relations exercise.
(e) It's economical also as compared to go for external recruitment process.
2.EXTERNAL SOURCES –
a. Employee Referral and Recommendations
Employee referral means, current employees of the company are encouraged to refer or
recommend qualified candidates suitable for the required job position as notified by the
Human Resources Management department. It's an effective and less time and money
consuming method since the current employee will only recommend a candidate whom
they consider suitable for the job and about whose conduct and capabilities they are
sufficiently sure. The referring employee, of course, is incentivized monetarily if his
recommendation is finally successful.
The recommended candidate also receives accurate information about the company and the
job requirement which perhaps cannot be conveyed through short advertisements of
through website of the company.
b. Advertisements
Depending on the level of job, number of vacancies and potential area of availability of
such candidates, traditionally advertisements are inserted in the local, regional or national
editions of newspapers, tabloids or business magazines.
Within the newspapers also size of advertisement, general or classified display is decided
by the HRM department of the company based on level of post or scarcity of suitable
candidates available in the market.
Two important aspects influence the response rate to such advertisements:
* Identification of the organization
* Extent to which the requirements are specified.
c. Placement or employment agencies
There are a number of employment agencies operating in the market viz.
* Public or State agencies
* Private employment agencies
* Placement consultants
The major difference between these agencies is the type of requirement or clients they
serve. State agencies or what we call, Government Employment Exchanges normally cater
to the requirements of low skill jobs and fulfill the needs of Government departments.
Private agencies, charge for their services and still compete with the Government agencies.
The private agencies have better image in the market as they are believed to offer positions
and candidates of higher caliber. Private agencies may also offer customized end to end
services to both the recruiters and to the candidates.
Placement consultants, head hunters or executive search firms are specialized agencies,
generally catering to middle level or top level job requirements or for specialists hard to
find. Such firms keep a data base of their contacts and keep on approaching them whenever
any specific requirement comes their way or even when some executive, not happy with
the current assignment, wants to shift job. Before recommending the candidates for final
selection by the client, such companies screen the candidates and conduct investigations
about their suitability.
d. Campus placements - School, Colleges or Universities
Campus placements or recruitment at all levels of educational and professional institutiors
has become a very popular and reliable source of recruitment at the entry level or even for
some lateral placement at higher levels. Most of the educational institutions either operate
or encourage the student themselves to organize and manage the placement function in the
institution.
The institutions invite the prospective recruiting companies to visit their campus during
appointed time slots and present their students for placement. Some institutions go across
to the companies and give presentations about the nature of curricula and methodology of
teaching followed by them in order to attract them to visit their campus for selection of a
batch of students for placement.
e. Professional organizations
Many professional organizations serving specialized occupations may also notify the job
requirements to their members and various companies approach them for assistance in
recruiting right type of professionals e.g. Institutive of Chartered Accountants of India.
f. Internet Recruiting
Advertisements on Internet for recruitment are fast replacing newspaper advertisements.
Many companies are now shifting to internet recruitment by adding a placement section of
careers section to their websites. Besides providing full information about the intended jobs
viz. qualifications, skills, length and type of experience, benefits offered, they also provide
full information of the status of the company, product line, corporate philosophy and the
working conditions etc. This information increases the quality of candidates and also enable
the candidates to judge whether they fit into the philosophy and culture of the recruiter and
take a decision accordingly.
g. Random applications
Many companies particularly good companies which are much sought after in the job
market keep on getting applications from many candidates about any current or future
openings. Companies keep on taking such applications on record and contact such
applicants in case they have any urgent requirement.
h. Outsourcing or independent Contractors
Now a day's many functions either within the company or at off site locations are awarded
to independent contractors who manage these jobs as per your specifications and standards.
Claims processing, organizing bookings for a new popular product are some examples
which can be independently managed by third parties. Even in the company premises
housekeeping, security and pantry services are outsourced to other agencies.
SELECTION
Selection is the process of picking or choosing the right candidate, who is most suitable for
a vacant job position in an organization. In others words, selection can also be explained as
the process of interviewing the candidates and evaluating their qualities, which are required
for a specific job and then choosing the suitable candidate for the position. The selection
of a right applicant for a vacant position will be an asset to the organization, which will be
helping the organization in reaching its objectives.
Different authors define Selection in different ways. Here is a list of some of the definitions:
1. Employee selection is a process of putting a right applicant on a right job.
2. Selection of an employee is a process of choosing the applicants, who have the
qualifications to fill the vacant job in an organization.
3. Selection is a process of identifying and hiring the applicants for filling the vacancies in
an organization.
4. Employee selection is a process of matching organization's requirements with the skills
and the qualifications of individuals.
DIFFERENCE BETWEEN RECRUITMENT AND SELECTION:
The major differences between Recruitment and Selection are as follows:
1. Recruitment is defined as the process of identifying and making the potential candidates
to apply for the jobs. Selection is defined as the process of choosing the right candidates
for the vacant positions.
2. Recruitment is called as a positive process with its approach of attracting as many
candidates as possible for the vacant jobs. Selection is called as a negative process with its
elimination or rejection of as many candidates as possible for identifying the right candidate
for the position.
3. Both recruitment and selection work hand in hand and both play a vital role in the overall
growth of an organization.
A good selection process will ensure that the organization gets the right set of employees
with the right attitude.
IMPORTANCE OF SELECTION
1. Selection is an important process because hiring good resources can help increase the
overall performance of the organization. In contrast, if there is bad hire with a bad selection
process then the work will be affected and the cost incurred for replacing that bad resource
will be high
2. The purpose of selection is to choose the most suitable candidate, who can meet the
requirements of the jobs in an organization, who will be a successful applicant.
3. For meeting the goals of the organization, it is important to evaluate various attributes of
each candidate such as their qualifications, skills, experiences, overall attitude, etc. In this
process, the most suitable candidate is picked after the elimination of the candidates, who
are not suitable for the vacant job.
4. The organization has to follow a proper selection process or procedure, as a huge amount
of money is spent for hiring a right candidate for a position. If a selection is wrong, then
the cost incurred in induction and training the wrong candidate will be a huge loss to the
employer in terms of money, effort, and also time.
Hence, selection is very important and the process should be perfect for the betterment of
the organization.
SELECTION PROCESS AND STEPS
We have already discussed that Selection is very important for any organization for
minimizing the losses and maximizing the profits. Hence the selection procedure should be
perfect. A good selection process should comprise the following steps:
 Employment Interview: Employment interview is a process in which one-on-one
session in conducted with the applicant to know a candidate better. It helps the
interviewer to discover the inner qualities of the applicant and helps in taking a right
decision.
 Checking References: Reference checking is a process of verifying the applicant's
qualifi-cations and experiences with the references provided by him. These
reference checks help the interviewer understand the conduct, the attitude, and the
behaviour of the candidate as an individual and also as a professional.
 Medical Examination: Medical examination is a process, in which the physical
and the mental fitness of the applicants are checked to ensure that the candidates
are capable of performing a job or not. This examination helps the organization in
choosing the right candidates who are physically and mentally fit.
 Final Selection: The final selection is the final process which proves that the
applicant has qualified in all the rounds of the selection process and will be issued
an appointment letter.
A selection process with the above steps will help any organization in choosing and
selecting the right candidates for the right job.

Checking Medical Final

Interview
references Examination Selection

BENEFITS OF PROPER SELECTION

 It is cost-effective and reduces a lot of time and effort.
 It helps avoid any biasing while recruiting the right candidate.
 It helps eliminate the candidates who are lacking in knowledge, ability, and
proficiency.
 It provides a guideline to evaluate the candidates further through strict verification
and reference-checking.
 It helps in comparing the different candidates in terms of their capabilities,
knowledge, skills, experience, work attitude, etc.
 A good selection process helps in selecting the best candidate for the requirement
of a vacant position in an organization.
INTRODUCTION TO PERFORMANCE APPRAISAL METHODS
Performance appraisal or performance review is a systematic process in which
employee performance at work is evaluated in relation to the projects on which employee
has worked and his contribution to the organization. It is also known as an annual review
or performance review.
It helps the Managers to place the right employees for the right jobs, depending on their
skills. Often, employees are curious to know about their performance details and compare
it with their fellow colleagues and how they can improve upon it. So every company needs
a good performance appraisal system.
The purpose of performance appraisal is:
i. To assess suitability for promotion.
ii. Transfer to another section.
iii. Punitive or corrective action.
iv. Planning for training and development.
v. Determination of raise in compensation, payment of incentive/bonus.
APPRAISAL PROCESS
(a) Establishing Performance Standards:
The appraisal process begins with establishment of performance standards in line with the
organization's strategic goals. These standards should also be clearly understandable by the
employees and the manager alike and it should be possible to measure them.
(b) Setting up Measurable goals:
 After setting up the performance standards for any employee, the same need to be
communicated to him in clear terms. It should be very clear to him as to what is expected
of him and nothing should be left to imagination of either the employee or the manager.
(c) Performance Measurement:
The third step is the performance measurement. For measurement of performance the
required actual information is essentially generated in the pre designed formats. It should
also be very clear, what is to be measured and how it is to be measured.
ADVANTAGES OF PERFORMANCE APPRAISAL
A systematic appraisal system helps the managers to properly identify the performance of
employees in a systematic manner and their areas of talent and areas where they are lacking
1. It helps the management to place the right employees for the perfect jobs depending on
their skills in particular areas.
2. It helps employees identify the areas in which they need to improve. The Managers can
also use this information to provide constructive criticism of the way employees perform
than work. 3. Potential employees are often given promotions on the basis of or the results
of performance appraisals. People who have high ratings get promotions. They can also
transfer or demote employees if they not performing up to the expectations of the managers.
4. An appraisal is also useful in determining the effectiveness and results of training
programs. It can show managers how much employees have improved after taking the
training programs. This will give managers data on how to change and evolve the training
programs.
5. It creates healthy competition among employees as they will try to improve their
performance and score better than their colleagues.
6. Managers use appraisal programs to identify the grievances of employees and act upon
them.
7. Keeping extensive records of performance appraisal will give managers a very good idea
of which employees have the highest growth rate and are which ones have a declining rate
of performance.
WAGE
A wage is the monetary compensation paid by an employer to an employee for work
performed or services rendered. It is usually determined on an hourly, daily, weekly, or
monthly basis. Wages form a crucial part of an employee’s earnings and directly impact
their livelihood.

FACTORS DETERMINING WAGE PAYMENT IN AN ORGANIZATION

Several factors influence how wages are determined in an organization. These include:

1. Government Regulations & Minimum Wage Laws

o Organizations must adhere to legal wage standards set by labour laws to ensure
fair compensation.
 2. Industry Standards & Competitive Pay
o Companies often benchmark wages against industry trends to attract and retain
talent.
3. Skills & Experience of the Employee
o Higher wages are usually given to employees with specialized skills,
qualifications, and experience.
4. Nature & Complexity of Work
o Jobs requiring technical expertise, risk, or additional responsibilities often
receive higher pay.
5. Company’s Financial Health & Profitability
o Organizations with higher profits and stable revenue can afford to pay higher
wages.
6. Market Demand & Supply of Labor
o If skilled workers are in high demand and short supply, wages tend to rise.
7. Location & Cost of Living
o Wages may vary depending on the city or region due to differences in the cost
of living.
8. Union Influence & Collective Bargaining
o Labor unions may negotiate wages and benefits for workers through agreements
with employers.
9. Performance & Productivity of Employees
o Many organizations have performance-based incentives or bonuses to reward
efficiency and productivity.
10. Economic Conditions & Inflation

o Inflation rates and economic growth can impact wage structures, leading to
periodic salary revisions.

FACTORS DETERMINING WAGE PAYMENT IN AN ORGANIZATION IN INDIA

In India, wage payment is influenced by various economic, legal, and organizational factors.
The key determinants include:

1. Government Regulations & Minimum Wage Laws

 The Minimum Wages Act, 1948 mandates employers to pay at least the prescribed
minimum wage to workers.
 Wages vary by state, industry, skill level (unskilled, semi-skilled, skilled), and type of
employment.
 Other laws like the Payment of Wages Act, 1936, and the Code on Wages, 2019
regulate wage payment and deductions.

2. Industry Standards & Wage Agreements

 Different industries follow standard wage structures based on market conditions and
labor demand.
 Sector-specific wages (e.g., IT, manufacturing, banking) are influenced by industry-
wide agreements.

3. Skill Level & Experience of the Employee

  Highly skilled professionals (e.g., engineers, doctors, IT specialists) command higher
wages.
 Experience and expertise play a major role in salary negotiations.

4. Nature & Complexity of Work

 Wages are higher for jobs that involve risk, specialized knowledge, or hazardous
conditions.
 Employees in managerial or technical roles typically earn more than those in clerical or
manual labor jobs.

5. Company’s Financial Health & Profitability

 Organizations with strong financials offer better salaries, bonuses, and perks.
 Startups and small businesses may offer lower wages compared to large corporations.

6. Demand & Supply of Labor

 When demand for skilled labor is high and supply is low, wages increase (e.g., IT and
data science professionals).
 Conversely, jobs with a large workforce availability (e.g., daily wage laborers) tend to
have lower wages.

7. Cost of Living & Location

 Wages are generally higher in metropolitan cities (Mumbai, Delhi, Bangalore) due to
higher living costs.
 Rural and semi-urban areas may have lower wage structures.

8. Trade Unions & Collective Bargaining

 Strong trade unions influence wage structures through negotiations with employers.
 Collective bargaining agreements impact wages in industries like manufacturing,
mining, and transportation.

9. Performance & Productivity-Based Pay

 Many organizations provide performance-linked incentives (PLIs) and bonuses.

 Employees with higher efficiency and output may receive additional compensation.

10. Inflation & Economic Conditions

 Inflation impacts wages as companies adjust salaries to maintain employees' purchasing

power.
 During economic downturns, wage hikes may be limited or frozen.

11. Gender & Social Factors

 The Equal Remuneration Act, 1976, mandates equal pay for equal work, regardless
of gender.
  However, wage disparities still exist in some sectors due to social and cultural factors.

12. Employment Type (Permanent vs. Contractual)

 Permanent employees get structured salaries, benefits (PF, gratuity, insurance).

 Contract and gig workers may have lower wages with limited or no additional
benefits.

METHODS OF PAYMENT OF WAGES

Organizations adopt different wage payment methods based on the nature of work, industry
standards, and labor laws. The two primary methods of wage payment are:

1. TIME RATE SYSTEM

In this method, wages are paid based on the time an employee spends on the job, regardless of
output or productivity.

Types of Time Rate System:

 Hourly Wage – Wages paid per hour worked.

 Daily Wage – Wages paid per day worked.
 Weekly Wage – Wages paid at the end of each week.
 Monthly Salary – Fixed salary paid at the end of the month.

Advantages:

✅ Simple to calculate and understand.

✅ Ensures income stability for employees.
✅ Encourages quality work rather than speed.
✅ Suitable for jobs requiring precision and safety (e.g., doctors, engineers, teachers).

Disadvantages:

❌ Does not reward efficiency or productivity.

❌ May encourage slow work as wages are fixed.
❌ Employers may have to supervise workers closely.

2. PIECE RATE SYSTEM

Under this system, wages are paid based on the number of units produced or tasks completed,
rather than the time spent working.

Types of Piece Rate System:

 Straight Piece Rate – A fixed amount is paid for each unit produced.
 Differential Piece Rate – Higher rates are given for increased output (e.g., more pay
per piece after crossing a set production target).
Advantages:

✅ Encourages higher productivity and efficiency.

✅ Beneficial for industries where output matters (e.g., textile, manufacturing).
✅ Employers can reduce labor costs if production is low.

Disadvantages:

❌ Can lead to poor-quality work if workers focus only on quantity.

❌ No income security in case of machine breakdowns or low production.
❌ Workers may face stress due to high production targets.

BASIS OF TIME RATE SYSTEM PIECE WAGE RATE

DISTINCTION SYSTEM
1. Definition Wages are paid based on the Wages are paid based on the
time spent working, irrespective number of units produced or
of output tasks completed.
2. Basis of Payment Time worked (hourly, daily, Output produced (per unit,
weekly, or monthly). per task).
3. Suitability Suitable for labor-intensive
Suitable for jobs requiring skill,
jobs where output is
precision, or supervision (e.g.,
measurable (e.g., textile,
doctors, teachers, engineers).
construction, agriculture).
4. Formula Total Wage = Time Worked × Total Wage = Number of
Rate per Hour/Day Units Produced × Rate per
Unit
5. Income Stability Provides a fixed income, Earnings fluctuate based on
ensuring financial security for productivity, leading to
workers. variable income.
6. Quality vs. Encourages higher output but
Focuses on quality work, as
Quantity may compromise quality
wages are not tied to output.
7. Motivation for Encourages workers to be
Workers may lack motivation to
Workers more productive, as earnings
work faster as wages are fixed.
increase with output.
8. Employer’s Less supervision is required
Requires strict supervision to
Supervision since workers are motivated
ensure productivity.
to produce more

LABOUR TURNOVER: DEFINITION, CAUSES, IMPACT, AND REMEDIES

DEFINITION OF LABOUR TURNOVER

Labour turnover refers to the rate at which employees leave an organization and are replaced
by new employees over a specific period. It is expressed as a percentage and indicates
workforce stability.
A high labour turnover rate suggests frequent employee exits, while a low rate indicates
workforce stability.

CAUSES OF LABOUR TURNOVER

Labour turnover can be caused by voluntary (employee-initiated) or involuntary (employer-

initiated) factors.

1. Voluntary Causes (Employee-Initiated Exits)

 Better Job Opportunities – Employees leave for higher salaries, better work
conditions, or career growth.
 Lack of Job Satisfaction – Monotonous work, low engagement, or poor management
can cause dissatisfaction.
 Work-Life Balance Issues – Long working hours, excessive stress, or lack of
flexibility.
 Health Issues – Physical or mental health concerns prompting employees to quit.
 Relocation & Personal Reasons – Employees may leave due to family commitments,
moving to another city, or higher education.

2. Involuntary Causes (Employer-Initiated Exits)

 Retrenchment or Layoffs – Economic downturns, cost-cutting measures, or business

closures.
 Termination for Poor Performance – Employees may be dismissed for failing to meet
expectations.
 Misconduct or Disciplinary Issues – Breach of company policies leading to
termination.

3. Organizational Factors

 Low Wages & Poor Benefits – Employees leave if they feel underpaid.
 Lack of Career Growth – Limited training, promotions, or learning opportunities.
 Poor Work Culture & Leadership – Bad management, toxic environment, or lack of
appreciation.
 Unsafe or Poor Working Conditions – In industries like mining, construction, or
manufacturing.

IMPACT OF LABOUR TURNOVER

1. Higher Recruitment & Training Costs – Hiring and training new employees require
time and money.
2. Loss of Productivity – Frequent employee exits disrupt workflow and efficiency.
3. Decline in Employee Morale – Existing employees may feel demotivated seeing high
turnover.
4. Impact on Customer Service – New employees take time to understand processes,
affecting service quality.
5. Loss of Skilled Talent – Experienced employees leaving affects innovation and
expertise.
REMEDIES TO REDUCE LABOUR TURNOVER
1. Competitive Salary & Benefits Package

Offering attractive compensation ensures employees feel valued and reduces the likelihood of
them leaving for better opportunities.

Key Actions:

 Regular salary reviews and increments.

 Performance-based bonuses and incentives.
 Employee benefits such as Provident Fund (PF), Employee State Insurance (ESI),
gratuity, and medical insurance.
 Travel, food, and housing allowances where applicable.
 Providing retention bonuses for key employees.

📌 Example: IT companies like TCS and Infosys offer performance-linked incentives and stock
options to retain top talent.

2. Employee Engagement & Job Satisfaction

Engaged employees are less likely to leave an organization. Fostering a positive work culture
can significantly reduce turnover.

Key Actions:

 Regular employee feedback surveys and action plans.

 Recognition programs like Employee of the Month or incentives for good
performance.
 Encouraging open communication and addressing workplace grievances.
 Team-building activities, corporate retreats, and cultural events.

📌 Example: Google India conducts regular town hall meetings where employees can voice
their concerns directly to leadership.

3. Career Growth & Training Opportunities

Employees seek organizations where they can grow professionally. Lack of growth
opportunities often leads to resignations.

Key Actions:

 Offering in-house training and upskilling programs.

 Sponsoring professional courses and certifications.
 Internal promotions over hiring external candidates.
 Creating clear career progression paths for employees.

📌 Example: Wipro offers "Wipro Academy of Software Excellence (WASE)" for employees
to upgrade their technical skills and get higher education.
4. Work-Life Balance & Flexible Work Policies

Many employees leave due to excessive workload and burnout. Ensuring a work-life balance
can help retain them.

Key Actions:

 Implementing hybrid work models or work-from-home options.

 Offering paid maternity/paternity leave.
 Flexible work schedules or compressed workweeks.
 Encouraging employees to take vacations and breaks.

📌 Example: Microsoft India offers flexible work schedules and work-from-home options to
improve employee well-being.

5. Strong Organizational Culture & Leadership

A supportive work environment and good leadership encourage employees to stay longer in
the organization.

Key Actions:

 Encouraging ethical and transparent leadership.

 Promoting inclusive and diverse workplaces.
 Ensuring zero tolerance for workplace harassment.
 Regular one-on-one meetings between managers and employees.

📌 Example: Tata Group is known for its ethical leadership and employee-friendly policies,
ensuring high retention rates.

6. Safe & Comfortable Working Conditions

Unhealthy or unsafe workplaces contribute to employee dissatisfaction and high turnover,

especially in industries like manufacturing and construction.

Key Actions:

 Ensuring a safe and hygienic work environment.

 Providing proper safety gear and training in hazardous jobs.
 Implementing stress management programs for employees.
 Reducing workplace hazards by complying with labor laws and safety regulations.

📌 Example: Larsen & Toubro (L&T) has stringent safety measures in place for its workers
in construction sites.

7. Reducing Unnecessary Work Pressure & Stress

Excessive workload and unrealistic targets can cause burnout, leading to higher attrition rates.
Key Actions:

 Setting realistic performance targets.

 Providing mental health support and counseling.
 Encouraging managers to distribute work fairly among teams.

📌 Example: Infosys provides an Employee Assistance Program (EAP) that offers stress
management counseling to employees.

8. Transparent & Fair HR Policies

Employees should feel that company policies are fair and consistent. Unfair treatment or bias
often results in high turnover.

Key Actions:

 Creating clear promotion, appraisal, and grievance policies.

 Ensuring fair pay for all employees regardless of gender, caste, or background.
 Handling employee grievances quickly and effectively.

📌 Example: Accenture follows a strict anti-discrimination policy, ensuring fair treatment of

all employees.

9. Exit Interviews & Data-Driven Insights

Understanding why employees leave can help the company fix issues and improve retention
strategies.

Key Actions:

 Conducting exit interviews to identify reasons for resignations.

 Analyzing employee retention data to find patterns.
 Making necessary policy changes based on feedback.

📌 Example: Amazon India actively tracks employee feedback and takes corrective actions
based on exit interview data.