MODULE -2

HUMAN RESOURCE
PLANNING

Human Resource Planning is a systematic process of forecasting both the prospective demand for
and supply of manpower, and employment of skills with the objectives of the organization.

 Human resources undoubtedly play the most important part in the functioning of an
organization. The term ‘resource’ or ‘human resource’ signifies potentials, abilities, capacities,
and skills, which can be developed through continuous interaction in an organizational setting.

 The interactions, interrelationships, and activities performed all contribute in some way or
other to the development of human potential. Organizational productivity, growth of companies,
and economic development are to a large extent contingent upon the effective utilization of
human capacities.

DEFINITION:
 According To Coleman, “Human Resource Planning is the process of manpower requirements
of an organization and the means for meeting those requirements in order to carry out the
integrated plan of the organization “

IMPORTANCE OF HRP:
1. Assessing Future Personnel Needs:

2. Foundation for Other HRM Functions:

3. Coping with Change:

4. Investment Perspective:

5. Expansion and Diversification Plans:

6. Employee Turnover:

7. Conformity with Government Guidelines:

8. International Expansion Strategies

Assessing Future Personnel Needs:

Whether it is surplus labour or labour shortage, it gives a picture of defective planning or absence
of planning in an organization. A number of organizations, especially public sector units (PSUs)
in India are facing the problem of surplus labour.
It is the result of surplus labour that the companies later on offer schemes like Voluntary
Retirement Scheme (VRS) to eliminate surplus staff. Thus, it is better to plan well about
employees in advance. Through HRP, one can ensure the employment of proper number and type
of personnel.
2. Foundation for Other HRM Functions: HRP is the first step in all HRM functions. So, HRP
provides the essential information needed for the other HRM functions like recruitment,
selection, training and development, promotion, etc.
3. Coping with Change: Changes in the business environment like competition, technology,
government guidelines, global market, etc. bring changes in the nature of the job. This means
changes in the demand of personnel, content of job, qualification and experience needed. HRP
helps the organization in adjusting to new changes.
4. Investment Perspective: As a result of change in the mindset of management, investment in
human resources is viewed as a better concept in the long run success of the enterprise. Human
assets can increase in value as opposed to physical assets. Thus, HRP is considered important for
the proper planning of future employees.
5. Expansion and Diversification Plans: During the expansion and diversification drives, more
employees at various levels are needed. Through proper HRP, an organization comes to know
about the exact requirement of personnel in future plans.
6. Employee Turnover: Every organization suffers from the small turnover of labour, sometime
or the other. This is high among young graduates in the private sector. This necessitates again
doing manpower planning for further recruiting and hiring.
7. Conformity with Government Guidelines: In order to protect the weaker sections of the
society, the Indian Government has prescribed some norms for organizations to follow. For
example, reservations for SC/ST, BC, physically handicapped, ex-servicemen, etc. in the jobs.
While planning for fresh candidates, HR manager takes into consideration all the Government
guidelines.
8. International Expansion Strategies: International expansion strategies of an organization
depend upon HRP. Under International Human Resource Management (IHRM), HRP becomes
more challenging. An organization may want to fill the foreign subsidiary’s key positions from its
home country employees or from host-country or from a third country. All this demands very
effective HRP.
9. Having Highly Talented Manpower Inventory: Due to changing business environment, jobs
have become more challenging and there is an increasing need for dynamic and ambitious
employees to fill the positions. Efficient HRP is needed for attracting and retaining well qualified,
highly skilled and talented employees.

External Factors Affecting HRP

 Economy: The state of economy has a direct influence on employment situations and the HR
needs of an organization.

 Technology: The march of technology means that skill obsolescence will also occur at a faster
pace, creating new workforce skills.

 Law: Various statutory requirements, judicial pronouncements, and executive actions also
create boundaries for HRP.

 Demography: Due to competitive pressures to keep the costs under wraps and also to escape
the rigors of statutory compliance, employers have been relying increasingly on contingent
workers.

 Geographic conditions: HRP is also impacted by local conditions, the availability of suitable
workforce in the neighboring labor market.

 Society: The trend for diversity and the rising numbers of women employees have warranted a
fresh look at reworking the traditional workplaces.
Internal Factors Affecting HRP
 Business strategy: HRP has to align itself to the evolving business strategies of the
organization and cannot remain stagnant.
 Company policies and strategies – Company policies and strategies relating to expansion,
diversification, alliances, etc. determines the human resource demand in terms of quality and
quantity.
 Human resource policies – Human resources policies of the company regarding quality of
human resource, compensation level, quality of work-life, etc., influences human resource plan.
 Job analysis – Fundamentally, human resource plan is based on job analysis. Job description
and job specification determines the kind of employees required.

RECRUITMENT
Recruitment refers to the overall process of identifying, attracting, screening, shortlisting, and
interviewing suitable candidates for jobs within an organization.
Edward.B.Flippo:
Recruitment is a process of searching for prospective employees and stimulating and encouraging
them to apply for the job”

SELECTION

Selection is the process of identifying an individual from a pool of job applicants with the
requisite qualifications and competencies to fill jobs in the organization. This is an HR process
that helps differentiate between qualified and unqualified applicants by applying various
techniques.
PURPOSE OR OBJECTIVES /IMPORTANCE OF RECRUITMENT
 A proper recruitment process can ensure long-term retention of selected candidates.

 Success in recruitment also means good return-on-investment or value for the money spent on
the recruitment process.

 In current times of globalization, more than at any earlier times, the trend is to build a
culturally diverse workplace, which is also facilitated by a properly orchestrated recruitment
process.

 It helps the organization by finding the necessary requirements by job analysis activities and
personnel planning.

FACTORS INFLUENCING RECRUITMENT

 Recruitment is affected by two sets of factors: internal and external. The internal factors
include primarily the recruitment policies of the organization, as described above.

1. A well-structured and comprehensive HR Plan, which facilitates seamless sourcing of

manpower in a systematic and appropriate manner.

2. The size of the firm in as much as the complexities in recruitment planning and process are
generally inversely connected with the largeness of the organization.

3. Budgetary considerations: requiring pursuit of cost-effective ways of recruiting (e.g., use of

social media instead of search firms).

External factors affecting recruitment are:

(1) Labor market conditions: A labour market in the classical sense meant a geographical area
inside which the dynamics of labour supply and labour demand determine the price of labour.
The surplus in supply would explain why unskilled labours struggle to obtain even the statutorily
fixed minimum wage, in the same way that the scarcity in supply makes an Airline Pilot
command salaries of their choice.

(2) Unemployment rate in the geography: The higher the unemployment rate, the larger the
number of applicants are for a given job. The national skill development program by the
government is a step in the direction of managing the issue of unemployment by increasing the
employment potential of a person through building marketable skill sets.

(3) Political and legal environment.

(4) Technological changes

PROCESS
Pre-recruitment
• This stage includes:
a. Business Strategy: The first step begins with the big picture of the organization: the business
strategy. In a scenario where the organization is venturing into new business, the parameters of
recruitment may vary from the traditional business. The entire recruitment process may remain
suspended in air if it does not have a visible linkage with the business strategy.
b. HR Plan: The second step in the process is the HR Planning process of scanning the
environment, balancing the supply with demand, and arriving at the scenario of either surplus or
scarcity. It will end up with an HR Program which will include the HR Plan of identified
vacancies with the numbers, skill requirements of the manpower required for a specific period.
Increasingly in respect of the identified vacancies, a more strategic and critical approach may be
taken.
c. Job Analysis: The next step is the stage where the jobs are analyzed in minute detail to cull out
the requirements of skill. The choice is for the organizations to adopt approaches suiting its
needswhether based on competencies or the classical processes of job analysis resulting in
formal job descriptions and Job specifications. The exercise should ideally throw up
specifications accurately describing the duties and requirements of the job as also the skills,
aptitudes, knowledge, experience, qualifications, and personal qualities required to discharge the
responsibilities in an appropriate manner.
2. Recruitment
• This stage includes:
a. Core recruitment process: In drawing up its recruitment plan, the organization aims to align
the interests of the two parties by creating incentives for the most desirable candidates to apply,
while keeping out the less qualified candidates from the mix. Through the recruitment process,
organizations primarily try to attract the highest possible number of candidates and then filter out
to select people who have the best
potential and fit their specific criteria. Organizations that recruit the more qualified applicants are
typically ones that have a larger applicant pool.
 Methods/Strategies to attract candidates for the recruitment process include:
• Better compensation and benefits than competitors
• Promotional gifts and joining bonus
• Pre-placement talk

Post-recruitment
• This stage includes:
a. Orientation/onboarding: The post-selection stage starts with the new recruit. The first step in
it is orientation/onboarding. Onboarding aims at making the new recruits engaged and productive
in a short time through a series of structured activities. Orientation process is intended to
familiarize the new hires about the organizations policies and practices, the benefits, and the
cultures through a process of socialization. Effective, carefully planned orientation and
onboarding processes can reduce start-up costs and prevent employee turnover by helping new
employees to adjust to their job and work environment with a positive attitude and increasing
motivation.
b. Placement: Placement is the allotment of individuals to specific jobs after a reasonable period
of observation and assessment. It is based on several factors including skill level, work and
educational experience, interview results, references, and consultation between the line and the
human resources function.

SOURCES OF RECRUITMENT/ RECRUITMENT STRATERGY/ METHODS OF

RECRUITMENT

Sources of Internal Recruitment

Hiring internally is a recruiting system through which current employees can be identified and
considered for other jobs / positions in an organization

Advertise the vacant position to your employees

(Circulars/Intranet advertisement/news mail): advertising a job position through internal
channels could motivate any staffs who think they have a chance of getting the job to work harder
to prove them. By raising their efforts, their results will often improve, too-not a bad side effect.
Here are some of the ways you could advertise to your own staff
i. Circulate the jobs opportunity in a “News” mail.
ii. Keep an updated Jobs/careers section on your company internet.
iii. Post the job on your corporate website if you don’t have an internet.
iv. Pin the job ad on your company notice board. Make the ad eye-catching.
II. From temporary to permanent:

Organizations find this source to fill the vacancies relatively at the lower level owing to the
availability of suitable candidates or trade and pressure or in order to motivate them on the
present job.
III. Employee Referrals:

 This can be a good source of recruitment. When employees recommend successful referrals,
they (former) are paid monetary incentives which are called finder fees. Employees can develop
good prospects for their families and friends by acquainting them with the advantages of a job
with the company, furnishing cards of introduction, and then encourages them to apply.
 This is a very effective means as many qualified people can be reached at a very low cost to
the company. The other advantages are that the employees would bring only those referrals that
they feel would be able to fit in the organization based on their own experience. The organization
can be assured of the reliability and the character of the referrals. In this way, the organization
can also fulfill social obligations and create goodwill.
 Regardless of what system is used, as with external recruitment, employee referral programs
used internally may need to rely on formal programs with recognition for participation to get
employees actively participating in making referrals. Moreover, they need to be educated on
eligibility requirements to ensure that qualified personnel are referred.

IV. Appointment of Promotion or transfers:

Promotions and transfers from among the present employees can be a good source
recruitment.

Retired/Retrenched employees as a temporary or contract position :

 Generally a particular organization retrenches the employee due to lay-off. The organization
takes the candidates for employment from the retrenched from the retrenched employees due to
obligation, trade union pressure and the like.

 Sometimes the organizations prefer to re-employ their retired employees as a token of their
loyalty to the organization or to postpone some inter-personal conflicts for promotion etc. such
employees are sourced as a temporary or for contract position so that the business is
streamed.

Present temporary employees or contract position to permanent position: With a tight labor
market and an unemployment rate floating around 3.7 percent, there are signs that some
employers facing worker shortages are more willing to rehire their retirees or other former
employees.

Former employees for part time/freelance/work at home: Former employees are also an
internal source of applicants. Some retired employee may be willing to come back to work on a
part-time basis or may recommend someone who would be interested in working in our company.
Sometimes, people who have left the company for some reason or other are willing to comeback
and work. Individuals, who left for other jobs, might be willing to come back for higher
emoluments. And advantage with this source is that the performance of these people is already
known

VIII. Dependent or relatives of deceased and disabled employee: some organizations with a
view to developing the commitment and loyalty of not only the employee but also his family
members and to build up image provide employment to the dependents of deceased, disabled and
present employees. Such organizations find this source as an effective source of recruitment.

External recruitment is the evaluation of open pool of job candidates, other than existing staff,
to check whether there are any enough talented or able to fill requirements and perform
existing employment opportunities.
Advertisement
a. It is an external source which has got an important place in recruitment procedure. The
biggest advantage of advertisement is that it covers a wide area of market and scattered
applicants can get information from advertisements. Medium used is Newspapers and
Television.
Walk-Ins
 This is again a direct form of recruitment wherein the prospective candidates are invited
through an advertisement to come and apply for the job vacancy. Here, the specified
date, venue, and time are mentioned, and the candidates are requested to come and
give interviews directly without submitting their applications in advance.

Search on the Internet

As opposed to actively posting jobs online, another (but not mutually exclusive) means
of recruiting on the Web is to search for applicants without ever having posted a
position. Under this process, applicants submit their resumes online, which are then
forwarded to employers when they meet the employer‘s criteria. Such systems allow
searching the databases according to various search criteria, such as job skills, years of
work experience, education, major, grade-point average, and so forth. It costs applicants
anywhere from nothing to $200 or more to post their resumes or other information on
the databases.

Wanted Signboards
Signboards like ‗Wanted‘ are posted at the factory front gate to recruit blue collar
workers
Consultants
These are agencies who contact, screen, and present applicants to employers for a fee. The fee is
contingent on successful placement of a candidate with an employer and is a percentage (around
25%) of the candidate‘s starting salary. During difficult economic periods, employers cut back on
the use of these agencies and/or attempt to negotiate lower fees in order to contain costs. Care
must be exercised in selecting an employment agency. It is a good idea to check the references of
employment agencies with other organizations that have already used their services. Allegations
abound regarding the shoddy practices of some of these agencies. They may, for example, flood
the organization with resumes. Unfortunately, this flood may include both qualified and
unqualified applicants.
VI. Employment Exchange
An employment exchange is an office set up by the government for bringing together as
quickly as possible those people who are in search of employment and those employers
who are looking for suitable candidates. Employment exchanges register unemployed
people and maintain the records of their names, qualifications, etc.

Campus Recruitment
When companies are in search of fresh graduates or new talent they opt for campus
recruitment. Companies approach colleges, management, technical institutes, make a
presentation about the company and the job and invite applications. Interested
candidates who have applied are made to go through a series of selection test and
interview before final selection.

Selection process
Preliminary Interview: The preliminary interview is also called as a screening interview
wherein those candidates are eliminated from the further selection process who do not meet the
minimum eligibility criteria as required by the organization.
Here, the individuals are checked for their academic qualifications, skill sets, family backgrounds
and their interest in working with the firm. The preliminary interview is less formal and is
basically done to weed out the unsuitable candidates very much before proceeding with a full-
fledged selection process.
2. Receiving Applications: Once the individual qualifies the preliminary interview he is required
to fill in the application form in the prescribed format. This application contains the candidate
data such as age, qualification, experience, etc. This information helps the interviewer to get the
fair idea about the candidate and formulate questions to get more information about him.
3. Screening Applications: Once the applications are received, these are screened by the
screening committee, who then prepare a list of those applicants whom they find suitable for the
interviews. The shortlisting criteria could be the age, sex, qualification, experience of an
individual. Once the list is prepared, the qualified candidates are called for the interview either
through a registered mail or e-mails.
4. Employment Tests: In order to check the mental ability and skill set of an individual, several
tests are conducted. Such as intelligence tests, aptitude tests, interest tests, psychological tests,
personality tests, etc. These tests are conducted to judge the suitability of the candidate for the
job.
5. Employment Interview: The one on one session with the candidate is conducted to gain more
insights about him. Here, the interviewer asks questions from the applicant to discover more
about him and to give him the accurate picture of the kind of a job he is required to perform.

Checking References: The firms usually ask for the references from the candidate to cross check
the authenticity of the information provided by him. These references could be from the
education institute from where the candidate has completed his studies or from his previous
employment where he was formerly engaged. These references are checked to know the conduct
and behavior of an individual and also his potential of learning new jobs.
7. Medical Examination: Here the physical and mental fitness of the candidate are checked to
ensure that he is capable of performing the job. In some organizations, the medical examination is
done at the very beginning of the selection process while in some cases it is done after the final
selection.
Thus, this stage is not rigid and can take place anywhere in the process. The medical examination
is an important step in the selection process as it helps in ascertaining the applicant’s physical
ability to fulfill the job requirements.
8. Final Selection: Finally, the candidate who qualifies all the rounds of a selection process is
given the appointment letter to join the firm.

Thus, the selection is complex and a lengthy process as it involves several stages than an
individual has to qualify before getting finally selected for the job.

Performance appraisal
Performance appraisal is the ongoing process of reviews of employee performance over
time, and is one component of the entire performance management process. It is a
formal system, which requires a manager to carry out this activity in a continuous
manner.

Performance evaluation system is a systematic way to examine how well an employee is

performing in his or her job. If you notice, the word systematic implies the performance
evaluation process should be a planned system that allows feedback to be given in a formal—as
opposed to informal—sense. Performance evaluations can also be called performance appraisals,
performance assessments, or employee appraisals.The performance rating systems can be
classified into two broad groups:

 TYPES:

 Relative rank ordering, paired comparisons and forced ranking.

 Absolute narrative method or essays, behaviour anchored rating scales, critical incidents,
graphic rating scales, management by objectives.
BASED ON RELATIVE
 In a relative ranking system, your rating depends on how your objective performance (test
grade) compares with the rest of the students' grades in your class.

1. Rank Ordering,

2. Paired Comparisons And

3. Forced Ranking.

1.Rank Ordering: In a ranking method system (also called stack ranking), employees in a
particular department are ranked based on their value to the manager or supervisor. This system is
a comparative method for performance evaluations.
There are two methods:
 Simple the rater orders all rates , from lowest to highest.

 Alternationalso referred to as multi-person comparison methods, each employee’s

performance is matched with that of her peers, eventually producing a rank order from top to
bottom.

2. The Paired Comparison Method

 The paired comparison Method evaluation is based on an employee's performance relative to
his or her peers in selected job skill categories. ... An employee's evaluation would be the sum of
their pluses and would be the basis of a relative ranking. In this method, the number of pairs of
rates to be compared may be calculated from the formula n (n-1)/2, n denoting the number of
employees.

Example, if a firm has just 10 employees , all 10 individuals will be compared in this process ,
(10(9))/2 , requiring 45 comparisons .
 The rater’s task is simply to choose the better of each pair and each individual’s rank is
determined by counting the number of times he or she was rated superior.

3. Forced ranking:
 It is also known as vitality curve, rank and yank and forced distribution.

 The forced ranking system is based on the much debated assumption that ratees confirm to a
pattern of normal distribution.

 One of the criticism of forced ranking system is that the system may introduce a great deal of
error, if a group of ratees do not confirm to the usual distribution and may ,as a group, be either
superior or substandard.

 In short, rather than eliminating error, forced distribution may introduce another kind of error.
BASED ON ABSOLUTE
Absolute Ratings or Supreme Rating System is one of the strategies utilized in Performance
Appraisal, where every worker is evaluated exclusively without authorizing an examination with
his partners or different representatives in the business.
TYPES:
1. The Narrative or the Essay Method

2. Behaviour anchored rating scales

Critical incidents

4. Graphic rating scales

5. Management by objectives
The Narrative or the Essay Method
 One of the simplest among absolute ratings, a rater is required to write a description of the
ratee’s performance, his strengths, weaknesses and areas of improvement.

 The narrative structure provides the rater with the opportunity to make their evaluative
assessment form that can go beyond a mere ticking of a box.

 The underlying belief is that a rater who is conversant with the rate and his work can produce a
narration which can be as powerful as acceptable as a formal appraisal system. Narratives can be
used alone, or combined with another method or form.

 The positives of a properly executive Narrative rating include scope for detailed feedback.

 The difficulties with this form are: sans quantitative information, comparisons between
individual employees, groups or teams become virtually impossible.

Critical Incidents Method

 The ’critical incident method’ is a set of procedures used for collecting direct observations of
employee behavior which have critical significance and meet methodically defined criteria.

 Critical incidents refer to reports prepared by knowledgeable observers of specific employee

behaviors that focus on either particularly outstanding behaviors or particularly questionable
behaviors. Supervisors document critical incidents as they occur usually in a file folder (kept for
each employee, either a hard copy or an electronic one).
Graphic Rating Scales
 The ratees get evaluated on a continuum with anchor points that demarcate levels of
effectiveness. For each ratee, the level of effectiveness is indicated at specific points on the
continuum. The scale typically features a Likert scale.

The number of points on the rating scale can vary from 1-3, 1-5, or 1-9 with the maximum end
point of 5 to 9 being considered suitable to yield the highest quality of ratings on the basis of
research.

BEHAVIORALLY ANCHORED RATING SCALES

 BARS comprises five to ten vertical scales, depending on the nature of the job under review.
Each scale describes a key performance dimension of the job.

 Each dimension is typically depicted by five or more critical incidents corresponding to ‘highly
effective’ to ‘highly ineffective’ visible job behaviours on the job dimension.

 Disadvantagesinter-rater reliability and rater errors (due to multiple developmental processes

and formats) and high cost associated with the employee time and effort required to develop and
use the instrument.

Sample Behaviorally 7 Can expect the trainee to

Anchored Rating Scale for make valuable suggestions
Sales Performance by Sales for increased sales and to
Trainee Excellent have positive relations with
customers all over the
country.
Good 6 Can expect to initiate creative
ideas for improvement of
Sales.
Above average 5 Can expect to keep in touch
with the customer throughout
the year.
Average 4 Can manage, with difficulty,
to deliver the goods in time.
Below Average 3 Can expect to unload the
trucks when asked by the
MBO implies a management approach by which employees participate in a vertically cascading
process of setting objectives, covering production, costs, sales and profits, together with their
superiors.

 The goals set in the participative manner become the basis of subsequent periodical evaluation
and rewards.
Balanced Scorecard
 It is a strategic performance management tool that can be used by managers to keep track of the
execution of activities by the staff within their control and to monitor the consequences arising
from these actions. It talks about four domains of performance:

1. Financial: measures which answer the question "How do we look to shareholders?" Examples:
cash flow, sales growth, operating income, return on equity.[

2. Customer: measures that answer the question "How do customers see us?" Examples: percent
of sales from new products, on time delivery, share of important customers’ purchases, ranking
by important customers.

Internal business processes: measures that answer the question "What must we excel at?"
Examples: cycle time, unit cost, yield, new product introductions.

4. Learning and growth: measures that answer the question "How can we continue to improve,
create value and innovate?” Examples: time to develop new generation of products, life cycle to
product maturity, time to market versus competition.
360 DEGREE PERFORMANCE APPRAISAL
The 360 degree performance appraisal system is advanced kind of appraisal which is
used by many organizations where performance of employee is judged using the review
of around 7 to 12 people. The 360 performance review is mostly focused on the
contribution of employee and their skills along with the competencies. It is a balance
way to view the actual performance of employee in the area of teamwork, leadership,
interaction, interpersonal communication, contribution, management, accountability,
 work habits, vision, and other things based on the employee’s job profile.Here the actual
contribution of employee in terms of performance is judge by the manager while the
other aspects of the role are judged by or reviewed by the subordinate, peers and the
customer.

COMPENSATION AND BENEFITS

 “Compensation is what employees receive in exchange for their contribution to the
organization.” – Keith Davis.

 In the words of Edwin B. Flippo, “The function compensation is defining as adequate and
equitable remuneration of personnel for their contributions to the organizational objectives.”
TOTAL COMPENSATION AND REWARDS SYSTEM
A. TOTAL COMPENSATION

1. John Tropman of University of Michigan Business School (The Compensation Solution.

Jossey-Bass.2001) classifies pay in three ways: Old Pay, New Pay and New New Pay

2. Old Pay is the frozen system based on ‘tenure, entitlement and internal equity’. The New Pay
is linked ‘to the success of the employee and the firm’. The New New Pay suggests a new system
of 10 variables that form the Total Compensation system’ or the Cafeteria Compensation.
 TC = (BP + AP + IP) + (WP + PP) + (OA + OG) + (PI + QL) + X

FORMS OF PAY OR COMPONENTS OF COMPENSATION

 BASIC PAY

 VARIABLE PAY
I. Company Performance Linked Pay

II. Group/Team Performance Linked Pay

III. Individual Performance Linked Pay

 FRINGE BENEFITS

 PERQUISITES

 ALLOWANCES

BASIC PAY:Basic salary is the base income of an individual. Basic salary is the amount paid to
employees before any reductions or increases due to overtime or bonus, allowances (internet
usage for those who work from home or communication allowance).

 VARIABLE PAY:Variable pay is the portion of compensation determined by employee

performance (commonly a commission). ... In sales, variable pay is the portion of sales
compensation determined by employee performance. When employees hit their goals (aka quota),
variable pay is provided as a type of bonus, incentive pay, or commission.

BENEFITS:Fringe benefit, any nonwage payment or benefit (e.g., pension plans, profit-sharing
programs, vacation pay, and company-paid life, health, and unemployment insurance programs)
granted to employees by employers. It may be required by law, granted unilaterally by
employers, or obtained through collective bargaining.
 PERQUISITES:Perquisite” may be defined as any casual emolument or benefit attached to
an office or position in addition to salary or wages. In essence, these are usually non-cash
benefits given by an employer to employees in addition to cash salary or wages.Examples rent-
free accommodation, supply of gas, water and electricity, professional tax of employee,
reimbursement of medical expense, and salary of servant employed by employee

 ALLOWANCESAllowances are the financial benefits that are provided to the employees
by the employers over their regular salary. While some allowances are taxable under the head
salaries, some are partly taxable or fully non-taxable.