SIKKIM MANIPAL UNIVERSITY - DDE Master of Business Administration I Semester ML0015 Compensation and Benefits (Book ID B1859) Credits:-4

Answer Key Duration: 3 hours Total Marks: 140

Section A

Descriptive questions (10*4= 40marks) (Answer any TWO questions from Q1-4. Case study questions 5 and 6 are COMPULSORY)

1. Explain the concept of salary structure. Enumerate the steps involved in designing a salary structure. (Refer Unit-2) 2. Describe the various tax implications of employees compensation package on the employer. (Refer Unit-7) 3. Explain the various methods of performance appraisal with example. (Refer Unit-11) 4. Explain the five basic elements in a typical expatriate's compensation package. (Refer Unit-15)

Case Study (Compulsory) The Total Reward Scheme at Crown Estate Crown Estate is a public body and has a dual role as both guardian of some of the UKs most important land and as a revenue generator for HM Treasury. This single organisation is responsible for managing over 6 billion worth of land in the UK including Regent Street in London to Windsor Great Park, Portland stone mines in Dorset and agricultural estates in Scotland as well as extensive marine assets. Valerie Burns, Head of Human Resources explains: In late 2006 we were experiencing recruitment problems because our reward packages did not reflect the job markets in which we were operating. We had a very traditional public sector pay model which was generalist and inflexible it simply didnt allow us to attract and retain the calibre of people we needed to meet our business objectives. Burns tasked her Remuneration Committee with agreeing a way forward that would lead to a more market oriented reward structure. They concluded this would require nothing less than a complete reworking of base pay, performance management, bonus, pension and benefits, terms and conditions. Our strategy, says Burns was to redistribute the reward budget rather than increase it. We were spending too much on pension and benefits and not enough on salary and performance incentives. Burns initiated a competitive tender to recruit third party assistance as she had neither the resources nor the expertise to execute a project of this scale internally. We selected Innecto based on their track record of working in both the public and private sector and the confidence they gave us of understanding our needs and what was required to achieve them. Theirs was the only presentation that gave us clear advice on the sheer momentum required to make this project successful. Looking at the scale of the project, The Crown Estate HR team and Innecto agreed a phased approach was best. Innecto Director Justine Woolf says: At the time, this was probably the most complex reward review we had ever considered. Our task was to produce a single reward strategy that could be applied to people working in very different environments and job markets the difference between the reward requirements of the property management team based in London and Edinburgh are a long way removed from the estate workers who tend woodland or agricultural land. Dividing the project into three phases allowed us to focus on each sector of employment separately and clearly.

The unique culture of The Crown Estate also presented some interesting challenges. The organisation has three core values: Commercialism, Integrity and Stewardship. With Commercialism rising to prominence, it was important tha t the other values werent sidestepped and would need to be built in as modifiers to the performance management system, for example. Over the next two years, Burns and Innecto looked at job descriptions, carried out job evaluations and benchmarked against the relevant markets. The result was a total reward programme that included a new pay structure based on a job family framework, a new performance management system linked directly to a new bonus scheme, new pension arrangements and a revised benefits package. The decision was made to create two separate reward packages: one for existing employees, and one for people joining in the future. This meant that The Crown Estate could continue to honour existing pension arrangements and benefits, terms and conditions for current staff while introducing sustainable and more affordable options for new joiners. At launch, we created an internal brand for the new reward packages with a unique design and colour coding for each area which allowed us to present complex information clearly to help employees choose which of the two reward packages suited them best. All employees were invited to a presentation by the Chief Executive to explain the new packages and were given a handbook to take home as well as a personal letter outlining their own individual position and options. Managers were given training and question and answers to support them in their important role communicating the new structure to their direct reports. The investment in employee engagement paid off. Now largely complete, the new total reward scheme is proving to be successful. Valerie Burns says: Its been hard work but we are now able to recruit with no difficulties as we are consistent with the commercial markets. Its also given us a degree of f lexibility we didnt have before. Id like to thank Innecto for their expert knowledge, project management, technical skills and sensible pragmatic advice which all contributed towards a successful outcome.

Questions: 1. Identify the weaknesses of reward system followed by Crown Estate during late 2006. 2. Critically analyze the new reward and performance management strategy at Crown Estate.

Section B Answer the following one mark questions from (1-50) :(1*50=50marks) 1. Maslows Need Hierarchy Theory considers compensation to fall in which of the below -needs category?

a. Social needs b. Esteem needs c. Safety needs d. Physiological needs

2. Which of the following is not a direct compensation?

a. Base Pay b. Disability Pay c. Merit Pay d. Wage

3. Which of the following is not an outcome of an effective Compensation and Rewards system a. Attracting and retaining competitive workforce in the organization b. Motivating employees to put their best efforts in organizational development. c. Minimization of cost of compensation thereby further adding to organizational effectiveness d. Increased attrition rate

Citizens of the country in which the subsidiary or branch of parent company is located are called a. Local Country Nationals. b. Third Country Nationals c. NRIs d. Expatriates 5. The method of studying and identifying various jobs in the organization which result in description of job is called:

a. Job evaluation b. Job description c. Job specification d. Job analysis

6. Rewarding and encouraging outstanding employees who show exceptional results but for whom suitable promotion opportunities dont exist fall into which of the grade pay zone? a. Qualified zone b. Premium Zone c. Learning zone d. Outstanding zone

7. The salary progression curve is also known as: a. Maturity curve b. Learning curve c. Wage curve

d. None of the above.

8. The allowance given to the wage earners so as to give assistance to them in the inflationary situations is called a. Basic Pay b. Bonus c. Dearness Allowance d. Provident Fund

9. The system of Dearness Allowance which provides a lump-sum payment to the employees over a period of time to adjust for the growth in inflation is called a. Annual Bonus b. Provident Fund c. Flat rate system of neutralization d. Consumer price linked system

10. Net intake of --------------calories should be taken into account at the time of minimum wage calculation. a. 3700 b. 1700 c. 2700 d. 3200

11. The wage which is capable of meeting the normal needs of an employee on an average is called: a. Living wage b. Minimum wage

c. Fair wage d. Real wage

12----------------can be defined as a process where standards are formed to govern labor relations including wages and working conditions. a. Adjudication by Third Party b. Wage Boards c. Pay Commissions d. Collective Bargaining

13. ------------------ is concerned with fixing the fair wages on an industry-cum-region basis. a. International Labor Organization b. Pay Commission c. Third Party d. Wage Board

14. Pay commission deals with the service condition of .. a. Private Sector employees b. Unskilled labourers c. Semi-skilled labourers d. Public sector employees

15. --------------refers to the equal pay for the same kinds of jobs in the organization. a. External Equity b. Internal Equity

c. Social equity d. Personal equity

16. The process of determining and identifying the relative worth or the value of the job in relation to the various other jobs in the firm is called: a. b. c. d. Job analysis Job description Job evaluation Job specification

17. A statement which contains knowledge, skills and abilities of an employee, which are required for the successful task completion is called: a. b. c. d. Job analysis Job description Job evaluation Job specification

18. Which of the following is a non-quantitative method of conventional job evaluation methods? a. Point rating method b. Ranking system method c. Factor comparison method d. Forced distribution Method 19. ----------------is a way of showing your appreciation to your employees hard work and giving them recognition. a. Flexi work b. Professional development c. Bonus d. Tuition reimbursement

20. Identification of the points and factors which are assigned to different aspects of the job in order to evaluate it is called a. Point method b. Factor comparison method c. Grade/Job classification method d. Ranking system method 21. The management system that enables organizations to enhance the clarity of their vision and strategy to translate them into action is called a. Performance appraisal method b. Critical Incident Technique c. Balance Score Card Method d. Behavioural Interviewing Method 22. In ---------------------- method, employees are compared directly against one another identifying the best employee, second best, and so on. a. Paired Comparison Method b. Forced Choice Method c. Behaviourally Anchored Rating Scale d. Straight Ranking method. 23. The process that includes activities which ensure that goals of the organization are consistently being met in an effective and efficient manner.by aligning it with employees performance is called. a. Performance management b. Performance strategies c. Mission and Vision d. Performance appraisal 24. Which of the following is not one of the categories of remuneration structure for managers

a. Salary b. Allowances c. Income Tax d. Contribution of superannuation, gratuity and provident funds 25. Which of the following does not affect Executive Compensation? a. Governance b. Investor confidence c. Effective benchmarking d. Outsourcing 26. Individuals born between 1980 and 1995 are called a. Gen X b. Baby Boomers c. Gen Y d. Gen Z 27. The concept of using is given importance worldwide in designing a strategic reward system. a. Fixed Pay b. Variable Pay c. Retirement Pay d. None of the above 28. -----------------------is the most common method used by organizations to reduce excess manpower in a cordial way. a. Retrenchment b. Lay Off c. Voluntary Retirement Scheme d. Attrition 29. The Worker Adjustment and Retraining Notification (WARN) Act requires employers who have 100 or more employees to give an advance notice period of -----------days before mass lay off or closure of a plant.

a. 100 days b. 120 days c. 60 days d. 90 days 30. Which of the following category of compensation does not fall into Tax exempted category a. Medical insurance b. Charity c. Variable Pay d. House Rent Allowance

31. Gratuity up to Rs.--------------------------- is exempted from tax a. Rs. 1,00,000 b. Rs. 5,00,000 c. Rs. 10,00,000 d. Rs. 15,00,000

32. Which of the following does not fall under employee benefits? a. Employee Stock Option Plan b. Group Insurance c. Base Salary d. Gratuity 33. An analysis done for the reduction of tax liabilities that enables employers and employees to evaluate their financial profile is called: a. Tax deduction b. Tax saving c. Tax minimization d. Tax planning

34. The jobs in which workers perform manual labor and get hourly wages in return are called: a. White Collar Job b. Grey Collar Job c. Blue Collar Job d. Yellow collar Job 35. _________________are monetary emoluments paid to an employee in acknowledgment of their enhanced performances aiming at motivating the performance of individuals and groups in the organization. a. Salary b. Wage c. Incentive d. Variable pay 36. In Emerson Plan up to --------------per cent of efficiency, the worker is paid by timerate. a. 67 b.77 c.57 d.87 37. The system of payment for work on the basis of the number of points of work done in a given amount of time, each point representing one minute of work on a given job at a normal rate of speed is called__________

a. Rowan b. Bedaux c. Hasley d. Emerson

38. A statement which contains Task, duties, Responsibilities of a job is called:

a. b. c. d.

Job analysis Job description Job evaluation Job specification

39. Which of the following is a non-quantitative method of conventional job evaluation methods? a. Point rating method b. Ranking system method c. Factor comparison method d. Critical Incident Technique

40. The building blocks of compensation model does not include which of the below? a. b. c. d. Objective of compensation Strategic issues/policies of compensation Compensation techniques Distribution of Compensation

41. One of the unconventional methods of job evaluation in which the panel members evaluate and record the ranking of job assessment of each individual and then feed it into a system is called a. Urwick Method b. Hay Plans Guide Chart Profile method c. Direct consensus method d. Decision Band method. 42. ------------------- system, the minimum wage is guaranteed even if the output falls below the standard. a. Hasley b. Bedaux c. Emerson

d. Rowan 43. Which of the below includes Total Compensation? a. b. c. d. Money paid directly Money paid Indirectly Money paid both directly and indirectly Money paid at a later stage

44. The percentage of education cess charged on the entire tax amount is a. 5% b. b.7% c. 3% d. d.2% 45. VRS is not applicable for which category of employees? a. Permanent Workers b. Casual Workers c. Bad workers d. Temporary workers 46. Optimizing the positions and numbers of an employee in order to make an organization more profitable and efficient is called a. Downsizing b. Lay off c. Retrenchment d. Right-sizing

47. --------------------------- includes acquiring highly specialized skills related to same job. a. Horizontal skill b. Vertical skill c. Depth skill

d. Basic skill 48. Which of the following Acts enacted by Government of India is not related to respect to compensation policy at national level?

a. Factories Act 1948 b. Minimum Wage Act, 1948 c. Industrial Dispute Act, 1947 d. Fair and Living Wage Act., 1938

49. ______________ is a situation when prices tend to rise sharply in economy bringing down their purchasing power. a. b. c. d. Inflation Deflation Stagflation Recession

50. ____________ firm holds back a sum equal to home country tax-obligation of expatriates and pays all taxes in the host country. (a) Tax-equalization (b) Tax protection (c) Ad hoc approach (d) Lassiez-faire

Answer the following two mark questions from (51-75) marks)

(2*25=50

1. State whether the following statements are true or false i. Developmental Approach of Performance Appraisal focuses on previous years performance and can also be used to determine the efficacy of recruitment and selection.

ii.

In Evaluative approach manager plays the role of a coach and mentor to reward good performance and give advice on how to improve.

a. ( i) False, (ii) True b. (i) True, (ii) False c. (i) True (ii) True d. (i) False (ii) False 2. State whether the following statements are True or False i. Performance linked rewards is concerned with administration of compensation revision and career progression of employees. ii. Performance feedback and counseling includes creating action plans for improving performance deficiencies. Choose the correct options from the following: a. ( i) False, (ii) True b. (i) True, (ii) False c. (i) True (ii) True d. (i) False (ii) False 3. State whether the following statements are true or false i. Any private or public organization which is a subsidiary of public company must pay 11% of its net profit of any financial year executive remuneration to its directors which comprises of any manager and whole time managing director. ii. In case an organization in financial year has no profits or inadequate profits, an organisation will not pay to its directors which comprise of any manager and whole time or managing director any remuneration except the one which is previously approved by the Central Government.

a. (i) True, (ii) False b. (i) True, (ii) True c. (i) False, (ii) True d. (i) False, (ii) False 4. i. ----------------------is the monetary and non-monetary rewards valued for employees relative contribution to MNC performance. ii. --------------------------is the non-financial compensation which is related to the nature of the work, interesting work and career prospects.

a. i. Direct compensation ii. Indirect compensation b.. i. Direct compensation ii. Intrinsic compensation c.. i. International compensation ii. Extrinsic compensation d.. i. International Compensation ii. Intrinsic Compensation

5. Choose the correct options i.------------ is an extra monetary reward which is added to the basic pay such as cash bonuses which are described as variable pay.

ii. ------------- refers to rules, procedures and standards which are linked and associated with the benefits and pay of the employees.

a..i. Financial reward ii. Non-financial reward b. .i. Contingent payii. Compensation Management c..i. Contingent Pay ii. Reward d.i. Intrinsic reward ii. Extrinsic reward

6. Arrange the following processes related to compensation design in correct sequence.

1. Collection of data, a. 2. Identifying the need for policy b. 3. Analysis of alternatives and c. 4. Finalizing the policy Choose the correct sequence of the process from the following a. 3,4,2,1 b. 1,2,3,4 c. 2,1,4,3 d. 2,1,3,4

7. State whether the following statements are true or false i. Job evaluation and differentiation considerations are one of the elements of compensation policy. ii. Provision for welfare, security, motivation, incentives and growth opportunities are one of the elements of compensation policy

a. (i) True, (ii) False b. (i) True, (ii) True c. (i) False, (ii) True d. (i) False, (ii) False 8. State whether the following statements are true or false i. In case of plant closing that can bring loss of employment of 100 or more employees during any 30 day period then it is mandatory to give notice period. ii. In case of mass layoff an organization has to give 1 month notice for 50 to 499 workers if they make up at least 33% of the employer's workforce. a. (i) True, (ii) False

b. (i) True, (ii) True c. (i) False, (ii True d. (i) False, (ii) False 9. Arun, aged 58, works in a PSU XYZ. He has worked there for past 20 years. Arun decided to take VRS being offered by the PSU. His Basic is 10,000 and DA is 5,000. According to the package of VRS, the employees are entitled 25 days of compensation for completion of each year of service and compensation for the number of months of the remaining service. Aruns total VRS amount is a. 4,03,006 b. 5,01,998 c. 3,33,506 d. 2,88,500 10. State True/False for the following statements. i. Todays organizations thrive and survive on the productivity and efficiency of their employees. ii. With greater customization and product variety, the service component of the product will decrease a. (i) True, (ii) False b. (i) True, (ii) True c. (i) False, (ii) False d. (i) False, (ii) True

11. State which of following statements on w.r.t declaration made by employer for VRS scheme is true? 1. The minimum service period and the age limit of the employee who can apply for the - Voluntary Retirement Scheme in the organization. 2. The approaches to be adopted for workforce redundancy. 3. The right of the employer for the acceptance and rejection of any application to voluntary retirement. 4. The Post- Voluntary Retirement Scheme benefits to be rendered to employees.

a. 1 and 2 b. 1 and 3 c. 2 and 3 d. 2 and 4

12. Kamal is working in a rail wheel construction company where he receives earnings on the basis of Merrick differential piece rate system. The Standard output = 100 units, Piece Rate = Rs.20. The company pays Straight piece rate up to 83% of standard output, at which bonuses of 10% of time-rate is also paid. Further a 20% bonus is given on reaching standard output and for output above standard high-piece rate is paid. What will be Kamals earning when the output is 130 units?

a. Rs. 2460 b. Rs. 3380 c. Rs. 3860 d. Rs. 2880 13. State whether the following statements are true or false 1. Donations to political party is eligible for tax benefit. 2. Interest Paid on Education Loan for self, spouse and children is not eligible for tax benefit. a. b. c. d. (1)False, (2) False (1) True, (2) False (1) False, (2) True (1) True, (2) True

14. State whether the following statements are true or false i.. For the computation of Voluntary Retirement Scheme, basic salary plus Dearness Allowance is to be considered ii. Casual leave (CL) may be encashed on the basis of pro rata up to the date of relief of employees.

Select the correct option a. (i) True, (ii) False b. (i) True, (ii) True c. (i) False, (ii) True d. (i) False, (ii) False 15. Choose the correct option. i ----------------are citizens of the country in which the subsidiary or branch of parent company is located. ii.---------------------are individuals who are in the process of applying visas to move to the countries which are not their country of origin. a. i. Third Country Nationals ii. Local Country National b. i. Local Country National ii. Third Country National c. i. Non-Residential India, ii. Third Country National d.. i. Local Country National ii. Non-Residential India 16. a. Tax exemption up to ` _____________ per year is available for your medical expenses reimbursed by the employer. b. Tax rebate of ` ____________ on education per child to the maximum of two children. 1. a. 15,000 b. 12,000 2. a. 10,000 b. 18,000 3. a. 12,000 b. 15,000 4. a. 18,000 b. 10,000 17. State whether the following statements are true or false a. According to Section 10 (14), childrens education and hostel allowance can be claimed as exemption b. About 4 percent of the salaried employees on an average pay a selfassessment tax of ` 15,000.

a. (a) True, (b) False b. (a) False, (b) True c. (a) False, (b) False d. (a) True, (b) True

18. State whether the following option is True or False i. Deflation is also another important factor that affects the benefit program of the employees. ii. Legal compliance cannot be taken into account while determining the objectives of the benefits and services. a. (i) True, (ii) False b. (i) False, (ii) True c. (i) False, (ii) False d. (i) True, (ii) True

19. An Indian working in the TCS branch in Australia is a---------------a. Third Country National b. Expatriates c. Non-Residential Indian

d. Local Country National.

20. a. Net intake of --------------calories should be taken into account at the time of minimum wage calculation. b. According to Need-based Minimum wage, the per-capita consumption of --------------yards of clothing requirement per annum is taken into consideration for calculating minimum wage.

1. a. 200, b.20

2. a. 2000 b. 200 3. a. 2700 b. 28 4. a. 2700 b. 18 21. i. ------------------ plan stressed on improvement in wages through increased productivity. ii. ------------------- plan recommended that the reward structure of the industrial employees in terms of wage and non-wage benefits must be related to performance records.

a. i. 3rd ii. 1st b. i. 2nd, ii. 5th c. i. 5th, ii. 2nd d. i. 1st, ii. 2nd

22. The Top Management decision may show its result after few years as compared to the decision taken up by the supervisor (in a week) and worker (in a few hours) decision. ? This is true in case of which unconventional method of job analysis? a. Hay Plans Guide chart profile method b. Time span discretionary method c. Urwick method d. Decision band method

23. i. In ------------------- system, the minimum wage is guaranteed even if the output falls below the standard. ii. --------------system was introduced with the objectives of giving sufficient incentives to workmen to motivate them to produce at their full capacity, and to remove the fear of earning deductions. a. i. Hasley ii. Taylors differential piece rate system b. i Bedeaux ii. Merricks differential piece rate system c i.Emerson ii. Gantt Task system

. d.i. Rowan ii. Emersons Efficiency system 24. State whether the following statements are true or false i. Donations to political party is eligible for tax benefit. ii. Interest Paid on Education Loan for self, spouse and children is not eligible for tax benefit. a. b. c. d. (i)False, (ii) False (i) True, (ii) False (i) False, (ii) True (i) True, (ii) True

25. State whether the following statements are True or False based on eligibility of an individual to be considered as a Resident and Ordinary Resident (ROR) for taxation purpose. i. He is a resident in India for 3 out of 10 years immediately preceding the relevant previous years ii. He has been in India for a period of 730 days or more during last 5 years immediately preceding the relevant previous year. a. b. c. d. (i)False, (ii) False (i) True, (ii) False (i) False, (ii) True (i) True, (ii) True