GEMBA School of HR

2nd Trimester

Compensation & Benefits Management

Slide Nos. Slide Nos. 1 to 37 : 38 to 65 : Module material Reference Materials

Purpose of COMPENSATION
1. 2. 3. 4. 5. 6. 7.

To establish a fair and equitable remuneration To attract competent candidates To retain workforce To improve productivity To control cost To improve industrial relations To improve public image of the organisaion

Types of COMPENSATION
Direct compensation
Monetary benefits offered to employees for their services to the organization. It includes components like . . . ..

Types of COMPENSATION
In-Direct compensation
Non-Monetary benefits offered to employees for their services to the organization. It includes components like . . . ..

Compensation Philosophy
Pay a competitive base salary - not an aggressive one, but a salary comparable to what an employee could get somewhere else Offer equity in the company to all employees so that they can reap the rewards of the company Be aggressive in total overall compensation through the use of the incentives Incentive programs should be designed so that highperformance people get high compensation

COMPENSATION Strategy
To improve the motivation of your people to perform better To have the potential of strengthening the image as GOOD EMPLOYER Reward scheme has the potential of motivating employees on effective implementation ; it would be demotivating if poorly handled Benchmark salary scheme so that it is at par with salaries paid in the open market for similar types of jobs Doing this will minimize the possibility of good employees leaving your organization for a more lucrative job elsewhere Paying too low a salary may save you money but will not attract quality people On the other hand, it may compel good employees to leave Paying competitive salaries is in accordance with sound employee recruitment, employee engagement and employee retention practices

Strategic Compensation Planning

To link the compensation of employees to the mission, objectives, philosophies, and culture of the organization To motivate employees through compensation To reward employees past performance To remain competitive in the labor market To maintain salary equity among employees To mesh employees organizational goals future performance with

To control the compensation budget To reduce unnecessary turnover

Pay-for-Performance Standard
$ Managers tie & link compensation to employees effort and performance $ Refers to a wide range of compensation options, including merit-based pay, bonuses, salary commissions, job and pay banding, team / group incentives, and various gain sharing programs.

Pay-for-Performance Standard
How will performance be measured? How will monies to be allocated for compensation increases ? Which employees will be eligible? How will payouts be made? How often will payouts occur? How large will the payouts be? Will employees perceive the rewards as valued?

Bases for Compensation

Hourly Work Work paid on an hourly basis Piecework Work paid according to the number of units produced Salaried Workers Employees whose compensation is computed on the basis of weekly, bi-weekly, or monthly pay periods

Expectancy Theory
A theory of Motivation Employees should exert greater work effort if they have reason to expect that it will result in a reward that they value Employees also must believe that good performance is valued by their employer and will result in their receiving the expected reward.

COMPENSATION Approach

COMPENSATION Approach
Joaneses model
Percentile Position : 75th percentile : : would be one of the top paymasters This model proved right when the IT industry was its BOOM

The value fit model

To fix up Compensation to a person in a position commensurate with internal equities

Tune of the time model

To pay more when the organisation is doing extremely well and to slash down during bad times ; it is whimsical and inconsistent ; it has its own relevance and strength with Small / Medium sized establishements

Capacity to pay model

COMPENSATION Approach
Performance, Position and Person Joaneses model The value fit model Tune of the time model Capacity to pay model

COMPENSATION Approach
Fairness Relevance Consistency Sustainability Compliance

The Pay Model

Business Goals Business Strategy

Compensation Strategy Org.Structure Compensation Plan Performance Management Job Evaluation Unit Inputs Market Surveys Non-Financial Rewards

Internal Equity Internal Equity

External Equity External Equity

Contribution /outputs

Pay levels / structures Total remuneration

Performance linked Pay

Individual Pay

Government Regulations on Compensation

Payment of Wages Act 1936 All employees to be paid before 7th of the month. Minimum Wages Act 1948 Stipulates minimum level of payment for sustenance Labour Law Act, 1988 Provision of Exemption to employers based on manpower size Payment of Bonus Act 1965 Bonus is profit sharing at a rate of 8.33% All the employees of service sector, educational institutions and educational institutions and manufacturing units are covered in the act

Factors Affecting Pay Structure

INTERNAL FACTORS Job W orthiness Com pensation Strategy Em ployee's relative worthiness Em ployer's ability to pay EXTERNAL FACTORS Market Conditions Cost of Living Index Collective Bargaining Legal requirem ents / im plications / com pliances

Pay Levels Grid

TRANSACTIONAL
HIGH PAY LOW COMMITMENT HIGH PAY HIGH COMMITMENT

Low ----- High

LOW PAY LOW COMMITMENT

LOW PAY HIGH COMMITMENT

RELATIONAL Low ----- High

The WAGE Curve

A curve in a scatter gram representing the relationship between relative worth of jobs and wage rates Pay Grades : : Groups of jobs within a particular class that are paid the same rate Rate Ranges : : A range of rates for each pay grade that may be the same for each grade or proportionately greater for each successive grade.

The WAGE Curve

Competence-based Pay or knowledge-based pay also skill-based pay Compensation for the different skills or increased knowledge employees possess rather than for the job they hold in a designated job category Red Circle Rates Payment rates above the maximum of the pay range Broadbanding Collapses many traditional salary grades into a few wide salary bands

Anatomy of a Pay structure

Pay Structure consists of a series of Pay Ranges, or grades, each with a minimum and maximum pay rate Pay Range Has a minimum pay value, maximum pay value and a midpoint Midpoint of a range Represents the competitive market value for the job or group of jobs.

Midpoint = Max + Min 2

Variation of Range Spread

Vary based on level and sophistication of skills required for a given position Entry level positions (skills that are quickly mastered) have narrower pay ranges Managerial positions will have broader pay ranges

Typical Range Spreads

20 25 % Lower-level service, production 30 40 % Clerical, technical 40 50 % Professional, Administrative & Middle management

Salary Survey
To gather information regarding the industry standards To know more about the market rate i.e. compensation offered by the competitors To design a fair compensation system To design and implement most competitive reward strategies To benchmark the compensation strategies

Salary Survey
1. Tools used to determine the median or average compensation paid to employees in one or more jobs 2. Compensation data as collected from several employers is analyzed to develop an understanding of the amount of compensation paid 3. Focuses on one or more job titles, geographic regions, employer size, and / or industries 4. It may be conducted by employer associations, survey vendors or by individual employers 5. It is often time sensitive and may become out-of-date quickly 6. It is a time sensitive information - hence are often carried-out by the year or quarter in which the data was collected 7. It provides means for comparison of salaries at the company

Types of Salary Survey

Standard Surveys Take by organizations regularly Annually based on the organizational objectives Attempts to cover the same companies every year and provide the same type of analysis Custom Surveys Organisations do on some specific information Either appoint research organizations to conduct theses surveys or they themselves conduct the survey by sampling few of the competitors on their own Do not have any time interval ; it is done as the need arises. Focuses on important issues usually one or two Survey Reports The survey reports consist of the analysis and conclusion drawn from the evaluative data based on the objectives of the study The reports also include the data, facts and figures to support the analysis and conclusion The supportive data and annexure provided in the report form the basis for the unbiased conclusion and validation of the analysis

Salary Survey

Salary Matrix
A salary increase matrix is a Two Dimensional Matrix Axis X Meets Expectations Exceeds Expectations Axis Y Lower third Middle third Upper third High performers paid low in range should receive the largest salary increase Lower level performers already paid at or above midpoint should receive smaller or no increases

Merit-based Pay
Managing merit compensation can be complicated and time consuming without following a basic structure and automating wherever possible Establish a salary range for each position or pay grade Establish a merit matrix defining increases based on performance and where the employee falls within the salary range. Establish your compensation budget Calculate the employees compensation ratio Calculate suggested increases based on performance, current pay, and budget Provide suggested increases to managers for review and approval Make any adjustments to the suggested increases and process

Significant Compensation Issues

Equal Pay for Comparable Worth The concept that male and female jobs that are dis-similar, but equal in terms of value or worth to the employer, should be paid the same Wage-Rate Compression Compression of pay differentials between job classes, particularly the pay differentials between hourly workers and their managers Low-wage Budgets Current wage budgets reflect the general trend toward tight compensation cost controls

ESOP
1. An Employee Stock Option Plan is when the company offers its shares to the employees. 2. An ESOP is nothing but an option to buy the company's share at a certain price. This could either be at the market price (price of the share currently listed on the stock exchange), or at a preferential price (price lower than the current market price). 3. If the firm has not yet gone public (shares are not listed on any stock exchange), it could be at whatever price the management fixes it at. Why ESOP 1. When you invest in shares, you do not invest in the market. You invest in the equity shares of a company. That makes you a shareholder or part owner in the company. 2. Owning an equity share means owning a share in the company business. 3. Companies offer their employees shares because it is considered that having a stake in the company would increase loyalty and motivation substantially. 4. It depends on company policy and your designation. 5. There are time limits for availing this scheme. ESOPs are taxable when they are sold

Employee Benefits

Benefits

1.SAVING MONEY on employee benefits is a must in todays economy 1.The cost of providing benefits is rising significantly, while employees consistently seek more and more from their benefits packages 2.Many employers struggle to balance employee needs with their own capabilities and bottom lines.
1. 2. 3. 4. 5. 6. 7. 8. Health Plans Dental Plans Vision Life Insurance Disability Income Insurance Business Overhead Insurance Individual Long-term care Group long-term care

Analysis & Benchmarking Benefit Needs

Employers to pitch Employee Benefits Benchmark based on 1. 2. 3. 4. 5. Geography Industry Company strategy Local customs Employee Needs & Expectations

Employers to understand 1. How many of their employees are living pay cheque to pay cheque and employees have needs that are not met by their salary or present employee benefits 2. Employee savings rates ; most aren't saving enough money for retirement 3. How well or poorly their benefits are received by employees

Time-Off Benefits
As life becomes more stressful and more people feel the pressures of balancing work and family concerns, benefits involving time off become more and more valuable to employees. When people talk about benefits, some don't even think about time off as a benefit, but that's exactly what it is Required time off In a sense, some types of time off are not benefits because you, as an employer, are required by law (either federal or state) to provide them to employees. They include: Time Off to Vote ; Jury Duty Leave ; Military Leave Family & Medical Leave Other time-off benefits Apart from the above mandated time-off benefits, we could offer the following leaves which can be paid or unpaid Holidays Personal Leave ; Administrative issues ; Vacations Funeral Leave ; ; Sick Leave Maternity / Paternity Leave

Work Life Setting

List out what matters to your life Seek and Accept Help & Guidance Set Boundaries Ergonomically designed work-place Have some Visual Stimulation Work board & Work Calendar Have some plants in your work area Mild & Melodious music Have a Recreational Space to observe breathing
Employers to build rapport and gain respect Excellence should not be demanded ( importance to personal sentiments ) Encourage to have personal life

Designing Benefit Package

Important recruitment and retention tool
Three most important factors that must be considered 1. 2. 3. What benefits can the employer afford? What benefits will best attract and retain the employees needed to execute the organization's business strategy? What benefit vendors provide a quality and consistent product now, and will continue to do so in the future?

Employers should engage in strategic planning as they try to balance employees' needs and budget. Additional Benefits like 1. 2. 3. Financial planning assistance Health club memberships Long-term care insurance

Benefits programs are most effective in attracting, motivating, and retaining employees Strategic planning can provide for controlled budgets over a period of years and provide meaningful benefits that aid in recruiting and retaining key employees To achieve these objectives : Evaluate current benefit plans and programs Identify corporate objectives Spell out strategies that relate to corporate culture Coordinate benefit strategies with other compensation and human resource programs Design a communication plan Establish budgets to accomplish these steps

Important Contents for Reference & Better Understanding

Job Description Format

Job Title Based at (Business Unit, Section - if applicable) Position reports to (Line Manager title, location, and Functional Manager, location if matrix management structure) Job Purpose Summary Key Responsibilities and Accountabilities Dimensions / Territory / Scope / Scale indicators (the areas to which responsibilities extend and the scale of responsibilities - staff, customers, territory, products, equipment, premises, etc) Date and other relevant internal references

Job Specification
Components Experience Education Required Skills Knowledge Characteristics

Job Evaluation
To determine the relative worth of a job To frame compensation plans Reduction in inequalities in salary structure Specialization identification Helps in selection of employees Harmonious relationship between employees and manager to curb salary controversies Standardization to bring uniformity in salary structure Relevance / Creation of New Jobs

INCOME TAX SLABS : 2011 - 12

IT Slab (in INR) Assesee Type From 0 Male 180001 500001 800001 0 Female 190001 500001 800001 0 Senior Citizens 250001 500001 800001 To 180000 500000 800000 and above 190000 500000 800000 and above 250000 500000 800000 and above Tax to be Charged NIL 10% 20% 30% NIL 10% 20% 30% NIL 10% 20% 30%

PROFESSIONAL TAX SLABS : TN

S No 1 2 3 4 5 6 Six months income (Rs.) upto 21,000 21,001 30,000 30,001 45,000 45,001 60,000 60,001 75,000 75,001 and above Old Tax (Rs) 75 188 390 585 810 New Tax (Rs) 100 235 510 760 1095

Payment of Bonus Act , 1965

An employee who is eligible to receive bonus even after leaving the service : : Can claim the same for the period equivalent to what he has worked for, even after leaving the job. Such bonus which is due and unpaid - can be claimed by the employee within one year of its becoming due and the employer is liable to pay the same. However, NO such liability incurs on employer when an employee has been dismissed from service for fraud, riotous or violent behavior, or theft, misappropriation or sabotage of any property of the establishment. The employer even has a right to forfeit bonus of such an employee.

LABOUR WELFARE FUND

Contribution to the Fund by Employee and Employer (Sec 15) and rules 11(a): 1.Every Employee contributes Rs.7/- per year 2.Employer in respect of and such Employee, contributes Rs.14/- per year to the Fund 3.Government in respect of each such employee contributes Rs.7/- per year to the Fund.
Needs to be deducted from Attrited employees also from the FnF dues Remitted to LW Board annually

Regulatory ACTs
SNo 1 2 3 4 5 6 7 8 9 C entral Acts The F actoriesAct 1948 C ontract labour (R ulations& Abolition) Act 1970 eg C hild L abour (P rohibition & R ulation) Act 1986. eg The E qual R uneration Act 1976. em Inter S tate Mig rant Workm Act 1979 en The labour L aws(E xem ption fromfurringreturns Act 1988. ) The Maternity Benefit Act. 1961. The Minim wag Act 1948 um es The P aym of wag Act 1936 ent es

Regulatory ACTs
SNo 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 R ulations/ AC eg T COMPANY LAW THE (State) SHOPS AND INDUSTRIAL ESTABLISHMENT ACT THE FACTORIES ACT The PROFESSIONAL TAX Act THE PAYMENT OF BONUS ACT THE PAYMENT OF GRATUITY ACT THE MINIMUM WAGES ACT MATERNITY BENEFITS ACT WORKMEN COMPENSATION ACT PROVIDENT FUND ACT EMPLOYEES STATE INSURANCE CORPORATION ACT TN LWF ACT AND RULES THE INCOME TAX ACT NATIONAL AND FESTIVAL HOLIDAYS THE INDUSTRIES DEVELOPMENT & REGISTRATION ACT TN Confirment for permanent status Act & Rules TN SUBSISTENCE ALLOWANCE ACT THE (State) GENERAL SALES TAX ACT THE CENTRAL SALES TAX ACT CENTRAL EXCISE TARIFFS AND MANUALS THE STANDARD OF WEIGHTS & MEASUREMENTS ACT FOREIGN EXCHANGE MANAGEMENT ACT

Regulatory ACTs
S No 1 2 3 4 5 6 7 8 9 Registers under Contract Labour Act
Form XIII - Register of Persons employed Form XIV - Employment Card Form XV - Service Certificate Form XVI - Muster Roll Form XVI - Register of wages Form XX - Register of Deductions for damage or loss Form XXI - Register of Fines Form XXII - Register of Advances Form XIX - Wage Slips

Regulatory Registers
Tamil Nadu List of Registers to be maintained.
S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 The Labour W elfare Fund Act 1972 The Paym ent of Bonus Act 1965 National & Festiv al Holiday Act 1958 Equal Rem uneration Act 1976 The Maternity Benefit Act 1961 Paym ent Subsistence Allowance Act 1981 Conferm ent of perm anent status of workm en Act 1981 Shops & Establishm ent Act 1947 Act Resgister/Form Number Form P Form Q Form R Form T Form VI Form D Form A Form I Form I Form A Form B Form C Form B Form C Description of the Register

Register of Advances, Deductions for Dam ages o Losses and Fines Register of Em ploym ent & Leav e Register of W ages W age slip Inspection Note Register of National and Festiv al Holidays Register of em ployees Muster roll

Register of em ployees placed under suspension Register of W orkm en

Register showing com putation of allocable surplu Register showing set-on and set-off the allocable surplus Register of bonus. Register of wages Register of unpaid accum ulations, fines and deductions

Regulatory Registers
ABSTRACTS DSPLAY
1 2 3 4 5 6 Form X THE MINIMUM WAGES ACT - 1948 Form V THE PAYMENT OF WAGES ACT - 1936 Form U THE PAYMENT OF GRATUITY ACT - 1972 Form J THE MATERNITY BENEFIT ACT - 1961 THE CONTRACT LABOR (REGULATION & ABOLITION) ACT - 1970 THE SHOP AND ESTABLISHMENTS ACT - 1947

NOTICES
1 2 3 4 5 6 7 8 Name Board -THE SHOP AND ESTABLISHMENTS ACT - 1947 Form S THE SHOP AND ESTABLISHMENTS ACT - 1947 From V THE INDUSTRIAL ESTABLISHMENTS (NATIONAL AND FESTIVAL HOLIDAYS) ACT - 1958 Pay master THE PAYMENT OF WAGES ACT - 1936 Form A THE PAYMENT OF GRATUITY ACT - 1972 Notice of Opening THE PAYMENT OF GRATUITY ACT - 1972 From I THE INDUSTRIAL ESTABLISHMENTS (NATIONAL AND FESTIVAL HOLIDAYS) ACT - 1958 From II THE INDUSTRIAL ESTABLISHMENTS (NATIONAL AND FESTIVAL HOLIDAYS) ACT - 1958

Regulatory Registers
RETURNS AND REMITTANCES
1 2 3 4 5 6 Form II Half yearly Return The Tamilnadu Industrial Establishments (Conferment of Permanent Status to Workmen) Act - 1981 and Rules - 1981 Form II Half yearly Return The Tamilnadu Payment of Subsistence Allowance Act 1981 and Rules 1981 The Tamil Nadu Labour Welfare Fund Act 1972 - Annual Return and Contribution Form A THE MINIMUM WAGE ACT 1948 FORM - III ANNUAL RETURN THE PAYMENT OF WAGES ACT 1936 FORM - IVV ANNUAL RETURN THE MATERNITY BENEFIT ACT FORM K , ANNUAL RETURN

Regulatory Registers
Payment of Wages Act
FORM No. II (Register of deductions for damage or loss caused to employers through the neglect or default of employed persons in respect of goods expressly entrusted to them for custody.) FORM NO. II-A (Register of wages) FORM NO. III(Register of advances made to employment persons) FORM NO. III-A (Register of loans granted to the employed persons for house building or other purposes) FORM NO. IV(Annual Return) FORM NO. V(Abstract of the payment of wages act, 1936, and the rules made thereunder.)

HAYs Job Evaluation : : An Overview

Measures jobs to reflect their relative weight in the organization Provides means to assess pay across different market/functions Evaluates jobs and not people Not based on performance, title, writing skills or current salary

Know-How Depth & Range of Know-How Planning & Organizing Communicating & Influencing ('Human Relations Skills) Problem Solving Thinking Environment ; Thinking Challenge Accountability Freedom to Act ; Nature of Impact ; Area of Impact (Magnitude) Work measurement Work alignment Work fit Work value Do you know how, where and why work is done? Does your structure fit with your strategy Do you have the right people in the right roles? What is each role really worth to your organization?

HAYs Job Evaluation : : An Overview

A set of compensable factors are identified as determining the worth of jobs. Typically the compensable factors include the major categories of : Skill Responsibilities Effort Working Conditions

HAYs Job Evaluation Points range from 127 to 1300

These factors can then be further defined. 1.Skill a. Experience b. Education 2.Responsibilities a. Fiscal b. Supervisory 3.Effort a. Mental b. Physical 4.Working Conditions a. Location b. Hazards c. Extremes in Environment c. Ability

HAYs Job Evaluation : : Points Table

P ition / Incum os bent Manag er S upervis or S tem S ys s pecialis t K nowH ow 304 230 230 P roblemS olving Accountability 115 76 76 152 115 76 Total P oints 571 421 382

Coverage under the ESI Act,1948

APPLICABILITY Under Section 2(12) the Act is applicable to non-seasonal factories employing 10 or more persons. Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings and newspaper establishments employing 20* or more persons. Further under section 1(5) of the Act, the Scheme has been extended to Private Medical and Educational institutions employing 20* or more persons in certain States/UTs. *Note: 14 State Govts. / UTs have reduced the threshold limit for coverage of shops and other establishments from 20 to 10 or more persons. Remaining State Governments/UTs are in the process of reducing the same. The existing wage limit for coverage under the Act is Rs. 15,000/- per month ( w.e.f. 01/05/2010). AREAS COVERED The ESI Scheme is being implemented area-wise by stages. The Scheme has already been implemented in different areas in the following States/Union Territories STATES All the States except Nagaland, Manipur, Tripura, Sikkim, Arunachal Pradesh and Mizoram. UNION TERRITORIES Delhi, Chandigarh and Pondicherry

E.S.I. Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. Employees contribution rate (w.e.f. 1.1.97) is 1.75% of the wages and that of employers is 4.75% of the wages paid/payable in respect of the employees in every wage period. Employees in receipt of a daily average wage upto Rs.100/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees. Collection of Contribution An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 21 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf. Contribution Period and Benefit Period There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

Contribution Period 1st April to 30th Sept. 1st Oct. to 31st March

Cash Benefit Period 1st January of the following year to 30th June. 1st July to 31st December of the year following

M a t e r n it y B e n e fit

M a te r n ity B e n e f it is p a y a b le to a n I n s u r e d W o m a n in th e fo llo w in g c a s e s s u b je c t t c o n d it io n s :-

C o n fin e m e n t- p a y a b le fo r a p e r io d o f 1 2 w e e k s ( 8 4 d a y s ) o n p r o d u c tio n o f F o rm 2 1

M is c a r ria g e o r M e d ic a l T e r m in a t io n o f P re g n a n c y ( M T P ) - p a y a b le f o r 6 w e e k s ( 4 2 d f o llo w in g m is c a r r ia g e - o n t h e b a s is o f F o r m 2 0 a n d 2 3 .

S ic k n e s s a r is in g o u t o f P r e g n a n c y , C o n f in e m e n t, P r e m a tu r e b ir th - p a y a b le fo r a p e o n e m o n th - o n th e b a s is o f F o r m s 8 , 1 0 a n d 9 . I n th e e v e n t o f th e d e a th o f t h e I n s u r e d W o m a n d u r in g c o n fin e m e n t le a v in g b e h i M a te r n ity B e n e f it is p a y a b le to h e r n o m in e e o n p r o d u c tio n o f F o r m 2 4 ( B ) . M a te r n ity b e n e f it ra t e is 1 0 0 % o f a v e r a g e d a ily w a g e s .

Maternity benefit is payable to insured women in case of confinement or miscarriage or sickness related thereto. For claiming this an insured woman should have paid for at least 70 days in 2 consecutive contribution periods i.e. 1 year. The benefit is normally payable for 12 weeks, which can be further extended up to 16 weeks on medical grounds. The rate of payment of the benefit is equal to wage or double the standard sickness benefit rate. The benefit is payable within 14 days of duly authenticated claim papers

T em p o rary D isab lem ent B enefit

(a) T D B is payable to an em ployee who suffers em ploym ent injury (E I) or O ccupational D isease and is certified to be tem porarily incapable to work. "E m ploym ent Injury" has been defined under S ection 2(8) of the A ct, as a p injury to an em ployee caused by accident or occupational disease arising o in the course of his em ploym ent, being in insurable em ploym ent, whether th accident occurs or the occupational disease is contracted within or outside t territorial lim its of India. b . C ertificates R eq u ired fo r T D B : A ccident R eport in form 16, F orm 8,9,10, 11 and E S IC M ed.13. c. E lig ib ility fo r T D B :

T he benefit is not subject to any contributory conditions. A n IP is eligible fro day he joins the insurable em ploym ent.

(d ) T D B R ate is 90% o f averag e d aily w ag es. d . D u ratio n o f T D B : T here is no prescribed lim it for the duration of T D B . T his is payable as long tem porary disablem ent lasts and significant im prov em ent by treatm ent is po a T em porary D isablem ent spell lasts for less than 3 days (excluding day of IP will be paid sickness benefit, if otherwise eligible. A special point for IM O that som e IP s m ay resist taking a F inal C ertificate especially before 3 days loss of T D B .

Permanent Disablement Benefit

(a) PDB is payableto an IP who suffers permanentresidualdisablementas a result of EI (includingOccupational Diseases)and results in loss of earning capacity.The proper authorityfor assessingloss of earning capacity for injuries is the Medical Board and for Occupational Diseases, Special Medical Board. (b) The durationof PDB may be for the period given by Medical Board, if assessmentis provisionalor for entire life if assessment is final. (c) PDB Rate: The PDB rate is calculatedas percentageof loss of earning capacityas assessedby the Medical Board/MAT/EICourt in relation to TDB. List of injuries deemed to result in permanent total disablementand percentage loss of earning capacity has been previewed in 2nd Schedule to ESIC Act, 1948. Hence, the maximum rate of PDB can be equal to the rate of TDB. PDB amount is revised by the ESIC from time to time to adjust for inflation.The latest enhancementis with effect from 01.08.2009 (d) Commutationof PDB (Regulation 76-B): IP whose PDB has been assessed as final and who has been awardedthe same at the rate not exceedingRs.1.50 per day may apply for commutationof periodicalpayments of PDB into a lump-sum. W hen an application for commutation is made within 6 months of the date of communicationof MedicalBoard decisionperiodicalpaymentsshall be commutedinto a lump sum providedthe total commutedvalue does not exceed Rs.10,000at the time of commencementof final award. However,where such an applicationis made after expiry of 6 months, LO/RO will refer the case to MR/PTMRto certify whether the IP has an average expectationof life for his age. Such a certificate is issued by Medical Referee in the relevant place on RO/LO letter. (e) Age of an IP will have to be proved to the satisfactionof the Corporationin all cases. Medical Boardsassess the age of IPs who are not able to producesatisfactoryproof of age and opinionof MedicalBoard shall be final in this regard.

PRIVATE LIM ITED COM PANY

Section 3(1) (iii) defines a private com pany as one which:has a m inim um paid-up share capital of Rs.1 Lakh or such higher capital as m ay be prescribed;and

by its Articles Association:

restricts the right of transfer of its share; lim its the num ber of its m em bers to 50 which will not include:m em bers who are em ployees of the com pany; and

m em bers who are ex-em ployees of the com pany and were m em bers while in such em ploym ent and who have c to be m em bers after ceasing to be em ployees; prohibits any invitation to the public to subscribe for any shares or debentures of the com pany; and

Prohibits any invitation or acceptance of deposits from persons other than its m em bers, directors or their relativ

This goes to say that a private com pany, in addition to the earlier conditions, shall have a m inim um paid-up sha of Rupees One Lakh or such higher capital as m ay be prescribed and its Articles shall prohibit invitation or acce deposits from persons other than its m em bers, directors or their relatives. In case of such com panies, public int not involved. The basic characteristics of a private com pany in term s of section 3(1)(iii) of the Act do not get altered just beca subsidiary of a public com pany in view of the fiction in term s of section 3(1)(iv)(c) of the Act that it is a public co May be it is a public com pany in relation to other provisions of the Act but not with reference to its basic charact term s of that section, a com pany is a private com pany when its articles restrict the right of transfer of shares, re m em bership to 50 (other than em ployees shareholders) and prohibits invitation to public to subscribe to its shar Therefore, all the provisions in the articles to m aintain the basic characteristics of a private com pany in term s of section is restriction on the right to transfer and the sam e will apply even if a private com pany is a subsidiary of com pany.

P U B L IC L IM IT E D C O M P A N Y T h e C o m p a n y d e fin e d u n d e r s e c tio n 3 (1 )(iv ) o f th e C o m p a n ie s A c t, 1 9 5 6 is a w h ic h is n o t a p riv a te c o m p a n y ; h a s a m in im u m p a id -u p c a p ita l o f R s . 5 la k h s o r s u c h h ig h e r c a p ita l a s m a y is a p riv a te c o m p a n y b u t s u b s id ia ry o f a p u b lic c o m p a n y . P riv a te C o m p a n ie s d e e m e d to b e P u b lic C o m p a n ie s C e rta in p riv a te c o m p a n ie s a re d e e m e d to b e p u b lic c o m p a n ie s b y v irtu e v iz .w h e n 2 5 % o r m o re o f its p a id -u p s h a re c a p ita l is h e ld b y o n e o r m o re b o d y w h e n its a v e ra g e a n n u a l tu rn o v e r (d u rin g th e la s t 3 y e a rs ) e xc e e d s R s . 2 5 w h e n it h o ld s 2 5 % o r m o re o f th e p a id -u p s h a re c a p ita l o f P u b lic C o m p a n y w h e n it a c c e p ts o r re n e w s d e p o s its fro m th e p u b lic a fte r m a k in g a n in v ita tio a d v e rtis e m e n t. H o w e v e r, a s p e r th e C o m p a n ie s (A m e n d m e n t) A c t, 2 0 0 0 e ffe c tiv e fro m 1 3 t 2 0 0 0 s u c h d e e m e d p u b lic lim ite d c o m p a n ie s a re re q u ire d to in tim a te to th e re v e rt b a c k to th e ir o rig in a l s ta tu s a s a p riv a te lim ite d c o m p a n y .

FIRM
A firm is a group of persons, with production tools, located in some premises, who, with work, transform raw materials into goods and services, and sell them. The work and the raw materials are bought on some markets, and the good and services are sold on other markets. Three Types of Firms 1.Industrial firms : think of a workshop, a plant, or a group of plants 2.Commercial firms : think of a retailer, a wholesaler, or a large commercial organisation 3.Financial firms : banks, insurance companies, mutual funds

Co Owners & Partnership

In co-ownership, there is only a combined ownership without any business purpose. In partnership, joint ownership and business are pooled. Partnership is based on contractual association among partners ; Co-ownership may be by a procedure of law. On the death of father, sons become co-owners of his possessions. On the other hand partnership is the result of an accord. The purpose of partnership is to enter into some business and earn profits whereas coownership is not meant for business intentions. No partner can reassign his interest without the approval off all other partners. A co-owner can transfer his interest whenever he likes without asking from other co-owners. Partners can also act as mediators of business. The have an indirect power to bind the firm by their acts. No agency affiliation exists in co-ownership. Every co-owner is answerable for his deeds only. A co-owner can insist the division of property but in partnership such a provision is not feasible. A partner can demand the imbursement of his share in business through cash. If a partner pays out some money for business he can demand its repayment. On the other hand, if a co-owner spends money for the upgrading of property he cannot claim it by the way of a lien of property. Co-ownership does not require the formation of a well-defined act that can govern its functioning, whereas such an act is mandatory in the case of partnership.