Causes Of Labor Disputes

Main causes of labor disputes are as follows:

1. Economic Causes
Economics causes of labor disputes are related to the variables consisting of interest disputes which are concerned with the economic condition of workers and management. The variables under it are as follows:
- Bonus
- Working conditions
- Industrial problem

2. Managerial Causes
The unfair labor practice by the management too lead to labor disputes. Sometimes, management performs insufficient and unfair policies and procedures to raise organizational profit. But such unfair practices enrage the workers and lead to labor disputes. They are reflected by:
- Non-recognition of unions
- Selection and development
- Job security
- Leadership style
- Communication

3. Political And Legal Causes
This refers to all political and legal forces that affect labor dispute in the organization. Political instability and poor legal procedures affect industrial peace to a large extent. Some of its components are:
- Political interference
- Union conflict
- Political change

4. Psychological Forces
Everyone has his/her own psychological feelings, attitudes and beliefs. This difference in beliefs and psychological aspects of individuals may bring some labor disputes in the organization. Some of the psychological causes are:
- Appreciation
- Authority and responsibility

Concept And Meaning Of Labor Disputes

Poor industrial relations culminate labor disputes in an organization which are manifested in the form of strikes, lock-outs and other industrial actions. The common consequences of labor disputes are loss of production, loss of profit, and even the closure of the organization. Disputes are common in industries; so their nature and causes are inevitable for the organization to study.

Labor disputes can be defined as conflicts or disagreements over the rights and interests of employees with the management. It means, disputes  are the disagreements between employees and the employers in matter relating to organizational procedures.The contradiction can be in ideas and views of workers and managers. In a broader sense, labor dispute can occur not only between workers and managers, but also between workers and workers, or between employers and employers. Hence, such disputes are symptoms of industrial unrest in which both workers and managers try to pressurize each other. Therefore, an attempt should be given towards the settlement of disputes whenever they occur.

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Concequences Of Employee Grievance

Employee grievance may be resulted either from management policies, or working conditions of the organization or personality traits of employees. These are the primary forces that give impetus to the emergence of grievance in the actual work floor. A firm can hardly operate without the influence of grievance. Hence, handling grievance through appropriate procedures play a key role in the settlement of management's mistakes and weakness. If grievances are handled with a proper care and attention, they will introduce positive changes in the organization, thereby enhancing organizational productivity and employee satisfaction.

But if the grievance are not managed properly, they will create some negative impacts. Such impacts reduce organization's output as well as productivity. The negative consequences of employee grievance are:

- Reduced Productivity
- Absenteeism Problem
- Disobeying of orders
- Indisciplined behavior
- Reduced quality of work
- Reduced co-operation among the employees
- Discouragement in employees
- Disharmonious relation between management and employees

Therefore, a due consideration should be given towards the proper settlement of employee grievance instantly when they occur.

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Causes Or Sources Of Grievance

Grievance is a feeling of unfair treatment at work. It can be resulted from dissatisfaction of work. In this regard, sources or causes of grievance can be anything that results dissatisfaction or involving wages, working hours, or conditions of employment are the basis of grievance. The causes or sources of grievance are classified into three categories as follows:

1. Management Policies
The policies and procedures adopted by management give rise to grievance. The autocratic or bureaucratic style of management, for instance, is hardly liked by educated masses. But they favor rather a participative style of management. Similarly, management practices also lead to employee grievance at work as the want to exploit employees through reduction in pays and other benefits. Grievances resulting from management policies are:

- Wages rates or scale of pay
- Overtime
- Leave
- Transfer improper matching of the worker with the job
- Seniority, promotion and discharge
- Lack of career planning and employee development
- Lack of regard for collective agreement
- Hostility towards a labor union
- Autocratic leadership style of supervisors.

2. Working Conditions
Working conditions are relative to the work environment of the organization. If the working environment of company is good, employees will get less place for grievance. Grievance resulting from working conditions are:

- Unrealistic environment
- Non-availability of proper tools, machines and equipments for doing the jobs
- Tight production standards
- Bad physical conditions of workplace
- Poor relationship with the supervisor
- Negative approach to discipline

3. Personal Factors
Personal factors are related to the personality traits of individuals. Sometimes, these personality traits also cause the emergence of grievances at work. Some important personality traits that result into grievance are:

- Over ambition
- Narrow attitudes
- Excessive self esteem
- Gambling and fault finding attitude

Features Of Employee Grievance

Following are the features of employee grievance in an organization:

1. Employee grievance is reflected in terms of dissatisfaction and dishonest behavior.

2. Employe grievance is a feeling of unfair treatment by and individual/group in the work floor.

3. A grievance may be written or verbal.

4. A grievance may be expressed or implied.

5. Grievance will be arisen from the differences between employees expectation and managerial practices.

6. Grievance, if not settled, gives rise to discontent behavior, frustration and low productivity.

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Concept And Meaning Of Employee Grievance

Employee grievance is the perception of unfair treatment on the job. There are many factors that make employees unhappy. For instance, non cooperation from fellow members or a harsh remark relating to domestic affairs, may create unhappy situation at work. Finally such feelings of dissatisfaction or discontent result in employee grievance. There is hardly an organization that runs smoothly at all times.

In most of the organizations, employees have complaint against their employers which is termed as employee grievance. Hence, a complaint affecting one or more employees at a time does constitute a grievance. The complaint may be related to wages, working hours or conditions of employment. The dissatisfaction which is expressed by an employee is regarded as a complaint. When the complaint is filed and brought to the notice of management, it will then be grievance. Hence, employee grievance is resulted from the perception of unfair treatment and differences in employee's expectations and managerial practices. A well defined grievance procedure is an important constitute of employee relation as it provides a medium for the transmission of complaints to the table of management.

Therefore, employee grievance is a formal complaint affecting one or more individuals at a time with respect to wages, working hours, condition of work environment, transfers, promotion and so on and formally informed to the management.

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Purposes OF Labor Relations

A brief description of  purposes of labor relation is as follows:

1. Harmonious Relations
Labor relation brings an efficient relationship between industrial actors employees, employers and the government/society. It aims to develop and promote a good working relationship within and outside organizational sphere.

2. Legal Representation
Labor relations brings about a legal representation of the society or that state in organizational affairs. This means, labor relation brings all actors in a negotiation regarding the implementation of labor laws, rules and regulations.

3. Industrial Peace
Through the institutionalization of organizational rules and regulations, an efficient relationship between and among the industrial actors is obtained. This ultimately results into high degree of industrial peace in the organization. Hence, an effective maintenance of labor relations ensures industrial peace and organizational stability.

                           Also read: Concept And Meaning Of Labor Relations

4. Physical Facility
A good maintenance of labor relations in the organization introduces a good working environment thereby increasing organizational facilities in the work station. Moreover, the workers get sufficient financial and non-financial benefits/incentives to lead a quality life. 

5. Effective Communication
Another purpose of labor relation is to introduce an effective communication system in the organization. The communication system will be effective when it allows two-way flow of messages and information between all levels of employees. For effective communication, the actors should also be effectively involved in the system.

                     Also read: Process Of Labor Relation

6. Change Management
An effective implementation of labor laws, rules and regulations by introducing a creative work environment, cooperation and confidence makes the process of change easy. This helps to initiate organizational and environmental changes in today's Topsy-curvy environment.

7. Productivity And Organizational Effectiveness
A good labor relation aims to increase the productivity of the workers as well as organization. Due to cordial labor relations, employees take interest in their jobs and work effectively and efficiently. This leads to higher production output thereby enhancing the existing level of productivity at a higher point. This ultimately results the enhancement of organizational effectiveness.

8. Reduce Industrial Actions
An efficient relationship between industrial actors helps to reduce industrial actions such as strikes, lock-outs, sits-in, demonstration and other protestive activities.

9. Organizational Stability
Labor relation aims to establish an efficient and friendly work environment in the organization. The introduction of industrial peace provides an important pre-condition for organizational stability and goal achievement.

Process Of Labor Relation

Labor relation is a step-by-step process that begins with the unionization of employees, moves through dispute/conflict to collective bargaining, to settlement of conflict, and finally ends with administration of contract.

1. Unionization Of Employees
The first step of labor relation is unionization of employees. A trade union is defined as an organization of employees that is formed to protect and promote the interest and welfare of employees in the organization. It is continuing and long-term process that is targeted to form and maintain specific purpose of blue collar workers. It is a voluntary organization of workers that protects their interests through collective bargaining.

2. Dispute Or Conflict
Usually, employers want to avoid trade unions in their organizations. Therefore, when the unions are formed, they create disputes or conflicts in the work environment. Because trade unions try to fulfill employees' needs first rather than the organizational objectives. Besides, trade unions have been severely criticized, particularly by the employers, that is why the even resist the formation of such unions in the organization. Hence, a dispute will be created after the formation of trade union.

                      Also read: Concept And Meaning Of Labor Relations

3. Collective Bargaining
Collective bargaining is a mechanism through which the essential conditions of employment are determined bu negotiating between employees' union and management. It is a negotiation about working terms and conditions between an employer and the trade unions. The negotiated agreement serves as a code defining the rights and duties of each employee. When disputes are conflicts are arisen in the work environment, such hurdles are solved through collective bargaining between concerned parities. hence, it is a next step of employee relation process.

4. Settlement Of Contract
In this step of labor relation, the disputes or conflicts are settled through a negotiation. Both of the conflicting parties (employees and employers) agree upon a consensus and sign on a contract to settle the existing problem. Hence, it serves a way for future disputes to be settled under a mechanism. This brings an effective work environment in the actual workplace.

                     Also read: Purposes Of Labor Relations

5. Contract Administration
This is the last step of labor relation process in which a monitoring team is formed to monitor the effectiveness of signed contract whether it is followed by the disputing parties. This means, a team is formed from proportionate representation of both the disputing parties to monitor the execution of settlement of contract.

Concept And Meaning Of Labor Relations

Traditionally, labor relation was considered as a relationship between employees and employers. But these days,this has become a burning issue consisting of the relationship between workers, employers and social environment of  the organization. It is a dynamic socio-economic process that makes a social dialogue possible among employees, employers and the organizational social environment. The primary focus of it should be on grievance handling, industrial dispute, and interpretation labor laws, etc. It provides a context in which organizational rules and regulations are framed so that organizational roles assigned to members are performed.

Hence, labor relation or employee relation or industrial relation is a system that makes the social dialogue between employees, employers and society/government. It refers to all means of relationship between management and employees, unions and management, unions and employees and between the employees themselves. It is a joint effort of these major influences that produce a harmonious industrial relations between them. But it is multidimensional force that is influenced by the external forces economic, social, cultural, political, legal, technological and occupational forces. The primary concern of labor relations is to promote a healthy and harmonious relationship between employees and the employers. Beside management and workers, the government is another important factor that influences organizational affairs through legal and administrative measures. In this way, this harmonizes the divergent and conflicting interests of these parties through a consolidated dialogue.

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Procedures Of Disciplinary Action

Discipline is considered as a force that promotes individuals or groups to observe organizational rules and regulations at work. If they are not performing based on the general guidelines provided by the company, disputes may occur in the work environment. In such a situation organization needs to suffer. Therefore, the organization develops a systematic procedure that helps to initiate disciplinary action upon accused employees. Different aspects of this procedure are as follows:

1. An Accurate Statement Of Disciplinary Problem
The first step of resolving disciplinary problem is to prepare an accurate statement of such problem. It means, under this step, a brief statement is prepared showing the location of responsibility, definition of performance, expectations, reasoning for immediate supervision etc.The details to be included in this statement are rules, regulations, policies and standards and find out the vault and violations to know when and how often the violation occurred.

2. Collecting Facts Bearing On The Case
After defining an accurate statement of disciplinary problem, the next phase of collecting required facts and information occurs. Before collecting necessary data and information the predefined rules and regulations, policies, procedures etc. are communicated to the employees. Then after, the required data and facts relating to performance standards are collected for the purpose of initiating disciplinary actions.

3. Selection Of Tentative Penalties
Under this step, the tentative penalties are selected based on the nature of disciplinary problem. It means, the kind of penalty that an accused individual is supposed to get depends on the nature and type of disciplinary problem committed by him/her.

4. Application Of The Penalty
Once the tentative penalties are selected, the management or disciplinary action committee awards punishment to the accused employee. This usually follows the procedure of progressive discipline that proceeds from an oral warning to a written warning to suspension to dismissal.

5. Follow-up Disciplinary Action
This is the last step in the procedure of disciplinary action. When the disciplinary action is initiated, it is necessary to keep see in order to verify whether the punishment has any influence on the accused employee's behavior. If not, other corrective measure needs to be followed to improve the accused employee's behavior.

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General Guideline In Administering Discipline

General Guideline In Administering Discipline

Administration of discipline is a process of making employees disciplined at work, The general guidelines developed by behavioral scientists for administering discipline are as follows:

1. Discipline Should Be Corrective
This is the very first guideline of administering employee discipline. This holds the philosophy that disciplinary action should be a corrective one rather than punitive. This means to say, the disciplinary action should not deal out the way of punishment, instead it should correct an employee's undesirable behavior. The objectives of disciplinary action should be mentioned in the policies and procedures of disciplining manual. 

2. Discipline Should Be Progressive
Although the type of disciplinary action depends upon the frequency and nature of problem, it should be a progressive one. This means, any disciplinary action should follow a procedure of progressive approach that proceeds from an oral warning to written warning to suspension to dismissal. More specifically, when problem is not much serious, an employee should not be dismissed after a first offense. But in case of a severe problem the employee will be dismissed even after a first offence too.. 

3. Discipline Should Follow The "Hot Stove" Rule
The rule of 'hot stove' holds the philosophy that any disciplinary action should be quick reactive, immediate thereby leaving no question of cause and effect. When we touch a burning stove we get an immediate response. We have ample warning that we should not touch burning stove. Hence, the comparison between touching a hot stove is similar to administering discipline. This means that the disciplinary action should be as like a red-hot-stove.

4. Employee Explanation
This states that the employees should be given a ample opportunity to clarify the matter before initiating any disciplinary action. This means, the employees should be provided with a chance to explain their position so that the real cause of such problems can be found out. Sometimes errors may occur due to misunderstanding and in influence of others. In such situation, a severe disciplinary action will not be an ethical.

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Causes Of Disciplinary Problems

Disciplinary problems are unproductive hurdles to the organization. Rather they hinder the smooth operation of organizational activities. Hence, such problems need to be addressed timely. Main causes of disciplinary problems are as follows:

1. Defective recruitment selection and socialization of employees.

2. Inappropriate and inadequate organizational values and norms established by the organization.

3. Defective evaluation of employees by supervisors.

4. Defective communication system may create such disciplinary problems. Defective communication means, lack of two-way communications.

5. Defective leadership by managers.

6. Defective supervision or lack of supervision at work.

7. The 'divide and rule' policy practiced by the managers.

8. Bad and unpleasant working environment.

9. Discrimination of employees at work.

10. Lack of delegation of authority and assignment of responsibility.

11. Improper coordination work.

12. Lack of timely address of employees problem.

13. Entry of different employees with different backgrounds, skills and experiences.

14. Lack of proper training and skill development programs at work.

Types Of Disciplinary Problems

All the employees of an organization are nor self-disciplined,rather some of them may create disciplinary problems in the organization. Such problems are also called indiscipline behaviors or misconducts. 
The most frequently used disciplinary problems are as follows:

1. Attendance Related Problems
Attendance related problems are those indisciplinary actions that seriously create infractions for managers. They are undoubtedly a serious problem facing managers. It is much more serious and wide spread than other problems. Attendance problems are as follows:
- Absenteeism
- Abuse of sick leave
- Tardiness
- Late arriving
- Leaving work without permission.

2. Job Behavior Problems
Job behavior problems are related to on the job behavior of the employees. Such problems may include carelessness, fighting, gambling, failure to use safety devices, dishonesty, refusal to obey orders,failure to report accidents, abuse of alcoholic liquids and drugs, sleeping or loafing on the job, insubordination and so on, Most of these problems reflect direct infractions of organizational rules and regulations, Moreover, such problems clearly indicate a violation of organizational norms, values and culture; hence, such infractions are rarely difficult to address.

3. Dishonesty Problems
Dishonesty is another crucial disciplinary problem in an organization. This has traditionally resulted one of the severe disciplinary problems found in organizations. Stealing, theft, falsification of information, etc. are the examples of dishonesty problems. Such dishonest act directly affects one's character and leads the employee separated from the organization even if it was only a first offence.

4. Outside Activities Problems
These are those disciplinary problems that will take place outside organizational environment. These are therefore, also called off-the-job activities. They are resulted from activities of employees outside of their work and adversely affect the work performance. Unauthorized strikes, wage garnishing, decorating outside criminal activities, working for competitors are the examples of outside activities. Sometimes they impair the image of the organization. Hence, such activities should be checked properly for which there will be a need for disciplinary actions.

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Objectives Of Employee Discipline

The primary concern of discipline is to frame an employee's behavior as per the organizational rules and regulations, or the value set by the organization. Besides, other important objectives are as follows:

1. To obtain organizational rules, regulations, norms and values so that the organizational activities are performed effectively.

2. To impart the environment of certainty despite the differences in individual backgrounds, cultures, values and experiences, and other related organizational changes.

3. To develop a spirit of tolerance and desire to make adjustments among employees.

4. To give and seek direction and responsibility.

5. To promote the environment of respect for human personality and harmonious labor relation.

Basic Features Of Discipline

The basic features or characteristics of discipline can be summarized as follows:

1.A disciplinary action refers to one's self-control to conform organizational rules and regulations.

2. Discipline is a determinative willingness that promotes individual and group to carry out the instructions and suggestions that have framed by the organization as acceptable behavior.

3. Discipline is a negative approach in the sense that it encourages individual to undertake some actions that restrain them from undertaking others.

4. Discipline is a positive in the sense that it imposes a penalty if the values and norms that have been laid down by the organization are violated.

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Concept And Meaning Of Employee Discipline

Discipline means behaving in a right and desired manner. It connotes orderly and acceptable behavior by the members of the organization. The employees are of different kinds and they come from different background, cultures and experiences with different norms, values and cultures. Hence, if they behave differently, the organizational objectives will be far beyond from target of achievement. 
Employee discipline can be referred as a force that promotes individuals.groups to observe the rules, regulations and procedures of the organization which are necessary to achieve organizational  goals. It is a condition in which employees perform organizational activities with a consistent behavior. In other words, it is said that discipline avoids disorder, irregularity and confusion. It is a condition in an organization when employees perform their activities in accordance of organizational rules and regulations. Through such disciplinary actions, employees confirm with what is considered proper behavior. It means, the employees confirm to organizational rules and regulations framed by the organization as acceptable behavior.

Therefore, employee discipline is a procedure that helps correct or punish a subordinate so that he/she conducts activities to within and acceptable manner. It is a tool that managers can rely on to communicate organizational behaviors to the employees. Usually, disciplinary actions are framed by supervisors, however, in self-managed work teams, it is a team's responsibility to maintain discipline at work.

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Merits And Demerits Of Organizational Incentives

Merits Of Organizational Incentives

1. Organizational incentive enhances organizational effectiveness.

2. Organizational incentive helps to enhance team work.

3. Organizational incentive encourages employee participation at work.

4. Organizational incentive adds a new dimension in organizational productivity and job satisfaction.

5. Organizational incentive ensures employee relations among the employees as well as between the employees and management.

Demerits Of Organizational Incentives

1. Since the incentive depends on organizational performance, employees may not be motivated at individual level.

2. It will be complex to determine the amount of incentive among different levels of employees

3 .Organizational incentive plan does not provide instant incentive to employees.

Merits And Demerits Of Group Incentives

Merits Of Group Incentives

1. Group incentive is suitable for employees who perform interdependent and interrelated tasks.

2. Group incentive enhances group work so that the jobs can be performed effectively.

3. Group incentive helps to enhance team spirit at work.

4. Group incentive encourages a sense of cooperation and responsibility.

5. Group incentive facilitates on-the-job training as the group members have interest in getting new people trained as quickly as possible.

6. Group incentive encourages employee participation in group, job satisfaction and quality of work life at organization's environment.

Demerits Of Group Incentives

1. No reward is solely on individual's own effort.

2. Due to group/team focus, individual job performance will not be improved.

3. A group incentive plan may be less effective as compared to an individual incentive plan because under it, the individual does not see his/her effort leading to award.

4. Since overall performance depends on team effort the conflict and disagreement may be seen in the workplace among team mates.

5. The problem of self deception can occur.

6. Usually group members expect greater than average rewards, which lead to internal conflict within the team.

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Merits And Demerits Of Individual Incentives

Merits Of Individual Incentives:

1. Employees are individually motivated for higher level of performance in the organization.

2. Organizational ability will increase due to individual's satisfaction at work.

3. Individual incentives will result in greater job satisfaction and organizational productivity.

4. Individual incentive reduces organizational expenses.

5. Individual incentives can be easily administered and applied.

Demerits Of Individual Incentives

1. Since the individual incentive is provided with an additional output, employees tend to increase their output as far as possible and they give less importance to the quality.

2. Goal conflict occurs between individual goals and organizational goals.

3. The quality of work life is reduced.

4. The living standard of employees will be uncertain.

5. Individual incentive does not promote team work,

Types Or Forms Of Incentives

The incentive plan can be designed on individual, group or organization wise performance:

1. Individual Incentives
Individual incentives refers to incentives given to individual employees for their additional contribution towards organizational objectives. Under it, incentives are calculated on the basis of individual performance that can be measurable in quantitative terms. This is a most popular form of incentive in the industry under which employees are rewarded individually for their additional contributions. The foundation of such incentives is the worth of individual performance. It can be of following types:
- Piece work plan
- Commission
- Bonus

2. Group Incentives
The individual incentive plan will be ineffective when the output of the individual employees is not measurable, in such situation a group incentive is applied. It means, when two or more employees are involved for a particular performance, incentives are provided to the group collectively, it is called a group incentive. Group incentives make a strong sense where employee's tasks are interdependent and thus require a collective effort for the completion of such tasks. Especially, this system of incentive is useful in project teams where one worker's contribution is almost impossible to reflect in measurable units. Under this plan, a productive plan is set as standard performance for group of employees and a the reward is provided by assessing the performance of the whole team. If the employees in the group perform better, all members of team are rewarded collectively.

3. Organizational Incentives
When the incentives are provided to all employees of the organization, it is called organizational incentives. This kind of incentive is useful to motivate all employees at work for organizational effectiveness. The primary goal of organizational incentive is to direct the efforts of all employees toward achieving organization's overall mission, vision, objectives. This incentive plan produces reward for all employees working in a particular organization. The reward is provided in terms of productivity, gain-sharing, profit sharing, share ownership. and so on.

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Concept And Meaning Of Incentive Plans

Incentives are variable rewards granted to employees as per the variations in their performance. Incentives are provided besides wages and salaries so that the level of motivation and job satisfaction can be enhanced. Incentive payments are quite substantial and paid regularly as wages and salaries. The International Labor Office states that the incentive payments as 'payment by results'. They emphasize on the point of motivation, productivity, job satisfaction and good labor relation among the employees. Usually incentives are not relatively fixed as wage and salaries do. They depend upon the level of performance and vary from individual to individual and from period to period for the same individual too.

The obtained advantage of incentives is the inducement and motivation of employees towards the higher level of performance and greater output. They offer an attraction of extra payment for efficiency and productivity. An efficient incentive plan guarantees a fixed minimum wage rate based on hourly rate and extra remuneration for increased output.
Incentive plan is designed on the basis of following assumptions:

- Individual workers and work teams differ in terms of how much they can contribute towards organizational objectives.

- The overall performance of the firm largely depends on the performance of individual workers and work teams.

- The employees are rewarded based on their relative performance for a high performance.

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Methods Of Establishing Employee's Compensation

The main purpose of establishing employee compensation system is to value and price each job. The methods to be followed for the establishment of compensation are as follows:

1. Job Analysis
Job analysis is known as a process of collecting necessary information relating to job and its specifications. The required information can be collected through different methods such as surveys, observation, discussions, and so on. The information is collected for the preparation of job description and job specification statements.

2. Job Evaluation
Job evaluation is a systematic approach of evaluating or rating or valuing the job in terms of its worthiness, It puts jobs in a hierarchy and assign a relative worth of each job so that a pay structure can be determined. It means a systematic comparison of job is done in order to determine the worth of one job relative to another. Job evaluation provides an objective ranking of jobs so that an equitable and appropriate rate of pay can be determined for each job.This provides a basic ground for the determination of an efficient pay structure through the identification of compensation factors.

                      Also read: Concept And Meaning Of Compensation Management

3. Compensation surveys
Compensation surveys refer to collecting information on prevailing market rates through different channels. The information can be collected through formal or informal surveys. Most employers in a small scale operation use informal telephone calls to collect data on a relatively small number of easily identified jobs. This informal telephone call is also a good technique for checking discrepancies in the wage rate. Under this method, the data and information relating to other's pay structure are obtained so that the collected data can serve a standard benchmark for formulating compensation plans and policies. The required data and information are collected through different sources such as published surveys, consultants and agencies, advertisements, informal communication etc.

                           Also read: Types Of Compensation

4. Pricing Jobs
Under pricing jobs method, different pay levels are determined based on the grade of each job. Firstly the jobs are grouped into pay grades, than, the pay rates are assigned to each individual pay grade, rather than assigning rate to each individual job. A pay grade comprises of jobs of approximately equal difficulty or importance. It means, the jobs having similar nature can be grouped under a job grade as determined by job evaluation. If we use a point method in it, a particular grade falls within a range of certain points. Fir instance 0-50 points, 50-100 points, and so on.

                   Also read: Factors Affecting Compensation System

Factors Affecting Compensation System

The primary objective of a compensation system is to administer an effective and equitable pay system. It can be affected by various factors which are as follows:

1. Organizational Provisions
Organizational provision states that the level of compensation largely depends upon organizational operating policies and procedures. It is because the policies serve as a guideline for formulating and implementing compensation plans and programs. Moreover, organizational regulations, plans, objectives, ability for pay etc. also affect the level of pay.

2. Government Regulations
In order to protect the working class from wage exploitation by strong employers, the government enacts various laws ans judicial decisions. Such laws and regulations affect compensation management. Because, they emphasize on minimum wage rate, overtime rate, working hours, equal pay for equal work, payment of bonus, etc. So, an organization has to design its pay system as per the government rules and regulations.

                      Also read: Methods Of Establishing Employee's Compensation

3. Equity Considerations
Equity considerations hold the philosophy that the compensation system should be fair and equitable. It means the compensation system should be similar for the same type of work within the organization. Similarly, it should be fair relative to what other people get for the similar job in another organization. It is important because any imbalance between what the employees contribute and what they obtain as return would lead to greater job dissatisfaction, employee turnover and absenteeism.

4. Union Pressure
Labor unions are pressure groups that work in the interest of the workers. Such unions lobby the management for the formulation of fair compensation plans. These organized unions can ensure better wages for employees.

                              Also read: Types Of Compensation

5. Job Analysis And Evaluation Report
Job analysis is a method through which necessary information about the contents and the contexts of the job is made available to determine the value of each job.The job evaluation is a process of determining the value/worth of a job so that a payment system can be specified. Job analysis and job evaluation determine the relative worth of job which ultimately assist for compensation management. Hence, it is regarded as an important factor of compensation management.

6. Cost Of Living
Compensation is concerned with an overall return that an employee obtains from the organization for rendering contributions towards organization objectives. Therefore, the payment should be adequate to maintain the cost of living of the employees. Hence, the employer should manage compensation viewing the cost of living of each individual.

                      Also read: Concept And Meaning Of Compensation Management

7. Organizational Positions
Sometimes, the organization itself evaluates where it is in order to prepare compensation plans. The position of the organization is determined by its productivity i.e, if the productivity of the worker is high, it assess itself as a higher position. As a consequence of it, the compensation system is determined at a higher level. Contrary to it, in case of lower productivity, wages/salary rates tend to be low. Thus, any shift in productivity and employee performance has direct impact on the wage level of the organization.

8. Productivity Of Workers
Another factor of compensation management is the productivity of workers. This is the new concept of linking pay with employee performance. Under it, if the workers are highly productive, they get high compensation as compared to less productive workers. Productivity is a key factor as it enhances organization's image and status.

Types Of Compensation

Compensation is a package of salaries and wages, pay incentives and benefits that an employee receives as a remuneration for rendering services to the organization. Depending upon the nature and mode of compensation, it can be categorized into two dimensions as follows:

1. Financial Benefits
The financial benefits consist such payments which are paid in terms of monetary gains. They enhance the economic well-being of the employees. Financial payments can either be direct or indirect.
Direct Payments
Direct payments consist of wages, salaries, bonuses, commissions,and other direct forms of payments.

Indirect Payments
Indirect payments consist of insurance, social benefits, allowances,employee services, holidays etc.

2. Non Financial Benefits
The non-financial benefits include everything in a work environment which are not expressed in monetary units. They help to enhance a worker's sense of self-respect and sense of being accomplished. The ideas under it are shown as:

Work Benefits
Work benefits consist of challenging job, responsibility, accountability, feeling of achievement and so forth.

Environment Benefits
Environment benefits consist of appropriate policy, adequate supervision, co-worker's status, interesting job, appropriate timing, and the like.

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Concept And Meaning Of Compensation Management

Compensation means the basic returns that an employee obtains from his/her work. Every organization offers a good compensation to attract and retain the ablest employees in the actual work floor. It is because if the company does not offer an attractive package of compensation,compared to other competitive firms, the efficient employees may leave the firm. Hence, the employees should be compensated adequately. A well-designed job evaluation program helps to determine an appropriate compensation system.

Compensation may be defined as a package of financial and non-financial benefits that the employee receives for his/her contribution rendered to the organization. It consists of all forms of monetary and non-monetary rewards/pays provided by the employer to the employees for services contributed by them towards organizational objectives. It has two main components- direct financial payments and indirect payments. The direct payments consists of salaries, wages, incentives,commissions, bonuses, etc. Whereas, the indirect payments comprise financial benefits like paid leaves, employee aid insurance  etc.

Compensation is a major component of reward which is basically given to the employees in return of their services. It is a package of quantifiable rewards provided to the employees. Hence, the assignment of appropriate/low cost compensation is known as compensation management.It will attract, motivate and retain competent employees at work, and this helps to minimize the turnover ratio.

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Criteria For Distributing Rewards

Different criteria of distributing rewards are as follows:

1. Performance

Reward is basically based on the level of job performance ability of an individual. The one who can perform the job well can get high reward in comparison to the poor performer. Hence, under this criteria of reward distribution, an individual's performance is evaluated before assigning any reward.

2. Effort
Another important criteria of distributing reward is the effort contributed by an individual towards organizational objectives. Where the question of employee performance is a low caliber, the only one way of rewarding employees is the basis of effort. Through this criterion one can exert the input of individual for organizational activities.

                      Also read:    Concept And Meaning Of Reward Management
3. Seniority
Under this criterion, reward is provided to those individuals who have served relatively for longer period. This is one of the traditional ways of determining rewards in the organization,under which, the rewards are provided on tenure basis. Hence, length of service on the job is a major factor for determining the level of pay and it is easy to determine rewards.

4. Skills Held
Under this criterion of reward distribution, individuals having special skills are rewarded. It is another important practice of distributing rewards which is not unknown in organizations. Under it, regardless of whether the skills are used, these individuals who possess the highest talents are rewarded.

                     Also read: Types Of Rewards

5. Job Difficulty
under this criterion of reward distribution, the complexities of the job are considered as the basis of rewarding employees. It assumes that the complex and difficult jobs require higher attention and concentration at work. So, these types of job holders should be rewarded.

6. Discretionary Time
This criterion is based upon the time taken for decision making. More tome for decision making means more probability of getting reward. This is because such jobs may have occur the chances of error hence, there is a need for careful judgement.

                   Also read: Qualities Of An Effective Reward System

Qualities Of An Effective Reward System

An effective reward management system is essential for high satisfaction and motivation of employees at work. It is concerned with the process of employee attraction, motivation and retention. Therefore, an effective reward system should possess the following qualities.

1. Importance
An utmost care should be given towards the management of reward system because the employees should feel that reward is important for them. No reward is equally important for all employees. Hence, they should be rewarded with what they feel is important for them.

2. Equitable
Equitable is concerned with the fairness in distributing rewards to the employees. It means rewards should be perceived as equitable and fair. The fairness can be among the organization's employees in one hand and fairness relative to what people get for the similar job in another organization, on the other.

                        Also read: Concept And Meaning Of Reward Management

3. Visibility
Rewards, to be effective, must be visible and seen by the employees. Because visible rewards helps to motivate employees for higher level of performance. They help to satisfy individual's esteem and recognition needs. 

4. Flexibility
Rewards, to be effective, should be flexible to vary with changes in the performance. This means,rewards should vary as per the changes in actual performance of the employees.

                   Also read: Types Of Rewards

5. Low Cost
An effective reward should be less costly because rewards are not free gifts they have some costs. Hence, the costs and benefits of reward should be taken into account in order to maintain organizational effectiveness.

6. Use Of Team Rewards For Interdependent Job
An interdependent job holds the philosophy that the tasks are interrelated with each other, and is performed step-by-step. The overall completion of such jobs is not the credit of single individual, rather it is due to the combined effort of all team members involving in the entire process of the job. Hence, in such situation it is advisable to use team rewards such as gain sharing and bonuses.

                      Also read: Criteria For Distributing Rewards

Types Of Rewards

Reward is pay provided by an employer to the employees. It consists of packages of pay, benefits,services etc. Broadly, rewards can be divided into following types:

1. Intrinsic Rewards And Extrinsic Rewards
Intrinsic rewards:
Intrinsic rewards are the satisfactions that an individual obtains from the job itself. It means, they are the factors of esteem and self actualization needs of the employees. These satisfactions are self initiated rewards and are fulfilled internally by the employees. These rewards consists of having a pride on work, having a feeling of  accomplishment, or being a part of team etc.

Extrinsic Rewards
Extrinsic rewards are the benefits provided externally. These rewards are provided in term of money and fringe benefits. These rewards are necessary to fulfill physiological and safety needs of the employees. Such rewards are the results of management policies and procedures of the organization.

                    Also read: Criteria For Distributing Rewards

2. Financial Rewards And Non-financial Rewards
Financial Rewards
Financial rewards means those direct and indirect payments that enhance an employee's well being. Financial rewards make employee financially sound so that he/she can fulfill his/her material desire. Direct payment consists of salary,wages, commissions,incentives, bonus, allowances etc. Indirect payment include pensions, medical insurance, paid leaves, paid sick leaves, purchases, discounts etc.

Non-financial Rewards
Non-financial rewards are those employee benefits that do not enhance an employee's financial well-being  However, such rewards provide more job satisfaction. Preferred lunch hours, preferred office furnishing, parking spaces, impressive job title, desired work assignments, business cards, own secretary etc. are some of its examples.

                    Also read: Qualities Of Effective Reward System

3. Performance Based Rewards And Membership Based Rewards
Performance Based Rewards
Performance based rewards are such benefits which are provided on the basis of an employee's job performance ability. The reward depends upon the performance of an individual in the actual work floor.These rewards are exemplified by the use of commissions, piece work pay plans, incentive systems, group bonuses or other forms of merit pay plans.

Membership Based Rewards
Membership based rewards are those rewards that are paid on the basis of being a member of an organization. It means, the basis of allocating rewards is employee's organizational membership. Hence, the reward goes to all employees irrespective of their performance.

                     Also read: Concept And Meaning Of Reward Management

Concept And Meaning Of Reward Management

Reward means a thing given to any one because of  his contribution to organization. Rewards and incentives contribute to strategy implementation by shaping individual behavior in the organization. A well design reward system is consistent with organizational goals, visions, missions and job performance. The most obvious reward that individual gets from the job is in the form of pay.

In managerial term, reward is defined as the total return given by an employer to an employee for rendering his/her services towards the organizational objectives. This is the overall return from the work. Every person asks for return from the organization before involving in any type of activities,which is termed as the reward. It attracts a worker's attention and inspires him/her to perform the task. Moreover, a reward is a pay-off for performance which is directly concerned with the level of motivation and job satisfaction.

Therefore, management of reward in an organization helps to motivated and retain employees at work. It is a vital aspect of HRM because a well-designed reward system will lead towards organizational productivity and employees satisfaction. Moreover, reward management is the process of  creating, implementing and controlling an effective reward system in the organization that helps to maintain and improve organizational performance. It senses the strategic purposes of attracting, motivating and retaining employees. Reward management basically focuses on how the employees can be retained or motivated at work.

Hence, reward management is a crucial aspect of Human Resource Management that revolves around designing and implementation of appropriate pay system. This system helps improve organizational performance and get people motivated at work.

Related Topics
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