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Reference Case Study on Compensation issues

M/s Aspire Silencers Limited,( ASL) Noida

Jasbir Singh, An Engineer from not so known Engineering Institute from Bhatinda, joined ASL

as Graduate Engineer based on recommendation from one of senior managers of the company..ASL was leading manufacturers of the Automobile silencers and was having a market share of 30 % in India. The overall turnover of the company was 2000 Crs and it had 2 units in Noida,and Gwalior It had a profit of Rs 150 Crs in the year 2008-09.

Jasbir was quite happy with job as he was learning a lot .He felt charged to go to factoryeveryday to work for his goals .But of late, he started feeling unhappy due to some of theincidents given below

1. ASL informed him that he would get a CTC of Rs 2.8 lacs pa . But he was given a salary of Rs 15000/- pm (Rs 1.8 lacs pa ). When asked, he was told about deductions due PF, ESI, andsuperannuation, Gratuity Bonus, Medical Insurance, LTA and Bus Charges etc . He found that it

is barely giving him saving potential as his rent of Rs 5000 pm and fooding expenses of Rs5000 /- consumed major portion of his salary.

1. The company had a Grade structure having 16 Grades as given in Annexure 1 . An engineer joined fresh from Delhi College of Engineering campus is taken in Grade 3 whereas he wastaken in Grade I . DCE fresher was drawing a salary of 4.0 lacs pa .It was told in the interviewthat ASL recruit engineers from campus at higher salary and he should perform well to deservethat salary . It would be considered after one year.

2. He met two other engineers who joined thru reference and they were still drawing 3 lacs paafter 2 years of experience.,

3. .He found that his compensation had components which did not give him the benefit of usingit when he wants. The components of his salary are given in Annexure 1 . He found that variouscomponents mentioned did not allow him flexibility.

LTA is given after one year of service. Superannuation amount can be taken only after leaving the company after serving for

5 years PF of 12% on basic salary takes away Rs 3000/- from his pocket. Medical Insurance for family costs him Rs 250 pm. Gratuity is paid at the end of 5 years on leaving the company. Bonus is paid only at the time of Deepawali. Bus Charges were very high HRA was not tax deductible as he could not produce receipt for the house rent. Land

lord did not give him the receipt. 4. The supervisors and supervisor staff were quite old. They were diploma holders with goodoperational knowledge. They almost managed the entire production shop. The grade structureas given in the Annexure 2 was in place for years. It was well protected due to DA per point of raise every month. The annual performance linked increments were between Rs 125 to275 /-per month for Excellent and 1.5 to those rated Very Good and 1 increment to those rated good

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and half increment to those rated average. Nil increase to those who were rated poor. .He foundvery difficult to get work done as they get more due to DA increase than annual increment givenby company. He once met the Personnel Manager informing him of the dissatisfaction of thestar supervisors with the annual increase given as they felt Rs 150 to Rs 200 pm increase isvery low. He was told that it is his duty to manage the supervisors and he should not entertainany such grievances on salary front as they get Rs 500 to Rs 600 pm increase due to DA.

5. He found that supervisors in Production shop were very unhappy because they came toknow that HR supervisor with same experience and grade was getting Rs 2000/- pm morethan him and Accounts staff was getting Rs 1000/- more than him whereas he was producingthe goods for sales. HR was only maintaining attendance records and accounts keeps daytoday transactions.

6. It was observed that many workers drawing more than supervisors due to annualagreement related increase negotiated by Union apart from overtime salary ( One gets doublethe basic salary during extra hours beyond 8 hrs of working ) . They were able to get overtime tomeet the increased targets.. ( Annexure 3)

6. The turn over of the Middle level managers was about 25 % in 2008 , the company decidedto do market survey of the Automobile related companies in India. While it was number 2in last survey done 3 years back, it has slipped to number 3 in the recent survey wheresome good multinational companies were also included. The data of the market is given inAnnexure 4 . .

7. The company is now on a major diversification plan and needs young critical talents with 0to 2 years experience from MBA Institutes and outside to manage Marketing, Finance etc for managing new Consumer goods business. Company has adequate funds to pay salariesand attract MBAs from Tier II institutes. It was not able to decide where it should pitch itself to attract the best MBAs and also ensure internal parity.

8. While it was struggling with its compensation policy, it decided to take some urgent remedialaction. A task force was set up which was assigned the responsibility of working out salarystructure in such a way that it retains the best talents and also ensures that the overallwages bill does not exceed the 13% benchmark for the automobile Industry.

YOU are now required to analyze the case and list down compensation issues that need to beaddressed by the company.

Annexure 1 Officers Grade structureAnnexure 2 Grade structures of workersAnnexure 3; Grade structure of supervisorsAnnexure 4 . Market data

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Annexure -1 Officers grade structure at ASL

Grad

e

Designation Min Basic

pm

HRA

%of Basic

Con

Pm

Med

pa

LTA

pa1 Jr officer 5000- 40 800 3000 4000

2 Officer 7000 40 1000 4000 5000

3 Executive10000

40 1600 5000 6000

4 Sr Executive12000

45 2000 6000 8000

5 Asst Manager 15000 45 3000 8000 9000

6 Dy Manager 20000 45

7 Manager 25000 50

8 Sr Manager

9 Chief manager

10 Dy General manager

11 General Manager

12 Sr general Manager

13 Vice president

14 Sr Vice President

15 President

16 CEO

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Annexure 2. Supervisor Structure at ASL

sn Designation Basic+increaseyearly

DA(dearnessAllowanc )

HRA pm Conveyancepm

1 Sr Superintendent 10000-250 6000 2000 15002 Superintendent 8500-225 6000 1900 12003 Sr Supervisor 7500-200 6000 1800 11004 Supervisor 6000-175 6000 1700 10005 Dy Supervisor 4500-150 6000 1600 900

6 Asst supervisor 3500-125 6000 1500 8007 Trainee 6000- Nil Nil Nil

Annexure 3.. Workers structure at ASL

sn Designation Basic (pm ) increment ina year

DA*/pm Averageovertimeallowance pm

AgreementBenefit

1 Expert 6000-70 6000 2000 30002 Highly skilled-II 5000-60 6000 15003 Highly skilled -1 4000-55 6000 1000 14004 Skilled III 3500-50 6000 13005 Skilled II 3000-45 6000 12006 Skilled I 2500-40 6000 900 11007 Semi Skilled -3 2000-35 6000 1000

8 Semi Skilled -2 2000-30 6000 9009 Semi Skilled -1 1800-25 6000 800 80010 Unskilled -3 1800-20 6000 70011 Unskilled-2 1700-15 6000 60012 Unskilled -1 1500-10 6000 700 500

Trainee 5000*DA is given based annual inflation linked to UNME or CPI @ 2/- per point increase

Annexure 4. Market Survey Report for Managers salary ( 6yrs exp)

factors Company a Company B Company C Company ASLLocation Ludhiana Chennai Mumbai NoidaBasic pm 25000/- 40000/- 45000/- 25000

Average CTC pa 10. lacs 12.0 lacs 14.5 lacs 11..0 lacsSales 2008 500 crs 600 Crs 1300 Crs 2000 crsWages /Sales % 14% 10% 14% 15%Percentile 45 55 60 50

25 th oct 2010 by vpswarup