A

PROJECT REPORT

ON

COMPENSATION ANALYSIS BETWEEN PUBLIC AND PRIVATE

SECTORS
Project submitted in partial fulfillment for the Award of the degree of
MASTER OF BUSINESS ADMINISTRATION
Submitted By
AAQILA ZAINAB RAZVI
H.T.No: 1402-17-672-113

Under the Guidance of

Dr. Naiymunnisa
(ASSOCIATE PROFESSOR)

AMJAD ALI KHAN COLLEGE OF BUSINESS ADMINISTRATION

Affiliated to Osmania University - Hyderabad
(2017-2019)

CERTIFICATION

ZAINAB RAZVI Page 1

 This is to certify that the project work entitled “A PROJECT REPORT ON
COMPENSATION ANALYSIS BETWEEN PUBLIC AND PRIVATE SECTORS” is
being submitted in partial fulfillment for the award of degree of Master of Business
Administration to Osmania University, a record of bonafide is carried out by Aaqila zainab
razvi, bearing HT.NO 1402-17-672-113.
The result in this report has not been submitted to any other University or Institution
for award of any degree or diploma.

PROF. SHEBAZ AHMED

DIRECTOR

CERTIFICATION

This is to certify that the Project Report title “A PROJECT REPORT ON

COMPENSATION ANALYSIS BETWEEN PUBLIC AND PRIVATE SECTORS”
submitted in partial fulfilment for the award of MBA Programme of Department of Business
Management, O.U. Hyderabad, was carried out by Aaqila zainab razvi, under my guidance.
This has not been submitted to any other University or Institution for the award of any
degree/diploma/certificate.

ZAINAB RAZVI Page 2

Dr NAIYMUNNISA
Associate Professor
Internal Guide Signature of the Guide

DECLARATION

I hereby declare that this Project Report titled “A PROJECT REPORT ON

COMPENSATION ANALYSIS BETWEEN PUBLIC AND PRIVATE SECTORS”
submitted by me to the Department of Business Management, O.U., Hyderabad, is a bonafide
work undertaken by me and it is not submitted to any other University or Institution for the
award of any degree diploma / certificate or published any time before.

AAQILA ZAINAB RAZVI

HT.No: 1402-17-672-113 Signature of the Student

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 ACKNOWLEDGEMENT

It is great pleasure to acknowledge the kind of help & suggestions given by various
individuals the persons during my project work.
I express my deep sense of gratitude to Prof. Shehbaz Ahmed, Director, Amjad Ali Khan
College of Business Administration, for extending his support.
I would like to thank my project guide dr. naiymunnisa, Associate Professor, Amjad Ali
Khan College of Business Administration for his valuable guidance & enthusiastic
encouragement in motivating me to take up the project by providing valuable ideas &
suggestions to carry the project in this endeavor.
I would like to thank one & all, who directly & indirectly extended their valuable support in
completing this project.
I take this opportunity to express my deep felt gratitude to my family members for being a
source of strength & moral support throughout the course of my study.

AAQILA ZAINAB RAZVI

HT.No: 1402-17-672-113

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 SNO. CHAPTER NAME PAGE
NO.

1. Abstract 1

2. Introduction 3

3. Review of literature 10

4. Company profile Public Sector 15

5. Data analysis 18

6. Objective 1 28

7. Objective 2 35

8. Findings 39

9. Suggestions 40

10. Conclusion 41

11. Bibliography 42

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 Abstract

ABSTRACT:

The paper consists the study is to identify and analyze the factors influencing the customer
adoption of technology in banking services in the twin cities. The impact of technology on

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banking operations. Also,a comparative study of banks in different regions to analyze ATM,
Internet banking, Telephone banking, Mobile banking services used between users and
problems of technology usage in that bank. The Paper is basically concernedand the customer
aspect of technology in banking searching for customer satisfaction level and adoptions of
banks are analyzed between using Statistical Tools through R-Programming. This is a
comparative study of Public sector banks and Private Sector banks and finds out the majority
of which kind of transaction in banks in Twin cities. Key words: ATM, Internet banking,
Telephone banking, Mobile banking.

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 Chapter 1:
Introduction

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Topic : A comparative study on annual compensation and benefits of Indian public and
private sectors.

Introduction: Compensation is a systematic approach which provides monetary value to

employees in exchange for work performed. Compensation may achieve several purposes
assisting in recruitment, job performance and job satisfaction. It also refers to the policies and

procedures for managing all forms of financial returns and tangible services and benefits that
employees receive as a part of an employment relationship. Better compensation management
facilities to attract the employees towards the organisation.

Objectives: 1.To understand the key compensation and benefits trends across sectors in the
Indian market.
2. Comparison between the compensation and benefits given in public and private sectors.

Scope: To analyse the structure of compensation and benefits in public and private sector
firms and also explore the role of the performance model.

Limitations: Since the project is based on the information collected only for a year, there
might be changes in the trends that might not be taken into account for the study.

Methodology: The methodology adopted for this project is secondary data. The secondary
data are those which have already been collected by someone else and which have already
been passed through the statistical process.

Meaning:
Compensation is the direct and indirect monetary and nonmonetary rewards given to
employees
on the basis of the value of the job, their personal contributions, and their performance. While

making these payments one should be alive to the governing legal regulations. The
compensation
and benefits processes belong to most important HR processes, which are critical for the

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organization and modern HR organization. The compensation and benefits is about managing
the personnel expenses budget, setting the performance standards, setting the transparent
compensation policies and introducing the competitive benefits for employees. The
organization with effective compensation and benefits drives its personnel costs, manages the
performance of employees and rewards the extraordinary performance.
The high performance corporate culture and the high performance. Human Resources
organization have to be supported by the compensation strategy, which is designed to be
business driven strategy and with the right compensation tools, which motivate employees to
go the extra mile and rewarding the real successes.

Main Compensation Goals:

The compensation strategy has to set the main compensation goals of the organization and
they have to be kept as the main target for Human Resources to be achieved. The
compensation goals have to be set in accordance with the business strategy and they have to
visible in the HR Strategy.
The top management and Human Resources have to decide, what the goals are of the
compensation schemes in the organization. The compensation goals should be aligned with
the corporate culture and the general long-term expectations of the employees, when the
organization does not implement a huge change in the corporate culture.

Main compensation goal is about the role of the compensation in the organization. Each
organization pay salaries, but the role of the compensation has to be balanced with the other
aspects of the overall motivation scheme applied in the organization. The organization has to
choose to pay higher salaries and offer less development or career opportunities or it can offer
lower salaries and better career opportunities to keep the motivation system balanced.
When the organization defines its basic compensation goals, it can continue with structuring
the main compensation decisions formulated in the compensation strategy.

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 Objectives:
- To attract and retain competent and productive staff from the appropriate national,
regional, local labour market.
- To identify different levels of responsibility and accountability and to establish salaries
accordingly.
- The financial compensation system forms as an effective motivator and increases
performance to give a feeling that the remuneration is fair and that no favouritism has been
shown in its payment.
- To maintain satisfaction of human resources, reducing voluntary separations and
complaints and grievances stemming from inadequate or inequitable wages as perceived by
the employees.

Importance:
The compensation strategy allows smooth and efficient operation of other HR Processes like
the recruitment and staffing, performance management, proper KPI and goal setting process,
performance appraisals. As the other HR Processes can run smoothly and they are not
blocked by the wrongly set compensation strategy, the main compensation decisions have to
be included in the compensation strategy and the top management and Human Resources
have to be aligned in the understanding to the main compensation decisions.

Role of Compensation in Human Resources:

The compensation is a part of the complex HR processes, policies and procedures. The top
management and Human Resources have to decide, what will be the primary role of
compensation in the organization. Some organizations prefer the supplementary role of the
compensation and other organizations prefer the dominant role of the compensation.
This compensation decision is extremely important as it sets the general framework for the
compensation components, if they will exist in the organization or they will be the part of the
other HR policy.
The compensation strategy definitely includes the description of the role of the compensation
in the organization.

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 Components of a compensation system:
- Job description
- Job analysis
- Job evaluation
- Pay structures
- Salary service

Constitutes of compensation:
- Wage and salary
- Incentives
- Fringe benefits
- Perquisites

Public sector:
The public sector is that portion of an economic system that is controlled by national, state
or provincial, and local governments.It consists of national and local governments, their
agencies, and their chartered bodies.

Public sector compensation is a difficult and complex issue often characterized by straw men
and generalizations.Public employee compensation is a matter of policy debate and
political controversy in states and cities around the country. Yet discussions of public sector
pay are rarely informed by hard data. Many public employees are under the impression that
they could earn higher pay and benefits “on the outside.” And many private sector workers
admire public sector pay and benefits, without recognizing that the average public employee
is often more educated and experienced than the average worker outside government.
Government employees typically have a significant portion of their salaries in benefits
including health insurance and pension benefits. Employees in public sector enterprises have
enjoyed job security, which is often not the case in private sector. Also, there is no denial that
they have traditionally enjoyed a range of benefits and perquisites that cannot be easily
monetised.The PSUs remuneration and human resource policies have to fitinto India's socio-
economic reality, which is a country that is stillpre-dominantly poor with lot of social and
economic inequities.To give equal opportunities and uplift people from certainsections, the

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government has reserved posts in PSUs forscheduled castes and scheduled tribes. Most PSUs
also have mandated to develop broader infrastructure facilities in areas adjoining their
facilities.The junior and middle management employees are, however, better off in PSUs than
those in the private sector because of these fringe benefits and more equal distribution of
compensation in PSUs.

Private sector:

The private sector encompasses all for-profit businesses that are not owned or operated by the
government. the private sector is the segment of a national economy owned, controlled and
managed by private individuals or enterprises.

The private sector has a goal of making money and employs more workers than the public
sector. The private sector in India have demonstrated its potential of growth and offered
tremendous opportunities of employment. Compensations become global in nature for similar
or equivalent skill sets, however, the growth levels in compensation differed market to
market. HR organisations have made attempts to understand the linkage and influencing
factors of salary escalation levels as a part of their routine exercise and projected short term
trends for different sectors/ industry. In the private sector, top management has to constantly
strive to reach higher operational targets, which will involve a certain degree of risk and an
employee has to be rewarded suitably.the high salaries in the private sector are often granted
only to a miniscule number of employees who hail from the top-end management schools,
and their remuneration, at times, are not reflective of the industry average.

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Limitations:

1. Compensation management involves a wider range. So, the present study examines it
from identified and selected dimensions only. However, it is possible that there may
be other factors which might not have been covered in this study
2. In this study, compensation analysis has been limited only to banking sector.

3. This interpretation being based on percentage method is not definite. This study is not
conclusive
4. The responses of the study have been taken only from one bank from each sector. The
perceptions and expectations of the bank employees and officers may vary from those
of the rest of India
5. Any study which is based on the primary data collected through the pre-designed
questionnaire suffers from the basic limitation of possibility of difference between
what is recorded and what is true because the people may not deliberately report their
true opinion due to some reasons or other service related issues, no matter how
carefully the interviews have been conducted.

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 Chapter 2:
Review of Literature

Wage Differentials Between The Public And The Private Sector: How Comparable Are
The Workers? - Journal of Business & Economics Research, May 2006.

This paper’s purpose is to examine the importance of controlling for the comparability of
the units in a sample when examining wage differentials of various types. We use U.S. CPS
data for the period 1992-2000 to compare estimated wage differentials between public and

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private sector workers obtained using two different methodologies: Lee’s two-step method
that controls for the selection bias resulting from the non-randomness of the sample, and the
propensity score matching method that controls also for the comparability of the workers.
Lee’s method suggests that federal workers are paid a premium, while state and local workers
are underpaid compared to private sector workers. However the matching method indicates
that this data is too heterogeneous to be used to compare wages across sectors. We conclude
that, when the outcome under study is not only affected by some sort of selection but also
requires comparable groups, the traditional methodology may not be enough.
This study approaches the public/ private wage comparison issue by comparing the
results obtained from the application of two different methodologies that focus on correcting
the selection bias problems that result from the nonrandom allocation of workers across
sectors. We show that accounting for the endogeneity of the sector of employment does not
ensure that the groups are comparable. If in addition the analysis assumes that the workers
from different sectors are similar to each other, we also need to find reliable counterparts.

Comparing Public and Private Sector Compensation over 20 Years - Keith A. Bender
and John S. Heywood, 2010.

The current recession and the resulting fiscal difficulties faced by state and local
governments have renewed interest in the compensation of the public workforce in regard to
pay, pensions, and other benefits. In this report we examine the extent to which state and
local government compensation in the United States is comparable to compensation in the
private sector
Levels of compensation help determine both the competence and the efficiency of
governmental services. Excessive levels waste resources, depriving governments of the
opportunity to address other costly objectives or to reduce burdens to taxpayers. Insufficient
levels make it difficult, if not impossible, to attract workers of the quality needed to provide
the services demanded by citizens. Comparability with the private sector is the most generally
accepted standard by which economists and compensation specialists judge whether the
processes for determining compensation in the public sector are working. In this report we
use publicly available data from the U.S. Bureau of Labor Statistics, along with an
established methodology used by researchers since the 1970s, to compare worker earnings
across and between private, state, and local sectors. We analyze differences in pay between
each sector as reported for the last several decades, up to and including the latest estimates.

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We also estimate the variation of these trends across some of the largest states. Next, to
compare overall compensation across public and private sectors, we describe benefit levels
and composition in public and private sectors. The earnings–comparability estimates are
adjusted to include benefits

Unequal Pay: Public vs. Private Sector Compensation - Yankee Staff, Oct 2015.

Public employee compensation should be set at the level necessary to attract and retain
required employees. Appropriate compensation levels for government employees can be
approximated by analyzing how workers with similar levels of education, experience and
other earnings-related attributes are paid in the private sector.

Rising budgetary costs for public employee pensions and health programs have caused public
employee compensation to be a matter of policy debate and public concern. Connecticut is
ranked second in the nation for the ratio of combined public debt and unfunded pension and
retiree health liabilities to state GDP.
This study compares the salaries and benefits of Connecticut state government employees in
non-public safety positions to those of private sector workers with similar education,
experience and other earnings-related characteristics. The main data sources used for this
analysis are the U.S. Census’ American Community Survey, the Bureau of Labor Statistics
National Compensation Survey, and actuarial valuations of state pension and health
programs.• Pensions and health coverage are the greatest budgetary burdens of public
employee compensation, as well as the elements of compensation that are most generous
relative to the private sector. Were the Connecticut state government to pay employees at
market levels, it would save between $1.4 billion and $2.5 billion in annual compensation
costs.
Thus, it seems appropriate that policy reforms focus on making public employee health,
pension and retiree health plans fiscally sustainable and competitive with the private sector.
Two Different Worlds: Public vs. Private Sector Compensation - PJ Austin, December,
2012

Despite the popular belief that federal employees are underpaid public servants, the data
tells a very different story. When all of the factors that affect compensation are accounted for,

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there is significant evidence that federal employees make considerably more than their
private sector counterparts.
The gaps in the (The Federal Salary Council)FSC’s analysis are exposed by a January

30, 2012 Congressional Budget Office (CBO) report. The CBO compared federal civilian
employees with private sector employees who had comparable levels of education, years of
work experience, occupations, geographic locations, and demographic characteristics; it
found, among other things, that, “overall, the federal government paid 16 percent more in
total compensation than it would have if average compensation had been comparable with
that in the private sector, after accounting for certain observable characteristics of workers.”
The findings of the CBO study are consistent with most other outside studies, which show
that federal employees receive greater total benefits than private-sector workers.

The report found that state governments pay on average 6.2 percent more per hour in
wages and benefits, including pension benefits, than the private sector for the 22 major
occupational categories that exist in both sectors. Additionally, the report found that no state
government pays its employees on par or below what the private sector pays; that the largest
percentage difference in pay between the public and private sector is 40 percent; and that the
highest difference in pay is $61 an hour. This disproportionately generous public sector
compensation is a major driver of unfunded state and municipal pension liabilities across the
country, which have been accurately described by pundits and experts of all political stripes
as looming financial crises.

Total compensation paid to federal civilian workers totaled $271 billion in 2011, which
means that regardless of whether or not the president decides extends the freeze on cost-of-
living increases for federal workers, overall federal compensation will have significant
budgetary ramifications in the decades to come. At a time when the national debt has grown
to more than $16.3 trillion, Congress cannot afford to ignore the conclusions of the studies
like the CBO report, which concludes that total compensation is 16 percent higher for federal
than private sector workers.

It is clear that the underlying assumptions that the FSC uses to calculate its
compensation figures are incomplete and therefore the group’s findings are inaccurate. To
avoid facing any misconceptions about compensation in the future, the FSC should correct

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the flawed methodology it uses to calculate federal versus private sector employee pay

Public vs. Private Sector Compensation - Tax Foundation in Last Week's Editorial
Pages, January 2009.\

There are 144 million wage and salary jobs in the United States. About 22 million, or 15%, of
those are federal, state, and local government jobs. Provided in this section are data relating
to the average compensation received by both government and private sector employees.

The data from this section are collected from the Bureau of Economic Analysis (BEA)
and include both wage and salary compensation and compensation in forms other than wages.

This non-wage compensation includes employer contributions to employee pension and

insurance funds and government social insurance funds such as social security and
unemployment, all of which are important to consider when looking at the total compensation
picture.
Unfortunately, while BEA can accurately report non-wage compensation for the private
sector, the task is more difficult for state and local governments. This is because many
governments provide employees with pension and retirement plans, the future liabilities of
which, by many calculations, are not adequately funded by current government contributions
to those plans.

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 Chapter 3: Public Sector
Private Sector

Public vs private sector

Company profile : The two companies taken to find out the disparities are SBI in public
sector and HDFC in private sector.

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 SBI (State Bank of India) is an Indian multinational, public sector banking and financial
services company. It is a government-owned corporation with its headquarters in Mumbai,
Maharashtra. As of 2014-15, it had assets of ₹20.480 trillion (US$300 billion) and more than
14,000 branches, including 191 foreign offices spread across 36 countries, making it the
largest banking and financial services company in India by assets. The company is ranked
232nd on the Fortune Global 500 list of the world's biggest corporations as of 2016. The bank
traces its ancestry to British India, through the Imperial Bank of India, to the founding, in
1806, of the Bank of Calcutta, making it the oldest commercial bank in the Indian
Subcontinent. Bank of Madras merged into the other two "presidency banks" in British India,
Bank of Calcutta and Bank of Bombay, to form the Imperial Bank of India, which in turn
became the State Bank of India in 1955. Government of India owned the Imperial Bank of
India in 1955, with Reserve Bank of India (India's Central Bank) taking a 60% stake, and
renamed it the State Bank of India. In 2008, the government took over the stake held by the
Reserve Bank of India. State Bank of India is a banking behemoth and has 20% market share
in deposits and loans among Indian commercial banks.SBI is one of the largest employers in
the country having 222,033 employees as on 31 March 2014, out of which there were 45,132
female employees (20%) and 2,610 (1%) employees with disabilities. Pay scales in
nationalised banks and SBI (including its associates) are fixed through Bipartite Settlements.
Pay scales are revised every 4 years..

HDFC Bank (Housing Development Finance Corporation) is an Indian banking and

financial services company headquartered in Mumbai, Maharashtra. It has about 87,555
employees and has a presence in Bahrain, Hong Kong and Dubai. HDFC Bank was
incorporated in August 1994. As of June 30, 2016, the Bank had a nationwide distribution
network of 4,541 branches and 12,013 ATM's in 2,587 cities/towns. HDFC Bank is the
second largest private bank in India as measured by assets. It is the largest bank in India by
market capitalization as of February 2016. It was ranked 69th in 2016 Brand Top 100 Most
Valuable Global Brands. HDFC Bank provides a number of products and services which
includes Wholesale banking, Retail banking, Treasury, Auto (car) Loans, Two Wheeler
Loans, Personal loans, Loan Against Property and Credit Cards. HDFC Bank merged with
Times Bank in February 2000. This was the first merger of two private banks in the New
Generation Private Sector Banks category. In 2008, Centurion Bank was acquired by HDFC
Bank.

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 Chapter 4:
Data Analysis

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Questionnaire:

1. Does your company have a bonus or incentive plan ?

Interpretation :

From the above graph, we observe that both public sector and private sector have bonus or
incentive plans.

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2. .Are you totally aware of the current compensation and benefits policy in your
organisation ?

Interpretation :

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From the graph, 95% of SBI employees are aware of the compensation and benefits policy,
while 5% of them are not totally aware of the policies. In HDFC, 97% of the employees are
aware and the rest 3% are not. This indicates that the private sector employees are well
focused and are fully conscious about the policies of their salaries than the public sector
employee who are a bit negligent.

3. What type of bonus does your organisation give its employees ?

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Interpretation :

We observe that different sectors have different compensation policies. Public sectors have
different compensation policy while the private sectors have a complete different policy. SBI
has incentive based bonus while HDFC has annual or year end bonus policy.

4. Does your organisation give financial incentives or non financial incentives or both ?

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Interpretation :

We understand that both the sectors, public and private give both financial and non financial
incentives. Though HDFC leads in the both financial and non financial incentives, SBI also
tries and gives a lot of hidden incentives to their employees. But over all, private sector leads
in giving better incentives.

5. How much is your annual salary ?

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Interpretation :

We understand that the salaries in private sector are more when compared to the public
sector. For example, the pay of a branch manager in SBI is around 5L-10L and in HDFC it’s
6L-15L. A pay of an Associate branch manager in HDFC is 3L-8L and in SBI the pay is 2.5L-
6.5L. The salary of a personal banker in SBI is 2L-5L and in HDFC it’s 1.2L-4.5L. The pay
of credit analyst is 2.3L-12L and clerk is 1.4L-4L. The pay of sales executive is 1L-4L and
relationship manager is 4L-14L.

6. How many hours do you work ?

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Interpretation :

We understand that the working hours also differs from sectors. The working hours in private
companies are more when compared to public sector. In the above graph, the working hours
of SBI are 8 hours and the working hours of HDFC are 9 hours.Work for more working hours
and get paid more, work for stagnant working hours and get according to it. About 17 %
employees of private sector are dissatisfied from general working conditions of their
organization. Hence public sector employees are more satisfied than private sector
employees.

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7. From the incentives given below, please choose the one's provided by your company.

Interpretation :

We understand that different incentives are given in public and private sectors. From the
above example, we see SBI employees get pension allowance, retirement insurance, health
insurance,performance based incentives, provident fund, transportation allowance and other
incentives. While in HDFC, their employees get shift allowance, pension allowance,
education allowance, health allowance, overtime allowance, performance based incentives,

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provident fund, transportation allowance and other incentives. We conclude that even in
giving extra incentives, private sector leads over public sector.

8. Does the compensation paid by your company allow to attract and retain the best
employees ?

Interpretation :

We understand that private sector companies gives better incentives to attract employees to
work. But, as per the research, public sector doesn’t have to boast its incentives to attract
employees because normally, everybody aspires to work in a government company for

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certain reasons. The main reason for most people opting public sector over private sector
would mainly be for job security. If not, private sector gives the best of the incentives.

9. Are you satisfied about the compensation system practiced in your company ?

Interpretation :

We understand that in spite of giving better incentives than public sectors, private sector
employees, majorly, are not satisfied. About 60% employees of private sector are dissatisfied,
10% neutral and only 30% are satisfied. Major cause of dissatisfaction is not having job
security. 20% extremely satisfied and 80% satisfied in public sector due to having job

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security in their jobs. Thus, public sector employees are happy and satisfied due to job
security even having less salary.

Objective 1 :

To understand the key compensation and benefits trends across sectors in the Indian
market.

Compensation analysis : The compensation package comprises of monetary and non-

monetary benefits that includes salary, special allowances, house rent allowance, travel
allowance, mobile allowance, employee stock options, club memberships, accommodations,
retirement benefits and other benefits. It may include a number of other benefits such as
insurance, extended leaves and retirement programs.

Compensation, both monetary and non-monetary is considered to be important by the

organisation and employees for various reasons such as:

> Increasing employee morale and motivation

> Improving performance of the employee
> Increasing productivity
> Enhancing employee efficiency
> Reducing employee turnover
> Commitment
> Retaining best employees
> Loyalty gained
> Helps dealing with union issues
> Organizational citizenship behaviour

Compensation can be divided into two components :

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1. Fixed
This component takes care of
> Basic Pay
> HR Allowance (HRA)
> Dearness Allowance (DA)

2. Flexible
> City Compensatory Allowance (CCA)
> Other Allowance
> Mobile Reimbursement / Month
> Educational Allowance
> Travel Allowance
> Gross per Month = Sum of all the above.
> Gross per Annum= 12*Gross/Month
> PF Contribution= 12% of Basic/Annum
> Gratuity
> ESI Contribution (ESIC)= 4.75% of Gross/Annum
> Medical = The Mediclaim facility provided to an employee who are not covered under >
Employee State Insurance (ESI).
> EX-Gratia/Bonus

The total cost hence is as follows:

Annual Fixed Gross Cost (AFGC) = Gross/Annum + Ex-gratia
Annual Total Cost = AFGC + PF + ESIC
Annual total cost is also called as CTC (the compensation an employee would receive from
the organization)

Scope :

The compensation and reward system plays a vital role in a business organisation. Job
description, job analysis, job evaluation, pay structure, and salary surveys are the important
components of compensation system. Compensation evolved from theories like economic

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theory, administrative theory, and social science theory.
There are a few factors that affect the compensation plan. The overall macroeconomics
situation where in the state of the economy of the country in which the firms are situated
plays a major role in determining the compensation to be paid. For instance, if an economy is
booming or is in high growth trajectory, chances are that the employees would pay the
employee more and conversely and vice-versa. The existing government policies also play an
important role in affecting the pay. Different types of companies, factors, industries following
different types of methods such as time rate system, piece rate system and balance or debt
method.
In a particular company, compensation is given depending upon their level. Mainly they are
top management, senior management, middle management, junior management and clerical
and compensation criteria goes with the flow. Executive compensation refers to the financial
payments and non monetary benefits provided to high level management in exchange for
their work on behalf of an organisation. Corporate presidents, chief executive officers, chief
financial officers, vice presidents, managing directors and others senior executives are paid
executive compensation.
Benefits are a form of compensation paid by employers to employees over, and above the
amount of pay specified as a base salary or hourly rate of pay. Benefits are a portion of a total
compensation package for employees. Benefits include paid time off such as sick days, and
vacation days, health insurance, life insurance, retirement benefits, paid prescriptions,
flexible spending accounts, disability insurance, relocation offer, legal assistance, employee
discounts,child care benefits, and more

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Disparities between various fields :

The above graph represents various disparities in compensation in certain markets in

India.The graph included markets like automobiles, BFSI, chemicals, consumer business,
energy, engineering and manufacturing, Hi-Tech, ITes, infrastructure and real estate, media
and advertising, pharma and life sciences, retail and others. We can see that engineering and
manufacturing sector is paid the most and then Hi-Tech comes second, ITes on third, BFSI
and pharma on fourth, consumer business on fifth, retail on sixth, automobiles on seventh,
chemical, infrastructure and media on eighth and energy in the end.Others include companies
in Hospitality, Professional Services, Agriculture, Aviation, Export and Social Services
sectors.
So, we learn that the compensation policy is not the same in all the sectors. It differs from
field to field. It’s high in some fields, moderate in some fields and less in some fields.

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Executive summary :

Increment : An increase or addition on a fixed scale is called increment. The average salary
increment across sectors is projected at 10.7% in FY 2016, which is 0.4% points higher than
the previous FY 2015 (10.3%)

Variable pay : Variable pay is employee compensation that changes as compared to salary
which is paid in equal proportions throughout the year. Variable pay is used generally to
recognize and reward employee contribution toward company productivity, profitability,
teamwork, safety, quality, or some other metric deemed important. The average variable pay
across sectors is projected at 17.4% in FY 2016, which is 0.4% points higher than the
previous FY 2015 (17.0%)

Overall industry analysis :

Average annual increments FY 2015 in comparison to FY 2016 :

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Consumer business and retail sectors show a decrease in projected increments for FY 2016 in
relation to last FY. Infrastructure and real estate has the maximum increase in projected
average increments over previous FY. In pharma, media, Hi-Tech and ITeS sectors, the
projected increments are significantly higher than Industry average whereas retail have lower
than industry average increment projections.

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Average annual variable pay FY 2016 in comparison to FY 2015 :

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BFSI, infrastructure and real estate have the maximum increase in projected average variable
pay over previous FY. Media have projected lower than average industry average variable
pay. In BFSI, pharma and consumer business, the projected average variable pay are
significantly higher than Industry average

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Objective 2 :

Comparison between the compensation and benefits given in public and private sector.

One of the most coveted jobs in India is the bank job, which offers a plethora of bright
options to the employees, be it a comfortable lifestyle, stability or low interest rates on loans.
Not just in India, but throughout the world, people try their level best to end up in a bank job,
because of the benefits they offer, and preferably public sector banks, as they are always a
few steps up in offering the benefits to the employees. Banking industry has grown by leaps
and bounds in the past few years and offers some of the best opportunities to grow as a
professional. However, the experience of working with a public sector bank could be totally
different from a private sector bank in terms of work hours, level of competition and the
professional learning curve. Job security and compensation can also be at a great deal of
variance and it would be best to explore these aspects before making the ideal choice of
banking organization to build a successful career. There are 26 banks operating in the public
sector in India. SBI and its 5 associate banks, 19 nationalized banks and IDBI bank appear
under the public sector. Out of 21 private sector commercial banks, 14 appear under old
private sector banks, while the remaining 7 are grouped under new private sector banks.
The public sector is that portion of an economic system that is controlled by national, state
or provincial, and local governments. The section of a nation's economy, which is under the
control of government, whether it is central, state or local, is known as the public sector. It
also consists of their agencies, and their chartered bodies. The public sector is one of the
largest sectors of any economy. The basic objective is to serve people. Compensation is the
main centre of attraction for every employee. In public sector banks, compensation to the
officers is paid according to their seniority and competency both. Public sector banks are
known for their better organizational structure and greater penetration in customer base. Work
environment is also relatively less competitive as compared with privately-owned banks and
professionals often do not have to focus on meeting targets and being the best performer in a
team. There is typically greater stress on providing necessary training to their personnel in
order to help update their knowledge and skills to be a better performer in the long run. Job
security is much higher as compared to private sector banks and for some, this could be the
prime attraction for building a long-term career.

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The part of the national economy that is not under direct state control is private sector.The
private sector is the part of a country's economic system that is run by individuals and
companies, rather than the government. The basic goal is to make profits. The private sector
banks in India believe that to attract the right talent, the remuneration policy should be
structured in line with other peer group banks, and is sensitive to compensation packages in
this part of the financial market. Compensation is structured in terms of fixed pay, variable
pay and employee stock options, with the last two being strongly contingent on employee
performance. Unlike public banks, private banks compensate their officers in accordance to
their competency skills. Thus, it is clear from the views of the bank officials that those who
will perform better, will be able to earn more. Also, a skillful person will be compensated
more as compared to a less skilled or non-performing employee. Private sector banks are
usually known for their highly competitive outlook and technological superiority. As a result,
careers in private sector banking also tend to be more competitive where professionals are

required to meet stiff targets and perform above par to ensure good career growth. Risk-
reward component is also higher and remuneration could be better but job security may not
be on par with publicly-owned banks.

Compensation :
For entry-level professionals, public sector banks may not offer as exciting a work
experience as might be possible with their privately-owned counterparts. The payscales are
fixed for every position and pay hikes are not as frequent if compared with private banks
which may not be a good enough incentive for top performers. Promotions are usually based
on the years of work experience instead of merit although out-of-turn promotions can also
happen occasionally. However, work hours are among the best and there is less competition
or targets to meet which gives enough time to grow as a professional at one’s own pace. Job
security is one of the most important advantages with public sector banks as rarely anyone is
laid off, except for disciplinary reasons.

The kind of remuneration offered primarily depends on the merit of an individual more than
anything else. Candidates with an excellent academic background and a competitive outlook
can get a higher pay package with some of the best private banks today. Perks and incentives
are not an issue for those who can deliver higher levels of performance and can also be

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promoted in a comparatively short span of time based on their merit. Generally, a competitive
work atmosphere can provide the much-needed motivation to perform better and individuals
can enjoy a fast-paced career growth. However, the working hours could be longer as
compared with public sector banks and job security can also be an issue, especially for lower-
to-mid rung professionals. However, even top-level professionals may also not be completely
safe in this sense.

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 Chapter 5: Findings,
Suggestions & Conclusion

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Findings :

In the first graph, we learn that both public and private sectors have an incentive/bonus plan.
In the second graph, we understand that, majority of employees both in SBI and HDFC are
aware of their company’s compensation and benefits policy. In SBI, the employees are given
an incentive based hike and in HDFC, the employees are given annual/year end based hike
which is a major difference.In the fourth graph, though HDFC leads in the both financial and
non financial incentives, SBI also tries and gives a lot of hidden incentives to their
employees. In the fifth graph, we understand the pay structure prevailing in SBI and HDFC.
From the very ground level to the top most management, the HDFC pays more when
compared to SBI. In the sixth graph, we learn the number of hours worked by employees in
both the sectors. We understood that in a SBI, employees work for eight hours and HDFC
employees work for eight and a half to nine hours per day. In seventh graph, SBI employees
are given pension allowance, retirement insurance, health allowance, performance based pay,
provident fund, transportation allowance etc. In HDFC, the employees are given, shift
allowance, pension allowance, education allowance, health allowance, overtime
allowance,performance based pay, provident fund, transportation allowance etc. In the eighth
graph, we understand at what rate the companies are giving benefits to attract and retain the
employees. Most of the private sector employees agree with the fact than the public sector
employees. A limited people are either do not agree or unsure of the fact. In the ninth graph,
we understand the rate of satisfaction of the employees towards their compensation system. A
major part of the employees in private sector are not satisfied with the compensation system.
Very less employees are slightly happy and the rest are neutral. While in public sector, most
of the employees are satisfied, a few are not and the rest are neutral.

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Suggestions:

Private and Public Banks provide precious services to the general public and also to the
industry. Not the only variety of services and profit are important, but simultaneously the
quality of services, the cost of services and safety of public money is also important. During
the course of research a lot of problems of financial nature and non-financial nature, have
been emerged. The problem of depositors, the problems of borrowers, the problems of
employees, the problem of management included among them. These problems are in detail
at appropriate places. 1. All the banks must have ATM facilities. It will be better to have
networking ATM system i.e. if it is not possible to install ATMs in all parts of the city there
should be tied up and other banks. Presently, some banks are doing the same 2. There should
be the suitable recruitment of more officers in the public sector banks so that the branches,
which are really understaffed and overburdened, become systematically sufficient. 3. There
should be the appropriate recruitment of more officers in the public sector banks so that the
branches, which are really understaffed and overburdened, become systematically sufficient.

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Conclusion :

After analysing all the graphs, we understand that, a lot of differences are prevailing between
public and private sectors. Generally, every company ought to have a bonus plan to have a
healthy work life for the employees.

Bonus and incentive programs can effectively drive employee behaviour and yield the desired
business results. However, if not properly designed or implemented, bonus and incentive
programs can become a major barrier to business success and can create high levels of
employee frustration.

It’s very important for all the employees to know all the benefits they deserve be it in public
or private sector. In the above survey, we found out that more of private sector employees are
aware than of public sector employees but with a minimal difference only.

The type of compensation policy existing in the sectors. Public companies follow a total
different plan while the private follow another plan.

Both the sectors give financial and non-financial incentives. Private sector gives better
incentives than the public sector. But, nevertheless public sector gives a main incentive i.e.,
job security which is not given in private companies.

We learn about the different types of incentives given in public and private sectors in the
given choices. The incentives given in public companies are different from the incentives
given in private companies. Most private companies tries giving more incentives to attract
and retain the employees while everybody wants to join the public sector because of the job
security. Public sector employees are very much satisfied with their compensation policy
when compared to the private sector employees. In the end we understand that private sector
companies are paid more when compared to public sector employees.

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.

Bibliography :

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https://www.theguardian.com/news/datablog/2012/mar/27/public-private-sector-pay

https://www.scribd.com/doc/35001648/Compensation-Ppt-private-vs-public

https://www2.deloitte.com/content/dam/Deloitte/in/Documents/human-capital/in-hc-
deloitte-india-annual-compensation-trends-survey-report-fy-2016-noexp.pdf

http://shodhganga.inflibnet.ac.in/bitstream/10603/28131/11/11_chapter%204.pdf

http://shodhganga.inflibnet.ac.in/bitstream/10603/6913/10/10_chapter%205.pdf

http://www.naukrihub.com/salary-information/salary-of-government-and-private-
sector-banks.html

http://www.goodreturns.in/classroom/2015/04/difference-between-public-sector-private-
sector-banks-347748.html

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 Annexure

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 Questionnaire:

Employee name:
Company’s name:
Age:
Gender:
E-mail address:

Phone number:

1. What type of company are you working with?

(i) Public sector
(ii) Private sector

2. How much is your annual salary?

(i) 0-100000
(ii) 100000-200000
(iii) 200000-300000
(iv) 300000-400000
(v) 400000-500000
(vi) 500000-600000
(vii) 600000-700000
(viii) 700000-more

3. State since how long are you working with this organisation.

4. How many hours do you work per day?

5. What was your starting salary?

6. Does your company have a bonus or incentive plan?

(i) Yes
(ii) No

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7. What type of bonus?
(i) Annual / Year End bonus
(ii) Incentive bonus
(iii) Other

8. From the incentives given below, please choose the one's provided by your company.
(i)Shift Allowance
(ii)Profit sharing
(iii)Pension allowance
(iv)Retirement insurance
(v)Food Allowance
(vi)Education Allowance
(vii)Health Allowance
(viii)Overtime Allowance
(ix)Performance based pay
(x)Provident Fund
(xi)Employee stock options
(xii)Leave travel concession
(xiii)Transportation Allowance
(xiv)Other

9. Does the compensation paid by your company allow to attract and retain the best
employees?
(i) Yes
(ii) No
(iii) Maybe

10. Are you satisfied about the compensation system practiced in your company ?
(i) Agree
(ii) Disagree
(iii) Can’t say

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