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Compensation & Benefits NHRDN Workshop Pune 17th March 2012
- 1. NHRD- C&B Workshop on 17-March-2012
• Major Compensation Trends 2012
• Generation Based Approach
• Impact of Union Budget & Tax Savings
Components
• Smart ways of restructuring Salaries
• Using Quality Tool in HR
By Parul Mittal
Head C&B;Zensar tech
www.zensar.com | © Zensar Technologies Ltd. 2012
- 2. Major Compensation Trends 2012
Focus areas for C&B
Average % increments :
Industry segment wise
Management cadre wise
Economy wise
Increment trends
Trends on variable pay
www.zensar.com | © Zensar Technologies Ltd. 2012
- 3. Emerging trend on Focus areas for C&B
Continued research by employers on effective ways to use C&B as a
differentiator against competition
Smart benefits receiving more significance than just Cash compensation
Car lease policies ,NPS and other tax saving schemes are being reviewed.
ESOP may be costly due to IFRS norms
Medical benefits : Coverage to extended families, coverage post
superannuation, wellness program, leave policies.
Increasing take home salary by making C&B structure more tax friendly
without increase in overall wage bill
C&B structure customized to suit various generations, viz, X, Y and Z
www.zensar.com | © Zensar Technologies Ltd. 2012
- 4. Major Compensation Trends 2012(AON Hewitt)
Managerial cadre Expected average
Industry segment Expected average % increment for
% increment for 2012
2012 Entry level 11.8%
Pharmaceuticals 13.3%
Junior Management 12.3%
Engineering and 13%
Middle Management 12%
design services
Senior Management 11.1%
Infrastructure 12.9%
Heavy engineering 12.4%
FMCG 12.4% Nation % Nation %
IT 11.9% India 11.9% Australia 4.6%
Telecom 11% China 9.5% Hongkong 5%
BFSI 10% Japan 2.8% Malaysia 6.2%
Philippines 6.9% Singapore 4.8%
Critical talent pool 15.1%
www.zensar.com | © Zensar Technologies
Ltd. 2012
- 5. Increment Trends
2011 with 12.6% average hike was better than 2010
2012
11.9% average salary hike (IT)
10% (financial institution/auto/gen engineering/BPO)
India has outpaced Asia pacific again with highest salary
hikes in the region
www.zensar.com | © Zensar Technologies Ltd. 2012
- 6. Trends on Variable pay
Increased use of variable pay with lower fixed salary income
Variable pay being introduced or increased at Middle
management level
Various innovative forms of variable pay introduced to boost
performance
A quick snapshot of emerging trend :
Earlier Now
Sr. Management 18% - 20% 25% - 30%
Middle Management 10% - 12% 18% - 20%
Jr. Management 5% - 8% 10% - 12%
www.zensar.com | © Zensar Technologies Ltd. 2012
- 7. Trends on Variable pay
Pros Cons
To build a performance oriented culture Reduces take home salary which could
impact the morale of the associate
To differentiate between various levels Many times, is linked with the associate
of performance being on the rolls of the company on a
specified date
Builds flexibility into overall If not properly designed might force
compensation structure associates to stretch creating stress and
affecting morale of the associate
To recognize outstanding performers If it is not objective and transparent
might create confusion and suspicion in
the minds of the associates
Will help in retention of critical talent A tendency amongst associates to see it
and high performers as a deferred pay
www.zensar.com | © Zensar Technologies Ltd. 2012
- 16. Total rewards : Moving back to old world charm in a new digital
economy
1990
Low cash
High benefits
Where are we 2000
moving to : Medium cash
Flexible benefits Medium benefits
2010
High cash
Valued benefits
www.zensar.com | © Zensar Technologies Ltd. 2011
- 17. Any C&B scheme should make sense to the end user
www.zensar.com | © Zensar Technologies Ltd. 2012
- 19. Basics of Tax savings
components
www.zensar.com | © Zensar Technologies Ltd. 2012
- 20. Income Tax Slab rates
Income tax rates for assessment New Income tax rates for
year 2012-13 Men & Women (FY assessment year 2013-14
2011-12) (FY 2012-13)
Up to Rs
1,80,000/1,90,000( No tax / Up to Rs No tax /
W) exempt 2,00,00 exempt
1,80,001/1,90,000( 2,00,001 to
W) to 5,00,000 10% 5,00,000 10%
5,00,001 to 5,00,001 to
8,00,000 20% 10,00,000 20%
Above
Above 8,00,000 30% 10,00,001 30%
Changes- Min Net Savings of Rs 22,000
Deductions of Rs 5,000 for Executive Health Check U/S 80 D over current provisions
Deductions of Rs 10,000 on interest earned from savings bank account u/s 80TTA
www.zensar.com | © Zensar Technologies Ltd. 2012
- 21. Budget 2012-13: relevant provisions
The senior citizen age has been reduced from 65 to 60 years as declared in
union budget as on 16march 2012 .The threshold limit of exemption for them
will remain Rs 250000/- and for 80 years and more will remain Rs 5 lacs.
Senior citizens are exempted from payment of advance tax.
For reporting mechanism in real estate sector ,a rate of 1% shall be deducted if
property is> Rs 50 lacs in urban agglomeration and >Rs 20 lacs in any other
area
TDS on cash sale of bullion and jewellery: Seller of bullion and jewellery shall
collect tax@1% of sale consideration from every buyer of bullion and jewellery if
sales exceeds Rs 2 lacs and sales is in cash.
Under sec 194 j ,tax is required to be deducted on the remuneration paid to a
director which is not in the nature of salary at the rate of 10% of the
remuneration with effect from July 2012
Wealth tax will not be levied on the residential house alloted by the company to
the employee if employee’s income is less than 10 lacs.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 22. As –IS provisions
Section 80C:
Life insurance
Home loan principal payment
Employees Provident Fund (EPF)
Public Provident Fund (PPF)
Tuition fee of your child
Section 24 : This is one of the popular sections in the act that allows a home buyer who has
taken a housing loan to avail of tax deductions of up to Rs 1.5 lakh on interest paid on that loan
80CCF Introduced last yea, this allows one to invest up to Rs 20,000 in notified infrastructure
bonds
Section 80D This section deals with deductions you can avail of if you have a mediclaim policy
80E (education loan), 80G (donations to charities), 80DD (medical treatment of a
disable person), 80DDB (treatment for specified diseases) which also allow you
deductions.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 23. Monetised and Non Monetised
Financial Non Financial
Excellence Award &Spot Awards
Pay -for role via Fixed salary Insurance personal and accident
insurance policy
Pay -for performance via Variable Pay and
Increment Executive Health Check Up ,Birthday Coupons
Pay for skills via Skill Allowances Careers enhancement through Training. Higher
edu (PHDs)
Pay for Value Proposition
Club Membership
Special Business Plans
Concierge Services
Sales Incentive
Free Parking for Car Pool
Shift allowance/ Over time
Allowance/Attendance Incentive for IT/ Mobile Phone reimbursements
BPO as applicable
Freedom to select a team
Concept of cash for referrals
Work Life Balance
Loans and Advances
Flexi Hours/Work From Home
Parents Medicare
Business Travel Insurance
Car policy for senior Associates
Spouse Placements when relocating
Creche Facility
Continued Insurance Cover for family in case
associates are abroad
Free Doctors and Counselors
Townships, Schools
www.zensar.com | © Zensar Technologies Ltd. 2012
Corporate Discounts
- 24. Flexible Benefits Plan/Bouquet of Benefits
Flexi basket is a bouquet of benefits offered to plan for future
contingency and save tax
-LTA (Leave Travel Assistance)
-HRA
-Medical Reimbursements
-Meal Coupons
-Children Education Allowance
-Telephone reimbursement
-Superannuation
-Company Car , Drivers salary & Fuel Allowance
www.zensar.com | © Zensar Technologies Ltd. 2012
- 25. Leave Travel Assistance
LTA is taxable twice in a block of four years, current Block Jan
10 to December 13
LTA for Domestic journeys performed through the shortest air
amount not exceeding air economy fare of the National Carrier.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 26. House Rent Allowance, Meal & Medical
HRA -The maximum entitlement provided per associate is 50 % (Metro)or
40%(Non Metro)
Medical -The maximum limit for all associates is Rs.15,000/- per annum.
Meal-The meal coupon is a tax saving benefit provided to the associate by
the company, the entitlement per associate is Rs. 13200- per annum.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 27. Child Education & Telephone Allowance
Child Education allowance-Entitlement per associate per child per annum up
to a max of 2 children
Telephone Reimbursement-Associates are entitled for reimbursements of
expenses for official purpose only
www.zensar.com | © Zensar Technologies Ltd. 2012
- 28. Superannuation
15% of Annual Basic or Rs 1 lacs whichever is less
Transferable and Interest is credited Annually
Superannuation contribution is a part of compensation
www.zensar.com | © Zensar Technologies Ltd. 2012
- 29. Company Car Policy, Driver & Fuel
allowance
Company Car-The company provides assistance to associates in buying a
car as per grade applicability.
Driver Allowance-Company usually provides for driver’s salary. This is an
additional benefits the company provides & forms part of Flexi components
Fuel Allowance – part of flexi component, extended to associates for fuel
expenses. E.g The entitlement per associate is Rs 1800 and 2400 per
month depending on the engine capacity.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 30. Smart ways of Restructuring Salaries
a) Smart Budgeting and provisioning
b) Paying for variable pay annually linked to KRAs; Deferred Bonus -quarterly –
linked to BU performance
c) Cash Out / Add On Options
d) Paying through allowances-Skill/Special/Project to keep wage bill in control,
and driving competencies
e) Deferred Variable- Variable pay to be paid 160% over a period of say 3 years
f) Strategising increments driving required behaviour through bell curve
www.zensar.com | © Zensar Technologies Ltd. 2012
- 31. Symmetrical Bell Curve
HIGH
PERFORMERS AVERAGE
PERFORMERS
PERFORMANCE
NEEDS
IMPROVEMENT
A-15% B-70% C-15%
www.zensar.com | © Zensar Technologies Ltd. 2012
- 33. Merit Pay Increase & Variable Payout
Performance Pay Variable
Band Increase % Payout % Remarks
12% in fixed Increment
and Rest 14% over a
period 12 Months, 30%
A 26 130 Extra Variable pay
12% in fixed Increment
B 12 100 and full 100% variable
6% in fixed Increment
C 6 70 and 70% variable
www.zensar.com | © Zensar Technologies Ltd. 2012
- 34. Significance of Bell Curve Distribution
Bell Curve is quite significant e.g a budget available of Rs 10000 for payout of
VP
Performance Bell Curve Variable Variable
Band Split Increment Pay out % Pay Out
1% increase
in B equals
4.6%
increase in
A 15 A 130 1950
B 70 1% increase 100 7000
C 15 70 1050
Total 10000
www.zensar.com | © Zensar Technologies Ltd. 2012
- 37. What is quality
conformance to specifications
What is defect
Non conformance to specifications
What is DPMO
Defects per million opportunities
www.zensar.com | © Zensar Technologies Ltd. 2012
- 38. What is six sigma
The term Six Sigma is widely used to refer to all of the following:
A structured method for improving business processes. This method,
called DMAIC (Define, Measure, Analyze, Improve, Control), is
supported by an assortment of statistical tools.
A statistical measurement of how well a business process is
performing. A process that performs at Six Sigma produces only 3.4
defects out of every million opportunities to produce a defect.
Processes that perform at lower sigma levels (such as one sigma or
four sigma) produce more defects per million opportunities. It is
possible for a process to perform at an even higher level (and thus
have even fewer defects), but Six Sigma has become popular as the
standard for excellent process performance.
An organizational mindset in which people make decisions based on
data, look for root causes of problems, define defects based on
customer rather than internal requirements, seek to control variation,
track leading indicators of problems to prevent them from happening,
etc.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 39. Sponsor
Senior executive who sponsors the overall Six Sigma Initiative.
Leader
Six Sigma Roles And Responsibilities
Senior-level executive who is responsible for implementing Six Sigma within the business.
Champion
Middle- or senior-level executive who sponsors a specific Six Sigma project, ensuring that resources
are available and cross-functional issues are resolved.
Black Belt
Full-time professional who acts as a team leader on Six Sigma projects. Typically has four to five
weeks of classroom training in methods, statistical tools, and (sometimes) team skills.
Master Black Belt
Highly experienced and successful Black Belt who has managed several projects and is an expert in
Six Sigma methods/tools. Responsible for coaching/mentoring/training Black Belts and for helping the
Six Sigma leader and Champions keep the initiative on track.
Green Belt
Part-time professional who participates on a Black Belt project team or leads smaller projects.
Typically has two weeks of classroom training in methods and basic statistical tools.
Team Member
Professional who has general awareness of Six Sigma (through no formal training) and who brings
relevant experience or expertise to a particular project.
Process Owner
www.zensar.com | © Zensar Technologies Ltd. 2012
- 40. Establish a clear and significant role of HR for institutionalizing
Establish Six Sigma objectives and role in HR
Seek customer feedback and identify opportunities for improvement
Establish Six Sigma goals for HR function
Formulate, prioritize projects and form teams
Provide Six Sigma Green Belt training
Implement DMAIC for breakthrough solution.
SOME Examples of Six Sigma projects that companies’ HR
departments have: include reduction in overtime,
reduction in time and cost to hire an employee, reduction in
employee Attrition, reduction in safety violations, reduction in cost of
Employee separation, and HR response to internal inquiries for
benefits, payroll, promotion and fairness.
www.zensar.com | © Zensar Technologies Ltd. 2012
- 41. Methodology
DEFINE
MEASURE ANALYZE IMPROVE CONTROL
• Define the problem
• Measure the symptoms/behavior of the problem we’ve defined
• Analyze the potential causes (elements of the process design) based on the symptoms
uncovered in measure
• Improve the process based on the results of the analysis
• Control the process at the new level of performance
www.zensar.com | © Zensar Technologies Ltd. 2012
- 42. Benefits – Holding the gains
Bandwidth per person
for query resolution/month(Hrs)
AS per current deployment
Benefits
• Major process improvement to save future efforts and increase
productivity
• Process Standardization.
• Improved Customer Satisfaction
• Better Utilization of resources
Horizontal deployment-
• Support functions including HR, Admin, Estate Management Department
Technical Infrastructure Management Service(TIMS)
www.zensar.com | © Zensar Technologies Ltd. 2012
- 43. Thank you.
www.zensar.com | © Zensar
Technologies Ltd. 2011