A Report On Compensation Structure Of Maruti Suzuki Ltd.

Submitted to: Col. Warrier Submitted By: Group 09, PGDM - HR (2010 2012)

Maruti Suzuki Ltd. Compensation Structure A Report

Members of Group 09:

Student
Suchi Shukla Snehal Aher Ankit Khare Anamika Tiwari Anupama Singh Mitali Shrivastava

Roll No
09 19 29 39 49 59

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Maruti Suzuki Ltd. Compensation Structure A Report

Table of Contents:

Particulars
About the Company y History y Rewards and Recognition HR strategy

Page No.
4

Organizational Structure

12

Rationale for Compensation

15

Compensation Structure

17

Strengths and Weakness in Compensation Structure

21

Recommendations

21

References

23

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Maruti Suzuki Ltd. Compensation Structure A Report

Maruti Suzuki Ltd. :

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Maruti Suzuki Ltd. Compensation Structure A Report

About the company:

y y y

y y y y y

Maruti Suzuki India Limited (MSIL, formerly known as Maruti Udyog Limited) is a subsidiary of Suzuki Motor Corporation, Japan. MSIL has been the leader of the Indian car market for over two and a half decades. The company has two manufacturing facilities located at Gurgaon and Manesar, south of New Delhi, India. Both the facilities have a combined capability to produce over a 1.2 million (1,200,000) passenger car units annually. The company offers a wide range of cars across different segments. It offers 14 brands and over 150 variants - Maruti 800, people movers, Omni and Eeco, international brands Alto, Alto-K10, A-star, WagonR, Swift, Ritz and Estilo, off-roader Gypsy, SUV Grand Vitara, sedans SX4 and Swift DZire In an environment friendly initiative, in August 2010 Maruti Suzuki introduced factory fitted CNG option on 5 models across vehicle segments. These include Eeco, Alto, Estilo, Wagon R and Sx4. In fiscal 2009-10 Maruti Suzuki became the only Indian company to manufacture and sell One Million cars in a year. Maruti Suzuki has employee strength over 7,600 (as at end March 2010), In 2009-10, the company sold a record 10,18,365 vehicles including 1,47,575 units of exports. With this, at the end of March 2010, Maruti Suzuki had a market share of 53.3 per cent of the Indian passenger car market (including C segment). The company has a sales network of 802 centers in 555 towns and cities, and provides service support to customers at 2,740 workshops in over 1,335 towns and cities (as on March 31, 2010). The company is focused on rapidly expanding the sales and service further across the country.

Recent awards:
y

y y

y y y y

The Company won the following awards/recognition during the year 2009-2010: A-star has been rated as No.1 environment friendly small car by Germany's prestigious VCD environmental car rating. Manufacturer of the year' award by CNBC overdrive. Ritz has been awarded as the 'hatchback car of the year' by auto car UTVi and 'car of the year' by Business Standard Motoring. 'National award for excellence in corporate governance' by Institute of Company Secretaries of India. 'CII-ITC sustainability award 2009' for strong commitment to 'sustainability'. Golden peacock award' for environmental initiatives. Gurgaon plant has been awarded the 'gold award' by Economic Times India Manufacturing Excellence Award (IMEA).

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Maruti Suzuki Ltd. Compensation Structure A Report

History of the company:

y

Over the quarter century of its existence, Maruti Suzuki's contribution as the growth engine for the Indian automobile industry is widely acknowledged. Maruti Suzuki has impacted the lifestyle and psyche of an entire generation of Indian middle class through the quality of its products and services that are in direct sync with the needs of the Indian populace.

1970

A private limited company named 'Maruti technical services private limited' (MTSPL) launched on November 16, 1970. The stated purpose of this company was to provide technical know-how for the design, manufacture and assembly of "a wholly indigenous motor car". The Indian Central government at the behest of Indira Gandhi salvages Maruti limited and starts looking for an active collaborator for this company. Maruti Udyog Ltd was incorporated under the provisions of the Indian Companies Act, 1956 License and Joint Venture Agreement(JVA) signed between Maruti Udyog Ltd. and SMC of Japan

1981

1982

1983

Maruti 800, a 796 cc hatchback, Indias first affordable car, is released in the market

1984

Installed capacity of the plant in Gurgaon, reaches 40,000 units

1992

Suzuki increases its stake in Maruti to 50 percent, making the company a 50-50 JV with the Government of India the other stake holder. Suzuki Motor Corporation (SMC) increases its stake in Maruti to 54.2 percent

2000

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Maruti Suzuki Ltd. Compensation Structure A Report

2003

Maruti Udyog Ltd is Listed on BSE and NSE after a public issue, which is oversubscribed 10 times

2004

Maruti Udyog closed the financial year 2003-04 with an annual sale of 472122 units, the highest ever since the company began operations 20 years ago

2007

o Maruti Udyog limited becomes Maruti Suzuki ltd

2008

o Completes 25 Years of existence

2010

o Establishes New plant at Manesar

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Maruti Suzuki Ltd. Compensation Structure A Report

HR strategy

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Maruti Suzuki Ltd. Compensation Structure A Report

1. Employee development:
y

The Company has always focused on employees' development. A total of 46200 man-days of training were conducted for employees across all levels during the year.

The training programmes vary according to the need of the employees at various levels. Based on the behavioral traits, some of the trainings introduced in 2009-10 were 'changing mindset-changing lives'; 'being the best'; 'emotional intelligence'; 'planning organizing problem solving'; 'assertiveness & self confidence'; and 'conflict management'.

Some of the trainings based on technical needs include 'market research'; 'capital budgeting'; 'risk management & hedging'; 'unigraphics'; 'business simulation games'; 'inhouse quiz'; 'cost management'; 'taxation'; 'motion & time study'; 'design failure mode effect analysis' and 'geometric designing & tolerancing'.

Training for leader ship traits include 'departmental heads convention'; 'divisional head training' and 'director re-treat'.

The Company also has higher education schemes for its employees.

2) Succession Planning:
y

A companywide succession planning exercise was undertaken for key roles to ensure the leadership pipeline stays full and business continuity is assured.

Building engineering capability has been identified as a key strategic imperative. Substantial steps were taken to create a large talent pool of young engineers with a clearly defined skill building process within Maruti and Suzuki, Japan.

The company also went to the USA, Europe and Japan for global hiring of engineering talent for imparting their knowledge to the younger engineers and for specific competencies.

In depth thought was given to training needs at all levels and functions.

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Maruti Suzuki Ltd. Compensation Structure A Report

3) Employee Engagement:
y

The Company has, over a period of time, inculcated an environment of exceptional employee engagement, ownership, motivation and pride.

The people in the Company take the growth of the Company as a means of their own advancement and believe in team spirit and collective progress.

This environment is a result of principles of equality, objectivity and openness, examples set by top leadership, a fair, transparent and interactive performance assessment and recognition system and a culture of appreciation.

The Company encourages people to look out for facts and do root cause analysis with depth and rigor.

The Company has since inception followed practices like an open office, a common canteen for all levels, common uniform all of which encourage openness and honesty.

Similarly the Company insists on 3G a Japanese principle meaning go to the spot, see the problem for yourself, take countermeasure then and there.

This is actually a measure to encourage people to stay in touch with reality. Internal communication is driven both culturally and through organized and structured tools to facilitate flow of this wisdom.

The Company believes that this is the foundation of superior business performance and is strong enough to create unprecedented results in market share, customer satisfaction and financials.

4) Appraisal:
y

The Company is adopting initiatives like 360 degree feedback for middle management, tea group meetings with MD and top management and Stay-Interview to take this openness to a still higher level.

y y

This translates to better speed, responsiveness, commitment and people excellence. The Company keeps realigning the organization structure with environment and business needs.

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Maruti Suzuki Ltd. Compensation Structure A Report

5) HR Organization:
y

The HR organization in the Company split itself to have dedicated HR departments for functions like R&D, Marketing and Production.

These departments are located in the offices of their respective functions and have dual reporting to the HR head and to the functional heads.

The result is each function gets customized HR support in terms of policy and training interventions.

The Company believes, as in its own case, the scalability and growth of component manufacturers will happen only if they place people first.

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Maruti Suzuki Ltd. Compensation Structure A Report

Organizational Structure

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Maruti Suzuki Ltd. Compensation Structure A Report

The Company has a multi-tier management structure, comprising the board of directors at the top and followed by managing executive officers, divisional heads and departmental heads.

Through this, it is ensured that: Strategic supervision is provided by the board; Control and implementation of Company's strategy is achieved effectively.

Board of directors:
y y y

As on 31st March 2010, the Company's board of directors consists of eleven members. The chairman of the board is a non-executive director. The Company has an optimum combination of executive and non-executive directors in accordance with the provisions of clause 49 of the listing agreement.

The board is made up of four executive directors and seven non-executive directors, of whom four are independent; no director is related to any other director.

All independent directors are persons of eminence and bring a wide range of expertise and experience to the board thereby ensuring best interest of stakeholders and the Company.

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Maruti Suzuki Ltd. Compe sation Structure A Report

Various l v ls in organi ational stru ture:

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Maruti Suzuki Ltd. Compensation Structure A Report

Rationale for Compensation

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Maruti Suzuki Ltd. Compensation Structure A Report

The basic compensation structure of the employees have been designed based on several factors such as o labour market conditions, o company s paying capacity o and legal provisions.

The pay structure in Maruti can be examined broadly under the following heads:
y

Basic Wage : The basic wage in India corresponds with what has been recommended by the Fair Wages Committee (1948) and the 15th Indian Labor Conference (1957).The following criterion may be considered while deciding the basic wage:
o o o o o o

Skill needs of the job. Experience needed. Difficulty of work: mental as well as physical. Training needed. Responsibilities involved. Hazardous nature of job.

 Bonus: An important component of employees earnings, besides salary, is bonus. According to The Payment of Bonus Act, 1965 an employee who earns more than Rs.2500 p.m. basic plus DA is eligible for bonus. The minimum bonus to be paid has been raised to 8.33% w.e.f 25.9.75.  The additional perks & benefits are as per level & position of the individual. This has been determined keeping in view the market trends and to attract, retain & motivate employees.

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Maruti Suzuki Ltd. Compensation Structure A Report

Compensation structure

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Maruti Suzuki Ltd. Compensation Structure A Report

Senior Management Remuneration:

Senior Management

Whole ime / Executive Directors: Performance criteria for payment of performance linked bonus : a. Actual achievement in terms of growth in sales, profit, etc. as compared to the previous year b. Actual achievement of growth as compared to the budget approved at the beginning of the year c. Growth of market share of Company s products as compared to key competitors in the industry

Maruti Suzuki Ltd. Compensation Structure Group 09 (PGDM

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Executive Directors

on Executive Directors

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Maruti Suzuki Ltd. Compensation Structure A Report

Allowances:

Accommodation (furnished/unfurnished) or house rent allowance House maintenance allowance Reimbursement of expenses or allowance for household utilities Medical reimbursement, accident insurance LTC for self & family Club fees Maximum limit of upto Rs.40,00,000 per annum

Non Executi e Directors: Payment of remuneration by way of commission at a sum not exceeding 1% of the net profits of the Company subject to a ceiling of Rs.10 million per annum. The criteria for the commission is: 1. Attendance at the board/ board level committee meetings 2. Time devoted 3. Current trends prevailing in the industry 4. Sitting fees

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Maruti Suzuki Ltd. Compensation Structure A Report

Super isory le el:

Level
H E A D D E S C R IP T IO N B a s ic Pay / Lease)

H o u s in g ( H R A

U n if o r m M a in t . A llo w . M e d ic a l D o m ic illa r y LT A C h ild E d u c a t io n A llo w . C o n v e y a n c e R e im b . S p e c ia l A llo w a n c e S ub T otal I

P e rf o rm a n c e P a y S ub T otal II 3 9 ,6 7 0 1 ,8 6 0 745 100 4 2 ,3 7 5 4 2 ,3 7 5

P r o v id e n t F u n d G r a t u it y S u p e r a n n u a t io n F u n d S ub T otal III

A n n u a l T o t a l R e m u n e r a t io n

Reward System:
y

Quarter based on excellent performance on the job and also is decided by the department heads in consultation with the HR head.

Quarterly suggestion scheme run on an organization wide basis, where cost saving suggestions are rewarded as 1st, 2nd & 3rd prize.

Yearly basis they have a High value reward scheme where an individual is rewarded based on his overall annual performance.

Collective vacation scheme whereby the employee enjoys an eight-day vacation starting December 24.

Lastly, for this Maruti Suzuki is looking at a 10-15% hike, up from last year s 8-10% so they are planning an average bonus payout of 100% across levels.

Maruti Suzuki Ltd. Compensation Structure

S u p e r v is o r
M O NT HLY 1 5 ,5 0 0 9 ,0 0 0 1 ,0 0 0 1 ,2 5 0 1 ,2 9 2 200 2 ,0 0 0 9 ,4 2 8 3 9 ,6 7 0 A NNUA L 1 8 6 ,0 0 0 1 0 8 ,0 0 0 1 2 ,0 0 0 1 5 ,0 0 0 1 5 ,5 0 0 2 ,4 0 0 2 4 ,0 0 0 1 1 3 ,1 3 8 4 7 6 ,0 3 8 5 6 ,5 0 0 5 3 2 ,5 3 8 2 2 ,3 2 0 8 ,9 4 2 1 ,2 0 0 5 6 5 ,0 0 0 5 6 5 ,0 0 0 12% o f B a s ic Pay Pay 10% of A T R 33% D is t r ib u t io n of A T R

F ix e d A m t F ix e d A m t F ix e d A m t O n e m t h B a s ic F ix e d A m t F ix e d A m t B a la n c in g A m t Pay

4 .8 1 %

o f B a s ic

F ix e d A m t

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Maruti Suzuki Ltd. Compensation Structure A Report

Strengths and Weakness & Recommendations

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Maruti Suzuki Ltd. Compensation Structure A Report

Strengths:
y y y y y

Minimum bonus of 8.33% No functional difference of pay Mix of fixed and non fixed components. Good reward system Common Structure across all functional levels.

Weakness:
y

No compensation committee to review market practices and to decide on remuneration packages applicable to the Vice-Chairman & Managing Director, the Executive Directors and Senior Executives of the Company. No fixed age of retirement. Retirement by rotation and reappointment.

Recommendations:
y y

To have a compensation committee To have a fixed retirement age

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Maruti Suzuki Ltd. Compensation Structure A Report

References:
y y y y y Mr. Karthik P.M. (HR Dept, Maruti Suzuki Ltd. Chennai) Annual Report 2009 -2010 - Maruti Suzuki India Ltd. Official Website Maruti Suzuki Ltd. Annual Report 2009 - 2010 Mahindra & Mahindra Annual Report 2009 - 2010 Tata Motors

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