Role of Human Resource Management in Industry - Essay Example

Human resource management Introduction: Human resource management plays a vitol role in every industry. The prime object of any industry is to maximumise the profits. The modern industrial world is more competetive. The profit is the difference between the selling price and the cost price. There fore the the cost price determines the profit. Cost price comprises the cost of material and cost of human services. Cost of material is almost the same for every competetive industry because all will purchase the material from the market at competative price. If at all there will be a marginal diference but not much. But the cost of human services is the most important cost, which requires an expertise management. It is Human Resource Mangement which manages the Human resources including the payments methods. The growth of industry largely depends up on the Human Resource Management. The cost of human services in an industry means and includes the payments made to the employees of an industry at factory, which is included in manufacturing cost, payments made to the employees in Shops which is included in selling and distribution over heads, payments made to the employees in offices which is included in administrative over heads. To maintain the balance between the quality, quantity and the cost of services the Human Resource Management shall plan and design suitable rewards to the employees by adopting an appropriate payment systems in these three sectors of industry say factory, shop and office. The rewards through payment systems are broadly classified into four major kinds such as 1.Performance related pay, 2.Competency Based Pay 3. Contribution pay, 4.Variable pay. Each system is suitable to the different sectors of the industry according their character. Adoption of ideal payment system enriches the industry. The ideal or appropriate systems of payments and the benefits which the employer to adopt for his employees are discussed below: Factory sector Performance related pay Payment by results: (PBR) Pay by results(PBR) is one of the methods of perfomrance related pay. Piece work Payment System is studied under the Pay by Result method. This method is more appropriate in factory sector. Piecework Payment system is more appropriate system of payment used in manufacturing sector of an industry. The labor cost of production is directly related to the workers engaged on the machines. By introducing this method of reward worker motivation will be enhanced. The worker will endeavor to produce more by exerting their skills. The more production will result in reduction of marginal labour cost. This system is based on the principle of more pay for more production, this will lead to variation in wages among the same class of workers, but still they accept the variation since they know that the variation is connected with their rate of production and it will motivate the other idle workers to improve their productivity. This system gives an opportunity to utilize their skills to the optimum level and earn more money there by improving the standard of living. By paying more pay for more production the workers satisfaction on the equity is achieved and the marginal cost of labour is reduced. By this way both worker and the industry is benefited. Some writers argue that this system leads to low quality of production. Their argument is based on the fact that workers are inclined to more production and neglect the quality of the products. But the organization can overcome this defect by improving the quality control system and imposing a minor and moderate penalties for the low quality products. PBR method is most approprite for the following reasons:- 1. It provides greater freedom for employees with less supervision. 2. Employees take initiative for high level production. 3. It gives opportunity to the employees to achieve high earnings. 4. It benefits the employees with high level earnings and benefits the Organization/Industry with high level production reducing marginal labour cost, there by increaing profits. Shop sector Performance Related Pay (PRP) Commission: Payment of Commission is one of the Performance Related Pay system (PRP), it is the appropriate method of the rewarding the employees serving in shops which is connected with sale of products or a sales division of an industry. The commission will be paid to the employees on their performance and efforts in promoting and improving the sales. The commission shall be fixed on the unit sale basis. This will motivate the employee to make more sales and earn good sales for the company. The employees contribute their share in increasing the profits with increased sales. Under this system the employees get the reward for their quality performance in improving the sales with their talents and skills. This will provides extra income to the employees and improves their economic standards. Here also the more reward for more performance there fore a healthy competition is developed in the work force. The employees will tend to acquire more knowledge about the product spontaneously and explore their potentials to serve the customers and promote the sales with a motive to earn smart money. The proprietary feeling also will be developed among the employees. The initiative and leadership qualities will be improved in the employees, which are essential for company for selling their products at faster rate and avoid the idle investment in the form of large stores of finished products waiting for sale. Sales Incentive plan: Payment of incentive on over all sales of the company, to the employees is also an appropriate system. Under this system incentive is paid equally. The uniformity in reward is maintained. All employees are encouraged with the rewards. Under this system the employees who are not directly exposed to the marketing and whose services are equally important in increasing the sale are also rewarded unlike in commission method. This will ensure uniform reward to the employees, which will prevent the stress on the employees who do not get or gets a less rewards only because that they are placed at the location not having an opportunity to show the results of his efforts directly in the form of increase in sales. This system will impart one family feeling among the employees. This system is appropriate where the employees are considerably less with almost equal potentials and equal initiative. Office sector 1. Profit Sharing Payment method: Profit sharing Payment method is method in which employees share the profits of the industry. The employees share the the profits of the company as a reward for their performance. This method is adopted to motivate the employees to improve the dedication and devotion towards achieiving the organisational goals. The perfomance of the employees detemines the percentage of share in the profit. It is an award for excellent perfomance and their contribution to the profits of the company. Profit sharing has been defined as "a part of employees pay which varies in relation to the movement in profits of the business or part of the business in which they work". (Duncan, 1988: 186)b3. The percentage of organisations which adopted this system has been increased from 18% to 43% between 1980's and 1990's. The survey revealed that 90% of the banking and financial institutions have been adopting this system successfullya1. This system is more appropriate since it motivates the employees to put their full efforts in increasing the profits and achieving organizational goals. It also benefits the employer in the form of tax excemption benefit. This system creates ownership feelings among the employees thereby improves the productivity. It generates long term loyality and encouragement among the employees. It prevents the employees from leaving the organization on economical grounds. 2. Performance related pay: Performance related pay is defined as " A System in which an individual's increase in salary is solely or mainly dependent on his/her appraisal or merit rating" (Swabe, 1989: 17)a2 Under this system the remuneration is awarded on the assessment and appraisal of employees performance. The employees who invest their extra efforts deserve the reward it is the modern saying that "Nobody owes anybody a thing. Nobody gets a pay rise unless they earn a pay rise" (Cannell and Wood, 1992 : 53-54)b1. This is an ideal system for the office sector of an industry as it is an ideal tool for identifying and awarding meritorious employees. It can be considered as an appropriate system of payment for the following reasons. 1. It helps the employer to retain the merit employees and improve the organizations growth and motivates the employees to improve their talents there by improve their economic standards. 2. Employee's initiative is recognised and rewarded. Interview of one financial organisation revealed that "With a small number of relatively senior people at our head office, we want people who have individual initiative. We don't have hordes of people doing the same thing but want to pay them on a system which demostrates that we recognise initiative" (Cannell and Wood, 1992 53)b2 3. Emloyees develop a performance competetive culture. 4. employees focus on what they need to do to improve if this is directly linked to pay 5. Employees with best performance will be rewared by a good PRP 6. Establishing a means of rewarding can retain industrious staff. Benefits:- The fringe benefits are as important as that of cash rewards under the above discussed payment systems in motivating the employees. The following benefits can be considered as the appropriate benefits for the employees in factory, shop and office. a) Pension: It is the most far-flung benefit of all other fringe benefits. This benefit is given to the employees for attracting and also retaining the loyal labour force. The employees receive pension on the basis of value of investment. It gives tax relief to the employees. This benefits provides relief to the employees after retirement. It is the security for the post retirement life of the employees. Therefore it has become a popular benefit. "As individuals become more responsible for their old age they may look more closely at employer provisioning this area". ( Taylor and Earnshaw, 1995) b4 b) Sick pay: Sick pay though it is a statutory obligation on the employer it is also the character of employment relationship. The employer shall be liberal in intending sick pay schemes to all the employees equally. This shall be extended as employee's health conscious measure. c) The following are the cafeteria benefits considered to be appropriate to be extended to the employees to attract and retain the loyal employees. 1) Providing canteen facility. It saves time and money 2) Holidays on religious festivals. It safeguards the religious sentiments of the employee 3) Opportunities for foreign travel 4) Telephone facilities. It keeps continuous communication between an employer and employee. 5) Health care facilities. 6) Childcare facilities 7) Providing insurance 8) Leave encashment 9) Personal office facilities to elevate the organizational status 10) Recreational facilities 11) Subsidized housing loans 12) Educational facilities However the success of any system of payment and benefits largely depends on the so many factors such the strength of the organization, the available resources, the effectiveness of the Manpower planning the Human Resource Management strategies and above all the co-ordination of all the departments and clear understanding of the concept. The systems are to be tailored according to the situation and requirements of the organization. Foot Notes a1. Ian Beardwell and Len Holden. Human Resource Management (P.521) a2. Ian Beardwell and Len Holden. Human Resource Management (P.525) b1. Mick Marchington AND Wilkingson Core Personal and Development(P.326) b2. Mick Marchington AND Wilkingson Core Personal and Development(P.326) b3. Mick Marchington AND Wilkingson Core Personal and Development(P.332) b4. Mick Marchington AND Wilkingson Core Personal and Development(P.340) Bibliography http://www.lg-employers.gov.uk/ rewards/schemes/performance.html Ian Beardwell and Len Holden - Human Resource Management(EDN) 1994 Mick Marchington AND Wilkingson - Core Personal and Development(EDN) 1996 Paul Turner - HR Forecasting and Planning (EDN) 2002 Read More