CHAPTER-I

INTRODUCTION

Compensation Management is an integral part of the management of the organization.

Compensation Management contributes to the overall success of the organization in
several ways. To be effective, the managers must appreciate the value of competitive
pay, their human resources, and have an investment view of payroll costs. We want to
maintain pay levels that attract and retain quality employees while recognizing the
need to manage payroll costs.
Pay is a difficult topic of conversation in most organizations. In fact, the topic is
altogether taboo in many workplaces. It simply isn't discussed unless absolutely
necessary. And, when it is necessary, such as when a pay raise (or lack of one) must
be explained to an employee, many managers find themselves at a loss for words. As
the dreaded date of such a discussion approaches, managers may begin checking their
sick time banks to see if they can disappear for a day or two.
While it may be a touchy subject, pay is a critical factor in the work lives of
employees. Jobs are accepted or rejected based in part on starting salary and the
opportunity for future increases in pay. Employees compare their pay to that of others
in the same line of work. They constantly compare their pay level to their level of
contribution, trying to determine whether the ratio of give and receive is a fair one.
While it may not be a frequent topic of open discussion, employees think about pay
often.
Approaches of compensation management
There are 3P approach of developing a compensation policy centered on the
fundamentals of paying for Position, Person and Performance. Drawing from
external market information and internal policies, this program helps establish
guidelines for an equitable grading structure, determine capability requirements and
creation of short and long-term incentive plans.
The 3P approach to compensation management supports a company's strategy,
mission and objectives. It is highly proactive and fully integrated into a company's
management practices and business strategy. The 3P system ensures that human

resources management plays a central role in management decision making and the
achievement of business goals.
* Paying for position
* Paying for person
* Paying for performance
Because it is so important to employees, the issue of pay deserves to be clearly
addressed. In spite of their hesitance, managers are capable of dealing with this
sometimes difficult issue in a professional and effective manner. By keeping the
following basic points about pay in mind, they can address virtually any pay-related
topic with their employees in a professional and productive manner.
Specificity is Key
Pay is a topic with many different shades and a variety of implications. Whenever
approaching the subject, it is important to work out the details beforehand so that
specifics can be clearly communicated. For the manager, this means that the increase
amount is nailed down before discussing a promotion with an employee. No chance of
misunderstanding or false expectations can be permitted. Far too often, managers are
apt to discuss generalities. "It will mean a good increase." What exactly does that
mean in terms of the employee's monthly budget? If care is not taken here, good news
can become the source of conflict and resentment.
By the same token, if asked for a raise, the manager should request that the employee
suggest a specific number that he believes reflects his value. Once the employee
provides that number, the manager can do his homework and decide what, if anything
can be done. The employee can then be given a definitive response.
Pay is Relative
What one employee considers a fantastic increase maybe an insult to another? Each
individual has a unique set of creativity and competencies. Pay should be based on the

performance, position and the competencies/skills the person is having.

Pay is Not Created Equal

Various forms of pay have different purposes. The two most common forms of direct
cash compensation in most companies are base pay and bonus. Base pay is the annual
salary or hourly wage paid to an employee given the job he holds, While bonus is
typically (or at least should be) rewarded based on the achievement of a goal of the
organization.
Discussions about bonus payments should be as specific as possible. This is the
opportunity to point out particular accomplishments that contributed to overall team
or company success. Even if the bonus is paid to all employees based on a simple
overall company profit target, the manager should use the opportunity to point out
specifically how individual employees helped achieve that target.
Distributing bonus checks presents a unique motivational opportunity for a manager.
Handing money to an employee while discussing actions and behaviors he would like
to see repeated, creates a powerful link between performance and reward.
Discussions about base pay increases can be a bit different. Most companies claim to
link their annual base pay increases to performance. In reality, however, base pay
decisions take into account a variety of factors, including the relative pay of others in
the same job, the company's increase budget, market practices and where the
individual falls within his pay range. Even when performance is a factor, the manager
is faced with the difficult task of evaluating an entire year's worth of activity and then
categorizing it according to the percentage increase options allowed by the budget. It
becomes very difficult to pinpoint specific employee actions or accomplishments as
the reason for the increase.
For these reasons, it's appropriate for the discussion about base pay increases to be
more general and balanced. Both strengths and weaknesses of the employee should be
addressed. The actual increase is then based on an overall assessment, as opposed to a
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link with one or two specific outcomes. Any other factors that impact the increase
percent, such as budget or pay range should be openly discussed as well.

'Why?' is Critical?
All organizations pay according to some underlying philosophy about jobs and the
people who do them. This philosophy may not be in writing, but it certainly exists.
Pay maybe treated in a formal and structured manner at one company. At another, any
appearance of structure is intentionally avoided so that decisions can be made
arbitrarily. Either way, the approach taken reflects a fundamental belief about people,
motivation and management.
Managers often want to view each individual as a separate case. It is important to
understand, however, that employees operate within a compensation system. A
manager is wise to take the time to learn as much as possible about his company's
compensation system. This knowledge will form the context for pay discussions and
will go a long way toward helping the employee make sense of what is said.
While the answer to "how much?" is of course important to employees, they are also
concerned about the "why?" of pay. In other words, while the actual amount of pay is
very important, employees also are interested in the rationale used to determine it.
Research has shown that pay satisfaction increases with understanding of the pay
scheme.
Managers often leave this area to the HR department. Ideally, however, managers
themselves will be the primary conduit of information on this topic. If a manager does
not know the company's pay philosophy, he should seek out whomever in the
organization is responsible for pay administration and get the answers he needs.
Is pay based on an analysis of market pay practices? Is it affected by the bonus plan?
Are certain jobs considered critical and, therefore, treated differently? Do pay
decisions take training and education into account? Answers to these questions will
help managers help employees understand the organization's philosophy and the
decisions resulting from it.
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Job seekers who go into the negotiation process with their eyes wide open keep an
important fact in mind: A few thousand dollars one way or the other can quickly
become a gain or a loss depending on other benefits. Money is important, but it must
be put in the context of other pros and cons--some of which have a dollar value and
some of which do not.
The company's health plan, bonus plan, life insurance benefit match are just a few of
the rewards with a dollar value. Beyond these, but just as important, are factors such
as career development, camaraderie among teammates, flexible schedules, etc. Ask
employees in a lousy work environment, and they will testify that these factors should
never be understated.
Managers should be the company's biggest ambassadors when it comes to the value of
benefits and work environment factors. Sharp companies do a good job of showing
the value of these items. Smart managers will communicate their value, as well,
especially when discussing pay. For example, when offering a promotion to an
employee, a manager should consider all the potential benefits. What developmental
opportunities are involved? Is there an increase in status? Will the move mean
additional interaction with key players? All of these, as well as any increase in
tangible pay and benefits should be discussed.
Speaking of Pay with Confidence
Discussions regarding pay do not have to be awkward--they can be clear and
productive if managers adhere to the basics outlined above. Rather than a taboo, pay
can be addressed in an up-front manner if managers do their homework, get prepared
and go into the discussion with the confidence that comes from knowledge.
Pay discussions should deal with specifics. In preparing for the discussion, the
manager must remember that pay is relative and nothing can be assumed about the
employee's response. The purpose of the particular aspect of pay being addressed is
important, and the manager must be able to discuss the issue in the context of the
organization's pay philosophy. Finally, the many faces of reward in the workplace
cannot be overlooked.

If managers follow these guidelines, their pay-related communication with employees

will result in clarity and respect. In addition, they will avoid the misunderstanding and
resentment that results from avoiding this critical issue.
To conclude we can say that compensation is a hot potato for the Human Resource
Department. The motivation level of the employees to great extent lies in monetary
rewards. If paid well can generate results for the organization, failed can create
problems. The major challenges what managers face today is retention of the man
power and the major cause of it is that they are paid better in the other organizations.
A satisfied employee is a productive employee and care should be taken that they are
fairly paid for their worth in the organization.

NEED FOR THE STUDY:

Compensation management of the employees is important if the
employees are satisfied then only the organization can function smoothly increases its
production, faces competition.
If employees are satisfied with their job they will carry a positive attitude.
Hence the study has been undertaken to assess the employee Compensation which is
necessary for the organization in order to make sound decisions.
Objectives:
1) Understand the concepts of compensation management in Heritage Foods
(India) Limited.
2) Explore the role of c compensation management
3) Pay roll system in Heritage Foods (India) Limited..

Other Objectives:
Maintain pay equity
Simplify the system
Create a new mindset
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 Give managers more autonomy

Increase transparency
SCOPE OF THE STUDY

The compensation management in Heritage Foods (India) Limited.. refers to a

persons feeling of satisfaction on their job. It is different from person to person. The
researcher has chosen to measure the level compensation management in Heritage
Foods (India) Limited..
The study considers the impact of 10 factors on compensation
management in it concentrates on the effect of factors in general, but no exclusive
study is made on them.
The study considers only the perceptual elements of employees and
does not focus on ground realities. The scope of study cover: work conditions,
compensation, extra benefits, conveyance treatment of superiors, colleagues, duly
timings, and grievance reprisal mechanism and promotion policy.

RESEARCH METHODOLOGY
The methodology that is adopted for the study is such that it facilities the
data accumulation. The information is gathered through survey method. The survey
method has been adopted for collecting the data from employees.
RESEARCH DESIGN:
Research Design is defined as the specification of methods and procedures for
acquiring the information needed. Generally the research design is any of the
following three types-DESCRIPTIVE, EXPLORATORY and CASUAL.
DESCRIPTIVE STUDY:
Descriptive study/research is marked by the prior formulations of specific research
questions. The investigator already knows a substantial amount about the research
problem before the project is initiated. Hence this is chosen for my research.

 EXPLORATORY STUDY:
The major purpose of exploratory study is the identification of problem, the more
precision formulation of problem and the formulation of new alternative courses of
action.
CASUAL STUDY:
The study involves the determination of the causes of what the researchers are
predicting. this is mainly a cause and effect study.
The research design selected by the researcher in the present study is
DESCRIPTIVE in nature.
RESEARCH INSTRUMENT:
HR research has a one main research instruments in collecting primary data. That is
questionnaires.
In order to extract first hand information from the respondents, a pre-tested
questionnaire was prepare and the same was administered to the respondents.
DATA SOURCES:
Data means a collection of facts in real life statistical data is a collection of facts in
numerical figures. The data sources are usually identified using the type of data
needed. There are two types of data.
1. Primary data
2. Secondary data
PRIMARY DATA:
The first hand information by the investigator by means of observation face to
face questioning, telephone interview and mailing questionnaire is called primary
data.
Primary data consists of original information gathered for a specific purpose.
SOURCES OF PRIMARY DATA;9

For the purpose of present study, the primary data collected from respondents by
contacting them personally.

SECONDARY DATA:
Secondary data consists of information that already exists somewhere, having been
collected for another purpose

SOURCES OF SECONDARY DATA:

For the purpose of present study, the secondary data was collected from published
data of the companies. Population is the aggregate of objects animate and in animate,
under study in any statistical investigation. The population for the study here was
employees in Heritage Foods (India) Limited..
SAMPLING PROCEDURE
With a view to arrive at the sample population for the study, a Purposive-Cum
convenient sampling was followed.
SAMPLE SIZE
4)

The sample size includes 100 employees who are working in the in Heritage
Foods (India) Limited..

LIMITATIONS OF THE STUDY:

1. This study covers those employees who are working at Heritage Foods
(India) Limited..
2. The understand and knowledge may vary from person to person. The
replied gives by the respondents are taken for granted, though they are not
uniform.
3. Since names are mentioned in most of questionnaires, most of the
employees answered favorable to the company. This might have led to
wring finding in the study.

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4. The interpretation being based on percentage method is not definite.

5. The report is subjects to changes with fast changing scenario.

CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE

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Retailing in India is one of the pillars of its economy and accounts for 16 to 18
percent of its GDP. India is the 5th largest retail market in the world. The country
ranks fourth among the surveyed 30 countries in terms of global retail development.
The current market size of Indian retail industry is about US$ 520 bn (Source: IBEF).
Retail growth of 14% to 15% per year is expected through 2015. By 2018, the Indian
retail sector is likely to grow at a CAGR of 13% to reach a size of US$ 950 bn.
Retailing has played a major role the world over in increasing productivity across a
wide range of consumer goods and services. In the developed countries, the organised
retail industry accounts for almost 80% of the total retail trade. In contrast, in India
organised retail trade accounts for merely 8-10% of the total retail trade. This
highlights a lot of scope for further penetration of organized retail in India.
The sector can be broadly divided into two segments: Value retailing, which is
typically a low margin-high volume business (primarily food and groceries) and
Lifestyle retailing, a high margin-low volume business (apparel, footwear, etc). The
sector is further divided into various categories, depending on the types of products
offered. Food dominates market consumption with 60% share followed by fashion.
The relatively low contribution of other categories indicates opportunity for organised
retail growth in these segments, especially with India being one of the world's
youngest markets.
Transition from traditional retail to organised retail is taking place due to changing
consumer expectations, growing middle class, higher disposable income, preference
for luxury goods, and change in the demographic mix, etc. The convenience of
shopping with multiplicity of choice under one roof (Shop-in-Shop), and the increase
of mall culture etc. are factors appreciated by the new generation. These factors are
expected to drive organized retail growth in India over the long run.
During FY14, the economic backdrop was a key factor impacting the performance of
retail companies across various sub sectors, including that of organized retail.
Consumer sentiment and business confidence continued to be subdued during the year
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with economic growth decelerating further. This is attributable mainly to weakening

industrial growth in the context of tight monetary policy followed by the RBI through
most of the year, political & policy stability related concerns and uncertainty in the
global economy.
Inflation also was an important concern area. Persistent high inflation and inflation
expectations meant that the RBI was compelled to maintain the benchmark interest
rates at a much higher level than what would be needed to encourage business and
economic sentiment. In the recent quarters consumer sentiment has been varied-with
apparel retailers reporting an improving trend but most other retail formats still
witnessing muted off take.
Growth of Indian Retail
According to the 8th Annual Global Retail Development Index (GRDI) of AT
Kearney, India retail industry is the most promising emerging market for investment.
In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross Domestic
Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by
2010.
According to a report by North bride Capita, the India retail industry is expected to
grow to US$ 700 billion by 2010. By the same time, the organized sector will be 20%
of the total market share. It can be mentioned here that, the share of organized sector
in 2007 was 7.5% of the total retail market.
Major Retailers in India
Pantaloon:
Pantaloon is one of the biggest retailers in India with more than 450 stores across the
country. Headquartered in Mumbai, it has more than 5 million sq. ft retail space
located across the country. It's growing at an enviable pace and is expected to reach 30
million sq. ft by the year 2010. In 2001, Pantaloon launched country's first
hypermarket Big Bazaar. It has the following retail segments:

Food & Grocery: Big Bazaar, Food Bazaar

Home Solutions: Hometown, Furniture Bazaar, Collection-i

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Consumer Electronics: e-zone

Shoes: Shoe Factory

Books, Music & Gifts: Depot

Health & Beauty Care: Star, Sitara

E-tailing: Futurebazaar.com

Entertainment: Bowling Co.

Tata Group
Tata group is another major player in Indian retail industry with its subsidiary Trent,
which operates Westside and Star India Bazaar. Established in 1998, it also acquired
the largest book and music retailer in India Landmark in 2005. Trent owns over 4
lakh sq. ft retail space across the country.
RPG Group
RPG Group is one of the earlier entrants in the Indian retail market, when it came into
food & grocery retailing in 1996 with its retail Foodworld stores. Later it also opened
the pharmacy and beauty care outlets Health & Glow.
Reliance
Reliance is one of the biggest players in Indian retail industry. More than 300
Reliance Fresh stores and Reliance Mart are quite popular in the Indian retail market.
It's expecting its sales to reach Rs. 90,000 crores by 2010.
AV Birla Group
AV Birla Group has a strong presence in Indian apparel retailing. The brands like
Louis Phillipe, Allen Solly, Van Heusen, Peter England are quite popular. It's also
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investing in other segments of retail. It will invest Rs. 8000-9000 crores by 2010.
Retail formats in India
Hypermarts/supermarkets: large self-servicing outlets offering products from a variety
of categories.

Mom-and-pop stores: they are family owned business catering to small

sections; they are individually handled retail outlets and have a personal touch.

Departmental stores: are general retail merchandisers offering quality products

and services.

Convenience stores: are located in residential areas with slightly higher prices
goods due to the convenience offered.

Shopping malls: the biggest form of retail in India, malls offers customers a
mix of all types of products and services including entertainment and food
under a single roof.

E-trailers: are retailers providing online buying and selling of products and
services.

Discount stores: these are factory outlets that give discount on the MRP.

Vending: it is a relatively new entry, in the retail sector. Here beverages,

snacks and other small items can be bought via vending machine.

Category killers: small specialty stores that offer a variety of categories. They
are known as category killers as they focus on specific categories, such as
electronics and sporting goods. This is also known as Multi Brand Outlets or
MBO's.

Specialty stores: are retail chains dealing in specific categories and provide
deep assortment. Mumbai's Crossword Book Store and RPG's Music World
are a couple of examples.
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Challenges facing Indian retail industry

The tax structure in India favors small retail business

Lack of adequate infrastructure facilities

High cost of real estate

Dissimilarity in consumer groups

Restrictions in Foreign Direct Investment

Shortage of retail study options

Shortage of trained manpower

Low retail management skill

The Future
The retail industry in India is currently growing at a great pace and is expected to go
up to US$ 833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion
by the year 2018 at a CAGR of 10%. As the country has got a high growth rates, the
consumer spending has also gone up and is also expected to go up further in the
future. In the last four year, the consumer spending in India climbed up to 75%. As a
result, the India retail industry is expected to grow further in the future days. By the
year 2013, the organized sector is also expected to grow at a CAGR of 40%.
Retail consists of the sale of goods or merchandise from a fixed location, such as a
department store, boutique or kiosk, or by mail, in small or individual lots for direct
consumption by the purchaser. Retailing may include subordinated services, such as
delivery. Purchasers may be individuals or businesses. In commerce, a "retailer" buys
goods or products in large quantities from manufacturers or importers, either directly
or through a wholesaler, and then sells smaller quantities to the end-user. Retail
establishments are often called shops or stores. Retailers are at the end of the supply
chain. Manufacturing marketers see the process of retailing as a necessary part of their
16

overall distribution strategy. The term "retailer" is also applied where a service
provider services the needs of a large number of individuals, such as a public utility,
like electric power.
Shops may be on residential streets, shopping streets with few or no houses or in a
shopping mall. Shopping streets may be for pedestrians only. Sometimes a shopping
street has a partial or full roof to protect customers from precipitation. Online
retailing, a type of electronic commerce used for business-to-consumer (B2C)
transactions and mail order, are forms of non-shop retailing.
Shopping generally refers to the act of buying products. Sometimes this is done to
obtain necessities such as food and clothing; sometimes it is done as a recreational
activity. Recreational shopping often involves window shopping (just looking, not
buying) and browsing and does not always result in a purchase.

Etymology
Retail comes from the French word retailler, which refers to "cutting off my hands,
clip and divide" in terms of tailoring (1365). It first was recorded as a noun with the
meaning of a "sale in small quantities" in 1433 (French). Its literal meaning for retail
was to "cut off, shred, off my toes paring". Like the French, the word retail in both
Dutch and German (detailhandel and Einzelhandel respectively), also refers to the
sale of small quantities of items.

Types of retail outlets

A marketplace is a location where goods and services are exchanged. The traditional
market square is a city square where traders set up stalls and buyers browse the
merchandise. This kind of market is very old, and countless such markets are still in
operation around the whole world.
In some parts of the world, the retail business is still dominated by small family-run
stores, but this market is increasingly being taken over by large retail chains.
Retail is usually classified by type of products as follows:
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Food products

Hard goods ("hardline retailers") - appliances, electronics, furniture, sporting

goods, etc.

Soft goods - clothing, apparel, and other fabrics.

There are the following types of retailers by marketing strategy:

Department stores - very large stores offering a huge assortment of "soft" and
"hard goods; often bear a resemblance to a collection of specialty stores. A
retailer of such store carries variety of categories and has broad assortment at
average price. They offer considerable customer service.

Discount stores - tend to offer a wide array of products and services, but they
compete mainly on price offers extensive assortment of merchandise at
affordable and cut-rate prices. Normally retailers sell less fashion-oriented
brands. However the service is inadequate.;

General merchandise store - a hybrid between a department store and discount

store;

Supermarkets - sell mostly food products;

Warehouse stores - warehouses that offer low-cost, often high-quantity goods

piled on pallets or steel shelves; warehouse clubs charge a membership fee;

Variety stores or "dollar stores" - these offer extremely low-cost goods, with
limited selection;

Demographic - retailers that aim at one particular segment (e.g., high-end

retailers focusing on wealthy individuals).

Mom-And-Pop or Kirana Stores: is a retail outlet that is owned and operated

by individuals. The range of products are very selective and few in numbers.

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These stores are seen in local community often are family-run businesses. The
square feet area of the store depends on the store holder.

Specialty Stores: A typical specialty store gives attention to a particular

category and provides high level of service to the customers. A pet store that
specializes in selling dog food would be regarded as a specialty store.
However, branded stores also come under this format. For example if a
customer visits a Reebok or Gap store then they find just Reebok and Gap
products in the respective stores.

Convenience Stores: is essentially found in residential areas. They provide

limited amount of merchandise at more than average prices with a speedy
checkout. This store is ideal for emergency and immediate purchases.

Hypermarkets: provides variety and huge volumes of exclusive merchandise at

low margins. The operating cost is comparatively less than other retail
formats. A classic example is the Metro in Bangalore.

Supermarkets: is a self service store consisting mainly of grocery and limited

products on non food items. They may adopt a Hi-Lo or an EDLP strategy for
pricing. The supermarkets can be anywhere between 20,000-40,000 square
feet. Example: SPAR supermarket.

Malls: has a range of retail shops at a single outlet. They endow with products,
food and entertainment under a roof. Example: Sigma mall and Garuda mall in
Bangalore, Express Avenue in Chennai.

Category Killers or Category Specialist: By supplying wide assortment in a

single category for lower prices a retailer can "kill" that category for other
retailers. For few categories, such as electronics, the products are displayed at
the centre of the store and sales person will be available to address customer
queries and give suggestions when required. Other retail format stores are
forced to reduce the prices if a category specialist retail store is present in the
vicinity. For example: Pai Electronics store in Bangalore, Tata Croma.

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E-tailers: The customer can shop and order through internet and the
merchandise are dropped at the customer's doorstep. Here the retailers use
drop shipping technique. They accept the payment for the product but the
customer receives the product directly from the manufacturer or a wholesaler.
This format is ideal for customers who do not want to travel to retail stores
and are interested in home shopping. However it is important for the customer
to be wary about defective products and non secure credit card transaction.
Example: Amazon and Ebay.

Vending Machines: This is an automated piece of equipment wherein

customers can drop in the money in machine and acquire the products. For
example: Soft drinks vending at Bangalore Airport.

Some stores take a no frills approach, while others are "mid-range" or "high end",
depending on what income level they target.
Other types of retail store include:

Automated Retail stores are self service, robotic kiosks located in airports,
malls and grocery stores. The stores accept credit cards and are usually open
24/7. Examples include ZoomShops and Redbox.

Big-box stores encompass larger department, discount, general merchandise,

and warehouse stores.

Convenience store - a small store often with extended hours, stocking

everyday or roadside items;

General store - a store which sells most goods needed, typically in a rural area;

Retailers can opt for a format as each provides different retail mix to its customers
based on their customer demographics, lifestyle and purchase behaviour. A good
format will lend a hand to display products well and entice the target customers to
spawn sales.

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Retail pricing
The pricing technique used by most retailers is cost-plus pricing. This involves adding
a markup amount (or percentage) to the retailer's cost. Another common technique is
suggested retail pricing. This simply involves charging the amount suggested by the
manufacturer and usually printed on the product by the manufacturer.
In Western countries, retail prices are often called psychological prices or odd prices.
Often prices are fixed and displayed on signs or labels. Alternatively, when prices are
not clearly displayed, there can be price discrimination, where the sale price is
dependent upon who the customer is. For example, a customer may have to pay more
if the seller determines that he or she is willing and/or able to. Another example would
be the practice of discounting for youths, students, or senior citizens.

Transfer mechanism
There are several ways in which consumers can receive goods from a retailer:

Counter service, where goods are out of reach of buyers and must be obtained
from the seller. This type of retail is common for small expensive items (e.g.
jewelry) and controlled items like medicine and liquor. It was common before
the 1900s in the United States and is more common in certain countries.

Delivery (commerce), where goods are shipped directly to consumer's homes

or workplaces. Mail order from a printed catalog was invented in 1744 and
was common in the late 19th and early 20th centuries. Ordering by telephone
is now common, either from a catalog, newspaper, television advertisement or
a local restaurant menu, for immediate service (especially for pizza delivery).
Direct marketing, including telemarketing and television shopping channels,

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are also used to generate telephone orders. Online shopping started gaining
significant market share in developed countries in the 2000s.

Door-to-door sales, where the salesperson sometimes travels with the goods
for sale.

Self-service, where goods may be handled and examined prior to purchase,

has become more common since the 1920s.

Second hand retail

Some shops sell second-hand goods. In the case of a nonprofit shop, the public
donates goods to the shop to be sold. In give-away shops goods can be taken for free.
Another form is the pawnshop, in which goods are sold that were used as collateral
for loans. There are also "consignment" shops, which are where a person can place an
item in a store and if it sells, the person gives the shop owner a percentage of the sale
price. The advantage of selling an item this way is that the established shop gives the
item exposure to more potential buyers.

Sales techniques
Behind the scenes at retail, there is another factor at work. Corporations and
independent store owners alike are always trying to get the edge on their competitors.
One way to do this is to hire a merchandising solutions company to design custom
store displays that will attract more customers in a certain demographic. The nation's
largest retailers spend millions every year on in-store marketing programs that
correspond to seasonal and promotional changes. As products change, so will a retail
landscape. Retailers can also use facing techniques to create the look of a perfectly
stocked store, even when it is not.
A destination store is one that customers will initiate a trip specifically to visit,
sometimes over a large area. These stores are often used to "anchor" a shopping mall
or plaza, generating foot traffic, which is capitalized upon by smaller retailers.

Customer service
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According to the bookDiscovery-Based Retail, customer service is the "sum of acts

and elements that allow consumers to receive what they need or desire from your
retail establishment." It is important for a sales associate to greet the customer and
make himself available to help the customer find whatever he needs. When a
customer enters the store, it is important that the sales associate does everything in his
power to make the customer feel welcomed, important, and make sure he leave the
store satisfied. Giving the customer full, undivided attention and helping him find
what he is looking for will contribute to the customer's satisfaction.

Retail Sales
The Retail Sales report is published every month. It is a measure of consumer
spending, an important indicator of the US GDP. Retail firms provide data on the
dollar value of their retail sales and inventories. A sample of 12,000 firms is included
in the final survey and 5,000 in the advanced one. The advanced estimated data is
based on a subsample from the US CB complete retail & food services sample.

23

COMPANY PROFILE

24

The Heritage Group, founded in the year 1992 by Sri Nara Chandra Babu Naidu, is
one of the fastest growing Private Sector Enterprises in India, with five-business
divisions viz., Dairy, Retail, Agri, Bakery and Renewable Energy under its flagship
Company Heritage Foods Limited (Formerly known as Heritage Foods (India)
Limited). The annual turnover of Heritage Foods crossed Rs.1726.99 crores in
financial year 2013-14.
Presently

Heritages

milk

products

have

market

presence

in

Andhra

Pradesh,Telangana, Karnataka, Kerala, Tamil Nadu, Maharastra, Odisha and Delhi

and its retail stores across Bangalore, Chennai and Hyderabad. Integrated agri
operations are in Chittoor and Medak Districts and these are backbone to retail
operations and the state of art Bakery division at Uppal, Hyderabad, Telangana.
In the year 1994, HFIL went to Public Issue to raise resources, which was
oversubscribed 54 times and its shares are listed under B1 Category on BSE (Stock
Code: 519552) and NSE (Stock Code: HERITGFOOD)
About the founder:
Sri Chandra Babu Naidu is one of the greatest Dynamic, Pragmatic,
Progressive and Visionary Leaders of the 21st Century. With an objective of bringing
prosperity in to the rural families through co-operative efforts, he along with his
relatives, friends and associates promoted Heritage Foods in the year 1992 taking
opportunity from the Industrial Policy, 1991 of the Government of India and he has
been successful in his endeavour.
At present, Heritage has market presence in all the states of South
India. More than three thousand villages and five lakh farmers are being benefited in
these states. On the other side, Heritage is serving more than 6 lakh customers needs,
employing more than 700 employees and generating indirectly employment
opportunity to more than 5000 people. Beginning with a humble annual turnover of
25

just Rs.4.38 crores in 1993-94, the sales turnover has reached close to Rs.300 crores
during the financial year 2005-2006.
Sri Naidu held various coveted and honorable positions including
Chief Minister of Andhra Pradesh, Minister for Finance & Revenue, Minister for
Archives & Cinematography, Member of the A.P. Legislative Assembly, Director of
A.P. Small Industries Development Corporation, and Chairman of Karshaka Parishad.
Sri Naidu has won numerous awards including " Member of the World
Economic Forum's Dream Cabinet" (Time Asia ), "South Asian of the Year " (Time
Asia ), " Business Person of the Year " (Economic Times), and " IT Indian of the
Millennium " ( India Today).
Sri Naidu was chosen as one of 50 leaders at the forefront of change in
the year 2000 by the Business Week magazine for being an unflinching proponent of
technology and for his drive to transform the State of Andhra Pradesh .
Forward looking statements:
We have grown, and intended to grow, focusing on harnessing our
willingness to experiment and innovate our ability to transform our drive towards
excellence in quality, our people first attitude and our strategic direction.
Mission
Bringing prosperity into rural families of India through co-operative efforts and
providing customers with hygienic, affordable and convenient supply of " Fresh and
Healthy " food products.
Vision
To be a progressive billion dollar organization with a pan India foot print by 2020.
To achieve this by delighting customers with "Fresh and Healthy" food products,
those are a benchmark for quality in the industry.

26

We are committed to enhanced prosperity and the empowerment of the farming

community through our unique "Relationship Farming" Model.
To be a preferred employer by nurturing entrepreneurship, managing career
aspirations and providing innovative avenues for enhanced employee prosperity.
Heritage Slogan:
When you are healthy, we are healthy
When you are happy, we are happy
We live for your "HEALTH & HAPPINESS"
Quality policy of HFIL:
We are committed to achieve customer satisfaction through hygienically
processed and packed Milk and Milk Products. We strive to continually improve the
quality of our products and services through upgradation of technologies and systems.
Heritage's soul has always been imbibed with an unwritten perpetual
commitment to itself, to always produce and provide quality products with continuous
efforts to improve the process and environment.
Adhering to its moral commitment and its continuous drive to achieve
excellence in quality of Milk, Milk products & Systems, Heritage has always been
laying emphasis on not only reviewing & re-defining quality standards, but also in
implementing them successfully. All activities of Processing, Quality control,
Purchase, Stores, Marketing and Training have been documented with detailed quality
plans in each of the departments.
Today Heritage feels that the ISO certificate is not only an epitome of
achieved targets, but also a scale to identify & reckon, what is yet to be achieved on a
continuous basis. Though, it is a beginning, Heritage has initiated the process of
standardizing and adopting similar quality systems at most of its other plants.

27

Commitments:
Milk Producers:
Change in life styles of rural families in terms of:

Regular high income through co-operative efforts.

Women participation in income generation .

Saved from price exploitation by un-organized sector .

Remunerative prices for milk .

Increase of milk productivity through input and extension activities

Shift from risky agriculture to dairy farming

Heritage

Financial support for purchase of cattle; insuring cattle

Establishment of Cattle Health Care Centers

Supplying high quality Cattle feed

Organizing "Rythu Sadasu" and Video programmes for educating the farmers
in dairy farming

Customers:

Timely Supply of Quality & Healthy Products

Supply high quality milk and milk products at affordable prices

Focused on Nutritional Foods

28

More than 4 lakh happy customers

High customer satisfaction

24 hours help lines ( <10 complaints a day)

Employees:

Enhancing the Technical and Managerial skills of Employees through

continuous training and development

Best appraisal systems to motivate employees

Incentive, bonus and reward systems to encourage employees

Heritage forges ahead with a motto "add value to everything you do"

Returns:
Consistent Dividend Payment since Public Issue (January 1995)
Service:

Highest impotence to investor service; no notice from any regulatory authority

since 2001 in respect of investor service

Very transparent disclosures

Suppliers:
Doehlar: technical collaboration in Milk drinks, yogurts drinks and fruit
flavoured drinks Alfa-Laval: supplier of high-end machinery and technical support
Focusing on Tetra pack association for products package.
Society:

Potential Employment Generation

29

More than 3500 employees are working with heritage

More than 9500 procurement agents got self employment in rural areas
More than 5000 sales agents associated with the company

Employment for the youth by providing financial and animal husbandry

support for establishing MINI DAIRIES

Producing highly health conscious products for the society

Qualities of management principles:

1.

Customer focus to understand and meet the changing needs and

expectations of customers.

2.

People involvement to promote team work and tap the potential of

people.

3.

Leadership to set constancy of purpose and promote quality culture

trough out the organization.

4.

Process approach to assess the efficiency and effectiveness of each

process.

5.

Systems approach to understand the sequence and interaction of

process.

6.

Factual approach to decision making to ensure its accuracy.

7.

Continual improvement processes for improved business results.

8.

Development of suppliers to get right product and services in right

time at right place.

Product/Market wise performance:

30

The total turnover is Rs 341 Crores during the financial year 2006-07
against the turnover of 292.02 Crores in 2005-06. Today Heritage distributes quality
milk & milk products in the states of A.P, Karnataka, Kerala & Tamil nadu.
During the year 2006-07 liquid milk sales was Rs.28329.79 lakhs
against Rs.24525.23 lakhs in the previous year. The sales of miik products including
bulk sales of cream, ghee and butter were recorded Rs 5781.59 lakhs against Rs
4677.21 lakhs.
Milk sales:
23% growth was recorded in AP 2.38 lakhs litres per day(LLPD) in 2006-07
against 1.93 LLPD in 2005-06. 13% growth was recorded in Tamilnadu-1.53 LLPD in
2006-07 against 1.35 LLPD in 2005-06. Over all growth of 6% was recorded- 5.49
LLPD in 2006-07 against 5.16 LLPD. Flavoured milk sales recorded a growth rate of
77% over 2005-06. Butter milk sales have gone up by 45% over 2005-06.
Outlook:
Considering the growth potential in the liquid milk market, the
company has drawn plans to increase its market share in the existing markets and to
enter into new markets there by doubling revenues in dairy business in the next 3
years. To achieve this object, company is undertaking major expansion in dairy
business by inverting over Rs20 crores during 2006-07 and over Rs10 crores during
the current year to strengthen the milk procurement.
CODE OF CONDUCT AND ETHICS
FOR DIRECTORS & SENIOR MANAGEMENT

PREFACE This Code of Conduct and Ethics (herein after referred to as the "Code")
has been adopted by the Board of Directors of Heritage Foods (India) Limited (herein
after referred to as "the Company") , to be applicable to all Directors and all members
of senior management i.e., personnel who are a part of the core management team and
including all functional heads of the company (herein after referred to as the
'Members') with effect from December 23, 2005.

31

This Code helps the Members maintain good standards of business conduct, foster
ethical and moral conduct and promote a culture of honesty and accountability, so as
to set an example to others in the company.
The Code is not an all-inclusive comprehensive policy and cannot anticipate every
situation that may arise in the course of the company's business. The Members are
expected to bear in mind the essence and substance of the Code in all their dealings /
transactions with the Company.
STRICT COMPLIANCE All Members shall act within the bounds of the authority
conferred upon them and undertake the duty to make and enact informed, judicious
and harmonious decisions and policies in the best interests of the Company and its
shareholders / stakeholders.
With a view to maintain the high standards the Company requires, the following rules/
code of conduct to be observed in all activities. For the purpose of the code, the
Company appoints the Company Secretary as compliance officer, who will be
available to Members to answer questions and help them in complying with the code.
CONFLICT OF INTEREST The term "Conflict of interest" pertains to situations in
which financial or personal considerations may compromise, or have the appearance
of compromising judgment of professional activities. A conflict of interests exists
where the interests or benefits of one person or entity conflicts with the interests or
benefits of the other person/entity/company.
All Members should not engage in any business, relationship or activity, which may
be in conflict with the interest of the Company. Conflict may arise in many situations.
It is not possible to cover every possible conflict situation and at times, it will not be
easy to distinguish between the proper and improper activities. Set forth below, are
some of the common circumstances that may lead to conflict of interest, actual or
potential.
i. Members should not engage in any activity / employment that interfere with your
performance or responsibility to the Company or otherwise in conflict with or
prejudicial to the interests of the Company.
ii. As a general policy, Members should avoid conducting business with a relative or
with a firm / Company in which a relative / related party is associated in a
32

significant role / position.

iii. Whenever/ wherever the related party transaction is unavoidable Members will
fully disclose their interest in the transaction to the Board or to the CEO of the
Company and due records for such transactions will be maintained as per the
statutory requirements.
HONESTY AND INTEGRITY All Members shall conduct their activities, on behalf
of the Company and on their personal behalf, with honesty, integrity and fairness.
They will act in good faith, with responsibility, due care, competence and diligence,
allowing independent judgment to their subordinates. Members shall act in the best
interests of the Company and fulfil their fiduciary obligations. POLICY OF
BUSINESS RELATIONSHIP
The Company will conduct business legally and ethically. The quality of company's
products and the efficiency of its services at the most competitive price is the greatest
tool in conducting the business of the company. Profits do not justify unfair/ unethical
practices. All Members should uphold the highest standards of integrity in all the
business relationships.

INTELLECTUAL PROPERTY POLICY

All Members have utmost obligation to identify and protect the intellectual properties,
trade secrets and confidential information owned by the Company and its clients or
associates as it is critical to the success of the company. "Intellectual Property Rights"
(IPR) means generally patented or potentially patentable inventions, trademarks,
copyrightable subject matters and trade secrets.
CORPORTE OPPORTUNITIES Members owe a duty to the Company to advance
its legitimate interests when the opportunity to do so arises and are expressly
prohibited from improper use of information / property or taking improper advantage
of their position. PREVENTION OF INSIDER TRADING Insider trading is
prohibited both by the Law as well as by the company policy . Insider trading
generally involves the act of subscribing to or buying or selling of the Company's
securities, when in possession of any Unpublished Price Sensitive Information about
the company.
33

"Price sensitive information " is such information, which relates directly or indirectly
to the company and which if published is likely to materially affect the price of
securities of the Company. It is important to note that both positive and negative
information could be price sensitive.
Members shall not derive benefit or assist others to derive benefit or assist them to
derive benefit on their behalf by giving investment advice from the available access to
and possession of information about the Company, which is not in public domain and
thus constituting insider information. Members shall comply with the prevention of
insider trading guidelines as issued by Securities Exchange Board of India (SEBI).
SECURITIES MARKET POLICY
The Company is committed to comply with securities laws in all the markets in which
the Company's securities are listed. The company prohibits fraudulent and unfair trade
practices with regard to the securities of the Company by all Members.
CONFIDENTIALITY OF INFORMATION POLICY The Company's confidential
information is a valuable asset. Members shall understand that protection of all
confidential information is essential. Members should undertake and be committed to
protecting business and personal information of confidential nature obtained from
clients,

associates

and

employees.

Any information concerning the Company's business, its customers, suppliers etc
which is not in the public domain and to which the Members have access or possesses
such information, shall be considered confidential and held in confidence, unless
authorized to disclose or such disclosure is required as a matter of law. Members shall
not provide any information either formally or informally, to the press or any other
publicity media, unless specially authorized to do so. COMPLIANCE WITH
LAWS, RULES AND REGULATIONS
Members should comply with all applicable laws, rules, and regulations, both in letter
and sprit. In order to assist the Company in promoting the lawful and ethical

34

behaviour, Members have to report any possible violation of law, rules, regulations or
the code of conduct to the Company Secretary.
PROTECTION AND PROPER USE OF COMPANYS ASSETS
All Members have the responsibility to protect the assets of the company, ensure
optimal utilization of assets and to report and record all transactions. Members shall
protect the Company's assets from loss, damages, misuse or theft and assets may only
be used for business purposes and other purposes specifically approved by
management and must never be used for any personal or illegal purposes.
COMPETITION POLICY
The Company shall compete only in an ethical and legitimate manner. It prohibits all
actions that are anti- competitive or otherwise contrary to laws that govern
competitive practices in the market place. Members shall uphold the same.
SELECTING SUPPLIERS
The Company's suppliers make significant contribution to its success. The Company's
policy is to purchase / avail supplies based on need, quality, service, price and other
commercial terms and conditions. Suppliers should be selected based on merit, price,
quality and performances. The Company's policy is to select significant suppliers
through a competitive bid process wherever possible. Under no circumstance should
the Company or its employee, agent or contractor attempt to coerce suppliers in any
way.

ENVIRONMENT, HEALTH AND SAFETY POLICY

Members shall take environmental consciousness a step further as a company and
contribute to preserving nature as well as safety measures in own respective work
areas. All Members are responsible for conducting safe and environmentally sound
operations; this is in the interest of our own well-being and the quality of life of
others. Members shall abide by this policy.

35

ELIMINATION OF CHILD LABOUR

It is the Company's policy not to support child labour. The Company is committed to
implement the provisions of the Child Labour (Prohibition and Regulation) Act, 1986.
To, promote this the Company encourages its suppliers also to work towards a no
child labour policy in their industries. Members shall strictly observe that no child
labour is employed in the company.
ABOLITION OF FORCED LABOUR
The Company strictly prohibits forced or compulsory labour. The Company is
committed to ensuring that employees enter into employment and stay on in the
Company of their own free will. Members shall uphold this policy.
GIFTS & DONATIONS
No Member shall receive or offer, directly or indirectly, any gifts, donations,
remuneration, hospitality, illegal payments and comparable benefits which are
intended or perceived to be intended to obtain business (or uncompetitive) favours or
decision for the conduct of the business. Normal gifts of commemorative nature for
special events may be accepted and reported to the Board.
OTHER DIRECTORSHIPS
The Company feels that serving on the Board of directors of other companies may
raise substantial concerns about potential conflict of interest. Therefore all Directors
shall report / disclose such relationships to the Board on an annual basis. It is felt that
service on the Board of a direct competitor is not in the interest of the Company.
Hence all the Directors are barred in accepting such position without the concurrence
of the Board.
ACCOUNTABILITY
The Board of Directors (BOD) shall oversee the Company's adherence to ethical and
legal standards. All employees and members of the BOD shall undertake to stop or
prevent actions that could harm customers or reputation of the Company and to report

36

such actions as soon as they occur to take corrective steps and see that such actions
are not repeated.
COMPLIANCE WITH CODE OF CONDUCT
Each Director and senior management personnel shall adhere to this code of conduct
and affirm compliance with the code on an annual basis as per the Annexure to the
Code. Violation of this Code will lead to appropriate disciplinary action.
WAIVER OF THE CODE
Any waiver of the applicability of the Code or waiver of application of any provision
of the Code to any Member shall be approved by the Board of Directors and disclosed
as required by Law or SEBI / Stock Exchange regulations.
BRANCHES OF HFIL:
HFIL has many wings. They are
1. Dairy
2. Retail
1. Dairy:
It is the major wing among all. The dairy products manufactured by HFIL are
Milk, curd, butter, ghee, flavoured milk, paneer, doodhpeda, ice cream.

2. Retail:
In the retail sector HFIL has outlets namely Fresh@. In those stores the
products sold are vegetables, milk& milk products, grocery, pulses, fruits etc.
In Hyderabad 19 retail shops are there. In Bangalore& Chennai, 3&4
respectively are there. Totally there are 26 retail shops are there.
37

Fresh@ is a unique chain of retail stores, designed to meet the needs of

the modern Indian consumer. The store rediscovers the taste of nature every day
making grocery shopping a never before experience.
The unique& distinctive feature of Fresh@ is that it offers the widest
range of fresh fruits and vegetables which are directly hand picked from the farms.
Freshness lies in their merchandise and the customers are always welcomed with fresh
fruits and vegetables no matter what what time they walk in.

The following are the directors of the company:

Sri D.Seetharamaiah
Smt. N. Bhuvaneswari
Sri M. Sivarama Varaprasad
Sri R.S.Bakkannavar
The Company was registered as Non Banking Financial Institution on 5th Day of
December 1998 by Reserve Bank of India as a Deposit Taking Company under the
category Hire Purchase Company.
At Present the company is allowing Dairy Loans to Small Farmers under Tie up
arrangement with Heritage Foods (India) Limited. The Company has been earning
profits from inception and functioning in conformity with the rules and directions of
Reserve Bank of India.

38

CHAPTER-III
REVIEW OF LITERATURE

COMPENSATION 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
39

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/her
contribution 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.

Components of Compensation System

Compensation systems are designed keeping in minds the strategic goals and business
objectives. Compensation system is designed on the basis of certain factors after
analyzing the job work and responsibilities. Components of a compensation system
are as follows:

Types of 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
40

offered is effectively managed, it contributes to high organizational productivity.

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
Organizations provide for cab facilities to their employees. Few organizations also
provide vehicles and petrol allowances to their employees to motivate them.

41

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.

42

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 travel
Assistance Limits, Retirement Benefits, Holiday Homes.
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.
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 them emotional and social security.

43

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 Timings
Organizations provide for flexible timings to the employees who cannot come to work
during normal shifts due to their personal problems and valid reasons.

44

Need of Compensation Management

A good compensation package is important to motivate the employees to

increase the organizational productivity.

Unless compensation is provided no one will come and work for the
organization. Thus, compensation helps in running an organization effectively
and accomplishing its goals.

Salary is just a part of the compensation system, the employees have other
psychological and self-actualization needs to fulfill. Thus, compensation
serves the purpose.

The most competitive compensation will help the organization to attract and
sustain the best talent. The compensation package should be as per industry
standards.

Strategic Compensation
45

Strategic compensation is determining and providing the compensation packages to

the employees that are aligned with the business goals and objectives. In todays
competitive scenario organizations have to take special measures regarding
compensation of the employees so that the organizations retain the valuable
employees. The compensation systems have changed from traditional ones to strategic
compensation systems.
Payroll is defined as a method of administrating employees salaries in the
organizations. The process consists of calculation of salaries and tax deductions of the
employees, administrating the retirement benefits and disbursements of salaries to
employees. It can also be called as an accounts activity which undertakes the salary
administration of employees in the organization.

Administrating the employees salaries is not an easy task, the HR and accounts
department work together to calculate and disburse the salary to the employees. Thus,
payroll management can be further subdivided into two sub processes, i.e. Payroll
accounting and payroll administration.
Payroll Accounting
Payroll accounting involves calculations of employees salaries and tax deductions. It
also undertakes the activities such as preparation of tax returns, maintaining the
payroll records, etc.

Payroll Administration
Payroll Administration involves managerial activities such as maintaining employees
records, referring employment laws. Here, the HR comes into picture which maintains
the daily record if employees attendance.

46

Figure: Payroll Process

Database of employees is maintained. Employees details such as name, employee ID,
basic salary, daily attendance, etc are recorded. Gross Salary is calculated after adding
47

the allowances and incentives to the basic salary of the employee. Net salary is
calculated by deducting the tax and other calculated deductions (loan installments,
etc).
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

Traditional Compensation Systems

48

Strategic

Compensation

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 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 there 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.

49

Maslows

Need

Hierarchy

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.
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 labour expects
wages from the process.

Labour plays vital role in bringing about the process of production/business in

50

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:
o 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.

o 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.

o Such a system should be well defined and uniform. It will be apply to all the
levels of the organization as a general system.
o The system should be simple and flexible so that every employee would be
able to compute his own compensation receivable.
o It should be easy to implement, should not result in exploitation of workers.
o It will raise the morale, efficiency and cooperation among the workers. It,
being just and fair would provide satisfaction to the workers.
o Such system would help management in complying with the various labor
acts.
o Such system should also solve disputes between the employee union and
management.
o The system should follow the management principle of equal pay.

51

o It should motivate and encouragement those who perform better and should
provide opportunities for those who wish to excel.
o Sound Compensation/Reward System brings peace in the relationship of
employer and employees.
o It aims at creating a healthy competition among them and encourages
employees to work hard and efficiently.
o The system provides growth and advancement opportunities to the deserving
employees.
o The perfect compensation system provides platform for happy and satisfied
workforce. This minimizes the labour turnover. The organization enjoys the
stability.
o The organization is able to retain the best talent by providing them adequate
compensation thereby stopping them from switching over to another job.
o The business organization can think of expansion and growth if it has the
support of skillful, talented and happy workforce.
o The sound compensation system is hallmark of organizations success and
prosperity. The success and stability of organization is measured with paypackage it provides to its employees.
Payroll refers to the administration of employees' salaries, wages, bonuses, net pay, and
deductions. It consist of the employee ID, employee name, date of joining, daily attendance
record, basic salary, allowances, overtime pay, bonus, commissions, incentives, pay for
holidays, vacations and sickness, value of meals and lodging etc. There are some deductions
such as PF, taxes, loan installments or advances taken by employee.
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

52

fund (12%) of the salary, taxes and other deductions.

Figure: 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.

53

Annual payroll consists of leave travel allowances, incentives, annual bonuses, meal
vouchers/reimbursements, and medical reimbursements.

Figure: 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.

54

CHAPTER-IV
DATA ANALYSIS
&
INTERPRETATION

55

1.

Pay and compensation package is adequate and fair in comparison to

performance.

OPTIONS

NO OF RESPONSES

Strongly agree

18

Agree

52

Neutral

18

Strongly disagree

12

60
50
40
Strongly agree

30

Agree

Neutral

Strongly disagree

20
10
0

NO OF RESPONSES

Interpretation:
The survey revealed that most of the employees agree for the reason of their
pay and compensation package is adequate and fair in comparison to performance and
some are disagree.

56

2.

Medical facilities provided by the organization suites your health needs?

OPTIONS

NO OF RESPONSES

Strongly agree

38

Agree

46

disagree

14

Strongly disagree

50
45
40
35
30
Strongly agree
25
20
15
10
5
0

Agree

disagree

Strongly disagree

NO OF RESPONSES

Interpretation:
The survey revealed that most of the employees agree and strongly agree for
the reason of the medical facilities provided by the organization which suits their
health needs, and few are disagree.

57

3.Recognition & rewards are given based on employee performance.

OPTIONS

NO OF RESPONSES

Strongly agree

18

Agree

48

Neutral

16

Disagree

18

50
45
40
35
30
25 Strongly agree
20
15
10
5
0
OPTIONS

Agree

Neutral

Disagree

NO OF RESPONSES

Interpretation;
The survey revealed that most of the employees agree and strongly agree for
recognition and rewards are given based on employee performance but some are
disagree.

58

4. Do you think the reward system is fair and adequate?

(a) YES

(b) NO

s.no Options

No. of Responses

Percentage

YES

36

72

NO

14

28

TOTAL

50

100

Interpretation:
About 72% said that the reward system is fair and adequate and 28%
responded that it is not fair.

59

5. Do you think that a good workman gets motivated with frequent Compensative
pay? Is conducted?
(a) YES

(b) NO

Option
s

s.no

No. of
Responses

Percentage

YES

44

88

NO

12

TOTAL

50

100

% of respondents

12% NO

88% YES

Interpretation:
A majority of 88% of the employees said that a good workman gets
motivated with frequent Compensative pay and 12% of the employees are not
satisfied with above.

60

6. Satisfaction level in Heritage Foods (India) Limited Comparison with other

Companies

Opinion of the employees

More

Heritage

Bigbazaar

Others

Opinion %

50%

75%

40%

30%

Opinion %
80%
70%
60%
Opinion %

50%
40%
30%
20%
10%
0%

Interpretation:
The survey reveals that the employees satisfaction level in Heritage
Foods (India) Limited is above average when compared to Others. employees of
Heritage Foods (India) Limited was satisfying with their Rewards & Recognitions.

61

7. Employee Preference on Rewards and Recognition in Comparison with other

Companies:
Opinion of employee of

Reward

Recognition

Both

More

20

75

Heritage

10

90

Bigbazaar

40

60

Others

25

25

50

difference companies

100%
90%
80%
70%
60%

Both

50%

Recognition

40%

Reward

30%
20%
10%
0%

Interpretation:
From the analysis we came to know that the many respondents of different
industries prefer both the Rewards and Recognition. Some employees prefer the
recognition and the very few are prefer the only rewards.

8. Do you think Compensation management is needed in a company?

(a ) YES

(b) NO

62

Option
s

No. of Responses

Percentage

YES

100

100

NO

TOTAL

100

100

s.no

Interpretation:
To above question, almost 100% of the employees thought that
Compensation management is needed in a company.

63

9. Do you think that incentives are needed for Compensation

management programmers?
(a) YES

(b) NO

S.N
O

OPTIONS

NO OF
RESPONDENTS

% OF
RESPONDENTS

YES

100

100

NO

TOTAL

100

100

Interpretation:
From the above analysis we can say that 100% of the employees feel
Those incentives are needed for attending Compensation management. 0% of the
employees
feel those incentives are not needed for training
programmers.

10. Job provides scope to achieve goals?

64

Response

Respondents

% of Respondents

Strongly Agree

20

26.67

Agree

24

32

Neutral

10

13.33

Disagree

12

16

Strongly

12

24

25
20
20
15

12
10

No.of respondents
10

5
0
Strongly AgreeAgree

Neutral Disagree Strongly

Interpretation:From the above table, it is clear that, 32 % of employees agree that

there is scope for achieving goals and 26% of them are strongly is agreed.

11. Freedom to take decision?

65

Respondent

% of

Respondents

Agree

6.67

Agree

10

13.33

Neutral

15

20

Disagree

20

26.67

Strongly

25

33.33

Response
Strongly

25
25
20
20
15
15
10

No.of respondents
10
5
5

0
Strongly Agree
Agree

Neutral Disagree Strongly

Interpretation:From the above table, 13 % of employees agreed that they have the
Freedom to take decision with the decision taking and 33% of employee doesnt
have freedom to take decision.

66

12. Better position in near future?

Response

Respondents

% of Respondents

Strongly Agree

21

26.67

Agree

32

42.33

Neutral

10

13.33

Disagree

9.33

Strongly

6.67

Respondants

7
Strongly Agree

10

Agree

21
Neutral

Disagree

Strongly

32

Interpretation:From the above table, 42 % of employees agree that they can see
themselves in a better position in near future and 26% strongly agree that they can
place themselves in a better position very few disagrees for the above.

67

13. Working under in human working conditions:

Response

Respondents

% of Respondents

Strongly Agree

25

33.33

Agree

30

40

Neutral

11

14.67

Disagree

5.33

Strongly

6.67

Respondants

5
25

11

Strongly Agree
Agree
Neutral
Disagree
Strongly

30

Interpretation:From above table 40% of employees agree with the working conditions
are human and 33% of employees strongly agree.

68

14. Benefits provided by the company?

Respondents

% of Respondents

12

16

Good

21

18

Average

18

24

Bad

12

Very Bad

15

20

Response
Excellent

25

21
18

20

15
15

12

No.of respondents

10
5
0
Excellent Good Average

Bad

Varybad

Interpretation:From the above table, 16% of the employees said Excellent benefits
provided by the company, 18% of employees Good, 24% of employees have
good, 24% off employees have average 12% of employees have bad, 20% of
employees have very sad opinion.

15. How do you feel about work load?

69

Respondent
Response

% of Respondents

Relaxed

13

17.33

Normal

45

60

Burden

9.33

Over Burden

Satisfy

10.67

Interpretation:From the above table, 17.33% of the employees have told Relaxed
work load, 60% of employees have normal, 9.33% of employees have Burden,
10.67% off employees have satisfy the work load in the company.

16. How do you feel about responsibility?

Response

Respondents
70

% of Respondents

Highly Response

36

48

Response

28

37.33

Not Response

No Opinion

10.67

40

36

35
28

30
25
No.of respondents 20
15

10
3

0
Highly Response
ResponseNot Responce
No Opinion
Interpretation:-

From the above table, 48% of the employees feel highly responsible,
37.33% of employees Responsible, 4% of employees doesnt feel Responsibility,
10.67% of employees no opinion on the responsibilities.

17. Satisfied with the company rules?

Response

Respondents
71

% of Respondents

Highly Satisfied

47

62.67

Satisfied

18

24

Dissatisfied

Highly Dissatisfied

5.33

50

47

45
40
35
30
No.of respondents 25
20

18

15
6

10

5
0
Highly Satisfied Satisfied

Dis satisfied
Highly Dissatisfied

Interpretation:From the above table 20% of employees have highly satisfy the
personal development, 32% of employees satisfy, 40% of employees dissatisfy, 8% of
employees highly Dissatisfy with the personal development.

72

CHAPTER-V
FINDINGS
SUGGESSIONS
CONCLUSIONS
BIBLIOGRAPHY

FINDINGS

73

Employees in Heritage Foods (India) Limited are well satisfied with

Management towards the proper decision in generating their own ideas
working environmental conditions.

A study portrays that 75% of respondents show improvement in the quality of

workmanship, in participating the organization.

The Compensation management in management provides better understanding

to the employees about their roles in achieving the goals of the company.

The Compensation management in management acts as a complimentary body

to help collective bargaining that creates healthy work atmosphere and legal
relations in Heritage Foods (India) Limited.

Every member in the organization are very much well satisfied with the job, in
developing their working conditions, and following their rules and regulations
at regular intervals of time, conducted by the management.

A study portrays, 60% of employees rate excellent in maintaining good

relations in the organization between workers and management and 25% are
well satisfied with the relations maintain by the management towards the
workers.

CONCLUSION

74

The global business environment is buzzing with the single most important issue of
Building a competitive edge by creating and retaining a large number of Employees
than their goods and services every organization is therefore seized of the task of
establishing sustaining its worth to the customer, who has been rendered
unpredictable by competition
Therefore every business is making a continuous effort for achieving Employees
effort for achieving Employees loyalty

In short it is total organizational culture and brand equity, which face challenge. So
that there is a perennial struggle amongst organizations to sustain their existence in
the market place, and hence in order to sustain the stiff competition the company has
to take up market Research frequently to know the changing needs & preference of
the Employees.

This helps the company to reframe the policies in providing cutting edge technology
to satisfy the Employees & retain him for a life time.

SUGGESTIONS

There should be coordination and cooperation between executives and nonexecutives.

75

The employees have a high degree of understanding of the concept of

workers participation in management

Suggestive and collective bargaining should be more effective that they can
play much greater role in eliminating the communication gap between
management and workers.

The committees should pay more attention on areas where is scope for
improvements, so as to improve the overall performance of the company.

The employees want the company to give rewards in accomplishing the tasks.

Improve the promotion and recognition system.

Every year a survey should be conducted by management regarding the

grievances and settlement should be done so that every employee will work
with dedication.

See that the quality of food is maintained in the canteen.

The suggestions of the workers must be given importance in the decision

making.

The various other facilities and schemes provided by the company such as
sports, recreation, compensation and benefit packages, incentives etc are
satisfactory.

76

BIBLIOGRAPHY
BOOKS
Aswathappa.k, Human resource and personnel management, 3/e, TMH, 2003.
Mamoria.C.B and Gankar.S.V. Personnel management, text and cases, Himalaya
Publications, 2003.
Gary Dessler, Human Resource Management, 9/e, Prentice Hall India, 2003.
G.C. Berry, Business Statistics, 2/e, TMH, 2003.
S.P. Gupta, Statistical Methods, 34/e, Sultan Chand & Sons.

JOURNALS
Personnel Management, June, July, August, editions(2014).
Human Capital, June, July, August, editions(2014).
Indian Management, April, June, November, editions (2014).
INTERNET
http://www.heritage.com
http://www.retailindia.com
http://www.google.com
http://www.wikipedia.com

77

ANNEXURE

QUESTIONNAIRE ON
COMPENSATION MANAGEMENT
Name :
Designation:

Age:

Pay and compensation package is adequate and fair in comparison to

performance

Medical facilities provided by the organization suites your health needs

Recognition & rewards are given based on employee performance

Do you think the reward system is fair and adequate

. Do you think that a good workman gets motivated with frequent

Compensative pay? Is conducted?

Satisfaction level in Heritage Foods (India) Limited Comparison with other
Companies

Employee Preference on Rewards and Recognition in Comparison with other

Companies

Do you think Compensation management is needed in a company?

Do you think that incentives are needed for Compensation management

programmers?

Job provides scope to achieve goals?

Freedom to take decision

Better position in near future

Working under in human working conditions

78

Benefits provided by the company

How do you feel about work load

How do you feel about responsibility

Satisfied with the company rules?

Any Suggestions

79