Human Resource Management मानव संसाधन व्यवस्थापन

Quick summary

Performance appraisal (कार्यमूल्यमापन) is the systematic evaluation of how well an employee does his job compared with set standards. Its results are used for pay rises, promotions, transfers, training and feedback. Methods range from old ones like ranking and confidential reports to modern ones like MBO and 360-degree feedback.

Key points

• Dale Yoder: performance appraisal includes all formal procedures used to evaluate personalities, contributions and potential of group members.
• Objectives: decide promotions and pay increases, find training needs, give feedback, improve performance, validate selection methods, plan careers.
• Process: set standards → communicate them → measure actual performance → compare with standards → discuss results with the employee → take action (reward, training, counselling).
• Traditional methods: straight ranking, paired comparison, graphic rating scale, checklist, forced choice, forced distribution (bell curve), critical incident method, essay method, confidential report (used in government).
• Modern methods: Management by Objectives (MBO) – introduced by Peter Drucker (The Practice of Management, 1954): manager and employee jointly set goals and review results; BARS (behaviourally anchored rating scales); assessment centre; 360-degree feedback (from superiors, peers, subordinates, customers and self); human resource accounting.
• Common errors: halo effect (one good trait colours the whole rating), horns effect, leniency or strictness, central tendency, recency effect, personal bias.
• A good appraisal system is clear, fair, consistent, job-related, regular and open to discussion.

Important terms

• Halo effect – rating an employee high on everything because of one good quality.
• Central tendency – giving average ratings to everyone to avoid decisions.
• Critical incident – a record of especially good or bad behaviour on the job.
• Potential appraisal – judging whether an employee can handle higher jobs in future.

Key facts

• Paired comparison: number of pairs = N(N − 1) ÷ 2, where N is the number of employees. For 5 employees: 5 × 4 ÷ 2 = 10 pairs.

5 important questions

Q1. What is the halo effect?

A rating error where the appraiser's impression of one trait of the employee (good or bad) influences the ratings of all other traits.

Q2. What is 360-degree feedback?

An appraisal method in which an employee is rated by everyone around him – superiors, peers, subordinates, customers – along with self-appraisal.

Q3. Explain the objectives and process of performance appraisal.

Outline: objectives listed above; six steps of the process with explanation; importance of feedback interview.

Q4. Explain the traditional and modern methods of performance appraisal.

Outline: four or five traditional methods with merits/demerits; MBO steps (set goals, action plan, periodic review, final evaluation); BARS, assessment centre, 360-degree; conclusion that modern methods are more objective and participative.

Q5. Explain the problems in performance appraisal and how to overcome them.

Outline: errors (halo, horns, leniency, central tendency, recency, bias, unclear standards); remedies – clear standards, training raters, multiple raters, documentation of critical incidents, regular reviews, employee participation.

Exam tip

Mention Peter Drucker and the year 1954 with MBO; it is a common short-note and the name adds weight to your answer.

Quick summary

Compensation (मोबदला / वेतन व्यवस्थापन) is everything an employee receives in return for work: basic wages, allowances, incentives and fringe benefits. Good compensation management attracts and keeps talented people, motivates them and keeps labour costs fair. It is guided by job evaluation, labour laws and market rates.

Key points

• Components: basic wage, dearness allowance (DA), other allowances (HRA, conveyance), incentives/bonus, fringe benefits (PF, gratuity, insurance, leave, canteen), and perquisites.
• Wage is usually paid to workers on a daily or hourly basis; salary is a fixed monthly payment to staff.
• Minimum wage: lowest wage that must be paid by law; fair wage: between minimum wage and living wage; living wage: covers food, clothing, housing, education, health and some comforts.
• Factors: job requirements, cost of living, company's ability to pay, prevailing market rates, union bargaining, government laws, productivity.
• Job evaluation finds the relative worth of jobs to set a fair pay structure. Methods: ranking, job classification (grading), factor comparison, point rating.
• Methods of wage payment: time rate (paid for time worked) and piece rate (paid per unit produced).
• Incentive plans: Halsey premium plan, Rowan plan, Taylor's differential piece rate, profit-sharing, ESOPs.
• Payment of Bonus: minimum 8.33% and maximum 20% of wages for eligible employees.
• Gratuity: 15 days' wages for every completed year of service, after 5 years of continuous service; ceiling ₹20 lakh.

Important terms

• Fringe benefits – non-wage benefits such as PF, insurance and leave.
• ESOP – Employee Stock Option Plan; employees get shares at a lower price.
• Pay grade – group of jobs of similar value with the same pay range.
• Cost to company (CTC) – total yearly cost of an employee to the employer.

Formats and formulas

• Time rate earnings = Hours worked × Rate per hour
• Piece rate earnings = Units produced × Rate per unit
• Halsey plan (50%) = (Time taken × Rate) + 50% × (Time saved × Rate)
• Rowan plan = (Time taken × Rate) + (Time saved ÷ Time allowed) × Time taken × Rate
• Gratuity (Payment of Gratuity Act) = Last drawn salary (basic + DA) × 15/26 × completed years of service

5 important questions

Q1. Distinguish between wage and salary.

A wage is paid to workers usually on an hourly, daily or piece basis and varies with work done; a salary is a fixed monthly or yearly payment to office staff and managers.

Q2. What are fringe benefits? Give examples.

Benefits given to employees in addition to wages, such as provident fund, gratuity, medical insurance, paid leave, canteen and transport facilities.

Q3. Standard time for a job is 10 hours; a worker completes it in 8 hours; rate is ₹50 per hour. Calculate earnings under the Halsey (50%) and Rowan plans.

Time saved = 10 − 8 = 2 hours.

Q4. An employee's last drawn basic + DA is ₹26,000 per month and he has 20 completed years of service. Calculate gratuity.

Gratuity = 26,000 × 15/26 × 20 = 1,000 × 15 × 20 = ₹3,00,000 (within the ₹20 lakh ceiling).

Q5. Explain the components of compensation and the factors affecting wage and salary administration.

Outline: components listed above; factors (internal and external); principles of a sound wage policy (equal pay for equal work, linked to performance, simple, fair, legal); role of job evaluation.

Exam tip

In incentive numericals, always show time saved first, then the bonus, then total earnings. Learn both formulas; Halsey and Rowan come together.

Quick summary

Industrial relations (औद्योगिक संबंध) are the relations between management, workers (and their trade unions) and the government in an industry. Good relations bring peace and high productivity; poor relations lead to strikes, lockouts and losses. Trade unions (कामगार संघटना) are workers' organisations that protect their interests, mainly through collective bargaining.

Key points

• Parties to industrial relations: employers, employees and trade unions, and the government (as law-maker and mediator).
• Objectives: industrial peace, higher productivity, protection of workers' interests, avoiding disputes, workers' participation in management.
• Industrial dispute: any dispute between employers and workers about employment, non-employment, terms of employment or conditions of labour.
• Forms of disputes: strike (workers stop work collectively), lockout (employer closes the workplace), gherao, go-slow, work-to-rule, picketing.
• Causes: wages and bonus, working conditions, retrenchment and layoffs, discipline, union rivalry, political influence, poor communication.
• Machinery for settlement: collective bargaining, works committee, conciliation, voluntary arbitration, adjudication (Labour Court, Industrial Tribunal, National Tribunal) — under the Industrial Disputes Act, 1947, now the Industrial Relations Code, 2020.
• Trade Unions Act, 1926: registration needs at least 7 members, and at least 10% or 100 workers (whichever is less) of the establishment.
• Functions of trade unions: collective bargaining, protecting jobs, better wages and conditions, welfare activities, education of workers, representing grievances.
• Indian central trade unions include AITUC (1920, the oldest), INTUC (1947), HMS (1948), CITU (1970) and BMS (1955).
• Problems of Indian unions: multiplicity and rivalry, political links, small size, weak finance, outside leadership, low membership in the informal sector.
• Workers' participation in management (WPM) – through works committees, joint management councils, worker-directors, quality circles.

Important terms

• Collective bargaining – negotiation between employer and union representatives to decide terms of employment.
• Conciliation – a neutral third party (conciliation officer) helps both sides reach an agreement.
• Arbitration – both sides refer the dispute to an arbitrator whose decision is binding.
• Adjudication – compulsory settlement by labour courts or tribunals.

Key facts

5 important questions

Q1. What is collective bargaining?

A process in which representatives of the employer and the workers' union negotiate together to decide wages, working conditions and other terms, resulting in a written agreement.

Q2. Distinguish between a strike and a lockout.

A strike is a collective stoppage of work by employees to press their demands; a lockout is the temporary closing of the workplace by the employer to put pressure on employees.

Q3. Explain the causes of industrial disputes and the measures to prevent them.

Outline: economic causes (wages, bonus, DA), non-economic (working conditions, discipline, recognition of unions, political); preventive measures – collective bargaining, grievance procedure, WPM, good communication, welfare, fair HR policies.

Q4. Explain the machinery for the settlement of industrial disputes in India.

Outline: works committee, conciliation officer and board, court of inquiry, voluntary arbitration, labour court, industrial tribunal, national tribunal; their roles; present position under the Industrial Relations Code 2020.

Q5. Explain the functions and problems of trade unions in India and suggest remedies.

Outline: functions (militant and fraternal); problems listed above; remedies – one union in one industry, internal leadership, worker education, financial strength, freedom from politics.

Exam tip

For dispute settlement, show the methods in the table "third party / binding". It answers the difference between conciliation, arbitration and adjudication in one view.

Quick summary

Employee welfare (कर्मचारी कल्याण) means facilities and services given to workers beyond wages to improve their working and living conditions, such as canteens, rest rooms and medical care. Social security (सामाजिक सुरक्षा) protects workers against risks like sickness, accident, maternity, old age and death through insurance and assistance. Both make a workforce healthy, loyal and productive.

Key points

• Types of welfare: statutory (required by law, e.g. drinking water, first aid, canteen, crèche) and non-statutory/voluntary (housing, transport, education, recreation given by choice).
• Intra-mural welfare is inside the factory (canteen, toilets, safety); extra-mural is outside it (housing, schools, sports).
• Factories Act, 1948 welfare rules: washing facilities, first aid boxes, canteen where 250 or more workers, crèche where 30 or more women workers, welfare officer where 500 or more workers, ambulance room where 500 or more workers.
• Employees' Provident Fund (EPF) Act, 1952: employee and employer each contribute 12% of basic + DA; part of the employer's share (8.33%, on wages up to ₹15,000) goes to the Employees' Pension Scheme.
• Employees' State Insurance (ESI) Act, 1948: medical, sickness, maternity, disablement and dependants' benefits for employees earning up to ₹21,000 per month; contributions 0.75% (employee) and 3.25% (employer).
• Payment of Gratuity Act, 1972: 15 days' wages per completed year after 5 years' service; ceiling ₹20 lakh.
• Maternity Benefit Act, 1961: paid maternity leave of 26 weeks (since the 2017 amendment) for the first two children; crèche facility where 50 or more employees.
• Employees' Compensation Act, 1923: compensation for injury or death caused by an accident at work.
• Welfare theories: police theory, religion theory, philanthropic theory, trusteeship theory, efficiency theory, public relations theory.

Important terms

• Statutory welfare – facilities employers must provide by law.
• Social assistance – help paid by the government from its own funds, e.g. old-age pension.
• Social insurance – benefits paid from contributions by workers and employers, e.g. ESI.
• Welfare officer – officer appointed to look after workers' welfare in large factories.

Key facts

5 important questions

Q1. What is social security?

Protection given by society to its members, through public measures, against economic distress caused by sickness, maternity, injury, unemployment, old age and death.

Q2. Distinguish between statutory and non-statutory welfare.

Statutory welfare facilities must be provided by law (e.g. canteen, first aid, crèche); non-statutory facilities are given voluntarily by the employer (e.g. housing, transport, recreation).

Q3. Explain the welfare facilities provided under the Factories Act, 1948.

Outline: health provisions (cleanliness, ventilation, drinking water, toilets), safety provisions (fencing of machinery, protective equipment), welfare provisions (washing, sitting, first aid, canteen, rest rooms, crèche, welfare officer) with the worker thresholds.

Q4. Explain the main social security laws in India.

Outline: the six laws in the table with coverage, benefits and contributions; mention the Code on Social Security 2020 bringing them together and extending cover to gig and platform workers.

Q5. Explain the meaning, types and importance of employee welfare.

Outline: meaning; types (statutory and voluntary; intra-mural and extra-mural); theories; importance (health, morale, productivity, lower absenteeism and turnover, better industrial relations, company image).

Exam tip

Learn the law names with years in the table; short questions often ask "name any two social security Acts" or "what is the period of maternity leave".