Author: indiafreenotes

A Company being an artificial person, any decision taken by it shall be in the form of a Resolution. Accordingly, a resolution may be defined as an agreement or decision made by the directors or members (or a class of members) of a company. A proposed resolution is a motion. When a resolution is passed a company is bound by it. The resolutions could be on just about any subject in case of Board meetings since they are ultimately responsible for running the Company. The Act generally specifies the matters in respect of which resolutions are required to be passed by the members in general meetings.

Basically, there are three types of resolutions: Ordinary Resolution, Special Resolution and Unanimous Resolution.

In case of Board Meetings, there is no concept of Special Resolutions and also unanimous resolutions are required in very few cases. However, in case of general meetings, all three are covered.

Section 114 of the Companies Act, 2013 defines an Ordinary and Special Resolutions. It states:

“(1) A resolution shall be an ordinary resolution if the notice required under this Act has been duly given and it is required to be passed by the votes cast, whether on a show of hands, or electronically or on a poll, as the case may be, in favour of the resolution, including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the resolution by members, so entitled and voting.

(2) A resolution shall be a special resolution when:

(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution;

(b) the notice required under this Act has been duly given; and

(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.”

Other than these two, there is also a concept of a unanimous resolution implying approval of all the members present and voting, without a single vote cast against it. Initially, as per Companies Act 1956 only one resolution required unanimous approval in the general meeting and the same has also been covered under section 162 (1) of the Companies Act 2013 which states that:

“At a general meeting of a company, a motion for the appointment of two or more persons as directors of the company by a single resolution shall not be moved unless a proposal to move such a motion has first been agreed to at the meeting without any vote being cast against it.”

However, in addition to above, for private companies, the Companies Act 2013 also inserts one more resolution which requires unanimous approval of all the members. As per sub-section 4 of section 5 for inclusion of “entrenchment provision” in the Articles of Association of an already existing Company, it should be “agreed to by all the members of the company in the case of a private company and by a special resolution in the case of a public company.” Other than these all-other specified matters require either an ordinary or a special resolution. Let us further take a look into the maters which require ordinary and/or special resolutions as per the Companies Act, 2013.

3Types of Resolutions recognized by Companies Act

Type 1. Ordinary Resolution:

An ordinary resolution is that which is passed by a simple majority at any general meeting of the shareholders. The resolution may be passed by a show of hands or by a poll. A 21 days notice must have been given for the meeting in which such a resolution is passed. Any matters can be decided through an ordinary resolution unless the Companies Act or the Articles of the company provide otherwise.

Objects:

Following are some of the matters which can be decided by an ordinary resolution:

1. Approval of statutory report.
2. Approval of directors report.
3. Approval of final accounts.
4. Declaration of dividend.
5. Appointment of directors.
6. Election of directors.
7. Issue of shares at discount.
8. Appointment of auditors and their remuneration.
9. Alteration of share capital.
10. Change in the rights of shareholders of any class.
11. Creation of reserve fund.
12. Conversion of fully paid-up shares into stock.
13. Sale of the whole or part of the company’s undertaking or business.

Specimen of Ordinary Resolutions:

1. Issue of shares at discount (Sec. 79). “RESOLVED that the Directors of the Company be and are hereby authorised, subject to the sanction of the court, to issue 10,000 shares of Rs. 10 each in the capital of the Company at a discount of not exceeding Rupee one per share.”
2. Increase in the number of directors (Sec. 258). “RESOLVED that (subject to the approval of Central Government) the number of existing directors be increased from……………………….. to…………………… and Mr………….. and Mr…………. be and they are hereby appointed as additional directors.”
3. Removal of director (Sec. 284) “RESOLVED that Mr…………………… Director of the Company regarding whose removal special notice has been received and has been duly heard as required by Section 284(3) of the Companies Act, 1956, be and is hereby removed from his office of director of the company.”

Type 2. Special Resolution:

A special resolution is one which is passed by at least 3/4th majority of the members voting on it at the General Meeting. A 21 days notice must have been given for the meeting in which such a resolution is passed. Notice calling the meeting should indicate that the resolution is intended to be proposed as a special resolution.

The main feature of special resolution is that the number of votes cast in favour of the resolution should be three times the number of votes against it.

Objects:

The following are some of the matters which can be decided by a special resolution:

(1) Alteration of the name of company.

(2) Alteration of the objects of the company.

(3) Alteration of articles of association.

(4) Change of registered office from one state to another state.

(5) Reduction of share capital.

(6) Creation of reserve capital.

(7) Payment of interest out of capital.

(8) Fixing directors’ remuneration.

(9) Voluntary winding up of a company.

(10) Making the liability of directors unlimited.

(11) Application to the court to wind up the company.

(12) Appointment of inspectors to investigate the affairs of the company.

(13) To bind the company by an arrangement or compromise made.

Specimen of Special Resolution:

1. Alteration of name of the company. RESOLVED that the name of the company be and is hereby altered from…………………. Limited to………………………… Limited and the Central Government be officially informed for the purpose of securing their consent of such alteration.
2. Voluntary winding up of the company. “RESOLVED that the company be wound up voluntarily and that Mr……………………….. of………. be and is hereby appointed liquidator for the purpose and that this be and is hereby passed as a special resolution pursuant to Sec. 484 of the Companies Act, 1956.
3. Alteration of articles of association. “RESOLVED that clause……………………………. of the Articles of Association of the Company be altered by omitting the following words therefore

“………………………….”

and substituting instead of the following words:

“………………………….”

Type 3. Resolution Requiring Special Notice:

The Indian Companies Act, 1956 has introduced a new type of resolution for the passing of which special notice has to be given. Some matters specified in the Act cannot be moved for discussion at 3 General Meeting unless a special notice is given to the company.

A notice containing the intention to move the resolution had to be given in such cases at least 14 days before convening the meeting in which it is proposed to be moved. The company in turn should give members the notice of that resolution at least seven days before the holding of the meeting. Such resolution may be ordinary or special resolution.

Following are some of the resolutions requiring special notice:

(1) Resolution to remove a director.

(2) Resolution to fill up a casual vacancy of the director.

(3) Resolution to appoint as Auditor a person other than the retiring person.

(4) Resolution to appoint as Director a person in place of removed director.

Theories of Collective Bargaining:

There are three important concepts on collective bargaining which have been discussed as follows:

1. The Marketing Concept and the Agreement as a Contract:

The marketing concept views collective bargaining as a contract for the sale of labour. It is a market or exchange relationship and is justified on the ground that it gives assurance of voice on the part of the organised workers in the matter of sale. The same objective rules which apply to the construction of all commercial contracts are invoked since the union-management relationship is concerned as a commercial one.

According to this theory, employees sell their individual labour only on terms collectively determined on the basis of contract which has been made through the process of collective bargaining.

The uncertainty of trade cycles, the spirit of mass production and competition for jobs make bargain a necessity. The trade union’s collective action provided strength to the individual labourer.

It enabled him to resist the pressure of circumstances in which he was placed and to face an unbalanced and disadvantageous situation created by the employer. The object of trade union policy through all the maze of conflicting and obscure regulations has been to give to each individual worker something of the indispensability of labour as a whole.

It cannot be said whether the workers attained a bargaining equality with employers. But, collective bargaining had given a new- relationship under which it is difficult for the employer to dispense without facing the relatively bigger collective strength.

2. The Governmental Concept and the Agreement as Law:

The Governmental Concept views collective bargaining as a constitutional system in industry. It is a political relationship. The union shares sovereignty with management over the workers and, as their representative, uses that power in their interests. The application of the agreement is governed by a weighing of the relation of the provisions of the agreement to the needs and ethics of the particular case.

The contract is viewed as a constitution, written by the point conference of union and management representative in the form of a compromise or trade agreement. The agreement lays down the machinery for making executing and interpreting the laws for the industry. The right of initiative is circumscribed within a framework of legislation.

Whenever, management fails to conform to the agreement of constitutional requirements, judicial machinery is provided by the grievance procedure and arbitration.

This creates a joint Industrial Government where the union share sovereignty with management over the workers and defend their group affairs and joint autonomy from external interference.

3. The Industrial Relations (Managerial) Concept as Jointly Decided Directives:

The industrial relations concept views collective bargaining as a system of industrial governance. It is a functional relationship. Group Government substitutes the State Government. The union representative gets a hand in the managerial role. Discussions take place in good faith and agreements are arrived at. The union joins with company officials in reaching decisions on matters in which both have vital interests. Thus, union representatives and the management meet each other to arrive at a mutual agreement which they cannot do alone.

To some extent, these approaches represent stage of development of the bargaining process itself. Early negotiations were a matter of simple contracting for the terms of sale of labour. Developments of the latter period led to the emergence of the Government theory. The industrial relations approach can be traced to the Industrial Disputes Act of 1947 in our country, which established a legal basis for union participation in the management.

Importance of Collective Bargaining:

The collective bargaining advances the mutual understanding between the two parties i.e., employees and employers.

The role of collective bargaining may be evaluated from the following point of view:

(1) From Management Point of View:

The main object of the organisation is to get the work done by the employees at work at minimum cost and thus earn a high rate of profits. Maximum utilization of workers is a must for the effective management. For this purpose co-operation is required from the side of the employees and collective bargaining is a device to get and promote co-operation. The labour disputes are mostly attributable to certain direct or indirect causes and based on rumors, and misconceptions. Collective bargaining is the best remedial measure for maintaining the cordial relations.

(2) From Labour and Trade Union Point of View:

Labour has poor bargaining power. Individually a worker has no existence because labour is perishable and therefore, the employers succeed in exploiting the labourers.

The working class in united form becomes a power to protect its interests against the exploitation of the employers through the process of collective bargaining.

The collective bargaining imposes certain restrictions upon the employer. Unilateral action is prevented. All employees are treated on equal footings. The conditions of employment and rates of wages as specified in the agreement can be changed only through negotiations with labour. Employer is not free to make and enforce decisions at his will.

Collective bargaining can be made only through the trade unions. Trade unions are the bargaining agents for the workers. The main function of the trade unions is to protect the economic and non- economic interests of workers through constructive programmes and collective bargaining is one of the devices to attain that objective through negotiations with the employers, Trade unions may negotiate with the employer for better employment opportunities and job security through collective bargaining.

(3) From Government Point of View:

Government is also concerned with the process of collective bargaining. Government passes and implements several labour legislations and desires it to be implemented in their true sense. If any person violates the rules and laws, it enforces them by force.

Collective bargaining prevents the Government from using the force because an amicable agreement can be reached between employer and employees for implementing the legislative provisions. Labour problems shall be minimised through collective bargaining and industrial peace shall be promoted in the country without any force.

Collective bargaining is a peaceful settlement of any dispute between worker and employers and therefore it promotes industrial peace and higher productivity resulting an increase in the Gross National Product or the national income of the country.

Main Hindrances for Collective Bargaining:

The main objective of developing collective bargaining technique is to improve the workers-management relations and thus maintain peace in industries. The technique has developed in India only after India got independence and got momentum since then.

The success of collective bargaining lies in the attitude of both management and workers which is actually not consistent with the spirit of collective bargaining in India. There are certain problems which hinder the growth of collective bargaining in India.

The following factors or activities act as hindrances to effective collective bargaining:

(1) Competitive Process:

Collective bargaining is generally becoming a competitive process, i.e., labour and management compete each other at negotiation table. A situation arises where the attainment of one party’s goal appears to be in conflict with the basic objectives of the other party.

(2) Not Well-Equipped:

Both the parties—management and workers—come to the negotiation table without doing their homework. Both the parties start negotiations without being fully equipped with the information, which can easily be collected from company’s records. To start with, there is often a kind of ritual, that of charges and counter charges, generally initiated by the trade union representatives. In the absence of requisite information, nothing concrete is achieved.

(3) Time to Protest:

The immediate objective of the workers’ representatives is always some kind of monetary or other gains, accrue when the economy is buoyant and the employer has capacity to pay. But in a period of recession, when demand of the product and the profits are falling, it is very difficult for the employer to meet the demands of the workers, he might even resort to retrenchment or even closure collective bargaining is no answer to such a situation.

(4) Where Prices are Fixed by the Government:

In industries, where the prices of products are fixed by the Government, it becomes very difficult for the employer to meet the demands of workers which would inevitably lead to a rise in cost of the products produced. Whereas the supply price to the consumers cannot be increased. It will either reduce the profits of the firm or increase the loss. In other words, it will lead to closure of the works, which again is not in the interest of the workers.

(5) Outside Leadership:

Most of the Indian trade unions are led by outsiders who are not the employees of the concerned organisations. Leader’s interests are not necessarily to be identical with that of the workers. Even when his bonafides are beyond doubt, between him and the workers he leads, there cannot be the degree of understanding and communication as would enable him to speak on behalf of the workers with full confidence. Briefly, in the present situation, without strong political backing, a workers’ organisation cannot often bargain successfully with a strong employer.

(6) Multiplicity of Trade Unions:

One great weakness of collective bargaining is the multiplicity of trade unions. In a multiple trade union situation, even a well recognised, union with long standing, stable and generally positive relationship with the management, adopts a militant attitude as its deliberate strategy.

In Indian situation, inter-union rivalries are also present. Even if the unions combine, as at times they do for the purpose of bargaining with the employer they make conflicting demands, which actually confuse employer and the employees.

(7) Appointment of Low-Status Executive:

One of the weaknesses of collective bargaining in India is that the management deputes a low-status executive for bargaining with the employees. Such executive has no authority to commit anything on behalf of the management. It clearly indicates that the management is not at all serious and the union leaders adopt other ways of settling disputes.

(8) Statutory Provisions:

The constraints are also imposed by the regulatory and participative provisions as contained in the Payment of Wages Act, the Minimum Wages Act, and Payment of Bonus Act etc. Such provisions are statutory and are not negotiable.

(9) Fresh Demands at the Time of Fresh Agreement:

At the time when the old agreement is near expiry or well before that, workers representatives come up with fresh demands. Such demands are pressed even when the industry is running into loss or even during the period of depression. If management accepts the demand of higher wages and other benefits, it would prefer to close down the works.

(10) Agreements in Other Industrial Units:

A prosperous industrial unit in the same region may agree with the trade unions to a substantial increase in wages and other benefits whereas a losing industry cannot do that. There is always pressure on the losing industries to grant wages and benefits similar to those granted in other (relatively prosperous) units in the same region.

Advantages of Collective Bargaining

Perhaps the biggest advantage of this system is that, by reaching a formal agreement, both sides come to know exactly what to expect from each other and are aware of the rights they have. This can decrease the number of conflicts that happen later on. It also can make operations more efficient.

Employees who enter collective bargaining know they have some degree of protection from employer retaliation or being let go from the job. If the employer were dealing with just a handful of individuals, he might be able to afford to lose them. When he is dealing with the entire workforce, however, operations are at risk and he no longer can easily turn a deaf ear to what his employees are saying.

Even though employers might need to back down a little, this strategy gives them the benefit of being able to deal with just a small number of people at a time. This is very practical in larger companies where the employer might have dozens, hundreds or even thousands of workers on his payroll. Working with just a few representatives also can make the issues at hand seem more personal.

Agreements reached through these negotiations usually cover a period of at least a few years. People therefore have some consistency in their work environment and policies. This typically benefits the company’s finance department because it knows that fewer items related to the budget might change.

On a broad scale, using this method well can result in more ethical way of doing business. It promotes ideas such as fairness and equality, for example. These concepts can spill over into other areas of a person’s life, inspiring better general behavior towards others.

Disadvantages of Collective Bargaining

A major drawback to using this type of negotiation system is that, even though everyone gets a say in what happens, ultimately, the majority rules, with only a few people determining what happens too many. This means that a large number of people, particularly in the general workforce, can be overshadowed and feel like their opinion doesn’t really matter. In the worst case scenario, this can cause severe division and hostility in the group.

Secondly, it always requires at least two parties. Even though the system is supposed to pull both parties together, during the process of trying to reach an agreement, people can adopt us-versus-them mentality. When the negotiations are over, this way of looking at each other can be hard to set aside, and unity in the company can suffer.

Collective bargaining can also be costly, both in terms of time and money. Representatives have to discuss everything twice—once at the small representative meetings, and again when they relay information to the larger group. Paying outside arbitrators or other professionals quickly can run up a fairly big bill, and when someone else is brought in, things often get slower and more complex because even more people are involved.

Some people point out that these techniques have a tendency to restrict the power of employers. Employees often see this as a good thing, but from the company’s perspective, it can make even basic processes difficult. It can make it a challenge to deal with individual workers, for example.

The goal of the system is always to reach a collaborative agreement, but sometimes tensions boil over. As a result, one or both parties might feel they have no choice but to muscle the other side into giving up. Workers might do this by going on strike, which hurts operations and cuts into profits. Businesses might do this by staging lockouts, which prevents members’ of the workforce from doing their jobs and getting paid, negatively effecting income and overall quality of living.

Lastly, union dues are sometimes an issue. They reduce the amount of take-home pay a person has, because they usually are deducted right from his paycheck. When things are good in a company and people don’t feel like they’re getting anything from paying the dues, they usually become unhappier about the rates.

The idea of collective bargaining emerged as a result of industrial conflict and growth of trade union movement and was first given currency in the United States by Samuel Crompers. In India the first collective bargaining agreement was conducted in 1920 at the instance of Mahatma Gandhi to regulate labour management relation between a group of employers and their workers in the textile industry in Ahmadabad.

Compensation management is the practice of the organization that involves giving monetary as well as non-monetary rewards to the employees, in order to compensate for the time they allocate to their job. The use of compensation management is increasing as organizations have started to realize the need for leveraging its human capital in order to gain a competitive edge in the industry. Compensation management involves “maximizing the return on human capital.”

Benefits of Compensation Management

• One of the most significant benefits associated with compensation management is that it helps the organization achieve employee satisfaction. A happy employee will be more productive, while contributing to the overall profit of the business. This makes employees realize that they are getting equal returns for the time and effort they are dedicating to the organization. The practice of compensation management exerts a positive impact in the employees by influencing them to perform better and increasing their overall efficiency.
• This stabilizes the labor turnover rate as employees get compensated for their work at a competitive market rate.  They do not feel the need of leaving the organization. It can then be concluded that compensation management helps increase the loyalty of the employees towards the organization.
• Compensation management is an important aspect of the job evaluation process. It augments the whole process by setting up standards for the company that are realistic as well as achievable, as far as the compensation practices of the organization are concerned.
• It is a practice which helps to improve the relationship of the company with the labor union, as it allows the compliance of different labor laws and acts. If the organization is following the compensation practices same as that of the market, there will be no dispute to settle between them and the labor union.
• It helps the professional growth of employees, as their efficiency increases, when there is a reward present for achieving a certain level of production. This also means that the deserving employees are fairly compensated for the efforts they are putting into their work, thus helping the organization to retain the best talent.
• Compensation Management is the practice that if followed properly, will turn the organization into a hub of talent. This means that more human capital will get attracted to the company, when they will view the compensation package that it will be offering. Also, the organization must keep in mind that monetary rewards are not something that only derives the motivation of the workforce. The overall compensation package must also include the non-monetary rewards, where the employees should be appreciated for the effort they are putting in their work. Therefore, the organization must ensure that its compensation package is based on monetary as well as non-monetary rewards.

Objectives of Compensation Management

1. To Attract Top Talent

Rai University states that one of the primary goals of compensation should be to recruit qualified talent. When you have a competitive compensation plan in place, you’ll be better able to attract top industry talent.

2. To Retain & Reward Personnel

Don’t lose your top talent to your competitors because employees believe that the grass will be greener elsewhere. Find out market values for your employees and pay accordingly. You can also set up pay-for-performance models to drive performance by encouraging associates to reach new goals and push farther.

3. To Boost Motivation

When structured effectively, your compensation plan can drive motivation across your teams. Employees who know that they’re being fairly compensated for their work feel appreciated and are therefore more likely to stay engaged, committed, and productive.

4. To Be Compliant

Compensation isn’t just about being fair within the industry; it must also comply with federal regulations, such as the Fair Labor Standards Act. While adhering to standards can complicate your compensation management, it will help protect your company against litigation and ensure fairness across the board for your personnel.

5. To Maximize ROI

It requires some fine tuning, but compensation management is most effective when you get the biggest bang for your buck. In other words, if you can create a compensation plan that stays within budget while also driving productivity through pay-for-performance and other motivational tactics, you’re creating a plan that’s both equitable for the company and advantageous for hardworking employees.

Principles

(i) There should be definite plan to ensure that differences in pay for jobs are based upon variations in job requirements, such as skill, effort, responsibility, working conditions, mental and physical requirements.

(ii) The general level of wages and salaries should be reasonably in line with that prevailing in the labour market. The labour market criterion is most commonly used.

(iii) The plan should carefully distinguish between jobs and employees. A job carries a certain wage rate, and a person is assigned to fill it at that rate. Exceptions sometimes occur in very high level jobs in which the job holder may make the job large or small, depending upon his ability and contribution.

(iv) Equal pay for equal work, i.e., if two jobs have equal difficulty requirements, the pay should be the same, regardless of who fills them.

(v) An equitable practice should be adopted for the recognition of individual differences in ability and contribution.

(vi) There should be a clearly established procedure for hearing and adjusting wage complaints. This may be integrated with the regular grievance procedure, if it exists.

(vii) The employees and the trade union should be informed about the procedure used to establish wage rates. Every employee should be informed of his own position, and of the wage and salary structure. Secrecy in wage matters should not be used as a cover up for haphazard and unreasonable wage programme.

(viii) The wage should be sufficient to ensure for the worker and his family reasonable standard of living. Workers should receive a guaranteed minimum wage to protect them against conditions beyond their control.

(ix) The wage and salary structure should be flexible so that changing conditions can be easily met.

(x) Prompt and correct payments of the dues of the employees must be ensured and arrears of payment should not accumulate.

(xi) For revision of wages, a wage committee should always be preferred to the individual judgement.

(xii) The wage and salary payment must fulfill a wide variety of human needs, including the need for self-actualization. It has been recognized that money is the only form of incentive which is wholly negotiable, appealing to the widest possible range of seekers. Monetary payment often acts as motivation and satisfies interdependently of other job factors.

Automated Payroll will be entirely GDPR-friendly: Payroll automation is founded on the idea that employee data is seamlessly available across locations and interfaces. The GDPR went into effect in the middle of last year; any new payroll management solution being introduced to the market will now be GDPR-compliant.

Payroll will be Audit-ready from Day One: Instead of scrambling at quarter-end or year-end to collate and reconcile payroll information, employers will adopt automated report generation that allows electronic submission, without any complex bureaucratic formalities.

Gig Workers will enter your Payroll: The distinction between pay rolled employees and third-party workers will start to fade as companies increasingly rely on gig workers. This goes beyond blue collar jobs, encompassing high-value projects led by experienced consultants and the enlightened ‘digital nomad’.

Bots will Guide Query Resolution: Employees running from one department to the other, trying to get queries answered from HR, finance, or even accounts, is a familiar picture to us all. In 2021 AI-based chatbots (deployed as standalone apps or part of a larger employee service suite) will be a common answer to this problem.

Manual Payroll will Finally become Obsolete: With payroll automation finally becoming extremely cost-effective as well as easy-to-deploy, a larger number of small businesses will abandon manual, paper-driven processes. This will be driven by increasing familiarity with tech and a boom in the payroll solutions market.

Weekly or Monthly payroll won’t be the Only Way: Some solutions have already started rolling out flexible payroll systems that align wages to a specific date every month or even support one-time payments as part of a company’s regularized disbursal cycle. Interestingly, this is perfectly in-line with gig worker requirements.

“Payroll companies like Gusto are increasingly offering alternatives to bi-weekly or monthly pay periods. For example, Gusto recently launched Flexible Pay, which allows employees on-demand access to funds without having to wait until payday, for little or no cost,” said Rick Chen, Communications Lead at Gusto.

Unbanked Employees will be Welcomed: Contrary to popular belief, a huge portion of the global population remains unbanked, even in developed economies. Platforms like Gusto will help bring this workforce segment into the payroll management ambit, easing access to the salaries they have rightfully earned. 

Disbursal will be Instantaneous: Taking off from the widespread popularity of mobile payment applications, payroll management will also explore instant payment options, so that workers do not have to wait for a certain period after their shift/project/seasonal tenue with a company has ended.

Financial Wellness will be Part of the Package: By advocating the need for financial wellness, employers can make sure their workforce is equipped to maintain a certain quality of life and correctly utilize their allocated wages. In 2019, financial wellness benefits will be a way to drive employee satisfaction without constant pay hikes.

Pay Transparency will be the Norm Everywhere: From ensuring that salary and wage levels are kept private, progressive employers will look at sharing salary levels publicly from white-collar ranks to part-time workers. This will go a long way in reinforcing employer brand, communicating the values of fair pay and equality.

The Normative Perspective

The normative perspective of human resource management bases itself on the concepts of “hard HRM” and “soft HRM,” on which the foundations of human resource management rest.

The concept of “Hard HRM” is the basis for the traditional approach toward human resource management. This concept traces its origins to the Harvard model that links workforce management to organizational strategy. Hard HRM stresses the linkage of functional areas such as manpower planning, job analysis, recruitment, compensation and benefits, performance evaluations, contract negotiations, and labor legislations to corporate strategy. This enforces organization interests over the employees’ conflicting ambitions and interests. It views the workforce as passive resources that the organization can use and dispose at will.

Soft HRM is synonymous with the Michigan model of human resources and is the bedrock of the modern approach to strategic human resource management. This model considers human capital as “assets” rather than “resources” and lays stress on organizational development, conflict management, leadership development, organizational culture, and relationship building as a means of increasing trust and ensuring performance through collaboration. This approach works under the assumption that what is good for the organization is also good for the employee.

The Critical Perspective of Human Resource Management

The critical perspective of human resource management is a reaction against the normative perception. This highlights some inherent contradictions within the normative perspective.

This perspective espouses a gap between rhetoric, as organizations claim to follow soft HRM policies when they actually enforce hard HRM. A study by Hope-Hailey et al. (1997) finds that while most organizations claim employees to be their most important assets and make many commitments for their welfare and development, in reality employers enforce a hard HRM-based strategic control, and the interests of the organization always take priority over the individual employee.

The Behavioral Perspective of Human Resource Management

The behavioral perspective of human resource management has its roots in the contingency theory that considers employee behavior as the mediator between strategy and organizational performance. This theory holds that the purpose of human resource intervention is to control employee attitudes and behaviors to suit the various strategies adopted to attain the desired performance. This perspective thus bases itself on the role behavior of employees instead of their skills, knowledge, and abilities.

For instance, an organization aiming to innovate will require a workforce that demonstrates a high degree of innovative behavior such as long-term focus, cooperation, concern for quality, creativity, propensity for risk taking, and similar qualities. The role of human resource management in such a context is to inculcate and reinforce such behavioral patterns in the workforce.

The Systems Perspective of Human Resource Management

The systems perspective describes an organization in terms of input, throughput, and output, with all these systems involved in transactions with a surrounding environment. The organized activities of employees constitute the input, the transformation of energies within the system at throughput, and the resulting product or service the output. A negative feedback loop provides communications on discrepancies.

The role of human resource management in the systems perspective is

1. Competence management to ensure that the workforce has the required competencies such as skills and ability to provide the input needed by the organization.
2. Behavior management through performance evaluation, pay systems, and other methods to ensure job satisfaction, so that employees work according to the organizational strategy, ultimately boosting productivity.
3. Setting up mechanisms to buffer the technological core from the environment in closed systems.
4. Facilitating interactions with the environment in open systems.

Agency or Transaction Cost Perspective of Human Resource Management

Among the different perspectives of human resource management is the agency or transaction cost perspective, which holds the view that the strong natural inclination of people working in groups is to reduce their performance and rely on the efforts of others in the group. When one person delegates responsibility to another person, conflicts of interests invariably arise.

The major role of human resource management in such a context is to promote alternative ways of controlling behavior to reduce the effects of such conflicts and minimize the cost to the organization. The two major approaches include

1. Monitoring employee behavior and preventing shrink of work by establishing effective control systems and improving productivity.
2. Providing employees with incentives such as rewards, motivation, and job satisfaction to increase their individual performance.

The human resource department needs to adopt the approach that minimizes transaction cost to the organization.

The main objective of wage and salary administration is to establish and maintain an equitable wage and salary system. This is so because only a properly developed compensation system enables an employer to attract, obtain, retain and motivate people of required calibre and qualification in his/her organisation. These objectives can be seen in more orderly manner from the point of view of the organisation, its individual employees and collectively. There are outlined and discussed subsequently:

Organisational Objectives:

The compensation system should be duly aligned with the organisational need and should also be flexible enough to modification in response to change.

Accordingly, the objectives of system should be to:

1. Enable an organisation to have the quantity and quality of staff it requires.
2. Retain the employees in the organisation.
3. Motivate employees for good performance for further improvement in performance.
4. Maintain equity and fairness in compensation for similar jobs.
5. Achieve flexibility in the system to accommodate organisational changes as and when these take place.
6. Make the system cost-effective.

Individual Objectives:

From individual employee’s point of view, the compensation system should have the following objectives:

1. Ensures a fair compensation.
2. Provides compensation according to employee’s worth.
3. Avoids the chances of favouritism from creeping in when wage rates are assigned.
4. Enhances employee morale and motivation.

Collective Objectives:

These objectives include:

1. Compensation in ahead of inflation.
2. Matching with market rates.
3. Increase in compensation reflecting increase in the prosperity of the company.
4. Compensation system free from management discretion.

Beach has listed the five objectives of wage and salary administration:

1. To recruit persons for a firm
2. To control pay-rolls
3. To satisfy people, reduce the incidence of turnover, grievances, and frictions.
4. To motivate people to perform better
5. To maintain a good public image.

Principles of wage and salary administration:

The main principles that govern wage and salary fixation are three:

1. External Equity
2. Internal Equity
3. Individual Worth.

1. External Equity:

This principle acknowledges that factors/variables external to organisation influence levels of compensation in an organisation. These variables are such as demand and supply of labour, the market rate, etc. If these variables are not kept into consideration while fixing wage and salary levels, these may be insufficient to attract and retain employees in the organisation. The principles of external equity ensure that jobs are fairly compensated in comparison to similar jobs in the labour market.

2. Internal Equity:

Organisations have various jobs which are relative in value term. In other words, the values of various jobs in an organisation are comparative. Within your own Department, pay levels of the teachers (Professor, Reader, and Lecturer) are different as per the perceived or real differences between the values of jobs they perform.

This relative worth of jobs is ascertained by job evaluation. Thus, an ideal compensation system should establish and maintain appropriate differentials based on relative values of jobs. In other words, the compensation system should ensure that more difficult jobs should be paid more.

3. Individual Worth:

According to this principle, an individual should be paid as per his/her performance. Thus, the compensation system, as far as possible, enables the individual to be rewarded according to his contribution to organisation.

Alternatively speaking, this principle ensures that each individual’s pay is fair in comparison to others doing the same/similar jobs, i.e., ‘equal pay for equal work’. In sum and substance, a sound compensation system should encompass factors like adequacy of wages, social balance, supply and demand, fair comparison, equal pay for equal work and work measurement.