Performanceandrewardmanagement

Assignment-5

Submittedby- ARPITASHARMA
MBAII
Q U E STIO N 1: W H AT IS P A Y S TR U C TU R E?

A N SW E R : The pa y struc ture is d e fine d a s a co lle ctio n of sa la ry g ra d es

tha t rela te to jo bs w ith in a hiera rc hy or se rie s. This is a n o rga niz a tion
b a sed on ho w ea c h ind ivid ua l is pa id ba sed o n the w o rth of th a t jo b to
b usinesse s a nd the ir e ffic ienc y w ithin those role s. The re a re m a ny
d iffe re nt w a ys to se pa ra te em p lo ye e p a y into d iffe rent kind s o f p a y
struc tures a nd pro vid e the b a sis fo r b a se pa y.
What are the different types of pay structures?
The re a re va riou s kind s of p a y structu re s, a lthou gh m a ny m a y be
ide ntifie d fro m tw o m a in tra its – the num be r o f ra n ks o r le ve ls a n d the ir
m inim um a nd m a x im um sa la ry ra ng e s. A ll gra d e s a nd lev els ca rry a sa la ry
ra ng e, o r pa y sc a le , w ith m inim um a nd m a x im um pa y g ra de w h ere the
system s o f g ra d ing co nstitute a vita l pa rt o f c om p e nsa tion in the
w orkp la ce . The m ost c om m o n typ es of ba se pa y struc tures a re :
Traditional Salary Structure / Pay Grading
The re a re m ultip le pa y struc ture in a tra ditiona l c om p e nsa tio n struc ture
w ith a na rro w sc o pe co m p a red to o ther struc tures.
● Sa la ry ra ng es sp rea d 20 – 5 0%
● Sm a ller m id po int p ro gre ssion s (5– 1 0 % )
● M ultiple p a y gra d e s
The a dv a nta g e o f a tra d itio na l p a y structure is tha t it su pp o rts inte rna l
e quity be ca use the jo b s in the sa m e g ra de a re p a id c om p a ra b le ra tes. T he
d isa dv a nta g es a re tha t e m plo yee s often re a ch the ir m a x im um sa la ry
ra ng e b efo re b eing p ro m ote d w hich c a n lim it them from b eing pa id th e
m a rke t ra te .
Broadband
B ro a d ba nd p a y stru cture s a re be c om ing inc re a sing ly p o p ula r a s
c om p a nie s se ek to p a y em p lo ye e s m o re in line w ith m a rke t ra te s. In a
b roa d b a nd p a y structu re , sa la ry ra n ge s a re m uc h w id er, o fte n sp a nning 50 -
1 00 % o f the p a y gra d e . This a llo w s for g rea te r flex ib ility in p a y
p rog re ssio n a nd m e a ns tha t em plo ye e s a re m ore like ly to b e p a id a t o r
ne a r th e m a rke t ra te .
Inste a d o f using title s, b ro a d ba nd p a y sc hem es d iv id e w o rkers up into
c a teg o rie s. A dm inistra tive job s, serv ic e o c cup a tions, a nd ex ec utive
p osition s a re just a fe w e xa m p les o f distinc t d ivisio ns tha t b roa d b a nd
c om p e nsa tio n m e thod s m a y cre a te. T he sa la ry ra nge s a re m uc h w id er
tha n tho se in a typ ica l p a y struc ture b ec a use th ere a re fe w er pa y g ra d es.
● W id e r sa la ry ra ng es (5 0 -1 00 % )
● L a rge r m id p oint p rog ressio ns (1 0 -2 0% )
● Fe w e r pa y g ra de s
The a dv a nta g e o f a b roa d b a nd p a y structure is tha t it su pp o rts e xte rna l
e quity be ca use e m plo yee s a re m o re like ly to b e p a id a t o r n ea r the m a rke t
ra te . The d isa dv a nta g e is tha t it ca n b e d ifficult to c om p a re jo b w o rth
a c ross the p a y gra de s a nd the re is a g re a ter risk o f o ve rpa ying or
und erp a ying in so m e jo bs.
Step Pay
A step pa y struc ture is o ne in w hich p a y inc rea se s a re g iv en a t fix ed
interv a ls, typ ica lly a fter e m plo yee s ha ve serv ed a se t pe rio d of tim e in a
ro le or a c hiev ed a sp e cific le ve l o f p erform a nce . Ste p p a y struc ture s a re
o fte n used in c om bina tio n w ith tra dition a l p a y g ra d es, w ith e m p loye es
m o ving u p a pa y g ra d e ea ch tim e the y re ce ive a p a y inc re a se.
The a dv a nta g e o f a step p a y struc ture is tha t it is sim p le to a d m inister
a nd und ersta nd . The disa d va nta ge is tha t it m a y no t a cc ura tely reflec t
p erform a nce sinc e the m ov e up the step s is o fte n b a sed on ye a rs o f
se rvice .
Market-based
M a rke t-b a sed sa la rie s a re the m o st co m m o n type a nd a re de term ine d b y
c ond uc tin g sa la ry b e nchm a rk o f sim ila r e m p lo yee s w ithin the sa m e
se cto r o r ge o gra p hy. M a rke t-b a sed sa la ry struc ture re q uire s som e
re sea rc h, such a s salary surveys, to o b ta in a m e dia n o r a v era ge sa la ry for
e a ch jo b . Since a m a rket-b a se d struc ture follow s the la test p a y
info rm a tio n, th e m a in a dv a nta g e o f using m a rket-a w a re sa la rie s is tha t
w orke rs shou ld fe el their sa la ry is fa ir a nd e q uita ble .
Q U E STIO N 2 : D ESC R IB E TH E B A SIC P A Y , G R O S S P A Y , H R A A N D TA K E
H OM E PAY?
A N SW E R : B a sic sa la ry is a fixe d a m o unt pa id to e m plo yee s b y their
e m plo yers in re turn fo r the w ork p erfo rm ed or p erform a n ce o f
p rofessio na l d utie s b y th e fo rm e r. B a se sa la ry, the refore , do e s no t in clud e
b onu ses, b ene fits or a ny o ther c om p e nsa tio n fro m em plo yers. A s the
na m e sugg e sts, b a sic sa la ry is the c o re o f the sa la ry of a n em p loye e.

It is a fix ed p a rt o f the co m p ensa tio n structure of a n e m p lo ye e a nd

g ene ra lly d ep e nds o n her o r he r de signa tio n. If th e a p po intm en t o f a n
e m plo yee is m a d e o n a p a y sca le , th e b a sic sa la ry m a y incre a se e ve ry
yea r. Else, it rem a ins fix ed .

A cc o rding to e xp erts, the b a sic sa la ry diffe rs a c co rd ing to the type of th e

ind ustry. F or insta nc e, em p lo ye e s in the inform a tio n tec hno lo g y ind ustry
p refer ta ke -ho m e sa la ry (since the sta ff turno ve r is high ) w hile e m p lo ye es
in the m a nufa c turing co m p a nies g et m o re fring e b e nefits.

C a lcula tio n o f B a sic Sa la ry fro m G ross Sa la ry

Gross salary = B a sic sa la ry + H RA (H o use re nt a llo w a nce ) + D A (de a rne ss

a llow a nc e) + M A (m e d ic a l a llo w a n ce ). O n a n e xc el shee t, the fo rm ula is
=SU M (D 2:G 2 )

H enc e, the Basic Salary = G ro ss sa la ry – T ota l A llo w a nce s (H R A , D A ,

M e dic a l insura nc e, a nd o th ers)

O r, Basic salary = 5 0 % of C T C o r 40 % o f gro ss pa y

H RA P A Y

H ouse Re nt A llo w a nce (H R A ) is a c om p o nen t o f a n e m plo yee 's sa la ry th a t

m a y be sub jec t to p a rtia l o r full ta x d e duc tions und e r Se c tio n 10 (13 A ) o f
the Inco m e T a x A ct. T he c a lc ula tion o f H RA is influenc ed b y se ve ra l
fa cto rs, w hic h a re a s fo llo w s:

Sa la ry

R ent p a id

H RA re ce iv a b le by the e m p lo yee
C ity o f re sid e nce of e m p loye e

Q U E STIO N 3: EX P L AIN TH E M E TH O D O F P A Y M EN T ?

A N SW E R : S ev era l typ e s o f p a ym e nt m etho d s a re used in so c ie ty b a se d o n

the sta g e o f d e ve lo p m ent for a giv en e co no m y.

B ro a d ly, the y c a n b e d iv id e d into tw o typ es o f p a ym en t m e tho ds: ca sh a nd

e le ctro nic.

A third type of elec tro nic pa ym e nt, kno w n a s c ryp to curre nc y p a ym en ts, is
slow ly b e co m ing p o pula r a nd m a y p la y a n im p o rta nt ro le in the future.

C a sh
Cash is use d to de no te p a p er-b a se d c urrenc y a nd m e ta l c o ins. It is the
m o st w id ely-use d form o f p a ym ent m e thod thro ugh out the w o rld cu rre ntly.

A physic a l num b e r is a sso cia te d w ith e a ch c a sh a rtifa c t, re p rese nting the

va lue of tha t a rtifa ct. T here a re thre e m a in a dv a nta g es to c a sh.

The first one is tha t it is ea sy to c a rry ov er long d ista nc e s, a llo w ing the
use r to co nd uct tra d e o ve r g e og ra p hies.

The sec on d a d va nta ge o f c a sh is tha t it is fung ib le, m e a ning o ne unit of

c a sh is a lw a ys e qu a l to a noth er unit.

The fina l a dv a nta g e o f c a sh is tha t it is a no nym ous. W hile c a sh-b a sed

c urrenc ies ha v e seria l num b ers im printe d o n them , it is d iffic ult to tra ce
the p ro gre ssion o f transactions using c a sh m on ey.

C a sh ha s rem a ine d the do m ina nt p a ym ent m e thod fo r sev era l ce nturies

b ut th e a d ve nt o f e lec tronic m etho d s o f p a ym e nt ha ve le d to a d ec lin e in
its u se.

A n ex a m p le is Sw e de n, w h ic h is hurtling to w a rds a ca shle ss soc iety.

A cc o rding to sta tistic s, on ly o ne p erc ent o f its gross domestic

product w a s tra nsa cte d using ca sh b y Sep te m be r 20 2 0.
A n op p osite c a se is tha t of Ja p a n, w hic h ha s a sig nifica n tly high
p ene tra tion o f e le ctro nic p a ym e nt o p tio ns a nd w he re c rypto cu rre nc ie s a re
c onsid ere d le ga l tend e r.

A cc o rding to a N o v em b er 2 01 9 surve y, a lm o st 84 % of Ja p a nese citize ns

use c a sh fo r tra nsa c tio ns.

C red it Ca rds
A cre dit ca rd is a c a rd w ith a m a g ne tic strip e tha t c on ta in s d a ta rela ting to
the c a rd a nd its o w ne r.

It c onne c ts e lec tronic a lly to a b a nk or issuing c om p a ny’s serve rs.

C red it ca rd s a re the m o st po p ula r fo rm o f e lec tronic c a rd s in use to d a y.

C red it ca rd issuing co m p a nies p a y v end o rs im m e d ia te ly a nd la ter co llec t

fro m the ind ividu a l for a pro c essing fe e.

A FIC O sco re, sho rt fo r Fa ir Isa a c C o rpo ra tion sc ore , tra cks a n ind iv id ua l’s
history o f p a ym ents a nd their a b ility to pa y.

The FIC O sco re influe nc es the c red it c a rd h old er's c red it lim it o r the
a m o unt tha t the issuing c om p a ny is w illing to lend to the c a rd ho ld er. It is
a lso use d in o ther indu strie s, su ch a s rea l esta te, a s a m a rk o f the
ind iv id ua l’s c red itw orthine ss.

C red it ca rd pa ym e nts a re g ene ra lly m a d e in tw o fo rm a ts.

The first one is b y using the p hysic a l ca rd a t a P oint of Sa le (P o S) syste m ,

w hich c onne c ts to a se rve r in the ba c kg round to v erify b a la nce a nd
ide ntity.

The sec on d m e thod to use cre dit ca rd s is o nlin e.

In this m etho d , p hysica l c a rds a re n ot req uired . In ste a d , cre dit ca rd de ta ils
a re e nte red o n a n e Co m m e rce site , such a s A m a z on, a nd used fo r
tra nsa c tions.

The site uses the se d eta ils fo r p a ym e nts e a c h tim e a p urc ha se is m a d e.

Sinc e the intro du ction o f the first c re dit ca rd , othe r va ria nts ha v e be e n
introd uc ed .
Fo r e xa m ple , d e bit ca rd s a re a lso e lec tronic c a rd s but the y a re co nne cte d
to a b a nk a c co unt. The y h a ve n o c re d it fa cility a nd the use r c a nno t spe nd
m o re tha n the a m oun t in their a cc o unt.

P re p a id ca rd s a re e le c tronic c a rd s tha t a re pre loa d e d w ith sp ec ific

a m o unts a nd u sers a re no t a llo w ed to sp end m ore tha n tha t a m ou nt.

E le c tro nic Tra nsfe rs

E le c tro nic tra nsfers c a n be m on ey tra nsfe rs a cc o m plished ele ctro nica lly
o r b a nk tra nsfers loc a te d in tw o diffe rent g eo gra phie s.

In b oth typ es o f tra nsfers, a n o rig ina ting p a rty se nd s m one y to

a n Automated Clearing House (ACH) w h ic h tra nsfe rs the re quire d a m o unt
to the de stina tion.

In e le c tro nic b a nk tra nsfers, a SWIFT ro utin g c od e is used a s the a d dre ss

o f a de stina tion b a nk. M o ney tra nsfers a re a lso used a s pa ym e nt
m e thod s be tw ee n busine sses.

P ure ly o nline m o ney tra nsfers ca n b e m a de usin g serv ice s like P a yP a l.

Se rvice s like W e stern U nion d o no t o pe ra te in a p ure ly o nline fa sh io n a nd
e na ble se nd ing o f m o ney using c a sh a nd in o ffline m od e .

M o bile P a ym ents
The ra pid pro lifera tio n of sm a rtpho ne s ha s m a de m ob ile p a ym ents a
p op ula r pa ym e nt m eth od , esp ec ia lly in d e ve lo p in g c ountrie s.

Sm a rtp ho ne a p p lic a tions like Ve nm o in the U nited Sta te s a nd W eC ha t in

C hina a re p op ula r w ith m ille nnia ls a s a p referre d p a ym en t m e tho d.

To ena b le p a ym en ts v ia m o b ile a pp s, the a c co unt sho uld b e linke d to a

b a nk a cc o unt o r a ca rd . The relev a nt a m o unt is d eb ited fro m ba nk
a c co unts o r c a rd s v ia m o b ile p a ym e nts.

In e m erg ing m a rke ts, such a s Ind ia , m ob ile p a ym ents a re c o nsid e red a
ke y fa cto r ena b ling so cio -e co no m ic de ve lop m e nt.

This is b ec a use they ena ble b a nking a nd lend ing se rvic es to un de rserv ed
a re a s o f the po p ula tio n b y re du cing the in fra struc tura l c o sts for m o ne y
m a na g e m ent a nd ba nkin g serv ice s.
C rypto c urrenc ies
c ryp to curre nc ie s a re the la te st p a ym e nt m etho d .

The y a re a n ev o lutio n ov er cre d it c a rds b ec a use th ey a llo w fo r tra nsfer o f

m o ney a nd va lue o ve r ele ctro nic ne tw o rks tha t sp a n m ultiple g e og ra p hies.

Fo r e xa m ple , n on-fung ible to ke ns o r N F Ts a re a type of c ryp to c urrenc y

tha t a llo w fo r tra n sfe r o f un iq ue c o lle ctible s, such a s ra re d igita l a rtifa cts,
b etw ee n tw o p a rtie s.

M o re c onv entio na lly, c rypto cu rre nc ie s like b itco in ca n b e use d for

b usiness tra nsa c tio ns b etw ee n g eo gra phie s.

The ir un de rlying tec hno lo g y, b loc kc ha in , is a glo ba l led g er tha t is

ta m p er-resista nt a nd c a n b e use d to m inim ize c o nve ntiona l tra nsfer fe e s
tha t suc h tra n sa ctio ns g e nera lly inc ur.

W hile th e sha re o f c rypto c urrenc ies in the ov era ll pa ym e nt m etho d s pie

re m a in s fa irly low , it is ex pe cte d to clim b in the future a s the te chn olo gy
d ev elo ps a nd be co m e s ea sier to use.

Q U E STIO N 4: W H A T IS M IN IM UM W A G E S AC T 1 9 48 ?

A N SW E R : The Minimum Wages Act 1948 is a n A ct of

P a rlia m e nt c o nce rning India n la b o ur la w tha t se ts the m inim um w a g e s
tha t m ust be pa id to skille d a nd unskille d la b ours.

The India n C onstitution ha s d efine d a 'liv ing w a ge ' tha t is the lev el o f
inco m e fo r a w o rker w hich w ill ensu re a ba sic sta nda rd o f liv ing inc lud ing
g oo d h ea lth, dig nity, c om fo rt, e d uca tio n a nd p ro vide fo r a ny c o ntin ge ncy.
H ow e ve r, to ke ep in m ind a n ind ustry's ca p a c ity to pa y the c onstitution
ha s d efined a 'fa ir w a g e'. [1] Fa ir w a ge is tha t le ve l o f w a g e tha t no t just
m a inta ins a le ve l o f em p loym e nt, b ut se eks to incre a se it ke ep ing in
p ersp ec tive the ind ustry's ca p a c ity to p a y. D ue to a n unjust a tte ntion
to w a rd s the de ca de s old la w it is n ow ex p lo ited b y m a jor b usinesse s to
und erp a y the ir e m plo yee s, In p ub lic o p in io n g ov ernm e nt m ust se t a n
yea rly w a ge cha n ge just like c ou ntrie s inte rna tio na lly do .

To a chie ve th is in its first se ssio n d urin g N ov em b e r 1 9 48 , the C e ntra l

A d visory C ounc il a p po inted a Trip a rtite C o m m ittee o f Fa ir W a ge . This
c om m itte e c a m e up w ith the c o nce p t o f a m inim um w a ge , w hic h not o nly
g ua ra nte es ba re subsiste nce a nd p rese rve s e fficien cy but a lso p rov id e s
for ed uc a tion, m e dic a l re q uire m e nts a n d so m e lev el of co m fo rt.

Ind ia introd uc ed the M inim u m W a g e s A ct in 1 9 48 , giving b oth the C e ntra l

g ov ernm ent a nd Sta te g o ve rnm ent jurisd ic tio n in fix in g w a g e s. T he a ct is
leg a lly no n-b ind ing , bu t sta tuto ry. P a ym e nt of w a g e s b e lo w the m in im u m
w a g e ra te a m o unts to forc e d la bo ur. W a g e b oa rd s a re se t u p to re vie w the
ind ustry's c a p a city to p a y a nd fix m inim um w a g e s suc h tha t they a t le a st
c ov er a fa m ily o f fo ur's re q uire m e nts o f c a lorie s, she lte r, c lo thing ,
e duc a tion , m e dic a l a ssista nc e, a nd ente rta inm ent. U nd e r the la w , w a g e
ra te s in sc he dule d e m p lo ym e nts diffe r a cro ss sta te s, sec tors, skills,
re gio ns a nd oc cu pa tio ns o w ing to diffe re nc e in c osts o f living , re gio na l
ind ustrie s' c a p a c ity to p a y, c onsum ptio n p a tterns, e tc . H enc e, there is no
sing le unifo rm m inim um w a g e ra te a c ross the co untry a nd the struc ture
ha s b ec o m e o ve rly c o m ple x. T he hig hest m inim um w a g e ra te a s up da te d
in 2 01 2 w a s R s. 3 2 2/d a y in A nd a m a n a nd N ic ob a r a nd the lo w est w a s Rs.
3 8/ da y in Tripura . In M um b a i, a s o f 2 0 17 , the m inim um w a g e w a s Rs.
3 48 /d a y for a (sew a g e clea ner a n d sw e ep er), b ut this
w a s ra rely p a id .