Compensation

Subject: COMPENSATION SYSTEM OF BEXIMCO.LTD

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Name Id Signature
Md. Fouad Hasan
Abu Bakar Siddique Shad
Muhammad Moshiur Rahman

Course: MGT351 (Human Resource Management)

Section: 04

Semester: Spring-2016

Submitted to
Mujibul Haque (Mjb)
Faculty, School of Business
North South University
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20 March,2016
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Mujibul Haque,
Senior Lecturer
School of Business,
North South University,
Dhaka.
Course: MGT 351(sec:04)

Subject: Submitting the report on "COMPENSATION SYSTEM IN BEXIMCO"

Dear Sir,
It gives us immense pleasure to inform you that we, the members of Group- 8 have successfully
completed our report which you authorized us to undertake as a part of our MGT 351 Course. We
have tried our level best to fulfill the requirement of this report by engaging ourselves seriously
and giving our best effort to prepare this report. Working hard for this report makes us able to
understand the core concepts of COMPENSATION which we think will be very
useful in our professional life.

Under this circumstance, we would be greatly happy if you kindly accept the result of our
extreme hard work and appreciate us for the future purposes.

If you have any enquires after reading the report you are welcome to contact us.

Thanking You
Md. Fouad Hasan ()
Abu Bakar Siddique Shad ()
Mohammad Moshiur Rahman ( )
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3 Abstract

Successful completion of any work needs inspiration, guidance, and financial and logical help
from others. Our study is not behind this theme. In preparing this report, different persons have
extended their helping hand to me. It would have not been possible for me to prepare this report
without their help. We are very much fortunate to get the sincere guidance and supervision from
a number experienced persons. First of all, we would like to express my indebtedness and deep
sense of gratitude to our honorable sir Mujibul Haque, Senior Lecturer School of business, North
South University, whose scholastic supervision, kind and whole hearted guidance, warm advice
and encouragement have enable us to prepare this report. We are indebted to the Senior HR
officer Mr. Rafey Alam, Gulshan-02 Office, Dhaka. We would like to convey our thanks to all
other officers for their valuable suggestions and contributions that have helped us much in
preparing this report.
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Summary
Human Resource Management the focus of human resource management (HRM) is to manage
people within the employer-employee relationship (Stone, 1998). It is the strategic and coherent
approach to the management of an organization's most valued assets - the people working there
who individually and collectively contribute to the achievement of the objectives of the business
(Armstrong, 2006). E of employees are the most important tasks that HRM does.

Executive Summary
Beximco group has a rich Human Resource Department. It maintains the
organizational responsibilities successfully. The HR team of Beximco is
completely organized and well reputed team. This report includes how an HR Department
works, what are the possible divisions and work distribution in an HRD, recruitment process,
how to keep employees motivated as well as how to control insubordinations, how to lead etc. In
Human Resource Division of Beximco group with almost all the wings of HR like Recruitment,
Learning & Organization Development (Training), Compensation, Pay and Benefits and HR
Administration. Compensation is the most crucial part of Human Resource Management. There
are many types of techniques from where the process of compensation can be done.
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Table of Content
Introduction Page- 06
Organization Introduction Page-07
Compensation System Page-10
Promotion Policy Page-14
Components Of Employee Page-20
Remuneration
Profit Sharing As Group Page-29
Incentive Plan
Conclusion Page-31
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Introduction
Theory Introduction: Human Resource Management "The focus of human resource
management (HRM) is to manage people within the employer-employee relationship" (Stone,
1998). "It is the strategic and coherent approach to the management of an organization's most
valued assets - the people working there who individually and collectively contribute to the
achievement of the objectives of the business (Armstrong, 2006)". Compensation is the most
important part that HRM does so smoothly.

Compensation refers that employee perceptions of what they contribute to the Organization, what
they get in return, and how their return-contribution ratio compares to others inside and outside
the organization, determine how fair they perceive their employment Relationship to be (Adams,
1963). There are many types of techniques from where the process of compensation can be done.

In the current scenario, organizations operate in a very competitive global environment.

The knowledge of all aspects of management is not only important but also very essential. One
of the important areas of operation in management is Human Resource Management. Human
Resources Management has mainly three functions, acquiring human resources, maintaining
them, and developing them. HRM is resource centered which directs human resources and
represents appropriate culture and climate for the employees in the organizations. Out of all
assets in an organization, Human Resource is the most important and dominant which give
companies edge over others. Thus, organizational management is buying commitment through
compensation of employees by successfully implementing motivation policies and principles
(Graham & Bennett 1998).
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Organization Introduction :
Today the BEXIMCO Group (BEXIMCO or the Group) is the largest private sector group in
Bangladesh. BEXIMCO was founded in the 1970s by two brothers Sohail F Rahman and
Salman F Rahman.

As BEXIMCO has grown over the years, the flagship platform now has operations and
investments across a wide range of industries including textiles, trading, marine food, real estate
development, hospitality, construction, information and communication technologies, media,
ceramics, aviation, pharmaceuticals, financial services and energy. The Group sells its products
and services in the domestic Bangladesh market as well as international markets. BEXIMCO is
the largest employer in the private sector in Bangladesh and employs over 48,000 people
worldwide.

The BEXIMCO name has now become one of the most recognizable brand names in
Bangladesh. It is synonymous with innovation, trust and quality. The Group consists of four
publicly traded and seventeen privately held companies. The publicly traded companies
Bangladesh Export Import Company Limited, Beximco Pharmaceuticals Limited, Shinepukur
Ceramics Limited and Beximco Synthetics Limited.

BEXIMCO is well positioned to capitalize on strong growth across industries in both the
domestic and global markets. Each Group company is managed by an independent, professional
team with significant depth of experience. Management teams have established a clear strategic
plan that will further strengthen the overall platform. BEXIMCO intends to leverage its market
position and global scale, further diversify operations into highly profitable sectors, capitalize on
the domestic growth opportunity and selectively pursue international opportunities going
forward.

In recognition of its corporate success and creation of shareholder value, the BEXIMCO Group
has and continues to make significant contributions to Bangladeshs society. Sponsored
organizations include Proyash, a specialized institute that works for the holistic development
of children with special educational needs and Gono Sahajjo Songstha, an institution that
provides education for the underprivileged. BEXIMCO was also an official sponsor of the
Bangladesh National Cricket team for the ICC Cricket World Cup 2011 and also the official title
sponsor of the FIFA friendly match between Argentina and Nigeria held in September, 2011.
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Company Vision

Building a profitable and socially responsible financial institution focused on

Markets and Businesses with growth potential, thereby assisting BEXIMCO
and stakeholders build a "just, enlightened, healthy, democratic and poverty
free Bangladesh (BEXIMCO, 2010).

Company Mission

We will be one of the most trusted, admired and successful Group of companies in the region
with a focus on strengthening research and development capabilities, creating partnerships and
building presence across the globe.

Each of our activities must benefit and add value to the common wealth of our society. We firmly
believe that, in the final analysis we are accountable to each of the constituents with whom we
interact, namely, our employee, our customer, our business associates, our fellow citizens and our
shareholders.

Objective
For the report assigned in the course MGT351, I worked on a companys Compensation process.
This is our core objective. Another objective of this report is to match the learning of Human
Resource Management with the real life problems.

Scope of the Report

Most of the Companies in Bangladesh has Human Resource Department. It is very important to
learn about them. For doing report we need to learn all the basic elements of HRM. Because
theory of HRM is related with our practical experience (hire employee, giving compensation).

By doing this report we have sufficient knowledge about how a companys HR department run,
which we help us later stage of our life.
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Methodology

To prepare this report we have collected data from different materials. Then we have conducted a
secondary study. After that we have contact a respective Officer of Beximco, Gulshan-2 branch
which is our primary data. We have also collected data from the internet, books and journal, this
way we collected secondary data. We collected much information from several websites. Thus,
we have used both primary and secondary information to prepare this report.

Limitation

We face some difficulties to finish this report. The main limitation is time. We have to finish this
report with limited time, which is insufficient. Communication problem with organization
officials is another limitation. Insufficient primary data also hinder our progress. Officials are
reluctant to disclose their internal information to us.

HRM & Organizations:

For many years, organizations like other institutions have been handling this
sensitive activity through respective personnel departments. This means
human resources were managed like other physical assets e.g. pieces of
furniture, calculators, equipment and appliances. Personnel departments
were primarily engaged in approval of leaves, handling of staff loans,
issuance of show cause, conducting disciplinary enquiries and termination
from service. Compensation was a routine function and was done in a
mechanical or automatic way to hire people and deliver their proper
compensation with specific educational background irrespective of their real
value to the institution. Success stories of large organization have been
evident of the fact that HRM is quite different from management of physical
assets. Human brain has its own peculiar chemistry. Its strong sensory and
decision-making capacity has to be greatly emphasized by the employers.
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The work forces constituting all levels of employees are constantly thinking
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in many dimensions (Dawn packed with overseas appeal, 2004).

COMPENSATION SYSTEM

PROMOTION

When there are vacancies in an organization, they can be filled up by the internal or external
candidates. Though the organization prefers to fill up the vacancies by the external candidates
through the selection procedure, the internal candidates may also apply for post and may be
tested and selected for higher level job in the organizational hierarchy at par with external
candidates. If the organization prefers to fill a vacancy only by the internal candidates, it assigns
that higher level job to the selected employee from within through promotion tests. Such upward
movement can be said as promotion.

Definition:-

Promotion is advancement of an employee to a better job- better in terms of grater

responsibility, more prestige or status, greater skills and especially increased rate of pay or
salary.

-Paul Pigors and Charles A. Myers.

MERIT AS A BASIS OF PROMOTION:-

Merit is taken to denote an individual employees skills, knowledge, ability, efficiency and
aptitude as measured from educational, training and past employment record. The merits of
Merit system of promotion are:

1) The resources of higher order of an employee can be better utilized at a higher level. It result
in maximum utilization of human resources in an organization
2) Competent employees are motivated to exert all their resources and contribute them to the
organizational efficiency and effectiveness
3) It works as golden hand-cuffs regarding employee turnover,
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Despite these advantages the merit systems suffer from some Demerit. They are:

1) Measurement or judging of merit is highly difficult.

2) Many people, particularly trade union leaders, distrust the managements integrity in judging
merit.
3) The techniques of merit measurement are subjective.
4) Merit denotes mostly the past achievement, efficiency but not the future success. Hence, the
purpose of promotion may not be served if merit is taken as sole criteria for promotion.

SENIOR AS A BASIS OF PROMOTION

Seniority refers to relative length of service in the same job and in the same organization. The
logic behind considering the seniority as a basis of promotion is that there is a positive
correlation between the length of service in the same job and the amount of knowledge and the
level of skill acquired by an employee in an organization. This system is also based on the
custom that the first in should be given first chance in all benefit and privileges.

ADVANTAGES OF SENIORITY AS A BASIS OF PROMOTION ARE:

1) It is relatively easy to measure the length of service and judge the seniority.
2) There would be full support of the trade unions to this system.
3) Every party trust the managements action as there is no scope for favoritism and
discrimination and judgment.
4) It gives a sense of certainty of getting promotion to every employee and of their turn of
promotion.
5) Senior employees will have a sense of satisfaction to this system as the older employees are
respected and their inefficiency cannot be pointed out.
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6) It minimizes the scope for grievances and conflicts regarding promotion.

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IN SPITE OF THESE MERITS, THIS SYSTEM ALSO SUFFERS FROM CERTAIN

LIMITATIONS. They are:

1) The assumption that the employees learn more relatively with length of service is not valid as
this assumption has reverse effect. In other words employees learn up to a certain age and
beyond that stage the learning ability of the cognitive process diminishes.
2) It denominates the young and more competent employees and results in employee turnover
particularly among the dynamic force.
3) It kills the zeal and interest to develop as everybody will be promoted with or without
improvement.
4) Organizational effectiveness may be diminishes through the deceleration of the human
resource effectiveness as the human resource consists of mostly undynamic and old blood.
5) Judging the seniority though it seems to be in the theoretical sense. it is highly difficult in
practice as the problems like job seniority, company seniority, zonal/regional seniority,
service in different organizations, experience as apprentice trainee, trainee, researcher, length
of service not only by days but hours and minutes will crop up.

Thus the two main basic of promotion enjoy certain advantages and at the same time suffer from
certain limitations. Hence, a combination of both of them may be regarded as an effective basis
of promotion.

SENIORITY-CUM-MERIT
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Management mostly prefers merit as the basis of promotion as they are interested in enriching its
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human resources. But trade union favour seniority as the sole basis for promotion with a view to
satisfy the interests of majority of their members.

Hence a combination of both seniority and merit can be considered as the basis for promotion
satisfying the management for organizational effectiveness and employees and trade union for
respecting the length of service. A balance between seniority and merit should be struck and a
new basis is to be developed. There are several ways in striking the balance between these two
basis.viz:-

1) Minimum length of service and merit:-

Under this method all those employees who complete the minimum service, say five years, are
made eligible for promotion and then merit is taken as the sole criteria for selecting the employee
for promotion from the eligible candidates. Most of the commercial bank in India has been
following this method for promoting the employees from clerks position to officers position.

2) Measurements Of Seniority And Merit Through A Common Factor.

3) Minimum merit and seniority:-

In contrast to the earlier methods, minimum score of merit which is necessary for the
acceptable performance on the future job is determined and all the candidates who secure
minimum score are declared as eligible candidates. Candidates are selected for promotion
based on their seniority only from the eligible candidates.
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PROMOTION POLICY

Every organizational has to specify clearly its policy regarding promotion based on its corporate
policy. The characteristics of a systematic promotion policy are:

1) It should be considered the sense that policy should be applied uniformly to all employees
irrespective of the background of the persons,
2) It should be fair and impartial. In other words it should not give room for nepotism,
favoritism etc.,
3) Systematic line of promotion channel should be incorporated
4) It should provide equal opportunities fro promotion in all categories of jobs, departments,
and regions of an organization
5) It should insure open policy in the sense that every eligible employee should be considered
for promotion rather than a closed system which consider only a class of employees
6) It should contain clear cut norms and criteria for judging merit, length or service, potentiality
etc.
7) Appropriate authority should be entrusted with the task of making final decision
8) Favoritism should not be taken as a basis for promotion

Wage and Incentive Payment

MEANING OF WAGE/ COMPENSATION PAYMENT:-

Wage is monetary payment made by the employer to his employee for the work done or services
rendered. It is a monetary compensation for the service rendered. A worker may be paid Rs. 100
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per day or Rs. 4500 per month. This is wage payment. It is like give and take. The workers give
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his services and take payment called wage payment. Industrial worker are paid remuneration for
their services in terms of money called wage payment. Wages are usually paid in cash at the end

of the day; one week or one month. Money wages in the monetary compensation or price paid by
the employer to his employee for the services rendered. Such compensation is called wages or
salary or reward given by an organization to a person in return to a work done.

Real wage is more important than money wage. Money wage is the payment in terms of
money. For example, Rs. 500 per month. Real wage means goods and services which a worker
can purchase out of the money wage paid. It represents the purchasing power of money payment.
In these days of rising prices, money wages are increasing but not the real wages as the price
level is increasing. For employees, real wages are more important than money wages as money
cannot be used directly for the satisfaction of human wants. At present, even a worker drawing
the salary of Rs.10000 in Mumbai city finds it difficult to meet the essential needs of his family.

Wages are determined by different theories of wages. They include subsistence theory, wages
fund theory, residual claimant theory, marginal productivity theory and so on. However, in reality
wages are fixed on the basis of practical considerations such as supply and demand of labour,
cost of living, bargaining power, economic situation in the country and so on.

Generally, compensation payable to an employee includes the following three parts/ components:

a) Basic Compensation For The Job ( wage/ salary)

b) Incentive Compensation for the employee on job; and
c) Supplementary Compensation paid to employees ( fringe benefits and employee
services)
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IMPORTANCE OF WAGE PAYMENT TO EMPLOYEES:

Wage payment to all categories of workers. It is the income earned by hard work. It provides
bread to the worker and his family members. Wage is a matter of life and death to workers/
employees. Their life, welfare and even social status depend on wage payment. It is the only
source of income to large majority of workers. They and unions always demand higher wages
and other monetary benefits. This rule is applicable to factory worker and also to other categories
of workers including bank employees, government servants and teachers.

Majority of labour problems and disputes are directly related to wage payment. The efficiency of
workers and their interest and involvement in the work depend on wage payment. Even their
attitude towards employer depends on the wage payment. In brief, wage payment is a matter of
greatest importance to workers. Wage problem is the most pressing and persistent problem before
the entire labour force.

IMPORTANCE OF WAGE PAYMENT TO EMPLOYER:

Wage payment is equally important to employers as their profit depends on the total wage bill.
An employer, in general, is interested in paying low wages and thereby controls the cost of
production. However, low wages are not necessarily economical. In fact, they may prove to be
too costly to the employer in the long run. An employer has a moral and social responsibility to
pay fair wages to his worker as they are equal partner in the production process. He should
introduce fair wages payment system which will give benefit to both the parties. Employees will
offer full co-operation to the management when they are paid attractive wages. On the other
hand, strike and disputes are likely to develop when workers are paid low wages or when they
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are dissatisfied and angry due to low wages rates. It is possible to earn more profit by paying
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attractive wages to workers.

IMPORTANCE OF WAGE PAYMENT TO GOVERNMENT:

Government also gives special importance and attention to wages paid to industrial workers as
industrial development, productivity, industrial peace and cordial labour management relations
largely depend on the wage payment to workers. Government desires to give protection to the
working class and for this minimum wages act and other act are made. In India, wages are now
linked with the cost of living. This is for the protection of workers. Government in the biggest
employer in India and the wage rate of government servants and employees of public sector
organizations are decided by the government only. Revision of pay scale of government
employees is made for adjusting their wages as per the cost of living. For this pay commission
is appointed and pay scales are adjusted as per the recommendations made.

In Beximco, wage payment is a very critical, controversial and delicate issue for all categories of
work force. This is due to poverty, rising price, mass unemployment and rising population. In
Beximco, all categories of workers (a factory worker drawing 4000tk as salary and a normal
officer drawing at least 25000tk or more as total salary) demand higher wages. Due to rising
prices, such demand is unavoidable.

FACTORS INFLUENCING/ DETERMINING WAGE RATES:

1. Demand and supply position in the employment/ labour market: if the demand for
labour is more, wage paid are higher and when the demand is limited, the rates of wage
payment are also low. In western countries, wage rate are high while in India they are
comparatively low due to demand supply position.
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2. Nature and features of the job: the wage rate depends on the qualities and
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qualifications required for performing the job. When the nature of job is hard, higher
wage are paid. Similarly wage rate is high in the case of job where special qualification
and experience are required. E.g. an engineer paid higher then a typist.
3.

3.Cost of living: wage rate are raised when the price level increases. This is necessary for
adjusting wage as per the cost of living. At present wage of central government
employees or factory workers are raised when the cost of living. At present wage of
central govt. employees or factory workers are raised when the cost of living index goes
up. The living wage criterion is quite suitable for determine wage rate as living wage
enables an employee to maintain himself and his family at a reasonable level of
existence.
4. Bargaining power of workers: when the trade union is strong, the workers get the
benefit of higher ages. This is because of the bargaining power of the trade union
leadership. Strong trade unions organize strike, etc. for raising the wage rate unorganized
workers are even paid less then the minimum wage as they are not united and do not have
bargaining power.
5. Efficiency and productive of work force: efficient worker are paid more as they give
more production. The wage payment increases along with the increase in the productivity
of work force.
6. State regulations: wage regulation depends on the law regarding wage payment i.e.
minimum wages act and linking of wage with the cost of living. Wages must be paid as
per the legal provisions made by the government from time to time. This is applicable to
organized workers as well as to worker from the unorganized sector.
7. Ability of the employer to pay: wage rate depends on the ability of the employer to pay.
Such ability depends on the profits earned financial position of the company and so on.
This is one important factor that determines the wage rate. Wage rate depends on the
ability of the employer to pay. Workers are paid attractive wages when company gets
huge profit.
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8. The present stage of economy: The wage rates are related to the position of national
economy. High wage rates are not possible when there is recession. There will be

9.increase in the labour supply in a depressed economy. This, in turn, should serve to
lower the going wage rates. Wage rates are normally high during the period of prosperity.
9. Internal factors determining wage rates: such factors include business strategy of the
company, job evolution and performance appraisal and employee related factors such as
individual performance, seniority, experience and potential. when the strategy of the
enterprise is to achieve rapid growth, remunerations should be higher than what
competitors pay.

ESSENTIALS OF A SOUND WAGE SYSTEM

1. Wage system should be just and reasonable: a sound of wage payment is one which is
just and reasonable to both the parties. It must be according to the capacity of the
employer to pay. The basic needs of the employees must be met properly out of the
money.
2. Guarantee of living wage: an ideal wage system plan should ensure living wage to all
employees. Living wage is always above the minimum wage fixed by legal provisions
and is useful for meeting the basic needs of workers.
3. Simplicity: an ideal wage is one which is simple and intelligible to an average worker. As
a result even as average worker will understand it easily, quickly and correctly. He will
know how much he is likely to get at the end of the month such simple wage system is
also easy and quick for calculation and gives convenience to the employer.
4. Flexibility: an ideal system of wage payment is always elastic and flexible so as to
permit necessary adjustments periodically as per the changing economic conditions. This
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facilitates periodically as per the changing economic conditions. This facilitates

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periodical adjustments in the wage rates. For example, the wage rate of allowances must
change along with the changes in the price level. In brief a good system of wage payment
is flexible and adjustable to the growing and changing economic social and cultural needs
of workers.
5. Promptness: an ideal wage system ensures prompt cash payment to all categories of a
worker after certain fixed period like a week or a month. Wage payment must be prompt
so as to enable workers to make their essential purchases regularly. Promptness in wage
payment gives convince and psychological satisfaction to workers. Wages delayed are as
good as wages denied. Late payment of wage or irregular wage payment creates many
problems and inconveniences to the workers and their family member.
6. Incentive for extra remuneration: a good system of wage payment is one which creates
desire among workers for efforts in order to extra remuneration. This means there should
be extra reward for special skill, better workmanship, prompt performance and higher
output.
7. Attractive to talented workers: an ideal wage system should be attractive to regular
employees as well as to outsiders. This will reduce labour turnover. In addition, talented
and skilled workers from other units will be attracted towards the company. Thus, a good
wage system creates satisfied labour force and attracts.
8. Equal pay for equal work: a good system of wage payment should be based on the
principle of equal pay for equal work such wage discrimination exists but is not fair.

COMPONENTS OF EMPLOYEE REMUNERATION:

The remuneration packet of an employee includes wage/ salary, incentives, fringe benefits,
perquisites and finally non monetary benefits.

Details of components of employee remuneration:

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1. Wage/ salary: wage is the payment as per the pay scale decided by the represent hourly
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rate of pay while salary refers to the monthly rate of pay, irrespective of the number of
hours put in by an employer. Salary payment includes dearness and other approved in the
pay scale given to employees. Salary payment is made regularly on the specific day
decided by the management. Salary payment is not uniform to all employees as it
2. depends on the nature of the job, responsibilities assigned, merits available status of the
post, seniority of the employee and so on. Salary payment is now made attractive to all
categories of workers. It constitutes major source of regular income to large majority of
industrial and other categories of workers. wages are now linked with the cost of living.
3. Incentives: monetary incentives are offered as a supplement to regular wage payment.
The basic purpose behind incentives is to encourage/ motivate employees to take more
interest / initiative in the work show concrete results and collect extra payment as per
rules. Incentives are payment by results incentive payment is in addition to regular wage
payment. Incentives depend on productivity, sales, profit, cost reduction efforts of
employees and so on.
4. Fringe benefits: these are monetary benefits provided to employees. They include the
benefit of a) Provident b) Gratuity c) Medical care d) hospitalization payment e) accident
relief f) health and group insurance.
5. Perquisites: there are special benefits offered to managers/ executives. The purpose is to
retain competent executives by offering them special benefits. Perquisites are a) company
car for traveling b) club membership c) paid holidays d) furnished house e) stock option
scheme.
6. Non monetary benefits: they include comfortable working conditions impartial
promotions support to workers facing special problems and so on.

SYSTEM OF WAGE PAYMENT

There are two basic system of wage payment.

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1) Time rate system: time rate system or time wage payment is the oldest and simplest5
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method of wage payment it is used extensively even today in the industrial field as well as in
government departments. In the time rate system wage are paid as per the time spent by
workers in the factory. The production given by the worker is not taken in to consideration.
E= RN where E means total earnings, R means rate per hour or day and N means number of
hours or day work.

MERITS OF TIME RATE SYSTEM:

a) Easy and simple: time rate system is easy to understand and simple to follow and
calculate. Every worker knows how much wage payment he will get at the end of the day
or month.
b) Guarantee of minimum wage: it gives guarantee of certain minimum wage payment to
every worker irrespective of the capacity to work. Worker get regular and stable income
and this gives a sense of security to all workers.
c) Maintains quality of production: in the time rate system, quality of production is
maintained as the workers are not in a hurry to complete the work. The worker does not
rush the job and spoil the quality because of the temptation to earning more. Workers
work slowly and with care. The quality of production is maintained. Support from trade
unions: workers and trade unions accept and support time rate system as all workers are
placed in one category as regards wage payment. This ensures unity among workers.
Trade unions normally prefer time rate system of wage payment.
d) Convenient in factory system: time rate payment is convenient in modern factory
system where production process is continuous and integrated. It is not possible to
measure the work completed by one individual worker and hence time rate system is
convenient.

DEMERITS OF TIME RATE SYSTEM:

a) Not scientific: time rate system is not a scientific system of wage payment as there is
no direct linking between wages and production / productivity. Wage bill ay increase
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without corresponding increase in the production. This will bring loss to the employer
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/ management
b) Absence of positive encouragement: in the time rate system there is no positive
encouragement to workers to improve their efficiency as the wage rate is uniform to
all workers efficient and inefficient
c) No effect on productivity: time rate system fails productivity and efficiency of
labour force. It is not an incentive system of wage payment.
d) Strict supervision on workers necessary in the time rate system strict supervision on
the workers is essential as payment is for the period and not for the production this
raises the expenditure on supervision.
e) No initiative to workers: time rate system fails to encourage workers to take more
initiative in the work in fact it encourages them to follow go slow policy. This is
because wage payment is not linked with they production given.

2) Piece rate system: piece rate system is another basic system of wage payment. It is opposite
time rate system. It is also treated as an incentive wage system as it encourages workers to
produce more and also to earn more. Wages are paid as per the output or production given by
the worker and not as per the time spent by the worker in the factory.
WE=NR, WE means workers earning, N means the number of piece produced and R means
the rate per piece of production. A worker who produce 20 pieces at rate of 10 Rs per piece
he will get Rs. 200 as the wage payment for the day.

MERITS OF PIECE RATE SYSTEM

a) Linking of wage with production: in the piece rate system, wage are linked with
production or productivity. It raises the productivity of labour. Workers work with speed
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and use their capacity fully as the wage payment is directly related to the quantity of
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production given by a worker.
b) Efficient and inefficient workers: in the piece rate system distinction is made between
efficient and inefficient worker and full justice is done to efficient worker as he gets
payment in proportion to the production given. Efficient workers support the piece rate
system but it is not preferred by UN skilled and in efficient workers. They get less
payment under this method as their capacity to produce is less. In brief piece rate system
is preferred by sincere and efficient workers.
c) Take initiative in the work: piece rate system encourages workers to take more interest
and initiative in the work as every worker gets full reward of his efforts.
d) Fair to employer and employees: piece rate system is fair to employer and employees.
The employees get income in proportion to the production given by them and the
employer gets production in proportion to the wage amount paid.

DEMERITS OF PIECE RATE SYSTEM:

a) No guarantee of minimum wage payment: in the piece rate system, there is no

guarantee of certain minimum wage payment to a worker. This may prove to be
dangerous particularly to newly recruited workers and workers who are below average.
b) Workers suffer even when they are not at fault: sometimes workers suffer in wage
payment even when they are not at fault for example due to power payment even when
they are not at fault. For example, due to power failure, workers may not be able to give
production and naturally they will not be eligible for wage payment.
c) Not fair to trainees: piece rate system is not fair in the case of trainees. Their capacity
to produce is less and naturally they will get very less wage.

INCENTIVE SYSTEM OF WAGE PAYMENT

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Meaning of Incentive Wage System:

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The wage plan should be highly incentive. This means, it should encourage workers to take more
initative and interest in the work, produce and also more. The wage plan which serves all this
purposes is called incentive wage plan. Such an incentive plan is beneficial to both employers
and employees. Incentive are monetary benefits paid to workmen in recognition of there
outstanding performance. Incentive are defined as variable rewards granted according to
variations in the achievement of specific results. According to Dale Yoder, Incentive wages
relate earnings to productivity and may use premiums, bonuses, or variety of rates to compensate
for superior performance. Thus incentive wage plans offer an attraction of extra payment for
efficiency. The basic idea in the incentive plans is motive workers to produce more thorough
monitory attraction in the form of wages, allowances and so on

TYPES OF POPULAR INCENTIVE PLAN:

For the sake of convenience, incentive plans can be divided into two broad groups. These are:
(a) Individual incentive plans and (b) Group incentive plans.

Individual incentive plans, meant for individual employee. He has to work hard i.e. efficiently,
produce more and share the monetary benefit for himself. In the group incentive plans, the
incentive is not for individual employee but for the group employees working in one department
or section. Such group incentive plan may cover the entire labour force of production unit.
Managements/ employees are interested in group incentive plans while efficient employees are
interested in individual incentive plans. Production activities are now conducted in an integrated
manner and naturally incentives should be offered to employees. Group incentive plans are better
as they encourage team spirit and develop cooperation and understanding among the employees.
This avoid wastage and promotes productivity. Types of incentive plans are as noted below.

INDIVIDUAL INCENTIVE PLANS:

(1) Halsey Premium Plan

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(2) Rowan Plan

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(3) Taylors Differential Piece Rate System
(4) Emerson Efficiency Bonus Plan
(5) Bedeaux Point Premium Plan
(6) Gnatt Task and Bonus Plan

GROUP INCENTIVE PLANS:

(1) Profit Sharing

(2) Labour Co- partnership.

ADVANTEGES OF INCENTIVE PAYMENT:

(1) Motivation of employees:

Incentives serve the purpose of motivation of employees for higher efficiency and greater
output. It is a fact that fixed income in the form of wage fails to evoke positive response.
However, positive response is certain when incentives are added to regular wage payment

(2) Financial benefit:

Total earning of employees will increase when liberal incentives are offered. This raises the
standard of living as well as overall efficiency of employees.

(3) Reduction in the cost of production:

Incentive lead to reduction in the total as well as unit cost of production. The productivity
will be higher resulting in greater number of units produced for given inputs.

(4) Increase in production capacity:

Production capacity is likely to increase due to attractive offered to employees.

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(5) Beneficial to employer/company:

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Incentive wage package is always attractive to company management due to benefits
available. Such benefits do not affect managements contribution to the provident fund and
other employee retirement benefits.

(6) Miscellaneous advantages:

Limited supervision on employees, better utilization of machinery, facilities and equipment,

reduction in wastage and scrap, reduction in lost time increase output/production.

LIMITATION OF INCENTIVE PLANS:

(1) Possibility of quality deterioration:

There is possibility of deterioration in the quality of production unless special steps are taken
to ensure quality control through quality control checking and inspection. This involves
additional expenditure.

(2) Introduction of new machine and method difficult:

There is opposition to the introduction of new machines or methods by employees because of

the fear that new incentive may lead to reduction in there earning.

(3) Labour cost may increase:

Employees feel that incentive payments are normal and demand for increase in the regular
wage/salary.

(4) Neglect of security rules:

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Employees do not give adequate attention to security rules made due to the desire to produce
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more and more earn. This may lead to industrial accident and deterioration in the health of
workers as they strain there body of earning.

(5) Dissatisfaction of among employees:

Due to incentive payments, some workers earn more as compared to others. This leads to
dissatisfaction among employees. In group incentive payment, the aged workers are blamed
young workers on the ground they are very slow in their work.

MEANING OF GROUP INCENTIVE PLAN:

In the group incentive plan, the entire group of workers will have to work efficiently in the
collective manner and also share the benefit collectively. In short group incentive plan distribute
rewards collectively to more than one employee i.e. to a group of employees. All employees have
to participate for raising production and all will participate in the extra benefits available. The
benefit will be also common for the whole group.

Group incentive plans are necessary under certain situation. For example the performance of
individual worker may not be measurable in an accurate manner. In some cases the production
process may require co-operations and participation of all workers for better performance. Under
such situation group incentive plans are necessary and useful.

ADVANTAGE OF GROUP INCENTIVE PLAN:

(1) Better co-operation and understanding among employees of the group.

(2) Limited supervision on the employees is adequate.

(3) Administration of the plan is easy.

DISADVANTAGE OF GROUP INCENTIVE PLAN:

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(1) The final benefit expected is uncertain and not depend only on the co- operation among
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employees.

(2) The efficient and honest employees suffer at the cost of inefficient and lazy workers as
both are treated on par and share equal benefit.

(3) Rivalry among employees of the group defeats the very purpose of group incentive plan.

PROFIT SHARING AS GROUP INCENTIVE PLAN:

MEANING OF PROFIT SHARING:

Profit sharing is an attractive supplement of wage system. It is a type of group incentive plan for
benefit of employees. In profit-sharing the employer agrees to share a part of the profit with
employees as per the agreement made. Profit-sharing is different regular wage payment. Profit
sharing is novel and progressive idea in the industrial world. In western countrys profit-sharing
concept is popular since long as group incentive plan of wage payment. For example in the UK
as early as in 1891, the profit-sharing scheme was initiated by South Metropolitan Gas
Company.

DEFINITION OF PROFIT-SHARING:

According to Pro. Henry R. Seager,Profit-Sharing is an agreement freely entered into by which

the employee receives a share fixed in advance of the profit.

OBJECTIVES OF PROFIT SHARING:

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1. To supplement the regular earning of the workers.

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2. To create sense of partnership among the workers and the management.
3. To enable the workers to participate in the prosperity of their company.
4. To introduce incentive wage plan.
5. To raise productive efficiency by reducing cost.

FEATURES OF PROFIT SHARING:

(1) Method of extra payment:

Profit-sharing is a technique under which extra payment is given to workers. It is reward for joint
efforts of employees in raising the profitability of the company.

(2) Payment out of net profit:

Profit is paid out of the net profit and as per the agreement between the employer and employees.

(3) Status of workers remains same:

In profit-sharing the employees get monetary benefits but their status remains unchanged.

(4) Benefits to majority of workers:

The benefits of profit-sharing are given to majority of employees of all categories and also
irrespective of their individual skill and efficiency.

(5) Payment of yearly basis:

The profit-sharing agreement is made generally for one year and is renewed year after year.
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31 Conclusion
Beximco is one of the largest company in our country.They always try to represent
Bangladesh in a different way in front of the world.Though they have some lakings but
they try to overcome those obstacles as early as possible.
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References:
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Armstrong, M. 2006, A Handbook of Human Resource Management Practice, 10th

Edition, Kogan Page, London.

Backgroun [online], retrived/visited 21/03/2010, Available at :

http://www.beximco.org/about.php

Dessler, Griffiths, Lloyd-Walker, 2004, Human Resource Management, 2nd ed., Pearson
Education Australia, U.S.A.

Peters, T & Waterman, R 1982, In Search of Excellence, 1st ed., Grand

Central Publishing, U.S.A

Compensation system

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