TYBMS SEM-5 Human Resource: Finance for HR Professional & Compensation Management (Q.P. November 2024 with Solution)

 Paper / Subject Code: 46005/Human Resource: Finance for HR Professionals & Compensation Management

 TYBMS SEM-5 

Human Resource: 

Finance for HR Professional & 

Compensation Management

(Q.P. November 2024 with Solution)

N.B 1) All questions are compulsory.

2) Figures to the right indicate the maximum marks.

3) Support your answer with illustration and diagram.

Q.1. A) Choose the most suitable alternative for the following questions (Any 8) (8) 

1. ___________ plan leads to efficiency of the overall payment system in the organization.

(A) Medical Insurance

(B) Tax Levels

(C) Cost of Living

(D) Compensation

2. ________ is provided to the employees who have migrated and stays in different city or country.

(A) LTA

(B) HRA

(C) Bonus

(D) Incentive

3. _________ is based on the philosophy of rewards management.

(A) Pay for the Position

(B) Pay to the Person

(C) Pay for Performance

(D) Pay to the Power

4. The aim is to motivate the managers for ________ growth and prosperity of the organization.

(A) Fast

(B) Steady

(C) Short Term

(D) Long Term

5. _________ arise because of differences in the personal characteristics.

(A) Inter-industry Differentials

(B) Occupational Differentials

(C) Personal Wage Differentials

(D) Intrinsic Rewards

6. ________ include core strategy groups, scientists, economists, knowledge management executive.

(A) Managers

(B) Consultants

(C) Agents

(D) Professionals

7. HRCA stands for __________.

(A) Human Resource Cost Accounting

(B) Human Resource Credit Accounting

(C) Human Resource Cost Auditing

(D) Human Resource Credit Accounting

8. The Lev and Schwartz Model was developed in the year ________. 

(A) 1961

(B) 1971

(C) 1981

(D) 1986

9. An employee, who had worked for not less than _______ working days in a year, is entitled to bonus.

(A) 30

(B) 45

(C) 60

(D) 80

10. The wage limit for the applicability of the Payment of Wages Act is Rs. ________ per  month.

(A) 18000

(B) 24000

(C) 21000

(D) 15000

Q1) B) True or False (answer any 7)                (7)

1) Human Resource managers ensure scientific recruitment and selection of people involved in compensation management.

Ans: True

2) The gratuity amount usually amounts to one month's salary of the employee.

Ans: False

3) Insured women are entitled to get the benefit to maternity leave for 26 weeks.

Ans: True

4) Merit pay is also called as Merit transfer.

Ans: False

5) Wage fund is that amount of floating capital which is set apart by employer for paying wages to the labour.

Ans: True

6) The value of CEO should correspond to some measure of organizational success.

Ans: True

7 ) Replacement Cost Method was developed by Brummet, Flamholtz and Pyle.

Ans: True

8) Salary progression curves are also called as "Economic Curves"

Ans: False

9) It is the duty of the employer to pay equal remuneration to men and women workers for the same work or work of the similar nature.

Ans: True

10) Provident fund schemes for the benefits of the employers had been introduced by some organization.

Ans: False

Q2) a) Define Compensation. Explain the objectives of a compensation plan?     (15)

Compensation refers to the total rewards that employees receive in return for their work and services to an organization. It includes monetary benefits like salary, wages, bonuses, incentives, and non-monetary benefits such as healthcare, paid leaves, housing, and other perks.

In simple terms, compensation is what a company pays or offers to its employees in exchange for their contribution to the organization.

Objectives of a Compensation Plan:

A well-designed compensation plan aims to achieve several strategic and operational goals:

1. Attract and Retain Talent

Compensation helps attract qualified candidates and retain skilled employees by offering competitive and fair rewards in the job market.

2. Motivate Employee Performance

By linking compensation to performance (e.g., through bonuses or incentives), employees are encouraged to perform better and achieve organizational goals.

3. Ensure Equity and Fairness

A sound plan ensures internal equity (fairness among employees within the organization) and external equity (fair pay compared to similar jobs in the inustry).

4. Control Labor Costs

Compensation plans help organizations manage their budget efficiently and avoid overpaying or underpaying for roles.

5. Support Organizational Culture and Strategy

The structure of compensation should align with the company’s culture, values, and long-term strategic objectives—whether that’s innovation, customer service, or cost-efficiency.

6. Compliance with Laws

A proper plan ensures the company adheres to labour laws and regulations like minimum wage, equal pay, and overtime.

7. Encourage Skill Development

Plans that include raises or promotions based on skills and education motivate employees to upskill and grow professionally.

8. Reduce Employee Turnover and Absenteeism

Fair and attractive compensation reduces dissatisfaction, which in turn helps lower attrition rates and absenteeism.

OR

Q2) b) What are the external factors influencing compensation?            (8)

External factors are those outside the organization that influence how compensation is determined. Companies must consider these factors to stay competitive, compliant, and attractive to talent in the job market.

External factors that influence compensation:

1. Labour Market Conditions

The supply and demand of labor in the job market significantly affect compensation.

• If there is a shortage of skilled workers, companies may offer higher pay to attract talent.

• If there is an abundance of candidates, wages may remain stable or low.

2. Cost of Living

Compensation is often adjusted based on the cost of living in a particular area.

• Employees in urban cities or expensive regions usually receive higher pay to match housing, transportation, and other expenses.

3. Industry Standards and Competitors' Pay

Organizations often benchmark their compensation plans against competitors.

• To attract and retain top talent, businesses must match or exceed industry pay standards.

4. Economic Conditions

Economic factors like inflation, recession, or economic growth can affect compensation.

• During inflation, companies may raise wages to maintain employees’ purchasing power.

• In economic downturns, companies might freeze or reduce salaries.

5. Legal and Regulatory Requirements

Companies must comply with labour laws such as:

• Minimum Wages Act

• Equal Remuneration Act

• Payment of Bonus Act

• These laws set minimum standards for employee compensation.

6. Trade Unions and Collective Bargaining

In unionized industries, trade unions play a major role in negotiating wages and benefits.

• Unions may demand better pay, bonuses, and working conditions, influencing compensation structures.

7. Technological Advancements

Automation and digitalization can affect job roles and their value.

• High-tech roles often demand higher compensation due to specialized skills.

• Routine jobs may see lower pay due to automation.

8. Globalization

Organizations operating globally need to consider international compensation standards, especially if they have employees working overseas or if they’re competing in a global talent market.

(Q2) c) Describe the dimensions of compensation.        (7)

Compensation is not limited to just salary or wages. It includes various financial and non-financial rewards that an employee receives from an organization. These dimensions reflect the total value provided to an employee in exchange for their work.

The main dimensions of compensation:

1. Direct Compensation

This is the monetary payment made to employees for their work.

Includes:

• Basic Salary/Wages – Fixed regular pay.

• Incentives – Payments based on performance (e.g., bonuses, commissions).

• Overtime Pay – Extra payment for working beyond regular hours.

• Profit Sharing – Share of the company’s profits given to employees.

2. Indirect Compensation (Benefits & Perks)

These are non-cash benefits provided to employees to improve their quality of life.

• Health Insurance

• Provident Fund (PF)

• Gratuity

• Paid Leave (Sick leave, Casual leave, Maternity leave)

• Company Car, Mobile, Laptop

• Housing Allowance / HRA

• Retirement Benefits

3. Non-Financial Compensation

These rewards don’t involve money but play a key role in employee motivation and satisfaction.

• Recognition & Awards (Employee of the Month, Certificates)

• Career Development Opportunities

• Job Security

• Work-life Balance

• Positive Work Environment

• Autonomy and Responsibility

4. Performance-Based Compensation

Rewards linked directly to individual or team performance.

• Merit Pay – Increment based on performance.

• Goal Achievement Bonuses

• Sales Incentives

• Variable Pay Components

5. Equity-Based Compensation

Offered mostly in startups or large companies to retain talent and promote ownership.

• Employee Stock Options (ESOPs)

• Shares or Equity Participation

Q3) a) Define Incentive plan. Discuss various types in incentive plans.        (15)

An incentive plan is a structured program designed by an organization to reward employees for achieving specific goals, improving performance, or exceeding expectations.

It is performance-based compensation that motivates employees to work more efficiently and aligns their efforts with the organization’s objectives.

Objectives of Incentive Plans:

• Boost productivity and efficiency

• Encourage high performance

• Retain top talent

• Align employee goals with organizational goals

• Reward efforts and achievements

Types of Incentive Plans:

1. Individual Incentive Plans

Rewards are given to individual employees based on their personal performance.

Examples:

• Piece Rate System – Employee is paid per unit produced.

• Commission – Common in sales jobs; payment based on sales made.

• Performance Bonuses – Bonus for exceeding targets or KPIs.

• Merit Pay – Increment based on performance appraisals.

2. Group Incentive Plans

Rewards are shared among a team or group of employees based on collective performance.

Examples:

• Team Bonuses – Given when a team achieves or exceeds its goals.

• Gainsharing Plans – Employees share in the savings gained from improved productivity or reduced costs.

3. Organizational/Company-wide Incentive Plans

All employees are rewarded based on the overall performance of the organization.

Examples:

• Profit Sharing – Employees receive a share of company profits.

• Stock Options (ESOPs) – Employees get the right to buy company shares at a lower price.

• Annual Performance Bonus – Given based on company performance over the year.

4. Non-Monetary Incentive Plans

These don’t involve cash but are still powerful motivators.

Examples:

• Recognition Programs – “Employee of the Month” awards

• Extra Paid Leave

• Gift Vouchers or Travel Packages

• Training and Development Opportunities

Incentive plans are key tools in human resource management. They not only help improve employee morale and productivity but also drive business growth by aligning employee performance with organizational goals. The right incentive plan can turn average workers into high performers.

OR

Q3) b) Mention the different types of Wage Differentials.

Wage Differentials refer to the differences in wages paid to different individuals or groups due to various factors such as skills, location, industry, or job responsibilities.

Here are the main types:

1. Inter-Industry Wage Differentials

• Wages differ between industries, even for similar kinds of jobs.

• Example: A machine operator in the automobile industry may earn more than a machine operator in the textile industry.

2. Inter-Occupational Wage Differentials

• Wages differ between different occupations based on skill level, risk, and demand.

• Example: A doctor earns more than a clerk due to skill and responsibility differences.

3. Inter-Firm Wage Differentials

• Wages vary between firms within the same industry.

• Example: A marketing executive in Company A may earn more than one in Company B, even if both work in the FMCG sector.

4. Personal Wage Differentials

• Differences in wages due to personal characteristics like experience, education, performance, and seniority.

• Example: Two teachers in the same school may earn different salaries based on qualifications and experience.

5. Regional Wage Differentials

• Wages vary by geographic location due to cost of living, demand for labor, and availability of resources.

• Example: A software engineer in Mumbai may earn more than one in a smaller city like Nagpur.

6. Gender-Based Wage Differentials

• Wage difference between male and female workers doing the same or similar job.

• Often exists due to discrimination or occupational segregation, despite laws like the Equal Remuneration Act.

Wage differentials exist due to multiple economic, social, and organizational factors. Understanding them is crucial for ensuring fairness, equity, and competitiveness in compensation practices.

Q3) c) Write in detail about "Wage Fund Theory"

The Wage Fund Theory is one of the classical theories of wage determination, proposed by Adam Smith and later developed by John Stuart Mill in the 19th century. It explains how wages are determined in an economy based on the availability of capital set aside for paying workers.

Definition:

Wage Fund Theory states that wages are paid from a pre-determined fund of capital (called the “wage fund”) that is allocated by employers for the purpose of paying labor.

This fund remains fixed in the short run, and wages depend on how this fund is distributed among workers.

Formula:

$$\text{Average Wage }= \frac{\text{Wage Fund / }}{\text{Number of Workers}}$$

This means that:

• If the wage fund increases, wages increase.

• If the number of workers increases, wages decrease (assuming the fund stays the same).

Assumptions of Wage Fund Theory:

1. Fixed Wage Fund: The total amount of capital available for paying wages is fixed in the short term.

2. Fixed Number of Workers: The size of the labor force is also assumed to be constant.

3. No Role of Productivity: Wages do not depend on the productivity of workers.

4. Short-Run Perspective: The theory is based on short-run analysis.

5. Wages are Paid in Advance: Employers must pay wages before the product is sold.

Implications:

• If more workers are available, the average wage per worker falls.

• If the wage fund is large and the number of workers is small, each worker receives a higher wage.

• Wage increase is only possible if the wage fund increases or the number of workers decreases.

Criticism of Wage Fund Theory:

1. Unrealistic Assumption of Fixed Wage Fund: In reality, the wage fund can change depending on profits, investments, and productivity.

2. Ignores Worker Productivity: The theory does not consider how much a worker contributes to production.

3. No Role of Collective Bargaining: Modern wage determination includes negotiations, minimum wage laws, and trade union influence.

4. Over-simplified Approach: It simplifies the complex nature of wage determination.

The Wage Fund Theory was an important early attempt to explain wage determination but has been largely rejected in modern economics. Today, wages are seen as a result of demand and supply, worker productivity, negotiations, and government policies, rather than a fixed fund.

Q 4) a) Elaborate the compensations given to special groups.

In every organization, there are certain groups of employees who require special attention in terms of their compensation due to the nature of their work, location, skills, or status. These groups are often called “special groups”, and their compensation plans are customized to meet their unique needs and to retain their services.

1. Top Executives / Senior Management

These include CEOs, CFOs, COOs, Directors, and Vice Presidents.

Compensation Components:

• High Base Salary

• Performance-based Bonuses

• Stock Options (ESOPs)

• Profit Sharing

• Long-term Incentive Plans (LTIPs)

• Perquisites like company cars, housing, and club memberships

2. Expatriates / International Employees

Employees who are posted to work in foreign countries.

Compensation Components:

• Foreign Service Premium

• Hardship Allowance

• Cost-of-Living Adjustments (COLA)

• Housing Allowance

• Travel and Relocation Allowance

• Tax Equalization

3. Professionals / Knowledge Workers

Includes engineers, IT experts, researchers, scientists, and consultants.

Compensation Components:

• Skill-Based Pay

• Innovation Bonuses

• Flexible Work Arrangements

• Project Completion Bonuses

• Continuous Learning Opportunities

4. Blue Collar Workers / Laborers

Manual or technical workers usually engaged in production or field work.

Compensation Components:

• Wages (Hourly/Daily)

• Overtime Pay

• Production Incentives

• Safety Allowance

• Attendance Bonuses

• Provident Fund, Gratuity, and ESIC

5. Sales Personnel

Sales executives, marketing agents, and field sales workers.

Compensation Components:

• Base Pay

• Commission on Sales

• Performance Bonuses

• Travel Allowance

• Incentive Trips

• Mobile and Vehicle Allowance

6. Retired Employees / Superannuated Workers

Former employees who have completed their service.

Compensation Components:

• Pension

• Gratuity

• Provident Fund Withdrawal

• Medical Benefits / Insurance

• Post-Retirement Welfare Schemes

7. Differently-Abled Employees

Employees with physical or mental disabilities.

Compensation Components:

• Equal Pay for Equal Work

• Accessibility Allowance

• Flexible Working Hours

• Medical Aid

• Welfare Schemes and Tax Benefits

Different employee groups have different needs and expectations, and compensation must be tailored accordingly. By designing appropriate and fair compensation for special groups, organizations can improve job satisfaction, loyalty, and overall performance.

OR

Q4) b) Define Human Resource Accounting. Explain HRVA.

Human Resource Accounting (HRA) is a process of identifying, measuring, and reporting investments made in human resources of an organization. It involves quantifying the value of employees—their skills, knowledge, and abilities—and incorporating this information into financial statements or management reports to support decision-making.

Definition of Human Resource Accounting (HRA):

“Human Resource Accounting is the process of identifying and measuring data about human resources and communicating this information to interested parties.”
— American Accounting Association

In simple terms, HRA aims to treat human resources as assets rather than as costs, thus recognizing their contribution to the organization's value.

Human Resource Valuation Approaches (HRVA)

HRVA refers to the different methods used to assign monetary value to human resources. These can be broadly classified into two categories:

1. Cost-Based Approaches

These methods consider the actual cost incurred in hiring, training, and developing employees.

• Historical Cost Method: Records the actual cost incurred in recruiting, hiring, and training the employee.

• Replacement Cost Method: Estimates how much it would cost to replace existing employees with others of equivalent skills and experience.

2. Value-Based Approaches

These methods attempt to measure the economic value that employees are expected to bring to the organization in the future.

• Present Value of Future Earnings Method: Calculates the present value of future earnings that an employee is expected to generate for the company.

• Economic Value Method: Measures the employee’s contribution to the organization’s profit over their expected tenure.

• Capitalization of Earnings Method: Capitalizes the expected future earnings of employees based on a predetermined rate of return.

Importance of HRVA

• Provides better insight into workforce planning and development.

• Helps in strategic decision-making related to recruitment, training, and retention.

• Facilitates comparison of human resource investment across departments.

• Enhances transparency and accountability in managing human capital.

Q4) c) How to write an Severance Agreement?

a Severance Agreement involves balancing legal protection for the employer with fair compensation and clarity for the departing employee. It should be clear, legally compliant, and mutually respectful. Here's a step-by-step guide along with a sample outline.

Components of a Severance Agreement

1. Title

Simple and clear.
Example: Severance Agreement and General Release

2. Parties Involved

Identify both the employer (company) and the employee.

This Severance Agreement (“Agreement”) is made between [Employee Name] and [Company Name], effective as of [Date].

3. Recitals / Background

A brief explanation of the employment relationship and reason for termination (optional but helpful).

WHEREAS, the Employee’s employment with the Company is ending as of [Separation Date]; and WHEREAS, the Company wishes to provide severance benefits in exchange for a release of claims.

4. Severance Payment

Clearly state the amount, method, and date of severance pay.

The Company shall pay the Employee [Amount] as severance, payable in [lump sum/installments], less applicable taxes.

5. Other Benefits (if any)

Include continuation of benefits like:

• Health insurance

• Outplacement services

• Unused vacation payout

6. Release of Claims

The employee agrees not to pursue legal claims against the employer.

The Employee releases the Company from any and all claims arising from their employment or termination, including but not limited to...

7. Non-Disparagement / Confidentiality

Mutual agreement not to harm each other's reputation or disclose confidential terms.

Both parties agree not to make negative or disparaging remarks and to keep this Agreement confidential, except as required by law.

8. Return of Company Property

Requirement that the employee returns all devices, files, and materials.

The Employee shall return all company property, including electronic devices, documents, and keys, by [Date].

9. Non-Compete / Non-Solicit (if applicable)

Optional clauses, depending on company policy and legal enforceability in your jurisdiction.

10. Acknowledgment of Understanding

Statement that the employee has had time to review and consult legal counsel.

The Employee acknowledges they have had [21] days to consider this Agreement and have been advised to consult legal counsel.

11. Governing Law

Mention the legal jurisdiction governing the agreement.

This Agreement shall be governed by the laws of the State of [State].

12. Signature Blocks

Include date and signatures for both parties.

Q5) a) Explain the Payment of Wages Act, 1936 in detail.

The Payment of Wages Act, 1936 is a key piece of labor legislation in India aimed at ensuring timely and full payment of wages to employees without unauthorized deductions. It is particularly important for protecting the rights of employees in the lower-income group.

Objective:

To regulate the payment of wages to certain classes of employed persons and ensure that they are paid on time and without unauthorized deductions.

Provisions of the Act 

1. Applicability (Section 1)

• Initially applied to employees earning up to ₹1,000 per month (this limit has been revised over time by the government).

• It applies to factories, railways, industrial establishments, and other specified establishments.

• The appropriate government (Central or State) has the power to extend the Act to other sectors.

2. Responsibility for Payment (Section 3)

• The employer or person responsible for supervision (like a manager) is liable to ensure payment of wages.

3. Time of Payment (Section 5)

• Wages must be paid:

  • Before the 7th day of the following month (if employees are less than 1,000)

  • Before the 10th day (if employees are more than 1,000)

• Upon termination, wages must be paid within two working days.

4. Mode of Payment (Section 6)

• Wages must be paid in current coin or currency notes, or by cheque/direct deposit into the employee's bank account (with consent).

5. Permissible Deductions (Section 7)

Only certain deductions are allowed under the Act. Examples include:

• Fines (must be pre-approved and follow a procedure)

• Absence from duty

• Damage or loss caused by negligence

• House accommodation provided by the employer

• Advances or loans

• Income tax, provident fund contributions

• Court orders

• Cooperative society dues

Note: Total deductions must not exceed 50% of wages (or 75% if deductions are for cooperative societies).

6. Fines (Section 8)

• Fines can only be imposed for acts and omissions specified in advance.

• The employee must be given a chance to explain before imposing the fine.

• Fines cannot exceed 3% of wages in a month.

• Fines collected must be recorded and used for employee welfare.

7. Maintenance of Records (Section 13A)

Employers are required to maintain detailed registers of wages, deductions, and fines to ensure transparency.

8. Claims and Penalties (Sections 15–20)

• Employees can file claims before an authority appointed by the government (like a labor commissioner).

• If payment is delayed or wrongfully deducted, the authority can:

  • Order payment of due wages

  • Impose compensation up to 10 times the deducted amount

• Employers violating the provisions can face fines or imprisonment.

Importance of the Act

• Protects low-wage earners from wage exploitation.

• Promotes transparency and fairness in wage administration.

• Sets a legal framework for redressal of wage disputes.

• Encourages timely payment and reduces labor unrest.

Recent Developments

Many provisions of this Act are now part of the Code on Wages, 2019, which aims to consolidate and simplify multiple wage-related laws in India.

Q5) b) Explain the Payment of Gratuity Act, 1972.

the Payment of Gratuity Act, 1972, which is a significant social security legislation in India.

Objective:

To provide a statutory retirement benefit to employees who have rendered long and continuous service, as a token of appreciation from the employer.

Provisions of the Act

1. Applicability (Section 1)

• Applies to:

  • Factories, mines, oilfields, plantations, ports, railways

  • Shops and establishments with 10 or more employees on any day in the preceding 12 months

• Once applicable, it continues to apply even if the number of employees falls below 10.

2. Eligibility (Section 4)

An employee becomes eligible for gratuity if:

• They have completed five years of continuous service, and

• The gratuity becomes payable on:

  • Superannuation (retirement)

  • Resignation

  • Death or disablement due to accident or disease (Note: 5-year service not required in case of death/disablement)

3. Definition of "Employee"

Covers any person (other than an apprentice) who is employed for wages in any kind of work—manual or clerical—in or in connection with a factory, mine, oilfield, etc., but does not cover government employees (they have a separate gratuity system).

4. Calculation of Gratuity

Gratuity is calculated using the formula:

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26

• Last drawn salary includes basic pay + dearness allowance

• 15 days' wages for every completed year (or part in excess of 6 months)

• Salary is divided by 26 to get wages for 15 days (assuming 26 working days in a month)

Example:

If an employee's last salary is ₹30,000 and they served for 10 years:

Gratuity = (30,000 × 15 × 10) ÷ 26 = ₹1,73,077 (approx)

5. Maximum Limit (as of recent updates)

• The maximum gratuity payable is ₹20 lakhs (as per the amendment effective from 2018).

6. Nomination (Section 6)

• Employees must nominate a family member to receive gratuity in case of death.

• Nomination should be submitted after one year of service.

7. Payment and Time Limit (Section 7)

• Gratuity must be paid:

  • Within 30 days from the date it becomes payable

• In case of delay, the employer must pay simple interest on the amount

8. Forfeiture of Gratuity (Section 4(6))

Gratuity can be wholly or partially forfeited if the employee:

• Is dismissed for acts of moral turpitude, willful misconduct, or

• Causes damage/loss to the employer’s property

9. Administration and Enforcement

• The Controlling Authority under the Act (usually the Labour Commissioner) handles disputes.

• If the employer refuses to pay gratuity, the employee can file a claim within 90 days.

Importance of the Act

• Ensures financial security post-retirement

• Encourages employee loyalty and long-term service

• Provides legal protection against non-payment

Recent Developments

• The Act is part of the Code on Social Security, 2020, which is yet to be fully implemented but aims to consolidate multiple labor laws, including this one.

OR

Q5) Short Notes (Any 3 out of 5)                [15]

a) Write a note on "The Distributive Justice Model".

Definition:

The Distributive Justice Model refers to a concept in ethics, economics, and organizational behavior that emphasizes the fair allocation of resources, rewards, and responsibilities among individuals in a society or organization.

It is concerned with "who gets what and why", based on principles such as equity, equality, and need.

Principles of Distributive Justice:

1. Equity – Rewards should be distributed based on an individual's contribution, performance, or merit.

2. Equality – Everyone should receive the same share, regardless of effort or status.

3. Need – Resources should be distributed according to each person’s needs.

Theorists & Thinkers:

• Aristotle – Introduced the idea of distributive justice based on merit.

• John Rawls – Modern philosopher who proposed that justice should ensure the greatest benefit to the least advantaged, under his theory of "justice as fairness."

In Organizational Context:

In HR and management, the distributive justice model is used to evaluate employee satisfaction and perceived fairness in:

• Salary and bonuses

• Promotions

• Workload distribution

• Recognition and rewards

Employees who perceive fair treatment are more likely to exhibit higher motivation, trust, and commitment.

Difference from Procedural Justice:

• Distributive justice focuses on outcomes.

• Procedural justice deals with the fairness of the process used to determine those outcomes.

Importance:

• Promotes a sense of fairness and equity

• Reduces workplace conflicts

• Enhances morale and productivity

• Contributes to social stability and trust in institutions

b) What are the different factors contributing to wage differentials?

Wage differentials refer to the differences in wages paid to workers for similar or different work. These differences exist across industries, regions, skills, and individuals.

Factors Contributing to Wage Differentials

1. Skill and Education Level

• Highly skilled or educated workers earn more than unskilled or semi-skilled workers.

• Specialized qualifications often command premium pay.

Example: A software engineer vs. a data entry operator.

2. Nature of the Job

• Jobs that are physically demanding, dangerous, or require high responsibility usually pay more.

• Mental vs. manual labor can also influence wage levels.

Example: A construction site manager vs. a regular laborer.

3. Experience and Seniority

• Employees with more years of experience or seniority tend to earn higher wages due to accumulated knowledge and loyalty.

4. Industry and Sector

• Wages vary significantly across industries.

• High-profit sectors like IT, finance, and pharmaceuticals often offer better pay compared to agriculture or textiles.

5. Geographical Location

• Cost of living, economic development, and labor supply in a region affect wages.

• Urban centers typically offer higher wages than rural areas.

6. Supply and Demand of Labor

• Scarcity of skilled labor in a field drives up wages.

• Oversupply can lead to lower wages.

7. Unionization and Collective Bargaining

• Strong labor unions can negotiate better wages and benefits for workers.

• Non-unionized sectors may offer lower or more variable pay.

8. Gender and Discrimination

• Unfortunately, wage gaps still exist due to gender bias, caste, ethnicity, or social background, despite being legally prohibited in many countries.

9. Working Conditions

• Jobs with poor or hazardous working conditions may offer higher wages as compensation (called "compensating wage differentials").

10. Government Policies and Minimum Wage Laws

• Legislation around minimum wage, wage boards, or public sector pay scales also affect wage levels and differentials.

11. Performance-Based Pay

• Bonuses, incentives, and commissions can cause wage variation even within the same job role.

Example: Salespersons with higher sales volume earn more commissions.

c) Write a note on Human Resource Value Accounting (HRCA).

Human Resource Value Accounting (HRVA), also known as Human Resource Cost Accounting (HRCA), is a system of accounting that identifies and reports investments made in human resources (like recruitment, training, and development) and measures the economic value of employees to the organization.

It treats human resources as valuable assets, rather than mere expenses, and seeks to quantify their worth in financial terms.

Objectives of HRVA:

• To determine the cost incurred in hiring, training, and developing employees.

• To estimate the value generated by employees during their service.

• To support strategic HR planning and performance evaluation.

• To improve decision-making by integrating HR data with financial reports.

Methods of Human Resource Value Accounting:

1. Historical Cost Method

• Measures actual costs incurred in hiring and developing employees.

• Similar to traditional accounting but applied to HR.

2. Replacement Cost Method

• Estimates the current cost to replace an existing employee with someone of equivalent skills.

3. Present Value of Future Earnings

• Calculates the present value of future earnings expected from an employee during their remaining service.

4. Economic Value Method

• Measures an employee’s contribution to organizational profit over time.

5. Standard Costing Method

• Uses pre-determined standard costs for different categories or grades of employees.

Advantages:

• Promotes a strategic view of human resource management.

• Encourages investment in employee development.

• Helps in workforce planning, budgeting, and performance tracking.

• Provides a realistic picture of an organization’s true assets.

Limitations:

• Difficulty in quantifying human behavior and productivity.

• No universal method or standard yet accepted.

• May lead to ethical concerns (e.g., “putting a price on people”).

d) Write a note on Bonus Act, 1965.

The Payment of Bonus Act, 1965 is a welfare legislation in India that aims to provide statutory bonus to employees based on profits or productivity. It seeks to bridge the gap between employers and employees by sharing a portion of the company’s profits with the workers.

Applicability:

• Applies to:

  • Every factory.

  • Every establishment with 20 or more employees.

• Once applicable, it continues to apply even if the number of employees falls below 20 later.

• Covers employees earning up to ₹21,000/month (as per latest amendment).

Eligibility:

• An employee is eligible if:

  • They have worked for at least 30 days in a financial year.

  • Their salary or wages (excluding allowances) does not exceed the prescribed limit.

Bonus Calculation:

✔️ Minimum Bonus 

• 8.33% of salary or wages, even if the employer makes no profit.

✔️ Maximum Bonus –

• 20% of salary or wages, depending on profits and allocable surplus.

Salary Ceiling for Calculation:

• For bonus calculation, salary is considered up to ₹7,000/month or the minimum wage for the scheduled employment (whichever is higher).

Time of Payment:

• Bonus must be paid within 8 months from the close of the accounting year.

Set-on and Set-off Provisions:

• If the allocable surplus exceeds the maximum bonus limit, the excess is "set-on" and carried forward up to 4 years.

• If there's a shortfall in profits, previous years’ excess can be used to "set-off" the deficit.

Disqualification from Bonus:

• Employees dismissed for:

  • Fraud,

  • Riotous or violent behavior,

  • Theft or sabotage, are not entitled to receive bonus.

Importance of the Act:

• Encourages employee participation in company profits.

• Enhances industrial harmony and motivation.

• Protects the interests of low-paid employees.

e) Write in note on Adjudication. 

Definition:

Adjudication refers to the legal process of resolving a dispute or deciding a case. In the context of industrial or labor laws, it means the settlement of industrial disputes by a legal authority such as a Labour Court, Industrial Tribunal, or National Tribunal.

Purpose of Adjudication:

• To provide a fair, legal resolution to conflicts between employers and employees.

• To maintain industrial peace and harmony.

• To ensure that disputes are resolved by impartial third parties, not through strikes or lockouts.

Authorities Involved in Adjudication (Under Industrial Disputes Act, 1947):

1. Labour Court – Deals with matters like wrongful dismissal, layoffs, etc.

2. Industrial Tribunal – Handles broader issues like wages, bonus, and working conditions.

3. National Tribunal – For disputes involving questions of national importance or affecting more than one state.

Process:

1. Dispute is referred by the appropriate government.

2. The court/tribunal holds hearings, examines evidence and witnesses.

3. A binding decision (award) is given and published.

4. The award becomes enforceable after 30 days of publication.

Advantages of Adjudication:

• Provides legal and structured resolution.

• Avoids industrial unrest.

• Protects the rights of both employers and employees.

• Useful when conciliation and mediation fail.

Limitations:

• Can be time-consuming and formal.

• May involve legal expenses.

• Delays in adjudication may aggravate disputes.