| Marketing | Finance | HRM | IT | OB | Research | ENT | Economics |
HRP Project on PakArab, PEPCO, PARCO
We are providing Projects for your business growth and to meet new challenges. Here are some projects prepared by our team of "Developing New Projects" for the Guarantee of your business growth
This
report has been written as a sequel to the series of lectures conducted on “HRM”
during the MBA programme. The subject assigned to the group was “Compensation
administration and HR departments”. The group made an earnest and whole hearted
effort to collect the possible relevant material. Also visit were conducted to
PAK ARAB at Multan,
PARCO at Qasba Gujrat and
KAPCO at Kot Addu for obtaining all
possible current information from the concerned. In the process, in addition to
human resource staff, the General Manager of
KAPCO was also interviewed for
obtaining expert opinion on the subject.
The report has four major
parts covering important aspects. In first part process of compensation
administration has been explained with special reference to its definition,
objectives and factors. In second part extracts from three different articles
has been given. These articles exclusively deal with compensation administration
and its various aspects. In third part brief introduction of the organization
which were allotted for practical study of the subject has been given. This part
also contains the analysis of the questionnaire completed during practical study
separately from all the organization. Also a comparison has been drawn through
these questionnaires.
Fourth part, contains the
bibliography and addresses of the individual consulted during the process of
preparation of the report.
The
purpose of this study / report is to examine, measure, evaluate and analyze
policies, procedures, rules and regulations for the implementation of various
financial compensations, wages criteria and pay structures for the personnel
employed in following organization: -
1.
Pak Arab Fertilizers.
2.
PARCO
3.
KAPCO
Wages, as
a means of providing income for employees and as a cost of doing business to the
employer, constitute one of the most important subjects in the filed of
personnel management. Wages can provide a source of motivation for employees to
perform effectively. The wage rate offered is one of the most important
considerations to a person who is taking a new job.
The term
compensation administration, or alternatively, wage and salary administration,
has come to be accepted as the designation for that field of endeavor concerned
with the establishment and implementation of sound policies and methods of
employee compensation. It includes such areas as job evaluation, development and
maintenance of wage structures, wage changes and adjustments, supplementary
payments, profit sharing, control of compensation costs, and other related pay
items.
Employee
compensation refers to all forms of pay or rewards going to employees and
arising from their employment, and it has two main components. There are direct
financial payments in the form of wages, salaries, incentives, commissions, and
bonuses, and there are indirect payments in the form of financial benefits like
employer-paid insurance and vacations.
In tern,
there are essentially two ways to base direct financial payments to employees:
on increments of time and on performance. Most employees are still paid based on
the time they put in on the job. For example, blue-collar workers are usually
paid hourly or daily wages; this is often called day work. Some employees
managerial, professional, and usually secretarial and clerical are salaried.
They are compensated on the basis of a longer period of time (like a week,
month, or year), rather than hourly or daily.
The
second option is to pay for performance. Piecework is an example: it ties
compensation directly to the amount of production (or number of “pieces”) the
worker produces, and is popular as an incentive pay plan. Psychologists know
that people have many needs, only some of which can be satisfied directly with
money. Other needs for achievement, affiliation, power, or self-actualization
for instance also motivate behavior but can only be satisfied indirectly (if at
all) by money. Yet even with all our more modern motivation techniques (like job
enrichment), there’s no doubt that money is still the most important motivator.
There are
four principal goals that compensation programs may seek to accomplish.
·
First they seek to serve a
labor market function of allocating people among firms according to the
perceived attractiveness of jobs as expressed by the rat of pay and associated
pay supplements.
·
Second, carefully designed
compensation programs enable management to control wages and salaries and
control labor costs.
·
A third major objective of
wage and salary programs is to keep employees content, to minimize quitting, and
to reduce employee complaints and grievances due to inadequate or inequitable
wage rates.
·
A fourth and final goal of
compensation is to induce and reward better performance. In other words, pay is
looked upon as a motivator.
Factors affecting the compensation
Union influences
Pay /
salary / wages rates is the major issue in collective bargaining. However, other
issues include cost of living, income security, time of with pay and health
care.
Legal
Aspect
All the
organizations are bound to follow the Government rules and regulations while
deciding the compensation for their employees. Also labor laws and workers Act.
are considered. In addition various organizations have their own policies for
compensation.
Compensation Policy
An
employer compensation policy also influence the wages and benefits to the
employees. One consideration is that whether the organization is leader or the
follower regarding pays / salaries / wages. Other important policies include the
basis for salaries increases, promotion and demotion, over-time pay policy and
policy regarding probationary period and leave period.
Equity
and Its Impact on Pay Rates
The need
for equity is crucial factor in determining the pay rates, specially external
and internal equity. In case of external equity, pays must compare favorably
with other organizations. Whereas internal equity means that each employee
should view his or her pay as equitable given other pay rates in the
organizations.
Process
of establishing pay rats while insuring external & internal equity
Step 1:
conduct an salary survey
A survey
aimed at determining prevailing wage rates. A good salary survey provides
specific wage rates for specific jobs. Different types of salary survey
including formal, informal, commercial and Government, are conducted in this
regard.
Step 2:
Determining the worth of the job / job evaluation
Job
evaluation is aimed and determining a job’s relative worth. Here we determine
the worth of one job relative to another and eventually results in wages or
salaries hierarchy. The job is evaluative through the content of job in relation
to one another or through the comparable factors such as skills, efforts,
responsibility and working conditions.
Step 3:
Group similar job into pay grade
Similar
nature and status jobs are grouped in one category of pay grade. Meaning there
by these jobs are paid equal amount of salaries / wages and other allowances and
benefits.
Step 4:
Price each pay grade
Assignee
pay rates to each of pay grades. Individual pay rates would have to be assigned
to each individual job.
Step 5:
Fine-tune the pay rates
As the
inflation keep on increasing there is a need to fine-tune the pay rates i.e.
adjustment according to the inflation. It is a continues process which takes
place with the time. Normally the organizations undertakes this process on
yearly basis.
Current
Issues in Compensation Management
Ø
Comparable worth of job.
Ø
Pay secrecy.
Ø
Inflation and salary
compression.
Ø
Cost of living differentials.
Ø
Legal issue.
Compensation in the year 2002: pay for performance
Introduction
In an
ever more competitive business environment, both locally and globally, many
companies today are attempting to identify innovative compensation strategies
that are directly linked to improving organizational performance. But this is
not a new concept. For many years, incentive compensation in one form or another
has been a common feature of employment contracts. The use of incentive systems
is not only a defence mechanism on the part of failing firms, but more often is
also a positive action in recognition of the strategic role of compensation in
furthering corporate goals. The bottom line is that many companies are beginning
to experiment with compensation alternatives, as the flexibility to try new
forms of management is an important need of the time.
This
issue is critical for organizational effectiveness. The basics of incentive pay
and how it correlates with known organizational behaviour theories can be linked
with the achievement of corporate goals through the use of reward system.
The Merit of Incentive
Compensation
When an
employee’s job performance exceeds the prescribed acceptable performance level
for the organization, the related reward is called merit pay. It can be paid in
the form of a bonus or as an addition to base pay. The latter is generally
preferred by employees, as such an increment becomes part of the base pay and
continues to be received for the duration of employment, regardless of
future performance levels with often residual lifelong benefits. Alternatively,
the bonus is a single, one-off, lump-sum payment, which can be in the form of
cash or other creative monetary scheme, such as stock options. Unlike a base pay
raise, a bonus is not automatically received in subsequent years unless
justified by levels of performance in those years. In short, merit pay can be
viewed as a reward for past performance, and incentive compensation as an
inducement for future performance.
Incentive
plans are cash payments made to employees when they exceed predetermined job or
organizational goals, and serve as inducements to produce specific results
desired by the organization. These metrics can be fiscal targets (sales and
bookings), production output, or productivity gains (cost reduction, quality),
etc. As many businesses of today embrace the concepts of total quality
management and customer focus, goals are being linked directly to customer
satisfaction in addition to business milestones. Tying incentives to individual
or group performance must be analysed in the context of the applicable industry
and what makes sense for the business. Along with performance measurement,
timing is a feature of the reward system that is critical to both its acceptance
and success.
Compensation serves different objectives, the main ones being to attract, retain
and motivate high-potential employees. Meanwhile, the fulfillment of these goals
are subject to constraints such as the maintenance of equity, cost control and
legal requirements (e.g. wage and salary legislation). There are many factors
that contribute to the determination of employee compensation levels, including
the followings: -
Labour/product market
conditions
In other
words, the demographics of the employee force and the significance of their
skills, the supply and demand situation in relation to critical skills, and the
pay levels and practices of competitors.
Economic
and sociopolitical environment
This
includes the influence of the business cycle and the power of organized labour.
Employee
characteristics
These
include Education, Seniority, Qualifications, Experience, etc.
Industry
characteristics
Such as
cyclical nature, high turnover, innovators, entrepreneurial, and traditional.
Industry standard wages vary considerably. Highly competitive industries, such
as soft goods manufacturing, pay only the wage required in response to changing
conditions in their labour market. Less competitive industries, such as
hard-goods manufacturing, typically pay somewhat more than the minimum required
by the labour market.
Enterprise characteristics
The list
includes culture (management style), organizational structure, objectives,
policies and strategies, technology, size, profitability (ability to pay),
competitive labour strategy (lead or lag), salary compression (inequitable pay
differentials when pay rates for new hires are too close to those of experienced
employees and when subordinate pay rates are too close to those of supervisors).
Employee
behaviour characteristics
Such as
performance, absenteeism, and turnover.
Job
characteristics
That take
into account the mental requirements (problem solving), physical requirements,
skill requirements, responsibility/accountability, working conditions, level of
public contact, and the effort required to carry our the work. Factors such as
responsibility and decision making would appear in evaluation systems for
managerial jobs; physical demands and skill might appear in systems for factory
jobs; and accuracy and amount of supervision received might appear as factors in
clerical and technical evaluation systems.
Discrimination
Although
unacceptable, there is still concern about the economic status of different
groups in society. The most obvious example is the lower economic status of
females compared with that of males. This seems to be a consequence of the fact
that males and females are not equally represented in various occupations, and
the male-dominated occupations are compensated at higher rates than are
female-dominated occupations. These determinants need to be considered in the
light of the contingencies required for compensation decisions.
A large
part of an individual’s direct compensation is often the base pay. To establish
its level, there are principally two approaches: job-based evaluation and
person-based (skill-based) evaluation. At times both appear to be in conflict.
The first approach is based on the assumption that, for the organization, each
“job” has a value that can be evaluated, and the person doing the job is only
worth what the job itself is worth. The main advantage of this system is to
facilitate a comparison of jobs and compensation levels between organizations.
On the other hand, it encourages people to seek out management positions, even
though they might lack the necessary managerial skills.
This
problem is avoided by utilizing the second approach that rewards individuals for
increasing their skills and abilities and for developing themselves, rather than
for moving up the hierarchy. The pros and cons of this approach are that,
initially, with frequent new skills and an accompanying pay rise, the system
tends to be highly motivating; but as the workforce matures and reaches the top
of the skill-based pay system, problems can arise as an individual’s
compensation reaches a plateau. In general, skill-based pay seems to fit those
organizations that want to have a flexible, relatively permanent workforce
oriented towards growth, learning and development.
Incentive
compensation can be based on the performance of the individual employee, a group
or departmental unit, or the organization as a whole. Typically, sales incentive
pay (bonuses and sales commissions) is viewed as a traditional way to compensate
sales staff on an individual basis. Other methods, that for the most part are
directed at the blue-collar worker, include piece-work or piece-rate incentives
and standard hour plans. Critical success criteria
for individual incentive plans are that the
employee is capable of performing the desired behaviour, and the employee
perceives that the reward is valued and is contingent on performance.
There
are three major categories of group incentive plans:
1.
Small-group or work units where rewards are allocated on group
performance for exceeding predefined standards;
2.
Productivity improvement plans;
3.
Profit sharing or share-ownership plans.
Group-incentive plans are usually the most appropriate under conditions where
direct supervision is not readily feasible, exact measurement of individual work
performance is difficult, and where teamwork and cooperation are essential to
success.
Designing and Effective Compensation Program
Employees compensation
A
properly designed and managed incentive compensation system can be a vehicle for
management communication, although communication of the plan, its policies and
what is expected of the employee is as critical as the underlying message it is
trying to reinforce. The stimulus for desired behavioural change reflected by
performance can also be achieved through a properly designed incentive
compensation plan, supported by core management processes. Finally, the basis of
rewards must understood by employees for the effective accomplishment of tasks
and results. This is a direct relationship between communications, culture,
performance and, ultimately, rewards.
An
open system of communication, which can include sharing the organization’s
overall incentive philosophy, tends to encourage people to ask questions, share
data, and ultimately be involved in decisions. Conversely, a secret compensation
system that prohibits employees to talk about their rewards and provides minimal
information on how rewards are allocated tends to put people in more dependent
positions and concentrate power at the top. A company’s compensation philosophy
can be developed from the business vision and mission that must support the
business strategy. Thus, with the proper infrastructure in place, incentive
compensation programmes can be extremely valuable in supporting the way
management wants to drive the company.
Organizations that are serious about performance, and which often see
performance management as the core business process for achieving their
strategy, are putting much effort into taking different views of performance
from all of the “stakeholders” involved to ensure success. To support and expand
further on this issue, it is necessary to enumerate certain conditions, which
must be present for rewards to elicit desired performance: -
Ø
Important rewards can be given and tied to performance.
Ø
Information can be made public about how rewards are given.
Ø
Superiors are willing to explain and support the reward system in discussions
with their subordinates.
Ø
Rewards can vary widely, depending on the individual’s current performance.
Ø
Performance can be objectively and inclusively measured.
Ø
Meaningful performance appraisal sessions can take place.
Ø
High
levels of trust exist or can be developed between superiors and subordinates.
Ø
The reward systems must be
clearly communicated, well understood by those affected and accepted as
relevant.
Ø
Finally, it is emphasized that all employees should be included in the reward
opportunities.
The
Executive Compensation
Today’s world is characterized by global competition, industry consolidation,
escalating technology, capital needs, and corporate restructuring. All these are
meshed with expanding constituencies, such as investors, employees, management,
customers, suppliers, the community, the government, and a worldwide society at
large. Thus the development of the compensation programs and especially those
for executives requires a broad prospective to ensure consistency with the
company’s real world. These programs must take into account:
Ø
Tying
cost to productivity improvement and building real organizational value.
Ø
Minimizing expenses and making sure that they are necessary.
Ø
Keeping staff both lean and knowledgeable about the business.
Ø
Promptly responding to tactical urgencies.
Ø
Building and maintaining credibility with owners and stakeholders.
Reaching these goals successfully calls for maximizing internal resources in a
complex environment and delivering effective compensation programs while
reducing the costs of operation. Such programs, to be effective, must have
following guiding principal.
Ø
Do
what is right for the business
Ø
Develop a programme that has credibility and provides ownership
Ø
Assess the programme against what is happening in the labour force marketplace
Constructing Executive Compensation Programmes
Indeed all compensation programmes, is both an art and science. The objective is
to optimize a system of fully integrated plans, developed in accordance with the
principles just expressed, and within the bounds of affordable cost. In the
final analysis, what the company can afford to do will dictate the financial
levels produced by the programme. The trick lies in spending money wisely and
getting full value for the expenditure.
The
costs of the programme are what is paid out as compensation plus the expenses in
connection with its development and administration. If the programme is well
constructed, the cost of what is paid out is matched or exceeded by the return
received. Thus the real “cost” is in development and administration – costs that
are controllable. Besides, if the development work is done well, administration
is not a major burden.
The Six Steps in Developing
and Maintaining any Compensation Programme
Step 1:
Information gathering:
Within the company, through document review and interviews with key executives
(and members of the board of directors for executive compensation programmes) to
gain insight into strategic business and organizational direction, management
processes, financial and operational information availability and validity, and
current programme effectiveness and efficiency of administration.
Outside the company, through information available to the consultants
supplemented by surveys, visits to other companies to observe best practices,
and to acquire competitive data and investment community perspectives.
Step 2:
Compensation philosophy:
For
developing and documenting a compensation philosophy and its guiding principles.
It refers to following figures, which outline the appropriate steps.
Examples of Compensation
Philosophy and Guiding Principals
|
Philosophy elements |
Guiding principles |
|
Competitive total
Compensation
|
·
Reflect prevailing corporate and industry
practices, as appropriate.
·
Retain key managers and executives, particularly
during performance turnaround.
·
Position individual executives between 25th
and 75th percentile for diversified
corporations based on relative performance. |
|
Leverage
|
·
Provide large percentage of compensation in the
form of incentives.
·
Deliver rewards against mutually agreed
performance contracts.
·
Balance short- and long-term incentives with
weighting for the long-term. |
|
Pay for
Performance
|
·
Establish challenging yet attainable goals (e.g.
75 per cent probability of goal achievement).
·
Hold individuals accountable for results and
make pay highly visible. |
|
Ownership
|
·
Build ownership (both direct and potential) of
executive team to establish community of
interest with shareholders.
·
Provide long-term capital accumulation
opportunities based on shareholder value. |
|
Value driven
|
·
Link recognition and rewards to the fulfillment
of articulated corporate and business unit
critical success factors.
·
Assure that all measures contribute to company
value, quality and productivity. |
|
Simplicity
|
·
Ensure that plan design and administration are
straightforward, understandable and
communicated. Effectively |
|
Value driven
|
·
Send consistent signals to all stakeholders.
·
Provide full disclosure to management about the
potential impact of one-time, non-recurring
events. |
Step 3:
Existing programmes:
·
Identifying the strengths and weaknesses of the existing programme.
·
Changes should not be made for the sake of change alone, unless that is the only
way to deliver the message.
·
Enhance areas of strength and correct any existing problems by examining closely
all design and operation facets of the current programme in the light of the
guiding principles, and clinically questioning the administrative elements.
Step 4:
Changes:
·
Where
change is necessary, consider alternative approaches and validate them against
the principles. Eliminate those which do not fully fit. Narrow the choice to no
more than two.
·
Test
the final choices in a model under various financial and operational scenarios
to choose the one which does the job and sends a clear, understandable message.
That approach is then selected, the necessary documentation is completed, and
the results are approved by the appropriate authorities.
Step 5:
Implementation and communication:
·
These
are critical elements which are often not fully carried out as a part of
programme development.
·
Aside
from the preparation of requisite processes and materials, it is essential that
steps be taken to ensure management’s ownership of, and enthusiasm for, the
programme.
·
Some
of this will occur by involving management in the information gathering and
development process. Not to be overlooked is calling on management to play a
leadership role in presenting the programme and being a major part of its
operation.
Step 6:
Monitoring:
·
Maintaining surveillance over the guiding principles and comparing them with
strategic changes. Updating the processes as necessary and continually assessing
the operation and administration of the programme for consistency with design
intent.
·
Often
the problem in a programme has more to do with operation and administration than
with design. The goal is to make sure everything is functioning as intended.
In
today’s environment all companies are driven to reduce expenses and increase
productivity. Executive compensation programmes are no exception. Neither are
expenditures by boards of directors; stockholders increasingly are looking over
their shoulders. Yet, in searching for ways of reducing the cost of developing
executive compensation programmes, many companies overlook a hidden asset, which
can help mightily to that end. That asset is the modern internal auditor.
There are
seven steps in the compensation programme where internal auditors can be helpful
and provide data at reasonable cost:
1.
Evaluating, against specific criteria, each facet of the type, design, and
operation of the existing plan.
2.
Reviewing documents and conducting interviews of selected personnel to gain
information on the operation of the existing compensation programme.
3.
Providing information on the company’s organization, financial results, business
plans, and strategic and organizational direction.
4.
Establishing the underlying business philosophy by identifying:
·
Business objectives, both qualitative and quantitative, consolidated and by
appropriate business segments, by assigned accountability with designated
measures and time horizons.
·
Internally and externally directed management actions needed to ensure defined
growth and success objectives.
·
The
existing and desired human characteristics and resources of the company which
facilitate the accomplishment of business objectives.
5.
Interviewing a cross-section of key executives to help to assess the
effectiveness of the current programme.
6.
Interviewing all members of the compensation committee to obtain their views,
and meet their information needs.
7.
Conducting a performance audit of incentive payouts by individual and
organizational components against each unit’s actual performance.
Constructing a new reward
strategy
Reward
management in the British construction industry
Changes
is the reward might system have been at the heart of development in human
research might. The reward might literature emphasizes the need to swft from
short term, adhoc approves to pa might to a longer term strategic approach
changes is pay and benefits system have therefore been presescbed an key HR
collectives.
The
astute reviews reward might policy and practices is one Industry is Britain.
Construction industry and is concered with the degree to which reward system has
been adopted to encourage and reinforce the processes of the change with in the
Industry.
New Pay
It is one
of the concept discussed in this article. The term new pay originates by one of
the America management consultant. This approach to pay system design is
facilitated by a shift from traditional “Job related pay” to new “Person related
pay” means skilled based pay. Job related pay is established through job
evaluation concept in new pay literature collective bargaining is not a major
concern. New pay system emphasizes that paying people according to their value
in the market pays. Because it is people who are the important organizational
asset.
New pay
approach involves much more variability in the pay package. Haeery identified
three aspects of variable pay:
Ø
Amount of pay which is
dependent on performance should increases with shift towards more variable pay
component.
Ø
The scope of variable pay
should be expended so that employees reflect a range of measures of corporate
performance.
Ø
Base pay reflects individual
market worth rather than the content of job.
Change in
Pay Practice in Britain
The key
development in Britain pay policies over the last twenty years have been shift
to more flexible and variable reward system and decline the collective the
bargain pay. The changing in pay depends upon changes in business environment,
companies ability to pay and change in economic activities. Here the author also
discussed the survey conducted by U.K. management consultant. This survey
covered nearly 400 hundred private and public organizations. After conducting
the survey, following results were concluded:
Ø
50 % of the organizations
reported some change in their pay strategy over the last 2 year.
Ø
30 % of the organizations
were in the process of changing their benefits.
Ø
50 % of the organizations
currently used some form of job evaluation concept to new pay ideas.
Ø
38 % of the organizations
work planning to introduce a formal job evaluation system for employees below
junior management level.
Ø
There was also evidence that
competency or skilled based pay system were on the increase.
Ø
There was also increase of
variable to base pay.
The main
finding of the research was that the construction sector is typified by
relatively traditional personal management practices compared to other sectors,
with the clear divide between the management of manual workers on site and the
management of directly employed white-collar administrative, clerical and
professional staff.
Reward
System for Manual Workers
Collective agreement within the construction industry remain the most
significant determinant of reward management for those firms which have manual
work force. Two-thirds of these companies said that matching the collective
agreement was the most important pay determinant for manual workers. Seven of
the remaining ten identified matching labor market condition as the most
important determinant. There is no doubt that some of the parties to collective
agreements, both employers associations and trade unions, have suffered reduced
membership and reduced credibility and that this effects the status of
agreement. Twelve companies of the thirty with manual employees had a grading
structure. Job-evaluation-based grading schemes are not common for manual
workers.
The
survey also showed that some construction firms liked the pay of their manual
workers to individual performance measurement. They also offered bonuses for
achieving qualify standard targets.
Reward
System for Non-manual Work Force
Reward
system for the white-collar work force-professionals, mangers, technical and
clerical staffs-are very different from those which apply to manual workers and
operate under conditions more similar to non-manual employees elsewhere in the
economy. Construction firms employee a range of professionally qualified
staff-architects, surveyors, civil engineers, planners, site managers, etc. For
these staff there is much more satiability of employment and employees will
normally be employed directly.
The most
common additions to salary for non-manual staff in construction are “one off”
merit bonuses and over time pay. Adjustments to pay or made for non-manual
employees primarily in the light of the company’s “ability to pay”. The cost of
living is a lower level consideration. The range of company benefits provided
for non-manual workers as similar to other industries with the range of company
provided welfare benefits-such as sick pay, pension, life insurance, paid
holidays and private medical insurance.
Construction companies don’t tend to provide woman-centered benefits such as
child care allowances or career breaks, other than where there is statutory
obligation-as in the case of maternity provision. This reflects the small
proportion of women employed in the industry and the absence of pressure for
such benefits.
Three
different organizations, i.e. Government, National and Multinational have been
considered and contacted during the study for assessing their compensation
system. These organizations include:
Ø
PAK
ARAB FERTILIZER
Ø
PAK
ARAB REFINERY (PARCO)
Ø
KOT
ADDU POWER COMPANY (KAPCO)
For
the assessment purpose a proper questionnaire was designed and got completed
from Human Resource Departments / Personnel Department of these above
organizations. Brief introduction of these organizations and analysis drawn are
given in the succeeding part: -
Introduction to The
Organization
Pakistan
and the State of Abu Dhabi, the two Muslim brother countries, agreed to
establish joint countries to Pakistan’s economy. Accordingly, a joint stock
company Pakarab Fertilizers Limited was established on November 12, 1973 with
equity participation by the National Fertilizer Corporation of Pakistan Limited
and Abu Dhabi National Oil company, for the expansion and modernization of the
Natural Gas Fertilizer Factory in Multan, the heart of Pakistan’s agricultural
scene.
The
National Fertilizer Corporation of Pakistan Limited is a Government undertaking
and is responsible for the installation and efficient operation of the
fertilizer plants in the public sector in Pakistan. Apart from the management of
existing production facilities at Daudkhel, Faisalabad and Jaranwala, the
Corporation is currently implementing two other large fertilizer complexes for
the manufacture of Urea at Mirpur Mathelo and Haripur, Hazara.
The
policy of the company is determined by the Board of Director which is nominated
by the two principal corporate shareholders and day to day management is vested
in the Managing Director
Departments
·
The organization have total
of twelve departments.
·
There is no formal “HR”
department in the organization. However, the organization has personnel and
industrial relation department which acts as “HR” department.
No of
employees
·
The organization have
following number of employees:
Regular
Management
=
5
Executives
=
165
Supervisors
=
119
Workers
=
712
Through
manpower supply contractor
Executives + supervisors
=
74
Workers
=
525
Survey
for the pay rates
·
No formal survey for the pay
rates is conducted by the organization.
Basis for
pay structure
·
The
organization set the pay structure of
various appointments on the basis of :
1.
Qualification
2.
Experience
3.
Technical skills
Job
evaluation concept
·
No job evaluation concept is
being followed by the organization.
Basic
salaries
·
Basic salary is set as per
the pay scale of “National
Fertilizer Corporation”.
Union
·
A formal labor union (C.B.A.)
exists in the organization.
·
The union discuss the issues
like:
1.
Wages rates
2.
Income security
3.
Time of with pay
4.
Cost of living adjustment
5.
Health care
Payment policy
·
The organization claims to be
leader in regard pays and allowances in their sector.
·
The probationary staff /
employees are paid the same amount as the regular employees.
Increments
·
The employees are awarded
annual increments. However special increments are also being granted.
Allowances policy
For
officers:
·
Policy is given by the
“National Fertilizer Corporation”.
For
workers:
·
Allowances are finalized
through peace settlements.
Compensation to the trainees
·
Compensation to the trainee
employees is paid according to the grades.
Accident
compensation
·
Compensation in case of
accidents (fatal/nonfatal) is paid through group insurance policy and workmen
compensation insurance policy.
Medical
treatment
·
Free medical treatment is
entitled to the employees and their families through various hospitals on the
pool of the organizations.
Payments
during leaves
·
Employees are paid
compensation during earned leave, casual, medical leave. They also get leave
fair assistance.
TA/DA’s
policy
·
TA/DA’s are paid to the
employees of different categories according to their grades and entitlement.
Overtime
premium
·
The organization has formal
overtime premium payment policy vide factories Act 1934.
Compensation for foreign qualified
·
No such compensation is paid
in case of foreign qualified individuals.
Additional technical qualification salary
·
Technical pay to the graduate
engineers is paid.
Pension
policy
·
Pension policy is only for
executives being paid as per “NFC” pension fund trust policy.
Post
retirement benefit
·
Being extended in the form of
free medical treatment / medical expenses, benefits.
Basis for
pays
·
The organization follows job
based pay system. The organization has centralized process for pays / wages
establishment.
Chief
executive compensation
·
The compensations are based
on the term and conditions of the post as finalized.
Manager’s
compensation
·
The managers are offered
salaries, bonuses, leave for assistance, time off with pay, health care and
retirement coverage.
Professional compensation
·
The criterion for
professional compensation are based on job scope.
Female
workers
·
The organization has female
workers.
·
There is no discrimination in
the wages/ pay structure of male, female worker.
Pay
policy
·
The organization has open pay
policy.
·
In case of inflation, the
workers are given increase in pay through peace settlements whereas for
executives variation in pay scales is done by “NFC”.
·
The retired personnel
payments /compensations are revised in accordance with revision of pay scales.
Relationship between productivity and salaries
·
The organization does not
believe in the relationship.
Introduction to The
Organization
PAK ARAB
REFINERY LIMITED is a joint venture between Pakistan, Abu Dhabi and Austria. The
company was incorporated as a public limited company in 1974. The shareholding
in the joint venture is in the proportion: Government of Pakistan (60 %) and ABU
DHABI Petroleum Investment (ADPI) and OMV of Austria (40 %). The company was
established with the primary objectives of:
1.
Oil Refining and allied
facilities.
2.
Oil pipeline systems, storage
and allied facilities.
The
company was established with seed money of Rs. 540 millions and has no expanded
24 times to an equity base of Rs. 13041 million and asset base of Rs. 91
billion. The total cost in US $ 886 million. The total area of mid country
refinery is 700 acres. PARCO is one among most solid financial companies of
Pakistan. They have four terminal stations near Keamari, Mehmood Kot, Faisalabad
and Machhike. The management of the company is vested in 10 board of directors
of which 6 directors including the chairman and the managing director are
appointed by GOP and 4 are from ABU DHABI.
The
company was formally commissioned in February 2001 at Mehmood Kot. It comprises
on a grass root refinery complex of main process unit, treatment and recovery
unit and full range of Offsite utilities system. It also include a new
residential colony that provides housing and other amenities.
Department
·
The organization has eight
departments.
·
The organization has formal
“HR” department.
No. of
employees
·
A total of eight hundred
employees are working in The organization.
Survey
for pay rates
·
The organization does conduct
informal survey for establishing the pay rates of various grades.
Basis for
pay structure
·
The organization set the pay
structure for various appointments on the basis of :
1.
Qualification
2.
Experience
3.
Technical skill
Job
evaluation concept
·
No job evaluation concept is
being followed by the organization.
Basic
salaries
·
Basic salaries are set
according to qualification, experience, and technical skills.
Union
·
A formal labor union (C.B.A.)
exists in the organization.
·
The union discuss the issues
like:
1.
Wages rates
2.
Income security
3.
Time of with pay
4.
Cost of living adjustment
5.
Health care
Payment
policy
·
No response is given by the
organization.
·
Regular salaries are paid to
the employees during probationary period.
Increments
·
The employees are awarded
annual increments.
Allowances policy
·
Allowances are paid grade
wise.
Compensation to the trainees
·
Compensation to the trainee
employees is paid according to the grades.
Accident
compensation
·
Compensation is paid through
in vogue group insurance policy as per government regulations.
Medical
treatment
·
Free medical treatment is
entitled to the employees, their parents and their families through various
hospitals on the pool of the organizations.
Payments
during leaves
·
Employees are paid during
leave periods.
TA/DA’s
policy
·
TA/DA’s are paid to the
employees at different categories according to their grades and entitlement.
Overtime
premium
·
The organization pays the
overtime premium to the employees.
Compensation for foreign qualified
·
No such compensation is paid
in case of foreign qualified individuals
Additional technical qualification salary
·
Yes, additional benefits paid
to technically high qualified personnel.
Pension
policy
·
Yes, the organization has
pension policy for their employees.
Post
retirement benefit
·
Free medical treatments to
self, spouse and dependent children.
Basis for
pays
·
The organization follows both
job base pay and skill base pay policies.
·
The organization has the
centralized process for pays / wages establishment.
Chief
executive compensation
·
The compensation for chief
executive is based on:
1.
Qualification
2.
Experience
3.
Performance
4.
Service length
Manager’s
compensation
·
The managers are offered
compensation in term of salary, benefits, short term incentive and long term
incentives
Professional compensation
·
No response is given by the
organization.
Female
workers
·
The organization has female
workers.
·
The females are being paid
more as compare to male workers.
Pay
policy
·
The organization has secret
pay policy.
·
The pays are revised after
every two years.
·
In case of inflation, for the
retire personnel there is no change in pension policy.
Relationship between productivity and salaries
·
The organization believes in
the relation between productivity and pays / salaries / wages.
·
They have strong intensity of
the relationship in the organization.
Introduction to The
Organization
The
Kot Addu Power Company (KAPCO) runs a 1600 MW combined cycle Power Plant
at Kot Addu, a small town, in the middle of Pakistan. The company came into
existence in the June of 1996 when the Water And Power Development Authority
(WAPDA) the state run the power generation utility of Pakistan, privatized the
plant by offering 36% stake to strategic investor “National Power “ of U.K.
along with management control.
WAPDA
entered into an agreement with KAPCO for the purchase of the power for next 25
years from this Plant. The tariff covered two kinds of payments viz. capacity
and energy payment. The capacity payment is made on the available capacity of
the plant and is mainly used by the company to meet fixed expenses and 756
million dollar debt liability that is inherited from WAPDA. The energy payment
is done on the actual dispatch from the plant. It covers the fuel cost and there
is hardly any saving from this part.
Departments
·
The organization has two
major and four sub departments.
·
The organization has the
formal “HR” department.
No of
employees
·
The organization has
approximately eight hundred people working in three different shifts round the
clock.
Survey
for the pay rates
·
The organization conduct the
commercial survey for establishment of pay rates.
Basis for
pay structure
·
The
organization set the pay structure of
various appointments on the basis of :
1.
Qualification
2.
Experience
3.
Technical skills
Job
evaluation concept
·
Yes, the organization has job
evaluation concept in vogue to determine the salaries / wages.
Basic
salaries
·
Initially salaries were based
on government pay scale, however after privatization the organization now has
its own pay structure.
Union
·
A formal labor union (C.B.A.)
exists in the organization.
·
The union discuss the issues
like:
1.
Wages rates
2.
Income security
3.
Time of with pay
4.
Cost of living adjustment
5.
Health care
Payment
policy
·
The organization does not
claim to be the leader in regard pays and allowances in their sector.
·
Regular salaries are paid to
the employees during probationary period.
Increments
·
The employees are awarded
annual increments.
Allowances policy
·
Allowances are paid grade
wise.
Compensation to the trainees
·
Yes, at times trainees are
paid.
Accident
compensation
·
Compensation in case of
accidents is paid through insurance policy.
Medical
treatment
·
The organization has its own
hospitals for routine and immediate medical treatment; however, cases are
referred to the other hospitals on their pool.
Payments
during leaves
·
Yes, employees are paid
during leaves.
TA/DA’s
policy
·
TA/DA’s are paid to the
employees at different categories according to their grades.
Overtime
premium
·
The organization pays the
overtime premium as per labour laws.
Compensation for foreign qualified
·
No such compensation is paid
in case of foreign qualified individuals
Additional technical qualification salary
·
Yes, additional benefits are
paid in case of higher Technical qualification.
Pension
policy
·
Pension is paid as per
WAPDA’s pension policy.
Post
retirement benefit
·
Pension, Free Electricity and
Medical Treatment are given to the employees at site.
Basis for
pays
·
The organization follows job
based pay system. The organization has centralized process for pays / wages
establishment.
Chief
executive compensation
·
The compensations for chief
executives is based on performance.
Manager’s
compensation
·
Salary and benefits are being
paid to the managers.
Professional compensation
·
No response.
Female
workers
·
The organization has female
workers.
·
There is no discrimination in
the wages/ pay structure of male, female worker.
Pay
policy
·
The organization has open pay
policy.
·
In case of inflation,
compensation is paid as per government rules.
·
For the retired personnel
there may change in pension policy.
Relationship between productivity and salaries
·
The organization believes in
the relationships between productivity and pays / salaries / wages.
·
They believe in the normal
relationship.
After
having completed the analysis of the questionnaire of individual organizations
following comparison is drawn: -
1.
Two
organizations out of three have formal Human Resource Department. Whereas in
case of third organization i.e. Pak Arab Fertilizer, the Personnel and
Industrial Relations Department performs the Human Resource functions.
2.
All
the three firms have more than 800 employees (Officers / Executives /
Supervisors / Workers). In case of Pak Arab Fertilizer in addition to regular
there are 600 employees working on contract basis.
3.
PARCO
and KAPCO do conduct “information” and “commercial” survey for establishing of
pay rates respectively, while PAK ARAB FERTILIZERS just follow the NFC policies
in this regard.
4.
All
the three organizations set their basic pay structure on the basis of
qualification, experience and technical skill. KAPCO also uses the job
evaluation concept.
5.
In
KAPCO and PAK ARAB the basic pay rates were set as per govt. regulations.
Later,when privatized KAPCO adopted their own pay policies.
6.
All
the three organizations have unions (CBA) which discuss following issues.
a.
Wages
rates
b.
Health care
c.
Income security
d.
Cost
of living adjustment
7.
All
the three organizations are paying regular pays to the employees during
probationary period.
8.
All
organizations are paying increment on annual basis to their staff and officers.
However PAK ARAB do give a special increment also. Only KAPCO pay some
incentives on festivals and special occasions to minorities.
9.
PAK
ARAB pays allowances on the peace settlement basis. Whereas PARCO and KAPCO pay
various allowances basing on their grades.
10.
All
the three organizations pay to the trainee employee.
11.
In
case of accident all the organizations pay through various insurance policies.
12.
KAPCO
has their own hospital and they refer acute cases to allover the country subject
to the requirement. PAK ARAB & PARCO also have good hospitals on their pool
which provide medical treatment and facilities to the employee and their
families.
13.
All
the three organizations do give leave with pay as per their policies.
14.
TA /
DAs are paid to the employees proceeding on duty according to their grades.
15.
PAK
ARAB give scholarship to the children of employees where as KAPCO has their own
school upto secondary level. PARCO also provides education facilities to the
children of their employees.
16.
Over
time is being paid by all the three organization vide Labour Laws and Factory
Act 1934.
17.
No
incentive is being given while during foreign qualification.
18.
Additional salary is paid for technical and higher qualification by all
organizations.
19.
All
organizations have formal pension policies. Their pensioners get additional
incentive in the form medical treatment even after retirement.
20.
The
pays and allowances with respect to new trends are based on job based pay.
However PARCO also consider the aspect of skilled based pay.
21.
All
the organizations establish their pay and allowance on centralized basis.
22.
The
executives get their pay and allowances on the basis of qualification,
experience and performance in all the organizations.
23.
Chief
Executive compensations are based on the terms and conditions of the post.
24.
Mangers are being paid salary as well as benefits like health care, time off
with pay and retirement coverage.
25.
No
special criterion for compensation for engineer in PARCO & KAPCO. However PAK
ARAB do consider job scope.
26.
All
the organizations have female workers. There is no disparity between males and
females compensation in KAPCO and PAK ARAB. However PARCO pay a little more to
the females.
27.
KAPCO
& PAK ARAB have open pay policy whereas PARCO has secret pay policy.
28.
Regular rise in the pay is given in case of KAPCO and PAK ARAB. As regard
pension it may change with inflation.
29.
Two
out of three organizations believe in relationship between compensation and
productivity. Where as PAK ARAB does not believe in relationship.
For any
organization to remain in the leading elements in their respective sector,
compensation in terms of pays / salaries / wages play vital role. It is evident
that the organization having better pay scales will have more satisfied
employees, thereby achieving high productivity and thus increased profitability.
As regard
the organizations, considered by the panel, it is concluded that all the three
organizations are having the “HR” departments in one or the other forms. They
are providing the maximum compensations to Executives, Managers and Employees as
per their abilities and willingness to pay. The employees of the organization
have been declared generally satisfied by the “HR” departments.
Although
as a whole it is established that these organizations are effectively using the
abilities and services of “HR” department for compensation purposes. These can
be graded with respect to their over all compensation policies towards their
employees in the following sequence: -
1.
Best organization
PARCO
2.
2nd best organization
PAKARAB
3.
3rd best organization
KAPCO
1.
Human Resource Management by Gerry Desseler
2.
PERSONNEL by
DALE S
BEACH
3.
The use of HRMIS. A survey
(Article)
by
Kirstie. S. Ball
4.
Integrating knowledge workers and organization role for I.T (Article)
by
Nilmini Wickramasinghe
Michael J. Ginzberg
5.
Changing HRIS practices in the organization
(Article)
by
Janet Druker and Geoff White
6.
Discussions with:
Mr. Nisar Asim
General Manager
(KAPCO)
Tel: 061-544192-3
Mr. Muhammad Yasin Manager
Human Resources
(KAPCO)
Tel: 061-544192-3
Mr. Khalid Bashir
Senior Manger Industrial &
Personnel Relations
(PAKARAB)
Tel: 061-552123-29
Mr. Manssor Bin Kfil
Chief Management Executive
Personnel & Industrial Relations (PARCO)
Tel: 0697-490697
First of
all we convey our sincere thanks to God the Almighty for having granting us the
Wisdom and energies to complete our assignments in the shortest possible time
In the
process of the preparation of report we required lot of guidance which we could
receive from most learned, experience and dedicated teacher
Mr. Shaukat Malik. Let us admit that without his dedicated guidance and
most useful advises the task was uphill. We have a lot and added to our
experience. For all this we extend our gratitude and most sincere thanks.
We also
extend our sincere thanks to the following executives of various organizations
who have really provided us most useful information about the subject.
Mr. Nisar
Asim
General Manager
(KAPCO)
Mr.
Muhammad Yasin Manager Human
Resources (KAPCO)
Mr. Khalid Bashir
Senior Manager Industrial &
Personnel
Relations
(PAKARAB)
Mr. Mansoor Bin Kfil
Chief Management Executive
Personnel
& Industrial Relation (PARCO)
We are
also thankful to all others who assisted us in completion of our assignment.
Authors
To
become an expert in any field, only theoretical knowledge does not provide a
concrete base. This is a unique approach of business education that provides an
opportunity to the students to observe daily life business practices and
problems. Human Resource Management is one of the core subject of MBA Program
that gives us an idea as to how the various aspect of human recourses are dealt
in the different organizations. Therefore, the study of this subject is
incomplete without observing the applications in the real working environment.
During the process of study, the group has made a number of contacts with the
executives of selected organizations. These contacts included physical visits
and telephone calls. In addition, Internet has been used effectively for the
collection of current information about the subject. A formal questionnaire was
prepared before the group preceded for practical study. A very informative,
exhaustive and valuable material has been collected during the discussion with
experts. All this prove to be a effective source of learning for the group.
EXECUTIVE SUMMERY
1
Objective of the study
2
Compensation Administration
3
What is Compensation
3
Goals of Compensation
4
Factors affecting the
compensation
4
Extract From Articles
7
Article No. 1
7
The Merit of Incentive
Compensation
7
Components of Compensation
8
Evaluating The Job
10
Group Incentive Plans
11
Designing and Effective Compensation Program
12
Article No. 2
13
Constructing Executive Compensation Programmes
14
The Six Steps in Developing
and Maintaining any Compensation Programme
15
The
Internal Auditor
20
Article No. 3
22
Constructing a new reward
strategy
22
Analysis
26
PAKARAB Fertilizers
26
Introduction to The
Organization
26
Analysis of the Questionnaire
27
PARCO
32
Introduction to The
Organization
32
KAPCO
37
Introduction to The
Organization
37
Comparison
42
CONCLUSION
45
Bibliography
46
|