A study on Compensation system with reference to Grade Matrix

Introduction: Compensation is the payment in the form of hourly wages or annual salary combined with benefits such as insurance, vacation, stock options etc. that can positively or negatively affect an employee performance. An ideal compensation system will help to significantly boost the performance of employees and create a more engaged work force thats willing to go the extra mile for any organization. Such a system should be well defined and uniform and should apply to all levels of the organization as a general system. With effective compensation system there will be clear visibility into individual employee performance when it comes time to make critical compensation planning decisions. These performance appraisals assist in determining compensation and benefits, but they are also instrumental in identifying ways to help individuals improve their current positions and prepare for future opportunities. Compensation can be defined as all of the rewards earned by employees in return for their labor. This includes:

Direct financial compensation consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals Indirect financial compensation including all financial rewards that are not included in direct compensation and can be understood to form part of the social contract between the employer and employee such as benefits, leaves, retirement plans, education, and employee services Non-financial compensation referring to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions In determining effective rewards, however, the uniqueness of each employee must also be considered. People have different needs or reasons for working. The most appropriate compensation will meet these individual needs. To a large degree, adequate or fair compensation is in the mind of the employee.

Grading system gives a clear view to the employee as to where they stand in the company, in accordance with their performance Every company designs the jobs families to group on the basis of purpose and characterization of the tasks into roles. The various levels at which the work is done is delineated by means of a role profile essentially a word picture describing the key factors which differentiate one level of job from another (the responsibilities or tasks to be carried out and the knowledge, skills and behaviors that underpin successful performance in the role). Each job family sets out a career path by clarifying the criteria for advancing from one level within the family to the next or to a role within a different family. Different functions include these job families to manage the workflow and chain of command. This forms to divisions including Operations, Finance and HR and process formation that culminate in to different systems. The Job families are mapped into broad banding which includes the grading to apportion the compensation and rewards. These are designed to be market competitive. It is easier to match job functions where external reference is easier to find. Bands are formed with levels embedded in them to included different degree of responsibilities within each set. It begins with Trainee including new recruit learning the basic job. This is followed by Individual contributors and supervisors. This would include the team level quality and business analysts who might be considered as Subject matter experts.. This level is preceded by managers who report into senior manager and AVP who would be responsible for budget and operational medium to long term planning. The level which is followed is the VP who has functional level responsibility towards the business units performance. CEO remains at the top holding the enterprise level responsibility.

NEED FOR THE STUDY: To provide a conceptual framework of employee grade matrix and compensating the employees with reference to the grade matrix in Bodhtree Consulting Ltd...

OBJECTIVES OF THE STUDY:-

Take the standard frame work. Identify columns/verticals. To equate / map employees with the grade structure. Propose a new Employee Grade Matrix for C1, C2 & C3 Levels. To provide for a uniform, stable and reasonably competitive compensation structure for all employees. All new recruits have to be designated and compensated with respect to the Designation & Grade Policy.

SOURCE OF DATA (METHODOLOGY OF STUDY) In this have two type of datas are here as fallows. 1. Primary Data. 2. Secondary Data. Primary Data:-

Part of the information is collected from interviewing with HR manager, Mr.Sudheer Koppineni (works in HR) and other employees of HR department.

Secondary Data :-

The data on Bodhtree Consulting Limited has been collected mainly from secondary sources like, 1) The administrative office of the Bodhtree. 2) Data collected though referral books. 3) Data from the internet.

SCOPE OF THE STUDY:

It is important for both employers and employees to know their position in the organization. It helps in discriminating the grade of the employees. Provides a relevant compensation package to the employees. Helps the employees in understanding the importance of their job role. Helps in giving job satisfaction to the employees

Limitations of the Grading System 1. It is not very easy to come up with grade descriptions which distinguish one grade from another and at the same time find commonalities between a numbers of jobs belonging to a particular grade. This difficulty increases as the number of jobs increases. 2. Also, it is not easy to interpret the grade descriptions and sort out the jobs, particularly for new jobs which have to be fitted into the given grading system. 3. One of the major drawbacks of this system is that the grade description and the key phrases used therein determine the grade and therefore the pay. Therefore, the Grading System of Job Evaluation may be misused by manipulating either the grade description or the job description through the introduction of suitable key phrases. In spite of the above drawbacks, this system at least makes a conscious attempt at bringing in some objectivity through the distinguishing characteristics separating one grade from another. The grading system is quite popular with government departments (in India and abroad) and public sector corporations.

INDUSTRY PROFILE: Information Technology (IT) is defined as the design, development, implementation and management of computer-based information systems, particularly software applications and computer hardware. Today, it has grown to cover most aspects of computing and technology. The largest firms globally include IBM, HP, Dell and Microsoft. Information Technology (IT) industry in India is one of the fastest growing industries. Indian IT industry has built up valuable brand equity for itself in the global markets. IT industry in India comprises of software industry and information technology enabled services (ITES), which also includes business process outsourcing (BPO) industry. India is considered as a pioneer in software development and a favorite destination for IT-enabled services. The origin of IT industry in India can be traced to 1974, when the mainframe manufacturer, Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export programmers for installing system software for a U.S. client. The IT industry originated under unfavorable conditions, local markets were absent and government policy toward private enterprise was hostile. The industry was begun by Bombay-based conglomerates which entered the business by supplying programmers to global IT firms located overseas. During that time Indian economy was state-controlled and the state remained hostile to the software industry through the 1970s. Import tariffs were high (135% on hardware and 100% on software) and software was not considered an "industry", so that exporters were ineligible for bank finance. Government policy towards IT sector changed when Rajiv Gandhi became Prime Minister in 1984. His New Computer Policy (NCP-1984) consisted of a package of reduced import tariffs on hardware and software (reduced to 60%), recognition of software exports as a "delicensed industry", i.e., henceforth eligible for bank finance and freed from license-permit raj, permission for foreign firms to set up wholly-owned, export-dedicated units and a project to set up a chain of software parks that would offer infrastructure at below-market costs. These policies laid the foundation for the development of a world-class IT industry in India.

Factors leading to growth in the IT/ITes sector are: Low operating costs and tax advantage. Favorable government policies. Technically qualified personnel easily available in the country. Rapid adoption of IT technologies in major sectors as Telecom, Manufacturing and BFSI. Strong growth in export demand from new verticals and non-traditional sectors as public sector, media and utilities. Use of new and emerging technologies such as cloud computing. SEZ as growth drivers; as more of SEZs are now being set up in Tier II cities and about 43 new tier II/III cities are emerging as IT delivery locations. All these factors have given IT/ITES industry in India a strong competitive position with high market share.

COMPANY PROFILE: Bodhtree is a provider of innovative consulting, and technology. We pride ourselves on delivering quality and value addition to our customers thereby exceeding their expectations. We understand industry needs and deliver solutions that leverage the process knowledge of our consultants. The company has niche strengths in building and managing a business oriented IT environment with rich experience in technology incubation, such as Product engineering, Business intelligence,DataManagement, SOAConsulting, CRMConsulting,Analytics,Data Warehousing,sharepointconsulting. Our other offerings comprise of customized solutions and services in SOA, BPM, enterprise architecture, offshore advisory services, and e-commerce. We give high end reliable and cost effective IT Services to global Organizations. Our customers include Fortune 500, Fortune 250 and Forbes 200 best small companies. We further collaborate with well reputed software vendors of the Silicon Valley for implementation and development of solutions. Bodhtree is headquartered in India with offices in US and UK. Its development and delivery centers are distributed in India, with a dedicated COE (Center of excellence) for SaaS and Cloud Computing. It serves companies from India, US, Europe and other parts of the globe. Bodhtree is a public listed company and has investments and interests in other niche business areas including E-Publishing, E-Learning, and Mobile Classified Search. The spirit of Bodhtree is central to every individual who are part of Bodhtree. It is deep rooted core human values. It defines the basic human thoughts and actions to govern the future. The spirit of Bodhtree is based on human values and ethics which are applied to various situations of life and working environment. Our values are reflected in our approach to every individual and how we make each individual part of our teams and groups. The spirit of Bodhtree is to win and let others win too. Bodhtree was founded on principles of building trust be it customers, partners or employees. And it has operated according to the guided principle of trust, integrity, ethics, character and values. These core values are instrumental for our evolution as successful Global Company. These values are not only important in our relationship with customers and partners, but also critical in our relationship with our team members and strategic groups. Our teams and groups constitute people from various diverse cultures, who have contributed significantly for our success.

ABOUT THE ACADEMIC PROJECT IN BODHTREE: The project is to form a new grade matrix for Bodhtree and integrate it with employee compensation, it helps the organization in: Avoid misunderstanding in organizational functioning. To determine fair remuneration structures. Assists with Employment Equity and Skills Development by classifying employees correctly according to occupational levels as required by the Employment Equity Act (EEA) and Skills Development Act (SDA); and Facilitates the career development/succession planning process in the organization by mapping out the different levels in the organization as per the job grading system) and clearly shows progression through these levels. Old Grade Matrix structure followed in Bodhtree was approved by CEO in August 2011. The employees joined the company after Aug11 is fitted into the Grade Matrix. For many purposes, once a grade structure is in place, it is relatively easy to slot jobs into grades. HR or a committee of managers is typically empowered to decide what grade a given job is in. One of the required Affirmative Action Plan reports, the Workforce Analysis, requests is to sort the jobs in each department by wage or salary. Most organizations, particularly small organizations, usually prefer not to show the actual annual compensation. Salary or pay grade is an appropriate substitute for actual compensation. The grade can be shown on the report without revealing confidential information. Salary grades are used by many organizations to help managers manage the compensation of new employees and establish appropriate pay increases for existing employees while maintaining equity among the jobs in the company. Salary grades provide a structure for fairly compensating employees and managing the payroll. Its simply a measuring tool that sorts out compensation.

METHODOLOGY FOR GRADE MATRIX: Traced out the cream & niche skills. Meet the Business unit (BU) heads and take their inputs about the problem area. Based on the BU heads inputs and arrive at the new grade matrix with decrease in number of verticals & designations. o Number of verticals before: 10 o Number of designations before: 126

PROCEDURE FOR GRADE MATRIX: The following table is formulated based on the inputs of BU heads and a new grade matrix and levels are proposed. Sub Grades C B A C B A C B A Experience in Bands Yrs Pay Band in Lacs E 15-18 22-26 M4 13-15 18-22 M3 11-13 14-18 M2 9-11 10-14 M1 7-9 8-10 L5 5-7 6-8 L4 3-5 4-6 L2, L3 1-3 2-4 L1 0-1 0-2

Grades

C3

C2

C1

CRITERIA ON WHICH NEW GRADE MATRIX IS FORMED: Engineering Services C C1 C2 Associate Leads B A C B A Sr. Systems Analyst Systems Analyst Programmer Analyst Sr. Software Engineer Software Engineer Trainee Consulting Services Principal Consultant Senior Consultant Consultant Sr. Associate Consultant Associate Consultant Trainee

OBSERVATIONS: Company adds & deletes business verticals Resources move from one vertical to another, even then the same designation is continued. Designations are not contemporary Even if the employee is having more than desired experience, he/she is not moving to the next level of grade (may be because of lack of skills & aptitude)