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Report ON Compensation System of Fatimafert Limited

28-km Sheikhupura Road, Chichokimallian

SUBMITTED TO

Mr. Khuram Shahzad

SUBMITTED BY

Muhammad Arif Hassan

Anum Iqbal

Ayesha Shhawaz

Muhammad Adnan

Submission Date

01-06-2019

University of Management Technology, Street No. 2, Block C Block C 2 Phase 1 Johar Town,
Lahore, Punjab 54770
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Table of Contents
1. Introduction....................................................................................................................... 3
1.1 Background of Study .................................................................................................................3
1.2 Background of Company ...........................................................................................................3
Mission & Vision ...................................................................................................................................................4
Number of Employees ..........................................................................................................................................4
Labor Union ..........................................................................................................................................................4

2. Employee Compensation & Benefits at FatimaFert ............................................................. 4

2.1 Base Pay ...................................................................................................................................4
2.2 Employee Benefits ....................................................................................................................5
2.3 Annual Bonuses ........................................................................................................................6
2.4 Annual Increment .....................................................................................................................7
2.5 Annual Leaves ..........................................................................................................................7
2.6 Overtime ..................................................................................................................................8
3.0 Analysis ........................................................................................................................... 8
4.0 Action Plan ...................................................................................................................... 9
Conclusion ............................................................................................................................. 9
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1. Introduction
1.1 Background of Study
Human Resource Management (HRM) has never been as significant as it is today. Companies
want to attract, retain and motivate brains to meet objectives. Today Humans are regarded as one
of every company’s assets so they need to be efficiently and effectively managedi. One of the tools
companies use to attract, retain and motivate its people is Compensation Management.
Compensation is an integral part of human resource management which helps in motivating the
employees and improving organizational effectiveness.

Employees today are not willing to work only for the cash alone, they expect 'extra'. This extra is
known as employee benefits. Also known as fringe benefits, Employee benefits are non-financial
form of compensation offered in addition to cash salary to enrich workers’ livesii.

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. They should be
managed properly and motivated by providing best remuneration and compensation as per the
industry standards. The lucrative compensation will serve the need for attracting and retaining the
best employees.

So, Human Resource managers’ task is to carefully design the organization’s benefit package.
They have to plan about what benefits should offer to whom and on which basis? Definitely all
the employees will not get the same benefit. A sales person and a receptionist will get different
benefit but inadequate benefits do contribute to low satisfaction level and increase absenteeism
and turnover in employees.

1.2 Background of Company

Fatimafert a wholly owned subsidiary of Fatima Fertilizer limited is a leading brand with the brand
name of Baber Sher Urea. Fatimafert produces urea and also a leading importer of DAP.
Fatimafert is enjoying their brand loyalty by proving valuable products to farmer. The production
facility of Fatimafert is situated at Checho ki Malluan, 28 Kilometers Lahore Road, Sheikhopura
started its production commercially on October 13, 1971. It was established with the help of World
bank and was the first private firm to receive loan from world bank in Pakistan. The company is
enjoying the position of “PSE Top 25” from last three decades.
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Mission & Vision

The vision statement of the Fatimafert is “To be a world class manufacturer of fertilizer and
ancillary products, with a focus on safety, quality and positive contribution to national economic
growth and development. We will care for the environment and the communities we work in while
continuing to create shareholders' value”iii.

The Mission of Fatimafert is in form of three bullets statements which are,

 “To be the preferred fertilizer company for farmers, business associates and suppliers by
providing quality products and services.
 To provide employees with an exciting, enabling and supportive environment to excel in,
be innovative, entrepreneurial in an ethical and safe working place based on meritocracy
and equal opportunity.
 To be a responsible corporate citizen with a concern for the environment and the
communities we deal with”.

Number of Employees
The Company has 573 employees.

Labor Union
Company has a registered union of workers Called “Fatimafert Employee Union” and its consist
of employees from grade 1 to 6. The term of union and settlement expires after 2 years.

2. Employee Compensation & Benefits at FatimaFert

At FatimaFert employees are positioned in 15 Grades. First 6 grades from S1 to S6 are Non-
Management staff, next 3 grades (M1 to M3) are for line managers and senior management is
graded from M3 to M9.

2.1 Base Pay

Base pay is the initial salary paid to an employee, not including benefits, bonuses, or raises. It is
the rate of compensation an employee receives in exchange for services. At FatimaFert Base pay
is 30% of total pay of an employee (on average).

Scale wise Base Pay structure is as below.

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Base Pay

Range

Grade Minimum Midpoint Maximum

1 15750 21000 26250

2 18000 24000 30000

3 20250 27000 33750

4 22500 30000 37500

5 25500 34000 42500

6 28500 38000 47500

M1 32250 43000 53750

M2 36000 48000 60000

M3 40500 54000 67500

M4 45750 61000 76250

M5 51750 69000 86250

M6 58500 78000 97500

M7 66000 88000 110000

M8 74250 99000 123750

M9 83250 111000 138750

2.2 Employee Benefits

Employee benefits also known as perks comprise of various types of non-wage compensation
provided to employees in addition to their normal wages or salaries. This actually provides a
cornerstone to the employees to work hard to get something over and above their salary and
motivates them to work.
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Likewise, Fatimafert limited also gives employee benefits and compensations to its employees. A
few are mentioned below

 Provident fund
 Gratuity fund
 Health Insurance
 Housing Facility
 Transport Facility / Car Policy
 Life insurance (for employees having PKR 20, 000salary or below)
 Social security (for employees below Grade 6 and above Salary 20,000)
 House loan
 Emergency loan
 Car loan
 Children education
 Laptops
 Mobile phones and Sims
 Overtime compensations
 Pick and drop facility
 Bike loan
There are a few things which are mandatory to seek as per law. These are mentioned below:

 Group life insurance

 EOBI (employee old age benefit Incentives)
 Social security or medical insurance.

2.3 Annual Bonuses

Following are the annual bonus,

 Production Incentive 6 Basic Salaries

 Industrial Peace Bonus 1 Gross

 Special Bonus (1/2 to 4 Basics) As per fiscal Condition

 Annual Adjustment For Management Staff

 Compensation
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Direct Indirect

Allownce &
Pay Benifits Services
INCENTIVES

Base Pay Merit Pay COLA Grdutity Medical Facility

House Rent
Special bonus Provident Transport
Allownce

Group Life
Utility Allownce Food
Insurance Plan

Basic salary 45 Annual Leaves Mobile

1 Special Group Accident

Family
Allowance Insurance Policy

Utilities Allowance Disability Benefits Housing Facility

Uniform
Maintenance Provident Fund
Expense

Conveyance
Gratuity
Allowance

Combined
Hajj Assistence
Allowance

2Special
Allowance

Fuel allownce

Anual Recreational
Allownce

The Compensation Map of FatimaFert

2.4 Annual Increment

On annual basis salaries of employees are adjusted on the basis of two types of increments
 Annual Increment (6% to every employee)
 Special Increment (Minimum 3 % Maximum 9%)

2.5 Annual Leaves

Employee are entitled with 45 annual leave in three different Categories which are
Earned 24 (Can be cashed)
Casual 11 (Have to Avail)
Sick 10
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2.6 Overtime
2 times of normal working hour salary is granted to employees on overtime and if overtime is on
any national or religious event 4 time of normal wage is granted to the employee.

3.0 Analysis
The Compensation of Fatimafert is consider as benchmark for many firms. They have strong
employer branding due to their strong compensation system. Some positive aspects of their
compensation system are as below,
 In country like Pakistan only few organizations are following compensation’s law and
minimum legal requirement, Fatimafert is not only following them but are also setting
standards for others (there minimum wage is 22,000) Provident Fund is at 25%).
 Majority of the annual bonuses are attached with the production (organization goal) which
is promoting all employees to achieve the production targets.
 In order to ensure peace of Plant a part of bonus is associated with peace on plant.
 A large sum of direct and indirect benefits are engaging employees with organization
psychologically.
 This compensation system is maintaining high internal equity because every employee is
getting salary as per the grading scale (In every JD scale is mentioned) of the organization.

According to us after taking the interview of HRBP of Fatimafert and by analyzing their
compensation system they are currently facing following problems in compensation system.
 Non-management staff in Grade 6 show reluctance to avail promotion opportunity because
they think they won’t get any financial benefit in that.
 This Compensation system is not acting as a reinforcer for high performer because there
is very less benefits for high performer.
 Employee Turn over rate is 9% and industry it is 5%. It is high because competitors of
Fatimafert (Engro, FFC) is paying far more than Fatimafert.
 Sometime employees have to spend 12 to 18 hours on plant site (in case of emergency) so
families of employees got affected. While in compensation family compensation is
missing.
 Intrinsic Rewards are very much less in compensation of FatimaFert.
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4.0 Action Plan

From M1 to M3 a revised pay structure is urgently required. Organization can do following things
in that
a) Without revising the current pay structure, they can allow these employees to avail the
benefits leave encashment and overtime or one from them (only non-management staff
can avail that). This will not increase the cost of company to that extent and will motivate
people do their best in order to get promoted. (One Lac per Annum for 1 employee)
b) By adding an allowance in these grades can maintain the equity. (10,000 per employee
with the name of “supervisors’ allowance)
c) By empowering supervisors with responsibility and by providing them frame in front of
other employees.

Will adopt option b and c side by side because it will fulfil both intrinsic and extrinsic need of an
employee.
More performance-based non-monetary and monetary rewards will be the part of employee’s compensation
such as

 Recreational Tours For best performers (After Every 3 months)

 Best Performer of Month
 Safety Awards
 Cash price for Constant best performance.

Organization can control their turnover rate by emotionally engaging their employees and salaries of Engro
and FFC is high because their plants are in remote location.

 Employee Children Education Policy (by covering the educational expense of employee’s
child) you can easily engage an employee.
 Family Dinners sponsored by the company will emotionally linked the organization with
employee and its family.
 In order to retain the young employees sponsoring them for certification will help us to
retain them.
 Sports week and other recreational activities will also help employees to engage themselves
with organization.
 Allowing employees to develop their shift schedules with the help of their supervisor will
also help to retain employees.

Conclusion
According to our analysis their compensation system is covering majors’ areas and there are very less error
in their system due to this their compensation system is benchmark for different companies. Overall the
compensation system of Fatimafert is well established and is based on equity system. But they should work
on intrinsic need of their employees because they have knowledge workforce and order to retain high skilled
people we need to engage themselves with our organization emotionallyiv.
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i
Noe Hollenbeck Gerhart wright, Human Resource Management, Gaining a competitive advantage, 4th Edition, chapter 1, pp. 1-44
ii
Burke, Ronald & Allisey, Amanda & Noblet, Andrew. (2013). The importance of human resource management in the public sector, future
challenges and the relevance of the current collection. Human Resource Management In The Public Sector. 13. 10.4337/9780857937322.00008.
iii
WWW.FFL.COM.PK

iv
KWM, R. Willium. (2018) Long Range Planning Vol. 30