Human Resource Management

HUMAN RESOURCE
MANAGEMENT
BHMCT III YEAR I SEMESTER

Human Resource Management BHMCT III Yr
S. No CONTENT PAGE NO.
1. UNIT -1
1.1 Basics Concepts & Definition. 1-4
1.2 Factorial Analysis Role & challenges of HRM 4-10
1.3 Manpower Planning Micro & Macro Level scenario
10-11
1.4 Concepts and Process of Human Resource Planning
1.5 Methods and Techniques of HRP. 11-12
1.6 Demand & Supply forecasting Methods and Techniques. 13-16
UNIT -2 17-21
2. 2.1 Job Analysis.
21-24
2.2 Job Description.
24-26
2.3 Job Specification.
27-35
2.4 Job Evaluation & Methods.
35-38
2.5 Job Design.
3. UNIT -3
3.1 Selection and Recruitment. 39-47
3.2 Performance Appraisal & Methods. 47-52
3.3 Transfer Promotion and Reward Polices. 52-56
3.5 Training and Development Off the Job training methods 57-60
On the job training methods
UNIT -4
4. 4.1 Minimum Wage Living wage Fair wage.
61-63
4.2 Wage Theory.
64-66
4.3 Wage and Salary Policy Revision of Wages.
67-69
4.4 Individual & Group / Team Incentive Programme &
Employees Benefits.
UNIT-5
5.
5.1 Human Resource Information System. 69-76
5.2 Human Resource Audit. 77-81
5.3 Human Resource Accounting. 81-86
UNIT -1
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Introduction
Human resources Management (HRM) is concerned with the people in management. Human
resources management used to refer to the philosophy, policies, procedures and practices relating
to the management of people within organizations.
HRM is an approach to the management of people, based on four fundamental principles:
1. Human resources are the most important asset of an organization and their effective
management is the key to its success.
2. This success is most likely to be achieved if the personnel policies and procedures of the
enterprise are closely linked with, and make a major contribution to the achievement of
corporate objectives and strategic plans.
3. The corporate culture and the values, organizational climate and managerial behaviour
that emanate from that culture will exert a major influence on the achievement of
excellence.
4. HRM is concerned with integration- getting all the members of the organization involved
and working together with a sense of common purpose.
General Concepts of HRM
Functional area of general management.
Concerned with the effective utilization of human resources.
Development of individual at work or group.
Achievement of common goal/integration of individual efforts with the common goal.
HRM helping people at work to develop their potentials and capacities to the maximum
possible extent to get great job satisfaction.
Understanding & Predicting individuals behaviour interpersonal behaviour, group
behaviour and organizational behaviour.
HRM has the central responsibility of organizing human efforts and stimulating and
releasing individual motivation for success of organization social goals.
HRM/Personal management is an approach, a point of view, a technique of thinking and a
philosophy of management.
Definitions of Human Resources Management
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According to lvancevich and Glucck, Human resources Management is the function performed
in organizations that facilitates the most effective use of people (Employees) to achieve
organizational and individual goals.
According to Flippo, Human resources Management is Planning, organizing, directing and
controlling of the procurement, development, compensation, integration, maintenance and
reproduction of Human resources to the end that individual, organizational and societal
objectives are accomplished.
According to Leon C The term human resources can be thought of as The total knowledge,
skills, creative abilities & aptitudes of an organizations work force, as well as the value,
attitudes & beliefs of the individuals involved. The term human resources can also be explained
in the sense that it is resource like any natural resources. It does mean that the mgmt can get and
use the skill, knowledge, ability etc.., through the development of skills, tapping & utilizing them
again & again.
Importance of HRM
People have always been (vital) to organization, but their strategic importance is growing is
todays knowledge based industries. An organizations success increasingly depends on the
knowledge, skills & abilities of employees, particularly as they establishment a set of core
competencies that distinguish an organization from its competitors with appropriate hr policies &
practices an organization can hire, develop & utilize best brains in the market place, realize its
preferred goals & delivers results better than others.
In sample sense, human resource management means employing people developing their
resources, utilizing maintaining & compensating their services in tune with the job and
organizational requirement.
Aims & Objectives
To ensure effective utilization of human resources
To establish and maintain an adequate organizational structure and a desirable working
relationship among all the members of an organization by dividing organizational task,
positions. Jobs and by defining clearly the responsibility, accountability authority for
each job and its relation with others jobs in the organization
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To generate maximum development of human resources within the organization by

offering opportunities for advancement to employees through training and education or
by effective transfers or by offering retaining facilities.
To secure the integration of the individuals and group within organization by reconciling
individuals/group goals with those of the organization, to feel a sense of involvement,
continuity & loyalty.
To identify & satisfy the needs of individuals by offering various monetary & non
monetary rewards.
To ensure respect for human beings by providing various services and welfare facilities to
the personal.
To achieve and maintain high morale among employees is the organizing by securing
better human relations.
Factorial Analysis functions of HRM
Managerial functions Operational Functions

Planning Employment
Organizing Human Resources Development
Directing Compensation
Controlling Human Relations &
Industrial Relations
Managerial Functions
Managerial functions of personnel management involve planning, organizing, directing
and controlling.
Planning
It is pre-determined course of action. Planning pertains to formulating strategies of personnel
programmes and changes in advance that will contribute to the organizational goals. It involves
planning of human resources, requirements, recruitment, selection, training etc. It also involves
forecasting of personnel needs, changing values, attitudes and behaviour of employees and their
impact on the organization.
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Organizing
An organization is a means to an end. It is essential to carry out the determined course of action.
An organization is a structure and a process by which a co-operative group of human beings
allocates its task among its members, identifies relationships and integrates its activities towards
a common objective. Complex relationships exist between the specialized departments and the
general departments as many top managers are seeking the advice of the personnel manager.
Thus an organization establishes relationships among the employees so that they can collectively
contribute to the attainment of company goals.
Directing
The next logical function after completing planning and organizing is the execution of the plan.
The basic function of personnel management at any level is motivating, commanding, leading
and activating people. The willing and effective co-operation of employees for the attainment of
organizational goals is possible through proper direction. Tapping the maximum potentialities of
the people is possible through motivation and command. Co-ordination deals with the task of
blending efforts in order to ensure successful attainment of an objective.
Controlling
After planning, organizing and directing various activities of personnel management, the
performance is to be verified in order to know that the personnel functions are performed in
conformity with the plans and directions of an organization. Controlling also involves checking,
verifying and comparing of the actuals with the plans, identification of deviations if any and
standards through controls. Auditing training programmes, analyzing labour turnover records,
directing morale surveys, conducting separate interviews are some of the means of controlling
the personnel management function and making it effective.
Operative Functions
The operative functions of human resources management are related to specific activities of
personnel management via, employment, development, compensation and relations. All these
functions are interacted with managerial functions.
Employment -It is the first operative function of Human Resource Management. Employment is
concerned with securing and employing the people possessing the required kind and level of
human resources necessary to achieve the organizational objectives. It covers functions such as
job analysis, human resource planning, recruitment, selection, placement, induction and internal
mobility.
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Human Resource Development -It is a process of improving, molding and changing the skills,
knowledge, creative ability, aptitude, values, commitment etc., based on present and future job
and organizational requirements. It includes Performance Appraisal, Training, Management
Development, Career Planning and Development, Internal Mobility, Transfer, Promotion,
Demotion, Change and Organisational Development.
Compensation-It is a process of providing adequate, equitable and fair remuneration to the

employees. It includes job evaluation, wage administration and salary administration, incentives,
bonus, fringe benefits, social security measures etc.
Human Relations -Practicing various human resources policies and programmes like
employment, development and compensation and interaction among employees create a sense of
relationship between the individual worker and management, among workers and trade unions
and the management. It is a process of interaction among human beings. Human relations is an
rear of management in integrating people into work situations in a away that motivates them to
work together productively co-operatively and with economic, psychological and social
satisfaction. It includes:
Understanding and applying the models of perception, personality, learning, intra and
inter personnel relations, intra and inter group relations.
Motivating the employees
Boosting employee morale
Developing the communication skills
Developing the communications skills
Redressing employee grievances properly and in time by means of a well-formulated
grievance procedure.
Handling disciplinary cases by means of an established disciplinary procedure.
Counseling the employees in solving their personal, family and work problems and
releasing their stress. Strain and tensions.
Improving quality of work life of employees through participation and other means.
Industrial Relations
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Industrial relations refer to the study of relations among employees, employer, government and
trade unions. Industrial relations include:
Indian labour market
Trade unionism
Collective bargaining
Industrial conflicts
Workers participation in management and
Quality circles
Recent Trends in HRM
Human Resources Management has been advancing at a fast rate. The recent trends in HRM
include:
Quality of work life
Total quality in human resources
HR accounting, audit and research
Recent techniques of HRM
Roles & Challenges of HRM

A goal seeking organizations especially one that seeks improvement over the current situation is
a challenge, taking organization. When many such goals are pursued tremendous internal
pressures some of them conflicting, tend to be generated. Unless the organization develops
mechanisms for
Coping with these self-generated pressures, it may face major failure and suffer disastrous
retreats from its goal.
Human Resource function cannot be performed in a vacuum. There are many challenges that it
has to face to survive. All these challenges are discussed below.
Technological factors -Just as necessity is the mother of invention competition and a host of
other reasons are responsible for the rapid technological changes and innovations. As a
consequence of these changes, technical personnel, skilled workers, computer operators and
machine operators are increasingly required while the demand for other categories of employers
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has declined. Hence procurement of skilled employees and their increase in numbers to match
the changing job requirements has become a complicated task.
Human Resource in the Country- The structure, values and the level of education of human
resource in a country influence much of the Human Resource function. The influence of
manpower in the country can be studies through the changes in structure of employment.
a. Change in the Structure of Employment: The structure of employment in an organization
changes with the entrance of workforce with different backgrounds (Social economic, region,
community, sex, religion, traditions culture etc). There has been a significant change in the
structure of employment with the entry of 1) candidates belonging to the schedule castes,
schedules tribes and backward communities. 2) More female employees, due to increased career
orientation among women to the suitability of women for certain jobs and to women becoming
more acclimatized to the working climate and higher level of commitment. 3) The workforce
consists of different regions but due to increased transportation facilities and mobile character of
people. These changes in workforce are a challenge and a complicated task of HR function. It
has to deal with employees with different backgrounds.
Changes in employee Roles and their Values-Earlier the management could totally control its
employees and get the desired output. Today the employees have to be considered as a partner in
the organization. Changing structure of workforce has led to the introduction of new values in
organization. Among these are moves 1) emphasis on quality of life rather than quantity ii)
equality and justice for employees over economic efficiency iii) participation over authority. iv)
Workers now prefer flexible working hours to fixed time schedule. v) Level of education in
recent years is comparatively very higher. Increased formal education has led to the change of
attitude of the employees.
Changing demands of employer-Changes always are not on the side of employees.
Organizations also undergo changes and consequently their demands on employees will also
change. The information technological revolution and neck to neck marketing competition of
most of the organizations due to globalization demand that the existing employees adopt to the
ever-changing work situation and learn new skills, knowledge etc to cope with the new changes.
Government and Legal factors-Until 1940 the government was not involved or interested
regarding the problems of labor or industry. But the need for Govt., interference arose out of the
belief that Government is the custodian of industrial and economic activities. The role of the
government in business has after 1991 with the announcement of economic liberalization.
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However awareness of legislations is very important like the Factory Act, 1948, Trade Union act
1962, Payment of wages Act 1936, The Minimum Wages Act 1923, The Payment of Bonus Act
1965, The Employment Exchange Act, Standing Order Act 1946, Maternity Benefit Act 1961,
and The Apprentice Act 1961. All these acts if not complied with can get the organization into
deep trouble.
Customers
Organizations produce products or render services for the ultimate consumption use by the
customer. In other words organizations depend upon customers for their survival and growth.
Customers revolt against employees, if the services rendered are less qualitative. The banks face
such type of Challenges. Customers may develop a negative attitude towards the organization, if
it does not follow the social policies of the country. Hence the customers pose a challenge special
ally in service industry.
Social factors
Social environment consists of class structure, mobility social roles social values nature and
development of social institutions caste structure and occupational structure, traditions, religion
culture etc. To cater to everyones requirement and keep them happy is a big challenge faced by
HR today.
Managing Knowledge Workers-Essentially, here we are looking at different kind of people
who does not obey the principles of management for the traditional group. This boils down to
higher educational qualifications, taking up responsibilities at a lesser age and experience, high
bargaining power due to the knowledge and skills in hand, high demand for the knowledge
workers, and techno suaveness. The clear shift is seen in terms of organization career
commitment to individualized career management. Managing this set of people is essential for
the growth of any industry but especially the IT, BPOs and other knowledge based sectors.
Competence of HR Managers-As it is more and more accepted that lot of success of
organizations depend on the human capital, this boils to recruiting the best, managing the best
and retaining the best. Clearly HR managers have a role in this process. Often it is discussed
about lack of competence of HR managers in understanding the business imperative. There is
now a need to develop competent HR professionals who are sound in HR management practices
with strong business knowledge.
Developing Leadership-It is quite interesting to note that there is less importance given to
developing leadership at the organizational level. Though leadership is discussed on basis of
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traits and certain qualities, at an organisational level it is more based on knowledge. The
challenge is to develop individuals who have performance potential on basis of past record and
knowledge based expertise in to business leaders by imparting them with the necessary "soft
skills".
Managing Change-Business environment in India is volatile. There is boom in terms of
opportunities brought forward by globalisation. However this is also leading to many
interventions in terms of restructuring, turnaround, mergers, downsizing, etc. Research has
clearly shown that the success of these interventions is heavily dependent on managing the
people issues in the process. HR has a pivotal role to play here.
Manpower Planning
Man power planning in Human Resource Management is a core factor. Understaffing loses the
business economies of scale and specialization, orders, customers and profits Overstaffing is
wasteful and expensive. Planning staff levels requires that an assessment of present and future
needs of the organization be compared with present resources and future predicted resources.
Appropriate steps then be planned to bring demand and supply into balance.
Definition
Manpower Planning or Human resource planning is the process of systematically forecasting
the future demand and supply for employees and the deployment of their skills within the
strategic objectives of the organization. It is the process by which management determines how
the management should move from its current manpower to its desired manpower utilization.
Advantages of Manpower Planning

Manpower planning ensures optimum use of available human resources.
1. It is useful both for organization and nation.
2. It generates facilities to educate people in the organization .
3. It brings about fast economic developments
4. It boosts the geographical mobility of labor.
5. It provides smooth working even after expansion of the organization.
6. It opens possibility for workers for future promotions, thus providing incentive.
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7. It creates healthy atmosphere of encouragement and motivation in the organization.
8. Training becomes effective.
9. It provides help for career development of the employees.
Steps in Manpower planning
1. Predict manpower plans
2. Design job description and the job requirement
3. Find adequate sources of recruitment .
4. Give boost to youngsters by appointment to higher posts.
5. Best motivation for internal promotion.
6. Look after the expected losses due to retirement, transfer and other issues.
7. See for replacement due to accident, death, dismissals and promotion.
Different Procedures in Manpower Planning
Planning for the status quo-Planning involves steps to replace any employees who are either
promoted or who leave the firm. An example is Management succession planning which seeks to
ensure that there is at least one qualified manager to replace any higher level manager in the
organization.
Thumb Rule-This is on the basis of firms beliefs with regard to forecasting Human resource
needs. For example one firm believes that a ratio of one production supervisor for every 12
producers (Workmen) in optimal. This firm maintains this 1:12 ratio because it has proved
successful in the past. Another thumb rule is based on past experience that one person can
produce 2000 units of output per day and accordingly 5 employees needed for 10,000 units as a
matter of forecast
Unit Forecasting-This refers to the estimate of supervisors and managers with regard to
forecasting Human resource needs for the next year unit wise this approach called as Bottom
up approach to forecasting as the judgment are made by lower level management and added
together at a higher level of the organization.
Delphi Method-This method relies on Expert opinion in making long range forecasts this
involves obtaining independent judgments from a panel of experts usually thru a questionnaire or
interview schedule on certain issue affecting the nature and magnitude of demand for an
organizations products and services
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Computer Simulation-This is one of the most sophisticated methods of forecasting human
resource needs A computer is a mathematical representation of major organizational processes,
policies and human resource movement thru organization computer simulations are useful in
forecasting for human resources by pinpointing any combination of organizational and
environmental variables.
In technical field where direct production activities are involved, typically different methods
following different method are used.
Time and motion study-Here the Industrial Engineer observes records and movement of
workman and productivity Vis a vis time required to conduct specific activities.
MOST (Maynard Operating Sequence Technique)-This method is well accepted in
automobile industries where lots of manual activities are involved. It is based on the walking and
moving of the workmen to conduct the specific activity.
Human Resource Planning
Definition - Process of ensuring the right number of qualified people, into the right job at the
right time to deliver the results in an efficient and effective manner.
Ensures the availability of the right resources in the right place to match the future
organisational needs.
Human Resources plan must incorporate the human resources needs in the light of
organizational goals.
Human resource plan must be directed towards well defined objectives.
Human resource plan must ensure that it has the right number of people and the right kind
of people at the right time doing work for which they are economically most useful.
Human resource planning should pave the way for an effective motivational process.
A human resource plan should take into account the principle of periodical
reconsideration of new developments and extending the plan to cover the changes during
the given long period.
Matching available internal and external resources
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Understanding the organisational objectives and translating them into a schedule of
employee requirements over a period of time- securing right resources to meet
requirements.
Ensure a balance in the management of HR in an unstable and unpredictable market.
Provide buffer for these uncertainties.
Objectives of Human Resource Planning
Maintain required quantity and quality of Human Resources.
Forecast attrition and turnover rates
Plan to meet organisational hr needs at the time of expansion or diversification
Foresee effects of technological changes on the requirement for hr.
To develop the existing hr to match future requirements.
Optimise staffing in the organisation
Make contingent plans to meet shortfalls.
Process of Human Resource Planning
With the expansion of business, adoption of complex technology and professional management
techniques, the process of human resource planning had assumed great significance. HRP
consists of the following stages.
1. Analyzing organizational plans and deciding objectives.
2. Analyzing factors for manpower requirements.
(a) Demand Forecasting: Forecasting the overall human resource requirements in
accordance with the organizational plans.
(b) Supply Forecasting: Obtaining the data and information about the present inventory
of human resources and forecasting the future changes in present human resource
inventory.
3. Developing employment plans.
4. Developing human resources plans.
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Macro level planning scenario of Human Resources
Macro level planning scenario of Human Resources refers to the planning done keeping in view
a wider and larger scale as in the case of the planning done for a country.
Macro level planning is usually done on a large scale keeping in view the need of a wider sector.
An example is given to understand the Macro level planning better.
The example is based on Indian Governments plans to handle an increased inflow of tourists, as
plans were afloat to increase tourist arrivals by 2.5 percentage. The plan broadly centered around
two major points:
1) Human Resource available at time of the planning period; and
2) Human Resource requirements in future.
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The first aspect was based on the people both skilled and unskilled working in the tourism
and its allied industry. An estimate was approximately decided upon to find a number
understandable.
The second aspect dealt with quest of the planning commission to increase the tourist traffic by
2.5 percentages in seven years. This lead to an approximate projection of human resource, i.e.,
manpower needed to handle the extra tourist traffic expected. This was necessarily decided upon
comparing present tourist traffic and personnel involved in handling them and the future needs.
The projection of manpower requirements in all capacities were assessed and plans were put
forward to develop the required manpower for managerial and entrepreneurial, engineering,
technical, kitchen and restaurant, drivers, pilots, entertainers, guides and other job allied to
tourism.
The planning dealt not only with projecting the needs and plans to develop human resources but
also put forward the proposals of opening institutes and courses to train and develop the required
manpower. An important fact decided was that the planning and implementation of plans for
human resource development must be left with the professionals.
In tourism and its allied industry, human resource planning is the first step towards the human
resource development. As it is a service industry it becomes more important to assess and plan
for human resources as services cant be provided without human resources. Providing excellent
services is possible with proper planning and anticipation of future needs.
UNIT II
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CONTENT - JOB ANALYSIS AND JOB DESIGN Job Analysis Job Description Job
Specification Job Evaluation Job Evaluation Methods Job Design.
Job Analysis
Job analysis is a formal and detailed study of jobs. It refers to a scientific and systematic analysis
of a job in order to obtain all pertinent facts about the job. Job analysis has been defines as the
process of determining by observation and study the tasks, which comprise the job, the methods
and equipment used, and the skills and attitudes required for successful performance of the job.
Job analysis is essentially a process of collecting and analyzing data relating to a job. It is a part
of overall work planning called Work Design. A job can be analyzed only after it has been
designed and someone is already performing it. Job analysis is therefore performed upon
ongoing jobs. As jobs are always subject to change, a job analysis may become obsolete within a
short period of time. Job analysis provides the following information about a job:
(i) Identity of the job in terms of its title and code number.
(ii) The operations and tasks involved in the job including their timing, signifance,
complexity and sequence.
(iii) Location, physical setting, hazards and discomforts, supervision given and received and
other significant characteristics of the job.
(iv) Duties involved in the job along with the frequency of occurrence of each duty.
(v) Materials, methods and equipments used in performing the job.
(vi) How the job is performed i.e. the nature of operations like cleaning, lifting, handling,
drilling, feeding, driving, guiding, assembling, etc..,
(vii) Relationship of the job with other jobs in the organization.
(viii) Personal attributes required for performing the job eg. Physical strength, education,
mental skills, attitudes, experience, training etc
The above information forms the contents of job description and job specification. Jobs have
their own terminology. It is necessary to understand these terms before discussing job
analysis in detail.
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Job: It is a group of positions involving same duties, responsibilities, knowledge, and skills.
Each job has definite title and is different from other jobs. For example steward, accountant,
salesman, are jobs.
Position: It implies a collection of tasks and duties regularly assigned to one person. Several
persons may be classified under the same job but each may perform different work. For
example, one mail clerk may sort out incoming mail; another may prepare the outgoing mail
and so on. It may be noted that while a position is personal a job is impersonal.
Occupation: An occupation implies a group of jobs which are similar as to the type of work
and which contain common characteristics. For example business is an occupation consisting
of several types of jobs like production, sales, etc.
Duty: It means a related sequence of tasks e.g. pick up, sort and deliver incoming mail.
Task: It refers to a distinct work activity with an identifiable beginning and end e.g. sorting a
bag of mail into appropriate boxes.
Job Family: It implies jobs of a similar nature e.g. clerical job.
Job Classification: It means grouping of jobs into certain categories on some specified basis
e.g. nature of work performed or the level of pay. It is often used as a simplified method of
job analysis.
Job Evaluation: It implies determining the worth of a job to an organization, by comparing
it with other jobs within the organization and with job market outside.
Objectives of Job Analysis
The main objectives of job analysis are as follows:

(i) Job Redesign: A job may be analyzed to simplify the process and methods involved
in it. Such work simplification helps to improve productivity.
(ii) Work Standard: In order to establish job and time standards, a job has to be
analysed in detail. A systematic study of the job reveals the time that should be taken
in performing the total task. Once the time requirements become known, standards
retailing to daily performance can be established.
(iii) Miscellaneous: Job analysis provides support to other personnel activities such as
recruitment, selection, training, performance appraisal, job evaluation, safety, etc.
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Uses of Job Analysis
A comprehensive programme of job analysis is essential element of sound human resource
management. It provides valuable information for taking right decisions about the organizations
human resources. Most functions of hrm can be carried out with the help of information
generated by job analysis. The specific uses of job analysis are given below:
1. Organizational Design: Job analysis is useful in classifying jobs and interrelationship among
them. Responsibility commensurate with authority and accountability for various jobs can be
specified so as to minimize duplication or overlapping. In order to improve organizational
efficiency, sound decisions concerning hierarchical positions and functional differentiation can
be taken on the basis of information obtained through job analysis.
2. HR Planning: Job analysis provides useful information for forecasting man power
requirements in terms of knowledge and skills. It also helps in planning for promotions and
transfers by indicating lateral and vertical relationships between different jobs. Job analysis helps
in determining quality of hr required in an organization. It also facilitates division of work.
Therefore, job analysis is an essential element of effective human resource planning.
3. Recruitment and Selection: Information relating to the tasks, responsibilities, knowledge and
skills serves as a realistic basis for hiring people. Job vacancy is advertised based on job
description and job specification. Job analysis provides understanding of what an employee is
expected to do on the job. Such understanding serves as the basis for meaningful forecast of job
performance. Selection methods are based upon such forecasts.
4. Placement and Orientation: A clear understanding of job requirements helps in matching
these requirements with the abilities, interests and aptitudes of people. Each job can be assigned
to the person who is best suited for it. Similarly, the orientation programme can be geared
towards helping the employee learn the activities, tasks and duties that are required to perform a
given job more effectively.
5. Training and Development: Job analysis provides valuable information required to identify
training needs, to design training needs, to design training programmes and to evaluate training
effectiveness. A clear idea of what is required on a job helps in deciding what is to be learnt and
how. Similarly, employee development programmes such as job rotation, job enlargement and
job enrichment are based an analysis of job requirements.
It also helps in Performance Appraisal, Career path Planning, Job design, Job Evaluation, Labour
Relations, Employee Counseling, Health and Safety, etc..,
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Job analysis generates several documents and procedures, which are very useful in the
management of human resources. These documents and their applications are shown below.
Job Analysis
Job Description Job Specification Job Evaluation Performance Appraisal
Procurement Development Compensation Integration Maintenance
The above figure shows that job analysis provides information, which is useful almost in all the
operative functions of human resource management.
Process of Job Analysis
Job can be analyzed through a process, which consists of six basic steps.
1. Collection of background information: Background information consists of

organization charts, class specifications and existing job descriptions. Organizational
charts show the relation of the job with each other jobs in the overall organization. Class-
specifications describe the general requirements of the class of job to which this
particular job belongs. The existing job description provides a good starting point for job
analysis.
2. Selection of representative positions to be analyzed: It would be highly difficult and
time consuming to analyze all the jobs. So the job analyzer has to select some of the
representative positions in order to analyze them.
3. Collection of job analysis data: This step involves actually analyzing a job by collecting
data on features of the job, required employee behaviour and human requirements.
4. Developing a job description: This step involves describing the contents of the job in
terms of functions, duties, responsibilities, operations etc..,. The incumbent of the job is
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expected to discharge the duties and responsibilities and perform the functions and
operations listed in job description.
5. Developing a job Specification: This step involves conversion of the job description
statements into a specification. Job specification or job requirements describe the
personnel qualities, traits, skills, knowledge and back ground necessary for getting the
job done.
6. Developing Employee Specifications: This final step involves conversion of
specification of human qualities under job specification into an employee specification.
Employee specification describes physical qualifications, educational qualifications, and
experience requirements etc.., which specify that the candidate with these qualities posses
the minimum human qualities listed in the job specification.
Job Description
Invariably, the process of job analysis ends with the preparation of two vital documents for the
organization. These are job description and job specification.
Job description is a written document or statement that describes all the aspects of a job. It aims
at simplifying and standardizing the HR activities of an organization. It also enables the
employees to understand clearly what is expected of them in their jobs. It contains both
organizational information (structure, relationship, to name a few) and functional information
relating to the job. But the description of each task should be confined to a few sentences with
the focus being on results.
Definition
Job description is a document that specifies the tasks, duties, and responsibilities of the job and
should certainly be relevant and accurate.
Job description is defined as a statement that specifies the purpose of a job, also mentions
where the job fits in the organization structure, the context within which the job holder functions,
and the principle accountability of job holders, or the main tasks to be carried out by them.
Shortly, job description is an important document which is basically descriptive in nature
and contains a statement of job analysis. It serves to identify a job for consideration by other job
analysts. It tells us what should be done, and why it should be done, and where it should be done
performed.
Content of Job Description
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Job Title (Should reflect the duties and level of the job in the
organization)
Alternative Title (If Any)
Job purpose (Briefly mention the general purpose of the job and also its
role in objective accomplishment)
Code Number (State the job identification number)

Job holder Title (Specify the title of the holder of this job)
Job location (Mention the location of the job in the organizational
structure)
Job Type (Details like full-time/ part- time should be provided.)
Department/ office (Mention the name of the department/unit/office where this
job is located.)
Reporting authority (Details of the job title to which this job should report need
to be provided here.)
Number of Staff members (State the number and name of the job titles to be controlled
by this
Reporting to this post job)
Job summary (A brief description about the job is to be provided here)
Job duties (State the day to day tasks to be performed as part of this
job and also provide the objective of each of these tasks.)
Authority Limits (Provide details regarding the prior permission

requirements for select decisions)
Working conditions (Identify the nature of working condition required for the
job)
Technical requirement (Mention whether any technical specification is required)
Skills required (State the minimum skills and competencies required for an
effective performance of the job.)
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Experience required (Mention the minimum experience required for the
performance of the job.)
Special Circumstances (Provide information about night shifts, overtime, extensive
traveling)
Special requirements (Specify the special tools and equipment requirements for
the job.)
Typical format of Job Description of a House Keeper
Job Title House keeper

Job Summary Organize the daily clearing and services of all bed rooms
and public rooms.
Supervise the collection, laundry and distribution of bed
and table linen and staff uniforms.
Organize room service for early morning teas and
breakfasts (up to 11.00 a.m. daily).
Requisition and control of the following stock: a) Cleaning
materials b) Linen c) Room service crockery.
Inspect staff accommodation with the hotel manager
weekly.
Liaison with reception staff on accommodation services
and security.
Plan and implement training of departmental staff in all
relevant craft skills, social skills, fire drills and induction.
Assist and advise the managers in planning repairs and
maintenance work, replacement of furnishings, fittings and
equipment.
Assist and advise in the selection of housekeeping staff.
Job Requirements Responsible for all activities and operation of the

housekeeping department.
Skills
Equipment used
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Supervision Job supervisor: Hotel manager

Job Subordinates: Floor house keepers, room maids,
laundry maids etc..,
Job relationship Contact maintenance staff, all departmental heads and

reception staff, fire inspection and fire equipment,
contracts, promotion to.
Qualification
Limits of Authority Cash up to on any purchase
Disciplines: Recommend dismissal of staff to manager.
Job Specification
Job specification can either be part of the job description or an independent statement. It is
actually a document that specifies the minimum acceptable qualities required for a person to
complete the job satisfactorily.
Definition
Job specification is the process of inferring the human trait requirements presumed to be
necessary for successful job performance.
Job specification sets out the education, qualification, training, personal attributes, and
competencies a job holder requires to perform her or his job satisfactory.
It usually contains the details of the employees characteristics and the qualifications essential for
the job. The job characteristics may include physical, mental, social and Behavioural characters
of the job holders. The qualifications may include education, experience, skills and other back
ground requirement for a job holder. Physical characteristics/ specifications include height,
weight, chest, vision, hearing, health, age, voice, poise, hand and foot coordination etc..,. Social
and psychological characteristics/ specifications comprise emotional stability, flexibility,
personal appearance, pleasing manners, initiative, drive, conversational ability etc..,. Mental
Characteristics / specifications comprise of abilities to perform arithmetic calculations, to
interpret data, information and blue prints, to read electrical circuits, ability to plan, reading
abilities, scientific abilities, judgment, ability to handle variable situations, memory power etc..,.
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Behavioural Characteristics/ specifications include judgment, research, creativity, teaching
ability, maturity level, trial of conciliation, self- reliance, and dominance etc.., these
specifications play an important role in selecting the candidates for higher level jobs in the
organizational hierarchy. These specifications seek to describe the acts of managers rather than
the traits that cause the acts.
All these traits may be classified into 3 categories:
1. Essential attributes which a person must posses.
2. Desirable attributes which a person ought to posses.
3. Contra- indicators which will become a handicap to successful job performance.
The important components of a job specification are listed as follows

Education and Training: A job specification states whether the job requires school or college
level education. It mentions the technical or professional qualification requirements of the job
holder. Finally, it specifies minimum training requirements the job holder must have completed.
Work Experience: A job specification prescribes the work experience requirements for the job
holder and some times also the minimum experience for effective performance.
Skills and competencies: Under this component head, a job specification states the types of
skills necessary for the satisfactory performance of the job. It indicates the nature of skills
required like computer skills, communication skills, technical skills, and statistical skills.
Physical Strength and stamina: If the job involves physical activities like lifting or moving
heavy objects, the job specification also mentions the physical requirements of the job holder. It
indicates the nature of skills required like computer skills, communication skills, technical skills,
and statistical skills.
Stress Coping: When the nature of the job requires a lot of stress endurance and involves
constant work pressure in the form of deadlines or night shifts, the stress management ability of
the candidate should be mentioned.
Special Needs: If the job requires any special skills, knowledge and ability like extensive
traveling, working at odd hours, and good memory power, it should be clearly mentioned.
Typical format of Job Specification of a House Keeper
Job Title: Executive House keeper

Description Essential Desirable
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1. Physical make up
Sex Female
Age Over 25 years 28-35 years
Height Over 52
Health No serious Disability Sound health
record
Eye Sight Normal vision Over past 5
years
2. Educational attainments
School certification Graduate
Further education Diploma in
HK
Recognized skills and training Diploma in
HM
Be able to express her self efficiency
3. Work Experience
Experience in this part of industry 5 years in HK Supervisory
experience Laundry Experience
4. Personnel characteristics Affability Good
reference
Honesty regarding
from
Stability previous
employer 5. 5. Personal circumstances Live in/out Live in
Children live within 5
miles
None under 10
years.
Job Evaluation
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Job evaluation is a systematic way of determining the value/worth of a job in relation to other
jobs in an organization. It tries to make a systematic comparison between jobs to assess their
relative worth for the purpose of establishing a rational pay structure.
Job evaluation needs to be differentiated from job analysis. Job analysis is a systematic way of
gathering information about a job. Every job evaluation method requires at least some basic job
analysis in order to provide factual information about the jobs concerned. Thus, job evaluation
begins with job analysis and ends at that point where the worth of a job is ascertained for
achieving pay-equity between jobs.
In other words, Job evaluation is the process of systematically determining a relative internal
value of a job in an organization. In all cases the idea is to evaluate the job, not the person doing
it. Job evaluation is the process of determining the worth of one job in relation to that of the other
jobs in a company so that a fair and equitable wage and salary system can be established.
Features of Job Evaluation
The purpose of job evaluation is to produce a defensible defensive ranking of jobs on which a
rational and acceptable pay structure can be built. The important features of job evaluation may
be summarized thus:
It tries to assess jobs, not people.
The standards of job evaluation are relative, not absolute.
The basic information on which job evaluations are made is obtained from job analysis.
Job evaluations are carried out by groups, not by individuals.
Some subjective element is there in job evaluation.
Job evaluation does not fix pay scales, but merely provides a basis for evaluating a
rational wage structure.
Some Principles of Job Evaluation
Clearly defined and identifiable jobs must exist. These jobs will be accurately described
in an agreed job description.
All jobs in an organisation will be evaluated using an agreed job evaluation scheme.
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Job evaluators will need to gain a thorough understanding of the job

Job evaluation is concerned with jobs, not people. It is not the person that is being
evaluated.
The job is assessed as if it were being carried out in a fully competent and acceptable
manner.
Job evaluation is based on judgement and is not scientific. However if applied correctly it
can enable objective judgements to be made.
It is possible to make a judgement about a job's contribution relative to other jobs in an
organisation.
The real test of the evaluation results is their acceptability to all participants.
Job Evaluation Process
An Overview
Job Evaluation is a technique to rank jobs in an organization on the basis of the duties and
responsibilities assigned to the job. The job evaluation process results in a job being assigned to a
pay grade. The pay grade is associated with a pay range that is defined by a minimum and a
maximum pay rate.
Job evaluation plans have been in use for approximately 75 years in the public and private
sectors. There are many variations to the design a job evaluation plan. However, they all
basically follow the same approach, which is to value each job in a defined group of jobs based
on a common set of generic factors.
The first set of decisions that an organization is required to make when installing a job
evaluation plan is to determine which jobs in the organization will be covered by the plan and
what factors will be used in the job evaluation process.
Company lists factors that are frequently used in job evaluation plans. The factors are selected
depending upon the type of jobs to be evaluated. The factors are grouped by the four factors
defined in the Equal Pay Act of 1963.
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Step two in the job evaluation process is to collect information about each job to be evaluated.
This can be done using a job analysis questionnaire, job descriptions, observation and interviews
with employees and supervisors.
Step three in the process is to systematically rate each job based on the job evaluation factors
selected. The points assigned for each of the factors are totaled for each job.
Step four is to select the benchmark jobs from the jobs that have been evaluated. The benchmark
jobs are those jobs commonly found in most organizations and are typically included in salary
surveys. The benchmark jobs connect the internal pay structure with the external labor market.
Job evaluation as a process is advantageous to a company in many ways:
1. Reduction in inequalities in salary structure - It is found that people and their

motivation is dependent upon how well they are being paid. Therefore the main objective
of job evaluation is to have external and internal consistency in salary structure so that
inequalities in salaries are reduced.
2. Specialization - Because of division of labour and thereby specialization, a large number
of enterprises have got hundred jobs and many employees to perform them. Therefore, an
attempt should be made to define a job and thereby fix salaries for it. This is possible
only through job evaluation.
3. Helps in selection of employees - The job evaluation information can be helpful at the
time of selection of candidates. The factors that are determined for job evaluation can be
taken into account while selecting the employees.
4. Harmonious relationship between employees and manager - Through job evaluation,
harmonious and congenial relations can be maintained between employees and
management, so that all kinds of salaries controversies can be minimized.
5. Standardization - The process of determining the salary differentials for different jobs
become standardized through job evaluation. This helps in bringing uniformity into salary
structure.
6. Relevance of new jobs - Through job evaluation, one can understand the relative value
of new jobs in a concern.
Job Evaluation Methods
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There are three basic methods of job evaluation: (1) ranking, (2) classification, (3) factor
comparison. While many variations of these methods exist in practice, the three basic
approaches are described here.
Ranking Method
Perhaps the simplest method of job evaluation is the ranking method. According to this method,
jobs are arranged from highest to lowest, in order of their value or merit to the
organization. Jobs also can be arranged according to the relative difficulty in performing
them. The jobs are examined as a whole rather than on the basis of important factors in the
job; and the job at the top of the list has the highest value and obviously the job at the
bottom of the list will have the lowest value.
Jobs are usually ranked in each department and then the department rankings are combined to
develop an organizational ranking. The following table is a hypothetical illustration of ranking of
jobs.
Table: Array of Jobs according to the Ranking Method
Rank Monthly salaries
1. Accountant Rs 3,000
2. Accounts clerk Rs 1,800
3. Purchase assistant Rs 1,700
4. Machine-operator Rs 1,400
5. Typist Rs 900
6. Office boy Rs 600
The variation in payment of salaries depends on the variation of the nature of the job performed
by the employees. The ranking method is simple to understand and practice and it is best suited
for a small organization. Its simplicity, however, works to its disadvantage in big organizations
because rankings are difficult to develop in a large, complex organization. Moreover, this kind of
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ranking is highly subjective in nature and may offend many employees. Therefore, a more
scientific and fruitful way of job evaluation is called for.
Classification Method
According to this method, a predetermined number of job groups or job classes are established
and jobs are assigned to these classifications. This method places groups of jobs into job classes
or job grades. Separate classes may include office, clerical, managerial, personnel, etc. Following
is a brief description of such a classification in an office.
(a) Class I - Executives: Further classification under this category may be Office
manager, Deputy Office manager, Office superintendent, Departmental supervisor,
etc.
(b) Class II - Skilled workers: Under this category may come the Purchasing assistant,
Cashier, Receipts clerk, etc?
(c) Class III - Semiskilled workers: Under this category the Steno typists, Machine-
operators, Switchboard operators, etc.., may come.
(d) Class IV - Semiskilled workers: This category comprises Dataries, File clerks, Office
boys, etc.
The job classification method is less subjective when compared to the earlier ranking method.
The system is very easy to understand and acceptable to almost all employees without hesitation.
One strong point in favor of the method is that it takes into account all the factors that a job
comprises. This system can be effectively used for a variety of jobs.
The weaknesses of the job classification method are:
Even when the requirements of different jobs differ, they may be combined into a single
category, depending on the status a job carries.
It is difficult to write all-inclusive descriptions of a grade.
The method oversimplifies sharp differences between different jobs and different grades.
When individual job descriptions and grade descriptions do not match well, the
evaluators have the tendency to classify the job using their subjective judgments.
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Factor Comparison Method
A more systematic and scientific method of job evaluation is the factor comparison method.
Though it is the most complex method of all, it is consistent and appreciable. Under this method,
instead of ranking complete jobs, each job is ranked according to a series of factors. These
factors include mental effort, physical effort, skill needed, supervisory responsibility, working
conditions and other relevant factors (For instance, know-how, problem solving abilities,
accountability, etc.). Pay will be assigned in this method by comparing the weights of the factors
required for each job, i.e., the present wages paid for key jobs may be divided among the factors
weighed by importance (the most important factor, for instance, mental effort, receives the
highest weight). In other words, wages are assigned to the job in comparison to its ranking on
each job factor.
The steps involved in factor comparison method may be briefly stated thus:
Select key jobs (say 15 to 20), representing wage/salary levels across the organization.
The selected jobs must represent as many departments as possible.
Find the factors in terms of which the jobs are evaluated (such as skill, mental effort,
responsibility, physical effort, working conditions, etc.).
Rank the selected jobs under each factor (by each and every member of the job
evaluation committee) independently.
Assign money value to each factor and determine the wage rates for each key job.
The wage rate for a job is apportioned along the identified factors.
All other jobs are compared with the list of key jobs and wage rates are determined.
An example of how the factor comparison method works is given below:
Table: Merits and Demerits of Factor Comparison Method
Demerits
Merits
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Analytical and objective. Difficult to understand,

Reliable and valid as each job explain and operate.
is compared with all other jobs
Its use of the same criteria to
in terms of key factors.
Money values are assigned in assess all jobs is questionable
as jobs differ across and within
a fair way based on an agreed
organizations.
rank order fixed by the job
evaluation committee.
Time consuming and costly.
Flexible as there is no upper

limitation on the rating of a
factor.
Point Method
This method is widely used currently. Here, jobs are expressed in terms of key factors. Points are
assigned to each factor after prioritizing each factor in the order of importance. The
points are summed up to determine the wage rate for the job. Jobs with similar point
totals are placed in similar pay grades. The procedure involved may be explained thus:
(a) Select key jobs. Identify the factors common to all the identified jobs such as skill, effort,
responsibility, etc.
(b) Divide each major factor into a number of sub factors. Each sub factor is defined and
expressed clearly in the order of importance, preferably along a scale.
The most frequent factors employed in point systems
Skill (key factor): Education and training required, Breadth/depth of experience required,
Social skills required, Problem-solving skills, Degree of discretion/use of judgment,
Creative thinking;
Responsibility/Accountability: Breadth of responsibility, Specialized responsibility,
Complexity of the work, Degree of freedom to act, Number and nature of subordinate
staff, Extent of accountability for equipment/plant, Extent of accountability for
product/materials;
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Effort: Mental demands of a job, Physical demands of a job, Degree of potential stress.
The educational requirements (sub factor) under the skill (key factor) may be expressed thus in
the order of importance.
1. Able to carry out simple calculations; High School educated
2. Does all the clerical operations; computer literate; graduate
3. Handles mail, develops contacts, takes initiative and does work independently; post
graduate
Assign point values to degrees after fixing a relative value for each key factor.
Table: Point Values to Factors along a Scale
Point values for Degrees Total
Factor 1 2 3 4 5
Skill 10 20 30 40 50 150
Physical effort 8 16 24 32 40 120
Mental effort 5 10 15 20 25 75
Responsibility 7 14 21 28 35 105
Working conditions 6 12 18 24 30 90
Maximum total points of all factors depending on their importance to job =540 (Bank Officer)
4. Find the maximum number of points assigned to each job (after adding up the point values
of all sub-factors of such a job). This would help in finding the relative worth of a job. For
instance, the maximum points assigned to an officers job in a bank come to 540. The managers
job, after adding up key factors + sub factors points, may be getting a point value of, say 650
from the job evaluation committee. This job is now priced at a higher level.
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5. Once the worth of a job in terms of total points is expressed, the points are converted into
money values keeping in view the hourly/daily wage rates. A wage survey, usually, is undertaken
to collect wage rates of certain key jobs in the organization. Lets explain this:
Table: Conversion of Job Grade Points into Money Value
Point range Daily wage rate (Rs) Job grades of key bank officials
500-600 300-400 1 Officer
600-700 400-500 2 Accountant
700-800 500-600 3 Manager I Scale
800-900 600-700 4 Manager II Scale
900-1,000 700-800 5 Manager III Scale
Merits and Demerits
The point method is a superior and widely used method of evaluating jobs. It forces raters to look
into all keys factors and sub-factors of a job. Point values are assigned to all factors in a
systematic way, eliminating bias at every stage. It is reliable because raters using similar criteria
would get more or less similar answers. The methodology underlying the approach contributes
to a minimum of rating error (Robbins, p.361). It accounts for differences in wage rates for
various jobs on the strength of job factors. Jobs may change over time, but the rating scales
established under the point method remain unaffected.
On the negative side, the point method is complex. Preparing a manual for various jobs, fixing
values for key and sub-factors, establishing wage rates for different grades, etc., is a time
consuming process.
According to Decenzo and Robbins, the key criteria must be carefully and clearly identified,
degrees of factors have to be agreed upon in terms that mean the same to all rates, the weight of
each criterion has to be established and point values must be assigned to degrees. This may be
35
too taxing, especially while evaluating managerial jobs where the nature of work (varied,
complex, novel) is such that it cannot be expressed in quantifiable numbers.
Job Design
In a simple sense, job design is the division of the work of the organization among its employees.
It is basically a combination of the job content and the work method adopted in the job. Job
content states the tasks to be performed as part of the job while the work method deals with the
mode of performing the job. Certainly, a well designed job can have a definite impact on the
performance of the job and its contribution to the overall growth of the organization. It can also
make the work experience of the employees more rewarding and productive. On the other hand,
a poorly designed job often causes difficulties in strategy formulation and also in the proper
alignment of various functional activities. Thus, the basic aim of a job design is to clearly
establish the role of each job and the job holder in the overall system of an organization.
The designing of a job often involves responding to certain questions: What tasks need to be
done as part of a job? Who should do the job? How should it be done? Where should it be done?
While designing a job, the firm must keep in mind the organizational interest in terms of
productivity, performance and quality. At the same time, it should also consider the employee
interest in terms of satisfaction, challenges and the growth potential available in the job.
Job design should always be in alignment with the strategic goals of the organization. Besides, it
is essential for an organization to ensure that its jobs are designed only by the people with
adequate experience and exposure in this profession. Further, the job design must be written in a
simple language so that it can be easily understood by all the stakeholders. Finally, it should be
agreeable to both the management and the employees.
Definition
Job design is the specification of the contents, methods, and relationships of jobs in order to
satisfy technological and organizational requirements as well as the social and personal
requirements.
Job design is the process of determining the specific tasks to be performed, the methods used
in performing these tasks, and how the job relates to other work in the organization.
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Benefits of Job Design
It enables the organization to develop a competent, dynamic and responsive work force.
It ensures that the customers get high quality goods and services without any delay and
interruptions.
It helps the firm in achieving cost reduction by eliminating the causes of accidents and
injuries through enhanced health and safety measures.
It enhances the employees satisfaction, motivation, involvement and commitment
leading to improved cooperation between the management and the employees.
It offers wide opportunities to the employees to convey their views and opinions to the
management through participative management programmes.
Its implementation often requires the employees to undergo periodic training to upgrade
their kills and thus helps them in their career growth.
It contributes effectively to the organizational effectiveness and as a result, to the
competitiveness of the organization in the market.
Recent Trends in Job design
In the changing labour market scenario, organizations are competing with one another to devise
strategies to attract and retain their best work force. Companies no longer depend on the
conventional method of monetary benefit alone to retain their employees. They effectively use
intrinsic motivational techniques like job design, job enrichment and job reengineering to offer
the necessary job satisfaction. We shall now see a few modern techniques.
E- Commuting
E- Commuting (also called telecommuting) is a kind of work system in which the distance
barrier is overcome by means of telecommunication. It facilitates the employees to perform their
jobs without being present in office. It is a facility provided to a select number of employees.
They may work from home for a relatively longer period of time. For instance, e-commuting can
be extended to employees who are pregnant, sick or on long tour. Several software companies
find it convenient and feasible to offer this facility to their employees. Companies are reaping
several benefits from their e- commuting policies and practices. Some of these are enhanced
productivity, reduced absenteeism and attrition, economy in operations and, above all, high job
satisfaction and commitment.
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However, e-commuting has a few defects that usually hamper its emergence as a major
phenomenon. These defects are: (i) the absence of social interaction and team spirit among
employees; (ii) the inability to establish effective supervision and control over the employees;
(iii) the high initial cost on infrastructure; and (iv) Problems in evaluating the performance of
these employees.
Of late, a few companies have moved beyond e-commuting to even more advanced systems. For
instance, part employments based exclusively on mobiles to intranets are offered to prospective
candidates by IT companies.
Flexi time Work
Flexitime work is another alternative work practice followed by organizations to achieve better
cooperation from employees and to ensure enhanced motivation and commitment. The flexitime
scheme is actually a work design in which employees are allowed to work during pre-
determined work hours.
In this method, employees have the freedom to choose their flexible starting and ending time of
work within the scheduled working hours of the organization. The individuals working hours are
determined as per the convenience of each employee. As employee may follow his own working
hours or his team working hours, depending upon his requirements. It is absolutely essential for
an employee to record his name entry and exit. In any case, the company will make no
compromise on the quality of the job.
The main merits of this method are:
In helps the employees strike a proper work life balance.
It enables the organization to create a high level of employees morale and motivation.
It reduces job stress among employees substantially as stress- causing factors like
inconvenient timings, logistical problems and child nurturing difficulties can be
managed effectively. It ensures the optimum use of the available infrastructure like office
and parking space, equipment like computers, and other devices.
It is an efficient tool to reduce employee absenteeism and attrition and enhance
productivity.
UNIT 3
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CONTENT-ACTION AREAS Selection and Recruitment Induction and Placement
Performance Appraisal Performance Appraisal Methods Transfer Promotion and
Reward Polices Training and Development Off the Job training methods On the job
training methods
Definition
The recruitment and selection is the major function of the human resource department and
recruitment process is the first step towards creating the competitive strength and the strategic
advantage for the organisations. Recruitment process involves a systematic procedure from
sourcing the candidates to arranging and conducting the interviews and requires many resources
and time.
Recruitment refers to the process of sourcing, screening, and selecting people for a job or
vacancy within an organization. Though individuals can undertake individual components of the
recruitment process, mid- and large-size organizations generally retain professional recruiters.
Objective
To attract potential employees into the rolls of the company

To make a positive impact with our clients, thereby increase the goodwill and equity for
the Company, leading to better market standing.
Recruitment Process
Identifying the vacancy:

The recruitment process begins with the human resource department receiving requisitions for
recruitment from any department of the company.
39
1. Identify vacancy
2. Prepare job description and person specification
3. Advertising the vacancy
4. Managing the response
5. Short-listing
6. Arrange interviews
7. Conducting interview and decision making
The recruitment process is immediately followed by the selection process i.e. the final interviews
and the decision making, conveying the decision and the appointment formalities.
These are the main recruiting stages.
Sourcing
Sourcing involves:
1) Advertising, a common part of the recruiting process, often encompassing multiple media,
such as the Internet, general newspapers, job ad newspapers, professional publications, window
advertisements, job centers, and campus graduate recruitment programs; and
2) Recruiting research, which is the proactive identification of relevant talent who may not
respond to job postings and other recruitment advertising methods done in #1. This initial
research for so-called passive prospects, also called name-generation, results in a list of prospects
who can then be contacted to solicit interest, obtain a resume/CV, and be screened (see below).
Screening & Selection
40
Suitability for a job is typically assessed by looking for skills, e.g. communication, typing, and
computer skills. Qualifications may be shown through rsums, job applications, interviews,
educational or professional experience, the testimony of references, or in-house testing, such as
for software knowledge, typing skills, numeracy, and literacy, through psychological tests or
employment testing.
In some countries, employers are legally mandated to provide equal opportunity in hiring.
On boarding
A well-planned introduction helps new employees become fully operational quickly and is often
integrated with the recruitment process.
Purpose & Importance of Recruitment
Attract and encourage more and more candidates to apply in the organization.
Create a talent pool of candidates to enable the selection of best candidates for the
organisation.
Determine present and future requirements of the organization in conjunction with its
personnel planning and job analysis activities.
Recruitment is the process which links the employers with the employees.
Increase the pool of job candidates at minimum cost.
Help increase the success rate of selection process by decreasing number of visibly under
qualified or overqualified job applicants.
Help reduce the probability that job applicants once recruited and selected will leave the
organization only after a short period of time.
Meet the organizations legal and social obligations regarding the composition of its
workforce.
Begin identifying and preparing potential job applicants who will be appropriate
candidates.
Increase organization and individual effectiveness of various recruiting techniques and
sources for all types of job applicants
Sources of Recruitment
41
Every organisation has the option of choosing the candidates for its recruitment processes from
two kinds of sources: internal and external sources. The sources within the organisation itself
(like transfer of employees from one department to other, promotions) to fill a position are
known as the internal sources of recruitment. Recruitment candidates from all the other sources
(like outsourcing agencies etc.) are known as the external sources of recruitment.
SOURCES OF RECRUITMENT
Internal Sources of Recruitment
1. TRANSFERS: The employees are transferred from one department to another according
to their efficiency and experience.
2. PROMOTIONS: The employees are promoted from one department to another with more
benefits and greater responsibility based on efficiency and experience.
3. Others are Upgrading and Demotion of present employees according to their
performance.
4. Retired and Retrenched employees may also be recruited once again in case of shortage
of qualified personnel or increase in load of work. Recruitment such people save time and
costs of the organisations as the people are already aware of the organisational culture
and the policies and procedures.
5. The dependents and relatives of Deceased employees and Disabled employees are also
done by many companies so that the members of the family do not become dependent on
the mercy of others.
External Sources of Recruitment
42
1. PRESS ADVERTISEMENTS: Advertisements of the vacancy in newspapers and

journals are a widely used source of recruitment. The main advantage of this method is
that it has a wide reach
2. EDUCATIONAL INSTITUTES: Various management institutes, engineering colleges,
medical Colleges etc. are a good source of recruiting well qualified executives, engineers,
medical staff etc. They provide facilities for campus interviews and placements. This
source is known as Campus Recruitment.
3. PLACEMENT AGENCIES: Several private consultancy firms perform recruitment
functions on behalf of client companies by charging a fee. These agencies are particularly
suitable for recruitment of executives and specialists. It is also known as RPO
(Recruitment Process Outsourcing)
4. EMPLOYMENT EXCHANGES: Government establishes public employment exchanges
throughout the country. These exchanges provide job information to job seekers and help
employers in identifying suitable candidates.
5. LABOUR CONTRACTORS: Manual workers can be recruited through contractors who
maintain close contacts with the sources of such workers. This source is used to recruit
labour for construction jobs.
6. UNSOLICITED APPLICANTS: Many job seekers visit the office of well-known
companies on their own. Such callers are considered nuisance to the daily work routine of
the enterprise. But can help in creating the talent pool or the database of the probable
candidates for the organisation.
7. EMPLOYEE REFERRALS / RECOMMENDATIONS: Many organisations have
structured system where the current employees of the organisation can refer their friends
and relatives for some position in their organisation. Also, the office bearers of trade
unions are often aware of the suitability of candidates. Management can inquire these
leaders for suitable jobs. In some organizations these are formal agreements to give
priority in recruitment to the candidates recommended by the trade union.
8. RECRUITMENT AT FACTORY GATE: Unskilled workers may be recruited at the
factory gate these may be employed whenever a permanent worker is absent. More
efficient among these may be recruited to fill permanent vacancies.
43
Recruitment Practices in India
Since 1991, the business environment in India had been dynamic and continuously changing.
Business organizations have been growing at a very rapid pace and globalizing. Consequently,
organizations are now looking for a globally competitive work force. These changing
expectations and requirements have completed the Indian Industrial management to introduce
changes in every sphere of HR activity, including recruitment.
Companies, now, judiciously combine the traditional recruitment sources and the modern ones
to procure the best-of-the-breed labour force. They are increasingly searching for human
resources best suited to achieving their long-run objectives and strategies rather than searching
for only prospective employees. At managerial levels, they place greater significance on
professional competence employees. At managerial levels, they place greater significance on
team work and leadership potential, communication and innovation skills, together with a
practical and structured approach to problem solving. The major sources of recruitment in
India are explained as follows:
Internal Sources Existing Employee, Employee Referrals
External Sources Advertising, Private Employment Agencies, Internet Recruiting.

Selection
Introduction
Once the applicant pool is prepared, the next step for the HR department is to implement be the
predetermined selection process in order to select the best candidate for the job. The aim of this
process is to finally end up with candidates best suited for the vacant jobs. the organization must
be able to distinguish the applicants who are most likely to perform well as employees from the
others who are less suitable. Of late, the hirers are attempting to measure even the candidate's
mental make-up and personal values to decide how closely they match those of the
organization.' Obviously, selecting the most suitable candidate for a job is never an easy task for
an organization, but it becomes all the more difficult when the organization has to screen
candidates to fill vacancies that are critical to the organization. This is because any faulty
decision in the selection of employees can have a far-reaching impact on performance and future
of the organization. We may conclude that selection is a systematic process of identifying
44
suitable candidates for the jobs available in the organization from the available applicant pool.
Definition
"Selection is the process by which candidates for employment are divided into two classes-
those who I will be offered employment and those who will not.
"Selection is the process of differentiating between; applicants in order to identify (and hire)
those with a; greater likelihood of success in a job."
Differences between Recruitment and Selection
Though the terms recruitment and selection are often treated as interchangeable, there are
differences between the two terms. Though few, they are worth mentioning. The table below
shows the differences between recruitment and selection.
Recruitment Selection
1. The process of procurement begins with 1. The process of procurement ends with the
the recruitment of candidates from different selection of the necessary no. of suitable
sources candidates for the job.
2. Since the aim of recruitment is to gather as 2. Selection attempts to eliminate the applicants
many applicants possible for the jobs in an in different stages to end up with a smaller
organization. It is a positive task. number of requisite candidates, and is thus a
negative task
3. Recruitment is comparability easy as it 3. Selection is difficulty job as it require
dies not require expertise on the part of the specialized knowledge and skills on the part of
recruiters to build on applicant pool. selectors to choose the best candidate by
predicting their lightly performance.
4.Recruitment is a basically a searching 4. Selection is a basically a screening function
process as it searched for prospective as it screens the candidates for their suitability
candidates for the job offered job offered.
Phases of the Selection Process
As there is no commonly accepted selection process available, organizations may have to adopt
different selection processes for different jobs, depending upon their nature and requirements.
Nonetheless, the aim of any selection process is to gather relevant and critical information about
an applicant at every stage of the process in order to determine his/her suitability for the job
45
offered. The selection process broadly involves measurement, decision making, and evaluation,
as explained below.
Phase -1 Phase -2 Phase -3

Evaluation
Measurement Decision Making
Ensuring the Identifying the
Verification of completeness of role and
the accuracy employee data effectiveness of
and consistency into make the selection
of selection accurate and from the
techniques. uncompromising organizational
selection decision prospective.
A good selection process must be able to distinguish applicants who are likely to perform well in
the job from those who are not. An organization adopts various steps in the selection process to
predict the likely performance of each applicant in the job. These steps are briefly presented as
follows:
Employment Application Forms/Blanks: These refer to a standardized format to collect

the necessary information about an applicant to determine his suitability for the job.
Selection Test: This is a psychological test for comparing and contrasting the behaviour
of two or more persons on the basis of a standardized measure in order to predict their
likely job performance, if selected.
Selection Interview: This is a face-to-face conversation with the candidate to collect the
required information that could not be collected through other selection tools to determine
his suitability for a job.
Reference Check: This is a process of cross-checking information provided by the
candidates in different stages of the selection process with the references cited by the
candidates themselves.
Physical Examination: This is a medical test to ensure that he candidates selected met
the physical requirements of the job.
Job offer: A job offer is a normal communication from the employer to the selected
candidates that specifies the details of an offer of job. This job offer generally provides
information about job description, reporting to, pay particulars, and leave eligibility.
46
Performance Appraisal
According to Flippo, "Performance appraisal is the systematic, periodic and an impartial rating of
an employee's excellence in matters pertaining to his present job and his potential for a better
job".
According to Dale Yoder, "Performance appraisal includes all formal procedures used to evaluate
personalities and contributions and potentials of group members in a. working organisation. It is a
continuous process to secure information necessary for making correct and objective decisions on
employees".
According to C.D. Fisher, L.F. Schoenfeldt and J.B. Shaw, "Performance appraisal is the process
by which an employee's contribution to the organisation during a specified period of time is
assessed".
Objectives of Performance Appraisal
Performance appraisal plans are designed to meet the needs of the organisation and the individual.
It is increasingly viewed as central to good human resource management. Performance appraisal
could be under-taken either for evaluating the performance of employees or for developing them.
The evaluative purpose has a historical dimension and is concerned primarily with looking back at
how employees have actually performed over given time period, compared with required
standards of performance. The developmental purpose is concerned with the identification of
employee's training and development needs.
Appraisal of employees serves several useful purposes.

l. Feedback: It series as a feedback to the employee. It tells him what he can do to improve the
present performance and go up the "organisational ladder". The appraisal thus facilitates self-
development. It also makes the employee aware of his key performance areas.
2. Compensation Decisions: It provides inputs to system of rewards. The approach to
compensation is at the heart of the idea that raises should be given for merit rather than for
seniority.
3. Data Base: It provides a valid database for personal decisions concerning placements, pay,
promotion transfer etc. Appraisal also makes the employee aware of his key performance areas.
47
Permanent Performance appraisal records, of employees help management to do planning
without relying upon personal knowledge of supervisors who may be shifted.
Advantages of Performance Appraisal
It is said that performance appraisal is an investment for the company which can be justified by
following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programmes for efficient employees. In this regards, inefficient workers can be dismissed
or demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for
employees. Merit rating is possible through performance appraisal. Performance
Appraisal tries to give worth to a performance. Compensation packages which include
bonus, high salary rates, extra benefits, allowances and pre-requisites are dependent on
performance appraisal. The criteria should be merit rather than seniority.
3. Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programmes. It helps to analyse strengths and
weaknesses of employees so that new jobs can be designed for efficient employees. It
also helps in framing future development programmes.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the
validity and importance of the selection procedure. The supervisors come to know the
validity and thereby the strengths and weaknesses of selection procedure. Future changes
in selection methods can be made in this regard.
5. Communication: For an organization, effective communication between employees and
employers is very important. Through performance appraisal, communication can be
sought for in the following ways:
a. Through performance appraisal, the employers can understand and accept skills of
subordinates.
b. The subordinates can also understand and create a trust and confidence in
superiors.
c. It also helps in maintaining cordial and congenial labour management
relationship.
48
d. It develops the spirit of work and boosts the morale of employees.
All the above factors ensure effective communication.
6. Motivation: Performance appraisal serves as a motivation tool. Through evaluating
performance of employees, a persons efficiency can be determined if the targets are achieved.
This very well motivates a person for better job and helps him to improve his performance in the
future.
TYPICAL APPRAISAL SHEET

F
O
YEAR 2007 - APPRAISAL SHEET R
M
1
DEPARTMENT : DESIGNATION : NAME :
. 2006 YEAR - RESULT EVALUATION 50% 50%

P
1ST 2ND
SELF OI
2006 YEAR - MAIN RESULT PERCENTAGE APP APP
APPR. N
R. R.
T
1
EVALUATION POINT 100%
49
. RESULT EVALUATION GRADE

SELF 1ST 2ND
DIVISION FINAL GRADE
APPRAISE APPRAISE APPRAISE
GRADE
50 50
. PLAN ACTIVITY ABILITY
% %
2
1S N
P
T D
SELF OI
2006 YEARS MAIN RESULT PERCENTAGE AP A
APPR. N
PR P
T
. P
R.
[KNOWAGE]
Do you have the direct and in-direct knowledge for your 15%
job?
[plan and activity ability]

Do you have a work plan and the activity-ability for your
20%
job through collecting the information and making work-
procedure plan and comprehensive plan?
[leadership]
Do you have leadership-like communication for each
15%
employee and application-ability for the rapidly
changing market?
[collecting information and analysis]
Do you collect the current information through the
20%
various root-cause analysis and forecast the future-
ability?
[team work]
Ability to achieve results on the job through
15%
communication and negotiation inside/outside the
factory ?
[challenge/innovation/improvement intention]
challenge/innovation/improvement intention by positive 15%
and activity work
Evaluation point 100%
i. Evaluaion for Plan activity ability
SELF 1ST 2ND

Division FINAL GRADE
Grade
. Evaluation total
PLAN
Evaluation
Result 40% ACTIVITY 30% General 30%
rate
ABILITY
50
SELF 1ST 2ND

DIVISION
FINAL
POINT POINT POINT POINT GRADE
POINT
Result
Ability
General
. EVALUATION POINT AND GRADE . APPLICATION FOR SALARY
APPLY GRADE
GRADE S A B C D
POINT POINT
1
20 15 5
S SPECIAL 100 MIN.90 25% 0
% % %
%
VERY
A 80 80~90
GOOD * According to grade, increase
the salary
B GOOD 70 70~80
C NORMAL 60 60~70
D BAD 50 BELOW 60
F
O
R
V. Description of your opinion for this evaluation
M
2
Self
first
51
second
. 2006 YEAR - MAIN TARGET WORK (2006.APRIL-

2007.MAR)
Ac
Me hie
Achie
as ve
Meas tar
ve
uri target
2006 YEAR MAIN TARGET WORK PERCENTAGE uring ng
get
for
for
unit per 1st
2nd
iod year
yea
r
EVALUATION POINT 100%
* Measuring unit : Amount, achieve rate, time

** Measuring period : week/month/half year/year
Performance Appraisal Methods
Performance appraisal means evaluating an employees current or past Performance relative to

the persons performance standards. Appraisal involves:
(i) Setting work standards

(ii) Assessing the employees actual performance relative to these standards
(iii) Providing feedback to the employees with the aim of motivating that person to eliminate
deficiencies or to continue to perform above par.
Managers usually conduct the appraisal using a predetermined and formal method. Various
methods of appraisal include:-
52
1. Graphic rating scale method.
2. Alternate ranking method
3. Paired comparison method
4. Forced distribution method
5. Critical incident method
6. Narrative forms
7. Behaviorally anchored rating scales
8. Management by objective (MBO)
9. 360 degree feedback.
Graphic rating scale method:- The graphic rating scale method is the simplest and most
popular technique for appraising performance. A graphic rating scale list traits (such as quality
and reliability) and a range of performance values (from unsatisfactory to outstanding) for each
trait. Subordinates are rated by circling of checking the score that best describes his or her
performance for each trait. Then the total of assigned value is calculated.
Alternate ranking method:- This method involves ranking employees from best to worst on a
particular trait, choosing highest, then lowest until all are ranked. Since it is easier to distinguish
between the worst and best employees and alternate ranking is quite popular. First, list all
subordinates to be rated. Then indicate the employee who is the highest on the characteristic
being measured and also the one who is lowest. The process continues till all the employees are
ranked on similar fashion.
Paired comparison method:- Paired comparison method helps make the ranting method more
precise. For every trait (quality of work, quality etc), Pairs are made and every subordinate is
compared with every other subordinate.
Forced distribution method:- Forced distribution method is similar to grading on a curve. With
this method, manager place predetermined percentage or rates in to performance categories. For
example you may decide to distribute employees as follows:
15% high performance
20% High average performance
53
30% average performance
20% low average performance
15% low performance
Forced distribution means tow things for employee: Not everyone can get an A; and ones
performance is always rated relative to ones peers. One practical, one practical, if low-tech, way
to do this is to write each employees name on a separate index card. Then for each trait (quality
of work, creativity etc.) managers place the employees card in the appropriate performance
category.
Critical Incident Method:- Critical incident method involves keeping a record of uncommonly
good or undesirable examples of an employees work related behavior and reviewing it with the
employee at predetermined time.
Narrative Forms:- The final written appraisal is often in narrative form. A persons supervisor is
asked (i) to rate the employees performance for each performance factor or skill (ii) to write
down examples and (iii) an important plan. This aids the employee to understand where his or
her performance was good or bad and how to improve that performance.
Behaviorally Anchored Rating Scales is an appraisal method that aims at combining the
benefits of narrative critical incidents and quantified ratings by anchoring a quantified scale with
specific narrative example of good and poor performance.
The concept of Management by Objectives (MBO) was first given by Peter Drucker in
1954. It can be defined as a process whereby the employees and the superiors come together
to identify common goals, the employees set their goals to be achieved, the standards to be
taken as the criteria for measurement of their performance and contribution and deciding the
course of action to be followed.
The essence of MBO is participative goal setting, choosing course of actions and decision
making. An important part of the MBO is the measurement and the comparison of the
employees actual performance with the standards set. Ideally, when employees themselves
54
have been involved with the goal setting and the choosing the course of action to
be followed by them, they are more likely to fulfill their responsibilities.
THE MBO PROCESS
UNIQUE FEATURES AND ADVANTAGES OF MBO

The principle behind Management by Objectives (MBO) is to create empowered employees
who have clarity of the roles and responsibilities expected from them, understand their
55
objectives to be achieved and thus help in the achievement of organizational as well as
personal goals.
Some of the important features and advantages of MBO are:
Clarity of goals With MBO, came the concept of SMART goals i.e. goals that are:
Specific
Measurable
Achievable
Realistic,
Timebound.
The goals thus set are clear, motivating and there is a linkage between organizational
goals and performance targets of the employees.
The focus is on future rather than on past. Goals and standards are set for the
performance for the future with periodic reviews and feedback.
Motivation Involving employees in the whole process of goal setting and
increasing employee empowerment increases employee job satisfaction and
commitment.
Better communication and Coordination Frequent reviews and interactions

between superiors and subordinates helps to maintain harmonious relationships
within the enterprise and also solve many problems faced during the period.
Training and Development
Training is a process of learning a sequence of programmed behaviour. It improves the

employees performance on the current job and prepares them for an intended job.
Development not only improves job performance but also brings about the growth of the
personality. Individuals not only mature regarding their potential capacities but also become
better individuals.
Difference between Training & Development:

Training:
1. Its a short term process.
56
2. Refers to instruction in technical and mechanical problems
3. Targeted in most cases for non-managerial personnel
4. Specific job related purpose
Development:
1. It is a long term educational process.
2. Refers to philosophical and theoretical educational concepts
3. Managerial personnel
4. General knowledge purpose
Purpose of Training:
1. To improve Productivity: Training leads to increased operational productivity and

increased company profit.
2. To improve Quality: Better trained workers are less likely to make operational mistakes.
3. To improve Organizational Climate: Training leads to improved production and

product quality which enhances financial incentives. This in turn increases the overall
morale of the organization.
4. To increase Health and Safety: Proper training prevents industrial accidents.
5. Personal Growth: Training gives employees a wider awareness, an enlarged skill base
and that leads to enhanced personal growth.
Steps in Training Process:
1. Discovering or Identifying Training needs: A training program is designed to assist in

providing solutions for specific operational problems or to improve performance of a
trainee.
Organizational determination and Analysis: Allocation of resources that relate

to organizational goal.
Operational Analysis: Determination of a specific employee behaviour required

for a particular task.
57
Man Analysis: Knowledge, attitude and skill one must possess for attainment of
organizational objectives
2. Getting ready for the job: The trainer has to be prepared for the job. And also who
needs to be trained - the newcomer or the existing employee or the supervisory staff.
3. Preparation of the learner:
Putting the learner at ease
Stating the importance and ingredients of the job
Creating interest
Placing the learner as close to his normal working position
Familiarizing him with the equipment, materials and trade terms
4. Presentation of Operation and Knowledge: The trainer should clearly tell, show,
illustrate and question in order to convey the new knowledge and operations. The trainee
should be encouraged to ask questions in order to indicate that he really knows and
understands the job.
5. Performance Try out: The trainee is asked to go through the job several times. This
gradually builds up his skill, speed and confidence.
6. Follow-up: This evaluates the effectiveness of the entire training effort
The Sequence of Training Program can be put in a Flowchart as below:
Discovering or Identifying Training needs -> getting ready for the job -> Preparation of
Learner (Creating desire) -> Presentation of Operation & Knowledge -> Performance Try
out -> Follow up and Evaluation
Training Techniques:
An effective training fulfills the following criteria:
1. Adaptation of the technique/method to the learner and the job
2. Provides motivation to the trainee to improve job performance
3. Creates trainees active participation in the learning process
58
4. Provide knowledge of results about attempts to improve
Development
Management development attempts to improve managerial performance by imparting
1. Knowledge
2. Changing attitudes
3. Increasing skills
The major objective of development is managerial effectiveness through a planned and a

deliberate process of learning. This provides for a planned growth of managers to meet the future
organizational needs.
Development Process:
1. Setting Development Objectives: It develops a framework from which executive need

can be determined.
2. Ascertaining Development Needs: It aims at organizational planning & forecast the

present and future growth.
3. Determining Development Needs: This consists of
Appraisal of present management talent
Management Manpower Inventory
The above two processes will determine the skill deficiencies that are relative to the future needs
of the organization.
1. Conducting Development Programs: It is carried out on the basis of needs of different

individuals, differences in their attitudes and behaviour, also their physical, intellectual
and emotional qualities. Thus a comprehensive and well conceived program is prepared
depending on the organizational needs and the time & cost involved.
2. Program Evaluation: It is an attempt to assess the value of training in order to achieve

organizational objectives.
59
UNIT IV
CONTENT
WAGES AND SALARY ADMINISTRATION Minimum Wage living wage Fair wage
Wage Theory Job Evaluation Wage and Salary Policy Revision of Wages.
INCENTIVES & BENEFITS ADMINISTRATION Effective Incentive Programme
Individual Incentive Programme Group / Team Incentive Programme Employees
Benefits.
Wages and Salary administration usually lies with the top management, who inturn is expected
to develop policies and procedure which will accomplish the companys objectives.
Objectives
Control of costs.
Establishment of fair and equitable remuneration.
Utilization of wages and salaries as an incentive to greater employee productivity
Maintenance of sati factionary public relations image.
Elements
60
Identifying the available salary opportunities, their costs, estimating, satisfaction the
worth of its members to the salary opportunities and communicating them to employees
Relating salary to needs and goals.
Developing quality, quantity and time standards relating to work and goals.
Measuring the actual performance
Comparing the performance with the salary received.
Evaluating the unsatisfied wants and unreached goals of the employees.
Finding out the dissatisfaction arising from unfulfilled needs and unattained goals.
Adjusting the salary levels accordingly with a view to enabling the employees to reach
unreached goals and fulfill the unfulfilled needs.
Functions
To approve the board policy determining, the manner, the system of job description and
evaluation.
To check all activities of the salary administration group.
To recommend the top mgmt the wage policies for the administration of the wage
programme.
To recommend changes in wages policies and in the salary or wage level.
To review wage and salary schemes department wise.
To recommend to top mgmt specific raises for executives above a specified limit.
Factors effecting Salary Levels

Remuneration in comparable industries
Firms ability to pay.
Cost of living
Productivity
Union pressure and strategies
Government legislation
Concept of wages
61
Wages are one of the important factors of production in any organization. It is also an important
determinant of the price and profit of the product. It is also necessary to know the various wage
concepts used in the determination of employee compensation. We shall now see these concepts
briefly
Real Wage
When the income earned by the employees as a reward for their job efforts is expressed in real
purchasing power, it is called real wage. The actual goods and services which wages can buy
constitute real wages. These real wages are usually adjusted for the prevailing rate of inflation.
Any fall in real wages normally indicates the diminishing purchasing power of employees and
reduced consumptions. The consumer price index acts as the basis for calculating such real
wages of the employees. The economic growth of the employees ultimately depends upon the
real wages received by them. Thus, the real wages are the indicator of the changes in the
economic well- being of employees over a long period of time.
Minimum wage
Minimum wages refer to the legally permissible minimum compensation payable to the
employees for their job efforts. In India, the minimum wage act. 1948, fixes the minimum rate of
wages for certain jobs. The committee report on the working of the Minimum Wages Act, 1948,
has defined minimum wages as the wage which must provide not only for the bare sustenance
of life, but for the preservation of the efficiency of the worker too. For this purpose, the
minimum wage must provide for some measure of education, medical requirements and
amenities. The purpose of minimum wages is to ensure the payment of fair wages to the
employees to preserve their families achieve self- sufficiency in life. Besides meeting the basic
requirements of life like food, clothes, rent, fuel and light6ing, the minimum wags should enable
the employees to take care of their medical, educational and minimum recreational expense.
Since the payment of minimum wages is a statutory requirement, the organization must pay such
wages, irrespective of its financial ability and labour market conditions.
Fair Wage
62
Fair Wages are the wages which are usually positioned above the minimum wages but below the
living wages. In the case of fair wages, the organizations should not fix any wages below the
minimum wages as fair wages. However, they can consider the industrys ability to pay for
determining any wages above the minimum wages. Usually, an organization considers the
productivity, the location of the industry, the level of national income and the pattern of its
distribution, and the wage levels prevailing in the same area for determining the fair wages.
Normally, fair wages relate with fair workload and the needs of a standard family.
Wage Theories
To gain a deeper knowledge of compensation or wage, it is important to know a few relevant
theories of compensation. We shall now see these important theories.
The Equity Theory
Definition of Equity
An individual will consider that he is treated fairly if he perceives the ratio of his inputs to his
outcomes to be equivalent to those around him. Thus, all else being equal, it would be acceptable
for a more senior colleague to receive higher compensation, since the value of his experience (an
input) is higher. The way people base their experience with satisfaction for their job is to make
comparisons with themselves to the people they work with. If an employee notices that another
person is getting more recognition and rewards for their contributions, even when both have
done the same amount and quality of work, it would persuade the employee to be dissatisfied.
This dissatisfaction would result in the employee feeling underappreciated and perhaps
worthless. This is in direct contrast with the idea of equity theory, the idea is to have the rewards
(outcomes) be directly related with the quality and quantity of the employees contributions
(inputs). If both employees were perhaps rewarded the same, it would help the workforce realize
that the organization is fair, observant, and appreciative.
This can be illustrated by the following equation:
63
Assumptions of Equity Theory applied to business
The three primary assumptions applied to most business applications of Equity Theory can be
summarized as follows:
1. Employees expect a fair return for what they contribute to their jobs, a concept referred to
as the equity norm.
2. Employees determine what their equitable return should be after comparing their inputs
and outcomes with those of their coworkers. This concept is referred to as social
comparison.
3. Employees who perceive themselves as being in an inequitable situation will seek to
reduce the inequity either by distorting inputs or outcomes in their own minds
(cognitive distortion), by directly altering inputs and/or outputs, or by leaving the
organization.
How to apply the Adams Equity Theory:
It is important to also consider the Adams Equity Theory factors when striving to improve an
employees job satisfaction, motivation level, etc., and what can be done to promote higher levels
of each.
To do this, consider the balance or imbalance that currently exists between your employees
inputs and outputs, as follows:
Outputs typically include: Result
Inputs typically include: Input greater than output
Financial rewards (salary, benefits, Outcome
perks, etc.) Low employee
Effort Intangibles that typically include: satisfaction and
Loyalty o Recognition motivation
o Reputation
Hard Work o Responsibility Output greater than input
Commitment o Sense of Achievement Outcome
o Praise High employee
Skill o Stimulus satisfaction and
Ability o Sense of motivation.
Advancement/Growth
Adaptability o Job Security
Flexibility
Tolerance
64
Determination
Enthusiasm
Trust in superiors
Support of colleagues
Personal sacrifice, etc.
While obviously many of these points cant be quantified and perfectly compared, the theory
argues that managers should seek to find a fair balance between the inputs that an employee
gives, and the outputs received.
And according to the theory, employees should be content where they perceive these to be in
balance.
The Expectancy theory
Expectancy theory is about the mental processes regarding choice, or choosing. It explains the
processes that an individual undergoes to make choices. In organizational behavior study,
expectancy theory is a motivation theory first proposed by Victor Vroom of the Yale School of
Management.
Expectancy theory predicts that employees in an organization will be motivated when they
believe that:
The reward they are receiving is adequate to offset the amount of work being done.
These predicted organizational rewards are valued by the employee in question.
"This theory emphasizes the needs for organizations to relate rewards directly to performance
and to ensure that the rewards provided are those rewards deserved and wanted by the
recipients."
Emphasizes self interest in the alignment of rewards with employee's wants. - Emphasizes the
connections among expected behaviors, rewards and organizational goals
Vroom's theory assumes that behavior results from conscious choices among alternatives whose
purpose it is to maximize pleasure and to minimize pain. Together with Edward Lawler and
Lyman Porter, Vroom suggested that the relationship between people's behavior at work and their
65
goals was not as simple as was first imagined by other scientists. Vroom realized that an
employee's performance is based on individual factors such as personality, skills, knowledge,
experience and abilities.
The Contingency theory

According to this theory, different compensation strategies act equally well in different
circumstances. As such, there is no single compensation strategy available for all conditions.
They effectiveness of compensation strategy certainly depends on the congruence among the
firm, the environment and the compensation strategies. Thus, it is possible to know the
importance of compensation only when other job properties are provided. This theory can be
understood better through example. A promising candidate, owing to family reasons (like
childrens education), is not willing to leave his location (city or country). In fact, he prefers to
settle in a local job even if the compensation is not rewarding. In case, compensation becomes a
secondary factor for the prospective candidate since the location of the organization becomes a
primary factor. In such a situation, it is necessary for the organization to ascertain the additional
monetary compensation required to persuade the prospective candidate to give priority to
compensation with respect to other factors. The essence of this theory is that the important the
importance of compensation varies from one market to another, depending upon the presence or
absence of their job properties.
Wages & Salary policies
In case of worker, the wages are depend generally on the rates of wages which may be
barely rate or time rate or leased on a piece rate, that is, dependent on workers output. There are
also various combinations of not only time & piece rate systems, but also several premium plans
adopted with a view to incorporate the incentive element and motivate the worker. In addition,
there are collective wage payments also.
Time of wage Payment
Under this system, the work is paid a certain sum for a fixed period of time that is so
much per hour or per day or month. The main advantages under this system are the followings:
It is simple in calculation.
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The worker does not rush the job and spoil the quality through a temptation of earning
more.
The following are however the drawbacks of the system:
The worker being assured of a fixed payment for the time spend is not tempted to work
harder or more productivity as he is not rewarded for the extra effort.
The superior worker often tries to protect his slower colleagues by the slacking off
himself.
The superior worker is discouraged as, although he is more productive, he is paid the
same amount. He therefore slackens off over a period time.
The system is satisfactory from the viewpoint of providing incentive to work harder and more
productivity.
The piece wage policy
In this system, the worker is paid a fixed rate per unit produced or job completed. The
rate is normally developed on the basis of analysis of previous performance and establishment of
average performance of a particular standard of workmanship.
The following are the advantages of The Piece Wage System:
As the worker is paid more when he produces more, he is inclined to put forth his best
efforts. This results in increased productivity, which benefits both the employer and
employee.
The employee helps management in avoiding delays through breakdown.
The superior worker is induced to work hard as at the end of the period he finds that his
pay is large than that of lazy of worker.
In his effort to produce more, the worker may disregard the spoiling of his tools and
machinery used by him for the production.
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It is paid merely on the basis of the number of items produced without regard to quality.
The quality of the production is likely to decline. There is thus a tendency to sacrifice
quality in favour of quantity.
This system may result in excessive fatigue as the employee tries to work his hardest and
his maximum speed to earn as much as he can.
Premium Bonus Method:
As in the piece wage system, the employee is not guaranteed any minimum wage in case
the supply of labour is abundant; the piece-wage rate could be so lowered as to lead to sweating
and other evils. Because of this, trade unions began to object the piece-wage system. They
pressed for a guarantee of a fair minimum wage in connection with certain trends. As a result, of
this, a number of systems of wage payments emerged technically known as progressive wage
systems or premier bonus system / methods.
UNIT V
CONTENT
MEASUREMENT IN HUMAN RESOURCE PLANNING Human Resource Information
System Human Resource Audit Human Resource Accounting.
Human Resource Information System
The Human Resource Information System (HRIS) is a software or online solution for the data
entry, data tracking, and data information needs of the Human Resources, Payroll, Management,
and Accounting functions within a business. Normally packaged as a data base, hundreds of
companies sell some form of HRIS and every HRIS has different capabilities. Pick your HRIS
carefully based on the capabilities you need in your company.
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Typically, the better The Human Resource Information Systems (HRIS) provide overall:
Management of all employee information.
Reporting and analysis of employee information.
Company-related documents such as employee handbooks, emergency evacuation
procedures, and safety guidelines.
Benefits administration including enrollment, status changes, and personal information
updating.
Complete integration with payroll and other company financial software and accounting
systems.
Applicant tracking and resume management.
The HRIS that most effectively serves companies tracks of
Attendance and Paid Time Off use,
Pay raises and history,
Pay grades and positions held,
Performance development plans,
Training received,
Disciplinary action received,
Personal employee information, and occasionally,
Management and key employee succession plans,
High potential employee identification, and
Applicant tracking, interviewing, and selection.
An effective HRIS provides information on just about anything the company needs to track and
analyze about employees, former employees, and applicants. Your company will need to select a
Human Resources Information System and customize it to meet your needs. With an appropriate
HRIS, Human Resources staff enables employees to do their own benefits updates and address
changes, thus freeing HR staff for more strategic functions. Additionally, data necessary for
employee management, knowledge development, career growth and development, and equal
treatment is facilitated. Finally, managers can access the information they need to legally,
ethically, and effectively support the success of their reporting employees.
69
Application of HRIS
HRIS can be applied in the following areas of HRM
HR planning
Succession planning
Work force planning
Work force dynamics analysis
Staffing
Applicant recruitment and tracking
Employee data base development
Performance management
Learning and development
Compensation and benefits
Pay roll
Job evaluation
Salary survey
Salary planning
International compensation
Benefits management
Develop innovative Org. Structure
Develop IT
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Purpose of HRIS
The function of Human Resources departments is generally administrative and common to all
organizations. Organizations may have formalized selection, evaluation, and payroll processes.
Efficient and effective management of "[[Human Capital]]" has progressed to an increasingly
imperative and complex process. The HR function consists of tracking existing employee data
which traditionally includes personal histories, skills, capabilities, accomplishments and salary.
To reduce the manual workload of these administrative activities, organizations began to
electronically automate many of these processes by introducing specialized Human Resource
Management Systems. HR executives rely on internal or external IT professionals to develop and
maintain an integrated HRMS. In consequence of the high capital investment necessary to buy or
program proprietary software, these internally-developed HRMS were limited to organizations
that possessed a large amount of capital. The advent of [[clientserver]], [[Application Service
Provider]], and Software as a Service [[SaaS]] or Human Resource Management Systems
enabled increasingly higher administrative control of such systems. Currently Human Resource
Management Systems encompass:
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Payroll
Work Time
Benefits Administration
HR management Information system
Recruiting
Training/[[learning management system| Learning Management System]]
Performance Record
Employee Self-Service
The '''payroll module''' automates the pay process by gathering data on employee time and
attendance, calculating various deductions and taxes, and generating periodic pay cheques and
employee tax reports. Data is generally fed from the human resources and time keeping modules
to calculate automatic deposit and manual cheque writing capabilities. This module can
encompass all employee-related transactions as well as integrate with existing financial
management systems.
The '''work time module''' gathers standardized time and work related efforts. The most advanced
modules provide broad flexibility in data collection methods, labor distribution capabilities and
data analysis features. Cost analysis and efficiency metrics are the primary functions.
The '''benefits administration module''' provides a system for organizations to administer and
track employee participation in benefits programs. These typically encompass insurance,
compensation, profit sharing and retirement.
The '''HR management module''' is a component covering many other HR aspects from
application to retirement. The system records basic demographic and address data, selection,
training and development, capabilities and skills management, compensation planning records
and other related activities. Leading edge systems provide the ability to "read" applications and
enter relevant data to applicable database fields, notify employers and provide position
management and position control.
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Human resource management function involves the recruitment, placement, evaluation,
compensation and development of the employees of an organization. Initially, businesses used
computer based information systems to:
Produce pay checks and payroll reports;
Maintain personnel records;
Pursue [Talent Management].
Online '''recruiting''' has become one of the primary methods employed by HR departments to
garner potential candidates for available positions within an organization. [[Talent Management]]
systems typically encompass:
Analyzing personnel usage within an organization;

Identifying potential applicants;
Recruiting through company-facing listings;
Recruiting through online recruiting sites or publications that market to both recruiters
and applicants.
The significant cost incurred in maintaining an organized recruitment effort, cross-posting within
and across general or industry-specific job boards and maintaining a competitive exposure of
availabilities has given rise to the development of a dedicated [[Applicant Tracking System]], or
'ATS', module.
The '''training module''' provides a system for organizations to administer and track employee
training and development efforts. The system, normally called a [[Learning Management
System]] if a stand alone product, allows HR to track education, qualifications and skills of the
employees, as well as outlining what training courses, books, CDs, web based learning or
materials are available to develop which skills. Courses can then be offered in date specific
sessions, with delegates and training resources being mapped and managed within the same
system. Sophisticated [[learning management system |LMS] allow managers to approve training,
budgets and calendars alongside performance management and appraisal metrics.
73
The '''Employee Self-Service module''' allows employees to query HR related data and perform
some HR transactions over the system. Employees may query their attendance record from the
system without asking the information from HR personnel. The module also lets supervisors
approve O.T. requests from their subordinates through the system without overloading the task
on HR department.
How to Select Human Resources Information System

Human Resources information System is essential for companies to manage their benefits plans
and their employee information. Benefits management technology is no longer a nice to have,
but a necessity to help HR manage both a sea of information and the money spent on benefits
plans, as HR faces limited resources and constantly changing data. But how do HR and other
executives know they are selecting the best HR information technology to manage all of the
details, and that the solution they select will stand the test of time?
Following are the key questions to ask and answer in the process of selecting Human Resources
information technology.
What is the degree of flexibility and scalability that the HR information technology
software provides? HR professionals should determine if the software can import data
from multiple Excel spreadsheets, databases, and paper documents and the level with
which it can interface with all kinds of systems and data. The software should be able to
take in and filter information from multiple sources. Ideally, this process should also be
automated. Many online enrollment solutions require that data be manually manipulated
before it can go to a carrier to update their systems. Automation of the update format,
transmission schedule and delivery method can help to eliminate billing and eligibility
issues.
Will the software be able to accommodate HRs company and benefits carriers rules? A
truly capable enrollment engine will evaluate each enrollment activity and apply any
necessary combination of rules, messages, prompts, and options specifically designed to
meet the exact eligibility requirements desired. The software should accommodate any
eligibility rules that the company and carriers have.
74
Will the HR information technology be able to grow and scale with the organization? HR
should assess the technologys ability to grow as the company brings on new employees,
offices, benefits changes, and rules. HR should ask about the thresholds for each of these
elements.
Is the HR information technology software able to integrate with other systems? Payroll
and other functions often share much of the same information as benefits management.
HR can obtain greater efficiencies when data and other employee information entered
into one system can be shared with another system.
Who is responsible for implementing, or building, the solution? What level of training is
involved? Some solutions require the client to be very involved with the initial
implementation, which can be overwhelming for already busy HR administrators.
HR should have a clear understanding of the level of training and technical expertise that
will be required and the amount of time expected. Questioning solution providers on this
topic can provide insight into subtle areas that might initially appear simple, yet involve
significant technological expertise. HR can then determine specific tasks that may be so
cumbersome as to realistically impede completion, potentially reducing HR information
technology value and ROI.
If training is involved, is there a charge? Costs of training should also be assessed -

including time away and travel expenses for off-site travel. HR needs to become aware of
all hard and soft costs involved in the HR information technology adoption.
Who will own the data? The answer to this question should be the Human Resources
organization. Companies should be able to transport their data to any Application Service
Provider (ASP). If the data resides on a carriers proprietary server, the company may
sometimes be charged additional fees should it switch carriers?
What types of maintenance and upkeep are required? When software is installed on a
companys on-site workstations or servers, regular updates to that technology are often
required and may be cumbersome to plan for and manage. Updates to HR information
75
technology are often made automatically with software available online through an
Application Service Provider (ASP) or Software as a Service (SAAS) model.
What security measures are built into the HR information technology? If the software is
available online, through an ASP or SaaS model, the provider should offer daily backups,
backup servers, and added protective layers. Additional systems and procedures should
be in place to safeguard information from being lost or accessed by unauthorized
personnel. HR, in consultation with other managers, should have exclusive authority to
decide who will be allowed access to the HR information technology and to what degree.
Does the software offer specific features to help HR communicate better with employees?
Some programs give HR the flexibility to communicate with employees on a number of
levels - via mass email, electronic "bulletin boards," and by specific filter criteria (such as
location, department, insurance plans, enrollment status, retirement status, and others)
through the HR information technology system.
The need for HR information technology systems is increasing. With HR staff finding a vast
array of options in HR information technology systems, it is increasingly important to analyze
and weigh all options available. Choosing an HR information technology system should be
looked at as an investment that will grow with the department and companys needs. These
questions will lead you to the appropriate HR information technology system for your company.
Human Resource Audit
Introduction
A human resources audit aims at ascertaining the effectiveness of the HR department and its
functions. The basic goal of an HR audit is to find out the HR interventions that will increase the
76
firms competitive advantage. An HR audit also ensures the compliance of the HR department
with the goals, plans and policies of the organization. Similarly, it makes sure that the statutory
provisions and other regulations of the govt are followed properly with out any deviations. It also
makes certain that the HR policies are followed uniformly across the entire organization. Infact,
it helps in determining not only the efficiency of the HR policies and practices but also their cost
to organization. The audit also helps in assessing the role and contributions of the HR functions
in the overall strategic planning of the organization. It facilitates the development of the
benchmarks with which the actual HR performance can be compared to identify any
performance deficiency. In fact, the HR audit assists the organization in the effective formulation
of HR strategies which will align well with the overall corporate strategy.
Definition
"A human resources audit is defined as an investigative, analytical and comparative process that
attempts to reflect the effectiveness of the human resource functions.
Human resource Audit is a systematic assessment of the strengths, limitations and

developmental needs of its existing human resources in the context of organizational
performance.
Objectives of HR Audit
To identify the degree of efficiency in the performance of the HR department in

implementing the HR policies and practices of the organization and assess the general
environment prevailing in HR department.
To propose appropriate strategies and corrective action, incase of performance and
efficiency gaps.
To determine whether the HR functions are performed according to the established
practices and procedure of the organization.
To measure the HR departments record of compliance with the statutory provisions
regarding hiring, compensation, safety and health, dispute settlement, etc..,
To discover the areas where the cost savings could be achieved in HR activities like
recruitment, development, retention and separation of human resources.
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To have an improved control over and check on all internal operations of the
organization.
To create a sense of accountability and discipline among the employees by investigating
their past actions periodically.
To provide feedback to the employees about the areas of good performance and areas
where improvements are required.
To convert HR management from an abstract concept into a measurable and quantifiable
activity.
To determine the HR areas and functions which require further research and development
To recognize the good work done by the HR people and reward them appropriately
To prepare the organization for countering the possible legal actions from the aggrieved
employees effectively.
Steps in HR Audit process

Steps in involved in HR Audit process are:
Determining the objectives of the HR Audit: The first step in an HR Audit process involves
making a decision regarding the objectives of the HR Audit. The HR Audit may attempt to know
the efficacy of the HR policies, procedures and practices, the regulatory compliance by the HR
department, or the degree of alignment between the corporate strategy and the HR strategy.
Further, it may also focus on identifying and solving specific problems like high industrial
disputes, labour turnover, and absenteeism. An unambiguous objective can keep the HR auditor
focused and help
The Five Critical Components of the HR Audit Process
Recognized as setting the standard in HR auditing, the new edition of the ELLA, the
Employment-Labor Law Audit, the leading HR auditing tool, incorporates the five critical
components of an HR audit into the HR audit process. These five critical components, which
should be addressed in every HR audit, are shown and discussed below in the HR Audit
Model.
HR Audit Model
78
I. II.
ACTIVITIES BEHAVIORS
Actions that demonstrate a
Tasks and actions that create
commitment to and
policies, practices, procedures,
implementation of policies and
and processes
procedures
III.
V. OUTCOMES
Qualitative and quantitative RISKS
results of the HR management Current or future events that
and employment practices have the potential to cause a
loss or peril
IV.
INTERNAL
CONTROLS
Processes, tests, and
assessments to ensure
compliance
Activities: The starting point of the HR auditing process is a review of the organizations
activities, that is, the tasks and actions that create or implement employment policies, practices,
procedures, and programs. Activities include such actions as the promulgation of an EEO policy
statement and other employment policies, and the posting of required employment posters. The
Activities component of HR audits is typically evaluated by using a checklist approach, that is,
the item is checked off when it is completed.
Behaviors: Behaviors in this context are actions and conduct that affect either positively or
negatively the implementation or effectiveness of the organizations policies, practices,
procedures, and programs, and demonstrate the organizations commitment to stated goals and
objectives. Examples of Behaviors include: the creation of a corporate culture that values and
promotes equal employment opportunities, diversity, and compliance; the visible and
unequivocal support by senior management for the organizations diversity efforts; and the
budgeting of sufficient resources to achieve EEO compliance and diversity goals. Behaviors are
frequently assessed using qualitative measures, such as culture scan and employee satisfaction
surveys.
Risk Assessment: Risk assessment is the identification of current and/or future events that have
the potential to cause loss, peril, or vulnerabilities, and managements willingness to accept those
risks. Risk assessment is also the identification of events or conditions that create new
opportunities for the organization to achieve its business objectives. Risk assessment provides
79
management with the information to make informed decision about the allocation of the
organizations human, physical, and financial capital and about effective ways to eliminate,
mitigate, control, or transfer those risks. Human resource management and employment
practices liability related risks include: employment law and regulation compliance failures; lost
business opportunities due to the failure to attract, hire, and retain top talent; intangible asset
losses due to turnover and the loss of top talent and key employees; ineffective staff development
and succession planning; and lower profitability due to the inability to control labor costs. HR
auditing activities include assessments of the external and internal factors that impact human
resource management and employment practices including: 1) the economy; 2) legal,
regulatory, and litigation trends; and 3) demographic and structural changes in the workplace and
work force.
Internal Controls: Internal controls are processes, tests, and assessments that help ensure
compliance, manage risks, identify fraud, and help ensure the achievement of organizational
goals. HR auditing activities include: 1) assessments of the effectiveness and efficiency of HR
management processes, policies, practices, and procedures; 2) the reliability and accuracy of HR
management reporting; and 3) the level of compliance with: laws and regulations; industry and
professional standards; codes of conduct and ethics; organizational policies; and budgets.
Outcomes: Outcomes are quantitative and qualitative measurements and metrics that measure
and help assess the achievement of organizational goals and objectives. HR auditing activity
includes the identification of metrics used by the organization to measure organizational and
individual performance; the assessment of results by comparing actual results against projected
results, budgets, and internal and external standards; and a description of the activities,
behaviors, and internal controls that are needed to maintain or improve future results.
The value of the HR Audit Model that it helps organizations: 1) Assess current HR management
and employment practices; 2) identify and diagnosis systemic problems; 3) evaluate and predict
the impact of corrective measures; 4) develop a plan of action; and 5) determine the ROI of such
actions. Using the ELLA, organizations enhance the value of their human capital, reduce their
exposure to employment related liabilities, and improve their ability to achieve business
objectives.
Areas of Human Resources Audit
80
The human resources audit must evaluate the personnel functions, the use of procedures by the
managers and the impact of these activities on the employees. A human resources audit covers
the following areas as identified by Robert L .Mathis and John H. Jackson:-s
1. Audit of various functions of human resources
2. Audit of managerial compliance
3. Audit of environment culture in the industry
4. Audit of corporate or industrial strategy
1. Audit of various functions of Human Resources

This covers all human resources activities including:
Determination of objectives of each activity
Identification of responsibility of performance
Review of performance
Developing an action plan to correct deviations between results and goals
Follow-up of action plan
2. Audit of managerial compliance
This covers audit of managerial compliance of personnel policies, procedures, and legal and
welfare provisions. Compliance with the legal provisions is most important as any violation
makes the management guilty of an offence.
3. Audit of environment culture in the industry
The working culture in any industry has an impact on employee motivation, morale, job
satisfaction, employee absenteeism, safety records and employee welfare.
4. Audit of corporate or industrial strategy This helps the industry to gain a competitive
advantage. By analyzing the SWOT analysis of the industry, the management can take decisions
regarding marketing channels, services, innovations, low cost production and other like
decisions.
HR Accounting
The past few decades have witnessed a global transition from manufacturing to service based
economies. The fundamental difference between the two lies in the very nature of their assets. In
the former, the physical assets like plant, machinery, material etc. are of utmost importance. In
81
contrast, in the latter, knowledge and attitudes of the employees assume greater significance. For
instance, in the case of an IT firm, the value of its physical assets is negligible when compared
with the value of the knowledge and skills of its personnel. Similarly, in hospitals, academic
institutions, consulting firms etc., the total worth of the organization depends mainly on the skills
of its employees and the services they render. Hence, the success of these organizations is
contingent on the quality of their Human Resource- its knowledge, skills, competence,
motivation and understanding of the organizational culture. In knowledge driven economies
therefore, it is imperative that the humans be recognized as an integral part of the total worth of
an organization. However, in order to estimate and project the worth of the human capital, it is
necessary that some method of quantifying the worth of the knowledge, motivation, skills, and
contribution of the human element as well as that of the organizational processes, like
recruitment, selection, training etc., which are used to build and support these human aspects, is
developed. Human resource accounting (HRA) denotes just this process of
quantification/measurement of the Human Resource.
Definition
Assigning, budgeting, and reporting the cost of human resources incurred in an organization,
including wages and salaries and training expenses.
It is widely recognized, that human resources are no lesser important than other productive
resources. However, the recognition of importance of people in organization
Human Resource Accounting is a method to measure the effectiveness of personnel
management activities and the use of people in an organization.
Assigning, budgeting, and reporting the cost of human resources incurred in an organization, including wages
and salaries and training expenses.
Approaches to Human resource accounting approaches to HRA was first developed 1691 the
next stage was during 1691-1960 and third phase post 1960. There are two approaches to HRA.
They are as follows
1. Cost approach:-
Cost approach is also called human resource cost accounting method or model. Under this there
are two important models
a) Acquisition cost model
82
b) Replacement cost model
2. Value approach:
Under this value approach there are three important approaches they are
a) Present value of future earnings method.

b) Discounted future wage model
c) Competitive bidding model
HRA scenario
It is true that worldwide, knowledge has become the key determinant for economic and business
success, but Indian companies focus on Return on Investment (RoI), with very few concrete
steps being taken to track Return on Knowledge.
What is needed is measurement of abilities of all employees in a company, at every level, to

produce value from their knowledge and capability. Human Resource Accounting (HRA) is
basically an information system that tells management what changes are occurring over time to
the human resources of the business. HRA also involves accounting for investment in people and
their replacement costs, and also the economic value of people in an organization, says P K
Gupta, the director of strategic development-intercontinental operations, of Legato Systems
India. The current accounting system is not able to provide the actual value of employee
capabilities and knowledge. This indirectly affects future investments of a company, as each year
the cost on human resource development and recruitment increases.
Experts point out that the information generated by HRA systems can be put to use for taking a
variety of managerial decisions like recruitment planning, turnover analysis, personnel
advancement analysis and capital budgeting, which can help companies save a lot of trouble in
the future.
Information Management in HRA
Like any accounting exercise, the HRA too depends heavily on the availability of relevant and
accurate information. HRA is essentially a tool to facilitate better planning and decision making
83
based on the information regarding actual HR costs and organizational returns. The kind of data
that needs to be managed systematically depends upon the purpose for which the HRA is being
used by an organization.
For example, if the purpose is to control the personnel costs, a system of standard costs for
personnel recruitment, selection and training has to be developed. It helps in analyzing projected
and actual costs of manpower and thereby, in taking remedial action, wherever necessary.
Information on turnover costs generates awareness regarding the actual cost of turnover and
highlights the need for efforts by the management towards retention of manpower.
Accountability in the management process is often enhanced when information involving an

evaluation of managerial effectiveness is generated.
Finally, information on the intangibles like intellectual capital/human capital becomes necessary
to measure the true worth of the organization. This information, though unaudited, needs to be
communicated to the board and the stockholders
Measurement in HRA
The biggest challenge in HRA is that of assigning monetary values to different dimensions of HR
costs, investments and the worth of employees. The two main approaches usually employed for
this are:
1. The cost approach which involves methods based on the costs incurred by the company, with
regard to an employee.
2. The economic value approach which includes methods based on the economic value of the
human resources and their contribution to the companys gains. This approach looks at human
resources as assets and tries to identify the stream of benefits flowing from the asset.
Economic value approach
The value of an object, in economic terms, is the present value of the services that it is expected
to render in future. Similarly, the economic value of human resources is the present worth of the
services that they are likely to render in future. This may be the value of individuals, groups or
84
the total human organization. The methods for calculating the economic value of individuals may
be classified into monetary and non-monetary methods.
Monetary Measures for assessing Individual Value
a) Flameouts model of determinants of Individual Value to Formal Organizations
According to Flamholtz, the value of an individual is the present worth of the services that he is
likely to render to the organization in future. As an individual moves from one position to
another, at the same level or at different levels, the profile of the services provided by him is
likely to change. The present cumulative value of all the possible services that may be rendered
by him during his/her association with the organization is the value of the individual.
b) Flamholtzs Stochastic Rewards Valuation Model
The movement or progress of people through organizational states or a role is called a

stochastic process. The Stochastic Rewards Model is a direct way of measuring a persons
expected conditional value and expected realizable value. It is based on the assumption that an
individual generates value as he occupies and moves along organizational roles, and renders
service to the organization. It presupposes that a person will move from one state in the
organization, to another, during a specified period of time.
Non- monetary methods for determining value
The non-monetary methods for assessing the economic value of human resources also measure
the Human Resource but not in dollar or money terms. Rather they rely on various indices or
ratings and rankings. These methods may be used as surrogates of monetary methods and also
have a predictive value. The non-monetary methods may refer to a simple inventory of skills and
capabilities of people within an organization or to the application of some behavioral
measurement technique to assess the benefits gained from the Human resource of an
organisation.
1. The skills or capability inventory is a simple listing of the education, knowledge, experience
and skills of the firms human resources.
85
2. Performance evaluation measures used in HRA include ratings, and rankings. Ratings reflect a
persons performance in relation to a set of scales. They are scores assigned to characteristics
possessed by the individual. These characteristics include skills, judgment, knowledge,
interpersonal skills, intelligence etc. Ranking is an ordinal form of rating in which the superiors
rank their subordinates on one or more dimensions, mentioned above.
3. Assessment of potential determines a persons capacity for promotion and development. It

usually employs a trait approach in which the traits essential for a position are identified. The
extent to which the person possesses these traits is then assessed.
4. Attitude measurements are used to assess employees attitudes towards their job, pay, working
conditions, etc., in order to determine their job satisfaction and dissatisfaction
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HUMAN RESOURCE

BHMCT III YEAR I SEMESTER

S. No CONTENT PAGE NO.

Definitions of Human Resources Management

To generate maximum development of human resources within the organization by

Factorial Analysis functions of HRM

Managerial functions Operational Functions

Compensation-It is a process of providing adequate, equitable and fair remuneration to the

Roles & Challenges of HRM

Advantages of Manpower Planning

Different Procedures in Manpower Planning

Human Resource Planning

Process of Human Resource Planning

Macro level planning scenario of Human Resources

1) Human Resource available at time of the planning period; and

2) Human Resource requirements in future.

Objectives of Job Analysis

The main objectives of job analysis are as follows:

Job Description Job Specification Job Evaluation Performance Appraisal

Procurement Development Compensation Integration Maintenance

Process of Job Analysis

1. Collection of background information: Background information consists of

Content of Job Description

Code Number (State the job identification number)

Authority Limits (Provide details regarding the prior permission

Typical format of Job Description of a House Keeper

Job Title House keeper

Job Requirements Responsible for all activities and operation of the

Supervision Job supervisor: Hotel manager

Job relationship Contact maintenance staff, all departmental heads and

The important components of a job specification are listed as follows

Typical format of Job Specification of a House Keeper

Job Title: Executive House keeper

Features of Job Evaluation

Job evaluators will need to gain a thorough understanding of the job

Job Evaluation Process

Job evaluation as a process is advantageous to a company in many ways:

1. Reduction in inequalities in salary structure - It is found that people and their

Job Evaluation Methods

Table: Array of Jobs according to the Ranking Method

Rank Monthly salaries

2. Accounts clerk Rs 1,800

3. Purchase assistant Rs 1,700

6. Office boy Rs 600

Table: Merits and Demerits of Factor Comparison Method

Analytical and objective. Difficult to understand,

Flexible as there is no upper

The most frequent factors employed in point systems

Table: Point Values to Factors along a Scale

Point values for Degrees Total

Physical effort 8 16 24 32 40 120

Table: Conversion of Job Grade Points into Money Value

500-600 300-400 1 Officer

600-700 400-500 2 Accountant

700-800 500-600 3 Manager I Scale

800-900 600-700 4 Manager II Scale

900-1,000 700-800 5 Manager III Scale

Merits and Demerits

To attract potential employees into the rolls of the company

Identifying the vacancy: