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Ms-27 Question bank

Ms-27 Question bank (11)

Ms-27 Question bank

June, 2013




1. Explain the role of Compensation and its structure in framing the corporates policy of an organization.

2. Explain the constitutional perspective on wages including the norms for fixation of wages. Discuss the role played by the International Labour organisation on protection of wages.

3. Define and differentiate between bonus and fringe benefits, how are they linked to social security. What are the components of pay packet ?

4. What is performance reward system ? Describe the various steps involved in designing a performance - linked reward system.

5. Write short notes on any three of the following :

(a) Tax planning

(b) Voluntary Retirement Scheme (VRS)

(c) Equal pay for equal work

(d) ESOP

(e) Minimum wage


6. Read the case given below and answer the questions given at the end of the case.

The Indian Electric Company is a city based manufacturer of welding machines and motors. When Mr. Nirad Shah established the company in 1970, he was keenly aware of the importance of a highly motivated workforce, and how the company's success, in fact, depended on it. Therefore, Mr. Shah had to ensure that each employee would work as diligently as possible for the good of the organisation. Mr. Shah realised that the best way to motivate employees would be to link the company's reward and recognition system to its goals. To establish this connection, Shah developed and implemented an incentive system. Its aim was to improve the company's overall performance by allowing contributing workers to share in the proceeds. The plan rewards employees for turning out quality products efficiently while controlling costs. The system includes the following components : Paying by the piece rate : Production workers are paid according to the number of "pieces" or product units they produce that are not defective. If a customer sends a defective part back to the company, the employee who produced it must repair it on his or her own time. Providing year-end Bonus : To reward workers further for their efforts, Shah introduced a year-end bonus system that gives all workers opportunity to nearly double their base wages. Workers get the bonus if the company's annual profit increases. Providing Stock Options : Shah also provided his employees with the option of buying company's stock at a low cost. Employees are also given shares of the company's stock based on annual profits. All the above financial incentive payments enabled the employees to earn more and helped to improve their morale and motivation.

Questions :

(a) Identify the salient issues of this case in general.

(b) What are the additional financial incentive schemes you suggest for sustaining the

morale and motivation of the employees ?

(c) Suggest suitable non-financial incentives for further improving the morale and motivation of the employees of Indian Electric Company.


MS-27   june-2007


l. Discuss the main features of reward system. How do the behavioural science theories influence reward management ?

2. What is the rationale for job evaluation ? Discuss the various methods of job evaluation

3. What are the requirements of the Payment of Wages Act, 1936 in respect of payment of wages ? Give an account of various deductions under the Act .

4. Discuss the various components of a compensation structure. What are the factors that are usually taken into consideration in determining compensation structure ?

5. Attempt any two of the following :

(a) Corporate compensation policy

(b) Compensation survey

(c) Minimum wage, fair wage and living wage

6. Discuss various allowances and fringe benefits paid to industrial employees as an integral part of their compensation package. Give examples.

7. Write short notes , on any three of the following :

(a) Tax implications of compensation to employees

(b) Equal Remuneration Act , !976

(c) Downsizing and VRS

(d) Collective bargaining as a method of wage fixation

(e) Emerging issues and trends in compensation

8. Read the following case and answer the questions given at the end.

The National Manufacturing Company reached an agreement with the Union on a production incentive scheme to increase production. The company had an unprecedented demand for its goods and the Union agreed for the incentive scheme. The management was pleased. with the assurance of the Union leader to

personally undertake the task of implementing the scheme. The management promised to give him a free hand if he could assist in increasing production. The Union did increase production to alrnost double the original level. As a result, the Union gained importance. Any problem could be sorted out by the Union by its direct access to the Chief Executive.

The incentive scheme benefitted primarily the Union members. The scheme was inequitable as some workers got disproportionately large incentives, some low and

some no incentive at all. The second feature was that as the incentive was linked to the Consumer Price Index (CPI), the distortion got further accentuated. However,

when the Union tried to misuse its new found powers,

   the management struck back one day by taking disciplinary actions against all the leaders and the Union found all of a sudden that it was without a leader. Another Union arrived on the scene and the leader had established a rapport with the Chief Executive, and this new Union faithfully followed the tenets of the management but as a price extracted some benefits for its members exclusively. The Union saw to it that production became its exclusive responsibility and it had a hot-line with the Chief Executive for any problem resolution. As the years passed, the Union started agitating for improvement in the wage scales. Because of the incentive scheme, the company found that any improvement in the basic wage would pose greater problems and the primary question before the management was to delink the CPI from the incentive scheme. The Union refused to delink the CPI from the incentive scheme as some of its members were earning an amount equal to, if not more than the salary, as an incentive itself. At the same time workmen with no incentive and being grade barred began to lose. And this resulted in discontentment amongst the workmen. But the dilemma could not be resolved and this led to an explosive situation.

     A third union emerged on the scene and this led to intense inter-union rivalry resulting in indiscipline, loss of production, and violence within the factory premises, as a result of which the company declared a lockout. when the plant reopened after four months, the Union in power lost its creditility and th; new Union had the complete support of the workmen. The new Union Ieader could develop a rapport not only with the workmen bui also with the management and expected the management to solve the problem of not having revised the wage scales for a long period. But this was not an easy task as there were a lot of inequalities that the management wanted to set right.

The union, though agreeing with the management, would not agree for a cut in the wage in any manner to set right the inequalities. The Union not only wanted to cling to the beneficial aspects of the incentive scheme but also insisted that the management somehow give an increase in the basic wages. The management was being drawn into a vicious circle of the incentive scheme being inequitable but when the Union's attention was being brought to the high incentive categories, it reverted to the low basic wage theme. The management remained in a quandry as regards how to convince the workmen, to win over the constituency of workmen and make managers effective and regain supremacy in production

Questions :

(a) Identify the problems and their causes in this case.

(b) Under the given situation, how are the problems to be remedied ?

(c) Suggest various principles and strategies the management has to keep in mind while formulating a wage incentive scheme for the employees

MS-27   june-2008


1. Explain the concept of compensation. What are the management's responsibilities regarding the compensation programme ?

2. Explain the need and purpose of allowances and fringe benefits given to the employees in an organisation. Discuss with suitable examples.

3. Describe different methods of wag e determination. Discussed why collective bargaining is superior to other methods of wage determination.

4- Explain out   is performance-linked reward system. Discuss various steps involved in designing a performance-linked reward system.

5. Write short notes on any t:hree of the folloving :

(a) Time and piece rate system of wage payment

(b) Tax planning

(c) Downsizing

(d) Stock options

(e) Retiral benefits

6. Read the case given- below and answer the questions given at the end.

A large public sector undertaking employing thousands of supervisors got an interim injunction order from the High Court in a case represented by the Employees Union regarding calculation of tax. The stay order was not to take into account City Compensatory Allowance (CCA), Dearness Allowance (DA) and Additional Dearness Allowance (ADA) for calculation of net taxable income'. If this stay order was implemented/made applicable to that section of the employees who were members of the Union, rnost of the staff will be out of the tax net. The matter was brought to the notice of the General Manager by the Accounts Department for advice /orders. The General Manager contacted his close friend and associate, a senior income tax department official, who advised him, to persuade the

staff and to take into account CCA, DA and ADA, for calculation of net taxable income and to recover tax from all the employees as due, irrespective of the high Court interim injunction or irrespective of the Union to which they belong. The justification for this advice was that the Direct Taxes Amendment Bill was being passed and that in any case the tax will have to be recovered inclusive of CCA, DA and ADA. The General Manager though reluctant; felt that the advice of his friend should be needed. The matter was taken to the personnel Department. The Chief of personnel held a different view. His view was that the not be included in taxable reasons : taken to the Personnel Personnel held a different CCA, DA and ADA should not be included in taxable income for the following reasons :

  1. (1)There are the High Court's interim orders and if not obeyed there may be a contempt petition by the Union

2) When in doubt we should always await the final outcome.

3) If we calculate net taxable income without taking CCA, DA and ADA we are not only not violating the High Court's orders but also the staff will feel that we are one with them and not anti-labour.

4) The Union will feel happy, since the others who are not members of the Union, can be wooed and they now know the prowess of the Union.

   When this was pointed out to the General Manager, he again contacted the income tax official. The official stated that the Amendment Bill is in final stage and is almost passed and it would therefore be wise to recover the full tax taking into account the CCA, DA and ADA to avoid double work and extra labour. The Chief of Personnel did not agree. with this view and added that considering the economics of present day with the rising trend in price index, etc., an  amount which is not clearly recoverable at present and in doubt but, will become recoverable subsequently should not be recoveled now. It should be recove red only later when it becomes clearly due and recoverable. Moreover, this course of action would show to the workers the organisation's good intentions towards their workers, oneness with the staff, abiding law and the impression that 'we care for the Union, though this may involve additional labour and extra work later on. The Chief of Personnel also pointed out that employee/employer relation is always ,pay now, recover later' and the maxim 'payments due first preference, recoveries due in due course' would always create a better industrial climate particularly in the context of our culture and work ethos coupled with the socialistic concept of the Government. It would also be good for the organisation, he argued.

   The General Manager was perplexed not only because the high official of the tax department was a well wisher and good friend of the General Manager and his advice was valued, but also in the interest of the company' he did not want strained relations with the tax department.


(a) Identify and describe the core issue in this case.

(b) with whom do you agree and why ? If you are the General Manager how will you deal with the situation ?

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