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PES INSTITUTE OF TECHNOLOGY – BANGALORE SOUTH CAMPUS
Hosur Road (1Km before Electronic City), Bangalore -560100
INTERNAL TEST # 2 Answer Key
COMPENSATION & BENEFITS – 12MBAHR342
Course: MBA Semester III
Faculty: Mr.Nagabhushana
Date:
30 /09/2014
Note:
Time Allowed: 90 Minutes
Max. Marks: 50 (Fifty Marks)
Time:11.30 AM – 1PM
Answer all the Questions.
Write down the difference between CTC, Gross salary and take home salary.
1
(a)
Cost to company (CTC) is the total cost that an employee is incurring in a
company. Gross Salary is the one which you see every month. But this is before any
deduction.Net Salary is what an employee get to his/her hand after deductions.(this is the
take home salary)
The relation between all three


(3 marks)
Gross = CTC - Other benefits
Net = Gross - Deductions
Explain various components of CTC
Monthly Components: Basic pay, DA, HRA, Conveyance Allowance, Metro Allowance
Quarterly Components: Incentive, Commission
(b)
Annual components: LTA, Bonus, Medical Allowance
(7 marks)
One time components: Gratuity,
Variable components: Stock options, Incentives for targets achieved
Terminal benefits: Retirement benefits, Leave encashment
Statutory components: EPF, Pension, Bonus, Paid leaves
Explain Principles of compensation Management.
 Internal and external equity
 Bargaining power of employee and unions and individual employee
 Legal compliance
(c)
 Ability to pay
 Worth of the job
 Demand and supply conditions in the market
 Job evaluation
 Salary survey
(10 marks)
What do you mean by legal compliance in the context of compensation management?
Legal compliance includes paying / extending benefits which are statutory like
1. Provident Fund / Pension Fund
2. ESIC
2
(a)
3. Leave Encashment
4. Gratuity
(3 marks)
5. Bonus
6. Insurance Premium
Explain different types of job evaluation methods.
(b)
A.
Ranking method: The job ranking method arranges jobs in numerical order on
the basis of the importance of the job's duties
and responsibilities to the
organization. This method, though easy
to understand, is highly subjective in nature.
B.
Classification method: The job classification method slots jobs
into
preestablished grades. Higher-rated grades demand more responsibilities, tougher
working conditions and varied job duties. This method is easy to understand and takes
care of all relevant
factors affecting the performance of a job. However, it is not easy
to write all inclusive descriptions of a grade. Further, the method oversimplifies
sharp differences between different jobs and different grades.
C.
Factor comparison method: In this method, jobs are ranked according to a series
of factors such as mental effort, physical
effort, skill needed, responsibility,
supervisory responsibility, working conditions, etc. pay will be assigned in this
method by
comparing the weights of the factors required for each job.
(7 marks)
D. Point method: The point system of job evaluation uses a point scheme based on the
compensable job factors of skill, effort,
responsibility and working conditions. The
more compensable factors a job possesses, the more points are assigned to it. Jobs
with higher accumulated points are considered more valuable to the
organization.

Select key jobs

Identify the factors to all identified jobs such as skill, effort,
responsibility etc.

Divide each major factor into a number of sub factors. Each
sub factor is defined and expressed in order of importance.

Find the maximum number of points assigned to each job
Once the worth of a job in terms of total points is known, the
points are
converted into money values, keeping the wage
rates in mind.
(c)
What are the various competitive pay policy alternatives available for employers as a part
of external alignment? Briefly explain.
(10 marks)
(5*2=10
marks)
3
Questions
1. Design a differential compensation package for sales manager, production
manager, and finance manager with breakup of components.
Break up of
Basic pay
DA
HRA
CA
Metro Allowance
Variable pay ( Incentives / Commission)
Bonus
Stock options
Perquisites
2. Justify the differential pay structures for same level in a organization.
Criteria’s like Worth of job, performance,
alignment.
motivation levels required, external