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Compensation & Benefits Practice in DVC ”

Table of Contents

Executive summary Company profile. Introduction to the topic Compensation plan at DVC Review of literature Research methodology Findings Limitations Recommendation and suggestion Conclusion Bibliography Annexure

EXECUTIVE SUMMARY

Employees receive compensation from a company in return for work performed. While most people think compensation and pay are the same, the fact is that compensation is much more than just the monetary rewards provided by an employer.

According to Milkovitch and Newman in Compensation, it is "all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship" The phrase "financial returns" refers to an individual's base salary, as well as short- and long-term incentives. "Tangible services and benefits" are such things as insurance, paid vacation and sick days, pension plans, and employee discounts.

Contd…

An organization's compensation practices can have far-reaching effects on its competitive advantage. As compensation expert Richard Henderson notes, "To develop a competitive advantage in a global economy, the compensation program of the organization must support totally the strategic plans and actions of the organization." Labor costs greatly affect competitive advantage because they represent a large portion of a company's operating budget. By effectively controlling these costs, a firm can achieve cost leadership.

INTRODUCTIONTO THE ORGANIZATION

Contd… The Damodar Valley Corporation, popularly known

as DVC, is the first multipurpose river valley project of independent India. The corporation came into being on July 7, 1948 by an act of the constituent assembly of India (act no.XIV). It is modeled on the Tennessee valley authority of USA. Jawaharlal Nehru, prime minister of India, Dr. B.C.Roy, chief minister of west Bengal and Sri Krishna Sinha, chief minister of Bihar, took personal interest to ensure early success of the project.

The Corporation has its Head Office at Kolkata (previously Calcutta), has a full time Chairman and two part-time members, generally the Secretary of the Power Dept., of the states of West Bengal and Bihar representing their respective states.

Contd…

DVC has three Hydro-electric power station at Tiliya, Maithon and Panchet, with total installed capacity of 144 MW. The one at Maithon was India’s first underground Hydro-electric power station.

DVC operates thermal power stations at Bokaro, Chandrapura, Durgapur and Mejia, with total capacity of 2745 MW. The power station at Bokaro was biggest in the country when it was built in the 50’s .DVC is expanding its thermal power capacity and with the completion of its presents plan by 2012 it would be generating more than 11000 MW of power.

Contd…

MISSIONThe Mission of DVC is defined by the following objectives:• Flood control and irrigation.• Generation, transmission and distribution of power.• Eco-conservation and afforestation.• Socio-economic welfare of the in habitants of Damodar

Valley.• Water supply of industrial and domestic use.

VISION• To establish as a mega pithead power producer and distributor

in the eastern Region and become a facilitator for all around growth of the region enriching the quality of lives of people.

LANDMARKS ACHIEVED

DVC is the first multipurpose river valley project taken up by the Govt. of India.

DVC, only the Government of India (GOI) organization generating power through three sources - coal, water and liquid fuel.

India’s first underground Hydel station set up at Maithon.

Bokaro TPS, the nation’s biggest thermal power plant in the 50’s last century.

The first re-heat units in India, utilizing high stream parameter at Chandrapura TPS.

DVC INFRASTRUCTURE AT A GLANCE

DVC Command Area 24,235 Sq. Km

POWER MANAGEMENT

Total Installed Capacity 2796.5 MW

Thermal Power Stations Five Capacity 2570 MW

Hydel Power Stations Three Capacity 144 MW

Gas Turbine Station One Capacity 82.5 MW

Sub-stations and Receiving Stations At 220 KV– 11 nos.At 132 KV– 33 nos.At 33 KV– 16 nos.

Transmission Lines 220 KV– 1500 ckt km132 KV– 3415 ckt km33 KV– 1070 ckt km

DVC POWER PLANTS AT A GLANCE

Name Location Existing Capacity Commissioning

HYDEL

Tilaiya River- BarakarDist.-HazaribaghState- Jharkhand

4 MW(2X2 MW)

U-I Feb 53U-II July 53

Maithon River- BarakarDist.- BurdhamanState- West Bengal

60 MW(3X20 MW)

U-I Oct 57U-II Mar 58U-II Dec 58

Panchet River- DamodarDist.- DhanbadState -Jharkhand

80 MW(2X40 MW)

U-I Dec 59U-II Mar 91

Total Hydel . 144 MW

Name Location Capacity Commissioning

THERMAL

Bokaro 'B' Dist- BokaroState- Jharkhand

630 MW(3X210 MW)

U-I Mar 86U-II Nov 90U-III Aug 93

Chandrapura Dist- BokaroState- Jharkhand

390 MW(3X130 MW)

U-I Oct 64U-II May 65U-III July 68

Durgapur Dist.- BarddhamanState- West Bengal

350 MW(1X140 MW)+(1X210 MW)

U-III Dec 66U-IV Sept 82

Mejia Dist.- BankuraState- West Bengal

1090 MW(4X210 MW)+ (1X250 MW)

U-I Mar 96U-II Mar 98U-III Sept 99U-IV Feb 05U-V Feb 08

Total Thermal . 2460 MW  

GRAND TOTAL 2604 MW  

INTRODUCTION TO THE TOPIC "If you pick the right people and give them the opportunity to spread

their wings - and put Compensation and rewards as a carrier behind it - you almost don't have to manage them."

  -Jack

WelchCOMPENSATION (Definition)

According to Robbins “Compensation management is a process of determining cost effective pay

structure, designed to attract and retain, provide an incentive to work hard, and structure to ensure that pay levels are perceived as fair.”

Cascio has defined Compensation as follows: “Compensation includes direct cash payments, indirect payments in the form

of employee benefits and incentives to motivate employees to strive for higher levels of productivity”

 

Compensation may be used to:• Recruit and retain qualified employees.• Increase or maintain morale/satisfaction.• Reward and encourage peak performance.• Achieve internal and external equity.• Reduce turnover and encourage company loyalty.• Modify (through negotiations) practices through unions.

EVOLUTION OF COMPENSATION

Today’s compensation systems have come from a long way. With the changing organizational structures workers' need and compensation systems have also been changing. From the bureaucratic organizations to the participative organizations, employees have started asking for their rights and appropriate compensations.

In traditional compensation system it was assumed that humans work only for money, there was no space for other psychological and social needs of workers. 

Today modern the compensation systems are designed aligned to the business goals and strategies. The employees are expected to work and take their own decisions. Authority is being delegated. Employees feel secured and valued in the organization. Organizations offer monetary and non-monetary benefits to attract and retain the best talents in the competitive environment. Some of the benefits are special allowances like mobile, company’s vehicle; House rent allowances; statutory leaves, etc.

Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc.

Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity.

Direct Compensation

Indirect Compensation

NEED OF COMPENSATION MANAGEMENT A good compensation package is important to motivate the

employees to increase the organizational productivity. Unless compensation is provided no one will come and work

for the organization. Thus, compensation helps in running an organization effectively and accomplishing its goals.

Salary is just a part of the compensation system, the employees have other psychological and self-actualization needs to fulfill. Thus, compensation serves the purpose.

The most competitive compensation will help the organization to attract and sustain the best talent. The compensation package should be as per industry standards.

COMPENSATION PLAN AT DVC DVC has been regulating by the central

government from the beginning, when Damodar valley corporation act passed in 1948 for the development of Damodar valley in province of Bihar and Bengal. All rules and regulation regarding pay structures, compensation and benefits is governed by central government of India. Although central government is responsible for this corporation, but DVC has status and format like a company.

Services classified under DVC are categorized into four categories.

Group A:under this group according to 6th pay revision salary of employees are starting from Rs.15600/ as a basic and ranging up to Rs.67000/-.This category employees are called office cadre.

Group ‘B’:– This category employees are called supervisory cadre. Their pay scales is starting from Rs. 5200 and ranging up to Rs.39100/-.

Group ‘C’:-– This category employees are called skilled lab our. They are physically working group. Their pay scales are starting from Rs.5200/- and ranging up to Rs. 20200/-.

Group ‘D’- This employee are called unskilled lab our .their pay scales ranges from Rs.5200/- up to 20200.this group created in 1996.

1.BASIC PAYFor group –‘A’ employees

SI.No Post/grade as per DVC pre-revised scales

Existing DVC Scale

Name of pay band/scale

Scales as revised w.e.f 1.1.06Corresponding pay bands/scales

corresponding Grade pay

(1) (2) (3) (4) (5) (6)

1Group -A

1 8000-13500

PB - 3 15600-39100

5400

2 2 8000-14050

PB - 3 15600-39100

5650

3 3 10000-15200

PB - 3 15600-39100

6600

4 4 12000-16500

PB - 3 15600-39100

7600

5 5 14300-18300

PB - 4 37400-67000

8700

6 6 15050-20000

PB - 4 37400-67000

8800

7 7 16400-20900

PB - 4 37400-67000

8900

8 8 18400-22400

PB - 4 37400-67000

10000

9 9 18400-22400(+150)Sr.C.E

PB - 4 37400-67000

10150

10 10 18400-22400(+300) Director

PB - 4 37400-67000

10300

Basic pay for group –‘B’, ‘C’, and ‘D’ employees

SI.No Post/grade as per DVC pre-revised scales

Existing DVC Scale

Name of pay band/scale

Scales as revised w.e.f 1.1.06

Corresponding pay bands/scales

corresponding Grade pay

(1) (2) (3) (4) (5) (6)1

Group –D

Group-C

Group-B

(i) 2550-3200 PB - 1 5200-20200 18002 (ii) 2610-3540 PB - 1 5200-20200 18003 (iii) 2650-4000 PB - 1 5200-20200 18004 A 2750-4400

2820-4475PB - 1PB - 1

5200-202005200-20200

180018005 B

6 C 2890-4550 PB - 1 5200-20200 18507 D 3050-4590 PB - 1 5200-20200 19008 E 3200-4900 PB - 1 5200-20200 20009 F 4100-6400 PB - 1 5200-20200 265010 G 4250-6550 PB - 1 5200-20200 265011 H 4750-7900 PB - 1 5200-20200 320012 I 5000-8000 PB - 1 9300-34800 420013 J 5625-10175 PB - 2 9300-34800 420014 K 5800-10480 PB - 2 9300-34800 430015 L 6400-11000 PB - 2 9300-34800 440016 M 8000-13500 PB - 3 15600-39100 5400

2. GRADE PAY

For Group ‘A’ employees Pay Bands are PB-3(Rs.15600-39100) PB-4 (Rs.37400-67000)

For group –‘B’, ‘C’, and ‘D’ employees PB-2 (Rs.9300-34800) PB-1 (Rs.5200-20200)

3. House Rent Allowance

30% will be payable to the employee on BP+GP+NPA in respect of the employees posted at Kolkata , Howrah, Delhi & 20% will be payable in respect of the employees posted at Ranchi and Jamshedpur as per GOI order.

In respect of field employees HRA will be continued to be paid @ 10% to 5% as the case may but without any ceiling limit.

4. Dearness Allowance D.A. is calculated as a percent of the basic

salary. At present 22%, according to GOI is calculated on basic pay.

5. City Compensatory Allowance (CCA)

Allowance that is given for ‘To and for Journey’ from living premises to officers premises. Now this has been merged with transport allowances with effect from 01.04.2009.

6. Non Practicing Allowances (NPA) This allowance is given to doctors only. This is 25%

(Basic Pay+ Grade pay) and it is given on condition that their total amount does not exceed 85000(Basic Pay +Grade Pay +NPA). The NPA at the new rate has been effective from 01.01.2009 or the date of option for revised pay

8. Night Duty Allowances

Grade Pay Range Rate (Rs.) per night shift

Rs.1800/- and 1850/- 100/-

Rs.1900/- and 2000/- 125/-

Rs.2650/- 160/-

Rs.3200 and 4200/- 200/-

Rs.4300/-,4400/-,5400/- 240/-

9. Hazard Allowance

Hazard Allowance @Rs.10/-per day of active duty per employee is been given for working in the notified area of Hazards.

10. Conveyance Allowances

This allowance is given for two wheeler and four wheeler journey. Corporation compensates the expenditure for daily journey from living establishment to office establishment. This allowance has been merged with transport allowance effective from 01.01.09.

 

11. Energy Allowances (EC)

EA is payable in accordance with the following Grade Pay range to the extended cost to units shown here under and chargeable by the service provide to the employee.

Grade-Pay Range Electricity units

For Rs.1800/- and Rs.1850/- 100/-

For Rs.1900/-, Rs 2000/-, Rs.2650/-,Rs.3200/-,Rs.4200/-,Rs.430

0/- & Rs.4400/- & Rs.5400/-

150/-

DVC employees, residing in DVC colony Quarter, will receive free electricity as per the above range. Any additional consumption is been charged at usual rate of the corporation.

REVIEW OF LITERATURE

Article:-Devising a Good Compensation Plan

A comprehensive compensation plan must involve the following steps:

1.  A comprehensive audit of the current compensation practices and plans must be performed.

2.  A feedback report must be developed based on the result of this audit.

3. The HR, top management and the board of directors should meet to work out the company’s compensation philosophy.

4. Every position in the company must be sampled so that the job nature can be totally analyzed. The fundamental duties, responsibilities and functions of each of the roles must be identified.

Research Methodology 

Objective of the Study:

To check the level of satisfaction level of the employees with the compensation plan in DVC.

To identify and correctly describe the compensation structure of the organization.

To study existing compensation system in DVC. To examine why compensation system is important. To study the effectiveness of compensation on job satisfaction.

Research Design:

This is a descriptive type of research. Survey method is adopted using questionnaire with appropriate scaling techniques. The survey will be done on the permanent employee of DVC, Chandrapura. The type of data will be primary which will be collected though questionnaires.

Time Allocation: The total time allocated to conduct the research was almost 2 months. The particular months were from May to June (2010).

Research Method for Data collection:

The sample data will be collected through the questionnaire.

Primary Data: for research primary data will be collected through questionnaire.

  Secondary Data: secondary sources of information will be taken from

company’s magazine, books and internet(website of organization)

Sample Design:  Target Population: Permanent employees of DVC, Chandrapura.  Sample Size: 30 employee of DVC ,Chandrapura  Sampling Method: Sampling method employed will be based on simple random sampling

method.

Data Collection, Analysis and Interpretation

Primary data is collected from the permanent employees of DVC through questionnaire and secondary data is collected through informal & formal talk, observation and study of compensation policy at DVC.

Questionnaire1. Does the pay practice help your company to have

employees who are satisfied with their jobs?  

Interpretation: - According to the employees of the organization the satisfaction level of the employees is related to the pay policy adopted in the organization to a large extent. This shows the pay high regards to the compensation of the satisfaction level.

8%

24%

37%

21%

10%Not at all To a small

extentTo a mod-erate ex-tent

To a large extend

To a very great extent

Questionnaire

2. Does the pay practice help the company to high performing employees?

Interpretation: - Employees of the company believes that the compensation is very important for selection and retention of the high performing employees.

9%17%

25%32%

17%

Not at allTo a small ExtendTo a moderate extend To a large extendTo a very great extend

•Interpretation: - Employees of the company believes that the compensation is very important for selection and retention of the high performing employees.•Interpretation: - Employees of the company believes that the compensation is very important for selection and retention of the high performing employees.•Interpretation: - Employees of the company believes that the compensation is very important for selection and retention of the high performing employees.

Questionnaire

3. Does the pay practice make a positive contribution to the overall effectiveness of the organization?

 Interpretation: The employees who are permanent in the organization do not believe that the pay practices is fully responsible for the effectiveness of the employees at the work but other things like stress level, amount of work, duration of work .etc are also very important.

4%20%

45%

15%

16%

Not at allTo a small ExtendTo a moderate extend To a large extendTo a very great extend

Questionnaire

4. Does base salary increases typically determined for the managerial and professional employees?

Interpretation: The determination of the base salary for the high level professionals is unknown by many of them also. They were not able to interpret their pay determination factor.

6%17%

44%

23%

10%

Not at allTo a small ExtendTo a moderate extend To a large extendto a very great extend

Questionnaire

5. Does the pay incentives and such as bonus or profit sharing is an important part of the compensation strategy in this organization?

Interpretation: Strategies like profit sharing has been successfully adopted by the organization in practice and is considered very effective by the employees.

7%

24%

34%

16%

19%

Not at allTo a small extendTo amoderate extendTo alarge extentTo a very great extend

Questionnaire

6. Does the benefits are an important part of the total pay packages?

Interpretation: The benefits provided by the DVC are considered very important by the employees for the effectiveness and the loyalty employees’ shows.

3%11%

44%

34%

8%

Not at allTo a small extendTo a moderate extendTo a large extendTo a very great extend

Questionnaire7. In this organization a portion of an employee’s

earning is contingent o group or organization performance goals being achieved?

 

Interpretation: The performance of the group is considered more important by the employees and the management. The employees are satisfied by the companies’ policy of focusing on the group performance.

4%16%

33%

37%

10%

Not at allTo a small extendTo a moderate extendTo a large extendTo a very great extend

Questionnaire

8. Does the employee’s seniority enter into pay decisions?

Interpretation: A large percentage of the employees say that the seniority very much affects the pay determination.

5%10%

33%47%

10%

Not at allTo a small extendTo a moderate extendTo a large extendTo a very great extend

•Interpretation: A large percentage of the employees say that the seniority very much affects the pay determination.

Questionnaire

9. Does the employee benefits package is very generous compared to what it could be?

Interpretation: Employees benefits are very generous according to the permanent employees as compared to other companies in the region. The pay practices are very smart and different from other organization.

11%

22%

32%

27%

10%

Not at allTo a small extendTo a moderate extendTo a large extendTo a very great extend

Questionnaire

10. Do the pay policies recognize that long term results are more important than short term results?

Interpretation: The pay practices in the organization are mainly focusing on the long term result and goals which helps the organization to have high performing people

8% 14%

40%

25%

13%

Not at allTo a small extendTo a moderate extendTo a large extendTo a very great extend

OVERALL COMPARISION OF DATA

According to the overall interpretation of the collected data conclusion can be drawn that the permanent employees are aware of the compensation policy prevailing in the organization. Nearly half of the employees do not give the accurate response fearing the management.

9%

34%

33%

16% 8%

Not at allTo a small extendTo a moderate extendTo a large extendTo a very great extend

FINDINGS

The respondents are fairly satisfied by the compensation plans prevailing in their organization but do not go to the extreme against the management for giving their own opinions which could give more realistic view of the shortcomings in the policy.

  Most of the employees of the organization are not much

aware of the prevailing compensation policy.  Compensation does not rely on the new ways of

deciding the compensation policy for improving the employees’ performance and satisfaction.

  Traditional ways of deciding the pay structure is still

working.

LIMITATIONS

Employees the report to be used for some other purpose so they do not give accurate opinion.

The time allotted for the data collection was very short.

The internet information could be irrelevant.

The respondent were limited so

cannot be treated as the whole population.

RECOMMMENDATIONS AND SUGESTIONS

The effectiveness can be measured by comparing the compensation in the two companies one could be of the private sector and other of public sector.

  Factors affecting the compensation policy could be taken

separately to compare the effect of these factors on the policy.  The organization should go for the renewal of the compensation

policy and proper information should be given to the employee for better understandings.

  Employees must be given full knowledge about the benefits and

base pay structure in advance before recruiting and selection.  They need to give more emphasis on the qualified fresh graduate 

CONCLUSION

The increasing competitiveness of the labor market and turnover of employees had resulted in nightmare in compensation planning. Apart from this, the growing demands of the employees and competitive salaries offered by multinational companies had almost resulted in a compensation war in certain industries.

Therefore, the human resources managers have to evolve proper compensation planning for High end and qualified employees. The components of compensation have to be devised in such a way that, it focuses on the growing demands of employees while retaining the competitiveness and profitability of the company