Sudhir Project

8/3/2019 Sudhir Project

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Chapter- 1

(INTRODUCTION)

GENERAL INTRODUCTION ABOUT SECTOR

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INDUSTRY PROFILEAgro Industry:

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a. Origin and development of the industry

Agriculture and industry have traditionally been viewed as two separate sectors both in terms oftheir characteristics and their role in economic growth. Agriculture has been considered thehallmark of the first stage of development, while the degree of industrialization has been takento be the most relevant indicator of a countrys progress along the development path. Moreover,the proper strategy for growth has often been conceived as one of a more or less gradual shiftfrom agriculture to industry, with the onus on agriculture to finance the shift in the first stage.

This view, however, no longer appears to be appropriate. On the one hand, the role ofagriculture in the process of development has been reappraised and revalued from the point ofview of its contribution to industrialization and its importance for harmonious development andpolitical and economic stability. On the other hand, agriculture itself has become a form ofindustry, as technology, vertical integration, marketing and consumer preferences have evolvedalong lines that closely follow the profile of comparable industrial sectors, often of notablecomplexity and richness of variety and scope. This has meant that the deployment of resources

in agriculture has become increasingly responsive to market forces and increasingly integratedin the network of industrial interdependencies. Agricultural products are shaped by technologiesof growing complexity, and they incorporate the results of major research and developmentefforts as well as increasingly sophisticated individual and collective preferences regardingnutrition, health and the environment. While one can still distinguish the phase of production ofraw materials from the processing and transformation phase, often this distinction is blurred bythe complexity of technology and the extent of vertical integration: the industrialization ofagriculture and development of agroprocessing industries is thus a joint process which isgenerating an entirely new type of industrial sector.

This chapter attempts to review some of these issues and assess the actual and potential role of

the agroprocessing industry in economic development. It starts by discussing the definition ofthe sector and reviewing some of the statistical evidence of its economic importance worldwide.It then moves on to a discussion of the role that the agroprocessing industry can play ineconomic development in the developing countries, before reviewing how conditions for agro-industrial development are currently changing worldwide as a result of changing trade policiesand regimes and the evolution of both technology and food consumption patterns. The chapterthen underlines the growing internationalization of agroprocessing activities, in particularthrough the increasing importance of international capital activities, and the role played bymultinational corporations in this process. Finally, it discusses elements of a conducive policyenvironment for promoting the agroprocessing industry and for ensuring that the sector canprovide the optimum contribution to economic development.

AGRO PROCESSING INDUSTRY:

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Types of agro processing:

A common and traditional definition of agroprocessing industry refers to the subset ofmanufacturing that processes raw materials and intermediate products derived from theagricultural sector. Agroprocessing industry thus means transforming products originating fromagriculture, forestry and fisheries.

Indeed, a very large part of agricultural production undergoes some degree of transformation between harvesting and final use. The industries that use agricultural, fishery and forestproducts as raw materials comprise a very varied group. They range from simple preservation(such as sun drying) and operations closely related to harvesting to the production, by modern,capital-intensive methods, of such articles as textiles, pulp and paper.

The food industries are much more homogeneous and are easier to classify than the non-foodindustries since their products all have the same end use. Most preservation techniques, forexample, are basically similar over a whole range of perishable food products, whether they be

fruit, vegetables, milk, meat or fish. In fact, the processing of the more perishable food productsis to a large extent for the purpose of preservation.

Non-food industries, in contrast to the food industries, have a wide variety of end uses. Almostall non-food agricultural products require a high degree of processing. Much more markedlythan with the food industries, there is usually a definite sequence of operations, leading throughvarious intermediate products before reaching the final product. Because of the value added ateach of these successive stages of processing, the proportion of the total cost represented by theoriginal raw material diminishes steadily. A further feature of the non-food industries is thatmany of them now increasingly use synthetics and other artificial substitutes (especially fibres)in combination with natural raw materials.

Another useful classification of agroprocessing industry is in upstream and downstreamindustries. Upstream industries are engaged in the initial processing of agriculturalcommodities. Examples are rice and flour milling, leather tanning, cotton ginning, oil pressing,saw milling and fish canning. Downstream industries undertake further manufacturingoperations on intermediate products made from agricultural materials. Examples are bread, biscuit and noodle making, textile spinning and weaving; paper production; clothing andfootwear manufacturing; and rubber manufactures.

A further specification is related to the nature of the production process which, in many cases,can range from craft to industrial organization. For example, in some developing countries the

same good may be produced both by handloom weavers working in their own home and bylarge textile factories that have sophisticated machinery and complex systems of organizationand that produce a range of industrial products for the domestic and external markets. In suchcases, it can be misleading to define agroprocessing industry just on the basis of the goods produced because only the second method of production mentioned has industrialcharacteristics.

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Today, however, it is becoming even more difficult to provide a precise demarcation of whatshould be considered an agro-industrial activity: the impact of innovation processes and newtechnologies suggests a widening of the range of agro-industry1 inputs that could be considered,including biotechnological and synthetic products, for example. This implies that agro-industrytoday continues to process simple agricultural goods while also transforming highly

sophisticated industrial inputs that are often the result of considerable investments in research,technology and innovation. Corresponding to this growing complexity of inputs is an increasingrange of transformation processes, characterized by physical and chemical alteration and aimedat improving the marketability of raw materials according to the final end use.

All these factors the growing complexity of inputs, the impact of innovation processes andnew technologies, the sophistication and the growing range of the transformation processes makes it increasingly difficult to draw a clear distinction between what should be consideredstrictly industry and what can be classified as agro-industry.

b. Growth and present status of the industry

Agriculture industry

From the time of its Independence, agriculture has been the most important deciding factor of Indias

economy. backbone of Indias economy. Agriculture segment in India alone was responsible for not less than

18% of Indias GDP in addition to offering jobs to about 60% of Indias entire population. Services related to

the agriculture industry in India could make up a bulk of 62% to the countrys GDP. However, irrespective of

its immense contribution to the GDP, it only employed 28% of the total population of the nation. The volume

of exports has been increasing between 2001 to 2009, making up a 200% increase during this time. On the

other hand, for the past three years, imports have not changed much. The enormous growth in the agricultureproducts segment has helped India significantly increase the production of food.

Despite the commendable growth in agriculture and agriculture products mentioned above, there has been a

fall in the total volume of exports of agriculture products from India since 2004 to 2009 from 12.7% to

10.23%.

Statistics also reveal that the average daily food consumption in India per head is blow 2,500 kilocalorie per

day which implies that there is a sizeable room available for growth. In addition, it is also noted that the

population of India will be on a steady growth over the next thirty years at the rate of 1 percent per year.

However, there are no chances for India to take over Chinas position as a major engine growth in the global

agricultural demand owing to the fact that the cultural traditions in the nation advocate and promotevegetarianism, which will hold back the nations demand for animal feeds and meet much below what is

noticed in China.

Experts in the arena reveal that the Indian Agriculture Industry is poised towards a great revolution that will

modernize the whole food chain since the total volume of food production in the sub continent is most likely to

double over the next ten years period.

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Recent studies show that the value of the total food market in India at present is about Rs.250000 crore (US $

69.4 billion). In this figure, the size of value-added food products alone makes up Rs.80000 crore (US $ 22.2

billion). Most importantly, the Indian government has sanctioned approval for a number of joint ventures and

collaborations with foreign firms besides licensing several industries and fully export units anticipating an

investment of about Rs.19100 crore (US $ 4.80 billion) in the segment. Out of this figure, the foreign

investments alone are expected to be more than Rs. 9100 crore (US $ 18.2 Billion). The agricultural food

industry also is gaining more significance on account of Indias substantial agrarian economy, which is

responsible for the countrys 35% of GDP while the sector has also given employment to more than 65 per

cent of Indias population. With respect to foreign investments and also a number of joint- ventures and

collaborations with foreign firms, the consumer food segment in India has always remained the top priority.

Over and above, there are also several other attractive features in the Indian agriculture industry that are

capable of luring foreigners with promising benefits like deep sea fishing, aqua culturing, milk and dairy

products manufacturing, poultry segments and meat.

The notable feature of the Indian agriculture industry can be listed as export prospects, competitive pricing and

international standards. These features are responsible for generating enormous trade opportunities in the

Indian agriculture industry. In addition, this portal has also served as the gateway for all the exporters andimporters in and out of the country to satisfy their requirements and make use of the benefits of buy sell

business leads and other trade opportunities connected to the agriculture products industry.

With a country of more than a billion people, entrepreneurs can choose from a wide variety of areas in the

agriculture products segment in the country ranging across food grains, canned, dairy, processed, fisheries,

frozen food, meat, poultry, alcoholic beverages and soft drinks.

Agriculture is the backbone of Indias rural economy around which both the socio-economic privileges and

deprivations surround. Any small change in the structure of this segment in India will invariably pronounce its

impact on the nations present pattern of social equality. During the 50 years period following the

independence of the nation, the growth of Indias agriculture was recorded at an impressive rate of 2.7 % perannum of which not less than two-third is brought about by the gains in crop productivity. Since the country

attained independence, the nation has been applying a thoroughly need based strategy in the agriculture sector

eventually intensifying the same after mid sixties with a chief focus on meeting the nutrition needs of the

countrys exploding population so as to make the nation self reliant with respect to food production.

In India, agriculture has been able to demonstrate a growth of more than four times during the planned area of

development raising the figure from just 51 million tonnes in 1950-51 to 199.1 million tonnes in 1997-98.

Starting from sixties, the growth witnessed in the sector is phenomenal aptly aided by several factors like

extensive usage of high yielding varieties of seed, fertilizers and pesticides, especially in well irrigated areas.

History and present day status of Agriculture industry

In the Indian sub continent, agriculture has a long history of more than 10,000 years with majority of the

population solely dependent on the industry. Consequently this sector has played a significant role in the

overall socio economic development of the nation. The Annual Report 2009-2010 pertaining to this sector

released by the Ministry of Agriculture has revealed that the total geographical area of India is 328.7 million

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the United Sates of America but this scenario is changing with a rapid pace with the

Indian steel companies on an acquisition spree.

History Of The Steel Industrydates back to the ancient times in Armenia which is

approximately around three thousand and five hundred Before Christ. Steel is nothing but

the alloy of iron and carbon. But the History Of The Steel Industry in the modern times

was initiated during the medium half of nineteenth century (during 1850s to be precise).

The initiator of it was a person named Mr. Henry Bessemer of England. At the same time,

another person named Mr. William Kelly, a resident of United States, has also started the

production of steel and was completely an independent approach from Mr. Bessemer. The

process in which the first ever production of steel was carried out came to be known as

Bessemer Process. This helped the steel industries to produce steel in large quantities and

also at comparatively low costs.

History Of The Steel Industry was enriched and modernized through the introduction of Open-

Hearth process of steel production which made the industries to produce steel out of domestic

iron ores. This process was first adopted by the steel industries situated in United States Of

America in the year 1888. This time saw rapid innovations in the processes of steel production

which got its impetus from the increased want for steel from various industries namely, railway

industry, automobile industry, industry involved in construction of bridges, etc. During this time

period, the enhanced demand as well as supply of steel pushed the ranking of USA to the first

position, in terms of the steel production.


India has traditionally been one of the major producers of steel in the world. Till the 1990s the

steel industry of India was regulated and controlled by government policies.

After the economic reforms of the early 1990s, the Indian steel industry has evolved

significantly to conform to global standards.

India has set a vision to be an economically developed nation by 2020. The steel industry is

expected to play a major role in India's economic development in the coming years. The steel

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industry of India has a very high growth potential and is expected to register significant growth

in the coming decades. India is expected to emerge as a strong force in the global steel market

in coming years.

The two major aspects that are expected to play a significant role in the growth of the steel

industry in India are -

Abundant availability of iron ore in the country

The country has well established facilities for steel production

Steel production in India has grown from 17 MT in 1990 to 36 MT in 2003. It is expected

that by 2011, the steel production in India will grow to 66 MT.

The major sectors where consumption of steel is expected to grow in the coming years are -

Construction

Housing

Ground transportation

Hi-tech engineering industries such as power generation, petrochemicals, fertilizers

The current scenario of the Indian steel industry indicates that there is huge growth

potential in this industry. The per capita-consumption of steel in India, according to

latest available estimates, is only 29 kg. This is much less compared to the global

average of 140kg. The per capita consumption level of developed nations like the

United States of America is 400kg. In this respect, one of the major initiatives that

need to be taken is to focus on increasing the consumption of steel in the rural areas of

India. The potential for the growth of consumption of steel in the rural areas of India

for purposes like rural housing, rural infrastructure, etc is high which needs to be

tapped efficiently.

In order to realize the growth potential in the steel industry of India, it is essential to

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ensure that the industry can remain competitive. One of the major aspects in this

regard is the availability of inputs. Shortage of inputs like coke has led to increase in

costs earlier. Moreover proper infrastructure facilities like transport infrastructure,

power etc are of prime importance in maintaining the competitiveness of the industry.

Most developed countries have regulations that are aimed to protect the domestic steel

industry. The Indian steel industry has comparatively much lesser protection through

regulations. Proper regulatory measures should be adopted by the government to

protect the domestic steel industry.

c. Future of IndustryIn the recent past, a major swing has been observed in the global steel production trend

with a shift from developed countries to developing countries. During CY 03-05, the CAGR

of steel production in developing economies like China (25.5%) and India (9.5%) was much

higher than the CAGR of world steel production (8.1%).

On the consumption aspect, globally, India has emerged as the 5th largest consumer of

steel in CY 05. Indian steel industry is characterized by fragmentation, particularly in the

downstream segment, with a large number of unorganized players.

Energy intensiveness of Indian steel industry is highlighted by its consumption of about10% and 27% of total electricity & coal consumed respectively by the entire Indian

industry. Primary producers (Integrated Steel Producers (ISPs)) in the country produce

majority of flat products and secondary producers (mini steel plants) produce most of the

long products. Globally, 65.4% of crude steel is produced by BF/BOF route, 31.7% by EAF

route and rest by Open Hearth method. In India, blast furnace/BOF route dominates with

41% share, followed by induction furnace at 31%, EAF at 25% and COREX at 3%. In FY

06, domestic steel production was apprx. 43 mt. Imports and exports as a % of steel

produced stood at 8.8% (3.77 mt) & 10.2% (4.35 mt) respectively.

In FY 06, India consumed about 38 mt of steel, infrastructure sector being the largest

consumer. The demand for the flat steel in the country is increasing with the growth in

automobile and consumer durable industries. Cost of production of steel depends on

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technology employed for production and extent of backward integration, sourcing of power

and raw material. Typical power consumption per tonne of steel produced ranges between

500-650 Kwh. Raw material accounts for 60- 70% and energy (coal and power) 25-30% of

total cost of production. India has self sufficiency in iron ore but for coking coal, coke and

scrap it has to depend upon imports. In FY 06, India produced about 166 mt of iron ore out

of which 66.3 mt was consumed by domestic steel producers and the rest was exported. The

demand growth of scrap is expected to be lower because of substitution by sponge iron.

Since2003, India has been the largest sponge iron producer in the world. In 2005, out of

total global production of 56.05 mt of sponge iron, India produced around 11.1 mt (19.8%).

In line with production target of 110 mt of steel (National Steel Policy) by FY20, many steel

producers have announced their capacity expansion plans by signing MOUs with various

state governments like Chattisgarh, Orissa and Jharkhand. The steel producers are

expected to add around 8 mt of capacity by FY 08. CARE estimates that during 2006-09,

demand for steel in the domestic market would grow at a CAGR of 8.4%. HR steel because

of its widespread applicability is expected to grow at a CAGR of 17.5%. During this period,

major demand drivers would be Consumer durables, Automobiles and Construction. After

latent scenario till 2003, international steel prices rose to touch record highs in early 2005,

mainly driven by rapid growth in steel demand from developing economies.

Domestically, steel prices of flat products follow the international trend. Globally, steel

prices are expected to firm up with continued growth in steel consumption. Further, the

winds of consolidation have gathered pace with Arcelor-Mittal merger and latest

acquisition of Corus by Tata Steel. The Indian steel industry has announced huge capacity

expansions. With commissioning of these capacities demand-capacity ratio is expected to

decline in FY 09 due to excess capacity. Will this lead to a drop in prices withcommissioning of these capacities? With China and India becoming the focus of major

global steel companies, will the consolidation of steel industry in these countries continue?

For comprehensive analysis and CAREs future outlook on the sector, please refer to the

exhaustive report on the Indian Steel Industry by CARE Research.

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Telecommunication Industry:

a. Origin and development of the industryThe history of telecommunication began with the use of smoke

signals and drums in Africa, theAmericas and parts ofAsia. In the 1790s, the first

fixed semaphore systems emerged in Europe; however it was not until the 1830s that

electrical telecommunication systems started to appear. This article details the history

of telecommunication and the individuals who helped make telecommunication

systems what they are today. The history of telecommunication is an important part of

the larger history of communication.


The telecom industry is growing at a great pace and the growth rate is expected to double withevery passing year. There are many newdevelopments in the telecomm sector, including the ingress of 3G technology that the Indianmarket is witnessing at present.

Public and Private Players

MTNL, BSNL, VSNL are the major Public Players, whereas Airtel, Idea, Hutch, Tata, Reliance,BPL are the leading Private Players in the country. Some of them are entering foreign markets aswell. The Bharti Telecom will be launching its services for the NRIs in the US with the help ofAirtel CALLHOME service.

The market shares of the leading public and Private Players

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http://en.wikipedia.org/wiki/Smoke_signalhttp://en.wikipedia.org/wiki/Smoke_signalhttp://en.wikipedia.org/wiki/Drum_(communication)http://en.wikipedia.org/wiki/Africahttp://en.wikipedia.org/wiki/Americashttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Semaphore_linehttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Telecommunicationhttp://en.wikipedia.org/wiki/History_of_communicationhttp://en.wikipedia.org/wiki/History_of_communicationhttp://en.wikipedia.org/wiki/Smoke_signalhttp://en.wikipedia.org/wiki/Smoke_signalhttp://en.wikipedia.org/wiki/Drum_(communication)http://en.wikipedia.org/wiki/Africahttp://en.wikipedia.org/wiki/Americashttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Semaphore_linehttp://en.wikipedia.org/wiki/Europehttp://en.wikipedia.org/wiki/Telecommunicationhttp://en.wikipedia.org/wiki/History_of_communication


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Investment And Growth

In 2005-2006, the telecom industry witnessed a growth of 21% with a total revenue of Rs.86,720 crores, and the total investment rising to Rs. 2,00,660 crores. It is projected that thetelecom industry will be enjoying over 150% growth in the next 4-6 years. The growth alsorequires a huge investment by the players in the sector. Bharti Airtel is planning to invest about$8 billion by the year 2010.

Liberalization policy and some socio-economic factors are mainly responsible for the immensegrowth in the sales volumes. The lifestyle of the people has changed. They need to be connectedto the other people all the time. With the lowering down of the tariffs the affordability of the

mobile phones has increased. The finance sector has also come up with loans for handsets on 0%interest. Mobile services providers are also expanding their coverage area by installing more andmore antennas and other equipments.

The telecom sector in the country has already adopted the latest technological advancements tocater to the demands of the growing market. Telecom Expo India, Convergence India, VAS Indiaand IPTV India being organized year to year are all efforts in this direction.

Budget 2007 has brought disappointment to the telecom sector. Mobile service providers havebeen asked to cut down their roaming rentals as well as their long distance and international calltariffs. This has led to discontent on the part of the service providers. However, Telecom

Regulatory Authority of India (TRAI) is of the opinion that this will lead to increased use ofroaming, which will ultimately lead to more revenue generation. Moreover, with cheaperhandsets and lesser tariffs, it is expected that by the year 2010 there will be over 500 millionsubscribers in the Indian telecom market.

Also, the telecom industry this year will be focusing more on rural areas to connect them withthe urban areas so that the farmers and the small-scale industries can have faster access toinformation related to weather and market conditions.

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Employment Status

With the coming of more and more projects, the telecom industry is going for high scalerecruitments. There is a huge demand for software engineers, mobile analysts, and hardware

engineers for mobile handsets. Besides, there are ample opportunities for marketing peoplewhose services are required to capture more and more customer base.

The new projects, setting up of new service bases, expansion of coverage areas, networkinstallations, maintenance, etc are providing more and more employment opportunities in thetelecom sector.

c. Future of Industry

The Indian telecommunication sector in India is the third largest sector across the globe

and the second largest among the emerging economies of Asia. This rapid growth has beenpossible due to various proactive and positive decisions of the Government and contribution of both the public and the private sector. The rapid strides in the telecom sector have beenfacilitated by liberal policies of the Government providing thetelecom equipments an easyaccessto the market and a fair regulatory framework for offering telecom services to the Indianconsumers at affordable prices.

The sector also witnessed a substantial change in terms of mobile versus fixed phones and publicversus private participation. The preference for use of wireless phones has also beenpredominantin the sector. Participation of the private entities in the telecom sector is increasing rapidly,alongside, giving rise to enormous growth opportunities. There is a clear distinction between the

Global Satellite Mobile Communication (GSM) and Code Division Multiple Access (CDMA)technologies used within the Indian telecom sector.

Market size

The sale of mobile devices in India will show of rise of 8.5 per cent in 2012 by growing up to231 million units from 213 million units last year, according to a research report from Gartner.The research firm says that the Indian mobile handset market is expected to show steady growththrough 2015 when end-user sales will surpass 322 million units. The Indian mobile devicemarket is very competitive with more than 150 manufacturers. Smartphone sales in India madeup 6 per cent of device sales in the first three quarters of 2011, and this share is expected to

increase to 8 per cent in 2012. The Indian mobile device market is driven by the lowest call ratesin the world and dominated by low-cost devices, which account for 75 per cent of sales in Indiain 2011.

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Indian Telecommunication - Major Investments

Nokia has unleashed its biggest-ever marketing campaign in India for the launch of its Windows-based smartphone Lumia, so as to keep itself relevant in a market being swarmed by GoogleAndroid phones such as Samsung Galaxy range. This is the first product under the Nokia-Microsoft partnership and Nokia has put in high stakes in the Indian market.

Citi India has launched a cash management service which will help its corporate customerscollect receivables from their retailers or customers using mobile payment technology. Known asCash-To-Mobile, this solution will increase the efficiency of collection for the company. It willalso help in reducing the cost of transaction and will ensure safe transfer of money.

Nokia Siemens Networks has decided to ramp up its India operations in three core areas ofmobile broadband, manufacturing and Global Network Operations Centres. "India will be thehub of the transformation that NSN has initiated globally. Investments into India are beingramped up in key focus areas, including global delivery centres and manufacturing. So all ofthese facilities which gives us global scale and advantage of centralisation is being ramped up,MrSandeepGirotra, head of Nokia Siemens in India, told Business Line.

The implementation of India's low-cost telecom model in the African market seems to have paiddividends for the country's largest company in the sector, BhartiAirtel, with the companycrossing 50 million subscribers in mobile operations. Bharti acquired Zain's assets in 16 Africancountries in June 2010, with a subscriber base of 42 million, brought down to an active user baseof 36 million. In these 17 months, it has got 14 million users, on the back of low and innovativerate plans, it said. It has 173 million subscribers in the Indian market.

Indian Telecommunication - Policy Initiatives

The Telecom policy 2011, will replace the existing framework that has been in place since 1999,and it aims to make the country's telecommunications sector more transparent, relax merger andacquisition norms to encourage consolidation and also give more teeth to sector regulatorTelecom Regulatory Authority of India (TRAI). The new policies by the Indian Government alsoproposes to do away with roaming charges, introduce a stronger customer grievance redressalmechanism, recognize telecoms as an infrastructure sector giving it tax concessions, and extend preferential status to 'Made in India' hardware products, thereby strengthening the IndianTelecom Industry for future challenges.

Indian Telecommunication - The Road Ahead

The Indian telecom sector is one of the fastest growing sectors in the Indian economy during thepast 4 years and has witnessed strong competition as a result of which tariffs have decreased bysignificant margins, promotion of customer and industry friendly policies and regulations. Thishas led to a healthy competition scenario within the sector. With a target to further increase theopportunities in the sector, the Indian government is taking proactive measures to develop this

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sector with the help of the various players in this segment. India, with its telecom success story,represents one of the sought after destinations for investment in the telecom sector.

Chapter-2(PROFILE OF THE ORGANIZATION)

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PROFILE OF THE COMPANY

ORIGIN OF THE ORGANIZATION:

Integrated Service Point P Ltd (ISPPL) was established in 1999 by professionals

experienced in the field of Agro based commodities, Telecommunication & SteelStructural fabrications.

Through several decades of enterprising and continuously pioneering, this family-

owned business has evolved into an export house of relatively large economical

scale under the ISP Banner.

GROWTH, DEVELOPMENT AND PRESENT STATUS OF THE ORGANIZATION:

The company began the journey as a modest EPC Contractor and within a short span of

time has been able to emerge as a reputed and reliable EPC contractor in the

Telecommunication and Petroleum Sectors.

ISPPL has been in the forefront in laying of Primary Cable, Distribution cable ,

Optical Fibre Cable , Rehabilitation and Erection of distribution panels, across

Tamil Nadu and has offered services to the best in the telecommunication industry

like Bharati Airtel, Reliance, BSNL, HCL etc. The company completed target of

60% of telecomm network of Bharati Telenet Ltd (Airtel) in Chennai, Coimbatore

and Tiruppur.

ISPPL also ventured into fabrication and has been instrumental in constructions of

various retail outlets across South India for all the reputed Oil Companies Viz India

Oil Corporation Limited (IOL), HPCL, Reliance etc. The companys quality and

timely execution of canopies and hoardings recognized by Reliance Industries Ltd

and awarded South India Vendors for all Franchisees of Reliance retail outlet. The

company completed execution of canopies and hoardings in Tamil Nadu, Andhra

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Pradesh, Karnataka and Kerala for Reliance Industries Ltd to the tune of 60

Outlets.

ISPPL has diversified in the recent years with main focus on the import and exportof various kinds of agro commodities. We are also into operation of Liquid Cargo

Storage Terminals at various Ports in India namely-Chennai (20000 KL), Mumbai

(25,000 KL), Karwar (10000 KL) and Vijaydurg (15000 KL). We specialize in export

of various agricultural commodities from India. Our network encompasses agri

commodity markets in countries like Singapore, Indonesia, Taiwan, Vietnam,

Yemen, Sri Lanka, Amsterdam etc. and is rapidly growing in other international

markets.

Over the Years our company has developed networks and resources in the local

Indian markets for procurement of quality products at competitive cost.

The product portfolio of our company includes Molasses, Sugar, Rice Maize,

Soybean Meal, Rapeseed Meal, Groundnut Meal, Castor Seed Meal, Rice Bran

Extraction.

Our clients include all the major international traders and manufacturers of animal

feed who are leaders in their respective markets. Our strength has been

procurement and delivery of uniform quality products as per customer's

requirements. Quality checks are conducted at various levels of procurement by

the independent surveyors.

We guarantee quality products, timely execution of the orders, proper feedback

mechanism to meet the global standards. We are committed to provide superior

services to our customers in terms of quality of the products, timely shipments and

competitive prices.

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ISPPL has carved a respectable position in the Asian Subcontinent and is extremely

proud to flaunt that it has established a very strong competitive edge in the Cane

Molasses industry, and thus is one of the biggest exporter and seller of Cane

Molasses from India. In fact, the companies export trade turnover has jumped

from just above Rs.2 Crores in 2006-07 to Rs100 Crores in the year 2011-12(upto Dec 1,2011).Primarily due to good working relations with its suppliers,

determination, business expertise, and zealous commitment to both honoring

contract and customer service, it has obtained and sustained its competitive edge.

Nevertheless, ISP is constantly thinking ahead to stay in tune with the dynamic

global demands. In realizing the new developments in the global open market

economy, ISP has accelerated the readjustment of its operating strategy.

Considering desired opportunities, perfect commercial goodwill, and existingassets, ISP has confirmed a new managing system of three combination:

combination of youth and experience;

combination of domestic and international focus; and

combination of human resources and technology.

With over a decade of experience, ISPs professional staff is capable of

coordinating the importation, exportation, distribution, and marketing of agro

commodities in the Middle East, Far East , Europe, Africa, Asian subcontinent and

emerging countries.

With a view to emerge as a vibrant and robust export house, we have incorporated

a public limited company - ISP EXPORTS INDIA LIMITED. This is a registered public

limited company incorporated under the Indian Companies Act

With the Government of India liberalizing trade policies to promote agri business,

India is a good base for export operations. Excellent export prospects, competitive

pricing of agricultural products and standards that are internationally comparable

has created trade opportunities in the agro products. We are being flooded with

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firm enquiries for supply of various commodities to various export destinations and

the company has initiated exploring the concept of corporate farming and

plans to take up the same in the land holdings belonging to its associate to

the tune of 200 acres.

Being an intermediary between all parties involved in the trading requires a

multi-disciplinary approach. ISP is geared for this purpose can undertake in

variety of ways which best fits the customer needs. Each company/customer

relationship is approached individually with suggested relationships being either

contract oriented or consultation base.

As commodity demands increase, ISP will continue to transform into a betterinternational commodity trading in the future. However, it will remain dedicated

to:

Addressing global trade opportunities

Providing a zealous commitment to honoring contracts

Providing a zealous commitment to honoring customer service

Supplying customers quality products at the best prices

Providing quality trading and marketing

Providing personal service to each customer

Meeting customer expectations

Providing long-term concept and orientation

Giving attention to each trade project from start to finish

Utilizing effective trading and marketing tools and techniques

Willingness to assume responsibility

Poviding clear and effective communication

Advancing through innovation for customer satisfaction

We make it our business to remain knowledgeable about the latest economical and

commercial developments in all aspects of global trading and marketing. ISP

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affords the optimum advantage to its customers. Our traders are successful

because we give special attention to areas of commodity trading which require our

individual

involvement, skill, and judgement.

Our Contact Address

INTEGRATED SERVICE POINT (P) LTD

No 32, VOC Colony, Annanagar East

Chennai 600 102 (INDIA)

Tel : +91 44 26633600, 26633800

Fax : +91 44 26633700

Contact Person:-

Suresh Gatreddi-General Manager

H/p : +91 9382899099

E-mail : [email protected]

*****************

ORGANIZATION STRUCTURE:

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The management is assisted by a professional team having hands on experience in

various discplines with focused attention by virtue of which the company is registering

an impressive growth and also providing an ideal platform to sustain the companys

growth plans

1. G.K.B.Narayana Prasad Chief Executive

2. Suresh Gatreddi General Manager

3. Ravi Balakirishnan Sr.Manager

4. R.S.Meenakshi Sundaram Adminsitrative Officer

5. B.Selvam Manager

6. R.K.Vardarajan Terminal Manager

7. V.Stanley Accounts Officer

The following are the Board of Directors who are actively engaged in managing

the affair of the company

1. G.Ahoram Managing Director

2. K.Madhav Sri Apparao Director ( Startegy & Public Relations)

3. K.Ramnath Apparao Director (Marketing & Business Dev)

4. K.Srikanth Apparao Director ( Finance & Admin)

5. K.Sasikanth Satynarayana Director( Operations)

The promoters hail from the family of Zamindar Karlapati Appa Rao, of AppaRao Gardens, Sydenham Road, Choolai, Chennai.

MARKET PROFILE OF THE ORGANIZATION

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As commodity demands increase, ISP will continue to transform into a better

international commodity trading in the future. However, it will remain dedicated

to:

Addressing global trade opportunities

Providing a zealous commitment to honoring contracts

Providing a zealous commitment to honoring customer service

Supplying customers quality products at the best prices

Providing quality trading and marketing

Providing personal service to each customer

Meeting customer expectations

Providing long-term concept and orientation

Giving attention to each trade project from start to finish

Utilizing effective trading and marketing tools and techniques

Willingness to assume responsibility

Poviding clear and effective communication

Advancing through innovation for customer satisfaction

Products of ISP in Market:

The product portfolio of our company includes Molasses, Sugar, Rice Maize, Soybean

Meal, Rapeseed Meal, Groundnut Meal, Castor Seed Meal, Rice Bran Extraction.

Our clients:

Our clients include all the major international traders and manufacturers of animal

feed who are leaders in their respective markets. Our strength has been procurement

and delivery of uniform quality products as per customer's requirements. Quality

checks are conducted at various levels of procurement by the independent surveyors.

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CHAPTER- 3

(DISCUSSION ON TRAINING)

STUDENT WORK PROFILE

N ame: K. SATYA SUDHIR

D esignation : HR trainee

My Profile:

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Roles and Responsibilities:

KEY LEARNINGS

Types of compensation

Internal equity its components

Acts relating to the employees payments and deductions:

Payroll processing:

Calculation of monthly payroll

Factors considered in formulating salary offers

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CHAPTER -4

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( STUDY OF SELECTED

RESEARCH PROBLEM)

PAYROLL MANAGEMENT

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.

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

employee relation 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.

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There are several difficult obstacles that you will come across when opening your own

business. However, they will become more manageable over time. A certain amount of capital is

always required when starting a new business, but without an efficient workforce the businesswill be unproductive and the capital wasted. It has been stated that a good company is made from

good employees, and every international company is well aware of the importance of a capable

workforce.

At the outset of opening a business, you typically dont have to bankroll a large staff of

employees. As a business grows, however, a company is faced with expanding payroll

complexity as their staff grows. It is proven that increased compensation draws a higher grade of

employees to a business.

DEFINITION:

Compensation which includes direct cash payments, indirect payments in the form of

employee benefits and incentives to motivate employees to strive for higher levels of productivity

is critical component of the employment relationship. Compensation is affected by forces as

diverse as labour market factors, collective bargaining, government legislation and top

managements philosophy regarding pay and benefits. _Wayne FCascio

The standard definition of "payroll management is quite simply the management ofwages and salaries of all employees of any business.

WAGES AND SALARIES

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The term wages has been defined as all remuneration (whether by way of salary,

allowances or otherwise) expressed in terms of money or capable of being expressed which

would in terms of employment, express or implied, were fulfilled, be payable to a person

employed in respect of his employment.

PAYMENT OF WAGES ACT, 1936

As has been pointed out earlier, this act intends to remedy the evil practices growing out

of the freedom of the employers to determine the mode and manner wage payment as they liked.

This act deals with removing of the evils done by the employers to the workers, they are as

follows:

Ensuring regularity of payment:

Ensuring payment in legal tender:

Preventing arbitrary deductions:

Restricting employers right to impose fine: and

Providing remedy to workers:

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COMPENSATION PACKAGE

It's important to give a lot of consideration to your business's compensation structure

because it ultimately reflects how employees are valued.

When it comes to employee compensation, most managers are busy asking: "What do I

have to pay to?" That is not an easy question to answer. A better question might be: "What do

I want my compensation package to say?"

Whether you realize it or not, it is already saying a lot. Child care and health benefits say

that you value family. Giving longevity bonuses for employees on the anniversaries of their

employment with you says that you value employees who stay with the business. Throwing a

party at the end of your business's busy season lets the employees and their families know that

you appreciate it when your people go the extra mile. No matter what compensation elements

you use, they all carry a message.

That message is important. Compensation packages can be linked to business structure,

employee recruitment, retention, motivation, performance, feedback and satisfaction.

Compensation is typically among the first things potential employees consider when looking for

employment. It is important, therefore, to give a lot of consideration to your business'scompensation structure. After all, for employees, compensation is the equivalent not to how they

are paid but, ultimately, to how they are valued.

COMPENSATION PACKAGE

It's easy to think "dollars per hour" when thinking about compensation. Successful

compensation packages, however, are more like a total rewards system, containing non-

monetary, direct and indirect elements.

Non-Monetary Compensation can include any benefit an employee receives from an

employer or job that does not involve tangible value. This includes career and social rewards

such as job security, flexible hours and opportunity for growth, praise and recognition, task

enjoyment and friendships.

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Direct compensation is an employee's base wage. It can be an annual salary, hourly wage or any

performancebased pay that an employee receives, such as profit-sharing bonuses.

Indirect Compensation is far more varied, including everything from legally required public

protection programs such as Social Security to health insurance, retirement programs, paid leave,child care or housing.

Employers have a wide variety of compensation elements from which to choose. By

combining many of these compensation alternatives, progressive mangers can create

compensation packages that are as individual as the employees who receive them.

The general consensus of recent studies is that pay should be tied to performance to be

effective. However, with traditional farming operations, that is not easily done. Business

performance can be affected by many factors over which employees have no influence,

specificallyweather. Successful managers must search for things employees influence and base

performance objectives on these areas. Your operation may benefit from the following: tenure

bonuses for long-time employees, equipment repair incentives to encourage good equipment

maintenance, or bonuses for arriving to work on time.

The more production information data your business has, the easier this is to accomplish.

Measures such as feed conversion rates, somatic cell count or mortality can offer great sources

for performance incentives.

DIRECT COMPENSATION ALTERNATIVES

Basic Pay: Cash wage paid to the employee. Because paying a wage is a standard

practice, the competitive advantage can only come by paying a higher amount.

Incentive Pay: A bonus paid when specified performance objectives are met. May

inspire employees to set and achieve a higher performance level and is an excellent

motivator to accomplish farm goals.

Stock Options: A right to buy a piece of the business which may be given to an

employee to reward excellent service. An employee, who owns a share of the business, or

just a few animals or acres, is far more likely to go the extra mile for the operation. For

example, very few people leave their own gates open.

Bonuses: A gift given occasionally to reward exceptional performance or for special

occasions. Bonuses can show an employer appreciates his/her employees and ensures that

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good performance or special events are rewarded. Some indirect compensation elements

are required by law: social security, unemployment and disability payments. Other

indirect elements are up to the employer and can offer excellent ways to provide benefits

to the employees and the employer as well. For example, a working mother may take alower-paying job with flexible hours which will allow her to be home when her children

get home from school. A recent graduate may be looking for stable work and also an

affordable place to live. Both of these individuals have different needs and, therefore,

would appreciate different compensation elements.

In a tight labor market, indirect compensation becomes increasingly important.

Businesses that cannot compete with high cash wages can offer very individualized

alternatives that meet the needs of the people you want to employ. Such creative

compensation alternatives are the small business's competitive advantage.

INDIRECT COMPENSATION ALTERNATIVES

Flexible working schedules

Elder care

Retirement programs

Moving expenses

Insurance (health, dental, eye) Subsidized housing

Paid leave (sick/holiday/personal days)

Subsidized utilities

Tickets to events (ball games, concerts)

Magazine subscriptions

Boots and clothing

Laundry service

Company parties

Use of firm vehicles, machinery

Farm produce/foods/meals

Cellular phones/pagers

Child care

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Use of firm pastures and gardens

DETERMINING THE CASH WAGE

Ask ten different people what a fair wage is and you'll get ten different answers. While

there are no hard and fast rules in determining a fair wage, the importance of the task is obvious.

Research according to Gregory Billikopf indicates that employees expect wages to 1) cover basic

living expenses, 2) keep up with inflation, 3) provide some funds for savings or recreation, and

4) increase over time. Discussing wage expectations with employees can help determine what

their compensation package should look like.

The first thing employers should consider when developing compensation packages is

fairness. It is absolutely vital that businesses maintain internal and external equity. Internal

equity refers to fairness between employees in the same business while external equity refers to

relative wage fairness compared to wages with other farms or businesses. No matter the

compensation level, if either internal or external equity is violated, a business will most likely

experience employee dissatisfaction and employees with begin to balance their performance

through a variety of ways ranging from decreased productivity to absenteeism and eventually to

leaving the business.

So, what constitutes a fair wage? One approach to determining a fair wage is a market

survey. These are typically fast and easy ways to establish compensation guidelines for many

businesses. A few phone calls to other employees in similar businesses can determine the

"market" value for a specific job. Unfortunately, this technique is not necessarily well suited for

agricultural producers. An agricultural manager can do informal surveys of other agricultural

producers to determine the "going rate" for labor or modify existing studies of non-agricultural

businesses to compare employees not by job title but by skill sets. For example, operating a

forklift in a factory and driving a tractor may require similar skills and, therefore, can be

compensated similarly.

Broadbanding was used in a Cornell University study. Five competency levels were

developed to classify employees according to three criteria: authority to make decisions, skill

level and supervisory capacity. By using a competency scale, each employee can be cross-

referenced by job title and competency level or studied solely within either category. Employees

of similar skill levels or competency are taken together in compensation "bands" regardless of

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job title. These bands then compensate like employees at like rates across the entire organization

and serve to maintain both internal and external equity.

EVOLUTION OF COMPENSATION

Todays compensation systems have come from a long way. With the changing

organizational structures workers 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

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

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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 behavioral 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.

M

aslo ws

Need

Hierarchy

THE MASLOW THEORY

Abraham Maslow, an eminent U.S. psychologist, gave a general theory of motivation

known as Need Hierarchy Theory in his paper published in 1943.

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According to him

1. People have a wide range of needs which motivate them to work

2. Human needs can be classified into different categories.

3. Human needs can be arranged into hierarchy

4. Human beings start satisfying their needs step by step.

5. A satisfied need does not motivate human behavior.

The classification of human needs by Maslow was widely appreciated. He classified the

needs as follows:

1. Psychological needs: These needs are related to the survival and maintenance of life.

These include food, clothing, shelter, etc.

2. Safety needs: These consist of physical safety against fire, murder, accident, security

against unemployment, etc.

3. Social needs: These are also called affiliation needs and include need for love, affection,

belonging or association with family, friends and other social groups.

4. Ego or esteem needs: These are the needs derived from recognition, status, achievement,

power, prestige etc.

5. Self fulfillment or self actualization needs: It is the need to fulfill what a person

considers to be his real mission in life. It helps an individual to realize ones potentialities

to the maximum.

Maslow is of the opinion that these needs have a hierarchy and are satisfied one by one.

When first needs are satisfied then the person moves to the second and when this is satisfied, he

moves on to the third and so on.

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Maslows need priority is simple and logical. It is compatible with the economic theory

of demand. The theory contains some fundamental truths. His critics say that it is another

simplification of human needs and motivation. The hierarchy of needs is not always fixed. They

also say that this theory is not empirically tested. Inspite of all this criticism, Maslow explainsinter-personal and intra-personal variations in human behavior.

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 non-monetary 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 SYSTEM

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 employee expects remuneration. 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:

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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.

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.

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.

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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.

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

BRIEF HISTORY OF PAYROLL SYSTEM

2600 BC: Clay tablets used by the Babylonians to record how long labourers worked and

wages received.

2000 BC: Cowrie shells (a rare mollusc found near the Maldives Islands) used as

currency in China.

200 BC: Origin of the word "salary". It comes from the word "solarium," meaning "salt-

money". Roman soldiers were paid their allowance in salt, a valuable seasoning and

preservative at the time.

30 BC: Augustus Caesar reforms the Roman monetary and taxation systems issuing

coins.

1275 - 92: Marco Polo introduces Europe to paper money after travelling to China.

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1529: First use of the word "payday" in English print.

1800s: Worker's wages begin to be paid by the hour instead of the day in response to

more stringent time-recording requirements.

1890s: First "punch clocks" are developed by Edward G. Watkins for the Heywood

Brothers Company in Heywood, Massachusetts.

1920s: Increased use of cheques by employers for payroll because of the security risks

involved in transporting and storing large amounts of cash.

1950s: First automatic deposit of cheques begins in the U.S.

1970s: Advances in computer technology lead to the increased use of computers for

payroll services.

1978: Founding of the Canadian Payroll Association by a small group of payroll

professionals who decided to challenge proposed revisions to the Record of Employment

form.

1995: National Payroll Week founded by the Canadian Payroll Association and members

of the payroll community.

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COMPONENTS OF COMPENSATION SYSTEM

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

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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.

JOB ANALYSIS

Job Analysis is a process to identify and determine in detail the particular job duties

and requirements and the relative importance of these duties for a given job. Job Analysis is a

process where judgments are made about data collected on a job.

THE JOB; NOT THE PERSON

An important concept of Job Analysis is that the analysis is conducted of the Job, not the

person. While Job Analysis data may be collected from incumbents through interviews or

questionnaires, the product of the analysis is a description or specifications of the job, not a

description of the person.

The purpose of Job Analysis is to establish and document the ' job relatedness' of

employment procedures such as training, selection, compensation, and performance appraisal.

SALARY SURVEYS:

Organizations have to bridge the gap between the industry standards and their salary

packages. They cannot provide compensation packages that are either less than the industry

standards or are very higher than the market rates. For the purpose they undertake the salary

survey. The Salary survey is the research done to analyze the industry standards to set up the

compensation strategy for the organization. Organizations can either conduct the survey

themselves or they can purchase the survey reports from a reputed research organization. These

reports constitute the last 2-5 years or more compensation figures for the various positions held

by the organizations. The analysis is done on the basis of certain factors defined in the objectives

of the research.

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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

To design a fair compensation system

To design and implement most competitive reward strategies

To benchmark the compensation strategic

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 areconducted 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

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organization.

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.

Types of data gathered in a salary survey include:

Base salaries

Salary Ranges

Starting Salary

Incentives/Bonuses

Allowances and Benefits

Working Hours

Working Conditions

The results of surveys conducted by third parties (e.g., associations, consultants, survey

vendors) can be relatively inexpensive compared to the cost of developing the same results

yourself. Surveys conducted by associations and vendors are often have a large number of

participants which results in a more accurate analysis.

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TYPES OF COMPENSATION:

1. Direct compensation

2. Indirect 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.

INTERNAL EQUITY ITS COMPONENTS

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.

COMPONENTS

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JOB RANKING

This method is one of the simplest to administer. Jobs are compared to each other based on theoverall worth of the job to the organization. The 'worth' of a job is usually based on judgments of

skill, effort (physical and mental), responsibility (supervisory and fiscal), and working

conditions. It is very effective when there are relatively few jobs to be evaluated (less than 30)

FACTOR COMPARISION

A set of compensable factors are identified as determining the worth of jobs.

Typically the number of compensable factors is small (4 or 5). Examples of compensable factors

are:

1. Skill

2. Responsibilities

3. Effort

4. Working Conditions

Next, benchmark jobs are identified. Benchmark jobs should be selected as having certain

characteristics.

1. Equitable pay (not overpaid or underpaid)

2. Range of the factors (for each factor, some jobs would be at the low end of the factor

while others would be at the high end of the factor).

3. The jobs are then priced and the total pay for each job is divided intopay for each factor.

JOB CLASSIFICATION

The primary objective of position classification is to define and describe accurately

the current duties and responsibilities of positions for purposes of determining proper

compensation and qualification requirements; to facilitate the functioning of other personnel

processes, such as developing performance standards and actual performance appraisals based

upon the assigned duties of specific positions; identifying career ladders and promotional lines;

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and translating broad organizational plans into the assignment of duties and responsibilities to

individual positions.

Classification is based upon the objective elements of a position and does not consider

the status of an incumbent. Information relative to the employees length of service, time spent atthe maximum salary level of the position, or the quality of his/her performance is not considered

in determining the appropriate classification of a position. Factors that are considered include

such elements as the nature, scope and level of the duties and responsibilities; the relationship of

the position to other positions in the department; supervision given or received; and exercise of

independent judgment.

EXTERNAL EQUITY ITS COMPONENTS

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 in their organizations.

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As part of the process of determining external equity, various markets are utilized to fill

positions, depending upon the requirements and the level of the vacancy. They are usually as

follows:

1. Department head level positions: national markets;2. Professional and administrative positions below department head level: regional markets;

and,

3. Support staff and entry level exempt positions: local markets.

ADMINISTRATION OF PAYROLL SYSTEM

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 (12%) of the salary, taxes

and other deductions.

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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.

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DIRECT COMPENSATION:

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

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Organizations provide for cab facilities to their employees. Few organizations also provide

vehicles and petrol allowances to their employees to motivate them.

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.

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:

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 travelAssistance Limits,

Retirement Benefits, Holiday Homes.

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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.

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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 thememotional and social security.

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 their stay in the guest house.

FLEXIBLE TIMINGSOrganizations provide for flexible timings to the employees who cannot come to work

during normal shifts due to their personal problems and valid reasons.

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ANNUAL PAYROLL:

Annual payroll consists of leave travel allowances, incentives, annual bonuses,

meal vouchers/reimbursements, and medical reimbursements

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.

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 theadvanced payroll processing software. An organization opts for any of the following payroll

processing methods available

Acts relating to the employees payments and deductions:

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There are several acts framed and passed for the well being and welfare of the

employees and workers. These acts are relating to the employees provident fund, employees

state insurance, payment of gratuity, payment of bonus etc.

These are explained hereunder:

The Employees Provident Funds Act 1952

This is applicable to every establishment which is a factory engaged in an industry

specified in schedule-1 and in which 20 or more persons are employed.

Provident Fund returns to be sent on or before 25th in Form-5, form-10 and form-12(A)

Annual returns to be sent on or before 30th

April in Form-3A and Form-6A.

Employees State Insurance Act 1948

It provides for certain benefits to employees in case of sickness, maternity and employment

injury and for certain other matters in relation.

The wage limit for coverage of this act is Rs.7500/-

Remittance of E.S.I contribution by way of challans on or before 21 st of every month.

Payment of Gratuity Act, 1972

Provisions of this act apply to all employees who have put in minimum of 5 years continuous

service. Gratuity payable at the rate of 15 days salary/wage for each completed year of service

the maximum amount of gratuity payable being Rs.3,50,000/-.

Workmens Compensation Act 1923

For all areas where ESI coverage is not extended, provisions of workmens compensation at will

apply. This act comprehensively covers all liabilities of partial/full disability and for

temporary/permanent disablement, and for loss of life, in industrial accidents, as per schedule

provided therein. This liability can be immunized by taking a policy with LIC or any other

National Insurance Company.

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Payment of Bonus Act, 1965

The maximum applicable limit of salary is Rs.3500/- and eligibility will be based on Rs.2500/-

per month. Therefore, maximum bonus payable, which is 20% of Basic + DA, is Rs.6000/- per

year. Forms A B C are to be maintained to give a clear indication of bonus payable, available

surplus, set-off, set-on, development rebate, depreciation etc.

PAYROLL PROCESSING:

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VARIOUS PAYROLL PROCESSES

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 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 themanual 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.

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 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

byt he software. It needs professionals to make use of the software for its efficient working.

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In global competitive environment organizations need to focus on cost-cutting strategies

and high qualitative results. Organi

Sudhir Project

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