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COMPENSATION MANAGEMENT
A study with reference to Airport Authority of India Visakhapatnam, India

A Synopsis Submitted to the Andhra University, Visakhapatnam In partial fulfillment for the award for the degree of

MASTER OF BUSINESS ADMINISTRATION

By M.SANDHYA
(Regd no. 110232802065)

Under the Esteemed Guidance of

Mrs. B.V. SANDHYA VANI

MBA, PGDHM ASSISTANT PROFESSOR

DEPARTMENT OF MANAGEMENT STUDIES SAMATA COLLEGE

(Approved by AICTE & affiliated to Andhra Pradesh)

Visakhapatnam,
(2010-2012)

CERTIFICATE

This is to certify that project study on Compensation Management in Airport Authority of India, Visakhapatnam is bonafide work done and submitted by M.SANDHYA in partial fulfillment of the requirements for the awards of Post Graduation in Management Studies (MBA), from SAMATA COLLEGE, VISAKHAPATNAM.

DECLARATION
I hereby declare that this project entitled COMPENSATION MANAGEMENT at Airport Authority of India, Visakhapatnam has been prepared by me during the period 2011 and submitted to SAMATA Degree and P.G College, Visakhapatnam in partial fulfillment of a Master of Business Administration from Andhra University. I also declare that this project work is the result of my sincere effort and that it has not been submitted to any other university for the award of the degree of the degree of master of business administration.

PLACE: VISAKHAPATNAM DATE:

M.SANDHYA

ACKNOWLEDGEMENT

I express my deep gratitude and Indebtedness to Mrs.S.VIJAYA RAVINDRA, Principal of Samata Degree and P.G College, Visakhapatnam, for the

encouragement given to me to complete the project and for the facilities provided to me through out the project. I am thankful to our guide Mrs.B.V.SANDHYA VANI

MBA,PGDHM(assistant professor) for her valuable guidance and kind cooperation right from the beginning of the project report. I am thankful very much for her kind constant encouragement and guidance shown during the course of our project. I express grateful thanks to Sri. G.M.S.RAO GARU,(F&A),and each and every member of AIRPORT AUTHORITY OF INDIA,

VISAKHAPATNAM for their encouragement.

Table of Contents
Contents CHAPTER-1 Introduction Need for the study Objectives of the Study Research Methodology Limitations of the Study CHAPTER-2 Profile of the Company Industry Profile Company Profile Vision and Mission CHAPTER-3 CHAPTER-4 CHAPTER-5 Theoretical Framework Data Analysis and Interpretation Findings Suggestions Conclusion BIBLIOGRAPHY QUESTIONNAIRE Page No. 7 9 11 12 15 17 17 21 29 39 78 94 95 96 97 98

CHAPTER-1
INTRODUCTION NEED FOR THE STUDY OBJECTIVES OF THE STUDY RESEARCH METHODOLOGY LIMITATIONS OF THE STUDY

CHAPTER 1 INTRODUCTION
PREFACE ON THE COMPENSATION MANAGEMENT

Ask any human resources consultant where financial compensation ranks in the hierarchy of employee requirements, and you're likely to get a range of answers. Some say it's the most important thing. Others declare wages are the only important thing. Still others say that while financial compensation isn't the most important thing, it's important enough that if your pay isn't fair, all the other employee benefits in the world may not be enough to keep employees on board. Obviously, it's important to know whether you're paying enough and how to get the most for what you're paying. In addition, you have to know how to bolster the actual dollars you lay out in salary and wages with nonfinancial compensation. You don't pay employees in a vacuum. That's another way of saying that the level of compensation that will attract and keep employees is set primarily by other employers. While there's no formula that will tell you the ideal salary for each position within your company, there are appropriate ranges. Some of the key sources for determining suitable salary ranges for your employees are:

Classified ad listings for specific positions, both in your daily newspaper and on the internet

Professional and trade organizations for the specific fields in which you're hiring. Most organizations regularly publish salary data.

Human resources consultants Specialized recruiters in the appropriate fields

8 While no one can discount the importance of financial rewards, keep in mind that today's job candidates are more concerned with corporate environment and quality-of-life issues than ever before. In an executive survey conducted by Robert Half International, corporate culture rivaled employee benefits in importance for candidates during job interviews. Many small businesses use this trend as a competitive advantage, offering such nonfinancial perks as flexible work schedules, casual dress days, additional vacation time and telecommuting opportunities. The costs of this approach are minimal, particularly when compared to the value-added benefits of improved recruitment, productivity and retention. Regardless of the monetary and nonmonetary ways you compensate your employees, creating an employee-friendly environment and determining competitive compensation ranges take time. Both require being flexible and adaptable to changing workplace trends and local conditions. The investment is worth it--the difference between a good company and a great company is its people. Workers' compensation (colloquially known as workers'comp in NorthAmerica

and compo in Australia) is a form of insurance that provides wage replacement and medical benefits for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence. The tradeoff between assured, limited coverage and lack of recourse outside the worker compensation system is known as "the compensation bargain." While plans differ between jurisdictions, provision can be made for weekly payments in place of wages (functioning in this case as a form of disability insurance), compensation for economic loss (past and future), reimbursement or payment of medical and like expenses (functioning in this case as a form of health insurance), and benefits payable to the dependents of workers killed during employment (functioning in this case as a form of life insurance). General damages for pain and suffering, and punitive damages for employer negligence, are generally not available in workers' compensation plans, and negligence is generally not an issue in the case. These laws were first enacted in Europe and Oceania, with the United States following shortly thereafter.

NEED FOR STUDY

By choosing aviation technology as a career, you can choose from a range of jobs. Most of the people believe that entering the field of aviation just means becoming a pilot. However, an aviation technological career is not just limited to the job position of a pilot. You can also choose to become a maintenance technician, a safety inspector or work in the air traffic control and flight operations department. So, depending on your interest and individual preferences, you can choose to take up a job position and make a successful career in the aviation industry. The growth in the aviation sector and capacity expansion by carriers has posed challenges to aviation industry on several fronts. These include shortage of workers and professionals, safety concerns and the lack of accompanying capacity and infrastructure. The purpose of the study is to bring-about various inside facts of this industry before the common people and the potential of manpower requirement of this industry to choose it as one of their career options and also to study about what exactly one is getting as compensation in such industry with a particular reference to Airports Authority of India, a Central Government Public Sector organization.

The aviation boom is looming large on the whole world and India is being no exception to it. The un-imaginable growth of aviation industry in the country during the last 2-3 years is attributable to this. At this juncture of huge anticipated turn-around in the aviation sector in the country, as a business student with Finance being the main subject, I felt it appropriate to do a project work on an organization of Civil Aviation and Airports Authority of India is obviously the first choice for the same. Being a resident of Visakhapatnam, I have zeroed in on to Visakhapatnam International Airport which is being managed and controlled by Airports Authority of India.

The reason for choosing the topic is mainly because of the latest concept in Airport sector i.e. Modernisation/Privatisation of Airports. This is due to the Indian airports are being termed

10 as not upto the international standards and huge amount of investments are needed to upgrade the facilities at Indian airports to bring at par with the other leading airports in the world.

The limitations of Airports Authority of India in investing huge capital cost required for the modernization of the existing airports has made the Government to think about bringing the private participation in the modernization, management and operation of the international airports in India to start with. Accordingly the airports at Delhi and Mumbai have already been leased out to private parties viz. M/s. G.M.R. and M/s. G.V.K. respectively. However, certain airports like Visakhapatnam airports are being modernized by AAI on its own by either constructing new terminal buildings or by improving the available facilities.

In this context it is thought that it is appropriate to study how far such huge investment of funds at smaller airports like these is commercially feasible to Airports Authority of India and I have chosen the Visakhapatnam airport for a case study.

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OBJECTIVES OF THE STUDY

1. To understand the compensation package available for the employees of Airports Authority of India, Visakhapatnam Airport 2. To study the detailed pay and allowances in various categories of executives and nonexecutives 3. To study about the recently introduced performance related pay and its applicability 4. To conduct a survey among the employees of Visakhapatnam Airport about their performance appraisal methods and their acceptance levels for compensation based on their performance. 5. To explore the pros and cons in introducing such performance oriented compensation methods 6. To offer suggestions on Effective Implementation of such compensation packages based on the findings

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METHODOLOGY
The study is proposed to be conducted partly on primary data and partly on secondary data. The primary data involves visiting a working airport, meeting the concerned officials, collection of information from the employees working in different posts and different responsibilities and finding-out their pay scales and various perquisites and by conducting a survey among the employees with a sample size of a minimum of 50 employees. The Secondary data involves studying the manuals, booklets relating to compensation packages, collection of information from relevant websites of Airports Authority of India (AAI).

TYPE OF DATA USED IN THE STUDY

The required data for the study are basically secondary in nature and the data are collected from The audited reports of the company. INTERNET which includes required financial data collected from Visakhapatnam airports official website i.e. www.visakapatanamairport.com and some other

websites on the internet for the purpose of getting all the required data of the airport and to get detailed knowledge about airport for the convenience of study. Brouchers of Visakhapatnam airport. The valuable cooperation extended by staff members and the branch manager of AIRPORT, VISAKHAPATANAM contributed a lot to fulfil the requirements in the collection of data in order to complete the project.

DATA COLLECTION Primary Data

The information needed is descriptive. This study includes construction of the data collection instrument i.e. structured questionnaire, the sample design and collecting the data. Primary information was collected through these questionnaires which contained questions regarding the employees contributions and their performances. The employees are rated basing on their performances levels accordingly.

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Secondary Data
Secondary information is any data originally generated for some purpose other than the present research objectives. It includes findings based on research done by outside organization as well as data generated in-house for earlier studies or even customer information collected by the firm s. Most often, if provides clues and directions for the design of primary research. Here the information is collected through company websites, journals, books and other websites.

Sample Size
The sample size of the survey was 50.

Sample Technique
The information was obtained through questionnaires. Respondents were asked a variety of questions regarding the behaviour, attitude, intentions, awareness, motivations, process, methods and demographic characteristics of the employees. The superiors and the supervisors gave responses to the questions for their subordinates, and the questionnaires were answered by the colleagues of the employees at senior level. The Subordinates were picked on the basis of convenience sampling. Typically, the questioning is structured i.e. standardization is imposed on the data collection process.

Instrumentation Technique
The questionnaire serves as a useful guide for the communication process and may be used with survey research in any form- whether the questions are in written or verbal form. Without a questionnaire, the interview has no structure.

Type of Questionnaire: Structured Questionnaire

A structured questionnaire consistently and repeatedly follows the same pattern and leaves little scope for a respondent to stray beyond the structured format.

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Research Tool
Simple statistical tool is used for this study of effectiveness of the performance-management. The data is analyzed and expresses in terms of percentage. The information gathered from the primary source would be analyzed by tabulating all information received. Conclusion and interpretation of this study would then be made using various tools like graphs, charts and tables.

TOOLS EMPLOYED
The data presentation tools are mainly mathematical tools, Tables and Charts are used for this study. The most important parts of tools include; a) Table numbers b) Title of the table c) Caption d) Stub or the designation of the rows and columns e) The body of the table f) The head note or prefatory note or explanatory just before the title. g) Source note, which refers to the literally or scientific source of the table has observed that a table has the following merits over a prose information that; h) A table ensures an easy location of the required figure; i) Comparisons are easily made utilizing a table than prose information; j) Patterns or trends within the figures which cannot be visualized in the prose information can be revealed and better depicted by a table; and a table is more concise and takes up a less space than a prose formation.

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LIMITATIONS
An Airport, in the present scenario, is a highly secured area with a lot of restrictions on the movement of passengers, officials and visitors, keeping in view the sensitivity and security of the passengers as well the aircrafts. In such a delicate situation taking-up a project work on airport sector involves, obtaining so many permissions and following a lot of procedures. Moreover, there are some prohibited areas and also most of the information is very confidential. In such situations obtaining the relevant information is a very difficult task and a challenging one too.

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CHAPTER-2

PROFILE OF THE COMPANY INDUSTRY PROFILE COMPANY PROFILE VISION AND MISSION

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CHAPTER II INDUSTRY AND COMPANY PROFILE

AIRPORT AND ITS FUNCTIONS

Airport is a place where aeroplanes and aircrafts take off and land, embark/disembark passengers and cargo. Air travel has become the chief means of long-distance transportation and modern aircrafts provide the safest means of travel. Every day, the worlds airports handle lakhs of passengers flying on thousands of commercial airplanes for business and leisure travel.

Airports are busy, exciting places overhead planes approach the airport on their assigned routes called traffic patterns. On the ground, one plane after another takes off. Automobiles, buses and taxis pull up to the passenger terminal to pick up or drop off travellers. Thousands of people jam the terminal area. Most of them are travellers. Some are airport and airline employees. Others go to airports to greet athletes, politicians and other celebrities and to receive friends and relatives arriving for a visit.

Airports resemble small cities. Many have hotels, restaurants, banks, post-offices and shopping malls as well as their own police force, fire departments, medical facilities and sewage treatment plants etc.. These services and facilities are important and useful for passengers and employees at an airport. When lengthy flight delays or emergencies arise, such service can become vital. Airport differs from other transportation terminals such as railway station, in two important ways:

(i) (ii)

Airports require more land and Airports are usually located away from the centres of the cities they serve.

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Passengers begin and end their flight at the passenger terminal. Airports may have one or more terminal buildings. At various airlines ticket counters, departing, passengers purchase tickets or have their ticket checked. They also have their baggage checked. Loudspeakers (Public Address System), television screens (CCTV Systems) and lighted boards (Flight Information Display Systems) announce flight arrivals and departures. Boarding lounges provide seats for travellers and their friends. Passengers board and leave aircraft from terminal locations called gates. At most Airports a covered walkway called a boarding bridge (Aerobridge) connects the gates with the aircraft during boarding. Arriving passengers pick up their luggage at a baggage claim area in the passengers terminal.

The Control tower is the airports nerve centre. In the tower, air traffic controllers use radar, radio, signal lights and other equipment to direct air traffic near the airport as well as movements of aircraft on the ground. Some airports have control towers on top of the terminal.

Large windows enclose the tower and give the controllers a clear view of the airport grounds and of landings and take offs. Some airports have a separate control tower building, which may rise more than 100 feet above the field.

Runways must be long enough and wide enough to handle the largest planes. They must be as level as possible and should provide good drainage. Runways must have a clear zone at each end to give aircraft additional space to take off or land.

Lines painted down the centre and sides and across the ends of runways guide pilots in the air and on the ground. Number painted on each end of a runway tells pilots the compass direction in which the runway is laid out. Most airports lay out runways in at least two different directions so planes are able to take off and land as nearly as possible into the wind.

At nights and other periods of low visibility white lights outline each runway and green lights mark the beginning of a runway. Red and White approach lights are located just in front of

19 the area of the runway where a plane should touch down. The aircraft parking area at the gates of the passenger terminal is called a loading apron. While an airplane is on the apron, workers refuel it and load baggage, cargo and meals for the passengers. The crew and passenger board airplanes on the loading apron. Airports provides roadways alongside the terminal buildings where airport buses, private cars and taxi can pick up and drop off passengers

The airport manager and the management staff direct the operation of the entire airport. The management staffs at airports are divided into several departments, such as administration, finance, operations, maintenance, engineering, safety, security and public affairs. The airport staffs works to ensure that the airport operates safely and efficiently for the community, airline passengers, airlines and other airport users. Every day, the staffs check the safety of the airports terminal, taxiways and runways, parking areas and roadways.

An airport must operate like a business. Airports rent space to the airlines for offices, ticket counters and baggage areas. Airports also grant concessions, agreements giving businesses such as restaurants, gift shops, and car rental agencies the right to operate at the airport for specific period. Leases and concessions provide revenue to pay for the operation and development of airport. In addition the airport receives income form parking lots, advertising and telephones in the terminal, landing fees paid by the airlines and in some airports, a passenger tax.

Airlines employ the largest number of workers at most commercial airports and most of their employees work in the terminal buildings. Ticket counters work in the terminal buildings. Ticket counter employees sell tickets, check in passengers who already have tickets and provide information about the times and gates for flight arrivals and departures. Most airlines have computer systems that quickly print tickets and check for vacancies on flights.

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Ticket counter workers also check in passengers baggage. Baggage handlers see that baggage is loaded on the correct flights. After a plane reaches its destinations, handlers unload bags and transport them to the baggage claim area.

Other airlines workers includes an airlines station manager, who overseas passenger services and reservations agents who keep records of flight reservations. The despatch staff maintains contact with planes in the air and with other airports that serve the airlines.

Most airports use the term Cargo for mail and all other freight carried by aircraft except baggage. The volume of cargo processed by airport is growing almost twice as fast as the number of passengers.

Airports have several separate terminals for cargo processing. Cargo brought in from the surrounding area is sorted at the airport for various flights. Carts, towed by small vehicles called tugs, then carry the cargo to the apron where workers load it into the airplanes.

Typical air cargo includes such products as electronic goods and machinery parts. Banks and other financial firms send cheques, stocks, and bonds by air. Much air cargo includes items that spoil rapidly (perishables), such as flowers, fruits, vegetables and sea food.

In the Control tower, the air traffic controller guide aircraft as they land and take off. The controllers see that the traffic keeps moving smoothly, rapidly and safely. They must have good eyesight, speak clearly over the radio and think quickly. The controllers must be able to remain calm during periods of heavy air traffic. Their job becomes especially difficult when fog or other weather conditions reduce visibility. In such situations, the controllers must rely entirely or radar to locate and guide aircraft in flight. At most Airports, Aviation Administration employees operate the control tower and maintain electronic equipment in the tower. Other federal employees include postal workers and at international airports; public health, immigration and customs officers.

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AIRPORTS AUTHORITY OF INDIA

The beginning:
The International Airports Authority of India (IAAI) an Autonomous body under ministry of civil aviation was formed in 1972 with the aim to develop and manage the four International Airports situated in Bombay (now Mumbai) New Delhi, Calcutta (now Kolkata) and Madras (now Chennai) IAAI lived up to its expectation and remarkable improvement was visible at these Airports.

In 1986 The Ministry of Civil Aviation created another Autonomous body called National Airports Authority of India (NAA) for the development and management of Domestic Airports including Civil Enclaves (small passenger terminals) at defence Airports. This body was also responsible for air traffic, services and the related communications, navigation and surveillance facilities in the country. In 1991, Trivandrum airport was also designated as International Airport under IAAI.

In 1995, with a view to ensure better co-ordination and optimum use of recourses, both IAAI and NAA were merged. The unified body called the Airports Authority of India (AAI). Airports Authority of India was established by an act of Parliament on 1st April 1995 by merging IAAI and NAA.

The objective of merger was for better Administration and cohesive Management of Airport and civil enclave where at air transport services are operated or intended to operate and of all aeronautical communication station and for matters connected there with or incidental there to. Airports Authority of India its ever growing spectrum of operations, provides Air Navigator Services over 2.8 million square nautical miles of airspace, reaching far beyond the continental airspace.

22 AAI manages 126 Airports, which include 11 international airports 89 domestic airports and civil enclaves at defence airfields. AAI also provides Air traffic management services over entire Indian air space and adjoining oceanic areas with ground installations at all airports and 25 other locations to ensure safety of aircraft operations. Airports, it also facilitates passenger services at 28 defence aerodromes last year the authority successfully ensured safe and orderly movement of 4.9lac aircraft, 42 million passengers and 8.4 lac tonnes of cargo at Indian Airports.

All major air- routes over Indian landmass are Radar covered (24 Radar installations at 11 locations) along with VOR/DVOR coverage (72 installations) co-located with Distance Measuring Equipment(71 installations) 39 runways provided with ILS installations with Night Landing Facilities at 36 Airports and Automatic message switching system at 15 Airports. AAIs successful implementation of Automatic Dependence Surveillance system, using indigenous technology, at Kolkata and Chennai air traffic control centres, gave India the distinction of being the first country to use this advanced technology in the South East Asian region enabling effective Air Traffic Control over oceanic areas using satellite mode of communication. Use of remote controlled VHF coverage, along with satellite communication links, has given added strength to AAIs Air Traffic Management system. Linking of 80 locations by V-Sat installations during 2005 shall vastly enhance Air Traffic Management and in turn safety of aircraft operations besides enabling administrative and operational control over AAIs extensive Airport network. More than 2 lac over flying flights, using Indian Airspace were immaculately handled by AAI in the same year. Extending beyond its inundating to function on business principles; AAI proudly asserts its social obligation of a corporate citizen, entrusted to import infrastructural facilities and services to bolster civil aviation in the country. Development of Airports in the NE and the inaccessible region has always been a priority over commercial considerations. The Authority has invested profoundly in all Airports across the country to realize the latent potential of these regions and to integrate them with respect to the country.

23 Development of Airport in North East and inaccessible regions has always been a priority over commercial consideration .AAI provides air navigation services over 2.8 million square nautical miles of airspace region far beyond the continental air space expansion of the activities of AAI covering services at 15 International Airports and 86 Domestic Airports and also facilitating passenger services at 28 civil enclaves speaks volumes about its commitment to develop civil aviation in the country towards achieving corporate mission.

Model Airports
AAI identified 12 domestic airports which are developed as model airports based on traffic potential, importance of the city, tourist potential and coverage of all regions in the country. The runways of these airports are designed to cater for A-320 operation with standard approach and landing aids modern communication and navigation facilities.

The terminal building offers excellent facilitation keeping in view the ecology and local environment. The model airports are Jaipur, Lucknow, Nagpur, Vadodara, Calicut, Coimbatore, Patna, Bhubaneshwar, Guwahati, Hyderabad and Imphal. Apart from this, AAI is developing some of the Airports which generate tourist traffic. These include Goa, Varanasi and Agra.

Customer satisfaction and safety

It is the core priority of AAI it endure to provide world class passenger amenities and services, the authority is developing more international airports and improving facilities in the domestic airport.

Modernisation
Developing world class air navigation infrastructure to effectively manage air traffic is an identified thrust area as part of this drive:

24 The Authority is in the process of implementing VSAT based satellite communication network to connect 80 airport in the country to support all operational communication in present as well as CNS/ATM environment Satellite navigation has also been one of the initiative for enhancing the accuracy and reliability of GPS signal which could be gainfully used by the other transport sector like road transport, railways, surveying, forestry, Resource exploration environment management. Phased induction of ATC automation system and also induction of new facilities to improve standards of safety at airport and in the air is in progress

IT Implementation
It holds the key to operational and managerial efficiency, and employee productivity.AAI initiated a program to inculcate IT culture among its employees .AAI website with domain name www.airportsindia.org.in or www.aai.aero is a popular website giving host of information.

Official Language
Progressive use of Hindi for effective implementation of official language act and rules is constantly encouraged. AAI has bagged a number of prizes for successful implementation of Raj Bhasha.

Human Resources
AAI comprises of highly proficient, motivated and trained manpower which helped it emerge as a professional organization on the horizon of aviation sector. High morale of employee continues to boost smooth operation of its airports towards accomplishing the objective of customer satisfaction. The authority has successfully used the HR tools like job rotation, Redeployment etc to sustain employee interest in their job.

25 AAI has strength of 21000 employees both executives and non executives. The management of AAI firmly believes that through this invaluable asset of HR alone it can achieve its goals. Utmost care is taken in the employee welfare and various schemes have been used for the upliftment and better living standard of AAI fraternity.

Kalyanmayee the women welfare association of AAI was set up with the main objectives of : Carrying out social cultural and educational activities for the benefit of members and their family, so as to promote and imbibe feeling of harmony and belongingness with in organization Carrying out social charitable and upliftment work for the downtrodden in the society

The activity of Kalyanmayee was spread through out India and has become a platform to cater to the welfare, social and recreational needs of whole family of AAI The personnel directorates endeavour is to have progressive HR practices and uniformly implement them in order to keep high employee morale enabling them to discharge their duties efficiently and reach excellence in their respective field. The wage agreement for both the executive and non-executive is effective from 1st January 1997 and harmonious industry relations are a testimony to this. The personnel directorate strives hard to improve its services, As a social responsibility adequate representation is ensured to those belonging to SC/ST and OBC in matter of recruitment and promotion.

Training
To cope up with the constant changes and strides in technology and fill up the gap between actual performance and planned performance, skill, acquisition and up gradation is ensured among the employees through the process of training at various levels

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The training requirement are catered through

Civil Aviation Training College (CATC), Allahabad

National Institute of Aviation Management and Research(NIAMAR), New Delhi

Fire Safety Training Centre (FSTC), Kolkata

Fire Training Centre (FTC), Delhi

India is one of the fastest growing economies of the world with an average GDP growth of over 8.9 percent in last five years. For India to sustain its economic growth story it has to strengthen its infrastructure sector and in particular, critically improve its transportation infrastructure. Aviation is an important part of national infrastructure and one of the prime movers for economic growth and an important strategic element of employment generation. Aviation sector in India has been transformed from an over regulated and under managed sector to a more open, liberal and investment friendly sector since 2004. Adoption of global standards has made aviation a safer way to travel. Presently Indias civil aviation sector is flying high. Liberalisation has revolutionized the industry, making air -travel affordable even for the common man. According to projections by the Union Civil Aviation Ministry, domestic air traffic is expected to surge from 29.82 million passengers in 2007-08 to 52.32 million by 2016-17.

The Indian aviation industry is one of the fastest growing aviation industries in the world with private airlines accounting for more than 75 per cent of the sector. With the liberalization of the Indian aviation sector, the industry had witnessed a transformation with the entry of the privately owned full service airlines and low cost carriers. As of May 2006, private carriers accounted for around 75% share of the domestic aviation market. The sector has also seen a significant increase in number of domestic air travel passengers. Some of the factors that have

27 resulted in higher demand for air transport in India include the growing middle class and its purchasing power, low airfares offered by low cost carriers, the growth of the tourism industry in India, increasing outbound travel from India, and the overall economic growth of India.

With a CAGR (Compound Annual Growth Rate) at 18 per cent and 454 airports and airstrips in place in India, of which 16 are designated as international airports, In addition to these factors, the emphasis on modernization of non-metro airports, fleet expansion by airlines, service expansion by state owned carriers, development of the maintenance, repair and overhaul (MRO) industry in India, opening up of new international routes by the Indian government, establishment of new airports and renovation and restructuring of the existing airports have added to the growth of the industry.

One area of concern as far as aviation manpower is concerned is finding required managerial, technical and non-technical staff. This sector requires managers, technicians and supervisors with different specialisations, such as in aero-engines, air-frames, electronics, instrumentation, electrical and air-conditioning, and so on

In view of the above obvious reasons, the shortage of manpower in the Indian Aviation Industry has grown during the last one decade. Until now this industry does not appear to have seen much of a competition from the prospective job-seekers. This is mainly due to the notion that everyone is forming about an airport that they have a restricted accessibility to the airports which are generally seem to be high security zones. Thus the aviation industry remains to be the most un-tapped and un-explored sector for the common people. Keeping in view this problem in mind an attempt is being made to study the in-depth details of various agencies working in an airport, their functions, deployment of manpower etc.

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Visakhapatnam Airport

VISION
To be a world class organization providing leadership in air traffic services and airport management and marketing India . A major hub in Asia pacific region by to 2016.

MISSION
To achieve highest standards of safety and quality in air traffic services and airport management by providing state of the art infrastructure for total customer satisfaction , contributing to economic growth and prosperity nation Visakhapatnam Airport is located 7 km (4.3 mi) from Visakhapatnam in the state of Andhra Pradesh, India. It is second busiest airport in Andhra Pradesh after Hyderabad International airport. It is controlled by the Indian Navy which carries out air traffic control as well as provides support for flying operations for both military and civil aviation. The runway was originally 6,000 ft (1,800 m) and Indian Union Minister of State for Mines T.Subbirami Reddy inaugurated the newly constructed 10,500 ft (3,200 m) and 60 m (200 ft) wide runway at the Vizag Airport on 15 June 2007. With the installation and calibration of the instrument landing system, Visakhapatnam got night landing capabilities in July 2007, with the Dornier of the Indian Navy taking off from the new landing facility. The night landing facility became operational from 30 March 2008 for commercial airlines with Spice Jet being the first airline to use the facility.

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Andhra Pradeshs second busiest airport, Visakhapatnam Airport is all set to go international once the Indian Navy gives its green signal as 3 international airlines are ready to operate flights from the industrial hub of the state.

The airport, which is under the control of the Indian Navy, handles 12 domestic services to cater to the needs of north coastal districts and the neighboring districts of Orissa and some parts of Chhattisgarh. While Middle Easts low-cost carrier Air Arabia wants to operate its Sharjah-Vizag-Sharjah service in the early hours, Fly Dubai Airlines, has plans to run a direct flight to Dubai from Vizag and has asked for 12 am-2 pm time slot.

Officials of Silk Airways, which has been showing a keen interest to operate flights since a year wants to operate the Singapore-Vizag-Singapore flight between 1 am and 2 am.

Among the domestic airlines, Spice Jet is planning to operate Chennai-Vizag-Kolkata, while Jetlite is planning Kolkata-Vizag-Kolkata flight. Jet Airways has a proposal to run Boeing-737 in Mumbai-Vizag- Mumbai and Delhi-Vizag- Delhi sectors. The

31 Vizag airport equipped with Night Landing Facility and the Instrument Landing Facility with 10,030 feet runway is also one of the 18 airports in India recognized for operating unlimited number of flights under Open Sky Policy.

Airlines

Destinations

Air India Regional Chennai, Delhi Indian Jet Airways Kingfisher Airlines Spice Jet Chennai, Hyderabad, Mumbai Chennai, Delhi, Hyderabad, Kolkata, Mumbai Bangalore, Chennai, Hyderabad, Pune Delhi, Hyderabad, Mumbai

Future plans
A memorandum of understanding between the Airports Authority of India and Sathyabama University has been signed to bring Falcon Airlines of England to start a Flying Club and Aeronautical Institute.

New Terminal Building

Visakhapatnam Airport Inside view

32 The new terminal was inaugurated on 20 February 2009, but became operational on 27 March 2009. The landing of a JetLite airliner from Delhi marked the commencement of operations from the new integrated terminal building complex at the airport. Visakhapatnam Airport officially commenced operations of a USD49 million runway, measuring 10,000 ft long and 60 m wide, on 15-Jun-07. Subbirami Reddy, Union Minister of State for Mines, described the opening of the new runway as a great success for him and everyone involve. Reddy states, by March next year, Vizag would become one of the finest airports in the country with international flight operations and all the facilities". The airport is currently undertaking an expansion programme, with a new terminal building and custom and immigration facilities scheduled for completion by the end of 2007.

Other Airports in Vicinity Name of the Airport

1 RajahmandryAirport 2 BhubaneswarAirport

Distance from the Airport

205 KM 440 KM

Aircraft movement for last Two years_ Year Domestic 2008-09

15,229

2009-10
11,696

33

Passenger Traffic For Last Two Years Year Domestic 2008-09

6,01,494

2009-10
6,35,178

Airline Companies Operating at Visakhapatnam Airport:

Name of the Airline Operator Indian Airlines Jet Lite King Fisher Airlines Spice Jet Paramount Airways Contact Number 91-891-2572521 91-891-2741092 & 91-9866004774 91-891-2517614 & 91-9989255511 91-891-2010422 & 91-9701071234 91-891-2010400 & 91-9866192539

Facilities in the Terminal Terminal Shop

T/R Shop Snack Bar Restaurant Handicrafts Shop Dry Fruits / Sweets SHA Snack Bar

Item (Brief)
Prerequisite Items Light Refreshment Food Handicrafts Dry Fruits / Sweets Light Refreshment

34 Life Style (Electronics) Pearl Shop Ladies Accessories Arrivals Nil Electronic Goods Pearls Ladies Accessories Nil

Other GeneralServices

Departures

Shop
Bank ATM

Item (Brief)
State Bank of India SBI P&T Taxi Hired Cars

Old Terminal Arrivals

Post Office Pre Paid Taxi Service

Car Rentals

Passenger Facilities at the Airport

FACILITY Trolleys WheelChair Medical First Aid Box Child CareRoom Assistance to PHC/Aged Rest Rooms for Transit Pax. Lost & Found Baggage Police Assistance

AVIALABILITY
Available Available Available Available Available Available Available Available

PAID CHARGES
Nil Nil Nil Nil Nil Nil Nil Nil

35

Parking Capacity and Rates Terminal Capacity

Bus/Coach Domestic 300 Cars + 180 Taxis 35/-

Charges
Car 25/Two wheeler 10/-

Transportation To and From Airport Type of Transport

Hotel Pickups City Bus Service Car Rental Service General Taxi Service Prepaid Taxi Service

Availability -Remarks
Available Available Available Available Available

Hotels Name of Hotel

Taj Residency Welcome Grand Bay Green Park Hotel Daspalla Hotel Dolphin PARK

Telephone No
91-891-6667756 91-891-2560101 91-891-6615151 91-891-2564825 91-891-6621155 91-891-2752288

Distance From Airport

17 Km 17 Km 14 Km 15 Km 15 Km 16Km

36

Places of Tourist Interest

Name of The Place Arakuvalley Borra Caves Bimilee beach Kailasagiri Thotla Konda Simhachalam GangavaramBeach Ramakrishna Beach Distance From Airport (KM) 112 82 25 18 28 13 19 17 Accessibility By Road By Road By Road By Road By Road By Road By Road

37

ORGANIZATION CHART

38

CHAPTER-3

THEORETICAL CONCEPTS THEORETICAL FRAMEWORK

39

CHAPTER 3 THEORITICAL PART

Introduction to Compensation
Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men.

Land, Labor, Capital and Organization are four major factors of production. Every factor contributes to the process of production/business. It expects return from the business process such as Rent is the return expected by the Landlord. Similarly Capitalist expects Interest and Organizers i.e. Entrepreneur expects profits. The labour expects wages from the process.

It is evident that other factors are in-human factors and as such labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos. Labour therefore expects to have fair share in the business/production process.

Human Resource is the most vital resource for any organization. It is responsible for each and every decision taken, each and every work done and each and every result. Employees should be managed properly and motivated by providing best remuneration and compensation as per the industry standards. The lucrative compensation will also serve the need for attracting and retaining the best employees.

DEFINITION
Compensation is the remuneration received by an employee in return for his/her contribution to the organization. It is an organized practice that involves balancing the work-employee relation

40 by providing monetary and non-monetary benefits to employees. Compensation is an integral part of human resource management which helps in motivating the employees and improving organizational effectiveness.

Compensation management is a step by step approach for designing the remuneration system that recognises job requirement, employee related knowledge, skills and performance related incentives that links individuals, teams, work unit and organisation performance.

Evaluation
Todays compensation systems have come from a long way. With the changing organizational structures need and compensation systems have also been changing. From the bureaucratic organizations to the participative organizations, employees have started asking for their rights and appropriate compensations. The higher education standards and higher skills required for the jobs have made the organizations provide competitive compensations to their employees.

Compensation strategy is derived from the business strategy. The business goals and objectives are aligned with the HR strategies. Then the compensation committee or the concerned authority formulates the compensation strategy. It depends on both internal and external factors as well as the life cycle of an organization.

Evolution of Strategic Compensation

41

Traditional Compensation Systems

In the traditional organizational structures, employees were expected to work hard and obey the bosses orders. In return they were provided with job security, salary increments and promotions annually. The salary was determined on the basis of the job work and the years of experience the employee is holding. Some of the organizations provided for retirement benefits such as, pension plans, for the employees. It was assumed that humans work for money, there was no space for other psychological and social needs of workers.

Change in Compensation Systems

With the behavioural science theories and evolution of labour and trade unions, employees started asking for their rights. Maslow brought in the need hierarchy for the rights of the employees. He stated that employees do not work only for money but there are other needs too which they want to satisfy from their job, i.e. social needs, psychological needs, safety needs, self-actualization, etc. Now the employees were being treated as human resource. Their performance was being measured and appraised based on the organizational and individual performance. Competition among employees existed. Employees were expected to work hard to have the job security. The compensation system was designed on the basis of job work and related proficiency of the employee.

Maslows Need Hierarchy

42

Todays Modern Compensation Systems

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

IMPORTANCE OF COMPENSATION Compensation and Reward system plays vital role in a business organization. Since, among four Ms, i.e. Men, Material, Machine and Money, Men has been most important factor, it is impossible to imagine a business process without Men. Every factor contributes to the process of production/business. It expects return from the business process such as rent is the return expected by the landlord, capitalist expects interest and organizer i.e. entrepreneur expects profits. Similarly the labour expects wages from the process.

Labour plays vital role in bringing about the process of production/business in motion. The other factors being human, has expectations, emotions, ambitions and egos.

Labour therefore expects to have fair share in the business/production process. Therefore a fair compensation system is a must for every business organization. The fair compensation system will help in the following:
o

An ideal compensation system will have positive impact on the efficiency and results produced by employees. It will encourage the employees to perform better and achieve the standards fixed.

43
o

It will enhance the process of job evaluation. It will also help in setting up an ideal job evaluation and the set standards would be more realistic and achievable.

Such a system should be well defined and uniform. It will be apply to all the levels of the organization as a general system.

The system should be simple and flexible so that every employee would be able to compute his own compensation receivable.

It should be easy to implement, should not result in exploitation of workers.

It will raise the morale, efficiency and cooperation among the workers. It, being just and fair would provide satisfaction to the workers.

Such system would help management in complying with the various labor acts.

Such system should also solve disputes between the employee union and management.

The system should follow the management principle of equal pay.

44
o

It should motivate and encouragement those who perform better and should provide opportunities for those who wish to excel.

Sound Compensation/Reward System brings peace in the relationship of employer and employees.

It aims at creating a healthy competition among them and encourages employees to work hard and efficiently.

The system provides growth and advancement opportunities to the deserving employees.

The perfect compensation system provides platform for happy and satisfied workforce. This minimizes the labour turnover. The organization enjoys the stability.

The organization is able to retain the best talent by providing them adequate compensation thereby stopping them from switching over to another job.

The business organization can think of expansion and growth if it has the support of skillful, talented and happy workforce.

45
o

The sound compensation system is hallmark of organizations success and prosperity. The success and stability of organization is measured with pay-package it provides to its employees.

Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and business objectives. Compensation system is designed on the basis of certain factors after analyzing the job work and responsibilities. Components of a compensation system are as follows:

Job analysis is a systematic approach to defining the job role, description, requirements, responsibilities, evaluation, etc. It helps in finding out required level of education, skills, knowledge, training, etc for the job position. It also depicts the job worth i.e. measurable effectiveness of the job and contribution of job to the organization. Thus, it effectively contributes to setting up the compensation package for the job position.

46

Importance of Job Analysis

Job analysis helps in analyzing the resources and establishing the strategies to accomplish the business goals and strategic objectives. It forms the basis for demand-supply analysis, recruitments, compensation management, and training need assessment and performance appraisal.

Components of Job Analysis

Job analysis is a systematic procedure to analyze the requirements for the job role and job profile. Job analysis can be further categorized into following sub components.

47

Job Position
Job position refers to the designation of the job and employee in the organization. Job position forms an important part of the compensation strategy as it determines the level of the job in the organization. For example management level employees receive greater pay scale than nonmanagerial employees. The non-monetary benefits offered to two different levels in the organization also vary.

Job Description
Job description refers the requirements an organization looks for a particular job position. It states the key skill requirements, the level of experience needed, level of education required, etc. It also describes the roles and responsibilities attached with the job position. The roles and responsibilities are key determinant factor in estimating the level of experience, education, skill, etc required for the job. It also helps in benchmarking the performance standards.

Job Worth

Job Worth refers to estimating the job worthiness i.e. how much the job contributes to the organization. It is also known as job evaluation. Job description is used to analyze the job worthiness. It is also known as job evaluation. Roles and responsibilities helps in determining the outcome from the job profile. Once it is determined that how much the job is worth, it becomes easy to define the compensation strategy for the position.

Therefore, job analysis forms an integral part in the formulation of compensation strategy of an organization. Organizations should conduct the job analysis in a systematic at regular intervals. Job analysis can be used for setting up the compensation packages, for reviewing employees performance with the standard level of performance, determining the training needs for employees who are lacking certain skills.

48

Pay-Structures
Once job analysis has been done organizations need to decide upon the pay structures. Pay structure refers to the process of setting up the pay for a job in an organization. The process deals with internal and external analysis to estimate the compensation package for a job profile. Internal equity, External equity and Individual equity are the most popular pay structures. Job description provides the in depth knowledge about the job profile and its worth. Pay structures are the strong determinant of employees value in the organization. It helps in analyzing the employees role and status in the organization. It provides for fair treatment to all employees. Pay structures also include the estimation of incentives. The level of incentives also depends on the level of job position in the organizational hierarchy.

Internal Equity
The internal equity method undertakes the job position in the organizational hierarchy. The process aims at balancing the compensation provided to a job profile in comparison to the compensation provided to its senior and junior level in the hierarchy. The fairness is ensured using job ranking, job classification, level of management, level of status and factor comparison.

49

External Equity
Here the market pricing analysis is done. Organizations formulate their compensation strategies by assessing the competitors or industry standards. Organizations set the compensation packages of their employees aligned with the prevailing compensation packages in the market. This entails for fair treatment to the employees. At times organizations offer higher compensation packages to attract and retain the best talent employees in their organizations.

Objectives of Salary Survey

To gather information regarding the industry standards

To know more about the market rate i.e. compensation offered by the competitors

50

To design a fair compensation system

To design and implement most competitive reward strategies

To benchmark the compensation strategies

Types of Compensation Surveys

There are two types of compensation surveys undertaken by the organizations.

Standard Surveys

Standard surveys are undertaken by organizations on a regular basis. These surveys are conducted annually based on the organizational objectives. These surveys attempt to cover the same companies every year and provide the same time of analysis. The reports are published annually by the research organizations. The organizations willing to formulate their compensations strategies based on the surveys purchase the reports from the research organization.

51

Custom Surveys

At times, a few organizations need to know some specific information. The surveys which cater this need are known as custom surveys. The organizations either higher research organizations to conduct theses surveys for them or they themselves conduct the survey by sampling few of the competitors on their own. These surveys do not have any time interval. They are undertaken as the need arises. They focus on important issues usually one or two.

Survey Reports

The survey reports consist of the analysis and conclusion drawn from the evaluative data based on the objectives of the study. The reports also include the data, facts and figures to support the analysis and conclusion. The supportive data and annexure provided in the report form the basis for the un-biased conclusion and validation of the analysis.

PAYROLL MANAGMENT COMPONENTS OF PAYROLLPayroll refers to the administration of employees' salaries, wages, bonuses, net pay, and deductions. It consist of the employee ID, employee name, date of joining, daily attendance record, basic salary, allowances, overtime pay, bonus, commissions, incentives, pay for holidays, vacations and sickness, value of meals and lodging etc. There are some deductions such as PF, taxes, loan installments or advances taken by employee.

Payroll is administered on monthly basis and annual basis.

While administrating the monthly payroll basic salary, HRA, conveyance, and other special allowances such mobile, etc are considered. There are some deductions which are provident fund

52 (12%) of the salary, taxes and other deductions.

Figure: Components of Monthly Payroll

Deductions such as tax and loan/advances taken by the employee from organizations are deducted only where applicable. Dearness Allowance and House rent allowance is provided at a fixed rate stated by the employment law. Provident fund is deducted from the gross salary of employee on the monthly basis as per the employment law, which is provided later to the employee. Organizations also contribute the same amount to the provident fund of the employee.

Annual payroll consists of leave travel allowances, incentives, annual bonuses, meal vouchers/reimbursements, and medical reimbursements.

53

Figure: Components of Annual Payroll Allowances, incentives, bonuses and reimbursements are based on organizational policies. Some organizations provided the allowances on a fixed rate say 10% or 12% of the basic salary. Some organizations go for performance based incentives.

Payroll Management Process

Calculation of gross salaries and deductible amounts is a tedious task which involves risk. Some of the organizations use the traditional manual method of payroll processing and some go for the advanced payroll processing software. An organization opts for any of the following payroll processing methods available::

Manual System
Manual payroll system is the traditional payroll system which involves pen and ink, adding machine, spreadsheet, etc instead of computers, software and other computerized aids. The

54 process was very popular when there were no computerized means for payroll processing.

Now-a-days it is only few small scale organizations in the remote areas that use the manual payroll. Sometimes the construction industry and manufacturing industry also use the manual payroll systems for the contractual labour, as theses contracts are on daily/weekly basis. There is full control in the hands of owner. But the process is tedious, time consuming and risky as it is more prone to errors.

Figure: Various Payroll Processes

Accountant
Accountant is a professional having a degree/diploma course in finance/accountancy. He/she is responsible for all the activities related to payroll accounting. He/she has the sound knowledge of accounting principles and globally accepted standards.

The process adds costs to the organization. It involves paying someone who is responsible for calculating the salaries of others. The financial control regarding salary goes in the hand of

55 accountant.

Payroll Software
In todays computerized environment, payroll system has also developed itself into automated software that performs every action needed by the payroll process. It helps in calculating the payable amounts and deductions very easily. It also helps in generating the pay slips in lesser time. Automated calculations result in no errors. Data is validated automatically by the software. It needs professionals to make use of the software for its efficient working.

Payroll Outsourcing
Payroll outsourcing involves a third party (an outsourcing company) in the calculations of salaries and deductions. The outsourcing organization is responsible for all the activities of the payroll accounting. It saves time and cost for the organization. If there is more number of employees (say more than 900-1000) in the organization, payroll outsourcing would be very much beneficial.

The data is provided to the consultants/outsourcing firms. The various payroll functions undertaken by the outsourcing organizations are as follows:

Analysis of Payroll records, payroll taxes

Medical claim processing

Employee Insurance & Provident fund processing

Quality Audit procedures & planning

56

Payroll OutsourcingPayroll is defined as a method of administrating employees salaries in the organizations. The process consists of calculation of salaries and tax deductions of the employees, administrating the retirement benefits and disbursements of salaries to employees. It can also be called as an accounts activity which undertakes the salary administration of employees in the organization. Administrating the employees salaries is not an easy task, the HR and accounts department work together to calculate and disburse the salary to the employees. Thus, payroll management can be further subdivided into two sub processes, i.e. Payroll accounting and payroll administration.

Payroll Accounting
Payroll accounting involves calculations of employees salaries and tax deductions. It also undertakes the activities such as preparation of tax returns, maintaining the payroll records, etc.

Payroll Administration
Payroll Administration involves managerial activities such as maintaining employees records, referring employment laws. Here, the HR comes into picture which maintains the daily record if employees attendance.

57

Figure: Payroll Process Database of employees is maintained. Employees details such as name, employee ID, basic salary, daily attendance, etc are recorded. Gross Salary is calculated after adding the allowances and incentives to the basic salary of the employee. Net salary is calculated by deducting the tax and other calculated deductions (loan installments, etc).

58

Significance of Payroll Outsourcing

Outsourcing industry is growing at a higher rate. HR outsourcing helps the HR professionals free themselves from the daily routine work and take part in the strategic level processes. Organizations really do not take HR as a strategic function; it is merely treated as paper work division. Therefore they want to reduce the cost being spent on HR activities.

In India payroll outsourcing is one of the HR processes and is being outsourced since 1997. Payroll outsourcing involves an external organization performing all the activities related to payroll management. HR Consultancies such as Ma Foi and many other firms have come up with payroll outsourcing. Outsourcing organizations strive for providing cost saving benefits to their clients. The organizations use its marketing division thoroughly to acquire more number of clients and retain them. Payroll outsourcing does not provide much cost reduction but it yield in high quality. Since compensation outsourcing requires lot of market survey and industry knowledge, it is not easy for an organization to carry the tasks with its operational business activities.

Figure: Benefits of Payroll Outsourcing

59

Outsourcing has benefited not only the service providers but also organizations and economy of the country. It enables the management to focus on the core competencies and strategic planning. It maintains the confidentiality of the pay package offered to employees as it is an external body administrating. Organizations do not have to keep the track of law related to salaries and compensation; it is the outsourcing firm which has to look after it. It offers qualitative results. It is very much time saving and cost effective. It also offers legal protection as the outsourcing firm is responsible for all the legal matters.

Outsourcing firms enjoys the revenue benefits as the services are being offered to MNCs. Service exports have caused the economic system to develop more and contribute to GDP growth.

Why Payroll Outsourcing

In todays global competitive environment organizations need to focus on cost-cutting strategies and high qualitative results. Organizations has to deal with tax filling, they have to adhere to the state employment law. These complexities have force the organizations to outsource their payroll processes. Outsourcing helps an organization to stay focused on the business operations. It results in cost-effectiveness and time saving. The organizations are relieved from law regulations and tax formalities.

Cost-Effective Payroll outsourcing results in cost effective benefits. A market study has revealed that outsourcing payroll process is cheaper than administrating the process internally.

Organizations have to set an additional department for the purpose resulting in the salaries of those responsible for performing the activities of payroll process. It also includes the cost associated with payroll checks, bank accounts and other charges, record maintenance, computerized aids such as payroll software, etc.

60

Figure: Reasons for Outsourcing Payroll Time Saving

Payroll outsourcing saves a lot of time for management. Time spent on activities associated with payroll process can now be utilized for more strategic roles. The organizations can focus on their strategic decisions and business operations.

Less Legal Adherence

Organizations are not bound for any legal formalities. Outsourcing companies are responsible for following rules, regulations and filing the tax returns. They look after changes in the tax slabs and state jurisdictions. This provides management a great relief and enables them to focus on business operations.

Profit Generation
Organizations can make use of new opportunities and utilize the time and money on new business ventures and generate more profits.

61

Error Free
Payroll outsourcing results in error free reports. Internal payroll process is more prone to errors, but the service providers recruit professionals and they make sure there are no mistakes.

Qualitative Results
The expertise and technological advancements results in qualitative results. There are no delays and no errors.

Figure: Reasons for Payroll Outsourcing (as reported by Society for Human Resource Management www.shrm.org )

The survey also reported that 53% of the participant organizations outsource their payroll processes and from those who outsourced 25% believes that it results in more focused strategic decisions. Most of the organizations agreed that it is cost-effective measure.

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Chapter 2 Incentive Management

In todays strategic compensation systems, incentives forms an integral part of the performance based compensation packages. It is a challenge for organizations to formulate strategies to maintain the internal equity and external equity and provide the most competitive compensation packages to attract and retain the talented workforce. For the purpose effective incentives programs are undertaken. Employees are involved in the process so as to deliver un-biased packages to all the employees.

The compensation strategies should be effective. All the employees should be aware of the organizational goals and objectives. The methods used for evaluating employees performance should be fair enough and easy to understand.

The performance standards established should be achievable. Deserving employees should receive significant rewards. There should be always scope for improvements. Employees performance should be evaluated on the basis of their productivity.

63

Figure: Benefits of Incentives

Incentives accounts for employees high productivity. Today youngsters believe in performance based pay, thus incentives will help to motivate them to produce more. In the hospitality and retail industry it is the incentive that accounts for the overall package of the employee.

Chapter 3 Employee Stock Ownership Plans (ESOP)

Employee Stock Ownership Plan (ESOP) is an employee benefit plan. The scheme provides employees the ownership of stocks in the company. It is one of the profit sharing plans. Employers have the benefit to use the ESOPs as a tool to fetch loans from a financial institute. It also provides for tax benefits to the employers.

Organizations strategically plan the ESOPs and make arrangements for the purpose. They make annual contributions in a special trust set up for ESOPs. An employee is eligible for the ESOPs

64 only after he/she has completed 1000 hours within a year of service. After completing 10 years of service in an organization or reaching the age of 55, an employee should be given the opportunity to diversify his/her share up to 25% of the total

value of ESOPs. Law has also provided an amendment for the employees who have attained the age of 60 and their ESOP shares are allotted after December 31, 1986. The amendment provides those employees with an option to diversify their shares up to 50%. Advantages of an ESOP

Figure: Advantages of ESOP

65

Disadvantages of an ESOP

Figure: Disdvantages of ESOP

Individual employees accounts are credited with the stocks acquired by ESOP. They can also acquire stocks through stock options. Stock options provide employees the right to buy shares at a definite price* for a defined number of years in future. *(Price for the current day i.e. the time the options are acquired is set as the definite price for the employee.)

Chapter 4 Executive Incentives

Organizations offer heavy incentives to executives to retain the talented workforce. The immense competition in the market has forced the organizations to offer lucrative compensation packages. Performance based incentives comes out to be the only solution for the demand-supply disparity. Who works- receives the appreciation and who does not works- lacks behind.

Incentives are more effective in the marketing segment as it results in more and more sales. The business development executives strive for more incentives and in the effort produce more business and receive heavy perks.

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Figure: Executive Incentives

The issues that have come up related to executive incentives are:

People believe that the incentives offered to the executives are much more than what the stockholders receive.

Some people also criticize the appraisals blaming the time duration given in achieving the set performance standards.

67

Some people also complaint of the un-fair distributions of incentives. They believe that team members actually work and more appreciation is given to the team leader.

Some people also complain that more incentives are given to place the organizations on top of the salary surveys conducted by the respected research organizations.

Chapter 5 Incentive Plans

Organizations can opt for an effective incentive plans from the various alternatives available. The organizations usually opt for that incentive plans which suits its requirement the most. As incentives covers the financial matters, organizations need to be very focused in choosing the best alternative that is in alignment to the business goals and objectives.

The various incentives plans available are:

Piece Rate
Piece rate incentive is given to the employees based on the number of units produced. This plan is practiced in the sectors dealing with manufacturing of products such as engineering automobile, telecommunication, FMCG, etc.

Commissions
Commission is a variable component of compensation package. It is given on the basis of business generated by the employee. Commission is a pre fixed component say 5% of the total sales done by the employee. It is practiced in the retail, FMCG and other sectors in the marketing and sales segment.

68

Figure: Incentive Plans

Bonuses
Bonuses are given to employees on a pre established goal or criteria. The organizations set policies regarding the bonuses. Usually bonuses are provided during the festive season.

Merit Raises
Merit raises are given on the basis of predetermined policies. The employees are given raise on

69 the basis of their performance. The performance standards are set by the organizations much in advance.

Standard Hour Pay

Standard hour plan provides incentives to employees based on the time saved by them during the job course. Employees productivity and quality is evaluated with respect to the set standards.

Maturity Curves
Maturity curve incentive plan considers the experience and performance of an employee for giving out the incentives. It is practiced in all the industries. Experience is always given a weight-age as experienced people can produce better quality results.

Gain Sharing
Gain sharing incentive plans undertake those employees who give outstanding performances and provide for cost saving measures. Organizations believe in sharing the profits with the employees who are responsible for producing those results.

Profit Sharing
Profit sharing incentive plans are practiced in retail and FMCG sectors. Other sectors too implement the plan based on organizational policies. It refers to giving out the share of profits the organization earned to all the employees. Indirectly all the organizations follow the plan by giving out the dividends.

Chapter 6 Strategic Incentive Plan

Organizational goals and objectives.

Various options for individual and group incentive plans should be explored.

70 Benefits and disadvantages of each plan should be considered and from the various options available one incentive plan should be chosen. Using the best incentive plan, compensation strategy should be formulated. In todays competitive business world of globalization organizations should formulate compensation strategies keeping in mind their employees interest. With more and more players entering the market and high attrition rate, it is a challenge for organizations to retain their talented human resource. The organizations should follow a systematic process to formulate the incentive plans.

Incentive Strategy Formulation Process

Organizations should first understand the need of incentive plans. They should set clear

objectives as of why incentive plans are formulated, what are the objectives. These objectives should be in alignment with

71

Figure: Incentive Strategy Formulation Process

Organizations should provide rewards based on employees performance. Significant monetary and non-monetary rewards should be given. Performance standards set should be acceptable by the management and the employees. The methods of appraisal should be fair and known to all the employees. Organizations should see that all the employees receive adequate compensation based on the internal equity with respect to the industry standards.

Organizations face some problems while setting up the incentive plans. Some employees do not trust the organizational policies. They complain that the performance standards set are not fair. There are also confusions related to the formulas used to calculate the payout incentives.

72

Types of Compensation
Compensation provided to employees can direct in the form of monetary benefits and/or indirect in the form of non-monetary benefits known as perks, time off, etc. Compensation does not include only salary but it is the sum total of all rewards and allowances provided to the employees in return for their services. If the compensation offered is effectively managed, it contributes to high organizational productivity. Direct compensation refers to monetary benefits offered and provided to employees in return of the services they provide to the organization. The monetary benefits include basic salary, house rent allowance, conveyance, leave travel allowance, medical reimbursements, special allowances, bonus, Pf/Gratuity, etc. They are given at a regular interval at a definite time.

Basic Salary
Salary is the amount received by the employee in lieu of the work done by him/her for a certain period say a day, a week, a month, etc. It is the money an employee receives from his/her employer by rendering his/her services.

House Rent Allowance

Organizations either provide accommodations to its employees who are from different state or country or they provide house rent allowances to its employees. This is done to provide them social security and motivate them to work.

Conveyance
Organizations provide for cab facilities to their employees. Few organizations also provide vehicles and petrol allowances to their employees to motivate them.

73

Leave Travel Allowance

These allowances are provided to retain the best talent in the organization. The employees are given allowances to visit any place they wish with their families. The allowances are scaled as per the position of employee in the organization.

Medical Reimbursement
Organizations also look after the health conditions of their employees. The employees are provided with medi-claims for them and their family members. These medi-claims include health-insurances and treatment bills reimbursements.

Bonus
Bonus is paid to the employees during festive seasons to motivate them and provide them the social security. The bonus amount usually amounts to one months salary of the employee.

74

Special Allowance
Special allowance such as overtime, mobile allowances, meals, commissions, travel expenses, reduced interest loans; insurance, club memberships, etc are provided to employees to provide them social security and motivate them which improve the organizational productivity. Indirect compensation refers to non-monetary benefits offered and provided to employees in lieu of the services provided by them to the organization. They include Leave Policy, Overtime Policy, Car policy, Hospitalization, Insurance, Leave travel Assistance Limits, Retirement Benefits, Holiday Homes.

Leave Policy
It is the right of employee to get adequate number of leave while working with the organization. The organizations provide for paid leaves such as, casual leaves, medical leaves (sick leave), and maternity leaves, statutory pay, etc.

Overtime Policy
Employees should be provided with the adequate allowances and facilities during their overtime, if they happened to do so, such as transport facilities, overtime pay, etc.

Hospitalization
The employees should be provided allowances to get their regular check-ups, say at an interval of one year. Even their dependents should be eligible for the medi-claims that provide them emotional and social security.

75

Insurance
Organizations also provide for accidental insurance and life insurance for employees. This gives them the emotional security and they feel themselves valued in the organization.

Leave Travel
The employees are provided with leaves and travel allowances to go for holiday with their families. Some organizations arrange for a tour for the employees of the organization. This is usually done to make the employees stress free.

Retirement Benefits
Organizations provide for pension plans and other benefits for their employees which benefits them after they retire from the organization at the prescribed age.

Holiday Homes
Organizations provide for holiday homes and guest house for their employees at different locations. These holiday homes are usually located in hill station and other most wanted holiday spots. The organizations make sure that the employees do not face any kind of difficulties during

76 their stay in the guest house.

Flexible Timings
Organizations provide for flexible timings to the employees who cannot come to work during normal shifts due to their personal problems and valid reasons.

77

CHAPTER-4

ANALYSIS AND INTERPRETATION OF THE STUDY

78

CHAPTER-4 DATA ANALYSIS & INTRPRETATION

1. A question was asked to the employees whether the compensation package in AAI is attractive to them or not.

Attributes

no. of respondents

in %

Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

20 10 10 5 5 50

- 40% - 20% - 20% - 10% - 10% - 100%

ANALYSIS:

10% 10% 20% 20% 40%

strongly agree agree satisfactory disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 70%
employees were strongly agree to the composition package given in AAI.

79 2. Organizations working conditions are satisfactory? Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL no. of respondents 30 15 3 1 1 50 in % - 60% - 30% - 6% - 2% - 2% - 100%

ANALYSIS:

2% 2% 6% strongly agree agree 30% 60% satisfactory disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 70%
employees were totally satisfied with the working conditions in AAI.

80

3. Are you satisfied with the allowances and benefits that your company offers you ? Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL no. of respondents 8 12 20 7 3 50 in % - 16% - 24% - 40% - 14% - 6% - 100%

ANALYSIS:

6% 14%

16%

strongly agree agree 24% satisfactory disagree strongly disagree

40%

INTERPRETATION: From the survey it was found that amongst 50 respondents 40%
employees were satisfactory to the allowances and benefits offers by the company.

81

4. Do you think the perquisites being given by the organization are meeting all your dayto-day requirements?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 10 20 15 3 2 50

in % - 20% - 40% - 30% - 6% - 4% - 100%

ANALYSIS:

4% 6% 20% strongly agree agree 30% satisfactory disagree 40% strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 4%

employees were strongly disagree to the perquisites provided by the organization.

82 5. Are you assured with the Job Security and Annual increments?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 28 12 5 2 3 50

in % - 56% - 24% - 10% - 4% - 6% - 100%

ANALYSIS:

4% 6% 10% strongly agree agree satisfactory 24% 56% disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 56%
employees were strongly assured with job security and annual increments.

83 6. Do you think that the performance/productivity based incentives appropriately compensate your hard-work?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 19 12 14 4 1 50

in % - 38%

- 24% - 28% - 8% - 2% - 100%

ANALYSIS:

2% 8% strongly agree 38% 28% agree satisfactory disagree strongly disagree 24%

INTERPRETATION: From the survey it was found that amongst 50 respondents 38%
employees were strongly agree to the performance based incentives in AAI.

84 7. Do you think that the Promotional Avenues are nicely designed/planned in your company based on your performances? Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL no. of respondents 20 10 15 5 0 50 in % 40% 20% 30% 10% 0% 100%

ANALYSIS:

2%

8%
strongly agree 40% 30% agree satisfactory disagree strongly disagree 20%

INTERPRETATION: From the survey it was found that amongst 50 respondents 40%
employees were strongly agree that the promotional avenues are nicely designed in AAI.

85

8. Whether the Compensation Policies in your company are fair-enough as compared with other companies in the Aviation Sector/Industry? Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL no. of respondents 13 8 19 6 4 50 in % 26% 16% 38% 12% 8% 100%

ANALYSIS:

8% 12% 26% strongly agree agree satisfactory 16% 38% disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 38%
employees were satisfied with the fair composition policies in their company as compared to other aviation industry.

86 9. Does the Medical Insurance package of your company makes you totally relaxed about your familys health concerns? no. of respondents 30 10 6 3 1 50 in % 60% 20% 12% 6% 2% 100%

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

ANALYSIS:

2% 6% 12% strongly agree agree satisfactory 20% 60% disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 60%
employees were strongly agreed in medical insurance package in AAI.

87 10. Do you believe there exists no religion/caste/gender-bias in the compensation package of your company?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 35 10 2 2 1 50

in % 70% 20% 4% 4% 2% 100%

ANALYSIS:
4% 2% strongly agree 20% agree satisfactory disagree 70% strongly disagree

4%

INTERPRETATION: From the survey it was found that amongst 50 respondents 70%
employees were strongly believe that there doesnt exists religion/caste/gender-bias in composition package in AAI.

88 11. Does the compensation package good-enough to retain the employees for a longer stint in the company? Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL no. of respondents 12 18 10 1 1 50 in % 24% 36% 20% 2% 2% 100%

ANALYSIS:
2% 2% 24% 36% strongly agree agree

satisfactory
disagree 36% strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 36%
employees were agreed that the composition package good-enough to retain the employees for a longer period of time in AAI.

89

12. Do you think there exists an Un-fair system of distribution of incentives?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 1 3 2 14 30 50

in % 2% 6% 4% 28% 60% 100%

ANALYSIS:

2% 6% 4% strongly agree agree 28% 60% satisfactory disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 60%
employees were strongly disagree for the UN fair system of incentives.

90 13. Have you come across with any classic examples of Phenomenal Career Growth achieved by certain officials in your company?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 29 10 5 5 1 50

in % 58% 20% 10% 10% 2% 100%

ANALYSIS:

2% 10% 10% strongly agree agree satisfactory 20% 58% disagree strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 58%
employees were strongly agreed to come across with any classic examples of phenomenal career growth achieved by certain officials in company.

91 14. Commission given on the basis of business generated by the employee?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 2 3 5 10 30 50

in % 4% 6% 10% 20% 60% 100%

ANALYSIS:

4%

6%
10%

strongly agree agree satisfactory disagree

60%

20%

strongly disagree

INTERPRETATION: From the survey it was found that amongst 50 respondents 60%
employees were strongly disagreed for the commission given on the basis of business generated by the employee.

92 15. The performance standards set by the organization are achievable in practicality?

Attributes Strongly agree Agree Satisfactory Disagree Strongly disagree TOTAL

no. of respondents 27 10 7 4 2 50

in % 54% 20% 7% 8% 4% 100%

ANALYSIS:

4% 8% 14% 54% 20% strongly agree agree satisfactory disagree strongly disagree

INTERPRETATION: :From the survey it was found that amongst 50 respondents 54%
employees were strongly agreed to the performance standards set by the organization are achievable in practically.

93

CHAPTER-5

FINDINGS SUGGESTIONS CONCLUSION BIBLIOGRAPHY

94

CHAPTER -5

FINDINGS
It is found that most of the employees were satisfied with compensation package given in AAI. Most of the employees are satisfied with the benefits and allowances paid by the company. It is very happy to note that majority of employees feels sense of job security and strives hard to achieve the organitional objectives. It I found that majority of employees disagree for the commission given on the basis of business generated by the employee. The entire compensation package systems are governed by the central government (pay commission) for a period of 10yrs. Hence, pay commission authorities may take appropriate steps to enhance the productivity.

95

SUGGESTIONS

I suggest that company should continue the same compensation package system in future also.

Timely reviews may be made by the expert committees regarding the compensation package given by AAI.

A particular system may be adopted which will encourage the employees to go for more productivity on the commission basis.

96

CONCLUSION

Compensation is very important and essential thing in every organization. The compensation package that I found in AAI is very appropriate. The employees responded very well to my questionnaire. The fair compensation packages are allotted to every employee in AAI. It helps to increase the skills and performance of the employees and results in enhance the flourishment of the organization.

97

Bibliography

www.visakhapatnam airport.com and some other websites on the internet En.wikipedia.org/wiki/. Brouchers provided by Visakhapatnam airport. Magazines of Visakhapatnam airport. H.R Books: K.Aswathappa, P.Subbarao.

98

QUESTIONNAIRE

1. A question was asked to the employees whether the compensation package in AAI is attractive to them or not. [ A. STRONGLY AGREE D. DISAGREE B. AGREE ] C. SATISFACTORY

E. STRONGLY DISAGREE [ ]

2. Organizations working conditions are satisfactory? A. STRONGLY AGREE D. DISAGREE B. AGREE

C. SATISFACTORY

E. STRONGLY DISAGREE

3. Are you satisfied with the allowances and benefits that your company offers you ? [ ]. B. AGREE C. SATISFACTORY

A. STRONGLY AGREE D. DISAGREE

E. STRONGLY DISAGREE

4. Do you think the perquisites being given by the organization are meeting all your day-to-day requirements? [ A. STRONGLY AGREE D. DISAGREE ] B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE
]

5. Are you assured with the Job Security and Annual increments? [ A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE

99 6. Do you think that the performance/productivity based incentives appropriately

compensate your hard-work? [ ]

A. STRONGLY AGREE D. DISAGREE

B. AGREE

C. SATISFACTORY

E. STRONGLY DISAGREE

7. Do you think that the Promotional Avenues are nicely designed/planned in your company based on your performances? [ A. STRONGLY AGREE D. DISAGREE B. AGREE ]

C. SATISFACTORY

E. STRONGLY DISAGREE

8. Whether the Compensation Policies in your company are fair-enough as compared with other companies in the Aviation Sector/Industry? [ ] A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE

9. Does the Medical Insurance package of your company makes you totally relaxed about your familys health concerns? [ ] A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE

10. Do you believe there exists no religion/caste/gender-bias in the compensation package of your company? [ A. STRONGLY AGREE D. DISAGREE ] C. SATISFACTORY

B. AGREE

E. STRONGLY DISAGREE

100

11. Does the compensation package good-enough to retain the employees for a longer stint in the company? [ ] A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE ]

12. Do you think there exists an Un-fair system of distribution of incentives? [ A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE

13. Have you come across with any classic examples of Phenomenal Career Growth achieved by certain officials in your company? [ A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY ]

E. STRONGLY DISAGREE ]

14. Commission given on the basis of business generated by the employee? [ A. STRONGLY AGREE D. DISAGREE B. AGREE C. SATISFACTORY

E. STRONGLY DISAGREE

15. The performance standards set by the organization are achievable in practicality?
[ ].

A. STRONGLY AGREE D. DISAGREE

B. AGREE

C. SATISFACTORY

E. STRONGLY DISAGREE

101